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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number 1-7795
UNC INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 54-1078297
(State of incorporation) (I.R.S. employer identification number)
175 Admiral Cochrane Drive
Annapolis, Maryland 21401
(Address of principal executive offices) (Zip code)
(410)266-7333
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Common Stock,
Par Value $0.20 Per Share New York Stock Exchange
9 1/8% Senior Notes due 2003 New York Stock Exchange
7 1/2% Convertible Subordinated
Debentures due 2006 New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at January 22, 1996 was approximately $107,659,292.
The number of shares of Registrant's Common Stock outstanding on February 28,
1996 was 17,798,981 (excluding 700,000 shares held in treasury).
(Cover page continued)
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement, expected to be filed
by April 29, 1996, specifically excluding the sections titled "Statement of
Management Development and Compensation Committee on Executive Compensation"
and "Comparison of Five-Year Cumulative Total Return Among UNC Incorporated,
NYSE Market Value Index and Peer Group Index", in connection with the
solicitation of proxies for its 1996 Annual Meeting of Shareholders, are
incorporated into Items 10, 11, 12 and 13 under Part III.
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UNC INCORPORATED AND SUBSIDIARIES
---------------------------------
Item 1. Business
The Company is a leading supplier of products and services to the
aviation industry. The Company's primary business is the aviation
aftermarket, which accounts for approximately 90% of its revenues. These
operations include the overhaul and repair of aircraft engines and
accessories, the repair and remanufacturing of engine components, and the
provision of training and maintenance services to the United States and
foreign military. Approximately 10% of the Company's revenues in 1995 were
derived from manufacturing engine and airframe parts for original equipment
manufacturers.
The Company has over 8,000 customers including: business aircraft
operators; major, national, regional, foreign, charter and package/cargo
airlines; engine and airframe OEMs; and the United States and foreign
military. The Company operates sixteen facilities and performs services at
approximately 80 government sites.
ENGINE OVERHAUL DIVISION
UNC Engine Overhaul Division is comprised of three operations, UNC
Airwork, UNC Engine & Engine Parts and UNC Metcalf. Together these three
operations perform turbine engine overhaul and maintenance, provide parts
provisioning for business and helicopter operators and regional airlines, and
provide industrial power packages for land based industrial use.
UNC Airwork is a leading independent provider of turbine engine overhaul
services. UNC Airwork overhauls and repairs over 40 different engine models
for a wide range of corporate and commercial customers. In 1994, the
auxiliary power unit repair capabilities of UNC Accessory Services were
transferred to UNC Airwork operations in Millville, New Jersey. Also in
1994, the small engine overhaul operations conducted at Pacific Airmotive in
Burbank, California were consolidated into UNC Airwork's facilities in
Millville, New Jersey and Miami, Florida. This consolidation places all major
engine overhaul capabilities in two strategic locations, making for a more
cost effective use of each unit's capabilities.
UNC Engine and Engine Parts provides parts and accessory support for
small gas turbine engines, as well as industrial packages. Specializing in
the support of the PT6 engine manufactured by Pratt & Whitney, this unit has
also expanded capabilities to meet the needs of PT6T Twin Pac, JT15D, Allison
250 and APU operators. UNC Engine and Engine Parts maintains an inventory of
PT6 spare engines and also has one of the largest PT6 inventories of parts and
accessories in the industry.
Acquired in 1993, UNC Metcalf specializes in the overhaul and repair of
industrial turbine engine, particularly the Solar Centaur and Saturn models.
UNC Metcalf provides support services that extend into all areas of operations
including engineering, installation, maintenance, parts repair and rebuild.
Additionally, UNC Metcalf has developed certain proprietary repair processes
which provide customers with a low cost alternative to parts replacement. UNC
Metcalf also provides complete "turnkey" service including on site contract
maintenance and operations.
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Revenues of the Engine Overhaul Division were $130.6 million in 1995
(24.5% of the Company's 1995 revenues).
ACCESSORY SERVICES DIVISION
UNC Accessory Services consists of four certified FAA repair station
facilities providing accessory overhaul, repair and test services to aircraft
operators, including business aircraft operators, major airlines,
international airlines, national airlines, regional airlines and package and
freight carriers. Services are also provided to independent aircraft engine
overhaul facilities and aftermarket distributors. UNC Accessory Services
supports over fifty categories of aircraft accessories, covering more than
thirty thousand different parts. The items serviced include landing gear,
constant speed drives, radar components, generators, transponders, pneumatic
valves, cooling turbines, flight control actuators, propellers, fuel system
components, hydraulic system components, and anti-skid brake system
components. New capabilities for regional turbo-prop aircraft and newer
generation turbine aircraft continue to be added.
UNC Accessory Services was founded in 1951 and acquired by the Company
in 1989. UNC Accessory Services is an authorized service center for leading
original equipment manufacturers, including Allied Signal Aerospace Products,
APPH and Chandler Evans. The Company believes it to be the largest
independent supplier of accessory support.
Revenues of the Component Services Division were $45.6 million in 1994
(8.5% of the Company's 1995 revenues).
MANUFACTURING
UNC's Manufacturing Division supplies turbine engine and airframe
component parts for the prime engine and aircraft original equipment
manufacturers and the military. UNC Manufacturing provides advanced
capabilities from design to production that result in high technology, precise
tolerance and advanced alloy parts. This Division consists of UNC Johnson
Technology, UNC Tri-Manufacturing, UNC Tri-Remanufacturing, UNC Artex and UNC
Aerostructures.
UNC Johnson Technology, founded in 1963 and acquired by the Company in
July 1993, provides high technology turbine nozzles and vane manufacturing and
repair, and specialized non-conventional machining of super alloys such as
electro-chemical deep hole drilling, laser drilling, and electrical-discharge
machining. Customers include Pratt & Whitney, the Department of Defense, and
General Electric.
UNC Tri-Manufacturing, founded in 1955 and acquired by the Company in
1988, is a leading manufacturer of precision components, aircraft parts and
assemblies for turbine engines for commercial and military aviation
applications. Primary customers include General Electric, Pratt & Whitney and
the Department of Defense.
UNC Aerostructures, founded in 1965 and acquired by the Company in 1993,
is an experienced manufacturer of structural components and sheet metal sub-
assemblies for major aircraft manufactures such as Boeing. UNC Aerostructures
provides a wide manufacturing capability serving virtually all major airframe
and aerospace companies, leading industrial subcontractors and the U.S.
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Military. Customers include, Boeing, Northrop, Vought, Bell Helicopter,
Lockheed and Grumman.
UNC Tri-Remanufacturing, which was started by the Company in 1991,
reconditions engine components to serviceable condition. The remanufacturing
business is supported by market driven repair development and customers'
desires to lower repair and overhaul costs. UNC Tri-Remanufacturing's
customers are the commercial airlines who perform their own engine overhauls,
OEM engine overhaul shops and the military. These customers generally lack
the expertise, the ability to develop approved repairs, and the volume of work
on each different part to justify in-house performance of this work.
UNC Artex, founded in 1957 and whose assets were acquired by the Company
in April 1993, expands the Company's repair and remanufacturing capabilities
through highly specialized repairs of components including engine gearboxes
and cases, as well as aircraft component housings and other engine and
aircraft parts and accessories. UNC Artex's primary customers are the major
commercial airlines.
Revenues for the Manufacturing Division were $103.6 million in 1995 (19%
of the Company's 1995 revenues).
AVIATION SERVICES
UNC Aviation Services Division is a market leader in the provision of
aircraft maintenance, overhaul, logistics support, aviation training services
and systems integration to the U.S. military, as well as to domestic and
foreign government agencies. The Division has over 63 years of cumulative
experience with an unblemished record of distinguished contract performance.
The Division has three operating units, UNC Federal Services, UNC Contract
Field Services and UNC International Services. Work is performed at military
aviation and ground training sites throughout the United States. Contracts
are both fixed price and time and materials for multiple years with options.
This business is managed centrally from the Company's Annapolis, Maryland
headquarters.
UNC Federal Services is a recognized leader of aircraft maintenance and
air-crew training to the U.S. military. The market for these military
contract services results from the Department of Defense turning to the
private sector to obtain services for less than they would cost if they were
performed by government personnel. Awards of these contracts are generally
based on best value to the government. As a result, success in obtaining the
awards of these contracts requires both high technical rating and low price.
In 1995, Aviation Services Division won a contract for Contractor
Logistics Support of a four-service fleet of VIP C-20 aircraft at four
locations: Andrews AFB, Maryland; Kaneoe NAS and Hicham Field, Hawaii; and
Ramstein AFB, Germany. They also were awarded a U.S. Army
Communications/Electronics Command Omnibus Contract, which provides systems
integration services for development and installation of avionics and
communications equipment in aircraft and ground vehicles at Lakehurst, New
Jersey and Ft. Belvoir, Virginia. The Division also won the Air Education and
Training Commands Contract to provide instructors for flight simulation
instruction at six bases: Randolph AFB, Texas; Reese AFB, Texas; Sheppard
AFB, Texas; Columbus AFB, Mississippi; Laughlin AFB, Texas; and Vance AFB,
Oklahoma.
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UNC Contract Field Services has for 35 years provided depot level and
below depot level maintenance, repair and logistical services for virtually
every Department of Defense weapon system. Through the Contract Field Teams
(CFT) program, the Company serves the U.S. Army, Navy, Air Force, NASA and
Coast Guard. In 1995, Field Teams began a major new effort at the Army's
Strategic Mobility Logistics Base, Charleston, South Carolina. Here the
Division is the Army's major support contractor for maintenance and upgrade
of war reserve equipment aboard prepositioned ships deployed around the world.
UNC International Services provides maintenance program management and
logistical services to customers worldwide. The Company is the largest U.S.
service contractor to the Royal Saudi Air Force providing F-5 technical and
logistical support, C-130 logistical support and other services. The Division
also holds a major contract with the Royal Saudi Naval Forces to provide
technical support at Jeddah and Jubail shipyards, with a support element in
Philadelphia, Pennsylvania.
The Aviation Services Division had revenues of $251.2 million in 1995
(47% of the Company's 1995 revenues).
TRADING DIVISION
During 1993, the Company established a Trading Division for the purpose
of expanding its business in the airframe and engine parts market and
generating revenues from other aircraft and engine related transactions. In
addition the Company is consolidating its engine and accessory marketing
within this Division located in Miami, Florida. In 1993 the Division acquired
a Boeing DC-10-30 aircraft under a leverage lease which it subsequently sold
in 1994. In addition, the Division acquired a Boeing 767 aircraft in 1994
which it has disassembled and is refurbishing or repairing, as required, and
disposing of in the aftermarket through sale, lease or the creation of
exchange pools or similar transactions.
Revenues for the Trading Division in 1995 were $5.2 million (1% of the
Company's 1995 revenues).
COMPETITION
The businesses and markets in which the Company operates are highly
competitive.
The Company's engine overhaul operations competes primarily with, and
largely at the discretion of, the aircraft OEMs including Allied Signal,
General Electric, Pratt & Whitney and Rolls-Royce. These operations also face
significant competition from a large number of other domestic and foreign
entities such as Aviall, Standard Aero, National Airmotive, BizJet, KC
Aviation (an aviation services subsidiary of Kimberly-Clark), Bombardier,
Duncan Aviation and others. The Company's overhaul operations also compete
with sales of used engines.
The Company's accessory services operations compete with a large number
of smaller service facilities and with certain OEMs that provide aftermarket
services for their products.
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Quality and reliability of service, prompt turn-around time, price and
customer service are major competitive factors in the engine overhaul and
accessory services businesses.
In providing contract aviation services to the military, the Company's
major competitors are Dyncorp, Reflectone, Serv-Air, Northrop, Raytheon,
Grumman and Lockheed. The Division is one of only four companies holding a
recurring contract under the Contract Field Team program. The program allows
these companies to provide maintenance services to the Government on an as
needed basis through individual orders. Other CFT contracts are held by
DynCorp, Lockheed, and Raytheon (Serv-Air).
With respect to the Company's manufacturing operations, UNC Tri-
Manufacturing's principal competitors are The Barnes Group, Ketema and
Chemtronics, and UNC Johnson Technology's competition exists in the form of
OEM in-house capabilities and Chromalloy, Meyer Tool, Howmet and Walbar. UNC
Aerostructures competes with Ace Clearwater, Dynabil Industries, Monitor
Aerospace, AeroChem and ChemFab. UNC Tri-Remanufacturing and UNC Artex's
principal competitors are Windsor Airmotive, Chromalloy, NORDAM PSD and
Pyromet. Price, quality and customer service are major competitive factors
in this business.
RESEARCH AND DEVELOPMENT; PATENTS:
The Company does not currently have any employees who are engaged full-
time in research and development activities; however, certain employees from
time to time render services of a research and development nature as part of
their regular duties. The Company owns a number of patents, but does not
consider that patent protection is essential to the successful operation of
its businesses.
GOVERNMENT REGULATION:
UNC Airwork, UNC Accessory Services, UNC Tri-Remanufacturing, UNC
Johnson Technology and UNC Artex are all licensed FAA repair stations in their
respective specialties. UNC Accessory Services, UNC Tri-Remanufacturing and
UNC Artex are certified by the FAA and hold current C.A.S.E. Registry as well
as various approvals by international aviation administration organizations.
The principal activities of the Company's discontinued submarine propulsion
unit manufacturing business are regulated by the Department of Energy ("DOE").
The Company is also subject to comprehensive regulations designed to maximize
safety in the handling of hazardous materials. In addition, certain
properties of the Company relating to its discontinued minerals business are
affected by special federal and state environmental laws and regulations. See
the description of environmental proceedings included in Note 11 to the
Company's Notes to Consolidated Financial Statements.
BACKLOG:
As of December 31, 1995, the total contract price of the backlog of
orders for manufactured engine and airframe parts and aviation contract
services for the military, including option years, believed to be firm was
approximately $646.1 million, and approximately 56% of the orders or services
represented thereby have been or are currently expected to be filled during
1996. As of December 31, 1994, such total was approximately $670.2 million.
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EMPLOYEES:
As of December 31, 1995, the Company had 5,730 employees.
EXPORT SALES:
For information related to sales to foreign countries, reference is made
to Note 17 to the Company's Notes to Consolidated Financial Statements.
ITEM 2. PROPERTIES.
The principal executive offices of the Company are located at 175
Admiral Cochrane Drive, Annapolis, Maryland. The executive offices are
subject to a lease expiring in 1997 with renewal options and an option to
purchase and are comprised of approximately 34,000 square feet in a modern
office building.
The following table sets forth certain information regarding the
Company's operating facilities as of December 31, 1995.
<TABLE>
<CAPTION>
Approximate
Location Square Footage Title
-------- -------------- -----
<S> <C> <C>
Engine Overhaul Division(1)
Millville, New Jersey 260,000 Leased
Miami, Florida 46,000 Leased
Odessa, Texas 36,500 Leased
Coconut Creek, Florida 4,000 Leased
Accessory Services Division
Bayshore, New York 41,000 Owned
Ft. Lauderdale, Florida 21,000 Leased
Grand Prairie, Texas 41,700 Owned
Millville, New Jersey 20,000 Leased
Manufacturing Division
Terre Haute, Indiana 212,000 Owned
Terre Haute, Indiana 66,000 Leased
Muskegon, Michigan 105,000 Owned
Everett, Washington 135,000 Leased
Addison, Texas 20,000 Leased
Aviation Services Division
Annapolis, Maryland 5,100 Leased
Oklahoma City, Oklahoma 36,700 Leased
San Antonio, Texas 10,000 Leased
Pensacola, Florida 2,600 Leased
______________________
(1) The Engine Overhaul Division also leases facilities in five states
aggregating approximately 12,600 square feet.
</TABLE>
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The Company owns its former engine parts manufacturing plant in Norwich,
Connecticut containing approximately 72,000 square feet and owns its former
engine overhaul plan in Burbank, California containing approximately 120,000
square feet.
ITEM 3. LEGAL PROCEEDINGS.
See the description of a litigation and contingencies appearing in Note
11 of Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The principal market for the common stock of UNC Incorporated is the New
York Stock Exchange. At December 31, 1995, there were 6,432 holders of record
of common stock. The accompanying table sets forth the high and low prices
for UNC's common stock in the periods indicated. See Note 7 of Notes to
Consolidated Financial Statements for a description of restrictions on the
payment of dividends.
1995 1994
Quarter Ended High Low High Low
- ------------- ------ ------ ------ ------
March 31 $ 6.25 $ 4.63 $11.75 $ 9.13
June 30 $ 6.00 $ 4.75 $10.25 $ 5.13
September 30 $ 6.75 $ 5.25 $ 6.50 $ 5.25
December 31 $ 6.63 $ 5.00 $ 6.50 $ 4.88
------------------ ------------------
The closing price on December 29, 1995 and 30, 1994 was $6.00 and $6.00,
respectively.
The closing price of the Company's common stock on February 23, 1996 was
$7.50.
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ITEM 6. SELECTED FINANCIAL INFORMATION
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues $536,243 $525,833 $438,293 $365,152 $360,571
======== ======== ======== ======== ========
Earnings (loss) from:
Continuing operations
before extraordinary
item $ 1,923 $(67,932) $ 11,594 $ 11,369 $(25,485)
Discontinued operations 34,100
Extraordinary item -
early retirement of debt (532) (1,700)
-------- -------- -------- -------- --------
Net earnings (loss) $ 1,923 $(67,932) $ 11,062 $ 11,369 $ 6,915
======== ======== ======== ======== ========
Earnings (loss) per share:
Continuing operations
before extraordinary
item $ .11 $ (3.89) $ .67 $ .66 $ (1.49)
Discontinued operations 1.99
Extraordinary item (.03) (.10)
-------- -------- -------- -------- --------
Net earnings (loss) $ .11 $ (3.89) $ .64 $ .66 $ .40
======== ======== ======== ======== ========
Weighted average number of
shares outstanding 17,666 17,474 17,356 17,279 17,128
FINANCIAL POSITION DATA
Working capital $124,098 $100,174 $150,200 $128,150 $ 88,379
Current ratio 2.3 to 1 1.7 to 1 2.5 to 1 3.1 to 1 1.5 to 1
Total assets $446,261 $468,034 $506,133 $391,082 $455,094
Total long-term debt,
including current
portion $205,081 $214,323 $197,283 $125,723 $177,829
Shareholders' equity $100,152 $ 98,897 $165,486 $155,639 $143,492
Total debt to
capitalization 67.2% 68.4% 54.4% 44.7% 55.3%
Return on average
shareholders' equity 1.9% 6.9% 7.6% 4.9%
OTHER
Capital expenditures $ 6,767 $ 10,299 $ 11,250 $ 6,602 $ 7,280
Depreciation and
amortization $ 12,491 $ 12,727 $ 11,477 $ 10,378 $ 10,196
Employees 5,730 5,410 6,430 3,383 3,852
Shareholders 6,432 6,715 7,029 7,371 8,936
</TABLE>
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See Notes 2, 14 and 18 of Notes to Consolidated Financial Statements for
matters affecting continuing operations and Note 3 of Notes to Consolidated
Financial Statements for a description of acquisitions. Capital expenditures
in 1994 included $0.5 million for the acquisition of the contract backlog of
Anadite and $1.9 million in 1993 for the acquisition of the contract backlog
of Heintz.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Continuing Operations
Overview
The Company's operations are conducted in one business segment which
includes: the overhaul of aircraft engines, industrial gas turbine engines and
aircraft accessories, the manufacture and remanufacture of jet engine and
aircraft components and providing maintenance and training, repair and
logistical contract services.
1995 Compared with 1994
- -----------------------
Revenues were $536.2 million in 1995 compared with $525.8 million in
1994, an increase of $10.4 million (2%). This increase in revenues was a
result of an increase of $25.7 million (29%) in international sales, offset
by a reduction in revenues due primarily to the closing of the overhaul
facility located in Burbank, California and the sale of two operating
divisions in connection with the Company's restructuring program. Operating
income was $22.4 million in 1995 compared with an operating loss of $61.0
million in 1994. Included in the 1994 results were a restructuring provision
of $58.7 million, a one-time charge of $9.6 million for adjustments described
below and a $14.0 million multi-employer pension withdrawal adjustment. See
1994 Compared with 1993 and Note 2 of Notes to Consolidated Financial
Statements for a discussion of the Company's restructuring program. Without
these adjustments operating income would have been $21.3 million in 1994.
Revenues for the Engine Overhaul Division in 1995 increased $1.5 million
(1%) to $130.6 million. The higher revenues are due to an increase in small
engine overhauls for international customers and in the overhaul and repair
of industrial turbine engines. These revenue increases were partially offset
by the loss of revenue resulting from the closing of the engine overhaul
facility in Burbank, California, at the end of 1994, as part of the Company's
restructuring program. Operating income in 1995 was $7.6 million compared
with an operating loss of $8.0 million in 1994. Included in the 1994 results
was a $14.0 million non-recurring charge for the withdrawal from a multi-
employer pension plan (See Note 14 of Notes to Consolidated Financial
Statements) and a one-time charge of $1.0 million for an increase in the
allowance for doubtful accounts for receivables related to litigation and the
bankruptcy of certain customers. Without these adjustments operating income
would have been $7.0 million in 1994 compared with $7.6 million in 1995.
Revenues of the Accessory Services Division in 1995 increased $3.9
million (9%) to $45.6 million principally due to increased volume from
international customers. Operating income decreased $1.3 million in 1995
principally due to lower volume on domestic business which was replaced with
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increased international business at lower margins due to increased competitive
actions by original equipment manufacturers ("OEM"). The 1994 period included
one-time charges of approximately $0.2 million for an increase in the
allowance for doubtful accounts.
The Company's Manufacturing Division revenues in 1995 decreased $2.8
million (3%) to $103.6 million compared with 1994. The decrease in revenues
is due to lower volume at the Company's engine components manufacturing
facility in Indiana and to a reduction in revenues generated by the Company's
chemical milled aircraft and engine components facility in Texas which was
sold in June 1995, as part of the Company's restructuring strategy. These
decreases were partially offset by higher volume at the Company's Michigan
engine components manufacturing facility due to increased activities on U.S.
government programs and higher volume at other manufacturing facilities,
principally due to new orders at the aerostructures manufacturing facility in
the State of Washington. Operating income was $10.7 million in 1995 compared
with $6.6 million in 1994. The 1994 period included a one-time charge of $3.5
million for an adjustment to cost estimates on long-term manufacturing
contracts. This charge resulted from a reevaluation of total cost to be
incurred under long-term production contracts with OEM customers, necessitated
by a reduced level of orders and the impact of recent price concessions that
were provided to the OEMs under these contracts. As a result of these events,
it was determined that the increasing overhead rates, resulting in higher
overhead charges to the contracts, in conjunction with higher production
costs, resulting from these lower volumes required an adjustment to the
carrying value of inventory under the contracts.
Aviation Services Division revenues of $251.2 million increased $5.1
million (2%) in 1995. The increase in 1995 is due in part to higher revenues
generated on U.S. government contracts for pilot training and contract field
teams services, and for activities on an international contract that was
awarded in the latter part of 1994. These increases in revenues were
partially offset by a reduction in aircraft maintenance activities on U.S.
government contracts and the sale of UNC Helicopter in December 1994, as part
of the Company's restructuring strategy. Operating income decreased $1.9
million (17%) to $9.6 million in 1995 due to a reduction in volume of flying
hours and one-time increases during the previous year.
In December 1994, the Company's Trading Division purchased a used Boeing
767 aircraft for $5.0 million, of which $1.0 million was paid in 1994 and $4.0
million in 1995. The aircraft was disassembled and the parts are being
refurbished or repaired, as required, and are being disposed of in the
aftermarket through sale, lease or the creation of exchange pools or similar
transactions. During 1995 the Division generated revenues of $3.3 million and
operating income of $1.1 million from parts sales. Also, included in 1995
revenues and operating income is $2.0 million for services provided to the
Mohegan Indians in connection with the sale of property in Connecticut. The
1994 period includes $2.6 million of revenues and operating income from the
leveraged lease of a McDonnell Douglas DC-10-30 aircraft which was sold in
December 1994.
Selling, general and administrative expenses in 1995 were $57.0 million
or 10.6% of sales compared with $69.8 million or 13.3% of sales in 1994. The
decrease in selling, general and administrative expenses in 1995 is due to the
closing of the Burbank engine overhaul facility, the sale of UNC Helicopter
in December 1994, the sale of the Texas chemical milled aircraft and engine
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components facility in June 1995, and other cost savings resulting from the
restructuring program initiated in the second quarter of 1994. Also included
in 1994 was a one-time charge of approximately $6.1 million for an increase
in the allowance for doubtful notes and accounts (included in this amount are
the allowance adjustments described above) and the write-off of expenses
incurred in connection with an acquisition that was not consummated. Selling
general and administrative cost also includes an investment for increased
international marketing efforts by the Company's international offices located
in Singapore, The Netherlands and Miami, Florida, serving Latin America. As
a result, international sales have increased $25.7 million (29%) and $27.9
million (47%) in 1995 and 1994, respectively. See Note 17 of Notes to
Consolidated Financial Statements.
Interest expense increased $1.0 million (5%) in 1995, principally due
to higher average debt levels.
The income tax provision for 1995 of $1.0 million results from the
Company reporting $3.0 million in earnings before income taxes and
extraordinary item. In 1994, the Company recognized an income tax benefit of
$13.5 million as a result of incurring a loss before income taxes and
extraordinary item of $81.4 million. See Note 12 of Notes to Consolidated
Financial Statements for a reconciliation of the statutory federal income tax
rate to the Company's effective tax rate.
The decrease in the deferred tax valuation allowance of $1.3 million in
1995 was due to the realization of current income tax benefits resulting from
the reversal of temporary differences against financial statement income. The
amount of deferred tax valuation allowance is determined based upon
management's evaluation of the net realizability of the future income tax
benefits, considering expiration of net operating losses, predictability of
future income, including the impact of the Company's restructuring program,
and the timing of reversal of temporary differences.
The Defense Department is continuing to close various military bases.
A portion of the workload of these bases is being relocated to bases where the
Company already performs aircraft maintenance functions. Further
consolidation of military training and maintenance contracts is expected as
bases are eliminated and other defense cuts reduce the value of individual
contracts. However, the Company expects that continued pressures on defense
spending could increase the outsourcing of services currently being provided
by military and other government personnel to lower cost providers such as the
Company. Additional opportunities for work from Army, Air Force and Navy
depots may result from the recommendations made by the Congressionally-
mandated Department of Defense Industry Depot Maintenance Task Force on which
UNC is represented. In May 1995, the Company was awarded a major delivery
order under its Contract Field Teams contract to develop the plans, procedures
and processes to implement the U.S. Army's Strategic Mobility Logistics
Program at Charleston, South Carolina. Also in May, the Company was awarded
a one year contract with four one-year options by the U.S. Army's
Communications and Electronics Command at Ft. Monmouth, N.J. with a potential
value of approximately $105 million. In July 1995, the Company was awarded
a $38 million seven year subcontract for maintenance and supply support of the
Air Force's worldwide C-20 Gulfstream VIP aircraft fleet, and in August, the
Company was awarded a one year contract with four one-year options aggregating
approximately $38 million to provide flight simulator instruction at six Air
Education and Training Command bases.
<PAGE>
<PAGE> 14
The Company's Manufacturing Division continues to receive pricing
pressure from certain customers, principally OEMs, as these OEMs continue to
significantly reduce the number of suppliers and their own procurement staffs.
The Company remains a part of the reduced OEM supplier base and has obtained
new contracts that may not have been available when the base of suppliers was
larger. The Division has provided price concessions to its principal OEM
customers during each of the past four years in anticipation of continuing to
receive future orders and to maintain OEM business relationships. As a result
of the depressed conditions in the industry over the past several years, the
additional orders have not been sufficient to offset the declining volume of
business. The Company has instituted on-going productivity enhancements and
cost reduction programs, in an effort to mitigate the effect of these price
concessions and reduced volumes. However, as a result of the impact that
these concessions and reduced volumes have had on the cost structure of the
Division, the Company adjusted the carrying value of certain inventories
related to these long-term manufacturing agreements by $3.5 million in 1994.
The OEM customers continue to apply pricing pressure on all suppliers, and the
Company expects continuing pressures from these OEM customers on future
pricing.
Continued effort on the part of the U.S. government to reduce defense
spending is affecting the demand for military aircraft engines and could also
have an impact on the Company's manufacturing operations. This trend is being
offset by the Defense Department bypassing OEMs and placing orders directly
with subcontractors such as the Company. Recently, the Company has been
awarded contracts to produce T56, F10 and F404 High Pressure Turbine Nozzle
Segments valued at $16 million, $9 million and $7 million, respectively. The
Company's manufacturing operations will capitalize on the opportunities in the
military market while focussing its efforts on building the commercial market.
During the second half of 1993 and the first quarter of 1994, the Company
expanded its commercial contract backlog as well as its customer base by
acquiring the contract backlog of two financially pressured competitors. The
inventory and production related to these contracts were transferred to
existing Company facilities.
1994 Compared with 1993
- -----------------------
The Company took steps in 1994 to reduce its cost structure and asset
base in light of the continuing depressed economic conditions in the aviation
industry. The Company's analysis of industry market conditions indicates that
the soft industry cycle will continue through 1996 and that many of our
markets will see little real growth during this period. As a result in the
second quarter of 1994 the Company recorded a $58.7 million provision for
restructuring which includes the shutting down of a marginal operation, an
allowance for the sale and disposition of two other businesses, the
consolidation and downsizing of other operations, and the write down of
inventory and under utilized property, plant and equipment that had been
identified for sale to generate additional cash flow. The provision for
restructuring consists of $42.3 million to cover the closing of a facility,
the sale and disposition of two other businesses, the consolidation of two
plants and the downsizing of other facilities. The Company has closed its
engine overhaul facility in Burbank, California and consolidated its engine
overhaul business principally at its facilities in Millville, New Jersey, and
Miami, Florida. The Company positioned for sale and disposition its chemical
milled aircraft and engine components facility in Weatherford, Texas, which
was sold in 1995, and its helicopter overhaul and refurbishment facility in
Ozark, Alabama, which was sold in December 1994. These actions were taken due
<PAGE>
<PAGE> 15
to the under utilization of the Weatherford facility caused by the depressed
market condition being experienced by OEM's in connection with the
construction of new aircraft and a sharp reduction in the number of military
helicopter overhauls that were expected in the foreseeable future at the Ozark
facility. The Company has also consolidated two of its accessory overhaul
plants located in Long Island, New York into one facility. The balance of the
provision of $16.4 million relates principally to the write down to estimated
realizable value of certain inventory and under utilized property, plant and
equipment that has been identified for sale on the open market. When fully
implemented the restructuring program is expected to generate $85.0 million
of cash, net of restructuring expenses.
During the first six months of this restructuring program the Company
closed its engine overhaul operations in Burbank, California and transferred
these operations to its Millville, New Jersey and Miami, Florida facilities
and sold its helicopter overhaul and refurbishment business. In addition, the
Company began liquidating the assets identified for sale under this program
and generated approximately $10 million of cash, net of restructuring
expenses. The Company completed the auction of certain fixed assets at its
Pacific Airmotive subsidiary in January 1995, generating approximately $2.6
million in cash.
At year end the Company's employee head count was 5,410, down slightly
more than 1,000 employees compared with the beginning of the year, reflecting
the results of improved cost controls and restructuring efforts.
Revenues were $525.8 million in 1994 compared with $438.3 million in
1993, an increase of $87.5 million (20%) and operating income for 1994
reflects a loss of $61.0 million compared with income of $23.4 million in
1993. Included in the 1994 results were a restructuring provision of $58.7
million, a one-time charge of $9.6 million for adjustments related to the
carrying value of certain long-term manufacturing contracts, increases in
allowance for doubtful accounts as well as other operating items described
below, and a $14.0 million fourth quarter 1994 multi-employer pension
withdrawal adjustment. Without these adjustments operating income would have
been $21.3 million in 1994.
Revenues for the Engine Overhaul Division in 1994 decreased $24.9
million (16%) to $129.1 million. The reduction in revenues is principally due
to decreases in JT8 overhauls, resulting from the Company's decision to
withdraw from the JT8 overhaul business in late 1993. The JT8 reductions were
partially offset by a revenue increase of $3.1 million generated by UNC
Metcalf acquired in the third quarter of 1993.
Operations of the Engine Overhaul Division generated a loss of
$8.0 million in 1994 compared with income of $4.2 million in 1993. Included
in the 1994 results is a $14 million non-recurring charge for the withdrawal
from a multi-employer pension plan (see Note 14 of Notes to Consolidated
Financial Statements) and a one-time charge of $1.0 million for an increase
in the allowance for doubtful accounts for receivables related to litigation
and the bankruptcy of certain customers. Without these adjustments operating
income would have been $7.0 million in 1994.
Revenues for the Accessory Services Division in 1994 decreased $8.3
million (17%) to $41.7 million, principally due to increased pricing pressures
from existing competition in the accessory services markets. Operating income
<PAGE>
<PAGE> 16
was $1.3 million in 1994 and $6.5 million in 1993. Included in the 1994
results was a one-time charge of $0.2 million for an increase in the allowance
for doubtful accounts related to the settlement of certain receivables.
Without this adjustment income would have been $1.5 million in 1994. The
decrease in operating income in 1994 is principally due to the reduction in
volume.
The Company's Manufacturing Division revenues for 1994 of $106.4 million
increased $15.6 million (17%) compared with 1993. The increase in 1994
revenues is principally due to revenues generated by UNC Johnson Technology
and UNC Aerostructures, Washington acquired in the third quarter of 1993,
offset by lower volume at the Company's other manufacturing facilities.
Operating income was $6.6 million in 1994 compared with $12.6 million in 1993.
The 1994 period includes a one-time charge of $3.5 million for an adjustment
to cost estimates on long-term manufacturing contracts. This charge resulted
from a reevaluation of total cost to be incurred under these long-term
production contracts with OEM customers, necessitated by a reduced level of
orders and the impact of recent price concessions that were provided the OEMs
under these contracts. As a result of these events, it was determined that
the increasing overhead rates, resulting in higher overhead charges to the
contracts, in conjunction with higher production cost, resulting from these
lower volumes, required an adjustment to the carrying value of inventory under
these contracts. Without this adjustment operating income would have been
$10.1 million in 1994.
Aviation Services Division revenues of $246.1 million increased $103.9
million in 1994. The increase in revenues is principally due to revenues
contributed by UNC Lear Siegler acquired in October 1993 and consolidated into
the Aviation Services Division. Operating income increased $5.0 million after
adjusting for a $2.0 million nonrecurring claim against the U.S. government
(for costs incurred prior to 1993) which was recorded in the first quarter of
1993. The increase in operating income is principally due to earnings
contributed from the acquisition of UNC Lear Siegler and resulting savings
from the consolidation of its operations.
In December 1994, the Company's Trading Division sold its McDonnell
Douglas DC-10-30 aircraft that was acquired in September 1993 under a
leveraged lease. Revenues and operating income from the leveraged lease in
1994 and 1993 were $2.6 million and $1.3 million, respectively.
Selling, general and administrative expenses in 1994 were $69.8 million
or 13.3% of sales compared with $54.0 million or 12.3% of sales in 1993. The
increase in selling, general and administrative expense in 1994 is due to
expenses of the companies acquired during 1993 and increased international
marketing efforts. Additionally, included in the 1994 period is a one-time
charge of approximately $6.1 million related to increases in allowances for
doubtful notes and accounts (included in this amount are the allowance
adjustments described above) and the write-off of expenses of $0.7 million
incurred in connection with an acquisition that was not consummated. Without
this one-time charge selling, general and administrative expenses would have
been approximately 12.2% of sales in 1994.
Interest expense increased $4.7 million in 1994 principally due to
higher average debt levels resulting from acquisitions made in 1993, the full
year effect of the Senior Notes issued in July 1993 and higher interest rates.
<PAGE>
<PAGE> 17
The income tax benefit for 1994 of $13.5 million was $9.7 million higher
than the $3.8 million benefit for 1993. This increase is due to the
recognition of income tax benefits, net of allowances, on the pre-tax losses
incurred in 1994. See Note 12 of Notes to Consolidated Financial Statements
for a reconciliation of the statuary federal income tax rate to the Company's
effective tax rate.
The increase in the deferred tax valuation allowance of $13.7 million
in 1994 was due to the uncertainty of realizing the tax benefits from net
operating losses and certain tax assets generated by the 1994 restructuring
provision, the provision for the withdrawal from a multi-employer pension plan
and other one-time charges. The amount of deferred tax valuation allowance
is determined based upon management's evaluation of the net realizability of
the future income tax benefits considering expiration of net operating losses,
predictability of future income, including the impact of the Company's
restructuring program, and the timing of reversal of temporary differences.
Liquidity and Capital Resources
- -------------------------------
Net cash flows from investing activities provided $25.9 million in 1995,
of which $33.6 million was generated by the sale of assets, principally those
identified in the restructuring program, including $25.0 million from the sale
of the Company's Connecticut property, $4.9 from the sale of other property
and equipment and $3.7 million from the sale of inventories included in the
restructuring program. The funds generated by the investing activities were
used to fund $6.8 million in capital expenditures, $0.9 million in payments
to the former owners of an acquired business under the terms of an earn-out
agreement, $9.2 million reduction of debt and $17.8 million of operating
activities. The use of funds in operating activities consisted of $15.9
million generated by earnings after adjusting for non-cash items, offset by
a $24.6 million investment in additional working capital and $9.1 million used
primarily to reduce noncurrent liabilities.
Many of the Company's restructuring goals have been achieved since the
program was implemented in June 1994. The Company has generated $47.8 million
from the sale of assets, including $25.0 million from the sale of the
Company's Connecticut property, $12.0 million from the sale of other under
utilized property and equipment, $10.8 million from the sale of other assets,
including its helicopter overhaul and refurbishing business in Ozark, Alabama
and its chemical milled aircraft and engine component business in Weatherford,
Texas. In addition, the Company has closed its JT8 engine overhaul facility
in Burbank, California and consolidated the engine overhaul business at its
facilities in Millville, New Jersey, and Miami, Florida. Two accessory
services facilities in Long Island, New York, have also been consolidated.
The disposal of these assets and consolidation of operations, along with
implementation of productivity enhancements and staff reductions, have
resulted in a reduced cost structure for the Company.
In addition to the cash described above, since June 30, 1994 the Company
generated approximately $7.9 million of proceeds from the collection of
certain disputed receivables and notes that were written down at the time of
the restructuring in connection with efforts made by the Company to accelerate
the collection of these troubled receivables and generate additional cash.
Since the restructuring program was implemented, the Company has
incurred $16.6 million of cash expenditures against its restructuring accrual.
<PAGE>
<PAGE> 18
These cash expenditures include employee severance and related costs of $2.5
million, $14.1 million of costs associated with the sale, closing and
consolidations of businesses and operations, including $3.8 million of third-
party costs associated with the shutdowns, consolidations and sales programs.
The Company believes that the remaining restructuring accrual of $3.9 million
should be adequate to complete the program.
Capital expenditures in 1995 amounted to $6.8 million compared with
$10.3 million in 1994. It is anticipated that capital expenditures in 1996
will be on a level comparable with the 1994 expenditures, excluding the impact
of the acquisition of Garrett Aviation Services, and will be financed from
internally generated funds, lease arrangements and, if necessary, revolving
credit borrowings.
The Company has approximately $34.6 million of net operating loss
carryforwards that can be applied against future taxable income.
Consequently, the Company does not expect to pay significant federal income
taxes for the next couple of years.
In May 1995, the Company entered into a new revolving credit agreement
which provides for a five-year credit line through May 2000, with a borrowing
capacity of up to $90 million, subject to borrowing base limitations as
defined in the agreement and reduced by outstanding letters of credit. The
Company's unused availability under the facility was $33.0 million at December
31, 1995. The $9.2 million debt reduction in 1995 includes the purchase in
the open market and the retirement of approximately $3.6 million of 7 1/2%
Convertible Subordinated Debentures due 2006 to satisfy, in part, the first
annual sinking fund payment of $4.2 million, which commences in March 1996,
the reduction of the Revolving Senior Bank Debt by $2.8 million, and other
debt by $2.8 million. In January 1996, the Company purchased in the open
market an additional $0.6 million of the 7 1/2% Convertible Subordinated
Debentures to satisfy the balance of the 1996 sinking fund requirement. The
Company's debt-to-capitalization ratio at December 31, 1995, was 67.2%
compared with 68.4% at December 31, 1994. At December 31, 1995, the Company's
working capital was $124.1 million, with a current ratio of 2.3 to 1 compared
with $100.2 million, with a current ratio of 1.7 to 1 at December 31, 1994.
In October 1995, the Company reached an agreement with Gildea Investment
Company ("Gildea") and other investors to provide up to $25 million of equity
financing on an as needed basis to assist in financing future acquisitions.
The equity investment will be in the form of senior cumulative convertible
preferred stock ("the Preferred") issued by the Company. The Preferred will
be issued at $100 per share with an annual cumulative dividend rate of 8.5%,
with no mandatory redemption, and will be convertible to common stock at a
price of $7 per share. The Company will have the option to pay dividends in
the form of a pay-in-kind cumulative preferred stock. Under the terms reached
with Gildea, the Company will only issue the new equity on an as needed basis
for prospective acquisitions. Gildea has the option to invest up to $10
million if a like amount of the Preferred has not been issued by the Company
by April 4, 1996.
On January 15, 1996, the Company entered into an agreement to acquire
substantially all of the assets and certain liabilities of Garrett Aviation
Services, a leading provider of aviation services in the business aviation
aftermarket. The purchase price is approximately $145 million which the
Company intends to finance through the issuance of $125 million of long-term
senior subordinated notes and $25 million of 8.5% cumulative convertible
<PAGE>
<PAGE> 19
Preferred Stock. In addition, borrowings under the Company's Revolving Senior
Bank Debt will be necessary to the extent the purchase price plus transaction
cost exceeds the amount of funds generated from the issuance of the notes and
Preferred Stock described above. The acquisition is contingent upon, among
other things, receiving certain governmental approval and financing on terms
that are satisfactory to the Company. The Company is currently soliciting the
holders of its 9 1/8% Senior Notes to amend certain covenants in order to
permit additional borrowings and amend the restrictions on the payment of cash
dividends. As of February 23, 1996, the Company received consent from the
required majority of note holders to amend the covenants. It is anticipated
that the acquisition will be completed in the latter part of April 1996. The
Company may be required to pay a break-up fee of up to potentially $5.0
million if, under certain circumstances such as a breach of the agreement, the
acquisition is not consummated. See Note 3 of Notes to Consolidated Financial
Statements.
The Company discontinued its minerals and offshore products and services
operations in 1984, its telecommunications operation in 1988 and its submarine
propulsion unit manufacturing operation and its environmental services
operation in 1990. In connection with these actions, the Company has
approximately $15.7 million accrued to cover the cost of certain long-term
remediation activities, wind-down and final closure of certain long-term U.S.
government contracts, resolution of certain litigation and disposition of
remaining properties. The Company anticipates that these activities will be
completed over the next three years.
Environmental
- -------------
The Company's operations are subject to a variety of federal, state and
local laws and regulations relating to the environment. The Company believes
that its facilities are operated substantially in compliance with applicable
environmental laws and regulations on an overall basis. However, as described
below, some areas require remedial action.
A subsidiary of the Company, United Nuclear Corporation, has been
involved in environmental reclamation of a former uranium mill and mill
tailings facility since 1988. The reclamation plan has been approved by the
U.S. Nuclear Regulatory Commission and the U.S. Environmental Protection
Agency and reclamation activities are proceeding on schedule. Site
reclamation under this plan is scheduled to be completed by the end of 1997.
The cost of this remediation was $2.1 million in 1995, $2.2 million in 1994
and $1.7 million in 1993. It is anticipated, based on the approved
reclamation plan, that the cost of future remediation through 1997 will be
approximately $4.0 million. Such cost has been accrued as part of the
discontinued operation.
The Company sold one of its manufacturing facilities, Chemical Dynamics,
Inc., in June 1995 to the former owner of the subsidiary. Under the terms of
the agreement, the former owner assumed, among other things, all known
environmental risks related to the operations of the business.
During 1993, the State of New Mexico passed the New Mexico Mining Act
("Act"), which imposes certain reclamation and other regulatory obligations
on operators of existing and new mining operations. A number of mines
operated by the Company's subsidiary, United Nuclear Corporation, at various
times during the period 1970 through 1982, may be covered by the Act.
<PAGE>
<PAGE> 20
However, it is impossible to determine, based on the provisions of the Act and
regulations issued by the State, the extent to which these mines may be
covered by the Act and, if covered, to estimate the cost of remediation or the
timing and extent of remedial action which may be required.
Lockheed-Martin Corporation ("Lockheed") began an action in United
States District Court of the Central District of California under the
Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA") in August 1994. In that action, Lockheed seeks to have owners and
operators of property situated above the San Fernando Valley aquifer
contribute to the costs incurred or to be incurred by Lockheed to clean up
contaminated groundwater constituting the aquifer. A subsidiary of the
Company, Pacific Airmotive Corporation ("PAC"), was made one of the defendants
in the action. The Company and a second subsidiary, Airwork Corporation, were
added as defendants in December 1995. Based on several series of soil tests
conducted on PAC's property and consultants' reports since approximately 1989,
the Company concluded, and continues to conclude, that there is no
demonstration that contaminants of concern identified in the groundwater by
the U.S. Environmental Protection Agency have been transmitted from the
surface of PAC's property to the underlying groundwater approximately 200 feet
below ground surface. PAC is also pursuing alternative remedies against Purex
Industries, Inc. which owned and operated the property prior to 1985. The
Company and Airwork have filed motions to dismiss the action as to them on the
grounds, among others, that they did not own or operate PAC's property, or
control PAC's operations. The Company is not able to determine whether it or
a subsidiary of the Company will be held liable as a result of the Lockheed
action, or to establish a range of loss.
Based on the Company's assessment of the matters described above, the
Company believes that these and other environmental matters will not have a
material adverse impact on the Company's financial condition, results of
operations or liquidity. For further details with respect to environmental
matters, see Note 11 of Notes to Consolidated Financial Statements.
Impact of Inflation
- -------------------
The Company believes that inflation did not have a material effect on
the results of operations or financial condition in 1995.
New Accounting Standards
- ------------------------
During 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 - "Accounting for Stock-Based
Compensation." This statement becomes effective in 1996 and encourages,
rather than requires, companies to recognize compensation expense based on the
estimated fair value of employee stock options and other equity instruments
issued to employees at the date the instruments are granted. Companies that
choose to continue to follow the measurement guidance in APB Opinion No. 25 -
Accounting for Stock Issued to Employees will be required to disclose pro
forma net income and earnings per share as if the accounting method in
Statement of Financial Accounting Standards No. 123 had been applied.
Management will continue to follow the measurement guidance in APB Opinion No.
25 when accounting for stock issued to Company employees.
<PAGE>
<PAGE> 21
Also issued in 1995 was Statement of Financial Accounting Standards No.
121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement becomes effective in 1996 and
requires that assets to be held and used be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset in question may not be recoverable. Companies will have to estimate
future cash flows expected from using the asset and its eventual disposition.
If this amount is less than the carrying amount of the asset, there is an
impairment loss. The impairment loss is measured by the difference between
the asset's fair value and its carrying amount. Assets to be disposed of,
with certain exceptions, would be reported as the lower of cost or fair value
less the cost to sell the asset. The Company currently follows the
provisions of this Standard.
ITEM. 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
UNC Incorporated and Subsidiaries
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales and operating revenues $536,243 $525,833 $438,293
Costs and expenses
Costs and operating expenses 456,935 444,375 360,869
Selling, general and administrative expenses 56,952 69,768 53,987
Restructuring charge 58,706
Multi-employer pension plan withdrawal charge 14,000
-------- -------- --------
513,887 586,849 414,856
-------- -------- --------
Operating income (loss) 22,356 (61,016) 23,437
Other income (expense)
Interest expense (19,514) (18,549) (13,865)
Other 116 (1,850) (1,821)
-------- -------- --------
(19,398) (20,399) (15,686)
-------- -------- --------
Earnings (loss) before income taxes and
extraordinary item 2,958 (81,415) 7,751
Income tax benefit (provision) (1,035) 13,483 3,843
-------- -------- --------
Earnings (loss) before extraordinary item 1,923 (67,932) 11,594
Extraordinary item - early retirement of debt,
net of income taxes (532)
-------- -------- --------
Net earnings (loss) $ 1,923 $(67,932) $ 11,062
======== ======== ========
Earnings (loss) per share
Earnings (loss) before extraordinary item $ .11 $ (3.89) $ .67
Extraordinary item (.03)
-------- -------- --------
Net earnings (loss) $ .11 $ (3.89) $ .64
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 22
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
December 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
Assets
Current assets
Cash $ 1,671 $ 2,619
Accounts receivable, less allowance
for doubtful accounts of $3,186
and $3,706, respectively 102,462 89,279
Unbilled costs and accrued profits on
contracts in progress 11,128 14,097
Inventories 91,130 85,110
Assets held for sale 5,099 49,174
Other 10,156 8,168
-------- --------
Total current assets 221,646 248,447
Assets held for sale - noncurrent 12,796 2,300
Property, plant and equipment, at cost
Land, buildings and improvements 22,087 22,081
Machinery and equipment 60,362 51,397
-------- --------
82,449 73,478
Less accumulated depreciation and amortization 34,381 28,789
-------- --------
Net property, plant and equipment 48,068 44,689
Cost in excess of net assets of acquired
companies, less accumulated amortization
of $28,175 and $23,397, respectively 136,298 140,128
Other noncurrent assets 27,453 32,470
-------- --------
Total assets $446,261 $468,034
======== ========
</TABLE>
<PAGE>
<PAGE> 23
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
December 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 1,748 $ 42,971
Accounts payable 39,614 38,918
Income taxes 1,392 3,521
Accruals and other current liabilities 54,794 62,863
-------- --------
Total current liabilities 97,548 148,273
Long-term debt, less current portion
Revolving Senior Bank Debt, interest rate
at December 31, 1995, 8.71% due 2000 37,181
9 1/8% Senior Notes due 2003 100,000 100,000
7 1/2% Convertible Subordinated Debentures due 2006 64,800 69,000
Other 1,352 2,352
-------- --------
Total long-term debt, less current portion 203,333 171,352
Other noncurrent liabilities 45,228 49,512
-------- --------
Total liabilities 346,109 369,137
Shareholders' equity
Series preferred stock, par value $1 per share;
Authorized 12,000,000 shares; 250,000
designated Series A Junior Participating
Preferred stock, none issued
Common stock, par value $0.20 per share;
Authorized 50,000,000 shares, issued
18,393,868 and 18,242,134 shares, respectively 3,679 3,648
Additional paid-in capital 123,717 122,940
Retained earnings (deficit) (15,450) (17,373)
-------- --------
111,946 109,215
Less
Treasury stock, at cost (700,000 shares) 8,750 8,750
Minimum pension liability adjustment 1,801 540
Unearned compensation - restricted stock 1,243 1,028
-------- --------
Total shareholders' equity 100,152 98,897
-------- --------
Total liabilities and shareholders' equity $446,261 $468,034
======== ========
</TABLE>
<PAGE>
<PAGE> 24
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 1,923 $(67,932) $ 11,062
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 12,491 12,727 11,477
Provision for pension withdrawal liability 14,000
Provision for restructuring 58,706
Provision for losses on accounts receivable 1,637 4,296 1,602
Income from leveraged lease (2,475) (1,263)
Deferred income taxes (benefit) (28) (14,587) (5,258)
Gain on disposition of assets and other (52) (350) (583)
Extraordinary loss on retirement of debt 625
Changes in assets and liabilities, net of
effect of acquisitions and divestitures:
(Increase) decrease in accounts receivable (15,355) (4,228) 33
(Increase) decrease in unbilled costs and
accrued profits on contracts in progress 2,969 14,065 (8,974)
(Increase) in inventories (4,974) (19,665) (9,082)
(Increase) decrease in other current assets 484 5,688 (7,111)
(Increase) decrease in other noncurrent assets (2,538) 389 (640)
Increase (decrease) in accounts payable 709 341 (3,408)
Increase (decrease) in accruals and other
current liabilities (5,816) (10,255) 5,855
Increase (decrease) in income taxes payable (2,660) 1,459 1,195
(Decrease) in other noncurrent liabilities (1,666) (6,559) (1,446)
(Decrease) in discontinued operations
liabilities (4,936) (5,115) (5,721)
-------- -------- --------
Total adjustments (19,735) 48,437 (22,699)
Net cash provided (used) by --------- --------- --------
operating activities (17,812) (19,495) (11,637)
-------- -------- --------
</TABLE>
<PAGE>
<PAGE> 25
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Cont.)
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Net proceeds from sale of assets 33,600 11,713 10,843
Additions to property, plant and equipment (6,767) (10,299) (11,250)
Acquisition of subsidiaries, net of cash acquired (947) (4,911) (48,477)
Proceeds from sale of leveraged lease 6,758
Investment in leveraged lease (2,697)
Other transactions, net 39 1
Net cash provided (used) by -------- -------- --------
investing activities 25,886 3,300 (51,580)
-------- -------- --------
Cash flows from financing activities:
Additions to debt 382,005 201,085 228,632
Reductions in debt (391,247) (184,045) (265,966)
Issuance of 9 1/8% Senior Notes 100,000
Exercise of stock options 220 280 77
Net cash provided (used) by -------- -------- --------
financing activities (9,022) 17,320 62,743
-------- -------- --------
Net increase (decrease) in cash (948) 1,125 (474)
Cash at beginning of year 2,619 1,494 1,968
-------- -------- --------
Cash at end of year $ 1,671 $ 2,619 $ 1,494
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 26
UNC Incorporated and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
(Dollars in thousands)
Additional
Common Stock Paid-in Retained
Shares Par Value Capital Earnings Other Total
---------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 18,002,334 $ 3,600 $121,292 $ 39,497 $ (8,750)* $155,639
Net earnings 11,062 11,062
Award of restricted
stock under the
employees' stock plan 65,000 13 381 394
Exercise of stock
options 18,000 4 73 77
Minimum pension
liability adjustment (1,345) (1,345)
Unearned compensation -
restricted stock (341) (341)
---------- --------- -------- -------- -------- --------
Balance at
December 31, 1993 18,085,334 3,617 121,746 50,559 (10,436) 165,486
Net loss (67,932) (67,932)
Award of restricted
stock under the
employees' stock plan 97,000 19 926 945
Exercise of stock
options 59,800 12 268 280
Minimum pension
liability adjustment 805 805
Unearned compensation -
restricted stock (687) (687)
--------- --------- -------- -------- -------- --------
Balance at
December 31, 1994 18,242,134 3,648 122,940 (17,373) (10,318) 98,897
Net income 1,923 1,923
Award of restricted
stock under the
employees' stock plan 104,534 21 567 588
Exercise of stock
options 47,200 10 210 220
Minimum pension
liability adjustment (1,261) (1,261)
Unearned compensation -
restricted stock (215) (215)
--------- --------- -------- -------- -------- --------
Balance at
December 31, 1995 18,393,868 $ 3,679 $123,717 $(15,450) $(11,794) $100,152
========== ========= ======== ======== ======== ========
</TABLE>
*Treasury Stock
<PAGE>
<PAGE> 27
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation. The accompanying financial statements
include the accounts of UNC Incorporated and its Subsidiaries ("the Company")
after elimination of all significant intercompany accounts and transactions.
(b) Long-Term Contracts. Revenues under fixed-price production
contracts are primarily recognized under the percentage-of-completion method
and are measured principally on a cost-to-cost basis. Cost estimates are
reviewed periodically as the work progresses, and adjustments are reflected
in the period in which revisions to such estimates are deemed necessary.
Revenues under fixed rate per hour service contracts are recognized as
services are performed based on actual hours incurred under the contracts.
Performance award fees incorporated in certain government contracts are
recognized when there is sufficient information to assess expected contract
performance. Provisions for estimated losses on contracts are recorded when
identified.
(c) Inventories. Valuation of inventories is at the lower of cost or
market, utilizing the first-in, first-out and average cost methods.
(d) Depreciation and Amortization. The Company's property, plant and
equipment are depreciated and amortized over their estimated useful lives by
the straight-line method, using periods ranging from 10 to 30 years for
buildings and improvements and from 3 to 10 years for machinery and equipment.
(e) Cost in Excess of Net Assets of Acquired Companies. The excess of
acquisition cost over the fair value of tangible and identifiable intangible
net assets of acquired companies at date of acquisition is amortized on a
straight-line basis over periods ranging from 10 to 40 years. The Company
assesses the recoverability of cost in excess of net assets of acquired
companies by determining whether the amortization of this intangible asset
over its remaining life can be recovered through estimated future undiscounted
operating cash flows. If it is not recoverable, the carrying value of the
cost in excess of net assets of acquired companies will be reduced by the
estimated shortfall of discounted cash flows.
(f) Pension Plans and Post-retirement Benefits. Substantially all non-
union employees of the Company are covered under defined contribution plans.
The cost of these plans is a fixed percentage of the participants' eligible
compensation. In addition, the Company provides benefits to a limited number
of active and retired employees under an unfunded contributory defined benefit
post retirement health care plan. Also, the Company participates in multi-
employer defined benefit pension plans for certain active and retired union
employees. The Company's policy is to fund these benefits in accordance with
the provisions of the collective bargaining agreements.
(g) Income Taxes. Deferred income taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and credit carryforwards, and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are reduced by a
valuation allowance when it is "more likely than not" that some portion or all
<PAGE>
<PAGE> 28
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
(h) Environmental Liabilities. The Company accrues environmental costs
on an undiscounted basis when it is probable that a liability has been
incurred and the amount can be reasonably estimated. To the extent such costs
are covered by U.S. government contracts, these costs are treated as contract
cost and recognized as incurred.
(i) Earnings Per Share. The calculation of earnings per share of common
stock is based on the weighted average number of shares outstanding, assuming
the exercise of stock options where the impact is dilutive. The weighted
average number of shares of common stock outstanding for the years 1995, 1994
and 1993 were 17,666,000, 17,474,000 and 17,356,000, respectively.
(j) Use. of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Restructuring
-------------
In the second quarter of 1994, the Company recorded a restructuring
charge of $58.7 million ($47 million after-tax) in connection with a strategic
program to reduce its cost structure and asset base in light of the continuing
depressed economic conditions in the aviation industry. The restructuring
charge consisted of a $21.8 million non-cash charge applicable to the
writedown of the estimated net realizable value of the assets, including $4.6
million of goodwill, associated with the sale and disposition of two business
units, the closing of a facility and the consolidation of two other plants,
and a $20.5 million provision for cost associated with the sale, closing and
consolidation of two business units and facilities, including severance and
related cost. The remaining $16.4 million restructuring charge consists of
non-cash charges of $3.0 million related to the writedown of the carrying
value of certain under utilized plant and equipment that were identified for
sale under the restructuring program and a $13.4 million writedown of the
carrying value of inventory that was identified for sale to third party
brokers and others under the restructuring program. The balance of the
reserve for future expenditures related to restructuring at December 31, 1995,
was $3.9 million.
3. Acquisitions and Prospective Acquisition
----------------------------------------
On January 15, 1996, the Company entered into an agreement to acquire
substantially all of the assets and certain liabilities of Garrett Aviation
Services, a leading provider of aviation services in the business aviation
aftermarket. The purchase price is approximately $145 million which the
Company intends to finance through the issuance of $125 million of long-term
senior subordinated notes and $25 million of 8.5% cumulative convertible
Preferred Stock. In addition, borrowing under the Company's Revolving Senior
Bank Debt will be necessary to the extent the purchase price plus transaction
costs exceeds the amount of funds generated from the issuance of the notes and
<PAGE>
<PAGE> 29
Preferred Stock. The Company is currently in the process of soliciting the
holders of the 9 1/8% Senior Notes to amend certain covenants in order to
permit the borrowing of additional debt and amend the restrictions on the
payment of cash dividends to permit the payment of dividends on the Preferred
Stock. As of February 23, 1996, the Company received consent from the
required majority of note holders to amend the covenants. The acquisition is
contingent upon, among other things, receiving governmental approval under the
Hart Scott Rodino Act and financing on terms that are satisfactory to the
Company. It is anticipated that the acquisition will be completed in the
latter part of April 1996. Under certain circumstances, if the acquisition
is not ultimately consummated, the Company may be required to pay a break-up
fee of up to potentially $5.0 million.
During 1993, the Company acquired the entities described below, which
were accounted for by the purchase method of accounting. The results of
operations of the acquired companies are included in the Company's statement
of earnings for the periods in which they were owned by the Company.
In April 1993, the Company acquired substantially all of the assets and
technology, and assumed certain liabilities of Artex Tool Corporation and
Stockton Enterprises (collectively "Artex") for $5.2 million which was funded
through a borrowing under the Company's revolving credit agreement. Artex is
engaged in the remanufacture and repair of aircraft engine gear box housings,
wheels and other aircraft and engine parts and accessories. Following its
acquisition this operation was renamed UNC Artex. Under the terms of the
purchase agreement, the Company may be required to make additional payments
of up to $1.2 million, contingent upon Artex achieving certain profit levels
during the three year period ending May 1, 1996. The excess of the purchase
price over the estimated fair value of the tangible and identifiable
intangible net assets acquired is amortized over a period of twenty-five years
using the straight-line method. Any future amounts earned under the terms of
this agreement will be recorded as additional cost in excess of net assets of
acquired companies.
In July 1993, the Company acquired substantially all of the assets and
technology, and assumed certain liabilities of Johnson Technology ("Johnson"),
a division of Freedom Forge Corporation for $14.5 million in cash and $4
million in notes, payable in annual installments through July 1997. The cash
portion of the purchase price was funded from proceeds received from the sale
of 9 1/8% Senior Notes (see Note 7 of Notes to Consolidated Financial
Statements). Johnson provides proprietary turbine nozzle and vane
<PAGE>
<PAGE> 30
manufacturing and repairs, and specialized non-conventional machining of super
alloys such as electro-chemical deep hole drilling, laser milling, and
electro-discharge machining. Following its acquisition, this operation was
renamed UNC Johnson Technology. Under the terms of the purchase agreement,
the Company may be required to make additional payments contingent upon
Johnson achieving certain gross profit levels during a five year period ending
in September 1998 of up to $5 million of which $0.9 million was paid in 1995,
and $1.0 million in 1994. The excess of the purchase price over the estimated
fair value of the tangible and identifiable intangible net assets acquired is
amortized over a period of forty years using the straight-line method.
Contingent amounts earned under the terms of this agreement are recorded as
additional cost in excess of net assets of acquired companies.
In August 1993, the Company acquired the assets and technology and
assumed certain liabilities of All Fab, Inc. ("All Fab"), an aerostructure
supplier for a major airframe manufacturer. All Fab serves the aviation
industry as a manufacturer of major aircraft structural components and sheet
metal sub-assemblies. Following its acquisition, this operation was renamed
UNC Aerostructures, Washington. The purchase price consisted of $2.7 million
in cash and $3.1 million in notes. The notes consist of a $1.8 million note
bearing interest at 8% and a $1.3 million note bearing interest at the prime
rate plus one half of one percent, payable in variable installments through
December 1998. The excess of the purchase price over the estimated fair value
of the tangible and identifiable intangible net assets acquired is amortized
over a period of forty years using the straight-line method.
In August 1993, the Company acquired substantially all the assets and
technology, and assumed certain liabilities of Metcalf Servicing Company
("Metcalf") for $4.5 million in cash and the Company elected to retire
$1.3 million of bank indebtedness of Metcalf. Metcalf serves the industrial
turbine engine market with overhauls, parts repair and contract maintenance
services. Following its acquisition, this operation was renamed UNC Metcalf
Servicing, Inc. The excess of the purchase price over the estimated fair
value of the tangible and identifiable intangible net assets acquired is
amortized over a period of twenty-five years using the straight-line method.
In October 1993, the Company acquired substantially all the assets and
assumed certain liabilities of Lear Siegler Management Services Corp. ("Lear
Siegler"). Lear Siegler provides contract services for the operation,
maintenance and repair of aircraft, land vehicles and marine vehicles for the
U.S. Department of Defense and the armed services of foreign governments.
Following its acquisition, this operation was renamed UNC Lear Siegler. The
purchase price was $17.4 million. The excess of the purchase price over the
estimated fair value of the tangible and identifiable intangible net assets
acquired is amortized over a period of twenty-five years using the straight-
line method.
Under the terms of the earn-out provisions of agreements related to
acquisitions prior to 1993, the Company paid $3.7 million in 1994, and $3.7
million in 1993. The earn-out provisions under these agreements have expired.
4. Contracts in Progress
---------------------
Unbilled costs and accrued profits on production contracts in progress
consist of the following:
<PAGE>
<PAGE> 31
<TABLE>
<CAPTION>
December 31,
---------------------
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
U.S. government contracts and
subcontracts:
Costs incurred and accrued profits
on contracts in progress $ 26,516 $ 14,192
Less progress billings to date 21,674 7,389
Unbilled costs and accrued profits -------- --------
on contracts in progress 4,842 6,803
Commercial contracts:
Costs incurred and accrued profits
on contracts in progress 6,286 7,294
Total unbilled costs and accrued -------- --------
profits on contracts in progress $ 11,128 $ 14,097
======== ========
</TABLE>
Amounts billed under contracts in progress and included in accounts
receivable at December 31, 1995 were $3.1 million under U.S. government prime
and subcontracts and $2.4 million under commercial contracts. At December 31,
1994 these amounts were $3.1 million and $2.2 million, respectively.
Also, included in accounts receivable at December 31, 1995 and 1994 were
other amounts due from the U.S. government totaling $37.7 million and $42.2
million, respectively, including unbilled amounts of $14.9 million and $18.3
million in 1995 and 1994, respectively.
Unbilled amounts are recoverable from the customer upon shipment of the
product, presentation of bills or completion of the contract. The Company
believes that a substantial portion (approximately 80%) of these unbilled
amounts will be collected in 1996.
Included in accounts receivable at December 31, 1995 and 1994 is $2.0
million of cost applicable to a $3.2 million claim for equitable adjustment
filed by the Company under a contract with the U.S. government. The claim,
which includes direct costs, overhead, general and administrative costs and
profit, arises from constructive change orders on the part of the government,
defective specifications, government caused delays and other issues in
connection with a contract to provide aircraft nozzle segment assemblies to
the U.S. Air Force. The Company has been advised by outside legal counsel
that a basis for entitlement exists and that recovery of the recorded amount
of the claim is probable.
Also included in accounts receivable at December 31, 1995 and 1994 is
a claim for $630,000 which the Company believes was improperly withheld by the
U.S. government in connection with a contract to provide aircraft intermediate
level maintenance, repair and overhaul services at six Naval Air Stations.
The claim arises from the U.S. government unilaterally imposing a previously
undisclosed conversion formula to the determination of the amount earned,
contrary to contract terms. In December 1993, the Company received a
favorable ruling on the claim from the Armed Services Board of Contract
Appeals which overturned the government's previous position and instructed the
<PAGE>
<PAGE> 32
government to reconsider the matter. The Company believes it will prevail in
realizing the amount of the claim that has been recorded in accordance with
the terms of the contract.
5. Inventories
-----------
Inventories as of December 31, 1995 and 1994, consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Component parts and materials $ 70,317 $ 61,282
Work in progress 17,436 21,161
Supplies 3,377 2,667
-------- --------
$ 91,130 $ 85,110
======== ========
</TABLE>
6. Assets Held for Sale
--------------------
Assets held for sale, which are stated at their estimated net realizable
value, consist principally of real estate and improvements and inventories of
the Company's former JT8 engine overhaul business that was closed in 1994, and
certain other inventory and underutilized property and equipment that has been
identified for sale under the Company's restructuring program. Also included
in assets held for sale is real estate of the Company's discontinued minerals
business. The Company expects to recover the recorded value of these assets
over the next three years.
7. Long-Term Debt
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Revolving Senior Bank Debt,
interest rate at December 31, 1995,
8.71% due 2000 $ 37,181
Revolving Senior Bank Debt,
prime plus 1/2% due 1995 $ 40,000
9 1/8% Senior Notes due 2003 100,000 100,000
7 1/2% Convertible Subordinated
Debentures due 2006 65,431 69,000
Other 2,469 5,323
-------- --------
205,081 214,323
Less current portion 1,748 42,971
-------- --------
$203,333 $171,352
======== ========
</TABLE>
<PAGE>
<PAGE> 33
In May 1995, the Company entered into a new revolving credit agreement
which provides for a five year credit line through May 2000 with a borrowing
capacity of up to $90 million, subject to borrowing base limitations as
defined in the agreement and reduced by outstanding letters of credit. The
Company's unused availability under the credit line was $33.0 million at
December 31, 1995. Interest is payable on the borrowings at a base rate, as
defined in the agreement, or the LIBOR rate plus, in each case, an applicable
margin based upon the Company's performance under certain financial ratios.
The interest rate at December 31, 1995, was 8.71%. The Company has agreed to
pay an annual commitment fee on the unused portion of the line at rates
ranging from 1/2 of 1% to 1/4 of 1% dependent on meeting certain financial
ratios. The revolving credit is collateralized by the Company's accounts
receivable and inventories. The agreement contains covenants which, among
other things, include provisions for the maintenance of certain financial
ratios and prohibits the payment of cash dividends,except for cash dividends
paid in connection with the senior cumulative convertible preferred stock to
be issued under the October 1995 agreement with Gildea Investment Company.
See Note 9 of Notes to Consolidated Financial Statements.
On July 29, 1993 the Company issued $100.0 million of 9 1/8% Senior
Notes due July 15, 2003. The Notes are redeemable, at the option of the
Company, on or after July 15, 1998 at declining premiums through 2000 and at
their principal amount thereafter. The debt indenture contains certain
covenants which, among other things, allow additional borrowings based on
certain financial ratios and restrict the payment of cash dividends. In
connection with the proposed acquisition of Garrett Aviation Services, the
Company is in the process of soliciting current note holders to amend certain
covenants in order to permit additional borrowings and amend the restrictions
on the payment of cash dividends. As of February 23, 1996, the Company
received consent from the required majority of note holders to amend the
covenants.
The 7 1/2% Convertible Subordinated Debentures due 2006 are convertible
into shares of the Company's common stock at a conversion price of $15.40 per
share and are redeemable (subject to certain restrictions) at the option of
the Company at declining premiums through 1996 and at the principal amount
thereafter. Annual sinking fund payments of $4.2 million commence in March
1996. During 1995 the Company purchased approximately $3.6 million face
amount of debentures to satisfy, in part, the March 1996 sinking fund payment.
In January 1996, the Company purchased in the open market an additional $0.6
million of the 7 1/2% Convertible Subordinated Debentures to satisfy the
balance of the 1996 sinking fund requirement.
Included in other assets at December 31, 1995 and 1994, respectively,
was approximately $3.5 million and $3.9 million of unamortized issue costs
incurred in connection with the issuance of the 9 1/8% Senior Notes and the
7 1/2% Convertible Subordinated Debentures.
Annual maturities of long-term debt during the next five years are
$1,748,000 in 1996, $5,317,000 in 1997, $4,317,000 in 1998, $4,318,000 in 1999
and $41,381,000 in 2000.
The estimated fair values of the 7 1/2% Convertible Subordinated
Debentures, and the 9 1/8% Senior Notes, based on quoted market prices, were
approximately $58.2 million and $98.0 million, respectively, at December 31,
1995 and $53.2 million and $89.0 million, respectively, at December 31, 1994.
<PAGE>
<PAGE> 34
The Company believes that the carrying value of its remaining debt, which
consists principally of revolving credit, approximates market value based on
interest rates that are available to the Company for the issuance of debt with
similar terms and maturities.
8. Other Liabilities
-----------------
Accruals and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Payroll and related expenses $ 28,339 $ 26,807
Pension plans 6,106 5,910
Accrued interest 5,812 6,473
Accruals related to discontinued operations 3,075 4,671
Accruals related to restructuring 3,858 7,812
Other 7,604 11,190
-------- --------
$ 54,794 $ 62,863
======== ========
</TABLE>
The Company discontinued its minerals and offshore products and services
operations in 1984, its telecommunications operation in 1988 and its submarine
propulsion unit manufacturing operation and its environmental services
operation in 1990. In connection with these actions, the Company has
approximately $15.7 million, $12.6 million included in noncurrent liabilities,
accrued to cover the cost of certain long-term remediation activities, wind
down and final closure of certain long-term U.S. government contracts,
resolution of certain litigation and disposition of remaining properties.
The Company anticipates that these activities will be completed over the next
three years.
9. Preferred Stock
---------------
In October 1995, the Company reached an agreement with Gildea Investment
Company ("Gildea") and other investors to provide up to $25 million of equity
financing on an as needed basis to assist in financing future acquisitions.
The equity investment will be in the form of a senior cumulative convertible
preferred stock ("the Preferred") issued by the Company. The Preferred will
be purchased at $100 per share with a cumulative annual dividend rate of 8.5%,
with no mandatory redemption, and will be convertible into common stock at a
price of $7 per share. The Company will have the option to pay dividends in
cash or in the form of a pay-in-kind cumulative preferred stock. Gildea has
the option to invest $10 million if a like amount of Preferred has not been
issued by the Company by April 4, 1996.
10. Preferred Stock Purchase Rights
-------------------------------
On September 25, 1987, the Board of Directors of the Company declared
a dividend of one Preferred Share Purchase Right for each share of common
<PAGE>
<PAGE> 35
stock outstanding on October 19, 1987. Each Right entitles the holder to
acquire one one-hundredth of a share of newly created Series A Junior
Participating Preferred Stock at an exercise price of $50 per one one-
hundredth of a Preferred Share. The Rights trade with the common stock and
are not exercisable or transferable apart from the common stock until 10 days
after a person or group acquires, or announces a tender offer for 20% or more
of the Company's outstanding common stock.
If the Company is acquired in a merger or other business combination,
each Right will entitle its holder to purchase, at the Right's then-current
exercise price, a number of the acquiring company's shares having a market
value at that time of twice the Right's exercise price. In addition, if
someone acquires 20% or more of the Company's outstanding common stock, each
Right will entitle its holder (other than the acquiring person) to purchase,
at the Right's then-current exercise price, a number of the Company's common
shares having a market value of twice the Right's exercise price.
Prior to the acquisition by someone of beneficial ownership of 20% or
more of the Company's common stock, the Rights are redeemable for $.01 per
Right either at the option of the Board of Directors or automatically in
connection with the consummation of any tender offer at a cash price per share
equal to or greater than the price approved by stockholders at a special
meeting which would be called under certain circumstances in accordance with
procedures contained in the Rights Plan. The Rights expire on October 19,
1997.
11. Litigation and Contingencies
----------------------------
Since 1985 the former Western Union has been seeking recoupment (the
"Claim") from various providers of international telex services ("ITPs") for
interconnect charges with respect to the use of Western Union's domestic telex
network during the late 1970s and early 1980s. Among these ITPs was TRT
Communications, Inc. ("TRT"), which the Company had acquired in September
1985. As part of the Company's acquisition of TRT, the Company had received
certain representations and warranties from the seller of TRT with respect to
the Claims. In January 1995, nearly seven years after a 1988 remand from the
U.S. Court of Appeals for the District of Columbia (the "Appeals Court"),
which had vacated an earlier determination by the FCC with respect to the
Claims, the FCC determined that the Claims were appropriate. The FCC's
determination was again appealed to the Appeals Court which on February 6,
1996 rendered a judgment upholding the FCC's determination with respect to
these matters. As a result, TRT may be liable to the former Western Union for
Claims and interest of approximately $5.0 million. However, the Company sold
its interest in TRT in 1988 and, in connection therewith, the Company provided
the purchaser with certain specific indemnities. The Company has been
informed that its purchaser has in turn sold TRT to a third party with whom
the Company has no contract for indemnity. As a consequence, the Company does
not believe that it has any indemnity liability to the current owner of TRT.
The Company intends to seek a rehearing by the Appeals Court, to assert a
protective claim against the seller of TRT, and to reject any claim by the
current owner of TRT. Both the Company and its outside legal counsel believe
the Company has meritorious defenses against any claim under its
indemnification agreement.
Lockheed-Martin Corporation ("Lockheed") began an action in United
States District Court of the Central District of California under the
<PAGE>
<PAGE> 36
Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA") in August 1994. In that action, Lockheed seeks to have owners and
operators of property situated above the San Fernando Valley aquifer
contribute to the costs incurred or to be incurred by Lockheed to clean up
contaminated groundwater constituting the aquifer. A subsidiary of the
Company, Pacific Airmotive Corporation ("PAC"), was made one of the defendants
in the action. The Company and a second subsidiary, Airwork Corporation, were
added as defendants in December 1995. Based on several series of soil tests
conducted on PAC's property and consultants' reports since approximately 1989,
the Company concluded, and continues to conclude, that there is no
demonstration that contaminants of concern identified in the groundwater by
the U.S. Environmental Protection Agency have been transmitted from the
surface of PAC's property to the underlying groundwater approximately 200 feet
below ground surface. PAC is also pursuing alternative remedies against Purex
Industries, Inc. which owned and operated the property prior to 1985. The
Company and Airwork have filed motions to dismiss the action as to them on the
grounds, among others, that they did not own or operate PAC's property, or
control PAC's operations. The Company is not able to determine whether it or
a subsidiary of the Company will be held liable as a result of the Lockheed
action, or to establish a range of loss.
The Company during 1995 was involved in litigation with respect to a
promissory note issued by the Company in July 1981 in connection with the
acquisition of Normco Contractors, Inc. ("Normco"), a former subsidiary of the
Company that was discontinued in 1984 and sold in 1985. The plaintiff, a
former owner of Normco, brought action to obtain payment of $2.2 million
allegedly due under the note. The Company did not make payment on the note
because the Company believed that, under the terms of the note and the related
purchase agreement, payment was contingent upon Normco attaining certain
operating profit levels that were not achieved. The plaintiff's motion for
summary judgment was granted in March 1992. However, in July 1993 the
appellate court reversed and remanded the case for trial. Following trial in
April 1994, a jury verdict was rendered in plaintiff's favor for the amount
of the note plus interest and attorney's fees. The Company appealed the
verdict on the grounds of prejudicial conduct by the trial judge as well as
on legal grounds that were essentially the same as those argued in its
previous successful appeal. The Appellate Court ruled in favor of the
plaintiff, and the Company paid the judgment of approximately $3.5 million in
October 1995. The Company is currently evaluating seeking recovery of all or
part of the judgment from the legal firm that represented the Company in the
1981 acquisition of Normco.
In June 1995, the Company sold its chemical milled aircraft and engine
component business located in Weatherford, Texas, Chemical Dynamics, Inc., to
the former owner of the business. Under the terms of the agreement, the
purchaser assumed, among other things, all known environmental risks related
to the operation of the business.
The Company and a subsidiary, UNC Airwork Corporation, are defendants
in litigation commenced in New York by Energy Services, Inc. ("ESI") seeking
$3.4 million in alleged contract damages relating to a proposal to provide and
install electrical generating and other related equipment for a third party.
The Company and Airwork believe they have meritorious defenses to ESI's
claims. Airwork has filed a counterclaim against ESI and an affiliate, Energy
Maintenance Corporation ("EMC") for more than $3.7 million. In December 1994,
the trial court granted Airwork's motion for partial summary judgment against
<PAGE>
<PAGE> 37
EMC, on a separate claim, in the amount of $458,000. The trial court
subsequently awarded $1.5 million of ESI's claims against the Company and
Airwork on a theory of unjust enrichment, based apparently on the opinion that
the Company, Airwork and ESI in 1992 were implementing an agreement between
Airwork and ESI's affiliate dated August 19, 1991. The Company and Airwork
are preparing for trial on Airwork's claim for more than $3.7 million, and
will appeal the trial court's award to ESI. The Company believes it is
probable that ESI and an affiliate will be found liable for Airwork's
remaining claims, and that any recovery against the Company and Airwork is not
predictable.
During 1993, the State of New Mexico passed the New Mexico Mining Act
("Act"), which imposes certain reclamation obligations on owners and operators
of existing and new mining operations. The State has asserted that a number
of mines operated by the Company's subsidiary, United Nuclear Corporation
("United Nuclear"), at various times during the period 1970 through 1982 may
be covered by the Act. Regulations for compliance with the Act were issued
in 1994. However, the regulations did not clarify the extent to which mines
previously operated by United Nuclear may be covered by the Act.
Consequently, it is impossible to estimate the cost of remediation or the
timing and extent of remedial action that may be required. The Company has
been advised by outside counsel that United Nuclear's defenses have merit, and
it is contesting the State's assertions.
A uranium mill and mill tailings facility of a subsidiary of the
Company, United Nuclear, located in Church Rock, New Mexico was placed on the
National Priorities List by the U.S. Environmental Protection Agency ("EPA")
in 1982, pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"). EPA issued an Administrative Order in
1989 requiring remediation of ground water on or adjacent to the site that is
the same as those contained in the reclamation plan submitted to the Nuclear
Regulatory Commission ("NRC") in 1988 by United Nuclear in accordance with its
license with the NRC. United Nuclear has been remediating the site in
accordance with the Administrative Order and the NRC license and has incurred
cost for such remediation of $2.1 million, $2.2 million and $1.7 million in
1995, 1994 and 1993, respectively. The Company has accrued approximately $4.0
million in the accompanying consolidated balance sheet for the balance of
remediation required under the approved reclamation plan.
The Company's former Naval Products Division has been named under
CERCLA, along with a number of other parties, as a Potentially Responsible
Party at several waste disposal sites. In each case, the Division has been
named as a de minimus party. The Company believes that any cost, estimated
to be less than a total of $100,000, that may be assessed to the Division is
recoverable under its U.S. government contracts.
The Company and its subsidiaries are also parties to various other legal
actions and administrative proceedings and subject to various claims arising
in the ordinary course of business. The Company believes that the disposition
of these matters will not have a material adverse effect on the financial
condition, results of operations or liquidity of the Company.
12. Income Taxes
------------
During 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 109 (SFAS No. 109), "Accounting for
<PAGE>
<PAGE> 38
Income Taxes" which supersedes SFAS No. 96. Similar to SFAS No. 96, SFAS No.
109 retains an asset and liability approach to accounting for income taxes.
This standard also requires recognition of income tax benefits for loss
carryforwards, credit carryforwards and certain temporary differences for
which tax benefits have not previously been recorded. The tax benefits
recognized must be reduced by a valuation allowance where it is more likely
than not that the benefits may not be realized. The Company adopted SFAS No.
109 as of January 1, 1993. There was no cumulative effect of this change in
accounting for income taxes on the consolidated financial statements.
The income tax provision for continuing operations consists of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
(Dollars in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Federal: Current $ 260 $ 103 $ 396
Deferred (97) (14,230) (5,664)
-------- -------- --------
163 (14,127) (5,268)
State: Current 803 1,001 1,019
Deferred 69 (357) 406
-------- -------- --------
872 644 1,425
-------- -------- --------
Total tax provision (benefit) $ 1,035 $(13,483) $ (3,843)
======== ======== ========
</TABLE>
The tax provision for continuing operations differs from the amount
computed using the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rate $ 1,006 $(27,681) $ 2,635
Amortization and write-off of cost in excess
of net assets of acquired companies 1,078 1,009 1,019
State taxes, net of federal tax benefit
and reduction of state tax accrual 600 425 1,238
Change in the valuation allowance for
deferred tax assets (1,331) 13,692 (8,242)
Foreign sales tax benefits (487) (381) (302)
Other 169 (547) (191)
-------- -------- --------
Tax provision (benefit) at actual rate $ 1,035 $(13,483) $ (3,843)
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 39
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 1,070 $ 503
Inventories, principally due to additional cost
inventoried for tax purposes and financial
statement allowances 1,679 1,666
Employee benefits, principally due to accrual
for financial reporting purposes 13,510 11,264
Accrual for costs of restructuring 8,750 12,112
Accrual for disposal of discontinued operations 5,020 5,820
Net operating loss carryforward 11,771 14,540
Alternative minimum tax credit carryforwards 1,730 1,730
Other 5,756 4,549
Less - valuation allowance (15,710) (17,041)
-------- ---------
Total deferred tax assets 33,576 35,143
-------- ---------
Deferred tax liabilities:
Plant and equipment, principally due to basis
differences (8,993) (8,617)
Contract income recognized for financial
reporting purposes (921) (1,232)
Intangibles (979)
Other (64) (320)
-------- ---------
Total deferred tax liabilities (10,957) (10,169)
-------- ---------
Net deferred tax asset $ 22,619 $ 24,974
======== =========
</TABLE>
The decrease in the deferred tax valuation allowance of $1,331,000 in
1995 was due to the realization of current income tax benefits resulting from
the reversal of temporary differences against financial statement income. The
increase in the deferred tax valuation allowance of $13,692,000 in 1994 was
due to the uncertainty of realizing the tax benefits from net operating losses
and certain tax assets generated by the 1994 restructuring provision, the
provision for the withdrawal from a multi-employer pension plan and other one-
time charges. The net change in the valuation allowance in 1993 was a
decrease of $10,070,000 of which $2,451,000 resulted from the realization of
tax benefits of temporary differences which reversed during the year and
$7,619,000 resulted from the Company's re-evaluation of the realizability of
future income tax benefit occasioned by various events, including the
acquisition of four new businesses, which resulted in an
<PAGE>
<PAGE> 40
adjustment to goodwill of $1,829,000, the awarding of approximately
$227,000,000 in new contracts and the decision to withdraw from the
unprofitable third-party JT8 engine overhaul product line. The amount of
deferred tax valuation allowance is determined based upon management's
evaluation of the net realizability of the future income tax benefits,
considering expiration of net operating losses, predictability of future
income, including the impact of the Company's restructuring program, and the
timing of reversal of temporary differences.
At December 31, 1995 and 1994, other current assets include net deferred
tax assets of approximately $5.7 million and $3.2 million and other noncurrent
assets include net deferred tax assets of approximately $16.9 million and
$21.7 million, respectively. Also, at December 31, 1995 and 1994, current
liabilities include income taxes payable of $1.4 million and $3.5 million,
respectively.
At December 31, 1995, the Company has net operating loss carryforwards
of $34,621,000 for income tax reporting purposes of which $8,727,000 expire
in 2008, $19,576,000 expire in 2009, and $6,318,000 expire in 2010. The
Company also has net operating loss carryforwards of $29,602,000 available for
purposes of federal alternative minimum tax of which $1,454,000 expire in
2008, $22,777,000 expire in 2009 and $5,371,000 expire in 2010. At December
31, 1995, the Company has alternative minimum tax credit carryforwards of
approximately $1,730,000 which are available to reduce future Federal regular
income taxes over an indefinite period.
In connection with an examination of the Company's federal income tax
returns for the years 1990 through 1992, the Internal Revenue Service ("IRS")
has proposed certain tax adjustments that could result in an additional tax
liability. The Company disagrees with a large majority of the proposed
adjustments and has asserted certain offsetting tax adjustments in its favor.
The Company has filed a written protest challenging the proposed adjustments
and supporting its right to the offsetting adjustments. Management and its
tax counsel are of the opinion that the issues making up most of the
additional tax liability proposed by the IRS are either not factually or
legally supportable and that the Company's offsetting adjustments are
meritorious. In addition, management is of the opinion that any additional
net tax liability that might ultimately result from the IRS audit would not
have a material adverse effect on the Company's consolidated financial
condition, results of operation or liquidity.
13. Incentive Compensation Plans
----------------------------
The Company has stock plans, approved by the shareholders, which provide
for the granting of options and restricted stock to officers and key
employees. Options are granted at no less than fair market value on the date
of grant, become exercisable in increments, in some instances partially
conditioned on the attainment of specific performance objectives, and expire
between six and ten years from the date of grant.
The 1990 Stock Option Plan for Key Employees reserved 1,125,000 shares
of common stock, either previously unissued shares or shares held in treasury,
for issuance upon the exercise of options or as stock appreciation rights or
as restricted stock awards. The exercise of an option is conditioned upon the
holder, (i) purchasing at fair market value, within ninety days of the grant,
stock equal to twenty-five percent of the number of options granted, and (ii)
continuing as beneficial owner of all such stock through the time of exercise.
<PAGE>
<PAGE> 41
Options are granted at no less than fair market value on the date of grant,
expire in ten years and vest in five annual installments of twenty percent
each January 1 following the date of grant. The 1985 stock plan for Key
Employees terminated as of December 31, 1994, and no further options will be
granted under that plan. However, 677,820 options remain outstanding and will
be exercisable in future years in accordance with the terms of the plan.
As of December 31, 1995, officers and employees eligible under the 1985
and 1990 plans have purchased 234,000 shares of the Company's common stock in
the open market in order to qualify under the terms of these plans and held
outstanding options to purchase an additional 1,597,862 shares.
A summary of certain plan information related to stock options is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
(Number of Shares) 1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year 1,912,996 1,788,896 1,735,946
Granted 150,000 423,000 159,000
Exercised (47,200) (59,800) (18,000)
Expired or canceled (417,934) (239,100) (88,050)
--------- --------- ---------
Outstanding at end of year 1,597,862 1,912,996 1,788,896
========= ========= =========
Exercisable at end of year 1,279,387 1,126,521 1,281,521
Available for grant at end of year 0 0 132,470
Price range of options
Outstanding $3.19- $3.19- $3.19-
9.75 9.75 8.63
Exercised $4.44- $3.88- $3.88-
5.75 6.57 5.75
</TABLE>
14. Pension Plans and Other Post-retirement Benefits
------------------------------------------------
The Company sponsors defined contribution plans that cover substantially
all of its employees. Contributions are based upon a percentage of the
employee's compensation. The cost of these plans was $6,273,000, $4,552,000
and $3,354,000 in 1995, 1994 and 1993, respectively.
A defined benefit plan is also maintained for a limited number of former
union personnel of an overhaul facility that the Company closed in 1994. The
cost of this plan was $98,000 in 1995, $81,000 in 1994 and $193,000 in 1993.
In connection with the restructuring program in the second quarter of 1994,
the Company recorded a curtailment loss of $460,000 as a result of the closing
of this facility and the termination of the employees who were covered under
this defined benefit plan. The projected benefit obligation and the fair
value of plan assets at December 31, 1995 were $1,568,000 and $985,000,
respectively. The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.25% in 1995.
The expected long-term rate of return on assets was 7.25% in 1995. Plan
assets consist principally of investments in commercial paper, marketable
securities, certificates of deposit and U.S. government obligations.
<PAGE>
<PAGE> 42
A subsidiary of the Company, UNC Airwork Corporation ("Airwork"), has
been a participating employer in a multi-employer pension plan covering its
hourly employees who are members of United Auto Workers ("UAW") Local 2315.
The plan is administered by trustees appointed by the UAW. Through December
1994, Airwork has made contributions under the plan on the basis of a portion
of its hourly payroll based on collective bargaining, and has expensed such
contributions on a current basis. The Company's contribution to the plan, as
required by the union contract, was $383,000 in 1994, and $313,000 in 1993.
The Company has not made any payments to the plan in 1995 because it withdrew
from the plan in January 1995.
During 1994, the plan's trustees informed participating employers that
the plan's obligations were substantially underfunded, that funding
deficiencies were incurred in the previous three plan years, and that a
substantial increase in employer contributions would be required. This
underfunded status of the plan is not a result of Airwork not meeting its
contractual obligations, as Airwork has consistently complied with its funding
responsibilities in accordance with the terms of the collective bargaining
agreement. On January 31, 1995, the UAW provided participating employers with
an amendment to their respective collective bargaining agreements that would
have the effect of terminating the plan as to each employer entering into such
an amendment and, by doing so, withdrawing from the plan. Airwork entered
into such an amendment, recognizing that participating employers not
withdrawing from the plan would be liable for underfunding on an ongoing
basis, that under the circumstances most employers would withdraw from the
plan, and that, as probably the largest participating employer, Airwork's
liability could be substantial. As a result of the UAW's action, and
confirming Airwork's expectations, employers representing approximately 95%
of the plan participants withdrew from the plan on January 31, 1995.
Under the rules and regulations of the Internal Revenue Service ("IRS")
regarding multi-employer plans, all employers who participate in an
underfunded multi-employer plan and withdraw are assessed a withdrawal
liability. Payment of the withdrawal liability is made over future years
while annual funding deficiencies, if not waived by the IRS, would be paid
at the time the waiver is denied. As a result of its withdrawal from the
plan, Airwork recognized as a non-recurring expense in 1994 of its portion of
the plan's unfunded liabilities and annual funding deficiencies which it
estimated to be approximately $14.0 million. The Company is currently
negotiating with the Plan Trustees regarding annual funding payments to the
plan for the withdrawal liability and anticipates payments in an undetermined
amount will begin in 1996.
The Company also contributes to other multi-employer plans that cover
approximately 566 employees. The cost of these plans was $630,000, $591,000
and $816,000 in 1995, 1994 and 1993, respectively.
The Company has non-qualified unfunded supplemental executive retirement
plans covering certain officers and directors for which the Company has
purchased cost recovery life insurance. The Company is the sole owner and
beneficiary of such policies. The amount of coverage is designed to provide
sufficient revenues to recover substantially all costs of the plans if the
assumptions made regarding mortality experience, policy earnings and other
factors are realized. As of December 31, 1995 and 1994 the projected benefit
obligation was $16,231,000 and $12,972,000, respectively, and the accumulated
benefit obligation was $15,883,000 and $12,640,000, respectively, which is
included in other noncurrent liabilities in the accompanying balance sheet.
<PAGE>
<PAGE> 43
The cost of these plans was $2,095,000, $2,280,000 and $1,232,000 for 1995,
1994 and 1993, respectively. The discount rate used in determining the
pension liabilities was 7.25% at December 31, 1995 and 8% at December 31,
1994. At December 31, 1995, the additional minimum liability exceeded the
unamortized transition amount by $1,801,000, net of deferred income taxes.
At December 31, 1994, the additional minimum liability exceeded the
unamortized transition amount by $540,000, net of deferred income taxes.
These amounts have been reflected in the accompanying consolidated balance
sheets as reductions in stockholders' equity at December 31, 1995 and 1994.
Post-retirement health care and life insurance benefits are provided to
a limited number of participating employees who become eligible for benefits
after reaching normal retirement age while employed by the Company. The plan,
which is an unfunded contributory defined benefit plan, covers approximately
3% of the Company's employees. Effective January 1, 1993, the Company adopted
the provisions of the Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions."
SFAS No. 106 requires the Company to accrue the estimated cost of such retiree
benefits payments, other than pensions, during the employee's active service
period. The Company previously expensed the cost of these benefits as claims
were paid. The Company is amortizing the unrecognized net loss and
unrecognized transition obligation over 20 years.
The actuarial and recorded liabilities for the post-retirement health
care and life insurance benefits at December 31, were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Accumulated post-retirement
benefit obligation:
Retirees $ 1,425 $ 1,320
Full eligible active plan participants 39 48
Other active participants 316 627
Total accumulated post-retirement benefit -------- --------
obligation 1,780 1,995
Unrecognized net loss (gain) 58 (329)
Unrecognized transition obligation (1,357) (1,437)
-------- --------
Accrued post-retirement benefit cost $ 481 $ 229
======== ========
</TABLE>
The net periodic post-retirement benefit cost for 1995 was $350,000 and
included $112,000 of service cost, $152,000 of interest and $86,000
amortization of the transition obligation. The cost for 1994 was $360,000 and
included $76,000 of service costs, $172,000 of interest and $112,000
amortization of the transition obligation.
For measurement purposes, a 7.25% and an 8% discount rate was used in
determining the accumulated post-retirement benefit obligation as of December
31, 1995 and 1994, respectively. Also, a 10% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1995; the rate
was assumed to decrease gradually to 6% for 2002 and remain at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. A 1% increase in the assumed health care cost
<PAGE>
<PAGE> 44
trend rates would increase the accumulated post-retirement benefit obligation
as of December 31, 1995 by approximately $202,000 and the aggregate of the
service and interest cost components of net periodic post-retirement benefit
cost for the year then ended by approximately $24,000.
The Company also contributes in accordance with a union agreement to a
multi-employer health benefit plan. The cost of this plan was $2,592,000,
$1,865,000 and $959,000 in 1995, 1994 and 1993, respectively.
15. Leases
------
In December 1994 the Company sold a McDonnell Douglas DC-10-30 aircraft
which had previously been covered under a leveraged lease. The net proceeds
received of $6.8 million approximated the Company's investment in the lease.
Income from the leveraged lease in 1994 and 1993 was $2.6 million and
$1.3 million, respectively ($1.5 million and $0.8 million net of income taxes
in 1994 and 1993, respectively).
The Company entered into several agreements for the sale and leaseback
of certain equipment which resulted in gains totaling approximately $2.6
million in 1993. The gains were deferred and are being amortized as a
reduction to rent expense over the lease terms. The leases are classified as
operating leases and the rental commitments and rental expenses are included
in the following summary.
The Company has noncancellable operating leases covering certain real
property and equipment used in its operations. Minimum rental commitments
under these leases are 1996, $8,290,000; 1997, $7,087,000; 1998, $6,765,000;
1999, $5,943,000; 2000, $4,167,000; and thereafter, $1,769,000. Rental
expenses for the years 1995, 1994 and 1993 were $9,186,000, $8,720,000, and
$5,702,000, respectively.
16. Cash Flows
----------
Cash payments for income taxes were $1.2 million, $0.8 million, and $1.8
million in 1995, 1994 and 1993, respectively. In these years, interest
payments were $19.6 million, $17.6 million, and $10.7 million, respectively.
In connection with the acquisition of companies, the Company assumed
liabilities of $44.5 million in 1993 (see Note 3 of Notes to Consolidated
Financial Statements).
17. Business Segment Information
----------------------------
The Company's operations are conducted within one business segment which
includes: the overhaul of aircraft engines, industrial gas turbine engines,
and aircraft accessories, the manufacture and remanufacture of jet engine and
aircraft components and providing maintenance and training, repair and
logistical contract services.
<PAGE>
<PAGE> 45
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales to federal government $228,512 $223,127 $148,849
======== ======== ========
Capital additions $ 6,767 $ 10,299 $ 11,250
======== ======== ========
Depreciation and amortization expense $ 12,491 $ 12,727 $ 11,477
======== ======== ========
</TABLE>
The Company maintains foreign marketing offices in Amsterdam, The Netherlands
and Singapore. Identifiable assets at these locations are not material.
Export sales from the Company's United States operations to unaffiliated
customers were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Europe, Africa, Middle East $ 71,283 $ 60,338 $ 30,706
Latin America 18,035 13,821 13,237
Asia, Pacific Rim 15,333 6,660 7,719
Canada 8,358 6,497 7,713
-------- -------- --------
Total $113,009 $ 87,316 $ 59,375
======== ======== ========
</TABLE>
Net sales of tangible products in 1995, 1994 and 1993 amounted to $335.2
million, $303.6 million and $322.4 million, respectively, and costs and
operating expenses related to tangible goods amounted to $273.5 million,
$244.4 million and $259.1 million, respectively.
<PAGE>
<PAGE> 46
18. Quarterly Summary (Unaudited)
-----------------------------
<TABLE>
<CAPTION>
(Dollars in thousands First Second Third Fourth Total
except per share amounts) Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- --------
<S> C> <C> <C> <C> <C>
Year Ended December 31, 1995
- ----------------------------
Revenues $ 125,703 $ 131,342 $ 137,437 $ 141,761 $ 536,243
Operating income 5,233 6,365 6,401 4,357 22,356
Net earnings 49 959 839 76 1,923
Net earnings per share .05 .05 .01 .11
Year Ended December 31, 1994
- ----------------------------
Revenues $ 138,412 $ 122,326 $ 129,721 $ 135,374 $ 525,833
Operating income (loss) 8,450 (63,746) 5,178 (10,898) (61,016)
Net earnings (loss) 2,462 (54,634) 30 (15,790) (67,932)
Net earnings (loss) per share .14 (3.12) (.90) (3.89)
</TABLE>
See Note 2 for a description of the restructuring charge in the second
quarter of 1994.
See Note 14 for a description of the multi-employer pension withdrawal
adjustment in the fourth quarter of 1994.
19. Guarantor Subsidiaries
----------------------
In July 1993, the Company issued $100 million principal amount of 9 1/8%
Senior Notes due 2003 (see Note 7 of Notes to Consolidated Financial
Statements). The notes are guaranteed by all of the Company's subsidiaries
in the manner described below. The combined guarantors are jointly and
severally liable under the subsidiary guarantees.
The Company's obligations under the Notes are unconditionally guaranteed
by each of the Company's subsidiaries (the "Guarantees"). Each Guarantee is
a senior unsecured obligation of the subsidiary providing such Guarantee and
ranks pari passu with all senior unsecured indebtedness of such subsidiary.
The subsidiaries also have guaranteed the indebtedness outstanding under the
Company's revolving credit facility (the "Subsidiary Bank Guarantees"). The
Subsidiary Bank Guarantees are collateralized, in general, by the accounts
receivable and inventory of the subsidiaries and therefore effectively rank
senior to the Guarantees. The Guarantees are in effect only for as long as
the Subsidiary Bank Guarantees remain in effect. If the Guarantees are
terminated the Notes will be obligations solely of the Company and will be
effectively subordinated to all existing and future indebtedness of the
subsidiaries.
<PAGE>
<PAGE> 47
The following condensed consolidating information presents:
(1) Condensed financial statements as of December 31, 1995 and 1994 and for
the years ended December 31, 1995, 1994 and 1993 of (a) the Company on
a parent company only basis (Parent Company), (b) the Combined
Guarantors, and (c) the Company on a consolidated basis.
(2) The Parent Company with its investments in subsidiaries accounted for
on the equity method.
(3) Elimination entries necessary to consolidate the Parent Company and its
subsidiaries.
<PAGE>
<PAGE> 48
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash $ 123 $ 1,548 $ 1,671
Accounts receivable, net 410 102,052 102,462
Unbilled costs and accrued
profits on contracts in progress 11,128 11,128
Inventories 91,130 91,130
Assets held for sale 114 4,985 5,099
Other 1,125 9,031 10,156
-------- -------- ---------
Total current assets 1,772 219,874 221,646
-------- -------- ---------
Assets held for sale noncurrent 2,834 9,962 12,796
Property, plant & equipment, net 706 47,362 48,068
Cost in excess of net assets
of acquired companies, net 136,298 136,298
Other noncurrent assets 9,748 17,705 27,453
Investments in and advances
to subsidiaries 343,366 $(343,366)
-------- -------- --------- ---------
Total assets $358,426 $431,201 $(343,366) $ 446,261
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 49
UNC INCORPORATED
Condensed Consolidating Balance Sheet (Cont.)
As of December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,631 $ 117 $ 1,748
Accounts payable 2,784 36,830 39,614
Accruals and other current liabilities 21,253 34,933 56,186
-------- -------- ---------
Total current liabilities 25,668 71,880 97,548
-------- -------- ---------
Long-term debt 202,981 352 203,333
Other noncurrent liabilities 20,875 24,353 45,228
-------- -------- ---------
Total liabilities 249,524 96,585 346,109
-------- -------- ---------
Common stock and additional paid
in capital 127,396 127,396
Retained earnings (deficit) (15,450) (15,450)
Equity of subsidiaries and
advances of parent 343,366 $(343,366)
-------- -------- --------- ---------
111,946 343,366 (343,366) 111,946
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 1,801 1,801
Unearned compensation-restricted
stock 1,243 1,243
-------- -------- --------- ---------
Total shareholders' equity 108,902 334,616 (343,366) 100,152
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $358,426 $431,201 $(343,366) $ 446,261
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 50
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash $ 1 519 $ 1,100 $ 2,619
Accounts receivable, net 640 88,639 89,279
Unbilled costs and accrued
profits on contracts in progress 14,097 14,097
Inventories 85,110 85,110
Assets held for sale 18,449 30,725 49,174
Other 1,168 7,000 8,168
-------- -------- ---------
Total current assets 21,776 226,671 248,447
-------- -------- ---------
Assets held for sale noncurrent 2,300 2,300
Property, plant & equipment, net 790 43,899 44,689
Cost in excess of net assets
of acquired companies, net 140,128 140,128
Other noncurrent assets 10,011 22,459 32,470
Investments in and advances
to subsidiaries 304,392 $(304,392)
-------- -------- --------- ---------
Total assets $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 51
UNC INCORPORATED
Condensed Consolidating Balance Sheet (Cont.)
As of December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 14,400 $ 28,571 $ 42,971
Accounts payable 1,387 37,531 38,918
Accruals and other current liabilities 25,643 40,741 66,384
-------- -------- ---------
Total current liabilities 41,430 106,843 148,273
-------- -------- ---------
Long-term debt 171,000 352 171,352
Other noncurrent liabilities 16,892 32,620 49,512
-------- -------- ---------
Total liabilities 229,322 139,815 369,137
-------- -------- ---------
Common stock and additional paid
in capital 126,588 126,588
Retained earnings (deficit) (17,373) (17,373)
Equity of subsidiaries and
advances of parent 304,392 $(304,392)
-------- -------- --------- ---------
109,215 304,392 (304,392) 109,215
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 540
Unearned compensation-restricted
stock 1,028 1,028
-------- -------- --------- ---------
Total shareholders' equity 107,647 295,642 (304,392) 98,897
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 52
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Year Ended December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
-------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 536,243 $ 536,243
Costs and expenses
Costs and operating expenses 456,935 456,935
Selling, general and
administrative expenses 16,423 40,529 56,952
Allocated expenses (19,739) 19,739
--------- --------- ---------
(3,316) 517,203 513,887
--------- --------- ---------
Operating income 3,316 19,040 22,356
Other income (expense)
Interest expense (17,987) (1,527) (19,514)
Other 141 (25) 116
Equity in income of
subsidiaries 11,367 $ (11,367)
--------- --------- --------- ---------
(6,479) (1,552) (11,367) (19,398)
--------- --------- --------- ---------
Earnings (loss) before income taxes (3,163) 17,488 (11,367) 2,958
Income tax benefit (provision) 5,086 (6,121) (1,035)
--------- --------- --------- ---------
Net earnings $ 1,923 $ 11,367 $ (11,367) $ 1,923
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 53
UNC INCORPORATED
Condensed Consolidating Statement of Earnings (Loss)
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 2,600 $ 523,233 $ 525,833
Costs and expenses
Costs and operating expenses 444,375 444,375
Selling, general and administrative
expenses 18,213 51,555 69,768
Restructuring charge 4,800 53,906 58,706
Multi-employer pension plan withdrawal
charge 14,000 14,000
Allocated expenses (22,803) 22,803
--------- --------- ---------
210 586,639 586,849
--------- --------- ---------
Operating income (loss) 2,390 (63,406) (61,016)
Other income (expense)
Interest expense (14,924) (3,625) (18,549)
Other (1,911) 61 (1,850)
Equity in income (loss) of
subsidiaries (55,838) $ 55,838
--------- --------- --------- ---------
(72,673) (3,564) 55,838 (20,399)
--------- --------- --------- ---------
Earnings (loss) before income taxes (70,283) (66,970) 55,838 (81,415)
Income tax benefit 2,351 11,132 13,483
--------- --------- --------- ---------
Net earnings (loss) $ (67,932) $ (55,838) $ 55,838 $ (67,932)
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 54
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Year Ended December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 1,263 $ 437,030 $ 438,293
Costs and expenses
Costs and operating expenses 360,869 360,869
Selling, general and administrative
expenses 12,856 41,131 53,987
Allocated expenses (15,481) 15,481
--------- --------- ---------
(2,625) 417,481 414,856
--------- --------- ---------
Operating income 3,888 19,549 23,437
Other income (expense)
Interest expense (11,897) (1,968) (13,865)
Other (1,869) 48 (1,821)
Equity in income of subsidiaries 17,658 $ (17,658)
--------- --------- --------- ---------
3,892 (1,920) (17,658) (15,686)
--------- --------- --------- ---------
Earnings before income taxes and
extraordinary items 7,780 17,629 (17,658) 7,751
Income tax benefit 3,814 29 3,843
--------- --------- --------- ---------
Earnings before extraordinary items 11,594 17,658 (17,658) 11,594
Extraordinary item-early retirement of
debt, net of income taxes (532) (532)
--------- --------- --------- ---------
Net earnings $ 11,062 $ 17,658 $ (17,658) $ 11,062
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 55
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash provided (used) by operating
activities $ (15,591) $ (2,221) $ (17,812)
--------- --------- ---------
Cash flows from investing activities:
Net proceeds from sale of assets 26,159 7,441 33,600
Additions to property, plant and
equipment (239) (6,528) (6,767)
Acquisition of subsidiaries (947) (947)
Net cash and short-term investments --------- --------- ---------
provided (used) by investing
activities 25,920 (34) 25,886
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 382,005 382,005
Reductions in debt (362,793) (28,454) (391,247)
Other transactions 220 220
Net cash transfers to (from) parent (31,157) 31,157
Net cash provided (used) by --------- --------- ---------
financing activities (11,725) 2,703 (9,022)
--------- --------- ---------
Net increase (decrease) in cash (1,396) 448 (948)
Cash at beginning of year 1,519 1,100 2,619
--------- --------- ---------
Cash at end of year $ 123 $ 1,548 $ 1,671
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 56
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash provided (used) by operating
activities $ (14,137) $ (5,358) $ (19,495)
--------- --------- ---------
Cash flows from investing activities:
Net proceeds from sale of assets 11,713 11,713
Additions to property, plant and
equipment (381) (9,918) (10,299)
Acquisition of subsidiaries (4,911) (4,911)
Proceeds from sale of leveraged lease 6,758 6,758
Other transactions, net 39 39
Net cash and short-term investments --------- --------- ---------
provided (used) by investing
activities 6,377 (3,077) 3,300
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 161,085 40,000 201,085
Reductions in debt (159,185) (24,860) (184,045)
Other transactions 280 280
Net cash transfers to (from) parent 6,242 (6,242)
Net cash provided (used) by --------- --------- ---------
financing
activities 8,422 8,898 17,320
--------- --------- ---------
Net increase in cash 662 463 1,125
Cash at beginning of year 857 637 1,494
--------- --------- ---------
Cash at end of year $ 1,519 $ 1,100 $ 2,619
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 57
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
-------- ---------- ------------
<S> <C> <C> <C>
Net cash provided (used) by operating
activities $ (384) $ (11,253) $ (11,637)
--------- --------- ---------
Cash flows from investing activities:
Net proceeds from sale of assets 10,843 10,843
Additions to property, plant and
equipment (331) (10,919) (11,250)
Acquisition of subsidiaries, net of
cash acquired (48,477) (48,477)
Investment in leveraged lease (2,697) (2,697)
Other transactions, net 68 (67) 1
Net cash and short-term investments --------- --------- ---------
provided (used) by investing
activities (2,960) (48,620) (51,580)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 193,132 35,500 228,632
Reductions in debt (210,632) (55,334) (265,966)
Issuance of 9-1/8% Senior Notes 100,000 100,000
Other transactions, net 77 77
Net cash transfers to (from) parent (80,022) 80,022
Net cash --------- --------- ---------
provided (used) by financing
activities 2,555 60,188 62,743
Net increase (decrease) in cash and --------- --------- ---------
short-term investments (789) 315 (474)
Cash at beginning of year 1,646 322 1,968
--------- --------- ---------
Cash at end of year $ 857 $ 637 $ 1,494
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 58
Report of Independent Accountants
The Board of Directors and Shareholders
UNC Incorporated:
We have audited the consolidated financial statements and the financial
statement schedule of UNC Incorporated and Subsidiaries listed in Item 14 to
this Annual Report on Form 10-K as of December 31, 1995 and 1994 and for the
years then ended. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UNC
Incorporated and Subsidiaries as of December 31, 1995 and 1994 and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
February 26, 1996
<PAGE>
<PAGE> 59
Independent Auditors' Report
The Board of Directors and Shareholders
UNC Incorporated:
We have audited the accompanying consolidated statements of earnings,
changes in shareholders' equity and cash flows of UNC Incorporated and
Subsidiaries for the year ended December 31, 1993. In connection with our
audit of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedule for the year ended December
31, 1993, as listed in the accompanying index under Item 14. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and the financial
statement schedule based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and the
cash flows of UNC Incorporated and Subsidiaries for the year ended December
31, 1993, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule for the year ended
December 31, 1993, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Washington, D.C.
February 9, 1994
<PAGE>
<PAGE> 60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
KPMG Peat Marwick were previously the principal certifying accountants
for the Company. Following discussions between KPMG Peat Marwick and
representatives of the Company, the parties determined that KPMG Peat Marwick
would cease to serve as the Company's auditors effective February 22, 1994.
The Company's Audit Committee was advised of these discussions and approved
of this action.
In connection with the audits of the Company's consolidated financial
statements for the fiscal year ended December 31, 1993, and in the subsequent
interim period through February 22, 1994, there were no disagreements between
the Company and KPMG Peat Marwick on any matter of accounting principles or
practices, financial statement disclosures or auditing scope or procedures,
which disagreements, if not resolved to KPMG Peat Marwick's satisfaction,
would have caused them to make reference in connection with their opinion to
the subject of the disagreement.
The audit report of KPMG Peat Marwick on the consolidated financial
statements of the Company and its Subsidiaries as of and for the year ended
December 31, 1993, did not contain any adverse opinion or disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles, except that, as required with respect to changes in
accounting principles, the 1993 audit report made reference to the Company's
adoption in 1993 of the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
Members of the management of the Company interviewed four of the "Big 6"
public accounting firms and requested that two of these firms present
proposals to the Audit Committee. On March 17, 1994, the two firms presented
their proposals to the Audit Committee, which, after due consideration,
recommended to the Company's Board of Directors that the firm of Coopers &
Lybrand be appointed as the Company's independent accountants for the year
ending December 31, 1994. The Board of Directors approved of the appointment
of the firm of Coopers & Lybrand on March 21, 1994, subject to ratification
by the Company's Annual Meeting of Shareholders to be held on April 29, 1994.
<PAGE>
<PAGE> 61
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) Directors of the Company. The information regarding directors in
response to Item 401 of Regulation S-K which will appear in the definitive
Proxy Statement of the Company in connection with the solicitation of proxies
for its 1996 Annual Meeting of Shareholders is incorporated herein by
reference.
(b) Executive Officers of the Company.
The following table sets forth the names and ages of all executive
officers of the Company, their positions and office with the Company, and the
period during which each person has served as such.
<TABLE>
<CAPTION>
Positions and Served as
Office Currently Held Officer
Name Age with the Company Since (1)
- ---- --- --------------------- ---------
<S> <C> <C> <C>
Dan A. Colussy 64 Chairman of the Board, President 1984
and Chief Executive Officer
and Director
Robert L. Pevenstein 49 Senior Vice President and 1987
Chief Financial Officer
John H. Moellering 57 Executive Vice President, 1993
Aviation Services Division
John J. Bonasia 62 Senior Vice President, 1990
Engine Overhaul Division
Robert A. Gustafson 49 Senior Vice President, 1994
Accessory Services Division
Gerald J. Knapp 53 Senior Vice President, 1991
Human Resources
Richard H. Lange 62 Senior Vice President, General 1987
Counsel and Secretary
Gregory M. Bubb 44 Vice President and Treasurer 1988
Paul X. McLain 55 Vice President, Financial Controls 1982
______________________
</TABLE>
(1) The dates indicated include service in offices other than current
office, but do not include any previous service as a Director.
There is no family relationship between any director, executive officer,
or person nominated or chosen by the Company to become a director or executive
officer and any other such person, director or executive officer.
<PAGE>
<PAGE> 62
The following information relates to the business experience during the
past five years of each Executive Officer named above:
Mr. Colussy has served as Chairman, President and Chief Executive
Officer of the Company since October 1995. Previously he was Chairman and
Chief Executive Officer of the Company since October 1994, and prior thereto
he was Chairman, President and Chief Executive Officer since April 1989 and
President and Chief Executive Officer since December 1984.
Mr. Pevenstein has served as Senior Vice President and Chief Financial
Officer of the Company since February 1992 and previously as Vice President
Finance and Chief Financial Officer since October 1987. He joined the Company
as Controller in September 1987.
Mr. Moellering joined the Company as Executive Vice President and Chief
Operating Officer, UNC Aviation Services in October 1993. Previously he was
President and Chief Executive Officer of Lear Siegler Management Services
Corporation from 1990 to 1993 and prior to that he was Corporate Vice
President with Automatic Data Processing, Inc. from 1987 to 1990.
Mr. Bonasia has served as Senior Vice President, Engine Overhaul
Division since October 1994. Prior to such time he served in various senior
management positions with the Company for more than five years.
Mr. Gustafson joined the Company as Senior Vice President, Accessory
Services Division in October 1994. Previously he was Group Vice President -
Aviation Division and President Page Avjet Corporation for the BBA Group PLC
from 1991 to 1994 and Group Vice President - AAR Service Companies of AAR
Corporate from 1990 to 1991.
Mr. Knapp has served as Senior Vice President, Human Resources since May
1994, he joined the Company as Vice President, Human Resources in April 1991.
Prior to such time he was Manager, Human Resources Management, for Thomason
Consumer Electronics, Inc. for more than five years.
Mr. Lange has served as Senior Vice President, General Counsel and
Secretary since May 1994, he was elected Vice President, General Counsel and
Secretary of the Company in July 1987.
Mr. Bubb has served as Vice President and Treasurer since May 1992. He
joined the Company as Treasurer in March 1988.
Mr. McLain joined the Company as Vice President, Financial Controls in
August 1982.
<PAGE>
<PAGE> 63
ITEM 11. EXECUTIVE COMPENSATION.
The information regarding executive compensation in response to Item 402
of Regulation S-K which will appear in the definitive Proxy Statement of the
Company in connection with the solicitation of proxies for its 1996 Annual
Meeting of Shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information regarding security ownership of certain beneficial
owners and management in response to Item 403 of Regulation S-K which will
appear in the definitive Proxy Statement of the Company in connection with the
solicitation of proxies for its 1996 Annual Meeting of Shareholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information regarding certain relationships and related transactions
in response to Item 404 of Regulation S-K which will appear in the definitive
Proxy Statement of the Company in connection with the solicitation of proxies
for its 1996 Annual Meeting of Shareholders is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
(1) and (2) Financial Statements and Financial Statement Schedules.
Page Number
Financial Statements: in this Report
- -------------------- --------------
Consolidated statements of earnings -
years ended December 31, 1995, 1994 and 1993 21
Consolidated balance sheets - as of
December 31, 1995 and 1994 22 - 23
Consolidated statements of cash flows -
years ended December 31, 1995, 1994 and 1993 24 - 25
Consolidated statements of changes in
shareholders' equity - years ended
December 31, 1995, 1994 and 1993 26
Notes to consolidated financial statements 27 - 57
Report of Independent Accountants 58
Independent Auditors' Report 59
<PAGE>
<PAGE> 64
Page Number
Index to Consolidated Financial Statement Schedules: in this Report
- --------------------------------------------------- --------------
Schedule VIII Valuation and qualifying
accounts - for the three
years ended December 31, 1995 73
Schedules other than those listed above have been omitted since they are
either not required, are not applicable, or the required information is
shown in the consolidated financial statements or related notes.
(3) Exhibits:
3.1 Certificate of Incorporation, as amended by Certificate of
Designations of Series A Preferred Stock, of the Company (filed
as Exhibit 4-H to Company's Registration Statement No. 33-13762
and incorporated herein by reference).
3.2 Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of Company (filed as Exhibit A to
the Company's Form 8.A dated October 9, 1987, and incorporated
herein by reference).
3.3 Amended and Restated By-Laws of the Company (including resolutions
of the Board of Directors of the Company on February 5, 1992
amending the By-Laws of the Company) (filed as Exhibit 3-C to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991 -- File No. 1-7795 and incorporated herein by reference).
4.1 Rights Agreement, dated as of September 25, 1987, between the
Company and Manufacturers Hanover Trust Company (filed as Exhibit
No. 1 to the Company's Form 8-A dated October 9, 1987 and
incorporated herein by reference).
4.2 Indenture, dated as of May 1, 1986, between the Company and
Maryland National Bank, Trustee, relating to the Company's 7 1/2%
Convertible Subordinated Debentures due 2006 (filed as Exhibit 4-A
to the Company's Registration Statement No. 33-5136 and
incorporated herein by reference).
4.3 First Supplemental Indenture, dated as of April 26, 1987, between
Maryland National Bank, Trustee (supplementing the Indenture,
dated May 1, 1986, between the Company and Maryland National Bank,
Trustee, relating to the Company's 7 1/2% Convertible Subordinated
Debentures due 2006) (filed as Exhibit 4-J to Registrant's
Registration Statement No. 33-13762 and incorporated herein by
reference).
4.4 Indenture, dated as of July 15, 1993, between the Company and
Continental Bank, National Association, Trustee, relating to the
Company's 9-1/8% Senior Notes due 2003 (filed as Exhibit 4-B to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993 -- File No. 1-7795 and incorporated herein by
reference).
<PAGE>
<PAGE> 65
4.5 First Supplemental Indenture, dated as of August 14, 1993, between
the Company and Continental Bank, National Association, Trustee
(supplementing the Indenture, dated July 15, 1993, between the
Company and Continental Bank, National Association, Trustee,
relating to the Registrant's 9-1/8% Senior Notes due 2003)
4.6 Second Supplemental Indenture, dated as of November 5, 1993,
between the Company and Continental Bank, National Association,
Trustee (supplementing the Indenture, dated July 15, 1993, between
the Company and Continental Bank, National Association, Trustee,
relating to the Registrant's 9-1/8% Senior Notes due 2003)
10.1 1977 Stock Plan for Key Employees of United Nuclear Corporation
and Its Subsidiaries, as amended on June 25, 1982 (filed as
Exhibit 10-F(i) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1982 -- File No. 1-7795 and
incorporated herein by reference).
10.2 1985 Stock Plans for Key Employees of UNC Resources, Inc. and Its
Subsidiaries (filed as Exhibit 28-C to the Company's Registration
Statement No. 2-99656, and incorporated herein by reference).
10.3 Resolutions adopted by the Board of Directors of the Company on
February 27, 1987, amending the 1985 Stock Plans for Key Employees
of UNC Resources, Inc. and Its Subsidiaries (filed as
Exhibit 10-A(ii) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1986 -- File No. 1-7795 and
incorporated herein by reference).
10.4 Extract from September 20, 1984 minutes of the Board of Directors
of the Company interpreting various general provisions of all
stock plans (filed as Exhibit 10-C(iv) to the Company's Annual
Report on Form 10-K, as amended by Form 8 dated April 7, 1986 for
the year ended December 31, 1985 -- File No. 1-7795 and
incorporated herein by reference).
10.5 Resolutions adopted by the Board of Directors of the Company on
December 17, 1987, minutes of the Board of Directors of UNC
Incorporated, ratifying and confirming action of the Management
Development and Compensation Committee on December 16, 1987
amending the outstanding stock options issued pursuant to the
Company's stock option plans (filed as Exhibit 10-A(vi) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1987 -- File No. 1-7795 and incorporated herein by
reference).
10.6 UNC Incorporated Share Purchase/Incentive Plan (filed as Exhibit 4
to the Company's S-8 Registration Statement No. 33-37586 dated
November 2, 1990 and incorporated herein by reference).
10.7 UNC Incorporated 1990 Stock Option Plan for Key Employees (filed
as Exhibit 4 to the Company's S-8 Registration Statement
No. 33-37585 dated November 2, 1990 and incorporated herein by
reference).
<PAGE>
<PAGE> 66
10.8 Resolutions adopted by the Board of Directors of the Company on
March 22, 1991, amending the 1990 Stock Option Plan for Key
Employees referred to in Exhibit 10-7 hereof to (1) permit
qualifying shares purchases to be made either from the Company or
on the open market and (2) comply with Rule 16b-3 (filed as
Exhibit 19-A to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992 -- File No. 1-7795 and incorporated
herein by reference).
10.9 UNC Resources, Inc. Outside Directors Compensation Plan (filed as
Exhibit 10-F to the Company's Annual Report on Form 10-K, as
amended by Form 8 dated April 7, 1986, of the year ended
December 31, 1985 -- File No. 1-7795 and incorporated herein by
reference).
10.10 Outside Directors Separation from Service Plan of Company
effective July 31, 1987 (filed as Exhibit 19-B to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1987
-- File No. 1-7795 and incorporated herein by reference).
10.11 UNC Resources, Inc. Incentive Compensation Plan (filed as
Exhibit 10-H to the Company's Annual Report on Form 10-K, as
amended by Form 8 dated April 7, 1986, for the year ended
December 31, 1985 -- File No. 1-7795 and incorporated herein by
reference).
10.12 Resolutions adopted by the Board of Directors of the Company on
March 22, 1991, amending Section 6.1 of the UNC Resources, Inc.
Incentive Compensation Plan referred to in Exhibit 10.11 hereof
to permit the committee to base incentive awards for employees of
a specific unit on the performance of other units and the Company
as a whole (filed as Exhibit 19-B to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992 -- File
No. 1-7795 and incorporated herein by reference).
10.13 Amended and Restated Supplemental Executive Retirement Plan for
Key Employees of Company and its Subsidiaries effective July 31,
1987 (filed as Exhibit 19-A to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1987 -- File No. 1-7795
and incorporated herein by reference).
10.14 Resolutions adopted by the Board of Directors of the Company on
October 30, 1987, amending the change in control language
contained in the Amended and Restated Supplemental Executive
Retirement Plan for Key Employees of the Company referred to in
Exhibit 10.13 hereof and in the Outside Directors Separation from
Service Plan of the Company referred to in Exhibit 10-9 hereof
(filed as Exhibit 10-H to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990 -- File No. 1-7795 and
incorporated herein by reference).
10.15 Resolutions adopted by the Board of Directors of the Company on
October 23, 1992, amending Sections 8(a) and 8(b) of the Amended
and Restated Supplemental Executive Retirement Plan for Key
Employees of the Company referred to in Exhibit 10.13 hereof to
require two years of service before a participant is entitled to
benefits under the plan and a participant's years of service to
<PAGE>
<PAGE> 67
commence on the date such employee becomes a participant under the
plan, respectively.
10.16 Resolutions adopted by the Board of Directors of the Company on
March 22, 1991, deleting Section 2(o)(i) of the Amended and
Restated Supplemental Executive Retirement Plan for Key Employees
of the Company referred to in Exhibit 10.13 hereof relating to the
offset from Plan benefits of the actuarial equivalent of the
Company's annual contributions to the Participants' Retirement
Income Savings Plan account (filed as Exhibit 19-C to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 -- File No. 1-7795 and incorporated herein by
reference).
10.17 Form of Agreement relating to a change in control executed by the
Company with certain key employees (filed as Exhibit 10-Q to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1987 -- File No. 1-7795 and incorporated herein by
reference).
10.18 Form of Agreement relating to severance pay and benefits executed
by the Company with certain key employees (filed as Exhibit 10-O
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1986 -- File No. 1-7795 and incorporated herein by
reference).
10.19 Employment Agreement, dated as of November 1, 1984, between UNC
Resources, Inc. and Dan A. Colussy (filed as Exhibit 10-T to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1984 -- File No. 1-7795 and incorporated herein by
reference).
10.20 Agreement, dated as of October 20, 1987, between the Company and
Dan A. Colussy amending the Employment Agreement referred to in
Exhibit 10.19 hereof (filed as Exhibit 10-U to the Company's
Annual Report on Form 10-K for the year ended December 31, 1987 -
- File No. 1-7795 and incorporated herein by reference).
10.21 Agreement, dated as of December 18, 1989, between the Company and
Dan A. Colussy amending the employment agreement referred to in
Exhibit 10.19 hereof, (filed as Exhibit 10-EE to Company's Annual
Report on Form 10-K for the year ended December 31, 1989 -- File
No. 1-7795 and incorporated herein by reference).
10.22 Second Amended and Restated Credit Agreement, dated as of
July 24, 1992, among the Company, the Company's wholly-owned
subsidiary Airwork Corporation, the several banks and other
financial institutions from time to time parties to this Agreement
and Chemical Bank, a New York banking corporation, as agent for
the Banks hereunder (filed as Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992
-- File No. 1-7795 and incorporated herein by reference).
10.23 Waiver and Amendment, dated as of December 7, 1992, to the Second
Amended and Restated Credit Agreement dated as of July 24, 1992,
among UNC Incorporated, a Delaware corporation, Airwork
<PAGE>
<PAGE> 68
Corporation, a Delaware corporation, the several banks and other
financial institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as agent for the
Banks, referred to in Exhibit 10.22 hereof (filed as Exhibit 10-C
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 -- File No. 1-7795 and incorporated herein by
reference).
10.24 Waiver and Amendment, dated as of December 28, 1992, to the Second
Amended and Restated Credit Agreement dated as of July 24, 1992,
among UNC Incorporated, a Delaware corporation, Airwork
Corporation, a Delaware corporation, the several banks and other
financial institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as agent for the
Banks, referred to in Exhibit 10.22 hereof (filed as Exhibit 10-D
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 -- File No. 1-7795 and incorporated herein by
reference).
10.25 Amendment, dated as of May 27, 1993, to the Second Amended and
Restated Credit Agreement dated as of July 24, 1992, among UNC
Incorporated, a Delaware corporation, Airwork Corporation, a
Delaware corporation, the several banks and other financial
institutions from time to time parties thereto and Chemical Bank,
a New York banking corporation, as agent for the Banks, referred
to in Exhibit 10.22 hereof.
10.26 Waiver and Amendment, dated as of July 20, 1993, to the Second
Amended and Restated Credit Agreement dated as of July 24, 1992,
among UNC Incorporated, a Delaware corporation, Airwork
Corporation, a Delaware corporation, the several banks and other
financial institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as agent for the
Banks, referred to in Exhibit 10.22 hereof (filed as Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993 -- File No. 1-7795 and incorporated
herein by reference).
10.27 Waiver and Amendment, dated as of October 22, 1993, to the Second
Amended and Restated Credit Agreement dated as of July 24, 1992,
among UNC Incorporated, a Delaware corporation, Airwork
Corporation, a Delaware corporation, the several banks and other
financial institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as agent for the
Banks, referred to in Exhibit 10.22 hereof.
10.28 Operating Agreement of Aviation Alliance & Capital Group, L.C.,
dated as of the 10th day of November, 1992, by and among
Integrated Aircraft Services Corp., Transcapital Air Alliance
Corporation and UNC Air Capital Incorporated (filed as Exhibit 10-
E to the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1992 -- File No. 1-7795 and incorporated herein by
reference).
10.29 Sale and Purchase Agreement dated July 30, 1993 between UNC
Johnson Technology, Inc. and Freedom Forge Corporation (filed as
<PAGE>
<PAGE> 69
Exhibit 1 to the Company's Annual Report on Form 8-K dated July
30, 1993 -- File No. 1-7795 and incorporated herein by reference).
10.30 Amendment, dated as of February 7, 1994, to the Second Amended and
Restated Credit Agreement, dated as of July 24, 1992, among UNC
Incorporated, UNC Airwork Corporation; the several banks and other
financial institutions from time to time parties to the Credit
Agreement and Chemical Bank, a New York banking corporation; as
agent for the Banks, referred to in Exhibit 10.22 hereof (filed
as Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994 -- File No. 1-7795 and
incorporated herein by reference).
10.31 Amendment and Waiver, dated as of August 8, 1994, to the Second
Amended and Restated Credit Agreement, dated as of July 24, 1992,
among UNC Incorporated or UNC Airwork Corporation, the several
banks and other financial institutions from time to time parties
thereto and Chemical Bank as agent for the Banks, referred to in
Exhibit 10.22 hereof (filed as Exhibit 10.31 to the Company's Form
10-Q for the quarter ended September 30, 1994 -- File No. 1-7795
and incorporated herein by reference).
10.32 Employment Agreement, dated as of November 22, 1994, between
Gerald M. Czarnecki and UNC Incorporated (filed as Exhibit 10.32
to the Company's Form 10-K for the year ended December 31, 1994--
File No. 1-7795 and incorporated herein by reference).
10.33 Amendment, dated as of December 29, 1994, to the Second Amended
and Restated Credit Agreement, dated as of July 24, 1992, among
UNC Incorporated, UNC Airwork Corporation; the several banks and
other financial institutions from time to time parties thereto and
Chemical Bank as agent for the Banks (filed as Exhibit 10.33 to
the Company's Form 10-K for the year ended December 31, 1994--File
No. 1-7795 and incorporated herein by reference).
10.34 Amendment, dated as of March 29, 1995, to the Second Amended and
Restated Credit Agreement, dated as of July 24, 1992, among UNC
Incorporated, UNC Airwork Corporation; the several banks and other
financial institutions from time to time parties thereto and
Chemical Bank as agent for the Banks (filed as Exhibit 10.34 to
the Company's Form 10-K for the year ended December 31, 1994--File
No. 1-7795 and incorporated herein by reference).
10.35 Credit Agreement, dated as of May 30, 1995, by and among UNC
Incorporated, the Lenders who are or may become a party to this
Credit Agreement, First Union Commercial Corporation, as
administrative agent and as collateral agent, and First Union
National Bank of North Carolina, as the issuing bank for letters
of credit issued hereunder (filed as Exhibit 10.35 to the
Company's Form 10-Q for the quarter ended June 30, 1995--File No.
1-7795 and incorporated herein by reference).
10.36 Security Agreement, dated as of May 30, 1995, by UNC Incorporated,
a Delaware corporation, to and for the Benefit of First Union
Commercial Corporation, a North Carolina corporation, as
<PAGE>
<PAGE> 70
collateral agent (filed as Exhibit 10.36 to the Company's Form 10-
Q for the quarter ended June 30, 1995--File No. 1-7795 and
incorporated herein by reference).
10.37 Stock Purchase Agreement, dated as of October 4, 1995, by and
among UNC Incorporated and certain Purchasers regarding the
purchase from the Company of up to 250,000 shares of newly created
series of Preferred Stock.
10.38 Asset Purchase Agreement dated January 15, 1996, by and among UNC
Incorporated, UNC/CFC Acquisition Co., CFC Aviation Services,
L.P., CFC Aviation Company, L.L.C., CFC Aviation, Inc., Carlisle
Enterprises, L.P., First Capital Corporation of Chicago, and Cross
Creek Partners III.
10.39 Amendment No. 2 to Credit Agreement dated February 1996, by and
among UNC Incorporated, UNC/CFC Acquisition Co., First Union
Commercial Corporation, as administrative agent, First Union
Commercial Corporation, as collateral agent, the various
corporations identified as Guarantors and the various banks and
lending institutions.
11 Statement re: Computation of Earnings per Share.
16 Letter dated March 1, 1994 of KPMG Peat Marwick (filed as Exhibit
16 to the Company's Report on Form 8-K dated March 1, 1994 -- File
No. 1-7795 and incorporated herein by reference).
21 Subsidiaries of the Company.
23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP
23.2 Independent Auditors' Consent - Coopers & Lybrand L.L.P.
24 Powers of Attorney.
27 Financial Data Schedule (electronically filed).
____________________
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1995.
(c) Exhibits Filed:
A listing of exhibits required to be filed is given in the Sequential
Exhibit Index.
(d) Financial Schedules:
The information regarding Financial Statement Schedules in this item is
provided in Item 14(a) 1 and 2.
<PAGE>
<PAGE> 71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNC INCORPORATED
March 28, 1996
By: /s/ Robert L. Pevenstein
---------------------------
Robert L. Pevenstein
Senior Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
<PAGE>
<PAGE> 72
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Dan A. Colussy Chairman of the Board, March 28, 1996
- ------------------------ President, Chief Excutive
(Dan A. Colussy) Officer and Director
/s/ Robert L. Pevenstein Senior Vice President and March 28, 1996
- ------------------------ Chief Financial Officer
(Robert L. Pevenstein) (principal financial and
accounting officer)
Berl Bernhard* Director March 6, 1996
- ------------------------
(Berl Bernhard)
John K. Castle* Director March 11, 1996
- ------------------------
(John K. Castle)
William C. Hittinger* Director March 6, 1996
- ------------------------
(William C. Hittinger)
J. L. Holloway III* Director March 8, 1996
- ------------------------
(J. L. Holloway III)
George V. McGowan* Director March 8, 1996
- ------------------------
(George V. McGowan)
Jack Moseley* Director March 7, 1996
- ------------------------
(Jack Moseley)
Lawrence A. Skantze* Director March 7, 1996
- ------------------------
(Lawrence A. Skantze)
Beverly B. Byron* Director March 4, 1996
- ------------------------
(Beverly B. Byron)
* By /s/ Richard H. Lange
---------------------
(Richard H. Lange)
Attorney-in-Fact
<PAGE>
<PAGE> 73
UNC INCORPORATED AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts
For the Three Years Ended December 31, 1995
</TABLE>
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions (1) of Year
----------- --------- --------- -------------- -------
Allowance for Doubtful
Accounts Receivable:
<S> <C> <C> <C> <C>
Year ended December 31, 1995 $ 3,706,000 $ 1,637,000 $ 2,157,000(1) $ 3,186,000
=========== =========== =========== ===========
Year ended December 31, 1994 $ 6,366,000 $ 4,296,000 $ 6,956,000(1) $ 3,706,000
=========== =========== =========== ===========
Year ended December 31, 1993 $ 5,041,000 $ 1,602,000 $ 277,000(1) $ 6,366,000
=========== =========== =========== ===========
Deferred Income Tax Asset
Valuation Allowance:
Year ended December 31, 1995 $17,041,000 $ 1,331,000(2) $15,710,000
=========== =========== ===========
Year ended December 31, 1994 $ 3,349,000 $13,692,000 $17,041,000
=========== =========== =========== ===========
Year ended December 31, 1993 $ 8,242,000(2)
$13,420,000 $ 1,829,000(3) $ 3,349,000
=========== =========== ===========
</TABLE>
(1) Uncollected receivables written off, net of recoveries.
(2) Reduction in valuation allowance based on management's evaluation of the
net realizability of the future income tax benefits considering
expiration of net operating losses, predictability of future income,
including the impact of the Company's restructuring program, and timing
of reversal of temporary differences. See Management's Discussion and
Analysis and Note 12 of Notes to Consolidated Financial Statements.
(3) Reduction in valuation allowance of $1,829,000 as a result of a change
in the assessment of the realizability of certain tax assets due to the
future earnings of acquired companies.
<PAGE>
<PAGE> 74
SEQUENTIAL EXHIBIT INDEX
The following exhibits are being filed herewith:
Exhibit
Number Description
- ------ -----------
10.37 Stock Purchase Agreement, dated as of October 4, 1995, by
and among UNC Incorporated and certain Purchasers regarding
the purchase from the Company of up to 250,000 shares of
newly created series of Preferred Stock.
10.38 Asset Purchase Agreement dated January 15, 1996, by and
among UNC Incorporated, UNC/CFC Acquisition Co., CFC
Aviation Services, L.P., CFC Aviation Company, L.L.C., CFC
Aviation, Inc., Carlisle Enterprises, L.P., First Capital
Corporation of Chicago, and Cross Creek Partners III.
10.39 Amendment No. 2 to Credit Agreement dated February 1996, by
and among UNC Incorporated, UNC/CFC Acquisition Co., First
Union Commercial Corporation, as administrative agent,
First Union Commercial Corporation, as collateral agent,
the various corporations identified as Guarantors and the
various banks and lending institutions.
11 Statement re: Computation of Earnings per Share.
21 Subsidiaries of the Company.
23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP
23.2 Independent Accountants' Consent - Coopers & Lybrand L.L.P.
24 Powers of Attorney.
27 Financial Data Schedule (electronically filed).
____________________
<PAGE>
<PAGE> 1
EXHIBIT 10.37
EXECUTION COPY
============================================================================
STOCK PURCHASE AGREEMENT
by and among
UNC INCORPORATED
AND
THE PURCHASERS SIGNATORY HERETO
Dated as of October 4, 1995
============================================================================
<PAGE>
<PAGE> 2
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Acquisition Shares. . . . . . . . . . . . . . . . . . 1
1.2 Firm Shares . . . . . . . . . . . . . . . . . . . . . 1
1.3 Terms of Series B Preferred Stock and Series C
Preferred Stock . . . . . . . . . . . . . . . . . . . 2
1.4 Purchase Price. . . . . . . . . . . . . . . . . . . . 2
1.5 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Commitment and Funding Fees . . . . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . 3
2.1 Corporate Organization and Good Standing. . . . . . . 3
2.2 Authorization . . . . . . . . . . . . . . . . . . . . 3
2.3 Consents and Approvals; No Violations . . . . . . . . 4
2.4 Capital Stock . . . . . . . . . . . . . . . . . . . . 4
2.5 Good Title. . . . . . . . . . . . . . . . . . . . . . 5
2.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 5
2.7 Offering of Shares. . . . . . . . . . . . . . . . . . 5
2.8 SEC Reports; Financial Information. . . . . . . . . . 6
2.9 Absence of Certain Changes or Events. . . . . . . . . 6
2.10 Legal Proceedings, etc. . . . . . . . . . . . . . . . 7
2.11 Title to Properties, Absence of Liens and
Encumbrances, etc.. . . . . . . . . . . . . . . . . . 7
2.12 Contracts and Commitments, etc. . . . . . . . . . . . 7
2.13 Compliance with Applicable Law. . . . . . . . . . . . 7
2.14 Investment Company Act of 1940. . . . . . . . . . . . 8
2.15 Public Utility Holding Company Act of 1935, etc.. . . 8
2.16 No Brokers. . . . . . . . . . . . . . . . . . . . . . 8
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. . . . . . . . . 8
3.1 Authorization . . . . . . . . . . . . . . . . . . . . 8
3.2 Consents and Approvals; No Violations . . . . . . . . 8
3.3 No Brokers. . . . . . . . . . . . . . . . . . . . . . 9
3.4 Investment Intent; Related Matters. . . . . . . . . . 9
3.5 Ownership of Company Capital Stock. . . . . . . . . . 9
4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Conduct of the Business of the Company Prior to
the Outside Date. . . . . . . . . . . . . . . . . . . 9
4.2 Confidentiality . . . . . . . . . . . . . . . . . . . 10
4.3 Public Announcements. . . . . . . . . . . . . . . . . 11
4.4 Best Efforts. . . . . . . . . . . . . . . . . . . . . 11
4.5 Shareholder Rights Plan . . . . . . . . . . . . . . . 11
<PAGE>
<PAGE> 3
5. CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS . . . . . . . 12
5.1 Representations and Warranties of the Company True;
Performance by the Company. . . . . . . . . . . . . . 12
5.2 Litigation Affecting Closing. . . . . . . . . . . . . 12
5.3 Approvals and Consents. . . . . . . . . . . . . . . . 12
5.4 Opinions of Counsel to the Company. . . . . . . . . . 13
5.5 The Shares. . . . . . . . . . . . . . . . . . . . . . 14
5.6 No Material Adverse Change. . . . . . . . . . . . . . 14
5.7 No Adverse Events Under Shareholder Rights Plan . . . 15
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AT THE
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Representations and Warranties of the Purchasers True;
Performance by the Purchasers . . . . . . . . . . . . 15
6.2 The Purchase Price. . . . . . . . . . . . . . . . . . 15
6.3 Opinion of Counsel to the Purchaser . . . . . . . . . 15
6.4 Litigation Affecting Closing. . . . . . . . . . . . . 16
6.5 Approvals and Consents. . . . . . . . . . . . . . . . 16
7. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 17
7.1 Restrictive Legend. . . . . . . . . . . . . . . . . . 17
7.2 Required Registrations. . . . . . . . . . . . . . . . 17
7.3 "Piggy-Back" Registrations. . . . . . . . . . . . . . 18
7.4 Registration Procedures . . . . . . . . . . . . . . . 19
7.5 Indemnification; Contribution . . . . . . . . . . . . 20
8. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES . . . . . 23
10. CERTAIN AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Standstill. . . . . . . . . . . . . . . . . . . . . . 24
10.2 Agreement Respecting Board Representation . . . . . . 25
10.3 No redemptions or cash payments . . . . . . . . . . . 26
11. NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
<PAGE> 4
12. GENERAL.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.1 Amendment and Waiver. . . . . . . . . . . . . . . . . 27
12.2 Assignment. . . . . . . . . . . . . . . . . . . . . . 28
12.3 Governing Law . . . . . . . . . . . . . . . . . . . . 28
12.4 Counterparts. . . . . . . . . . . . . . . . . . . . . 28
12.5 Headings. . . . . . . . . . . . . . . . . . . . . . . 28
12.6 Severability. . . . . . . . . . . . . . . . . . . . . 28
12.7 Termination . . . . . . . . . . . . . . . . . . . . . 28
SCHEDULES
SCHEDULE 1 Names of Purchasers
SCHEDULE 2 Acceptable Acquisition
EXHIBITS
Exhibit A Series B Certificate of Designation
Exhibit B Series C Certificate of Designation
<PAGE>
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 4, 1995, by and among UNC
Incorporated, a Delaware corporation (the "Company"), and the persons set
forth on Schedule 1 hereto (the "Purchasers").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, up to 250,000 shares of
a newly created series of Preferred Stock of the Company, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE.
-----------------
1.1 Acquisition Shares. Upon the terms and subject to the
conditions set forth herein, if the Company shall consummate one or more
acquisitions of a business or entity meeting the terms and conditions set
forth on Schedule 2 hereto (an "Acceptable Acquisition") on or prior to the
Outside Date (as hereinafter defined), the Company shall have the option (the
"Company Option") to sell to the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to the extent that the Company exercises
the Company Option, to purchase from the Company, on any Closing Date (as
hereinafter defined) the number of shares (collectively, the "Acquisition
Shares") of the Company's Series B Senior Cumulative Convertible Preferred
Stock, par value $1.00 per share (the "Series B Preferred Stock"), set forth
opposite the name of each such Purchaser on Schedule 1 hereto under the column
"Acquisition Shares." The Company Option may be exercised by the Company upon
written notice delivered to each of the Purchasers at least 20 days prior to
any Closing Date. The Company Option may be exercised by the Company, in
whole or in part, provided, however, that the Company Option may only be
exercised by the Company for a minimum of 50,000 Acquisition Shares in the
aggregate and in integral multiples of 10,000 Acquisition Shares in the
aggregate. Any sales of Acquisition Shares by the Company pursuant to a
partial exercise of the Company Option by the Company shall be made to the
Purchasers pro rata in proportion to the number of Acquisition Shares set
forth opposite the name of each Purchaser on Schedule 1 hereto.
1.2 Firm Shares. Upon the terms and subject to the conditions
set forth herein, the Purchasers shall have the option (the "Purchasers'
Option") to purchase from the Company, and the Company agrees to sell to the
Purchasers, to the extent that the Purchasers exercise the Purchasers' Option,
on the Outside Date a number of shares (collectively, the "Firm Shares" and,
together with the Acquisition Shares, the "Shares") of Series B Preferred
Stock equal to the positive difference, if any, between (a) 100,000 and (b)
the aggregate number of Acquisition Shares sold by the Company to the
Purchasers on or prior to the Outside Date. The Purchasers' Option may be
exercised by the Purchasers, in whole or in part, provided, however, that the
Purchasers' Option may only be exercised by the Purchasers for a minimum of
10,000 Firm Shares in the aggregate and in integral multiples of 10,000 Firm
Shares in the aggregate. Any purchase of Firm Shares by the Purchasers
pursuant to a partial exercise of the Purchasers' Option by the Purchasers
shall be made by the Purchasers exercising the Purchasers' Option pro rata in
proportion to the number of Acquisition Shares set forth opposite the name of
each Purchaser on Schedule 1 hereto. The Purchasers' Option may be exercised
<PAGE>
<PAGE> 6
by the Purchasers upon twenty days prior written notice delivered to the
Company on or prior to April 4, 1996.
1.3 Terms of Series B Preferred Stock and Series C Preferred
Stock. The Series B Preferred Stock shall have such designations,
preferences, qualifications, voting rights, limitations, restrictions and
relative rights as set forth in the Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A (the "Series B Certificate of
Designation"). The Series C Senior Cumulative Preferred Stock, par value
$1.00 per share (the "Series C Preferred Stock"), of the Company issuable as
dividends on the Series B Preferred Stock shall have such designations,
preferences, qualifications, voting rights, limitations, restrictions and
relative rights as set forth in the Certificate of Designation, Preferences
and Rights attached hereto as Exhibit B (the "Series C Certificate of
Designation" and, together with the Series B Certificate of Designation, the
"Certificates of Designation").
1.4 Purchase Price. The purchase price for the Shares shall be
$100 per Share (the "Purchase Price").
1.5 Closing. Upon the terms and subject to the conditions set
forth herein, the closing (the "Closing") of the purchase and sale of (a) if
the Purchasers' Option is exercised by the Purchasers, any Firm Shares, and
(b) if the Company Option is exercised by the Company, any Acquisition Shares,
shall take place at the offices of Coudert Brothers, 1114 Avenue of the
Americas, New York, New York 10036, at 10:00 a.m., New York time, on (i) with
respect to any Acquisition Shares, the date of closing of the Acceptable
Acquisition, and (ii) with respect to the Firm Shares, the Outside Date, or
on such other date and at such other time and place as the parties hereto may
agree (the "Closing Date"). As used in this agreement the term "Outside Date"
shall mean the later of (i) April 4, 1996 or (ii) the date on which the twenty
day notice period with respect to the last Company Option notice or
Purchasers' Option notice delivered on or prior to April 4, 1996 expires. In
no event shall the Outside Date be later than April 24, 1996. The Purchasers
agree that any Closing with respect to the purchase and sale of Acquisition
Shares shall occur and the Company Option may be exercised by the Company
(subject to the notice provisions set forth in Section 1.1 hereof) in a manner
such that the Company receives the proceeds from the sale of the Acquisition
Shares as to which the Company Option is exercised immediately prior to or
simultaneous with the Company's consummation of the Acceptable Acquisition.
At any Closing, the Company shall deliver to each of the Purchasers
certificates representing the number of Shares to be sold to each such
Purchaser hereunder and each such Purchaser shall deliver to the Company by
wire transfer of immediately available funds an amount equal to the Purchase
Price for such Shares. Such Shares shall be delivered to the Purchasers free
and clear of all liens, security interests, options, charges, beneficial
interests, claims and encumbrances of every kind (and free and clear of any
agreement to create any of the foregoing), except for restrictions on transfer
imposed by this Agreement and restrictions on transfer arising under
applicable securities laws.
1.6 Commitment and Funding Fees. Simultaneously with the
execution of this Agreement, the Company shall pay Network III Holdings, LDC
or its designee ("Network III") a commitment fee in an amount equal to $1.00
multiplied by the aggregate number of Acquisition Shares set forth opposite
the names of all of the Purchasers on Schedule 1 hereto. At any Closing, the
Company shall pay to Network III an amount equal to $1.75 multiplied by the
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aggregate number of Shares purchased by all of the Purchasers at that Closing.
In the event that the Company does not exercise the Option as to all
Acquisition Shares and the Company shall, within one year of the Outside Date,
consummate the sale of any of its equity securities having terms similar to
the Series B Preferred Stock and on terms similar to the terms set forth
herein, the Company shall pay to Network III upon consummation of the sale of
such equity securities an amount equal to $2.00 multiplied by the difference
between (a) the aggregate number of Acquisition Shares set forth opposite the
names of all of the Purchasers on Schedule 1 hereto and (b) the aggregate
number of Shares sold by the Company to all Purchasers on or prior to the
Outside Date.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and agrees with each of the Purchasers as follows:
2.1 Corporate Organization and Good Standing. The Company and
each Subsidiary (as defined in Section 2.6 hereof) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as now being conducted and to own or lease the assets and
properties it now owns or holds under lease. The Company and each Subsidiary
is duly qualified or licensed to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted by it or the character of the assets and properties owned or leased
by it makes such qualification necessary, except for such jurisdictions where
the failure to be so qualified would not, individually or in the aggregate,
have a material adverse effect on the business, financial condition,
operations, properties, assets or liabilities (collectively, the "Business")
of the Company and its Subsidiaries taken as a whole. The Company has
delivered to the Purchaser complete and correct copies of its Certificate of
Incorporation and By-Laws, the Certificate of Incorporation and By-Laws of
each Subsidiary, the Certificates of Designation and all resolutions of the
Board of Directors of the Company relating to this Agreement or the
transactions contemplated hereby (certified as correct in each case by the
Company's Secretary or an Assistant Secretary), in each case as in effect on
the date hereof (it being understood that the Company shall have two business
days from the date of this Agreement to file the Certificates of Designation
with the Secretary of State of the State of Delaware).
2.2 Authorization. The Company has full right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of the Company has
duly approved this Agreement and has duly authorized the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
agreement of the Company enforceable in accordance with its terms. The
issuance, sale and delivery of (a) the Shares, (b) the shares of Series C
Preferred Stock, issuable as dividends on the Shares pursuant to the Series
B Certificate of Designation (the "Dividend Shares"), and (c) the shares of
Common Stock, par value $.20 per share, of the Company (including the
associated stock purchase rights, the "Common Stock") issuable upon conversion
of the Shares (the "Conversion Shares") have been duly authorized by all
requisite corporate action on the part of the Company and, when issued and
delivered as provided in this Agreement and the Certificates of Designation,
will be validly issued, fully paid and non-assessable. The Dividend Shares
and Conversion Shares have been, and at all times prior to the issuance
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<PAGE> 8
thereof in accordance with the Certificates of Designation, will be, duly
reserved for issuance.
2.3 Consents and Approvals; No Violations. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate any provision of the
Certificate of Incorporation or By-Laws of the Company or any Subsidiary; (ii)
assuming that all required approvals are obtained under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, violate any statute, ordinance, rule,
regulation, order or decree of any court or of any public, governmental or
regulatory body, agency or authority applicable to the Company or any
Subsidiary or by which any of their respective properties or assets may be
bound; (iii) except for any required filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, require any filing, declaration or
registration with, or permit, consent or approval of, or the giving of any
notice to, any public, governmental or regulatory body, agency or authority;
or (iv) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, or other evidence of indebtedness,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which any
of them or any of their respective properties or assets may be bound,
excluding from the foregoing clause (iv) violations, breaches and defaults
which would not have a material adverse effect on the Business of the Company
and the Subsidiaries taken as a whole.
2.4 Capital Stock. The Company's authorized capital stock
consists of 50,000,000 shares of Common Stock, 17,692,781 shares of which are
issued and outstanding and 700,000 shares of which are held in treasury on the
date hereof, and 12,000,000 shares of preferred stock (which includes 250,000
shares of Series A Junior Participating Preferred Stock), no shares of which
are issued and outstanding on the date hereof. All of the issued and
outstanding shares of the Company's capital stock and of each Subsidiary's
capital stock have been duly authorized and validly issued and are fully paid
and non-assessable. Other than approximately 2,515,000 shares of Common Stock
reserved for issuance under employee benefit plans, shares of Common Stock
reserved for issuance pursuant to the conversion of the Company's 7-1/2%
Convertible Subordinated Debentures Due 2006, up to 300,000 shares of Common
Stock reserved for issuance to current or prospective members of senior
management of the Company for compensatory purposes ("Management Compensation
Shares") and 250,000 shares of Series A Junior Participating Preferred Stock
reserved for issuance under the Shareholder Rights Plan, as of the date of
this Agreement there are no existing options, warrants, calls, commitments or
agreements of any character to which the Company or any Subsidiary is a party
or by which it is bound calling for the issuance or sale of shares of its
respective capital stock or securities convertible into or exchangeable for
shares of such capital stock. As of the date of this Agreement neither the
Company nor any Subsidiary is a party to or otherwise bound by any agreement,
instrument or commitment for the purchase or repurchase of capital stock of
the Company or any Subsidiary or entitled to the benefit of any option, right
of first refusal or other elective privilege to purchase capital stock of the
Company or any Subsidiary. Neither the Company nor any Subsidiary owns,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any other corporation, partnership, association,
trust, joint venture or other entity other than, in the case of the Company
and its Subsidiaries, equity interests in the Subsidiaries.
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<PAGE> 9
2.5 Good Title. Upon payment of the Purchase Price by each of
the Purchasers, the Company will deliver to each of the Purchasers good and
valid title to the Shares, and upon the issuance of the Dividend Shares and
the Conversion Shares, the Company will deliver to each of the Purchasers good
and valid title to the Dividend Shares and the Conversion Shares, in each
case, free and clear of all liens, security interests, options, charges,
beneficial interests, claims and encumbrances of every kind (and any agreement
to create any of the foregoing), except for restrictions on transfer imposed
by this Agreement and restrictions on transfer arising under applicable
securities laws.
2.6 Subsidiaries. The Company has no direct or indirect
subsidiaries other than those entities listed on Schedule 2.6 hereto (each a
"Subsidiary" and collectively the "Subsidiaries"). All outstanding shares of
capital stock of the Subsidiaries owned by the Company are owned, directly or
indirectly, by the Company free and clear of all liens, security interests,
options, beneficial interests, claims and encumbrances of every kind (and any
agreement to create any of the foregoing). No subsidiary is in default in the
performance, observation or fulfillment of its Certificate of Incorporation
or its By-laws. Except with respect to ordinary course intercompany
transactions between or among the Company and various Subsidiaries and except
for obligations of the Subsidiaries with respect to obligations arising with
respect to the Company's 9-1/8% Senior Notes due 2003 and the Company's
secured Revolving Credit Facility from various Lenders with First Union
Commercial Corporation, as Agent, dated May 30, 1995 (the "Senior Credit
Facility"), neither the Company nor any Subsidiary is subject to any
obligation or requirement to provide funds for or to make any investment (in
the form of a loan, capital contribution or otherwise) in any entity.
2.7 Offering of Shares. Neither the Company nor any person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Shares under the Securities Act of 1933 (the "Securities Act") and the rules
and regulations of the Securities and Exchange Commission (the "SEC")
thereunder) which might subject the offering, issuance or sale of the Shares,
the Conversion Shares or the Dividend Shares to the registration requirements
of Section 5 of the Securities Act or to any similar provision of any
applicable state blue sky law.
2.8 SEC Reports; Financial Information. The Company has
heretofore furnished each of the Purchasers with the following information:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994; (ii) the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1995 and June 30, 1995; (iii) the Company's
proxy statement for the Company's 1995 Annual Meeting of Stockholders; and
(iv) any other reports or registration statements filed by the Company with
the SEC since December 31, 1993. As of their respective dates, such reports
and statements (including any amendments or supplements thereto) did not
contain any 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, in light of the circumstances under which they were made, not
misleading. All of the financial statements contained in the reports referred
to above have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated (subject, in
the case of the unaudited interim statements, to normal year-end audit
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<PAGE> 10
adjustments). The financial statements in the reports referred to above
present fairly in all material respects the financial position, results of
operations and the related changes in financial position as at the dates and
for the periods indicated. Except for liabilities or obligations, which were
incurred in the ordinary course of business and consistent with past practice,
since June 30, 1995, neither the Company nor any Subsidiary has incurred any
liabilities or obligations which are material to the Business of the Company
and the Subsidiaries taken as a whole.
2.9 Absence of Certain Changes or Events. Since June 30, 1995,
there has not been, occurred or arisen: (i) any event or development which
has had or is reasonably likely to have a material adverse effect on the
Business of the Company and the Subsidiaries taken as a whole; (ii) any change
in any accounting principle or practice of the Company or any Subsidiary;
(iii) any damage, destruction or loss, whether covered by insurance or not,
materially adversely affecting the Business of the Company and the
Subsidiaries taken as a whole; (iv) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) in
respect of the capital stock of the Company or any issuance or sale of any
capital stock of the Company or any Subsidiary or any redemption, purchase or
other acquisition of any shares of capital stock of the Company or any
Subsidiary by the Company or any Subsidiary or any split, combination or
reclassification of shares of capital stock of the Company or any Subsidiary
declared or made by the Company or any Subsidiary; (v) any capital
expenditures or commitments by the Company or any Subsidiary for additions to
property or equipment which in the aggregate exceed $5,000,000 for all such
companies taken together or any new borrowings by the Company or any
Subsidiary (other than in the ordinary course of business or pursuant to the
Senior Credit Facility); (vi) any transaction other than in the ordinary
course of business; (vii) any Shares Acquisition Date or Distribution Date (as
defined in the Rights Agreement, dated as of September 25, 1987, between the
Company and Manufacturers Hanover Trust Company (the "Shareholder Rights
Plan")) or any other event causing the Rights issued thereunder to become
exercisable; and (viii) any agreement, whether in writing or otherwise, to
take any action described in this Section 2.9.
2.10 Legal Proceedings, etc. There are no suits, actions,
claims, proceedings or investigations pending or, to the best knowledge of the
Company, threatened against, relating to or involving the Company or any
Subsidiary or any properties or rights of the Company or any Subsidiary,
before any court, arbitrator or administrative or governmental body, United
States or foreign, which is reasonably likely, either individually or in the
aggregate, to have a material adverse effect on the Business of the Company
and the Subsidiaries taken as a whole. There are no such suits, actions,
claims, proceedings or investigations pending or, to the best knowledge of the
Company, threatened challenging the validity or propriety of the transactions
contemplated by this Agreement. Neither the Company nor any Subsidiary is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator or,
to the best knowledge of the Company, any governmental restriction applicable
to the Company or any Subsidiary, which is reasonably likely to have a
material adverse effect on the Business of the Company and the Subsidiaries
taken as a whole.
2.11 Title to Properties, Absence of Liens and Encumbrances, etc.
Each of the Company and each of its Subsidiaries has good, valid and
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<PAGE> 11
marketable title to or, in the case of leases and licenses, valid and
subsisting leasehold interests or licenses in, all of its assets and property,
of whatever kind (whether real or personal, tangible or intangible), free and
clear of all mortgages, liens, security interests, options, pledges, claims,
charges, beneficial interests and encumbrances of every kind (and any
agreement to create any of the foregoing) other than liens for taxes not
delinquent, liens arising in the ordinary course of business and liens arising
under the Senior Credit Facility.
2.12 Contracts and Commitments, etc. As of the date of this
Agreement, neither the Company nor any Subsidiary is a party to or bound by
any contract (including leases), agreement, instrument, arrangement or
understanding which is not disclosed in the Company's SEC reports referred to
in Section 2.8 hereof and which is material to the Business of the Company and
its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in violation of or in default in respect of (nor have any events occurred
which with notice or lapse of time or both would constitute violations of or
defaults in respect of) any contract (including leases), agreement,
instrument, arrangement or understanding to which it is a party or by which
it is bound and, to the best knowledge of the Company, there are no facts or
circumstances which would reasonably indicate that the Company or any
Subsidiary will be or may be in violation of or in default in respect of (or
with notice or lapse of time or both would be in violation of or in default
in respect of) any such contract, agreement, instrument, arrangement or
understanding subsequent to the date hereof, except in all cases for such
violations and defaults (and events which, with notice or lapse of time or
both, would constitute violations or defaults) which in the aggregate would
not have a material adverse effect on the Business of the Company and its
Subsidiaries taken as a whole.
2.13 Compliance with Applicable Law. The Company and each
Subsidiary currently holds, and is in compliance with the terms of, all
licenses, permits and authorizations necessary for the lawful conduct of their
respective businesses, and has complied with, and, to the best of its
knowledge, neither the Company nor any Subsidiary is in violation of, or in
default in any respect under, the applicable statutes, ordinances, rules,
regulations, orders or decrees of all federal, state, local and foreign
governmental bodies, agencies and authorities having, asserting or claiming
jurisdiction over it or over any part of its operations or assets, except for
such violations and defaults which in the aggregate would not have a material
adverse effect on the Business of the Company and its Subsidiaries.
2.14 Investment Company Act of 1940. Neither the Company nor any
Subsidiary is an investment company within the meaning of the Investment
Company Act of 1940, as amended.
2.15 Public Utility Holding Company Act of 1935, etc. Neither
the Company nor any Subsidiary is a public utility holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended, nor is
the Company or any Subsidiary a public utility subject to regulation as such
by any federal or state authority.
2.15 No Brokers. All negotiations relating to this Agreement and
the sale contemplated hereby have been carried on by the Company with the
Purchasers without the intervention of any other person and there exists no
basis for any valid claim against the Company or against any of the Purchasers
for a brokerage commission, finder's fee or other like payment.
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<PAGE> 12
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of
the Purchasers, severally and not jointly, represents, warrants and agrees
with the Company, as to itself, as follows:
3.1 Authorization. Each of the Purchasers has full right, power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby has
been duly authorized by each of the Purchasers. This Agreement constitutes
the legal, valid and binding agreement of each of the Purchasers enforceable
in accordance with its terms.
3.2 Consents and Approvals; No Violations. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate any provision of the
constitutive documents, if applicable, of any of the Purchasers; (ii) assuming
that all required approvals are obtained under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, violate any statute, ordinance, rule, regulation,
order or decree of any court or of any public, governmental or regulatory
body, agency or authority applicable to any of the Purchasers or by which any
of their respective properties or assets may be bound; (iii) except for any
required filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, require any filing, declaration or registration with, or permit, consent
or approval of, or the giving of any notice to, any public, governmental or
regulatory body, agency or authority; or (iv) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, or other evidence of indebtedness, indenture, license,
franchise, permit, agreement or other instrument or obligation to which any
of the Purchasers is a party, or by which any of them or any of their
respective properties or assets may be bound, excluding from the foregoing
clause (iv) violations, breaches and defaults which would not have a material
adverse effect on such Purchaser.
3.3 No Brokers. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
intervention of any other person and there exists no basis for any valid claim
against the Company or any of the Purchasers for a brokerage commission,
finder's fee or other like payment.
3.4 Investment Intent; Related Matters. (a) The Purchaser
acknowledges that the Shares have not been registered under the Securities Act
or any state securities act. The Purchaser represents that the Shares are
being acquired for investment and without any present view toward distribution
thereof in violation of the Securities Act or any state securities act and the
Purchaser will not sell or otherwise dispose of the Shares except in
compliance with the registration requirements or exemption provisions of the
Securities Act and any state securities act and the rules and regulations
under such acts.
(b) Each Purchaser is, and on the Closing Date will
be, an "accredited investor," as such term is defined in Regulation D under
the Securities Act. Each Purchaser possesses such knowledge and experience
in business matters that it is capable of evaluating the merits and risks of
its purchase of the Shares. Each Purchaser acknowledges that it has reviewed
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<PAGE> 13
such information about the Company as it deems necessary to evaluate the
merits and risks of its investment in the Shares; provided, however, that such
review of such information shall not be deemed to impair or in any way affect
the Purchasers' ability to rely on the representations and warranties,
covenants and other agreements contained herein.
3.5 Ownership of Company Capital Stock. The Purchasers do not
presently have any direct or indirect legal or beneficial ownership interest
in any capital stock of the Company, any securities convertible into capital
stock of the Company or any rights to acquire any capital stock of the Company
or any securities convertible into capital stock of the Company (other than
as set forth herein). Immediately following the Closing Date, the Purchasers
will not have any direct or indirect legal or beneficial ownership interest
in any capital stock of the Company, or securities convertible into capital
stock of the Company, or have any rights with respect to the acquisition of
any capital stock of the Company or securities convertible into capital stock
of the Company other than the Shares, the Dividend Shares and the Conversion
Shares.
4. COVENANTS.
4.1 Conduct of the Business of the Company Prior to the Outside
Date. During the period commencing on the date hereof and continuing until
the Outside Date, the Company agrees that:
(a) The Company and each Subsidiary will carry on
its business in, and only in, the usual, regular and ordinary course and
consistent with past practice and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organizations, keep substantially available the services of its present
management and preserve its relationships with material customers, suppliers
and others having material business dealings with it.
(b) Except for issuances of up to 2,515,000 shares
of Common Stock pursuant to the terms of employee benefit plans as in effect
on the date hereof, shares of Common Stock issued pursuant to the conversion
of the Company's 7-1/2% Convertible Subordinated Debentures Due 2006 and
Series A Junior Participating Preferred Stock, up to 300,000 Management
Compensation Shares or Common Stock pursuant to the terms of the Shareholder
Rights Plan, the Company will not declare, pay or set aside for payment any
dividends on or make other distributions in respect of its capital stock.
Neither the Company nor any Subsidiary will amend its Certificate of
Incorporation or By-Laws as in effect on the date hereof.
(c) Except for issuances of up to 2,515,000 shares
of Common Stock pursuant to the terms of employee benefit plans as in effect
on the date hereof, shares of Common Stock issued pursuant to the conversion
of the Company's 7-1/2% Convertible Subordinated Debentures Due 2006 and
Series A Junior Participating Preferred Stock, up to 300,000 Management
Compensation Shares or Common Stock pursuant to the terms of the Shareholder
Rights Plan, neither the Company nor any Subsidiary will, directly or
indirectly, issue, grant or sell, or authorize or propose the issuance of, or
split, combine, reclassify or redeem, purchase or otherwise acquire or propose
the purchase of, any shares of any class of the capital stock of the Company
or any Subsidiary or issue any securities convertible into, or rights to
subscribe to, or warrants or options to acquire, or enter into any arrangement
or contract with respect to the issuance of, any such shares or other
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<PAGE> 14
convertible securities, or make any other changes in its equity capital
structure.
(d) The Company will not knowingly and intentionally
(i) breach any of the terms or provisions of this Agreement, or (ii) cause any
of the representations or warranties of the Company contained herein to be or
become untrue in any material respect.
(e) The Company will, and will cause each
Subsidiary, upon reasonable request by any of the Purchasers, to provide the
Purchasers and their respective accountants, counsel and other authorized
representatives full access, during reasonable business hours and under
reasonable circumstances, to any and all premises, properties, contracts,
commitments, books, records and other information (including tax returns filed
and those in preparation) of the Company and each Subsidiary.
4.2 Confidentiality. The Purchasers will, and will instruct
their employees and agents to, hold in strict confidence, all Confidential
Information (as hereinafter defined), and will not disclose the same to any
person without the prior consent of the Company, unless compelled to disclose
any such Confidential Information by judicial or administrative process or,
in the opinion of their counsel, by other requirements of law. If this
Agreement is terminated, the Purchasers will promptly return to the Company
or destroy all documents (including all copies thereof) furnished by the
Company and received by the Purchasers containing such Confidential
Information. For purposes hereof, "Confidential Information" shall mean all
information of any kind concerning the Company, wherever obtained, except
information (i) ascertainable or obtained from the public or publicly
available information, (ii) received from a third party not known to the
Purchasers to be under an obligation to the Company to keep such information
confidential, (iii) which is or becomes known to the public (other than
through a breach of this Agreement), (iv) which the Purchasers can demonstrate
was in their possession prior to disclosure thereof to the Purchasers in
connection with this Agreement, or (v) which the Purchasers can demonstrate
was independently developed by them.
4.3 Public Announcements. The Company, on the one hand, and the
Purchasers, on the other hand, agree to consult promptly with each other prior
to issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or by obligations pursuant to any listing
agreement with any national securities exchange.
4.4 Best Efforts. Upon the terms and subject to the conditions
hereof, each of the parties hereto agrees to use its reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement and shall use its reasonable
efforts promptly to obtain all waivers, permits, consents and approvals and
to effect all registrations, filings and notices with or to third parties or
governmental or public bodies or authorities which are necessary or desirable
in connection with the transactions contemplated by this Agreement. Nothing
contained in this Section 4.4 shall require any party to pay any money to any
third party other than filing fees or similar costs or expenses that may be
required or imposed by governmental authorities.
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<PAGE> 15
4.5 Shareholder Rights Plan. The Company will take all such
action as may be necessary to ensure that each of the Purchasers and all of
the Purchasers together shall not constitute an "Acquiring Person" under the
Shareholder Rights Plan by reason of their acquisition of the Shares, the
Dividend Shares and the Conversion Shares. The Board of Directors of the
Company has determined that, consistent with the objectives of the Shareholder
Rights Plan, the Purchasers should not be considered "Acquiring Persons" under
the Shareholder Rights Plan with respect to their acquisition of the Shares,
the Dividend Shares and the Conversion Shares and the transactions
contemplated by the terms of this Agreement. The Board of Directors of the
Company will take reasonable steps to amend the Shareholder Rights Plan in
order to: (i) confirm, if necessary, that the Purchaser(s) shall not be
Acquiring Persons by reason of their acquisition of the Shares, the Dividend
Shares and the Conversion Shares and (ii) to ensure that, in the event that
rights distributed under the Shareholder Rights Plan become exercisable, each
Purchaser will be provided, with respect to their Shares, with substantially
the same rights that they would have had if such Shares had theretofore been
converted into shares of the Company's Common Stock (the "Shareholder Rights
Plan Amendment"). Such Shareholder Rights Plan Amendment shall be in a form
reasonably satisfactory to the Purchasers.
5. CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS. The
obligations of each of the Purchasers under this Agreement to purchase any
Shares on any Closing Date shall be subject to the satisfaction, or waiver in
writing (it being understood that any waiver of a condition with respect to
any Closing Date shall also constitute a waiver with respect to any remedy
that a Purchaser may otherwise have with respect to the matter or condition
that is the subject of the waiver with respect to Shares purchased on such
Closing Date but not as to any other purchase of Shares occurring prior or
subsequent to such Closing Date), of the following conditions on the Closing
Date.
5.1 Representations and Warranties of the Company True;
Performance by the Company. The representations and warranties of the Company
contained in this Agreement shall each be true and correct in all material
respects as of the Closing Date and, except for representations and warranties
which speak of a specified date, with the same effect as though made on and
as of that date. The Company shall have performed and complied in all
material respects with all agreements and conditions required by this
Agreement and the transactions contemplated hereby to be performed or complied
with by the Company before or at the Closing Date. The Purchasers shall have
been furnished with such certificates of officers of the Company, dated the
Closing Date, as the Purchasers may reasonably request, certifying to the
fulfillment of the foregoing conditions.
5.2 Litigation Affecting Closing. On the Closing Date, no suit,
action or other proceeding shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or prohibit the
consummation or implementation of this Agreement or the transactions
contemplated hereby, or to obtain damages or other relief in connection with
this Agreement or the transactions contemplated hereby, and on the Closing
Date, no governmental investigation that might result in any such suit, action
or proceeding shall be pending or, based on a communication from a
governmental official, threatened.
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<PAGE> 16
5.3 Approvals and Consents. (a) All consents, approvals or
authorizations of regulatory authorities having jurisdiction over the
Company's or any Subsidiary's business relating to the Company's or any
Subsidiary's business as it is currently conducted or in connection with the
consummation of the transactions contemplated hereby shall have been obtained
in final and definitive form and shall be in full force and effect.
(b) All additional consents, approvals or
authorizations required for the consummation of the transactions contemplated
hereby or to preserve for the Company and its Subsidiaries, and to maintain
in full force and effect, all material contracts, leases, instruments and
other agreements to which the Company and its Subsidiaries are a party or by
which any of their respective property or assets are bound, shall have been
obtained and shall be in full force and effect.
5.4 Opinions of Counsel to the Company. The Purchasers shall
have been furnished with an opinion, dated the Closing Date, of Miles &
Stockbridge, a professional corporation, special counsel to the Company,
satisfactory to the Purchasers, substantially in the following form:
(a) This Agreement has been duly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company;
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, will
not result in any violation of, or constitute a default under, and will not
be in conflict with, any terms of the Company's Certificate of Incorporation
or By-Laws, in each case as amended to date, or to the knowledge of such
counsel, the terms of any mortgage, note, bond, evidence of indebtedness,
indenture, contract, lease or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of its
assets or properties may be subject;
(c) Upon payment of the Purchase Price for the
Shares, the Company will deliver to the Purchaser good and valid title to the
Shares free and clear of any liens, security interests, options, charges,
beneficial interests, claims and encumbrances of any kind (and any agreement
to create any of the foregoing) except for restrictions on transfer created
pursuant to the terms of this Agreement and applicable securities laws;
(d) The Shares have been duly and validly authorized
and issued and are fully paid and non-assessable, such Shares constitute all
of the issued and outstanding shares of the Series B Preferred Stock, and such
Shares are entitled to all of the rights and preferences set forth in the
Certificate of Designation. The Dividend Shares and the Conversion Shares,
when issued in accordance with the terms of the Certificates of Designation,
will be duly and validly authorized and issued, fully paid and non-assessable;
(e) No consents, approvals, authorizations and
orders of any public, governmental or regulatory body, agency or authority
and, to the knowledge of such counsel, of any other party (except such as
shall have been obtained) are necessary for the due authorization, execution
and delivery by the Company of this Agreement and the valid sale and delivery
of the Shares to be sold by the Company hereunder;
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<PAGE> 17
(f) The Company has taken all action, legal or
otherwise, necessary to authorize the issuance of and reserve the Dividend
Shares and the Conversion Shares;
(g) The Company and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the State of its jurisdiction of incorporation and has full corporate
power to own its property and carry on its business as currently conducted;
(h) To the knowledge of such counsel, there are no
actions, suits, proceedings or investigations pending or, so far as is known
to such counsel after inquiry of the officers of the Company, threatened
against the Company or any of the Subsidiaries which (i) question or challenge
the validity of this Agreement or any action to be taken hereunder or
thereunder or (ii) singly or in the aggregate could reasonably be expected to
materially and adversely affect the Business of the Company and the
Subsidiaries taken as a whole;
(i) The issuance, sale and delivery of the Shares,
the Dividend Shares and the Conversion Shares under the circumstances
contemplated by this Agreement are exempted transactions under the
registration provisions of the Securities Act and all applicable state
securities laws, and do not require the registration of the Shares, the
Dividend Shares or the Conversion Shares thereunder; and
(j) The Company is not an "investment company" or
a company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In giving the above opinions, such counsel may assume the genuineness of the
signatures of the officers of the Company and may rely, as to factual matters,
without independent check or verification, upon the representations and
warranties made in this Agreement, the documents delivered in connection
herewith and certificates of the officers of the Company. Miles & Stockbridge
may also rely upon opinions given or expressed by Richard H. Lange, Esquire,
General Counsel to the Company, provided that such firm has no reason to
believe that it is unreasonable to so rely on such opinions and provided
further that counsel for the Purchasers consent to such reliance (which
consent shall not be unreasonably withheld).
5.5 The Shares. The Company shall issue and deliver to the
Purchasers certificates representing the Shares registered in the name of the
Purchasers.
5.6 No Material Adverse Change. Prior to any Closing Date,
there shall be no material adverse change in the Business of the Company, and
the Company shall have delivered to the Purchaser a certificate, dated the
Closing Date, to such effect.
5.7 No Adverse Events Under Shareholder Rights Plan. The
Shareholder Rights Plan Amendment shall have become effective or the Company
and the Purchasers shall have agreed to other satisfactory arrangements with
respect to the Shareholders Rights Plan. No "Shares Acquisition Date" or
"Distribution Date" (as defined in the Shareholder Rights Plan) or any other
event causing the Rights issued under the Shareholder Rights Plan to become
exercisable shall have occurred and there shall have been no amendment or
<PAGE>
<PAGE> 18
modification to the Shareholder Rights Plan other than the Shareholder Rights
Plan Amendment.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AT
THE CLOSING. The obligations of the Company under this Agreement to sell the
Firm Shares and the Acquisition Shares on any Closing Date shall be subject
to the satisfaction, or waiver in writing (it being understood that any waiver
of a condition with respect to any Closing Date shall also constitute a waiver
with respect to any remedy that the Company may otherwise have with respect
to the matter or condition that is the subject of the waiver with respect to
Shares acquired on such Closing Date but not as to any other sale of Shares
occurring prior or subsequent to such Closing Date), of the following
conditions on the Closing Date:
6.1 Representations and Warranties of the Purchasers True;
Performance by the Purchasers. The representations and warranties of the
Purchasers contained in this Agreement shall each be true and correct in all
material respects as of the Closing Date, with the same effect as though made
on and as of that date. The Purchasers shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement and the transactions contemplated hereby to be performed or complied
with by the Purchasers before or at the Closing Date.
6.2 The Purchase Price. Each of the Purchasers shall have
delivered to the Company by wire transfer of immediately available funds an
amount equal to the Purchase Price for the Firm Shares and the Acquisition
Shares to be purchased by such Purchaser.
6.3 Opinion of Counsel to the Purchaser. The Company shall have
been furnished with an opinion, dated the Closing Date, of Coudert Brothers,
special counsel for the Purchasers, satisfactory to the Company, substantially
in the following form:
(a) Upon execution and delivery, this Agreement
shall constitute the legal, valid and binding obligations of the Purchasers;
(b) The execution and delivery of this Agreement by
the Purchasers and the consummation of the transactions contemplated hereby
do not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any of the constitutive documents of any
of the Purchasers or to the knowledge of such counsel any mortgage, note, bond
or other evidence of indebtedness or indenture, contract, lease or other
agreement known to such counsel to which any of the Purchasers is a party;
(c) To the knowledge of such counsel, there are no
actions, suits, proceedings or investigations pending or threatened against
the Purchasers which question or challenge the validity of this Agreement or
the purchase by the Purchasers of the Shares hereunder; and
(d) No consents, approvals, authorizations and
orders of any public, governmental or regulatory body, agency or authority
(except such as shall have been obtained) are necessary for the due
authorization, execution and delivery by the Purchasers of this Agreement and
the purchase of the Shares to be purchased by the Purchasers hereunder;
<PAGE>
<PAGE> 19
In giving the above opinions, such counsel may assume the genuineness of the
signatures of the Purchasers and their officers or other authorized
representatives and may rely, as to factual matters, without independent check
or verification, upon the representations and warranties made in this
Agreement, the documents delivered in connection herewith and certificates of
the Purchasers and their officers or other authorized representatives.
6.4 Litigation Affecting Closing. On the Closing Date, no suit,
action or other proceeding shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or prohibit the
consummation or implementation of this Agreement or the transactions
contemplated hereby, or to obtain damages or other relief in connection with
this Agreement or the transactions contemplated hereby, and on the Closing
Date, no governmental investigation that might result in any such suit, action
or proceeding shall be pending or, based on a communication from a
governmental official, threatened.
6.5 Approvals and Consents. (a) All consents, approvals or
authorizations of regulatory authorities having jurisdiction over the
Company's or any Subsidiary's business relating to the Company's or any
Subsidiary's business as it is currently conducted or in connection with the
consummation of the transactions contemplated hereby shall have been obtained
in final and definitive form and shall be in full force and effect.
(b) All additional consents, approvals or authorizations
required for the consummation of the transactions contemplated hereby or to
preserve for the Company and its Subsidiaries, and to maintain in full force
and effect, all material contracts, leases, instruments and other agreements
to which the Company and its Subsidiaries are a party or by which any of their
respective properties or assets are bound, shall have been obtained and shall
be in full force and effect.
7. REGISTRATION RIGHTS.
7.1 Restrictive Legend. Each certificate representing the
Shares, the Dividend Shares and the Conversion Shares shall bear legends
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PERTAINING THERETO
UNDER SAID ACT AND COMPLIANCE WITH APPLICABLE STATE LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND COMPLIANCE ARE NOT REQUIRED.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS, INCLUDING RESTRICTIONS ON
TRANSFERABILITY. THE COMPANY WILL FURNISH ANY STOCKHOLDER UPON
REQUEST AND WITHOUT CHARGE A STATEMENT OF THE RESTRICTIONS ON
TRANSFERABILITY WHICH ARE CONTAINED IN A STOCK PURCHASE AGREEMENT
BY AND AMONG THE COMPANY AND PURCHASERS SIGNATORY THERETO DATED
AS OF OCTOBER 4, 1995. THE TERMS CONTAINED IN THAT STOCK
PURCHASE AGREEMENT ARE BINDING UPON TRANSFEREES AND PURCHASERS OF
THE SHARES REPRESENTED BY THIS CERTIFICATE IN CERTAIN
CIRCUMSTANCES.
<PAGE>
<PAGE> 20
7.2 Required Registrations. If at any time the Company shall
be requested by any of the Purchasers (or the successors and assigns of any
of the Purchasers, who for purposes of this Section 7 shall be deemed to be
included within the term Purchaser) who holds, or upon the conversion of
Shares held by the Purchaser would hold, in the aggregate, at least the number
of Conversion Shares that would be issuable upon the conversion of 50% of the
Shares held in the aggregate by the Purchasers (including the Dividend
Shares), to effect the registration under the Securities Act of the Shares,
the Dividend Shares or the Conversion Shares, the Company shall notify in
writing all Purchasers of the receipt of the registration request within 10
days of said receipt and shall use its reasonable efforts promptly to effect
the registration under the Securities Act of such Shares, Dividend Shares and
Conversion Shares as were covered by the original request or as may be
requested to be registered in one or more writings delivered to the Company
within 30 days after the giving of notice by the Company to all Purchasers,
for disposition in accordance with the intended method or methods of
disposition specified by the Purchaser requesting registration of such Shares,
Dividend Shares and Conversion Shares, as well as to effect any notification,
registration or qualification under any state securities laws which shall be
reasonably necessary to permit the sale of such Shares, Dividend Shares and
Conversion Shares. The registration statement filed by the Company with the
SEC for the registration of such Shares, Dividend Shares and Conversion Shares
shall be kept effective for such period as may be requested in the
registration request, including any period then permitted under Rule 415 under
the Securities Act (it being understood that in no case, however, shall the
Company be required to keep any registration hereunder effective for a period
of more than two years in the aggregate, not including any period in which
sales of Shares, Dividend Shares or Conversion Shares cannot be made
thereunder). Any obligation of the Company to register Shares, Dividend
Shares or Conversion Shares shall be deemed satisfied when a registration
statement covering the Shares, Dividend Shares and the Conversion Shares shall
be declared effective and shall have remained effective for the period
specified above. All expenses of any registration and offering under this
paragraph (including, without limitation, registration fees and fees and
disbursements of the Company's counsel) shall be borne by the Company, except
that the Company shall not bear underwriting discounts or commissions
attributable to Shares, Dividend Shares or Conversion Shares, fees and
expenses of any separate counsel for the Purchasers selling Shares, Dividend
Shares or Conversion Shares or any related transfer taxes. The Company shall
only be required to file two registration statements covering the Shares,
Dividend Shares or Conversion Shares pursuant to the terms of this Section
7.2.
7.3 "Piggy-Back" Registrations. If at any time the Company
shall determine to register any of its Common Stock or securities convertible
into Common Stock under the Securities Act, whether in connection with a
public offering by the Company, a public offering by shareholders, or both,
including, without limitation, by means of any shelf registration pursuant to
Rule 415 under the Securities Act or any similar rule or regulation, but other
than a registration to implement an employee benefit or dividend reinvestment
plan, the Company shall promptly give written notice thereof to the Purchasers
who shall be registered holders of Shares or Conversion Shares and shall use
its reasonable efforts to effect the registration under the Securities Act of
such Conversion Shares as may be requested in a writing delivered to the
Company within 30 days after such notice by the Purchasers as well as to
include such Conversion Shares in any notifications, registrations or
qualifications under any state securities laws which shall be made or obtained
<PAGE>
<PAGE> 21
with respect to the securities being registered by the Company; provided,
however, that (a) any distribution of Conversion Shares pursuant to such
registration shall be managed by the investment banking firm, if any, managing
the distribution of the securities being offered by the Company on the same
terms as all other securities to be registered, and (b) the Company shall not
be required under this Section 7.3 to include Conversion Shares in any
registration of securities if the Company shall have been advised by the
investment banking firm managing the offering of the securities proposed to
be registered by the Company or others that the inclusion of Conversion Shares
in such offering would substantially interfere with the orderly sale of such
securities which the Company or others propose to register; provided, however,
that in making any determination under this subparagraph (b) as to the
inclusion of the Conversion Shares in any such offering, (i) a first priority
shall be given to the registration of 1,750,000 Conversion Shares, (ii)
thereafter, a second priority shall be given to all remaining Conversion
Shares over any other securities as to which the Company has granted or may
in the future grant registration rights that were (or will be) issued by the
Company in any merger transaction or similar business combination transaction
and (iii) with respect to circumstances not addressed in clauses (i) and (ii),
Conversion Shares shall be registered on a pro-rata basis with any other
securities as to which the Company has granted or may in the future grant
registration rights. All expenses of any registration and offering of
Conversion Shares pursuant to this Section 7.3 (including, without limitation,
registration fees and fees and disbursements of the Company's counsel) shall
be borne by the Company, except that the Company shall not bear underwriting
discounts or commissions attributable to Conversion Shares, the fees of any
separate counsel for the holders of Conversion Shares or related transfer
taxes.
7.4 Registration Procedures. 1. In connection with any
registration pursuant to Sections 7.2 or Section 7.3 hereof, the Company will
prepare and file with the SEC, a registration statement, and any amendments
and supplements thereto, on any form for which the Company then qualifies or
which counsel for the Company shall deem appropriate, and use its reasonable
efforts to cause such registration statement to become effective; provided
that before filing with the SEC a registration statement or prospectus or any
amendments or supplements thereto, the Company will (i) furnish to counsel
selected by the Purchasers copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel, and (ii) notify
the Purchasers of any stop order issued or threatened by the SEC and take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered. The Company will also (i) promptly notify each
Purchaser of the effectiveness of such registration statement, (ii) furnish
to each Purchaser such number of copies of such registration statement, and
each amendment and supplement thereto, the prospectus included in such
registration statement and such other documents as such Purchaser may
reasonably request; (iii) use its reasonable efforts to register or qualify
such securities to be registered under such other securities or blue sky laws
of such jurisdictions as any Purchaser reasonably requests; (iv) use its
reasonable efforts to cause all such securities to be registered to be listed
on each securities exchange on which similar securities issued by the Company
are then listed, and to provide a transfer agent and registrar for such
securities to be registered no later than the effective date of such
registration statement; (v) enter in to such customary agreements (including
an underwriting agreement in customary form) and take all such other actions
as the Purchasers or the underwriters retained by the Purchasers, if any,
<PAGE>
<PAGE> 22
reasonably request in order to expedite or facilitate the disposition of such
securities to be registered, including customary indemnification; and (vi)
otherwise use its reasonable efforts to comply with all applicable rules and
regulations of the SEC. The terms of this Section 7.4 shall not require the
Company to qualify as a foreign corporation or as a dealer in securities or
to execute or file any general consent to service of process under the laws
of any such jurisdiction where it is not so subject.
(b) The Company shall be entitled to postpone, for
up to 60 days, the filing of any registration statement otherwise required to
be prepared and filed by it pursuant to this Agreement if, at the time it
receives a request, the Company would be required to prepare any financial
statements other than those it customarily prepares or the Company determines
in its reasonable business judgment that such registration and offering would
interfere with any material financing, acquisition, corporate reorganization
or other material corporate transaction or development involving the Company
and the Company promptly gives the Purchaser written notice of such
determination. If the Company shall so postpone the filing of a registration
statement, the Purchaser shall have the right to withdraw the request by
giving written notice to the Company within 30 days after the receipt of the
notice of postponement and, in the event of such withdrawal, the request which
was withdrawn shall not be deemed to have been made.
(c) In connection with any effective registration
statement filed pursuant to this Agreement, the Company will immediately
notify each Purchaser participating in the distribution to which such
registration statement relates of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and will promptly
prepare and furnish to each such Purchaser a supplement or amendment to such
prospectus so that such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. Notwithstanding the foregoing, if the Company
determines in its reasonable business judgment that an amendment or supplement
to any such prospectus would interfere with any material financing,
acquisition, corporate reorganization, or other material corporate transaction
or development involving the Company, the Company may delay the preparation
and filing of such amendment or supplement for a period of up to 60 days in
order to complete or make a public announcement with respect to such material
transaction or development (it being understood that the Company shall be
obligated to extend the period of time it is required to maintain in effect
any such registration statement to take into account the period of time that
the Purchasers are unable to offer or sell Shares, Dividend Shares or
Conversion Shares by reason of this Section 7.4(c)).
(d) In the event that the Company conducts an
underwritten public offering of Common Stock or securities convertible into
Common Stock during the term of this Agreement, the Purchasers covenant and
agree that, except for sales of Shares, Dividend Shares or Common Shares
pursuant to such underwritten public offering, they shall not offer or sell
any of the Shares, Dividend Shares or Conversion Shares for a period of 120
days following the date on which the Company's underwritten public offering
is consummated. Except for sales of Shares, Dividend Shares or Common Shares
<PAGE>
<PAGE> 23
pursuant to such underwritten public offering, the Purchasers shall be
obligated to perform the covenants contained in this Section 7.4(d)
irrespective of whether or not some or all of the Purchasers' Shares, Dividend
Shares or Conversion Shares are included in the underwritten public offering
or are then included in a registration statement that has been filed pursuant
to Section 7.2 of this Agreement (it being understood that the Company shall
be obligated to extend the period of time it is required to maintain in effect
any registration statement that has been filed pursuant to Section 7.2 of this
Agreement at the time an underwritten public offering is consummated to take
into account the period of time that the Purchasers are unable to offer or
sell Shares, Dividend Shares or Conversion Shares by reason of this Section
7.4(d)).
7.5 Indemnification; Contribution. (a) Indemnification by the
Company. In connection with each registration effected by the Company
pursuant to this Agreement, the Company agrees to indemnify and hold harmless
each holder of Shares, Dividend Shares and Conversion Shares participating
therein (a "Selling Shareholder"), its officers, directors, agents and
Affiliates (as hereinafter defined) and each underwriter of Shares, Dividend
Shares and Conversion Shares (an "Underwriter") registered and each person who
controls any Underwriter within the meaning of Section 15 of the Securities
Act against any and all losses, claims, damages or liabilities to which any
of them may be subject under the Securities Act or any other statute or the
common law, and to reimburse them for any legal or other expenses incurred by
them in connection with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or actions arise out
of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in the registration statement relating to the sale
of such Shares, Dividend Shares and Conversion Shares, or any post-effective
amendment thereof, or 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, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus,
if used prior to the effective date of such registration statement or
contained in the prospectus (as amended or supplemented if the Company shall
have filed with the SEC any amendment thereof or supplement thereto), if used
within the period during which the Company is required to keep the
registration statement to which such prospectus relates current pursuant to
the terms of this Agreement, or the omission or alleged omission to state
therein (if so used) a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the indemnification agreement contained
in this subparagraph (a) shall not apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by such
Selling Shareholders or such Underwriter specifically for inclusion in the
registration statement or any preliminary prospectus or prospectus contained
in the registration statement or any such amendment thereof or supplement
thereto.
(b) Indemnification By Selling Shareholders and
Underwriters. Each request that registration be effected by the Company
pursuant to this Agreement (and each notice of any Purchaser to the effect
that such holder wishes to join in any such request) shall be accompanied by
<PAGE>
<PAGE> 24
an agreement of each party making such request, and shall be accompanied or
followed by an agreement of each Underwriter, to indemnify and hold harmless,
which indemnity, as to the Purchasers, shall be several and not joint and in
proportion to the offering price of the securities sold by each of the
Purchasers, in the same manner and to the same extent as set forth in
subparagraph (a) of this Section 7.5, the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
the directors of the Company or any such person and those officers of the
Company who shall have signed any such registration statement with respect to
any statement in or omission from such registration statement or any post-
effective amendment thereof or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) contained in such
registration statement, if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company
by any such holder or underwriter specifically for inclusion in such
registration statement or any preliminary prospectus or prospectus contained
in such registration statement or any such amendment thereof or supplement
thereto.
(c) If the indemnification provided for in this
Section 7.5 is unavailable other than in accordance with its terms to an
indemnified party under subparagraph (a) or (b) above, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of the losses, claims, damages, liabilities or actions referred
to in subparagraph (a) or (b) above in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Selling Shareholders and Underwriters on the other from the offering of the
Shares, Dividend Shares or Conversion Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Selling Shareholders and Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or actions as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Selling Shareholders and Underwriters participating in
the offering on the other shall be deemed to be in the same proportion as (i)
the total net proceeds from the offering (before deducting expenses) received
by the Company bear to (ii) the total net proceeds from the offering (before
deducting expenses) received by the Selling Shareholders and the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters or by the Selling Shareholders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims,
damages, liabilities or actions referred to above in this subparagraph (c)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subparagraph (c).
Notwithstanding the provisions of this subparagraph (c), no Selling
Shareholder shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares, Dividend Shares and Conversion
<PAGE>
<PAGE> 25
Shares sold by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Selling Shareholder has otherwise
been required to pay by reason of such 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 obligations of the Selling Shareholders in
this subparagraph (c) to contribute are several in proportion to the
respective number of Shares, Dividend Shares and Conversion Shares sold by
them and not joint.
8. EXPENSES. Each of the parties hereto will pay its own legal
fees and other expenses relating to the transactions contemplated by this
Agreement; provided, however, that the Company agrees to pay to the Purchasers
their reasonable legal fees and up to $10,000 of other expenses incurred by
the Purchasers in connection with the negotiation and execution of this
Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES.
(a) The representations and warranties included or provided for in this
Agreement shall survive for a period of two years from the Closing Date;
provided that such survival shall continue during the pendency of any suit,
action, claim or other proceeding brought in respect of such representations
and warranties prior to the termination of such two-year period; and provided,
further, that the representations and warranties contained in Section 2.5
shall survive the Closing indefinitely. The Company agrees to indemnify,
defend and hold harmless the Purchasers, their respective permitted successors
and assigns and the respective affiliates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of such Purchasers and such respective
permitted successors and assigns (collectively, the "Purchaser Indemnified
Parties") from and against and in respect of any demand, action, damage,
deficiency, liability, loss, cost or expense (including, without limitation,
reasonable counsel fees incurred in litigation or otherwise) to the Purchaser
Indemnified Parties arising out of any breach of representation or warranty
or nonfulfillment by it of any agreement or covenant contained herein
(collectively "Purchaser Indemnified Party Losses"); provided, however, that
the Company's indemnification obligations under this Section 9(a) shall arise
only in the event that the accumulated amount of all Purchaser Indemnified
Party Losses, in the aggregate, shall exceed $100,000. If the accumulated
amount of all Purchaser Indemnified Party Losses in the aggregate exceeds
$100,000, the Company shall then be liable on a dollar for dollar basis for
the full amount of all Purchaser Indemnified Party Losses. The Purchasers and
the Purchaser Indemnified Parties shall not be entitled to indemnification
with respect to any claim under the foregoing provisions of this Section 9 as
to which notice shall not have been given by a Purchaser Indemnified Party to
the Company within two years of the date of occurrence of the events giving
rise to such claim, or, with respect to indemnification for claims arising out
of the breach of the representations and warranties contained in Section 2.5,
within two years from the date of discovery of the breach by the Purchaser
Indemnified Parties.
(b) Each of the Purchasers agrees to indemnify,
defend and hold harmless the Company from and against and in respect of any
demand, action, damage, deficiency, liability, loss, cost or expense
(including, without limitation, reasonable counsel fees incurred in litigation
or otherwise) to the Company arising out of any material breach of any
representation or warranty or nonfulfillment by such Purchaser of any
agreement or covenant contained herein (collectively "Company Losses");
<PAGE>
<PAGE> 26
provided, however, that each Purchaser's indemnification obligations under
this Section 9(b) shall arise only in the event that the accumulated amount
of all Company Losses attributable to all Purchasers shall exceed $100,000 in
the aggregate. If the accumulated amount of all Company Losses in the
aggregate exceeds $100,000 each Purchaser shall then be liable on a dollar-
for-dollar basis for the full amount of all Company Losses attributable to
such Purchaser. The Company shall not be entitled to indemnification with
respect to any claim under the foregoing provision of this Section 9 as to
which notice shall not have been given by the Company to such Purchaser within
two years of the date of the occurrence of the event giving rise to such
claim.
(c) Promptly after receipt by an indemnified party
under this Agreement 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 Section 7.5 or Section 9 hereof, notify
the indemnifying party in writing of the claim or the commencement of that
action. 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 7.5 or Section 9
hereof 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 Purchasers shall have the
right to employ counsel to represent jointly the Purchasers 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 Purchasers
against the Company under Section 7.5 hereof if, in the reasonable judgment
of the Purchasers, it is advisable for the Purchasers and such controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company.
10. CERTAIN AGREEMENTS.
10.1 Standstill. (a) For so long as a Purchaser shall hold
Shares and/or Conversion Shares, such Purchaser will not (i) acquire, or make
any offer to acquire or announce any intention to acquire, additional
ownership (including beneficial ownership) of any of the shares of the voting
securities of the Company, or other securities of the Company convertible into
voting securities, or the right or option to acquire any such securities,
except for the Shares, the Dividend Shares and the Conversion Shares, (ii)
participate in any "group," as that term is defined in Section 13(d)(3) of the
Exchange Act, with respect to the voting securities of the Company, other than
any group comprised of the Purchasers and their respective affiliates, (iii)
make or in any way participate, directly or indirectly, in any material
respect in any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the SEC), whether before or after the formal commencement of
any such solicitation, or any solicitation of shareholder written consents,
in opposition to, or designed to influence the management of the Company, (iv)
execute any written consent or initiate any shareholder proposal for action
by shareholders, (v) except as provided in the Certificates of Designation
seek to place more than one representative on the Board of Directors of the
<PAGE>
<PAGE> 27
Company, seek the removal of any member of the Board of Directors of the
Company, or seek to have called any meeting of the stockholders of the
Company, (vi) otherwise act, alone or in concert with others, to seek to
control or influence in any material respect the management, Board of
Directors or policies of the Company or any of its Subsidiaries, (vii)
request, the Company (or its directors, officers, employees or agents) to
amend or waive any provision of this Section 10.1(a), (viii) knowingly and
intentionally sell or otherwise transfer Shares or Conversion Shares
representing in the aggregate beneficial ownership of 5% or more of the then
outstanding Common Stock to any person, entity or "group", as that term is
defined in Section 13(d)(3) of the Exchange Act, (ix) knowingly and
intentionally sell or otherwise transfer any Shares or Conversion Shares to
any person, entity or "group", as that term is defined in Section 13(d)(3) of
the Exchange Act, as to which person, entity or group the Purchasers have
received notice from the Company of such person, entity or group's intention
to seek to take, assist or participate in any of the actions set forth in
clauses (iii) through (vi) above, and (x) assist, participate in, encourage
or solicit in any material respect any effort or attempt by any other person
or group to do or seek to do any of the foregoing. Notwithstanding anything
in this Section 10.1(a) to the contrary, the Purchasers shall have the right
to (i) make or effect open-market sales of any Shares or Conversion Shares
through a broker-dealer, without any duty of inquiry as to the identity of any
purchaser of Shares or Conversion Shares (in the absence of actual knowledge
that the purchaser of Shares or Conversion Shares in the open market from the
Purchasers is a person, entity or group of the type specified in clause (ix)
above) and (ii) make or effect transfers to their affiliates, other persons
with respect to whom the Purchaser has investment authority with respect to
any Shares or Conversion Shares to be transferred to any such person or any
person under common investment management with such Purchaser (collectively,
"Permitted Transferees") and other Purchasers and their Permitted
Transferees.
(b) During the period in which the Purchasers shall
hold Shares and/or Conversion Shares which represent, in the aggregate, 5% of
the shares of the Company's Common Stock issued and outstanding after giving
effect to the pro forma conversion of all outstanding shares into Conversion
Shares and ending on the date on which a Change in Control occurs, each
Purchaser covenants and agrees that he shall not sell, transfer or dispose,
in any three-month period, in the aggregate, Shares or Conversion Shares
which, when aggregated with any sale, transfer or disposal of Shares or
Conversion Shares of any other Purchaser during any such three month period,
represent beneficial ownership of more than the greater of (i) 1,000,000
shares of the Common Stock then issued and outstanding, or (ii) the volume of
Shares and Conversion Shares saleable under Rule 144(e) promulgated under the
Securities Act. The Purchasers shall have the right to make or effect sales,
transfers or other dispositions to their Permitted Transferees and to other
Purchasers and their Permitted Transferees, without regard to the limitations
set forth in this Section 10.1(b), subject to compliance with all applicable
securities laws.
10.2 Agreement Respecting Board Representation. From and after
the exercise of the Company Option by the Company and the purchase of the
Acquisition Shares by the Purchasers (but only for so long as the Purchasers
shall hold Shares and/or Conversion Shares which represent, in the aggregate,
10% of the shares of the Company's Common Stock issued and outstanding after
giving effect to the pro forma conversion of all outstanding Shares into
<PAGE>
<PAGE> 28
Conversion Shares), the Company shall take all action necessary, including,
without limitation, increasing the number of directors constituting the entire
Board of Directors of the Company, to cause one person (the "Purchasers'
Nominee") nominated by the Purchasers holding a majority of the Conversion
Shares issued or issuable upon conversion of the Shares to be nominated for
election to the Board of Directors of the Company, at any regular or special
meeting of stockholders of the Company called for the purpose of filling
positions on the Board of Directors of the Company, or in any written consent
executed in lieu of such a meeting of stockholders, and to recommend the
Purchasers' Nominee for election to the Board of Directors in the same manner
as all other nominees of the Company for election as director. Not fewer than
20 days after receipt of a written notice from the Company requesting such
information, the Purchasers shall notify the Secretary of the Company of the
identity of the Purchasers' Nominee and provide such information concerning
the Purchasers' Nominee as may be required by Regulation 14A under the
Exchange Act. The Company shall have the right to reject any particular
Purchasers' Nominee if the Company determines in its reasonable business
judgement that the election as a director of such Purchasers' Nominee would
materially impair the Company's reputation in the business and financial
community. Consistent with the foregoing, the Company will advise the
Purchasers promptly of the non-approval of any proposed nominee so that an
alternative can be selected by the Purchasers. In the event of non-approval,
the Purchasers and the Company's Organization Committee will meet and use
their best efforts to agree upon an acceptable nominee. It is hereby agreed
by the Company that John W. Gildea shall be an acceptable nominee. If, prior
to his election to the Board of Directors of the Company, the Purchasers'
Nominee shall, be unable or unwilling to serve as a director of the Company,
the Purchasers who nominated such Purchasers' Nominee shall be entitled to
nominate a replacement who (subject to the procedures set forth in the
preceding sentences with respect to unacceptable nominees) shall then be the
Purchasers' Nominee for purposes of this Section 10.2. If, following election
to the Board of Directors of the Company, any Purchasers' Nominee shall resign
or be removed or be unable to serve for any reason prior to the expiration of
his term as a director of the Company, the Purchasers who nominated such
Purchasers' Nominee shall within 30 days of such event, notify the Board of
Directors of the Company in writing of a replacement Purchasers' Nominee and
the Board of Directors of the Company shall take all action necessary (subject
to the procedures set forth herein with respect to unacceptable nominees) to
cause such replacement Purchasers' Nominee to be elected or appointed to fill
the unexpired term of such Purchasers' Nominee and to recommend the
replacement Purchasers' Nominee for election to the Board of Directors in the
same manner as all other nominees of the Company for election as director at
any subsequent annual or special meeting of shareholders or pursuant to any
written consent in lieu of such a meeting. For purposes of this Section 10.2,
the term Purchasers shall refer to the Purchasers' signatory hereto, persons
with respect to whom a Purchaser signatory has investment authority with
respect to any Shares transferred to any such person and any other person
which is under common investment management with any Purchaser signatory.
10.3 No redemptions or cash payments. The Company hereby
covenants and agrees that, whenever any share of the Series C Preferred Stock
is issued and outstanding, it shall not (i) make or pay any cash dividends,
distributions or other cash payments of any type on or with respect to any
Junior Security (as hereinafter defined) or (ii) redeem for cash (in whole or
in part) any Junior Security. For purposes of this agreement, the term
"Junior Security" shall mean any security constituting part of a class of
<PAGE>
<PAGE> 29
equity securities of the Company or any of its Subsidiaries, other than the
Series B and Series C Preferred Stock.
11. NOTICES, ETC. All notices, requests, demands or other com-
munications hereunder shall be in writing and shall be deemed to have been
duly given when delivered upon receipt or if mailed:
If to the Company, to:
UNC Incorporated
175 Admiral Cochrane Drive
Annapolis, Maryland 21401
Attention: Richard H. Lange
General Counsel
with a copy to:
John B. Frisch, Esq.
Miles & Stockbridge,
A Professional Corporation
10 Light Street
Baltimore, Maryland 21202
If to the Purchasers, to:
Gildea Management Company, L.P.
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. William P. O'Donnell
with a copy to:
Thomas J. Drago, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036
12. GENERAL.
12.1 Amendment and Waiver. Neither this Agreement nor any term
hereof may be changed, waived, amended or terminated orally, but only by
written act of the Purchasers and the Company (or, in respect of a waiver, the
waiving party or parties).
12.2 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and legal
representatives, but shall not be assignable by any party without the written
consent of the other party; provided, however, that the rights and obligations
of any Purchaser may be assigned to one or more of its affiliates or other
persons or entities with respect to whom such Purchaser has investment
authority with respect to any Shares transferred to such affiliate or other
person or entity or which is under common investment management with any
Purchaser, if such affiliate or other person or entity agrees in writing to
be bound by all of the terms and conditions of this Agreement. The terms of
this Agreement, including, without limitation, Section 9 and Section 10.1
hereof, shall be binding upon any person or entity who acquires Shares,
<PAGE>
<PAGE> 30
Dividend Shares or Conversion Shares from a Purchaser hereunder unless such
Shares are acquired at least three years from the date such Shares were
issued, in an underwritten public offering or in unsolicited broker's
transactions effected in compliance with all of the terms and provisions of
Rule 144 under the Securities Act.
12.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the conflicts of law provisions thereof.
12.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which, when taken
together, shall constitute one and the same instrument.
12.5 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning and interpretation of this Agreement.
12.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereto hereby waive any
provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
12.7 Termination. Anything herein to the contrary
notwithstanding, this Agreement may be terminated by either the Purchasers or
the Company, upon written notice to the other, if the Closing of the purchase
and sale of any Shares shall not have occurred on or prior to the Outside
Date. This Agreement may also be terminated by mutual consent of the
Purchasers and the Company. After termination, the Purchasers and the Company
shall have no liability or further obligation to the other under this
Agreement, other than their respective obligations under Sections 1.6, 4.2,
4.3, 8, 9, 10 and Section 12 hereof.
<PAGE>
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
UNC INCORPORATED
By: ---------------------------------------------
Name: Gregory M. Bubb
Title: Vice President and Treasurer
PURCHASERS
NETWORK III HOLDINGS LDC
By:
---------------------------------------------
Name: John Gildea
Title: Director
GILDEA INVESTMENT COMPANY
By:
---------------------------------------------
Name: John Gildea
Title: Managing Director
IRON CITY PARTNERS, INC.
By:
---------------------------------------------
Name: William P. O'Donnell
Title: Vice President
ARIEL FUND LTD.
By:
---------------------------------------------
Name: Steven Feinberg
Title: Investment Adviser
PEQUOD INVESTMENTS, .L.P.
By:
---------------------------------------------
Name: John Gallen
Title: General Partner
<PAGE>
<PAGE> 32
SCHEDULE 1
----------
Name of Purchaser Acquisition Shares
- ----------------- ------------------
Network III Holdings, LDC 30,000
Gildea Investment Company 20,000
Iron City Partners, Inc. 50,000
Ariel Fund Ltd. 146,000
Pequod Investments, L.P. 4,000
===========
Total 250,000
<PAGE>
<PAGE> 33
SCHEDULE 2
----------
For purposes of this Agreement, an "Acceptable Acquisition" shall mean
an acquisition or series of related acquisitions by the Company of a
corporation or other entity (or its assets, businesses or divisions) whose
principal business or businesses is supplying products and services to the
aviation industry of a nature similar to, or complementary with, the Company's
currently existing lines of business. An Acceptable Acquisition must (a) be
approved by the Board of Directors of the Company and the company to be
acquired and, if required, the stockholders of the Company and the company to
be acquired and any third parties or governmental bodies, agencies and
authorities whose approval is required; (b) not violate any statute,
ordinance, rule, regulation, order or decree of any court or federal, state,
local or foreign governmental body, agency or authority; (c) not violate or
result in a default in respect of any contract, lease, agreement, instrument,
arrangement or understanding to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound; (d)
not violate any of the constitutive documents of the Company or any of its
Subsidiaries; and (e) not result in a breach of, or default under, any of the
representations and warranties, covenants and other agreements and terms of
this Agreement.
<PAGE>
<PAGE> 34
UNC INCORPORATED
CERTIFICATE OF THE DESIGNATION, POWERS,
PREFERENCES AND RIGHTS OF THE SERIES B SENIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK
PAR VALUE $1.00 PER SHARE
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The following resolutions were duly adopted by the Board of Directors
of UNC Incorporated, a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, on September 29, 1995 at a meeting of the Board of Directors at
which there was at all times present and acting a quorum of the Board of
Directors of the Corporation:
WHEREAS, the Board of Directors of the Corporation is authorized, within
the limitations and restrictions stated in the Certificate of Incorporation,
to fix by resolution or resolutions the designation of each series of
Preferred Stock and the powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including, without limiting the generality of the
foregoing, such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the General Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of such Preferred Stock and the number of shares constituting such
series:
NOW, THEREFORE, BE IT RESOLVED:
(1) Designation and Number of Shares. The designation of said series
of Preferred Stock, par value $1.00 per share (the "Series Preferred Stock"),
authorized by this resolution shall be "Series B Senior Cumulative Convertible
Preferred Stock" (the "Series B Preferred Stock"). The number of shares of
Series B Preferred Stock authorized hereby shall be 250,000 and no more,
except as provided herein.
(2) Rank. The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank (a) on a
parity with the Series C Senior Cumulative Preferred Stock, par value $1.00
per share (the "Series C Preferred Stock"), and (b) prior to any other equity
securities of the Corporation, whether currently authorized or hereafter
created, including any other series of Series Preferred Stock and the Common
Stock, par value $.20 per share, of the Corporation (the "Common Stock", all
of such equity securities of the Corporation to which the Series B Preferred
Stock ranks prior, including any other series of Series Preferred Stock and
the Common Stock, are referred to herein collectively as the "Junior
Securities").
<PAGE>
<PAGE> 35
(3) Dividends. (a) (i) The holders of the shares of Series B Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative dividends at the annual rate (subject to adjustment as set forth
in subparagraph (iv) below) of $8.50 per share in equal quarterly payments on
the last business day of each calendar quarter (each of such dates being a
"Dividend Payment Date"), commencing with the last day of the calendar quarter
in which the shares of Series B Preferred Stock are issued, in preference to
dividends on the Junior Securities. Such dividends shall be paid to the
holders of record at the close of business on the date which is ten (10)
business days prior to the Dividend Payment Date. Each of such quarterly
dividends (whether payable in cash or in stock) shall be fully cumulative and
shall accrue (whether or not declared), without interest, from the Date of
Issuance. Subject to subparagraph (iii) below, any dividend payments due with
respect to the Series B Preferred Stock on any Dividend Payment Date shall be
made by issuing fully paid and non-assessable shares of Series C Preferred
Stock, valued as set forth below (a "PIK Dividend"); provided, however, that
in lieu of issuing shares of Series C Preferred Stock, dividends may be paid,
in the sole discretion of the Corporation, in cash or any combination of cash
and Series C Preferred Stock. The issuance of such shares or the issuance of
such shares together with payment of cash in lieu of the issuance of any
shares shall constitute full payment of such dividend.
(ii) Shares of Series C Preferred Stock used for the purpose of paying
dividends on the Series B Preferred Stock will be valued at $100.00 per share.
(iii) In the event that the Corporation is no longer a party to any
Restrictive Agreement (as defined below) prohibiting the payment of cash
dividends on the Series B Preferred Stock, dividend payments with respect to
the Series B Preferred Stock shall be made in cash. "Restrictive Agreement"
shall mean any agreement to which the Corporation is a party on the date
hereof (including as modified, amended, extended, refinanced or replaced)
which by its terms restricts the Corporation's ability to (A) pay dividends
in cash with respect to the Series B Preferred Stock or (B) redeem the Series
B Preferred Stock, excluding any such agreement which has been substantially
assigned to a party which is not a party thereto on the date hereof.
(iv) In the event that the Corporation shall make a PIK Dividend at any
time after the third anniversary of the date of issuance of the Series B
Preferred Stock (the "Date of Issuance"), the annual rate of PIK Dividends
payable thereafter with respect to the Series B Preferred Stock shall be
increased to $9.50 per share. In the event that the Corporation shall make
a PIK Dividend at any time after the fourth anniversary of the Date of
Issuance, the annual rate of PIK Dividends payable thereafter with respect to
the Series B Shares shall be increased to $10.50 per share. In the event that
the Corporation shall make a PIK Dividend at any time after the fifth
anniversary of the Date of Issuance, the annual rate of PIK Dividends payable
thereafter with respect to the Series B Preferred Stock shall be increased to
$11.00 a share. Any adjustment to the annual rate of PIK Dividends payable
with respect to the Series B Preferred Stock pursuant to this subparagraph
(iv) shall be effective after the date of the applicable PIK Dividend and the
dividend payment in fully paid non-assessable shares of Series C Preferred
Stock with respect to the next following date of PIK Dividend shall be
adjusted to reflect the applicable increased annual rate. Dividend payments,
or any portion thereof, with respect to the Series B Preferred Stock to be
paid in cash will be at annual rate of $8.50 per share.
<PAGE>
<PAGE> 36
(b) All dividends paid with respect to shares of Series B Preferred
Stock pursuant to paragraph (3)(a) shall be paid pro rata to the holders
entitled thereto.
(c) No full cash dividends shall be declared or paid or set apart for
payment on the Series C Preferred Stock for any period unless full cumulative
cash dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment on the Series B Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any cash dividends are not paid in full, as aforesaid, upon the
shares of Series B Preferred Stock and the Series C Preferred Stock, all cash
dividends declared upon shares of Series B Preferred Stock and the Series C
Preferred Stock shall be declared pro rata so that the amount of cash
dividends declared per share on the Series B Preferred Stock and the Series
C Preferred Stock shall in all cases bear to each other the same ratio that
accrued cash dividends per share on the Series B Preferred Stock and the
Series C Preferred Stock bear to each other. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series B Preferred Stock which may be in arrears.
(d) (i) Whenever dividends or distributions payable on the Series B
Preferred Stock as provided in this Section 3 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series B Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(A) declare or pay dividends, or make any other distributions,
on any Junior Securities (either as to dividends or upon liquidation,
dissolution or winding up); or
(B) redeem or purchase or otherwise acquire for consideration
shares of any Junior Securities (either as to dividends or upon liquidation,
dissolution or winding up), provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such Junior Securities in
exchange for shares of any other Junior Securities.
(ii) Subject to the foregoing provisions of this Section 3, the Board
of Directors may declare, and the Corporation may pay or set apart for
payment, dividends and other distributions on any of the Junior Securities,
and may purchase or otherwise redeem any of the Junior Securities or any
warrants, rights or options exercisable for or convertible into any of the
Junior Securities, and the holders of the shares of Series B Preferred Stock
shall not be entitled to share therein.
(4) Liquidation Preference. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Series B Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to
$100.00 for each share outstanding, plus an amount in cash equal to all
accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities. If the assets of
the Corporation are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of Series B Preferred Stock and
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<PAGE> 37
Series C Preferred Stock, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of Series B Preferred Stock and Series C Preferred Stock
are entitled were paid in full.
(b) The liquidation payment with respect to each fractional share of
Series B Preferred Stock outstanding or accrued but unpaid shall be equal to
a ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series B Preferred Stock.
(c) For the purposes of this Section 4, neither the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(5) Redemption. Commencing after the Effective Date (as defined
below), the Corporation at its option may redeem, to the extent funds are
legally available therefor, the Series B Preferred Stock, at any time in whole
or from time to time in part, at the per share redemption price equal to
$100.00 plus all accrued and unpaid dividends thereon to the date fixed for
redemption, without interest (the "Redemption Price"). "Effective Date" shall
mean, the last day of any ninety (90) consecutive calendar day period that
occurs after the fourth anniversary of the Date of Issuance in which the last
reported sales price regular way for the Common Stock of the Corporation on
the New York Stock Exchange (or any other national securities exchange or
NASDAQ on which the Common Stock is listed or quoted) on all trading days in
that period is at least equal to 200% of the Conversion Price (as defined in
Section 7).
(b) The Corporation shall not optionally redeem the Series B Preferred
Stock, in whole or in part, without first redeeming, all outstanding shares
of Series C Preferred Stock at the Redemption Price for the Series C
Preferred Stock.
(c) Unless the Corporation is prohibited by the terms of any
Restrictive Agreement from redeeming any shares of Series B Preferred Stock,
in the event of any Change in Control (as defined below) with respect to the
Corporation, each holder of the Series B Preferred Stock may, from time to
time, require the Corporation to, and the Corporation shall, redeem any number
of the shares of Series B Preferred Stock held by it for the Redemption Price
upon thirty (30) days prior written notice. "Change in Control" shall mean
(A) any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which will result in
the Corporation's stockholders immediately prior to such transaction not
holding (by virtue of such shares or securities issued solely with respect
thereto) at least fifty percent (50%) of the voting power of the surviving or
continuing entity, (B) a sale of all or substantially all of the assets of the
Corporation, unless the Corporation's stockholders immediately prior to such
sale will, as a result of such sale, hold (by virtue of securities issued as
consideration for the Corporation's sale) at least fifty percent (50%) of the
voting power of the purchasing entity, or (C) during any period of two
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<PAGE> 38
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Corporation's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period.
(d) Shares of Series B Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued shares of the class
of Series Preferred Stock, undesignated as to series, and may be redesignated
and reissued as part of any series of the Series Preferred Stock, par value
$1.00 per share, of the Corporation; provided, however, that no such issued
and reacquired shares of Series B Preferred Stock shall be reissued or sold
as Series B Preferred Stock.
(e) Notwithstanding the foregoing provisions of this Section 5, unless
the full cumulative dividends on all outstanding shares of Series B Preferred
Stock shall have been paid or contemporaneously are declared and paid for all
past dividend periods, none of the shares of Series B Preferred Stock shall
be redeemed unless all outstanding shares of Series B Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or otherwise
acquire (except pursuant to Section 6 hereof) any shares of Series B Preferred
Stock; provided, however, that the foregoing shall not prevent the purchase
or acquisition of shares of Series B Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares
of Series B Preferred Stock.
(6) Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Series B Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be determined by lot or pro rata as may
be determined by the Board of Directors.
(b) In the event the Corporation shall redeem shares of Series B
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than thirty (30) days nor more than sixty
(60) days prior to the date of redemption (the "Redemption Date"), to each
holder of record of the shares to be redeemed at such holder's address as the
same appears on the stock register of the Corporation; provided, however, that
no failure to mail such notice nor any defect therein shall affect the
validity of the proceeding for the redemption of any shares of Series B
Preferred Stock to be redeemed except as to the holder to whom the Corporation
has failed to mail said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the Redemption Date; (ii) the
number of shares of Series B Preferred Stock to be redeemed and, if less than
all the shares held by such holder are to be redeemed from such holder, the
number of shares to be redeemed from such holder; (iii) the Redemption Price;
(iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such Redemption Date.
(c) Notice having been mailed as aforesaid, from and after the
Redemption Date (unless default shall be made by the Corporation in providing
money for the payment of the Redemption Price of the shares called for
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<PAGE> 39
redemption) dividends on the shares of Series B Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed
to be outstanding and shall have the status of authorized but unissued shares
of Preferred Stock, unclassified as to series, and shall not be reissued as
shares of Series B Preferred Stock, and all rights of the holders thereof as
stockholders of the Corporation with respect to said shares (except the right
to receive from the Corporation the Redemption Price) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so state),
such shares shall be redeemed by the Corporation at the Redemption Price
aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(7) Conversion. (a) Subject to and upon compliance with the
provisions of this Section 7, unless previously redeemed by the Corporation,
the holders of shares of Series B Preferred Stock shall have the right, at
such holders' option, at any time and from time to time, to convert such
shares into fully paid and non-assessable shares of Common Stock of the
Corporation. The number of shares of Common Stock issuable upon conversion
of each share of Series B Preferred Stock shall be equal to $100.00 divided
by the Conversion Price (as hereinafter defined) in effect at the time of
conversion, determined as hereinafter provided. The price at which shares of
Common Stock shall be delivered upon conversion (the "Conversion Price") shall
initially be $7.00 (subject to the adjustments set out in this Section 7).
The right to convert shares called for redemption pursuant to this Section 7
shall terminate at the close of business on the date fixed for such redemption
unless the Corporation shall default in making payment of the amount payable
upon such redemption.
(b) The holders of shares of Series B Preferred Stock at the close of
business on a dividend payment record date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof or the Corporation's default in payment
of the dividend due on such Dividend Payment Date. However, shares of Series
B Preferred Stock surrendered for conversion during the period between the
close of business on any dividend payment record date and the opening of
business on the corresponding Dividend Payment Date must be accompanied by
payment of an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series B Preferred Stock on a
dividend payment record date who (or whose transferee) surrenders any of such
shares for conversion into shares of Common Stock on a Dividend Payment Date
will receive the dividend payable by the Corporation on such shares of Series
B Preferred Stock on such date, and the converting holder need not include
payment in the amount of such dividend upon surrender of shares of Series B
Preferred Stock for conversion. Except as provided above, the Corporation
shall make no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the shares of Common Stock
issued upon such conversion.
(c) (i) In order to exercise the conversion privilege, the holders of
each share of Series B Preferred Stock to be converted shall surrender the
certificate representing such share at the office of the transfer agent for
the Series B Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate
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<PAGE> 40
completed and signed. Unless the shares of Common Stock issuable on
conversion are to be issued in the same name in which such share of Series B
Preferred Stock is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender of the certificates
for shares of Series B Preferred Stock as aforesaid, the Corporation shall
issue and shall deliver at such office to such holder, or on his written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such shares in accordance with the
provisions of this Section 7, and any fractional interest in respect of a
share of Common Stock arising upon such conversion shall be settled as
provided in paragraph (d) of this Section 7.
(iii) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
shares of Series B Preferred Stock shall have been surrendered and such notice
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date,
unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become
such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, and such notice
received by the Corporation. All shares of Common Stock delivered upon
conversion of the Series B Preferred Stock will upon delivery be duly and
validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights.
(d) The Conversion Price in effect at any time and the number and kind
of securities issuable upon the conversion of each share of Series B Preferred
Stock shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(i) In the event that the Corporation shall make a PIK Dividend
pursuant to Section 3 hereof after the third anniversary of the Date of
Issuance, then the Conversion Price shall be reduced by five percent
(5%); provided that a reduction in the Conversion Price pursuant to this
subparagraph (i) shall be made only once.
(ii) In case the Corporation shall hereafter (A) pay a dividend
or make a distribution on its Common Stock in shares of its Common
Stock, (B) subdivide its outstanding Common Stock, (C) combine its
outstanding Common Stock into a smaller number of shares, or (D) issue
any shares by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Corporation is the continuing corporation), the Conversion Price in
effect at the time of the record date for such dividend or distribution
or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder
of any share of Series B Preferred Stock converted after such date shall
be entitled to receive the aggregate number and kind of shares of Common
Stock which, if such share of Series B Preferred Stock had been
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<PAGE> 41
converted immediately prior to such record date or effective date, he
would have owned upon such conversion and been entitled to receive upon
such dividend, distribution, subdivision, combination or
reclassification.
(iii) In case the Corporation shall hereafter issue rights or
warrants to all holders of its Common Stock entitling them (for a period
expiring within 45 days after the record date mentioned below) to
subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share (or having a
conversion price per share) less than the Conversion Price in effect on
the record date with respect to such issuance, the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Conversion
Price in effect immediately prior to the date of such issuance, and of
which the denominator shall be the number of shares of Common Stock
outstanding on the record date for determination of the Stockholders
entitled to receive such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are then
convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately
prior to the date of such issuance; and to the extent that shares of
Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or
warrants, the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery
of only the number of shares of Common Stock (or securities convertible
into Common Stock) actually delivered.
(iv) In case the Corporation shall hereafter distribute to all
holders of its Common Stock shares of stock other than Common Stock or
evidences of its indebtedness or assets (excluding cash dividends or
distributions out of retained earnings and dividends or distributions
referred to in subparagraph (ii) above) or rights or warrants (excluding
those referred to in subparagraph (iii) above), then in each such case
the Conversion Price in effect thereafter shall be determined by
multiplying the Conversion Price in effect immediately prior to the date
of such distribution by a fraction, of which the numerator shall be the
total number of outstanding shares of Common Stock multiplied by the
Conversion Price in effect immediately prior to the date of such
distribution, less the then fair market value (as determined in good
faith by the Corporation's Board of Directors, irrespective of the
accounting treatment thereof, whose determination shall be described in
a certified Board Resolution) of said shares of stock, assets or
evidences of indebtedness so distributed or of such rights or warrants,
and of which the denominator shall be the total number of outstanding
shares of Common Stock multiplied by the Conversion Price in effect
immediately prior to the date of such distribution. Such adjustments
shall be made whenever any such distribution is made and shall become
effective immediately prior to the date of such distribution.
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<PAGE> 42
(v) In case the Corporation shall hereafter issue shares of its
Common Stock (excluding shares issued (A) in any of the transactions
described in subparagraph (ii) above, (B) upon conversion or exchange
of securities convertible into or exchangeable for Common Stock, or upon
conversion of rights or warrants issued to the holders of Common Stock,
for which an adjustment has already been made pursuant to subparagraph
(iii) above, (C) by grant to or upon exercise of options granted or to
be granted to employees or directors pursuant to any employee benefit
plan or program of the Corporation or any of its subsidiaries in
existence on the Date of Issuance or subsequently approved by the
Corporation's stockholders, (D) upon conversion of shares of Series B
Preferred Stock, (E) to shareholders of any corporation which merges
into the Corporation or a subsidiary of the Corporation in proportion
to their stockholdings of such corporation immediately prior to such
merger, upon such merger, (F) in a bona fide public offering pursuant
to a firm commitment underwriting, or (G) pursuant to any stockholders
rights plan of the Corporation) for a consideration per share of Common
Stock less than the Conversion Price in effect on the date the
Corporation fixes or has fixed the offering, conversion, exchange or
exercise price of such additional shares, the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, of
which the numerator shall be the total number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares
plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subparagraph (vii)
below) for the issuance of such additional shares would purchase at the
Conversion Price in effect on the date the Corporation fixes or has
fixed the offering, conversion, exchange or exercise price of such
additional shares, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively
whenever such an issuance is made and shall become effective immediately
prior to the date of such issuance.
(vi) In case the Corporation shall hereafter issue any securities
convertible into or exchangeable for its Common Stock (excluding
securities issued (A) in transactions described in subparagraphs (iii)
and (iv) above or (B) pursuant to any stockholders rights plan of the
Corporation) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities (determined
as provided in subparagraph (vii) below) less than the Conversion Price
in effect on the issuance date of such securities, the Conversion Price
shall be adjusted so that it shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date
of such issuance by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subparagraph (vii)
below) for such securities would purchase at the Conversion Price prior
to any adjustment pursuant hereto, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately prior
to such issuance plus the maximum number of shares of Common Stock of
the Corporation deliverable upon conversion of or in exchange for such
securities at the initial conversion or exchange price or rate. Such
adjustment shall be made successively whenever such an issuance is made
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<PAGE> 43
and shall become effective immediately prior to date of issuance of such
securities.
(vii) For purposes of any computation respecting consideration
received pursuant to subparagraphs (v) and (vi) above, the following
shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions, discounts
or other expenses incurred by the Corporation for any underwriting of
the issue or otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Corporation
(irrespective of the accounting treatment thereof), whose determination
shall be conclusive and described in a certified Board Resolution; and
(C) in the case of the issuance of securities convertible into
or exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Corporation for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Corporation upon
the conversion or exchange thereof (the consideration in each case to
be determined in the same manner as provided in clauses (A) and (B) of
this subparagraph (vii)).
(viii) In case the Corporation is a participant in a
consolidation, merger or combination with another corporation (other
than with a wholly-owned subsidiary of the Corporation and other than
a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock) or in case of any sale or
transfer of all or substantially all of the assets of the Corporation,
as a result of which holders of the Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash)
with respect to or in exchange for such Common Stock, or any share
exchange whereby the Common Stock is converted into other securities or
property of the Corporation, then as a condition to the consummation of
such transaction, lawful and adequate provision shall be made so that
the holder of each share of Series B Preferred Stock then outstanding
shall have the right, with respect to such shares of Series B Preferred
Stock, to receive stock, other securities or property or assets
(including cash) or any combination thereof, having a value equal to the
value of the stock, other securities, property and assets (including
cash) which such holder would have been entitled to receive upon such
consolidation, merger, combination, sale or transfer, or exchange, if
such holder had held the Common Stock issuable upon the conversion of
such shares of Series B Preferred Stock immediately prior to such
consolidation, merger, combination, sale or transfer, or exchange.
(ix) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
ten cents ($0.10) in such price; provided, however, that any adjustments
not required to be made shall be carried forward and taken into account
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<PAGE> 44
in any subsequent adjustment. All calculations under this paragraph
7(d) shall be made to the nearest cent or to the nearest one-thousandth
of a share, as the case may be.
(x) Anything in this paragraph 7(d) to the contrary
notwithstanding, the Corporation shall be entitled, but shall not be
required, to make such changes in the Conversion Price, in addition to
those required by this paragraph 7(d), as it in its discretion shall
determine to be advisable in order that any dividend or distribution in
shares of Common Stock, subdivision, reclassification or combination of
shares of Common Stock, issuance of rights or warrants to purchase
Common Stock or distribution of shares of stock other than Common Stock,
evidences of indebtedness or assets (other than distributions in cash
out of retained earnings) referred to hereinabove in this paragraph
7(d), hereafter made by the Corporation to the holders of the Series B
Preferred Stock shall not be taxable to them.
(xi) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly cause a notice setting forth
the adjusted Conversion Price and adjusted number of shares issuable
upon conversion of each share of Series B Preferred Stock to be mailed
to the holders, at their last addresses appearing in the Series B
Preferred Stock share register. The certificate setting forth the
computation shall be signed by the chief financial officer of the
Corporation.
(xii) In the event that at any time, as a result of any
adjustment made pursuant to paragraph (a) above, the holder of any share
of Series B Preferred Stock thereafter shall become entitled to receive
any shares of the Corporation, other than Common Stock, thereafter the
number of such other shares so receivable upon conversion of any share
of Series B Preferred Stock shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subparagraphs
(i) to (ix) inclusive, above.
(e) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purposes of effecting conversions
of the Series B Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series B
Preferred Stock not theretofore converted. For purposes of this paragraph
(e), the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Series B Preferred Stock shall be
computed as if at the time of computation all such outstanding shares were
held by a single holder.
(f) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 7 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred Stock against impairment.
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<PAGE> 45
(8) Voting Rights. The holders of record of shares of Series B
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 8 or as otherwise provided by law.
(a) Whenever dividends are in arrears and remain unpaid for six (6) or
more Dividend Payment Dates, the holders of the then outstanding Series B
Preferred Stock, voting as a class, shall have the exclusive right to appoint
one additional director to the Board of Directors of the Corporation (in
addition to any rights to appoint or have nominated any director pursuant to
any contractual agreement between the Corporation and any holders of the
Series B Preferred Stock) until such time as all accrued and unpaid dividends
shall have been paid in full, at which time the term of office of such
director shall terminate.
(b) So long as any shares of Series B Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the
holders of at least a majority of the outstanding shares of Series B Preferred
Stock, voting as a class (i) create, authorize or issue any shares of any
other class of senior or parity dividend stock or senior or parity liquidation
stock or having class voting rights except as required by the Delaware General
Corporation Law or voting rights in excess of one vote per share, (ii) amend,
alter or repeal, whether by merger, consolidation or otherwise, the
Corporation's Certificate of Incorporation if the amendment, alteration or
repeal materially and adversely affects the powers, preferences or special
rights of the Series B Preferred Stock, or (iii) declare any reverse stock
dividend with respect to the Series B Preferred Stock or otherwise reduce the
number of outstanding shares of Series B Preferred Stock other than pursuant
to Section 4, 5 or 7 hereof; provided, however, that the approval of not less
than two-thirds of the outstanding shares of Series B Preferred Stock, voting
as a class, shall be required to amend, alter, or repeal any of the provisions
of the Certificate of Incorporation of the Corporation that would adversely
affect the dividend provisions, liquidation rights, conversion terms, or
voting rights of the Series B Preferred Stock or the holders thereof.
(c) A special meeting of holders of the Series B Preferred Stock (or a
request for a vote by written consent without a meeting) to approve or
disapprove any action of the Corporation on which the holders of the Series
B Preferred Stock are entitled to vote as a separate class by law or pursuant
to this Section 8 may be called by the Secretary of the Corporation or by the
holder(s) of twenty-five percent (25%) or more of the outstanding shares of
Series B Preferred Stock on written notice to the address of each holder
thereof as it appears on the records of the Corporation deposited in the U.S.
mail, all charges prepaid, at least ten (10) but no more than sixty (60) days
prior to the applicable vote. The record date for determination of the
holders of the Series B Preferred Stock entitled to vote by written consent
or at a meeting shall be set by the Corporation's Board of Directors, and only
holders who are holding of record on the stock book of the Corporation on that
date will be entitled to participate in such vote. At any time at which any
share of Series B Preferred Stock has been issued and is outstanding, no
proposal for the Corporation to take any action described in paragraph (b)
shall be adopted, nor shall the Corporation be authorized to take any such
action, unless the holders of at least two-thirds of the outstanding shares
of Series B Preferred Stock voting as a separate class vote in favor of such
proposal.
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<PAGE> 46
(d) Copies of all notices sent to the holders of Common Stock shall be
simultaneously sent to each holder of the Series B Preferred Stock.
(e) In exercising the voting rights set forth in this Section 8, each
share of Series B Preferred Stock shall have one vote per share.
(f) No consent of the holders of the Series B Preferred Stock, except
to the extent such holders are entitled to vote together with the holders of
the Series Preferred Stock or Common Stock, shall be required for (i) the
creation, authorization or issuance of any indebtedness of any kind of the
Corporation, (ii) the creation, authorization or issuance of any other class
of stock of the Corporation subordinate as to dividends and upon liquidation
to the Series B Preferred Stock, (iii) any increase or decrease in the amount
of authorized Common Stock or Series Preferred Stock or any increase, decrease
or change in the par value thereof, or (iv) any increase in the amount of the
Series C Preferred Stock for the purpose of paying dividends in shares of
Series C Preferred Stock as provided herein, and none of the foregoing shall
be deemed to affect adversely the powers, special rights or preferences of
holders of the Series B Preferred Stock.
IN WITNESS WHEREOF, UNC Incorporated caused this certificate to be
signed by its Chairman of the Board and Chief Executive Officer and attested
by its Secretary this 5th day of October, 1995.
UNC INCORPORATED
By:_____________________
Dan A. Colussy
Chairman of the Board and
Chief Executive Officer
ATTEST:
___________________
Secretary
<PAGE>
<PAGE> 47
UNC INCORPORATED
CERTIFICATE OF THE DESIGNATION, POWERS,
PREFERENCES AND RIGHTS OF THE SERIES C SENIOR CUMULATIVE
PREFERRED STOCK
PAR VALUE $1.00 PER SHARE
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The following resolutions were duly adopted by the Board of Directors
of UNC Incorporated, a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, on September 29, 1995 at a meeting of the Board of Directors at
which there was at all times present and acting a quorum of the Board of
Directors of the Corporation:
WHEREAS, the Board of Directors of the Corporation is authorized, within
the limitations and restrictions stated in the Certificate of Incorporation,
to fix by resolution or resolutions the designation of each series of
Preferred Stock and the powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including, without limiting the generality of the
foregoing, such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the General Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of such Preferred Stock and the number of shares constituting such
series:
NOW, THEREFORE, BE IT RESOLVED:
(1) Designation and Number of Shares. The designation of said series
of Preferred Stock, par value $1.00 per share (the "Series Preferred Stock"),
authorized by this resolution shall be "Series C Senior Cumulative Preferred
Stock" (the "Series C Preferred Stock"). The number of shares of Series C
Preferred Stock authorized hereby shall be 250,000 and no more, except as
provided herein.
(2) Rank. The Series C Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank (a) on a
parity with the Series B Senior Cumulative Preferred Stock, par value $1.00
per share (the "Series B Preferred Stock"), and (b) prior to any other equity
securities of the Corporation, whether currently authorized or hereafter
created, including any other series of Series Preferred Stock and the Common
Stock, par value $.20 per share, of the Corporation (the "Common Stock", all
of such equity securities of the Corporation to which the Series C Preferred
Stock ranks prior, including any other series of Series Preferred Stock and
the Common Stock, are referred to herein collectively as the "Junior
Securities").
<PAGE>
<PAGE> 48
(3) Dividends. (a) The holders of the shares of Series C Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative dividends at the annual rate of $8.50 per share in equal quarterly
payments on the last business day of each calendar quarter (each of such dates
being a "Dividend Payment Date"), commencing with the last day of the calendar
quarter in which the shares of Series C Preferred Stock are issued, in
preference to dividends on the Junior Securities. Such dividends shall be
paid to the holders of record at the close of business on the date which is
ten (10) business days prior to the Dividend Payment Date. Each of such
quarterly dividends shall be fully cumulative and shall accrue (whether or not
declared), without interest, from the Date of Issuance. Any dividend payments
due with respect to the Series C Preferred Stock on any Dividend Payment Date
shall be made in cash.
(b) All dividends paid with respect to shares of Series C Preferred
Stock pursuant to paragraph (3)(a) hereof shall be paid pro rata to the
holders entitled thereto.
(c) No full cash dividends shall be declared or paid or set apart for
payment on the Series B Preferred Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Series C Preferred Stock for all dividend payment periods terminating on or
prior to the date of payment of such full cumulative dividends. If any cash
dividends are not paid in full, as aforesaid, upon the shares of Series C
Preferred Stock and Series B Preferred Stock, all cash dividends declared upon
shares of Series C Preferred Stock and Series B Preferred Stock shall be
declared pro rata so that the amount of cash dividends declared per share on
the Series C Preferred Stock and Series B Preferred Stock shall in all cases
bear to each other the same ratio that accrued dividends per share on the
Series C Preferred Stock and Series B Preferred Stock bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series C Preferred Stock which may be
in arrears.
(d) (i) Whenever dividends or distributions payable on the Series C
Preferred Stock as provided in this Section 3 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series C Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(A) declare or pay dividends, or make any other distributions, on
any Junior Securities (either as to dividends or upon liquidation,
dissolution or winding up); or
(B) redeem or purchase or otherwise acquire for consideration
shares of any Junior Securities (either as to dividends or upon
liquidation, dissolution or winding up), provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of any such
Junior Securities in exchange for shares of any other Junior Securities.
(ii) Subject to the foregoing provisions of this Section 3, the Board
of Directors may declare, and the Corporation may pay or set apart for
payment, dividends and other distributions on any of the Junior Securities,
and may purchase or otherwise redeem any of the Junior Securities or any
<PAGE>
<PAGE> 49
warrants, rights or options exercisable for or convertible into any of the
Junior Securities, and the holders of the shares of Series C Preferred Stock
shall not be entitled to share therein.
(4) Liquidation Preference. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to
$100.00 for each share outstanding, plus an amount in cash equal to all
accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities. If the assets of
the Corporation are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of Series C Preferred Stock and
Series B Preferred Stock, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of Series C Preferred Stock and Series B Preferred Stock
are entitled were paid in full.
(b) The liquidation payment with respect to each fractional share of
Series C Preferred Stock outstanding or accrued but unpaid shall be equal to
a ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series C Preferred Stock.
(c) For the purposes of this Section 4, neither the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(5) Redemption. (a) The Corporation at its option may redeem, to the
extent funds are legally available therefor, the Series C Preferred Stock, at
any time in whole or from time to time in part, at the per share redemption
price equal to $100.00 plus all accrued and unpaid dividends thereon to the
date fixed for redemption, without interest (the "Redemption Price").
(b) The Corporation shall not optionally redeem the Series B Preferred
Stock, in whole or in part, without first redeeming all outstanding shares of
Series C Preferred Stock at the Redemption Price.
(c) Unless the Corporation is prohibited by the terms of any
Restrictive Agreement (as defined below) from redeeming any shares of Series
C Preferred Stock, in the event of any Change in Control (as defined below)
with respect to the Corporation, each holder of the Series C Preferred Stock
may, from time to time, require the Corporation to, and the Corporation shall,
redeem any number of the shares of Series C Preferred Stock held by it for the
Redemption Price upon thirty (30) days prior written notice. "Restrictive
Agreement" shall mean any agreement to which the Corporation is a party on the
date hereof (including, as modified, amended, extended, refinanced or
replaced) which by its terms restricts the Corporation's ability to (A) pay
dividends in cash with respect to the Series C Preferred Stock or (B) redeem
<PAGE>
<PAGE> 50
the Series C Preferred Stock, excluding any such agreement which has been
substantially assigned to a party which is not a party thereto on the date
hereof. "Change in Control" shall mean (A) any transaction or series of
related transactions (including, without limitation, any reorganization,
merger or consolidation) which will result in the Corporation's stockholders
immediately prior to such transaction not holding (by virtue of such shares
or securities issued solely with respect thereto) at least fifty percent (50%)
of the voting power of the surviving or continuing entity, (B) a sale of all
or substantially all of the assets of the Corporation, unless the
Corporation's stockholders immediately prior to such sale will, as a result
of such sale, hold (by virtue of securities issued as consideration for the
Corporation's sale) at least fifty percent (50%) of the voting power of the
purchasing entity, or (C) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board
of Directors shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Corporation's
stockholders, of each new director was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of the period.
(d) Shares of Series C Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued shares of the class
of Series Preferred Stock, undesignated as to series, and may be redesignated
and reissued as part of any series of the Series Preferred Stock, par value
$1.00 per share, of the Corporation; provided, however, that no such issued
and reacquired shares of Series C Preferred Stock shall be reissued or sold
as Series C Preferred Stock.
(e) Notwithstanding the foregoing provisions of this Section 5, unless
the full cumulative dividends on all outstanding shares of Series C Preferred
Stock shall have been paid or contemporaneously are declared and paid for all
past dividend periods, none of the shares of Series C Preferred Stock shall
be redeemed unless all outstanding shares of Series C Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or otherwise
acquire (except pursuant to Section 6 hereof) any shares of Series C Preferred
Stock; provided, however, that the foregoing shall not prevent the purchase
or acquisition of shares of Series C Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares
of Series C Preferred Stock.
(6) Procedure for Redemption. A. In the event that fewer than all the
outstanding shares of Series C Preferred Stock are to be redeemed, the number
of shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors.
(b) In the event the Corporation shall redeem shares of Series C
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than thirty (30) days nor more than sixty
(60) days prior to the date of redemption (the "Redemption Date"), to each
holder of record of the shares to be redeemed at such holder's address as the
same appears on the stock register of the Corporation; provided, however, that
no failure to mail such notice nor any defect therein shall affect the
validity of the proceeding for the redemption of any shares of Series C
<PAGE>
<PAGE> 51
Preferred Stock to be redeemed except as to the holder to whom the Corporation
has failed to mail said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the Redemption Date; (ii) the
number of shares of Series C Preferred Stock to be redeemed and, if less than
all the shares held by such holder are to be redeemed from such holder, the
number of shares to be redeemed from such holder; (iii) the Redemption Price;
(iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such Redemption Date.
(c) Notice having been mailed as aforesaid, from and after the
Redemption Date (unless default shall be made by the Corporation in providing
money for the payment of the Redemption Price of the shares called for
redemption) dividends on the shares of Series C Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed
to be outstanding and shall have the status of authorized but unissued shares
of Preferred Stock, unclassified as to series, and shall not be reissued as
shares of Series C Preferred Stock (unless reissued as a stock dividend on
Series C Preferred Stock or Series B Preferred Stock), and all rights of the
holders thereof as stockholders of the Corporation with respect to said shares
(except the right to receive from the Corporation the Redemption Price) shall
cease. Upon surrender in accordance with said notice of the certificates for
any shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall
so state), such shares shall be redeemed by the Corporation at the Redemption
Price aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(7) Voting Rights. The holders of record of shares of Series C
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 7 or as otherwise provided by law.
(b) So long as any shares of Series C Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the
holders of at least a majority of the outstanding shares of Series C Preferred
Stock, voting as a class (i) create, authorize or issue any shares of any
other class of senior or parity dividend stock or senior or parity liquidation
stock or having class voting rights except as required by the Delaware General
Corporation Law or voting rights in excess of one vote per share, (ii) amend,
alter or repeal, whether by merger, consolidation or otherwise, the
Corporation's Certificate of Incorporation if the amendment, alteration or
repeal materially and adversely affects the powers, preferences or special
rights of the Series C Preferred Stock, or (iii) declare any reverse stock
dividend with respect to the Series C Preferred Stock or otherwise reduce the
number of outstanding shares of Series C Preferred Stock other than pursuant
to Section 4 or 5 hereof; provided, however, that the approval of not less
than two-thirds of the outstanding shares of Series C Preferred Stock, voting
as a class, shall be required to amend, alter, or repeal any of the provisions
of the Certificate of Incorporation of the Corporation that would adversely
affect the dividend provisions, liquidation rights, conversion terms, or
voting rights of the Series C Preferred Stock or the holders thereof.
(c) A special meeting of holders of the Series C Preferred Stock (or
a request for a vote by written consent without a meeting) to approve or
disapprove any action of the Corporation on which the holders of the Series
C Preferred Stock are entitled to vote as a separate class by law or pursuant
<PAGE>
<PAGE> 52
to this Section 7 may be called by the Secretary of the Corporation or by the
holder(s) of twenty-five percent (25%) or more of the outstanding shares of
Series C Preferred Stock on written notice to the address of each holder
thereof as it appears on the records of the Corporation deposited in the U.S.
mail, all charges prepaid, at least ten (10) but no more than sixty (60) days
prior to the applicable vote. The record date for determination of the
holders of the Series C Preferred Stock entitled to vote by written consent
or at a meeting shall be set by the Corporation's Board of Directors, and only
holders who are holding of record on the stock book of the Corporation on that
date will be entitled to participate in such vote. At any time at which any
share of Series C Preferred Stock has been issued and is outstanding, no
proposal for the Corporation to take any action described in this paragraph
(b) shall be adopted, nor shall the Corporation be authorized to take any such
action, unless the holders of at least two-thirds of the outstanding shares
of Series C Preferred Stock voting as a separate class vote in favor of such
proposal.
(d) Copies of all notices sent to the holders of Common Stock shall be
simultaneously sent to each holder of the Series C Preferred Stock.
(e) In exercising the voting rights set forth in this Section 7, each
share of Series C Preferred Stock shall have one vote per share.
(f) No consent of the holders of the Series C Preferred Stock, except
to the extent such holders are entitled to vote together with the holders of
the Series B Preferred Stock or Common Stock, shall be required for (i) the
creation, authorization or issuance of any indebtedness of any kind of the
Corporation, (ii) the creation, authorization or issuance of any other class
of stock of the Corporation subordinate as to dividends and upon liquidation
to the Series C Preferred Stock, or (iii) any increase or decrease in the
amount of authorized Common Stock or Series B Preferred Stock or any increase,
decrease or change in the par value thereof, and none of the foregoing shall
be deemed to affect adversely the powers, special rights or preferences of
holders of the Series C Preferred Stock.
(8) Business Combinations. In case the Corporation is a participant
in a consolidation, merger or combination with another corporation (other than
with a wholly-owned subsidiary of the Corporation and other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock) or in case of any sale or transfer of all
or substantially all of the assets of the Corporation, as a result of which
holders of the Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, or any share exchange whereby the Common Stock is converted
into other securities or property of the Corporation, then as a condition to
the consummation of such transaction, lawful and adequate provision shall be
made so that the holder of each share of Series C Preferred Stock then
outstanding shall have the right, with respect to such shares of Series B
Preferred Stock, to receive stock, other securities or property or assets
(including cash) or any combination thereof, having a value equal to the
product of (a) the quotient obtained by dividing (x) $100 plus all accrued and
unpaid dividends, whether or not declared, on the Series C Preferred Stock by
(y) the then Existing Conversion Price for the Series B Preferred Stock (as
adjusted to give effect to such transaction), and (b) the value of the stock,
other securities, property and assets (including cash) which each holder of
one share of Common Stock is entitled to receive upon such consolidation,
merger, combination, sale or transfer, or exchange.
<PAGE>
<PAGE> 53
IN WITNESS WHEREOF, UNC Incorporated has caused this certificate to be
signed by its Chairman of the Board and Chief Executive Officer and attested
by its Secretary this 5th day of October, 1995.
UNC INCORPORATED
By: _____________________
Dan A. Colussy
Chairman of the Board and
Chief Executive Officer
ATTEST:
_________________________
Secretary
<PAGE>
<PAGE> 1 EXHIBIT 10.38
_________________________________________________________________
_________________________________________________________________
ASSET PURCHASE AGREEMENT
Dated as of January 15, 1996
By and Among
UNC INCORPORATED
a Delaware corporation
("Buyer's Parent")
UNC/CFC ACQUISITION CO.
a Delaware corporation
("Buyer")
CFC AVIATION SERVICES, L.P.
a Delaware limited partnership
("Garrett")
CFC AVIATION COMPANY, L.L.C.
("Jet Center")
CFC AVIATION, INC.
a Delaware corporation
("CFC")
CARLISLE ENTERPRISES, L.P.
a Delaware limited partnership
("Carlisle")
FIRST CAPITAL CORPORATION OF CHICAGO
an Illinois corporation
and
CROSS CREEK PARTNERS III
an Illinois general partnership
_________________________________________________________________
_________________________________________________________________
<PAGE>
<PAGE> 2 TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS
-----------
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
Section 2.1. Purchase and Sale of Assets . . . . . . . . . . . . . . . 9
Section 2.2. Purchase Price and Payment for Assets . . . . . . . . . . 9
Section 2.3. Assumption of Assumed Obligations . . . . . . . . . . . . 10
Section 2.4. Adjustments to Cash Consideration.. . . . . . . . . . . . 11
Section 2.5. Closing Holdback. . . . . . . . . . . . . . . . . . . . . 13
Section 2.6. Instruments of Transfer . . . . . . . . . . . . . . . . . 14
Section 2.7. Allocation of Purchase Price. . . . . . . . . . . . . . . 14
Section 2.8. Transfer Taxes and Costs. . . . . . . . . . . . . . . . . 14
Section 2.9. Assignment of Contracts and Rights. . . . . . . . . . . . 14
Section 2.10. Compliance with Bulk Transfer Laws. . . . . . . . . . . . 15
Section 2.11. Escrow Agreement. . . . . . . . . . . . . . . . . . . . . 15
Section 2.12. Schedules to Agreement. . . . . . . . . . . . . . . . . . 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Section 3.1. Organization and Good Standing. . . . . . . . . . . . . . 16
Section 3.2. Execution and Effect of Agreement . . . . . . . . . . . . 16
Section 3.3. Restrictions. . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.4. Consents. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.5. Financial Statements. . . . . . . . . . . . . . . . . . . 17
Section 3.6. Capitalized Lease Obligations . . . . . . . . . . . . . . 18
Section 3.7. No Undisclosed Liabilities. . . . . . . . . . . . . . . . 18
Section 3.8. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.9. Subsidiaries; Investments . . . . . . . . . . . . . . . . 19
Section 3.10. Real Properties; Absence of Encumbrances. . . . . . . . . 19
Section 3.11. Intellectual Property . . . . . . . . . . . . . . . . . . 21
Section 3.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.13. AlliedSignal Agreements . . . . . . . . . . . . . . . . . 23
Section 3.14. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.15. Employee Benefit and Employment Matters . . . . . . . . . 24
Section 3.16. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.17. Environmental Matters . . . . . . . . . . . . . . . . . . 28
Section 3.18. Compliance With Laws. . . . . . . . . . . . . . . . . . . 29
Section 3.19. Licenses and Permits. . . . . . . . . . . . . . . . . . . 29
Section 3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.21. Claims of Directors, Officers, Etc. . . . . . . . . . . . 30
Section 3.22. Extraordinary Transactions. . . . . . . . . . . . . . . . 30
Section 3.23. Broker and Finder Fees. . . . . . . . . . . . . . . . . . 31
Section 3.24. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.25. Related Party Transactions. . . . . . . . . . . . . . . . 32
Section 3.26. No Adverse Change or Conditions . . . . . . . . . . . . . 32
Section 3.27. Product and Service Warranty. . . . . . . . . . . . . . . 32
Section 3.28. Interstate Commerce Act . . . . . . . . . . . . . . . . . 32
Section 3.29. Adequate Disclosure . . . . . . . . . . . . . . . . . . . 33
<PAGE>
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER'S PARENT
----------------------------------------------------------
Section 4.1. Organization and Good Standing. . . . . . . . . . . . . . 33
Section 4.2. Execution and Effect of Agreement . . . . . . . . . . . . 33
Section 4.3. Restrictions. . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.4. No Consents . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.5. No Broker . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.6. UNC Status. . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
PRE-CLOSING COVENANTS AND AGREEMENTS OF SELLER AND CFC
------------------------------------------------------
Section 5.1. Status. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2. Access to Information . . . . . . . . . . . . . . . . . . 34
Section 5.3. Conduct of Business to Closing. . . . . . . . . . . . . . 35
Section 5.4. Consents. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.5. Certain Employee Benefit Matters. . . . . . . . . . . . . 37
Section 5.6. Public Statements . . . . . . . . . . . . . . . . . . . . 37
Section 5.7. Update of Disclosure. . . . . . . . . . . . . . . . . . . 37
Section 5.8. H-S-R Act Filings . . . . . . . . . . . . . . . . . . . . 38
Section 5.9. Employee Matters. . . . . . . . . . . . . . . . . . . . . 38
Section 5.10. Financial Statements. . . . . . . . . . . . . . . . . . . 38
Section 5.11. Closing Conditions. . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
PRE-CLOSING COVENANTS AND AGREEMENTS OF BUYER
---------------------------------------------
Section 6.1. Public Statements . . . . . . . . . . . . . . . . . . . . 40
Section 6.2. Consents. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.3. H-S-R Act Filings . . . . . . . . . . . . . . . . . . . . 40
Section 6.4. Employees . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
Section 7.1. Representations and Warranties True . . . . . . . . . . . 41
Section 7.2. Covenants and Agreements--No Default. . . . . . . . . . . 41
Section 7.3. Certificate . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.4. Employment Agreements . . . . . . . . . . . . . . . . . . 41
Section 7.5. No Material Adverse Change. . . . . . . . . . . . . . . . 41
Section 7.6. Seller Consents/Certain Assurances. . . . . . . . . . . . 42
Section 7.7. Buyer Consents. . . . . . . . . . . . . . . . . . . . . . 42
Section 7.8. No Injunction . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.9. Closing Documents . . . . . . . . . . . . . . . . . . . . 43
Section 7.10. Financing . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.11. Due Diligence . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.12. Board Approval. . . . . . . . . . . . . . . . . . . . . . 43
Section 7.13. H-S-R Approval. . . . . . . . . . . . . . . . . . . . . . 43
Section 7.14. Financial Statements. . . . . . . . . . . . . . . . . . . 43
<PAGE>
<PAGE> 4
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
Section 8.1. Representations and Warranties True . . . . . . . . . . . 44
Section 8.2. Covenants and Agreements--No Default. . . . . . . . . . . 44
Section 8.3. Certificate . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.4. No Injunction . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.5. Closing Documents . . . . . . . . . . . . . . . . . . . . 45
Section 8.6. H-S-R Approval. . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX
CLOSING
-------
Section 9.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.2. Documents to be Delivered by Sellers. . . . . . . . . . . 45
Section 9.3. Documents to be Delivered by Buyer. . . . . . . . . . . . 46
Section 9.4. Fee for Delayed Closing . . . . . . . . . . . . . . . . . 47
ARTICLE X
TERMINATION
-----------
Section 10.1. Right to Terminate Agreement . . . . . . . . . . . . . . 47
Section 10.2. Effect of Termination. . . . . . . . . . . . . . . . . . 49
Section 10.3. Survival of Covenants Following Termination. . . . . . . 52
ARTICLE XI
POST-CLOSING COVENANTS AND AGREEMENTS
-------------------------------------
Section 11.1. Financial Statements/Preservation of and Access to Information
After Closing . . . . . . . . . . . . . . . . . . . . 52
Section 11.2. Employee Benefit Matters . . . . . . . . . . . . . . . . 53
Section 11.3. Survival . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.4. Indemnification by Seller. . . . . . . . . . . . . . . . 55
Section 11.5. Indemnification by Buyer . . . . . . . . . . . . . . . . 59
Section 11.6. Confidentiality. . . . . . . . . . . . . . . . . . . . . 60
Section 11.7. Restrictive Covenants of Seller and CFC. . . . . . . . . 61
Section 11.8. Change of Names. . . . . . . . . . . . . . . . . . . . . 63
Section 11.9. Specific Performance and Injunctive Relief . . . . . . . .63
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1. Power of Attorney. . . . . . . . . . . . . . . . . . . . 64
Section 12.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.3. Entire Agreement . . . . . . . . . . . . . . . . . . . . 64
Section 12.4. Amendment and Waiver . . . . . . . . . . . . . . . . . . 64
Section 12.5. Binding Agreement and Successors . . . . . . . . . . . . 65
Section 12.6. Assignment . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.7. No Third Party Beneficiaries . . . . . . . . . . . . . . 65
Section 12.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.9. Further Assurances . . . . . . . . . . . . . . . . . . . 66
<PAGE>
<PAGE> 5
Section 12.10. Article and Section Headings . . . . . . . . . . . . . . 66
Section 12.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . 67
Section 12.12. Construction . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.14. Exhibits and Schedules . . . . . . . . . . . . . . . . . 67
SCHEDULES
---------
Schedule 1.0 Required Consents
Schedule 2.1 Assets
Schedule 2.4 Personal Property Lease Obligations
Schedule 2.7 Allocation of Purchase Price
Schedule 3.3 Restrictions
Schedule 3.4 Seller Consents
Schedule 3.6 Capitalized Lease Obligations
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Litigation
Schedule 3.9 Subsidiaries; Investments
Schedule 3.10 Real Properties; Absence of Encumbrances
Schedule 3.11 Intellectual Property
Schedule 3.12 Contracts
Schedule 3.13 AlliedSignal Agreements
Schedule 3.14 Guarantees
Schedule 3.15 Employee Benefit and Employment Matters
Schedule 3.16 Tax Matters
Schedule 3.17 Environmental Matters
Schedule 3.18 Compliance with Laws
Schedule 3.19 Licenses and Permits
Schedule 3.20 Insurance
Schedule 3.21 Claims of Directors, Officers, Etc.
Schedule 3.22 Extraordinary Transactions
Schedule 3.23 Broker and Finder Fees
Schedule 3.24 Assets
Schedule 3.25 Related Party Transactions
Schedule 3.26 Adverse Changes or Conditions
Schedule 3.27 Product and Service Warranty
Schedule 4.4 Buyer Consents
Schedule 4.5 No Broker
Schedule 11.7 Restrictive Covenants of Seller and CFC
<PAGE>
<PAGE> 6
EXHIBITS
--------
Exhibit A Description of Business
Exhibit B Form of Assumption Agreement
Exhibit C Form of Employment Agreement
Exhibit Form of Escrow Agreement
Exhibit E Financial Statements
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G-1 Form of Opinion of Buyer's Counsel
Exhibit G-2 Form of Opinion of Richard H. Lange
<PAGE>
<PAGE> 7
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (together with the Schedules and Exhibits
hereto, this "Agreement") is made and entered into as of the 15th day of
January, 1996, by and among UNC INCORPORATED, a Delaware corporation with its
principal place of business at 175 Admiral Cochrane Drive, Annapolis, Maryland
21401 ("Buyer's Parent"), UNC/CFC ACQUISITION CO., a Delaware corporation with
its principal place of business at c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801
("Buyer"), CFC AVIATION SERVICES, L.P., a Delaware limited partnership, with
its principal place of business at 432 N. 44th Street, Suite 340, Phoenix,
Arizona 85008 ("Garrett"), CFC AVIATION COMPANY, L.L.C., a Delaware limited
liability company with its principal place of business at 16300 Daily Drive,
Van Nuys, California 91406 ("Jet Center") and CFC AVIATION, INC., a Delaware
corporation with its principal place of business at 432 N. 44th Street, Suite
340, Phoenix, Arizona 85008 ("CFC"), CARLISLE ENTERPRISES, L.P., a Delaware
limited partnership with its principal place of business at 7777 Fay Avenue,
La Jolla, California 92037 ("Carlisle"), FIRST CAPITAL CORPORATION OF
CHICAGO, an Illinois corporation, and CROSS CREEK PARTNERS III, an Illinois
general partnership, each with its principal place of business at Three First
National Plaza, Chicago, Illinois 60670.
Certain capitalized terms used herein without definition have the
meanings given to such terms in Article I of this Agreement. Unless the
context otherwise requires, all references in this Agreement to "Seller" or
"Sellers" shall be construed to mean each and both of Garrett and Jet Center.
Unless the context otherwise requires, First Capital Corporation of Chicago
and Cross Creek Partners III are collectively referred to herein as "First
Chicago").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers are engaged in the business described on Exhibit A to
this Agreement; and
WHEREAS, subject to the conditions set forth in this Agreement, Buyer
desires to purchase from Sellers, pursuant to and in accordance with the terms
of this Agreement, substantially all of the assets, business, rights and
properties of Sellers and to assume certain of the liabilities and obligations
of Sellers; and
WHEREAS, subject to the conditions set forth in this Agreement, Sellers
desire to sell, assign, transfer and deliver to Buyer, pursuant to and in
accordance with the terms of this Agreement, substantially all of their
assets, business, rights and properties;
WHEREAS, CFC is the corporate general partner of Garrett and the
managing member of Jet Center and desires to enter into this Agreement for the
purpose of making certain covenants and agreements in favor of Buyer;
WHEREAS, Carlisle and First Chicago have entered into this Agreement
solely for the purpose of making the covenants contained in Section 11.7
hereof; and
WHEREAS, Buyer's Parent owns, indirectly, all of the outstanding shares
of capital stock of Buyer and desires to enter into this Agreement for the
purpose of making certain covenants in favor of the Sellers;
<PAGE>
<PAGE> 8
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements of the parties contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1. Certain Definitions. The following terms, when used in
capitalized form in this Agreement, shall have the following meanings:
"Affiliate" shall mean any Person that directly or indirectly controls,
is controlled by, or is under common control with the Person in question. For
purposes of determining whether a Person is an Affiliate, the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through ownership of securities, contract or otherwise.
"AlliedSignal" shall mean AlliedSignal Inc., a Delaware corporation, and
its Affiliates.
"AlliedSignal Purchase Agreement" shall mean that certain Asset and
Stock Purchase Agreement dated as of May 26, 1994 (and as amended pursuant to
Amendment No. 1 thereto dated as of June 30, 1994), and as amended in the
manner contemplated by Schedule 3.13 to this Agreement, by and between
AlliedSignal and Garrett, a true and correct copy of which Garrett has
delivered previously to Buyer together with all agreements related thereto
including, without limitation, a Licensed Proprietary Rights Agreement and
Noncompetition Agreement, true and correct copies of which Garrett has
delivered previously to Buyer.
"Applicable Laws" shall mean any laws, statutes, ordinances, codes,
rules, regulations, standards, rulings, decrees, orders or other requirements
of any Governmental Authority that are applicable to the business, assets or
properties of a Seller.
"ASE Operating Agreement" shall mean that certain Allied- Signal Engine
Division Operating Agreement dated as of June 30, 1994, and as amended in the
manner contemplated by Schedule 3.13 to this Agreement, by and between Garrett
and AlliedSignal, a true and correct copy of which Garrett has delivered
previously to Buyer.
"Assets" shall have the meaning set forth in Section 2.1.
"Assumed Obligations" shall have the meaning set forth in Section 2.3.
"Assumption Agreement" shall mean the Assumption Agreement to be
executed and delivered by the Sellers and Buyer at the Closing in the form
attached hereto as Exhibit B.
"Balance Sheet" shall mean the unaudited combined balance sheet of the
Sellers as of October 31, 1995.
"Benefit Arrangements" shall mean all life and health benefits,
hospitalization, savings, bonus, deferred compensation, profit sharing,
incentive compensation, severance pay, disability, sick pay, vacation pay,
<PAGE>
<PAGE> 9
stock option, award or similar plans, and fringe benefit plans, individual
employment and severance contracts and other policies and practices, whether
written or oral, providing employee or executive compensation or benefits to
Employees or their dependents, other than Employee Benefit Plans.
"Business" shall mean the trade and business of each Seller as conducted
prior to the Closing and as described on Exhibit A to this Agreement.
"Buyer Group" shall mean Buyer, Buyer's Parent and any Affiliate of
Buyer or Buyer's Parent.
"Buyer Losses" shall have the meaning set forth in Section 11.4(a).
"Carlisle Affiliates" shall mean Carlisle Enterprises L.P., a Delaware
limited partnership, Carlisle CFC Holding L.P., a Delaware limited
partnership, Carlisle Fiberite Holding L.P., a Delaware limited partnership
and James Carlisle, Dennis Dunn, Dale Ziegler and David Canedo, individuals
(but specifically excluding George Leisz and Harry Todd).
"Cash Consideration" shall have the meaning set forth in Section 2.2.
"Cash Equivalents" shall mean cash deposit accounts, short-term
commercial paper, and other items commonly understood to constitute cash
equivalents.
"CFC" shall mean CFC Aviation Services, Inc., a Delaware corporation,
the corporate general partner of Garrett and the managing member of Jet
Center.
"Closing" shall mean the consummation of the events described in
ARTICLE IX.
"Closing Balance Sheet" shall mean the audited combined balance sheet
of Sellers as of the Closing Date.
"Closing Date" shall mean the date on which the Closing shall occur.
"Closing Holdback" shall mean the amount of $3,000,000, which shall be
deposited with the Escrow Agent by Buyer on the Closing Date pursuant to
Section 2.5 and administered and disbursed by the Escrow Agent as provided in
the Escrow Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral Agreements" shall mean the Escrow Agreement, the Employment
Agreement and the Assumption Agreement.
"Contest" shall mean any administrative or judicial Tax audit,
examination, proceeding or litigation involving any Tax Authority.
"Contested Claim" shall have the meaning set forth in Section 11.4(d).
"Contracts" shall mean all contracts, agreements, leases, arrangements,
commitments or understandings, whether oral or written, express or implied,
executed or executory, now existing or hereafter entered into, to which a
Seller is a party or is otherwise legally bound; provided, however, that
<PAGE>
<PAGE> 10
"Contracts" shall not include any Benefit Arrangements or Employee Benefit
Plans.
"Definitive Agreement Break-Up Fee" shall mean the amount of $4,000,000
which may become due and payable by Buyer in accordance with the terms of
Section 10.2.
"Delayed Closing Fee" shall mean the amount of $5,000,000, which may
become due and payable by Buyer to the Sellers and CFC, collectively, pursuant
to and in accordance with Section 9.4.
"De Minimus Claim" shall have the meaning set forth in Section 11.5(c).
"DOL" shall mean the United States Department of Labor.
"Employee Benefit Plans" shall mean each "employee benefit plan," as
defined in Section 3(3) of ERISA, maintained or contributed to by Seller or
any of its ERISA Affiliates, which provides benefits to Employees or their
dependents but excluding Multiemployer Plans.
"Employees" shall mean all current employees, former employees and
retired employees of each Seller.
"Employment Agreement" shall mean the Employment Agreement to be
executed and delivered by Buyer and L. David Clemons at the Closing in the
form attached hereto as Exhibit C.
"Encumbrance" shall mean any interest or equity of any Person,
including, without limitation, any right to acquire, option, right of
preemption, or any mortgage, lease, charge, pledge, lien, encumbrance,
assignment, hypothecation, security interest, title retention, claim,
covenant, condition, easement or any other security agreement or arrangement
or any restriction of any kind or character, except that "Encumbrance" shall
not include liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, arising in the ordinary course of the Business and
the assertion of which would not have a Material Adverse Effect on the
Business.
"Environmental Laws" shall mean any laws, statutes, regulations, rules,
orders, consents, decrees, or requirements of any Governmental Authority,
which relate to or otherwise impose liability or standards of conduct
concerning discharges or releases of any pollutants, contaminants or hazardous
or toxic wastes, substances or materials into ambient air, water or land, or
otherwise relating to the manufacture, operation, maintenance, processing,
generation, distribution, use, treatment, storage, disposal, cleanup,
transport or handling of Hazardous Materials, including (but not limited to)
the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended; the Resource Conservation and Recovery Act of 1978, as
amended; any other so-called "Superfund" or "Superlien" law; the Clean Water
Act, Clean Air Act, or any other similar federal, state or local statutes in
the United States or elsewhere.
"Escrow Agent" shall mean the Bank of America.
"Escrow Agreement" shall mean the Escrow Agreement by and among the
Escrow Agent, Seller and Buyer in the form attached hereto as Exhibit D.
<PAGE>
<PAGE> 11
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any Person that is treated as a single
employer with the Person in question under Section 414(b), (c), (m) or (o) of
the Code.
"Excluded Assets" shall mean (i) all cash, bank accounts and Cash
Equivalents of Seller, and (ii) amounts payable to a Seller (including loans
and intercompany accounts receivables) by CFC or any Affiliate of a Seller.
Notwithstanding the foregoing, an amount payable by one Seller to the other
Seller shall not be an Excluded Asset to the extent that an equal offsetting
liability in respect to such asset is set forth on the Closing Balance Sheet.
"Excluded Liabilities" shall have the meaning set forth in Section
2.3(c).
"Final Net Asset Value" shall mean the total book value of the assets
of Sellers (other than the Excluded Assets) minus the total book value of the
liabilities of Sellers (other than the Excluded Liabilities) as determined in
accordance with Section 2.4(b).
"Financial Statements" shall have the meaning set forth in Section 3.5.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States on the date of this Agreement.
"Governmental Authority" shall mean any government or state (or any
subdivision thereof), whether domestic, foreign or multinational, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Guarantees" shall mean any obligations, contingent or otherwise, of a
Person in respect of any indebtedness, obligation or liability of another
Person, including but not limited to, direct or indirect guarantees,
endorsements (except for collection or deposit in the ordinary course of
business), notes co-made or discounted, recourse agreements, take-or-pay
agreements, keep-well agreements, agreements to purchase or repurchase such
indebtedness, obligation or liability or any security therefor or to provide
funds for the payment or discharge thereof, agreements to maintain solvency,
assets, level of income, or other financial condition, and agreements to make
payment other than for value received.
"Hazardous Materials" shall mean any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials, including,
without limitation, asbestos, PCBs, petroleum product, urea-formaldehyde (in
situations where considered hazardous or toxic), radon, and any substances
defined as or included in the definition of (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensa-
tion and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; (c) any "toxic substance" as defined by the Toxic
Substances Control Act, as amended from time to time, and regulations
promulgated thereunder; (d) any substance or matter (including but not limited
to underground storage tanks), the presence of which is prohibited or
regulated under any Applicable Laws; and (e) any other substance, pollutant,
<PAGE>
<PAGE> 12
contaminant, chemical, or industrial toxic or hazardous substances or waste,
including without limitation hazardous materials, which is prohibited or is
otherwise regulated by any Applicable Laws.
"H-S-R Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"H-S-R Approval" shall mean the date on which the waiting period
required by the H-S-R Act expires or the Federal Trade Commission or the
Department of Justice provides notice of early termination of such waiting
period to Buyer or Sellers, whichever occurs earlier.
"IRS" shall mean the United States Internal Revenue Service.
"Income Taxes" shall mean any income, gross receipts, gains, net worth,
surplus, franchise or withholding taxes (including interest, penalties or
other additions to Tax) imposed by a Tax Authority.
"Independent Accountants" shall have the meaning set forth in
Section 2.4.
"Intellectual Property" shall mean any and all design registrations,
patents, patent applications, trademarks, trademark registrations and
applications therefor, service marks, service mark registrations and
applications therefor, copyrights, copyright registrations and applications
therefor and trade names that are owned by, licensed to, or used by a Seller
in its business.
"Knowledge" shall mean, with respect to a Seller, that the matter
referred to is actually known by any one or more of the following persons:
(i) L. David Clemons, James E. Greenslade, Peter M. Hokanson or Dale L.
Ziegler, each a member of the executive management of Seller, (ii) John R.
Myers, Burton E. McGillivray or James S. Carlisle, each a member of the
Executive Committee of the Board of Directors of CFC, or (iii) David N. Roy,
Michael L. Durst, Edgar J. Ahrens, James M. Zentgraf, William G. Nielsen and
Robert E. Mays, each of which is a Vice President and General Manager of a
Seller (each of the persons identified in this clause (iii), a "Hangar
Manager").
"Letter of Intent Break-Up Fee" shall mean the amount of $1,000,000
which may become due and payable by Buyer in accordance with the terms of
Section 10.2 hereof.
"Material Adverse Effect," when used with reference to a Person or
Persons, shall mean a material adverse effect on the business, assets,
liabilities, operations, results of operations, financial condition or
business prospects (but not including general industry, financial or political
events not specific to the business of a Person) of the Person or Persons.
"Net Asset Value" shall mean the total book value of the assets of
Sellers (other than the Excluded Assets) minus the total book value of the
Assumed Liabilities of Sellers (other than the Excluded Liabilities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Employee Benefit Plan that is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA.
<PAGE>
<PAGE> 13
"Person" shall mean any individual, corporation, unincorporated
association, business trust, estate, partnership, limited liability company,
limited liability partnership, trust, state, the United States or any other
entity.
"Predecessor Financial Statements" shall have the meaning set forth in
Section 5.10(a).
"Properties" shall have the meaning set forth in Section 3.10(a).
"Purchase Price" shall have the meaning set forth in Section 2.2.
"Required Consents" shall mean the consents, approvals, waivers and
authorizations specified on Schedule 1.0 to this Agreement.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Laws" shall mean the Securities Act of 1933, as amended (and
the rules and regulations promulgated thereunder), and the Securities Exchange
Act of 1934, as amended, (and the rules and regulations promulgated
thereunder).
"Seller Group" shall mean Garrett, Jet Center, CFC and each other
Affiliate of Garrett and Jet Center.
"Seller Losses" shall have the meaning set forth in Section 11.5.
"Tax Authority" shall mean a foreign or United States federal, state,
or local Governmental Authority having jurisdiction over the assessment,
determination, collection or imposition of any Tax, as the context requires.
"Tax Returns" shall mean all returns (including information returns and
amended returns), declarations, reports, claims for refunds, estimates and
statements regarding Taxes, required to be filed under Applicable Laws.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including without limitation, all net income, gross income, gross
receipts, sales, use, value added, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, windfall profit, alternative or add
on minimum, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments, or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Tax Authority.
"Technology" shall mean all unpatented inventions or discoveries, trade
secrets, proprietary information, research records, test information, market
surveys, know-how, analysis, processes and procedures, and software and
computer programs and source code data relating thereto owned, used by or
licensed to Sellers.
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
Section 2.1. Purchase and Sale of Assets. Subject to the conditions
set forth in this Agreement, and pursuant to and in accordance with the terms
of this Agreement, (i) each Seller hereby agrees to sell, transfer, assign and
<PAGE>
<PAGE> 14
deliver to Buyer at the Closing all of its right, title and interest in and
to all of its tangible and intangible assets, rights and properties, other
than the Excluded Assets, including, without intended limitation, the assets,
rights and properties of each Seller that are associated with or used or
useful in the Business of the Sellers, and including, without intended
limitation, the assets, rights and properties described on Schedule 2.1 to
this Agreement (the "Assets"), and (ii) in reliance upon the representations
and warranties of the Sellers and CFC made herein and subject to the
satisfaction of the conditions set forth herein, Buyer hereby agrees to
purchase such Assets at the Closing from the Sellers.
Section 2.2. Purchase Price and Payment for Assets.
(a) Purchase Price. The entire consideration to be given
by Buyer to the Sellers in the aggregate in exchange for the sale, assignment,
transfer and delivery of the Assets to Buyer at the Closing (the "Purchase
Price") shall be (i) $150,000,000, which amount shall be subject to adjustment
at and after the Closing as provided in Sections 2.4(a) and 2.4(c) and paid
to the Sellers as provided in Section 2.2(b) (the "Cash Consideration") plus
(ii) the assumption by Buyer at the Closing of the Assumed Obligations.
(b) Payment of Cash Consideration on the Closing Date. On
the Closing Date, upon satisfaction of all of the conditions precedent to the
obligations of Buyer which are set forth in Article VII that have not been
waived in writing by Buyer, in consideration of the sale, transfer, assignment
and delivery of the Assets to Buyer, Buyer shall pay to the Sellers, at the
Closing, by wire transfer to an account of the Sellers designated in writing
by Sellers prior to the Closing Date, the aggregate amount of $150,000,000
less (i) the Closing Holdback (which shall be subject to and payable in
accordance with Section 2.5) and (ii) the amount of the adjustment that will
be made thereto in accordance with Section 2.4(a) in respect of certain lease
obligations of Seller assumed by Buyer at the Closing.
Section 2.3. Assumption of Assumed Obligations.
(a) Assumption. On the Closing Date, upon satisfaction of
all of the conditions precedent to the obligations of Buyer which are set
forth in Article VII that have not been waived in writing by Buyer, in
consideration of the sale, transfer, assignment and delivery of the Assets to
Buyer, Buyer shall assume the Assumed Obligations at the Closing, and shall
thereafter pay, perform and discharge the Assumed Obligations in the ordinary
course of business from and after the Closing Date in accordance with their
respective terms and the terms of the Assumption Agreement. Notwithstanding
the foregoing, each Seller shall retain all of, and Buyer shall not acquire
or assume or otherwise be liable or responsible for any of, the Excluded
Liabilities. Each Seller shall perform, pay, discharge and satisfy all
Excluded Liabilities from and after the Closing in accordance with their
respective terms and CFC shall cause each Seller to comply with their
obligations hereunder.
(b) Assumed Obligations. For purposes of this Agreement,
the term "Assumed Obligations" shall mean and include all of the obligations,
liabilities and commitments of each Seller arising out of the business of each
Seller, whether known, contingent or arising in the future, with respect to
matters occurring prior to the Closing Date; including without limitation,
obligations which (i) arise out of, or under, the Contracts, (ii) constitute
trade accounts payable of Seller reflected on the Balance Sheet or which arise
<PAGE>
<PAGE> 15
in the ordinary course of business of Seller prior to the Closing and which
are of a type consistent with the trade accounts payable reflected on the
Balance Sheet, and (iii) all capitalized lease obligations of Seller which are
reflected on the Balance Sheet or which arise in the ordinary course of
business of Seller prior to the Closing and which are of a type consistent
with the capitalized lease obligations set forth on the Balance Sheet (to the
extent, and only to the extent, that the Cash Consideration has been reduced
in respect of such capitalized lease obligations in accordance with Section
2.4(a) of this Agreement); provided, however, that in no event shall the
Assumed Obligations include any Excluded Liabilities.
(c) Excluded Liabilities. For purposes of this Agreement,
the term "Excluded Liabilities" shall mean and include (i) the obligations and
liabilities of Seller in respect of borrowed money, current portions of long-
term bank financing, and long-term bank financing, (ii) any of the Sellers'
liabilities or obligations under this Agreement or any of the Exhibits hereto,
(iii) any of the Sellers' liabilities for expenses or fees incurred by the
Sellers in connection with the negotiation, preparation, approval and
authorization of the execution and delivery of this Agreement, any of the
Collateral Agreements or the consummation of any the transactions contemplated
hereby or thereby, (iv) except as otherwise set forth in Section 2.8, any
liabilities or obligations (including Taxes) of a Seller which arise in
connection with or relate to the consummation of the transactions contemplated
by this Agreement, (v) liabilities, amounts or obligations payable by Jet
Center to CFC, Garrett or any Affiliate thereof; or (vi) amounts or
obligations payable by Garrett to Jet Center, CFC or any Affiliate thereof;
provided, however, that an amount or obligation identified in clauses (v) and
(vi) shall not constitute an Excluded Liability to the extent that it
represents an amount payable by a Seller to the other Seller and an equal
offsetting asset in respect of such amount is set forth on the Closing Balance
Sheet.
Section 2.4. Adjustments to Cash Consideration.
(a) Personal Property Lease Obligations. The Cash
Consideration shall be reduced at the Closing by an amount equal to certain
liabilities assumed by Buyer at the Closing in respect of certain lease
obligations of each of the Sellers. The amount of the Purchase Price
reduction shall be determined on the basis set forth on Schedule 2.4 to this
Agreement.
(b) Preparation of Closing Balance Sheet.
(i) As promptly as practicable following the
Closing Date, but in no event later than 60 days after the Closing Date, the
Sellers shall deliver to Buyer (a) the Closing Balance Sheet, which shall be
prepared in accordance with GAAP, consistently applied, and on a basis
consistent with the principles, methods and policies used in the preparation
of the combined balance sheet of Sellers at December 31, 1994 included in the
Financial Statements and the Balance Sheet (to the extent that such
principles, methods, and policies are consistent with and proper under GAAP),
accompanied by a favorable audit opinion of Ernst & Young, and (b) a statement
of the Net Asset Value of Seller shown on the Closing Balance Sheet.
(ii) Each Seller shall provide, and shall cause
Ernst & Young to provide, Buyer (and its employees, accountants and other
representatives) with full, complete and contemporaneous access to the work
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papers, schedules or other documents prepared by or on behalf of the Seller
in connection with the preparation of the Financial Statements, the Balance
Sheet and the Closing Balance Sheet. Each Seller also shall permit Buyer (and
its employees, accountants and other representatives) to consult with the
Seller (and its employees), and shall cause Ernst & Young to permit Buyer (and
its employees, accountants and other representatives) to consult with Ernst
& Young and its employees, on a contemporaneous basis in connection with the
preparation of the Closing Balance Sheet. Each Seller (and its employees,
accountants and representatives) shall cooperate fully with Buyer in
furnishing all information and documents reasonably requested by Buyer (or its
employees, accountants or representatives) in connection with the preparation
of the Closing Balance Sheet, and shall consult with Buyer (and its employees,
accountants or representatives) in connection with the preparation of the
Closing Balance Sheet.
(iii) In the event that Buyer disputes the
correctness of the Closing Balance Sheet or the statement of the Net Asset
Value of the Sellers provided by the Sellers, Buyer shall notify the Sellers
in writing of its objections within 20 business days after its receipt of the
Closing Balance Sheet and shall describe, in reasonable detail, the reasons
for Buyer's objections. If Buyer fails to deliver a notice of objection to
the Sellers within such 20-day period, Buyer shall be deemed to have accepted
the Closing Balance Sheet and the statement of the Net Asset Value of Seller
provided to Buyer by Sellers. If, however, Buyer delivers a notice of
objection to the Sellers within such 20-day period, Buyer and Sellers shall
endeavor in good faith to resolve any disputed items within 10 business days
after the date of Sellers' receipt of Buyer's notice of objection. In the
event that Buyer and Sellers are unable to resolve any items in dispute
relating to the Closing Balance Sheet and the statement of Net Asset Value
provided to Buyer by Sellers, Buyer and Sellers shall select a nationally
known independent accounting firm (the "Independent Accountants")
to resolve all items remaining in dispute, and the determination of the
Independent Accountants in respect of such items shall be conclusive and
binding on the parties. The Independent Accountants shall be instructed by
Sellers and Buyer to prepare and deliver to Sellers and Buyer, after resolving
any items in dispute between Sellers and Buyer, a balance sheet of Sellers as
of the Closing Date reflecting its resolution of all issues in dispute and a
statement of the Net Asset Value of Sellers shown thereon.
(iv) The Net Asset Value of the Sellers as
finally determined pursuant to this Section 2.4(b) (whether by failure of
Buyer to deliver a notice of objection to Sellers, by the agreement of the
parties or by the final determination of the Independent Accountants) shall
be deemed to be, and shall be referred to herein as, the "Final Net Asset
Value."
(v) Sellers shall bear, and be solely
responsible for, all of their costs and expenses incurred in connection with
the preparation of the Closing Balance Sheet; provided, however, that Seller
shall not be responsible for costs and expenses associated with individuals
who become and remain Buyer's employees following Closing. The Sellers and
Buyer shall each bear, and be responsible for, the costs and expenses incurred
by each of them (including the fees and expenses of their respective
accounting firms) in connection with their review of the Closing Balance
Sheet. If the Independent Accountants are engaged, the fees and expenses of
the Independent Accountants will be paid (i) by the Sellers in the event the
review of the Independent Accountants results in a negative variance of more
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<PAGE> 17
than ten percent (10%) in the disputed item or the aggregate of the disputed
items from the amount(s) represented by the Sellers and favorable to the
Buyer; and (ii) by Buyer in the event the review of the Independent
Accountants does not reveal such a variance.
(vi) Buyer acknowledges that from and after the
Closing Date the employees of Sellers shall be the employees of Buyer and the
Assets, including books and records of the Sellers shall be the property of
Buyer. Accordingly, Buyer shall make each of Sellers' former employees who
accepts employment with Buyer and Sellers' books and records acquired by Buyer
available to the Sellers, its advisors and representatives and to Ernst &
Young at such time and from time to time as shall be necessary to allow each
Seller to comply with its obligations under this Section 2.4(b) and elsewhere
in this Agreement and its obligations under any Applicable Law with respect
to matters occurring prior to the Closing Date.
(c) Final Net Asset Value Adjustment.
(i) If the Final Net Asset Value is less than
$47,075,000, then the Cash Consideration shall be decreased by an amount equal
to the difference between $47,075,000 and the Final Net Asset Value, and the
amount of such difference shall be paid by Sellers to Buyer as provided in
this Section 2.4(c).
(ii) If the Final Net Asset Value is greater
than $47,575,000, then the Cash Consideration shall be increased by an amount
equal to the difference between the Final Net Asset Value and $47,575,000, and
the amount of such difference shall be paid by Buyer to Sellers as provided
in this Section 2.4(c).
(iii) All payments contemplated by this
Section 2.4(c) shall be made within three (3) business days of the date on
which the Final Net Asset Value is finally determined. All payments shall be
made by wire transfer of immediately available funds to an account or accounts
designated by the party entitled to receive any such payment. Sellers shall
retain not less than $2 million to cover their obligations under this Section
2.4(c) and shall not distribute such funds to any Affiliates until the Final
Net Asset Value has been finally determined. CFC covenants and agrees that
it shall contribute capital to Sellers following Closing to the extent that
the $2 million amount is not sufficient to satisfy Sellers' obligations
hereunder.
Section 2.5. Closing Holdback. On the Closing Date, upon satisfaction
of all of the conditions precedent to the obligations of Buyer which are set
forth in Article VII that have not been waived in writing by Buyer, Buyer
shall deliver the Closing Holdback to the Escrow Agent, as escrow agent for
the benefit of the Sellers and Buyer, by wire transfer to an account
designated by the Escrow Agent prior to the Closing Date. The Closing
Holdback shall be administered and disbursed by the Escrow Agent as provided
in the Escrow Agreement.
Section 2.6. Instruments of Transfer. On the Closing Date, upon
satisfaction of all of the conditions precedent to the obligations of the
Sellers which are set forth in Article VIII that have not been waived in
writing by Sellers, Sellers shall execute and deliver to Buyer such warranty
bills of sale, warranty deeds, assignments, certificates of title, and other
documents and instruments of transfer and title, individually or in bulk as
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<PAGE> 18
Buyer may reasonably request, in such form as may be required by the laws of
any jurisdiction which may be applicable thereto, all as may be requested by
Buyer in order to evidence the sale, assignment, transfer and delivery of the
Assets to Buyer at the Closing. The Sellers also shall, without the payment
of any further consideration by Buyer, execute and deliver from time to time
after the Closing, such further warranty bills of sale, warranty deeds,
assignments, certificates of title, and other documents of title and transfer
as may be reasonably requested by Buyer in order to evidence more effectively
or fully the sale, assignment, transfer and delivery of the Assets to Buyer
at the Closing.
Section 2.7. Allocation of Purchase Price. The Purchase Price shall
be allocated among each of the Sellers' and the Assets as set forth in
Schedule 2.7 to this Agreement. Buyer and each of the Sellers agree that the
allocation of the Purchase Price has been negotiated between them and is
consistent with the value of the Assets. Buyer and each of the Sellers
further agree that the allocation of the Purchase Price may be adjusted
following the Closing to reflect the adjustments to the Cash Consideration
made pursuant to the terms of this Agreement, but that any such adjustment
shall be reflected by a ratable adjustment to each category of Assets set
forth in the allocation of the Purchase Price on Schedule 2.7. Buyer and each
of the Sellers further agree that the allocation of the Purchase Price, as
finally adjusted, shall be used consistently by each of them in any Tax
Returns filed by either of them following the Closing, including any filings
required by Section 1060 of the Code.
Section 2.8. Transfer Taxes and Costs. Buyer on the one hand and the
Sellers on the other hand shall pay one-half of all Taxes (including sales
taxes), stamp duties, notarial, registration and recording fees resulting from
or relating to the transfer of the Assets to Buyer at the Closing (other than
Income Taxes and Taxes on, relating to or measured by income or gains which
shall be the sole and exclusive obligation and liability of the Sellers and
CFC and borne exclusively by the Sellers and CFC or their Affiliates). Buyer
shall prepare all sales tax returns and provide them to Seller five business
days prior to the filing of such returns. Buyer shall consult in good faith
with Seller in the preparation of the sales tax returns. Seller shall pay to
Buyer 50% of the tax due at least one full business day prior to the date such
tax must be remitted.
Section 2.9. Assignment of Contracts and Rights. This Agreement shall
not constitute an agreement to purchase or assign any Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
adversely affect the rights of Buyer thereunder. Each of the Sellers and the
Buyer will use their reasonable efforts to obtain the consent of the other
parties to the assignment of any such Asset or any claim or right to any
benefit arising thereunder as Buyer may reasonably request. If such consent
is not obtained, or if an attempted assignment thereof would be ineffective
or would adversely affect the rights of a Seller or Buyer thereunder so that
Buyer would not in fact receive all such rights, the affected Seller and Buyer
will cooperate in a mutually agreeable arrangement for a period of up to 90
days following Closing under which Buyer would obtain the benefits and assume
the obligations thereunder in accordance with this Agreement, including
subcontracting, sub-licensing, or sub-leasing to Buyer, or under which the
affected Sellers would enforce for the benefit of Buyer, with Buyer assuming
such Seller's obligations, any and all rights of such Seller against the other
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<PAGE> 19
party thereto. Sellers will promptly pay to Buyer when received all monies
received by either Seller under any Asset or any claim or right or any benefit
arising thereunder.
Section 2.10. Compliance with Bulk Transfer Laws. Prior to, at and
after the Closing, the Sellers and Buyer shall duly and timely take all
actions and execute all instruments necessary to comply fully with the
provisions of the Uniform Commercial Code Bulk Transfers and similar laws
which may be applicable in various jurisdictions in connection with the
transactions contemplated by this Agreement.
Section 2.11. Escrow Agreement. At the Closing, Buyer and each Seller
shall execute and deliver the Escrow Agreement.
Section 2.12. Schedules to Agreement. Sellers have delivered to Buyer
Schedules 3.3; 3.4; 3.6; 3.7; 3.8; 3.12; 3.13; 3.15; 3.17; 3.18; 3.22 and 3.26
to this Agreement. As soon as practicable, but in no event later than the
last to occur of (i) the date which is ten (10) days after the date of this
Agreement, or (ii) January 31, 1996, the Sellers shall provide to Buyer the
remaining Schedules referenced in Article III of this Agreement (or which are
otherwise contemplated to be prepared and delivered by the Sellers) and any
updates to the Schedules as originally delivered (such Schedules and updates
to the previously delivered Schedules shall be referred to collectively as the
"Remaining Schedules"). Notwithstanding the foregoing, Sellers shall not be
entitled to update Schedule 3.13(a) (except is response to the last sentence
of Section 3.13(a)) or 3.13(d) during such period. The Remaining Schedules
shall be responsive to the matters to be disclosed on the particular Schedules
and shall be accompanied by a notice from the Sellers to Buyer stating that
the Remaining Schedules are in final form. Buyer shall review the Remaining
Schedules and determine, in its sole but reasonable discretion, the adequacy
and the acceptability to Buyer of the disclosures and the content and
substance of the matters set forth or referenced in the Schedules. Buyer
shall provide notice to the Sellers, within ten (10) days of receiving the
Schedules, of its acceptance or rejection of the Remaining Schedules (it being
understood that Buyer shall be entitled to reject the Remaining Schedules in
the event that a reasonable Buyer would determine not to purchase the Assets
at all or to materially reduce the Purchase Price based on the disclosures or
the content and substance of the matters set forth in or referenced on the
Remaining Schedules). In the event that Buyer does not provide a notice of
acceptance or rejection to the Sellers within such ten (10) day period, Buyer
shall be deemed to have accepted the Remaining Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
In order to induce Buyer to enter into this Agreement, each Seller
hereby jointly and severally makes the following representations and
warranties to Buyer (all of which are made only with respect to the Knowledge
of each Seller and are subject to the limitations expressed in Sections 11.3
and 11.4 hereof):
Section 3.1. Organization and Good Standing. Garrett is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware. Jet Center is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
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<PAGE> 20
State of Delaware. Each of the Sellers has full power and authority to own,
operate and lease its properties, and to carry on its business as it is now
being conducted. Each Seller is qualified as a foreign partnership or limited
liability company, as appropriate, and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the affected Seller.
Each Seller has delivered to Buyer a complete and correct copy of its
certificate of limited partnership, partnership agreement, articles of
organization, management agreement and/or operating agreement, as the case may
be, and the charter and bylaws of CFC, none of which has been amended or
repealed since delivery to Buyer, and each of which is in full force and
effect.
Section 3.2. Execution and Effect of Agreement. Each Seller and CFC
has the power and authority to enter into this Agreement and each of the
Collateral Agreements and to perform their obligations hereunder and
thereunder. The execution and delivery of this Agreement and of each of the
Collateral Agreements by each of the Sellers and CFC, the consummation by each
Seller and CFC of the transactions contemplated hereby and thereby, and the
performance by each Seller and CFC of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary
partnership, member or corporate action on the part of each Seller and CFC,
respectively. This Agreement has been duly executed and delivered by each
Seller and CFC and constitutes the legal, valid and binding obligation of each
Seller and CFC, fully enforceable against each Seller and CFC in accordance
with its terms.
Section 3.3. Restrictions. The execution and delivery of this Agree-
ment and the Collateral Agreements by each Seller and CFC, the consummation
of the transactions contemplated hereby and thereby by each Seller and CFC,
and the performance of the obligations of each Seller and CFC hereunder and
thereunder will not (a) violate any of the provisions of the certificate of
limited partnership or partnership agreement of Garrett, the articles of
organization or operating agreement of Jet Center, or the charter or by-laws
of CFC or (b) except as set forth in Schedule 3.3, (i) violate or conflict
with the provisions of any Applicable Laws or any order, award, judgment or
decree of any Governmental Authority applicable to a Seller or CFC, (ii)
result in the creation of any Encumbrance upon any of the Assets, or
(iii) conflict with, violate any provisions of, result in a breach of or give
rise to a right of termination, modification or cancellation of, constitute
a default of, or accelerate the performance required by, with or without the
passage of time or the giving of notice or both, or require any consent,
waiver or approval of a third party under the terms of (x) any Contract set
forth on Schedule 3.12 or (y) any agreement, indenture, mortgage, deed of
trust, lease, contract, note, bond, license, permit, authorization or other
instrument to which a Seller is a party or to which a Seller or any of the
Assets are subject (except in the case of the items referenced in this clause
(y) where such conflict, violation or breach would not have a Material Adverse
Effect).
Section 3.4. Consents. Except as set forth in Schedule 3.4, and except
for the Required Consents and filings, approvals, consents, waivers and
approvals under the H-S-R Act, no filing with, or consent, waiver, approval
or authorization of, or notice to, any Governmental Authority is required to
be made or obtained by a Seller or CFC in connection with the execution and
delivery of this Agreement, the Collateral Agreements or any instrument
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<PAGE> 21
contemplated hereby or thereby, the consummation of any of the transactions
contemplated hereby or thereby or the performance of any of their respective
obligations hereunder or thereunder.
Section 3.5. Financial Statements.
(a) Attached hereto as Exhibit E are true and correct
copies of (i) the audited combined financial statements of the Sellers as of
December 31, 1994, and for the six-month period then-ended, and (ii) the
unaudited combined financial statements of the Sellers as of and for the ten-
month period ended October 31, 1995 (including the Balance Sheet)
(collectively, the "Financial Statements"). The Financial Statements have
been prepared in accordance with GAAP in a manner consistent with each other
and the books and records of each Seller, and fairly present in all material
respects the financial condition, results of operations and cash flow of the
Sellers at and for the dates and for the periods indicated therein (it being
understood that, with respect to the ten month period ended October 31, 1995,
such statements do not include footnotes required by GAAP and are subject to
normal year-end adjustments which are not material). If footnotes were
presented with respect to the October 31, 1995 financial statements, no
footnote would be required disclosing events of an extraordinary or non-
recurring nature that are not reflected in the footnotes to the Financial
Statements for the year ended December 31, 1994. The regular books of account
of each Seller fairly and accurately reflect all transactions involving each
Seller and are true, correct, complete and consistent with the Financial
Statements. Except as set forth in the notes to the Financial Statements,
there are no special, extraordinary or non-recurring items of income or
expenses reflected in the Financial Statements. Each Seller has followed and
consistently applied the same accounting policies, principles, methods and
practices since such Seller's inception.
(b) All accounts receivable of the Sellers reflected on the
books and records of the Sellers arose from bona fide, arms-length
transactions in the ordinary course of business for services performed or
goods sold by the Sellers.
(c) All accounts payable reflected on the books and records
of each Seller (i) arose from bona fide, arms-length transactions in the
ordinary course of business for services performed for or goods sold to the
Seller for which the Seller obtained substantially equivalent value and
(ii) have been incurred in accordance with applicable payment or credit terms
imposed by the vendors of such services or goods. The Closing Balance Sheet
shall include all accounts payable which must be reflected thereon in
accordance with GAAP.
(d) All inventories (net of reserves) reflected on the
Balance Sheet or the Closing Balance Sheet, as the case may be, consist of
materials and supplies of the quality and quantity which are reasonably
believed by the Sellers to be useable or saleable within one year in the
ordinary course of the business of the Sellers as presently conducted and no
such inventories are valued in excess of the lower of cost or net realizable
market value.
Section 3.6. Capitalized Lease Obligations. Schedule 3.6 sets forth
the payment terms and scheduled maturities of all capitalized lease
obligations of each Seller.
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Section 3.7. No Undisclosed Liabilities. The Sellers do not have any
liabilities or obligations of any nature whatsoever, due or to become due,
absolute, accrued, contingent or otherwise, and whether or not determined or
determinable), including, without limitation, any unfunded obligation under
any Employee Benefit Plan, except for (i) liabilities or obligations set forth
on Schedule 3.7, (ii) obligations to perform (other than obligations arising
by reason of a default, breach or faulty performance of a contract) contracts
entered into in the ordinary course of business and not required to be
reflected on a balance sheet prepared in accordance with GAAP, (iii)
liabilities or obligations to the extent expressly reflected on or reserved
against in the Balance Sheet, or (iv) liabilities or obligations incurred in
the ordinary course of business and consistent with past practices and levels
since October 31, 1995 which would be required to be reflected on a balance
sheet prepared in accordance with GAAP, and there is no basis for the
assertion of any such liability or obligation against a Seller. At Closing,
no distributions to any partners or Affiliates of a Seller will be due and
payable by a Seller.
Section 3.8. Litigation. There is no suit, claim, action at law or in
equity, proceeding or governmental investigation or audit pending or
threatened, by or before any court, any Governmental Authority or arbitrator,
against a Seller that reasonably could be expected to prevent the consummation
of any of the transactions contemplated hereby, nor is there any basis for any
of the foregoing. Except as set forth in Schedule 3.8, there is no suit,
claim, action at law or in equity, proceeding or governmental investigation
or audit pending or threatened, by or before any arbitrator, court, or other
Governmental Authority, against a Seller or involving any of the Assets or any
Employees, nor is there any basis for the assertion of any of the foregoing.
Except as disclosed in Schedule 3.8, there are no judgments, orders,
injunctions, decrees, stipulations or awards rendered by any Governmental
Authority or arbitrator against a Seller or any Employees or Assets.
Section 3.9. Subsidiaries; Investments. Except as set forth in
Schedule 3.9, neither Seller owns any shares of capital stock or equity
securities of, or any interest in any other Person, and each Seller has good,
valid and marketable title, free and clear of all Encumbrances, to all shares
of capital stock or equity securities of, or interests in, other Persons owned
by such Seller.
Section 3.10. Real Properties; Absence of Encumbrances.
(a) Neither Seller owns any real property. Schedule 3.10
contains a list and brief description of all of real property leased or
otherwise occupied by a Seller and the basis of such occupation (the
"Properties"). Seller has a valid and existing leasehold interest under each
of the leases for the term set forth with respect thereto on Schedule 3.10.
(b) The Sellers have provided to Buyer true and complete
copies of each of the leases described on Schedule 3.10.
(c) Except as set forth on Schedule 3.10, (i) each Seller
is entitled to and has exclusive possession of the Properties, (ii) the
Properties are not subject to any lease, tenancy or license or any agreement
to grant such lease, tenancy or license, (iii) there is no person in
possession or occupation of or who has or claims any right to possession or
occupation of the Properties, and (iv) there are no easements of any kind in
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<PAGE> 23
respect of the Properties adversely affecting the rights of Seller therein to
use the Properties for the conduct of the Business as presently conducted or
as planned to be conducted by the Sellers.
(d) In respect of each of the Properties:
(i) At the effective date of the lease, the
lessor had good title to the Property covered thereby and all consents neces-
sary for the lessor to execute and deliver the lease were obtained.
(ii) There are no circumstances which would
entitle or require the lessor to exercise any power of entry upon or of taking
possession of any of such Properties.
(iii) Seller is not in default under any of the
terms of the lease.
(iv) No notice of any alleged breach of any of
the terms of the lease has been served on or received by the Seller.
(v) Except as set forth on Schedule 3.10,
Seller has paid all rents and service charges to the extent such rents and
charges are due and payable.
(e) Each of the Properties is available for immediate use
in the operation of its business and for the purpose for which such property
currently is being utilized.
(f) All improvements on the Properties conform to
Applicable Laws relating to zoning, health and safety and access, including
without limitation, the Americans With Disabilities Act, and the Properties
are zoned for the purposes for which they are being used by Seller (it being
understood that this representation shall not be deemed to be breached unless
a Seller has knowledge of facts or matters which have caused the relevant
person to actually reach a conclusion or belief with respect to the legal
status or consequences which are the subject of this representation).
(g) Subject to the terms and conditions of the respective
leases and excepting the subleases disclosed on Schedule 3.10, Seller has full
legal rights under the leases to the use and enjoyment of all of the
Properties for the operation of the Business as presently conducted by the
Sellers or as contemplated to be conducted by the Sellers.
(h) Seller has not entered into any commitment (whether
legally binding or not) with any Person who owns or occupies any property
adjacent or near to any of the Properties to do any act or thing or make any
payment to any Person in connection with or relating to any use or occupancy
of the Properties by any Person.
(i) There is no resolution, proposal, order,
act or thing made or done or contemplated for acquisition by condemnation or
otherwise of any of the Properties by any Governmental Authority nor any
outstanding order, notice or other requirement of any such authority that
affects the Properties or the roads abutting them or involves expenditure in
complying with it nor any other circumstances which may result in any such
order or notice being made or served or which may otherwise affect the
Properties.
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<PAGE> 24
(j) The Properties are served by drainage, water,
electricity, gas and telecommunications services necessary for the operation
of the Business as presently conducted by the Sellers or as contemplated to
be conducted by the Sellers.
(k) Except as set forth on Schedule 3.10, no Seller has
assigned any lease or tenancy.
Section 3.11. Intellectual Property.
(a) Schedule 3.11 sets forth a complete list of (i) all
Intellectual Property owned or licensed by each Seller, together with the
identity of the owner thereof, and (ii) all license agreements pursuant to
which any Intellectual Property or Technology is licensed to or by a Seller
(other than commercially available computer software used by Sellers in the
ordinary course of business). Each Seller owns its Intellectual Property and
Technology free and clear of Encumbrances, or, in the case of licensed
Intellectual Property or Technology, has valid, binding and enforceable rights
to use such Intellectual Property or Technology. Each Seller has duly and
timely filed all renewals, continuations and other filings necessary to
maintain its Intellectual Property or registrations thereof.
(b) Except as set forth in Schedule 3.11, (i) the use of
any Intellectual Property or Technology does not infringe upon, conflict with
or misappropriate the rights of any other Person, (ii) the Intellectual
Property or Technology is valid and enforceable, and (iii) no Seller has made
any claim that any Person has violated or infringed upon its rights with
respect to any Intellectual Property or Technology.
(c) No Person is infringing upon, misappropriating or
engaging in the unauthorized use of any of the Intellectual Property or the
Technology.
(d) Except as set forth in Schedule 3.11, no Intellectual
Property or Technology of a Seller has ever been sold, licensed, leased,
conveyed or delivered, in whole or in part, to any third party.
(e) Each Seller has taken reasonable and practicable steps
designed to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Intellectual Property and Technology.
Section 3.12. Contracts.
(a) Schedule 3.12 sets forth a list of the following
written, and a description of the following oral Contracts embodying or
evidencing the following transactions or arrangements to which a Seller is a
party or by which a Seller is obligated or has agreed to become obligated: (i)
agreements for the employment of any officer of a Seller or CFC or written
agreements with other individual employees of Seller or CFC; (ii) any
agreement, commitment or arrangement with respect to the provision of
services, sale of goods or lease of premises by a Seller entered into outside
the ordinary course of business; (iii) any single contract, purchase order or
commitment (other than bids to provide services and parts to customers made
in the ordinary course of business and consistent with past practices)
providing for expenditures by Seller after the date hereof of more than
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<PAGE> 25
$750,000; (iv) any option, preferential right of purchase, real estate
mortgage, chattel mortgage, deed of trust, security agreement or conditional
sales agreement relating to any of the assets or property of a Seller; (v) any
bond, loan agreement, promissory note, indenture, overdraft agreement or other
obligation to pay money (other than usual trade payables), indenture or other
instrument relating to municipal or governmental finance or financial
assistance, arrangement for the factoring or assignment of accounts receivable
or borrowed money, (vi) any employment, consulting agreement, agency
agreement, independent contractor arrangement and any other service agreement
that will continue in force after the Closing Date with respect to the
employment or retention by a Seller of consultants, agents, legal counsel,
accountants or anyone else who is not an Employee or which is not terminable
upon notice without penalty; (vii) any contract containing covenants limiting
the freedom of a Seller or any officer, director, or employee of a Seller or
CFC to engage in any line or type of business or with any person in any
geographic area; (viii) any commitment or arrangement to participate in a
partnership, joint venture, limited liability company or other cooperative
undertaking with any other Person; (ix) any bid, commitment or other proposal
submitted to any Person involving the provision of services or goods by a
Seller (other than bids, commitments or other proposals submitted by Seller
in the ordinary course of business and consistent with past practices); (x)
any agreement pursuant to which a Seller will acquire any assets outside the
ordinary course of business, or assets comprising a business or portion of a
business or equity securities of any other Person; (xi) any capitalized lease
obligation of a Seller; (xii) any lease or other agreement relating to any of
the Properties; or (xiii) any commitments by a Seller for capital expenditures
involving more than $50,000 individually or $100,000 in the aggregate. No
Seller is party to any contract (including any requirements or exclusive
arrangement with any AlliedSignal Service Centers (as defined in the ASE
Operating Agreement), other than contracts which will be terminable by Buyer
on not more than 30 days notice and without any penalty, that would restrict
or prevent Buyer from having UNC Airwork Corporation or any other Affiliate
of Buyer, perform services for or on behalf of Buyer with respect to the
matters which are the subject of the ASE Operating Agreement, to the extent
Buyer is otherwise permitted to have UNC Airwork Corporation or an Affiliate
perform such services by the terms of the ASE Operating Agreement.
(b) Except as set forth on Schedule 3.12, each Seller is
in full compliance with each, and is not in default under any, Contract to
which it is a party and no event has occurred that, with notice or lapse of
time or both, would constitute such a default thereunder, has not waived any
rights under or with respect thereto. No party with whom a Seller has
contractual arrangements disclosed on Schedule 3.12, or required to be
disclosed on Schedule 3.12, or with whom a Seller otherwise has material
contractual arrangements, written or oral, is in default under any such
contractual arrangements and no event has occurred that, with notice or lapse
of time or both, would constitute such a default thereunder. Each Contract
is a valid and binding obligation of a Seller and is enforceable against such
Seller in accordance with its respective terms.
(c) True and complete copies of all written Contracts
listed on Schedule 3.12 have been provided to Buyer.
Section 3.13. AlliedSignal Agreements.
(a) Garrett has delivered previously to Buyer true and
correct copies of the AlliedSignal Purchase Agreement and the ASE Operating
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<PAGE> 26
Agreement. Each of the AlliedSignal Purchase Agreement and the ASE Operating
Agreement are in full force and effect and, except as set forth on Schedule
3.13(a), the terms set forth in each of those agreements have not been waived,
modified, or otherwise adversely affected by any oral or written communica-
tion, agreement or instrument or any course of dealing between or among any
of the parties thereto. Nothing has come to Sellers' attention to indicate
that any of the representations and warranties made by AlliedSignal to Garrett
pursuant to the terms of Article IV of the AlliedSignal Purchase Agreement
were not true and correct in all material respects on the date of that
Agreement and on June 30, 1994.
(b) Each of the AlliedSignal Purchase Agreement and the ASE
Operating Agreement is fully assignable to the Buyer without any consent or
other action required on the part of the parties (other than Garrett's
assignment of each of the agreements to Buyer pursuant to this Agreement) and
Buyer shall succeed to all of the rights and obligations of Garrett and its
Affiliates under each of the AlliedSignal Purchase Agreement and the ASE
Operating Agreement by reason and as a result of the consummation of the
transactions contemplated by this Agreement.
(c) Except as set forth on Schedule 3.13(c), no unresolved
disputes or claims exist among any parties to the AlliedSignal Purchase
Agreement or the ASE Operating Agreement with respect to the subject matter
or the terms and conditions of such agreements. Except as set forth on
Schedule 3.13(c), Garrett and its Affiliates have not made any claims against
AlliedSignal or its Affiliates for indemnification and AlliedSignal and its
Affiliates have not made any claims against Garrett for indemnification under
the terms of the AlliedSignal Purchase Agreement, the ASE Operating Agreement
or any other contract.
(d) Subject to the notice and other matters of a procedural
nature contained in the AlliedSignal Purchase Agreement, AlliedSignal is
responsible for paying, satisfying, discharging and remediating all of the
conditions and matters specified on Schedule 3.13(d) to this Agreement, and
Buyer does not assume and shall not incur any liability or obligation with
respect to any of such matters. Sellers have not failed to give AlliedSignal
any notice or have not otherwise failed to comply with any matter of a
procedural nature that would prejudice Buyer's rights to seek indemnification
from AlliedSignal under the AlliedSignal Purchase Agreement following Closing.
(e) The terms of the Operating Agreement, including the
terms relating to the consignment of inventory and the pricing of products
purchased from AlliedSignal pursuant to the ASE Operating Agreement apply with
respect to each site and facility operated presently by each Seller.
AlliedSignal has not requested Seller to open a facility in Canada or Mexico
and the "Exclusive Territory" is as that term is defined in the ASE Operating
Agreement.
(f) Schedule 3.13(f) sets forth a true and correct
description of the basis on which AlliedSignal is required to sell "General
Products" (as that term is defined in the ASE Operating Agreement) to the
Sellers pursuant to the ASE Operating Agreement.
Section 3.14. Guarantees. Schedule 3.14 sets forth a complete list of
all Guarantees provided by a Seller for the benefit of any other Person and
of all Guarantees provided by any other Person for the benefit of a Seller or
any Persons doing business with a Seller.
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<PAGE> 27
Section 3.15. Employee Benefit and Employment Matters.
(a) Schedule 3.15 sets forth a true, complete and accurate
list (except for inaccuracies which are not in the aggregate material) of each
Employee, his or her date(s) of hire by a Seller, position and title (if any),
current rate of compensation (including bonuses, commissions and incentive
compensation (if any), whether such Employee is hourly or salaried, whether
such Employee is exempt or non-exempt, the number of such Employee's accrued
sick days and vacation days, whether such employee is absent from active
employment, and if so, the dates such Employee became inactive, the reason for
such inactive status and, if applicable, the anticipated date of return to
active employment.
(b) Schedule 3.15 sets forth a list of all Employee Benefit
Plans and all Benefit Arrangements to which a Seller is a party, a Seller
sponsors, a Seller participates in or under which a Seller may be liable.
With respect to such Employee Benefit Plans and Benefit Arrangements, Sellers
have delivered to Buyer, as applicable, copies of (i) the text of the formal
plan document or other agreements, written policies or guidelines evidencing
the terms of such Employee Benefit Plans and Benefit Arrangements, including
amendments and, if applicable, the summary plan description and any employee
handbook, (ii) in the case of a Pension Plan that is intended to qualify under
Section 401 of the Code, the most recent IRS determination letter, if any,
relating to the Pension Plan's qualification under Section 401 of the Code and
the related trust's qualification under Section 501 of the Code, (iii) the
trust agreements, insurance contracts or other documents that constitute all
or a part of the funding vehicle, and (iv) the annual reports (IRS
Form 5500s), including the schedules thereto.
(c) Except as set forth in Schedule 3.15, each Employee
Benefit Plan and Benefit Arrangement has been operated or maintained in
compliance in all material respects with all Applicable Laws, including
without limitation ERISA and the Code, and has been maintained in compliance
with its terms. Except as set forth in Schedule 3.15, with respect to any
Pension Plan that is intended to qualify under Section 401 of the Code, a
timely submission has been made to the IRS for a favorable determination
letter as to qualification under Section 401 of the Code and that submission
is still pending or a favorable determination letter has been issued by the
IRS and any amendments required for continued qualification under Section 401
of the Code have been timely adopted and there are no facts or events that
could adversely affect the qualified status of any such Pension Plan.
(d) Except as set forth in Schedule 3.15, there are no
actions, suits or claims pending, including proceedings before the IRS, the
DOL or the PBGC, with respect to any Employee Benefit Plan, Benefit
Arrangement or any administrator or fiduciary thereof, other than benefit
claims arising in the normal course of operation of such Employee Benefit
Plans or Benefit Arrangements, and no Employee Benefit Plan or Benefit
Arrangement is under audit or investigation by any Governmental Authority.
(e) No Seller has any current or projected liability for
any unfunded post-retirement medical or life insurance benefits in connection
with any Employee of such Seller.
(f) Except as set forth in Schedule 3.15, no event has
occurred with respect to any Employee Benefit Plan or any employee benefit
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<PAGE> 28
plan previously sponsored, maintained or contributed to by a Seller, which
could subject any Employee Benefit Plan, Buyer or a Seller, directly or
indirectly (through an indemnification agreement or otherwise), to any
liability for or as a result of a breach of fiduciary duty, a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or a civil penalty under Section 502 of ERISA or a Tax under Section
4971 of the Code.
(g) All contributions required to be made to or benefit
liabilities arising under the terms of each Employee Benefit Plan, Benefit
Arrangement, ERISA or the Code, for all periods of time prior to the date
hereof and that are attributable to Employees have been paid or accrued (and,
in the case of accruals, such accruals will be and are as set forth on the
Closing Balance Sheet), as the case may be.
(h) None of the Employee Benefit Plans to which a Seller
is a party, which a Seller sponsors or maintains or to which a Seller
contributes is subject to the requirements of Section 302 of ERISA or Section
412 of the Code.
(i) Neither Seller nor any of its ERISA Affiliates have
incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203
and 4205 of ERISA, from, or failed to timely make contributions to, any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA, which
has resulted in an unpaid liability. No such plan is in "reorganization"
within the meaning of Section 4241 of ERISA, is "insolvent" within the meaning
of Section 4245 of ERISA, or is in the process of terminating.
(j) Except to the extent provided by the terms of the
Employee Benefit Plans and Benefit Arrangements listed on Schedule 3.15 or as
expressly provided in this Agreement, neither the execution, delivery or
performance of this Agreement nor the consummation of the Closing will (i)
increase any benefits otherwise payable under any Employee Benefit Plan or
Benefit Arrangement, (ii) result in the acceleration of the time of payment
or vesting of any such benefits, or (iii) give rise to an obligation with
respect to the payment of any severance pay.
(k) Except as set forth in Schedule 3.15, no "parachute
payment" (within the meaning of Section 280G of the Code), "change in control"
or severance payment has been made or will be made by a Seller or a Seller to
any Employee in connection with the execution, delivery or performance of this
Agreement or as a result of the consummation of the Closing.
(l) Except as set forth in Schedule 3.15, no Employees of
Seller are members of any collective bargaining unit, Seller is not a party
to any union agreement covering any of its Employees and no union organizing
activities are taking place or have taken place within the past two years.
Except as set forth in Schedule 3.15, Seller is not liable for any arrearage
of wages, any accrued or vested vacation pay or any Tax or penalty for failure
to comply with any applicable local, state or federal law relating to
employment or labor, and there is not a material controversy pending or
threatened between Seller and its employees. No Employee with a position of
Vice President or above and no group of Employees of Seller has any plans to
terminate or modify his status as an Employee of the Seller or the business
conducted by Seller, including upon consummation of the transactions
contemplated by this Agreement.
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<PAGE> 29
(m) Except as set forth in Schedule 3.15, all current
employees of the Sellers may be terminated at will, without notice and without
incurring any severance or other liability or obligation to the employee in
connection with the termination other than the payment of accrued sick and
vacation pay, if any.
Section 3.16. Tax Matters.
(a) Sellers are partnerships for purposes of federal and
state income tax laws and have had the tax status of a partnership constantly
and without interruption since their formation (other than those states that
tax limited liability companies as corporations).
(b) Each Seller has timely filed or will timely file all
federal, state, local, and other Tax Returns required to be filed by it under
Applicable Laws, including estimated Tax Returns and reports, and has paid all
required Income Taxes and other Taxes (including any additions to taxes,
penalties and interest related thereto) due and payable on or before the date
hereof (and will duly and timely pay all such amounts required to be paid
between the date hereof and the Closing Date). Each Seller has paid,
withheld, or will pay any and all Income Taxes and other Taxes in respect of
the conduct of its business or the ownership of its property and in respect
of any transaction for all periods (or portions thereof) through the close of
business on the Closing Date.
(c) Except as set forth in Schedule 3.16, all deficiencies
asserted against a Seller as a result of IRS examinations have been paid or
finally settled and no issue has been raised by any IRS examination that, by
application of the same principles, might result in a proposed deficiency for
any other period not so examined.
(d) Except as set forth in Schedule 3.16, no material
deficiencies with respect to Taxes, additions to Tax, interest, or penalties
have been proposed or asserted against and communicated to a Seller, or any
Affiliate of a Seller, except those that have been paid in full and for those
matters that would not result in liability being imposed against a Seller.
Except as set forth in Schedule 3.16, there are no agreements, waivers of
statutes of limitations, or other arrangements providing for extensions of
time in respect of the assessment or collection of any unpaid Tax against a
Seller.
(e) No property of any of the Companies is subject to a tax
benefit transfer lease subject to the provisions of former Section 168(f)(8)
of the Internal Revenue Code of 1954.
(f) No Seller is a foreign person subject to withholding
under Section 1445 of the Code.
(g) Each Seller has complied fully with all Applicable Laws
relating to information reporting and withholding or collection and payment
over of Taxes with respect to payments made to or received from third parties.
(h) No Seller is a party to a "disqualified leaseback or
long-term agreement" described in Section 467(b)(4) of the Code.
(i) Each Seller has collected all sales, use and value
added Taxes required to be collected, and has remitted, or will remit on a
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<PAGE> 30
timely basis, such amounts to the appropriate Governmental Authorities and has
furnished properly completed exemption certificates for all exempt
transactions.
(j) None of the Assets are subject to any liens in respect
of Taxes (other than for current Taxes not yet due and payable).
(k) No Seller is a party to or bound by any Tax sharing,
Tax indemnity or Tax allocation agreement or other similar arrangement except
for those disclosed in Schedule 3.16.
(l) Each Seller has delivered to Buyer complete and correct
copies of all state and federal income Tax Returns filed by such Seller for
all of the taxable years for which such Tax Returns have been filed
immediately preceding the date of this Agreement. Other than with respect to
Taxes shown on state, federal and all other Tax Returns (which have been paid)
or for Taxes accrued on the Closing Balance Sheet, no Seller owes or will owe
any Tax for periods prior to and through Closing.
(m) Schedule 3.16 contains a list of all states and other
jurisdictions in which each Seller has filed Tax Returns during the past three
years or expects to file Tax Returns during the current calendar year and each
state in which Seller joins in the filing of combined or unitary state tax
returns.
Section 3.17. Environmental Matters.
(a) Since June 30, 1994, except as set forth in
Schedule 3.17, (i) and except for Hazardous Materials (other than 1,1,1-
trichloroethane ("TCA") that are used in the ordinary course of Seller's
Hangar Business in compliance with all Environmental Laws, no Seller has used,
generated, manufactured, stored, disposed of, on, under or about any of the
Properties or any other properties used by a Seller in the past, any Hazardous
Materials, (ii) no friable asbestos, polychlorinated biphenyls or
polychlorinated biphenyl compounds have been contained on or in any of the
Properties, nor have such substances been used in the construction, repair or
alteration of any portion of any real property owned, leased or used by a
Seller, and (iii) no Seller has used, generated, manufactured, stored,
disposed of, on, under or about any of the Properties or any other properties
used by a Seller in the past, any TCA.
(b) Except as set forth in Schedule 3.17, each Seller has
obtained all permits, licenses and other authorizations that are required
under Environmental Laws. Except as set forth in Schedule 3.19, each Seller
is in compliance with the terms and conditions under which the permits,
licenses and other authorizations referenced in the preceding sentence were
issued or granted.
(c) Except as set forth in Schedule 3.17, Seller has fully
complied with and no Seller is subject to any actual or potential liability
(fixed or contingent) under, any Environmental Laws.
(d) Except for spills, discharges, leaks, emissions,
injections, disposals, escape, dumpings or releases prior to June 30, 1994
(and as to which AlliedSignal has full responsibility for any liabilities or
obligations relating to such matters under the terms of the AlliedSignal
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<PAGE> 31
Purchase Agreement), and except as set forth on Schedule 3.17 there has been
no spill, discharge, leak, emission, injection, disposal, escape, dumping or
release of any kind on, beneath or above the Properties or into the
environment surrounding the Properties of any Hazardous Materials which
imposes on Seller or any party or individual on Sellers' Properties a
reporting, notification, remediation or other obligation under any
Environmental Laws.
Section 3.18. Compliance With Laws. Except as set forth on Schedule
3.18, each Seller has conducted its business and maintained its assets, rights
and properties in substantial compliance with all (and has not received any
notice of any claimed violation of any) Applicable Laws.
Section 3.19. Licenses and Permits. Except as set forth on
Schedule 3.19, each Seller possesses all licenses, permits, and other
governmental consents, certificates, approvals, or other authorizations (the
"Permits") necessary for the operation of their respective businesses.
Schedule 3.19 contains a list of all Permits held or applied for by each
Seller. Except as otherwise set forth on Schedule 3.19, (a) Seller has
complied with the terms and conditions of all Permits in all respects and all
such Permits are in full force and effect, and (b) there has occurred no event
nor is any event, action, investigation or proceeding pending or threatened,
which could cause or permit revocation or suspension of or otherwise adversely
affect the maintenance of any Permits. Except as set forth on Schedule 3.19,
the transactions contemplated by this Agreement will not lead to the
revocation, cancellation, termination or suspension of any Permits.
Section 3.20. Insurance. Schedule 3.20 sets forth a list and
description of all policies of fire, casualty, liability, worker's
compensation, life and other forms of insurance (excluding employee benefits
set forth on Schedule 3.15) carried by each Seller currently, including, with
respect to each policy, a description of the types and limits of the coverage,
the amount of premiums, the name of the carrier, the policy number, the
expiration date of the current premium period and the nature and amount of any
claims pending thereunder. Each Seller has delivered to Buyer a true,
complete and correct copy of each such insurance policy. Except as set forth
in Schedule 3.20, all insurance coverage has been maintained by each Seller
on an "occurrence" rather than a "claims made" basis and each Seller shall be
entitled to the full benefits of such insurance following Closing. Each
Seller has regularly maintained all insurance policies in amounts and types
required by law and generally carried by operators of similar businesses. No
Seller is in default with respect to any provision contained in any insurance
policy or has failed to give any notice or present any claim thereunder in due
and timely fashion and no cancellation or non-renewal has been threatened or
has occurred with respect to any policy.
Section 3.21. Claims of Directors, Officers, Etc. Except as set forth
on Schedule 3.21, no Employee or partner of a Seller, or any director, officer
or stockholder of CFC, either individually or in any other capacity, has a
claim of any kind whatsoever against a Seller (including, without limitation,
in respect of (i) loans extended to a Seller or (ii) any bonus or incentive
payments that relate to prior periods or which will become payable if the
transactions contemplated by this Agreement are consummated), except the right
to his or her current salary or wages, any accrued vacation pay, any benefits
due under an Employee Benefit Plan or Benefit Arrangements disclosed to Buyer
under Section 3.15 and any reimbursable expenses arising in the ordinary
course of business. Except as noted in the immediately preceding sentence,
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<PAGE> 32
no Seller has any obligation to any such person that has not been fully
performed.
Section 3.22. Extraordinary Transactions. Except as set forth on
Schedule 3.22, since October 31, 1995, no Seller has (i) mortgaged, pledged
or subjected to any Encumbrance any of the Assets; (ii) canceled or
compromised any claim of or debts owed to it; (iii) sold, licensed, leased,
exchanged or transferred any of its assets; (iv) sold, assigned, transferred
or licensed any of its Intellectual Property or Technology to any other party;
(v) waived any rights; (vi) entered into any material transaction; (vii)
suffered any material change in the relationship or course of dealing with any
customer, supplier or creditor; (viii) suffered any material destruction, loss
or damage to any of the Assets; (ix) made any management decisions involving
any material change in its policies with regard to pricing, sales, purchasing
or other business, financial, accounting (including reserves and the amounts
thereof) or Tax policies or practices; (x) declared, set aside or made any
distributions to its partners; (xi) submitted any bid, proposal, quote or
commitment to any Governmental Authority or third party in response to a
request for proposal or otherwise; (xii) engaged in any merger or
consolidation with, or agreed to merge or consolidate with, or purchased or
agreed to purchase, all or substantially all of the assets of, or otherwise
acquire, any other Person; (xiii) entered into any partnership, joint venture
or similar arrangement with any other Person; (xiv) incurred or agreed to
incur indebtedness for borrowed money; (xv) issued or agreed to issue to any
party, any securities; (xvi) redeemed, purchased or agreed to redeem or
purchase any of its outstanding securities; (xvii) increased the rate of
compensation payable or to become payable to CFC or any of Seller's officers,
directors, Employees or agents who receive more than $75,000 as a base salary
over the rate being paid to them as of October 31, 1995 or agreed to do so
otherwise than in accordance with contractual agreements with such parties
and, in the case of Employees other than Hangar Managers, other than year end
increases made in the ordinary course of business consistent with past
practice; or (xviii) charged off any bad debts or increased its bad debt
reserve except in the manner consistent with its past practices which have
been disclosed to Buyer; except, with respect to the foregoing items set forth
in clauses (i) through (xviii) above where such transactions, events or
occurrences took place in the ordinary course of the Business consistent with
past practices.
Section 3.23. Broker and Finder Fees. Except as set forth in Schedule
3.23, neither Seller nor CFC, nor any of their respective Affiliates, have
engaged any broker or finder in connection with the transactions contemplated
by this Agreement, and no action by any of the foregoing will cause or support
any claim to be asserted against Buyer or the Seller by any broker, finder or
intermediary in connection with such transaction.
Section 3.24. Assets.
(a) Except as described on Schedule 3.24, each Seller has
good and marketable title to its assets, rights and properties, free and clear
of restrictions on or conditions to transfer or assignment, and free and clear
of all Encumbrances. As of the Closing, Buyer will obtain good and marketable
title to the Assets, free and clear of all Encumbrances.
(b) The Assets constitute all of the tangible and
intangible assets and interests owned or used by each Seller in the Business
other than the Excluded Assets, and are sufficient to enable Buyer to continue
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<PAGE> 33
to conduct the Business after the Closing in the manner in which the Business
has been conducted by Seller.
(c) All of the tangible assets of each Seller used by the
Sellers in the Business (whether owned or held under lease) have been repaired
or maintained consistently with the past practices of the Sellers (and in
accordance with the terms of any manufacturers' warranty requirements), are
in good operating condition and repair (normal wear and tear excepted), free
from material defects, suitable for their intended uses in the ordinary course
of the Business of the Sellers and located on the Properties (except for
assets at other locations which have a dollar value of not more than $50,000
in the aggregate).
(d) All equipment owned, leased or used by each Seller in
the Business conforms in substantial respects with all Applicable Laws. No
Applicable Law or any other impediment of any kind prohibits, interferes with,
limits or impairs, or could, if enforced, prohibit, interfere with, limit or
impair the use, operation or maintenance of any of the equipment or personal
property included among the Assets or the conduct of the Business of Sellers
as currently conducted.
Section 3.25. Related Party Transactions. Schedule 3.25 contains a
description of any and all transactions, Contracts and other arrangements to
which a Seller is a party, or to which a Seller was a party at any time from
and after December 31, 1994, involving the furnishing of services to a Seller
by, the rental or purchase of real or personal property by a Seller from, or
otherwise involving payments by a Seller to, CFC, any officer, director or
stockholder of CFC, any Affiliate of any such party, any relative of any such
party or any partnership, joint venture, limited liability company or
corporation in which any such party is or was a member, partner or stockholder
or any partner or Affiliate of a Seller.
Section 3.26. No Adverse Change or Conditions. Except as set forth in
Schedule 3.26, since October 31, 1995, each Seller (i) has conducted its
business in the ordinary course and consistent with past practice, and (ii)
has not suffered any change that has had a Material Adverse Effect. There are
no conditions, facts, developments or circumstances of an unusual or special
nature that reasonably could be expected to have a Material Adverse Effect
upon a Seller.
Section 3.27. Product and Service Warranty. Each product repaired or
delivered and service rendered by a Seller with respect to the Business has
been in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties given by a Seller. Except
as set forth on Schedule 3.27, no product repaired or delivered or service
rendered by a Seller during the one-year period prior to the date hereof is
subject to any guaranty, warranty or other indemnity with a term in excess of
12 months from the date such product was repaired or delivered or such service
was rendered. Prior to the date hereof, each Seller has delivered to Buyer
copies of the terms and conditions of sale for products delivered and services
rendered by such Seller and a copy of applicable guarantees, warranties and
indemnities.
Section 3.28. Interstate Commerce Act. Neither the operations of the
business of a Seller nor any of the Assets or Properties is subject to
regulation under the Interstate Commerce Act nor does a Seller own or operate
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<PAGE> 34
any common or contract carrier within the meaning of the Interstate Commerce
Act that is subject to the jurisdiction of the Interstate Commerce Commission
or the Federal Energy Regulatory Commission or any state or local public
utility commission, public service commission or any other similar
Governmental Authority.
Section 3.29. Adequate Disclosure. No representation or warranty made
by a Seller in this Agreement, or any statement contained in any Exhibit or
Schedule to this Agreement, or any certificate or document furnished or to be
furnished to Buyer pursuant to the terms of this Agreement in connection with
the transactions contemplated hereby, contains, or will contain, any untrue
or misleading statement of a material fact or omits, or will omit, to state
a material fact necessary in order to make the statements contained therein,
in light of the circumstances under which they were made and taken as a whole
not misleading. There is no fact which the Sellers and CFC have not disclosed
to Buyer in writing which has had or would reasonably be expected to have a
Material Adverse Effect.
* * * * *
The actual knowledge of each of the Hangar Managers shall only be attributed
to the Seller (for purposes of determining the Knowledge of the Seller as set
forth in the preamble to this Article III) with respect to the representations
and warranties contained in Sections 3.8; 3.10; 3.11; 3.12; 3.13; 3.15; 3.17;
3.18; 3.19; 3.24; and 3.26 of this Article III. Furthermore, the actual
knowledge of each Hangar Manager that shall be relevant and applicable to each
such representation and warranty shall be limited to the actual knowledge of
such Hangar Manager only insofar as the Hangar Manager's actual knowledge
relates directly to the facility at which he is located or the Seller's
business conducted at or from such facility.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER'S PARENT
----------------------------------------------------------
Buyer and Buyer's Parent represent and warrant to and for the benefit
of Seller as follows:
Section 4.1. Organization and Good Standing. Each of Buyer and Buyer's
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has full corporate power and
authority to carry on its businesses as it is now being conducted.
Section 4.2. Execution and Effect of Agreement. Each of Buyer and
Buyer's Parent has the corporate power to enter into, execute and deliver this
Agreement and the Collateral Agreements, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the consummation by
each of Buyer and Buyer's Parent of the transactions contemplated hereby and
the performance of its obligations hereunder have been duly authorized by all
necessary corporate action on the part of Buyer and Buyer's Parent,
respectively. This Agreement has been duly executed and delivered by each of
Buyer and Buyer's Parent and constitutes a legal, valid and binding obligation
of each of Buyer and Buyer's Parent, enforceable against Buyer and Buyer's
Parent in accordance with its terms.
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Section 4.3. Restrictions. The execution and delivery by each of Buyer
and Buyer's Parent of this Agreement and the Collateral Agreements, the
consummation of the transactions contemplated hereby and thereby and the
performance of the obligations hereunder and thereunder will not violate any
of the provisions of the charter or by-laws of Buyer or Buyer's Parent or the
laws of the jurisdiction in which Buyer and Buyer's Parent are incorporated.
Section 4.4. No Consents. Except as set forth in Schedule 4.4, and
except for filings, consents, waivers, approvals and authorizations required
under the H-S-R Act, no filing with, or consent, waiver, approval or
authorization of, or notice to, any Governmental Authority or any third party
is required to be made or obtained by Buyer or Buyer's Parent in connection
with the execution and delivery of this Agreement or the Collateral
Agreements, the consummation of any of the transactions contemplated hereby
or thereby or the performance of any of its respective obligations hereunder
or thereunder.
Section 4.5. No Broker. Except as set forth in Schedule 4.5, neither
Buyer nor any of its Affiliates has engaged any broker or finder in connection
with the transactions contemplated by this Agreement, and no action by Buyer
will cause or support any claim to be asserted against Seller by any broker,
finder or intermediary in connection with such transaction.
Section 4.6. UNC Status. Each of Buyer, Buyer's Parent and their
Affiliates are not a "Competitor" as that term is defined in Section 18(c) of
the ASE Operating Agreement.
ARTICLE V
PRE-CLOSING COVENANTS AND AGREEMENTS OF SELLER AND CFC
------------------------------------------------------
Section 5.1. Status. From and after the date hereof through and
including the Closing Date, each Seller shall take all actions that in the
reasonable opinion of Buyer are necessary or appropriate to maintain the
status of Seller as a limited partnership or limited liability company, as
appropriate, validly existing and in good standing under the laws of the State
of Delaware and to maintain its qualification(s) as a foreign partnership or
limited liability company, as appropriate, in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership or
operation of its assets and properties requires such qualification.
Section 5.2. Access to Information. Except as prohibited or limited
by Applicable Laws and subject to the provisions set forth in Section 11.6 of
this Agreement, each Seller shall, and CFC shall cause each Seller to, from
and after the date of this Agreement and until the Closing Date, give Buyer
and Buyer's employees, counsel, accountants and agents, full and complete
access upon reasonable notice during normal business hours, to all properties,
agreements, records, employees and affairs of each Seller and CFC, and provide
copies of such information concerning each Seller and CFC as Buyer may
reasonably request.
Section 5.3. Conduct of Business to Closing. Except as contemplated
by this Agreement, from and after the date hereof through and including the
Closing Date, each Seller shall, and CFC shall cause each Seller to, conduct
its business in the ordinary course consistent with past practice and in
accordance with all Applicable Laws, and each Seller and CFC shall use their
best efforts to preserve the business and goodwill of each Seller. Without
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limiting the generality of the foregoing, except as expressly contemplated by
this Agreement or as consented to by Buyer in writing, each Seller and CFC,
as applicable, shall act as follows from and after the date hereof through and
including the Closing Date:
(a) No Seller will adopt any change in any method of
accounting or accounting practice, except as required by GAAP;
(b) Except in the ordinary course of business and
consistent with past practice, or as required by Applicable Laws, no Seller
will enter into or amend in any material respect any Employee Benefit Plan;
(c) No Seller will merge or consolidate with, or agree to
merge or consolidate with, or purchase or agree to purchase all or
substantially all of the assets or securities of, or otherwise acquire, any
other business entity;
(d) No Seller will authorize for issuance, issue or sell,
or agree to issue or sell, any additional securities or any securities or
obligations convertible into its securities or issue or grant any option,
warrant or other right to purchase any of its securities (it being understood
that Buyer shall not assume or have any liability with respect to or relating
to the issuance of such securities);
(e) No Seller will make any loans, advances or capital
contributions to or investments in, any Person other than intercompany loans
Garrett may extend to Jet Center in the ordinary course of business consistent
with past practices.
(f) No Seller will assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person;
(g) Except as required by law or contractual obligations
existing on the date hereof that are contained in Contracts in effect on the
date hereof, no Seller will (i) increase in any manner the compensation (other
than increases in the ordinary course of business and consistent with past
practice) of, or enter into any new bonus or incentive agreement or
arrangement with, any of its Employees or any officer, director or employee
of CFC, (ii) pay or agree to pay any pension, retirement allowance or similar
employee benefit to any Employee or any officer, director or employee of CFC,
(iii) enter into any new employment, severance, consulting or other
compensation agreement with any existing Employee or any officer, director or
employee of CFC, or (iv) commit itself to any additional pension, profit-
sharing, deferred compensation, group insurance, severance pay, retirement or
other employee benefit plan, fund or similar arrangement or amend or commit
itself to amend any of such plans, funds or similar arrangements in existence
on the date hereof;
(h) Except as required by law or contractual obligations
existing on the date hereof that are contained in Contracts disclosed in
Schedule 3.12 in effect on the date hereof, no Seller will outside of the
ordinary course of business consistent with past practices (i) sell, transfer
or otherwise dispose of any of its assets without replacement thereof by a
substantially equivalent asset of substantially equivalent kind, or (ii)
create any Encumbrance on any of its Properties or the Assets. No Seller
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shall enter into or become a member or partner of any joint venture,
partnership, limited liability company or other similar arrangement;
(i) No Seller will enter into any new Contract that
reasonably can be expected to result in payments to or from Seller in excess
of $100,000 (other than contracts entered into in the ordinary course of
business consistent with past practice) during the 12-month period commencing
on the Closing Date;
(j) No Seller shall engage in any promotional sales or
discount or other activities with customers that would reasonably be expected
to have the effect of accelerating to pre-closing periods sales that otherwise
would be expected to occur in post-closing periods;
(k) No Seller will agree to take any action prohibited by
this Section 5.3;
(l) CFC shall not permit or allow a Seller to take any
action prohibited by this and Section 5.3; and
(m) Sellers shall not amend, modify or waive any rights
under the ASE Operating Agreement or the AlliedSignal Purchase Agreement (or
agree to do any of the foregoing) other than in the manner contemplated by
items 1, 2, 4, 5 and 6 of Schedule 3.13(a) to this Agreement (it being
understood that Seller shall not amend, modify or waive the ASE Operating
Agreement, or agree to do any of the foregoing, with respect to the matters
set forth at item 3 to Schedule 3.13(a) to this Agreement).
Section 5.4. Consents. Each Seller and CFC shall, and CFC shall cause
each Seller to, use their respective best efforts to obtain all consents,
waivers, approvals and authorizations and make all filings with and give all
notices that may be necessary or reasonably required on the part of CFC or a
Seller to consummate the transactions contemplated hereby, including, without
limitation, the Required Consents.
Section 5.5. Certain Employee Benefit Matters.
(a) Each Seller shall before the Closing Date, and CFC
shall cause each Seller to, make and pay before the Closing Date or accrue on
the Closing Balance Sheet all contributions and premiums, with respect to
liabilities arising under (or that will arise in the future in respect of
periods prior to and through Closing) any Benefit Arrangements or Employee
Benefit Plans on or prior to the Closing Date, including, but not limited to,
any and all contributions to all tax-qualified plans, the contribution
obligations for which have accrued or will accrue with respect to periods
ending on or prior to the Closing Date.
(b) Each Seller shall, and CFC shall cause each Seller to,
discharge all of its liabilities under any Benefit Arrangements or Employee
Benefit Plans.
(c) Sellers represent and warrant that they do not have any
defined benefit or money purchase pension plan. Sellers have developed a
retiree medical plan (a summary of which has been provided to Buyer) which has
been presented to and approved by the Board of Directors of Seller. Such
retiree medical plan has not been broadly communicated to Sellers' Employees
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and has not been implemented and Seller is not legally obligated to implement
such plan. Sellers covenant and agree that as provided in Section 5.3 they
shall not adopt or commit to adopt any pension plan or implement such retiree
medical plan prior to Closing or commit or take any action that would require
Buyer to implement the retiree medical plan following Closing.
Section 5.6. Public Statements. From and after the date hereof until
the earlier of the Closing or the termination of this Agreement, neither
Seller nor CFC shall release any information concerning this Agreement or the
transactions contemplated hereby that is intended for or is reasonably likely
to result in public dissemination thereof without the prior written consent
of Buyer, unless in the reasonable opinion of counsel to Seller, the release
of such information is required by law. In any such case, the parties shall
consult in good faith with each other concerning the release of such
information.
Section 5.7. Update of Disclosure. From and after the date hereof
through and including the Closing Date, each Seller shall promptly notify
Buyer of the occurrence of any facts or circumstances that would have required
disclosure pursuant to the representations and warranties contained in ARTICLE
III hereof if such facts or circumstances had been known to a Seller prior to
the execution of this Agreement and of any other matters that would cause any
representation or warranty contained herein to be untrue, incorrect or
misleading in any respect.
Section 5.8. H-S-R Act Filings. The Sellers shall (i) make and
cooperate with Buyer in the preparation and filing of any and all filings that
are or in the reasonable opinion of Buyer's counsel may be required under the
H-S-R Act, (ii) cooperate with Buyer, and use their reasonable efforts, to
ensure that any pre-acquisition waiting period required by the H-S-R Act
expires or is otherwise terminated, and (iii) comply promptly with any request
made pursuant to the H-S-R Act or the regulations thereunder.
Section 5.9. Employee Matters.
(a) Each Seller shall, and CFC shall cause each Seller to,
comply with all Applicable Laws regarding notice of employment termination,
including applicable plant closing laws, and the right to continue or convert
health insurance coverage (including, but not limited to Part 6 of Title I of
ERISA) as they relate to events occurring on or prior to the Closing Date.
Each Seller shall be solely responsible for the issuance of the notices and
any other actions required by these laws. Buyer hereby represents that it
shall offer employment to all employees of each Seller on terms and conditions
equivalent to or better than that in place with each Seller (exclusive of
arrangements with respect to equity securities or similar matters). Each
Seller shall be entitled to rely on this representation in discharging its
obligations under this Section 5.9(a).
(b) Each Seller shall use reasonable efforts to cause all
of its Employees to accept such employment with Buyer.
Section 5.10. Financial Statements.
(a) The Sellers shall use their reasonable efforts to cause
AlliedSignal (and its employees and independent accountants) to provide Buyer
(and its employees, accountants and other representatives) with access to the
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<PAGE> 39
accounting records, work papers and other books and records relating to the
AlliedSignal Engine Division for the year 1993 and for the first six months
of 1994, and to cause AlliedSignal to provide Buyer with appropriate audited
financial statements of the "Hangar Business" Seller acquired from Allied
Signal pursuant to the AlliedSignal's Purchase Agreement (as the term "Hangar
Business" is defined in the AlliedSignal Purchase Agreement) for the year
ended December 31, 1993 and the six months ended June 30, 1994 (the
"Predecessor Financial Statements"). The Sellers shall use their reasonable
efforts to cause AlliedSignal to agree to consent to the inclusion of the
Predecessor Financial Statements (and to cause AlliedSignal independent public
accountants to agree to consent to the inclusion of their audit reports
thereon) in filings Buyer's Parent may make from time to time with the SEC (or
in any disclosure documents Buyer's Parent may utilize in connection with an
offering of its securities in a transaction exempt from registration under the
Securities Laws) prior to and following Closing in accordance with applicable
Securities Laws. Buyer agrees that Buyer shall pay any direct costs and
expenses AlliedSignal may incur in connection with providing the Predecessor
Financial Statements and the other materials referenced above, including the
reasonable fees and expenses of AlliedSignal's independent public accountants.
Buyer shall also agree to indemnify and hold AlliedSignal harmless from and
against any losses, damages, costs or expenses AlliedSignal may suffer as a
consequence of Buyer's use of the Predecessor Financial Statements.
(b) The Sellers shall cause Ernst & Young to complete the
audit of Sellers' financial statements for the year ended December 31, 1995
no later than February 28, 1996. The Sellers shall consult with and cause
Ernst & Young to consult with and make its workpapers available to Buyer as
the audit progresses. The Sellers shall deliver their audited financial
statements for the year ended December 31, 1995 (the "1995 Audited
Statements") to Buyer as soon as they become available. In the event that the
1995 Audited Statements are delivered to Buyer after February 28, 1996 the
provisions set forth in Sections 9.1, 10.1 and 10.2 hereof shall be adjusted
appropriately to take into account Sellers' late delivery of such financial
statements (it being understood that, consistent with the terms of Section
9.4, Buyer shall not be obligated to pay any Delayed Closing Fee to Seller).
In addition to the foregoing, and notwithstanding anything contained in this
Agreement to the contrary, Sellers shall not be liable to pay the Definitive
Agreement Break-Up Fee to Buyer in any circumstances, in the event Sellers do
not deliver the 1995 Audited Statements to Buyers by the close of business
Phoenix time on March 15, 1996.
(c) In the event that Buyer's Parent determines it is
advisable to include audited and/or unaudited financial statements of the
Seller (including the Financial Statements and the 1995 financial statements
referenced in Section 5.10(b)) in any filings with the SEC (or in any
disclosure documents Buyer's Parent may utilize in connection with an offering
of its securities in a transaction exempt from registration under the
Securities Laws), the Seller shall provide Buyer's Parent with its audited and
unaudited financial statements for such periods and at such dates as Buyer's
Parent may request. Such financial statements shall be provided to Buyer's
Parent as soon as is reasonably practicable. Seller shall also promptly
provide to Buyer's Parent consents from Ernst & Young to the inclusion of its
audit reports in filings with the SEC (or in any disclosure documents Buyer's
Parent may utilize in connection with an offering of its securities in a
transaction exempt from registration under the Securities Laws), "comfort
letters," and such other assurances from Ernst & Young that may be reasonably
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requested by Buyer's Parent or any underwriter, placement agent or purchaser
of Buyer's Parent securities with respect to any financial statements provided
to Buyer's Parent pursuant to this Section 5.10.
Section 5.11. Closing Conditions. Each of the Sellers and CFC shall
cause all of the conditions precedent to Buyer's obligation to close the
transactions contemplated by this Agreement to be satisfied.
ARTICLE VI
PRE-CLOSING COVENANTS AND AGREEMENTS OF BUYER
---------------------------------------------
Section 6.1. Public Statements. From and after the date hereof through
the Closing Date, Buyer and Buyer's Parent shall not release any information
concerning this Agreement or the transactions contemplated hereby that is
intended for or is reasonably likely to result in public dissemination thereof
without the prior written consent of the Sellers, unless in the reasonable
opinion of counsel to Buyer, the release of such information is required by
law. In any such case, the parties shall consult in good faith with each
other concerning the release of such information. Nothing contained herein
shall prevent Buyer's Parent from including the financial statements of the
Sellers and the Predecessor Financial Statements, and information concerning
this Agreement and the Sellers in any registration statement Buyer's Parent
may file with the SEC (or in any disclosure documents Buyer's Parent may
utilize in connection with an offering of its securities in a transaction
exempt from registration under the Securities Laws) with respect to the
offering of its securities in accordance with applicable Securities Laws.
Section 6.2. Consents. From and after the date hereof through the
Closing Date, Buyer shall use reasonable efforts to obtain all consents,
waivers, approvals and authorizations and make all filings with and give all
notices that may be necessary or reasonably required on the part of Buyer to
consummate the transactions contemplated hereby.
Section 6.3. H-S-R Act Filings. Buyer shall (i) make and cooperate
with the Sellers in the preparation and filing of any and all filings that are
or may be required under the H-S-R Act, (ii) cooperate with the Sellers, and
use its reasonable efforts, to ensure that any pre-acquisition waiting period
required by the H-S-R Act expires or is otherwise terminated, and (iii) comply
promptly with any request made pursuant to the H-S-R Act or the regulations
thereunder.
Section 6.4. Employees. Buyer shall assume the Employment Agreements
set forth on Schedule 3.12 to which each Hangar Manager is presently a party.
Buyer shall negotiate in good faith a one-year employment contract with James
E. Greenslade, and a three-year employment agreement with each of David N.
Roy, Peter M. Hokanson and Kennard Goldsmith. Each of the employment
agreements shall be on financial terms and conditions equivalent to or better
than those contained in the Employment Agreements set forth on Schedule 3.12
to which each of the foregoing persons is a party (exclusive of arrangements
with respect to equity securities), respectively (it being understood that the
employment agreements shall contain covenants limiting the freedom of each of
the executive officer to compete with Buyer for a period up to two years
following the termination of employment). Buyer hereby represents that it
shall offer employment to all other employees of each Seller on terms and
conditions equivalent to or better than that in place with each Seller
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(exclusive of arrangements with respect to equity securities or other similar
matters).
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
The obligations of Buyer to consummate the purchase of the Assets on the
Closing Date and to perform its other obligations under this Agreement which
are to be performed at and after the Closing are subject to the satisfaction
on or prior to the Closing Date of each of the conditions precedent set forth
in this ARTICLE VII:
Section 7.1. Representations and Warranties True. Each of the
representations and warranties of each Seller contained in this Agreement
shall have been true and correct in all material respects on and as of the
date hereof and shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though made on and as of the
Closing Date, except for representations and warranties that speak only as to
matters existing as of a specific date or time other than the Closing Date
(which need only be true and correct as of such date or time).
Section 7.2. Covenants and Agreements--No Default. Each Seller and CFC
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
them on or prior to the Closing Date.
Section 7.3. Certificate. Each of the Sellers and CFC shall have
delivered to Buyer a certificate, dated the Closing Date, to the effect that
the conditions set forth in Sections 7.1 and 7.2 have been satisfied.
Section 7.4. Employment Agreements. L. David Clemons shall have
entered into the Employment Agreement with Buyer, shall have executed and
delivered the Employment Agreement to Buyer and shall be physically and
mentally able to perform his obligations thereunder. There shall have been
no breach or anticipatory breach by Mr. Clemons prior to or as of the Closing,
and the Employment Agreement shall be in full force and effect and shall not
have been repudiated as of the Closing.
Section 7.5. No Material Adverse Change. The Sellers, taken as a
whole, shall not have suffered any change that has, as of the Closing, or will
have after the Closing, a Material Adverse Effect on a Seller or on Buyer
following Closing.
Section 7.6. Seller Consents/Certain Assurances.
(a) Each Seller and CFC shall have obtained the Required
Consents. Buyer shall have obtained (or be reasonably satisfied that it will
obtain) or had transferred from each Seller to Buyer all other Licenses and
Permits except where the failure to obtain such License or Permit would not
have a Material Adverse Effect on the Business.
(b) Garrett and CFC shall have duly and validly assigned
all of Garrett's right to continue to use the "Garrett Aviation" trademark,
tradename and servicemark on a fully paid-up and royalty free basis and on a
month to month basis as presently enjoyed by Sellers.
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(c) The Sellers shall have entered into a definitive
agreement in form and substance satisfactory to Buyer with respect to the
purchase of Air Supply parts which shall be fully assignable to Buyer.
(d) Each Seller shall have provided Buyer with evidence
reasonably satisfactory to Buyer of the release and discharge of the
Encumbrances created to secure any of the Excluded Liabilities.
(e) Seller shall have provided Buyer with evidence or
assurances satisfactory to Buyer that all agreements and arrangements
(including, without limitation, management agreements) between or among each
Seller and CFC or any Affiliate of CFC shall have been terminated in a manner
which will not give rise to any liability or obligation on the part of Buyer
following Closing.
(f) Sellers shall provide Buyer with an executed copy of
an executed services agreement with I-NET, Inc., a Maryland corporation, in
the form previously provided to Buyer by Sellers, and such agreement shall
have been validly assigned to Buyer.
(g) Buyer shall have become reasonably satisfied that it
shall not have or succeed to any liability or liabilities arising out of or
related to the Piper Aztec aircraft accident and related deaths referenced on
Schedule 3.8 to this Agreement.
Section 7.7. Buyer Consents. Buyer shall have obtained all consents,
waivers, approvals and authorizations required on the part of Buyer for the
consummation of the transactions contemplated by this Agreement set forth on
Schedule 4.4 to this Agreement.
Section 7.8. No Injunction. At the Closing Date, (i) there shall be
no injunction, restraining order or decree of any nature of any court or other
Governmental Authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated
hereby; (ii) no action, suit, proceeding or investigation instituted by a
Governmental Authority shall be pending before any court or Governmental
Authority to restrain or prohibit the consummation of the transactions
contemplated hereby; and (iii) none of the parties hereto shall have received
notice from any Governmental Authority of its intention to institute any
action, suit, proceeding or investigation.
Section 7.9. Closing Documents. Each Seller shall have provided Buyer
with all of the instruments of transfer requested by Buyer pursuant to Section
2.6 and all of the other documents required by Section 9.2 to be delivered at
Closing by a Seller.
Section 7.10. Financing. Buyer shall have obtained equity or debt
financing, on terms and conditions satisfactory to Buyer, in its sole
discretion, for the full amount of the Cash Consideration and in an amount
sufficient, in the reasonable judgment of Buyer, to satisfy its working
capital requirements with respect to the conduct of the Business from and
after the Closing.
Section 7.11. Due Diligence. Buyer shall be satisfied in its sole
discretion with the results of its due diligence review of the Assets and
Properties, the legal and financial condition of each Seller, the business and
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operations of each Seller, the accounting records of each Seller and
environmental matters relating to the Business and operations of each Seller
(it being understood that information learned during such review shall not
qualify or be deemed to have any effect on the representations and warranties
made by a Seller in this Agreement). Prior to Closing, Buyer shall notify the
Sellers promptly if it learns of a breach of a representation or warranty made
by a Seller pursuant to this Agreement during the period of time from the date
of this Agreement through Closing.
Section 7.12. Board Approval. The Board of Directors of Buyer and
Buyer's Parent shall have approved and authorized the execution and delivery
by Seller of this Agreement and each of the Collateral Agreements, and the
consummation of the transactions contemplated hereby and thereby by Buyer.
Section 7.13. H-S-R Approval. The parties shall have received H-S-R
Approval for the transactions contemplated by this Agreement.
Section 7.14. Financial Statements. Buyer shall have received audited
financial statements of the Sellers for the year ended December 31, 1995 at
least thirty days prior to Closing. Buyer shall have received either (i) the
Predecessor Financial Statements, accompanied by appropriate audit opinion
letters, consents and agreements from AlliedSignal and the auditors of the
Predecessor Financial Statements with respect to the inclusion of the
Predecessor Financial Statements and the audit reports thereon in any filings
to be made by Buyer with the SEC from time to time (or in any disclosure
documents Buyer's Parent may utilize from time to time in connection with an
offering of its securities in a transaction exempt from registration under the
Securities Laws), and the provision of "comfort letters" to underwriters,
placement agents or purchasers of Buyer's Parent securities from time to time,
and such other assurances from the auditors of the Predecessor Financial
Statements that may be reasonably requested by Buyer or any underwriter,
placement agent or purchaser of the securities of Buyer with respect to any
such financial statements, or (ii) a waiver or exemption from the SEC stating
that Buyer's Parent will not be required to include the Predecessor Financial
Statements in its filings with the SEC.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligation of Seller to consummate the sale of the Assets on the
Closing Date and to perform its other obligations under this Agreement which
are to be performed at or after the Closing are subject to the satisfaction
on or prior to the Closing Date of the conditions precedent set forth in this
ARTICLE VIII:
Section 8.1. Representations and Warranties True. Each of the
representations and warranties of Buyer contained in this Agreement shall have
been true and correct in all material respects on and as of the date hereof
and shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing
Date, except for representations and warranties that speak only as to matters
existing as of a specific date or time other than the Closing Date (which need
only be true and correct as of such date or time).
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Section 8.2. Covenants and Agreements--No Default. Buyer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date.
Section 8.3. Certificate. Buyer shall have delivered to the Sellers
a certificate, dated the Closing Date and signed by an executive officer of
Buyer, to the effect that the conditions set forth in Sections 8.1 and 8.2
have been satisfied.
Section 8.4. No Injunction. At the Closing Date, (i) there shall be
no injunction, restraining order or decree of any nature of any court or other
Governmental Authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated
hereby; (ii) no action, suit, proceeding or investigation instituted by a
Governmental Authority shall be pending before any court or Governmental
Authority to restrain or prohibit the consummation of the transactions
contemplated hereby; and (iii) none of the parties hereto shall have received
notice from any Governmental Authority of its intention to institute any
action, suit, proceeding or investigation.
Section 8.5. Closing Documents. Buyer shall have provided the Sellers
with all of the documents required by Section 9.3 to be delivered at the
Closing by Buyer.
Section 8.6. H-S-R Approval. The parties shall have received H-S-R
Approval for the transactions contemplated by this Agreement.
ARTICLE IX
CLOSING
Section 9.1. Closing.
(a) The Closing contemplated by this Agreement shall take
place at the offices of Gray Cary Ware & Freidenrich, a Professional
Corporation, at 10:00 a.m., on March 31, 1996, or at such other place and at
such other time and date as may be mutually agreed upon in writing by Buyer
and Sellers, upon fulfillment of (i) all the conditions set forth in
ARTICLE VII that have not been waived in writing by Buyer, and (ii) all of the
conditions set forth in ARTICLE VIII that have not been waived in writing by
the Sellers. If any of the conditions to the obligations of the parties have
not been satisfied or waived in writing by March 31, 1996, the Closing shall
take place within five (5) business days following the satisfaction or waiver
of all such conditions, but in no event later than June 30, 1996, unless
otherwise agreed in writing by Buyer and Sellers.
(b) All proceedings to be taken and all documents to be
executed and delivered by the Sellers in connection with the consummation of
the transactions contemplated hereby shall be reasonably satisfactory in form
and substance to Buyer and its counsel. All proceedings to be taken and all
documents to be executed and delivered by Buyer in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Seller and their counsel. All
proceedings to be taken and all documents to be executed and delivered on the
Closing Date by the parties shall be deemed to have been taken and executed
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simultaneously, and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed or delivered.
Section 9.2. Documents to be Delivered by Sellers. On the Closing
Date, the Sellers shall deliver, or shall cause to be delivered, to Buyer the
following:
(a) A Certificate of the Secretary of CFC, dated the
Closing Date, certifying that attached thereto are true and complete copies
of (i) consents of the partners of Garrett, the members of Jet Center and
resolutions of the Board of Directors of CFC, which authorize (a) the
execution and delivery by each Seller of this Agreement and each of the
Collateral Agreements, and (b) the consummation of the transactions contem-
plated hereby and thereby by each Seller; and (ii) the certificate of limited
partnership and partnership agreement of Garrett, the articles of organization
and operating agreements of Jet Center and the charter and bylaws of CFC, each
as in effect as of the date of such certification, and certifying the identity
and incumbency of the officers and directors of CFC;
(b) A good standing certificate dated as of a date
reasonably close to the Closing Date of CFC and each Seller;
(c) An opinion letter from Gray Cary Ware & Freidenrich,
a Professional Corporation, counsel to Sellers, in the form attached hereto
as Exhibit F;
(d) A bill of sale and other instruments of conveyance
referenced in Section 2.6 of this Agreement; and
(e) Such other documents, instruments or agreements as may
be reasonably requested by Buyer to effectuate the transactions contemplated
by this Agreement.
Section 9.3. Documents to be Delivered by Buyer. On the Closing Date,
Buyer shall deliver to Sellers the following:
(a) Evidence reasonably satisfactory to the Sellers of (i)
a wire transfer of funds to the account designated by the Sellers in the
amount of the Cash Consideration as adjusted in accordance with Section 2.4,
less the Closing Holdback, and (ii) a wire transfer of funds to the account
designated by the Escrow Agent in the amount of the Closing Holdback.
(b) A certificate of the Secretary or an Assistant
Secretary of Buyer, dated the Closing Date, certifying that attached thereto
are true and complete copies of (i) the resolutions of the Board of Directors
of Buyer which authorize (a) the execution and delivery of this Agreement and
each of the Collateral Agreements and (b) the consummation of the transactions
contemplated hereby and thereby, and certifying that such resolutions have not
been amended or rescinded and are in full force and effect; and (ii) the
Charter and By-laws of Buyer as in effect as of the date of such
certification; and certifying the identity and incumbency of the officers of
Buyer;
(c) An opinion letter of Miles & Stockbridge, a
Professional Corporation, counsel to Buyer and Richard H. Lange, General
Counsel to Buyer's Parent, in the forms attached hereto as Exhibits G-1 and
G-2; and
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(d) Such other documents, instruments or agreements as may
be reasonably requested by the Sellers to effectuate the transactions
contemplated by this Agreement.
Section 9.4. Fee for Delayed Closing. Except as otherwise provided in
this Section 9.4, if the Closing shall not occur prior to the close of
business on March 31, 1996, and the Agreement has not been sooner terminated
or terminated on that date in accordance with Section 10.1, the Sellers and
CFC shall be entitled to receive from Buyer, collectively and in the
aggregate, a payment in the amount of the Delayed Closing Fee, which amount
shall be paid by wire transfer to an account or accounts designated by Sellers
and CFC prior to such date no later than April 7, 1996, and shall be deemed
to be an increase to the Purchase Price and the Cash Consideration if the
Closing shall nevertheless occur after such date. Notwithstanding the
foregoing, however, the Delayed Closing Fee shall not be due and payable by
Buyer if the Closing shall not occur by March 31, 1996 due to (i) the
continuing failure of a Seller or CFC (or their respective officers,
employees, directors, agents or legal counsel) to cooperate reasonably with
Buyer in connection with the Agreement, the preparation and negotiation of the
Collateral Agreements and the other documents, instruments, certificates and
other agreements contemplated by this Agreement and the Collateral Agreements
or in connection with the scheduling and consummating the Closing following
notice to the CFC Board of Directors and allowing for a reasonable period to
cure such lack of cooperation, (ii) any of the conditions precedent to the
obligations of Buyer that are set forth in Sections 7.1 (Representations and
Warranties of Seller True), 7.2 (No Default in Covenants and Agreements by
Seller), 7.3 (Seller Certificates), 7.4 (Employment Agreements), 7.5 (No
Material Adverse Change), 7.6 (Seller Consents and Assurances), 7.8 (No
Injunction), 7.9 (Closing Documents), 7.13 (H-S-R Approval) or 7.14 (Seller
Financial Statements) shall not have been satisfied or waived in writing by
Buyer as of the close of business on such date, or (iii) Buyer and Sellers
shall agree in writing to delay the Closing to a date later than March 31,
1996.
ARTICLE X
TERMINATION
-----------
Section 10.1. Right to Terminate Agreement. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned prior to
the Closing only as follows:
(a) by mutual written consent of Buyer and Sellers; or
(b) by Buyer upon written notice to Sellers in the event
that following the delivery of the Remaining Schedules (i) any of the
representations or warranties made by a Seller in this Agreement or in any
Schedule to this Agreement or in any certificate delivered by a Seller
pursuant to this Agreement shall not have been true and correct in any
material respect as of the date so made or thereafter by a Seller, or
(ii) either of the Sellers or CFC shall fail to perform or comply in any
material respect with any covenant or agreement to be performed or complied
with by a Seller or CFC pursuant to this Agreement prior to or at the Closing;
or
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(c) by Buyer upon written notice to the Sellers in the
event that any of the conditions to the obligations of Buyer set forth in
ARTICLE VII of this Agreement (other than the condition set forth in Section
7.13) shall not have been satisfied or waived in writing by Buyer on or before
May 31, 1996; or
(d) by the Sellers upon written notice to Buyer in the
event that (i) any of the representations or warranties made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement
shall not have been true and correct as of the date so made or thereafter
breached by Buyer, or (ii) Buyer shall fail to perform or comply with any
covenant or agreement to be performed or complied with by Buyer pursuant to
this Agreement prior to or at the Closing; or
(e) by the Sellers upon written notice to Buyer in the
event that any of the conditions to the obligations of Seller set forth in
ARTICLE VIII of this Agreement (other than the condition set forth in Section
8.4 or 8.6) shall not have been satisfied or waived in writing by Seller on
or before May 31, 1996; or
(f) by Buyer or the Sellers, upon written notice to the
other, at any time after May 31, 1996 and for any reason in such party's sole
and absolute discretion; provided, however, that the right of the Sellers to
terminate this Agreement pursuant to this Section 10.1(f) shall not be
available if the failure to consummate the Closing on or before such date was
caused by or resulted from the failure of a Seller or CFC to perform any of
the obligations to be performed by them prior to or as of the Closing under
this Agreement or to obtain any of the Required Consents, or if the failure
to consummate the Closing was due to the failure of the parties to receive the
H-S-R Approval; or
(g) by Buyer or the Sellers, upon written notice to the
other, in the event that (i) the Department of Justice or the Federal Trade
Commission seeks or advises either party that it intends to seek an injunction
against the consummation of the transactions contemplated by this Agreement,
(ii) the Federal Trade Commission commences or advises either party that it
intends to commence an administrative proceeding relating to the transactions
contemplated by this Agreement or (iii) the H-S-R Approval has not been
obtained by the close of business on June 30, 1996;
(h) by Buyer upon written notice to the Sellers in the
event that for a period exceeding two (2) business days (i) trading in
securities generally on the New York Stock Exchange, the International Stock
Exchange, the American Stock Exchange or the over-the-counter market shall
have been suspended or materially limited or minimum prices shall have been
established on one or more such exchanges or such market by the SEC, by such
exchange or by any other Governmental Authority having jurisdiction, (ii) a
banking moratorium shall have been declared by United States federal or New
York state authorities, (iii) the United States shall have become engaged in
major hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a
national emergency or war by the United States, or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions, national or international securities markets or currency
exchange rates or controls as to make it, in the reasonable judgment of the
Buyer, inadvisable or impracticable to finance the transaction or to proceed
with the Closing;
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(i) by Buyer upon written notice to the Sellers if Buyer
properly rejects the Remaining Schedules in accordance with the terms of
Section 2.11 of this Agreement; or
(j) automatically as of June 30, 1996 unless extended by
mutual agreement.
Section 10.2. Effect of Termination.
(a) In the event that this Agreement is terminated pursuant
to Section 10.1(a), by Buyer or Sellers pursuant to Section 10.1(g), or by
Buyer pursuant to Section 10.1(i) then, except for the payment by Buyer of the
Letter of Intent Break-Up Fee (and not the Definitive Agreement Break-Up Fee)
in the manner contemplated by Section 10.2(h), and the covenants contained in
Sections 10.3 and 11.6, this Agreement shall become null and void and of no
further force or effect, and the parties hereto shall have no further
obligation or liability hereunder.
(b) In the event that this Agreement is terminated by Buyer
pursuant to Section 10.1(b) and by reason of the knowing and intentional
breach of this Agreement by a Seller or CFC, Buyer shall be entitled to pursue
all legal and equitable remedies available to it against each Seller and CFC
with respect to any and all damages that Buyer may have incurred in connection
with any failure of a Seller or CFC to perform and comply with any covenant
or agreement to be performed or complied with by a Seller or CFC pursuant to
this Agreement prior to or at the Closing; provided, however, in no event
shall Buyer be entitled to claim or receive consequential damages from the
Sellers.
(c) In the event that this Agreement is terminated (i) by
Buyer pursuant to Section 10.1(c) solely by reason of the fact that the
conditions to the obligations of Buyer set forth in Sections 7.7 (Buyer
Consents), 7.10 (Buyer Financing), 7.11 (Due Diligence Satisfactory), or 7.12
(Buyer Board Approval) shall not have been satisfied or waived in writing by
Buyer on or before May 31, 1996, (ii) by Buyer pursuant to Section 10.1(h) or
(iii) by Buyer or Seller pursuant to Section 10.1(j), then Seller and CFC
shall be entitled to receive from Buyer, collectively and in the aggregate,
a payment in the amount of the Definitive Agreement Break-Up Fee plus the
Letter of Intent Break-Up Fee, which amount shall constitute liquidated
damages to Seller and CFC with respect to any and all damages that one or all
of them may have incurred in connection with any breach, non-performance or
misrepresentation by Buyer with respect to any representation, warranty,
covenant or agreement made by Buyer pursuant to or to be performed or complied
with by Buyer pursuant to this Agreement prior to or at the Closing, and,
except as otherwise provided in Section 10.3, this Agreement shall become null
and void and of no further force or effect and Buyer shall have no further
obligation or liability whatsoever to a Seller or CFC with respect to this
Agreement. Notwithstanding the foregoing, no Definitive Agreement Break-Up
Fee shall be payable pursuant to this Section 10.2(c) in the case of a
termination under 10.1(j) if the Buyer would not be obligated to pay any
Delayed Closing Fee to Seller pursuant to the terms set forth in Section 9.4
in the event the Agreement was not being terminated; provided, however, that
if a Delayed Closing Fee would not be payable solely due to the failure of the
Sellers to deliver its 1995 Audited Statements to Buyer by February 28, 1996,
then the Definitive Agreement Break-Up Fee shall still be payable in the event
that the Sellers deliver the 1995 Audited Statements to the Buyer by the close
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of business Phoenix time on March 15, 1996 and at least 30 days prior to the
dates upon which certain rights to terminate the Agreement expressed in
Section 10.1 of the Agreement have been extended to take into account the late
delivery of the financial statements in the manner contemplated by Section
5.10 of this Agreement. No Definitive Agreement Break-Up Fee will be payable
under the terms of this Section 10.2(c) in the event that Sellers have failed
to deliver the 1995 Audited Statements to Buyer by the close of business
Phoenix time on March 15, 1996.
(d) In the event that this Agreement shall be terminated
by Buyer pursuant to Section 10.1(c) by reason of the fact that, the
conditions to the obligations of Buyer set forth in Sections 7.1
(Representations and Warranties or Seller True), 7.2 (No Default in Covenants
and Agreements by Seller), 7.3 (Seller Certificates), 7.4 (Employment
Agreements), 7.5 (No Material Adverse Change), 7.6 (Seller Consents and
Assurances), 7.8 (No Injunction), 7.9 (Closing Documents), or 7.14 (Seller
Financial Statements) shall not have been satisfied or waived in writing by
Buyer on or before May 31, 1996, then, Buyer's remedy shall be termination of
this Agreement, and Buyer shall not be liable for the Definitive Agreement
Break-Up Fee. Nothing contained herein shall be construed to prevent Buyer
from proceeding against the Sellers or CFC pursuant to Section 10.2(b) if
Buyer is entitled to do so.
(e) In the event that this Agreement is terminated by
Sellers pursuant to Sections 10.1(d) or 10.1(e), Sellers and CFC shall be
entitled to receive a payment from Buyer in an aggregate amount equal to the
Definitive Break-Up Fee plus the Letter of Intent Break-Up Fee, which amount
shall constitute liquidated damages to Sellers and CFC with respect to any and
all damages that one or all of them may have incurred in connection with any
breach, non-performance or misrepresentation by Buyer with respect to any
representation, warranty, covenant or agreement made by Buyer pursuant to or
to be performed or complied with by Buyer pursuant to this Agreement prior to
or at the Closing, and, except as otherwise provided in Section 10.3, this
Agreement shall become null and void and of no further force or effect and
Buyer shall have no further obligation or liability whatsoever to Sellers or
CFC with respect to this Agreement. Notwithstanding the foregoing, no
Definitive Agreement Break-Up Fee will be payable in the event Sellers have
failed to deliver the 1995 Audited Statements to Buyer by the close of
business Phoenix time on March 15, 1996.
(f) In the event that this Agreement shall be terminated
by Sellers or Buyer pursuant to Section 10.1(f), Sellers and CFC shall be
entitled to receive a payment from Buyer in an aggregate amount equal to the
Definitive Agreement Break-Up Fee plus the Letter of Intent Break-Up Fee which
amount shall constitute liquidated damages to Sellers and CFC with respect to
any and all damages that one or all of them may have incurred in connection
with any breach, performance or misrepresentation by Buyer with respect to any
representation, warranty, covenant or agreement made by Buyer pursuant to or
to be performed or complied with by Buyer pursuant to this Agreement prior to
or at the Closing, and, except as otherwise provided in Section 10.3, this
Agreement shall become null and void and of no further force or effect and
Buyer shall have no further obligation or liability whatsoever to Seller or
CFC with respect to this Agreement. Notwithstanding the foregoing, no
Definitive Agreement Break-Up Fee shall be payable pursuant to this Section
10.2(f) if the Buyer would not be obligated to pay any Delayed Closing Fee to
Seller pursuant to the terms set forth in Section 9.4 in the event the
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Agreement was not being terminated; provided, however, that if a Delayed
Closing Fee would not be payable solely due to the failure of the Sellers to
deliver the 1995 Audited Statements to Buyer by February 28, 1996, then the
Definitive Agreement Break-Up Fee shall still be payable in the event that the
Sellers deliver the 1995 Audited Statements to the Buyer by March 15, 1996 and
at least 30 days prior to the dates upon which certain rights to terminate the
Agreement expressed in Section 10.1 of the Agreement have been extended to
take into account the late delivery of the financial statements in the manner
contemplated by Section 5.10 of this Agreement. No Definitive Agreement
Break-Up Fee will be payable in the event that Sellers have failed to deliver
the 1995 Audited Statements to Buyer by the close of business Phoenix time on
March 15, 1996.
(g) The parties understand and acknowledge that Buyer shall
only be obligated to pay the Delayed Closing Fee or the Definitive Agreement
Break-Up Fee and/or the Letter of Intent Break-Up Fee to Seller and CFC
pursuant to the terms of Section 9.4 and Section 10.2 of this Agreement and
that in no circumstances will Seller and CFC be entitled to receive the
Delayed Closing Fees and either or both of the Letter of Intent Break-Up Fee
or the Definitive Agreement Break-Up Fee. Furthermore, the Delayed Closing
Fee and Break-Up Fee that may be payable to Seller and CFC hereunder shall be
payable to Seller and CFC collectively and in the aggregate such that Buyer
shall not be required to make any payments which aggregate in excess of
$5,000,000 pursuant to the terms of Section 9.4 and 10.2 of this Agreement.
(h) Notwithstanding any other provision of this Agreement,
but subject to the limitations expressed in Section 10.2(g) above, if this
Agreement is terminated for any reason (other than by Buyer in accordance with
the terms of Section 10.2(b) and in the case of a knowing and intentional
breach of this Agreement by a Seller or CFC) or for no reason, Buyer shall
immediately pay to Seller the Letter of Intent Break-Up Fee.
Section 10.3. Survival of Covenants Following Termination.
Notwithstanding the termination of this Agreement and the abandonment of the
transactions contemplated hereby, or the provisions of Section 10.2, the
obligations of the parties hereto under Sections 11.6 and 12.2 shall survive
the termination of this Agreement by any party to this Agreement.
ARTICLE XI
POST-CLOSING COVENANTS AND AGREEMENTS
-------------------------------------
Section 11.1. Financial Statements/Preservation of and Access to
Information After Closing.
(a) In the event that Buyer's Parent determines it is
advisable to include audited and/or unaudited financial statements of the
Seller with respect to periods prior to and through Closing (including the
Financial Statements and the 1995 financial statements to be provided to Buyer
pursuant to Section 5.10(b)) in any filings with the SEC (or in any disclosure
documents Buyer's Parent may utilize in connection with an offering of its
securities in a transaction exempt from registration under the Securities
Laws), the Sellers shall provide Buyer's Parent with their audited and
unaudited financial statements for such periods and at such dates as Buyer's
Parent may request. Such financial statements shall be provided to Buyer's
Parent as soon as is reasonably practicable. Sellers shall also promptly
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provide to Buyer's Parent consents from Ernst & Young to the inclusion of its
audit reports in filings with the SEC (or in any disclosure documents Buyer's
Parent may utilize in connection with an offering of its securities in a
transaction exempt from registration under the Securities Laws), "comfort
letters," and such other assurances from Ernst & Young that may be reasonably
requested by Buyer's Parent or any underwriter, placement agent or purchaser
of Buyer's Parent securities with respect to any financial statements provided
to Buyer's Parent pursuant to this Section 11.1.
(b) To the extent that a Seller has books and records which
are not to be conveyed to Buyer because such books and records are not Assets
within the meaning of item 5 of Schedule 2.1, from and after the Closing, each
Seller shall preserve all books and records in Seller's possession relating
to the Assets and Properties until Buyer notifies such Seller that all
statutes of limitations relating to Tax periods to which such books and
records relate have expired, and, thereafter, shall not destroy or dispose of
such books and records without giving notice to Buyer of such pending
destruction or disposal and offering Buyer the right and opportunity to copy
such books and records.
(c) Except as prohibited or limited by Applicable Laws,
Buyer shall, from and after the Closing Date, provide each Seller and each
Seller's employees, counsel and independent accountants, full and complete
access upon reasonable notice during normal business hours, to all properties,
agreements, records and affairs of Buyer relating to the Assets and
Properties, and will provide copies of such information concerning the Assets
and Properties as a Seller may reasonably request in connection with the
preparation of any Tax Returns, or in connection with or in anticipation of
any audit by any federal, state or local Tax Authorities of Seller. From and
after the Closing Date, Buyer shall preserve all books and records of Buyer
relating to the Assets and Properties in, as the case may be, Buyer's
possession until the Sellers notify Buyer that all statutes of limitations
relating to Tax periods to which such books and records related have expired
and, thereafter, not to destroy or dispose of such books and records without
giving notice to Sellers of such pending destruction or disposal and offering
Sellers the right and opportunity to copy such books and records.
(d) A number of the representations and warranties
contained in Article III provide Buyer with certain assurances regarding the
payment of obligations and liabilities prior to Closing or the accrual of
amounts in respect of them on the Closing Balance Sheet. Seller covenants and
agrees that it shall take all actions as may be necessary to pay such amounts
or make accruals with respect to payables and liabilities on the Closing
Balance Sheet in the manner required by GAAP.
Section 11.2. Employee Benefit Matters.
(a) Each Seller shall make all contributions (or accrue
such contributions on the Closing Balance Sheet) and shall pay all premiums
(or accrue such premiums on the Closing Balance Sheet) with respect to
liabilities arising under the Benefit Arrangements and Employee Benefit Plans
on or prior to the Closing Date, with respect to liabilities or obligations
which have accrued on or prior to the Closing Date or which will accrue
following the Closing Date in respect of periods prior to and through the
Closing Date.
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(b) Each Seller and CFC shall cooperate with Buyer and
provide any assistance reasonably requested by Buyer (whether before or after
the Closing Date) in connection with the employment matters contemplated by
this Agreement, including, but not limited to, providing all information that
the Buyer deems necessary to determine whether there have been any failures
to comply with the continuation of health care requirements of Section 4980B
of the Code and Part 6 of Title I of ERISA and each Seller and CFC shall
provide all information Buyer deems necessary to correct any such failures.
(c) With respect to each Employee Benefit Plan and each
Benefit Arrangement, such Plan or Arrangement shall be modified to provide
that sponsorship and maintenance thereof shall be transferred to Buyer or any
Affiliate of Buyer (as Buyer may determine), which shall assume all
obligations of each Seller thereunder. Each Seller and CFC shall cooperate
fully in effecting the transfer of the sponsorship of each such Plan and
Arrangement as expeditiously as possible. Without limiting the generality of
the foregoing, each of the Sellers and CFC shall (i) provide any information
or copies of any documents which may be requested by Buyer and (ii) join in
or participate in any application to or proceeding before any governmental
agency, the purpose of which is to effectuate the agreements contained in this
paragraph. Notwithstanding anything contained in this Agreement to the
contrary, Buyer shall not assume or be responsible for any of a Seller's
obligations under the Employment Agreements with Messrs. Clemons, Greenslade,
Hokanson, Goldsmith or Roy or John Myers (to the extent John Myers reaches an
agreement with Buyer or Buyer's Parent at Closing) or all of the Executive
Securities Agreements set forth on Schedule 3.12.
Section 11.3. Survival.
(a) Except as otherwise provided in this Agreement, all of
the representations, warranties, covenants and agreements of the parties
contained in this Agreement or in any certificate delivered by the parties
pursuant to this Agreement shall survive the Closing as provided in Section
11.3(c).
(b) Notwithstanding any investigation or audit conducted
by Buyer prior to the Closing, Buyer shall be entitled to rely upon the
representations and warranties each of the Sellers which are set forth in this
Agreement, including in any Schedules to this Agreement, or any certificates
delivered by each Seller or CFC pursuant to this Agreement or in connection
with the execution and delivery of this Agreement and the performance of the
obligations of the parties hereunder, and such representations and warranties
shall not be deemed to have been waived or otherwise affected by any such
investigation or audit or any knowledge attributable to Buyer.
(c) The representations and warranties contained in or made
pursuant to this Agreement, and the related indemnity obligations of Sellers
set forth in Section 11.4, shall terminate on, and no claim or action with
respect thereto may be brought after, 5:00 P.M., Eastern Standard Time, on
March 31, 1997 or 5:00 P.M., Eastern Standard Time, on the first anniversary
of the Closing Date, whichever occurs later; provided, however, that such
representations and warranties and the related indemnity obligation of Sellers
with respect thereto, shall not terminate with respect to any claim (whether
or not fixed as to liability or liquidated as to amount) with respect to which
Sellers have been given specific notice with such information as is reasonably
available at the time such claim is submitted to Sellers, prior to the
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expiration of such representations and warranties, and related indemnity
obligations as provided herein.
(d) The representations and warranties contained in or made
pursuant to this Agreement and the related indemnity obligations of Buyer set
forth in Section 11.7 shall terminate on, and no claim or action with respect
thereto may be brought after, 5:00 P.M., Eastern Standard Time, on March 31,
1997 or 5:00 P.M., Eastern Standard Time, or the first anniversary of the
Closing Date, which occurs later; provided, however, that such representations
and warranties and the related indemnity obligation of Buyer with respect
thereto, shall not terminate with respect to any claim (whether or not fixed
as to liability or liquidated as to amount) with respect to which Buyer has
been given specific notice with such information as is reasonably available
at the time such claim is submitted to Buyer, prior to the expiration of such
representations and warranties, and related indemnity obligations as provided
herein.
Section 11.4. Indemnification by Seller.
(a) From and after the Closing Date, subject to the
limitations set forth in this Section 11.4, the Sellers shall defend,
indemnify and hold harmless the Buyer Group for, from and against all demands,
suits, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, judgments and expenses, including, without limitation,
interest, penalties, reasonable attorneys' fees, disbursements and expenses,
and reasonable consultants' fees, disbursements and expenses (collectively,
the "Buyer Losses"), based upon, arising out of, asserted against, resulting
from, imposed on, or incurred by any member of the Buyer Group, directly or
indirectly, as a result of (i) any misrepresentation or breach of warranty on
the part of a Seller in respect of, or any inaccuracy of or omission from, any
of the representations or warranties of a Seller contained in this Agreement
or any of the Schedules hereto or any certificate furnished or to be furnished
to Buyer hereunder or in connection herewith any of which arise during the
survival period set forth in Section 11.3(c), (ii) any nonfulfillment or
nonperformance by either of the Sellers or CFC or any of their Affiliates of
any agreement, covenant or obligation of either of the Sellers or CFC under
this Agreement, or any breach by a Seller or CFC or any of their Affiliates
of any provision of this Agreement, (iii) the noncompliance by Sellers or
Buyer with any applicable "bulk transfer" or similar provisions of the laws
of the any applicable jurisdiction in connection with the transactions
contemplated by this Agreement, (iv) the failure of Sellers to pay, perform
or discharge any of the Excluded Liabilities when and as due for payment,
performance or discharge, or (v) costs and expenses incurred by the Buyer
Group during the first twelve months following Closing pursuant to warranties
provided by the Sellers to their customers in respect of services rendered and
goods sold prior to the Closing to the extent and only to the extent that such
costs and expenses exceed $650,000.
(b) In the event that subsequent to the Closing Date, any
claim is asserted, any event occurs or any proceeding (including governmental
investigations or audits) is instituted relating to any matter as to which any
member of the Buyer Group is entitled to indemnification pursuant to Section
11.4(a), as soon as practicable after Buyer receives any notice or otherwise
becomes aware of any such claim, proceeding or event, Buyer shall notify
Sellers in writing; provided, however that the failure of Buyer to so notify
Sellers shall not relieve Sellers from any liability under this Section 11.4,
except to the extent it is proved that the Sellers suffered actual prejudice
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in connection with or in defending against such claim. In case any action
is brought against Buyer or a Seller in respect thereof and Buyer notifies
Sellers of the commencement thereof, Sellers shall be entitled to participate
in the defense of such action and, to the extent that Sellers may wish, to
assume sole control over the defense and settlement of such action; provided,
however, that:
(i) the applicable member or members of the
Buyer Group shall be entitled to participate in the defense of such action and
to employ counsel at its own expense to assist in the handling of such action;
(ii) Sellers shall obtain the prior written
approval of the applicable member of the Buyer Group before entering
into any settlement of such action (which shall not be unreasonably
withheld) or ceasing to defend against such action; and
(iii) Sellers shall notify Buyer of its
election to assume control of the defense of any such action within 15 days
after receipt of written notice of the action from a member of the Buyer
Group.
After written notice by Sellers to the Buyer Group of its election to
assume control of the defense of any such action in accordance with the
foregoing, (i) Sellers shall not be liable to any members of the Buyer Group
for any legal or other expenses (other than expenses of investigation)
subsequently incurred by any of such Persons in connection therewith except
in cases where any member of the Buyer Group shall be advised in writing by
reputable legal counsel that it may have defenses available to it which are
inconsistent with or contrary to the defenses available to Seller in
connection with such action, and (ii) as long as the Sellers are reasonably
contesting such action in good faith, the members of the Buyer Group shall not
admit any liability with respect to, or settle, compromise or discharge the
claim underlying such action without Sellers' prior written consent, which
consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Sellers shall not be entitled to assume
sole control over the defense and settlement of any claim, proceeding or
action relating to any matter as to which any member of the Buyer Group may
be entitled to indemnification pursuant to Section 11.4(a):
(i) if the claim, proceeding or action relates
to, could result in, or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation of any officer or employee of
Buyer;
(ii) if the claim, proceeding or action could
result in or cause a Material Adverse Effect on Buyer in the reasonable
judgment of Buyer;
(iii) if the claim, proceeding or action is one
which seeks principally injunctive or equitable relief against the Buyer or
to the extent that the claims proceeding or action seeks injunctive or
equitable relief and a party has entered a motion seeking such relief;
(iv) the claim, proceeding or action seeks
monetary damages in excess of the amount that Sellers would be required to pay
to Buyer pursuant to Section 11.4, or Buyer determines, in its reasonable
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discretion, that the claim, proceeding or action could result in a judgment
for monetary damages in excess of the amount that Sellers would be required
to pay to Buyer pursuant to Section 11.4, or
(v) a court, Governmental Authority or other
arbiter of the claim, proceeding or action rules that the Sellers failed or
are failing to adequately protect Buyer's interests, rights or remedies.
If Sellers do not elect to assume control over the defense or settlement
of an action as provided in this Section 11.4(b) or is not entitled to do so,
any member of the Buyer Group shall have the right to defend the action and
related claims in any reasonable manner as it may deem appropriate and,
subject to the limitations set forth in Section 11.4(c), Sellers shall
indemnify and hold harmless the applicable members of the Buyer Group to the
extent such members are entitled to indemnification pursuant to Section
11.4(a); provided, however, in no event shall Sellers be required to pay
expenses of more than one legal counsel for the Buyer Group.
(c) No member of the Buyer Group shall be entitled to
indemnification under Section 11.4(a)(i), (ii), (iii) or (iv) in respect of
any individual claim involving Buyer Losses of less than $40,000 ("De Minimus
Claims") (it being understood that all Losses related to any claims arising
out of the same or similar facts, events, circumstances or matters shall be
considered part of the same claim for purposes of this Agreement), and no
member of the Buyer Group shall be entitled to indemnification under Section
11.4(a) until the aggregate amount of all Buyer Losses incurred by the Buyer
Group, exclusive of De Minimus Claims, exceeds $400,000. In the event that
the aggregate amount of all Buyer Losses, exclusive of De Minimus Claims,
incurred by the Buyer Group under Section 11.4(a) exceeds $400,000, the Buyer
Group shall be entitled to indemnification only for the amount of the Buyer's
Losses in excess of $400,000. Sellers shall only be required to pay to the
Buyer Group in the aggregate, and its maximum obligation to provide indemnity
pursuant to this Agreement shall be limited to the sum of the Closing
Holdback.
(d) Buyer shall have the right, subject to the limitations
set forth in Section 11.4(c) and the provisions of this Section 11.4(d), to
set-off against the Closing Holdback, the entire amount of any Buyer Losses
for which the Buyer determines in good faith that any member of the Buyer
Group is entitled to indemnification from Sellers under Section 11.4(a). The
right to set-off described in this Section shall be exercised as follows:
(i) Buyer shall deliver written notice to the
Sellers of each claim for indemnification for which the Buyer desires to
exercise its right to set-off.
(ii) Sellers shall then have fifteen days
(which period may be extended by mutual consent in writing) following receipt
of such notice in which to accept or dispute each such claim, in whole or in
part. To the extent that any such claim is not disputed in writing by Sellers
within such fifteen day period, such claim shall be deemed to have been
accepted by Sellers, and Buyer shall be entitled to set-off the entire amount
of such claim against the Closing Holdback.
(iii) In the event that Sellers shall dispute
any claim of Buyer, in whole or in part (hereafter a "Contested Claim"), the
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Escrow Agent shall be instructed to hold such amount in escrow until the
Contested Claim has been resolved by agreement of the parties or until
otherwise ordered by a court of competent jurisdiction in the manner
contemplated by this Agreement. Upon resolution of the Contested Claim, the
Escrow Agent shall be instructed to promptly disburse the amount of the
Contested Claim to the party entitled thereto (as determined by agreement of
the parties or by order of Court) upon receipt of joint, written instructions
from Buyer and Sellers to that effect or upon presentation of a certified copy
of an order of a court of competent jurisdiction by either party.
Section 11.5. Indemnification by Buyer.
-------------------------
(a) From and after the Closing Date, Buyer shall indemnify
and hold harmless Sellers, CFC and any of their Affiliates (collectively, the
"Seller Group") for, from and against all demands, suits, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs, judgments
and expenses, including, without limitation, interest, penalties, reasonable
attorneys' fees, disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses (collectively "Seller Losses"), based upon, arising
out of, asserted against, resulting to, imposed on, or incurred by the Seller
Group, directly or indirectly, from any misrepresentation or breach of any
warranty contained in or made by Buyer pursuant to this Agreement or the
breach by Buyer of any covenant or agreement to be performed or complied with
by Buyer after the Closing including, without limitation, Buyer's covenant to
satisfy and discharge the Assumed Obligations. In addition to the foregoing,
Buyer shall indemnify and hold the Seller Group harmless from and against any
Losses incurred by the Seller Group which involve claims made by purchasers
or underwriters of Buyer's securities based on the inaccuracy or inadequacy
of disclosure contained in any prospectus or offering circular utilized by
Buyer in connection with an offering of its securities, if the offering
circular or prospectus contains the financial statements of the Sellers. The
indemnification provided to Buyer in accordance with the preceding sentence
shall not be available if the claim is based in whole or in part on the
Sellers' financial statements (but not including the Predecessor Financial
Statements) and it is determined that such financial statements do not fairly
present in all material respects the financial condition, results of
operations or cash flow of the Sellers at and for the dates and periods
presented in the financial statements. The indemnification contained herein
with respect to covenants made by Buyer (including, without limitation, the
covenant to discharge the Assumed Obligations and the covenant set forth in
this Section relating to indemnification for inaccurate or inadequate
prospectuses or offering circulars of Buyer's Parent) shall survive the
Closing indefinitely.
(b) In the event that subsequent to the Closing Date, any
claim is asserted, any event occurs or any proceeding (including governmental
investigations or audits) is instituted relating to any matter as to which any
member of the Seller Group is entitled to indemnification pursuant to Section
11.5(a), as soon as practicable after Sellers receive any notice of or
otherwise becomes aware of any such claim, proceeding or event, the Sellers
shall notify Buyer in writing; provided, however, that the failure of Sellers
to so notify the Buyer shall not relieve the Buyer from any liability under
this Section 11.5, except to the extent it is proved that Buyer suffered
actual prejudice in connection with or in defending against such claim. In
case any such action is brought against any member of the Seller Group with
respect thereto and Sellers notify the Buyer of the commencement thereof, the
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<PAGE> 57
Buyer shall be entitled to participate in the defense of such claim and, to
the extent Buyer may wish, to assume sole control over the defense and
settlement of such action; provided, however, that:
(i) the applicable member or members of the
Seller Group shall be entitled to participate in the defense of such action
and to employ counsel at their own expense to assist in the handling of such
action;
(ii) the Buyer shall obtain the prior written
approval of the applicable member of the Seller Group before entering into any
settlement of such action or ceasing to defend against such action; and
(iii) the Buyer shall notify Seller of their
election to assume control of the defense of any such action within 15 days
of receipt of written notice of the action from a member of the Seller Group.
After written notice by the Buyer to the Seller Group of its election
to assume control of the defense of any such action in accordance with the
foregoing, (i) Buyer shall not be liable to any members of the Seller Group
for any legal or other expenses (other than expenses of investigation)
subsequently incurred by any of such Persons in connection therewith except
in cases where Seller shall be advised in writing by reputable legal counsel
that they may have legal defenses available to them which are inconsistent
with or contrary to the legal defenses available to the Buyer in connection
with such action, and (ii) as long as the Buyer is reasonably contesting such
action in good faith, the members of the Seller Group shall not admit any
liability with respect to, or settle, compromise or discharge the claim
underlying such action without the prior written consent of the Buyer, which
consent may be given or withheld in the sole discretion of the Buyer.
If the Buyer elects to assume control over the defense or settlement of
an action as provided in this Section 11.5(b), any member of the Seller Group
shall have the right to defend the action and related claims in any reasonable
manner as it may deem appropriate and, subject to the limitations set forth
in Section 11.5(a), the Buyer shall indemnify and hold harmless the applicable
members of the Seller Group to the extent such members are entitled to
indemnification pursuant to Section 11.5(a). No member of the Buyer
Indemnification Group shall be liable under this Section 11.5 for any
settlement or compromise effected without its consent (it being understood and
agreed that, in the event no member of the Buyer Indemnification Group elects
to assume control over the defense of the action, the members of the Buyer
Indemnification Group shall not unreasonably withhold or unreasonably delay
any such consent).
Section 11.6. Confidentiality. Each of the parties hereto for
themselves and their respective officers, directors, employees, stockholders
and representatives, shall hold in confidence all information, books, records
and documents acquired from any other party hereto prior to, on, or after the
date hereof in the course of negotiation of the transactions contemplated
hereby or pursuant to the provisions hereof and will not disclose the same to
any third party except as required by law, and except to the extent necessary
to (a) respond to lawful process, (b) comply with Applicable Laws, (c)
establish a lawful claim or defense, or (d) obtain reasonably necessary advice
of counsel. Should the transactions contemplated hereby not be consummated
for any reason, each party shall promptly return to the other all originals
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and copies of such documents and other written information obtained from the
other in the course of such negotiations or pursuant hereto and shall promptly
destroy all evaluations and studies prepared by it or by any of its
representatives on the basis of such information, books, records or documents.
The foregoing shall not apply to information concerning CFC or a Seller which
was known to Buyer or was in the public domain at the time it was disclosed
to Buyer or which subsequently entered the public domain through no wrongful
act of Buyer.
Section 11.7. Restrictive Covenants of Seller and CFC.
(a) Each of the Sellers and CFC hereby covenant and agree,
jointly and severally, that:
(i) neither Seller nor CFC, nor any other
presently existing or hereafter created Affiliate of a Seller or CFC (other
than Carlisle and the Carlisle Affiliates and First Chicago and its
Affiliates, as to which the terms of this Section 11.7(a) shall not apply),
shall, directly or indirectly, for a period of three years from and after the
Closing Date, whether for its own account or as an owner, investor, partner,
stockholder, member, agent, principal, consultant or otherwise, engage in,
invest in, be associated with, or manage, operate, control, consult for or
otherwise assist any Person or any enterprise that engages anywhere in the
world in the repair or overhaul of AlliedSignal engines;
(ii) call upon, solicit or otherwise contact,
either directly or indirectly, for a period of three years from and after the
Closing Date, any of the present or former customers of a Seller for the
purpose of soliciting the repair or overhaul of AlliedSignal engines; or
(iii) at any time after the Closing, use,
license, or convey any of the Intellectual Property or Technology or disclose,
or through the failure to exercise due care and diligence permit to be used,
licensed, conveyed or disclosed, any of the Intellectual Property or
Technology.
(b) Each of Carlisle and the Carlisle Affiliates (the
"Carlisle Group"), and First Chicago (for purposes of this Section 11.7(b)
only, including Cross Creek Partners III and its individual partners),
covenant and agree that:
(i) for a period of three years following
Closing no member of the Carlisle Group or First Chicago shall, directly or
indirectly, alone or with others invest in or otherwise obtain any interest
or engage in any transaction with the business entities identified on Schedule
11.7(b);
(ii) no member of the Carlisle Group nor First
Chicago shall at any time after the Closing, use, license, or convey any of
the Intellectual Property or Technology or disclose, or through the failure
to exercise due care and diligence permit to be used, licensed, conveyed or
disclosed, any of the Intellectual Property or Technology;
(iii) no member of the Carlisle Group nor First
Chicago shall acquire, offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities, or direct or
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<PAGE> 59
indirect rights to acquire any voting securities of the Buyer's Parent, or any
assets of the Buyer's Parent or any division or subsidiary thereof or of any
successor or controlling person of the Buyer's Parent (it being understood
that the foregoing covenant shall not prevent the members of the Carlisle
Group or First Chicago from acquiring, collectively among the members of each
such group, shares representing less than 5% of the outstanding shares of the
common stock of Buyer's Parent);
(iv) no member of the Carlisle Group nor First
Chicago shall make or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in the Rules of the
Securities and Exchange Commission), to vote, or seek to advise or influence
any person or entity with respect to the voting of, any voting securities of
Buyer's Parent;
(v) no member of the Carlisle Group nor First
Chicago shall make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any extraordinary
transactions involving the Buyer's Parent or its securities or assets; or
(vi) no member of the Carlisle Group nor First
Chicago shall form, join or in any way participate in a "group" (as defined
in Section 13d-3 of the Exchange Act), in connection with any of the foregoing
and will not publicly or privately request the Buyer's Parent (its officers,
directors, employees or agents) or publicly disclose any request, directly or
indirectly, to waive any provisions of this Section.
(c) From and after the Closing, neither of the Sellers nor
CFC nor any of their presently existing or hereafter created Affiliates shall
use, or assert any right to use, or take any action inconsistent with Buyer's
right to use, any trademark, logo or tradename related to the Business of
Sellers, including, without intended limitation, the trade names "CFC Aviation
Services" or "Garrett Aviation Services," and shall not use any trademarks,
logos or tradenames that are confusingly similar thereto or that are a
translation or transliteration thereof into any language or alphabet, in
connection with any business that is the same or similar to the Business
engaged in by the Sellers.
(d) Construction. Each covenant and agreement of this
Section 11.7 shall be read and construed independently of each other and if
any one of them (or portion thereof) is held invalid the others (or others
portions thereof) shall continue to be valid and to apply and the one (or the
portion) held to be invalid shall be read and construed in the most
restrictive manner intended by this Section 11.7 that would permit it to be
held valid and enforceable. Accordingly, the parties agree that because the
provisions of this Section 11.7 are divisible and separable, if any provision
hereof is held to be unreasonable, unlawful or unenforceable in duration,
geographical scope or character of restriction by any court of competent
jurisdiction, such provision shall be modified to the extent necessary in
order that any such provision or portion thereof shall be legally enforceable
to the fullest extent permitted by law, and the parties hereto do hereby
expressly authorize any court of competent jurisdiction to enforce any such
provision or portion of this Section 11.7 or to modify any such provision or
portion hereof in order that any such provision or portion hereof shall be
enforced by such court to the fullest extent permitted by applicable law.
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(e) Notwithstanding anything contained in this Section 11.7
to the contrary, the terms and conditions of Sections 11.7(a)(i) and
11.7(a)(ii) shall not be binding upon John R. Myers, George Leisz or Harry
Todd.
Section 11.8. Change of Names. Promptly following the Closing, but in
no event later than 10 days following the Closing, each of the Sellers and CFC
shall take all actions necessary to change the name of the Sellers and CFC to
names which are not confusingly similar to or a translation or transliteration
of "CFC Aviation Services" or "Garrett Aviation Services." Each Seller and
CFC shall take similar action to modify the names under which they have
qualified to do business in foreign jurisdictions within 30 days of Closing.
Section 11.9. Specific Performance and Injunctive Relief. Each Seller
hereby acknowledges and agrees that the damages to Buyer resulting from any
breach or threatened breach of any of the covenants and agreements contained
in this Agreement to be complied with or performed by each Seller may be
intangible, in whole or in part, and incapable of being assessed a monetary
value and will result in irreparable harm to, and have a Material Adverse
Effect on, Buyer. Therefore, each of the Sellers and CFC hereby agree that,
in the event of any breach or threatened breach of any of the covenants or
agreements contained in this Agreement to be complied with or performed by a
Seller, Buyer shall be entitled to a decree of specific performance,
injunctive relief to prevent any such breach or the continuation thereof and
other equitable remedies in addition to monetary damages and legal remedies
in respect thereof, together with an award of it's attorney's fees, expenses
and disbursements incurred in connection with seeking such relief.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Power of Attorney. As of the Closing Date, each Seller
hereby constitutes and appoints Buyer, and its successors and assigns, the
true and lawful attorney of Seller, in the name of Buyer or in the name of
such Seller but for the benefit of Buyer, (i) to institute and prosecute all
proceedings that Buyer may deem proper in order to collect, assert, or enforce
any claim, right, or title of any kind in or to the Assets; (ii) to defend or
compromise any and all actions, suits, or proceedings in respect of any of the
Assets or the Assumed Obligations, and to take all such actions in relation
thereto as Buyer deems advisable; and (iii) to take all actions that Buyer or
its successors or assigns deem proper in order to provide for Buyer and its
successors or assigns the benefits of any of the Assets except that the
foregoing Power of Attorney shall not extend to any such action that could
reasonably be expected to have a Material Adverse Effect on a Seller or the
Business. Each Seller acknowledges and agrees that the foregoing powers are
coupled with an interest and are irrevocable by each Seller.
Section 12.2. Expenses. All legal, accounting and other costs and fees
incurred by a Seller or CFC in connection with the transactions contemplated
by this Agreement shall be borne and paid for solely by such Seller or CFC,
as the case may be. All legal, accounting and other costs and fees incurred
by Buyer in connection with the transactions contemplated by this Agreement
shall be borne and paid for by the Buyer.
<PAGE>
<PAGE> 61
Section 12.3. Entire Agreement. This Agreement, together with the
Collateral Agreements, constitutes the entire agreement and understanding
between the parties hereto in respect of the matters set forth herein, and all
prior negotiations, writings and understandings relating to the subject matter
of this Agreement (including the letter of intent dated December 4, 1995) are
merged herein and are superseded and cancelled by this Agreement.
Section 12.4. Amendment and Waiver. This Agreement may be amended,
modified, supplemented or changed in whole or in part only by an agreement in
writing making specific reference to this Agreement and executed by each of
the parties hereto. Any of the terms and conditions of this Agreement may be
waived in whole or in part, but only by an agreement in writing making
specific reference to this Agreement and executed by the party that is
entitled to the benefit thereof. The failure of any party hereto to insist
upon strict performance of or compliance with the provisions of this Agreement
shall not constitute a waiver of any right of any such party hereunder or
prohibit or limit the right of such party to insist upon strict performance
or compliance at any other time.
Section 12.5. Binding Agreement and Successors. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 12.6. Assignment. This Agreement and the rights of the parties
hereunder may not be assigned, and the obligations of the parties hereunder
may not be delegated, in whole or in part, by any party without the prior
written consent of the other parties hereto except that Buyer shall have the
right to assign this Agreement and its rights hereunder and delegate its
obligations hereunder to any Affiliate of Buyer or to any party who succeeds
to the business of the Buyer.
Section 12.7. No Third Party Beneficiaries. Nothing in this Agreement
is intended to confer any rights or remedies upon any Person (including,
without limitation, any Employee) other than the parties hereto and the
indemnified Persons under Section 11.4 and Section 11.5.
Section 12.8. Notices. Any notice, request, instruction or other
document or communication required or permitted to be given under this
Agreement to any of the parties hereto shall be in writing and shall be deemed
given (i) three days after being deposited in the mail, postage prepaid,
certified or registered mail, (ii) on the next business day after delivery to
a reputable overnight delivery service such as Federal Express, or (iii) upon
personal delivery if delivered or addressed to the addresses set forth below
or to such other address as any party may hereafter specify by written notice
to the other parties hereto:
(a) If to the Sellers, delivered or mailed to:
CFC Aviation Services, L.P.
432 N. 44th Street, Suite 340
Phoenix, Arizona 85008
Attention: __________________________
__________________________
and
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<PAGE> 62
CFC Aviation Company, L.L. C.
432 N. 44th Street, Suite 340
Phoenix, Arizona 85008
Attention: __________________________
__________________________
with a copy delivered or mailed to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121-2189
Attention: Cameron Jay Rains, Esquire
and
First Capital Corporation of Chicago
Three First National Plaza
Suite 1210
Chicago, Illinois 60670
Attention: Burton E. McGillivray
Managing Director
and
Carlisle Enterprises L.P.
7777 Fay Avenue, Suite 200
La Jolla, California 92037
Attention: James S. Carlisle
(c) If to Buyer, delivered or mailed to:
UNC Incorporated
175 Admiral Cochrane Drive
Annapolis, Maryland 21401
Attention: Richard H. Lange, Esquire
with a copy delivered or mailed to:
John B. Frisch, Esquire
Miles & Stockbridge,
a Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Section 12.9. Further Assurances. The parties hereto each agree to
execute, make, acknowledge, and deliver such instruments, agreements and other
documents as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
Section 12.10. Article and Section Headings. The Article and Section
headings contained in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning or interpretation of this
Agreement or any of its terms and conditions.
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<PAGE> 63
Section 12.11. Governing Law. This Agreement shall be construed and
enforced in accordance with and shall be governed by the laws of the State of
Delaware.
Section 12.12. Construction. As used in this Agreement, any reference
to the masculine, feminine or neuter gender shall include all genders, the
plural shall include the singular, and the singular shall include the plural.
With regard to each and every term and condition of this Agreement and any and
all agreements and instruments contemplated hereby, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement
or instrument subject hereto, no consideration shall be given to the issue of
which party hereto actually prepared, drafted or requested any term or
condition of this Agreement or any agreement or instrument subject hereto.
Section 12.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
Section 12.14.Exhibits and Schedules. The Exhibits and Schedules
attached to this Agreement constitute a substantive part of this Agreement and
are hereby incorporated herein by this reference.
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement as of the day and year first above written.
UNC INCORPORATED
By:________________________________
Dan A. Colussy
Chairman, President and Chief
Executive Officer
UNC/CFC ACQUISITION CO.
By:________________________________
Dan A. Colussy
President
CFC AVIATION, INC.
By:________________________________
John R. Myers
Chairman
By:________________________________
L. David Clemons
President
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<PAGE> 64
By:________________________________
Dale L. Ziegler
CFC AVIATION SERVICES, L.P.
By: CFC Aviation Inc., its general
partner
By:___________________________
John R. Myers
Chairman
By:___________________________
L. David Clemons
President
By:___________________________
Dale L. Ziegler
CFC AVIATION COMPANY, L.L.C.
By:________________________________
John R. Myers
Chairman
By:___________________________
L. David Clemons
President
By:___________________________
Dale L. Ziegler
CARLISLE ENTERPRISES, L.P.
By:________________________________
James Carlisle, General Partner
of Carlisle Enterprises, L.P.
<PAGE>
<PAGE> 65
FIRST CAPITAL CORPORATION OF
CHICAGO
By:________________________________
Name:
Title: General Partner
CROSS CREEK PARTNERS III
By:_________________________________
Name:
Title:
<PAGE>
<PAGE> 1
EXHIBIT 10.39
AMENDMENT NO. 2 TO CREDIT AGREEMENT
-----------------------------------
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT ("AMENDMENT") is dated as of the
_____ day of February, 1996 by and among UNC INCORPORATED, a corporation
organized under the laws of the State of Delaware (the "BORROWER"), UNC/CFC
ACQUISITION CO., a Delaware corporation ("CFC ACQUISITION"), FIRST UNION
COMMERCIAL CORPORATION, as administrative agent (the "ADMINISTRATIVE AGENT"),
FIRST UNION COMMERCIAL CORPORATION, as collateral agent (the "COLLATERAL
AGENT"), the various corporations identified on the signature pages hereto as
a GUARANTOR (each a "GUARANTOR" and collectively, the "GUARANTORS") and the
various banks and lending institutions identified on the signature pages
hereto (each a "LENDER" and collectively, the "LENDERS").
STATEMENT OF PURPOSE
--------------------
Pursuant to the terms and provisions of the Credit Agreement dated as of
May 30, 1995 by and among the BORROWER, the ADMINISTRATIVE AGENT, the
COLLATERAL AGENT, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as issuer of
certain letters of credit, and the LENDERS, as amended by Amendment No. 1 to
Credit Agreement dated August 30, 1995 ("CREDIT AGREEMENT"), the LENDERS
agreed to extend certain credit facilities to the BORROWER. The GUARANTORS
have guaranteed the obligations of the BORROWER under the CREDIT AGREEMENT
pursuant to the terms of various Guaranty And Security Agreements dated May
30, 1995 (collectively, "GUARANTIES").
CFC ACQUISITION has been formed as a subsidiary of the BORROWER for the
purpose of acquiring substantially all of the assets of CFC AVIATION SERVICES,
L.P., a Delaware limited partnership and CFC AVIATION COMPANY, L.L.C., a
Delaware limited liability company (collectively, "GARRET") pursuant to the
terms and provisions of that certain Asset Purchase Agreement dated as of
January 15, 1996 by and among the BORROWER, CFC ACQUISITION, GARRET, CFC
AVIATION, INC., CARLISLE ENTERPRISES, L.P., FIRST CAPITAL CORPORATION OF
CHICAGO and CROSS CREEK PARTNERS III ("PURCHASE AGREEMENT").
In order to finance the acquisition of substantially all of the assets
of GARRET pursuant to the terms of the PURCHASE AGREEMENT ("ACQUISITION"), the
BORROWER intends to: (a) issue and sell One Hundred Twenty-Five Million
Dollars ($125,000,000.00) of its Senior Subordinated Debentures Due 2006 ("NEW
SUBORDINATED DEBENTURES"); and (b) issue and sell two hundred fifty thousand
(250,000) shares of its Series B Senior Cumulative Convertible Preferred Stock
at a purchase price of One Hundred Dollars ($100.00) per share all pursuant
to the terms of a Stock Purchase Agreement dated as of October 4, 1995 by and
among the BORROWER, NETWORK III HOLDINGS LDC, GILDA INVESTMENT COMPANY, IRON
CITY PARTNERS, INC., ARIEL FUND, LTD. and PEQUOD INVESTMENTS, L.P. ("STOCK
PURCHASE AGREEMENT").
The BORROWER has requested the LENDERS' consent to (1) CFC ACQUISITION
completing the ACQUISITION, (2) the BORROWER incurring the indebtedness under
the NEW SUBORDINATED DEBENTURES, and (3) the BORROWER selling the preferred
stock pursuant to the terms of the STOCK PURCHASE AGREEMENT. The BORROWER has
also requested that the LENDERS agree to amend certain provisions of the
CREDIT AGREEMENT.
The LENDERS are willing to consent to the BORROWER'S requests subject and
pursuant to the terms and provisions set forth in this AMENDMENT.
<PAGE>
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto agree as follows:
Section 1. AMENDMENT TO CREDIT AGREEMENT. The CREDIT AGREEMENT is
hereby amended as follows:
a. Section 1.1. Section 1.1 of the CREDIT AGREEMENT is
hereby amended as follows:
i. Fixed Charge Coverage Ratio Definition. The
definition of "FIXED CHARGE COVERAGE RATIO" contained in Section 1.1 of the
CREDIT AGREEMENT is hereby amended by deleting its present language in its
entirety and substituting in lieu thereof the following:
"FIXED COVERAGE RATIO" means, as determined on a
CONSOLIDATED basis for any period, the CREDIT PARTIES'
ratio of: (a) EBITDA for that period minus CAPITAL
EXPENDITURES that are not financed with the use of
borrowed funds (exclusive of the CREDIT FACILITY) or
CAPITAL LEASES minus dividends paid to shareholders of
the BORROWER in cash; to (b) regularly scheduled
principal payments and prepayments of principal on the
CONSOLIDATED TOTAL FUNDED INDEBTEDNESS (including,
without limitation, the SINKING FUND PAYMENTS), paid or
scheduled to be paid during the period of determination
(except payments made under the LOANS), plus INTEREST
EXPENSE deducted in determining the CREDIT PARTIES'
earnings, plus payments under all CAPITAL LEASES paid or
scheduled to be paid during the period of determination.
ii. Senior Notes Definition. The definition of
"SENIOR NOTES" contained in Section 1.1 of the CREDIT AGREEMENT is hereby
amended by deleting its present language in its entirety and substituting in
lieu thereof the following:
'SENIOR NOTES' means, collectively: (4) the nine
and one-eighth percent (9 1/8%) Senior Notes Due 2003
which were issued under the terms of the Indenture dated
as of July 15, 1993 between the BORROWER and the trustee
thereunder; and (5) the SENIOR SUBORDINATED DEBENTURES.
iii. Senior Subordinated Debentures. Section 1.1
of the CREDIT AGREEMENT is hereby amended by inserting between the definitions
of "SENIOR NOTES" and "SETTLEMENT DATE" the following new definition:
'SENIOR SUBORDINATED DEBENTURES' means, debentures
issued by the BORROWER which: (6) are in an aggregate
face amount not exceeding One Hundred Twenty-Five
Million Dollars ($125,000,000.00); (7) have a maturity
date no earlier than March 1, 2006; (8) require payments
of interest only until their maturity; (9) are
subordinate in right of payment to the OBLIGATIONS; (10)
do not give the holder of such debentures any right to
require the BORROWER to repurchase the debentures except
in the case of a "Change of Control" (as that term is
<PAGE>
<PAGE> 3
defined in the Indenture dated as of July 15, 1993 between the
BORROWER and the trustee thereunder) or on the "Distribution Date"
(as that term is defined in the Indenture dated as of May 1, 1986
between the BORROWER and the trustee thereunder); and (11) are
evidenced by, and are issued pursuant to, documents which do not
contain covenants any more restrictive than the covenants contained
in this CREDIT AGREEMENT.
b. Section 9.1. Section 9.1 of the CREDIT AGREEMENT is
hereby amended by deleting its present language in its entirety and
substituting in lieu thereof the following:
Section 9.1. Tangible Net Worth. The minimum TANGIBLE NET WORTH
of the CREDIT PARTIES measured at the end of each fiscal quarter shall not be
less than the following amounts during the following periods:
MINIMUM TANGIBLE
FISCAL PERIOD NET WORTH
------------- ----------------
12/31/95 TO 03/30/96 $ 28,000,000.00
03/31/96 TO 06/29/96 ($ 60,000,000.00)
06/30/96 TO 09/29/96 ($ 57,500,000.00)
09/30/96 TO 12/30/96 ($ 55,000,000.00)
12/31/96 TO 12/30/97 ($ 50,000,000.00)
12/31/97 TO 12/30/98 ($ 38,500,000.00)
12/31/98 TO 12/30/99 $ 12,500,000.00
12/31/99 & THEREAFTER $ 50,000,000.00
c. Section 9.2. Section 9.2 of the CREDIT AGREEMENT is
hereby amended by deleting its present language in its entirety and
substituting in lieu thereof the following:
Section 9.2. Consolidated Total Funded Indebtedness To EBITDA.
The ratio of CONSOLIDATED TOTAL FUNDED INDEBTEDNESS to EBITDA, measured at the
end of each fiscal quarter (EBITDA shall be calculated on a cumulative basis
for the four (4) most recent fiscal quarters, prior to the date of
determination) of the CREDIT PARTIES shall not exceed the following amounts
during the following periods:
FISCAL PERIOD RATIO
------------- -----
12/31/95 TO 03/30/96 6.00 to 1
03/31/96 TO 06/29/96 10.50 to 1
06/30/96 TO 09/29/96 9.00 to 1
09/30/96 TO 12/30/96 8.00 to 1
12/31/96 TO 03/30/97 7.00 to 1
03/31/97 TO 06/29/97 6.00 to 1
06/30/97 & THEREAFTER 5.00 to 1
d. Section 9.3. Section 9.3 of the CREDIT AGREEMENT is
hereby amended by deleting its present language in its entirety and
substituting in lieu thereof the following:
<PAGE>
<PAGE> 4
Section 9.3. Fixed Charge Coverage Ratio. The FIXED CHARGE
COVERAGE RATIO of the CREDIT PARTIES, measured as of the end of each fiscal
quarter and calculated on a rolling four (4) fiscal quarters basis, shall not
be less than the following amounts during the following periods:
FISCAL PERIOD RATIO
12/31/95 TO 03/30/96 1.10 to 1
03/31/96 TO 09/29/96 .90 to 1
09/30/96 TO 12/30/96 1.00 to 1
12/31/96 & THEREAFTER 1.10 to 1
e. Section 10.1. Section 10.1 of the CREDIT AGREEMENT
is hereby amended by deleting Subsection 10.1(f) in its entirety and
substituting in lieu thereof the following:
(f) DEBT incurred in connection with (i) the
CAPITALIZED LEASES which UNC/CFC Acquisition Co. assumed
in connection with UNC/CFC Acquisition Co.'s acquisition
of substantially all of the assets of CFC Aviation
Services, L.P. and CFC Aviation Company, L.L.C. pursuant
to that certain Asset Purchase Agreement dated January
15, 1996, provided that the aggregate amount of such
DEBT does not exceed Five Million Three Hundred Sixty
Thousand Dollars ($5,360,000.00), and (ii) purchase
money DEBT of the CREDIT PARTIES (including DEBT
incurred in connection with CAPITALIZED LEASES (other
than those referred to in (i) above) and DEBT incurred
in connection with the construction of improvements to
real property) in an aggregate amount not to exceed Five
Million Dollars ($5,000,000.00) on any date of
determination;
f. Section 10.7. Section 10.7 of the CREDIT AGREEMENT
is hereby amended as follows: (a) Subsection 10.7(b) is hereby amended by
deleting the word "and" at the end thereof; (b) Subsection 10.7(c) is hereby
amended by deleting the period "." at the end thereof and substituting in lieu
thereof the word "; and"; (c) Section 10.7 is hereby amended by inserting the
following new subsection at the end thereof:
(d) provided there are no DEFAULTS or EVENTS OF
DEFAULT under this AGREEMENT after giving effect
thereto, the BORROWER may pay dividends on the
BORROWER'S Series B Senior Cumulative Convertible
Preferred Stock and the BORROWER'S Series C Senior
Cumulative Convertible Preferred Stock, provided that
the aggregate amount of all such dividends paid in cash
in any FISCAL YEAR may not exceed Two Million One
Hundred Twenty-Five Thousand Dollars ($2,125,000.00).
g. Schedule 1. Schedule 1 to the CREDIT AGREEMENT is
hereby deleted and in lieu thereof Schedule 1 attached hereto is substituted
therefor.
Section 2. CONSENTS BY LENDERS. The LENDERS hereby provide the
following consents:
<PAGE>
<PAGE> 5
a. Acquisition. Pursuant to Subsection 10.4(c) of the
CREDIT AGREEMENT the LENDERS hereby consent to the ACQUISITION; provided that:
(d) CFC ACQUISITION delivers to the COLLATERAL AGENT all of the documents
required to be delivered pursuant to Section 3 of this AMENDMENT; (e) the
ACQUISITION is completed in accordance with the terms of the PURCHASE
AGREEMENT; (f) the COLLATERAL AGENT is provided with copies of lien searches
and other documents which evidence that CFC ACQUISITION shall acquire the
assets of GARRET free and clear of all liens other than liens permitted
pursuant to Section 10.3 of the CREDIT AGREEMENT; (g) the COLLATERAL AGENT is
provided with acceptable evidence that the Operating Agreement dated June 30,
1994 between AlliedSignal, Inc. and CFC Aviation Services, L.P., the Licensed
Proprietary Rights Agreement dated June 30, 1994 between AlliedSignal, Inc.
and CFC Aviation Services, L.P. and the Trade Name and Service Mark License
Agreement dated June 30, 1994 between AlliedSignal, Inc. and CFC Aviation
Services, L.P., have each been validly assigned to CFC ACQUISITION; (h) the
COLLATERAL AGENT is provided with acceptable evidence that the rights of
indemnification from AlliedSignal, Inc. under the terms of the Asset And Stock
Purchase Agreement dated May 26, 1994 between AlliedSignal, Inc. and LDC
Aviation Services, Inc. have been validly assigned to CFC ACQUISITION; and (i)
the ADMINISTRATIVE AGENT, for the benefit of the LENDERS, is provided with an
acceptable opinion of counsel letter from the counsel for the BORROWER, the
GUARANTORS and CFC ACQUISITION opining (A) to the due authorization and
execution of this AMENDMENT by the BORROWER, the GUARANTORS and CFC
ACQUISITION; (B) that this AMENDMENT is the valid, binding and enforceable
obligation of the BORROWER, the GUARANTORS and CFC ACQUISITION; (C) to the due
authorization and execution of the documents referred to in Section 3 of this
AMENDMENT by CFC ACQUISITION, and (D) that the documents referred to in
Section 3 of this AMENDMENT are the valid, binding and enforceable obligations
of CFC ACQUISITION.
b. Amendment To Senior Notes. Notwithstanding the terms
of Section 10.11 of the CREDIT AGREEMENT the LENDERS consent to the amendments
to the terms and provisions of the Indenture dated July 15, 1993, relating to
the nine and one-eighth percent (9 1/8%) Senior Notes Due 2003, as such
amendments are described in the BORROWER'S Consent Solicitation Statement
dated February 2, 1996, as supplemented in the BORROWER'S Supplement to
Consent Solicitation Statement dated February 21, 1996.
Section 3. CFC ACQUISITION. On or before the date of the ACQUISITION,
CFC ACQUISITION shall execute and deliver to the COLLATERAL AGENT: (12) a
Secured Promissory Note in the form attached to the CREDIT AGREEMENT as
Exhibit A; (13) a Guaranty And Security Agreement in the form attached to the
CREDIT AGREEMENT as Exhibit B; (14) a Certificate of the Corporate Secretary
of CFC ACQUISITION in a form acceptable to the COLLATERAL AGENT and which
shall have attached to it the Charter and By-laws of CFC ACQUISITION and the
Resolutions of the Board of Directors of CFC ACQUISITION approving the
ACQUISITION and the execution and delivery of the Secured Promissory Note and
Guaranty And Security Agreement referred to in Subparagraphs (a) and (b)
above; and (15) such financing statements and other documents requested by the
COLLATERAL AGENT in order to perfect the security interests granted under the
Secured Promissory Note and Guaranty And Security Agreement referred to in
Subparagraphs (a) and (b) above.
Section 4. CONTRIBUTION AND INDEMNIFICATION AGREEMENT. CFC ACQUISITION,
the GUARANTORS and the COLLATERAL AGENT agree that the Contribution And
Indemnification Agreement dated May 30, 1995 by and between the BORROWER and
the GUARANTORS ("INDEMNIFICATION AGREEMENT") is hereby amended to include CFC
<PAGE>
<PAGE> 6
ACQUISITION in the definition of "SUBSIDIARIES" as used therein. CFC
ACQUISITION agrees that by its execution and delivery of this AMENDMENT, CFC
ACQUISITION unconditionally and irrevocably accepts, adheres to and becomes
party to and bound under the INDEMNIFICATION AGREEMENT as a "SUBSIDIARY" as
fully as if CFC ACQUISITION had been a signatory to the INDEMNIFICATION
AGREEMENT as a "SUBSIDIARY" when the INDEMNIFICATION AGREEMENT was executed
and delivered by the GUARANTORS and the BORROWER.
Section 5. CONSENT OF GUARANTORS. The GUARANTORS hereby consent to the
modifications contained in this AMENDMENT and ratify and confirm their
respective obligations under the GUARANTIES.
Section 6. OTHER TERMS. Except as specifically modified herein, all
other terms and provisions of the CREDIT AGREEMENT and all other documents
executed in connection therewith remain in full force and effect and are
hereby ratified and confirmed.
Section 7. AMENDMENT FEE. The BORROWER shall pay to the ADMINISTRATIVE
AGENT, for the benefit of the LENDERS on a pro rata basis, on the date of this
AMENDMENT a fee in the amount of One Hundred Twelve Thousand Five Hundred
Dollars ($112,500.00).
Section 8. BINDING NATURE. This AMENDMENT shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors
and assigns.
Section 9. GOVERNING LAW. This AMENDMENT shall be governed by and
construed and enforced in accordance with the laws of the State of Maryland,
without reference to the conflicts or choice of law principles thereof.
Section 10. DELIVERY BY TELEFACSIMILE. This AMENDMENT may be delivered
by telefacsimile and a telefacsimile of any parties signature hereto shall
constitute an original signature for all purposes.
Section 11. COUNTERPARTS. This AMENDMENT may be executed in multiple
counterparts, any one of which need not contain the signatures of more than
one party, but all of which, taken together, shall constitute one and the same
agreement.
<PAGE>
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT under
seal as of the date first above written.
WITNESS/ATTEST: BORROWER:
UNC INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
ADMINISTRATIVE AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Harold K Wallace,
Vice President
COLLATERAL AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Harold K. Wallace,
Vice President
WITNESS/ATTEST: LENDERS:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Harold K. Wallace,
Vice President
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
<PAGE>
<PAGE> 8
IBJ SCHROEDER BANK & TRUST CO.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
BANK ONE, COLUMBUS, N.A.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
THE FIRST NATIONAL BANK OF MARYLAND
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
PROVIDENT BANK OF MARYLAND
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
WITNESS/ATTEST: LENDERS: (Continued)
SANWA BUSINESS CREDIT CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
GUARANTORS:
UNC HOLDINGS INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
<PAGE>
<PAGE> 9
UNC LEAR SIEGLER, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC ALL FAB, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC METCALF SERVICING, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
WITNESS/ATTEST: GUARANTORS: (Continued)
UNC JOHNSON TECHNOLOGY, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC ARTEX, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
<PAGE>
<PAGE> 10
UNC TEXAS CAMCO INCORPORATED,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC CAMCO INCORPORATED,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC ARDCO INCORPORATED,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
WITNESS/ATTEST: GUARANTORS: (Continued)
UNC ENGINE & ENGINE PARTS, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC ACCESSORY OVERHAUL GROUP,
INCORPORATED, A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
<PAGE>
<PAGE> 11
UNC AVIATION SERVICES, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC TRI-INDUSTRIES, INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC AIRWORK CORPORATION,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
WITNESS/ATTEST: GUARANTORS: (Continued)
UNC PARTS ACQUISITION COMPANY, INC.,
A Maryland Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
UNC PACIFIC AIRMOTIVE CORPORATION,
INC.,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Treasurer
<PAGE>
<PAGE> 1
EXHIBIT 11
UNC INCORPORATED AND SUBSIDIARIES
Earnings Per Share
For the Three Years Ended December 31, 1995
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Earnings (loss) before extraordinary item $ 1,923 $(67,932) $ 11,594
Extraordinary item (532)
-------- -------- --------
Net earnings (loss) - primary earnings per share 1,923 (67,932) 11,062
Adjustments - fully diluted earnings per share:
Decrease in interest expense related to
convertible debt, net of income tax effect (1),(3) 3,343 4,318 4,114
Adjusted net earnings (loss) - fully diluted
-------- -------- --------
earnings per share $ 5,266 $(63,614) $ 15,176
======== ======== ========
Calculation of primary net earnings (loss) per share:
Average common shares outstanding during the year (2) 17,666 17,474 17,356
Increase for common stock equivalents:
Stock options under treasury stock method 229 385 400
Adjusted average shares outstanding for the year -
-------- -------- --------
primary 17,895 17,859 17,756
======== ======== ========
Primary earnings (loss) per share:
Earnings (loss) before extraordinary item $ .11 $ (3.80) $ .62
Extraordinary item (.03)
-------- -------- --------
Net earnings (loss) $ .11 $ (3.80) $ .59
======== ======== ========
Calculation of fully diluted earning (loss) per share:
Average common shares outstanding during the year (2) 17,666 17,474 17,356
Increase for common stock equivalents:
Stock options under treasury stock method 244 385 503
Dilutive shares issuable upon conversion of
convertible debt(1) 4,364 4,481 4,481
Adjusted average shares outstanding for the year -
-------- -------- --------
fully diluted 22,274 22,340 22,340
======== ======== ========
Fully diluted earnings (loss) per share:
Earnings (loss) before extraordinary item $ .24 $ (2.85) $ .68
Extraordinary item (.02)
-------- -------- --------
Net earnings (loss) $ .24 $ (2.85) $ .66
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 2
(1) The convertible subordinated debentures were anti-dilutive for all years
presented.
(2) Exclusive of 700,000 treasury shares for all years presented.
(3) The convertible subordinated debentures are not common stock equivalents
in the calculation of primary net earnings per share.
<PAGE>
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
------------------------------
<TABLE>
<CAPTION>
Jurisdiction Percentage of
Name of Incorporation Voting Securities
- ---- ---------------- -----------------
<S> <C> <C>
UNC Holdings, Inc. Delaware 100
UNC Tri-Industries, Inc. Delaware 100
UNC Airwork Corporation Delaware 100
UNC Accessory Overhaul Group, Inc. Delaware 100
UNC ARDCO Incorporated Delaware 100
UNC CAMCO Incorporated Delaware 100
UNC Engine & Engine Parts, Incorporated Delaware 100
UNC Texas CAMCO Incorporated Delaware 100
UNC Aviation Services, Inc. Delaware 100
UNC Artex, Inc. Delaware 100
UNC Johnson Technology, Inc. Delaware 100
UNC Metcalf Servicing, Inc. Delaware 100
UNC Lear Siegler, Inc. Delaware 100
UNC All Fab, Inc. Delaware 100
</TABLE>
The subsidiaries omitted from the foregoing list do not, considered in the
aggregate, constitute a significant subsidiary.
<PAGE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
UNC Incorporated:
We consent to incorporation by reference in the registration statements (No.
33-37585, No. 33-37586, No. 33-41703, No. 33-41704, No. 33-55193, No. 2-62043
and No. 2-99656) on Form S-8 of UNC Incorporated of our report dated February
9, 1994, relating to the consolidated statements of earnings, changes in
shareholders' equity and cash flows of UNC Incorporated and Subsidiaries for
the year ended December 31, 1993, and the related financial statement schedule
for the year ended December 31, 1993, which report appears in the December 31,
1995 annual report on Form 10-K of UNC Incorporated.
KPMG PEAT MARWICK LLP
Washington, D.C.
March 25, 1996
<PAGE>
<PAGE> 2
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
--------------------------------
The Board of Directors and Shareholders
UNC Incorporated:
We consent to the incorporation by reference in the registration statements
of UNC Incorporated on Form S-8 (File No. 33-37585, No. 33-37586, No. 33-
41703, No. 33-41704, No. 2-62043, No. 2-99656, and No. 33-55193) of our report
dated February 26, 1996, on our audits of the consolidated financial
statements and financial statement schedule of UNC Incorporated and
Subsidiaries as of December 31, 1995 and 1994, and for the years then ended,
which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 25, 1996
<PAGE>
<PAGE> 1
EXHIBIT 24
1 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ Berl Bernhard
-------------------------
Director
Witness:
/s/ Mary Kremp
- ----------------------
Date: March 6, 1996
<PAGE>
<PAGE> 2
EXHIBIT 24
2 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ John K. Castle
-------------------------
Director
Witness:
/s/ Laura F. Klun
- ----------------------
Date: March 11, 1996
<PAGE>
<PAGE> 3
EXHIBIT 24
3 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ William C. Hittinger
-------------------------
Director
Witness:
/s/ Sylvia N. Mitchell
- ----------------------
Date: March 6, 1996
<PAGE>
<PAGE> 4
EXHIBIT 24
4 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ J. L. Holloway III
-------------------------
Director
Witness:
Sylvia Mitchell
- ----------------------
Date: March 8, 1996
<PAGE>
<PAGE> 5
EXHIBIT 24
5 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ George V. McGowan
-------------------------
Director
Witness:
/s/ Sylvia Mitchell
- ----------------------
Date: March 8, 1996
<PAGE>
<PAGE> 6
EXHIBIT 24
6 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ Jack Moseley
-------------------------
Director
Witness:
/s/ Sylvia N. Mitchell
- ----------------------
Date: March 7, 1996
<PAGE>
<PAGE> 7 EXHIBIT 24
7 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ Lawrence A. Skantze
-------------------------
Director
Witness:
/s/ Sylvia Mitchell
- ----------------------
Date: March 7, 1996
<PAGE>
<PAGE> 8
EXHIBIT 24
8 of 8
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the "Company") hereby
authorizes the proper officers of the Company to file the Company's annual
report on Form 10-K for the year ended December 31, 1995 with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on March 4, 1996, with such changes as may be
approved by the officers of the Company who sign such Form 10-K, their signing
to be conclusive evidence of such approval.
The undersigned Director of the Company hereby appoints Richard H.
Lange, with full power of substitution, his true and lawful attorney and
agent, acting in the name and on behalf of the undersigned, to execute and to
file such annual report on Form 10-K with the Securities and Exchange
Commission.
/s/ Beverly Byron
-------------------------
Director
Witness:
/s/ B. Kirk Walsh
- ----------------------
Date: March 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheet as of 12/31/95 and the
related consolidated statement of earnings, cash flows and
notes to consolidated financial statements for the year ended
12/31/95 and is qualified in its entirety by reference to such financial
statements and notes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,671
<SECURITIES> 0
<RECEIVABLES> 105,648
<ALLOWANCES> 3,186
<INVENTORY> 91,130
<CURRENT-ASSETS> 221,646
<PP&E> 82,449
<DEPRECIATION> 34,381
<TOTAL-ASSETS> 446,261
<CURRENT-LIABILITIES> 97,548
<BONDS> 203,333
<COMMON> 3,679
0
0
<OTHER-SE> 96,473
<TOTAL-LIABILITY-AND-EQUITY> 446,261
<SALES> 335,218<F1>
<TOTAL-REVENUES> 536,243
<CGS> 273,528<F1>
<TOTAL-COSTS> 456,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,637<F2><F3>
<INTEREST-EXPENSE> 19,514
<INCOME-PRETAX> 2,958
<INCOME-TAX> 1,035
<INCOME-CONTINUING> 1,923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,923
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<PAGE>
<FN>
<F1>See Note 17 of Notes to Consolidated Financial Statements
<F2>The provision for doubtful accounts and notes is included with Selling,
General and Administrative Expenses in the Consolidated Statement of Earnings.
<F3>It also appears in the Consolidated Statement of Cash Flows under the
title "Provision for losses on accounts receivables."
</FN>
</TABLE>
