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, 1996 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
-------------------- -----------------------------------------
Series B Senior Cumulative Preferred
Stock New York Stock Exchange
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 13, 1997 was approximately $249,600,000.
The number of shares of Registrant's Common Stock outstanding on March 13,
1997 was 18,359,406 (excluding 486,500 shares held in treasury).
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
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UNC INCORPORATED AND SUBSIDIARIES
---------------------------------
Item 1. Business
Proposed Merger
Original Agreement
- ------------------
On February 13, 1997, the Company entered into an Agreement and Plan of
Reorganization (the "Original Merger Agreement") with Greenwich Air Services,
Inc. ("Greenwich") pursuant to which the Company would be merged into, and
thereby become, a wholly-owned subsidiary of Greenwich. Under the Original
Merger Agreement, each of the Company's "Common Stock Equivalents" (as defined
in the Original Merger Agreement) would be valued at not less than $14.00 and
each holder of the Company's Common Stock Equivalents would be entitled to
receive that number of shares of Class B nonvoting Common Stock, par value
$.01 per share, of Greenwich ("Greenwich Class B Stock") as is determined by
multiplying the number of shares of the Company's Common Stock Equivalents
held by such holder by the Exchange Ratio.
Subject to adjustment upon the occurrence of certain events set forth in
the Original Merger Agreement, "Exchange Ratio" means the fraction (expressed
as a decimal to the nearest ten thousandth) determined as follows:
(a) if the average of the closing prices of a share of Greenwich Class
B Stock, as reported on The Nasdaq National Market, for the twenty trading
days immediately preceding the closing date(the "Closing Date Market Value")
is less than or equal to $24.86, the Exchange Ratio is $14.00 divided by the
Closing Date Market Value;
(b) if the Closing Date Market Value exceeds $24.86, but is less than or
equal to $28.59, the Exchange Ratio is 0.5632; and
(c) if the Closing Date Market Value exceeds $28.59, then the Exchange
Ratio is $16.10 divided by the Closing Date Market Value.
In general, the merger consideration would be payable to the holders of
the Company's Common Stock Equivalents solely in shares of Greenwich Class B
Stock. Subject to the limitations and conditions set forth in the Original
Merger Agreement, however, such holders would be entitled, in accordance with
the procedures set forth in the Original Merger Agreement, to elect to receive
all or a portion of the merger consideration in cash; provided, however, that
Greenwich would not be obligated to pay in cash an aggregate amount which
exceeds fifty (50%) percent of the aggregate merger consideration payable to
all holders of the Company's Common Stock Equivalents computed at $14.00 per
share.
Amended and Restated Agreement
- ------------------------------
On March 9, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Merger (the "Amended Merger Agreement") modifying and
restating the terms of the Original Merger Agreement. The Amended Merger
Agreement modifies, among other things, the consideration to be received by
holders of shares of the Company's Common Stock and Series B Preferred Stock
by virtue of the UNC-Greenwich Merger. Pursuant to the Amended Merger
<PAGE>
<PAGE> 3
Agreement, holders of the Company's Common Stock will be entitled to receive
at the Effective Time (as defined in the Amended Merger Agreement) $15.00 in
cash for each share of Common Stock then currently issued and outstanding and
holders of the Company's Series B Preferred Stock will be entitled to receive
an amount equal to $15.00 multiplied by the number of shares of the Company's
Common Stock into which such Series B Preferred Stock is convertible
immediately before the Effective Time.
Concurrently with the execution and delivery of the Amended Merger
Agreement, Greenwich, General Electric Company, a New York corporation ("GE"),
and GB Merger Corp., a wholly-owned subsidiary of GE, entered into an
Agreement and Plan of Merger pursuant to which those parties have agreed that
Greenwich will merge with GB Merger Corp. (the "GE-Greenwich Merger"), thereby
becoming a wholly-owned subsidiary of GE.
Consummation of the UNC-Greenwich Merger pursuant to the Amended Merger
Agreement is subject to a number of conditions, including approval by the
stockholders of the Company entitled to vote thereon, certain regulatory
approvals, and satisfaction of waiver of all conditions to the GE-Greenwich
Merger. The GE-Greenwich Merger is, in turn, subject to a number of
conditions, including approval by the Greenwich stockholders entitled to vote
thereon and certain regulatory approvals. If the GE-Greenwich Merger is
terminated for any reason, the Amended Merger Agreement provides, in effect,
that the terms of the Original Merger Agreement will once again become
effective, with certain modifications.
Operations Overview
The Company's operations are conducted in one business segment which
includes: airframe maintenance, modification and retrofit services; avionics
and aircraft interior installations; the overhaul and repair of aircraft
engines and accessories and industrial gas turbine engines; the provision of
aircraft maintenance and pilot training contract services and the
manufacturing and remanufacturing of jet engine and aircraft components. The
Company groups these operations into three major operating activities: Garrett
Aviation Services, Manufacturing and Aviation Services.
- Garrett Aviation Services is a leading provider of engine, airframe
and accessories services to the business aviation and regional
airline aftermarket.
- Aviation Services is a leading provider of aircraft maintenance,
logistics support, system integration and aviation training services
to the United States military, as well as to domestic and foreign
government agencies.
- Manufacturing provides specialized turbine engine and airframe
manufacturing services to original equipment manufacturers ("OEMs")
including General Electric, Pratt & Whitney and Boeing as well as
directly to the United States military.
Garrett Aviation Services
The Company acquired the assets and operations of Garrett on May 29, 1996
from a management led investor group which had previously acquired Garrett
from AlliedSignal Aerospace in a leveraged buyout transaction in June 1994
(the "1994 LBO"). The Garrett hangar facilities had been the engine and
aircraft maintenance arm of AlliedSignal, Inc. ("AlliedSignal") a manufacturer
of business jet engines and engine spare parts, including various models of
<PAGE> 4
the TFE731 turbofan engine and TPE331 turboprop engine.
As part of the 1994 LBO AlliedSignal entered into a 15-year operating
agreement (the "Operating Agreement"). The Operating Agreement, which lasts
through 2009 (plus renewal options), provides Garrett with full access to the
AlliedSignal engine rental pool, which better allows customers to maintain
full use of their aircraft while awaiting completion of major engine
overhauls. Garrett has a 70% market share in North America servicing the
AlliedSignal TFE731 turbofan engine, which is the leading business jet engine
in the world. This original equipment manufacturer ("OEM") sponsored status
also provides Garrett with an opportunity to capture airframe and avionics
revenues.
Garrett provides its services through six coast-to-coast "fly-in" hangar
facilities at the following airports: Van Nuys, California; Los Angeles
International; Houston Intercontinental; Augusta, Georgia; Springfield,
Illinois; and Long Island, New York.
Concurrent with the Company's acquisition of Garrett (the "Garrett
Acquisition"), the Company's overhaul businesses, formerly the Engine
Overhaul, Accessory Overhaul and Trading businesses, were combined with
Garrett to form the Garrett Aviation Services businesses (the "Garrett
Businesses"). The reorganization of the group of businesses is the product of
the Company's strategy to focus increasingly on business aviation and military
services, while limiting its focus to commercial aviation. The Company
believes that it is a global leader in providing aftermarket to the business
aviation market.
In addition, the Garrett Businesses maintain operations in Millville, New
Jersey; Miami, Ft. Lauderdale and Coconut Creek, Florida; and Grand Prairie
and Odessa, Texas, along with four satellite operations located in Atlanta,
Georgia; Dayton, Ohio; Van Nuys, California; and Wichita, Kansas.
The Garrett Businesses provide business and regional airline customers
with a total service concept, providing "one-stop" customer service from the
original completion and customization of aircraft after release from the
factory, followed by decades of ongoing engine, airframe and avionics
maintenance and upgrade services. The range of services includes the
following:
Turbine Engine Services. The Garrett Businesses provide extensive
turbofan and turboprop engine maintenance services, including engine line
maintenance, mid-point original equipment manufacturers ("OEMs") scheduled
inspections, and major engine maintenance and overhaul and have OEM
authorizations to service over 70 engine types from a variety of leading
engine OEMs. These OEMs include AlliedSignal, General Electric, Pratt &
Whitney and Rolls Royce. The engines are primarily for fixed wing aircraft,
but also include Allison and Pratt & Whitney turbine-powered helicopter
engines. This array of engine types along with the Company's established
position in the overhaul of engines and components provides the Company with
the ability to lower the customer's total engine repair cost and enhance
turntimes, through the use of a wide range of factory and FAA approved parts
repair procedures.
In addition to aircraft engines, the Garrett Businesses service auxiliary
power units ("APUs"), which are turbine power units generally used to provide
standby power for aircraft while on the ground.
<PAGE>
<PAGE> 5
Airframe Maintenance and Overhaul. The Garrett Businesses also provide
airframe services to the business aviation market, including exterior
painting, airframe maintenance, engine retrofit programs, new aircraft
completions and interior refurbishment. These services are provided at the
six hangar facilities with each hangar specializing in several airframe types.
Each facility has the ability to provide customized interior work, including
the design and installation of interior fabrics, woodwork and accessories.
Corporate aircraft are increasingly being redesigned to become "in-flight
global offices," with the availability of global satellite communications
equipment allowing for incoming and outgoing digital telephone, facsimile and
computer modem communications at all points of the globe. Recent advances in
this communications technology and other in-flight electronic services,
including first-class equivalent individualized video monitors, provide a
continuing demand for total interior refurbishment.
The Garrett Businesses are enjoying strong growth in airframe revenues,
due largely to the following: (a) the acquisition by Garrett of The Jet Center
in September 1994, which expanded its airframe capabilities at the Van Nuys,
California airport; (b) Garrett's decision after the 1994 LBO to place added
emphasis on airframe and avionics work, which had not been a large focus
previously of AlliedSignal; and (c) the joining of the Company's Millville,
New Jersey, engine overhaul capabilities with those of Garrett's thereby
providing the ability to service more easily a full range of airframe types,
rather than simply those powered by AlliedSignal engines. The principal
airframes serviced include GulfStream, Challenger, Lear, Falcon, Citation,
Hawker, Westwind, Jetstar, Astra and Beechcraft.
Avionics Installation. The Garrett Businesses are the largest independent
distributor of avionics equipment in the business aviation market, with
authorizations from the three leading avionics OEMs: AlliedSignal, Collins and
Honeywell. Advances in technology are causing more frequent replacement and
refurbishment of avionics and communications systems. The availability of
global satellite communications technology requires integration of front-cabin
and passenger cabin electronics, which provides the Garrett Businesses with
a significant business opportunity.
Accessory Overhaul. The accessory overhaul operation includes the repair
and overhaul of a wide range of hydraulic, pneumatic and electro-mechanical
aircraft components, including constant-speed drives, actuators, fuel
accessories and other essential aircraft items.
Spare Parts Distribution. A major service area is the distribution of
spare parts and components. These parts are used both in the Company's engine
overhaul activities and for more general redistribution to other service
providers. Although generating a lower margin than many of the other
operations of the Company, the spare parts business presents major new
business opportunities as the aviation industry continues to consolidate by
providing, for example, pools of rotable parts and components, which help
customers maintain flight status while awaiting parts repairs.
Industrial Turbine Engines. The Company has a growing market presence in
the maintenance, packaging and sale of industrial turbine units, used
principally for small to medium sized independent power plants (generally
units ranging from 1 megawatt to 50 megawatts) and for remote oil field and
other applications. The turbine units are generally derivative from aviation
turbine engines, having similar maintenance requirements and demanding similar
technical knowledge.
<PAGE>
<PAGE> 6
Competition. The engine overhaul businesses compete with a variety of
fixed base operators, aircraft repair, and engine overhaul entities, although
many of these provide only light-level engine maintenance. Primary
competitors include KC Aviation, Duncan Aviation, Premier Turbine (a unit of
Sabreliner), AlliedSignal, General Electric, Pratt & Whitney, Rolls-Royce,
Dallas Airmotive, Standard Aero, National Airmotive, Bizjet, Bombardier, and
others.
Accessory overhaul operations compete with a large number of smaller
service facilities and with certain OEM's that provide aftermarket services
for their competitors' products. Quality and reliability of service, prompt
turn-around time, price, and customer service are major competitive factors
in the engine overhaul and component services businesses.
Aviation Services
The Aviation Services business is based in Annapolis, Maryland and has
field offices in Oklahoma City, Oklahoma, Pensacola, Florida, and San Antonio,
Texas as well as operations at a number of military bases. The operating
margins in the Aviation Services business are lower than those in the other
operating groups within the Company. The Aviation Services business, however,
produces relatively high returns on invested capital because very little
capital investment is required. The earnings of the Aviation Services
business are also relatively stable, due to the existence of multi-year
contracts and substantial backlogs.
The Aviation Services business is divided into three operating activities:
Federal Services, Contract Field Services and International Services.
Federal Services. Federal Services is a leader in aircraft maintenance,
contract logistics support, systems integration and aircrew training for the
United States military. The demand for these services derives from a growing
trend within the military to outsource an increasing percentage of their
ongoing maintenance and training requirements. Contract awards are based on
best value criteria, which requires high technical ratings, a low price and
demonstrated past performance.
Contract Field Services. Contract Field Services has for more than 35
years provided depot-level and below-depot-level maintenance, repair,
modification and logistical services for virtually every Department of Defense
weapon. Through the Contract Field Teams ("CFT") program, the Company serves
the U.S. Army, Navy, Air Force, Coast Guard, and National Air and Space
Administration. One major CFT program for the U.S. Army manages and performs
maintenance for the operating equipment in support of the military's worldwide
prepositioned ship program. The business is one of only four companies
holding the recurring CFT contract administered by the United States Air
Force. Other CFT contracts are held by DynCorp, Lockheed, and Raytheon
(Serv-Air).
International Services. International Services provides maintenance
program management and logistical services to customers worldwide. The
Company is the largest service contractor to the Royal Saudi Air Force,
providing F-5 jet fighter technical and logistical support, C-130 cargo
aircraft logistical support and other services. In addition, the Company
provides electronic repair and support functions to the Royal Saudi Naval
Forces.
<PAGE>
<PAGE> 7
Competition. The Company's major competitors in the Aviation Services
business are DynCorp, Raytheon Aerospace Services (formerly Beech Aircraft
Services and Serv-Air), Northrop-Grumman Services, Lockheed Martin Logistics
Management, McDonnell Douglas Services, and Reflectone Training Services.
Manufacturing
The Company's Manufacturing business focuses on sophisticated technical
manufacturing services, principally on an outsourcing basis for major engine
and airframe OEMs. The Company maintains manufacturing operations in:
Muskegon, Michigan; Terre Haute, Indiana; Addison, Texas; and Seattle and
Woodinville, Washington.
The Manufacturing business has focused on niche markets in the aviation
industry in which it can establish a leading position. An advantage of the
manufacturing services outsourcing orientation is that the Company has not
needed to invest significantly in research and development costs or new
development. The range of products and services include the following:
Turbine Engine Nozzles and Vanes. The Michigan engine component
manufacturing operation, founded in 1963 and acquired by the Company in 1993,
is one of the leading independent producers and repair sources of high
technology turbine nozzles and vanes, both on an outsourcing basis and
directly as replacement parts for the U.S. military. These nozzles and vanes
are manufactured to extreme tolerances, using the latest manufacturing
technologies, including electrochemical deep hole drilling, laser drilling and
electro-discharge machining. Advanced metallurgical experience is also an
important competitive advantage. Most of the blades and vanes are
manufactured for large engines. The business has been expanding capacity to
meet customer demand, which has grown with the backlog of new aircraft and
engines which are on order. It is one of three of the Manufacturing
operations which has achieved ISO 9000 certification.
Engine Components Manufacturing. The Indiana manufacturing operation,
founded in 1955 and acquired by the Company in 1988, is one of the nation's
leading outsource manufacturers of turbine engine components, including air
manifolds, engine cases and other complex fabricated components.
Component Repair. The component repair business reconditions complex
engine components to serviceable condition including vanes, seals, liners, and
gearboxes and cases.
Aerostructures. The Aerostructures operation, founded in 1965 and
acquired by the Company in 1993, is a leading manufacturer of structural
components and sheet metal subassemblies for major aircraft manufacturers and
serves as a first-tier supplier to Boeing. Other principal customers include
Northrop, Vought, Bell Helicopter, Lockheed and Grumman.
In September 1996, the Company acquired all of the assets and certain
liabilities of the Stearns Company, a Seattle-based manufacturer and supplier
of structural aircraft parts, principally to Boeing. The purpose of this
acquisition was to increase the Company's aerostructure manufacturing capacity
at a time of increasing market demand.
<PAGE>
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Competition. The Company's Manufacturing operation compete with OEMs,
Chromalloy, Meyer Tool, Howmet, Walbar, the Barnes Group, Ketema, Chemtronics,
Windsor Airmotive, NORDAM PSD, and Pyromet. Aerostructures competes with Ace
Clearwater, Dynabil Industries, Monitor Aerospace, AeroChem, and ChemFab.
Price, quality, and customer service are major competitive factors in this
business.
Government Regulation:
All of the Company's overhaul and repair operations are licensed by the
Federal Aviation Administration ("FAA") in their respective specialties and are
subject to applicable FAA rules and regulations.
Backlog:
As of December 31, 1996, 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
$557.1 million, and approximately 70% of the orders or services represented
thereby have been or are currently expected to be filled during 1997. As of
December 31, 1995, the total backlog was approximately $646.1 million.
Employees:
As of December 31, 1996, the Company had 7,449 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.
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Item 2. Properties.
The principal executive offices of the Company are located at 175 Admiral
Cochrane Drive, Annapolis, Maryland. The executive offices are leased and are
comprised of approximately 25,500 square feet in a modern office building.
The following table sets forth certain information regarding the Company's
operating facilities as of December 31, 1996.
<TABLE>
<CAPTION> Approximate
Location Square Footage Title
------------ -------------- -----
<S> <C> <C>
Garrett Aviation Services (1)
Millville, New Jersey 260,000 Leased
Coconut Creek, Florida 4,000 Leased
Miami, Florida 46,000 Leased
Odessa, Texas 36,500 Leased
Little Rock, Arkansas 6,000 Leased
Los Angeles, California 127,260 Leased
Van Nuys, California 80,000 Leased
Augusta, Georgia 96,604 Leased
Springfield, Illinois 241,143 Leased
Ronkonkoma, New York 116,685 Leased
Houston, Texas 114,851 Leased
Ft. Lauderdale, Florida 21,000 Leased
Millville, New Jersey 20,000 Leased
Bayshore, New York 41,000 Owned
Grand Prairie, Texas 41,700 Owned
Burbank, California (closed) 120,000 Owned
Aviation Services
Pensacola, Florida 2,600 Leased
Annapolis, Maryland 5,100 Leased
Oklahoma City, Oklahoma 36,700 Leased
San Antonio, Texas 10,000 Leased
Manufacturing Services
Terre Haute, Indiana 212,000 Owned
Terre Haute, Indiana 66,000 Leased
Muskegon, Michigan 105,000 Owned
Addison, Texas 20,000 Leased
Everett, Washington 135,000 Leased
Woodinville, Washington 55,000 Leased
______________________
</TABLE>
(1) This Group also leases facilities in five states aggregating
approximately 10,000 square feet.
Item 3. Legal Proceedings.
See the description of litigation and contingencies in Note 11 of Notes
to Consolidated Financial Statements.
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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, 1996, there were 6,164 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.
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
Quarter Ended High Low High Low
- ------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
March 31 $ 8.13 $ 5.63 $ 6.25 $ 4.63
June 30 $ 9.50 $ 7.25 $ 6.00 $ 4.75
September 30 $ 9.38 $ 7.38 $ 6.75 $ 5.25
December 31 $12.00 $ 8.63 $ 6.63 $ 5.00
</TABLE>
The closing price on December 31, 1996 and December 29, 1995 was $ 12.00 and
$6.00, respectively.
The closing price of the Company's common stock on March 13, 1997 was $14.25.
<PAGE>
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Item 6. Selected Financial Information
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues $832,063 $536,243 $525,833 $438,293 $365,152
======== ======== ======== ======== ========
Earnings (loss) before
extraordinary item $ 7,624 $ 1,923 $(67,932) $ 11,594 $ 11,369
Extraordinary item -
early retirement of debt (532)
-------- -------- -------- -------- --------
Net earnings (loss) 7,624 1,923 (67,932) 11,062 11,369
Preferred stock dividends 1,249
-------- -------- -------- -------- --------
Net earnings (loss)
applicable to common stock $ 6,375 $ 1,923 $(67,932) $ 11,062 $ 11,369
======== ======== ======== ======== ========
Earnings (loss) per share
Primary
Before extraordinary item $ .35 $ .11 $ (3.89) $ .67 $ .66
Extraordinary item-early
retirement of debt (.03)
-------- -------- -------- -------- --------
Net earnings (loss) $ .35 $ .11 $ (3.89) $ .64 $ .66
======== ======== ======== ======== ========
Fully diluted
Before extraordinary item $ .34 $ .11 $ (3.89) $ .67 $ .66
Extraordinary item-early
retirement of debt (.03)
-------- -------- -------- -------- --------
Net earnings (loss) $ .34 $ .11 $ (3.89) $ .64 $ .66
======== ======== ======== ======== ========
</TABLE>
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<PAGE> 12
Item 6. Selected Financial Information (cont.)
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Weighted average number of
shares outstanding
Primary 18,056 17,666 17,474 17,356 17,279
Fully diluted 18,638 17,910 17,860 17,859 17,669
FINANCIAL POSITION DATA
Working capital $ 176,679 $124,098 $100,174 $150,200 $128,150
Current ratio 1.9 to 1 2.3 to 1 1.7 to 1 2.5 to 1 3.1 to 1
Total assets $ 748,296 $446,261 $468,034 $506,133 $391,082
Total long-term debt,
including current
portion $ 372,946 $205,081 $214,323 $197,283 $125,723
Shareholders' equity $ 136,279 $100,152 $ 98,897 $165,486 $155,639
Total debt to
capitalization 73.2% 67.2% 68.4% 54.4% 44.7%
Return on average common
shareholders' equity 6.0% 1.9% 6.9% 7.6%
OTHER
Capital expenditures $ 9,630 $ 6,767 $ 10,299 $ 11,250 $ 6,602
Depreciation and
amortization $ 18,690 $ 12,491 $ 12,727 $ 11,477 $ 10,378
Employees 7,449 5,730 5,410 6,430 3,383
Shareholders 6,164 6,432 6,715 7,029 7,371
</TABLE>
See Notes 2 and 14 of Notes to Consolidated Financial Statements for matters
affecting operations and Note 3 of Notes to Consolidated Financial Statements
for a description of proposed merger and acquisitions.
<PAGE>
<PAGE> 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company's operations are conducted in one business segment which
includes: airframe maintenance, modification and retrofit services; avionics
and aircraft interior installations; the overhaul and repair of aircraft
engines and accessories and industrial gas turbine engines; the provision of
aircraft maintenance and pilot training contract services and the
manufacturing and remanufacturing of jet engine and aircraft components.
The Company groups these operations into three major operating activities:
Garrett Aviation Services; Manufacturing; and Aviation Services. Concurrent
with the acquisition of the assets and operations of Garrett on May 29, 1996
(the "Garrett Acquisition") the Company's overhaul businesses, formerly the
Engine Overhaul, Accessory Overhaul and Trading businesses, combined with
Garrett to form Garrett Aviation Services businesses (the "Garrett
Businesses").
1996 Compared With 1995
- -----------------------
Revenues were $832.1 million in 1996 compared with $536.2 million in 1995,
an increase of $295.9 million (55%). Contributing to this overall increase
were revenues of $245.0 million generated by the Garrett Acquisition and $2.8
million from Stearns Company ("Stearns"), acquired in September 1996, as well
as increased volume from the Manufacturing and Aviation Services businesses,
including a $4.3 million increase in international revenues. These increases
were partially offset by a decrease in accessory services overhauls.
Operating income in 1996 increased $19.4 million (87%) to $41.7 million due
to increased volume, the acquisition of Garrett and Stearns and $3.0 million
of adjustments, net, to previously established restructuring allowances and
a multi-employer pension plan withdrawal liability to reflect the impact of
the continuing assessment of the net realizability of assets held for sale and
the settlement of the multi-employer pension plan withdrawal liability.
Revenues for the Garrett Businesses increased $233.3 million in 1996 to
$414.7 million. The higher revenues were due to $245.0 million generated by
the Garrett Acquisition, increases of $7.2 million in domestic and
international revenues from other engine overhauls and an increase of $2.6
million from the overhaul and repair of industrial turbine engines. These
increases were partially offset by a decrease in revenues of $17.4 million
from accessory overhauls due to lower volume resulting from increased
competition from OEMs, the elimination of certain low margin product lines and
initiatives to strengthen the accessory overhaul business by temporarily
closing certain operations in the third quarter of 1996 to improve quality
standards in order to meet expected new Federal Aviation Administration
regulations and a decrease of $2.1 million from aircraft parts sales. Also,
1995 included a nonrecurring gain of $2.0 from the sale of certain property.
Operating income in 1996 increased $12.7 million to $23.4 million, of which
$17.4 million was generated by the Garrett Acquisition, $3.0 million from
adjustments described above and $1.0 million from other business activities.
These increases were partially offset by an operating loss from accessory
overhauls of $6.7 million, principally due to the factors described above and
a nonrecurring gain of $2.0 million in 1995 regarding the sale of certain
<PAGE> 14
property.
Aviation Services business revenues of $284.1 million increased $32.9
million (13%) in 1996. The higher revenues in 1996 are due to an increase of
$20.8 million in activities on Federal Services contracts awarded towards the
end of 1995, an increase of $12.7 million from Contract Field Services due to
the addition of a major program during 1996, and an increase of $1.8 million
in international revenues due to the award of new contracts during 1996.
These increases were partially offset by a $2.4 million reduction in pilot
training activities on certain contracts. Operating income increased $1.4
million (15%) to $11.0 million in 1996 principally due to these higher
volumes.
The Company's Manufacturing business revenues in 1996 increased $29.6
million (29%) to $133.2 million compared with 1995. The increase in revenues
is principally due to higher volume on U.S. government contracts and
commercial programs of $28.3 million, including $2.8 million generated by the
acquisition of Stearns in September 1996 and increased volume from specialized
repairs of $3.1 million. These increases were partially offset by the loss
of $1.8 million in revenues attributable to the Company's chemical milled
aircraft and engine component business which was sold in June 1995. Operating
income increased $5.6 million (52%) to $16.3 million in 1996 principally due
to higher volume.
Selling, general and administrative expenses in 1996 were $82.7 million
or 9.9% of sales compared with $57.0 million or 10.6% of sales in 1995. The
increase in selling, general and administrative expenses in 1996 of $25.7
million is principally due to the acquisition of Garrett, and an increase in
domestic sales and marketing activities, which includes an investment for
increased international marketing efforts by the Company's international
offices located in Singapore, Amsterdam, Beijing and Miami, Florida, which
services Latin America.
Interest expense increased $9.6 million in 1996 as a result of higher
average debt levels, principally due to the acquisitions of Garrett and
Stearns.
Effective income tax rates as a percent of earnings before income taxes
were 30% and 35% for 1996 and 1995, respectively. The decrease in the
deferred tax valuation allowance of $2.1 million in 1996 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 and 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. Many of Aviation Services's contracts are funded by the
operations and maintenance ("O&M") budget of the United States Department of
Defense. The O&M budget has remained stable over the last four years and is
projected to remain relatively flat through the end of the decade, despite a
decline in the Department of Defense's overall budget. The Company believes
that more maintenance work under the O&M budget will be outsourced in the
<PAGE> 15
future to lower cost private sector suppliers, such as the Company, to meet
ongoing Department of Defense budget pressures in other budget areas, such as
new or modernized weapons systems. There can be no assurance, however, that
the Department of Defense will outsource significant amounts of additional
work to entities such as the Company or that federal budgetary pressures will
not adversely affect the Company. In October, the Company was notified that
it had been awarded the Fort Rucker training contract ($101.6 million) for the
third consecutive five-year period.
The Company's Manufacturing business continues to receive pricing pressure
from certain customers, principally OEMs. Price concessions have been
provided to certain OEM customers during each of the past four years in
anticipation of continuing to receive future orders and to maintain OEM
business relationships. The industry is currently experiencing an economic
turnaround after several years of depressed conditions due to increased demand
for new aircraft. The Company has recently experienced an increase in new
commercial orders as a result of this increased demand. These additional
orders, along with ongoing productivity enhancements and cost reduction
programs instituted by the Company over the past several years has resulted
in increased profitability. However, the OEM customers continue to apply
pricing pressure on all suppliers, and the Company expects continuing
pressures from certain 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. The Company's Michigan engine
component manufacturing facility continues to receive orders under multi-year
contracts for military spares parts, which include the production of high
pressure turbine vanes for the F110 and F404 engines. Sales of spares parts
sold directly to the U.S. military services were approximately $37 million in
1996. The Company's manufacturing operations will capitalize on the
opportunities in the military market while focusing its efforts on building
the commercial market.
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 the result
of an increase of $25.7 million (29.4%) 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 businesses in
connection with the Company's 1994 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.
Revenues for the Garrett Businesses in 1995 increased $6.1 million (3.5%)
to $181.4 million. The higher revenues in 1995 were due to an increase in
small engine overhauls of $8.6 million, an increase of $3.9 million from the
overhaul and repair of aircraft accessories for domestic and international
customers, an increase of $4.3 million from the repair of industrial turbine
engines and $3.2 million from parts provisioning due to increased volumes.
These revenue increases were partially offset by a loss of $11.4 million in
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. The 1994 period also included $2.5 million from the leveraged lease
of an aircraft which was sold in December 1994. Operating income in 1995 was
<PAGE> 16
$8.8 million compared with a loss of $4.2 million in 1994. Included in the
1994 results were 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 $1.1 million for an increase in the
allowance for doubtful accounts for receivables related to litigation and the
bankruptcy of certain customers.
Aviation Services business 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 of $7.3 million, an
increase in contract field teams services of $1.8 million, and an increase of
$4.0 million 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
of $3.3 million and a loss of $4.7 million in revenues due to 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 nonrecurring credit in 1994 of $2.3 million related to certain insurance
adjustments, $1.4 million to lower margins on international contracts and $0.9
million to a reduction in aircraft maintenance activities. These reductions
were partially offset by a $2.7 million increase in income from pilot training
and contract field teams services.
The Company's Manufacturing business 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 of $7.7 million and to a loss of $3.1 million of revenue
attributable to 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 component manufacturing facility of
$3.1 million due to increased activities on U.S. Government programs and
higher volume of $4.9 million 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 costs 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
the OEM's 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.
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
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 writeoff of expenses
incurred in connection with an acquisition that was not consummated. Selling
general and administrative costs also include an investment for increased
international marketing efforts by the Company's international offices. As
a result, international sales have increased $25.7 million (29.4%) and $27.9
million (47.1%) in 1995 and 1994, respectively. (See Note 17 of "Notes to
Consolidated Financial Statements.")
<PAGE> 17
Interest expense increased $1.0 million (5.2%) 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.)
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities used $5.7 million in 1996, which
consists of $26.7 million generated by earnings after adjusting for noncash
items, offset by a $27.6 million investment in additional working capital and
an investment of $4.8 million related to changes in noncurrent assets and
liabilities. Investing activities used $158.8 million during 1996 of which
$149.9 million related to the Garrett Acquisition, including transaction
costs, $6.0 million related to the acquisition of Stearns, $2.0 million in
payments under the terms of earn-out provisions of an agreement related to a
prior acquisition and $9.6 million for capital expenditures. Cash of $8.7
million was generated from the sale of assets. Net cash provided by financing
activities of $181.2 million includes proceeds from the issuance of 11% Senior
Subordinated Notes and Convertible Preferred Stock used in the Garrett
Acquisition and an increase in revolving credit borrowings, which were used
to pay certain transaction costs related to the Garrett Acquisition, to fund
the acquisition of the Stearns Company and to provide the funds used by
operating activities.
The Company has approximately $36.2 million of net operating loss carry-
forwards that can be applied against future taxable income, which the Company
expects will significantly reduce its future federal income taxes.
The Company's debt-to-capitalization ratio at December 31, 1996 was 73.2%
compared with 67.2% at December 31, 1995. At December 31, 1996, the Company's
working capital was $176.7 million, with a current ratio of 1.9 to 1 compared
with $124.1 million with a current ratio of 2.3 to 1 at December 31, 1995.
Capital expenditures in 1996 amounted to $9.6 million compared with $6.8
million in 1995.
The Company's Amended and Restated Revolving Credit Agreement provides for
a borrowing capacity of up to $112 million through May 2000 and is subject to
borrowing base limitations as defined in the agreement and reduced by
outstanding letters of credit. In addition to the $18.4 million in cash on
hand, the Company's unused availability under the credit line was $21.8
million at December 31, 1996. In February 1997, the Company received a
commitment from the lead bank under its revolving credit facility to issue a
secured standby letter of credit not to exceed $13.2 million. The Company
considers these resources, coupled with cash expected to be generated by
borrowings adjusted for noncash items, to be sufficient to meet its
foreseeable funding needs, including anticipated capital expenditures.
<PAGE> 18
On May 29, 1996, the Company acquired substantially all of the assets and
certain liabilities of Garrett, a leading provider of aviation services in the
business aviation aftermarket. The purchase price of approximately $145
million was paid in cash. The financing of the acquisition was accomplished
through the issuance of $125 million in 11% Senior Subordinated Notes due 2006
and $25 million in Convertible 8.5% Preferred Stock. In addition, borrowings
were made under the Company's revolving credit facility for various
transaction costs which, combined with the purchase price, exceeded the amount
of funds generated from the issuance of the Notes and Preferred Stock.
In September 1996, the Company acquired substantially all of the assets
and certain liabilities of the Stearns Company, a manufacturer and supplier
of aircraft parts, primarily to original equipment manufacturers. The
purchase price was $6.0 million, which was funded through a borrowing under
the Company's revolving credit facility.
Many of the Company's restructuring goals have been achieved since the
program was implemented in June 1994. The Company has generated $49.5 million
from the sale of assets, including $25.0 million from the sale of the
Company's Connecticut property, $12.1 million from the sale of other under-
utilized property and equipment, $12.4 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 $9.1 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 receivables and generate additional cash.
Since the restructuring program was implemented, the Company has incurred
$21.8 million of cash expenditures against its restructuring accrual. These
cash expenditures include employee severance and related costs of $2.5
million, $19.3 million of costs associated with the sale, closing and
consolidation of businesses and operations, including $3.8 million of third-
party costs associated with shutdowns, consolidations and sales programs. The
Company believes that adequate accruals are available to complete the
program.
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 $11.5 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.
<PAGE> 19
On February 13, 1997, the Company entered into an Agreement and Plan of
Reorganization (the "Original Merger Agreement") with Greenwich Air Services,
Inc. ("Greenwich") pursuant to which the Company would be merged into, and
thereby become, a wholly-owned subsidiary of Greenwich. Under the Original
Merger Agreement, each of the Company's "Common Stock Equivalents" (as defined
in the Original Merger Agreement) would be valued at not less than $14.00 and
each holder of the Company's Common Stock Equivalents would be entitled to
receive that number of shares of Class B nonvoting Common Stock, par value
$.01 per share, of Greenwich ("Greenwich Class B Stock") as is determined by
multiplying the number of shares of the Company's Common Stock Equivalents
held by such holder by the Exchange Ratio.
Subject to adjustment upon the occurrence of certain events set forth in
the Original Merger Agreement, "Exchange Ratio" means the fraction (expressed
as a decimal to the nearest ten thousandth) determined as follows:
(a) if the average of the closing prices of a share of Greenwich Class
B Stock, as reported on The Nasdaq National Market, for the twenty trading
days immediately preceding the closing date(the "Closing Date Market Value")
is less than or equal to $24.86, the Exchange Ratio is $14.00 divided by the
Closing Date Market Value;
(b) if the Closing Date Market Value exceeds $24.86, but is less than or
equal to $28.59, the Exchange Ratio is 0.5632; and
(c) if the Closing Date Market Value exceeds $28.59, then the Exchange
Ratio is $16.10 divided by the Closing Date Market Value.
In general, the merger consideration would be payable to the holders of
the Company's Common Stock Equivalents solely in shares of Greenwich Class B
Stock. Subject to the limitations and conditions set forth in the Original
Merger Agreement, however, such holders would be entitled, in accordance with
the procedures set forth in the Original Merger Agreement, to elect to receive
all or a portion of the merger consideration in cash; provided, however, that
Greenwich would not be obligated to pay in cash an aggregate amount which
exceeds fifty (50%) percent of the aggregate merger consideration payable to
all holders of the Company's Common Stock Equivalents computed at $14.00 per
share.
On March 9, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Merger (the "Amended Merger Agreement") modifying and
restating the terms of the Original Merger Agreement. The Amended Merger
Agreement modifies, among other things, the consideration to be received by
holders of shares of the Company's Common Stock and Series B Preferred Stock
by virtue of the UNC-Greenwich Merger. Pursuant to the Amended Merger
Agreement, holders of the Company's Common Stock will be entitled to receive
at the Effective Time (as defined in the Amended Merger Agreement) $15.00 in
cash for each share of Common Stock then currently issued and outstanding and
holders of the Company's Series B Preferred Stock will be entitled to receive
an amount equal to $15.00 multiplied by the number of shares of the Company's
Common Stock into which such Series B Preferred Stock is convertible
immediately before the Effective Time.
Concurrently with the execution and delivery of the Amended Merger
Agreement, Greenwich, General Electric Company, a New York corporation ("GE"),
and GB Merger Corp., a wholly-owned subsidiary of GE, entered into an
Agreement and Plan of Merger pursuant to which those parties have agreed that
Greenwich will merge with GB Merger Corp. (the "GE-Greenwich Merger"), thereby
becoming a wholly-owned subsidiary of GE.
<PAGE> 20
Consummation of the UNC-Greenwich Merger pursuant to the Amended Merger
Agreement is subject to a number of conditions, including approval by the
stockholders of the Company entitled to vote thereon, certain regulatory
approvals, and satisfaction of waiver of all conditions to the GE-Greenwich
Merger. The GE-Greenwich Merger is, in turn, subject to a number of
conditions, including approval by the Greenwich stockholders entitled to vote
thereon and certain regulatory approvals. If the GE-Greenwich Merger is
terminated for any reason, the Amended Merger Agreement provides, in effect,
that the terms of the Original Merger Agreement will once again become
effective, with certain modifications.
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, Pacific Airmotive Corporation ("PAC"),
acquired by the Company in 1985 from Purex Corporation conducted aircraft
engine overhaul operations on two adjacent parcels (the "PAC parcels") in
Burbank, California. In 1994, Lockheed Martin Corporation ("Lockheed")
commenced an action against PAC and other parties in United States District
Court for the Central District of California under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, to
allocate and recover environmental response costs Lockheed alleged it incurred
and would incur in remediating groundwater in the vicinity of the parcels as
required by the U.S. Environmental Protection Agency. In December 1995,
Lockheed amended its complaint to include remediation of soil and groundwater
with respect to a third Burbank parcel that Lockheed had purchased in 1981
from a subsidiary of Purex Corporation (the "Lockheed parcel") and to add the
Company and another subsidiary as parties to the case. Trial on the Lockheed
claims was held in August 1996. On October 25, 1996, the trial court issued
proposed findings of fact which, if not substantially altered, could lead to
a judicial determination that PAC is liable for contamination on and from the
Lockheed parcel, based on a series of assumptions of liability among
participants in a leveraged buyout of Purex Corporation in 1982, and liable
for contamination on and from the PAC parcels. The Company and PAC have
objected on several grounds to the court's proposed findings. In addition,
the Company and PAC have joined Purex Industries, Inc. (as successor by merger
to Purex Corporation) ("Purex") as a third-party defendant in the Lockheed
action, asserting that Purex is liable to the Company and PAC to the extent
that they may be found liable with respect to the Lockheed claims. No trial
has yet been held on the claims of the Company and PAC against Purex. The
Company is currently considering whether to expand its third-party claim to
assert that Purex will be unjustly enriched if it is allowed to retain the
rights and benefits associated with insurance policies covering the clean-up
costs and to request that a constructive trust be imposed on any amounts that
Purex has received or may be entitled to received in connection with such
insurance policies to the extent that such policies would respond to any
recovery by Lockheed. In addition, the Company has notified its own insurance
carriers of its potential exposure and has requested that these carriers
provide indemnification for any recovery by Lockheed. If the trial court
adopts its proposed findings of fact, the Company could have a judgment
entered against it for approximately $9.6 million, plus additional and
<PAGE> 21
unspecified future amounts which could approach or exceed that figure to
complete remediation. It is not known whether the trial court will enter a
judgment in the Lockheed phase of the action before there is a trial of the
related Purex phase. The Company has been advised by counsel that there are
valid and meritorious appellate issues that are available to the Company
should the Court enter a judgment. However, because of the uncertainties
associated with this litigation, the Company is unable to determine its
ultimate liability, if any, in this matter. Should a judgment be entered
against the Company or PAC, the Company intends to vigorously pursue an appeal
as well as vigorously pursue its claims against Purex and its insurance
carriers as well as the Company's carriers.
A subsidiary of the Company, United Nuclear Corporation, has been involved
in environmental reclamation of a former uranium mill and mill tailing
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. The cost of this
remediation was $1.4 million in 1996, $2.1 million in 1995 and $2.2 million
in 1994. It is anticipated, based on the approved reclamation plan, that the
cost of future remediation will be approximately $2.6 million. Such cost has
been accrued as part of the discontinued operation.
United Nuclear Corporation was engaged in mining uranium ore at a number
of leased sites in New Mexico, ceasing all such operations in 1982. In June
1993, the State of New Mexico enacted the New Mexico Mining Act (the "Mining
Act"), requiring existing mining operations to perform site assessments,
obtain permits, and effect any required remediation regarding such mines. The
Mining Act defines "existing mining operations" as those that were in operation
for two or more years between 1970 and June 18, 1993, the effective date of
the Mining Act. United Nuclear has taken the position with respect to these
mines that it was not an owner or operator of those mining operations when the
Mining Act was enacted and that the Mining Act is instead applicable to
current owners or operators of existing mining operations as defined in the
Mining Act. The New Mexico Mining Commission (the "Commission") determined in
July 1996 that the Mining Act and regulations apply to these three former
operations. An appeal of the Commission's determination has been made to the
New Mexico District Court. Oral argument is anticipated during the first
quarter of 1997. Counsel to United Nuclear believes that United Nuclear has
a meritorious legal position and United Nuclear is pursuing its appeal
vigorously. The extent of reclamation that the Commission might require if
it is determined that the Mining Act applies to the former mining operations
is not known. As a result, no range of loss can be established regarding
United Nuclear's possible costs should the Mining Act be held to apply to its
former mining operations.
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
operation 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 conditions in 1996.
<PAGE>
<PAGE> 22
Item. 8 Financial Statements and Supplementary Data.
UNC Incorporated and Subsidiaries
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
Years Ended December 31,
---------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Sales and operating revenues $832,063 $536,243 $525,833
Costs and expenses
Costs and operating expenses 710,589 456,935 444,375
Selling, general and administrative
expenses 82,729 56,952 69,768
Restructuring charge 3,000 58,706
Multi-employer pension plan withdrawal
charge (adjustment) (6,000) 14,000
-------- ------- --------
790,318 513,887 586,849
-------- -------- --------
Operating income (loss) 41,745 22,356 (61,016)
Other income (expense)
Interest expense (29,106) (19,514) (18,549)
Other (1,748) 116 (1,850)
-------- -------- --------
(30,854) (19,398) (20,399)
-------- -------- --------
Earnings (loss) before income taxes 10,891 2,958 (81,415)
Income tax benefit (provision) (3,267) (1,035) 13,483
-------- -------- --------
Net earnings (loss) 7,624 1,923 (67,932)
Preferred dividends 1,249
-------- -------- --------
Net earnings (loss) applicable to
common stock $ 6,375 $ 1,923 $(67,932)
======== ======== ========
Net earnings (loss) per common share
Primary $ .35 $ .11 $ (3.89)
Fully diluted $ .34 $ .11 $ (3.89)
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 23
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
December 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Assets
- -------
Current assets:
Cash $ 18,368 $ 1,671
Accounts receivable, less allowance for
doubtful accounts of $6,678 and $3,186,
respectively 203,939 102,462
Unbilled costs and accrued profits on
contracts in progress 6,325 11,128
Inventories 127,777 91,130
Assets held for sale 6,773 5,099
Other 18,638 10,156
--------- ---------
Total current assets 381,820 221,646
Assets held for sale - noncurrent 7,762 12,796
Property, plant and equipment, at cost
Land, buildings and improvements 30,286 22,087
Machinery and equipment 82,838 60,362
--------- ---------
113,124 82,449
Less accumulated depreciation 39,714 34,381
--------- ---------
Net property, plant and equipment 73,410 48,068
Cost in excess of net assets of acquired
companies, less accumulated amortization of
$35,237 and $28,175, respectively 252,647 136,298
Other assets 32,657 27,453
--------- ---------
Total assets $ 748,296 $ 446,261
========= =========
</TABLE>
<PAGE>
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
December 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Liabilities and Shareholders' Equity
- -------------------------------------
Current liabilities:
Current portion of long-term debt $ 5,317 $ 1,748
Accounts payable 122,575 39,614
Income taxes payable 2,006 1,392
Accruals and other current liabilities 75,243 54,794
--------- ---------
Total current liabilities 205,141 97,548
Long-term debt, less current portion:
Revolving Senior Bank Debt, interest rate
at December 31, 1996, 8.37% due 2000 76,285 37,181
9 1/8% Senior Notes due 2003 100,000 100,000
11% Senior Subordinated Notes due 2006 125,000
7 1/2% Convertible Subordinated Debentures due 2006 60,600 64,800
Other 5,744 1,352
--------- ---------
Total long-term debt, less current portion 367,629 203,333
Other noncurrent liabilities 39,247 45,228
--------- ---------
Total liabilities 612,017 346,109
Shareholders' equity:
Series preferred stock, par value $1.00
per share; authorized 12,000,000 shares:
Series A Junior Participating Preferred Stock,
250,000 shares authorized, none issued
Series B Senior Cumulative Preferred Stock,
250,000 shares authorized and issued
$25,000,000 liquidation preference 250
Series C Senior Cumulative Preferred Stock,
250,000 shares authorized, none issued
Common stock, par value $0.20 per share;
authorized 50,000,000 shares, issued
18,763,181 and 18,393,868 shares, respectively 3,753 3,679
Additional paid-in capital 148,672 123,717
Retained earnings (deficit) (7,826) (15,450)
--------- ---------
144,849 111,946
Less:
Treasury stock, at cost (486,500 and
700,000 common shares, respectively) 5,143 8,750
Minimum pension liability adjustment 1,790 1,801
Unearned compensation-restricted stock 1,637 1,243
--------- ---------
Total shareholders' equity 136,279 100,152
--------- ---------
Total liabilities and shareholders' equity $ 748,296 $ 446,261
========= =========
</TABLE>
<PAGE>
<PAGE> 25
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 7,624 $ 1,923 $(67,932)
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 18,690 12,491 12,727
Provision (adjustment) for pension withdrawal
liability (6,000) 14,000
Provision for restructuring 3,000 58,706
Provision for losses on accounts receivable 1,866 1,637 4,296
Income from leveraged lease (2,475)
Deferred income taxes (benefit) 1,511 (28) (14,587)
Gain(loss) on disposition of assets and other 12 (52) (350)
Changes in assets and liabilities, net of
effect of acquisitions and divestitures:
(Increase) in accounts receivable (48,324) (15,355) (4,228)
Decrease in unbilled costs and
accrued profits on contracts in progress 4,803 2,969 14,065
(Increase) in inventories (14,233) (4,974) (19,665)
(Increase) decrease in other current assets (3,104) 484 5,688
(Increase) decrease in other noncurrent assets (3,182) (2,538) 389
Increase in accounts payable 29,543 709 341
Increase (decrease) in accruals and other
current liabilities 5,242 (5,816) (10,255)
Increase (decrease) in income taxes payable (1,522) (2,660) 1,459
(Decrease) in other noncurrent liabilities (1,640) (6,602) (11,674)
-------- -------- --------
Total adjustments (13,338) (19,735) 48,437
-------- -------- --------
Net cash provided (used) by operating activities (5,714) (17,812) (19,495)
-------- -------- --------
</TABLE>
<PAGE>
<PAGE> 26
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Net proceeds from sale of assets 8,702 33,600 11,713
Additions to property, plant and equipment (9,630) (6,767) (10,299)
Acquisition of subsidiaries, net of cash acquired (157,867) (947) (4,911)
Other transactions, net 6,797
-------- -------- --------
Net cash provided (used) by investing activities (158,795) 25,886 3,300
-------- -------- --------
Cash flows from financing activities:
Additions to debt 885,824 382,005 201,085
Reductions in debt (848,380) (391,247) (184,045)
Issuance of 11% Senior Subordinated Notes 125,000
Issuance of convertible preferred stock 25,000
Payment of preferred stock dividends (1,249)
Other (4,989) 220 280
-------- -------- --------
Net cash provided (used) by financing activities 181,206 (9,022) 17,320
-------- -------- --------
Net increase (decrease) in cash 16,697 (948) 1,125
Cash at beginning of year 1,671 2,619 1,494
-------- -------- --------
Cash at end of year $ 18,368 1,671 $ 2,619
======== ======= ========
</TABLE>
<PAGE>
<PAGE> 27
UNC Incorporated and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Preferred AdditionalRetained
Stock Common Stock Paid-in Earnings
Par Value Shares Par Value Capital (Deficit) Other Total
--------- --------- --------- ------------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $ 18,085 $ 3,617 $ 121,746 $ 50,559 $(10,436) $165,486
Net loss ( 67,932) (67,932)
Award of
restricted stock 97 19 926 945
Exercise of stock
options 60 12 268 280
Pension liability
adjustment 805 805
Unearned compensa-
tion restricted
stock (687) (687)
-------- -------- --------- -------- -------- -------- --------
Balance at
December 31, 1994 18,242 3,648 122,940 (17,373) (10,318) 98,897
Net earnings 1,923 1,923
Award of
restricted stock 105 21 567 588
Exercise of stock
options 47 10 210 220
Pension liability
adjustment (1,261) (1,261)
Unearned compensa-
tion restricted
stock (215) (215)
-------- -------- --------- -------- -------- -------- --------
Balance at
December 31, 1995 18,394 3,679 123,717 (15,450) (11,794) 100,152
</TABLE>
<PAGE>
<PAGE> 28
UNC Incorporated and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Preferred AdditionalRetained
Stock Common Stock Paid-in Earnings
Par Value Shares Par Valu Capital (Deficit) Other Total
--------- --------- --------- ------------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings 7,624 7,624
Award of
restricted stock 93 19 837 856
Exercise of stock
options 276 55 1,364 1,419
Issuance of 250
preferred shares 250 24,750 25,000
Preferred stock
dividends (1,249) (1,249)
Treasury stock
issued in
connection with
Garrett acquisition (747) 3,607 2,860
Pension liability
adjustment 11 11
Unearned compensa-
tion restricted
stock (394) (394)
-------- -------- --------- -------- -------- -------- --------
Balance at
December 31, 1996 $ 250 18,763 $ 3,753 $148,672 $ (7,826) $ (8,570) $136,279
======== ======== ========= ======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE> 29
UNC Incorporated and Subsidiaries
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 25 to 40 years
(approximately 33 years on a weighted average basis). The amortization period
for these intangible assets is based upon an evaluation of many operating and
economic factors including the nature of the business acquired, customer base
and the effects of obsolescence, demand and competition on the business. The
Company assesses the recoverability of cost in excess of net assets of
acquired companies by determining whether the amortization of the 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 is 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 a multi-employer defined benefit pension plan 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
agreement.
(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
<PAGE> 30
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
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
costs 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 used in the calculation of
primary earnings per share for the years 1996, 1995 and 1994 were 18,056,000,
17,666,000 and 17,474,000, respectively. The number of shares used in the
calculation of fully diluted earnings per share for 1996, 1995 and 1994 were
18,638,000, 17,910,000, and 17,860,000, 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 economic
conditions in the aviation industry. The restructuring charge consisted of
a $21.8 million noncash 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 costs associated with the sale, closing and consolidation of two
business units and facilities, including severance and related cost. The
remaining $16.4 million charge consisted of noncash charges of $3.0 million
related to the writedown of the carrying value of certain underutilized
property 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. During 1996, the Company recorded an additional $3.0
million to previously established restructuring allowances to reflect the
impact of the continuing assessment of the net realizable value of assets held
for sale. Since the restructuring program was implemented, the Company has
incurred $21.8 million of cash expenditures consisting principally of cost
associated with the sale closing and consolidation of business and operations.
The Company anticipates the balance of the accrual will be expended within
the next 18 months.
<PAGE> 31
3. Proposed Merger and Acquisitions
--------------------------------
On February 13, 1997, the Company entered into an Agreement and Plan of
Reorganization (the "Original Merger Agreement") with Greenwich Air Services,
Inc. ("Greenwich") pursuant to which the Company would be merged into, and
thereby become, a wholly-owned subsidiary of Greenwich. Under the Original
Merger Agreement, each of the Company's "Common Stock Equivalents" (as defined
in the Original Merger Agreement) would be valued at not less than $14.00 and
each holder of the Company's Common Stock Equivalents would be entitled to
receive that number of shares of Class B nonvoting Common Stock, par value
$.01 per share, of Greenwich ("Greenwich Class B Stock") as is determined by
multiplying the number of shares of the Company's Common Stock Equivalents
held by such holder by the Exchange Ratio.
Subject to adjustment upon the occurrence of certain events set forth
in the Original Merger Agreement, "Exchange Ratio" means the fraction
(expressed as a decimal to the nearest ten thousandth) determined as follows:
(a) if the average of the closing prices of a share of Greenwich Class
B Stock, as reported on The Nasdaq National Market, for the twenty trading
days immediately preceding the closing date(the "Closing Date Market Value")
is less than or equal to $24.86, the Exchange Ratio is $14.00 divided by the
Closing Date Market Value;
(b) if the Closing Date Market Value exceeds $24.86, but is less than
or equal to $28.59, the Exchange Ratio is 0.5632; and
(c) if the Closing Date Market Value exceeds $28.59, then the Exchange
Ratio is $16.10 divided by the Closing Date Market Value.
In general, the merger consideration would be payable to the holders of
the Company's Common Stock Equivalents solely in shares of Greenwich Class B
Stock. Subject to the limitations and conditions set forth in the Original
Merger Agreement, however, such holders would be entitled, in accordance with
the procedures set forth in the Original Merger Agreement, to elect to receive
all or a portion of the merger consideration in cash; provided, however, that
Greenwich would not be obligated to pay in cash an aggregate amount which
exceeds fifty (50%) percent of the aggregate merger consideration payable to
all holders of the Company's Common Stock Equivalents computed at $14.00 per
share.
On March 9, 1997, the Company entered into an Amended and Restated
Agreement and Plan of Merger (the "Amended Merger Agreement") modifying and
restating the terms of the Original Merger Agreement. The Amended Merger
Agreement modifies, among other things, the consideration to be received by
holders of shares of the Company's Common Stock and Series B Preferred Stock
by virtue of the UNC-Greenwich Merger. Pursuant to the Amended Merger
Agreement, holders of the Company's Common Stock will be entitled to receive
at the Effective Time (as defined in the Amended Merger Agreement) $15.00 in
cash for each share of Common Stock then currently issued and outstanding and
holders of the Company's Series B Preferred Stock will be entitled to receive
an amount equal to $15.00 multiplied by the number of shares of the Company's
Common Stock into which such Series B Preferred Stock is convertible
immediately before the Effective Time.
<PAGE> 32
Concurrently with the execution and delivery of the Amended Merger
Agreement, Greenwich, General Electric Company, a New York corporation ("GE"),
and GB Merger Corp., a wholly-owned subsidiary of GE, entered into an
Agreement and Plan of Merger pursuant to which those parties have agreed that
Greenwich will merge with GB Merger Corp. (the "GE-Greenwich Merger"), thereby
becoming a wholly-owned subsidiary of GE.
Consummation of the UNC-Greenwich Merger pursuant to the Amended Merger
Agreement is subject to a number of conditions, including approval by the
stockholders of the Company entitled to vote thereon, certain regulatory
approvals, and satisfaction of waiver of all conditions to the GE-Greenwich
Merger. The GE-Greenwich Merger is, in turn, subject to a number of
conditions, including approval by the Greenwich stockholders entitled to vote
thereon and certain regulatory approvals. If the GE-Greenwich Merger is
terminated for any reason, the Amended Merger Agreement provides, in effect,
that the terms of the Original Merger Agreement will once again become
effective, with certain modifications.
On May 29, 1996 the Company acquired substantially all of the assets and
certain liabilities of Garrett, a leading provider of aviation services in the
business aviation aftermarket. The purchase price of approximately $145
million was paid in cash. The financing of the acquisition was accomplished
through the issuance of $125 million in 11% Senior Subordinated Notes due 2006
and $25 million in Convertible 8.5% Preferred Stock. In addition, borrowings
were made under the Company's Revolving Senior Bank Debt for various
transaction costs which, combined with the preliminary purchase price,
exceeded the amount of funds generated from the issuance of the notes and
Preferred Stock. The acquisition was accounted for as a purchase, and the
purchase price was allocated to the assets and liabilities of Garrett based
on their estimated fair values. Under the terms of the Purchase Agreement,
the purchase price is to be adjusted based on the net asset value of the
company acquired based upon a post-closing audit. The audit has not been
concluded. The estimated cost in excess of the net assets acquired may be
adjusted upon final determination of these net assets values. Management does
not believe that the final allocation of the purchase price will differ
materially from the preliminary allocation. The excess of the purchase cost
over the estimated fair value of the net assets acquired is being amortized
over a period of thirty years using the straight line method. Also in
connection with the acquisition, the Company issued 213,500 shares of its
treasury common stock to certain Garrett executives it employed following the
closing at a purchase price of $5.75 per share (see Note 13 of Notes to
Consolidated Financial Statements).
The following unaudited pro forma consolidated results of operations do
not include certain operating enhancements that might have been achieved had
the acquisition occurred on January 1, 1995. This pro forma information does
not necessarily reflect the actual results of operations that would have
occurred if the acquisition occurred on January 1, 1995 nor is it necessarily
indicative of the combined future operating results. The unaudited pro forma
consolidated results of operations give effect to the acquisition of Garrett
as though the acquisition occurred on January 1, 1995, including the issuance
of debt and preferred stock, the divestiture of UNC Airwork's AlliedSignal TFE
731 heavy maintenance business and the elimination of certain nonrecurring
management and consulting fees and certain administrative costs previously
incurred by Garrett.
<PAGE> 33
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
(Dollars in thousands, except per share amounts) 1996 1995
------- --------
<S> <C> <C>
Sales and operating revenues $975,452 $865,325
Earnings before income taxes 9,831 1,512
Net earnings 6,881 982
Net earnings (loss), applicable to common stock 4,756 (1,143)
Earnings (loss) per common share:
Primary $ .26 $ (.06)
Fully diluted .26 (.06)
</TABLE>
In September 1996, the Company acquired substantially all of the assets
and certain liabilities of Stearns Company, a manufacturer and supplier of
aircraft parts, primarily to original equipment manufacturers. The purchase
price was approximately $6.0 million, which was funded through a borrowing
under the Company's revolving credit facility. The excess of the purchase
price over the estimated fair value of the net assets acquired will be
amortized over a twenty five year period using the straight line method.
A summary of the fair values of the net assets acquired, costs of
acquisition of Garrett and Stearns and the costs in excess of net assets
acquired are as follows:
Current assets $ 78,790
Other assets, principally property and
equipment 32,255
Excess of costs over net assets acquired 121,275
Current liabilities (69,248)
Other liabilities (5,569)
--------
Purchase consideration, including
acquisition costs $ 157,503
=========
4. Contracts in Progress
---------------------
Unbilled costs and accrued profits on production contracts in progress
consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
U. S. Government contracts and subcontracts:
Costs incurred and accrued profits on
contracts in progress $ 15,886 $ 26,516
Less progress billings to date 12,507 21,674
-------- --------
Unbilled costs and accrued profits on
contracts in progress 3,379 4,842
Commercial contracts:
Costs incurred and accrued profits on
contracts in progress 2,946 6,286
-------- --------
Total unbilled costs and accrued profits on
contracts in progress $ 6,325 $ 11,128
======== ========
</TABLE>
Amounts billed under contracts in progress and included in accounts
receivable at December 31, 1996 were $2.1 million under U.S. Government prime
and subcontracts and $1.7 million under commercial contracts. At December 31,
1995 these amounts were $3.1 million and $2.4 million, respectively.
Also, included in accounts receivable at December 31, 1996 and 1995 were
other amounts due from the U.S. Government totaling $32.2 million and $37.7
million, 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 1997.
Included in accounts receivable at December 31, 1996 and 1995, is $2.0
million of cost applicable to a $2.9 million claim for equitable adjustment
filed by the Company under a contract with the U.S. Government in 1993. 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 claim was denied by the U.S. Force
contracting officer in December 1994. The Company filed an appeal in January
1995 with the Armed Services Board of Contract Appeals. Discovery is
currently in process and technical documentation is being exchanged. Although
a trial date has not been set, the Company anticipates that trial will occur
in the latter part of 1997. Also included in accounts receivable at December
31, 1996 and 1995, 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's
unilaterally imposing a previously undisclosed conversion formula to the
determination of the amount earned, contrary to contract terms. Argument was
held before the U.S. Court of Appeals for the Federal Circuit in November
1996, at which the government conceded the position taken by the Company on
the reviewability of the government's action and on the applicable standard
of review. A decision is pending. The Company believes it will prevail in
realizing the amount of the claims that have been recorded in accordance with
the terms of the contracts.
5. Inventories
-----------
Inventories as of December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Component parts and materials $ 82,224 $ 70,317
Work in progress 39,116 17,436
Supplies 6,437 3,377
-------- --------
$127,777 $ 91,130
======== ========
</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, certain
inventories 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 several years.
7. Long-Term Debt
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Revolving Senior Bank Debt, interest rate at
December 31, 1996, 8.37% due 2000 $ 76,285 $ 37,181
9 1/8% Senior Notes due 2003 100,000 100,000
11% Senior Subordinated Notes due 2006 125,000
7 1/2% Convertible Subordinated Debentures
due 2006 64,800 65,431
Other 6,861 2,469
-------- --------
372,946 205,081
Less current portion 5,317 1,748
-------- --------
$367,629 $203,333
======== ========
</TABLE>
The Company's amended revolving credit agreement provides for a five-
year credit line through May 2000 with a borrowing capacity of up to $112
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 $21.8 million at December 31, 1996. (Subsequent to
December 31, 1996, the Company received a commitment from the lead bank under
its revolving credit facility to issue a secured standby letter of credit not
to exceed $13.2 million). 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, 1996 and 1995 was 8.37% and 8.71%,
respectively. 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. Borrowings under the revolving
credit facility are collateralized by the Company's accounts receivable and
inventories. The agreement contains covenants which, among other things,
provide 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 issued in May 1996. (See
Note 9 of "Notes to Consolidated Financial Statements.")
The 9 1/8% Senior Notes due July 15, 2003 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.
On May 30, 1996, the Company issued $125 million of 11% Senior
Subordinated Notes due 2006. The Notes are redeemable, at the option of the
Company, on or after June 1, 2001 at declining premiums through May 31, 2003
and at their principal amount thereafter.
The debt indentures covering both the 9 1/8% Senior Notes and the 11%
Senior Subordinated Notes contain certain covenants which, among other things,
allow additional borrowings based on certain financial ratios and restrict the
payment of cash dividends except for dividends paid on the senior cumulative
convertible preferred stock.
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 the principal amount of the debentures. Annual sinking fund
payments of $4.2 million commenced in March 1996.
Annual maturities of long-term debt during the next five years are
$5,317,000 in 1997, $4,317,000 in 1998, $4,318,000 in 1999, $80,485,000 in
2000 and $4,200,000 in 2001.
The estimated fair values of the 7 1/2% Convertible Subordinated
Debentures, the 9 1/8% Senior Notes and the 11% Senior Subordinated Notes,
based on quoted market prices, were approximately $61.9 million, $101.5
million and $133.8 million, respectively, at December 31, 1996. At December
31, 1995, the estimated fair values of the 7 1/2% Convertible Subordinated
Debentures and the 9 1/8% Senior Notes were approximately $58.2 million and
$98.0 million, respectively.
8. Other Liabilities
-----------------
Accruals and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Payroll and related expenses $41,859 $ 28,339
Pension plans 4,713 6,106
Accrued interest 6,880 5,812
Other 21,791 14,537
-------- --------
$ 75,243 $ 54,794
======== ========
</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 operations, the Company has
accruals included in noncurrent liabilities of approximately $11.5 million in
1996 and $15.7 million in 1995 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 several years.
9. Preferred Stock
---------------
In May 1996, in connection with the financing of the Garrett
acquisition, the Company issued 250,000 shares of 8.5% Series B Senior
Preferred Stock at $100 per share. The Stock has an annual cumulative
dividend rate of 8.5% with no mandatory redemption and is convertible into
common stock at a price of $7 per common share.
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 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. Under the terms of the Merger Agreement between
the Company and Greenwich, the Company has agreed to take the actions
necessary to terminate or redeem these Rights. The Rights expire on October
19, 1997.
11. Litigation and Contingencies
----------------------------
A subsidiary of the Company, Pacific Airmotive Corporation ("PAC"),
acquired by the Company in 1985 from Purex Corporation, conducted aircraft
engine overhaul operations on two adjacent parcels (the "PAC parcels") in
Burbank, California. In 1994, Lockheed Martin Corporation ("Lockheed")
commenced an action against PAC and other parties in United States District
Court for the Central District of California under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, to
allocate and recover environmental response costs Lockheed alleged it incurred
and would incur in remediating groundwater in the vicinity of the parcels as
required by the U.S. Environmental Protection Agency. In December 1995,
Lockheed amended its complaint to include remediation of soil and groundwater
with respect to a third Burbank parcel that Lockheed had purchased in 1981
from a subsidiary of Purex Corporation (the "Lockheed parcel") and to add the
Company and another subsidiary as parties to the case. Trial on the Lockheed
claims was held in August 1996. On October 25, 1996, the trial court issued
proposed findings of fact which, if not substantially altered, could lead to
a judicial determination that PAC is liable for contamination on and from the
Lockheed parcel, based on a series of assumptions of liability among
participants in a leveraged buyout of Purex Corporation in 1982, and liable
for contamination on and from the PAC parcels. The Company and PAC have
objected on several grounds to the court's proposed findings. In addition,
the Company and PAC have joined Purex Industries, Inc. (as successor by merger
to Purex Corporation) ("Purex") as a third-party defendant in the Lockheed
action, asserting that Purex is liable to the Company and PAC to the extent
that they may be found liable with respect to the Lockheed claims. No trial
has yet been held on the claims of the Company and PAC against Purex. The
Company is currently considering whether to expand its third-party claim to
assert that Purex will be unjustly enriched if it is allowed to retain the
rights and benefits associated with insurance policies covering the clean-up
costs and to request that a constructive trust be imposed on any amounts that
Purex has received or may be entitled to received in connection with such
insurance policies to the extent that such policies would respond to any
recovery by Lockheed. In addition, the Company has notified its own insurance
carriers of its potential exposure and has requested that these carriers
provide indemnification for any recovery by Lockheed. If the trial court
adopts its proposed findings of fact, the Company could have a judgment
entered against it for approximately $9.6 million, plus additional and
unspecified future amounts which could approach or exceed that figure to
complete remediation. It is not known whether the trial court will enter a
judgment in the Lockheed phase of the action before there is a trial of the
related Purex phase. The Company has been advised by counsel that there are
valid and meritorious appellate issues that are available to the Company
should the Court enter a judgment. However, because of the uncertainties
associated with this litigation, the Company is unable to determine its
ultimate liability, if any, in this matter. Should a judgment be entered
against the Company or PAC, the Company intends to vigorously pursue an appeal
as well as vigorously pursue its claims against Purex and its insurance
carriers as well as the Company's carriers.
The Company acquired TRT Telecommunications Corporation ("TRT") from
United Brands Company in 1985. At that time, TRT was one of a number of so-
called international record carriers that were parties to a proceeding before
the Federal Communications Commission ("FCC") in which the former Western Union
Telegraph Company sought to collect additional retroactive charges for
interconnecting message traffic that Western Union had carried on its
facilities in the late 1970's and early 1980's. The Company subsequently sold
TRT and its parent corporation, ICC Communications Corp., to Pacific Telecom,
Inc. ("PTI") in 1988, while the FCC proceeding was still pending. As part of
that transaction, the Company agreed to indemnify PTI, ICC and defined
subsidiaries including TRT against losses, reasonable costs and expenses,
damages or liabilities incurred in connection with the FCC proceeding.
Following several corporate reorganizations, PTI sold certain PTI
subsidiaries, including the former TRT, to IDB Communications Group, Inc. (now
known as WorldCom, Inc.) ("IDB") in 1993. In connection with that transaction,
PTI agreed to indemnify IDB against losses, damages, or expenses incurred or
sustained as a result of the FCC proceeding. In a decision released in
January 1995, the FCC determined that the former Western Union was entitled
to the additional charges it sought. This determination was upheld by the
U.S. Court of Appeals for the D.C. Circuit in February 1996. PTI has asserted
that its indemnification of IDB would be a "loss" incurred in connection with
the FCC proceeding under its 1988 agreement with the Company. The Company has
rejected PTI's claim, and in April 1996 filed a declaratory judgment action
in Delaware Superior Court against PTI, seeking a determination that it has
no obligation to indemnify PTI under the 1988 agreement. In November 1996,
PTI paid IDB $4.9 million as indemnification against the former TRT's
liability in the FCC proceeding and obtained purported assignments and
subrogation of rights allegedly held by IDB as indirect parent corporation of
TRT and by the present IDB WorldCom Services, Inc. as alleged "corporate
successor in interest" to the former TRT. PTI has added claims based on these
purported assignments and subrogation to its original counterclaims against
the Company for indemnification under the 1988 agreement. It is the Company's
position that it is not obligated to indemnify PTI because any amounts PTI
voluntarily paid to IDB pursuant to its 1993 agreement with IDB do not
constitute a "loss" in connection with the FCC proceeding within the meaning
of the 1988 agreement. It is also the Company's position that PTI's separate
and unconditional agreement to indemnify IDB superseded any obligation the
Company may have had to indemnify TRT or any successor against the same
liability. The Company has also asserted that, pursuant to the 1988 agreement
between the Company and PTI, any indemnification by the Company would have to
be reduced by the benefit of available federal and state income tax deductions
by the indemnified party. In addition, the Company has asserted claims:
against the former United Brands for breach of representations and warranties
relating to the FCC proceeding made in connection with the Company's
acquisition of TRT in 1985; against the public accounting firm that prepared
the closing balance sheet underlying the Company's purchase of TRT, which did
not adequately reflect the potential liability; and against two law firms
which represented the Company in its purchase of TRT. The Company is unable
to estimate its liability, if any, in this matter. However, the Company
believes it has meritorious defenses against any claim by PTI, and, should it
become necessary, would be able to recover all or a significant part of any
liability it may have to PTI from United Brands, their accounting firm and the
attorneys that represented the Company.
A uranium mill and mill tailings facility of a subsidiary of the Company,
United Nuclear Corporation, 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 that 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
costs for such remediation of $1.4 million, $2.1 million and $2.2 million in
1996, 1995, and 1994, respectively. It is anticipated, based on the approved
reclamation plan, that the cost of future remediation will be approximately
$2.6 million. Such cost has been accrued as part of reserves established for
the discontinued operation.
United Nuclear Corporation was engaged in mining uranium ore at a number
of leased sites in New Mexico, ceasing all such operations in 1982. In June
1993, the State of New Mexico enacted the New Mexico Mining Act (the "Mining
Act"), requiring existing mining operations to perform site assessments,
obtain permits, and effect any required remediation regarding such mines. The
Mining Act defines "existing mining operations" as those that were in operation
for two or more years between 1970 and June 18, 1993, the effective date of
the Mining Act. United Nuclear has taken the position with respect to these
mines that it was not an owner or operator of those mining operations when the
Mining Act was enacted and that the Mining Act is instead applicable to
current owners or operators of existing mining operations as defined in the
Mining Act. The New Mexico Mining Commission (the "Commission") determined in
July 1996 that the Mining Act and regulations apply to these three former
operations. An appeal of the Commission's determination has been made to the
New Mexico District Court. Oral argument is anticipated during the first
quarter of 1997. Counsel to United Nuclear believes that United Nuclear has
a meritorious legal position and United Nuclear is pursuing its appeal
vigorously. The extent of reclamation that the Commission might require if
it is determined that the Mining Act applies to the former mining operations
is not known. As a result, no range of loss can be established regarding
United Nuclear's possible costs should the Mining Act be held to apply to its
former mining operations.
The Company and one of its subsidiaries has been named under CERCLA, along
with a number of other parties, as a Potentially Responsible Party at several
waste disposal sites. The Company believes that any cost assessed with regard
to these sites will not have a material adverse effect on the financial
condition, results of operations or liquidity of the Company.
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
------------
The income tax provision (benefit) for each of the three years ended
December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
(Dollars in thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal: Current $ (398) $ (260) $ (103)
Deferred (1,480) 97 14,230
-------- -------- --------
(1,878) (163) 14,127
State: Current (1,358) (803) (1,001)
Deferred (31) (9) 357
-------- -------- --------
(1,389) (872) (644)
-------- -------- --------
Total tax benefit (provision) $ (3,267) $ (1,035) $ 13,483
======== ======== ========
</TABLE>
The tax provision differs from the amount computed using the statutory
federal income tax rate as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
(Dollars in thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rate $ (3,703) $ (1,006) $ 27,681
Amortization and write-off of cost in
excess of net assets of acquired
companies (1,076) (1,078) (1,009)
State taxes, net of federal tax benefit
and reduction of state tax accrual (927) (600) (425)
Change in the valuation allowance for
deferred tax assets 2,122 1,331 (13,692)
Foreign sales tax benefits 487 487 381
Other (170) (169) 547
-------- -------- --------
Tax benefit (provision) at actual rate $ (3,267) $ (1,035) $ 13,483
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 977 $ 1,070
Inventories, principally due to additional cost
inventoried for tax purposes and financial
statement allowances 3,523 1,679
Employee benefits, principally due to accrual
for financial reporting purposes 9,814 13,510
Accrual for costs of restructuring 5,392 8,750
Accrual for disposal of discontinued operations 4,312 5,020
Net operating loss carryforward 12,310 11,771
Alternative minimum tax credit carryforward 1,868 1,730
Reserves for self insurance and warranties 7,720 5,606
Other 1,736 150
Less - valuation allowance (13,588) (15,710)
-------- --------
Total deferred tax assets 34,064 33,576
-------- --------
Deferred tax liabilities:
Plant and equipment, principally due to basis
differences (7,770) (8,993)
Contract income recognized for financial
reporting purposes (436) (921)
Intangibles (4,751) (979)
Other - (64)
-------- --------
Total deferred tax liabilities (12,957) (10,957)
-------- --------
Net deferred tax asset $ 21,107 $ 22,619
======== ========
</TABLE>
The decrease in the deferred tax valuation allowance of $2,122,000 in
1996 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.
At December 31, 1996 and 1995, other current assets include net deferred
tax assets of approximately $9.7 million and $5.7 million, and other
noncurrent assets include net deferred tax assets of approximately $11.4
million and $16.9 million, respectively. Also, at December 31, 1996 and 1995,
current liabilities include income taxes payable of $2.0 million and $1.4
million, respectively.
At December 31, 1996, the Company has a net operating loss carryforward
of $36,204,000 for income tax reporting purposes, of which $2,796,000 expires
in 2008, $19,576,000 expires in 2009, and $13,832,000 expires in 2010. The
Company also has a net operating loss carryforward of $27,336,000 available
for purposes of federal alternative minimum tax, of which $18,041,000 expires
in 2009, and $9,295,000 expires in 2010. At December 31, 1996, the Company
has an alternative minimum tax credit carryforward of approximately
$1,868,000, which is 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 materially adverse effect on the Company's consolidated financial
condition, results of operation or liquidity.
13. Incentive Compensation Plans
----------------------------
The Company's 1996, 1990, and 1985 Stock Plans for Key Employees 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 and expire ten years from the date
of grant.
The 1996 Stock Options Plan for Key Employees reserved 250,000 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
restricted stock awards. Options expire ten years from date of grant and vest
in four annual installments on each January 1 following the grant date. 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 value, within ninety days of the grant, stock
equal to twenty-five percent of the number of options granted, and (ii)
continuing beneficial ownership of all such stock through the time of
exercise. Options expire ten years from the date of grant and vest in five
equal annual installments on 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, 456,862 options
remain outstanding and may be exercised in future years in accordance with the
terms of the plan.
In connection with the Garrett Acquisition, the Garrett Stock Purchase
and Option Agreement (the "Garrett Plan") reserved 447,000 shares of common
stock held in treasury for issuance upon exercise of options granted to
certain key executives of Garrett. Certain executives of Garrett acquired
213,500 shares, the initial shares, at a purchase price of $5.75 per share
under the terms of the Garrett Stock Purchase and Option Agreement. In
addition, options were granted with an exercise price of $6.90 per share,
which vest in three equal installments on each of the first three anniversary
dates of closing and expire on January 15, 2001. Option vesting is
conditioned upon the key executives retaining certain ownership interest in
the initial shares over the three year vesting period. The costs of $697,000
and $938,700, associated with the sale of the initial shares and granting of
these options, respectively, was included in the cost of the acquisition of
Garrett.
A summary of certain plan information related to stock options is as
follows:<TABLE>
<CAPTION>
1996 1995
Weighted Weighted
Average Average
1996 Exercise 1995 Exercise 1994
Shares Price Shares Price Shares
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning
of the year 1,597,862 $ 5.97 1,912,996 $ 3.87 1,788,896
Granted 688,500 7.52 150,000 5.31 423,000
Exercised (275,700) 5.15 (47,200) 4.63 (59,800)
Forfeited (114,300) 6.57 (417,934) 6.45 (239,100)
--------- --------- ---------
Outstanding at the end
of the year 1,896,362 4.92 1,597,862 5.97 1,912,996
Exercisable at end of year 1,039,962 1,279,387 1,126,521
Available for grant at end
of year 20,500
Price range of options
Outstanding $3.19-9.75 $3.19-9.75 $3.19-9.75
Exercised $3.88-6.38 $4.44-5.75 $3.88-6.57
Weighted average fair
value of options,
granted during the year $4.51 $2.76
</TABLE>
The weighted-average fair value of options in 1996 granted under the
1996 Plan was $4.60 and the Garrett Plan was $4.21.
The following table summarizes information about fixed price stock
options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Weighted Options
Outstanding Average Weighted Exercisable Weighted
Range of at Remaining Average at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Prices 1996 Life Price 1996 Price
--------- ------------ ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 6.06-6.19 34,000 1 year $ 6.91 34,000 $ 6.91
8.63 19,362 2 years 8.63 19,362 8.63
3.19-4.44 613,000 4 years 3.91 613,000 3.91
4.44-5.75 260,000 5 years 4.70 260,000 4.70
5.57 20,000 6 years 5.57 16,000 5.57
5.69-7.88 58,500 7 years 6.66 41,600 6.72
5.94-9.75 55,000 8 years 6.81 26,000 6.82
5.31 150,000 9 years 5.31 30,000 5.31
6.90-8.69 686,500 10 years 7.52 - -
--------- ---------
$ 3.19-9.75 1,896,362 1,039,962
========= =========
</TABLE>
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plan. Accordingly, no compensation cost has been
recognized for its fixed stock option plans. Had compensation costs for the
Company's stock-based compensation plans been determined based on the fair
value at the grant dates for awards in 1995 and 1996 under those plans
consistent with the recognition method of FASB Statement No. 123, the
Company's net earnings and earnings per share would have been reduced to the
pro forma amounts presented below:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) 1996 1995
------- -------
<S> <C> <C> <C>
Net earnings applicable to common stock As reported $6,375 $1,923
Pro forma 5,709 1,869
Primary earnings per share As reported $ 0.35 $ 0.11
Pro forma 0.32 0.10
Fully diluted earnings per share As reported $ 0.34 $ 0.11
Pro forma 0.31 0.10
</TABLE>
The fair value of each option is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Expected life (years) 4.35 6
Interest rate 6.47% 5.84%
Volatility 45.2% 45.2%
Dividend yield 0.00% 0.00%
</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 $7,852,000, $6,273,000
and $4,552,000 in 1996, 1995 and 1994, 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 $75,000 in 1996, $98,000 in 1995 and $81,000 in 1994.
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 in December 31, 1996 were $1,566,000 and $1,081,000,
respectively. The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.25% in 1996
and 1995. The expected long-term rate of return on assets was 7.25% in 1996
and 1995. Plan assets consist principally of investments in commercial paper,
marketable securities, certificates of deposit and U.S. Government
obligations.
A subsidiary of the Company, UNC Airwork Corporation (Airwork), had 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
was administered by trustees appointed by the UAW. Through December 1994,
Airwork had made contributions under the plan on the basis of a portion of its
hourly payroll based on collective bargaining, and had 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. The Company did not
make 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 was not a result of Airwork not meeting its
contractual obligations, as Airwork had 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 could
have substantial liability. 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.
As a result of its withdrawal from the plan, Airwork recognized as a
nonrecurring expense in 1994 its portion of the plan's unfunded liabilities
and annual funding deficiencies, which it estimated to be approximately $14.0
million. In September 1996, the Company entered into a settlement agreement
whereby it will satisfy its withdrawal liability by the payment of $7.3
million. This amount will be paid over a period of 20 years in quarterly
installments including interest at 7.5%. As a result of this settlement the
Company reduced its accrual for the withdrawal liability by $6.0 million in
September 1996.
The Company also contributes to other multi-employer plans that cover
approximately 570 employees. The cost of these plans was $691,000, $630,000
and $591,000 in 1996, 1995 and 1994, respectively.
The Company has non-qualified unfunded supplemental executive retirement
plans covering certain officers and directors. As of December 31, 1996 and
1995, the projected benefit obligation was $19,245,000 and $16,231,000,
respectively, and the accumulated benefit obligation was $18,669,000 and
$15,883,000, respectively, which is included in other noncurrent liabilities
in the accompanying balance sheet. The cost of these plans was $2,060,000,
$2,095,000 and $2,280,000 for 1996, 1995 and 1994, respectively. The discount
rate used in determining the pension liabilities was 7.25% at December 31,
1996 and December 31, 1995. The additional minimum liability exceeded the
unamortized transition and prior service cost amounts by $1,790,000 and
$1,801,000, net of deferred income taxes at December 31, 1996 and 1995,
respectively. These amounts have been reflected in the accompanying
consolidated balance sheets as reductions in shareholders' equity at December
31, 1996 and 1995.
Post-retirement health care 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. 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 benefits at December 31, were as follow:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Retirees $ 1,414 $ 1,425
Fully eligible active plan participants 149 39
Other active participants 351 316
-------- --------
Total accumulated post-retirement benefit
obligation 1,914 1,780
Unrecognized net loss (gain) (87) 58
Unrecognized transition obligation (1,277) (1,357)
-------- --------
Accrued post-retirement benefit cost $ 550 $ 481
======== ========
</TABLE>
The net periodic post-retirement benefit cost for 1996 was $250,000 and
included $40,479 of service cost, $129,521 of interest and $80,000
amortization of the transition obligation. The cost for 1995 was $350,000 and
included $112,000 of service costs, $152,000 of interest and $86,000
amortization of the transition obligation.
For measurement purposes, a 7.25% discount rate was used in determining
the accumulated post-retirement benefit obligation as of December 31, 1996 and
1995, respectively. Also, a 9% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1996; 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 trend rates would
increase the accumulated post-retirement benefit obligation as of December 31,
1996 by approximately $228,000 and the aggregate of the service and interest
cost components of net periodic post-retirement benefit cost for the year then
ended by approximately $30,000.
The Company also contributes in accordance with a union agreement to a
multi-employer health benefit plan. The cost of this plan was $2,030,000,
$2,592,000 and $1,865,000 in 1996, 1995 and 1994, 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 was $2.5 million ($1.5 million
net of income taxes).
The Company has noncancellable operating leases covering certain real
property and equipment used in its operations. Minimum rental commitments
under these leases are: 1997, $17,978,000; 1998, $17,011,000; 1999,
$13,264,000; 2000, $9,596,000; 2001, $7,094,000; and thereafter, $9,312,000.
Rental expenses for the years 1996, 1995 and 1994 were $11,717,000,
$9,186,000, and $8,720,000, respectively.
16. Cash Flows
----------
Cash payments for income taxes were $1.3 million, $1.2 million and $0.8
million in 1996, 1995 and 1994, respectively. Interest payments were $27.9,
$19.6 and $17.6 million in 1996, 1995 and 1994, respectively.
17. Sales Information
-----------------
The Company's operations are conducted in one business segment which
includes: airframe maintenance, modification and retrofit services; avionics
and aircraft interior installations; the overhaul and repair of aircraft
engines and accessories and industrial gas turbine engines; the provision of
aircraft maintenance and pilot training contract services and the
manufacturing and remanufacturing of jet engine aircraft components.
The Company maintains foreign marketing offices in Amsterdam, Singapore
and Beijing, China and Miami, serving Latin America. Identifiable assets at
these locations are not material.
Export sales from the Company's United States operations to unaffiliated
customers, which are denominated in U.S. dollars, were as follow:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
(Dollars in thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Europe, Africa, Middle East $ 71,857 $ 71,283 $ 60,338
Latin America 21,139 18,035 13,821
Asia, Pacific Rim 15,786 15,333 6,660
Canada 8,540 8,358 6,497
-------- -------- --------
Total $117,322 $113,009 $ 87,316
======== ======== ========
</TABLE>
Sales to the federal government were $275.4 million, $228.5 million and
$223.1 million in 1996, 1995, and 1994, respectively.
Net sales of tangible products in 1996, 1995 and 1994 amounted to $604.5
million, $335.2 million and $303.6 million, respectively, and costs and
operating expenses related to tangible goods amounted to $499.7 million,
$273.5 million and $244.4 million, respectively.
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, 1996
- ----------------------------
Revenues $141,509 $181,292 $247,895 $261,367 $832,063
Operating income 5,865 8,767 12,490 14,623 41,745
Net earnings 474 1,451 2,331 3,368 7,624
Net earnings per common share
Primary .03 .07 .10 .15 .35
Fully diluted .03 .07 .10 .14 .34
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 common share .05 .05 .01 .11
</TABLE>
19. Guarantor Subsidiaries
----------------------
The Company's obligations under the 9 1/8% Senior Notes, 11% Senior
Subordinated Notes and the revolving credit facility are unconditionally
guaranteed by each of the Company's domestic wholly-owned operating subsidiaries
(the "Guarantees"). The combined guarantors are jointly and severally liable
under the subsidiary guarantees. Each Guarantee under the Notes is a senior
unsecured obligation of the subsidiary providing such Guarantee and ranks pari
passu with all senior unsecured indebtedness of such subsidiary. The Guarantees
under the revolving credit facility are collateralized, in general, by the
accounts receivable and inventory of the subsidiaries and, therefore,
effectively rank senior to the Guarantees. The Guarantees under the Notes are
in effect only for as long as the Guarantees under the revolving credit agree-
ment remain in effect. If the Guarantees under the Notes 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.
The following condensed consolidating information presents:
(1) Condensed financial statements as of December 31, 1996 and 1995 and for
the years ended December 31, 1996, 1995 and 1994 of (a) the Company on
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>
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash $ 18,332 $ 36 $ $ 18,368
Accounts receivable, net 190 203,749 203,939
Unbilled costs and accrued
profits on contracts in progress 6,325 6,325
Inventories 127,777 127,777
Assets held for sale 2,541 4,232 6,773
Other 1,405 17,233 18,638
-------- -------- ---------
Total current assets 22,468 359,352 381,820
-------- -------- ---------
Assets held for sale-noncurrent 2,414 5,348 7,762
Property, plant & equipment, net 468 72,942 73,410
Cost in excess of net assets
of acquired companies, net 252,647 252,647
Other noncurrent assets 17,343 15,314 32,657
Investments in and advances
to subsidiaries 523,986 (523,986)
-------- -------- --------- ---------
Total assets $566,679 $705,603 $(523,986) $ 748,296
======== ======== ========= =========
</TABLE>
<PAGE>
UNC INCORPORATED
Condensed Consolidating Balance Sheet (cont.)
As of December 31, 1996
(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 $ 5,200 $ 117 $ $ 5,317
Accounts payable 1,899 120,676 122,575
Accruals and other current liabilities 25,129 52,120 77,249
-------- -------- ---------
Total current liabilities 32,228 172,913 205,141
-------- -------- ---------
Other noncurrent liabilities 31,144 8,103 39,247
Total liabilities 425,257 186,760 612,017
-------- -------- ---------
Cumulative preferred stock 250 250
Common stock and additional paid-
in capital 152,425 152,425
Retained earnings (deficit) (7,826) (7,826)
Equity of subsidiaries and
advances of parent 523,986 (523,986)
-------- -------- --------- ---------
144,849 523,986 (523,986) 144,849
Less:
Treasury stock at cost
(486,500 shares) 5,143 5,143
Minimum pension liability adjustment 1,790 1,790
Unearned compensation-restricted
stock 1,637 1,637
-------- -------- --------- ---------
Total shareholders' equity 141,422 518,843 (523,986) 136,279
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $566,679 $705,603 $(523,986) $ 748,296
======== ======== ========= =========
</TABLE>
<PAGE>
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>
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>
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Year Ended December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 832,063 $ $ 832,063
Costs and expenses
Costs and operating expense 710,589 710,589
Selling, general and
administrative expenses 14,037 68,692 82,729
Restructuring charge 3,000 3,000
Multi-employer pension plan
withdrawal adjustment (6,000) (6,000)
Allocated expenses (5,004) 5,004
--------- --------- ---------
9,033 781,285 790,318
--------- --------- ---------
Operating income (loss) (9,033) 50,778 41,745
Other income (expense)
Interest expense (28,709) (397) (29,106)
Other (2,136) 388 (1,748)
Equity in income of
subsidiaries 35,538 (35,538)
--------- --------- --------- ---------
4,693 (9) (35,538) (30,854)
--------- --------- --------- ---------
Earnings (loss) before income taxes (4,340) 50,769 (35,538) 10,891
Income tax benefit (provision) 11,964 (15,231) (3,267)
--------- --------- --------- ----------
Net earnings $ 7,624 $ 35,538 $ (35,538) $ 7,624
Preferred dividends 1,249 1,249
--------- --------- --------- ----------
Net earnings applicable to
common stock $ 6,375 $ 35,538 $ (35,538) $ 6,375
========= ========= ========= =========
</TABLE>
<PAGE>
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 (7,723) 7,723
--------- --------- ---------
8,700 505,187 513,887
--------- --------- ---------
Operating income (8,700) 31,056 22,356
Other income (expense)
Interest expense (17,987) (1,527) (19,514)
Other 141 (25) 116
Equity in income of
subsidiaries 19,178 (19,178)
--------- --------- --------- ---------
1,332 (1,552) (19,178) (19,398)
--------- --------- --------- ---------
Earnings (loss) before income taxes (7,368) 29,504 (19,178) 2,958
Income tax benefit (provision) 9,291 (10,326) (1,035)
--------- --------- --------- ---------
Net earnings $ 1,923 $ 19,178 $ (19,178) $ 1,923
========= ========= ========= =========
</TABLE>
<PAGE>
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 18,344 51,424 69,768
Restructuring charge 4,800 53,906 58,706
Multi-employer pension plan withdrawal
charge 14,000 14,000
Allocated expenses (7,104) 7,104
--------- --------- ---------
16,040 570,809 586,849
--------- --------- ---------
Operating income (loss) (13,440) (47,576) (61,016)
Other income (expense)
Interest expense (16,286) (2,263) (18,549)
Other (1,911) 61 (1,850)
Equity in income (loss) of
subsidiaries (41,535) 41,535
--------- --------- --------- ---------
(59,732) (2,202) 41,535 (20,399)
--------- --------- --------- ---------
Earnings (loss) before income taxes (73,172) (49,778) 41,535 (81,415)
Income tax benefit 5,240 8,243 13,483
--------- --------- --------- ---------
Net earnings (loss) $ (67,932) $ (41,535) $ 41,535 $ (67,932)
========= ========= ========= =========
</TABLE>
<PAGE>
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash provided (used) by operating
activities $ (15,970) $ 10,256 $ (5,714)
--------- --------- ---------
Cash flows from investing activities:
Net proceeds from sale of assets 77 8,625 8,702
Additions to property, plant and
equipment (105) (9,525) (9,630)
Acquisition of subsidiary (157,867) (157,867)
--------- --------- ---------
Net cash provided (used) by
investing activities (28) (158,767) (158,795)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 1,010,824 1,010,824
Reductions in debt (848,351) (29) (848,380)
Issuance of preferred stock 25,000 25,000
Other transactions, net (6,188) 1,199 (4,989)
Payment of preferred stock dividend (1,249) (1,249)
Net cash transfers to (from) parent (145,829) 145,829
--------- --------- ---------
Net cash provided (used) by
financing activities 34,207 146,999 181,206
--------- --------- ---------
Net increase (decrease) in cash 18,209 (1,512) 16,697
Cash at beginning of year 123 1,548 1,671
--------- --------- ---------
Cash at end of year $ 18,332 $ 36 $ 18,368
========= ========= =========
</TABLE>
<PAGE>
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 $ (23,402) $ 5,590 $ (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 (23,346) 23,346
--------- --------- ---------
Net cash provided (used) by
financing activities (3,914) (5,108) (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>
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 $ (28,349) $ 8,854 $ (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 20,454 (20,454)
--------- --------- ---------
Net cash provided (used) by financing
activities 22,634 (5,314) 17,320
--------- --------- ---------
Net increase in cash 662 463 125
Cash at beginning of year 857 637 1,494
--------- --------- ---------
Cash at end of year $ 1,519 $ 1,100 $ 2,619
========= ========= =========
</TABLE>
<PAGE>
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, 1996 and 1995, and for each
of the three years in the period ended December 31, 1996. 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 the 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, 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 14, 1997, except for
Note 3, as to which the date is
March 9, 1997
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Company.
(a) Directors of the Company.
The current Directors of the Company are set forth below:
<TABLE>
<CAPTION>
Name Age Served As Director Since
- ------ --- ------------------------
<S> <C> <C>
Dan A. Colussy 65 1981
Berl Bernhard 67 1992
Beverly B. Byron 64 1993
John K. Castle 56 1986
John W. Gildea 53 1996
Freeman A. Hrabowski, III 46 1996
George V. McGowan 69 1989
Jack Moseley 65 1987
Lawrence A. Skantze 68 1989
</TABLE>
Dan A. Colussy has been Chairman of the Board, Chief Executive Officer and
President of the Company since October 1995 and prior thereto served as
Chairman and Chief Executive Officer from September 1994. Mr. Colussy was
Chairman, President and Chief Executive Officer of the Company from 1989
through September 1994. From December 1984 through 1989, Mr. Colussy was
President and Chief Executive Officer of the Company. Mr. Colussy was
Chairman, President and Chief Executive Officer of Canadian Pacific Air Lines,
Limited, a commercial airline, from November 1982 until December 1984. Mr.
Colussy also served as Chairman of Columbia Air, a commercial airline, from
June 1981 to November 1982. Prior to that time, Mr. Colussy served in senior
management positions with Pan American World Airways, a commercial airline,
for more than five years, and was President and Chief Operating Officer from
1978 to December 1980. Mr. Colussy is a Director of Baltimore Gas and
Electric Company, a public utility, and Chairman of the Board of Blue Cross
Blue Shield of Maryland, Inc., a health insurer. Mr. Colussy has served as
a Director of the Company since 1981.
Berl Bernhard has been a Director of the Company since 1992. Since 1982, Mr.
Bernhard has been the Chairman of the law firm of Verner, Lipfert, Bernhard,
McPherson and Hand. Mr. Bernhard has been a partner in the firm since 1962.
Since 1992, Mr. Bernhard has been a Director of Uniroyal Chemical Company,
Inc., a manufacturer of speciality chemicals.
<PAGE>
Beverly B. Byron has been a Director of the Company since 1993. Ms. Byron has
been an independent consultant since November 1993. Ms. Byron served as a
Presidential Appointee to the Commission on Base Closure & Realignment during
1993. She served as a Representative in the United States Congress from
January 1979 to January 1993. Ms. Byron presently serves as a Director of
Baltimore Gas & Electric Company; McDonnell Douglas Corporation, an aerospace
manufacturer; Farmers & Mechanics National Bank of Frederick, a banking
corporation; and Blue Cross Blue Shield of Maryland, Inc.
Jack K. Castle has been a Director of the Company since 1986. Mr. Castle has
been the Chief Executive Officer and a Director of Branford Castle, Inc., an
investment firm, since September 1986. He has also served as Chairman, Chief
Executive Officer and Director of Castle Harlan, Inc., a merchant banking
firm, since June 1987. During the period 1979 to 1987, he served as the
President and Chief Executive Officer of Donaldson, Lufkin & Jenrette, Inc.,
an investment banking firm. Mr. Castle is a Director of Sealed Air
Corporation, a manufacturer of protective packaging materials; Quantum
Restaurant Group, Inc., a restaurant holding company; INDSPEC Chemical
Corporation, a manufacturer of specialty chemicals; and Homestead National
Corporation, an insurance holding company.
John W. Gildea has been a Director of the Company since June 1996. Mr. Gildea
is Managing Director of Gildea Management Company, a position he has held for
over 25 years. He presently serves as Director for Factory Stores of America,
America Service Group, Barry's Jewelers, and American Opportunity Trust, PLC.
Freeman A. Hrabowski, III has been a Director of the Company since April 1996.
Mr. Hrabowski has been the President of University of Maryland Baltimore
County ("UMBC") since 1993. He served as interim President of UMBC from 1992
to 1993 and Executive Vice President of UMBC from 1990 to 1993. Mr. Hrabowski
serves as a Director of Baltimore Gas & Electric Company, the Joint Center for
Political and Economic Studies, Loyola College of Maryland, the Maryland
Academy of Science, The Robert G. And Ann M. Merrick Foundation, Inc./The
Jacob and Anita France Foundation, Inc., a private grantmaking foundation,
Citizens Bank of Maryland/Citizens Bancorp of Maryland, the Baltimore
Equitable Society, Insurance, CollegeBound, University of Maryland Medical
System, and the Baltimore Community Foundation, a community grantmaking
foundation.
George V. McGowan has been a Director of the Company since 1989. Mr. McGowan
served as Chairman and Chief Executive Officer of the Baltimore Gas & Electric
Company from 1988 until his retirement in 1993. He presently serves as a
Director of Baltimore Gas & Electric Company; NationsBank, N.A. a bank holding
company; and McCormick and Company, Inc., a manufacturer of spices and
specialty foods.
Jack Moseley has been a Director of the Company since 1987. Mr. Moseley
served as Chairman, President and Chief Executive Officer of USF&G
Corporation, an insurance and financial services company, from 1980 until his
retirement in 1990.
Lawrence A. Skantze has been a Director of the Company since 1989. Mr.
Skantze has been an independent industrial consultant since August 1987. He
is a retired General, U.S. Air Force and served as the Commander, U.S. Air
Force Systems Command from July 1984 to August 1987.
(b) Executive Officers of the Company.
<PAGE>
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 65 Chairman of the Board, President 1984
and Chief Executive Officer
and Director
John J. Bonasia 63 Vice Chairman 1990
Robert L. Pevenstein 50 Senior Vice President and 1987
Chief Financial Officer
L. David Clemons 43 President, Garrett Aviation 1996
Services
Ronald W. Frederick 49 President, Manufacturing 1995
John H. Moellering 59 President, Aviation Services 1993
Gerald J. Knapp 54 Senior Vice President, 1991
Human Resources
Gregory M. Bubb 45 Vice President 1988
Paul X. McLain 56 Vice President, Financial Controls 1982
Kenneth G. Mosesian 49 Treasurer 1996
Richard H. Lange 63 Secretary 1987
______________________
</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.
The following information relates to the business experience during the
past five years of each Executive Officer named above:
John J. Bonasia has served as Vice Chairman of the Company since June
1996. Previously he was Senior Vice President, Manufacturing from October
1994. Prior to that time he served as Executive Vice President and Chief
Operating Officer of the Company from February 1992. He also served as Senior
Vice President and Chief Operating Officer since January 1991, and Group Vice
President of Engine Overhaul from August 1990.
Robert L. Pevenstein has served as Senior Vice President and Chief
Financial Officer of the Company since February 1992. He served as Vice
President Finance and Chief Financial Officer of the Company from October 1987
to February 1992. He joined the Company as Controller in September 1987.
L. David Clemons has served as President, Garrett Aviation Services
since June 1996. Previously he served as President and Chief Executive
Officer of Garrett since its inception in June 1994. Prior to this he served
as General Manager of the Los Angeles facility of Garrett Aviation Services
and in various positions with AlliedSignal's aircraft services and repair
business for over 20 years.
Ronald W. Frederick has served as President, Manufacturing since June
1996. Previously he was Vice President, Manufacturing Division since joining
the Company in July 1993. Prior to joining UNC, he served as President of
Johnson Technology and Gentz Manufacturing companies. He served as Director,
Manufacturing for Williams International, a manufacturing company. Also he
served in various management positions with General Electric Aircraft Engine
Group, a manufacturing company, for 21 years.
John H. Moellering has served as President, Aviation Services since June
1996. He joined the Company as Executive Vice President, UNC Aviation
Services in October 1993. Previously he was President and Chief Executive
Officer of Lear Siegler Management Services Corporation, an international
aviation maintenance service company, from 1990 to 1993. He served as
Corporate Vice President with Automatic Data Processing, Inc., a computer
operations and network services company, from 1987 to 1990.
Gerald J. Knapp has served as Senior Vice President, Human Resources
since May 1994. He joined the Company of Vice President, Human Resources in
April 1991. Prior to such time, he was Manager, Human Resources Management,
for Thomason Consumer Electronics, Inc., a consumer electronics company, and
General Electric Company, a manufacturing company.
Gregory M. Bubb has served as Vice President of the Company and Chief
Financial Officer of Garrett Aviation Services since January 1997. Previously
he was Senior Vice President, Finance and Treasurer since June 1996 and Vice
President and Treasurer since May 1992. He joined the Company as Treasurer
in March 1988.
Paul X. McLain joined the Company as Vice President, Financial Controls
in August 1982.
Kenneth G. Mosesian has served as Treasurer since November 1996. Prior
to joining the Company, he was Treasurer for Par Pharmaceutical, Inc. since
1993. He worked as a financial consultant from 1990 to 1993. Previously he
served in several finance positions with Primerica Corporation, a financial
services and specialty retailing company, from 1982 to 1989.
Richard H. Lange retired as Senior Vice President and General Counsel
of the Company in October 1996 but continues to serve as Secretary. He had
been 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.
Compliance with Section 16(a)
Section 16(a) of the Securities Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership. Except as otherwise noted, based solely on its review
of copies of the forms received by it, or written representations from certain
reporting persons that they were not required to file Form 5's, the Company
believes that during 1996, all filing requirements were complied with on a
timely basis. Form 4's reflecting the conversion of stock options to
restricted stock were filed ten days late for each of Messrs. Colussy,
Frederick, Pevenstein, Knapp and Bubb.
Item 11. Executive Compensation.
Summary Compensation Table
The following table summarizes certain information regarding the
Company's compensation of certain executive officers for the last three fiscal
years.
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Other Annual
Compensation
Year Salary Bonus ($) ($)(1)
---- -------- -----------------------
<S> <C> <C> <C> <C>
Dan A. Colussy, 1996 $630,007 $469,993 $47,376
Chairman, President and 1995 610,000 171,000(4) 44,887(5)
Chief Executive Officer 1994 592,019 150,000(6) 42,278
John H. Moellering, 1996 278,253 167,000 31,964
President, Aviation Services 1995 265,000 138,496(8) 29,798(5)
1994 260,344 - 88,852(9)
Robert L. Pevenstein, 1996 216,000 130,000 22,200
Senior Vice President and 1995 216,000 82,500(4) 28,741(5)
Chief Financial Officer 1994 211,587 57,764(6) 20,365
Ronald W. Frederick, 1996 215,384 145,000 157,251
President, Manufacturing 1995 179,502 56,543 19,778(5)
1994 156,538 49,309 5,000
John J. Bonasia, 1996 222,505 111,253 307,155(10)
Vice Chairman 1995 195,000 6,700 119,768(5)
1994 248,308 26,658(6) 62,239
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Restricted All Other
Stock Awards Stock Option Compensation
Year ($)(2) Award ($) ($)
---- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Dan A. Colussy, 1996 $648,000 $ 0 $34,564(3)
Chairman, President and 1995 436,526 171,000(4) 24,923(3)
Chief Executive Officer 1994 702,000 150,000 24,923(3)
John H. Moellering, 1996 - 0 9,000(7)
President, Aviation Service 1995 45,450 30,000 9,000(7)
1994 48,750 60,000 9,000(7)
Robert L. Pevenstein, 1996 67,500 0 9,000(7)
Senior Vice President and 1995 64,687 0 9,000(7)
Chief Financial Officer 1994 48,750 0 9,000(7)
Ronald W. Frederick 1996 22,500 0 9,000(7)
President, Manufacturing 1995 - 40,000 9,000(7)
1994 - 0 9,000(7)
John J. Bonasia 1996 - 0 9,000(7)
Vice Chairman 1995 - 0 9,000(7)
1994 - 0 9,000(7)
- ------------------------
</TABLE>
(1) The Company also provides certain perquisites and other personal
benefits. Except as noted, the aggregate dollar cost to the Company of
the perquisites and other personal benefits in each of the represented
years did not exceed the lesser of $50,000 or 10% of the amount
reflected in the Salary and Bonus columns for any of the named executive
officers.
(2) As of December 31, 1996, Messrs. Colussy, Moellering, Pevenstein,
Frederick and Bonasia held 316,034, 12,500, 25,000, 2,500, and 5,000
shares of restricted stock having a value of $3,792,408, $150,000,
$300,000, $30,000, and $60,000, respectively, based upon a $12.00 per
share closing price of the Company's Common Stock as reported on the New
York Stock Exchange as of December 31, 1996, the last trading day of the
fiscal year. Dividends are paid on all restricted stock to the same
extent as any other shares of the Company's Common Stock. In connection
with the awards of restricted stock in 1996, 1995 and 1994, each of the
named executive officers canceled an equal number of stock options
without compensation.
(3) Includes Company contributions under the Company's 401(k) Retirement
Income Savings Plan of $9,000 and an insurance premium of $15,923 paid
by the Company in respect of life insurance coverage for the benefit of
Mr. Colussy in 1994 and 1995 and $25,564 paid in 1996.
(4) In December 1995, the Compensation Committee authorized payment of
special awards to certain executive officers and key employees of the
Company in recognition of their exceptional performance during 1995
related to the sale of the Company's Naval Products property in
Connecticut for the total amount of $28.4 million. These awards, which
included $150,000 payable to Mr. Colussy and $75,000 to Mr. Pevenstein,
were not part of the Incentive Compensation Plan of the Company.
(5) Includes contributions paid directly to the employee that would have
been included in the Company's contributions in 1994 and 1995 to the
Company's 401(k) Retirement Income Savings Plan, but for limitations
imposed pursuant to the 1993 Tax Act.
(6) In July 1994, the Compensation Committee authorized payment of special
awards to certain executive officers and key employees of the Company
in recognition of their exceptional performance during 1993 on specific
projects that were of major benefit to the Company. These awards were
not part of the Incentive Compensation Plan of the Company, under which
no bonuses were earned in respect of 1993.
(7) Company contribution under the Company's 401(k) Retirement Income
Savings Plan.
(8) Includes bonus paid in April 1995 in the amount of $85,000, which
related to his performance in 1994, but was paid subsequent to the
filing of the Proxy Statement in 1995.
(9) Includes reimbursement of relocation costs of $38,767.
(10) Includes $284,125 realized upon the exercise of stock options in 1996.
Stock Option Grants in the Last Fiscal Year
There were no stock options granted by the Company to Messrs. Colussy,
Moellering, Pevenstein, Frederick or Bonasia pursuant to the Company's stock
option plans during the last fiscal year.
Aggregated Stock Option Exercises in Last Fiscal Year, and Fiscal Year-End
Option Value
The following table sets forth, on an aggregate basis, certain information
concerning each exercise of stock options during the last fiscal year by each
of the named executive officers, and the fiscal year-end value of unexercised
stock options.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-
Shares Options Money Options
Acquired on Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Dan A. Colussy, * * 450,000/0 $3,730,432/0
John H. Moellering * * 68,000/34,500 $357,980/$174,870
Robert L. Pevenstein * * 142,500/0 $1,081,720/0
Ronald W. Frederick * * 23,500/24,000 $146,865/$160,560
John J. Bonasia 50,000 $ 284,125 99,000/0 $748,440/0
</TABLE>
* These named executive officers did not exercise options during 1996
<PAGE>
Defined Benefit Plans - Pension Plan Table
The Company has a non-tax-qualified Supplemental Executive Retirement
Plan for Key Employees (the "Supplemental Retirement Plan"), adopted as of
December 22, 1983. The following table sets forth examples of the annual
benefits payable under the Company's Supplemental Retirement Plan upon
retirement for certain specified levels of final average compensation and
years of service:
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------
Final Average
Compensation 4 6 8 10
- ----------------- --------- --------- -------- ----------
<S> <C> <C> <C> <C>
$200,000......... $ 48,000 $ 72,000 $96,000 $120,000
300,000......... 72,000 108,000 144,000 180,000
400,000......... 96,000 144,000 192,000 240,000
600,000......... 144,000 216,000 288,000 360,000
800,000......... 192,000 288,000 384,000 480,000
</TABLE>
Benefits under the Supplemental Retirement Plan are payable in monthly
installments, equal to 60% of the person's final average compensation
multiplied by a ratio equal to one-tenth of the participant's years of
service, provided, however, that no participant shall receive more than 10
years of service and such ratio shall equal zero until a participant completes
two years of service. Final average compensation is defined as the average of
the employee's annual base salary, incentive bonus and similar payments (as
set forth in the compensation column of the Summary Compensation Table above)
for the three calendar years that produce the highest annual rate of
compensation out of the ten calendar years prior to termination of employment
or retirement. Benefit payments are not subject to any offset for Social
Security benefits. Benefits become payable upon a participant's attaining age
65, or upon a participant's death, in which event benefits are paid to the
surviving spouse, if any. However, at a participant's election, a reduced
level of benefits may become payable upon a termination of employment for a
reason other than cause after attaining age 55. Upon a change in control of
the Company, as defined, the Company, is required to pay each eligible
participant in a lump sum the present value of the participant's accrued and
vested benefit as of the date of such change. Messrs. Colussy, Pevenstein,
Moellering, Bonasia and Frederick are each participants under the Supplemental
Retirement Plan. As of January 1, 1997, Mr. Colussy was fully vested under the
plan and Messrs. Pevenstein, Moellering, Bonasia and Frederick were credited
with 9.3, 3.2, 8.5, and 1.7 years of service, respectively.
Compensation of Directors
Directors who are employees of the Company receive no additional
compensation for their services as directors or as members of committees of
the Board. Cash compensation payable to other directors for services in that
capacity under the Outside Directors Compensation Plan currently consists of
a retainer of $15,000 per year and a fee of $1,000, plus travel expenses, for
each day of each meeting of Board of Directors attended in person and a fee
of $500 for participation in a meeting by telephone. Additional annual
retainers of $3,000 and $2,000 are paid to the Chairman of each committee and
to each member of a committee, respectively. Members of the committees are
also paid a fee of $800 for each committee meeting attended in person and a
fee of $400 for participation in a committee by telephone. In addition to any
retainer or meeting fees for serving on the Board of Directors or any
committee, a director who renders services on behalf of the Company outside
of formal meetings is compensated for such services at the rate of $1,000 per
day.
Effective as of July 31, 1987, the Company adopted the Outside Directors
Separation from Service Plan (the "Outside Directors Services Plan"). All
directors who are not employed by the Company automatically become
participants under the Outside Directors Service Plan, but must have served
on the Board of Directors for three years before their benefits become vested.
Benefits are payable in monthly installments, equal to the director's final
basic retainer fee, multiplied by a ratio equal to one-tenth of the director's
years of service, provided, however, that no director shall receive more than
10 years of service and such ratio shall equal zero until a director completes
three years of service. Benefits become payable upon a director's ceasing to
serve on the Board of Directors, or upon a director's death in which event
benefits are paid to the surviving spouse, if any. Upon a change in control
of the Company, as defined, the Company is required to pay each eligible
director in a lump sum the present value of the director's accrued and vested
benefit as of the date of such change. All directors not otherwise employed
by the Company are participants under the Outside Directors Service Plan.
Directors are eligible to participate in the Company's group life
insurance program.
Employment Contracts and Other Transactions
Dan A. Colussy, Chairman, President and Chief Executive Officer of the
Company, is serving under an employment agreement the term of which has been
extended to December 31, 1997. The Company is required to provide Mr. Colussy
life insurance coverage of $1,000,000 at the Company's expense until age 65
and thereafter the Company pays an agreed upon portion of the premiums due
until Mr. Colussy reaches age 71. Mr. Colussy's employment agreement provides
for varying severance benefits, including compensation, additional service
credit, coverage under employee benefit plans for a minimum of three years,
vesting of stock options and restricted stock awards, and some relocation
expenses, upon certain events of termination of employment, such as
termination after a change in control.
The Company has also entered into agreements with certain key employees,
including Messrs. Bonasia, Pevenstein, Moellering and Frederick providing
benefits for a period of three years following a change in control of the
Company as defined in the agreements, including continued employment for a
specified period and vesting of stock options and restricted stock awards. In
addition, these agreements provide the employee an election to terminate his
employment up to one year after a change in control, which will result in a
continuation of salary and benefits for two years following the date of such
termination.
Statement of Management Development and Compensation Committee on Executive
Compensation
The Company has required that a substantial portion of the compensation
of its executives and other key employees shall be at risk, based on the
financial performance of the Company against specific goals established by the
Board of Directors.
Under the Company's Incentive Compensation Plan, the Management
Development and Compensation Committee ("Compensation Committee") establishes
early each year the business attainment goals to be achieved by the Company
and each of its operating divisions during the year. Incentive compensation
awards for attaining each of these goals can amount to 50% or more of the base
salary (or 33% or more of total compensation) of the Company's executives, and
30% or more (or 25% or more of total compensation) for participating key
employees of its operating divisions.
The performance of both the Company (or, as applicable, each operating
division) and the individual executive or key employee are further considered
in connection with discretionary awards under the Plan, which can amount to
20% or more of the award for business goal attainment. As a result, 37.5% or
more of the total compensation of the Company's executives is at risk related
to the financial performance of the Company and, more generally, to their
individual performance.
Company performance, as related to the market price of its stock, is
also the only element in the Company's long term incentive compensation policy
for executives and key employees since the Company has no incentive plan
providing long term cash compensation. Under the Company's stock plans,
approved by its stockholders and administered by the Compensation Committee,
executives and participating key employees receive incentives in the form of
stock options, valued at the market price of the Company's stock at time of
grant, and, on a more limited basis, in the form of restricted stock. These
incentives are potentially substantial, based entirely on increases in the
price of the Company's stock over a period of years in the future. Such
options and restricted stock vest over a period of five years and, in the case
of options, can be exercised, as vested, over a ten year period, providing
longer term performance based incentives.
The Company's stock option program requires that a participant purchase
with his or her own funds, on the open market, a number of shares equal to 25%
of his or her award, and hold that stock in order to be eligible to exercise
any portion of the option. Thus, each executive and key employee of the
Company who is a participant in the option program personally has a
substantial economic stake in the performance of the Company as reflected in
the price of its stock, thus further aligning the interests of executives and
key employees with those of the Company's stockholders.
This performance orientation is also considered by the Compensation
Committee in establishing base salary compensation for the executives of the
Company and the heads of its operating divisions. The degree to which the
performance of the Company as a whole may be a consideration in determining
salary level necessarily increases with the level of responsibility of the
executive or key employee.
The Company's Chief Executive Officer
The compensation of the Company's Chief Executive Officer is
established by the Compensation Committee, and in accordance with Company
policy, must be ratified by the entire Board of Directors. The Chief Executive
Officer is responsible to the Board for both the current performance and the
future prospects of the Company as a whole. It is on this basis, and in the
light of his performance of that responsibility, that his base salary, the
discretionary portion of his incentive awards, if any, and his stock option
and restricted stock awards are established.
The current performance of the Company extends in many directions beyond
its day to day operations; it includes the relationship between the Company
and its several key constituencies, including investors, media, financial
sources and federal and state governments and regulatory agencies, as well as
the Company's relationships with its customers and within each of the
industries in which it is engaged. The current performance of the Company also
entails an ongoing deep involvement in developments affecting each of those
industries. The current performance of the Company also includes its day to
day operations, including substantial investment and policy decisions, the
monitoring of the results of operations, the development of opportunities, the
remedy of problems and the resolution of issues.
Of particular importance to the Compensation Committee in determining
the total compensation of the Chief Executive Officer for 1996 were his
direction and leadership of the Company in acquiring Garrett Aviation
Services, financing the acquisition, and integrating Garrett successfully into
the Company. This development had a significant positive impact on the
Company's financial position, allowing it to continue to pursue its growth
strategy.
The non-discretionary portion of the Chief Executive Officer's incentive
award for 1996 was based on specific business attainment goals to be achieved
by the Company. These were the Company's earnings per share and return on
invested capital.
Company Executive Officers
The Compensation Committee has followed generally similar criteria in
establishing the compensation of the executive officers of the Company
reporting to the Chief Executive Officer, including those previously named in
this Annual Report. In a real sense, the performance of each of these officers
directly affects the performance of the Company, even though their
responsibilities and areas of action are relatively defined and, in most
cases, somewhat specialized.
With regard to the executive officers of the Company as a group for
purposes of this statement, the Compensation Committee establishes their base
salary within salary ranges derived from publicly available survey data that
is principally industry and occupationally specific. The individual
executive's performance of his responsibilities is used to establish his
salary level within that range. The Compensation Committee relies on
appropriate corporate staff input, primarily as to salary ranges, and the
recommendations of the Company's Chief Executive Officer regarding individual
performance and salary level for each of the executive officers of the
Company.
As with the Chief Executive Officer of the Company, the incentive
compensation of each of the executive officers for 1996 was contingent on
business goal attainment and represented a substantial at risk proportion of
his total compensation that was dependent on the financial performance of the
Company against specific goals that were established by the Compensation
Committee for the year. As with the Chief Executive Officer, the Company
performance measures for non-discretionary incentive awards in respect of 1996
were based on earnings per share and return on invested capital. In addition,
also representing at risk compensation, the discretionary award to each
executive officer was dependent on Company performance within his area of
responsibility and his individual performance both generally and with regard
to the attainment of specific goals established with each executive.
Also at risk, and dependent on the performance of the Company as
reflected in the market price of its stock, is the long term stock based
compensation potentially available to executives. The Compensation Committee
determines the stock option and restricted stock awarded to those executives
based principally on the individual performance of their responsibilities and
the importance of that performance with respect to the future prospects of the
Company.
Regulations of the Internal Revenue Service are now final regarding
performance based compensation for purposes of the Company's deduction of
compensation for the Chief Executive Officer of the Company, or other
executive officers, in excess of $1 million in any one fiscal year. Although
the compensation of the Chief Executive Officer in 1996 slightly exceeded the
$1 million limit, the Company does anticipate that the full amount of
compensation will be deductible under the terms of the regulations as finally
issued.
Management Development and
Compensation Committee
John K. Castle, Chairman
George V. McGowan
Jack Moseley
Comparison of Five-Year Cumulative Total Return Among
UNC Incorporated, NYSE Market Value Index and Peer Group Index
<TABLE>
<CAPTION>
Unc Peer Group NYSE Market
Year Incorporated Index Index
---- ------------ ---------- -----------
<S> <C> <C> <C>
1991 100 100 100
1992 92 83 105
1993 156 91 119
1994 100 89 117
1995 100 114 151
1996 200 167 182
</TABLE>
The foregoing chart shows the value of $100 invested on January 1, 1992
in Company Common Stock, in the New York Stock Exchange ("NYSE") Market Value
Index and in a peer group comprised of companies that participate in the same
industries in which the Company now participates. The chart is compiled on
a "total return" basis, including not only year to year appreciation, or
depreciation, in the price of stocks represented on the chart, but also
assuming the reinvestment of dividends paid during each year. The Company
does not pay any dividends.
The companies comprising NYSE index represent a diverse cross section
of industries in the United States. The index is generally used to portray
the price levels of stocks listed on the NYSE, and does not purport to afford
a direct comparison of such companies with the Company. Companies in the peer
group are AAR Corp., Barnes Group, Inc., Ducommun Incorporated and Sequa, Inc.
Also, it should be noted that the chart shows information relating only
to stock prices. It does not purport to show information directly relating
to the business or economic performance of any of the companies, including the
Company, as to which stock price information is shown.
Item 12. Ownership of Common Stock by Certain Persons.
The following table sets forth information, as of February 14, 1997,
concerning those persons known to the Company to be the beneficial owners of
more than 5% of the issued and outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage
Beneficial Owner (1) Beneficially Owned of Class
- -------------------- ------------------ ----------
<S> <C> <C>
Heartland Advisors, Inc. (2)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 2,025,147(3) 11.0%(4)
Heartland Group, Inc.(5)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 1,100,000(6) 6.8%
Bridge Partners, L.P.(7))
115 East Putnam Avenue
Greenwich, Connecticut 06830 2,014,286(3) 10.1%(8)
Carson Street Partners, Inc.(9)
115 East Putnam Avenue
Greenwich, Connecticut 06830 2,014,286(3) 10.1%(8)
John W. Gildea(10)
115 East Putnam Avenue
Greenwich, Connecticut 06830 3,000,000(3) 14.4%(8)
Network Fund III Ltd (11)
P.O. Box 219 Butterfield House
Grand Cayman, Cayman Islands B.W.I. 842,857(3) 4.5%(8)
J O Hambro & Company Limited(12)
10 Park Place
London SW1A 1LP England 1,257,500(13) 7.1%(14)
J O Hambro Asset Management Limited(12)
10 Park Place
London SW1A 1LP England 1,257,500(13) 7.1%(14)
J O Hambro & Partners Limited(15)
10 Park Place
London SW1A 1LP England 1,257,500(13) 7.1%(14)
Christopher Harward Bernard Mills(15)
10 Park Place
London SW1A 1LP England 1,257,500(13) 7.1%(14)
Growth Financial Services Limited(16)
77 Middle Street
Brockham, Surrey
RH3 7HL England 600,000(13) 3.4%(14)
North Atlantic Smaller
Companies Investment Trust plc(17)
77 Middle Street
Brockham, Surrey
RH3 7HL England 600,000(13) 3.4%(14)
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage
Beneficial Owner (1) Beneficially Owned of Class
- -------------------- ------------------ ----------
<S> <C> <C>
American Opportunity Trust plc (17)
77 Middle Street
Brockham, Surrey
RH3 7HL England 250,000(13) 1.4%(14)
Oryx International Growth
Fund Limited(17)
Bermuda House
St Julian's Avenue
St Peter Port, Guernsey 300,000(13) 1.7%(14)
Consulta (Channel Islands) Limited (15)
P.O. Box 208
Bermuda House
St. Julian's Avenue
St. Peter Port, Guernsey 300,000(13) 1.7%(14)
Dan A. Colussy
c/o UNC Incorporated
175 Admiral Cochrane Dr.
Annapolis, MD 21401 977,780(18) 5.3%
- ---------------------------------
</TABLE>
(1) The information set forth above with respect to Heartland Advisors and
Heartland Group was provided to the Company in the beneficial owner's
Schedule 13G dated December 8, 1995, as amended by Amendment No.2 dated
February 12, 1997. The information set forth above with respect to
Bridge Partners, L.P., Carson Street Partners, Inc., John W. Gildea and
Network Fund III Ltd. was provided to the Company in the beneficial
owner's schedule 13D dated June 10, 1996. The information set forth
above with respect to J O Hambro & Partners Limited, J O Hambro Asset
Management Limited, J O Hambro & Company Limited, Growth Financial
Services Limited, Christopher Harwood Bernard Mills, North Atlantic
Smaller Companies Investment Trust plc, American Opportunity Trust plc,
Oryx International Growth Fund Limited and Consulta (Channel Islands)
Limited was provided to the Company in the beneficial owner's Schedule
13D dated May 9, 1996, as amended by Amendment No. 2 dated July 8, 1996.
(2) Reporting as an investment advisor in accordance with Rule
13d-1(b)(1)(ii)(E) in respect of shares beneficially owned by its
clients.
(3) Sole voting power and sole dispositive power in respect of all shares.
(4) Of which 6.8% is also held by Heartland Group.
(5) Reporting as an investment company in accordance with Rule 13d-
1(b)(1)(ii)(D) in respect of shares beneficially owned by its clients.
(6) Sole voting power only in respect of all shares.
(7) Reporting as a limited partnership which is the owner of 141,000 shares
of the Company's Series B Senior Cumulative Preferred stock, convertible
into 2,014,286 shares of common stock.
(8) Filing as part of a group which owns an aggregate of 3,000,000 shares.
(9) Reporting as a corporation which is the general partner of Bridge
Partners, L.P.
(10) Reporting as an individual who is the Chairman of the Board of
Directors, Chief Executive Officer, President and Controlling
Stockholder of Carson Street Partners, Inc. as well as the Chairman of
the Board, Chief Executive Officer, President and sole stockholder of
Gildea Management Company, which has the power to dispose of the 842,857
shares owned by Network Fund III, Ltd pursuant to an Investment Advisory
Agreement.
(11) Reporting as a corporation which is the owner of common stock set forth
above.
(12) Reporting as a holding company in accordance with Rule 13d-
1(b)(1)(ii)(G) in respect of shares beneficially owned by its clients.
(13) Shared investment power and shared dispositive power in respect of all
shares.
(14) Filing as part of a group which beneficially owns an aggregate of
1,257,500 shares.
(15) Reporting as an investment advisor in accordance with Rule 13d-
1(b)(1)(ii)(E) in respect of shares beneficially owned by its clients.
(16) Reporting as an investment advisor pursuant to a contract with
Christopher Mills in accordance with Rule 13d-1(b)(1)(ii)(E) in respect
of shares beneficially owned by its clients.
(17) Reporting as an investment company in accordance with Rule 13d-
1(b)(1)(ii)(D) in respect of shares beneficially owned by its clients.
(18) Includes 450,000 shares with respect to which Mr. Colussy, as of January
1, 1997, has the right to acquire ownership upon exercise of outstanding
stock options within 60 days, 316,034 shares of restricted stock,
80,000 shares of unrestricted stock, 128,500 shares owned by Mr.
Colussy's spouse and 3,246 shares that Mr. Colussy has the right to
acquire within 60 days upon exercise of conversion rights relating to
the Company's Convertible Debentures.<PAGE>
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth the beneficial ownership, as of January
1, 1997, of Common Stock by each of the directors and nominees for director,
each of the executive officers named in the Summary Compensation Table, and
all directors and executive officers as a group, as reported by such persons.
Unless otherwise indicated in a footnote to the table, the director, nominee
or executive officer held sole voting and investment power over the shares.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name Beneficially Owned of Class
- ------ ------------------ ----------
<S> <C> <C>
Berl Bernhard 8,000 *
John J. Bonasia 122,500 *
Beverly B. Byron 5,000 *
John K. Castle 30,000 *
Dan A. Colussy (1)(2) 977,780 5.3%
Ronald W. Frederick(1) 38,800 *
John W. Gildea 3,000,000 14.4%
Freeman A. Hrabowski, III 0 *
George V. McGowan 2,000 *
John H. Moellering(1) 94,000 *
Jack Moseley 10,000 *
Robert L. Pevenstein(1)(3) 204,550 *
Lawrence A. Skantze(4) 20,000 *
All directors and executive officers
as a group (20 persons)(1) 4,904,557 26.8%
- --------------------------
</TABLE>
* Less than 1%
(1) The number of shares stated as "beneficially owned" by executive officers
includes shares with respect to which such executive officers, as of
January 1, 1997, have the right to acquire beneficial ownership within
60 days (a) upon the exercise of outstanding options, if such options
are exercised, as follows: Mr. Colussy, 450,000; Mr. Moellering, 68,000;
Mr. Frederick, 23,500; Mr. Pevenstein, 142,500; Mr. Bonasia, 99,000;
and all directors and executive officers as a group, exclusive of the
foregoing 195,062, and (b) upon exercise of conversion rights relating
to the Company's Convertible Debentures, as follows; Mr. Colussy, 3,246;
and Mr. Pevenstein, 4,550.
(2) The number of shares shown as beneficially owned by Mr. Colussy includes
128,500 shares owned by his spouse, 316,034 shared of restricted stock
and 80,000 shares of unrestricted stock.
(3) The number of shares shown as beneficially owned by Mr. Pevenstein
includes 28,798 shares owned jointly with his spouse, and 1,558 shares
held in custodian for his minor children.
(4) The number of shares shown as beneficially owned by Mr. Skantze includes
20,000 owned jointly with his spouse.
Item 13. Certain Relationships and Related Transactions.
Mr. Knapp, an executive officer of the Company, was indebted to the
Company during the year in connection with a loan made by the Company to
facilitate the purchase of a home upon his relocation to the Annapolis area.
The outstanding loan balance throughout the year was $124,000, which balance
was reduced to $55,000 as of January 1997.
Following the Company's acquisition of Garrett in May 1996, L. David
Clemons was elected as an officer of the Company and director of several of
the Company's subsidiaries. Mr. Clemons was a shareholder of one of the
selling entities in the Garrett acquisition and as such received a share of
the purchase price of approximately $145 million paid by the Company.
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, 1996, 1995 and 1994 22
Consolidated balance sheets - as of
December 31, 1996 and 1995 23-24
Consolidated statements of cash flows -
years ended December 31, 1996, 1995 and 1994 25
Consolidated statements of changes in
shareholders' equity - years ended
December 31, 1996, 1995 and 1994 26
Notes to consolidated financial statements 27-54
Report of Independent Accountants 55
Page Number
Index to Consolidated Financial Statement Schedules: in this Report
- --------------------------------------------------- --------------
Schedule VIII Valuation and qualifying
accounts - for the three
years ended December 31, 1996 84
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).
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) (filed as Exhibit 4.6 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 -- File No. 1-7795
and incorporated herein by reference).
4.7 Third Supplemental Indenture, dated as of May 15, 1996, among UNC
Incorporated, UNC Johnson Technology, Inc., UNC Parts Company,
the other corporations identified as Guarantors therein and
Chemical Bank, as Trustee (filed as Exhibit 4.11 to the Company's
registration statement on Form S-8, No. 333-6389 and incorporated
herein by reference).
4.8 Fourth Supplemental Indenture, dated as of May 30, 1996, among
UNC Incorporated, the corporations identified as Guarantors
therein and Chemical Bank, as Trustee (filed as Exhibit 4.12 to
the Company's registration statement on Form S-8, No. 333-6389
and incorporated herein by reference).
4.9 Indenture dated as of May 30, 1996, among UNC Incorporated, the
other corporations identified therein as Guarantors and The Bank
of New York, as Trustee (relating to the Company's 11% Senior
Subordinated Notes due 2006) (filed as Exhibit 4.13 to the
Company's registration statement on Form S-8, No. 333-6389 and
incorporated herein by reference).
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).
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
commence on the date such employee becomes a participant under
the plan, respectively (filed as Exhibit 10-A (xiii) 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).
10.16 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
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 (filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993 -- File No. 1-7795 and incorporated herein by
reference).
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 (filed as Exhibit
10.27 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 -- File No. 1-7795 and incorporated
herein by reference).
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
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 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 (filed as Exhibit 10.37 to the
Company's Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
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 (filed as Exhibit 10.38 to the Company's
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
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 (filed as Exhibit 10.39 to the Company's
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.40 Purchase Agreement, dated May 23, 1996, by and among CS First
Boston Corporation, First Union Capital Markets Corp. and the
Company and its subsidiaries named therein (filed as Exhibit 10.1
to the Company's registration statement on Form S-4, No. 333-9959
and incorporated herein by reference).
10.41 Registration Rights Agreement, dated May 23, 1996, by and among
CS First Boston Corporation, First Union Capital Markets Corp.
and the Company and its subsidiaries named therein (filed as
Exhibit 10.2 to the Company's registration statement on Form S-4,
No. 333-9959 and incorporated herein by reference).
10.42 Agreement and Plan of Reorganization; dated February 13, 1997 by
and among UNC Incorporated, Greenwich Air Services, Inc., and
Condor Acquisition Corporation (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated February 19, 1997).
10.43 Amended and Restated Credit Agreement, dated as of May 22, 1996,
by and among UNC Incorporated, the Lenders who or may become a
party to the Credit Agreement, First Union Commercial
Corporation, as administrative and collateral agent, and First
Union National Bank of North Carolina, as the issuing bank for
letter of credit.
10.44 Amendment No. 1 to Amended and Restated Credit Agreement dated as
of October 2, 1996, by and among UNC Incorporated, First Union
Commercial Corporation, as administrative and collateral agent
and First Union National Bank of North Carolina, as issuer of
certain letters of credit.
10.45 Amendment No. 2 to Amended and Restated Credit Agreement dated as
of December 19, 1996, by and among UNC Incorporated, First Union
Commercial Corporation, as administrative and collateral agent
and First Union National Bank of North Carolina, as issuer of
certain letters of credit.
10.46 Agreement, dated September 27, 1996, between the Company and Dan
A. Colussy amending the Employment Agreement referred to in
Exhibit 10.19 hereof.
10.47 1996 Stock Option Plan for Key Employees of UNC Incorporated and
its subsidiaries dated as of October 1, 1996.
10.48 Letter to Robert L. Pevenstein dated as of February 15, 1995,
regarding a change in the period for termination of benefits in
UNC's August 19, 1987 employment agreement.
10.49 Offer letter dated as of August 19, 1987, to Robert L. Pevenstein
for the position of Vice President and Controller.
10.50 Offer letter dated as of September 24, 1994, to John J. Bonasia
for the position of Senior Vice President, Manufacturing.
10.51 Offer letter dated as of August 20, 1990, to John J. Bonasia for
the position of UNC Group Vice President - Engine Overhaul
Operations.
10.52 Offer letter dated as of May 20, 1988, to John J. Bonasia for the
position of Senior Vice President of Sales for Airwork
Corporation.
10.53 Offer letter dated as of November 21, 1995, to Ronald W.
Frederick for the position of Vice President, Manufacturing.
10.54 Offer letter dated as of January 9, 1995, to Ronald W. Frederick
for the position of General Manager, Manufacturing.
10.55 Offer letter dated as of July 23, 1993, to Ronald W. Frederick
for the position of Vice President of Johnson Technology.
10.56 Offer letter dated as of October 26, 1993, to John Moellering for
the position of Executive Vice President and Chief Operating
Officer of UNC Aviation Services.
10.57 Amended and Restated Agreement and Plan of Merger, dated March 9,
1997 among Greenwich Air Services, Inc., Condor Acquisition
Corp., and UNC Incorporated (filed as exhibit 1 to the Company's
Current Report on Form 8-K dated March 14, 1997).
10.58 Agreement and Plan Merger dated March 9, 1997 among General
Electric Company, Greenwich Air Services, Inc., and GB Merger
Corp.,(filed as exhibit 2 to the Current Report on Form 8-K dated
March 14, 1997).
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 Independent Accountants' Consent
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, 1996.
(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>
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 25, 1997
By: /s/ Robert L. Pevenstein
---------------------------
Robert L. Pevenstein
Senior Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
<PAGE>
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, February 26, 1997
- ------------------------ President, Chief Executive
(Dan A. Colussy) Officer and Director
/s/ Robert L. Pevenstein Senior Vice President and March 25, 1997
- ------------------------ Chief Financial Officer
(Robert L. Pevenstein (principal financial and
accounting officer)
/s/Berl Bernhard* Director February 25, 1997
- ------------------------
(Berl Bernhard)
/s/John K. Castle* Director February 25, 1997
- ------------------------
(John K. Castle)
/s/John W. Gildea * Director February 25, 1997
- ------------------------
(John W. Gildea)
/s/Freeman A. Hrabowski III*Director February 27, 1997
- ---------------------------
(Freeman A. Hrabowski III)
/s/George V. McGowan* Director February 26, 1997
- ------------------------
(George V. McGowan)
/s/Jack Moseley* Director February 27, 1997
- ------------------------
(Jack Moseley)
/s/Lawrence A. Skantze* Director February 26, 1997
- ------------------------
(Lawrence A. Skantze)
/s/Beverly B. Byron* Director February 25, 1997
- ------------------------
(Beverly B. Byron)
</TABLE>
* By /s/Robert L. Pevenstein
-----------------------
(Robert L. Pevenstein)
Attorney-in-Fact
<PAGE>
UNC INCORPORATED AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts
For the Three Years Ended December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions(1) of Year
----------- --------- --------- ------------- --------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable:
Year ended December 31, 1996 $ 3,186 $ 5,426(1) $ 1,934(2) $ 6,678
========= ========= ========= =========
Year ended December 31, 1995 $ 3,706 $ 1,637 $ 2,157(2) $ 3,186
========= ========= ========= =========
Year ended December 31, 1994 $ 6,366 $ 4,296 $ 6,956(2) $ 3,706
========= ========= ========= =========
Deferred Income Tax Asset
Valuation Allowance:
Year ended December 31, 1996 $ 15,710 $ 2,122(3) $ 13,588
========= ========= =========
Year ended December 31, 1995 $ 17,041 $ 1,331(3) $ 15,710
========= ========= =========
Year ended December 31, 1994 $ 3,349 $ 13,692 $ 17,041
========= ========= =========
</TABLE>
(1) Includes $3,560 acquired in the acquisition of Garrett and $1,866 which
was charged to costs and expenses in 1996.
(2) Uncollected receivables written off, net of recoveries.
(3) 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.
<PAGE>
SEQUENTIAL EXHIBIT INDEX
The following exhibits are being filed herewith:
Exhibit
Number Description
- ------- -----------
10.43 Amended and Restated Credit Agreement, dated as of May 22,
1996, by and among UNC Incorporated, the Lenders who or may
become a party to the Credit Agreement, First Union
Commercial Corporation, as administrative and collateral
agent, and First Union National Bank of North Carolina, as
the issuing bank for letter of credit.
10.44 Amendment No. 1 to Amended and Restated Credit Agreement
dated as of October 2, 1996, by and among UNC Incorporated,
First Union Commercial Corporation, as administrative and
collateral agent and First Union National Bank of North
Carolina, as issuer of certain letters of credit.
10.45 Amendment No. 2 to Amended and Restated Credit Agreement
dated as of December 19, 1996, by and among UNC
Incorporated, First Union Commercial Corporation, as
administrative and collateral agent and First Union
National Bank of North Carolina, as issuer of certain
letters of credit.
10.46 Agreement, dated September 27, 1996, between the Company
and Dan A. Colussy amending the Employment Agreement
referred to in Exhibit 10.19 hereof.
10.47 1996 Stock Option Plan for Key Employees of UNC
Incorporated and its subsidiaries dated as of October 1,
1996.
10.48 Letter to Robert L. Pevenstein dated as of February 15,
1995, regarding a change in the period for termination of
benefits in UNC's August 19, 1987 employment agreement.
10.49 Offer letter dated as of August 19, 1987, to Robert L.
Pevenstein for the position of Vice President and
Controller.
10.50 Offer letter dated as of September 24, 1994, to John J.
Bonasia for the position of Senior Vice President,
Manufacturing.
10.51 Offer letter dated as of August 20, 1990, to John J.
Bonasia for the position of UNC Group Vice President -
Engine Overhaul Operations.
10.52 Offer letter dated as of May 20, 1988, to John J. Bonasia
for the position of Senior Vice President of Sales for
Airwork Corporation.
10.53 Offer letter dated as of November 21, 1995, to Ronald W.
Frederick for the position of Vice President,
Manufacturing.
10.54 Offer letter dated as of January 9, 1995, to Ronald W.
Frederick for the position of General Manager,
Manufacturing.
10.55 Offer letter dated as of July 23, 1993, to Ronald W.
Frederick for the position of Vice President of Johnson
Technology.
10.56 Offer letter dated as of October 26, 1993, to John
Moellering for the position of Executive Vice President and
Chief Operating Officer of UNC Aviation Services.
11 Statement re: Computation of Earnings per Share.
21 Subsidiaries of the Company.
23 Independent Accountants' Consent
24 Powers of Attorney.
27 Financial Data Schedule (electronically filed).
____________________
<PAGE>
Exhibit 10.43
AMENDED AND RESTATED CREDIT AGREEMENT
Table Of Contents
STATEMENT OF PURPOSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . 1
Section 1.2. General . . . . . . . . . . . . . . . . . . 22
Section 1.3. Other Definitions And Provisions. . . . . . 22
(a) Use Of Capitalized Terms. . . . . . . . . . 22
(b) Miscellaneous . . . . . . . . . . . . . . . 22
ARTICLE II - REVOLVING CREDIT FACILITY . . . . . . . . . . . 23
Section 2.1. Revolving Credit Loans. . . . . . . . . . . 23
Section 2.2. Procedure For Advances Of Loans . . . . . . 23
(a) Requests For Borrowing. . . . . . . . . . . 23
(b) Disbursement Of Loans . . . . . . . . . . . 23
Section 2.3. Settlement Among The Administrative Agent And
The Lenders . . . . . . . . . . . . . . . . 24
Section 2.4. Repayment Of Loans. . . . . . . . . . . . . 27
(a) Repayment On Termination Date . . . . . . . 27
(b) Mandatory Repayment Of Excess Loans . . . . 27
(c) Optional Prepayments. . . . . . . . . . . . 27
(d) Limitation On Prepayment Of Libor Rate
Loans . . . . . . . . . . . . . . . . . . . 27
(e) Repayments From Cash Collateral Account . . 27
Section 2.5. Permanent Reduction Of The Aggregate
Commitment . . . . . . . . . . . . . . . . 28
Section 2.6. Termination Of Credit Facility. . . . . . . 29
Section 2.7. Revolving Credit Notes. . . . . . . . . . . 29
Section 2.8. Use Of Proceeds . . . . . . . . . . . . . . 29
ARTICLE III - LETTER OF CREDIT FACILITY. . . . . . . . . . . 29
Section 3.1. L/C Commitment. . . . . . . . . . . . . . . 29
Section 3.2. Procedure For Issuance Of Letters Of Credit 30
Section 3.3. Commissions And Other Charges . . . . . . . 31
Section 3.4. L/C Participations. . . . . . . . . . . . . 32
Section 3.5. Reimbursement Obligation Of The Borrower. . 33
Section 3.6. Obligations Absolute. . . . . . . . . . . . 34
Section 3.7. Provisions Relating To Trade Letters Of
Credit . . . . . . . . . . . . .. . . . . . 35
Section 3.8. Effect Of Application . . . . . . . . . . . 35
Section 3.9. Exchange Rate Affect On L/C Commitment. . . 35
ARTICLE IV - GENERAL LOAN PROVISIONS . . . . . . . . . . . . 36
Section 4.1. Interest. . . . . . . . . . . . . . . . . . 36
(a) Interest Rate Options . . . . . . . . . . . 36
(b) Interest Periods. . . . . . . . . . . . . . 36
(c) Applicable Margin . . . . . . . . . . . . . 37
(d) Default Rate. . . . . . . . . . . . . . . . 38
(e) Interest Payment And Computation. . . . . . 38
(f) Maximum Rate. . . . . . . . . . . . . . . . 38
Section 4.2. Notice And Manner Of Conversion Or Continuation
Of Loans. . . . . . . . . . . . . . . . . . 39
Section 4.3. Fees. . . . . . . . . . . . . . . . . . . . 39
(a) Commitment Fee. . . . . . . . . . . . . . . 39
(b) Fees. . . . . . . . . . . . . . . . . . . . 40
Section 4.4. Manner Of Payment . . . . . . . . . . . . . 40
Section 4.5. Crediting Of Payments And Proceeds. . . . . 41
Section 4.6. Adjustments . . . . . . . . . . . . . . . . 41
Section 4.7. Nature Of Obligations Of Lenders Regarding
Extensions Of Credit. . . . . . . . . . . . 41
Section 4.8. Changed Circumstances . . . . . . . . . . . 42
(a) Circumstances Affecting LIBOR Rate
Availability. . . . . . . . . . . . . . . . 42
(b) Laws Affecting LIBOR Rate Availability. . . 42
(c) Increased Costs . . . . . . . . . . . . . . 43
Section 4.9. Indemnity . . . . . . . . . . . . . . . . . 44
Section 4.10. Capital Requirements. . . . . . . . . . . . 44
Section 4.11. Taxes . . . . . . . . . . . . . . . . . . . 45
(a) Payments Free And Clear . . . . . . . . . . 45
(b) Stamp And Other Taxes . . . . . . . . . . . 45
(c) Indemnity . . . . . . . . . . . . . . . . . 46
(d) Evidence Of Payment . . . . . . . . . . . . 46
(e) Delivery Of Tax Forms . . . . . . . . . . . 46
(f) Survival. . . . . . . . . . . . . . . . . . 47
ARTICLE V - CLOSING; CONDITIONS OF CLOSING AND BORROWING . . 47
Section 5.1. Closing . . . . . . . . . . . . . . . . . . 47
Section 5.2. Conditions To Closing And Initial Extensions Of
Credit. . . . . . . . . . . . . . . . . . . 47
(a) Executed Loan Documents . . . . . . . . . . 47
(b) Closing Certificates; Etc.. . . . . . . . . 47
(c) Consents; No Adverse Change . . . . . . . . 48
(d) Financial Matters . . . . . . . . . . . . . 49
(h) Miscellaneous . . . . . . . . . . . . . . . 50
Section 5.3. Conditions To All Loans And Letters Of
Credit. . . . . . . . . . . . . . . . . . . 50
(a) Continuation Of Representations And
Warranties. . . . . . . . . . . . . . . . . 50
(b) No Existing Default . . . . . . . . . . . . 50
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE BORROWER. 51
Section 6.1. Representations And Warranties. . . . . . . 51
(a) Organization; Power; Qualification. . . . . 51
(b) Ownership . . . . . . . . . . . . . . . . . 51
(c) Authorization Of Agreement, Loan Documents
And Borrowing . . . . . . . . . . . . . . . 51
(d) Compliance Of Agreement, Loan Documents And
Borrowing With Laws, Etc. . . . . . . . . . 52
(e) Compliance With Law; Governmental Approvals 52
(f) Tax Returns And Payments. . . . . . . . . . 52
(g) Intellectual Property Matters . . . . . . . 52
(h) Environmental Matters . . . . . . . . . . . 53
(i) ERISA . . . . . . . . . . . . . . . . . . . 54
(j) Margin Stock. . . . . . . . . . . . . . . . 55
(k) Government Regulation . . . . . . . . . . . 55
(l) Material Contracts. . . . . . . . . . . . . 56
(m) Employee Relations. . . . . . . . . . . . . 56
(n) Financial Statements. . . . . . . . . . . . 56
(o) No Material Adverse Change. . . . . . . . . 56
(p) Solvency. . . . . . . . . . . . . . . . . . 57
(q) Titles To Properties. . . . . . . . . . . . 57
(r) Liens . . . . . . . . . . . . . . . . . . . 57
(s) Debt And Contingent Obligations . . . . . . 57
(t) Litigation. . . . . . . . . . . . . . . . . 57
(u) Absence Of Defaults . . . . . . . . . . . . 58
(v) Accuracy And Completeness Of Information. . 58
(w) Material Subsidiaries . . . . . . . . . . . 58
Section 6.2. Survival Of Representations And Warranties;
Etc. . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII - FINANCIAL INFORMATION AND NOTICES. . . . . . . 59
Section 7.1. Financial Statements And Projections. . . . 59
(a) Monthly Financial Statements. . . . . . . . 59
(b) Quarterly Financial Statements. . . . . . . 59
(c) Annual Financial Statements . . . . . . . . 60
(d) Annual Business Plan And Financial
Projections. . . . . . . . . . . . . . . . 60
(e) Five Year Business Plan . . . . . . . . . . 60
Section 7.2. Officer's Compliance Certificate. . . . . . 60
Section 7.3. Accountants' Certificate. . . . . . . . . . 61
Section 7.4. Collateral Reports. . . . . . . . . . . . . 61
Section 7.5. Other Reports . . . . . . . . . . . . . . . 61
Section 7.6. Notice Of Litigation And Other Matters. . . 62
Section 7.7. Accuracy Of Information . . . . . . . . . . 63
Section 7.8. Authorization To Obtain Financial
Information . . . . . . . . . . . . . . . . 63
Section 7.9. Inventory Appraisal . . . . . . . . . . . . 63
ARTICLE VIII - AFFIRMATIVE COVENANTS . . . . . . . . . . . . 64
Section 8.1. Preservation Of Corporate Existence And Related
Matters . . . . . . . . . . . . . . . . . . . . 64
Section 8.2. Maintenance Of Property . . . . . . . . . . . 64
Section 8.3. Insurance . . . . . . . . . . . . . . . . . . 64
Section 8.4. Accounting Methods And Financial Records. . . 64
Section 8.5. Payment And Performance Of Obligations. . . . 64
Section 8.6. Compliance With FACA. . . . . . . . . . . . . 65
Section 8.7. Compliance With Laws And Approvals. . . . . . 65
Section 8.8. Environmental Laws. . . . . . . . . . . . . . 65
Section 8.9. Compliance With ERISA . . . . . . . . . . . . 66
Section 8.10. Compliance With Agreements . . . . . . . . . 66
Section 8.11. Conduct Of Business . . . . . . . . . . . . 66
Section 8.12. Visits And Inspections . . . . . . . . . . .66
Section 8.13. Further Assurances . . . . . . . . . . . . . 66
Section 8.14. Material Subsidiaries . . . . . . . . . . . 67
Section 8.15. Lockbox And Concentration
Arrangements. . . . . . . . . . . . . . . . . 67
ARTICLE IX - FINANCIAL COVENANTS . . . . . . . . . . . . . . 68
Section 9.1. Tangible Net Worth. . . . . . . . . . . . . . 68
Section 9.2. Consolidated Total Funded Indebtedness To EBITDA
. . . . . . . . . . . . . . . . . . . . . . . . 68
Section 9.3. Fixed Charge Coverage Ratio . . . . . . . . . 69
ARTICLE X - NEGATIVE COVENANTS . . . . . . . . . . . . . . . 69
Section 10.1. Limitations On Debt . . . . . . . . . . . . .69
Section 10.2. Limitations On Contingent
Obligations. . . . . . . . . . . . . . . . . 70
Section 10.3. Limitations On Liens . . . . . . . . . . . . 70
Section 10.4. Limitations On Loans, Advances,
Investments And Acquisitions. . . . . . . . . 72
Section 10.5. Limitations On Mergers And
Liquidation. . . . . . . . . . . . . . . . . 73
Section 10.6. Limitations On Sale Of Assets . . . . . . . 74
Section 10.7. Limitations On Dividends And
Distributions . . . . . . . . . . . . . . . . 74
Section 10.8. Limitations On Exchange And
Issuance Of Capital Stock. . . . . . . . . . 75
Section 10.9. Transactions With Affiliates And
Subsidiaries . . . . . . . . . . . . . . . . 75
Section 10.10. Certain Accounting Changes . . . . . . . . 76
Section 10.11. Amendments And Restricted Payments . . . . 76
Section 10.12. Restrictive Agreements . . . . . . . . . . 76
ARTICLE XI - DEFAULT AND REMEDIES. . . . . . . . . . . . . . 76
Section 11.1. Events Of Default . . . . . . . . . . . . . 76
(a) Default In Payment Of Principal Of Loans
And Reimbursement Obligations. . . . . . . 76
(b) Other Payment Default . . . . . . . . . . . 76
(c) Misrepresentation . . . . . . . . . . . . . 76
(d) Default In Performance Of Certain Covenants
. . . . . . . . . . . . . . . . . . . . . . 77
(e) Default In Performance Of Other Covenants
And Conditions. . . . . . . . . . . . . . . 77
(f) Hedging Agreement . . . . . . . . . . . . . 77
(g) Debt Cross-Default. . . . . . . . . . . . . 77
(h) Other Cross-Defaults. . . . . . . . . . . . 77
(i) Change In Control . . . . . . . . . . . . . 78
(j) Voluntary Bankruptcy Proceeding . . . . . . 78
(k) Involuntary Bankruptcy Proceeding . . . . . 78
(l) Failure Of Agreements . . . . . . . . . . . 78
(m) Termination Event . . . . . . . . . . . . . 79
(n) Judgment. . . . . . . . . . . . . . . . . . 79
Section 11.2. Remedies. . . . . . . . . . . . . . . . . . 79
(a) Acceleration; Termination Of Facilities . . 79
(b) Letters Of Credit . . . . . . . . . . . . . 80
(c) Rights Of Collection. . . . . . . . . . . . 80
Section 11.3. Rights And Remedies Cumulative; Non-Waiver;
Etc. . . . . . . . . . . . . . . . . . . . 80
ARTICLE XII - THE AGENTS . . . . . . . . . . . . . . . . . . 81
Section 12.1. Appointment . . . . . . . . . . . . . . . . 81
Section 12.2. Delegation Of Duties. . . . . . . . . . . . 81
Section 12.3. Exculpatory Provisions. . . . . . . . . . . 81
Section 12.4. Reliance By The Agents. . . . . . . . . . . 82
Section 12.5. Notice Of Default . . . . . . . . . . . . . 82
Section 12.6. Non-Reliance On The Agents And Other
Lenders. . . . . . . . . . . . . . . . . . 82
Section 12.7. Indemnification . . . . . . . . . . . . . . 83
Section 12.8. The Agents In Their Individual Capacities . 84
Section 12.9. Resignation Of The Agents; Successor Agent
. . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . 84
Section 13.1. Notices . . . . . . . . . . . . . . . . . . 84
(a) Method Of Communication . . . . . . . . . . 84
(b) Addresses For Notices . . . . . . . . . . . 85
(c) Agent's Office. . . . . . . . . . . . . . . 86
Section 13.2. Expenses; Indemnity . . . . . . . . . . . . 86
Section 13.3. Set-Off . . . . . . . . . . . . . . . . . . 87
Section 13.4. Governing Law . . . . . . . . . . . . . . . 87
Section 13.5. Consent To Jurisdiction . . . . . . . . . . 87
Section 13.6. Waiver Of Jury Trial. . . . . . . . . . . . 88
Section 13.7. Reversal Of Payments. . . . . . . . . . . . 88
Section 13.8. Accounting Matters. . . . . . . . . . . . . 88
Section 13.9. Successors And Assigns; Participations. . . 88
(a) Benefit Of Agreement. . . . . . . . . . . . 88
(b) Assignment By Lenders . . . . . . . . . . . 89
(c) Rights And Duties Upon Assignment . . . . . 89
(d) Register. . . . . . . . . . . . . . . . . . 90
(e) Issuance Of New Notes . . . . . . . . . . . 90
(f) Participations. . . . . . . . . . . . . . . 90
(g) Disclosure Of Information; Confidentiality
. . . . . . . . . . . . . . . . . . . . . . 91
(h) Certain Pledges Or Assignments. . . . . . . 91
Section 13.10. Amendments, Waivers And Consents. . . . . . 92
Section 13.11. Performance Of Duties . . . . . . . . . . . 92
Section 13.12. All Powers Coupled With Interest. . . . . . 92
Section 13.13. Survival Of Indemnities . . . . . . . . . . 93
Section 13.14. Titles And Captions . . . . . . . . . . . . 93
Section 13.15. Severability Of Provisions. . . . . . . . . 93
Section 13.16. Counterparts. . . . . . . . . . . . . . . . 93
Section 13.17. Term Of Agreement . . . . . . . . . . . . . 93
<PAGE>
UNC INCORPORATED,
A Delaware Corporation
________________________
AMENDED AND RESTATED CREDIT AGREEMENT
Dated As Of May 22, 1996
________________________
$110,000,000.00
________________________
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
As Agent
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 22 day of May,
1996, by and among UNC INCORPORATED, a corporation organized under the laws
of the State of Delaware (the "BORROWER"), 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.
STATEMENT OF PURPOSE
The BORROWER has requested, and the LENDERS have agreed, to extend certain
credit facilities to the BORROWER on the terms and conditions of this Credit
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms when used in this Credit
Agreement shall have the meanings assigned to them below:
"ACCOUNT DEBTOR" means any PERSON who is or who may become obligated to a
CREDIT PARTY under or with respect to or on account of an ACCOUNT.
"ACCOUNTS" means all accounts (as that term is defined in the UCC) and all
chattel paper evidencing the same arising from valid leases of goods rendered
to customers of a CREDIT PARTY.
"ACQUISITION" means the purchase, lease, or other acquisition (in a single
transaction or a series of related transactions) by a CREDIT PARTY of all or
substantially all of the stock or assets of a PERSON or line of business of
a PERSON.
"ADMINISTRATIVE AGENT" means FUCC in its capacity as administrative agent
for the LENDERS and the ISSUING BANK hereunder, and any successor thereof
appointed pursuant to Section 12.9.
"AFFILIATE" means, with respect to any PERSON, any other PERSON (other
than a SUBSIDIARY) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, such first PERSON or any of its SUBSIDIARIES. The term "control"
means: (a) the power to vote ten percent (10%) or more of the securities or
other equity interests of a PERSON having ordinary voting power; or (b) the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a PERSON, whether through
ownership of voting securities, by contract or otherwise.
"AGENTS" means collectively the ADMINISTRATIVE AGENT and the COLLATERAL
AGENT.
"AGENT'S OFFICE" means the office of the ADMINISTRATIVE AGENT specified in
or determined in accordance with the provisions of Section 13.1.
"AGGREGATE COMMITMENT" means the aggregate amount of the LENDERS'
COMMITMENTS hereunder, as such amount may be reduced at any time or from time
to time pursuant to Section 2.5. On the CLOSING DATE, the AGGREGATE
COMMITMENT shall be One Hundred Ten Million DOLLARS ($110,000,000.00).
"AGREEMENT" means this Credit Agreement, as amended, supplemented, or
modified from time to time.
"APPLICABLE LAWS" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all GOVERNMENTAL AUTHORITIES and
all orders and decrees of all courts and arbitrators.
"APPLICABLE MARGIN" shall have the meaning assigned thereto in Subsection
4.1.(c).
"APPLICATION" means an application, in the form specified by the ISSUING
BANK from time to time, requesting the ISSUING BANK to issue a LETTER OF
CREDIT.
"ASSIGNMENT AND ACCEPTANCE" shall have the meaning assigned thereto in
Section 13.9.
"AVAILABLE COMMITMENT" means, as to any LENDER at any time, an amount
equal to the excess, if any, of: (a) such LENDER'S COMMITMENT, over (b) such
LENDER'S EXTENSIONS OF CREDIT.
"AVIATION SERVICES DIVISION" means, collectively, UNC/Lear Services, Inc.
and UNC Aviation Services, Inc.
"BASE RATE" means, at any time, the higher of: (a) the PRIME RATE; or (b)
the FEDERAL FUNDS RATE plus one-half of one percent ( 1/2%); each change in
the BASE RATE shall take effect simultaneously with the corresponding change
or changes in the PRIME RATE or the FEDERAL FUNDS RATE.
"BASE RATE LOAN" means any LOAN bearing interest at a rate based upon the
BASE RATE as provided in Subsection 4.1.(a).
"BORROWER" means UNC Incorporated, a Delaware corporation, in its capacity
as borrower hereunder.
"BORROWING BASE" means, at any time the sum of: (a) eighty-five percent
(85%) of the amount of the CREDIT PARTIES' billed DOMESTIC ACCOUNTS which are
ELIGIBLE ACCOUNTS; plus (b) ninety percent (90%) of the amount of the CREDIT
PARTIES' billed GOVERNMENT ACCOUNTS which are ELIGIBLE ACCOUNTS; plus (c)
sixty percent (60%) of the amount of the CREDIT PARTIES' UNBILLED ACCOUNTS
which are ELIGIBLE ACCOUNTS, provided that advances against UNBILLED ACCOUNTS
shall not exceed at any one time thirty percent (30%) of the total sums
available to be advanced against the ELIGIBLE ACCOUNTS; plus (d) fifty
percent (50%) of the amount of the CREDIT PARTIES' billed FOREIGN ACCOUNTS
which are ELIGIBLE ACCOUNTS and in which the COLLATERAL AGENT'S security
interests in such ACCOUNTS are perfected and can be enforced to the
satisfaction of the COLLATERAL AGENT and its counsel, and, if the COLLATERAL
AGENT requires, for which the ACCOUNT DEBTOR has acknowledged the assignment
thereof to the COLLATERAL AGENT and has agreed to direct payment thereof to
the COLLATERAL AGENT (but specifically excluding any such ACCOUNTS which are
included in the BORROWING BASE pursuant to subparagraph (e) of this
paragraph); plus (e) eighty-five percent (85%) of the CREDIT PARTIES' billed
FOREIGN ACCOUNTS which are ELIGIBLE ACCOUNTS and for which payment thereof is
secured by either a letter of credit which is, if the COLLATERAL AGENT
requires, assigned to the COLLATERAL AGENT or other credit insurance
acceptable to the COLLATERAL AGENT; plus (f) the INVENTORY VALUE, provided,
that advances against ENGINE WIP shall not exceed at any one time Five
Million DOLLARS ($5,000,000.00), advances against all ELIGIBLE INVENTORY
shall not exceed Thirty-Six Million DOLLARS ($36,000,000.00) and the
aggregate amount of the INVENTORY VALUE included in the BORROWING BASE shall
never constitute more than forty percent (40%) of the total BORROWING BASE;
minus (g) the LOAN RESERVE; provided, however, the advance rate percentages
set forth above may, following notice to the BORROWER, be revised from time
to time by the REQUIRED LENDERS and the COLLATERAL AGENT in their discretion,
exercised in good faith and in a commercially reasonable manner.
"BORROWING BASE CERTIFICATE" shall have the meaning assigned thereto in
Subsection 7.4.(a).
"BUSINESS DAY" means: (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina, Baltimore, Maryland, and New York,
New York, are open for the conduct of their commercial banking business; and
(b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, any LIBOR RATE LOAN, any day that is
a BUSINESS DAY described in clause (a) and that is also a day for trading by
and between banks in DOLLAR deposits in the London interbank market.
"CAPITAL ASSET" means, with respect to any PERSON, any asset that should,
in accordance with GAAP, be classified and accounted for as a capital asset.
"CAPITAL EXPENDITURES" means all expenditures which in accordance with
GAAP would be classified as capital expenditures, including, without
limitation, CAPITAL LEASES but excluding non-cash expenditures arising from
the transfer of assets among the various CREDIT PARTIES.
"CAPITAL LEASE" means, with respect to any PERSON, any lease of any
property that should, in accordance with GAAP, be classified and accounted
for as a capital lease.
"CAPITAL LEASE OBLIGATIONS" means any indebtedness incurred as a lessee
pursuant to a CAPITAL LEASE.
"CASH COLLATERAL ACCOUNT" means a deposit account in the name of the
COLLATERAL AGENT with FIRST UNION (or any other financial institution
approved by the COLLATERAL AGENT).
"CASH EQUIVALENTS" means: (a) direct obligations of, or obligations
guaranteed as to principal and interest by, the UNITED STATES government or
any agency or instrumentality thereof (provided that the full faith and
credit of the UNITED STATES is pledged in support thereof) maturing in one
year or less from the date of acquisition thereof; (b) DOLLAR denominated
deposits in (including money market accounts of), or DOLLAR denominated
certificates of deposit or bankers' acceptances of (i) any bank or trust
company organized or licensed under the laws of the UNITED STATES or any
state thereof, which bank or trust company has capital and surplus in excess
of One Hundred Million DOLLARS ($100,000,000.00), (ii) international banks of
recognized standing ranking among the world's one hundred (100) largest
commercial banks in terms of total assets, or (iii) any LENDER; (c)
commercial paper maturing within one hundred eighty (180) days that is either
issued by the holding company of the ADMINISTRATIVE AGENT or has one of the
two highest ratings of either Moody's Investors Service, Inc. or Standard and
Poor's Corporation; (d) investments in money market funds (other than those
referred to in clause (b) above) that are managed by recognized and
responsible institutions and invest solely in obligations of the types
referred to in clauses (a), (b) and (c) above; and (e) repurchase obligations
with a term of not more than seven (7) days for investments of the type
described in clause (a) above and entered into with any LENDER.
"CHANGE IN CONTROL" shall have the meaning assigned thereto in Subsection
11.1.(i).
"CLOSING DATE" means the date upon which each condition described in
Article V shall be satisfied or waived in all respects in a manner acceptable
to the ADMINISTRATIVE AGENT, in its sole discretion.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"COLLATERAL AGENT" means FUCC, in its capacity as collateral agent for the
SECURED PARTIES, and any successor thereto appointed pursuant to Section
12.9.
"COLLECTION DEPOSIT ACCOUNT" means an account maintained by a CREDIT PARTY
pursuant to a LOCKBOX AGREEMENT into which a CREDIT PARTY directs ACCOUNT
DEBTORS to make payments and remittances in respect of ACCOUNTS due from such
ACCOUNT DEBTORS.
"COMMITMENT" means, as to any LENDER, the obligation of such LENDER to
make LOANS to and issue or participate in LETTERS OF CREDIT issued hereunder,
in an aggregate principal or face amount at any time outstanding not to
exceed the amount set forth opposite such LENDER'S name on Schedule 1 hereto,
as the same may be reduced or modified at any time or from time to time
pursuant to Sections 2.5 and 13.9.
"COMMITMENT PERCENTAGE" means, as to any LENDER at any time, the fraction,
expressed as a percentage in which: (a) the amount of the COMMITMENT of such
LENDER is the numerator; and (b) the AGGREGATE COMMITMENT of all of the
LENDERS is the denominator.
"COMPONENT SERVICES DIVISION" means, collectively, UNC Artex, Inc., UNC
Texas CAMCO Incorporated, UNC CAMCO Incorporated, UNC ARDCO Incorporated, UNC
Accessory Overhaul Group, Incorporated and UNC Tri Industries, Inc. (d/b/a
UNC Tri-Remanufacturing).
"CONSOLIDATED" means, when used with reference to financial statements or
financial statement items of the BORROWER and its SUBSIDIARIES or of the
CREDIT PARTIES, as the case may be, such statements or items on a
consolidated basis in accordance with applicable principles of consolidation
under GAAP.
"CONSOLIDATED TOTAL FUNDED INDEBTEDNESS" means all TOTAL FUNDED
INDEBTEDNESS of the CREDIT PARTIES on a CONSOLIDATED basis determined in
accordance with GAAP.
"CONTINGENT OBLIGATION" means, with respect to the BORROWER and its
SUBSIDIARIES, without duplication, any obligation, contingent or otherwise,
of any such PERSON pursuant to which such PERSON has directly or indirectly
guaranteed any DEBT or other obligation of any other PERSON and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such PERSON: (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such DEBT or other
obligation (whether arising by virtue of partnership arrangements, by
agreement to keep well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement condition or otherwise); or
(b) entered into for the purpose of assuring in any other manner the obligee
of such DEBT or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided, that
the term CONTINGENT OBLIGATION shall not include endorsements for collection
or deposit in the ordinary course of business.
"CREDIT FACILITY" means the collective reference to the REVOLVING CREDIT
FACILITY and the L/C FACILITY.
"CREDIT PARTIES" means collectively the BORROWER and the GUARANTORS; and
the term "CREDIT PARTY" means any one of the CREDIT PARTIES individually.
"DEBT" means, with respect to the BORROWER and its SUBSIDIARIES at any
date and without duplication, the sum of the following calculated in
accordance with GAAP: (a) all indebtedness for money borrowed of any such
PERSON; (b) all obligations to pay the deferred purchase price of property or
services of any such PERSON except trade payables arising in the ordinary
course of business; (c) all obligations of any such PERSON as lessee under
CAPITAL LEASES; (d) all debt of any other PERSON secured by a LIEN on any
asset of any such PERSON; (e) all CONTINGENT OBLIGATIONS of any such PERSON
other than CONTINGENT OBLIGATIONS of one CREDIT PARTY with respect to an
underlying obligation of another CREDIT PARTY; (f) all obligations,
contingent or otherwise, of any such PERSON relative to the face amount of
letters of credit, whether or not drawn, including without limitation any
reimbursement obligation, and banker's acceptances issued for the account of
any such PERSON; and (g) all net payment obligations incurred by any such
PERSON pursuant to HEDGING AGREEMENTS.
"DEFAULT" means any event which with the passage of time, the giving of
notice or any other condition, would constitute an EVENT OF DEFAULT under
this AGREEMENT.
"DEFAULTING LENDER" shall have the meaning assigned thereto in Subsection
2.3.(c).
"DOLLAR EQUIVALENT" means, in relation to any amount in a specified
currency, at any date, the amount obtained by converting such amount in the
specified currency into DOLLARS, at the EXCHANGE RATE for such currency.
"DOLLARS" OR "$"" means, unless otherwise qualified, dollars in lawful
currency of the UNITED STATES.
"DOMESTIC ACCOUNTS" means ACCOUNTS of a CREDIT PARTY for which the ACCOUNT
DEBTOR is located within the geographic boundaries of the UNITED STATES, but
specifically excluding GOVERNMENT ACCOUNTS.
"EBITDA" means, as determined on a CONSOLIDATED basis with respect to any
period, the earnings of the CREDIT PARTIES (including earnings arising from
the sale or discontinuation of any CREDIT PARTY, or line of business of any
CREDIT PARTY) before interest, taxes, depreciation, and amortization, and
without regard to gains or losses arising from asset sales not in the
ordinary course of business, all as determined in accordance with GAAP. It
is agreed that gains or losses arising from asset sales made in connection
with the CREDIT PARTIES' existing restructuring plan as represented to the
ADMINISTRATIVE AGENT by the BORROWER shall be deemed in the ordinary course
and affect EBITDA to the extent such gains or losses affect the BORROWER'S
and its SUBSIDIARIES' income statement.
"ELIGIBLE ACCOUNTS" means, those ACCOUNTS of the CREDIT PARTIES which
satisfy the following criteria for eligibility: (a) the ACCOUNT arises from
goods sold or leased or from services performed in the ordinary course of a
CREDIT PARTY'S business; (b) except for UNBILLED ACCOUNTS, the delivery of
the goods or the performance of the services has been completed; (c) no
return, rejection, or repossession has occurred; (d) except for UNBILLED
ACCOUNTS, the goods delivered or the services performed have been accepted by
the ACCOUNT DEBTOR without dispute, objection, complaint, offset, defense,
counterclaim, adjustment or allowance; (e) except for UNBILLED ACCOUNTS, no
more than ninety (90) days have elapsed from the billing or invoice date and
no more than sixty (60) days have elapsed from the due date; (f) no prior,
contemporaneous, or subsequent assignment, claim, LIEN, or security interest,
other than that of the COLLATERAL AGENT, applies to the ACCOUNT; (g) no
bankruptcy or insolvency proceedings or payment moratoriums of any kind apply
to the ACCOUNT DEBTOR;
(h) no bonding company or surety asserts or has the ability to assert any
claim based upon the legal doctrine of equitable subrogation, or under any
other right to claim a LIEN into or right to payment of the ACCOUNT; (i) the
ACCOUNT does not arise from or pertain to any transaction with any other
CREDIT PARTY, or any SUBSIDIARY or
AFFILIATE of a CREDIT PARTY; (j) the ACCOUNT is not payable by an ACCOUNT
DEBTOR with respect to which fifty percent (50%) or more of the DOLLAR amount
of that ACCOUNT DEBTOR'S receivables to the CREDIT PARTY are more than ninety
(90) days due from the date of invoice or more than sixty (60) days due from
the due date; (k) if the ACCOUNT is payable by an ACCOUNT DEBTOR (excluding
the UNITED STATES or any agency or department thereof) to whom a CREDIT PARTY
owes any money only the portion of the ACCOUNT in excess of the amount owed
to that ACCOUNT DEBTOR may be deemed eligible; (l) the COLLATERAL AGENT has
a perfected first priority security interest therein; and (m) the ACCOUNT
does not arise from an ACCOUNT DEBTOR (excluding GOVERNMENT ACCOUNTS) whose
ACCOUNTS in the aggregate constitute in excess of ten percent (10%) of all of
the ACCOUNTS of the CREDIT PARTIES; and (o) the COLLATERAL AGENT has not
notified the BORROWER that the COLLATERAL AGENT has determined that such
ACCOUNT is ineligible because of uncertainty as to the creditworthiness of
the ACCOUNT DEBTOR or because the COLLATERAL AGENT, in its discretion,
exercised in good faith and in a commercially reasonable manner, otherwise
considers the collateral value to the LENDERS of that ACCOUNT or similar
ACCOUNTS to be impaired or the COLLATERAL AGENT'S and LENDERS' ability to
realize such value to be insecure.
"ELIGIBLE ASSIGNEE" means, with respect to any assignment of the rights,
interest and obligations of a LENDER hereunder, a PERSON that is at the time
of such assignment: (a) a commercial bank organized under the laws of the
UNITED STATES or any state thereof, having combined capital and surplus in
excess of Five Hundred Million DOLLARS ($500,000,000.00); (b) a finance
company, insurance company or other financial institution which in the
ordinary course of business extends credit of the type extended hereunder and
that has total assets in excess of One Billion DOLLARS ($1,000,000,000.00);
(c) already a LENDER hereunder (whether as an original party to this
AGREEMENT or as the assignee of another LENDER); (d) the successor (whether
by transfer of assets, merger or otherwise) to all or substantially all of
the commercial lending business of the assigning LENDER; or (e) any other
PERSON that has been approved in writing as an ELIGIBLE ASSIGNEE by the
BORROWER (which approval shall not be unreasonably withheld) and the
ADMINISTRATIVE AGENT.
"ELIGIBLE INVENTORY" means collectively: (a) raw materials, component
parts and finished goods INVENTORY owned by the MANUFACTURING DIVISION; (b)
parts and rotable parts INVENTORY and finished goods INVENTORY owned by the
COMPONENT SERVICES DIVISION; (c) parts and components owned by the AVIATION
SERVICES DIVISION; (d) parts INVENTORY, ENGINE WIP, parts and rotable parts
INVENTORY owned by the ENGINE OVERHAUL DIVISION; (e) RENTAL ENGINES; and (f)
such other INVENTORY owned by CREDIT PARTIES which the COLLATERAL AGENT deems
to be eligible in its discretion; provided, however, the COLLATERAL AGENT
will be entitled to exclude from ELIGIBLE INVENTORY, by providing notice
thereof to the BORROWER, any materials, parts or other INVENTORY (i) that the
COLLATERAL AGENT, in its discretion, determines to be defective,
unmerchantable, post-seasonal, slow moving or obsolete, or (ii) that the
COLLATERAL AGENT determines to be ineligible because the COLLATERAL AGENT, in
its discretion, exercised in good faith and in a commercially reasonable
manner, considers the collateral value thereof to be impaired or the
COLLATERAL AGENT'S and LENDERS' ability to realize such value to be insecure.
"EMPLOYEE BENEFIT PLAN" means any employee pension benefit plan (other
than an unfunded plan described in ERISA Section 201(2)) within the meaning
of Section 3(2) of ERISA which: (a) is maintained for employees of the
BORROWER or any ERISA AFFILIATE; or (b) in the case of a plan that is subject
to Title IV of ERISA, has at any time within the preceding six years been
maintained for the employees of the BORROWER or any current or former ERISA
AFFILIATE.
"ENGINE OVERHAUL DIVISION" means, collectively, UNC Airwork Corporation,
UNC Metcalf Servicing, Inc., UNC Pacific Airmotive Corporation, Inc., UNC/CFC
Acquisition Co. and UNC Engine & Engine Parts, Inc.
"ENGINE WIP" means UNC Airwork Corporation's work in process arising from
its engine overhaul operations in the State of New Jersey, and, if deemed
acceptable to the COLLATERAL AGENT, work in process from engine overhaul
operations: (a) of UNC Airwork Corporation in States other than the State of
New Jersey; and (b) of other CREDIT PARTIES.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals, and
orders of courts or GOVERNMENTAL AUTHORITIES, relating to the protection of
human health or the environment, including, but not limited to, requirements
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of HAZARDOUS MATERIALS.
ENVIRONMENTAL LAWS include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Sec.9601
et. seq.), the Hazardous Materials Transportation Authorization Act of 1994
(49 U.S.C. Sec.5101 et. seq.), the Resource Conservation and Recovery Act (42
U.S.C. Sec.6901 et. seq.), the Federal Water Pollution Control Act (33 U.S.C.
Sec.1251 et. seq.), the Clean Air Act (42 U.S.C. Sec.7401 et. seq.), the
Toxic Substances Control Act (15 U.S.C. Sec.2601 et. seq.), the Safe Drinking
Water Act (42 U.S.C. Sec.300f-300k), and the Environmental Protection
Agency's regulations relating to underground storage tanks (40 C.F.R. Parts
280 and 281), analogous state statutes, and the rules and regulations
promulgated under the foregoing as such statutes amended or modified from
time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA AFFILIATE" means any PERSON who together with the BORROWER is
treated as a single employer within the meaning of Section 414(b), (c), (m)
or (o) of the CODE or Section 4001(b) of ERISA.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or
emergency reserves) in respect of Eurocurrency liabilities or any similar
category of liabilities for a member bank of the Federal Reserve System in
New York City.
"EVENT OF DEFAULT" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"EXCHANGE RATE" means, on any day, the current sell spot rate of exchange
for the purchase and sale of DOLLARS and the specified currency as publicly
or generally quoted by the ISSUING BANK on the date of determination, or if
the ISSUING BANK is not publicly or generally quoting such exchange rates on
such date, then such rate as the ISSUING BANK shall determine in good faith
for purposes hereof.
"EXPIRATION DATE" means the expiration date of any LETTER OF CREDIT.
"EXTENSIONS OF CREDIT" means, as to any LENDER at any time, an amount
equal to the sum of: (a) the aggregate principal amount of all LOANS made by
such LENDER then outstanding; and (b) an amount equal to such LENDER'S
COMMITMENT PERCENTAGE of the L/C OBLIGATIONS then outstanding.
"FACA" means the Federal Assignment of Claims Act of 1940 (31 U.S.C.
Sec.3727 and 41 U.S.C. Sec.15), as amended, and all regulations promulgated
thereunder, and all other applicable federal procurement laws and
regulations.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"FEDERAL FUNDS RATE" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the ADMINISTRATIVE AGENT and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the ADMINISTRATIVE AGENT. If, for any
reason, such rate is not available, then "FEDERAL FUNDS RATE" shall mean a
daily rate which is determined, in the opinion of the ADMINISTRATIVE AGENT,
to be the rate at which federal funds are being offered for sale in the
national federal funds market at 9:00 a.m. (Charlotte time). Rates for
weekends or holidays shall be the same as the rate for the most immediate
preceding business day.
"FIRST UNION" means First Union National Bank of North Carolina, a
national banking association, and its successors.
"FISCAL YEAR" means the fiscal year of the BORROWER and its SUBSIDIARIES
which ends on December 31 of each year.
"FIXED CHARGE 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.
"FOREIGN ACCOUNTS" means ACCOUNTS of a CREDIT PARTY for which the ACCOUNT
DEBTOR is located outside the geographic boundaries of the UNITED STATES.
"FUCC" means First Union Commercial Corporation, a North Carolina
corporation, and its successors.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a
consistent basis for the BORROWER and its SUBSIDIARIES throughout the period
indicated and consistent with the prior financial practice of the BORROWER
and its SUBSIDIARIES.
"GARRETT ACQUISITION" means the acquisition by UNC/CFC Acquisition Co. of
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 pursuant to the terms and provisions of that certain Asset
Purchase Agreement dated as of January 15, 1996 by and among the BORROWER,
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.
"GOVERNMENT ACCOUNTS" means ACCOUNTS of the CREDIT PARTIES for which the
ACCOUNT DEBTOR is the UNITED STATES government or an agency or department
thereof, and if such ACCOUNT is in excess of One Hundred Thousand DOLLARS
($100,000.00) for which the COLLATERAL AGENT has obtained full compliance to
the COLLATERAL AGENT'S satisfaction with all provisions necessary to protect
the LENDERS' interests under FACA.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to,
all GOVERNMENTAL AUTHORITIES.
"GOVERNMENTAL AUTHORITY" means any nation, province, state or political
subdivision thereof, and any government or any PERSON exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"GUARANTOR ADVANCES" means the revolving credit accommodations provided by
the BORROWER to each of the GUARANTORS evidenced by the GUARANTOR NOTES, and
which are secured by first priority security interests in certain tangible
and intangible assets of such GUARANTORS, excluding such GUARANTORS'
equipment and real property.
"GUARANTOR NOTES" means the Amended And Restated Secured Promissory Notes
of even date herewith, together with any additional secured Promissory Notes
in the form attached hereto as Exhibit A, from each of the GUARANTORS to the
order of the BORROWER, which evidence and secure the GUARANTOR ADVANCES and
which have been assigned to the COLLATERAL AGENT as security for the
OBLIGATIONS.
"GUARANTORS" means each of the PERSONS set forth on Schedule 2 attached
hereto and made a part hereof, together with all other MATERIAL SUBSIDIARIES
which hereafter execute and deliver to the COLLATERAL AGENT, GUARANTY
AGREEMENTS, financing statements and such other documents as required by the
COLLATERAL AGENT or the MAJORITY LENDERS.
"GUARANTY AGREEMENTS" means the Guaranty And Security Agreements, in the
form attached hereto as Exhibit B, executed by each of the GUARANTORS to and
for the benefit of the COLLATERAL AGENT pursuant to which the GUARANTORS are
guaranteeing the full and absolute repayment of the OBLIGATIONS.
"HAZARDOUS MATERIALS" means any substances or materials: (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
ENVIRONMENTAL LAW; (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to
human health or the environment and are regulated by any GOVERNMENTAL
AUTHORITY; (c) the presence of which require investigation or remediation
under any ENVIRONMENTAL LAW or common law; (d) the discharge or emission or
release of which requires a permit or license under any ENVIRONMENTAL LAW or
other GOVERNMENTAL APPROVAL; (e) which are deemed to constitute a nuisance,
a trespass or pose a health or safety hazard to PERSONS or neighboring
properties; (f) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons,
petroleum derived substances or waste, crude oil, nuclear fuel, natural gas
or synthetic gas; or (g) which are materials consisting of underground
storage tanks, which are or have ever been filled or partially filled with
any substance or materials described in this paragraph.
"HEDGING AGREEMENT" means any agreement with respect to an interest rate
swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the BORROWER under this AGREEMENT,
and any confirming letter executed pursuant to such hedging agreement, all as
amended or modified.
"INTEREST PERIOD" shall have the meaning assigned thereto in Subsection
4.1.(b).
"INVENTORY" means all inventory, materials, raw materials, goods in
process, finished goods, work in progress, component materials and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts of sale.
"INVENTORY APPRAISAL" means an appraisal of the ORDERLY LIQUIDATION VALUE
of the CREDIT PARTIES' ELIGIBLE INVENTORY prepared for the benefit of the
LENDERS by MB Valuation Services, Inc., or such other appraiser selected by
the MAJORITY LENDERS and the COLLATERAL AGENT, which appraisal shall be
periodically updated pursuant to Subsection 7.9.
"INVENTORY VALUE" means, except as hereafter described, the sum of: (a)
eighty percent (80%) of the ORDERLY LIQUIDATION VALUE of the ELIGIBLE
INVENTORY which is not ENGINE WIP; plus (b) fifty percent (50%) of the
ORDERLY LIQUIDATION VALUE of the ENGINE WIP. The percentages used in
determining INVENTORY VALUE may be fixed and revised by the REQUIRED LENDERS
and the COLLATERAL AGENT from time to time, in their discretion, exercised in
good faith in a commercially reasonable manner. The contrary
notwithstanding, the INVENTORY VALUE shall be adjusted each month between the
COLLATERAL AGENT'S receipt of the semi-annual updates of the INVENTORY
APPRAISAL based on changes in the NET BOOK VALUE of the CREDIT PARTIES'
INVENTORY. Each monthly adjustment of the INVENTORY VALUE shall be
calculated by multiplying (a) the fraction in which the INVENTORY VALUE, as
evidenced by the most recent update of the INVENTORY APPRAISAL, is the
numerator, and the NET BOOK VALUE of the CREDIT PARTIES' INVENTORY, as of the
date of the most recent update of the INVENTORY APPRAISAL, is the
denominator, multiplied by (b) the NET BOOK VALUE of the CREDIT PARTIES'
INVENTORY as set forth in the most recent monthly financial statements
delivered to the COLLATERAL AGENT under Subsection 7.1.(a). For example, if
on January 1, the NET BOOK VALUE of the CREDIT PARTIES' INVENTORY is One
Hundred Million DOLLARS ($100,000,000.00), and the INVENTORY VALUE of the
ELIGIBLE INVENTORY is Thirty-Two Million DOLLARS ($32,000,000.00) based upon
an INVENTORY APPRAISAL of the same date, then the INVENTORY VALUE shall be
Thirty-Two Million DOLLARS ($32,000,000.00). If on March 1 the NET BOOK
VALUE of the CREDIT PARTIES' INVENTORY is One Hundred Ten Million DOLLARS
($110,000,000.00), then the INVENTORY VALUE as of March 1 shall be considered
to be Thirty-Five Million Two Hundred Thousand DOLLARS ($35,200,000.00).
"ISSUING BANK" means FIRST UNION, in its capacity as issuer of any LETTER
OF CREDIT, or any successor thereto.
"L/C COMMITMENT" means Twenty Million DOLLARS (including DOLLAR
EQUIVALENTS) ($20,000,000.00).
"L/C CONVERSION DATE" shall have the meaning assigned thereto in
Subsection 3.3.(d).
"L/C FACILITY" means the LETTER OF CREDIT facility established pursuant to
Article III hereof.
"L/C OBLIGATIONS" means at any time, an amount equal to the sum of: (a)
the aggregate undrawn and unexpired amount (in DOLLARS and DOLLAR
EQUIVALENTS) of the then outstanding LETTERS OF CREDIT; and (b) the aggregate
amount (in DOLLARS and DOLLAR EQUIVALENTS) of drawings under LETTERS OF
CREDIT which have not then been reimbursed pursuant to Section 3.5.
"L/C PARTICIPANTS" means the collective reference to all the LENDERS.
"L/C REBATE SUM" shall have the meaning assigned thereto in Subsection
3.3.(d).
"L/C RESPONSIBLE CREDIT PARTY" shall have the meaning assigned thereto in
Section 3.1.
"LENDER" means each PERSON executing this AGREEMENT as a LENDER set forth
on the signature pages hereto and each PERSON that hereafter becomes a party
to this AGREEMENT as a LENDER pursuant to Section 13.9.
"LENDING OFFICE" means, with respect to any LENDER, the office of such
LENDER maintaining such LENDER'S COMMITMENT PERCENTAGE of the LOANS.
"LETTER OF CREDIT" shall mean a STANDBY LETTER OF CREDIT or a TRADE LETTER
OF CREDIT, or both, as appropriate.
"LIBOR" means the rate for deposits in DOLLARS for a period equal to the
INTEREST PERIOD selected which appears on the Telerate Page 3750 at
approximately 11:00 a.m. London time, two (2) BUSINESS DAYS prior to the
commencement of the applicable INTEREST PERIOD. If, for any reason, such rate
is not available, then "LIBOR" shall mean the rate per annum at which, as
determined by the ADMINISTRATIVE AGENT, DOLLARS in the amount of Five Million
DOLLARS ($5,000,000.00) are being offered to leading banks at approximately
11:00 a.m. London time, two (2) BUSINESS DAYS prior to the commencement of
the applicable INTEREST PERIOD for settlement in immediately available funds
by leading banks in the London interbank market for a period equal to the
INTEREST PERIOD selected.
"LIBOR RATE" means a rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) determined by the ADMINISTRATIVE AGENT pursuant to
the following formula:
LIBOR RATE = LIBOR
----------------------------------
1.00-EURODOLLAR RESERVE
PERCENTAGE
"LIBOR RATE LOAN" means any LOAN bearing interest at a rate based upon the
LIBOR RATE as provided in Subsection 4.1.(a).
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this AGREEMENT, a PERSON shall be deemed to own
subject to a LIEN any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, CAPITAL
LEASE or other title retention agreement relating to such asset.
"LOAN" means any revolving loan made to the BORROWER pursuant to Section
2.1, and all such LOANS collectively as the context requires.
"LOAN DOCUMENTS" means, collectively, this AGREEMENT, the NOTES, the
APPLICATIONS, any HEDGING AGREEMENT executed by any LENDER, the SECURITY
DOCUMENTS, and each other document, instrument and agreement executed and
delivered by any of the CREDIT PARTIES in connection with this AGREEMENT or
otherwise referred to herein or contemplated hereby, all as may be amended or
modified from time to time.
"LOAN RESERVE" means the following amounts during the following periods:
<TABLE>
<CAPTION>
DATE LOAN RESERVE AMOUNT
- ---- -------------------
<S> <C>
CLOSING DATE to 6/29/96; and
3/31 to 6/29 of each year
thereafter during the term
of the CREDIT FACILITY,
provided the BORROWER has
made all required payments
under the SUBORDINATED DEBT
when and as due $ 0.00
6/30 to 9/29 of each year 1/3rd of amount of
during the term of the SUBORDINATED
CREDIT FACILITY DEBT PAYMENT
9/30 to 12/29 of each 2/3rds of amount of
year during the term SUBORDINATED
of the CREDIT FACILITY DEBT PAYMENT
12/30 of each year to 3/30 of The amount equal to the
each succeeding year during the SUBORDINATED
term of the CREDIT FACILITY DEBT PAYMENT
</TABLE>
The contrary notwithstanding, if at any time the BORROWER has not made
all required payments under the SUBORDINATED DEBT when and as due, the LOAN
RESERVE shall be the amount equal to the SUBORDINATED DEBT PAYMENT until such
payments are made.
"LOCKBOX AGREEMENTS" means collectively any agreement among: (a) a
LOCKBOX BANK; (b) a CREDIT PARTY; and (c) the COLLATERAL AGENT, in
substantially the form of Exhibit C, pursuant to which a CREDIT PARTY shall
establish and maintain one or more COLLECTION DEPOSIT ACCOUNTS, each as
amended, supplemented or otherwise modified from time to time.
"LOCKBOX BANK" means any LENDER or bank designated as a lockbox bank in
a LOCKBOX AGREEMENT.
"MAJORITY LENDERS" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal amount of the
NOTES, or if no amounts are outstanding under the NOTES, any combination of
LENDERS whose COMMITMENT PERCENTAGES aggregate at least fifty-one percent
(51%).
"MANUFACTURING DIVISION" means, collectively, UNC Tri Industries, Inc.
(d/b/a UNC Tri-Manufacturing), UNC Johnson Technology, Inc. and UNC All Fab,
Inc.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
properties, business, operations or condition (financial or otherwise) of the
CREDIT PARTIES taken as a whole or the ability of them to perform their
obligations under the LOAN DOCUMENTS or MATERIAL CONTRACTS.
"MATERIAL CONTRACT" means: (a) any contract or other agreement, written
or oral, of any of the CREDIT PARTIES involving monetary liability of or to
any such PERSON in an amount in excess of Seven Million DOLLARS
($7,000,000.00) per annum; or (b) any other contract or agreement, written or
oral, of any of the CREDIT PARTIES the failure to comply with which could
reasonably be expected to have a MATERIAL ADVERSE EFFECT.
"MATERIAL SUBSIDIARIES" means each of the GUARANTORS and any other
SUBSIDIARY of the BORROWER, whether now existing or hereafter acquired or
formed, which has total assets equal or greater than Five Million DOLLARS
($5,000,000.00).
"MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as defined in Section
4001(a)(3) of ERISA which is subject to Title IV of ERISA and to which the
BORROWER or any ERISA AFFILIATE is making, or is accruing an obligation to
make, contributions within the preceding six years.
"NET BOOK VALUE" means, with respect to the CREDIT PARTIES' INVENTORY,
the value given the CREDIT PARTIES' INVENTORY on the CREDIT PARTIES' balance
sheet and books and records, minus reserves.
"NOTES" means the separate Revolving Credit Notes made by the BORROWER
payable to the order of each LENDER, substantially in the form of Exhibit D
hereto, evidencing the REVOLVING CREDIT FACILITY, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "NOTE"
means any of such NOTES.
"NOTICE OF BORROWING" shall have the meaning assigned thereto in
Subsection 2.2.(a).
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned
thereto in Section 4.2.
"OBLIGATIONS" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the LOANS;
(b) the REIMBURSEMENT OBLIGATIONS and the L/C OBLIGATIONS; (c) all payment
and other obligations owing by the BORROWER to any LENDER or either AGENT
under any HEDGING AGREEMENT; and (d) all other fees and commissions
(including attorney's fees), charges, indebtedness, loans, liabilities,
financial accommodations, obligations, covenants and duties owing by the
BORROWER to the LENDERS, the ISSUING BANK, or either AGENT, of every kind,
nature and description, direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any NOTE, and whether or not for the payment of money
under or in respect of this AGREEMENT, any NOTE, any LETTER OF CREDIT or any
of the other LOAN DOCUMENTS.
"OFFICER'S COMPLIANCE CERTIFICATE" shall have the meaning assigned
thereto in Section 7.2.
"ORDERLY LIQUIDATION VALUE" means, with respect to the ELIGIBLE
INVENTORY, the amount of gross proceeds which could be generated by a
properly conducted liquidation of such ELIGIBLE INVENTORY, held under forced
sale conditions and over a reasonably short period of time, based on the most
recent INVENTORY APPRAISAL prepared for the LENDERS.
"OTHER TAXES" shall have the meaning assigned thereto in Subsection
4.11.(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"PENSION PLAN" means any EMPLOYEE BENEFIT PLAN, other than a
MULTIEMPLOYER PLAN, which is subject to the provisions of Title IV of ERISA
or Section 412 of the CODE and which: (a) is maintained for employees of the
BORROWER or any ERISA AFFILIATES; or (b) in the case of a plan that is
subject to Title IV of ERISA, has at any time within the preceding six years
been maintained for the employees of the BORROWER or any of their current or
former ERISA AFFILIATES.
"PERSON" means an individual, corporation, partnership, association,
trust, business trust, limited liability company, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
GOVERNMENTAL AUTHORITY or any other form of entity or group thereof
specifically listed herein.
"PRIME RATE" means, at any time, the rate of interest per annum
publicly announced from time to time by FIRST UNION as its prime rate. Each
change in the PRIME RATE shall be effective as of the opening of business on
the day such change in the PRIME RATE occurs. The parties hereto acknowledge
that the rate announced publicly by FIRST UNION as its PRIME RATE is an index
or base rate and shall not necessarily be its lowest or best rate charged to
its customers or other banks.
"REGISTER" shall have the meaning assigned thereto in Subsection 13.9.
"REIMBURSEMENT OBLIGATION" means the obligation of the BORROWER to
reimburse the ISSUING BANK pursuant to Section 3.5 for amounts drawn under
LETTERS OF CREDIT.
"RENTAL ENGINES" means aircraft engines which are owned by UNC Airwork
Corporation (or such other CREDIT PARTIES as the COLLATERAL AGENT deems
acceptable) for the purpose of leasing to its customers during repair and
overhaul work.
"REQUIRED LENDERS" means, at any date, any combination of holders of at
least sixty-six and two-thirds percent (66 %) of the aggregate unpaid
principal amount of the NOTES, or if no amounts are outstanding under the
NOTES, any combination of LENDERS whose COMMITMENT PERCENTAGES aggregate at
least sixty-six and two-thirds percent (66 %).
"RESTRICTED PAYMENTS" means any prepayments or optional redemptions of
the SENIOR NOTES, the SUBORDINATED DEBT (excluding the SINKING FUND PAYMENTS
and redemptions made within the year preceding a SINKING FUND PAYMENT due
date which pursuant to the terms of the SUBORDINATED DEBT documents are
credited to reduce the amount of the next SINKING FUND PAYMENT), or any other
indebtedness for borrowed money.
"REVOLVING CREDIT FACILITY" means the revolving credit facility
established pursuant to Article II hereof.
"SECURED PARTIES" means collectively, the LENDERS, the ISSUING BANK,
and the ADMINISTRATIVE AGENT.
"SECURITY DOCUMENTS" means the collective reference to the Security
Agreement executed by the BORROWER, the documents evidencing or securing the
GUARANTOR ADVANCES which have been assigned to the COLLATERAL AGENT, the
GUARANTY AGREEMENTS, and each other agreement or writing pursuant to which
any CREDIT PARTY pledges or grants a security interest in any property or
assets securing the OBLIGATIONS or any such PERSON guaranties the payment
and/or performance of the OBLIGATIONS.
"SENIOR NOTES" means, collectively: (a) the 91/8% Senior Notes Due
2003 which were issued under the terms of the Indenture dated as of July 15,
1993 among the BORROWER and the trustee thereunder; and (b) the SENIOR
SUBORDINATED DEBENTURES.
"SENIOR SUBORDINATED DEBENTURES" means, debentures issued by the
BORROWER which: (a) are in an aggregate face amount not exceeding One
Hundred Fifty Million DOLLARS ($150,000,000.00); (b) have a maturity date no
earlier than March 1, 2006; (c) require payments of interest only until their
maturity; (d) are subordinate in right of payment to the OBLIGATIONS; (e) 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 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 (f) 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.
"SETTLEMENT DATE" shall have the meaning assigned thereto in Subsection
2.3.(b)(i).
"SINKING FUND PAYMENT" means the annual mandatory redemption payment in
the amount of Four Million Two Hundred Thousand DOLLARS ($4,200,000.00) to be
made by the BORROWER under the SUBORDINATED DEBT.
"SOLVENT" means, as to the CREDIT PARTIES on a particular date, that
any such PERSON: (a) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage
and is able to pay its debts as they mature; (b) owns property having a
value, both at fair valuation and at present fair saleable value, greater
than the amount required to pay its probable liabilities (including
contingencies); and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they
mature.
"STANDBY L/C COMMISSION" shall have the meaning assigned thereto in
Section 3.3.(a).
"STANDBY LETTER OF CREDIT" means a standby letter of credit issued for
the account of the BORROWER or another CREDIT PARTY by the ISSUING BANK
pursuant to the terms of this AGREEMENT, as such letter of credit may be
amended, modified, extended, renewed or replaced from time to time.
"SUBORDINATED DEBT" means the 7 1/2% Convertible Subordinated
Debentures Due 2006 which were issued under the terms of the Indenture dated
as of May 1, 1986 among the BORROWER and Maryland National Bank, Trustee (or
any successor trustee).
"SUBORDINATED DEBT PAYMENT" means the amount necessary to pay: (a) one
(1) SINKING FUND PAYMENT minus the amount of any prepayment, redemption or
acquisition made by the BORROWER of the SUBORDINATED DEBT to the extent it
has reduced the amount of the next due SINKING FUND PAYMENT; plus (b) the
aggregate amount necessary to pay all interest and mandatory redemption
payments (other than the SINKING FUND PAYMENT) due on the SUBORDINATED DEBT
during the next six (6) months from the date of determination.
"SUBSIDIARY" means, as to any PERSON, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding
capital stock or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity is at the time, directly or
indirectly (through one or more wholly-owned SUBSIDIARIES), owned by or the
management is otherwise controlled by such PERSON (irrespective of whether,
at the time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified references to "SUBSIDIARY" or
"SUBSIDIARIES" herein shall refer to those of the BORROWER.
"SYNDICATION COMPLETION DATE" means the date on which FUCC'S COMMITMENT
is reduced to an amount not in excess of Twenty Million DOLLARS
($20,000,000.00).
"TANGIBLE NET WORTH" means, as determined on a CONSOLIDATED basis, the
excess of the CREDIT PARTIES' assets, excluding goodwill and other intangible
assets, over liabilities (excluding the SUBORDINATED DEBT), all as determined
in accordance with GAAP.
"TAXES" shall have the meaning assigned thereto in Subsection 4.11.(a).
"TERMINATION DATE" means the earliest of the dates referred to in
Section 2.6.
"TERMINATION EVENT" means: (a) a "Reportable Event" described in
Section 4043 of ERISA; or (b) the withdrawal of the BORROWER or any ERISA
AFFILIATE from a PENSION PLAN during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) the
termination of a PENSION PLAN, the filing of a notice of intent to terminate
a PENSION PLAN or the treatment of a PENSION PLAN amendment as a termination
under Section 4041 of ERISA; or (d) the institution of proceedings to
terminate, or the appointment of a trustee with respect to, any PENSION PLAN
by the PBGC; or (e) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any PENSION PLAN; or (f) the partial
or complete withdrawal of the BORROWER or any ERISA AFFILIATE from a
MULTIEMPLOYER PLAN; or (g) the imposition of a LIEN pursuant to Section 412
of the CODE or Section 302 of ERISA; or (h) any event or condition which
results in the reorganization or insolvency of a MULTIEMPLOYER PLAN under
Sections 4241 or 4245 of ERISA; or (i) any event or condition which results
in the termination of a MULTIEMPLOYER PLAN under Section 4041A of ERISA or
the institution by PBGC of proceedings to terminate a MULTIEMPLOYER PLAN
under Section 4042 of ERISA; provided, however, that no event or condition
shall be a TERMINATION EVENT unless such event or condition by itself or
combined with any one or more other such events or conditions could
reasonably be expected to have a MATERIAL ADVERSE EFFECT.
"TOTAL FUNDED INDEBTEDNESS" means for any CREDIT PARTY: (a) the sum of
all indebtedness for borrowed money, including sums borrowed under the CREDIT
FACILITY, the SENIOR NOTES and the SUBORDINATED DEBT; plus (b) all CAPITAL
LEASE OBLIGATIONS, but excluding trade indebtedness arising in the ordinary
course of business and other normal accruals incurred in the ordinary course
of business.
"TRADE L/C FEES" shall have the meaning assigned thereto in Section
3.3.(b).
"TRADE LETTER OF CREDIT" means any commercial letter of credit issued
for the account of the BORROWER by the ISSUING BANK pursuant to the terms of
this AGREEMENT, as such letter of credit may be amended, modified, extended,
renewed or replaced from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of
Maryland.
"UNBILLED ACCOUNTS" means those (a) DOMESTIC ACCOUNTS (other than those
of UNC Airwork Corporation) reasonably acceptable to the COLLATERAL AGENT,
(b) GOVERNMENT ACCOUNTS, and (c) DOMESTIC ACCOUNTS of UNC Airwork
Corporation, that are otherwise ELIGIBLE ACCOUNTS but have not yet been
billed by the applicable CREDIT PARTY. Such ACCOUNTS are billable by the
CREDIT PARTIES according to the contract terms as completed work, but due to
timing differences will be billed by the CREDIT PARTIES at the earlier of the
immediately succeeding billing cycle or within thirty (30) days of the
completion of the work.
"UNIFORM CUSTOMS" the Uniform Customs and Practice for Documentary
Credits (1994 Revision), International Chamber of Commerce Publication No.
500, as amended or revised from time to time and any successor thereof.
"UNITED STATES" means the United States of America.
Section 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning assigned thereto by GAAP.
Unless otherwise specified, a reference in this AGREEMENT to a particular
section, subsection, Schedule or Exhibit is a reference to that section,
subsection, Schedule or Exhibit of this AGREEMENT. Wherever from the context
it appears appropriate, each term stated in either the singular or plural
shall include the singular and plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the feminine and the
neuter. Any reference herein to "Charlotte time" shall refer to the
applicable time of day in Charlotte, North Carolina.
Section 1.3. Other Definitions And Provisions.
(a) Use Of Capitalized Terms. Unless otherwise defined
therein, all capitalized terms defined in this AGREEMENT shall have the
defined meanings when used in this AGREEMENT, the NOTES and the other LOAN
DOCUMENTS or any certificate, report or other document made or delivered
pursuant to this AGREEMENT.
(b) Miscellaneous. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this AGREEMENT shall
refer to this AGREEMENT as a whole and not to any particular provision of
this AGREEMENT.
ARTICLE II
REVOLVING CREDIT FACILITY
-----------------------------
Section 2.1. Revolving Credit Loans. Subject to the terms and
conditions of this AGREEMENT, each LENDER severally agrees to make LOANS to
the BORROWER from time to time from the CLOSING DATE through the TERMINATION
DATE as requested by the BORROWER in accordance with the terms of Section
2.2; provided, that: (a) the aggregate principal amount of all outstanding
LOANS (after giving effect to any amount requested) shall not exceed the
lesser of (i) the BORROWING BASE less the L/C OBLIGATIONS, or (ii) the
AGGREGATE COMMITMENT less the L/C OBLIGATIONS; and (b) the principal amount
of outstanding LOANS (after giving effect to any amount requested) from any
LENDER to the BORROWER plus the amount equal to such LENDER'S COMMITMENT
PERCENTAGE of L/C OBLIGATIONS shall not at any time exceed such LENDER'S
COMMITMENT. Each LOAN by a LENDER shall be in a principal amount equal to
such LENDER'S COMMITMENT PERCENTAGE of the aggregate principal amount of
LOANS requested on such occasion. Subject to the terms and conditions
hereof, the BORROWER may borrow, repay and reborrow LOANS hereunder until the
TERMINATION DATE.
Section 2.2. Procedure For Advances Of Loans.
(a) Requests For Borrowing. The BORROWER shall give the
ADMINISTRATIVE AGENT irrevocable prior written notice (a "NOTICE OF
BORROWING"): (i) in the form attached hereto as Exhibit E in connection with
BASE RATE LOANS, not later than 2:00 p.m. (Charlotte time) on the same
BUSINESS DAY as each BASE RATE LOAN; and (ii) in the form attached hereto as
Exhibit F in connection with LIBOR RATE LOANS not later than 11:00 a.m.
(Charlotte time) at least three (3) BUSINESS DAYS before each LIBOR RATE
LOAN, of its intention to borrow, specifying (1) the date of such borrowing,
which shall be a BUSINESS DAY, (2) the amount of such borrowing, which shall
be with respect to LIBOR RATE LOANS an aggregate principal amount of Two
Million Five Hundred Thousand DOLLARS ($2,500,000.00) or a whole multiple of
Five Hundred Thousand DOLLARS ($500,000.00) in excess thereof, (3) whether
the LOANS are to be LIBOR RATE LOANS, or BASE RATE LOANS, and (4) in the case
of a LIBOR RATE LOAN, the duration of the INTEREST PERIOD applicable thereto.
Notices received after the time designated in Subsections 2.2.(a)(i) or
2.2.(a)(ii), as applicable, shall be deemed received on the next BUSINESS
DAY. Notwithstanding anything contained herein to the contrary, prior to the
SYNDICATION COMPLETION DATE all borrowings will be BASE RATE LOANS.
(b) Disbursement Of Loans. The BORROWER hereby irrevocably
authorizes the ADMINISTRATIVE AGENT to disburse the proceeds of each
borrowing requested pursuant to this Section 2.2 in immediately available
funds by crediting such proceeds to a deposit account of the BORROWER
maintained with FIRST UNION or by wire transfer to such account as may be
agreed upon by the BORROWER and the ADMINISTRATIVE AGENT from time to time.
Each disbursement of proceeds of a borrowing requested pursuant to this
Section 2.2 shall be made by the ADMINISTRATIVE AGENT prior to 4:00 p.m.
(Charlotte time) on the proposed borrowing date set forth in each NOTICE OF
BORROWING; however, subject to Section 2.3 hereof, the ADMINISTRATIVE AGENT
shall not be obligated to disburse the proceeds of any LOAN requested
pursuant to this Section 2.2 until each LENDER shall have made available to
the ADMINISTRATIVE AGENT its COMMITMENT PERCENTAGE of such LOAN.
Section 2.3. Settlement Among The Administrative Agent And The
Lenders.
(a) Except as provided in Subsection 2.3.(b), (i) the
ADMINISTRATIVE AGENT shall give to each LENDER prompt notice of each NOTICE
OF BORROWING by telecopy, telex or cable, and (ii) no later than 3:00 p.m.
(Charlotte time) on the proposed borrowing date set forth in each NOTICE OF
BORROWING, each LENDER will make available to the ADMINISTRATIVE AGENT at the
office of the ADMINISTRATIVE AGENT, in immediately available funds, its
COMMITMENT PERCENTAGE of such LOANS requested to be made. Unless the
ADMINISTRATIVE AGENT shall have been notified by any LENDER prior to a
proposed borrowing date that such LENDER does not intend to make available to
the ADMINISTRATIVE AGENT its portion of the LOANS to be made on such date,
the ADMINISTRATIVE AGENT may assume that such LENDER will make such amount
available to the ADMINISTRATIVE AGENT on (i) the date of the proposed
borrowing if a LIBOR RATE LOAN, or (ii) the SETTLEMENT DATE (as defined
below) if a BASE RATE LOAN, and the ADMINISTRATIVE AGENT, in reliance upon
such assumption, may but shall not be obligated to make available the amount
of the LOANS to be provided by such LENDER. Except as provided in Subsection
2.3.(b) and subject to Subsection 2.3.(e), promptly after its receipt of
payments from or on behalf of the BORROWER, the ADMINISTRATIVE AGENT will
cause such payments to be distributed ratably to the LENDERS subject to and
in accordance with the provisions of Sections 4.4 and 4.5.
(b) Unless the MAJORITY LENDERS have instructed the
ADMINISTRATIVE AGENT to the contrary, the ADMINISTRATIVE AGENT on behalf of
the LENDERS may but shall not be obligated to make BASE RATE LOANS under
Section 2.2 without prior notice of the proposed BASE RATE LOANS to the
LENDERS, as follows:
(i) The amount of each LENDER'S COMMITMENT PERCENTAGE of BASE
RATE LOANS shall be computed weekly (or more frequently in the
ADMINISTRATIVE AGENT'S discretion) and shall be adjusted upward or
downward on the basis of the amount of outstanding BASE RATE LOANS as
of 5:00 p.m. (Charlotte time) on the last BUSINESS DAY of the period
specified by the ADMINISTRATIVE AGENT (each such date, the "SETTLEMENT
DATE"). The ADMINISTRATIVE AGENT shall deliver to each of the LENDERS
at least once per week a periodic summary statement of the amount of
the LOANS and LETTERS OF CREDIT, and promptly after the last BUSINESS
DAY of each month a comprehensive statement of the activity under this
AGREEMENT (including extensions of credit and payments) for such
period. The LENDERS shall transfer to the ADMINISTRATIVE AGENT, or,
subject to Subsection 2.3.(e), the ADMINISTRATIVE AGENT shall transfer
to the LENDERS, such amounts as are necessary so that (after giving
effect to all such transfers) the amount of BASE RATE LOANS made by
each LENDER shall be equal to such LENDER'S COMMITMENT PERCENTAGE of
the aggregate amount of BASE RATE LOANS outstanding as of such
SETTLEMENT DATE. If the summary statement is received by the LENDERS
prior to 12:00 Noon (Charlotte time) on any BUSINESS DAY, such LENDER
shall make the transfers described above in immediately available funds
no later than 3:00 p.m. (Charlotte time) on the day such summary
statement was received, and if such summary statement is received by
the LENDERS after 12:00 Noon (Charlotte time) on such day, each LENDER
shall make such transfers no later than 3:00 p.m. (Charlotte time) on
the next succeeding BUSINESS DAY. The obligation of each of the
LENDERS to transfer such funds shall be irrevocable and unconditional
and without recourse to or warranty by the ADMINISTRATIVE AGENT. The
ADMINISTRATIVE AGENT and each of the LENDERS agree to mark their
respective books and records on the SETTLEMENT DATE to show at all
times the DOLLAR amount of their respective COMMITMENT PERCENTAGE of
the outstanding LOANS.
(ii) To the extent that the settlement described above shall
not yet have occurred, upon repayment of BASE RATE LOANS by the
BORROWER, the ADMINISTRATIVE AGENT may first apply such amounts repaid
directly to the amounts made available by the ADMINISTRATIVE AGENT
pursuant to this Subsection 2.3.(b).
(iii) Because the ADMINISTRATIVE AGENT on behalf of the LENDERS
may be advancing and/or may be repaid BASE RATE LOANS prior to the time
when the LENDERS will actually advance and/or be repaid BASE RATE
LOANS, interest with respect to BASE RATE LOANS shall be allocated by
the ADMINISTRATIVE AGENT to each LENDER and the ADMINISTRATIVE AGENT in
accordance with the amount of BASE RATE LOANS actually advanced by and
repaid to each LENDER and the ADMINISTRATIVE AGENT and shall accrue
from and including the date such BASE RATE LOANS are so advanced to but
excluding the date such BASE RATE LOANS are either repaid by the
BORROWER in accordance with Section 2.4 or actually settled by the
applicable LENDER as described in this Subsection 2.3.(b).
(c) If any amount described in Sections 2.2 or 2.3 hereof is
not made available to the ADMINISTRATIVE AGENT by a LENDER (such LENDER being
hereinafter referred to as a "DEFAULTING LENDER") and the ADMINISTRATIVE
AGENT has made such amount available to the BORROWER, the ADMINISTRATIVE
AGENT shall be entitled to recover such amount on demand from such DEFAULTING
LENDER together with interest as hereinafter provided. If such DEFAULTING
LENDER does not pay such amount forthwith upon the ADMINISTRATIVE AGENT'S
demand therefor, the ADMINISTRATIVE AGENT shall promptly notify the BORROWER
and the BORROWER shall immediately (but in no event later than five (5)
BUSINESS DAYS after such demand) pay such amount to the ADMINISTRATIVE AGENT
together with interest. The ADMINISTRATIVE AGENT shall also be entitled to
recover from such DEFAULTING LENDER and/or the BORROWER, as the case may be,
(x) interest on such amount in respect of each day from the date such
corresponding amount was made available by the ADMINISTRATIVE AGENT to the
BORROWER to the date such amount is recovered by the ADMINISTRATIVE AGENT, at
a rate per annum equal to either (i) if paid by such DEFAULTING LENDER, the
FEDERAL FUNDS RATE, or (ii) if paid by the BORROWER, the then applicable rate
of interest on BASE RATE LOANS, plus (y) an amount equal to any costs
(including reasonable legal expenses) and losses incurred by the
ADMINISTRATIVE AGENT as a result of the failure of such DEFAULTING LENDER to
provide such amount as provided in this AGREEMENT. Nothing herein shall be
deemed to relieve any LENDER from its duty to fulfill its obligations
hereunder or to prejudice any rights which the BORROWER may have against any
LENDER as a result of any default by such LENDER hereunder, including,
without limitation, the right of the BORROWER to seek reimbursement from any
DEFAULTING LENDER for any amounts paid by the BORROWER under clause (y) above
on account of such DEFAULTING LENDER'S default.
(d) The failure of any LENDER to fund its COMMITMENT PERCENTAGE
of any LOAN or fund its participation in any drawing under a LETTER OF CREDIT
shall not relieve any other LENDER of its obligation, if any, hereunder to
make LOANS, or fund its participation in any LETTER OF CREDIT, but no LENDER
shall be responsible for the failure of any other LENDER to make the LOAN to
be made by such other LENDER on the date of a borrowing or to fund any other
LENDER'S participation in any LETTER OF CREDIT.
(e) Notwithstanding anything contained herein to the contrary,
so long as any LENDER is a DEFAULTING LENDER or has rejected its COMMITMENT,
the ADMINISTRATIVE AGENT shall not be obligated to transfer to such LENDER
any payments made by the BORROWER to the ADMINISTRATIVE AGENT for the benefit
of such LENDER; and, such LENDER shall not be entitled to the sharing of any
payments pursuant to Section 4.4. Amounts payable to such LENDER under
Section 4.4 shall instead be paid to the ADMINISTRATIVE AGENT. The
ADMINISTRATIVE AGENT may hold and, in its discretion, re-lend to the BORROWER
the amount of all such payments received by it for the account of such
LENDER. For purposes of voting or consenting to matters with respect to the
LOAN DOCUMENTS and determining COMMITMENT PERCENTAGES, such DEFAULTING LENDER
shall be deemed not to be a "LENDER" and such LENDER'S COMMITMENT PERCENTAGE
shall be deemed to be Zero (0). This Subsection 2.3.(e) shall remain
effective with respect to such LENDER until (x) the OBLIGATIONS under this
AGREEMENT shall have been declared or shall have become immediately due and
payable or (y) the MAJORITY LENDERS, the ADMINISTRATIVE AGENT and the
BORROWER shall have waived such LENDER'S default in writing. No commitment
of any LENDER shall be increased or otherwise affected, and performance by
the BORROWER shall not be excused, by the operation of this Subsection
2.3.(e).
Section 2.4. Repayment Of Loans.
(a) Repayment On Termination Date. The BORROWER shall repay
the outstanding principal amount of all LOANS in full, together with all
accrued but unpaid interest thereon, on the TERMINATION DATE.
(b) Mandatory Repayment Of Excess Loans. If at any time the
outstanding principal amount of all LOANS exceeds (i) the lesser of the
AGGREGATE COMMITMENT or the BORROWING BASE, less (ii) the L/C OBLIGATIONS,
the BORROWER shall repay immediately upon notice from the ADMINISTRATIVE
AGENT, by payment to the ADMINISTRATIVE AGENT for the account of the LENDERS,
the LOANS in an amount equal to such excess. Each such repayment shall be
accompanied by accrued interest on the amount repaid and any amount required
to be paid pursuant to Section 4.9 hereof.
(c) Optional Prepayments. Subject to Subsection 2.4.(d)
hereof, the BORROWER may at any time and from time to time prepay LOANS, in
whole or in part, upon at least three (3) BUSINESS DAYS' irrevocable notice
to the ADMINISTRATIVE AGENT with respect to LIBOR RATE LOANS and at least one
(1) BUSINESS DAY irrevocable notice with respect to BASE RATE LOANS,
specifying the date and amount of prepayment and whether the prepayment is of
LIBOR RATE LOANS, BASE RATE LOANS, or a combination thereof, and, if of a
combination thereof, the amount allocable to each. Upon receipt of such
notice, the ADMINISTRATIVE AGENT shall promptly notify each LENDER. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date set forth in such notice. Partial prepayments of LIBOR
RATE LOANS shall be in an aggregate amount of Two Million Five Hundred
Thousand DOLLARS ($2,500,000.00) or a whole multiple of Five Hundred Thousand
DOLLARS ($500,000.00) in excess thereof.
(d) Limitation On Prepayment Of Libor Rate Loans. The BORROWER
may not prepay any LIBOR RATE LOAN on any day other than on the last day of
the INTEREST PERIOD applicable thereto unless such prepayment is accompanied
by any amount required to be paid pursuant to Section 4.9 hereof.
(e) Repayments From Cash Collateral Account. All amounts on
deposit in or to the credit of the CASH COLLATERAL ACCOUNT shall be applied
by the COLLATERAL AGENT on a daily basis to repay principal of the BASE RATE
LOANS. Repayments of principal pursuant to this Subsection 2.4.(e) shall not
constitute prepayments for the purposes of Subsection 2.4.(c). In the event
the amount of any repayment required to be made under this Subsection 2.4.(e)
shall exceed the aggregate principal amount of the outstanding BASE RATE
LOANS (the amount of any such excess being called the "EXCESS AMOUNT"), the
EXCESS AMOUNT shall be held by the COLLATERAL AGENT subject to this
Subsection 2.4.(e) in the CASH COLLATERAL ACCOUNT. Any amounts so held shall
be held by the COLLATERAL AGENT as collateral for the OBLIGATIONS and applied
to the repayment of the LOANS in accordance with this Subsection 2.4.(e),
subject to the BORROWER'S right of withdrawal in lieu of borrowing set forth
in this Subsection 2.4.(e). On any day on which (i) amounts remain on
deposit in or to the credit of the CASH COLLATERAL ACCOUNT after giving
effect to the payments made on such day pursuant to this Subsection 2.4.(e),
and (ii) the BORROWER shall have delivered to the COLLATERAL AGENT a written
request or a telephonic request (which shall be promptly confirmed in
writing) that such remaining amounts be invested in the CASH EQUIVALENTS
specified in such request, the COLLATERAL AGENT shall invest such remaining
amounts in such CASH EQUIVALENTS on an overnight basis; provided, however,
that the COLLATERAL AGENT shall have continuous dominion and full control
over any such investments (and over any interest that accrues thereon) to the
same extent that it has dominion and control over the CASH COLLATERAL
ACCOUNT. Any such amounts so invested (together with any interest thereon)
shall be deposited in the CASH COLLATERAL ACCOUNT not later than 11:30 a.m.
on the next succeeding BUSINESS DAY. The BORROWER shall have the right, in
lieu of any borrowing which it would at the time be permitted to make under
Section 2.2 and Article V, to request the ADMINISTRATIVE AGENT to withdraw
funds in an equal amount from the CASH COLLATERAL ACCOUNT and (1) deliver
such funds to the BORROWER, or (2) deliver such funds to any creditor of a
CREDIT PARTY. Each such request shall be deemed a representation and
warranty by the BORROWER that the conditions precedent set forth in Section
5.3 have been satisfied.
Section 2.5. Permanent Reduction Of The Aggregate Commitment.
(a) The BORROWER shall have the right at any time and from time
to time, upon at least five (5) BUSINESS DAYS prior written notice to the
ADMINISTRATIVE AGENT, to permanently reduce, in whole at any time or in part
from time to time, without premium or penalty, the AGGREGATE COMMITMENT in an
aggregate principal amount not less than Five Million DOLLARS ($5,000,000.00)
or any whole multiple of One Million DOLLARS ($1,000,000.00) in excess
thereof.
(b) Each permanent reduction pursuant to this Section 2.5 shall
be accompanied by a payment of principal sufficient to reduce the aggregate
outstanding EXTENSIONS OF CREDIT of the LENDERS after such reduction to the
AGGREGATE COMMITMENT as so reduced and by payment of accrued interest on the
amount of such repaid principal. Any reduction of the AGGREGATE COMMITMENT
to zero shall be accompanied by payment of all outstanding OBLIGATIONS (and
furnishing of cash collateral satisfactory to the COLLATERAL AGENT for all
L/C OBLIGATIONS) and, if such reduction is permanent, termination of the
COMMITMENTS and CREDIT FACILITY. Such cash collateral shall be applied in
accordance with Subsection 11.2.(b). If the reduction of the AGGREGATE
COMMITMENT requires the repayment of any LIBOR RATE LOAN, such reduction may
be made only on the last day of the then current INTEREST PERIOD applicable
thereto unless such repayment is accompanied by any amount required to be
paid pursuant to Section 4.9 hereof.
Section 2.6. Termination Of Credit Facility. The CREDIT
FACILITY shall terminate on the earliest of: (a) May 31, 2000; (b) the date
of termination by the BORROWER pursuant to Subsection 2.5.(a); and (c) the
date of termination by the ADMINISTRATIVE AGENT on behalf of the LENDERS
pursuant to Subsection 11.2.(a).
Section 2.7. Revolving Credit Notes. Each LENDER'S LOANS and
the obligation of the BORROWER to repay such LOANS shall be evidenced by a
NOTE executed by the BORROWER payable to the order of such LENDER
representing the BORROWER'S obligation to pay such LENDER'S COMMITMENT or, if
less, the aggregate unpaid principal amount of all LOANS made and to be made
by such LENDER to the BORROWER hereunder, interest and all other fees,
charges and other amounts due thereon. Each NOTE shall bear interest on the
unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 4.1.
Section 2.8. Use Of Proceeds. The BORROWER shall use the
proceeds of the LOANS: (a) to finance the ACQUISITIONS; (b) to make the
GUARANTOR ADVANCES for the working capital and general corporate requirements
of the GUARANTORS; and (c) for working capital and general corporate
requirements of the BORROWER, including the payment of certain fees and
expenses incurred in connection with the CREDIT FACILITY.
ARTICLE III
LETTER OF CREDIT FACILITY
--------------------------
Section 3.1. L/C Commitment. Subject to the terms and
conditions hereof, the ISSUING BANK, in reliance on the agreements of the
LENDERS set forth in Subsection 3.4.(a), agrees to issue LETTERS OF CREDIT
for the account of the BORROWER or, in connection with STANDBY LETTERS OF
CREDIT, such other CREDIT PARTY as is designated by the BORROWER for any
particular STANDBY LETTER OF CREDIT ("L/C RESPONSIBLE CREDIT PARTY") on any
BUSINESS DAY from the CLOSING DATE through but not including the TERMINATION
DATE in such form as may be approved from time to time by the ISSUING BANK;
provided, that the ISSUING BANK shall have no obligation to issue any LETTER
OF CREDIT if, after giving effect to such issuance: (a) the L/C OBLIGATIONS
would exceed the L/C COMMITMENT; (b) the AVAILABLE COMMITMENT of any LENDER
would be less than zero; or (c) the sum of the L/C OBLIGATIONS plus the
aggregate principal amount outstanding under the LOANS would exceed the
lesser of the BORROWING BASE at the time in effect and the AGGREGATE
COMMITMENT. Each STANDBY LETTER OF CREDIT shall (i) be denominated in
DOLLARS, or to the extent the ISSUING BANK determines is reasonably possible,
such foreign currency as may be requested by the BORROWER or the L/C
RESPONSIBLE CREDIT PARTY, (ii) be issued to support obligations of a CREDIT
PARTY, contingent or otherwise, incurred in the ordinary course of business,
(iii) have an EXPIRATION DATE no more than three hundred sixty (360) days
after the date of issuance and no later than the TERMINATION DATE, and (iv)
be subject to the UNIFORM CUSTOMS and, to the extent not inconsistent
therewith, the laws of the State of Maryland. Each TRADE LETTER OF CREDIT
shall (i) be denominated in DOLLARS, or to the extent the ISSUING BANK
determines is reasonably possible, such foreign currency as may be requested
by the BORROWER, (ii) be issued for the account of the BORROWER in respect of
the purchase of goods or services by the BORROWER in the ordinary course of
business, (iii) have an EXPIRATION DATE no later than the earlier of the
TERMINATION DATE and the date occurring ninety (90) days after issuance, and
(iv) be subject to the UNIFORM CUSTOMS and, to the extent not inconsistent
therewith, the laws of the State of Maryland. The ISSUING BANK shall not at
any time be obligated to issue any LETTER OF CREDIT hereunder if such
issuance would conflict with, or cause the ISSUING BANK or any L/C
PARTICIPANT to exceed any limits imposed by, any APPLICABLE LAW. References
herein to "issue" and derivations thereof with respect to LETTERS OF CREDIT
shall also include extensions or modifications of any existing LETTERS OF
CREDIT, unless the context otherwise requires.
Section 3.2. Procedure For Issuance Of Letters Of Credit. The
BORROWER may from time to time request that the ISSUING BANK issue a LETTER
OF CREDIT by delivering to the ISSUING BANK at the address for notices to the
ISSUING BANK specified herein: (a) in the event the LETTER OF CREDIT is to
be issued for the account of the BORROWER, an APPLICATION therefor, completed
to the satisfaction of the ISSUING BANK, and such other certificates,
documents and other papers and information as the ISSUING BANK may request,
and (b) in the event of a STANDBY LETTER OF CREDIT which is to be issued for
the account of a CREDIT PARTY other than the BORROWER, a request from the
BORROWER that such STANDBY LETTER OF CREDIT be issued for the account of such
other CREDIT PARTY, an APPLICATION therefor, completed to the satisfaction of
the ISSUING BANK, and such other certificates, documents and other papers and
information as the ISSUING BANK may request. Upon receipt of any
APPLICATION, the ISSUING BANK shall process such APPLICATION and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall,
subject to Section 3.1 and Article V hereof, promptly issue the LETTER OF
CREDIT requested thereby (but in no event shall the ISSUING BANK be required
to issue any LETTER OF CREDIT earlier than three (3) BUSINESS DAYS after its
receipt of the APPLICATION therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such LETTER OF CREDIT to the beneficiary thereof or as otherwise
may be agreed by the ISSUING BANK and the BORROWER or the L/C RESPONSIBLE
CREDIT PARTY. The ISSUING BANK shall furnish to the BORROWER a copy of such
LETTER OF CREDIT and furnish to each LENDER a copy of such LETTER OF CREDIT
and notice of the amount of each LENDER'S L/C PARTICIPATION therein, all
promptly following the issuance of such LETTER OF CREDIT.
Section 3.3. Commissions And Other Charges.
(a) The BORROWER shall pay to the ADMINISTRATIVE AGENT, for the
account of the L/C PARTICIPANTS, a commission with respect to each STANDBY
LETTER OF CREDIT, in an amount equal to the sum of (1) the APPLICABLE MARGIN
per annum, as of the date of issuance, for LIBOR RATE LOANS from the date of
issuance to the EXPIRATION DATE, multiplied by (2) the face amount of such
STANDBY LETTER OF CREDIT (collectively, the "STANDBY L/C COMMISSION"). Such
STANDBY L/C COMMISSION shall be payable on the date of the issuance of each
STANDBY LETTER OF CREDIT.
(b) The BORROWER shall pay to the ADMINISTRATIVE AGENT, for the
account of the L/C PARTICIPANTS, a fee with respect to each TRADE LETTER OF
CREDIT (collectively, the "TRADE L/C FEES") in an amount equal to three-
eighths percent (3/8%) of the face amount of each TRADE LETTER OF CREDIT,
payable on the date of issuance of each TRADE LETTER OF CREDIT.
(c) The ADMINISTRATIVE AGENT shall, promptly following its
receipt thereof, distribute to the L/C PARTICIPANTS all STANDBY L/C
COMMISSIONS and TRADE L/C FEES received by the ADMINISTRATIVE AGENT in
accordance with their respective COMMITMENT PERCENTAGES.
(d) In the event that, prior to the EXPIRATION DATE of a
STANDBY LETTER OF CREDIT, a STANDBY LETTER OF CREDIT is either: (i) returned
to, and canceled by, the ISSUING BANK; or (ii) fully drawn upon by the
beneficiary thereof (the date of either event shall be referred to as an "L/C
CONVERSION DATE"), the L/C PARTICIPANTS shall return to the ADMINISTRATIVE
AGENT a percentage of the STANDBY L/C COMMISSION received by the L/C
PARTICIPANT equal to the sum of: (1) the STANDBY L/C COMMISSION received by
such L/C PARTICIPANT, multiplied by (2) the number of calendar days from the
date of issuance of the STANDBY LETTER OF CREDIT to the L/C CONVERSION DATE,
divided by (3) the number of calendar days from the date of issuance of the
STANDBY LETTER OF CREDIT to the EXPIRATION DATE of such STANDBY LETTER OF
CREDIT ("L/C REBATE SUM"). The ADMINISTRATIVE AGENT shall pay to the
BORROWER the L/C REBATE SUMS actually received by the ADMINISTRATIVE AGENT
from the L/C PARTICIPANTS.
(e) In addition to the foregoing STANDBY L/C COMMISSIONS and
TRADE L/C FEES, the BORROWER shall pay the ISSUING BANK (i) an issuance fee
for each STANDBY LETTER OF CREDIT equal to the greater of Three Hundred
DOLLARS ($300.00) or one-eighth percent (1/8%) per annum from the date of
issuance to the date of expiration on the face amount of each STANDBY LETTER
OF CREDIT payable on the date of issuance of each LETTER OF CREDIT, and (ii)
a fee for each TRADE LETTER OF CREDIT, payable upon each draw under a TRADE
LETTER OF CREDIT, in an amount equal to the greater of Sixty DOLLARS ($60.00)
or three-eighths percent (3/8%) of the amount of such draw under a TRADE
LETTER OF CREDIT.
Section 3.4. L/C Participations.
(a) The ISSUING BANK irrevocably agrees to grant and hereby
grants to each L/C PARTICIPANT (excluding the ISSUING BANK if the ISSUING
BANK becomes a LENDER), and, to induce the ISSUING BANK to issue LETTERS OF
CREDIT hereunder, each L/C PARTICIPANT irrevocably agrees to accept and
purchase and hereby accepts and purchases from the ISSUING BANK, on the terms
and conditions hereinafter stated, for such L/C PARTICIPANT'S own account and
risk an undivided interest equal to such L/C PARTICIPANT'S COMMITMENT
PERCENTAGE in the ISSUING BANK'S obligations and rights under each LETTER OF
CREDIT issued hereunder and the amount of each draft paid by the ISSUING BANK
thereunder. Each L/C PARTICIPANT unconditionally and irrevocably agrees with
the ISSUING BANK that, if a draft is paid under any LETTER OF CREDIT for
which the ISSUING BANK is not reimbursed in full by the BORROWER or the L/C
RESPONSIBLE CREDIT PARTY in accordance with the terms of this AGREEMENT, such
L/C PARTICIPANT shall pay to the ISSUING BANK upon demand at the ISSUING
BANK'S address for notices specified herein an amount equal to such L/C
PARTICIPANT'S COMMITMENT PERCENTAGE of the amount of such draft, or any part
thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by
any L/C PARTICIPANT to the ISSUING BANK pursuant to Subsection 3.4.(a) in
respect of any unreimbursed portion of any payment made by the ISSUING BANK
under any LETTER OF CREDIT, the ISSUING BANK shall notify each L/C
PARTICIPANT of the amount and due date of such required payment and such L/C
PARTICIPANT shall pay to the ISSUING BANK the amount specified on the
applicable due date. If any such amount is paid to the ISSUING BANK after
the date such payment is due, such L/C PARTICIPANT shall pay to the ISSUING
BANK on demand, in addition to such amount, the product of (i) such amount,
multiplied by (ii) the daily average FEDERAL FUNDS RATE as determined by the
ADMINISTRATIVE AGENT during the period from and including the date such
payment is due to the date on which such payment is immediately available to
the ISSUING BANK, multiplied by (iii) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of
which is three hundred sixty (360). A certificate of the ISSUING BANK with
respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error. With respect to payment to the ISSUING BANK of
the unreimbursed amounts described in this Subsection 3.4.(b), if the L/C
PARTICIPANTS receive notice that any such payment is due (1) prior to 1:00
p.m. (Charlotte time) on any BUSINESS DAY, such payment shall be due that
BUSINESS DAY, and (2) after 1:00 p.m. (Charlotte time) on any BUSINESS DAY,
such payment shall be due on the following BUSINESS DAY.
(c) Whenever, at any time after the ISSUING BANK has made
payment under any LETTER OF CREDIT and has received from any L/C PARTICIPANT
its COMMITMENT PERCENTAGE of such payment in accordance with this Section
3.4, the ISSUING BANK receives any payment related to such LETTER OF CREDIT
(whether directly from the BORROWER or otherwise, or any payment of interest
on account thereof, the ISSUING BANK will distribute to such L/C PARTICIPANT
its pro rata share thereof; provided, that in the event that any such payment
received by the ISSUING BANK shall be required to be returned by the ISSUING
BANK, such L/C PARTICIPANT shall return to the ISSUING BANK the portion
thereof previously distributed by the ISSUING BANK to it, together with such
L/C PARTICIPANT'S proportionate share of any interest required to be paid by
the ISSUING BANK on such returned payment.
Section 3.5. Reimbursement Obligation Of The Borrower. The
BORROWER agrees to reimburse the ISSUING BANK on each date on which the
ISSUING BANK notifies the BORROWER of the date and amount of a draft paid
under any LETTER OF CREDIT for the amount of (a) such draft so paid and (b)
any taxes, charges or other costs or expenses incurred by the ISSUING BANK in
connection with such payment (excluding fees such as issuance fees, amendment
fees and negotiation fees). Each such payment shall be made to the ISSUING
BANK at its address for notices specified herein in lawful money of the
UNITED STATES and in immediately available funds. If any draft under a
LETTER OF CREDIT is payable in a currency other than DOLLARS, the BORROWER
shall reimburse the ISSUING BANK for such draft by paying to the ISSUING BANK
the equivalent in DOLLARS of the amount required to purchase the currency
from the ISSUING BANK at the ISSUING BANK'S current selling rate of exchange
in Charlotte, North Carolina for cable transfers to the place of payment in
the currency and amount in which such draft was drawn (or if there is no
current selling rate of exchange generally offered by the ISSUING BANK for
effecting such cable transfers, the amount of DOLLARS required to be paid
shall be based on such rate as the ISSUING BANK shall determine in good faith
for such purpose). Interest shall be payable on any and all amounts
remaining unpaid by the BORROWER under this Article III from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding BASE RATE LOANS which were then overdue. If the BORROWER fails
to timely reimburse the ISSUING BANK on the date the BORROWER receives the
notice referred to in this Section 3.5, the BORROWER shall be deemed to have
timely given a NOTICE OF BORROWING hereunder to the ADMINISTRATIVE AGENT
requesting the LENDERS to make a BASE RATE LOAN on such date in an amount
equal to the amount of such drawing and, subject to the satisfaction or
waiver of the conditions precedent specified in Article V, the LENDERS shall
make BASE RATE LOANS in such amount, the proceeds of which shall be applied
to reimburse the ISSUING BANK for the amount of the related drawing and costs
and expenses.
Section 3.6. Obligations Absolute. The BORROWER'S OBLIGATIONS
under this Article III (including without limitation the REIMBURSEMENT
OBLIGATION) shall be absolute and unconditional under any and all
circumstances and irrespective of (a) any set-off, counterclaim or defense to
payment which the BORROWER or the L/C RESPONSIBLE CREDIT PARTY may have or
have had against the ISSUING BANK or any beneficiary of a LETTER OF CREDIT,
and (b) whether a LETTER OF CREDIT is issued for the account of the BORROWER
or another CREDIT PARTY. The BORROWER also agrees with the ISSUING BANK that
the ISSUING BANK shall not be responsible for, and the BORROWER'S
REIMBURSEMENT OBLIGATION under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the BORROWER or the L/C
RESPONSIBLE CREDIT PARTY and any beneficiary of any LETTER OF CREDIT or any
other party to which such LETTER OF CREDIT may be transferred or any claims
whatsoever of the BORROWER or the L/C RESPONSIBLE CREDIT PARTY against any
beneficiary of such LETTER OF CREDIT or any such transferee. The ISSUING
BANK shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any LETTER OF CREDIT, except for errors or
omissions caused by the ISSUING BANK'S gross negligence or willful
misconduct. The BORROWER agrees that any action taken or omitted by the
ISSUING BANK under or in connection with any LETTER OF CREDIT or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the
UNIFORM CUSTOMS and, to the extent not inconsistent therewith, the UCC, shall
be binding on the BORROWER and shall not result in any liability of the
ISSUING BANK to the BORROWER. The responsibility of the ISSUING BANK to the
BORROWER in connection with any draft presented for payment under any LETTER
OF CREDIT shall, in addition to any payment obligation expressly provided for
in such LETTER OF CREDIT, be limited to determining that the documents
(including each draft) delivered under such LETTER OF CREDIT in connection
with such presentment are in conformity with such LETTER OF CREDIT.
Section 3.7. Provisions Relating To Trade Letters Of Credit.
In connection with each TRADE LETTER OF CREDIT, neither the ISSUING BANK nor
any of its correspondents shall be responsible for: (a) the existence,
character, quality, quantity, condition, packing, value or delivery of the
property purporting to be represented by documents; (b) any difference in
character, quality, quantity, condition or value of the property from that
expressed in documents; (c) the time, place, manner or order in which
shipment of the property is made; (d) partial or incomplete shipment referred
to in such credit; (e) the character, adequacy or responsibility of any
insurer, or any other risk connected with insurance; (f) any deviation from
instructions, delay, default or fraud by the beneficiary or any one else in
connection with the property or the shipping thereof; (g) the solvency,
responsibility or relationship to the property of any party issuing any
documents in connection with the property; (h) delay in arrival or failure to
arrive of either the property or any of the documents relating thereto; (i)
delay in giving or failure to give notice of arrival or any other notice; (j)
any breach of contract between the shippers or vendors and the BORROWER; (k)
any laws, customs, and regulations which may be effective in any jurisdiction
where any negotiation and/or payment of such TRADE LETTER OF CREDIT occurs;
(l) failure of documents (other than documents required by the terms of the
TRADE LETTER OF CREDIT) to accompany any draft at negotiation; or (m) failure
of any PERSON to note the amount of any document or drafts on the reverse of
such TRADE LETTER OF CREDIT or to surrender or to take up such TRADE LETTER
OF CREDIT or to forward documents other than documents required by the terms
of the TRADE LETTER OF CREDIT. In connection with each TRADE LETTER OF
CREDIT, the ISSUING BANK shall not be responsible for any error, neglect or
default of any of its correspondents. None of the above shall affect, impair
or prevent the vesting of any of the ISSUING BANK'S rights or powers
hereunder. If a TRADE LETTER OF CREDIT provides that payment is to be made
by the ISSUING BANK'S correspondent, neither the ISSUING BANK nor such
correspondent shall be responsible for the failure of any of the documents
specified in such TRADE LETTER OF CREDIT to come into the ISSUING BANK'S
hands, or for any delay in connection therewith, and the BORROWER'S
obligations to make reimbursements shall not be affected by such failure or
delay in the receipt of any such documents.
Section 3.8. Effect Of Application. To the extent that any
provision of any APPLICATION executed by the BORROWER related to any LETTER
OF CREDIT is inconsistent with the provisions of this Article III, the
provisions of this Article III shall apply.
Section 3.9. Exchange Rate Affect On L/C Commitment. On the
first BUSINESS DAY of each month the ADMINISTRATIVE AGENT shall determine the
amount of L/C OBLIGATIONS in DOLLARS and DOLLAR EQUIVALENTS then outstanding
and if such aggregate amount exceeds the L/C COMMITMENT (as a result of a
decrease in the value of DOLLARS as measured against the value of other
currencies in which LETTERS OF CREDIT are denominated), the ADMINISTRATIVE
AGENT shall promptly notify the BORROWER and the BORROWER shall immediately
deposit in an account maintained by the COLLATERAL AGENT, as security for the
OBLIGATIONS, an amount equal to the amount by which the aggregate amount of
L/C OBLIGATIONS exceeds the L/C COMMITMENT. Amounts held in the account
shall be applied by the COLLATERAL AGENT to the payment of drafts drawn under
LETTERS OF CREDIT. The COLLATERAL AGENT shall maintain sole control over the
amounts deposited by the BORROWER pursuant to this Section until such time as
the amount of the L/C OBLIGATIONS no longer exceed the L/C COMMITMENT.
ARTICLE IV
GENERAL LOAN PROVISIONS
Section 4.1. Interest.
(a) Interest Rate Options. Subject to the provisions of this
Section 4.1, at the election of the BORROWER, the aggregate principal balance
of the NOTES or any portion thereof shall bear interest at the BASE RATE or
the LIBOR RATE, plus, in each case, the APPLICABLE MARGIN. Notwithstanding
anything contained herein to the contrary, until the SYNDICATION COMPLETION
DATE, the aggregate principal balance of the NOTES shall bear interest at the
BASE RATE plus one and one-half percent (1 1/2%) per annum. Following the
SYNDICATION COMPLETION DATE, the BORROWER shall select the rate of interest
and INTEREST PERIOD, if any, applicable to any LOAN at the time a NOTICE OF
BORROWING is given pursuant to Section 2.2 or at the time a NOTICE OF
CONVERSION/CONTINUATION is given pursuant to Section 4.2. Each LOAN or
portion thereof bearing interest based on the BASE RATE shall be a "BASE RATE
LOAN", and each LOAN or portion thereof bearing interest based on the LIBOR
RATE shall be a "LIBOR RATE LOAN." Any LOAN or any portion thereof as to
which the BORROWER has not duly specified an interest rate as provided herein
shall be deemed a BASE RATE LOAN.
(b) Interest Periods. In connection with each LIBOR RATE LOAN,
the BORROWER, by giving notice to the ADMINISTRATIVE AGENT at the times
described in Subsection 4.1.(a), shall elect an interest period (each, an
"INTEREST PERIOD") to be applicable to such LOAN, which INTEREST PERIOD shall
be a period of one (1), two (2), three (3), or six (6) months with respect to
each LIBOR RATE LOAN;
(i) the INTEREST PERIOD shall commence on the date of
advance of or conversion to any LIBOR RATE LOAN and, in the case of
immediately successive INTEREST PERIODS, each successive INTEREST
PERIOD shall commence on the date on which the next preceding INTEREST
PERIOD expires;
(ii) if any INTEREST PERIOD would otherwise expire on
a day that is not a BUSINESS DAY, such INTEREST PERIOD shall expire on
the next succeeding BUSINESS DAY; provided, that if any INTEREST PERIOD
with respect to a LIBOR RATE LOAN would otherwise expire on a day that
is not a BUSINESS DAY but is a day of the month after which no further
BUSINESS DAY occurs in such month, such INTEREST PERIOD shall expire on
the next preceding BUSINESS DAY;
(iii) any INTEREST PERIOD with respect to a LIBOR RATE
LOAN that begins on the last BUSINESS DAY of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such INTEREST PERIOD) shall end on the last
BUSINESS DAY of the relevant calendar month at the end of such INTEREST
PERIOD;
(iv) no INTEREST PERIOD shall extend beyond the
TERMINATION DATE; and
(v) there shall be no more than five (5) INTEREST
PERIODS outstanding at any time.
(c) Applicable Margin. The APPLICABLE MARGIN provided for in
Subsection 4.1.(a) with respect to the LOANS shall, for each fiscal quarter,
be determined by reference to the ratio of CONSOLIDATED TOTAL FUNDED
INDEBTEDNESS to EBITDA as set forth below, which ratio shall be calculated as
of the end of each fiscal quarter commencing with the fiscal quarter ending
June 30, 1996 (EBITDA shall be calculated on a cumulative basis for the four
(4) most recent fiscal quarters):
<TABLE>
<CAPTION>
APPLICABLE MARGIN PER ANNUM
---------------------------
BASE LIBOR
RATIO OF CONSOLIDATED TOTAL RATE RATE
FUNDED INDEBTEDNESS TO EBITDA LOANS LOANS
- ------------------------------- ------ ------
<S> <C> <C>
Until the first calculation of ratio 1.50% 2.75%
Greater than or equal to 5.00:1 1.50% 2.75%
Greater than or equal to 4.00:1
but less than 5.00:1 1.0% 2.25%
Greater than or equal to 3.00:1
but less than 4.00:1 0.50% 1.75%
Less than 3.00:1 0% 1.25%
</TABLE>
Adjustments, if any, in the APPLICABLE MARGIN shall be made by the
ADMINISTRATIVE AGENT on the fifth BUSINESS DAY after receipt by the
ADMINISTRATIVE AGENT of quarterly financial statements for the BORROWER and
its SUBSIDIARIES and the accompanying OFFICER'S COMPLIANCE CERTIFICATE
setting forth the ratio of CONSOLIDATED TOTAL FUNDED INDEBTEDNESS to EBITDA
of the CREDIT PARTIES as of the most recent fiscal quarter end. Subject to
the immediately succeeding sentence, in the event the ADMINISTRATIVE AGENT
makes an adjustment of the APPLICABLE MARGIN pursuant to the terms of this
Subsection 4.1.(c), the new APPLICABLE MARGIN shall: (i) retroactively apply
and be effective, as to BASE RATE LOANS, commencing with the first calendar
day of the month in which the ADMINISTRATIVE AGENT receives the quarterly
financial statements of the BORROWER and its SUBSIDIARIES and the
accompanying OFFICER'S COMPLIANCE CERTIFICATE evidencing the ratio of
CONSOLIDATED TOTAL FUNDED INDEBTEDNESS to EBITDA which is the basis for such
adjustment; and (ii) as to LIBOR RATE LOANS, be effective for LIBOR RATE
LOANS with INTEREST PERIODS commencing on or after the date, as set forth in
the immediately preceding sentence, the ADMINISTRATIVE AGENT makes the
adjustment to the APPLICABLE MARGIN. In the event the BORROWER fails to
deliver such financial statements and certificate within the time required by
Subsections 7.1.(b) and Section 7.2 hereof, the APPLICABLE MARGIN shall be
the highest APPLICABLE MARGIN set forth above until the delivery of such
financial statements and certificate.
(d) Default Rate. Upon the occurrence and during the
continuance of an EVENT OF DEFAULT, the BORROWER shall no longer have the
option to request LIBOR RATE LOANS. Upon the occurrence and during the
continuance of an EVENT OF DEFAULT under Subsection 11.1.(a) or 11.1.(b), all
amounts owed under the CREDIT FACILITY which are past due shall bear interest
at a rate per annum two percent (2%) in excess of the rate that would
otherwise then be applicable. Interest shall continue to accrue on the NOTES
after the filing by or against the BORROWER of any petition seeking any
relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign.
(e) Interest Payment And Computation. Interest on each BASE
RATE LOAN shall be payable in arrears on the last BUSINESS DAY of each
calendar month commencing June 28, 1996; and interest on each LIBOR RATE LOAN
shall be payable on the last day of each INTEREST PERIOD applicable thereto,
and if such INTEREST PERIOD extends over three (3) months, at the end of each
three (3) month interval during such INTEREST PERIOD. All interest rates,
fees and commissions provided hereunder shall be computed on the basis of a
360-day year and assessed for the actual number of days elapsed, except that
interest with respect to each BASE RATE LOAN and the commitment fee
referenced in Subsection 4.3.(a) shall be computed on the basis of a 365/366-
day year.
(f) Maximum Rate. In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest hereunder or under any of the
NOTES charged or collected pursuant to the terms of this AGREEMENT or
pursuant to any of the NOTES exceed the highest rate permissible under any
APPLICABLE LAW which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court
determines that the LENDERS have charged or received interest hereunder in
excess of the highest applicable rate, the rate in effect hereunder shall
automatically be reduced to the maximum rate permitted by APPLICABLE LAW and
the LENDERS shall at the ADMINISTRATIVE AGENT'S option promptly refund to the
BORROWER any interest received by LENDERS in excess of the maximum lawful
rate or shall apply such excess to the principal balance of the OBLIGATIONS.
It is the intent hereof that the BORROWER not pay or contract to pay, and
that neither the ADMINISTRATIVE AGENT nor any LENDER receive or contract to
receive, directly or indirectly in any manner whatsoever, interest in excess
of that which may be paid by the BORROWER under APPLICABLE LAW.
Section 4.2. Notice And Manner Of Conversion Or Continuation Of
Loans. Provided that no EVENT OF DEFAULT has occurred and is then
continuing, the BORROWER, following the SYNDICATION COMPLETION DATE, shall
have the option to (a) convert at any time all or any portion of its
outstanding BASE RATE LOANS in a principal amount equal to Two Million Five
Hundred Thousand DOLLARS ($2,500,000.00) or any whole multiple of Five
Hundred Thousand DOLLARS ($500,000.00) in excess thereof into one or more
LIBOR RATE LOANS, (b) upon the expiration of any INTEREST PERIOD, (i) convert
all or any part of its outstanding LIBOR RATE LOANS in a principal amount
equal to One Million DOLLARS ($1,000,000.00) or a whole multiple of Two
Hundred Fifty Thousand DOLLARS ($250,000.00) in excess thereof into BASE RATE
LOANS, or (ii) continue such LIBOR RATE LOANS as LIBOR RATE LOANS. Whenever
the BORROWER desires to convert or continue LOANS as provided above, the
BORROWER shall give the ADMINISTRATIVE AGENT irrevocable prior written notice
in the form attached as Exhibit G (a "NOTICE OF CONVERSION/CONTINUATION") not
later than 11:00 a.m. (Charlotte time) three (3) BUSINESS DAYS before the day
on which a proposed conversion or continuation of such LOAN is to be
effective specifying the LOANS to be converted or continued, and, in the case
of any LIBOR RATE LOAN to be converted or continued, the last day of the
INTEREST PERIOD therefor, the effective date of such conversion or
continuation (which shall be a BUSINESS DAY), the principal amount of such
LOANS to be converted or continued, and the INTEREST PERIOD to be applicable
to such converted or continued LIBOR RATE LOAN. The ADMINISTRATIVE AGENT
shall promptly notify the LENDERS of such NOTICE OF CONVERSION/CONTINUATION.
Section 4.3. Fees.
(a) Commitment Fee. On a quarterly basis as set forth below,
the BORROWER shall pay to the ADMINISTRATIVE AGENT, for the account of the
LENDERS, a non-refundable commitment fee equal to the applicable per annum
percentage set forth on the following matrix (with the ratio of CONSOLIDATED
TOTAL FUNDED INDEBTEDNESS to EBITDA calculated, as of the end of each fiscal
quarter commencing with the fiscal quarter ending June 30, 1996 and EBITDA
calculated on a cumulative basis for the four (4) most recent fiscal
quarters) of the average daily unused portion of the AGGREGATE COMMITMENT:
<TABLE>
<CAPTION>
Ratio Of CONSOLIDATED TOTAL
FUNDED INDEBTEDNESS To EBITDA Commitment Fee
- ----------------------------- --------------
<S> <C>
Until the date of the first
calculation of the ratio 0.50%
Greater than or equal to 5.00:1 0.50%
Greater than or equal to 4.00:1
but less than 5.00:1 0.50%
Greater than or equal to 3.00:1
but less than 4.00:1 0.375%
Less than 3.00:1 0.25%
</TABLE>
The commitment fee shall be payable in arrears on the last BUSINESS DAY of
each fiscal quarter during the term of this AGREEMENT commencing June 30,
1996 and ending on the TERMINATION DATE. Such commitment fee shall be
distributed by the ADMINISTRATIVE AGENT to the LENDERS pro rata in accordance
with the LENDERS' respective COMMITMENT PERCENTAGES.
(b) Fees. The BORROWER shall pay all fees as set forth in the
separate fee letter agreement executed by the BORROWER and the ADMINISTRATIVE
AGENT dated May 17, 1996.
Section 4.4. Manner Of Payment. Each payment (including
prepayments described in Article II) by the BORROWER on account of the
principal of or interest on the LOANS or of any fee, commission or other
amounts (including the REIMBURSEMENT OBLIGATION) payable to the LENDERS under
this AGREEMENT or any NOTE shall be made not later than 2:00 p.m. (Charlotte
time) on the date specified for payment under this AGREEMENT to the
ADMINISTRATIVE AGENT for the account of the LENDERS pro rata in accordance
with their respective COMMITMENT PERCENTAGES at the ADMINISTRATIVE AGENT'S
OFFICE, in DOLLARS, in immediately available funds and shall be made without
any set-off, counterclaim or deduction whatsoever. Any payment received
after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the
next succeeding BUSINESS DAY for all purposes. Subject to the terms of
Section 2.3, upon receipt by the ADMINISTRATIVE AGENT of each such payment,
the ADMINISTRATIVE AGENT shall credit each LENDER'S account with its pro rata
share of such payment in accordance with such LENDER'S COMMITMENT PERCENTAGE
and shall wire advice of the amount of such credit to each LENDER. Each
payment to the ADMINISTRATIVE AGENT of the ISSUING BANK'S fees or L/C
PARTICIPANTS' commissions shall be made in like manner, but for the account
of the ISSUING BANK or the L/C PARTICIPANTS, as the case may be. Subject to
Subsection 4.1.(b)(ii), if any payment under this AGREEMENT or any NOTE shall
be specified to be made upon a day which is not a BUSINESS DAY, it shall be
made on the next succeeding day which is a BUSINESS DAY and such extension of
time shall in such case be included in computing any interest if payable
along with such payment.
Section 4.5. Crediting Of Payments And Proceeds. In the event
that the BORROWER shall fail to pay any of the OBLIGATIONS when due and the
OBLIGATIONS have been accelerated pursuant to Section 11.2, all payments
received by the LENDERS upon the NOTES and the other OBLIGATIONS and all net
proceeds from the enforcement of the OBLIGATIONS shall be applied first to
all expenses then due and payable by the BORROWER hereunder, then to all
indemnity OBLIGATIONS then due and payable by the BORROWER hereunder, then to
all ADMINISTRATIVE AGENT'S and ISSUING BANK'S fees then due and payable, then
to all commitment and other fees and commissions then due and payable, then
to accrued and unpaid interest on the NOTES, the REIMBURSEMENT OBLIGATION,
then to the principal amount of the NOTES and REIMBURSEMENT OBLIGATION and
then to the cash collateral account described in Subsection 11.2.(b) hereof
to the extent of any L/C OBLIGATIONS then outstanding, in that order.
Section 4.6. Adjustments. If any LENDER (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its EXTENSIONS OF
CREDIT, or interest thereon, or if any LENDER shall at any time receive any
collateral in respect to its EXTENSIONS OF CREDIT (whether voluntarily or
involuntarily, by set-off or otherwise) in a greater proportion than any such
payment to and collateral received by any other LENDER, if any, in respect of
such other LENDER'S EXTENSIONS OF CREDIT, or interest thereon, such
BENEFITTED LENDER shall purchase for cash from the other LENDERS such portion
of each such other LENDER'S EXTENSIONS OF CREDIT, or shall provide such other
LENDERS with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such BENEFITTED LENDER to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
LENDERS; provided, that if all or any portion of such excess payment or
benefits is thereafter recovered from such BENEFITTED LENDER, such purchase
shall be rescinded, and the purchase price and benefits returned to the
extent of such recovery, but without interest. The BORROWER agrees that each
LENDER so purchasing a portion of another LENDERS' EXTENSIONS OF CREDIT may
exercise all rights of payment including, without limitation, rights of set-
off) with respect to such portion as fully as if such LENDER were the direct
holder of such portion.
Section 4.7. Nature Of Obligations Of Lenders Regarding
Extensions Of Credit. The obligations of the ISSUING BANK and the LENDERS
under this AGREEMENT to make the LOANS and issue or participate in LETTERS OF
CREDIT are several and are not joint or joint and several.
Section 4.8. Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with
respect to any INTEREST PERIOD the ADMINISTRATIVE AGENT or any LENDER (after
consultation with the ADMINISTRATIVE AGENT) shall determine that, by reason
of circumstances affecting the foreign exchange and interbank markets
generally, deposits in eurodollars, in the applicable amounts are either:
(i) not being offered to such LENDER for such INTEREST PERIOD; or (ii) not
being quoted via Telerate Page 3750 or offered in the amount of Five Million
DOLLARS ($5,000,000.00) to lending banks in the London interbank market for
such INTEREST PERIOD, then the ADMINISTRATIVE AGENT shall forthwith give
notice thereof to the BORROWER. Thereafter, until the ADMINISTRATIVE AGENT
notifies the BORROWER that such circumstances no longer exist, the obligation
of the LENDERS to make LIBOR RATE LOANS and the right of the BORROWER to
convert any LOAN to or continue any LOAN as a LIBOR RATE LOAN shall be
suspended, and the BORROWER shall repay in full (or cause to be repaid in
full) the then outstanding principal amount of each such LIBOR RATE LOANS
together with accrued interest thereon, on the last day of the then current
INTEREST PERIOD applicable to such LIBOR RATE LOAN or convert the then
outstanding principal amount of each such LIBOR RATE LOAN to a BASE RATE LOAN
as of the last day of such INTEREST PERIOD.
(b) Laws Affecting LIBOR Rate Availability. If, after the date
hereof, the introduction of, or any change in, any APPLICABLE LAW or any
change in the interpretation or administration thereof by any GOVERNMENTAL
AUTHORITY, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any LENDER (or any of their
respective LENDING OFFICES) with any request or directive (whether or not
having the force of law) of any such GOVERNMENTAL AUTHORITY, central bank or
comparable agency, shall make it unlawful or impossible for any of the
LENDERS (or any of their respective LENDING OFFICES) to honor its obligations
hereunder to make or maintain any LIBOR RATE LOAN, such LENDER shall promptly
give notice thereof to the ADMINISTRATIVE AGENT and the ADMINISTRATIVE AGENT
shall promptly give notice to the BORROWER and the other LENDERS.
Thereafter, until the ADMINISTRATIVE AGENT notifies the BORROWER that such
circumstances no longer exist, (i) the obligations of the LENDERS to make
LIBOR RATE LOANS and the right of the BORROWER to convert any LOAN or
continue any LOAN as a LIBOR RATE LOAN shall be suspended and thereafter the
BORROWER may select only BASE RATE LOANS hereunder, and (ii) if any of the
LENDERS may not lawfully continue to maintain a LIBOR RATE LOAN to the end of
the then current INTEREST PERIOD applicable thereto as a LIBOR RATE LOAN, the
applicable LIBOR RATE LOAN shall immediately be converted to a BASE RATE LOAN
for the remainder of such INTEREST PERIOD.
(c) Increased Costs. If, after the date hereof, the
introduction of, or any change in, any APPLICABLE LAW, or in the
interpretation or administration thereof by any GOVERNMENTAL AUTHORITY,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any of the LENDERS (or any of their
respective LENDING OFFICES) with any request or directive (whether or not
having the force of law) of such GOVERNMENTAL AUTHORITY, central bank or
comparable agency:
(i) shall subject any of the LENDERS (or any of their
respective LENDING OFFICES) to any tax, duty or other charge with
respect to any NOTE, LETTER OF CREDIT or APPLICATION or shall change
the basis of taxation of payments to any of the LENDERS (or any of
their respective LENDING OFFICES) of the principal of or interest on
any NOTE, LETTER OF CREDIT or APPLICATION or any other amounts due
under this AGREEMENT in respect thereof (except for changes in the rate
of tax on the overall net income of any of the LENDERS or any of their
respective LENDING OFFICES imposed by the jurisdiction in which such
LENDER is organized or is or should be qualified to do business or such
LENDING OFFICE is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit, insurance or capital
or similar requirement against assets of, deposits with or for the
account of, or credit extended by any of the LENDERS (or any of their
respective LENDING OFFICES) or shall impose on any of the LENDERS (or
any of their respective LENDING OFFICES) or the foreign exchange and
interbank markets any other condition affecting any NOTE;
and the result of any of the foregoing is to increase the costs to any of the
LENDERS of maintaining any LIBOR RATE LOAN or issuing or participating in
LETTERS OF CREDIT or to reduce the yield or amount of any sum received or
receivable by any of the LENDERS under this AGREEMENT or under the NOTES in
respect of a LIBOR RATE LOAN or LETTER OF CREDIT or APPLICATION, then such
LENDER shall promptly notify the ADMINISTRATIVE AGENT, and the ADMINISTRATIVE
AGENT shall promptly notify the BORROWER of such fact and demand compensation
therefor from the BORROWER and, within fifteen (15) days after such notice by
the ADMINISTRATIVE AGENT, the BORROWER shall pay to such LENDER such
additional amount or amounts as will compensate such LENDER or LENDERS for
such increased cost or reduction. The ADMINISTRATIVE AGENT will promptly
notify the BORROWER of any event of which it has knowledge which will entitle
such LENDER to compensation pursuant to this Subsection 4.8.(c); provided,
that the ADMINISTRATIVE AGENT shall incur no liability whatsoever to the
LENDERS or the BORROWER in the event it fails to do so. The amount of such
compensation shall be determined, in the applicable LENDER'S reasonable
discretion, based upon the assumption that such LENDER funded its COMMITMENT
PERCENTAGE of the LIBOR RATE LOANS in the London interbank market, and using
any reasonable attribution or averaging methods which such LENDER deems
appropriate and practical. A certificate of such LENDER setting forth in
reasonable detail the basis for determining such amount or amounts necessary
to compensate such LENDER shall be forwarded to the BORROWER through the
ADMINISTRATIVE AGENT and shall be conclusively presumed to be correct save
for manifest error. A LENDER will not be entitled to compensation under this
Subsection 4.8.(c) with respect to any increased cost or reduction if the
LENDER fails to give the notification to the BORROWER required hereby within
ninety (90) days after such LENDER obtains actual knowledge of the event
giving rise to any such increased cost or reduction.
Section 4.9. Indemnity. The BORROWER hereby indemnifies each
of the LENDERS against any loss or expense which may arise or be attributable
to each LENDER'S obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain any LOAN (a) as a consequence of any
failure by the BORROWER to make any payment when due of any amount due
hereunder in connection with a LIBOR RATE LOAN, (b) due to any failure of the
BORROWER to borrow on a date specified therefor in a NOTICE OF BORROWING or
NOTICE OF CONTINUATION/CONVERSION, or (c) due to any payment, prepayment or
conversion of any LIBOR RATE LOAN on a date other than the last day of the
INTEREST PERIOD therefor. The amount of such loss or expense shall be
determined, in the applicable LENDER'S reasonable discretion, based upon the
assumption that such LENDER funded its COMMITMENT PERCENTAGE of the LIBOR
RATE LOANS in the London interbank market, and using any reasonable
attribution or averaging methods which such LENDER deems appropriate and
practical. A certificate of such LENDER setting forth in reasonable detail
the basis for determining such amount or amounts necessary to compensate such
LENDER shall be forwarded to the BORROWER through the ADMINISTRATIVE AGENT
and shall be conclusively presumed to be correct save for manifest error.
Section 4.10. Capital Requirements. If either (a) the
introduction of, or any change in, or in the interpretation of, any
APPLICABLE LAW or (b) compliance with any guideline or request from any
central bank or comparable agency or other GOVERNMENTAL AUTHORITY (whether or
not having the force of law), has or would have the effect of reducing the
rate of return on the capital of, or has affected or would affect the amount
of capital required to be maintained by, any LENDER or any corporation
controlling such LENDER as a consequence of, or with reference to the
COMMITMENTS and other commitments of this type, below the rate which the
LENDER or such other corporation could have achieved but for such
introduction, change or compliance, then such LENDER will promptly notify the
BORROWER and within five (5) BUSINESS DAYS after written demand by any such
LENDER, the BORROWER shall pay to such LENDER from time to time as specified
by such LENDER additional amounts sufficient to compensate such LENDER or
other corporation for such reduction. A certificate as to such amounts
submitted to the BORROWER and the ADMINISTRATIVE AGENT by such LENDER setting
forth in reasonable detail the calculation of such amounts, shall, in the
absence of manifest error, be presumed to be correct and binding for all
purposes. A LENDER will not be entitled to compensation under this Section
4.10 with respect to any reduction in the rate of return referred to in this
Section 4.10 if the LENDER fails to give the notification to the BORROWER
required hereby within ninety (90) days after such LENDER obtains actual
knowledge of the event giving rise to any such reduction.
Section 4.11. Taxes.
(a) Payments Free And Clear. Any and all payments by the
BORROWER hereunder or under the NOTES or the LETTERS OF CREDIT shall be made
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholding, and all
liabilities with respect thereto excluding, (i) in the case of each LENDER,
the ISSUING BANK, and the AGENTS, income and franchise taxes imposed by the
jurisdiction under the laws of which such LENDER, the ISSUING BANK, or the
AGENTS (as the case may be) is organized or is or should be qualified to do
business or any political subdivision thereof and (ii) in the case of each
LENDER, income and franchise taxes imposed by the jurisdiction of such
LENDER'S LENDING OFFICE or any political subdivision thereof (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). If the BORROWER shall
be required by law to deduct any taxes from or in respect of any sum payable
hereunder or under any NOTE or LETTER OF CREDIT to any LENDER or the AGENTS,
(1) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 4.11) such LENDER, the ISSUING BANK, or the
AGENTS (as the case may be) receives an amount equal to the amount such party
would have received had no such deductions been made, (2) the BORROWER shall
make such deductions, (3) the BORROWER shall pay the full amount deducted to
the relevant taxing authority or other authority in accordance with
applicable law, and (4) the BORROWER shall deliver to the ADMINISTRATIVE
AGENT evidence of such payment to the relevant taxing authority or other
authority in the manner provided in Subsection 4.11.(d).
(b) Stamp And Other Taxes. In addition, the BORROWER shall pay
any present or future stamp, registration, recordation or documentary taxes
or any other similar fees or charges or excise taxes, levies of the UNITED
STATES or any state or political subdivision thereof or any applicable
foreign jurisdiction which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
AGREEMENT, the LOANS, the LETTERS OF CREDIT, the other LOAN DOCUMENTS, or the
perfection of any rights or security interest in respect thereto (hereinafter
referred to as "OTHER TAXES").
(c) Indemnity. The BORROWER shall indemnify each LENDER, the
ISSUING BANK, and the AGENTS for the full amount of TAXES and OTHER TAXES
(including, without limitation, any TAXES and OTHER TAXES imposed by any
jurisdiction on amounts payable under this Section 4.11) paid by such LENDER,
the ISSUING BANK, or the AGENTS (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such TAXES or OTHER TAXES were correctly or
legally asserted. Such indemnification shall be made within thirty (30) days
from the date such LENDER, the ISSUING BANK, or the AGENTS (as the case may
be) makes written demand therefor.
(d) Evidence Of Payment. Within thirty (30) days after the
date of any payment of TAXES or OTHER TAXES, the BORROWER shall furnish to
the ADMINISTRATIVE AGENT, at its address referred to in Section 13.1, the
original or a certified copy of a receipt evidencing payment thereof or other
evidence of payment satisfactory to the ADMINISTRATIVE AGENT.
(e) Delivery Of Tax Forms. Each LENDER organized under the
laws of a jurisdiction other than the UNITED STATES or any state thereof
shall deliver to the BORROWER, with a copy to the ADMINISTRATIVE AGENT, on
the CLOSING DATE or concurrently with the delivery of the relevant ASSIGNMENT
AND ACCEPTANCE, as applicable, (i) two UNITED STATES Internal Revenue Service
Forms 4224 or Forms 1001, as applicable (or successor forms) properly
completed and certifying in each case that such LENDER is entitled to a
complete exemption from withholding or deduction for or on account of any
UNITED STATES federal income taxes, and (ii) an Internal Revenue Service Form
W-8 or W-9 or successor applicable form, as the case may be, to establish an
exemption from UNITED STATES backup withholding taxes. Each such LENDER
further agrees to deliver to the BORROWER, with a copy to the ADMINISTRATIVE
AGENT, a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms
or manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the BORROWER, certifying in the case of a Form 1001 or 4224 that such
LENDER is entitled to receive payments under this AGREEMENT without deduction
or withholding of any UNITED STATES federal income taxes (unless in any such
case an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders such forms inapplicable or the exemption
to which such forms relate unavailable and such LENDER notifies the BORROWER
and the ADMINISTRATIVE AGENT that it is not entitled to receive payments
without deduction or withholding of UNITED STATES federal income taxes) and,
in the case of a Form W-8 or W-9, establishing an exemption from UNITED
STATES backup withholding tax.
(f) Survival. Without prejudice to the survival of any other
agreement of the BORROWER hereunder, the agreements and OBLIGATIONS of the
BORROWER contained in this Section 4.11 shall survive the payment in full of
the OBLIGATIONS and the termination of the COMMITMENTS.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
--------------------------------------------
Section 5.1. Closing. The closing shall take place at the
offices of Gebhardt & Smith, The World Trade Center, Ninth Floor, Baltimore,
Maryland 21202 at 9:00 a.m. on May 22, 1996, or on such other date as the
parties hereto shall mutually agree.
Section 5.2. Conditions To Closing And Initial Extensions Of
Credit. The obligation of the LENDERS to close this AGREEMENT and to make
the initial LOAN or issue the initial LETTER OF CREDIT is subject to the
satisfaction of each of the following conditions:
(a) Executed Loan Documents. This AGREEMENT, the NOTES, the
SECURITY DOCUMENTS and all other LOAN DOCUMENTS shall have been duly
authorized, executed and delivered to the ADMINISTRATIVE AGENT by the parties
thereto, shall be in full force and effect and no default shall exist
thereunder, and the BORROWER shall have delivered original counterparts
thereof to the ADMINISTRATIVE AGENT.
(b) Closing Certificates; Etc.
(i) Officer's Certificate Of The Borrower. The
ADMINISTRATIVE AGENT shall have received a certificate from the Chief
Financial Officer or Treasurer of the BORROWER, in form and substance
satisfactory to the ADMINISTRATIVE AGENT, to the effect that all
representations and warranties of the BORROWER contained in this
AGREEMENT and the other LOAN DOCUMENTS are true, correct and complete
in all material respects; that the BORROWER is not in violation of any
of the covenants contained in this AGREEMENT and the other LOAN
DOCUMENTS; and that, after giving effect to the transactions
contemplated by this AGREEMENT, no DEFAULT or EVENT OF DEFAULT has
occurred and is continuing.
(ii) Certificate Of Secretary Of Each Credit Party. The
ADMINISTRATIVE AGENT shall have received a certificate of the secretary
or assistant secretary of each of the CREDIT PARTIES certifying that
attached thereto is a true and complete copy of the articles of
incorporation of such CREDIT PARTY and all amendments thereto; that
attached thereto is a true and complete copy of the bylaws of such
CREDIT PARTY as in effect on the date of such certification; that
attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such CREDIT PARTY authorizing (1)
if from the Secretary of the BORROWER, the borrowings contemplated
hereunder and the execution, delivery and performance of this AGREEMENT
and the other LOAN DOCUMENTS to which it is a party, or (2) if from a
GUARANTOR, the borrowings under the applicable GUARANTOR ADVANCES, the
guaranteeing of the BORROWER'S OBLIGATIONS hereunder and the execution,
delivery and performance of the LOAN DOCUMENTS to which it is a party;
and as to the incumbency and genuineness of the signature of each
officer of such CREDIT PARTY executing LOAN DOCUMENTS to which it is a
party.
(iii) Certificates Of Good Standing. The ADMINISTRATIVE
AGENT shall have received long-form certificates as of a recent date of
the good standing of each CREDIT PARTY under the laws of its
jurisdiction of organization, the laws of the jurisdiction in which it
maintains its chief executive office and each other jurisdiction where
the CREDIT PARTY'S failure to qualify to do business would have a
MATERIAL ADVERSE EFFECT.
(iv) Opinions Of Counsel. The ADMINISTRATIVE AGENT
shall have received favorable opinions of counsel to the CREDIT PARTIES
addressed to the AGENTS, the ISSUING BANK, and the LENDERS with respect
to the CREDIT PARTIES, the LOAN DOCUMENTS and such other matters as the
ADMINISTRATIVE AGENT shall reasonably request.
(c) Consents; No Adverse Change.
(i) Governmental And Third Party Approvals. All
necessary approvals, authorizations and consents, if any be required,
of any PERSON and of all GOVERNMENTAL AUTHORITIES and courts having
jurisdiction with respect to the transactions contemplated by this
AGREEMENT and the other LOAN DOCUMENTS shall have been obtained,
provided, however, that in connection with compliance with FACA it is
agreed that acknowledgements of assignments under FACA from officers of
the UNITES STATES, or any agency or department thereof, shall not be
obtained by the CLOSING DATE.
(ii)Permits And Licenses. All permits and licenses,
including permits and licenses required under APPLICABLE LAWS, necessary to
the conduct of business by the CREDIT PARTIES shall have been obtained.
(ii) No Injunction; Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any GOVERNMENTAL AUTHORITY to enjoin,
restrain, or prohibit, or to obtain substantial damages in respect of,
or which is related to or arises out of this AGREEMENT or the other
LOAN DOCUMENTS or the consummation of the transactions contemplated
hereby or thereby.
(iii) No Event Of Default. No DEFAULT or EVENT OF
DEFAULT shall have occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The ADMINISTRATIVE AGENT
shall have received the audited CONSOLIDATED financial statements of
the BORROWER and its SUBSIDIARIES for FISCAL YEAR 1995, accompanied by
an unqualified report thereon prepared by Coopers & Lybrand. The
ADMINISTRATIVE AGENT shall have also received the most recently
completed unaudited CONSOLIDATED financial statements of the BORROWER
and its SUBSIDIARIES for each fiscal month and fiscal quarter ending
during the portion of FISCAL YEAR 1996 preceding the CLOSING DATE.
(ii) Payment At Closing; Fee Letters. There shall have
been paid by the BORROWER to First Union Capital Markets Corp., the
ADMINISTRATIVE AGENT and the LENDERS the fees set forth or referenced
in Section 4.3 and any other accrued and unpaid fees or commissions due
hereunder (including, without limitation, legal fees and expenses), and
to any other PERSON such amount as may be due thereto in connection
with the transactions contemplated hereby, including all taxes, fees
and other charges in connection with the execution, delivery,
recording, filing and registration of any of the LOAN DOCUMENTS. The
ADMINISTRATIVE AGENT shall have received duly authorized and executed
copies of the fee letter agreement referred to in Subsection 4.3.(c).
(e) Garrett Acquisition. UNC/CFC Acquisition Co. shall have
completed the GARRETT ACQUISITION pursuant to the terms of the Asset Purchase
Agreement dated as of January 15, 1996, as amended by a letter agreement
dated April 22, 1996, by and among the BORROWER, UNC/CFC Acquisition Co., CFC
Aviation Services, L.P., CFC Aviation Company, L.L.C., CFC Aviation, Inc.,
Carlisle Enterprises, L.P., First Capitol Corporation of Chicago and Cross
Creek Partners III, or such other terms as are acceptable to the LENDERS.
(f) Senior Subordinated Debentures. The BORROWER shall have
received at least One Hundred Twenty-Five Million DOLLARS ($125,000,000.00)
from the issuance and sale of the SENIOR SUBORDINATED DEBENTURES.
(g) Preferred Stock. The BORROWER shall have received Twenty-
Five Million DOLLARS ($25,000,000.00) from the issuance and sale of the
BORROWER'S Series B Senior Cumulative Convertible Preferred Stock pursuant to
the Stock Purchase Agreement dated as of October 4, 1995 by and among the
BORROWER, Network III Holdings LDC, Gildea Investment Company, Iron City
Partners, Inc., Ariel Fund Ltd. and Pequod Investments, L.P.
(h) Miscellaneous.
(i) Notice Of Borrowing. The ADMINISTRATIVE AGENT
shall have received written instructions from the BORROWER to the
ADMINISTRATIVE AGENT directing the payment of any proceeds of LOANS
made under this AGREEMENT that are to be paid on the CLOSING DATE.
(ii) Proceedings And Documents. All opinions,
certificates and other instruments and all proceedings in connection
with the transactions contemplated by this AGREEMENT shall be
satisfactory in form and substance to the LENDERS. The LENDERS shall
have received copies of all other instruments and other evidence as the
LENDERS may reasonably request, in form and substance satisfactory to
the LENDERS, with respect to the transactions contemplated by this
AGREEMENT and the taking of all actions in connection therewith.
(iii) Due Diligence And Other Documents. The BORROWER
shall have delivered to the ADMINISTRATIVE AGENT such other documents,
certificates and opinions as the ADMINISTRATIVE AGENT reasonably
requests.
Section 5.3. Conditions To All Loans And Letters Of Credit. The
obligations of the LENDERS to make any LOAN or issue any LETTER OF CREDIT is
subject to the satisfaction of the following conditions precedent on the
relevant borrowing or issue date, as applicable:
(a) Continuation Of Representations And Warranties. The
representations and warranties contained in Article VI shall be true and
correct in all material respects on and as of such borrowing or issuance date
with the same effect as if made on and as of such date.
(b) No Existing Default. No DEFAULT or EVENT OF DEFAULT shall
have occurred and be continuing hereunder on the borrowing date with respect
to such LOAN or after giving effect to the LOANS to be made on such date or
the issue date with respect to such LETTER OF CREDIT or after giving affect
to such LETTERS OF CREDIT on such date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE BORROWER
Section 6.1. Representations And Warranties. To induce the
AGENTS to enter into this AGREEMENT, the LENDERS to make the LOANS and
participate in the LETTERS OF CREDIT, and the ISSUING BANK to issue the
LETTERS OF CREDIT, the BORROWER hereby represents and warrants to the AGENTS,
the LENDERS and the ISSUING BANK that:
(a) Organization; Power; Qualification. Each of the CREDIT
PARTIES is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization, except
for those jurisdictions where failure to so qualify would not have a MATERIAL
ADVERSE EFFECT. The jurisdictions in which the CREDIT PARTIES are organized
and qualified to do business are described on Schedule 6.1(a).
(b) Ownership. Each SUBSIDIARY of the BORROWER is listed on
Schedule 6.1(b). Except as described on Schedule 6.1.(b), each SUBSIDIARY is
directly or indirectly wholly owned by the BORROWER. There are no
outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of the SUBSIDIARIES of the BORROWER, except as
owned directly or indirectly by the BORROWER and except as described on
Schedule 6.1(b).
(c) Authorization Of Agreement, Loan Documents And Borrowing.
Each of the CREDIT PARTIES has the right, power and authority and has taken
all necessary corporate and other action to authorize the execution, delivery
and performance of this AGREEMENT and each of the other LOAN DOCUMENTS to
which it is a party in accordance with their respective terms. This
AGREEMENT and each of the other LOAN DOCUMENTS have been duly executed and
delivered by the duly authorized officers of the CREDIT PARTIES that are
parties thereto, and each such document constitutes the legal, valid and
binding obligation of the CREDIT PARTIES that are parties thereto,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
state or federal debtor relief laws from time to time in effect which affect
the enforcement of creditors' rights in general and the availability of
equitable remedies.
(d) Compliance Of Agreement, Loan Documents And Borrowing With
Laws, Etc. The execution, delivery and performance by the CREDIT PARTIES of
the LOAN DOCUMENTS to which each such PERSON is a party, in accordance with
their respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving
of notice or otherwise, (i) require any GOVERNMENTAL APPROVAL or violate any
APPLICABLE LAW relating to the CREDIT PARTIES, (ii) conflict with, result in
a breach of or constitute a default under the articles of incorporation,
bylaws or other organizational documents of the CREDIT PARTIES or any
indenture, agreement or other instrument to which such PERSON is a party or
by which any of its properties may be bound or any GOVERNMENTAL APPROVAL
relating to such PERSON, or (iii) result in or require the creation or
imposition of any LIEN upon or with respect to any property now owned or
hereafter acquired by such PERSON other than LIENS arising under the LOAN
DOCUMENTS.
(e) Compliance With Law; Governmental Approvals. The BORROWER
and each of its SUBSIDIARIES (i) has all GOVERNMENTAL APPROVALS required by
any APPLICABLE LAW for it to conduct its business, each of which is in full
force and effect, is final and not subject to review on appeal and is not the
subject of any pending or, to the best of its knowledge, threatened attack by
direct or collateral proceeding and (ii) is in compliance in all material
respects with each GOVERNMENTAL APPROVAL applicable to it and in compliance
in all material respects with all other APPLICABLE LAWS relating to it or any
of its respective properties.
(f) Tax Returns And Payments. The BORROWER and each of its
SUBSIDIARIES has duly filed or caused to be filed all federal, state, local
and other tax returns required by APPLICABLE LAW to be filed, and has paid,
or made adequate provision for the payment of, all federal, state, local and
other taxes, assessments and governmental charges or levies upon it and its
property, income, profits and assets which are due and payable. No
GOVERNMENTAL AUTHORITY has asserted any LIEN or other claim against the
BORROWER or any SUBSIDIARY thereof with respect to unpaid taxes which has not
been discharged or resolved except as is permitted pursuant to Subsection
10.3.(a). The charges, accruals and reserves on the books of the BORROWER
and any of its SUBSIDIARIES in respect of federal, state, local and other
taxes for all FISCAL YEARS and portions thereof since the organization of the
BORROWER and any of its SUBSIDIARIES are in the judgment of the BORROWER
adequate, and the BORROWER does not anticipate any additional taxes or
assessments for any of such years.
(g) Intellectual Property Matters. The BORROWER and each of
its SUBSIDIARIES owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses,
patent applications, trademarks, trademark rights, trade names, trade name
rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. No event has occurred which permits, or
after notice or lapse of time or both would permit, the revocation or
termination of any such rights, and neither the BORROWER nor any other CREDIT
PARTY is liable to any PERSON for infringement under APPLICABLE LAW with
respect to any such rights as a result of its business operations.
(h) Environmental Matters. Except as previously disclosed in
writing to the LENDERS and as set forth on Schedule 6.1.(h):
(i) the properties of the BORROWER and its SUBSIDIARIES
do not contain, and have not, to their knowledge, previously contained,
any HAZARDOUS MATERIALS in amounts or concentrations which (1)
constitute or constituted a violation of, or (2) could give rise to
liability under, applicable ENVIRONMENTAL LAWS which could reasonably
be expected to have a MATERIAL ADVERSE EFFECT;
(ii) such properties and all operations conducted in
connection therewith are in compliance with all applicable
ENVIRONMENTAL LAWS, and there is no contamination at, under or about
such properties or such operations which could reasonably be expected
to have a MATERIAL ADVERSE EFFECT or impair the fair saleable value
thereof;
(iii) neither the BORROWER nor any SUBSIDIARY thereof has
received any notice of violation, alleged violation, noncompliance,
liability or potential liability regarding compliance with
ENVIRONMENTAL LAWS which could reasonably be expected to have a
MATERIAL ADVERSE EFFECT with regard to any of their properties or the
operations conducted in connection therewith, nor does the BORROWER or
any SUBSIDIARY thereof have knowledge or reason to believe that any
such notice will be received or is being threatened;
(iv) HAZARDOUS MATERIALS have not been transported or
disposed of from the properties of the BORROWER and its SUBSIDIARIES in
violation of, or in a manner or to a location which could give rise to
liability under, ENVIRONMENTAL LAWS which could reasonably be expected
to have a MATERIAL ADVERSE EFFECT, nor have any HAZARDOUS MATERIALS
been generated, treated, stored or disposed of at, on or under any of
such properties in violation of, or in a manner that could give rise to
liability under, any applicable ENVIRONMENTAL LAWS which could
reasonably be expected to have a MATERIAL ADVERSE EFFECT;
(v) no judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the BORROWER,
threatened, under any ENVIRONMENTAL LAW to which the BORROWER or any
SUBSIDIARY thereof is or will be named as a party with respect to such
properties or operations conducted in connection therewith, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any ENVIRONMENTAL LAW with
respect to such properties or such operations which could reasonably be
expected to have a MATERIAL ADVERSE EFFECT; and
(vi) there has been no release, or to the best of the
BORROWER'S knowledge, the threat of release, of HAZARDOUS MATERIALS at
or from such properties, in violation of or in amounts or in a manner
that could give rise to liability under ENVIRONMENTAL LAWS which could
reasonably be expected to have a MATERIAL ADVERSE EFFECT.
(i) ERISA. Except as disclosed in the audited financial
statements of the BORROWER for the year ended December 31, 1994 and the notes
thereto or in the Annual Report of the BORROWER on Form 10-K for the year
then ended:
(i) neither the BORROWER nor any ERISA AFFILIATE
maintains or contributes to, or has any obligation under, any EMPLOYEE
BENEFIT PLANS other than those identified on Schedule 6.1(i);
(ii) the BORROWER and each ERISA AFFILIATE is in
compliance in all material respects with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with
respect to all EMPLOYEE BENEFIT PLANS except for any required
amendments for which the remedial amendment period as defined in
Section 401(b) of the CODE has not yet expired. Each EMPLOYEE BENEFIT
PLAN that is intended to be qualified under Section 401(a) of the CODE
has been determined by the Internal Revenue Service to be so qualified
or an application for such determination is pending with the Internal
Revenue Service, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the CODE (or an
application for such determination is pending). No liability has been
incurred by the BORROWER or any ERISA AFFILIATE which remains
unsatisfied for any taxes or penalties with respect to any EMPLOYEE
BENEFIT PLAN, or MULTIEMPLOYER PLAN;
(iii) No PENSION PLAN has been terminated which resulted
in liability that remains outstanding, nor has any accumulated funding
deficiency (as defined in Section 412 of the CODE) been incurred which
remains outstanding (without regard to any waiver granted under Section
412 of the CODE), nor has any funding waiver from the Internal Revenue
Service been received or requested with respect to any PENSION PLAN,
nor has the BORROWER or any ERISA AFFILIATE failed to make any
contributions or to pay any amounts due and owing as required by
Section 412 of the CODE, Section 302 of ERISA or the terms of any
PENSION PLAN prior to the due dates of such contributions under Section
412 of the CODE or Section 302 of ERISA which contributions or amounts
remain outstanding, nor has there been any event requiring any
disclosure under Section 4041(c) (3) (C) or 4063(a) of ERISA with
respect to any PENSION PLAN;
(iv) Neither the BORROWER nor any ERISA AFFILIATE has:
(1) engaged in a material nonexempt prohibited transaction described in
Section 406 of the ERISA or Section 4975 of the CODE which remains
uncorrected, (2) incurred any material liability to the PBGC which
remains outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid, (3) failed to make a
material required contribution or payment to a MULTIEMPLOYER PLAN which
contribution or payment remains outstanding, or (4) failed to make a
required installment or other required payment under Section 412 of the
CODE which installment or payment remains outstanding;
(v) No TERMINATION EVENT has occurred or is reasonably
expected to occur; and
(vi) No proceeding, claim, lawsuit and/or investigation
is existing or, to the best knowledge of the BORROWER after due
inquiry, threatened concerning or involving any (1) employee welfare
benefit plan (as defined in Section 3(l) of ERISA) currently maintained
or contributed to by the BORROWER or any ERISA AFFILIATE, (2) PENSION
PLAN or (3) MULTIEMPLOYER PLAN, which by itself or together with one or
more other such proceedings, claims, lawsuits or investigations could
reasonably be expected to result in a MATERIAL ADVERSE EFFECT.
(j) Margin Stock. Neither the BORROWER nor any SUBSIDIARY
thereof is engaged principally or as one of its activities in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" (as each such term is defined or used in Regulations G and U of the
Board of Governors of the Federal Reserve System). No part of the proceeds
of any of the LOANS or LETTERS OF CREDIT will be used for purchasing or
carrying margin stock or for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation G, T, U or X of such Board of
Governors.
(k) Government Regulation. Neither the BORROWER nor any
SUBSIDIARY thereof is an "investment company" or a company "controlled" by an
"investment company" (as each such term is defined or used in the Investment
Company Act of 1940, as amended) and neither the BORROWER nor any SUBSIDIARY
thereof is, or after giving effect to any EXTENSION OF CREDIT will be,
subject to regulation under the Public Utility Holding Company Act of 1935 or
the Interstate Commerce Act, each as amended, or any other APPLICABLE LAW
which limits its ability to incur or consummate the transactions contemplated
hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete
and accurate list of all MATERIAL CONTRACTS of the BORROWER and its
SUBSIDIARIES in effect as of the CLOSING DATE not listed on any other
Schedule hereto; other than as set forth in Schedule 6.1(l), each such
MATERIAL CONTRACT is, as of the CLOSING DATE, and after giving effect to the
consummation of the transactions contemplated by the LOAN DOCUMENTS will be,
in full force and effect in accordance with the terms thereof and there will
be no material defaults or events of default thereunder.
(m) Employee Relations. The BORROWER and each of its
SUBSIDIARIES has a stable work force in place. As of the CLOSING DATE, the
BORROWER knows of no pending, threatened or contemplated strikes, work
stoppage or other collective labor disputes involving its employees or those
of its SUBSIDIARIES.
(n) Financial Statements. The (i) CONSOLIDATED balance sheets
of the BORROWER and its SUBSIDIARIES as of December 31, 1995 and the related
CONSOLIDATED statements of earnings and cash flows for the FISCAL YEAR then
ended and (ii) unaudited CONSOLIDATED balance sheet of the BORROWER and its
SUBSIDIARIES as of March 31, 1996 and related unaudited CONSOLIDATED
statements of earnings and cash flows for the period then ended, copies of
which have been furnished to the ADMINISTRATIVE AGENT and each LENDER, are
complete and correct and fairly present the assets, liabilities and financial
position of the BORROWER and its SUBSIDIARIES as at such dates, and the
results of the operations and changes of financial position for the periods
then ended. All such financial statements, including the related schedules
and NOTES thereto, have been prepared in accordance with GAAP. As of the
date of the foregoing financial statements, the BORROWER and its SUBSIDIARIES
had no DEBT, obligation or other unusual forward or long-term commitment
required to be reflected in the foregoing financial statements or in the
notes thereto which was not fairly reflected therein.
(o) No Material Adverse Change. Since December 31, 1995, there
has been no change in the properties, business, operations, or condition
(financial or otherwise) of the BORROWER and its SUBSIDIARIES, including, but
not limited to, any material adverse change resulting from any fire,
explosion, accident, drought, storm, hail, earthquake, embargo, act of God,
or of the public enemy or other casualty (whether or not covered by
insurance) that could reasonably be expected to have a MATERIAL ADVERSE
EFFECT.
(p) Solvency. As of the CLOSING DATE and after giving effect
to each EXTENSION OF CREDIT made hereunder, the GARRETT ACQUISITION and the
SENIOR SUBORDINATED DEBENTURES, each CREDIT PARTY will be SOLVENT.
(q) Titles To Properties. The BORROWER and each of its
SUBSIDIARIES has such title to the real property owned by it as is necessary
or desirable to the conduct of its business and valid and legal title to all
of its personal property and assets, including, but not limited to, those
reflected on the balance sheets of the BORROWER and its SUBSIDIARIES
delivered pursuant to Subsection 6.1.(n), except those which have been
disposed of by the BORROWER or its SUBSIDIARIES subsequent to such date which
dispositions have been in the ordinary course of business or as otherwise
expressly permitted hereunder.
(r) Liens. None of the properties and assets of the BORROWER
or any SUBSIDIARY thereof is subject to any LIEN, except LIENS permitted
pursuant to Section 10.3. No financing statement under the UCC of any state
which names the BORROWER or any SUBSIDIARY thereof or any of their respective
trade names or divisions as debtor and which has not been terminated, has
been filed in any state or other jurisdiction and neither the BORROWER nor
any SUBSIDIARY thereof has signed any such financing statement or any
security agreement authorizing any secured party thereunder to file any such
financing statement, except (i) to perfect those LIENS permitted by Section
10.3 hereof, and (ii) financing statements filed to protect the interests of
lessors under operating leases and consignors.
(s) Debt And Contingent Obligations. Schedule 6.1(s) is a
complete and correct listing of all DEBT and CONTINGENT OBLIGATIONS of the
BORROWER and its SUBSIDIARIES in excess of Three Million DOLLARS
($3,000,000.00) existing as of the CLOSING DATE. The BORROWER and its
SUBSIDIARIES have performed and are in compliance with all of the terms of
such DEBT and CONTINGENT OBLIGATIONS and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with notice or lapse of time or both would constitute such a default or
event of default on the part of the BORROWER or its SUBSIDIARIES exists with
respect to any such DEBT or CONTINGENT OBLIGATION.
(t) Litigation. Except as set forth on Schedule 6.1(t) and in
the BORROWER'S annual 10-K and quarterly 10-Q reports to the Securities And
Exchange Commission (i) as of the CLOSING DATE, there are no actions, suits
or proceedings pending, nor to the knowledge of the BORROWER, threatened
against or in any other way relating adversely to or affecting the BORROWER
or any SUBSIDIARY thereof of any of their respective properties in any court
or before any arbitrator of any kind or before or by any GOVERNMENTAL
AUTHORITY, which, if determined adversely to the interest of the BORROWER or
its SUBSIDIARY, would result in liability in excess of One Million DOLLARS
($1,000,000.00) (or Five Million DOLLARS ($5,000,000.00) if the action, suit
or proceeding is fully covered by insurance), (ii) as of the date of each
borrowing under the CREDIT FACILITY, there are no actions, suits or
proceedings pending nor, to the knowledge of the BORROWER, threatened against
or in any other way relating adversely to or affecting the BORROWER or any
SUBSIDIARY thereof or any of their respective properties in any court or
before any arbitrator of any kind or before or by any GOVERNMENTAL AUTHORITY,
which could reasonably be expected to have a MATERIAL ADVERSE EFFECT.
(u) Absence Of Defaults. No event has occurred and is
continuing which constitutes a DEFAULT or an EVENT OF DEFAULT.
(v) Accuracy And Completeness Of Information. All written
information, reports and other papers and data produced by or on behalf of
the BORROWER or any SUBSIDIARY thereof and furnished to the LENDERS were, at
the time the same were so furnished, complete and correct in all respects to
the extent necessary to give the recipient a true and accurate knowledge of
the subject matter. No document furnished or written statement made to the
AGENTS or the LENDERS by the BORROWER or any SUBSIDIARY thereof in connection
with the negotiation, preparation or execution of this AGREEMENT or any of
the LOAN DOCUMENTS contains or will contain any untrue statement of a fact
material to the creditworthiness of the BORROWER or its SUBSIDIARIES or omits
or will omit to state a fact necessary in order to make the statements
contained therein not misleading. The BORROWER is not aware of any facts
which it has not disclosed in writing to the ADMINISTRATIVE AGENT which,
insofar as the BORROWER can now foresee, could reasonably be expected to have
a MATERIAL ADVERSE EFFECT.
(w) Material Subsidiaries. The GUARANTORS are the only
MATERIAL SUBSIDIARIES of the BORROWER.
Section 6.2. Survival Of Representations And Warranties; Etc.
All representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the
LOAN DOCUMENTS (including but not limited to any such representation or
warranty made in or in connection with any amendment thereto) shall
constitute representations and warranties made under this AGREEMENT. All
representations and warranties made under this AGREEMENT shall be made or
deemed to be made at and as of the CLOSING DATE, shall survive the CLOSING
DATE and shall not be waived by the execution and delivery of this AGREEMENT,
any investigation made by or on behalf of the LENDERS or any borrowing
hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
----------------------------------
Until all of the OBLIGATIONS have been paid and satisfied in full and
the COMMITMENTS terminated, unless consent has been obtained in the manner
set forth in Section 13.10 hereof, the BORROWER will furnish or cause to be
furnished to the COLLATERAL AGENT or ADMINISTRATIVE AGENT, as specified
below, at the AGENTS' respective offices at their addresses set forth in
Section 13.1 hereof (with copies for each LENDER), or such other offices as
may be designated by the AGENTS from time to time, all of the statements,
reports, information and notices set forth in this Article VII. Upon receipt
from the BORROWER of such statements, reports, information and notices, the
AGENTS shall promptly provide each LENDER with copies of such statements,
reports, information and notices.
Section 7.1. Financial Statements And Projections. The BORROWER
shall furnish or cause to be furnished to the ADMINISTRATIVE AGENT:
(a) Monthly Financial Statements. As soon as practical and in
any event within twenty-five (25) days after the end of each calendar month,
an unaudited CONSOLIDATED balance sheet of the BORROWER and its SUBSIDIARIES
as of the close of such calendar month and unaudited CONSOLIDATED statements
of income, retained earnings and cash flows for the calendar month then
ending, containing a statement indicating the variances from the previous
monthly statements and prepared by the BORROWER in accordance with GAAP and
certified by the Chief Financial Officer or Treasurer of the BORROWER to
present fairly in all material respects the financial condition of the
BORROWER and its SUBSIDIARIES as of the respective dates and the results of
operations of the BORROWER and its SUBSIDIARIES for the respective periods
then ended, subject to normal year-end adjustments.
(b) Quarterly Financial Statements. As soon as practicable and
in any event within forty-five (45) days after the end of each fiscal
quarter, an unaudited CONSOLIDATED and consolidating balance sheet of the
BORROWER and its SUBSIDIARIES as of the close of such fiscal quarter and
unaudited CONSOLIDATED and consolidating statements of income, retained
earnings and cash flows for the fiscal quarter then ended and that portion of
the FISCAL YEAR then ended, including the notes thereto, all in reasonable
detail setting forth in comparative form the corresponding figures for the
preceding FISCAL YEAR and prepared by the BORROWER in accordance with GAAP
and, if applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of
accounting principles and practices during the period, and certified by the
Chief Financial Officer or Treasurer of the BORROWER to present fairly in all
material respects the financial condition of the BORROWER and its
SUBSIDIARIES as of their respective dates and the results of operations of
the BORROWER and its SUBSIDIARIES for the respective periods then ended,
subject to normal year end adjustments.
(c) Annual Financial Statements. As soon as practicable and in
any event within one hundred twenty (120) days after the end of each FISCAL
YEAR, an audited CONSOLIDATED and consolidating balance sheet of the BORROWER
and its SUBSIDIARIES as of the close of such FISCAL YEAR and audited
CONSOLIDATED and consolidating statements of income, retained earnings and
cash flows for the FISCAL YEAR then ended, including the notes thereto, all
in reasonable detail setting forth in comparative form the corresponding
figures for the preceding FISCAL YEAR and prepared by an independent
certified public accounting firm acceptable to the ADMINISTRATIVE AGENT in
accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is
not qualified with respect to scope limitations imposed by the BORROWER or
any of its SUBSIDIARIES or with respect to accounting principles followed by
the BORROWER or any of its SUBSIDIARIES not in accordance with GAAP.
(d) Annual Business Plan And Financial Projections. As soon as
practicable and in any event within fifteen (15) days after the beginning of
each FISCAL YEAR, a business plan of the BORROWER and its SUBSIDIARIES for
the ensuing four (4) fiscal quarters, such plan to be prepared in accordance
with GAAP and to include, on a quarterly basis, the following: a quarterly
operating and capital budget, a projected income statement, statement of cash
flows and balance sheet and a report containing the assumptions used in
preparing such projections, accompanied by a certificate from the Chief
Financial Officer or Treasurer of the BORROWER to the effect that, to the
best of such officer's knowledge, such projections are good faith estimates
of the financial condition and operations of the BORROWER and its
SUBSIDIARIES for such four (4) quarter period.
(e) Five Year Business Plan. The BORROWER shall deliver to the
ADMINISTRATIVE AGENT on or before each July 31 during the term of the CREDIT
FACILITY, commencing with FISCAL YEAR 1996 a CONSOLIDATED and consolidating
financial projection analysis for that FISCAL YEAR and the ensuing four (4)
FISCAL YEARS.
Section 7.2. Officer's Compliance Certificate. The BORROWER
shall furnish to the ADMINISTRATIVE AGENT within forty-five (45) days after
the end of each of the first three (3) fiscal quarters of the BORROWER and
within seventy (70) days after the end of each FISCAL YEAR, and at such other
times as the ADMINISTRATIVE AGENT shall reasonably request, a certificate of
the Chief Financial Officer or Treasurer of the BORROWER in the form of
Exhibit H attached hereto (an "OFFICER'S COMPLIANCE CERTIFICATE").
Section 7.3. Accountants' Certificate. The BORROWER shall
furnish to the ADMINISTRATIVE AGENT, at each time financial statements are
delivered pursuant to Subsection 7.1.(c), a certificate of the independent
public accountants certifying such financial statements addressed to the
ADMINISTRATIVE AGENT for the benefit of the LENDERS:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
DEFAULT or EVENT OF DEFAULT or, if such is not the case, specifying such
DEFAULT or EVENT OF DEFAULT and its nature and period of existence; and
(b) including the calculations, prepared by the BORROWER and
reviewed by such accountants, required to establish whether or not the CREDIT
PARTIES are in compliance with the financial covenants set forth in Article
IX hereof as of the end of each respective period.
Section 7.4. Collateral Reports. The BORROWER shall furnish or
cause to be furnished to the COLLATERAL AGENT:
(a) Within twenty-five (25) days after the end of each calendar
month: (i) a BORROWING BASE certificate, detailed for each division of each
CREDIT PARTY, in the form attached hereto as Exhibit I (a "BORROWING BASE
CERTIFICATE"); (ii) accounts receivable agings, accounts payable agings,
sales journals, and cash receipts journal, all in a form acceptable to the
COLLATERAL AGENT; and (iii) upon the request of the COLLATERAL AGENT, an
analysis from the Chief Financial Officer or Treasurer of the BORROWER of
cash in and cash out based upon asset sales by any of the CREDIT PARTIES;
(b) Within ten (10) days after the request of the COLLATERAL
AGENT, an Asset Reevaluation And Business Reserve Provision Statement,
certified by the Chief Financial Officer or Treasurer of the BORROWER; and
(c) Within forty-five (45) days after the end of each fiscal
quarter, a contract status report, detailing either (i) the ten (10)
contracts with the highest gross revenues for the CREDIT PARTIES during the
immediately preceding four (4) fiscal quarters, or (ii) the contracts
comprising at least eighty percent (80%) of the AVIATION SERVICES DIVISION'S
gross revenues for the immediately preceding four (4) fiscal quarters,
certified by the Chief Financial Officer or Treasurer of the BORROWER.
Section 7.5. Other Reports. The BORROWER shall furnish, or
cause to be furnished, to the ADMINISTRATIVE AGENT such information regarding
the operations, business affairs and financial condition of the BORROWER or
any of its SUBSIDIARIES as either AGENT or any LENDER may reasonably request.
Section 7.6. Notice Of Litigation And Other Matters. The
BORROWER shall provide the ADMINISTRATIVE AGENT with prompt (but in no event
later than ten (10) days after an officer of the BORROWER obtains knowledge
thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by
or before any GOVERNMENTAL AUTHORITY and all actions and proceedings in any
court or before any arbitrator against or involving a CREDIT PARTY or any of
their respective properties, assets or businesses, which could reasonably be
expected to have a MATERIAL ADVERSE EFFECT;
(b) any notice of any violation received by a CREDIT PARTY from
any GOVERNMENTAL AUTHORITY including, without limitation, any notice of
violation of ENVIRONMENTAL LAWS, which could reasonably be expected to have
a MATERIAL ADVERSE EFFECT;
(c) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against a CREDIT PARTY, which could
reasonably be expected to have a MATERIAL ADVERSE EFFECT;
(d) any DEFAULT or EVENT OF DEFAULT, or any event which
constitutes or which with the passage of time or giving of notice or both
would constitute a material default or event of default under any MATERIAL
CONTRACT to which a CREDIT PARTY is a party or by which a CREDIT PARTY or any
of their respective properties may be bound;
(e) (i) the failure of the BORROWER or any ERISA AFFILIATE to
make a required installment or payment in any material amount under Section
302 of ERISA or Section 412 of the CODE by the due date, (ii) any "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975
of the CODE which could reasonably be expected to have a MATERIAL ADVERSE
EFFECT or any TERMINATION EVENT, in connection with any EMPLOYEE BENEFIT PLAN
or any trust created thereunder, along with a description of the nature
thereof, what action the BORROWER has taken, is taking or proposes to take
with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, (iii) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an EMPLOYEE BENEFIT PLAN under Section
401(a) of the CODE (along with a copy thereof), (iv) all notices received by
the BORROWER or any ERISA AFFILIATE of the PBGC's intent to terminate any
PENSION PLAN or to have a trustee appointed to administer any PENSION PLAN,
(v) all notices received by the BORROWER or any ERISA AFFILIATE from a
MULTIEMPLOYER PLAN sponsor concerning the imposition in any material amount
of withdrawal liability pursuant to Section 4202 of ERISA and (vi) the
BORROWER obtaining knowledge or reason to know that the BORROWER or any ERISA
AFFILIATE has filed or intends to file a notice of intent to terminate any
PENSION PLAN under a distress termination within the meaning of Section
4041(c) of ERISA;
(f) any event which makes any of the representations set forth
in Section 6.1 inaccurate in any material respect;
(g) any claims or disputes by an ACCOUNT DEBTOR on any ACCOUNT
included in the most recently submitted BORROWING BASE CERTIFICATE as an
ELIGIBLE ACCOUNT, which claim or dispute is in excess of Two Hundred Fifty
Thousand DOLLARS ($250,000.00); and
(h) any notice received by any CREDIT PARTY from its
independent certified public accountants that the amount of the reserve in
connection with the MULTIEMPLOYER PLAN described in footnote 13 to the
BORROWER'S and its SUBSIDIARIES' audited financial statements for the year
ended December 31, 1994, as set forth in such financial statements, should be
increased by an amount of Five Hundred Thousand DOLLARS ($500,000.00) or more
from that amount set forth in such financial statements.
Section 7.7. Accuracy Of Information. All written information,
reports, statements and other papers and data furnished by or on behalf of
the BORROWER to either AGENT or any LENDER (other than financial forecasts)
whether pursuant to this Article VII or any other provision of this
AGREEMENT, or any of the SECURITY DOCUMENTS, shall be, at the time the same
is so furnished, complete and correct in all material respects to the extent
necessary to give the AGENTS or any LENDER complete, true and accurate
knowledge of the subject matter based on the BORROWER'S knowledge thereof.
Section 7.8. Authorization To Obtain Financial Information. The
BORROWER shall, upon the request of the ADMINISTRATIVE AGENT, direct its
independent public accountants which prepare the annual financial statements
which are to be delivered to the ADMINISTRATIVE AGENT pursuant to Subsection
7.1.(c) to discuss the annual financial statements delivered under Subsection
7.1.(c) with the ADMINISTRATIVE AGENT and with any group of LENDERS
constituting the MAJORITY LENDERS. Upon the request of the ADMINISTRATIVE
AGENT, the BORROWER shall deliver to the ADMINISTRATIVE AGENT copies of any
management letters received from the BORROWER'S independent public
accountants.
Section 7.9. Inventory Appraisal. The BORROWER shall cooperate
with the COLLATERAL AGENT and the appraiser selected by the COLLATERAL AGENT
and the MAJORITY LENDERS in order to obtain, at the expense of the BORROWER,
updated INVENTORY APPRAISALS of the ORDERLY LIQUIDATION VALUE of the CREDIT
PARTIES' ELIGIBLE INVENTORY within ten (10) days of each October 1 and April
1 during the term of the CREDIT FACILITY.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the OBLIGATIONS have been paid and satisfied in full and
the COMMITMENTS terminated, unless consent has been obtained in the manner
provided for in Section 13.10, the BORROWER will, and will cause each other
CREDIT PARTY to:
Section 8.1. Preservation Of Corporate Existence And Related
Matters. Except as permitted by Section 10.5, preserve and maintain its
separate corporate existence and all rights, franchises, licenses and
privileges necessary to the conduct of its business and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the failure to so qualify would have a MATERIAL ADVERSE
EFFECT.
Section 8.2. Maintenance Of Property. Protect and preserve all
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 8.3. Insurance. Maintain insurance with financially
sound and reputable insurance companies against such risks and in such
amounts as are customarily maintained by similar businesses and as may be
required by APPLICABLE LAW, and on the CLOSING DATE and from time to time
thereafter deliver to the ADMINISTRATIVE AGENT upon its request a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts of the insurance, the dates of the expiration thereof
and the properties and risks covered thereby.
Section 8.4. Accounting Methods And Financial Records. Maintain
a system of accounting, and keep such books, records and accounts (which
shall be true and complete in all material respects) as may be required or as
may be necessary to permit the preparation of financial statements in
accordance with GAAP and in compliance with the regulations of any
GOVERNMENTAL AUTHORITY having jurisdiction over it or any of its properties.
Section 8.5. Payment And Performance Of Obligations. Pay and
perform all OBLIGATIONS under this AGREEMENT and the other LOAN DOCUMENTS,
and pay or perform (a) all taxes, assessments and other governmental charges
that may be levied or assessed upon it or any of its property, and (b) all
other indebtedness, OBLIGATIONS and liabilities in accordance with customary
trade practices; provided, that the BORROWER or such CREDIT PARTY may contest
any item described in this Section 8.5 in good faith so long as (i) adequate
reserves are maintained with respect thereto in accordance with GAAP, (ii)
the CREDIT PARTIES' assets are not subject to sale, forfeiture or loss during
such contesting, and (iii) no LIENS arising from such obligations or
indebtedness have priority over any LIENS granted to the COLLATERAL AGENT
under the SECURITY DOCUMENTS.
Section 8.6. Compliance With FACA. Notify the ADMINISTRATIVE
AGENT if any ACCOUNT arises out of a contract with the UNITED STATES
government and, if such contract is in excess of One Hundred Thousand DOLLARS
($100,000.00), the CREDIT PARTY shall execute all documents or instruments
and shall take all steps or actions required by the COLLATERAL AGENT so that
all monies due or to become due under such contracts are assigned to the
SECURED PARTIES and notice given thereof to the appropriate agency of the
UNITED STATES government in accordance with the requirements of FACA.
Section 8.7. Compliance With Laws And Approvals. Observe and
remain in compliance in all material respects with all APPLICABLE LAWS and
maintain in full force and effect all GOVERNMENTAL APPROVALS applicable and
material to the conduct of its business.
Section 8.8. Environmental Laws. In addition to and without
limiting the generality of Section 8.7: (a) comply in all material respects
with, and ensure such compliance by all tenants and subtenants, if any, with,
all applicable ENVIRONMENTAL LAWS and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants obtain
and comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable ENVIRONMENTAL LAWS; (b)
conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under ENVIRONMENTAL LAWS,
and promptly comply with all lawful orders and directives of any GOVERNMENTAL
AUTHORITY regarding ENVIRONMENTAL LAWS; and (c) defend, indemnify and hold
harmless the AGENTS and the LENDERS, and their respective parents,
SUBSIDIARIES, AFFILIATES, employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any ENVIRONMENTAL LAWS
applicable to the operations of the BORROWER or such other CREDIT PARTY, or
any orders, requirements or demands of GOVERNMENTAL AUTHORITIES related
thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
directly result from the gross negligence or willful misconduct of the party
seeking indemnification therefor.
Section 8.9. Compliance With ERISA. In addition to and without
limiting the generality of Section 8.7: (a) comply in all material respects
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all EMPLOYEE BENEFIT PLANS; (b)
not take any action or fail to take action the result of which could be a
material liability to the PBGC or to a MULTIEMPLOYER PLAN (provided that for
so long as the applicable CREDIT PARTY is contesting in good faith in
appropriate proceedings any such liability, such CREDIT PARTY maintains
adequate reserves for such liability to the extent required by GAAP and such
liability is not secured by any LIENS not permitted by Section 10.3, it will
not be deemed a failure to take action); (c) not participate in any
prohibited transaction that could result in any material civil penalty under
ERISA or tax under the CODE; (d) operate each employee welfare benefit plan
(as defined in Section 3(1) of ERISA) in such a manner that will not incur
any material tax liability under Section 4980B of the CODE or any material
liability to any qualified beneficiary as defined in Section 4980B of the
CODE (other than liability for benefits under that plan); and (e) furnish to
the ADMINISTRATIVE AGENT upon the ADMINISTRATIVE AGENT'S request such
additional information about any EMPLOYEE BENEFIT PLAN as may be reasonably
requested by the AGENTS.
Section 8.10. Compliance With Agreements. Comply in all material
respects with each term, condition and provision of all material leases,
agreements and other instruments entered into in the conduct of its business
including, without limitation, all MATERIAL CONTRACTS.
Section 8.11. Conduct Of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the CLOSING DATE
and in lines of business reasonably related thereto.
Section 8.12. Visits And Inspections. Permit representatives of
either AGENT or any LENDER, from time to time, to visit and inspect its
properties; inspect, audit and make extracts from its books, records and
files; and discuss with its principal officers its business, assets,
liabilities, financial condition, results of operations and business
prospects, all upon not less than twenty-four (24) hours prior telephonic
notice and during normal business hours. Each of such visits or inspections
by a LENDER, other than an AGENT, will be at such LENDER'S expense.
Section 8.13. Further Assurances. Make, execute and deliver all
such additional and further acts, things, deeds and instruments as either
AGENT, the ISSUING BANK, or any LENDER may reasonably require to document and
consummate the transactions contemplated hereby and to vest completely in and
insure the AGENTS, the ISSUING BANK, and the LENDERS their respective rights
under this AGREEMENT, the NOTES, the LETTERS OF CREDIT and the other LOAN
DOCUMENTS.
Section 8.14. Material Subsidiaries. In the event that any
SUBSIDIARY of the BORROWER, now existing or hereafter acquired, becomes a
MATERIAL SUBSIDIARY: (a) the BORROWER shall cause such SUBSIDIARY to execute
and deliver to the COLLATERAL AGENT for the benefit of the SECURED PARTIES,
a GUARANTY AGREEMENT, financing statements and such other documents as either
AGENT or the MAJORITY LENDERS may reasonably require; and (b) the BORROWER
shall cause such SUBSIDIARY to execute and deliver to the BORROWER a
GUARANTOR NOTE and financing statements evidencing the security interests
granted therein, and the BORROWER shall endorse such GUARANTOR NOTE to the
order of the COLLATERAL AGENT, assign the financing statements to the
COLLATERAL AGENT and deliver such documents to the COLLATERAL AGENT.
Section 8.15. Lockbox And Concentration Arrangements.
(a) Promptly from time to time cause each newly established
account to which payments are hereafter made directly by ACCOUNT DEBTORS to
be covered by a LOCKBOX AGREEMENT executed and delivered to the COLLATERAL
AGENT by the applicable CREDIT PARTY, and the relevant LENDER or other bank;
(b) From time to time cause all payments and remittances in
respect of ACCOUNTS which are collected by the CREDIT PARTY (other than
payments and remittances permitted to be held by the CREDIT PARTIES under
clause (d) of this Section 8.15) to be promptly deposited in (i) COLLECTION
DEPOSIT ACCOUNTS, or (ii) bank accounts with banks which will within one
BUSINESS DAY automatically transfer the proceeds of such deposit to the CASH
COLLATERAL ACCOUNT;
(c) Cause all collected amounts on deposit in or to the credit
of each COLLECTION DEPOSIT ACCOUNT to be transferred on a daily basis
directly to the CASH COLLATERAL ACCOUNT, and not make or permit any other
withdrawal or transfer from any COLLECTION DEPOSIT ACCOUNT (except for
withdrawals solely for the purpose of paying customary fees and expenses of
the bank with such COLLECTION DEPOSIT ACCOUNT is maintained pursuant to the
terms of the LOCKBOX AGREEMENT governing such COLLECTION DEPOSIT ACCOUNT;
(d) At no time permit the aggregate amount of all cash, checks,
money orders and other CASH EQUIVALENTS held by the CREDIT PARTIES, other
than in COLLECTION DEPOSIT ACCOUNTS or the CASH COLLATERAL ACCOUNT (including
monies held or invested by the COLLATERAL AGENT pursuant to Subsection
2.4.(e)) or accounts described in clause (b)(ii) above, to exceed Five
Hundred Thousand DOLLARS ($500,000.00) and promptly deposit in the CASH
COLLATERAL ACCOUNT any amount in excess of Five Hundred Thousand DOLLARS
($500,000.00).
(e) Take all such actions as the COLLATERAL AGENT from time to
time may reasonably request to permit the COLLATERAL AGENT to have continuous
dominion and full control over the CASH COLLATERAL ACCOUNT and each
COLLECTION DEPOSIT ACCOUNT;
(f) Execute and deliver, and use its best efforts to cause any
third parties necessary for the accomplishment or implementation of the
actions and procedures set forth in Subsections 8.15.(a) through 8.15.(e)
above to execute and deliver, all such documents and instruments as the
COLLATERAL AGENT reasonably shall deem necessary or appropriate to accomplish
or implement the actions and procedures set forth in Subsections 8.15.(a)
through 8.15.(e) above, including amendments to LOAN DOCUMENTS.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the OBLIGATIONS have been paid and satisfied in full and
the COMMITMENTS terminated, unless consent has been obtained in the manner
set forth in Section 13.10 hereof, the BORROWER shall cause the CREDIT
PARTIES, on a CONSOLIDATED basis, to maintain compliance with each of the
following financial covenants:
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:
<TABLE>
<CAPTION>
MINIMUM TANGIBLE
FISCAL PERIOD NET WORTH
------------- ----------------
<S> <C> <C>
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 ($ 60,500,000.00)
09/30/96 TO 12/30/96 ($ 58,000,000.00)
12/31/96 TO 12/30/97 ($ 58,000,000.00)
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
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL PERIOD RATIO
-------------- -------
<S> <C> <C>
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 10.50 to 1
09/30/96 TO 12/30/96 9.50 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
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL PERIOD RATIO
--------------- ---------
<S> <C> <C>
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 TO 03/30/97 1.05 to 1
03/31/97 & THEREAFTER 1.10 to 1
</TABLE>
ARTICLE X
NEGATIVE COVENANTS
------------------
Until all of the OBLIGATIONS have been paid and satisfied in full and
the COMMITMENTS terminated, unless consent has been obtained in the manner
set forth in Section 13.10 hereof, the BORROWER will not and will not permit
any other CREDIT PARTY to:
Section 10.1. Limitations On Debt. Create, incur, assume or
suffer to exist any DEBT except:
(a) the OBLIGATIONS;
(b) DEBT incurred in connection with a HEDGING AGREEMENT with
a counterparty and upon terms and conditions reasonably satisfactory to the
ADMINISTRATIVE AGENT;
(c) the SUBORDINATED DEBT;
(d) the SENIOR NOTES;
(e) DEBT (other than DEBT specifically referenced in this
Section 10.1) existing on the date of this AGREEMENT and the renewal and
refinancing (but not the increase) thereof;
(f) DEBT incurred in connection with (i) the CAPITALIZED LEASES
which UNC/CFC Acquisition Co. assumed, or will assume, in connection with the
GARRETT ACQUISITION, 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;
(g) DEBT consisting of CONTINGENT OBLIGATIONS permitted by
Section 10.2;
(h) other unsecured DEBT with an aggregate principal amount of
not more than Three Million DOLLARS ($3,000,000.00) outstanding at any one
time; and
(i) the GUARANTOR ADVANCES.
Section 10.2. Limitations On Contingent Obligations. Create,
incur, assume or suffer to exist any CONTINGENT OBLIGATIONS except:
(a) CONTINGENT OBLIGATIONS in favor of the COLLATERAL AGENT for
the benefit of the SECURED PARTIES;
(b) CONTINGENT OBLIGATIONS in an amount not to exceed Three
Million DOLLARS ($3,000,000.00) in the form of performance or bid bonds;
(c) CONTINGENT OBLIGATIONS of one CREDIT PARTY with respect to
an underlying obligation of another CREDIT PARTY which underlying obligation
is not prohibited by the terms of this AGREEMENT or any other LOAN DOCUMENT;
and
(d) CONTINGENT OBLIGATIONS set forth on Schedule 6.1.(s) and
the renewal or refinancing (but not the increase) thereof.
Section 10.3. Limitations On Liens. Create, incur, assume or
suffer to exist, any LIEN on or with respect to any of its assets or
properties (including shares of capital stock), real or personal, whether now
owned or hereafter acquired, except:
(a) LIENS for taxes, assessments and other governmental charges
or levies (excluding any LIEN imposed pursuant to any of the provisions of
ERISA or ENVIRONMENTAL LAWS) not yet due or as to which the period of grace
(not to exceed thirty (30) days), if any, related thereto has not expired or
which are being contested in good faith and by appropriate proceedings if (i)
adequate reserves are maintained to the extent required by GAAP, (ii) the
CREDIT PARTIES' assets are not subject to sale, forfeiture or loss during
such proceeding, and (iii) any such LIENS in any of the CREDIT PARTIES'
assets in which the COLLATERAL AGENT has a LIEN are subject and subordinate
to the COLLATERAL AGENT'S LIEN;
(b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies or
rentals incurred in the ordinary course of business, (i) which are not
overdue for a period of more than thirty (30) days, or (ii) which are being
contested in good faith and by appropriate proceedings and for which adequate
reserves are maintained to the extent required by GAAP;
(c) LIENS consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment of,
obligations under workers' compensation, unemployment insurance or similar
legislation;
(d) LIENS constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of
real property, which in the aggregate are not substantial in amount and which
do not, in any case, detract from the value of such property or impair the
use thereof in the ordinary conduct of business;
(e) LIENS of the COLLATERAL AGENT for the benefit of the
SECURED PARTIES;
(f) Existing LIENS described on Schedule 10.3;
(g) LIENS securing the GUARANTOR ADVANCES, provided such LIENS
have been assigned to the COLLATERAL AGENT for the benefit of the SECURED
PARTIES;
(h) LIENS securing DEBT permitted under Subsection 10.1.(f);
provided that (i) such LIENS shall be created substantially simultaneously
with the acquisition of the related asset, (ii) such LIENS do not at any time
encumber any property other than the property financed by such DEBT, (iii)
the amount of DEBT secured thereby is not increased and (iv) the principal
amount of DEBT secured by any such LIEN shall at no time exceed the original
purchase price of such property at the time it was acquired;
(i) attachment, judgment or other similar LIENS arising in
connection with court or similar proceedings, which LIENS do not give rise to
a DEFAULT or an EVENT OF DEFAULT and for which the execution or enforcement
of such LIENS is effectively stayed and the claims secured thereby are being
actively contested in good faith by appropriate proceedings;
(j) LIENS on any property or assets acquired by a CREDIT PARTY
and on any property or assets of a corporation which becomes a CREDIT PARTY
after the date of this AGREEMENT, provided that such LIENS are in existence
at the time the property or assets are acquired or at the time such
corporation becomes a SUBSIDIARY of the BORROWER and were not created in
anticipation of, or in connection with, the acquisition thereof;
(k) LIENS securing performance or bid bonds provided such LIENS
are unperfected and do not have priority over the LIENS securing the
OBLIGATIONS;
(l) LIENS (excluding LIENS on any portion of the COLLATERAL)
other than those described above in this Section 10.3 provided that the
aggregate amount of indebtedness secured by such other LIENS does not exceed
Two Million DOLLARS ($2,000,000.00) at any one time; and
(m) any extension, renewal or replacement, in whole or in part,
of any LIEN described in the foregoing paragraphs (a) through (l); provided
that such LIEN is limited to all or a part of the property or asset that was
subject to the LIEN so extended, renewed or replaced, the principal amount of
the obligations secured by such LIEN is not increased by such extension,
renewal or replacement and the maturity of such obligations are not shortened
by such extension, renewal or replacement.
Section 10.4. Limitations On Loans, Advances, Investments And
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture,
evidence of DEBT or other obligation or security, substantially all or a
portion of the business or assets of any other PERSON or any other investment
or interest whatsoever in any other PERSON or make or permit to exist,
directly or indirectly, any loans, advances or extensions of credit to, or
any investment in cash or by delivery of property in, any PERSON or enter
into, directly or indirectly, any commitment or option in respect of the
foregoing except:
(a) existing loans, advances and investments described on
Schedule 10.4 and investments existing on the CLOSING DATE in SUBSIDIARIES;
(b) investments in CASH EQUIVALENTS or (i) marketable direct
obligations issued or unconditionally guaranteed by the UNITED STATES or any
agency thereof maturing within one hundred twenty (120) days from the date of
acquisition thereof, (ii) commercial paper maturing no more than one hundred
twenty (120) days from the date of creation thereof and currently having the
highest rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc., (iii) certificates of deposit maturing no
more than one hundred twenty (120) days from the date of creation thereof
issued by commercial banks incorporated under the laws of the UNITED STATES,
each having combined capital, surplus and undivided profits of not less than
Five Hundred Million DOLLARS ($500,000,000.00) and having a rating of "A" or
better by a nationally recognized rating agency; provided, that the aggregate
amount invested in such certificates of deposit shall not at any time exceed
Five Million DOLLARS ($5,000,000.00) for any one such certificate of deposit
and Ten Million DOLLARS ($10,000,000.00) for any one such bank, or (iv) time
deposits maturing no more than thirty (30) days from the date of creation
thereof with commercial banks or savings banks or savings and loan
associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum
amounts of insurance thereunder; and
(c) the GARRETT ACQUISITION, and other investments by a CREDIT
PARTY in the form of ACQUISITIONS if either: (i) such ACQUISITION is
approved in writing by the MAJORITY LENDERS; or (ii) the purchase price
(whether in the form of cash, DEBT or property) of such ACQUISITION, when
aggregated with the purchase price of all other ACQUISITIONS made by a CREDIT
PARTY since the CLOSING DATE which have not been approved in writing by the
MAJORITY LENDERS, does not exceed Five Million DOLLARS ($5,000,000.00);
(d) investments in the form of the purchase of SUBORDINATED
DEBT provided that the entire purchase price used to acquire such
SUBORDINATED DEBT will be credited to reduce the amount of the next due
SINKING FUND PAYMENT on at least a DOLLAR for DOLLAR basis;
(e) investments of the BORROWER in other CREDIT PARTIES;
(f) other investments by CREDIT PARTIES (but not investments in
the form of ACQUISITIONS) which when aggregated with loans and advances
permitted under Subsection 10.9.(a) do not at any time exceed the aggregate
amount of Three Million DOLLARS ($3,000,000.00);
(g) extensions of credit provided in the ordinary course of
business in connection with the sale of INVENTORY and prepaid expenses made
in the ordinary course of business; and
(h) the promissory note from Saberliner Corporation payable to
the order of UNC Airwork Corporation dated May ____, 1996 in the principal
amount of One Million Five Hundred Thirteen Thousand Dollars ($1,513,000.00)
provided such promissory note is delivered to the COLLATERAL AGENT and
endorsed to the COLLATERAL AGENT as security for the OBLIGATIONS.
Section 10.5. Limitations On Mergers And Liquidation. Merge,
consolidate or enter into any similar combination with any other PERSON or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) except:
(a) any CREDIT PARTY may merge or consolidate with any other
CREDIT PARTY provided that in the event the BORROWER is a party to any such
merger or consolidation, the BORROWER shall be the surviving entity; and
(b) any CREDIT PARTY may merge into or consolidate with the
PERSON such CREDIT PARTY was formed to acquire in connection with an
ACQUISITION permitted by Subsection 10.4.(c), provided the surviving PERSON
is, or immediately after the merger becomes, a GUARANTOR.
Section 10.6. Limitations On Sale Of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its property, business
or assets (including, without limitation, the sale of any receivables and
leasehold interests and any sale leaseback or similar transaction), whether
now owned or hereafter acquired except:
(a) the sale of INVENTORY in the ordinary course of business
and the leasing of RENTAL ENGINES in the ordinary course of business;
(b) the sale of assets no longer used or usable in the business
of any CREDIT PARTY provided the net proceeds of any such sale are used to
reduce the amount outstanding under the LOANS;
(c) a CREDIT PARTY may sell assets at not less than the fair
market value thereof provided (i) at least seventy-five percent (75%) of the
consideration therefor received by such CREDIT PARTY is in the form of cash
with the remaining consideration being in the form of assets other than
notes, instruments or other forms of deferred payment, and (ii) all of the
cash proceeds are applied to reduce the principal balance outstanding under
the LOANS (or if there is no principal balance outstanding under the LOANS,
to repay such DEBT as is approved by the ADMINISTRATIVE AGENT);
(d) the sale by a CREDIT PARTY of all or any portion of the
stock in UNC Chemical Dynamics, Inc.; and
(e) the lease by UNC Airwork Corporation of four Allied Signal
TFE-731 engines (serial numbers 84427, 89294, 74816 and 73329) and the
sublease by UNC Airwork Corporation of four Allied Signal TFE-731 engines
(serial numbers 77500, 77521, 78283 and 78284), all to Saberlines Corporation
pursuant to the Purchase And Sale Agreement dated as of April 23, 1996
between UNC Airwork Corporation and Saberlines Corporation.
Section 10.7. Limitations On Dividends And Distributions. Declare
or pay any dividends upon any of its capital stock; purchase, redeem, retire
or otherwise acquire, directly or indirectly, any shares of its capital
stock, or make any distribution of cash, property or assets among the holders
of shares of its capital stock or make any change in its capital structure,
provided that:
(a) the BORROWER or any CREDIT PARTY may pay dividends in
shares of its own capital stock;
(b) any GUARANTOR may pay dividends or make other distributions
to, or redeem or acquire its capital stock from, the BORROWER or any other
CREDIT PARTY;
(c) provided there are no DEFAULTS under this AGREEMENT, the
BORROWER may redeem or acquire its capital stock from its shareholders
provided that the aggregate amount paid by the BORROWER in connection with
any such redemptions or acquisitions after the CLOSING DATE shall not exceed
Five Hundred Thousand DOLLARS ($500,000.00); and
(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).
Section 10.8. Limitations On Exchange And Issuance Of Capital
Stock. Issue, sell or otherwise dispose of any class or series of capital
stock that, by its terms or by the terms of any security into which it is
convertible or exchangeable, is, or upon the happening of an event or passage
of time would be, (a) convertible or exchangeable into DEBT or (b) required
to be redeemed or repurchased, including at the option of the holder, in
whole or in part, or has, or upon the happening of an event or passage of
time would have, a redemption or similar payment due.
Section 10.9. Transactions With Affiliates And Subsidiaries.
Directly or indirectly: (a) make any loan or advance to, or purchase or
assume any note or other obligation to or from, any of its officers,
directors, shareholders, other AFFILIATES or any SUBSIDIARIES (other than
CREDIT PARTIES), or to or from any member of the immediate family of any of
its officers, directors, shareholders, other AFFILIATES or SUBSIDIARIES, or
subcontract any operations to any of its AFFILIATES, or any SUBSIDIARIES
(other than CREDIT PARTIES), except for loans or advances which when
aggregated with investments permitted under Subsection 10.4.(f) do not exceed
at any time the aggregate amount of Three Million DOLLARS ($3,000,000.00); or
(b) enter into, or be a party to, any transaction with any of its AFFILIATES,
or any SUBSIDIARIES (other than CREDIT PARTIES), except pursuant to fair and
reasonable terms that are no less favorable to it than it would obtain in a
comparable arm's length transaction with a PERSON not its AFFILIATE or
SUBSIDIARY.
Section 10.10. Certain Accounting Changes. Change its FISCAL
YEAR-end, or make any change in its accounting treatment and reporting
practices except as is consistent with by GAAP.
Section 10.11. Amendments And Restricted Payments. Amend or
modify (or permit the modification or amendment of) any of the terms or
provisions of the SUBORDINATED DEBT or the SENIOR NOTES or make any
RESTRICTED PAYMENT.
Section 10.12. Restrictive Agreements. Enter into any DEBT which
contains any negative pledge on assets, or which restricts, limits or
otherwise encumbers its ability to incur LIENS on or with respect to any of
its assets or properties or which contains any restrictive covenants, in each
case more restrictive than the provisions of Articles VIII, IX and X hereof.
ARTICLE XI
DEFAULT AND REMEDIES
Section 11.1. Events Of Default. Each of the following shall
constitute an EVENT OF DEFAULT, whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment or order of any court or any order, rule or
regulation of any GOVERNMENTAL AUTHORITY or otherwise:
(a) Default In Payment Of Principal Of Loans And Reimbursement
Obligations. The BORROWER shall default in any payment of principal of any
LOAN, NOTE or REIMBURSEMENT OBLIGATION when and as due (whether at maturity,
by reason of acceleration or otherwise).
(b) Other Payment Default. The BORROWER shall default in the
payment when and as due (whether at maturity, by reason of acceleration or
otherwise) of interest on any LOAN, NOTE or REIMBURSEMENT OBLIGATION or the
payment of any other OBLIGATION, and such default shall continue unremedied
for five (5) BUSINESS DAYS.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by the BORROWER or any of its SUBSIDIARIES under this
AGREEMENT, any LOAN DOCUMENT or any amendment hereto or thereto, shall at any
time prove to have been incorrect or misleading in any material respect when
made or deemed made.
(d) Default In Performance Of Certain Covenants. The BORROWER
shall default in the performance or observance of any covenant or agreement
contained in Section 7.6 or Articles IX or X of this AGREEMENT.
(e) Default In Performance Of Other Covenants And Conditions.
The BORROWER or any other CREDIT PARTY shall default in the performance or
observance of any term, covenant, condition or agreement contained in (i)
this AGREEMENT (other than as specifically provided for otherwise in this
Section 11.1) and such default shall continue for a period of thirty (30)
days after written notice thereof has been given to the BORROWER by the
ADMINISTRATIVE AGENT, or (ii) any other LOAN DOCUMENT and such default shall
continue beyond the expiration of any applicable cure period after the giving
of any required notice.
(f) Hedging Agreement. Any termination payment shall be due by
the BORROWER under any HEDGING AGREEMENT and such amount is not paid within
five (5) BUSINESS DAYS of the due date thereof.
(g) Debt Cross-Default. The BORROWER or any other CREDIT PARTY
shall (i) default in the payment of any DEBT (other than the NOTES or any
REIMBURSEMENT OBLIGATION, but specifically including, without limitation, the
SUBORDINATED DEBT and the SENIOR NOTES) the aggregate outstanding amount of
which is in excess of Three Million DOLLARS ($3,000,000.00) beyond the period
of grace if any, provided in the instrument or agreement under which such
DEBT was created or (ii) default in the observance or performance of any
other agreement or condition relating to any DEBT (other than the NOTES or
any REIMBURSEMENT OBLIGATION, but specifically including, without limitation,
the SUBORDINATED DEBT and the SENIOR NOTES) the aggregate outstanding amount
of which is in excess of Three Million DOLLARS ($3,000,000.00) or contained
in any instrument or agreement evidencing, securing or relating thereto or
any other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or holders
of such DEBT (or a trustee or agent on behalf of such holder or holders) to
cause, with the giving of notice or the expiration of time if required, any
such DEBT to become due prior to its stated maturity (any applicable grace
period having expired).
(h) Other Cross-Defaults. The BORROWER or any other CREDIT
PARTY shall default in the payment when due, or in the performance or
observance, of any material obligation or condition of any MATERIAL CONTRACT
(other than those MATERIAL CONTRACTS provided for otherwise in Subsection
11.1.(g) above) unless, but only as long as (i) the existence of any such
default is being contested by the BORROWER or such SUBSIDIARY in good faith
by appropriate proceedings and adequate reserves in respect thereof have been
established on the books of the BORROWER or such SUBSIDIARY to the extent
required by GAAP, or (ii) the termination of such MATERIAL CONTRACT and any
liability of the applicable CREDIT PARTY resulting from such default would
not have a MATERIAL ADVERSE EFFECT.
(i) Change In Control. Any PERSON or group of PERSONS (within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) shall obtain ownership or control in one or more series of
transactions of more than twenty-five percent (25%) of the common stock of
the BORROWER entitled to vote in the election of members of the board of
directors of the BORROWER or there shall have occurred under any indenture or
other instrument evidencing any DEBT in excess of Three Million DOLLARS
($3,000,000.00) any "change in control" or "distribution date" (as defined in
such indenture or other evidence of DEBT) obligating the BORROWER, or
permitting the holder thereof to require the BORROWER, to repurchase, redeem
or repay all or any part of the DEBT or capital stock provided for therein
(any such event, a "CHANGE IN CONTROL").
(j) Voluntary Bankruptcy Proceeding. The BORROWER or any
GUARANTOR shall (i) commence a voluntary case under the federal bankruptcy
laws (as now or hereafter in effect) (ii) file a petition seeking to take
advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts
(iii) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws
or other laws (iv) apply for or consent to, or fail to contest in a timely
and appropriate manner, the appointment of, or the taking of possession by,
a receiver, custodian, trustee, or liquidator of itself or of a substantial
part of its property, domestic or foreign (v) admit in writing its inability
to pay its debts as they become due (vi) make a general assignment for the
benefit of creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the BORROWER or any GUARANTOR in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like for the BORROWER or any GUARANTOR
thereof or for all or any substantial part of their respective assets,
domestic or foreign, and such case or proceeding shall continue undismissed
or unstayed for a period of sixty (60) consecutive days, or an order granting
the relief requested in such case or proceeding (including, but not limited
to, an order for relief under such federal bankruptcy laws) shall be entered.
(l) Failure Of Agreements. Any material provision of this
AGREEMENT or of any other LOAN DOCUMENT shall for any reason cease to be
valid and binding on any CREDIT PARTY a party thereto or any such PERSON
shall so state in writing, or this AGREEMENT or any other LOAN DOCUMENT shall
for any reason cease to create a valid and perfected first priority LIEN on,
or security interest in, any of the collateral purported to be covered
thereby, in each case other than in accordance with the express terms hereof
or thereof.
(m) Termination Event. The occurrence of any of the following
events: (i) the BORROWER or any ERISA AFFILIATE fails to make full payment
when due of amounts in an aggregate amount in excess of One Million DOLLARS
($1,000,000.00) which, under the provisions of any PENSION PLAN or Section
412 of the CODE, the BORROWER or any ERISA AFFILIATE is required to pay as
contributions thereto (ii) an accumulated funding deficiency in excess of One
Million DOLLARS ($1,000,000.00) occurs or exists, whether or not waived, with
respect to any PENSION PLAN, (iii) a TERMINATION EVENT, or (iv) except as
such event relates to withdrawal from the MULTIEMPLOYER PLAN described in
footnote 13 to the BORROWER'S and its SUBSIDIARIES' audited financial
statements for the year ended December 31, 1994, the BORROWER or any ERISA
AFFILIATE as employers under one or more MULTIEMPLOYER PLAN makes a complete
or partial withdrawal from any such MULTIEMPLOYER PLAN and the plan sponsor
of such MULTIEMPLOYER PLANS notifies such withdrawing employer that such
employer has incurred a withdrawal liability requiring payments in an amount
exceeding One Million DOLLARS ($1,000,000.00).
(n) Judgment. A judgment or order for the payment of money or
judgments or orders for the payment of money shall be entered against the
BORROWER or any of its SUBSIDIARIES by any court and such judgment(s) or
order(s) shall continue undischarged or unstayed for a period of thirty (30)
days, provided that the aggregate of all such judgments and orders exceeds
Three Million DOLLARS ($3,000,000.00).
Section 11.2. Remedies. Upon the occurrence of an EVENT OF
DEFAULT, with the consent of the REQUIRED LENDERS, the AGENTS may, or upon
the request of the REQUIRED LENDERS, the AGENTS shall, by notice to the
BORROWER, take any or all of the following actions:
(a) Acceleration; Termination Of Facilities. The
ADMINISTRATIVE AGENT shall declare the principal of and interest on the
LOANS, the NOTES and the REIMBURSEMENT OBLIGATIONS at the time outstanding,
and all other amounts owed to the LENDERS, the ISSUING BANK, and to the
AGENTS under this AGREEMENT or any of the other LOAN DOCUMENTS (including,
without limitation, all L/C OBLIGATIONS, whether or not the beneficiaries of
the then outstanding LETTERS OF CREDIT shall have presented the documents
required thereunder) and all other OBLIGATIONS, to be forthwith due and
payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this AGREEMENT or the other LOAN DOCUMENTS to
the contrary notwithstanding, and terminate the CREDIT FACILITY and any right
of the BORROWER to request borrowings or LETTERS OF CREDIT thereunder;
provided, that upon the occurrence of an EVENT OF DEFAULT specified in
Subsections 11.1.(j) or (k), the CREDIT FACILITY shall be automatically
terminated and all OBLIGATIONS shall automatically become due and payable.
(b) Letters Of Credit. The ADMINISTRATIVE AGENT shall, with
respect to all LETTERS OF CREDIT with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to the
preceding subsection, require the BORROWER at such time to deposit in a cash
collateral account opened by the COLLATERAL AGENT an amount equal to the
aggregate then undrawn and unexpired amount of such LETTERS OF CREDIT.
Amounts held in such cash collateral account shall be applied by the
COLLATERAL AGENT to the payment of drafts drawn under such LETTERS OF CREDIT,
and the unused portion thereof after all such LETTERS OF CREDIT shall have
expired or been fully drawn upon, if any, shall be applied to repay the other
OBLIGATIONS. After all such LETTERS OF CREDIT shall have expired or been
fully drawn upon, the REIMBURSEMENT OBLIGATION shall have been satisfied and
all other OBLIGATIONS shall have been paid in full, the balance, if any, in
such cash collateral account shall be returned to the BORROWER.
(c) Rights Of Collection. The AGENTS shall exercise on behalf
of the LENDERS all rights and remedies available under this AGREEMENT, the
other LOAN DOCUMENTS and APPLICABLE LAW, in order to satisfy all of the
BORROWER'S OBLIGATIONS.
Section 11.3. Rights And Remedies Cumulative; Non-Waiver; Etc.
The enumeration of the rights and remedies of the AGENTS and the LENDERS set
forth in this AGREEMENT is not intended to be exhaustive and the exercise by
the AGENTS and the LENDERS of any right or remedy shall not preclude the
exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder or
under the LOAN DOCUMENTS or that may now or hereafter exist in law or in
equity or by suit or otherwise. No delay or failure to take action on the
part of the AGENTS or any LENDER in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or privilege preclude other or further exercise
thereof or the exercise of any other right, power or privilege or shall be
construed to be a waiver of any EVENT OF DEFAULT. No course of dealing
between the BORROWER, the AGENTS and the LENDERS or their respective agents
or employees shall be effective to change, modify or discharge any provision
of this AGREEMENT or any of the other LOAN DOCUMENTS or to constitute a
waiver of any EVENT OF DEFAULT.
ARTICLE XII
THE AGENTS
Section 12.1. Appointment. Each of the LENDERS hereby
irrevocably designates and appoints FUCC as ADMINISTRATIVE AGENT and as
COLLATERAL AGENT of such LENDER under this AGREEMENT and the other LOAN
DOCUMENTS and each such LENDER irrevocably authorizes FUCC as ADMINISTRATIVE
AGENT and COLLATERAL AGENT for such LENDER, to take such action on its behalf
under the provisions of this AGREEMENT and the other LOAN DOCUMENTS and to
exercise such powers and perform such duties as are expressly delegated to
the AGENTS by the terms of this AGREEMENT and such other LOAN DOCUMENTS,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this AGREEMENT or
such other LOAN DOCUMENTS, the AGENTS shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any LENDER, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
AGREEMENT or the other LOAN DOCUMENTS or otherwise exist against the AGENTS.
Section 12.2. Delegation Of Duties. The AGENTS may execute any
of their respective duties under this AGREEMENT and the other LOAN DOCUMENTS
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The AGENTS shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by the AGENTS with reasonable care.
Section 12.3. Exculpatory Provisions. Neither the AGENTS nor any
of the respective officers, directors, employees, agents, attorneys-in-fact,
SUBSIDIARIES or AFFILIATES of the AGENTS shall be: (a) liable for any action
lawfully taken or omitted to be taken by it or such PERSON under or in
connection with this AGREEMENT or the other LOAN DOCUMENTS (except for
actions occasioned solely by its or such PERSON'S own gross negligence or
willful misconduct); or (b) responsible in any manner to any of the LENDERS
for any recitals, statements, representations or warranties made by the
BORROWER or any of its SUBSIDIARIES or any officer thereof contained in this
AGREEMENT or the other LOAN DOCUMENTS or in any certificate, report,
statement or other document referred to or provided for in, or received by
the AGENTS under or in connection with, this AGREEMENT or the other LOAN
DOCUMENTS or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this AGREEMENT or the other LOAN DOCUMENTS
or for any failure of the BORROWER or any of its SUBSIDIARIES to perform its
OBLIGATIONS hereunder or thereunder. Each LENDER acknowledges that all
financing statements and other documents filed in public records in order to
evidence or perfect the LIENS granted in the LOAN DOCUMENTS shall name only
the COLLATERAL AGENT, as collateral agent, as the secured party or LIEN
holder. The AGENTS shall not be under any obligation to any LENDER to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this AGREEMENT, or to inspect the
properties, books or records of the BORROWER or any of its SUBSIDIARIES.
Section 12.4. Reliance By The Agents. The AGENTS shall be
entitled to rely, and shall be fully protected in relying, upon any NOTE,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper PERSON or PERSONS and upon
advice and statements of legal counsel (including, without limitation,
counsel to the BORROWER), independent accountants and other experts selected
by the AGENTS. The AGENTS may deem and treat the payee of any NOTE as the
owner thereof for all purposes unless such NOTE shall have been transferred
in accordance with Section 13.9 hereof. Each AGENT shall be fully justified
in failing or refusing to take any action under this AGREEMENT and the other
LOAN DOCUMENTS unless it shall first receive such advice or concurrence of
the MAJORITY LENDERS (or, when expressly required hereby or by the relevant
other LOAN DOCUMENT, the MAJORITY LENDERS which must include the COLLATERAL
AGENT, the REQUIRED LENDERS, or all the LENDERS, as the case may be) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
LENDERS against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action except for its own
gross negligence or willful misconduct. Each AGENT shall in all cases be
fully protected in acting, or in refraining from acting, under this AGREEMENT
and the NOTES in accordance with a request of the MAJORITY LENDERS (or, when
expressly required hereby, the MAJORITY LENDERS which must include the
COLLATERAL AGENT, the REQUIRED LENDERS or all the LENDERS, as the case may
be), and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the LENDERS and all future holders of the NOTES.
Section 12.5. Notice Of Default. The AGENTS shall not be deemed
to have knowledge or notice of the occurrence of any DEFAULT or EVENT OF
DEFAULT hereunder unless it has received notice from a LENDER or the BORROWER
referring to this AGREEMENT, describing such DEFAULT or EVENT OF DEFAULT and
stating that such notice is a "NOTICE OF DEFAULT". In the event that the
ADMINISTRATIVE AGENT receives such a notice, it shall promptly give notice
thereof to the LENDERS. The AGENTS shall take such action with respect to
such DEFAULT or EVENT OF DEFAULT as shall be reasonably directed by the
REQUIRED LENDERS; provided that unless and until the AGENTS shall have
received such directions, the AGENTS may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such DEFAULT
or EVENT OF DEFAULT as they shall deem advisable in the best interests of the
LENDERS.
Section 12.6. Non-Reliance On The Agents And Other Lenders. Each
LENDER expressly acknowledges that neither the ADMINISTRATIVE AGENT, the
COLLATERAL AGENT nor any of the respective officers, directors, employees,
agents, attorneys-in-fact, SUBSIDIARIES or AFFILIATES of the AGENTS has made
any representations or warranties to it and that no act by the AGENTS
hereinafter taken, including any review of the affairs of the BORROWER or any
of its SUBSIDIARIES, shall be deemed to constitute any representation or
warranty by either AGENT to any LENDER. Each LENDER represents to the AGENTS
that it has, independently and without reliance upon the AGENTS or any other
LENDER, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
the BORROWER and its SUBSIDIARIES and made its own decision to make its LOANS
and issue or participate in LETTER OF CREDIT hereunder and enter into this
AGREEMENT. Each LENDER also represents that it will, independently and
without reliance upon the AGENTS or any other LENDER, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this AGREEMENT and the other LOAN DOCUMENTS, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
the BORROWER and its SUBSIDIARIES. Except for notices, reports and other
documents expressly required to be furnished to the LENDERS by the AGENTS
hereunder or by the other LOAN DOCUMENTS, neither AGENT shall have any duty
or responsibility to provide any LENDER with any credit or other information
concerning the business, operations, property, financial and other condition
or creditworthiness of the BORROWER or any of its SUBSIDIARIES which may come
into the possession of that AGENT or any of its respective officers,
directors, employees, agents, attorneys-in-fact, SUBSIDIARIES or AFFILIATES.
Section 12.7. Indemnification. The LENDERS agree to indemnify
the AGENTS in their respective capacities as such and (to the extent not
reimbursed by the BORROWER and without limiting the obligation of the
BORROWER to do so), ratably according to the respective amounts of their
COMMITMENT PERCENTAGES, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
NOTES or any REIMBURSEMENT OBLIGATION) be imposed on, incurred by or asserted
against either AGENT in any way relating to or arising out of this AGREEMENT
or the other LOAN DOCUMENTS, or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by an AGENT under or in connection with any of the
foregoing; provided that no LENDER shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the respective AGENT'S bad faith, gross negligence or willful
misconduct. The agreements in this Section 12.7 shall survive the payment of
the NOTES, any REIMBURSEMENT OBLIGATION and all other amounts payable
hereunder and the termination of this AGREEMENT.
Section 12.8. The Agents In Their Individual Capacities. Each
AGENT and its parent and respective SUBSIDIARIES and AFFILIATES may make
loans to, accept deposits from and generally engage in any kind of business
with the BORROWER as though the AGENT were not an AGENT hereunder. With
respect to any LOANS made or renewed by it and any NOTE issued to it and with
respect to any LETTER OF CREDIT issued by it or participated in by it, each
AGENT shall have the same rights and powers under this AGREEMENT and the
other LOAN DOCUMENTS as any LENDER and may exercise the same as though it
were not an AGENT, and the terms "LENDER" and "LENDERS" shall include the
AGENTS in their individual capacities.
Section 12.9. Resignation Of The Agents; Successor Agent. Subject
to the appointment and acceptance of a successor as provided below, either
AGENT may resign at any time by giving notice thereof to the LENDERS and the
BORROWER. Upon any such resignation, the MAJORITY LENDERS shall have the
right to appoint a successor AGENT, which successor shall have minimum
capital and surplus of at least Five Hundred Million DOLLARS
($500,000,000.00) and shall be reasonably acceptable to the BORROWER. If no
successor AGENT shall have been so appointed by the MAJORITY LENDERS and
shall have accepted such appointment within thirty (30) days after the
AGENT'S giving of notice of resignation, then the AGENT may, on behalf of the
LENDERS, appoint a successor AGENT, which successor shall have minimum
capital and surplus of at least Five Hundred Million DOLLARS
($500,000,000.00) and shall be reasonably acceptable to the BORROWER. Upon
the acceptance of any appointment as AGENT hereunder by a successor AGENT,
such successor AGENT shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring AGENT, and the retiring
AGENT shall be discharged from its duties and obligations hereunder. After
any retiring AGENT'S resignation hereunder as AGENT, the provisions of this
Section 12.9 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as AGENT.
ARTICLE XIII
MISCELLANEOUS
--------------
Section 13.1. Notices.
(a) Method Of Communication. Except as otherwise provided in
this AGREEMENT, all notices and communications hereunder shall be in writing,
or by telephone subsequently confirmed in writing. Any notice shall be
effective if delivered by hand delivery or sent via telecopy, recognized
overnight courier service or certified mail, return receipt requested, and
shall be presumed to be received by a party hereto (i) on the date of
delivery if delivered by hand or sent by telecopy, (ii) on the next BUSINESS
DAY if sent by recognized overnight courier service and (iii) on the third
BUSINESS DAY following the date sent by certified mail, return receipt
requested. A telephonic notice to an AGENT as understood by the AGENT will
be deemed to be the controlling and proper notice in the event of a
discrepancy with or failure to receive a confirming written notice.
(b) Addresses For Notices. Notices to any party shall be sent to it
at the following addresses, or any other address as to which all the other
parties are notified in writing.<PAGE>
If to the BORROWER or any CREDIT PARTY:
UNC INCORPORATED
175 Admiral Cochrane Drive
Annapolis, Maryland 21401-7394
ATTN: Gregory M. Bubb, Vice President and Treasurer
Telephone No.: (410) 266-7333
Telecopy No.: (410) 224-0439
With copies to:
UNC INCORPORATED
175 Admiral Cochrane Drive
Annapolis, Maryland 21401-7394
ATTN: Richard H. Lange, Senior Vice
President and General Counsel
Telephone No.: (410) 266-7333
Telecopy No.: (410) 266-7471
If to FUCC as ADMINISTRATIVE AGENT or COLLATERAL AGENT:
FIRST UNION COMMERCIAL CORPORATION
Leveraged Finance
One First Union Center
301 South College Street, TW-18 Mail Code - NC-0737
Charlotte, North Carolina 28288-0735
ATTN: Terri K. Lins, Vice President
Telephone No.: (704) 374-6305
Telecopy No.: (704) 374-3300
If to FUCC as ISSUING BANK:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Leveraged Finance
One First Union Center
301 South College Street, TW-18 Mail Code - NC-0737
Charlotte, North Carolina 28288-0735
ATTN: Terri K. Lins, Vice President
Telephone No.: (704) 383-1893
Telecopy No.: (704) 374-2703
If to any LENDER:
To the Address set forth on
Schedule 1 hereto
(c) Agent's Office. The ADMINISTRATIVE AGENT hereby designates
its office located at the address set forth above, or any subsequent office
which shall have been specified for such purpose by written notice to the
BORROWER, the ISSUING BANK, the COLLATERAL AGENT, and LENDERS, as the AGENT'S
OFFICE referred to herein, to which payments due are to be made and at which
LOANS will be disbursed.
Section 13.2. Expenses; Indemnity. The BORROWER will: (a) pay
all out-of-pocket expenses of the AGENTS in connection with (i) the
preparation, execution and delivery of this AGREEMENT and each other LOAN
DOCUMENT, whenever the same shall be executed and delivered, including
without limitation all out-of-pocket syndication and due diligence expenses,
and reasonable fees and disbursements of counsel for the AGENTS, (ii) the
preparation, execution and delivery of any waiver, amendment or consent by
the AGENTS, the ISSUING BANK or the LENDERS relating to this AGREEMENT or any
other LOAN DOCUMENT, including without limitation reasonable fees and
disbursements of counsel for the AGENTS, and (iii) the administration and
enforcement of any rights and remedies of the AGENTS, the ISSUING BANK and
LENDERS under the CREDIT FACILITY, including consulting with appraisers,
accountants, engineers, attorneys and other PERSONS concerning the nature,
scope or value of any right or remedy of the AGENTS, the ISSUING BANK or any
LENDER hereunder or under any other LOAN DOCUMENT, including any review of
factual matters in connection therewith, which expenses shall include without
limitation the reasonable fees and disbursements of such PERSONS; and (b)
defend, indemnify and hold harmless the AGENTS, the ISSUING BANK and the
LENDERS, and their respective parents, SUBSIDIARIES, AFFILIATES, employees,
agents, officers and directors, from and against any losses, penalties, fines
liabilities, settlements, damages, costs and expenses, suffered by any such
PERSON in connection with any claim, investigation, litigation or other
proceeding (whether or not either AGENT, the ISSUING BANK or any LENDER is a
party thereto) and the prosecution and defense thereof, arising out of or in
any way connected with the AGREEMENT, any other LOAN DOCUMENT or the LOANS,
including without limitation reasonable attorney's and consultant's fees,
except to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification
therefor.
Section 13.3. Set-Off. In addition to any rights now or
hereafter granted under APPLICABLE LAW and not by way of limitation of any
such rights, upon and after the occurrence of any EVENT OF DEFAULT and during
the continuance thereof, the LENDERS and any assignee or participant of a
LENDER in accordance with Section 13.9 are hereby authorized by the BORROWER
at any time or from time to time, without notice to the BORROWER or to any
other PERSON, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness at any
time held or owing by the LENDERS, or any such assignee or participant to or
for the credit or the account of the BORROWER against and on account of the
OBLIGATIONS irrespective of whether or not (a) the LENDERS shall have made
any demand under this AGREEMENT or any of the other LOAN DOCUMENTS or (b) the
ADMINISTRATIVE AGENT shall have declared any or all of the OBLIGATIONS to be
due and payable as permitted by Section 11.2 and although such OBLIGATIONS
shall be contingent or unmatured.
Section 13.4. Governing Law. This AGREEMENT, the NOTES and the
other LOAN DOCUMENTS, unless otherwise expressly set forth therein, shall be
governed by, 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 13.5. Consent To Jurisdiction. The BORROWER hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in Baltimore City, Maryland, in any action, claim or other
proceeding arising out of any dispute in connection with this AGREEMENT, the
NOTES and the other LOAN DOCUMENTS, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The BORROWER
hereby irrevocably consents to the service of a summons and complaint and
other process in any action, claim or proceeding brought by either AGENT, the
ISSUING BANK, or any LENDER in connection with this AGREEMENT, the NOTES or
the other LOAN DOCUMENTS, any rights or obligations hereunder or thereunder,
or the performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 13.1. Nothing in this Section
13.5 shall affect the right of the AGENTS, the ISSUING BANK, or any LENDER to
serve legal process in any other manner permitted by APPLICABLE LAW or affect
the right of the AGENTS, the ISSUING BANK, or any LENDER to bring any action
or proceeding against the BORROWER or its properties in the courts of any
other jurisdictions.
Section 13.6. WAIVER OF JURY TRIAL. THE AGENTS, THE ISSUING
BANK, EACH LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR
THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
Section 13.7. Reversal Of Payments. To the extent the BORROWER
makes a payment or payments to the ISSUING BANK or the ADMINISTRATIVE AGENT
for the ratable benefit of the LENDERS or an AGENT receives any payment or
proceeds of the collateral, which payments or proceeds or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or proceeds repaid, the
OBLIGATIONS or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or proceeds had not
been received by the ISSUING BANK or an AGENT.
Section 13.8. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this AGREEMENT, including, without limitation, all computations utilized by
the BORROWER or any other CREDIT PARTY to determine compliance with any
covenant contained herein, shall, except as otherwise expressly contemplated
hereby or unless there is an express written direction by the ADMINISTRATIVE
AGENT to the contrary agreed to by the BORROWER, be performed in accordance
with GAAP. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the BORROWER'S certified
public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and after the
date the BORROWER and the LENDERS shall have amended this AGREEMENT to the
extent necessary to reflect any such changes in the financial covenants and
other terms and conditions of this AGREEMENT.
Section 13.9. Successors And Assigns; Participations.
(a) Benefit Of Agreement. This AGREEMENT shall be binding upon
and inure to the benefit of the BORROWER, the AGENTS, the ISSUING BANK, and
the LENDERS, all future holders of the NOTES, and their respective successors
and assigns, except that the BORROWER shall not assign or transfer any of its
rights or OBLIGATIONS under this AGREEMENT without the prior written consent
of each LENDER.
(b) Assignment By Lenders. Each LENDER may, with the consent
of the ADMINISTRATIVE AGENT, which consent shall not be unreasonably
withheld, assign to one or more ELIGIBLE ASSIGNEES all or a portion of its
interests, rights and obligations under this AGREEMENT (including, without
limitation, all or a portion of the EXTENSIONS OF CREDIT at the time owing to
it and the NOTES held by it); provided that:
(i) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning LENDER'S rights and
obligations under this AGREEMENT;
(ii) if less than all of the assigning LENDER'S
COMMITMENT is to be assigned, the COMMITMENT so assigned shall not be
less than Five Million DOLLARS ($5,000,000.00);
(iii) the parties to each such assignment shall execute
and deliver to the ADMINISTRATIVE AGENT, for its acceptance and
recording in the REGISTER, an ASSIGNMENT AND ACCEPTANCE in the form of
Exhibit J attached hereto, together with any NOTE or NOTES subject to
such assignment;
(iv) such assignment shall not, without the consent of
the BORROWER, require the BORROWER to file a registration statement
with the Securities and Exchange Commission or apply to or qualify the
LOANS or the NOTES under the blue sky laws of any state; and
(v) in connection with any such assignment after the
SYNDICATION COMPLETION DATE, the assigning LENDER shall pay to the
ADMINISTRATIVE AGENT an assignment fee of Two Thousand Five Hundred
DOLLARS ($2,500.00) upon the execution by such LENDER of the ASSIGNMENT
AND ACCEPTANCE; provided that no such fee shall be payable upon any
assignment by a LENDER to an AFFILIATE thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each ASSIGNMENT AND ACCEPTANCE, which effective
date shall be at least five (5) BUSINESS DAYS after the execution thereof,
(1) the assignee thereunder shall be a party hereto and, to the extent
provided in such ASSIGNMENT AND ACCEPTANCE, have the rights and OBLIGATIONS
of a LENDER hereby and (2) the LENDER thereunder shall, to the extent
provided in such assignment, be released from its obligations under this
AGREEMENT.
(c) Rights And Duties Upon Assignment. By executing and
delivering an ASSIGNMENT AND ACCEPTANCE, the assigning LENDER thereunder and
the assignee thereunder confirm to and agree with each other and the other
parties hereto as set forth in such ASSIGNMENT AND ACCEPTANCE.
(d) Register. The ADMINISTRATIVE AGENT shall maintain a copy
of each ASSIGNMENT AND ACCEPTANCE delivered to it and a register for the
recordation of the names and addresses of the LENDERS and the amount of the
EXTENSIONS OF CREDIT with respect to each LENDER from time to time (the
"REGISTER"). The entries in the REGISTER shall be conclusive, in the absence
of manifest error, and the BORROWER, the AGENTS and the LENDERS may treat
each PERSON whose name is recorded in the REGISTER as a LENDER hereunder for
all purposes of this AGREEMENT. The REGISTER shall be available for
inspection by the BORROWER or LENDER at any reasonable time and from time to
time upon reasonable prior notice.
(e) Issuance Of New Notes. Upon its receipt of an ASSIGNMENT
AND ACCEPTANCE executed by an assigning LENDER and an ELIGIBLE ASSIGNEE
together with any NOTE or NOTES subject to such assignment and the written
consent to such assignment, the ADMINISTRATIVE AGENT shall, if such
ASSIGNMENT AND ACCEPTANCE has been completed and is substantially in the form
of Exhibit J:
(i) accept such ASSIGNMENT AND ACCEPTANCE;
(ii) record the information contained therein in the
REGISTER;
(iii) give prompt notice thereof to the LENDERS, the
ISSUING BANK, and the BORROWER; and
(iv) promptly deliver a copy of such ASSIGNMENT AND
ACCEPTANCE to the BORROWER.
Within five (5) BUSINESS DAYS after receipt of notice, the BORROWER shall
execute and deliver to the ADMINISTRATIVE AGENT, in exchange for the
surrendered NOTE or NOTES, a new NOTE or NOTES to the order of such ELIGIBLE
ASSIGNEE in amounts equal to the COMMITMENT assumed by it pursuant to such
ASSIGNMENT AND ACCEPTANCE and a new NOTE or NOTES to the order of the
assigning LENDER in an amount equal to the COMMITMENT retained by it
hereunder. Such new NOTE or NOTES shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered NOTE or NOTES,
shall be dated the effective date of such ASSIGNMENT AND ACCEPTANCE and shall
otherwise be in substantially the form of the assigned NOTES delivered to the
assigning LENDER. Each surrendered NOTE or NOTES shall be canceled and
returned to the BORROWER.
(f) Participations. Each LENDER may sell participations to one
or more banks or other entities in all or a portion of its rights and
obligations under this AGREEMENT (including, without limitation, all or a
portion of its EXTENSIONS OF CREDIT and the NOTES held by it); provided that:
(i) each such participation shall be in an amount not
less than Five Million DOLLARS ($5,000,000.00);
(ii) such LENDER'S obligations under this AGREEMENT
(including, without limitation, its COMMITMENT) shall remain unchanged;
(iii) such LENDER shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iv) such LENDER shall remain the holder of the NOTES
held by it for all purposes of this AGREEMENT;
(v) the BORROWER, the AGENTS, the ISSUING BANK, and the
other LENDERS shall continue to deal solely and directly with such
LENDER in connection with such LENDER'S rights and obligations under
this AGREEMENT;
(vi) such LENDER shall not permit such participant the
right to approve any waivers, amendments or other modifications to this
AGREEMENT or any other LOAN DOCUMENT other than waivers, amendments or
modifications which would reduce the principal of or the interest rate
on any LOAN or REIMBURSEMENT OBLIGATION, extend the term or increase
the amount of the COMMITMENT, reduce the amount of any fees to which
such participant is entitled, extend any scheduled payment date for
principal of any LOAN or, except as expressly contemplated hereby or
thereby, release any collateral securing the OBLIGATIONS or any
SECURITY DOCUMENT; and
(vii) any such disposition shall not, without the consent
of the BORROWER, require the BORROWER to file a registration statement
with the Securities and Exchange Commission to apply to qualify the
LOANS or the NOTES under the blue sky law of any state.
(g) Disclosure Of Information; Confidentiality. The AGENTS and
the LENDERS shall hold all non-public information with respect to the
BORROWER obtained pursuant to the LOAN DOCUMENTS in accordance with their
customary procedures for handling confidential information. Any LENDER may,
in connection with any assignment, proposed assignment, participation or
proposed participation pursuant to this Section 13.9, disclose to the
assignee, participant, proposed assignee or proposed participant, any
information relating to the BORROWER furnished to such LENDER by or on behalf
of the BORROWER; provided, that prior to any such disclosure, each such
assignee, proposed assignee, participant or proposed participant shall agree
with the BORROWER or such LENDER to preserve the confidentiality of any
confidential information relating to the BORROWER received from such LENDER.
(h) Certain Pledges Or Assignments. Nothing herein shall
prohibit any LENDER from pledging or assigning any NOTE to any Federal
Reserve Bank in accordance with APPLICABLE LAW.
Section 13.10. Amendments, Waivers And Consents. Except as set
forth below, any term, covenant, agreement or condition of this AGREEMENT or
any of the other LOAN DOCUMENTS may be amended or waived by the LENDERS, and
any consent given by the LENDERS, if, but only if, such amendment, waiver or
consent is in writing signed by the MAJORITY LENDERS (or by the
ADMINISTRATIVE AGENT with the consent of the MAJORITY LENDERS) and delivered
to the ADMINISTRATIVE AGENT and, in the case of an amendment, signed by the
BORROWER; provided, that no amendment, waiver or consent: (a) shall (i)
increase the amount or extend the time of the obligation of the LENDERS to
make LOANS or issue or participate in LETTERS OF CREDIT (including without
limitation pursuant to Sections 2.1, 2.6 or 3.1), (ii) extend the originally
scheduled time or times of payment of the principal of any LOAN or
REIMBURSEMENT OBLIGATION or the time or times of payment of interest on any
LOAN or REIMBURSEMENT OBLIGATION, (iii) reduce the rate of interest or fees
payable on any LOAN or REIMBURSEMENT OBLIGATION, (iv) reduce the fees payable
upon the issuance of a LETTER OF CREDIT (other than the fee payable to the
ISSUING BANK pursuant to subsection 3.3.(e) hereof which may be amended or
waived by the ISSUING BANK without the consent of the LENDERS), (v) permit
any subordination of the principal or interest on any LOAN or REIMBURSEMENT
OBLIGATION, (vi) release any collateral or SECURITY DOCUMENT (other than as
specifically permitted in this AGREEMENT or the applicable SECURITY
DOCUMENT), (vii) amend the provisions of this Section 13.10 or the definition
of REQUIRED LENDERS or MAJORITY LENDERS or modify in any other manner the
number or percentage of LENDERS required to make any determinations or waive
any rights hereunder or to modify any provision hereof, (viii) release any
GUARANTOR from liability under a GUARANTY AGREEMENT, (ix) modify the
definition of "BORROWING BASE," "INVENTORY VALUE," or "LOAN RESERVE" except
for such modifications which are permitted pursuant to the definitions of
such terms or modify the definition of "AGGREGATE COMMITMENT," "COMMITMENT,"
or "L/C COMMITMENT," or (x) amend, modify or waive any provision of Sections
4.8, 4.9, 4.10, or 4.11, without the prior written consent of each LENDER;
(b) amend, modify or waive any provision of Article IX without the prior
written consent of the REQUIRED LENDERS; (c) amend, modify or waive any
provision of Article III without the prior written consent of the ISSUING
BANK; (d) amend, modify or waive any provision in Section 2.3 without the
prior written consent of the ADMINISTRATIVE AGENT; or (e) amend, modify or
waive any of the provisions of Article XII without the prior written consent
of the AGENTS.
Section 13.11. Performance Of Duties. The BORROWER'S OBLIGATIONS
under this AGREEMENT and each of the LOAN DOCUMENTS shall be performed by the
BORROWER at its sole cost and expense.
Section 13.12. All Powers Coupled With Interest. All powers of
attorney and other authorizations granted to the LENDERS, the AGENTS and any
PERSONS designated by either AGENT or any LENDER pursuant to any provisions
of this AGREEMENT or any of the other LOAN DOCUMENTS shall be deemed coupled
with an interest and shall be irrevocable so long as any of the OBLIGATIONS
remain unpaid or unsatisfied or the CREDIT FACILITY has not been terminated.
Section 13.13. Survival Of Indemnities. Notwithstanding any
termination of this AGREEMENT, the indemnities to which the AGENTS, the
ISSUING BANK, and the LENDERS are entitled under the provisions of this
Article XIII and any other provision of this AGREEMENT and the LOAN DOCUMENTS
shall continue in full force and effect and shall protect the AGENTS, the
ISSUING BANK, and the LENDERS against events arising after such termination
as well as before.
Section 13.14. Titles And Captions. Titles and captions of
Articles, Sections and subsections in this AGREEMENT are for convenience
only, and neither limit nor amplify the provisions of this AGREEMENT.
Section 13.15. Severability Of Provisions. Any provision of this
AGREEMENT or any other LOAN DOCUMENT which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 13.16. Counterparts. This AGREEMENT may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and shall be binding upon all parties, their successors and assigns,
and all of which taken together shall constitute one and the same agreement.
Section 13.17. Term Of Agreement. This AGREEMENT shall remain in
effect from the CLOSING DATE through and including the date upon which all
OBLIGATIONS shall have been paid and satisfied in full. No termination of
this AGREEMENT shall affect the rights and obligations of the parties hereto
arising prior to such termination.
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be
executed by their duly authorized officers, all as of the day and year first
written above.
WITNESS/ATTEST: BORROWER:
UNC INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Gregory M. Bubb,
Vice President and Treasurer
ISSUING BANK:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
A National Banking Association
_________________________ By: _________________________(SEAL)
Name: __________________
Title: __________________
WITNESS/ATTEST: ADMINISTRATIVE AGENT and
COLLATERAL AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name: __________________
Title: __________________
LENDERS:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name: __________________
Title: __________________
<PAGE>
EXHIBIT 10.44
AMENDMENT NO. 1 TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDMENT NO. 1 TO AMENDED AND
RESTATED CREDIT AGREEMENT ("AMENDMENT") is dated as of the 2 day of October,
1996 by and among UNC INCORPORATED, a corporation organized under the laws of
the State of Delaware ("BORROWER"), FIRST UNION COMMERCIAL CORPORATION, as
administrative agent ("ADMINISTRATIVE AGENT"), FIRST UNION COMMERCIAL
CORPORATION, as collateral agent ("COLLATERAL AGENT"), FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, as issuer of certain letters of credit ("ISSUING
BANK"), 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 (collectively, "LENDERS").
STATEMENT OF PURPOSE
----------------------
Pursuant to the terms and provisions of
the Amended And Restated Credit Agreement dated as of May 22, 1996 by and
among the BORROWER, the ADMINISTRATIVE AGENT, the COLLATERAL AGENT, the
ISSUING BANK and the LENDERS ("CREDIT AGREEMENT"), the LENDERS have extended
certain credit facilities to the BORROWER ("CREDIT FACILITY"). The
GUARANTORS have guaranteed the obligations of the BORROWER under the CREDIT
AGREEMENT pursuant to the terms of various Guaranty And Security Agreements
(individually "GUARANTY" and collectively, "GUARANTIES").
The BORROWER has requested that one of
the terms of the CREDIT AGREEMENT be modified in order to provide the
BORROWER with additional borrowing availability under the revolving line of
credit being provided pursuant to the terms of the CREDIT AGREEMENT. The
LENDERS are willing to consent to such modification to the terms of the
CREDIT AGREEMENT pursuant to the terms and provisions of this AMENDMENT.
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 XIV. RECITALS. The parties hereto hereby acknowledge the
accuracy of the above Statement Of Purpose and hereby incorporate the
Statement Of Purpose into this AMENDMENT.
Section XV. AMENDMENT TO CREDIT AGREEMENT. The CREDIT AGREEMENT is
hereby amended by deleting the words and number "Thirty-six Million Dollars
($36,000,000.00)" from the definition of "BORROWING BASE" contained in
Section 1.1 of the CREDIT AGREEMENT and substituting in lieu thereof the
words and number "Forty-five Million DOLLARS ($45,000,000.00)."
Section XVI. CONSENT OF GUARANTORS. The GUARANTORS hereby consent
to the modifications contained in this AMENDMENT and hereby confirm their
respective obligations under the GUARANTIES.
Section XVII. 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. All security interests and liens
previously granted by the BORROWER or the GUARANTORS to secure their
respective obligations under the CREDIT FACILITY remain in full force and
effect and secure their respective obligations under the CREDIT FACILITY as
amended herein. The modifications contained herein shall not constitute
a novation of the BORROWER'S or any of the GUARANTORS' obligations under
the documents evidencing, securing or otherwise documenting the CREDIT
FACILITY.
Section XVIII. BINDING NATURE. This AMENDMENT shall be binding upon
and inure to the benefit of the parties hereto, and their respective
successors and assigns.
Section XIX. 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 XX. DELIVERY BY TELECOPIER. This AMENDMENT may be delivered
by telecopier and a telefacsimile of any parties signature hereto shall
constitute an original signature for all purposes.
Section XXI. 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.
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)
Gregory M. Bubb,
Vice President & Treasurer
WITNESS/ATTEST: ADMINISTRATIVE AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
COLLATERAL AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
ISSUING BANK:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
LENDERS:
FIRST UNION COMMERCIAL CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
IBJ SCHROEDER BANK & TRUST CO.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
BANK ONE, COLUMBUS, N.A.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
SANWA BUSINESS CREDIT CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
PROVIDENT BANK OF MARYLAND
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
GUARANTORS:
UNC HOLDINGS, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC/LEAR SERVICES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC ALL FAB, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC METCALF SERVICING, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC JOHNSON TECHNOLOGY, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC ARTEX, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC CAMCO INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC TEXAS CAMCO INCORPORATED,
A Delaware Corporation
________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC ARDCO INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC ENGINE & ENGINE PARTS, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC ACCESSORY OVERHAUL GROUP, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC AVIATION SERVICES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC TRI-INDUSTRIES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC AIRWORK CORPORATION,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC PACIFIC AIRMOTIVE CORPORATION, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC PARTS COMPANY,
A Maryland Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC/CFC ACQUISITION CO.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
UNC STEARNS COMPANY,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
<PAGE>
EXHIBIT 10.45
AMENDMENT NO. 2 TO
AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT
("AMENDMENT") is dated as of the 19th day of December, 1996 by and among UNC
INCORPORATED, a corporation organized under the laws of the State of Delaware
("BORROWER"), FIRST UNION COMMERCIAL CORPORATION, as administrative agent
("ADMINISTRATIVE AGENT"), FIRST UNION COMMERCIAL CORPORATION, as collateral
agent ("COLLATERAL AGENT"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
issuer of certain letters of credit ("ISSUING BANK"), 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 (collectively,
"LENDERS").
STATEMENT OF PURPOSE
----------------------
Pursuant to the terms and provisions of the Amended And Restated Credit
Agreement dated as of May 22, 1996 by and among the BORROWER, the
ADMINISTRATIVE AGENT, the COLLATERAL AGENT, the ISSUING BANK and the LENDERS,
as amended by the Amendment No. 1 To Amended And Restated Credit Agreement
dated October 2, 1996 ("CREDIT AGREEMENT"), the LENDERS have extended certain
credit facilities to the BORROWER in the maximum principal amount of One
Hundred Ten Million Dollars ($110,000,000.00) ("CREDIT FACILITY"). The
BORROWER from time to time makes advances and other credit accommodations to
each of the GUARANTORS with proceeds of the CREDIT FACILITY and such advances
and credit accommodations to each GUARANTOR are evidenced by a secured
promissory note from each such GUARANTOR to the order of the BORROWER which
has been assigned by the BORROWER to the COLLATERAL AGENT (all of such
secured promissory notes are collectively herein referred to as the
"GUARANTOR NOTES").
The BORROWER'S obligations under the CREDIT FACILITY are secured by,
among other things, the security interests and liens granted by the BORROWER
to the COLLATERAL AGENT, pursuant to the terms of the Security Agremeent
dated May 22, 1996 executed by the BORROWER ("SECURITY AGREEMENT"). The
GUARANTORS have guaranteed the obligations of the BORROWER under the CREDIT
FACILITY pursuant to the terms of various Guaranty And Security Agreements
(individually "GUARANTY" and collectively, "GUARANTIES").
The BORROWER has requested that the LENDER increase the maximum
principal amount of the CREDIT FACILITY from One Hundred Ten Million Dollars
($110,000,000.00) to One Hundred Twelve Million Dollars ($112,000,000.00).
The LENDERS are willing to increase the maximum principal amount of the
CREDIT FACILITY as requested by the BORROWER pursuant to the terms and
provisions of this AMENDMENT.
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 XXII. RECITALS. The parties hereto hereby acknowledge the
accuracy of the above Statement Of Purpose and hereby incorporate the
Statement Of Purpose into this AMENDMENT.
Section XXIII. AMENDMENT TO CREDIT AGREEMENT. The CREDIT AGREEMENT
is hereby amended as follows:
a. The CREDIT AGREEMENT is hereby amended by deleting
the definition of "AGGREGATE COMMITMENT" contained in Section 1.1 of the
CREDIT AGREEMENT and substituting in lieu thereof the following:
"AGGREGATE COMMITMENT" means the aggregate amount of the LENDER'S
COMMITMENTS hereunder, as such amount may be reduced at any time and from
time to time pursuant to Section 2.5. On the CLOSING DATE, the AGGREGATE
COMMITMENT shall be One Hundred Ten Million Dollars ($110,000,000.00) and on
December 20, 1996 the AGGREGATE COMMITMENT shall be increased to One Hundred
Twelve Million Dollars ($112,000,000.00).
b. The CREDIT AGREEMENT is hereby amended by inserting at the
end of the definition of "GUARANTOR NOTES," contained in Section 1.1 of the
CREDIT AGREEMENT, immediately preceding the period, the phrase "as such
promissory notes may from time to time be amended, modified or restated."
c. The CREDIT AGREEMENT is hereby amended by inserting at the
end of the definition of "GUARANTY AGREEMENTS," contained in Section 1.1 of
the CREDIT AGREEMENT, immediately preceding the period, the phrase "as such
agreements may from time to time be amended, modified or restated."
d. The CREDIT AGREEMENT is hereby amended by deleting the
existing Schedule 1 of the CREDIT AGREEMENT in its entirety and substituting
in lieu thereof, as Schedule 1 of the CREDIT AGREEMENT, the Schedule 1
attached hereto and made a part hereof.
Section XXIV. AMENDMENT OF NOTES.
a. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Twenty-Four Million Seven Hundred Fifty Thousand
Dollars ($24,750,000.00) which is payable to the order of First Union
Commercial Corporation is hereby amended and restated in its entirety in
accordance with the terms of the Amended And Restated Revolving Credit Note
of even date herewith from the BORROWER to the order of First Union
Commercial Corporation in the principal amount of Twenty-Five Million Two
Hundred Thousand Dollars ($25,200,000.00);
b. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Twenty-Two Million Five Hundred Fifty Thousand
Dollars ($22,550,000.00) which is payable to the order of The Bank of New
York Commercial Corporation is hereby amended and restated in its entirety
in accordance with the terms of the Amended And Restated Revolving Credit
Note of even date herewith from the BORROWER to the order of The Bank of New
York Commercial Corporation in the principal amount of Twenty-Two Million
Nine Hundred Sixty Thousand Dollars ($22,960,000.00);
c. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Twenty-One Million Five Hundred Seventy-One
Thousand Dollars ($21,571,000.00) which is payable to the order of Sanwa
Business Credit Corporation is hereby amended and restated in its entirety
in accordance with the terms of the Amended And Restated Revolving Credit
Note of even date herewith from the BORROWER to the order of Sanwa Business
Credit Corporation in the principal amount of Twenty-One Million Nine Hundred
Sixty-Three Thousand Two Hundred Dollars ($21,963,200.00);
d. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Fifteen Million Two Hundred Sixty-Eight Thousand
Dollars ($15,268,000.00) which is payable to the order of IBJ Schroeder Bank
& Trust Co. is hereby amended and restated in its entirety in accordance with
the terms of the Amended And Restated Revolving Credit Note of even date
herewith from the BORROWER to the order of IBJ Schroeder Bank & Trust Co. in
the principal amount of Fifteen Million Five Hundred Forty-Five Thousand Six
Hundred Dollars ($15,545,600.00);
e. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Thirteen Million Six Hundred Forty Dollars
($13,640,000.00) which is payable to the order of Bank One Columbus, N.A. is
hereby amended and restated in its entirety in accordance with the terms of
the Amended And Restated Revolving Credit Note of even date herewith from the
BORROWER to the order of Bank One Columbus, N.A. in the principal amount of
Thirteen Million Eight Hundred Eight-Eight Thousand Dollars ($13,888,000.00);
and
f. The BORROWER'S Revolving Credit Note dated July 15, 1996
in the principal amount of Twelve Million Two Hundred Twenty-One Thousand
Dollars ($12,221,000.00) which is payable to the order of Provident Bank of
Maryland is hereby amended and restated in its entirety in accordance with
the terms of the Amended And Restated Revolving Credit Note of even date
herewith from the BORROWER to the order of Provident Bank of Maryland in the
principal amount of Twelve Million Four Hundred Forty-Three Thousand Two
Hundred Dollars ($12,443,200.00)
Section XXV. AMENDMENT TO SECURITY AGREEMENT. The SECURITY
AGREEMENT is hereby amended by deleting the words and number "One Hundred Ten
Million Dollars ($110,000,000.00)" from Section 1.5 of the SECURITY AGREEMENT
and substituting in lieu thereof the words and number "One Hundred Twelve
Million Dollars ($112,000,000.00)."
Section XXVI. CONSENT AND AGREEMENT OF GUARANTORS. The GUARANTORS
hereby consent to the modifications contained in this AMENDMENT. Each
GUARANTOR agrees to execute and deliver to the COLLATERAL AGENT: (a) an
amendment and restatement of the GUARANTY of such GUARANTOR in the same form
as the existing GUARANTY of such GUARANTOR but modified to clarify that the
GUARANTOR is guarantying all of the obligations of the BORROWER under the
CREDIT FACILITY as increased and modified pursuant to the terms of this
AMENDMENT; and (b) an amendment and restatement of the GUARANTOR NOTE of such
GUARANTOR in the same form as the existing GUARANTOR NOTE of such GUARANTOR
but in the principal amount of One Hundred Twelve Million Dollars
($112,000,000.00). The BORROWER shall endorse to the order of the COLLATERAL
AGENT each of the amended and restated promissory notes from the GUARANTORS.
Section XXVII. 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. All security interests and liens
previously granted by the BORROWER or the GUARANTORS to secure their
respective obligations under the CREDIT FACILITY remain in full force and
effect and secure their respective obligations under the CREDIT FACILITY as
amended herein. The modifications contained herein shall not constitute a
novation of the BORROWER'S or any of the GUARANTORS' obligations under the
documents evidencing, securing or otherwise documenting the CREDIT FACILITY.
Section XXVIII. FEE. On the date of this AMENDMENT, the BORROWER
shall pay to each of the LENDERS which have increased the amount of its
"COMMITMENT" (as defined in the CREDIT AGREEMENT), pursuant to the terms of
this AMENDMENT, a fee in an amount equal to three-eighths of one percent
(3/8%) of the amount of the increase in such LENDER'S COMMITMENT pursuant to
the terms of this AMENDMENT.
Section XXIX. BINDING NATURE. This AMENDMENT shall be binding upon
and inure to the benefit of the parties hereto, and their respective
successors and assigns.
Section XXX. 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 XXXI. DELIVERY BY TELECOPIER. This AMENDMENT may be
delivered by telecopier and a telefacsimile of any parties signature hereto
shall constitute an original signature for all purposes.
Section XXXII. 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.
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)
Robert L. Pevenstein,
Senior Vice President and
Chief Executive Officer
ADMINISTRATIVE AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
COLLATERAL AGENT:
FIRST UNION COMMERCIAL CORPORATION,
A North Carolina Corporation
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
ISSUING BANK:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
WITNESS/ATTEST: LENDERS:
FIRST UNION COMMERCIAL CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
IBJ SCHROEDER BANK & TRUST CO.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
BANK ONE, COLUMBUS, N.A.
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
SANWA BUSINESS CREDIT CORPORATION
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
PROVIDENT BANK OF MARYLAND
_________________________ By: _________________________(SEAL)
Name:____________________
Title:___________________
WITNESS/ATTEST: GUARANTORS:
UNC HOLDINGS, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
President
UNC/LEAR SERVICES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC ALL FAB, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC METCALF SERVICING, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC JOHNSON TECHNOLOGY, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC ARTEX, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
WITNESS/ATTEST: UNC CAMCO INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC TEXAS CAMCO INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC ARDCO INCORPORATED,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC ENGINE & ENGINE PARTS, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC ACCESSORY OVERHAUL GROUP, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC AVIATION SERVICES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
WITNESS/ATTEST: UNC TRI-INDUSTRIES, INC.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC AIRWORK CORPORATION,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC PACIFIC AIRMOTIVE CORPORATION,
INC., A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
President
UNC PARTS COMPANY,
A Maryland Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
President
UNC/CFC ACQUISITION CO.,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
UNC STEARNS COMPANY,
A Delaware Corporation
_________________________ By: _________________________(SEAL)
Robert L. Pevenstein,
Vice President
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
----------
Name and Address Commitment
- ---------------- -----------
<S> <C>
First Union Commercial Corporation $25,200,000
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0735
The Bank of New York Commercial Corporation $22,960,000
1290 Avenue of the Americas, Third Floor
New York, New York 10104
IBJ Schroeder Bank & Trust Co. $15,545,600
1 State Street
New York, New York 10004
Bank One, Columbus, N.A. $13,888,000
100 East Broad Street
Columbus, Ohio 43271
Sanwa Business Credit Corporation $21,963,200
One South Wacker Drive, Suite 2800
Chicago, Illinois 60606
Provident Bank of Maryland $12,443,200
114 E. Lexington Street, 5th Floor
Baltimore, Maryland 21202
</TABLE>
EXHIBIT 10.48
February 15, 1995
Robert L. Pevenstein
14 Chilhowie Ct.
Hunt Valley, MD 21030
Dear Bob:
The period for termination benefits in UNC's August 19, 1987, employment
agreement letter is changed as follows:
In the event of involuntary termination, for any reason other than for cause,
you will be entitled to twelve (12) months of salary and employee benefits
continuance from the termination date.
Sincerely,
/s/ Dan A. Colussy
Chairman &
Chief Executive Officer
EXHIBIT 10.49
Mr. Robert L. Pevenstein
5283 Golden Sky Court
Columbia, MD 21045
Dear Bob:
Welcome to UNC!
It is with great pleasure that I summarize and confirm the employment details
upon which we have agreed.
Your position will be Vice President and Controller, reporting directly to
me as Executive Vice President and Chief Financial Officer. You will be
joining UNC Incorporated at the earliest possible date; however, in no case
will this be later than 30 days after giving notice to your current employer.
Your base salary will be $110,000 (annualized) and will be reviewed
periodically in accordance with the Company's salary review policies. You
will have an opportunity to earn Incentive Compensation equal to as much as
30% of your base salary (pro-rated in 1987 to reflect the number of months
you will have been with UNC). In addition, you will receive a $3,000 per
year allowance for car expenses and other perquisites.
Your responsibility will include the full scope of controllership functions,
i.e. general accounting, taxes, public and SEC reporting, operations
analysis, annual operating plan preparation, asset management and working
capital performance, and acquisition, divestiture and capital expenditure
analysis.
We have recommended to the Chairman of the Compensation Committee of the UNC
Board of Directors that, incident to employment, you be granted options on
20,000 UNC Incorporated shares. Certain of these options will be Incentive
Stock Options (ISOs) with the remainder being Non-Qualifying Options. The
date of the grant will be either your starting date or the date of the
Committee approval, whichever is the latter. Vesting is as follows: 5% on
the date of grant, 20% on each January 2 thereafter until the award is
totally vested.
You will be a participant in our Supplementary Executive Retirement Plan
(SERP).
Beginning on January 1, 1988, you will be eligible for UNC's's Retirement
Income Savings Plan (RISP), our 401 (k) plan wherein each year we deposit an
amount equal to 2% of your annual salary and match the first 4% of your
savings, dollar-for-dollar. Your savings in the RISP, to a maximum of
$7,000, are before-tax dollars.
A Change-in-Control letter will be provided.
Also, in the event of involuntary termination, for any reason other than for
cause or a Change-in-Control, you would be entitled to six (6) months of
salary and employee benefits continuance from the termination date.
In addition to the above, you will be entitled to participate in any other
programs and benefits available generally to executive officers of the
Company.
Bob, I think I have covered all the bases. If you agree, please sign below.
(Return one signed copy to me and retain the other for your files.)
I feel very good about this, Bob. I think both of us have made the right
decision.
Sincerely,
/s/ G. Vern Diedrick
GVD/ad
ACCEPTED:
/s/ Robert L. Pevenstein
EXHIBIT 10.50
Mr. John J. Bonasia
1160 South River Landing
Edgewater, MD 21037
Dear John:
This letter will set forth our agreement regarding your employment and
management responsibilities as Senior Vice President, Manufacturing effective
October 3, 1994.
1. Position: The position is that of Senior Vice President, Manufacturing
reporting to the President and Chief Operating Officer of UNC Incorporated.
You will be responsible for the profitability and growth of the units
comprising UNC's Manufacturing operations, including UNC Chemical Dynamics,
UNC Tri Manufacturing, UNC Johnson Technology, UNC Aerostructures, UNC Tri
Remanufacturing and Artex.
2. Compensation:
(a) Base Salary: Your base annual salary will
be $195,000, payable biweekly and reviewed annually.
(b) Incentive Compensation Plan: You will be
designated a participant in UNC's Incentive Compensation Plan (the "Plan"),
under which you may receive incentive compensation of up to 50% of your base
annual salary depending on UNC's performance in achieving it's annual
business plan goals. You will also be eligible to receive additional
discretionary compensation up to $100,000 for achieving all of the UNC
Manufacturing operations objectives and goals to be determined at a later
date between you and the President and Chief Operating Officer.
3. Other Benefits:
(a) Perquisite:You will receive a $10,000 per
year allowance, paid in January and July in lieu of car expenses and other
perquisites.
(b) Retirement Income Savings Plan: You will
continue to be eligible to participate in the UNC Retirement Income Savings
Plan.
(c) Group Insurance: You will continue to be
eligible to participate in UNC's health, life insurance, disability and other
benefit plans.
(d) Supplemental Executive Retirement Plan:
You will continue as an eligible participant in this plan. Your future
benefit will be calculated using the average of your highest three years of
base salary.
(e) Change In Control: Will remain in effect.
(f) Vacation: You will be entitled to an
annual vacation of three weeks.
4. Termination: In the event of the termination of your employment at the
initiative of UNC Incorporated, for any reason other than for cause or a
change in control, you will be entitled to receive up to twelve (12) months
of salary and group health benefits continuance from the date of termination
of your active employment to the time alternative employment is obtained.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter to me.
Sincerely,
/s/Dan Colussy
Accepted:
/s/ John J. Bonasia
9/29//94
Date
DAC/aa
EXHIBIT 10.51
August 20, 1990
Mr. John J. Bonasia
President
Airwork Corporation
Municipal Airport
Millville, New Jersey 08332
Dear John:
This letter will set out our agreement regarding the transfer of your
management responsibilities from Airwork to a group level position here in
Annapolis:
1. Position: The position is that of UNC Group Vice President - Engine
Overhaul Operations, reporting to me effective today. You will be
responsible for the operations, profitability and growth of the units
comprising UNC's Aviation Group, including Airwork and Pacific Airmotive,
providing aircraft engine overhaul services.
2. Transition: There will be a transition period of about six months,
during which you will continue to be responsible as President of Airwork.
Your efforts during this period will include the identification, development
and transition of a replacement as President of Airwork from among its
present key executives.
3. Expenses: Additional residence, living and personal commuting expenses
will be reimbursed to you by UNC during the transition period. It is
understood that you will begin relocation efforts during this period. All
relocation expenses will be paid for or reimbursed to you in accordance with
UNC's current relocation policy.
4. Compensation:
(a) Base Salary: Your base annual salary will
be $180,000, payable biweekly and reviewable annually as of each May 1 by the
Management Development and Compensation Committee of UNC's Board of
Directors.
(b) Incentive Compensation Plan: You will be
eligible to participate in UNC's Executive Compensation Plan up to 50% of
your base salary depending on corporate performance. You will also be
eligible to receive, at my discretion, additional incentive compensation
based on any extraordinary performance on your part.
You will also receive a $10,000 per year allowance, paid in January and July,
in lieu of car expenses and other perquisites.
5. Other Benefits:
(a) Stock Options: An award of stock options
covering 40,000 UNC shares has been authorized by the Management Development
and Compensation Committee.
(b) Supplemental Executive Retirement Plan:
You will be recommended to the Management Development and Compensation
Committee to participate in UNC's Supplemental Executive Retirement Plan.
This plan provides retirement income at 60% of the last year's salary after
ten years of service.
(c) Change-In-Control: A change-in-
control agreement will also be provided to you, reflecting your new position
and responsibilities.
(d) Retirement Income Savings Plan: You will
continue to be eligible to participate in UNC'S Retirement Income Savings
Plan.
(e) Group Insurance: You will continue to be
eligible to participate in UNC's group health insurance and other benefits.
(f) Vacation: You will be entitled to an
annual vacation of three weeks.
(g) In the event of the termination of your
employment at the initiative of UNC, for any reason other than for cause or
a change in control, you will be entitled to twelve months of salary and
employee benefits continuance from the date of termination of your active
employment.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter for our records. I am happy to welcome you to your new
position at UNC, and look forward to continuing our relationship on this new
basis.
Sincerely yours,
/s/ Dan A. Colussy
Chairman, President and
Chief Executive Officer
Accepted:
/s/ John J. Bonasia
Date: 8/20/90
EXHIBIT 10.52
May 20, 1988
Mr. John J. Bonasia
P.O. Box 262
Bellbrook, OH 45305
Dear John:
I am pleased to confirm your appointment to the position of Senior Vice
President of Sales for Airwork Corporation of UNC Incorporated. Your annual
base salary will be $110,000 effective June 27, 1988. You will also be paid
an annual perquisite of $2,500.
You are eligible to participate in the UNC Incorporated 30% base Incentive
Compensation Program (I.C.) if Company goals are met. Under the same program
you may be eligible for a CEO discretionary I.C. award. You will be
guaranteed a minimum incentive payment of $30,000 for the first year.
You will be granted 6,000 stock options upon approval of the UNC Incorporated
Board of Directors.
Employee and dependent health insurance, employee life insurance and LTD
coverage are available from date of hire under existing Company plans. Also,
you will be eligible to participate in the 401 (K) Retirement Income Savings
Plan effective July 1, 1988.
You will be eligible for reasonable costs for relocation expenses in
accordance with the attached UNC Incorporated policy, except under Section
15.3, you will receive one month's base pay for miscellaneous costs of
moving.
You agree within 30 days after assuming your position, as part of this
Agreement, you will execute UNC's standard confidential and covenant not to
compete provision when presented to you by Company Counsel.
In the event your employment is terminated by UNC Incorporated, your base
salary and employee and dependent health insurance would continue to be paid
for an additional 12 months from date of termination.
To confirm your Agreement, please sign and return the enclosed copy of this
letter and Employee Relocation Agreement to me.
I look forward to an exciting and rewarding relationship in a promising
business venture.
Sincerely,
/s/ Bob Boyne
JSS
Enclosure
Accepted: /s/ John J. Bonasia
Date: 6/3/88
EXHIBIT 10.53
November 21, 1995
Mr. Ronald W. Frederick
8350 River Ridge Drive
Coopersville, MI 49404
Dear Ron:
This letter will set out our agreement regarding your employment and
management responsibilities as Vice President, Manufacturing effective
December 14, 1995.
1. Position: The position is Vice President, UNC Manufacturing reporting
to Dan Colussy, Chairman, President and Chief Executive Officer of UNC
Incorporated. The position is located in Annapolis, Maryland.
You will be responsible for managing the profitability and growth of the
units comprising UNC's Manufacturing operations, including UNC Tri
Manufacturing, UNC Johnson Technology, UNC All Fab, UNC Tri Remanufacturing
and UNC Artex.
2. Compensation:
(a) Base Salary: Your base annual salary will
be $210,000 and reviewed in accordance with UNC's salary plan guidelines.
(b) Incentive Compensation Plan: You will be
designated a participant in UNC's Incentive Compensation Plan (the "Plan"),
under which you may receive incentive compensation of up to 50% of your base
annual salary depending on the performance of UNC Manufacturing and the
Corporation in achieving their annual business plan goals. You will also be
eligible to receive an additional incentive award from the CEO's
discretionary fund that recognizes exceptional performance on your part in
comparison with the performance of other key executives of UNC.
3. Relocation: You will be reimbursed for the reasonable costs of
relocation for you and your family in accordance with UNC's employee
relocation policy, a copy of which is enclosed.
4. Other Benefits:
(a) Perquisites: You will receive a $10,000
per year allowance, paid in January and July, in lieu of car expenses and
other perquisites.
(b) Retirement Income Savings Plan: You will
continue to be eligible to participate in the UNC Retirement Income Savings
Plan.
(c) Group Insurance: You will continue to be
eligible to participate in the group benefit plans you currently have through
December 31, 1995. Effective January 1, 1996, you will be eligible to
participate in the group benefit plans offered to employees of UNC
Corporate.
(d) Vacation: Your annual vacation
entitlement will be four (4) weeks and is to be used in the year earned with
no carryover.
4. Termination: In the event of the termination of your employment at the
initiative of UNC Incorporated, for any reason other than for cause, you will
be entitled to receive up to twelve (12) months of salary and group health
benefits continuance from the date of termination of your active employment
to the time alternative employment is obtained.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter to me.
Sincerely,
/s/Dan Colussy
Chairman, President and
Chief Executive Officer
Accepted:
/s/ R.W. Frederick
DAC/aa
Enclosure
EXHIBIT 10.54
Mr. Ronald W. Frederick
8350 River Ridge Drive
Coopersville, MI 49404
Dear Ron:
This letter will set out our agreement regarding your employment and
management responsibilities as General Manager, Manufacturing effective
January 9, 1995.
1. Position: The position is General Manager, Manufacturing reporting to
Gerry Czarnecki, President and Chief Operating Officer of UNC Incorporated.
The position is located in Terre Haute, Indiana.
You will be responsible for managing the profitability and growth of the
units comprising UNC's Manufacturing operations, including UNC Tri
Manufacturing, UNC Johnson Technology, UNC Chemical Dynamics and UNC All Fab.
2. Compensation:
(a) Base Salary: Your base annual salary will
be $180,000 and reviewed in accordance with UNC's salary plan.
(b) Incentive Compensation Plan: You will be
designated a participant in UNC's Incentive Compensation Plan (the "Plan"),
under which you may receive incentive compensation of up to 50% of your base
annual salary depending on UNC Manufacturing's performance in achieving it's
annual business plan goals. You will also be eligible to receive an
additional incentive award from the CEO's discretionary fund that recognizes
exceptional performance on your part in comparison with the performance of
other key executives of UNC operating units.
3. Relocation: You will be reimbursed for the reasonable costs of
relocation for you and your family in accordance with UNC's employee
relocation policy, a copy of which is enclosed.
4. Other Benefits:
(a) Perquisites: You will receive a $10,000
per year allowance, paid in January and July, in lieu of car expenses and
other perquisites.
(b) Retirement Income Savings Plan: You will
be eligible to participate in the UNC Retirement Income Savings Plan.
(c) Group Insurance: You will be eligible to
participate in the group health, life, disability and other benefit plans
offered to employees of UNC Tri Manufacturing.
(d) Vacation: Your annual vacation
entitlement will be in accordance with UNC Tri Manufacturing's vacation
policy and is to be used in the year earned with no carryover.
4. Termination: In the event of the termination of your employment at the
initiative of UNC Incorporated, for any reason other than for cause, you will
be entitled to receive up to twelve (12) months of salary and group health
benefits continuance from the date of termination of your active employment
to the time alternative employment is obtained.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter to me.
Sincerely,
/s/Gerald M. Czarnecki
President and Chief Operating Officer
Approved:/s/ Dan Colussy
GMC/aa
Enclosure
EXHIBIT 10.55
July 23, 1993
Mr. Ronald W. Frederick
8350 River Ridge Drive
Coopersville, MI 49404
Dear Ron:
This letter will set forth our agreement regarding your employment and
responsibilities as General Manager and Vice President of Johnson Technology
effective upon completion of the acquisition.
1. Position: The position is that of General Manager and Vice President
of UNC Johnson Technology, an operation of UNC's Manufacturing Division,
initially reporting to John J. Bonasia, Executive Vice President and Chief
Operating Officer.
You will be responsible for the successful integration of UNC Johnson
Technology into UNC's Manufacturing Division, managing the Company for
profitability and growth as defined by all operational and financial
objectives set forth by management when UNC Johnson Technology was acquired.
2. Compensation:
(a) Base Salary: Your base annual salary will be $150,000 and
reviewed annually.
(b) Incentive Compensation Plan: You will be designated a
participant in UNC's Incentive Compensation Plan (the "Plan"), under which you
may receive incentive compensation from the field pool, of up to 30% of your
base annual salary depending on Johnson Technology's performance in achieving
its annual business plan goals. You will also be eligible to receive an
additional incentive award from the CEO's Discretionary Fund that recognizes
exceptional performance on your part in comparison with the performance of
other key executives of UNC operating divisions.
You will be guaranteed $30,000 incentive compensation for 1993 from UNC.
3. Stock Options: Based upon availability of shares, recommendation will
be made to the Management Development and Compensation Committee that you be
granted an option to purchase 10,000 shares of UNC Common Stock, at the fair
market value of such shares at the date of grant, under UNC's 1990 Stock
Option Plan for Key Employees. The Plan requires the purchase of qualifying
shares by option holders of one share for each four option shares.
4. Other Benefits:
(a) Perquisites: You will receive a $5,000 per year allowance,
paid in January and July, in lieu of car expenses and other perquisites.
(b) Retirement Income Savings Plan: You will continue to
participate in the Johnson Technology 401 (k) plan.
(c) Group Insurance: You will continue to participate in the
Johnson Technology health, life and disability plans, and other benefit
plans.
(d) Vacation: Your annual vacation entitlement will be in
accordance with UNC Johnson Technology's vacation policy.
(e) Reinstitute country club membership currently listed as
"Leave of Absence" until 2/1/94.
5. Terms of Agreement: Subject to the terms and conditions of this
agreement, this agreement shall be for a term of two years. Should the
company decide to terminate your employment during the term of this agreement
(for reasons other than for cause), you would be compensated for the
remainder of the term, twelve months or until you commence employment with
a new employer, whichever is less. The compensation would be at your
annualized compensation level plus employee benefits and out placement
service.
You, in turn, agree to give UNC ample notice should you decide to voluntarily
leave Johnson Technology. Should you leave during the first year, you agree
to give 6 months notification. For the remainder of the contract, 90-day
notification is required.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter to me.
Sincerely,
UNC INCORPORATED
/s/ John J. Bonasia
Executive Vice President
Chief Operating Officer
Accepted:
/s/ Ronald W. Frederick
7/27/93
JJB/aa
EXHIBIT 10.56
October 26, 1993
Mr. John Moellering
12912 Castle Rock Court
Oklahoma City, OK 73142
Dear John:
This letter will set out our agreement regarding your employment and
management responsibilities as Executive Vice President and Chief Operating
Officer of UNC Aviation Services effective October 27, 1993.
1. Position: The position is Executive Vice President and Chief Operating
Officer, UNC Aviation Services reporting to Dan Colussy, Chairman, President
and Chief Executive Officer of UNC Incorporated.
You will be responsible for the total profit and loss of UNC Aviation
Services as well as the leadership and direction of the operation.
2. Compensation:
(a) Base Salary: Your base annual salary will be $250,000 and
reviewed annually.
(b) Incentive Compensation Plan: You will be designated a
participant in UNC's Incentive Compensation Plan (the "Plan"), under which you
may receive incentive compensation of up to 50% of your base annual salary
depending on UNC's performance in achieving its annual business plan goals.
You will also be eligible to receive an additional incentive award from the
CEO's discretionary fund that recognizes exceptional performance on your part
in comparison with the performance of other key executives of UNC.
3. Stock Options: A recommendation will be made to the Management
Development and Compensation Committee that you be granted an option to
purchase 25,000 shares of UNC Common Stock, at the fair market value of such
shares at the date of grant, under UNC's 1990 Stock Option Plan for Key
Employees. The Plan requires the purchase of qualifying shares by option
holders of one share for each four option shares.
4. Relocation: You will be reimbursed for the reasonable costs of
relocation for you and your family in accordance with UNC's employee
relocation policy, a copy of which is enclosed. It is understood that you
will begin relocation efforts immediately upon your acceptance of this
agreement.
5. Other Benefits:
(a) Perquisite: You will receive a $10,000 per year allowance,
paid in January and July, in lieu of car expenses and other perquisites.
In addition, UNC will make its best effort to obtain, and
will make available to you, a corporate membership in the Old South Country
Club for which UNC will pay initiation fee, dues and non-meal assessments.
(b) Retirement Income Savings Plan: You will be eligible to
participate in the UNC Retirement Income Savings Plan.
(c) Group Insurance: You will be eligible to participate in UNC's
health, life, disability and other benefit plans.
(d) Vacation: You will be entitled to an annual vacation of three
weeks.
6. Termination: In the event of the termination of your employment at the
initiative of UNC Incorporated, for any reason other than for cause, you will
be entitled to receive up to twelve (12) months of salary and group health
benefits continuance from the date of termination of your active employment
to the time alternative employment is obtained.
If the foregoing is acceptable to you, please sign and return the enclosed
copy of this letter to me.
I welcome you in joining the UNC team. We are all excited about the
opportunities for our company and are convinced that you will make a major
contribution to the future success of UNC.
Sincerely,
/s/ Dan Colussy
Accepted: /s/ J. Moellering
10/26/93
( Date)
<PAGE>
EXHIBIT 11
UNC INCORPORATED AND SUBSIDIARIES
Earnings Per Share
For the Three Years Ended December 31, 1996
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net earnings (loss) $ 7,624 $ 1,923 $(67,932)
Preferred stock dividends 1,249
-------- -------- --------
Net earnings applicable to common stock-
primary earnings (loss) applicable to common stock 6,375 1,923 (67,932)
Adjustments - fully diluted earnings per share:
Elimination of preferred stock dividends
upon assumed conversion 1,249
Decrease in interest expense related to
convertible debt, net of income tax
effect (1),(3) 3,402 3,343 4,318
-------- -------- --------
Adjusted net earnings - fully diluted
earnings (loss) applicable to common stock $ 11,026 $ 5,266 $(63,614)
======== ======== ========
Calculation of primary net earnings
per common share:
Average common shares outstanding during the
year (2) 18,056 17,666 17,474
Increase for common stock equivalents:
Stock options under treasury stock method 375 229 385
-------- -------- --------
Adjusted average shares outstanding for the
year - primary 18,431 17,895 17,859
======== ======== ========
Primary earnings (loss) per common share $ .35 $ .11 $ (3.80)
======== ======== ========
Calculation of fully diluted earning (loss) per
common share:
Average common shares outstanding during the
year (2) 18,056 17,666 17,474
Increase for common stock equivalents:
Assumed conversion of preferred stock 2,099
Stock options under treasury stock method 582 244 385
Dilutive shares issuable upon conversion of
convertible debt(1) 4,208 4,364 4,481
-------- -------- --------
Adjusted average shares outstanding for the year -
fully diluted 24,945 22,274 22,340
======== ======== ========
Fully diluted earnings (loss) per common share $ .44 $ .24 $ (2.85)
======== ======== ========
</TABLE>
(1) The convertible subordinated debentures and preferred stock were anti-
dilutive for all years presented.
(2) Exclusive of 574,448 average treasury shares for the year ended December
31, 1996 and 700,000 shares for all other years presented.
(3) The convertible subordinated debentures and the preferred stock are not
common stock equivalents in the calculation of primary net earnings per
share.
<PAGE>
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
UNC Stearns Company Delaware 100
UNC Pacific Airmotive Corporation, Inc. Delaware 100
UNC Parts Company, Inc. Delaware 100
UNC/CFC Acquisition Company
dba Garrett Aviation Services Delaware 100
</TABLE>
The subsidiaries omitted from the foregoing list do not, considered in the
aggregate, constitute a significant subsidiary.
<PAGE>
EXHIBIT 23
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. 2-99656, and No. 33-55193) of our report dated
February 14, 1997, on our audits of the consolidated financial statements and
the financial statement schedule of UNC Incorporated and Subsidiaries as of
December 31, 1996 and 1995, and for the three years in the period ended
December 31, 1996, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 21, 1997
<PAGE>
EXHIBIT 24
1 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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/ Dan Colussy
-----------------
Director
Witness:
/s/ Sylvia N. Mitchell
- ----------------------
Date: February 26, 1997
<PAGE>
EXHIBIT 24
2 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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/ June Danley
- -----------------
Date: February 25, 1997
<PAGE>
EXHIBIT 24
3 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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 Castle
----------------
Director
Witness:
/s/ Laura Klun
- ---------------
Date: February 25, 1997
<PAGE>
EXHIBIT 24
4 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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 W. Gildea
------------------
Director
Witness:
/s/ William P. Daniels
- ----------------------
Date: February 25, 1997
<PAGE>
EXHIBIT 24
5 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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/ Freeman Hrabowski
----------------------
Director
Witness:
/s/ Karen Wensch
- ----------------
Date: February 27, 1997
<PAGE>
EXHIBIT 24
6 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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/ Judith C. Williams
- ----------------------
Date: February 26, 1997
<PAGE>
EXHIBIT 24
7 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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 N. Mitchell
- ----------------------
Date: February 26, 1997
<PAGE>
EXHIBIT 24
8 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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 B. Byron
-------------------
Director
Witness:
/s/ B. Kirk Walsh
Date: February 25, 1997
<PAGE>
EXHIBIT 24
9 of 9
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, 1996, with the Securities
and Exchange Commission, in substantially the form presented to the members
of the Board of Directors on February 24, 1997, 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 Robert L.
Pevenstein, 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: February 27 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheet as of 12/31/96 and the
related consolidated statement of earnings, cash flows and
notes to consolidated financial statements for the year ended
12/31/96 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,368
<SECURITIES> 0
<RECEIVABLES> 210,617
<ALLOWANCES> 6,678
<INVENTORY> 127,777
<CURRENT-ASSETS> 381,820
<PP&E> 113,124
<DEPRECIATION> 39,714
<TOTAL-ASSETS> 748,296
<CURRENT-LIABILITIES> 205,141
<BONDS> 367,629
<COMMON> 3,753
0
250
<OTHER-SE> 132,276
<TOTAL-LIABILITY-AND-EQUITY> 748,296
<SALES> 604,537<F1>
<TOTAL-REVENUES> 832,063
<CGS> 499,738<F1>
<TOTAL-COSTS> 710,589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,866<F2><F3>
<INTEREST-EXPENSE> 29,106
<INCOME-PRETAX> 10,891
<INCOME-TAX> 3,267
<INCOME-CONTINUING> 7,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,375<F4>
<EPS-PRIMARY> .35
<EPS-DILUTED> .34<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", also see Schedule VIII-Valuation and Qualifying accounts.
<F4>Net of preferred stock dividends.
</FN>
</TABLE>
EXHIBIT 10.46
UNC INCORPORATED
1996 STOCK OPTION PLAN FOR KEY EMPLOYEES
1. Objectives of the Plan
The Plan is intended to encourage ownership of Common Stock of UNC
Incorporated (the "Company") by key employees of the Company and its
subsidiaries, and to provide incentives for them to put forth maximum efforts
for the success of the Company. By extending to key employees opportunities
to acquire proprietary interests in the Company, the Plan may be expected to
benefit the Company and its stockholders by making it possible for the Company
to attract and retain the best available talent and by affording key
management a significant interest in increasing the value of the Company's
shares.
2. Stock Reserved for the Plan
There will be reserved for issuance under the Plan upon the exercise of
Options, or of stock appreciation rights issued in respect of such Options,
or as awards of restricted stock, 250,000 shares of Common Stock, par value
$0.20 per share ("Common Stock"), of the Company, subject to adjustment as
provided in paragraph 12. Such shares may be in whole or in part authorized
but unissued shares of Common Stock or issued shares of Common Stock which
shall have been reacquired by the Company ("Treasury Shares"), as the Board
of Directors of the Company (the "Board of Directors") shall from time to time
determine. If any Option shall expire or terminate for any reason without
having been exercised in full, or shall be reduced as to the number of shares
covered thereby or repurchased by the Company, or if the terms or conditions
of any Restricted Stock award shall not have been satisfied, the balance of
shares subject to such option or award shall again be available for the
purposes of the Plan. If stock appreciation rights shall be exercised under
the Plan, only the number of shares actually delivered upon the exercise of
such stock appreciation rights shall be charged against the maximum limitation
on the number of shares which may be issued under the Plan, and otherwise the
related Option shall be deemed to have terminated for a reason other than the
exercise thereof for the purpose of such maximum limitation.
3. Administration of the Plan
The Plan shall be administered by the Management Development and
Compensation Committee of the Board of Directors, which shall meet the
qualifications set forth in paragraph 4 (the "Committee"). Subject to the
express provisions of the Plan, the Committee shall have plenary authority to
determine the individuals to whom, and the time or times at which Options or
stock appreciation rights shall be granted, or restricted stock awarded, the
number of shares to be subject to each Option, stock appreciation right or
restricted stock award, the exercise price and duration of each Option, and
the other terms and conditions of each Option grant and stock appreciation
right, or of each restricted stock award. Such terms and conditions may
include provisions for repurchase by the Company of shares of Common Stock
issued pursuant to the Plan. In making any such determination, the Committee
may take into account the nature of the services rendered by the respective
key employees, their present and potential contributions to the Company's
success, their investment in the Company and such other factors as the
Committee in its discretion shall deem relevant. Subject to the express
provisions of the Plan, the Committee shall also have plenary authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to them, to determine the terms and provisions of the agreements with
and instruments issued to participants (which need not be identical) and to
make all other determinations necessary or advisable for the administration
of the Plan. The Committee's determination on the matters referred to in this
paragraph 3 shall be conclusive.
4. The Committee
The Committee shall consist of three or more members of the Board of
Directors who are not currently, and within one year prior to appointment have
not been, eligible for selection as a person to whom Options or stock
appreciation rights may be granted, or restricted stock awarded. However,
service by a director on the Committee shall not affect any grant or award
received by such director while not serving on the Committee. The Committee
shall be appointed by the Board of Directors, which may from time to time
appoint members of the Committee in substitution for members previously
appointed and may fill vacancies, however caused, in the Committee. The Board
of Directors shall select one of the members of the Committee as its Chairman.
The Committee shall hold its meetings at such times and places as it may
determine. All actions of the Committee shall be taken by not less than a
majority of its members. Action may be taken without a meeting if a consent
in writing, setting forth the action, shall be signed either before or after
such action by all of the members of the Committee. The Committee may appoint
a secretary, shall keep minutes or other records of such action, and shall
make such rules and regulations for the conduct of its business as it shall
deem advisable.
5. Eligibility
Participation in the Plan may be afforded only to key employees of the
Company who are not officers of the Company elected to office by the Board of
Directors, and to officers and other key employees of present and future
subsidiary corporations of the Company ("Subsidiaries") as selected by the
Committee. Members of the Board of Directors and officers of the Company who
have been elected to office by the Board of Directors will not be eligible to
receive awards under the Plan. Additionally, officers of the Company or its
Subsidiaries, or any other employees of the Company or its Subsidiaries who
are subject to liability under Section 16(b) of the Securities and Exchange
Act of 1934 (the "'34 Act") will not be eligible to receive awards under the
Plan. Nothing contained in the Plan shall be construed to limit the right of
the Company to grant options or other benefits otherwise than under the Plan
in connection with the acquisition of the business or assets of any
corporation, firm or association, including options granted to employees
thereof who become employees of the Company or a Subsidiary, or for other
proper corporate purposes.
6. Stock Options
(a) Subject to the express provisions of the Plan, the Committee shall
have full and complete authority to grant options under the Plan ("Options").
(b) Options may be granted under the Plan to eligible employees upon
such terms and conditions as the Committee in its discretion may deem
appropriate.
(c) The purchase price of the Common Stock under each Option shall not
be less than 100% of the fair market value of the stock at the time of the
granting of the Option. Such fair market value shall be determined by the
Committee and may be computed by such method as the Committee shall consider
will reflect the fair market value of the Common Stock on such day.
(d) The term of each Option and any related stock appreciation right
shall, subject to the limitations set forth herein, be for such period (not
to exceed ten years from the date such Option is granted) as the Committee
shall determine and shall be subject to earlier termination as provided in the
Plan.
(e) Each Option shall vest in four annual installments of 25% each on
each January 1 following the date of grant.
(f) Options granted under the Plan may include stock appreciation
rights, either at the time of grant or by later amendment. Such stock
appreciation rights shall be subject to such terms and conditions as the
Committee shall impose, including the following:
(i) A stock appreciation right shall not be exercisable to any
greater extent than the related Option is exercisable.
(ii) A stock appreciation right shall be exercisable only after
the expiration of any waiting period specified by the Committee. Any such
waiting period may be longer (but not shorter) than the waiting period, if
any, specified for the exercise of the related Option.
(iii) A stock appreciation right shall entitle the Option holder
to elect to surrender to the Company the Option in which it is included, or
any portion thereof, in lieu of exercising such Option, or portion thereof,
and to receive from the Company in exchange therefor that number of shares
having an aggregate value equal to the excess (if any) of the market value (as
hereinafter defined) of one share over the option price per share specified
in such Option multiplied by the total number of shares called for by the
Option or portion thereof, which is so surrendered, with a cash settlement to
be made for any fractional share interests. In the discretion of the
Committee, the Company shall be entitled to elect instead to settle its
obligation, arising out of the exercise of a stock appreciation right, by the
payment in cash equal to the aggregate market value of the shares it would
otherwise be obligated to deliver, or the Company may elect to settle such
obligation in part with stock and in part with cash. The Committee may agree
with any Option holder that the Company will not elect a cash settlement of
a related stock appreciation right without the prior consent of the holder.
The market value of a share for the purposes of this paragraph 6 shall be the
closing price of a share as reported for New York Stock Exchange-Composite
Transactions on the trading day next preceding the date on which the stock
appreciation right shall be exercised, or, if applicable, on the trading day
next preceding the date of such election by the Company.
The Committee may provide that a stock appreciation right may be
exercised only within the sixty (60) day period following a Change in Control
(as defined in Section 13) and that any stock appreciation right exercised
within such period shall be paid in cash.
7. Restricted Stock
The Committee shall have full and complete authority to award shares of
Common Stock as restricted stock to eligible employees upon such terms and
conditions and subject to such restrictions as the Committee may deem
appropriate. All awards of restricted stock shall provide that such
restricted stock shall revert to the Company to the extent that the terms,
conditions and restrictions thereon have not lapsed or been removed within
such period as the Committee shall determine, and the right to such shares may
become sooner forfeitable as provided in the Plan. Also, any Option or
related stock appreciation right granted under the Plan may, in the discretion
of the Committee, either at the time of grant or by later amendment to which
the Option holder consents, provide for the issuance of restricted stock, in
whole or in part, upon the exercise of such Option or related stock
appreciation right, such restricted stock to be issued upon such terms and
conditions and subject to such restrictions as the Committee may deem
appropriate. Any such restrictions may, in the discretion of the Committee,
be intended to subject the shares of Common Stock issued under such
restrictions to a substantial risk of forfeiture until such restrictions shall
lapse or be removed.
8. Exercise of Options and Stock Appreciation Rights
Unless otherwise provided in the Plan or the related Option, each Option
and related stock appreciation right shall be exercisable, in whole at any
time, or in part from time to time, during the term of the Option. The
purchase price of the shares as to which an Option shall be exercised shall
be paid in full at the time of exercise. Except as provided in paragraph 11,
no Option or related stock appreciation right may be exercised at any time
unless the holder is then an employee of the Company or of a Subsidiary and
has continuously remained an employee at all times since the date of the
granting of such Option. The holder of an Option shall not have any rights
of a stockholder with respect to the shares covered by the Option until such
shares shall be issued to him upon exercise of the Option or related stock
appreciation right. Upon the exercise of any Option or stock appreciation
right, any applicable taxes which the Company is required to withhold shall
be paid to the Company, and any information which the Company deems necessary
in connection with such exercise shall be supplied to the Company.
9. Issuance of Restricted Stock
Promptly following the award of restricted stock to an employee or the
exercise by an employee of an Option or related stock appreciation right
entitling the holder to restricted stock, the Company shall issue in the name
of the employee one or more certificates representing the shares awarded or
to be issued. The employee shall thereupon become a stockholder of the
Company with respect to all of the shares represented by such certificate or
certificates; and unless the Committee has otherwise specified, such recipient
shall have all of the rights of a stockholder with respect to all such shares,
including the right to vote such shares and to receive dividends, if any,
declared by the Board of Directors, but subject to the terms, conditions and
restrictions specified by the Committee. The certificate or certificates
representing restricted stock shall be inscribed with a legend referring to
the Plan and the agreement under which such restricted stock is issued, and
such certificate or certificates, along with blank stock powers, shall be
deposited with the Secretary of the Company, to be held for delivery to the
holder when the terms, conditions and restrictions specified by the Committee
shall lapse or be removed. If the holder of restricted shares shall become
entitled to new or additional or different securities upon the occurrence of
an event such as those specified in paragraph 12 hereof, such new, additional
or different securities shall likewise be deposited with the Secretary of the
Company with blank stock powers or other instruments of transfer, to be held
subject to the same terms, conditions and restrictions specified for the
restricted stock originally awarded. The Committee may make such provisions
as it deems appropriate in an award of restricted stock with respect to the
possible termination of the employment of the holder before the restrictions
shall otherwise lapse or be removed.
10. Non-Transferability of Options, Stock Appreciation Rights and Restricted
Stock
No Option, stock appreciation right or restricted stock (before the
terms, conditions and restrictions have lapsed or been removed) shall be
transferable otherwise than by will or the laws of descent and distribution,
and an Option or stock appreciation right may be exercised, during the
lifetime of the holder, only by the holder. An Option, stock appreciation
right or restricted stock transferred by will or the laws of descent and
distribution shall remain subject to all of the provisions of the Plan and the
agreement or instrument governing such Option, stock appreciation right or
restricted stock.
11. Termination of Employment
In the event of the termination of the employment of the holder of an
Option, other than by reason of death, unless otherwise provided in his option
agreement, the holder may exercise the Option and any related stock
appreciation right at any time within three months after such termination, but
in no event after the expiration of the term of the Option, if and to the
extent the holder was entitled to exercise such Option or stock appreciation
right at the date of such termination. In the event of the death of the
holder of an Option while in the employ of the Company or of a Subsidiary, or
while still entitled to exercise the Option as provided in the preceding
sentence, the Option and any related stock appreciation right theretofore
granted may be exercised by a legatee or legatees of the holder, or by the
holder's personal representatives or distributees, at any time thereafter
within a period of one year after the holder's death, but in no event after
the expiration of the term of such Option, if and to the extent that the
holder was entitled to exercise such Option or stock appreciation right at the
date of the holder's death.
Options and stock appreciation rights shall not be affected by any
change of duties or position so long as the holder continues to be an employee
of the Company or of a Subsidiary. Nothing in the Plan or in any Option,
stock appreciation right or restricted stock award shall confer on any
individual any right to continue in the employ of the Company or any of its
Subsidiaries or interfere in any way with the right of the Company or any of
its Subsidiaries to terminate an employee's employment at any time.
12. Adjustments Upon Changes in Capitalization
Notwithstanding any other provision of the Plan, the agreements or
instruments governing Options, stock appreciation rights and restricted stock
may contain such provisions as the Committee shall determine for the
adjustment of the number and class of shares subject to each Option, stock
appreciation right and allotment of restricted stock and the exercise prices
and other terms, conditions and restrictions in the event of changes in or
distributions in respect of the outstanding Common Stock of the Company by
reason of stock dividends, stock splits, recapitalizations, mergers,
reorganizations, liquidations, consolidations, combinations or exchanges of
shares and the like, and, in the event of any such change in the outstanding
Common Stock of the Company, the aggregate number and class of shares
available under the Plan shall be appropriately adjusted by the Committee, and
the determination of the Committee shall be conclusive.
13. Special Provisions Regarding Change in Control
(a) The Board of Directors or the Committee may from time to time make
provisions for one or more employees respecting a possible change in control
of the Company, and to the extent that any such provisions made with the
consent of the affected employee may have the effect of accelerating the
vesting of Options, the removal of restrictions on restricted stock or
preventing an immediate termination of benefits, such provisions shall be
controlling over and shall be deemed to be an amendment of any inconsistent
terms of the agreement with the employee respecting such Options or restricted
stock, and termination of employment by any such employee in accordance with
such special provisions upon a change in control shall be deemed to be with
the consent of the Company or Subsidiary then employing such employee, for the
purposes of the Plan.
(b) A "change in control" shall be deemed to have occurred if:
(i) the stockholders of the Company approve a definitive
agreement (A) for the merger or other business combination
of the Company with or into another corporation pursuant to
which the Company will not survive or will survive only as
a subsidiary of another corporation, (B) for the sale or
other disposition of all or substantially all of the assets
of the Company, (C) for the merger of another corporation
into the Company which survives if, as a result of such
merger, less than sixty percent (60%) of the outstanding
voting securities of the Company shall be owned in the
aggregate immediately after such merger by the owners of
the voting shares of the Company outstanding immediately
prior to such merger, or (D) any combination of the
foregoing; or
(ii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting power of the Company's
then outstanding securities; or
(iii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the Company's
shareholders, 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.
14. No Loans to Holders
Neither the Company nor any Subsidiary may directly or indirectly lend
money to any employee for the purpose of assisting such employee to acquire
or carry shares of Common Stock issued upon the exercise of Options granted
under the Plan.
15. Time of Granting, Issue or Award
The effective date of the grant of any Option or stock appreciation
right or award of restricted stock shall be the date specified by the
Committee at the time it grants or awards such Option, stock appreciation
right or restricted stock, provided that such date shall not be prior to the
actual date of such grant or award. The Committee shall promptly notify the
recipient of such grant or award, and a written agreement in the form
specified by the Committee shall promptly be duly executed and delivered by
or on behalf of the Company and the recipient. Each such agreement and any
amendment thereof, shall contain such terms and conditions as the Committee
shall determine. The Committee shall have the right to terminate a grant or
award if the written agreement is not signed by the recipient and returned to
the Company within thirty days after the delivery thereof.
16. Government and Stock Exchange Regulations
The Plan, the granting and exercise of Options and stock appreciation
rights, the award of restricted stock and the obligation of the Company to
deliver shares under the Plan shall be subject to all applicable governmental
laws, rules and regulations, and to such approvals by any governmental
agencies as may then be required, and to all applicable rules and regulations
of the principal stock exchange upon which the Common Stock may then be
listed. The Committee may include in any agreements entered into pursuant to
the Plan provisions regarding the registration or qualification of the sale
or resale of shares acquired pursuant to the Plan.
17. Amendment and Termination
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no Stock Option or stock
appreciation right shall be granted, and no restricted stock shall be awarded
after October 1, 2006; however, grants or awards made on or before that date
may extend beyond that date. The Plan may be terminated, modified or amended
by the Board of Directors at any time in such respects as it shall deem
advisable, provided, however, that the Board of Directors may not permit any
member of the Board of Directors, any officer of Company elected to office by
the Board of Directors, or any officer or other employee of the Company or its
shareholders who are subject to liability under Section 16(b) of the 34 Act
to become eligible for benefits under the Plan. No termination or
modification or amendment of the Plan may, without the consent of the employee
to whom any Option or stock appreciation right has been granted or to whom
restricted stock shall have been awarded, adversely affect the rights of such
employee under such Option, stock appreciation right or award of restricted
stock. An outstanding Option or stock appreciation right or award of
restricted stock may be modified or amended by the Committee in such manner
as it may deem appropriate; provided, however, that no such modification or
amendment may adversely affect the rights of any employee under an outstanding
Option or stock appreciation right, or restricted stock award, without the
prior consent of the employee.
18. Adoption
The effective date of the Plan is the effective date approved by the
Board of Directors upon its original adoption of the Plan, which is October
1, 1996.
<PAGE>
EXHIBIT 10.47
1996 Amendment to
UNC-Colussy Employment Agreement
WHEREAS, pursuant to the terms of Sec.1(b) of the Employment Agreement
between UNC Incorporated (formerly UNC Resources, Inc.) (the "Company") and
Dan A. Colussy dated as of November 1, 1984, as since amended in October
1987, December 1989 and March 1995 and as extended from time to time (the
"Agreement"), Mr. Colussy's current Renewal Employment Period has been
extended to December 31, 1997, subject to such further extensions (if any)
as may hereafter occur in accordance with Sec.1(b); and
WHEREAS, the Board now wishes to update certain provisions in the
Agreement to more fully reflect pre-1996 changes in the Corporate SERP
applicable to the Company's key executives; to refer to Mr. Colussy's
position as Chairman of the Board; to reflect certain Change in Control
protections already provided to other key executives and to otherwise update
such provisions; to clarify or amend certain provisions in the Agreement as
they relate to Mr. Colussy's continued employment by the Company after
attaining his 65th birthday in 1996; and to otherwise update the Agreement;
and
WHEREAS, the Board also wishes to amend the Pension Benefit formula in
Schedule 5A to include Mr. Colussy's annual bonus awards in his pensionable
compensation for purposes of calculating his Pension Benefit under Sec. 5 of
the Agreement;
NOW THEREFORE, the Agreement is hereby amended, with Mr. Colussy's
consent, effective as of July 1, 1996, as follows:
1. Sec.2, Sec. 10(a) and (b), Sec.13(b)(i) and Sec.15(c)(ii) and (iv) are
amended to add the phrase "and Chairman of the Board" after the phrases
"President and Chief Executive Officer of the Company" and "President
and Chief Executive Officer" wherever used therein.
In addition, Sec. 13(b)(ii), Sec. 15(c)(iii) and the second paragraph
of Sec. 17 (as amended in 1987) are amended to add the phrase "and
chairman of the board" after the phrases "president and chief executive
officer" or "chief executive officer" wherever used therein.
2. Sec. 3(a) is amended to reflect the fact that Mr. Colussy's annual base
salary rate (his "Base Compensation"), as previously increased from
time to time prior to 1996, was increased by the Board, effective as
of July 1, 1996, to $650,000, subject to such further increases (if
any) as may hereafter be approved by the Board.
3. Schedule 5A, as amended to date (pursuant to the provision in Sec.
5(a)(i) of the Agreement incorporating by reference any increases in
the benefit formula under the Company's Supplemental Executive
Retirement Plan as restated in 1987 and since amended (the "SERP")),
is hereby amended and restated as set forth in Attachment A hereto to
more fully reflect the elimination in 1987 and 1991, respectively, of
both the prior $150,000 cap on benefits and the prior RISP-related
offset provision, and to revise the definition of "Final Average Base
Compensation" in such Schedule 5A (i) to include prior and future
annual bonus awards (based on the year in which such awards are paid
(rather than when they are earned), as well as prior and future base
salary in the year paid, and (ii) to permit compensation paid after Mr.
Colussy's 65th birthday to be included, in each case, in determining
Mr. Colussy's high-3-year pensionable compensation for purposes of
calculating Mr. Colussy's Pension Benefits under the Agreement.
4. Consistent with the SERP as amended in 1987, the first paragraph of
Sec. 5(a)(iii) is amended to read:
"The vested Pension Benefit payable to Mr. Colussy shall be
paid, commencing on the first day of the month next following
the later of his 65th birthday or the effective date of the
termination of his status as Chief Executive Officer of the
Company (for any reason)."
5. The following new paragraph is inserted in between the second and third
paragraphs of Sec. 5(a)(iii):
"In the event that the payment of Mr. Colussy's Pension Benefit
commences after Mr. Colussy's 65th birthday, the vested Pension
Benefit payable hereunder shall be actuarially adjusted to
reflect such delayed benefit commencement only if and to the
extent so determined by the Board in writing at such time."
6. Based on, and consistent with, the Survivor Death Benefit provisions
in Sec. 2(q) of the SERP as amended and restated in 1987, the first
paragraph of Sec. 5(a)(iv) is amended to read as follows:
"(iv) Death Benefits. In the event of Mr. Colussy's death prior to
the commencement of payment of his Pension Benefit but after
becoming partially or fully vested in accordance with this
Section 5 or Sections 10(c)(iv), 13(a)(iv) or 15(e)(iii), Mr.
Colussy's surviving spouse (if any) at the time of his death
shall be entitled to receive a monthly benefit equal to 100% of
the vested portion of Mr. Colussy's Pension Benefit at the time
of his death for the first 15 years following his death or, if
less, for the rest of her life, with such benefit continuing
after the 15th year, if she is then still living, at 75% of the
full benefit for the rest of her life."
In addition, based on, and consistent with, the provisions of the SERP
as amended and restated in 1987, the second paragraph of Sec. 5(a)(iv)
is amended to replace the phrase "Mr. Colussy's spouse as of November
1, 1984" with the phrase "Mr. Colussy's Surviving Spouse at the time
of his death (defined as the person to whom he is married at the time
of his death)", and to add at the end of such paragraph the language:
"... provided that, if such Surviving Spouse is not the same
person as Mr. Colussy's spouse at the time of Pension Benefit
commencement, any benefit payable after the initial 15-year
period certain period referred to in this paragraph beginning
with Mr. Colussy's benefit commencement date shall be determined
in a manner consistent with the last sentence of Sec. 2(i) of
the SERP as in effect on July 1, 1996."
7. Sec. 5(b) is amended to add at the end of the first paragraph of such
provision the language: "except where application of any individual
provision of the SERP would produce a result more favorable to Mr.
Colussy."
Sec. 5(b) is also amended to clarify the application of Sec. 9 of the
SERP to the Pension Benefit provided under Sec. 5 of the Agreement, by
adding a new paragraph at the end of Sec. 5(b) that reads as follows:
"In the event of a Change in Control of the Company as defined
in Sec. 2(d) of the SERP as amended through July 1, 1996, the
Pension Benefit provided by this Section 5 shall be subject to
and fully covered by the annuitization provisions of Sec. 9 of
the SERP (as amended through July 1, 1996) relating to the
consequences of a Change in Control, provided that Mr. Colussy
shall also have the right, in the event of a Change in Control,
to elect (i) to have a cash surrender feature included as part
of any annuity policy purchased and distributed to him pursuant
to Sec.9 of the SERP, or (ii) to receive an immediate lump sum
cash payment in lieu of all or any portion of any annuity policy
that would otherwise be purchased and distributed under Sec. 9
of the SERP, with such lump sum cash amount being equal to the
actuarial equivalent of the portion of the Pension Benefit
covered by such lump sum amount (but not less than the purchase
price of an annuity policy providing a benefit equal to such
cashed-out benefit and satisfying the insurance company rating
provisions in Sec. 9 of the SERP). Pursuant to Sec. 19 of this
Agreement, any resulting annuity policy and related benefit
payments and any such lump sum cash payment shall be subject to,
and fully covered by, the provisions of Sec. 19 relating to Mr.
Colussy's entitlement to a full tax gross-up on any IRC Sec.
4999 excise tax liabilities incurred as a result of payments
made pursuant to this Agreement or otherwise."
8. Pursuant to the amended life insurance arrangements approved by the
Management Development and Compensation Committee in 1991, the current
$1 million life insurance coverage referred to in Sec. 6 shall continue
to be provided on a whole-life, fully-paid-at-age-71 basis, with the
Company paying an agreed-on portion of the annual premiums due, and Mr.
Colussy paying the balance of premiums due, for each year until Mr.
Colussy attains age 71, subject to such terms and conditions as are set
forth in the separate documents relating to such insurance arrangement,
provided (i) that the Company shall continue to pay an amount equal,
on an after-tax basis to Mr. Colussy, to its share of any premiums due
on such policy in the event that Mr. Colussy's employment by the
Company is terminated due to Disability, retirement or by the Company
without Cause, and (ii) that, in the event of a Change in Control, the
Company shall immediately pay to Mr. Colussy an amount equal, on an
after-tax basis to Mr. Colussy, to the Company's share of the lump-sum
premium required to be paid to provide for an immediately fully paid-up
policy.
9. The end of the last paragraph of Sec. 14(a) is amended to change the
phrase "clauses (i) or (ii) above" to read "clause (i), (ii), (iii) or
(iv) above".
10. Sec. 15(e)(ii), as amended in 1987, is amended to revise the phrase
"including Life Insurance" to read "including (but not limited to)
life, disability and medical/hospitalization insurance" and any
executive perquisites; to add the following language at the end of the
first sentence:
"and provided further that any medical insurance continuation
coverage shall, to the extent practical, be accomplished on a
non-Company-self-insured basis, and provided further that, in
..."
and to delete the word "In" at the start of the second sentence in Sec.
15(e)(ii), to add the rest of such second sentence to the end of such
first sentence, and to add a semi-colon at the end of Sec. 15(e)(ii).
11. Sec.15(e)(iv) is amended to read as follows:
"(iv) to the extent greater than the prorated Incentive Compensation
amount (if any) paid under Sec. 13(a)(ii), a prorated Incentive
Compensation award for the fiscal year in which the termination
occurs equal to:
(A) the number of full or partial months that Mr. Colussy is
employed by the Company in such year prior to such
termination, and
(B) 1/12 of the higher of (x) the Incentive Compensation award
(if any) paid or payable to Mr. Colussy for the fiscal
year of the Company immediately preceding the year in
which the Change in Control occurs, or (y) the average of
the three highest Incentive Compensation awards paid or
payable to him for years preceding such Change in Control
regardless of the fiscal year with regard to which such
awards were paid; and"
and Sec. 13(a) is amended to delete the phrase "to the extent not
otherwise payable under Section 15 below" from the start of Sec.
13(a)(ii), as amended in October 1987.
In addition Sec. 15(e) is also amended to add a new Sec.15(e)(v) to
read as follows:
"(v) an amount equal to 1/12 of the highest Incentive Compensation
award amount referred to Sec.15(e)(iv) above, multiplied by the
number of full months remaining, as of the date of such
termination, in the initial 36-month period commencing on the
effective date of the Change in Control."
12. The "$10 million" amount referred to in clauses (i) and (ii) in the
second paragraph of Sec. 18 is amended to read "$50 million" in both
cases.
13. Sec. 25(a) is amended to change the clause "if Mr. Colussy does not
prevail in any proceeding..." to read "if Mr. Colussy does not prevail
at least in part in any proceeding...".
14. The governing law language in the fifth paragraph of Sec. 26 shall be
amended to refer to "the laws of Delaware without reference to
conflict-of-law principles", rather than Virginia law.
IN WITNESS WHEREOF, the Board of Directors of UNC Incorporated has
caused this Amendment to be executed on behalf of the Company by a duly
authorized director of the Company, and Mr. Colussy has executed this
Amendment, all as of September 27, 1996.
UNC INCORPORATED
by
/s/ RICHARD LANGE
______________________________ ______________________________
[Corporate Secretary] [Name] RICHARD LANGE
[Title] Senior Vice President,
General Counsel & Secretary
/s/ DAN A. COLUSSY
______________________________
DAN A. COLUSSY<PAGE>
Attachment A
Schedule 5A
Pension Benefit Formula
The monthly Pension Benefit payable to Mr. Colussy under Section 5
above (subject to the vesting provisions of Section 5(a)(ii) above) shall be
equal to one-twelfth (1/12th) of sixty percent (60%) of Mr. Colussy's Final
Average Base Compensation.
For this purpose, Mr. Colussy's "Final Average Base Compensation"
("FABC") shall be defined as Mr. Colussy's average annual cash compensation
as an employee of the Company:
(i) including all base salary paid in a given year (including for
this purpose any salary amounts payable in such year but
deferred to a later year) and all regular and special annual
bonus awards (based on the year in such bonus awards are paid
out rather than on when they are earned), but
(ii) excluding stock compensation, long-term incentive compensation
and other non-salary, non-bonus compensation
in each case for those three (3) calendar years (whether or not consecutive)
out of the last ten (10) years ending with the year (after 1995) in which Mr.
Colussy ceases to be the Chief Executive Officer of the Company for any
reason, which produces the highest average annual cash compensation.
Consistent with Sec. 2(j) of the SERP as in effect on July 1, 1996, for
purposes of determining FABC in the event that Mr. Colussy's status as Chief
Executive Officer terminates other than as of the last day of the calendar
year, his salary for such final partial year (based on the salary rate in
effect immediately prior to such termination) shall be annualized before
adding any bonus actually paid in such year.
Actuarial Factors and Assumptions
For purposes of determining actuarial equivalence with respect to the
monthly Pension Benefit payable to Mr. Colussy under Section 5 above, such
actuarial equivalence shall be determined on the basis of such reasonable
actuarial factors and assumptions as are in use under the SERP at the time
that actuarial equivalence needs to be determined.
