As filed with the Securities and Exchange Commission on October 6, 1995
Pre-Effective Amendment No. 1 to Registration Statement No. 33-59279
Registration Statement No. 33-59279
Securities and Exchange Commission
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DynCorp
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
4581
(Primary Standard Industrial Classification Code Number)
36-2408747
(I.R.S. Employer Identification Number)
2000 Edmund Halley Drive, Reston, Virginia 22091-3436
(703) 264-0330
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
David L. Reichardt Daniel L. Goelzer
Senior Vice President & General Counsel Marc R. Paul
DynCorp Baker & McKenzie
2000 Edmund Halley Drive 815 Connecticut Avenue, N.W.
Reston, Virginia 22091-3436 Washington, D.C. 20006-4078
(703) 264-9106 (202) 452-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to rule 415 under the
Securities Act of 1933, check the following box. X
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount Offering Aggregate
Securities to be to be Price Offering Amount of
Registered(1) Registered Per Share(2) Price (2) Registration
Common Stock 11,969,313 $14.90 $178,342,764 $61,497.50
par value $0.10 per shares
share
(1) This Registration Statement also relates to an indeterminate
number of interests in the DynCorp Savings and Retirement Plan, the
DynCorp Employee Stock Purchase Plan, the DynCorp 1995 Non-Qualified
Stock Option Plan, the DynCorp Executive Incentive Plan, and the
DynCorp Employee Stock Ownership Plan pursuant to which certain of the
shares of Common Stock offered pursuant to the Prospectus included as
part of this Registration Statement may be issued and delivered or
sold.
(2) Estimated solely for purposes of determining the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
this Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
DynCorp
Cross Reference Sheet
Pursuant to Rule 404(a) of Regulation C and Item 501(b) of Regulation S-K
Form S-1
Item Number and Caption Caption or Location
1. Forepart of Registration Statement Facing Page of Registration Statement;
and Outside Front Cover Page of Outside Front Cover Page of Prospectus
Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Factors The Company; Risk Factors; Securities
and Ratio of Earnings to Fixed Offered by this Prospectus; Exhibit 12
Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus;
Market Information -- Determination of
Offering Price
6. Dilution Dilution
7. Selling Security Holders Securities Offered by this Prospectus
8. Plan of Distribution Outside Front Cover Page of Prospectus;
Employee Benefit Plans; Market
Information
9. Description of the Securities Securities Offered by this Prospectus;
to be Registered Description of Capital Stock
10.Interests of Named Experts and Validity of Common Stock; Experts
Counsel
11.Information with Respect to the The Company; Risk Factors; Use of
Registrant Proceeds; Dividend Policy; Selected
Financial Data; Business; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Employee Benefit Plans; Management;
Security Ownership of Certain
Beneficial Owners and Management;
Certain Relationships and Related
Transactions; Description of
Capital Stock; Financial Statements
12.Disclosure of Commission Position Commission Position on Indemnification
on Indemnification for Securities
Act Liabilities
PROSPECTUS
DynCorp
11,969,313 Shares of DynCorp Common Stock
(Par Value $0.10 per Share)
Of the 11,969,313 shares of DynCorp (the "Company") common stock,
par value $0.10 per share (the "Common Stock"), being offered hereby
(the "Offering"), 4,539,839 shares may be offered and sold by the
Company, 5,330,569 shares which represent all of the shares owned by
certain officers, directors, and affiliates of the Company as of the
date of this Prospectus may be offered and sold by such officers,
directors, and affiliates, and 2,098,905 shares may be offered and sold
by other employees and other stockholders of the Company. See
"Securities Offered by this Prospectus." The Company will not receive
any portion of the net proceeds from the sale of shares by officers,
directors, affiliates or other individual employees or stockholders.
The 4,539,839 shares of Common Stock offered by the Company (of
which approximately 500,000 are currently treasury shares which were
acquired by the Company pursuant to the Stockholders Agreement and
through the Employee Stock Ownership Plan ("ESOP") between 1989 and
1995, and the remainder of such shares are heretofore unissued shares)
are expected to be offered as follows: (i) up to 850,000 shares may be
issued and delivered by the Company to a trustee for the benefit of
employees under the DynCorp Savings and Retirement Plan; (ii) up to
100,000 shares may be issued and delivered by the Company to employees
under the DynCorp Employee Stock Purchase Plan; (iii) up to 1,200,000
shares may be issued upon the exercise of options granted and available
to be granted to employees under the DynCorp 1995 Non-Qualified Stock
Option Plan; (iv) up to 300,000 shares may be issued and delivered to
employees under the DynCorp Executive Incentive Plan; and (v) up to
2,089,839 shares may be offered and sold by the Company to present and
future employees and directors on a limited trading market (the "Internal
Market") established by the Company's wholly wned subsidiary, DynEx, Inc.
The actual number of shares offered and sold by the Company under each
category may be less than the indicated number, but will not exceed the
maximum for such category. See "Securities Offered by this Prospectus"
and "Employee Benefit Plans."
The Internal Market is established and managed by DynEx, Inc., in order to
provide employees, directors and stockholders of the Company the
opportunity to buy and sell shares of Common Stock. The Internal
Market generally permits eligible stockholders to buy and sell shares
of Common Stock on four predetermined days each year (each a "Trade
Date"). The offers and sales on the Internal Market by officers,
directors, employees, affiliates and other stockholders of the Company
on the Internal Market may be attributed to the Company. The Company
may buy or sell shares of Common Stock on the Internal Market, but will
do so only to address imbalances between the number of shares offered
for sale and bid for purchase on any particular Trade Date. The
Company will not be both a buyer and a seller on the Internal Market on
the same Trade Date. The purchase and sale of shares in the Internal Market
are carried out by Buck Investment Services, Inc. ("Buck"), a registered
broker-dealer, upon instructions from the respective buyers and sellers.
All stockholders (other than the Company and its retirement plans) will
pay a commission to Buck equal to 2% of the proceeds from the sale of any
shares of Common Stock sold by them on the Internal Market. See "Market
Information -- The Internal Market."
There is no public market for the Common Stock, and it is not
currently anticipated that such a market will develop. To the extent
that the Internal Market does not provide sufficient liquidity for a
shareholder, and the shareholder is otherwise unable to locate a buyer
for his or her shares of Common Stock, the shareholder could
effectively be subject to a total loss of investment. See "Market
Information -- The Internal Market."
All of the shares of Common Stock offered hereby will be subject to
certain restrictions (including restrictions on their transferability)
set forth in the Company's By-Laws (the "By-Laws") and may be subject
to other contingencies. See "Description of Capital Stock --
Restrictions on Common Stock."
For information concerning certain factors that should be considered
by prospective investors, see "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The purchase price of the shares of Common Stock offered hereby,
other than those shares issuable upon exercise of options or awarded
under the DynCorp Executive Incentive Plan, will be their fair market
value determined pursuant to the formula and valuation process
described below (the "Formula Price"). The Formula Price per share of
Common Stock is the product of seven times the operating cash flow
("CF") where operating cash flow is represented by earnings before
interest, taxes, depreciation and amortization ("EBITDA") of the
Company for the four fiscal quarters immediately preceding the date on
which a price revision is to occur and the market factor (the "Market
Factor" denoted "MF"), plus the non-operating assets at disposition value
(net of disposition costs)("NOA"), minus the sum of interest bearing
debt adjusted to market and other outstanding securities senior to
Common Stock ("IBD") divided by the number of shares of Common
Stock outstanding, at the date on which a price revision is made,
on a fully diluted basis assuming conversion of all
Class C Preferred Stock and exercise of all outstanding options and
warrants ("ESO"). The Market Factor is
a numerical factor which yields a fair market value for the Common
Stock by reflecting existing securities market conditions relevant to
the valuation of such stock. The Formula Price of the Common Stock,
expressed as an equation, is as follows:
Formula Price = [(CF x 7)MF + NOA - IBD] / ESO
The Formula Price including the Market Factor is reviewed four times
each year, generally in conjunction with Board of Directors meetings,
which are generally scheduled for February, May, August and November.
At such meetings, the Market Factor is reviewed in conjunction with an
appraisal which is prepared by an independent appraisal firm for the
committee administering the Company's qualified retirement plans (the
"Committee") and which is relied upon by the Committee and the Board of
Directors. The Board of Directors believes that the valuation process
and Formula Price result in a fair market value for the Common Stock
within a broad range of financial criteria. See "Market Information --
Determination of Offering Price" and "Market Information -- Price Range
of Common Stock."
On August 15,1995, the Formula Price as determined by the Company's
Board of Directors was $14.90 per share.
The date of this Prospectus is October 6,1995
THE COMPANY
DynCorp (the "Company") provides diversified management, technical,
and professional services to government and commercial customers
throughout the United States and internationally. The Company provides
primarily information technology, operations and maintenance, and
research and development support services under contracts with U.S.
Government agencies, foreign government agencies and commercial
customers. The Company's U.S. Government customers include the
Department of Defense, the National Aeronautics and Space
Administration, the Department of State, the Department of Energy, the
Environmental Protection Agency, the Centers for Disease Control, the
National Institutes of Health, the U.S. Postal Service, and other U.S.
Government agencies.
During the second quarter of 1995, the Company's Board of Directors
determined that it would be in the Company's best interest to
discontinue its commercial aviation business operations (the
"Commercial Aviation Business"), which comprised approximately 20% of
the Company's revenues in fiscal year 1994. This decision was made as
a result of several factors including: (i) the Company's need for cash
to reduce its debt, (ii) the capital intensive nature of the Commercial
Aviation Business, (iii) the continual losses of the unit of the
Commercial Aviation Business responsible for aircraft maintenance and
repair operations (the "Aircraft Maintenance Unit"), and (iv) a high
level of interest from potential buyers. On June 30, 1995, the Company
sold the Aircraft Maintenance Unit in a $12.5 million (subject to
adjustment) cash transaction with Sabreliner Corporation. On August
31, 1995, the Company divested that portion of the Commercial Aviation
Business comprising its aviation ground handling business, including
DynAir Services, Inc. and its affiliates (the "Ground Handling Unit"),
in a $122 million (subject to adjustment) cash transaction with ALPHA
Airports Group Plc. The net proceeds from the two aforementioned
transactions will be used to retire substantially all of the
Company's 16% Pay-In-Kind debentures and to satisfy existing equipment
financing obligations of the Ground Handling Unit. See "Business -- Commercial
Aviation" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's principal executive offices are located at 2000 Edmund
Halley Drive, Reston, Virginia 22091-3436. The Company's telephone
number is (703) 264-0330. As used in this Prospectus, all references
to the Company include, unless the context indicates otherwise, DynCorp
and its predecessor and subsidiary corporations.
RISK FACTORS
Prior to purchasing the Common Stock offered hereby, purchasers
should carefully consider all of the information contained in this
Prospectus and in particular should carefully consider the following
factors:
Past and Prospective Net Operating Losses
The Company reported net losses for each of the past five fiscal
years. The Company reported net losses for the years ended December
31, 1994 and 1993 of $12.8 million and $13.4 million respectively, and
for the years ended December 31, 1992, 1991 and 1990 of $24.3 million,
$17.6 million and $18.8 million, respectively. Net losses for the six
months ended June 29, 1995 and June 30, 1994 were $875,000 and $2.5
million respectively. In the future, there can be no guarantee that
profitable operations will be achieved, or, if achieved, sustained.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Highly Leveraged Financial Position
As a result of the management buyout in 1988 and the recent
acquisition of several businesses, the Company is highly leveraged. As
of June 29, 1995, the Company had a long-term indebtedness of $192.8
million, stockholders' equity of $22.3 million, and a long-term debt-
to-total capitalization ratio of 8:6:1. The Company's continuing debt
service payments may have materially adverse effects on its cashflow.
In addition, the Company's debt levels may limit its future ability to
borrow funds, including borrowing for growth opportunities or to
respond to competitive conditions, or if additional borrowings can be
made, they may not be on terms favorable to the Company. The Company's
ability to meet its future debt service and working capital
requirements is dependent upon increased future earnings and cash flow
from operations, the expansion of an accounts receivable facility
financing, continuation of ESOP stock purchases in lieu of cash
retirement contributions and the reduction of its debt expense. If the
Company is unable to repay its debt as it becomes due, the purchasers
of Common Stock could lose some or all of their investment. See "Risk
Factors -- Inability to Maintain Certain Ratios Under the Contract
Receivable Collateralized Notes" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Dependence on and Risks Inherent in U.S. Government Contracts
The Company derived 97% of its revenues in 1994 from contracts with
the U.S. Government ("Government Contracts"); contracts with the
Department of Defense ("DoD") represented 60% of the Company's 1994
revenues. Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of additional
Government Contracts is contingent upon, among other things, the
availability of adequate funding for various U.S. Government agencies.
The current world political situation and domestic pressure to reduce
the federal budget deficit have reduced, and may continue to reduce,
military and other spending by the U.S. Government.
Typically, a Government Contract has an initial term of one year
combined with two, three, or four one-year renewal periods, exercisable
at the discretion of the Government. The Government is not obligated
to exercise its option to renew a Government Contract. At the time of
completion of a Government Contract, the contract in its entirety is
"recompeted" against all interested third-party providers. Federal law
permits the Government to terminate a contract at any time if such
termination is deemed to be in the Government's best interest. The
Government's failure to renew or termination of any significant portion
of the Company's Government Contracts could adversely affect the
Company's business and prospects. See "Risk Factors -- Termination of
Contracts/Increased Demand on Cash Flow" and "Business -- Government
Contracting."
Termination of Contracts/Increased Demand on Cash Flow
Upon termination of any of the Company's contracts, including
Government Contracts, the Company would no longer accrue a stream of
accounts receivable thereunder for sale to its wholly owned financing
subsidiary, Dyn Funding Corporation ("DFC"), which may result in
demands on the Company's available cash as the Company endeavors to
replace the terminated contracts. The ability of the Company to
maintain certain ratios under the Contract Receivable Collateralized Notes
depends in part on its ability to keep in force
existing contracts and/or acquire new contracts such that sufficient
eligible receivables are available for sale by the Company to DFC. See
"Risk Factors -- Inability to Maintain Certain Ratios Under the
Contract Receivable Collateralized Notes" and "Business -- Factoring of
Receivables."
Inability to Maintain Certain Ratios Under the Contract Receivable
Collateralized Notes
In 1992, the Company, DFC and various lending institutions entered
into a Note Purchase Agreement whereby DFC purchased certain accounts
receivable from the Company and issued to the lending institutions
$100,000,000 of 5-year, 8.54% Contract Receivable Collateralized Notes
(the "Notes") which are secured by certain of the Company's accounts
receivable. By the terms of the Notes, in the event that the interest
coverage ratio (as defined in the Notes) falls below certain prescribed
levels and the Company's principal debt exceeds certain amounts, DFC
may be prohibited from purchasing additional receivables from the
Company, thereby reducing the Company's access to additional cash
resources. Further, in the event that the collateral value ratio (as
defined in the Notes) falls below certain levels required in the Notes
due to a decrease in the Company's contract revenue and the Company
fails to provide sufficient receivables in order to increase the
collateral value ratio, the Company may be forced to redeem part or all
of the Notes which would result in additional demands on the Company's
cash resources. See "Risk Factors -- Termination of
Contracts/Increased Demand on Cash Flow," "Risk Factors -- Potential
for Suspension and Debarment" and "Business -- Factoring of
Receivables."
Contract Profit Exposure Based on Type of Contract
The Company's Government Contract services are provided through
three types of contracts -- fixed-price, time-and-materials, and cost-
reimbursement. The Company assumes financial risk on fixed-price
contracts (approximately 12% of the Company's total Government
Contracts revenue in 1994) and time-and-material contracts
(approximately 16% of its total Government Contracts revenue in 1994),
because the Company assumes the risk of performing those contracts at
the stipulated prices or negotiated hourly rates. The failure to
accurately estimate ultimate costs or to control costs during
performance of the work could result in losses or smaller than
anticipated profits. The balance of the Company's Government Contracts
revenue in 1994 (approximately 72%) was derived from cost-reimbursement
contracts. To the extent that the actual costs incurred in performing
a cost-reimbursement contract are within the contract ceiling and
allowable under the terms of the contract and applicable regulations,
the Company is entitled to reimbursement of its costs plus a stipulated
profit. However, if the Company's costs exceed the ceiling or are not
allowable under the terms of the contract or applicable regulations,
any excess would be subject to adjustment and repayment upon audit by
Government agencies. See "Risk Factors -- Audits by U.S. Government
Agencies" and "Business -- Government Contracting."
Audits by U.S. Government Agencies
Government Contract payments received by the Company for allowable
direct and indirect costs are subject to adjustment and repayment after
audit by Government auditors if the payments exceed allowable costs as
defined in such Government Contracts. Audits have been completed on
the Company's incurred contract costs through 1986 and are continuing
for subsequent periods. The Company has included an allowance in its
financial statements for excess billings and contract losses which it
believes is adequate based on its interpretation of contracting
regulations and past experience. There can be no assurance, however,
that this allowance will be adequate. See "Business -- Government
Contracting."
Potential for Suspension and Debarment
As a U.S. Government contractor, the Company is subject to federal
regulations under which its right to receive future awards of new
Government Contracts, or extensions of existing Government Contracts,
may be unilaterally suspended or barred for periods of up to three
years, should the Company be convicted of a crime or be indicted based
on allegations of a violation of certain specific federal statutes or
other activities. Suspensions, even if temporary, can result in the
loss of valuable contract awards for which the Company would otherwise
be eligible. While suspension and debarment actions may be limited to
that division or subsidiary of a company which is involved in the
alleged improper activity which gives rise to the suspension or
debarment actions, Government agencies have authority to impose
debarment and suspension on affiliated entities which in no way were
involved in the alleged improper activity. The initiation of
suspension or debarment hearings against the Company or any of its
affiliated entities could have a material adverse impact upon the
Company's business and prospects. See "Risk Factors -- Termination of
Contracts/Increased Demand on Cash Flow," "Risk Factors -- Inability to
Maintain Certain Ratios Under the Contract Receivable Collateralized
Notes" and "Business -- Government Contracting."
Potential Environmental Liability
The Company's business activities occasionally result in the
generation of non-nuclear hazardous wastes, the hauling and disposal of
which are governed by federal, state, and local environmental
compliance statutes and regulations. In addition, certain of the
Company's businesses operate petroleum storage and other facilities
that are subject to similar regulations. Violations of these laws can
result in significant fines and penalties for which insurance is not
reasonably available. Moreover, because many of the Company's
operations involve the management of storage and other facilities owned
by others, primarily governmental entities, the Company is
not always in a position to control the compliance of the facilities it
operates with environmental and other laws. See "Business --
Environmental Matters."
Dilution
Purchasers of Common Stock in the Offering will realize immediate
and substantial dilution in that the net tangible book value per share
of the Common Stock after the offering will be substantially less than
the offering price. See "Dilution."
Risks Inherent in International Operations
The Company from time to time conducts some operations outside of
the United States. Such international operations entail additional
business risks and complexities such as foreign currency exchange
fluctuations, different taxation methods, restrictions on financial and
business practices and political instability. Each of these factors
could have an adverse impact on operating results. There can be no
assurance that the Company can achieve or maintain success in these
markets. See "Business -- International Operations."
Competition
The markets which the Company services are highly competitive. Some
of the Company's competitors are large, diversified firms with
substantially greater financial resources and larger technical staffs
than the Company has available to it. Government agencies also compete
with and are potential competitors of the Company because they can
utilize their internal resources to perform certain types of services
that might otherwise be performed by the Company. See "Business --
Competition."
Employee Stock Ownership Plan
In September 1988, the Company established its Employee Stock
Ownership Plan (the "ESOP") as a principal retirement vehicle for the
Company's employees. As of the date of this Prospectus, the ESOP owns
approximately 72% of the outstanding Common Stock, and approximately
46% of the Common Stock on a fully diluted basis assuming conversion of
all Class C Preferred Stock and exercise of all outstanding options and
warrants. Under the terms of the ESOP, each participant has the right
to instruct the ESOP trustee as to how to vote his or her shares. The
ESOP trustee will vote all unallocated shares (shares for which no
voting instructions have been received) in the same proportion as the
allocated shares. Collectively, the ESOP participants maintain
substantial shareholdings and may influence Company policy. See "Risk
Factors -- Shareholders Agreement" and "Employee Benefit Plans --
Employee Stock Ownership Plan."
Absence of a Public Market
There is no present public market for the Common Stock, and it is
not currently anticipated that such a market will develop in the
future. There can be no assurance that the purchasers of Common Stock
in this Offering will be able to resell their shares through the
Internal Market should they decide to do so. To the extent that the
Internal Market does not provide sufficient liquidity for a
shareholder, and the shareholder is otherwise unable to locate a buyer
for his or her shares, the shareholder could effectively be subject to
a total loss of investment. Accordingly, the purchase of Common Stock
is suitable only for persons who have no need for liquidity in this
investment and who can afford a total loss of investment. See "Market
Information -- The Internal Market."
Company's Right of First Refusal
All shares of Common Stock offered hereby will be subject to the
Company's right of first refusal to purchase such shares before they
may be offered to third parties (other than on the Internal Market).
See " Description of Capital Stock -- Restrictions on Common Stock."
Offering Price Determined by Formula
The offering price is, and subsequent offering prices will be,
determined by means of a formula as set forth on the cover page of this
Prospectus. The formula takes into consideration the Company's
financial performance, the market valuation of comparable companies and
the limited liquidity of the Common Stock, as determined by the Board
of Directors based on an independent appraisal. See "Market
Information -- Determination of Offering Price."
Interim Trading Rule for Internal Market
The Company has adopted an interim rule that will apply to trading
on the Internal Market on the first two trade dates. Under the interim
rule, employee stockholders who were parties to the DynCorp
Stockholders Agreement and who retired from the Company during
calendar year 1994 will have priority on each of the first two trade
dates to sell all or a portion of their shares of Common Stock on the
Internal Market before other stockholders may sell any of their shares.
The result may be that these other shareholders will be prohibited from
selling some or all of their shares on the first two trade dates. See
"Market Information -- The Internal Market."
Class C Preferred Stock Veto Rights
The Company has outstanding 123,711 shares of Class C Preferred
Stock, par value $0.10 per share (the "Class C Preferred"), all of
which is owned by Capricorn Investors, LP ("Capricorn"), a limited
partnership in which a company controlled by H.S. Winokur, Jr., the
Company's Chairman, serves as general partner. The holder of Class C
Preferred shares has the right to vote as a separate class on certain
major corporate actions, such as corporate borrowings, issuance of
stock, payment of dividends and the repurchase of more than $250,000
per annum fair market value of shares of Common Stock held by employees
of the Company (other than shares of Common Stock distributed to
retiring or terminated employees by the ESOP). These voting rights
give the holder of Class C Preferred the ability to effectively control
the Company with respect to certain major corporate decisions.
Consequently, actions that might otherwise be approved by a majority of
the holders of Common Stock could be vetoed by the holder of Class C
Preferred. See "Description of Capital Stock -- Class C Preferred
Stock."
Corporate Control Implications of Stockholders Agreement
Certain of the management group of the Company, Capricorn and other outside
investors who hold shares of Common Stock are parties to a Stockholders
Agreement originally dated March 11, 1988 and restated March 11, 1994
(the "Stockholders Agreement"). Under the terms of the Stockholders
Agreement, stockholders who own approximately 54% of the fully diluted
outstanding shares of Common Stock have agreed, among other things, to
vote for the election of a Board of Directors consisting of four
management group nominees, four Capricorn nominees and a joint nominee
who would be elected if needed to break a tie vote. Since the
management group stockholders, directly and through ESOP shareholdings,
and Capricorn represent a majority of the shares of Common Stock
necessary to elect the Company's Board of Directors on a fully diluted
basis, it is unlikely that other stockholders acting in concert or
otherwise will be able to change the composition of the Board of
Directors. Unless extended, the Stockholder's Agreement expires on
March 10, 1999. See "Description of Capital Stock -- Stockholders
Agreement."
Obligations to Repurchase Shares
In the event that an employee participating in the ESOP is
terminated, retires, dies or becomes disabled while employed by the
Company, the Company is obligated to repurchase shares of
Common Stock distributed to such former employee under the ESOP, until such
time as the Common Stock becomes "Readily Tradable Stock," as defined
in the ESOP plan documents. In the event the
fair market value of a share is less than $27.00, the Company is committed to
pay through December 31, 1996, up to an aggregate of $16,000,000, the
difference ("Premium") between the fair market value and $27.00 per share. As
of February 1, 1995, the Company had paid a total of $4.1 million of the
$16,000,000 to such former employees. To the
extent that the Company repurchases shares as described above, its
ability to purchase shares on the Internal Market will be adversely
affected. See "Employee Benefit Plans -- Employee Stock Ownership
Plan."
Anti-Takeover Effects
The combined effects of management's and Capricorn's collective
ownership of a majority of the outstanding shares of Common Stock, the
voting rights of the Class C Preferred, the voting provisions of the
Stockholders Agreement, and the Company's right of first refusal may
discourage, delay, or prevent attempts to acquire control of the
Company that are not negotiated with the Company's Board of Directors.
These may, individually or collectively, have the effect of
discouraging takeover attempts that some stockholders might deem to be
in their best interests, including tender offers in which stockholders
might receive a premium for their shares over the Formula Price
available on the Internal Market, as well as making it more difficult
for individual stockholders or a group of stockholders to elect
directors. See "Description of Capital Stock."
SECURITIES OFFERED BY THIS PROSPECTUS
Common Stock Offered by the Company
The shares of Common Stock offered by the Company may be offered
through the Internal Market and directly or contingently to present and
future employees and directors of the Company and to trustees or agents
for the benefit of employees under the Company's employee benefit plans
described below.
Direct and Contingent Sales to Employees and Directors
The Company believes that its success is dependent upon the
abilities of its employees and directors. Therefore, since 1988, the
Company has pursued a policy of offering such persons an opportunity to
make an equity investment in the Company as an inducement to such
persons to become or remain employed by or affiliated with the Company.
At the discretion of the Board of Directors or the Compensation
Committee of the Board of Directors (the "Compensation Committee"),
employees and directors may be offered an opportunity to purchase a
specified number of shares of Common Stock offered hereby. All such
direct and contingent sales to employees and directors will be effected
through the Internal Market or the employee benefit plans described
below, and may be attributable to the Company. Pursuant to the By-
Laws, all shares of Common Stock offered by the Company in the future,
directly or contingently, to its employees or directors are subject to
a right of first refusal. See "Description of Capital Stock --
Restrictions on Common Stock."
Equity Target Ownership Policy
The Company has adopted an Equity Target Ownership Policy (the
"ETOP") under which certain highly paid employees of the Company are
encouraged over a period of seven years to invest up to specified
multiples of their annual salaries in shares of the Common Stock.
Under the ETOP, corporate officers, presidents and vice presidents of
strategic business units, and other participants in the Executive
Incentive Plan with salaries greater than $99,999 but less than
$200,000 are encouraged to invest at least 1.5 times their salary in
shares of Common Stock; those with salaries greater than $199,999 but
less than $300,000 are encouraged to invest at least two times their
salary in shares of Common Stock; and those with salaries greater than
$299,999 are encouraged to invest at least three times their salary in
shares of Common Stock. Investments under any of the employee benefit
plans described below, as well as any other holdings, including
securities held prior to adoption of the ETOP, will qualify for
purposes of the ETOP.
Savings and Retirement Plan
The Company maintains a Savings and Retirement Plan (the "SARP"),
which is intended to be qualified under Sections 401(a) and (k) of the
Internal Revenue Code of 1986, as amended (the "Code"). Generally, all
employees are eligible to participate, except for employees of
divisions or other units designated as ineligible. The SARP permits a
participant to elect to defer, for federal income tax purposes, a
portion of his or her annual compensation and to have such amount
contributed directly by the Company to the deferred fund of the SARP
for his or her benefit. The Company may, but is not obligated to, make
a matching contribution to the SARP's deferred fund for the benefit of
those participants who have elected to defer a portion of their
compensation for investment in shares of Common Stock. The amount of
the matching contribution will be determined periodically by the
Company's Board of Directors based on the aggregate amounts deferred by
participants. The SARP currently provides for a Company matching
contribution, in cash or Common Stock, of 100% of the first one percent
of compensation invested in a Company Common Stock fund by a
participant and 25% of the next four percent of compensation so
invested. The Company currently intends to make such matching
contributions in the form of shares of Common Stock. The Company may
also make additional contributions to the SARP deferred fund in order
to comply with Section 401(k) of the Code. Each participant will be
vested at all times in 100% of his or her contributions to the deferred
fund accounts. Company contributions will vest 50% after two years of
service and 100% after three years of service. Benefits are payable to
a participant within certain specified time periods following such
participant s retirement, permanent disability, death or other
termination of employment. Pursuant to the By-Laws, shares of Common
Stock distributed to a participant under the SARP will be subject to
the Company's right of first refusal. See "Employee Benefit Plans --
Savings and Retirement Plan" and "Description of Capital Stock --
Restrictions on Common Stock."
Employee Stock Purchase Plan
The Company has, subject to stockholder approval to be solicited in
October 1995, established the Employee Stock Purchase Plan (the "ESPP")
for the benefit of substantially all its employees. The ESPP provides
for the purchase of Common Stock through payroll deductions by
participating employees. The ESPP is intended to qualify under Section
423(b) of the Code. Participants contribute 95% of the purchase price
of the Common Stock, and the Company contributes the balance in the
form of cash or shares of Common Stock. Such purchases will be made
through the Internal Market. All shares purchased pursuant to the ESPP
will be credited to the participant's account promptly following the
Internal Market trade day on which they were purchased and, pursuant to
the By-Laws, will be subject to the Company's right of first refusal.
See "Employee Benefit Plans -- Employee Stock Purchase Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
1995 Stock Option Plan
Pursuant to the Company's 1995 Non-Qualified Stock Option Plan
("1995 Option Plan"), the Company may grant stock options to certain of
its employees and directors. Stock options under the 1995 Option Plan
may be granted contingent upon an employee obtaining a certain level of
contract awards for the Company within a specified period or upon the
satisfaction of other performance criteria and, in many cases, a
requirement that such individual also purchase a specified number of
shares of Common Stock on the Internal Market at the Formula Price.
Pursuant to the By-Laws, all shares of Common Stock issued upon the
exercise of such stock options will be subject to the Company s right
of first refusal. See "Employee Benefit Plans -- 1995 Stock Option
Plan" and "Description of Capital Stock -- Restrictions on Common
Stock."
Executive Incentive Plan
The Company maintains an Executive Incentive Plan (the "EIP"), which
provides for the payment of annual bonuses to certain officers and
management/executive employees. The Company intends to amend the
Incentive Plan, effective January 1, 1996, to provide for payment of up
to 20% of the bonuses in the form of shares of Common Stock, valued at
the then current Formula Price. Awards of shares of Common Stock will
be distributed during each fiscal year. Pursuant to the By-Laws, all
shares of Common Stock awarded pursuant to the EIP will be subject to
the Company's right of first refusal. See "Employee Benefit Plans --
Executive Incentive Plan" and "Description of Capital Stock --
Restrictions on Common Stock."
Employee Stock Ownership Plan
The Company maintains an Employee Stock Ownership Plan ("ESOP"),
which is a stock bonus plan intended to be qualified under Section
401(a) of the Code. Generally, all employees are eligible to
participate, except employees of groups or units designated as
ineligible. Interests of participants in the ESOP vest in accordance
with the vesting schedule and other vesting rules set forth in the ESOP
plan document. Benefits are allocated to a participant in shares of
Common Stock and are distributable within certain specified time
periods following such participant's retirement, permanent disability,
death or other termination of employment. Upon distribution, the
participant is entitled to a statutory "put" right, whereby the Company
is obligated to purchase the shares at fair market value as determined
by the ESOP's financial advisor. In the event the participant declines
to exercise the put right, such shares of Common Stock may be sold on
the Internal Market subject to the restrictions and limitations of the
Internal Market. See "Market Information -- The Internal Market." The
amount of the Company's annual contribution to the ESOP is determined
by, and within the discretion of, the Board of Directors and may be in
the form of cash, Common Stock or other qualifying securities.
Pursuant to the ESOP plan document and the By-Laws, any shares of
Common Stock distributed out of the ESOP will be subject to a right of
first refusal on behalf of the Company. See "Employee Benefit Plans -
- - Employee Stock Ownership Plan" and "Description of Capital Stock --
Restrictions on Common Stock."
Common Stock Offered by Officers, Directors, and Affiliates
Certain officers, directors, and affiliates of the Company may, from
time to time, sell up to an aggregate of 5,330,569 shares of the Common
Stock being offered hereby on the Internal Market or otherwise. While
the Company has registered all shares owned by its officers, directors
and affiliates as of the date of this Prospectus, the Company does not
know whether some, none, or all of such shares will be so offered or
sold. However, the Company believes that the ETOP and the initial
priority of access to the Internal Market will act as disincentives to
the officers, in the case of the ETOP, and to the officers, directors
and affiliates, in the case of market access, to sell their Common
Stock during 1995 and maybe in later years as well. The officers,
directors, and affiliates will not be treated more favorably than other
stockholders participating on the Internal Market and, like all other
stockholders selling shares on the Internal Market (other than the
Company and its retirement plans), will pay Buck, the Company's
designated broker-dealer, a commission equal to two percent of the
proceeds from their sales. See "Market Information -- The Internal
Market."
The following table sets forth information as of August 21, 1995,
with respect to the number of shares of Common Stock owned directly or
indirectly by each of the officers, directors, and affiliates
(including shares issuable upon the exercise of outstanding options and
warrants, shares issuable upon conversion of outstanding Class C
Preferred and exercise of related warrants, shares issuable as a result of
vesting and expiration of deferrals or otherwise under the former Restricted
Stock Plan, and shares allocated to such person's accounts under the
Company s employee benefit plans), and their respective percentages of
ownership of equity on a fully diluted basis. The table does not give
effect to the sale of any shares of Common Stock being offered by the
Company in this Prospectus. Each of the persons (other than Capricorn,
which is an affiliate by reason of its ownership of more than 10% of
the Company's equity) is now and has, during some portion of the past
three years, been a director and/or officer of the Company. Except as
indicated below, all the shares are owned of record or beneficially.
The table also reflects the relative ownership of such persons in the
event of their individual sales of all the shares owned by them in this
Offering.
<TABLE>
<CAPTION>
Percent
of
Ownership
of Fully Percent
Diluted Ownership
Number of Equity Number After
Shares Before of Sale of
Beneficially Offering Shares All
Name and Title of Beneficial Owner Owned (1) (1) Offered Shares *
<C> <S> <S> <S> <S>
D.R. Bannister, President & Director 379,126 2.76% 379,126 *
T.E. Blanchard, Senior Vice President & Director 219,497 1.60% 219,497 *
R.E. Dougherty, Director 2,331 * 2,331 *
J.H. Duggan, Executive Vice President & Director 206,273 1.50% 206,273 *
P.V. Lombardi, Executive Vice President & Director 20,331 * 20,331 *
D.C. Mecum II, Director 2,331 * 2,331 *
D.L. Reichardt, Senior Vice President & Director 99,748 * 99,748 *
Capricorn Investors LP/H.S. Winokur, Jr., 4,117,127 30.01% 4,117,127 *
Chairman of the Board and Director
G.A. Dunn, Vice President & Controller 102,194 * 102,194 *
M.C. Filteau, Vice President 9,990 * 9,990 *
H.M. Hougen, Vice President & Secretary 27,324 * 27,324 *
R.A. Hutchinson, Treasurer 24,276 * 24,276 *
M.J. Hyman, Vice President 26,742 * 26,742 *
M.J. Mandell, Vice President 4,802 * 4,802 *
C.H. McNair, Jr., Vice President 18,051 * 18,051 *
R. Morrel, Vice President 20,245 * 20,245 *
R.J. Stephenson, Vice President 7,211 * 7,211 *
J.L. Sullivan, Vice President 6,233 * 6,233 *
H.J.M. Williams, Vice President 6,049 * 6,049 *
R.G. Wilson, Vice President & General Auditor 30,688 * 30,688 *
Total 5,330,569 38.8% 5,330,569 *
* indicates less than one percent
<FN>
(1) Includes shares issuable upon the exercise of
outstanding options and warrants, shares issuable upon conversion of
outstanding Class C Preferred and exercise of related warrants, shares
issuable as a result of vesting and expiration of deferrals or
otherwise under the former Restricted Stock Plan, and shares allocated
to such person's accounts under the Company's employee benefit plans
</TABLE>
MARKET INFORMATION
The Internal Market
In 1988, following a decision by the Company's Board of Directors to
consider offers for the purchase of the Company, the Company became
privately owned through a leveraged buy-out (the "LBO") involving its
management group. Public trading of the Common Stock ceased, and the
new management installed the ESOP as the Company's principal retirement
benefit. Approximately 31,000 former and present employees are now
beneficial owners of the Common Stock through the ESOP, representing
approximately 72% of the shares of Common Stock outstanding on the date
of this Prospectus and approximately 46% of the Company's Common Stock
on a fully diluted basis.
Approximately 280 managers and other employees have also made direct
investments in the Company since the LBO. As a consequence of these
investments and the subsequent issuance of shares pursuant to the
Company s former Restricted Stock Plan, 2,000,917 shares of Common
Stock, and 189,717 warrants to purchase Common Stock at an exercise
price of $0.25 per share (the "Warrants"), are held by members of
management. In addition, the Company accepted a subscription for
350,313 shares of Common Stock and 2,338,934 Warrants from certain
other private and institutional investors and Capricorn, a limited
partnership which is controlled by the Company's Chairman, Herbert S.
Winokur, Jr. Capricorn also purchased 123,711 Class C Preferred
shares, which are convertible share for share into Common Stock and
into 825,981 Warrants, and purchased 82,475 shares of Class B Preferred
Stock, which the Company retired through redemption in 1990. See
"Description of Capital Stock -- Class C Preferred Stock."
Since the LBO, the management stockholders, Capricorn and certain
other investors have relied on the Stockholders Agreement as a means of
restricting the distribution of the Company's shares of capital stock.
The Stockholders Agreement contains various provisions for the annual
offering of shares of Common Stock owned by retiring and terminated
management stockholders, first to other management stockholders,
Capricorn, and certain other investors and then to the Company as
purchaser of last resort. However, the holder of Class C Preferred
shares may veto the repurchase of more than $250,000 per annum fair
market value of shares of Common Stock held by employees of the Company
(other than shares of Common Stock distributed to retiring or
terminated employees by the ESOP).
On May 10, 1995, the Board of Directors, with the consent of the
Class C Preferred holder, approved the establishment of the Internal
Market as a replacement for the resale procedures set forth in the
Stockholders Agreement.
The Internal Market generally permits eligible stockholders to sell
shares of Common Stock on four predetermined days each year (each a
"Trade Date"). All Warrants to be sold must first be converted into
shares of Common Stock which can then be sold on the Internal Market.
All sales of Common Stock on the Internal Market are made at the
prevailing Formula Price to employees and directors of the Company who
have been approved by the Compensation Committee as being entitled to
purchase up to a specified number of shares of Common Stock. In
addition, the trustee of the SARP and the administrator of the ESPP may
also purchase shares of Common Stock for their respective trust and
plan on the Internal Market at the prevailing Formula Price.
The Internal Market will be established and managed by the Company's
wholly owned subsidiary, DynEx, Inc. The purchase and sale of shares on
the Internal Market will be carried out by Buck Investment Services, Inc.
("Buck"), a registered broker-dealer, upon instructions from the respective
buyers and sellers, and individual stock ownership account records will be
maintained by Buck's affiliate, Buck Consultants, Inc.
The Company may, but is not obligated to, purchase shares of Common
Stock on the Internal Market on any Trade Date, but only if and to the
extent that the number of shares offered for sale by stockholders
exceeds the number of shares sought to be purchased by authorized
buyers, and the Company, in its discretion, determines to make such
purchases. Such purchases are also limited by the rights and
preferences of the Class C Preferred Stock as noted above. See "Risk
Factors -- Class C Preferred Stock Veto Rights."
Except as provided below, in the event that the aggregate number of
shares offered for sale on the Internal Market is greater than the
aggregate number of shares sought to be purchased by authorized buyers
and the Company, offers to sell 500 shares or less of Common Stock or
up to the first 500 shares if more than 500 shares of Common Stock are
offered by any seller will be accepted first and offers to sell shares
in excess of 500 shares of Common Stock will then be accepted on a pro-
rata basis determined by dividing the total number of shares remaining
under purchase orders by the total number of shares remaining under
sell orders. If, however, there are insufficient purchase orders to
support the primary allocation of 500 shares of Common Stock, then the
purchase orders will be allocated equally among all of the proposed
sellers up to the first 500 shares offered for sale by each seller. To
the extent that the aggregate number of shares sought to be purchased
exceeds the aggregate number of shares offered for sale, the Company
may, but is not obligated to, sell authorized but unissued shares of
Common Stock on the Internal Market. All sellers on the Internal
Market (other than the Company and its retirement plans) will pay Buck
a commission equal to two percent of the proceeds from such sales. No
commission is paid by purchasers on the Internal Market.
Notwithstanding the 500-share pro-ration rule described above, on
the first two Trade Dates priority for the right to sell shares on the
Internal Market will be given first to those employee stockholders who
were parties to the DynCorp Stockholders Agreement and who retired
from the Company during calendar year 1994. See "Risk Factors --
Interim Trading Rule for Internal Market."
There is no public market for the Common Stock. While the Company
is initiating the Internal Market in an effort to provide liquidity to
stockholders, there can be no assurance that there will be sufficient
liquidity to permit stockholders to resell their shares on the Internal
Market, or that a regular trading market will develop or be sustained
in the future. The Internal Market will be dependent on the presence
of sufficient buyers to support sell orders that will be placed through
the Internal Market. Depending on the Company's performance, potential
buyers (which would include employees and trustees under the Company's
benefit plans) may elect not to buy on the Internal Market. Moreover,
although the Company may enter the Internal Market as a buyer of Common
Stock under certain circumstances, including an excess of sell orders
over buy orders, the Company has no obligation to engage in Internal
Market transactions. Consequently, there is a risk that sell orders
could be prorated as a result of insufficient buyer demand, or that the
Internal Market may not be permitted to open because of the lack of
buyers. To the extent that the Internal Market does not provide
sufficient liquidity for a shareholder and the shareholder is otherwise
unable to locate a buyer for his or her shares, the shareholder could
effectively be subject to a total loss of investment. Accordingly, the
purchase of Common Stock is suitable only for persons who have no need
for liquidity in this investment and who can afford a total loss of
investment. See "Risk Factors -- Absence of a Public Market."
Determination of Offering Price
The purchase price of the shares of Common Stock offered hereby,
other than those shares issuable upon exercise of options or awarded
under the EIP, will be their fair market value determined pursuant to
the formula and valuation process described below (the "Formula
Price"). The Formula Price per share of Common Stock is the product of
seven times the operating cash flow ("CF") where operating cash flow is
represented by earnings before interest, taxes, depreciation and
amortization ("EBITDA") of the Company for the four fiscal quarters
immediately preceding the date on which a price revision is made and
the market factor (the "Market Factor" denoted MF), plus the non-
operating assets at disposition value (net of disposition
costs)("NOA"), minus the sum of interest bearing debt adjusted to
market and other outstanding securities senior to Common Stock ("IBD")
divided by the number of shares of Common Stock outstanding at
the date on which a price revision is made, on a fully diluted basis
assuming conversion of all Class C Preferred Stock and exercise of all
outstanding options and warrants ("ESO"). The Market Factor is
a numerical factor which yields a fair market value for the Common
Stock by reflecting existing securities market conditions relevant to
the valuation of such stock. The Formula Price of the Common Stock,
expressed as an equation, is as follows:
Formula Price = [(CF x 7)MF + NOA - IBD] / ESO
The Formula Price including the Market Factor is reviewed four times
each year, generally in conjunction with Board of Directors meetings,
which are generally scheduled for February, May, August and November.
At such meetings, the Market Factor is reviewed in conjunction with an
appraisal which is prepared by an independent appraisal firm for the
committee administering the Company's qualified retirement plans (the
"Committee") and which is relied upon by the Committee and the Board of
Directors. The Board of Directors believes that the valuation process
and Formula Price result in a fair market value for the Common Stock
within a broad range of financial criteria. See "Risk Factors --
Offering Price Determined by Formula" and "Market Information -- Price
Range of Common Stock."
The Formula was adopted in its present form by the Board of
Directors on August 15, 1995, and will become effective with price
determinations on the Internal Market. The Formula is subject to
change by the Board of Directors.
The most recent Formula Price is $14.90 per share based on a Market
Factor of 1.002, as determined at the Board of Directors meeting on
August 15, 1995, effective as of March 31, 1995. The first use of the
Formula Price on the Internal Market will be in connection with
determination of the Formula Price prior to the first Trade Date. Such
determination, and all subsequent determinations of the Formula Price,
will be based on financial data for the four fiscal quarters
immediately preceding the date on which a price revision is to occur.
Trade Dates are expected to occur on or about February 15, May 15,
August 15, and November 15 of each year.
Price Range of Common Stock
Because the Company's Common Stock has not been publicly traded
since 1988, there has not been any historical market-determined price.
However, there have been valuations of the Common Stock made by an independent
appraiser as required by the ESOP, the Board of Directors has (based upon such
valuations) periodically
determined the fair market value of the Common Stock for purposes of offers and
sales of Common Stock made pursuant to the Stockholders Agreement, and there
have also been private share transactions based upon such
determinations. The prices of the Common Stock set forth in the table below
are based on these various valuations, determinations and transactions, and
(with the exception of the price for July 1, 1995) not on the Formula Price
that will be utilized for purchases and sales of Common Stock on the Internal
Market.
Effective with the commencement of the LBO in January
1988, the price was based on a "package" consisting of one share of
Common Stock plus Warrants to purchase 6.6767 additional shares. The
exercise price of the Warrants was reduced from $5.00 per share to
$0.25 per share during the period 1988 to 1993: as each third of the out-
standing balance of the initial ESOP loan was repaid, the exercise price
was reduced by one-third.
The average price per share figures shown below for July 1, 1988 and
1989 ($3.47 and $3.79, respectively) represent the weighted average of
the actual costs to the Company's employee stockholders based on a
purchase price of $24.25 per unit, each unit being comprised of one
share of Common Stock and Warrants to purchase 6.6767 shares of Common
Stock at an exercise price of $0.25 per share.
Other than an isolated block transaction in November 1991, as a result of
which the Company repurchased approximately $1.2 million of Common Stock at
a per-share price of $7.04, the average price per share figures shown
below for July 1, 1990 through July 1, 1994 reflect fair market values
established by the Board of Directors based on valuations (adjusted as
described below) of the Common Stock made by an independent appraiser as
required by the ESOP. Prior to December 31, 1993, the appraiser's calculation
produced annually a single control share valuation, which applied to shares
allocated to ESOP participants' accounts during the period from 1988 through
1993. This control share premium was not applicable to shares of
Common Stock outside the ESOP, and therefore the appraisal amount was
adjusted by the Company's Chief Financial Officer in his recommendation to the
Board of Directors to apply a discount for lack of liquidity and to eliminate
the control
share premium. Since December 31, 1993, the independent appraiser has also
produced annually a valuation for the shares of Common Stock not having such
a control premium, which has thereupon been adopted by the Board of Directors
without further adjustment.
From and after May 10, 1995, the Board of Directors has determined that the
price per share will equal the Formula Price described herein. There can be no
assurance that the Common Stock will in the future provide returns
comparable to historical returns, or that the Formula Price will provide
returns similar to those for past transactions that were based on prices other
than the Formula Price.
Date Average price per share
July 1, 1988 $3.47
July 1, 1989 $3.79
July 1, 1990 $5.20
July 1, 1991 $5.72
July 1, 1992 $7.68
July 1, 1993 $7.97
July 1, 1994 $11.86
July 1, 1995 $14.90
Although the Formula is subject to change by the Board of Directors
in its sole discretion, the Board of Directors will not change the
Formula unless (i) in the good faith exercise of its fiduciary duties
and after consultation with its professional advisors, the Board of
Directors, including a majority of the directors who are not employees
of the Company, determines that the Formula no longer results in a fair
market value for the Common Stock or (ii) a change in the Formula or
the method of valuing the Common Stock is required under applicable
law.
USE OF PROCEEDS
The shares of Common Stock which may be offered by the Company are
principally being offered to permit the acquisition of shares by the
Company's employee benefit plans as described herein and to permit the
Company to offer shares of Common Stock to present and future employees
and directors. The Company does not intend or expect this Offering to
raise significant capital. Any net proceeds received by the Company
from the sale of the Common Stock offered (after giving effect to the
payment of expenses of the Offering) will be added to the general funds
of the Company for working capital and general corporate purposes.
Currently, the Company has no specific plans for the use of such
proceeds. Since it is anticipated that the majority of the sales of
Common Stock on the Internal Market will be made by stockholders rather
than by the Company, and the Company will not receive any portion of
the net proceeds from the sale of such shares.
DIVIDEND POLICY
The Company last paid a dividend in 1986, prior to the LBO. The
Company has not, since that time, paid a dividend and does not have a
policy for the payment of regular dividends. The payment of dividends
in the future will be subject to the discretion of the Board of
Directors of the Company and will depend on the Company's results of
operations, financial position, and capital requirements, general
business conditions, restrictions imposed by financing arrangements, if
any, legal and regulatory restrictions on the payment of dividends, and
other factors the Board of Directors deems relevant. The holder of the
Class C Preferred also has the right to approve or disapprove proposed
dividend payments. See "Description of Capital Stock -- Class C
Preferred Stock."
DILUTION
The tangible book value of the Company on June 29, 1995 was a
negative figure of $26,124,000, or ($2.76) per share. Tangible book
value per share represents the amount of total tangible assets less
total liabilities, divided by the number of shares of Common Stock
outstanding. As the following table demonstrates, after giving effect
to the sale of 4,539,839 shares of Common Stock by the Company in the
Offering at an assumed Formula Price of $14.90 per share, and after
deducting anticipated expenses, the pro forma book value of the Company
on June 29, 1995, would have been $41,008,000, or $2.93 per share,
representing an immediate $11.97 per share dilution to new investors
purchasing shares of Common Stock at the assumed Formula Price.
Assumed initial Formula Price per share $14.90
Net tangible book value per share before the Offering ($2.76)
Increase per share attributable to new investors $5.69
Pro forma net tangible book value per share after the Offering $2.93
Dilution per share to new investors $11.97
Dilution is determined by subtracting pro forma book value per share
after giving effect to the Offering from the initial public offering
price paid by a new investor for a share of Common Stock. The
foregoing calculation assumes no additional exercises of the
outstanding warrants to purchase shares of Common Stock. As of June
29, 1995 there were outstanding warrants to purchase 4,120,023 million
shares of Common Stock at a warrant exercise price of $0.25 per share.
If all the warrants outstanding and warrants issuable upon conversion
of the Class C Preferred as of June 29, 1995, were to be immediately
converted to Common Stock, dilution per share to new investors would be
$12.64 per share.
SELECTED FINANCIAL DATA
The following table presents summary selected historical financial
data for the Company, restated to take into account the discontinuance
of the Commercial Aviation Business effective June 29, 1995. The
selected historical financial data for the five years ended December
31, 1994 were derived from the audited Consolidated Statements of the
Company as adjusted to reflect the Commercial Aviation Business as a
discontinued operation. The selected financial data for the six months
ended June 29, 1995 and June 30, 1994 were derived from the unaudited
Consolidated Statements of the Company which, in the opinion of
management, reflect all adjustments necessary for a fair presentation
of such data. During the periods presented, the Company paid no cash
dividends on the Common Stock. The following information should be
read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related notes thereto, included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
Six Months Ended For the Years Ended December 31, (a)
(in thousands)
June 29, June 30,
1995 1994 (a) 1994 (b) 1993 (c) 1992 (d) 1991 1990
<C> <S> <S> <S> <S> <S> <S> <S>
Statement of Operations Data:
Revenues $421,576 $391,161 $818,683 $777,216 $728,244 $654,692 $559,798
Cost of services $403,945 $374,328 $783,095 $742,455 $707,905 $635,458 $548,692
Selling and corporate
administrative $ 9,308 $ 8,558 $ 16,887 $ 17,547 $ 18,503 $ 15,538 $ 13,098
Interest expense $ 8,518 $ 8,096 $ 14,903 $ 14,777 $ 14,629 $ 12,135 $ 9,148
Loss from continuing operations
and before extraordinary item $ (481) $ (1,825) $ (352) $ (4,485) $(14,112) $ (8,726) $ (8,641)
Net loss $ (875) $ (2,519) $(12,831) $(13,414) $(23,342) $(12,403) $(13,691)
Net loss for common stockholders $ (875) $ (2,519) $(12,831) $(13,414) $(24,301) $(17,583) $(18,752)
Loss per share from continuing
operations and before extra-
ordinary item for common
stockholders $ (0.17) $ (0.44) $ (0.29) $ (1.13) $ (3.18) $ (3.19) $ (3.22)
Balance Sheet Data:
Total assets $356,851 $380,763 $379,000 $360,103 $338,135 $298,725 $276,353
Long-term debt excluding
current maturities $192,757 $205,461 $230,444 $215,939 $198,770 $119,949 $101,886
Redeemable preferred stock $ - $ - $ - $ - $ - $ 24,884 $ 19,705
Redeemable common stock $ 2,288 $ 2,200 $ 2,288 $ 2,200 $ - $ - $ -
<FN>
(a) Restated for the discontinued operations of the Commercial Aviation
Business.
(b) 1994 includes $3,250,000 write-off of investment in unconsolidated
subsidiary and a credit of $1,830,000 resulting from reversal of legal and
other expense associated with an acquired business. See Note 14 to the
Consolidated Financial Statements as of December 31, 1994.
(c) 1993 includes $2,070,000 of legal and other expenses associated with an
acquired business. See Note 14 to the Consolidated Financial Statements
as of December 31, 1994. 1993 also includes $988,000 accelerated
amortization of costs in excess of net assets of an acquired business, for
assets that were subsequently determined to have been overvalued at the
time of acquisition.
(d) 1992 Cost of Services includes approximately $6,000,000 for settlement of
nonrecurring claims against the Company related to prior years.
</TABLE>
BUSINESS
Overview
The Company provides diversified management, technical, and
professional services to government and commercial customers throughout
the United States and internationally. The Company provides primarily
information technology, operations and maintenance, and research and
development support services under contracts with U.S. Government
agencies, foreign government agencies and commercial customers. The
Company's U.S. Government customers include the Department of Defense
(the "DoD"), the National Aeronautics and Space Administration
("NASA"), the Department of State, the Department of Energy (the
"DOE"), the Environmental Protection Agency (the "EPA"), the Centers
for Disease Control the U.S. Postal Service and other U.S. Government
agencies. Sales generated from services provided to the DoD and the
U.S. Government in the aggregate, represented 60% and 97% of total
sales, respectively, in 1994. Total sales, earnings before interest,
taxes, depreciation and amortization, and net losses for the Company in
1994 were $818.7 million, $26.3 million and $12.8 million,
respectively.
During the second quarter of 1995, the Company's Board of Directors
determined that it would be in the Company's best interest to
discontinue its commercial aviation business operations (the
"Commercial Aviation Business"), which comprised about 20% of the
Company's revenues in fiscal year 1994. This decision was made as a
result of of several factors including: (i) the Company's need for cash
to reduce its debt, (ii) the capital intensive nature of the Commercial
Aviation Business, (iii) the continual losses of the unit of the
Commercial Aviation Business responsible for aircraft maintenance and
repair operations (the "Aircraft Maintenance Unit") and (iv) a high
level of interest from potential buyers. On June 30, 1995, the Company
sold the Aircraft Maintenance Unit in a $12.5 million (subject to
adjustment) cash transaction with Sabreliner Corporation. On August
31, 1995, the Company divested that portion of the Commercial Aviation
Business comprising its aviation ground handling business, including
DynAir Services, Inc. and its affiliates (the "Ground Handling Unit"),
in a $122 million (subject to adjustment) cash transaction with ALPHA
Airports Group Plc. The proceeds from the two aforementioned
transactions will be used to retire substantially all of the
Company's 16% Pay-In-Kind debentures and satisfy existing equipment
financing obligations of the Ground Handling Unit. See "Business -- Commercial
Aviation" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's strategy has been to grow internally, increasing
business through strong marketing and business development efforts, as
well as through an aggressive strategic acquisition program. The
Company provides services through five primary business areas. The
composition and market niches, including the total contract price of
certain significant contracts, of the business areas are described
below. While the contract descriptions provided below may refer to
contract terms in excess of one year, such contracts are one-year contracts
which may be extended at the customer's option for additional one-year periods
up to the number of years indicated. Except as otherwise identified,
contract amounts set forth herein represent aggregate anticipated gross
revenues over the life of such contract, assuming exercise of all option
years. Amounts include both prior periods and the remaining life of
the contract. See "Risk Factors -- Dependence on and Risks Inherent in
U.S. Government Contracts" and "Business -- Government Contracting."
Aerospace Technology
This organization consists of one of the Company's oldest
businesses -- Aerospace Operations -- first started by the Company in
1951. It includes military aviation maintenance and aerospace
engineering operations in Texas, various military bases and locations
where Government aircraft are maintained, and certain locations
overseas in support of the North Atlantic Treaty Organization ("NATO")
and the United Nations.
$508 million Contract Field Teams - This is the Company's second
oldest contract, first awarded by the U.S. Air
Force in 1951. Under this contract, which has been
retained by the Company through successive
recompetitions (the last of which was in 1993 for a
five-year renewal), the Company furnishes between
1,500 and 2,500 aviation technicians who are
available on short notice to travel anywhere in the
world to service and modify U.S. military aircraft.
$407 million Fort Rucker Helicopter Support - First awarded to
the Company in 1988, this contract involving 1,400
employees was renewed in 1993 for an additional
five-year period. The Company maintains over 600
rotary-wing aircraft which are operated 24 hours a
day to support Army and Air Force pilot training
activities.
$111 million Aerotherm - The Aerotherm subsidiary of Aerospace
Technology is a test and evaluation contractor with
expertise in space vehicle reentry technology. It
also builds test vehicles for the U.S. Air Force
Ballistic Missile Office and operates a high energy
laser testing facility for the Army. Aerotherm
performs most of its work under five major long-
term contracts and numerous subcontracts of various
durations.
$98 million International Narcotics Matters Support - Under
this contract first awarded in 1991, the Company
operates and supports a dedicated air wing of the
Department of State's drug interdiction program in
Central and South America. The program is based in
Florida and employs over 120 pilots, engineers, and
technical support and advisory personnel.
$97 million Johnson Space Center Support - This NASA aircraft
maintenance support contract was won by the Company
in January of 1994. A total of 200 Company
technicians and support personnel maintain NASA
aircraft used in launch activities.
$84 million III Corps and Fort Hood Combined Aircraft
Maintenance Program - More than 500 Company
personnel support the U.S. Army and U.S. Army
Reserve units in a ten-state region in maintaining
1,200 rotary wing aircraft and related ground
support equipment. Under the contract, which
extends through 1999, the Company provides line
maintenance support, limited depot level repairs,
maintenance work order installations and
maintenance test flight operations.
$76 million Patuxent River Research & Development Center - This
is a Navy contract first awarded to the Company in
1985 and re-won in 1991 for an additional five-year
term. Approximately 225 employees provide test and
systems operations support in connection with test
launches.
$39 million Mission Field Teams - Under two contracts with the
Department of State and the United Nations,
Aerospace Technology furnishes logistical and other
support services in connection with international
peace keeping activities world-wide. Recent
operations have been in Haiti and the former
Yugoslavia.
Other Business Aerospace Technology has recently acquired
exclusive application rights in North and South
America to Australian-developed technology for the
application of composite patches to aircraft
surfaces and structural members. The utilization
of this process where appropriate avoids the costly
alternative of replacing and rebuilding metal
surfaces and support members. Aerospace Technology
recently completed repairs of C-141 aircraft for
the U.S. Air Force using the composite repair
technology. A prototype repair has also been made
to a C-5A Starlifter aircraft. The Company
believes that there is a significant market for
composite repair of military and commercial
aircraft surfaces and supporting structures.
Enterprise Management
This organization consists primarily of the former Support Services
Division of the Company which was started in 1987 and the range
operations and test evaluation activities and contracts of the former
Test & Evaluation Division of the Company. Its basic markets include
management of test ranges, military and other governmental facilities,
management of commercial enterprises and facilities, and the operation
and management of multi-location service contracts, such as the U.S.
Department of Justice Asset Forfeiture Program involving over 300
offices throughout the United States.
It includes the operation, maintenance, and management of major
governmental and private enterprises and installations, ranging from
the turn-key responsibility for operation of all aspects of a single
base (such as a military installation) to assumption of responsibility
for the staffing of particular functions at various locations for a
single customer. Disciplines included within operational responsibility
vary, but generally include scientific support, operation of
sophisticated electronic and mechanical systems, grounds and buildings,
environmental systems, security systems, transportation systems,
construction and demolition, environmental remediation, and the
handling of and accountability for inventories of equipment and
materials/supplies and other property. Activities include testing and
evaluation of military hardware systems at government test ranges,
collection and processing of data, maintenance of targets, ranges and
laboratory facilities, developmental testing of complex weapons
systems, security systems work, and technology transfer into commercial
applications.
$585 million Rocky Flats - A subsidiary of the Company is a
subcontractor to Kaiser Hill, a joint venture.
Through the subsidiary, the Company will provide
site support services to the DOE complex at Rocky
Flats, Colorado. These services include facilities
and equipment maintenance, logistics and property
management, information and records management, and
environmental safety and health services.
$250 million (1) Arnold Engineering Development Center - Under a
joint venture with Computer Sciences Corporation
and General Physics Corporation, the Company will
provide information technology, civil engineering,
facilities management and environmental expertise
to the Air Force's Advanced Simulation and Test
Facilities. The Company is a 35% owner of the
joint venture, which holds the eight year contract,
due to expire in 2003.
(1) Represents the value of the Company's share of the
joint venture's reimbursable costs and award fee.
The Company will report only its share of net
earnings on its financial statements.
$235 million National Training Center - Over 1,100 Company
personnel operate the Army's National Training
Center near Barstow, California, where U.S. and
foreign military organizations engage in mock
military exercises. The Company maintains and
issues over 3,000 items of military equipment and
provides personnel to operate the entire Fort Irwin
facility, which supports more than 12,000
personnel. This contract was first won in 1987 and
was renewed for an additional five-year term in
1991. A portion of the contract was recompeted in
1995 and awarded to a competitor. This award has
been protested. The company is providing services
for the protested portion of the contract under the
final option year of the contract, which protested
portion has a contract revenue of approximately $20 million.
$217 million Department of Justice Asset Forfeiture Support
Program - This five-year, 1,000-person contract,
requiring staffing of over 300 locations in the
United States, involves the support of Department
of Justice's drug-related asset seizure program.
Company personnel support the various U.S. Attorney
offices that are responsible for enforcing and
administering the federal asset forfeiture laws.
The contract was secured for a period of five years
in 1993.
$98 million White Sands Missile Range - Under the Company's
oldest contract, originally awarded in 1946, the
Company provides data collection services to the
U.S. Army at White Sands Missile Range, New Mexico.
$88 million Fort Belvoir - This facility management and support
contract involves every aspect of operational
responsibility ranging from grounds maintenance to
security and air field operations at Fort Belvoir,
Virginia. Over 225 Company personnel are involved
under this contract. The Company was awarded this
contract for an additional five-year period in
March of 1995.
$62 million Fallon Naval Air Station Support - Awarded in 1992,
this contract covers the maintenance and support of
the facilities at Fallon Naval Air Station,
including all grounds and air field maintenance.
The contract requires 302 Company support
personnel.
$55 million Department of State Security - The Company provides
a variety of technical services to the Department
of State at various locations around the world
under six contracts that extend through 2000.
$44 million Memphis Naval Air Station - This five-year Navy
contract awarded in 1993 involves operational and
maintenance support for the infrastructure of the
Naval Air Station in Millington, Tennessee.
$35 million Marine Spill Response Corporation Operations
Contract - Under this commercial contract awarded
in 1993, the Company operates a fleet of 16 oil
spill response ships that were specifically
commissioned and built for U.S. coastal protection
service under the Oil Pollution Act of 1992.
Other Business Enterprise Management operates internationally
where it performs security services and other
support activities related to facilities and
enterprise management. In addition to its military
customers, this unit has contracts for similar
services with non-DoD agencies such as the U.S.
Department of Agriculture, Department of State, and
Department of Justice.
Information and Engineering Technology
This business consists of segments of businesses acquired during the
period 1991 through 1994 -- Viar & Company, NMI Systems, Inc.,
Technology Applications, Inc., and CBIS Federal, Inc. -- plus existing
segments. The Company integrated these portions of the previously
acquired corporate entities into the Information and Engineering
Technology business effective January 1, 1995.
Its activities include software development and maintenance,
computer center operations, data processing and analysis, database
administration, telecommunications support and operations, maintenance
and operation of integrated electronic systems, and networking of
electronic systems in a local and wide area environment.
$247 million DOE Information Technology Support Operations -
This recently awarded five-year information
technology support contract marks a significant
milestone in the Company's efforts, starting with
the acquisitions of Viar and Meridian in 1992, to
expand its activities into the growing information
technology marketplace. Over 200 Company personnel
provide basic computer, software, and networking
support to all of DOE's operations.
$200 million Department of Treasury Information Processing
Support Services - This five-year contract awarded
in June, 1995 provides support to the Internal
Revenue Service and Treasury Department for major
information resource management projects. Company
personnel will provide information systems
services, telecommunication and network support,
software and database development and technical
evaluation analysis.
$156 million General Services Administration ("GSA") Automated
Data Processing - Under this recently acquired 4 1/2-
year contract, the Company provides life cycle
applications software development and maintenance
for business and scientific systems to U.S.
agencies in the GSA's Southeast Sunbelt and Great
Lakes regions. The contract will employ between
400 and 800 persons in 14 states.
$126 million Naval Warfare Systems Contract -
One of the Company's oldest
contracts, first awarded over 30 years ago, this is
an engineering, technical and computer operations
contract with the U.S. Navy. The current five-year
term is scheduled to run through 1995, at which
time it will be recompeted. The Company has
received a six-month extension of this contract,
pending recompetition.
Other Business Information and Communications Technology -
Performs approximately $20 million per annum of
systems networking contracts inherited from its
1993 acquisition of NMI Systems, Inc.. Commercial
and governmental customers are served.
Environmental, Energy and National Security Programs
This business consists of the former environmental operations of
Viar & Company and certain of the energy research and study operations
of Meridian Corporation. Other principal contracts involve furnishing
of research and other support services to the EPA and DOE. This
business includes environmental regulation development, quality
assurance studies and research, management of information relating to
the proper handling of hazardous materials and substances, alternative
energy research and evaluation, and energy security studies and
assessments. This business also provides services in support of
nuclear safeguards and security research and development. Specialized
disciplines include the development of physical security systems,
vulnerability and risk assessments, and human reliability.
$1.5 billion (1) DOE Strategic Petroleum Reserve - Through its
60% controlled affiliate, DynMcDermott Petroleum
Services Company, Inc. ("DynMcDermott"), the
Company furnishes approximately 900 technicians and
operational personnel to operate DOE's seven-site
emergency crude oil storage facilities in Louisiana
and Texas (the "Reserve"). The Reserve is
maintained for possible draw-down and domestic
sales of crude in the event of an international
crisis or threat to the U.S. oil supply. The
operation of the Reserve involves all technical
responsibility for approximately 700 million
barrels of crude in storage, over 1,000 miles of
pipeline, as well as all related environmental,
safety, and security matters. The current contract
runs through 1998.
(1) Represents value of costs incurred and fee earned by DynMcDermott.
Only the Company's portion of the fee ($5.1 million in 1994) has been
recorded as revenue in the Company's financial statements.
$89 million EPA Programs - Under several contracts, the Company
performs program management, analytical, and
technical support for EPA Superfund policy,
research and development, and enforcement under
Superfund and effluent guidelines. These contracts
extend into 1998.
$81 million Defense Policy Support - As a provider of direct
energy policy support to DoD, DOE and other federal
agencies, the Company holds contracts with terms
continuing through 1999, under which it furnishes
analysis and documentation support on defense
policy related to energy matters.
$40 million EPA Contract Laboratory Administrative Support
Services - Under this five-year contract awarded in
1994, the Company provides program management
support in the testing of environmental samples by
EPA's contracted laboratories for the Office of
Emergency and Remedial Responses. This is a
successor contract to a contract first awarded to
Viar & Company in 1980.
Advanced Technology Services
This business includes remote bar coding contracts and other
contracts with the U.S. Postal Service and health and health-care
related support services, including health surveillance, health
education, industrial hygiene, fitness programs and clinical laboratory
services. The mission of Advanced Technology Services is to identify
and develop new and innovative commercial businesses for the Company
through leveraging of the Company's existing know-how and to pursue
commercial opportunities that arise external to the Company. It serves
as an incubator for new commercial applications for the established
business lines or possible future business in new market areas and
focuses on emerging technologies or novel process applications where
the application of known or evolving technologies may represent value-
added or new market opportunities.
$220 million U.S. Postal Service Remote Bar Coding - Under
contracts secured in 1992, the Company operates a
contractor-furnished remote bar coding facility in
Pennsylvania which provides remote bar coding of
mail for four U.S. Postal Service regions. The
contracts, which currently run through 1996,
including options, may not be renewed beyond April,
1996, due to an announced policy change in the U.S.
Postal Service that would bring this contracted-out
work back into the Service.
$18 million Biotechnology and Health Services - The Company
provides biomedical technology services to various
health organizations. Under contracts extending
into 1998, the Company operates seven laboratories
and five repositories for the National Institutes
of Health.
Commercial Aviation
During the second quarter of 1995, the Company's Board of Directors
determined that it would be in the Company's best interest to
discontinue the Commercial Aviation Business, which comprised about 20%
of the Company's revenues in fiscal year 1994. This decision was made
as a result of several factors including: (i) the Company's need for
cash to reduce its debt, (ii) the capital intensive nature of the
Commercial Aviation Business, (iii) the continual losses of the
Aircraft Maintenance Unit and (iv) a high level of interest from
potential buyers.
The Aircraft Maintenance Unit included the Company's DynAir Tech
subsidiaries in Arizona (acquired in 1987), Florida (acquired in 1969),
and Texas. The Aircraft Maintenance Unit performed maintenance checks,
component overhauls, heavy structural maintenance, airframe and systems
maintenance and modification of a wide variety of passenger and cargo
aircraft. The Aircraft Maintenance Unit was sold on June 30, 1995, for
$12.5 million, which price is subject to adjustment based on balance sheet
figures to be obtained after closing. In addition, the
Company may receive additional payments based on future revenues of the
Aircraft Maintenance Unit.
The aviation ground handling business was conducted through the
Company's wholly owned subsidiaries, DynCorp Aviation Services, Inc.,
DynAir Fueling, Inc., and DynAir Services, Inc., formerly Servair,
Inc., which was acquired by the Company in 1971 (collectively, the
"Ground Handling Unit"). The Ground Handling Unit provided a wide
range of ground handling services at approximately 80 airports, ranging
from line maintenance and fueling to cleaning and baggage handling.
The Ground Handling Unit was sold on August 31, 1995, for $122 million,
which price is subject to adjustment based on balance sheet
figures to be obtained after closing.
Government Contracting
The Company derived 97% of its revenues in 1994 from Government
Contracts, and 60% of its total revenues in 1994 were derived from
Government Contracts with the DoD. Typically, a Government Contract
has an initial term of one year combined with two, three, or four one-
year renewal periods, exercisable at the discretion of the Government.
The Government is not obligated to exercise its option to renew a
Government Contract. At the time of completion of a Government
Contract, the contract in its entirety is "recompeted" against all
interested third-party providers. Approximately 80% of the Company's
Government Contracts business is from contracts that have an aggregate
initial term including renewal periods of five years or more. Federal
law permits the Government to terminate a contract at any time if such
termination is deemed to be in the Government's best interest. The
Government's failure to renew, or the early termination of, any
significant portion of the Company's Government Contracts could
adversely affect the Company's business and prospects. In addition, the
fact that Government Contracts may be terminated without renewal prior
to the stated maturity of the Contract Receivable Collateralized Notes
previously issued by the Company to its wholly owned financing
subsidiary, Dyn Funding Corporation, may result in demands on the
Company's available cash as the Company endeavors to replace the
terminated contracts underlying the Contract Receivable Collateralized
Notes. See "Risk Factors -- Dependence on and Risks Inherent in
Government Contracts " and "Risk Factors -- Termination of
Contracts/Increased Demand on Cash Flow."
Contracts with the U.S. Government and its prime contractors usually
contain standard provisions for termination at the convenience of the
Government or such prime contractors, pursuant to which the Company is
generally entitled to recover costs incurred, settlement expenses, and
profit on work completed prior to termination. There can be no
assurance that terminations will not occur, and such terminations could
adversely affect the Company's business and prospects. The Company's
Government Contracts do not provide for renegotiation of profits. See
"Risk Factors -- Dependence on and Risks Inherent in Government
Contracts."
Continuation and renewal of the Company's existing Government
Contracts and the acquisition by the Company of additional Government
Contracts is contingent upon, among other things, the availability of
adequate funding for various U.S. Government agencies. The current
world political situation and domestic pressure to reduce the federal
budget deficit have reduced, and may continue to reduce, military and
other spending by the U.S. Government. The precise effect of these
political developments on the Company's business and prospects cannot
be predicted. Such budget reductions and/or changes in governmental
policies might increase somewhat the nature and amount of work
contracted out by Government agencies to businesses such as the
Company, but they might also limit future revenue opportunities for the
Company with respect to U.S. Government Contracts. See "Risk Factors -
- - Dependence on and Risks Inherent in Government Contracts."
The Company's Government Contract services are provided through three
types of contracts -- fixed-price, time-and-materials, and cost-
reimbursement. The Company assumes financial risk on fixed-price
contracts (approximately 12% of the Company's total Government
Contracts revenue in 1994) and time-and-material contracts
(approximately 16% of its total Government Contracts revenue in 1994),
because the Company assumes the risk of performing those contracts at
the stipulated prices or negotiated hourly rates. The failure to
accurately estimate ultimate costs or to control costs during
performance of the work could result in losses or smaller than
anticipated profits. The balance of the Company's Government Contracts
revenue in 1994 (approximately 72%) was derived from cost-reimbursement
contracts. To the extent that the actual costs incurred in performing
a cost-reimbursement contract are within the contract ceiling and
allowable under the terms of the contract and applicable regulations,
the Company is entitled to reimbursement of its costs plus a stipulated
profit. However, if the Company's costs exceed the ceiling or are not
allowable under the terms of the contract or applicable regulations,
any excess would be subject to adjustment and repayment upon audit by
Government agencies. See "Risk Factors -- Contract Profit Exposure
Based on Type of Contract."
Government Contract payments received by the Company in excess of
allowable direct and indirect costs are subject to adjustment and
repayment after audit by Government auditors. Audits have been
completed on the Company's incurred contract costs through 1986 and are
continuing for subsequent periods. The Company has included an
allowance in its financial statements for possible excess billings and
contract losses which it believes is adequate based on its
interpretation of contracting regulations and past experience. There
can be no assurance, however, that this allowance will be adequate.
See "Risk Factors -- Audits by U.S. Government Agencies."
As a U.S. Government contractor, the Company is subject to federal
regulations under which its right to receive future awards of new
Government Contracts, or extensions of existing Government Contracts,
may be unilaterally suspended or barred for periods of up to three
years, should the Company be convicted of a crime or be indicted based
on allegations of a violation of certain specific federal statutes or
other activities. Suspensions, even if temporary, can result in the
loss of valuable contract awards for which the Company would otherwise
be eligible. While suspension and debarment actions may be limited to
that division or subsidiary of a company which is involved in the
alleged improper activity which gives rise to the suspension or
debarment actions, Government agencies have authority to impose
debarment and suspension on affiliated entities which in no way were
involved in the alleged improper activity. The initiation of
suspension or debarment hearings against the Company or any of its
affiliated entities could have a material adverse impact upon the
Company's business and prospects. See "Risk Factors -- Potential for
Suspension and Debarment."
Factoring of Receivables
On January 23, 1992, the Company's wholly owned subsidiary, Dyn
Funding Corporation ("DFC"), completed a private placement of
$100,000,000 of 8.54% Contract Receivable Collateralized Notes, Series
1992-1 (the "Notes"). Upon receiving the proceeds from the sale of the
Notes, DFC purchased from the Company an initial pool of receivables
for $70,601,000, paid $1,524,000 for expenses and deposited $3,000,000
into a reserve fund account and $24,875,000 into a collection account
with Bankers Trust Company as trustee pending additional purchases of
receivables from the Company. Of the proceeds received from DFC, the
Company used $38,112,000 to pay the outstanding balances of the ESOP
loan and a revolving loan facility, and $33,280,000 was used for the
redemption of all outstanding Class A Preferred Stock plus accrued
dividends (the redemption price per share was $25.00 plus accrued
dividends of $0.66 per share).
The Notes are collateralized by the right to receive proceeds from
certain Government Contracts and certain eligible accounts receivable
of commercial customers of the Company. Credit support for the Notes
is provided by over-collateralization in the form of additional
receivables. The Company retains an interest in the excess balance of
receivables through its ownership of the common stock of DFC.
Additional credit and liquidity support is provided to the Notes
through a cash reserve fund. Interest payments are made monthly with
monthly principal payments beginning February 28, 1997. The Notes are
for a term of five years and two months and are required to be fully
repaid by July 30, 1997.
On an ongoing basis, the cash receipts from collection of the
receivables will be used by DFC to make interest payments on the Notes,
pay a servicing fee to the Company, and purchase additional receivables
from the Company. Beginning February 28, 1997, instead of purchasing
additional receivables, the cash receipts will be used by DFC to repay
principal on the Notes. During the non-amortization period (the period
between January 23, 1992 and January 30, 1997), cash in excess of the
amount required to purchase additional receivables and meet payments on
the Notes is to be paid to the Company, subject to certain collateral
coverage tests. The receivables pledged as security for the Notes are
valued at a discount from their stated value for purposes of
determining adequate credit support. DFC is required to maintain
receivables, at their discounted values, plus cash on deposit at least
equal to the outstanding balance of the Notes.
Commencing March 30, 1994, the Notes became redeemable in whole, but
not in part, at the option of DFC at a price equal to the principal
amount of the Notes plus accrued interest plus a premium (as defined in
the Notes).
Upon termination of any of the Company's contracts, including
Government Contracts, the Company would no longer accrue a stream of
accounts receivable thereunder for sale to DFC, which may result in
demands on the Company's available cash as the Company endeavors to replace the
terminated contracts. The ability of the Company to maintain certain ratios
under the Notes depends in part on its ability to keep in force existing
contracts and/or acquire new contracts such that sufficient eligible
receivables are available for sale by the Company to DFC. See "Risk
Factors -- Termination of Contracts/Increased Demand on Cash Flow."
By the terms of the Notes, in the event that the interest coverage
ratio (as defined in the Notes) falls below certain prescribed levels
and the Company's principal debt exceeds certain amounts, DFC may be
prohibited from purchasing additional receivables from the Company,
thereby reducing the Company's access to additional cash resources. Further, in
the event that the collateral value ratio (as defined in the Notes)
falls below certain levels required in the Notes due to a decrease in
the Company's contract revenue and the Company fails to provide
sufficient receivables in order to increase the collateral value ratio,
the Company may be forced to redeem part or all of the Notes which
would result in additional demands on the Company's cash resources.
See "Risk Factors -- Inability to Maintain Certain Ratios Under the
Contract Receivable Collateralized Notes."
Environmental Matters
The Company's business activities occasionally result in the
generation of non-nuclear hazardous wastes, the hauling and disposal of
which are governed by federal, state and local environmental compliance
statutes and regulations. In addition, certain of the Company's
businesses operate petroleum storage and other facilities that are
subject to similar regulations. Violations of these laws can result in
significant fines and penalties for which insurance is not reasonably
available. Moreover, because many of its operations involve the
management of storage and other facilities owned by others, primarily
governmental entities, the Company is not always in a position to
control the compliance of the facilities it operates with environmental
and other laws. However, neither the Company nor any of its
subsidiaries have been named a potentially responsible party relating
to environmental liability at any sites. There are no enforcement
actions relating to environmental liability currently in progress with
respect to the Company, its subsidiaries or any of their operations.
See "Risk Factors -- Environmental Matters" and "Legal Matters."
International Operations
The Company from time to time conducts some operations outside of the
United States. Such international operations entail additional
business risks and complexities such as foreign currency exchange
fluctuations, different taxation methods, restrictions on financial and
business practices and political instability. Each of these factors
could have an adverse impact on operating results. There can be no
assurance that the Company can achieve or maintain success in these
markets. See "Risk Factors -- Risks Inherent in International
Operations."
Competition
The markets which the Company services are highly competitive. In
each of its operating groups, the Company's competition is quite
fragmented, with no single competitor holding a significant market
position. The Company experiences vigorous competition from industrial
firms, university laboratories, non-profit institutions and U.S.
Government agencies. Some of the Company's competitors are large,
diversified firms with substantially greater financial resources and
larger technical staffs than the Company has available to it.
Government agencies also compete with and are potential competitors of
the Company because they can utilize their internal resources to
perform certain types of services that might otherwise be performed by
the Company. A majority of the Company's revenues are derived from
contracts with the U.S. Government and its prime contractors, and such
contracts are awarded on the basis of negotiations or competitive bids
where price is a significant factor. See "Risk Factors --
Competition."
Backlog
The Company's backlog of business (including estimated value of
option years on Government Contracts) was $2.0 billion at December 31,
1994, compared to a year-end 1993 backlog of $2.6 billion. At June 29,
1995, backlog (including estimated value of option years on Government
Contracts) was $3.0 billion. U.S. Government agencies operate under
annual fiscal appropriations by the Congress and fund various contracts
on an incremental basis. Therefore, a substantial portion of the
Company's backlog represents contracts which have not been funded by
the responsible Government agency.
Properties
The Company is primarily a service-oriented company, and, as such,
the ownership or leasing of real property is an activity which is not
material to an understanding of the Company's operations. The Company
owns two office buildings. The Company leases numerous commercial
facilities used in connection with the various services rendered to its
customers, including its corporate headquarters, a 149,000 square foot
facility under a 12-year lease. None of the properties is unique. All
of the Company's owned facilities are located within the United States.
In the opinion of management, the facilities employed by the Company
are adequate for the present needs of the business.
LEGAL MATTERS
The Company is involved in various claims and lawsuits, including
contract disputes and claims based on allegations of negligence and
other tortious conduct. The Company is also potentially liable for
certain environmental, personal injury, tax, and contract dispute
issues related to the prior operations of divested businesses. In most
cases, the Company has denied, or believes it has a basis to deny,
liability, and in some cases has offsetting claims against the
plaintiffs or third parties. Damages currently claimed by the various
plaintiffs for these items, some of which may not be covered by insurance
and which have not been fully accounted for in the financial statements
aggregate approximately $32,000,000 (including compensatory and possible
punitive damages and penalties). Material legal proceedings are described below.
A former subsidiary of the Company, which discontinued its business
activities in 1986, has been named as one of many defendants in civil
lawsuits which have been filed in various state courts against
manufacturers, distributors and installers of asbestos products. The
Company has also been named as a defendant in several of these actions.
At the beginning of 1992, 408 claims had been filed, and during the
year 1,784 additional claims were filed, with 74 claims being settled.
In 1993, 711 additional claims were filed and 1,275 were settled. In
1994, 1,135 new claims were filed with 353 being settled. Through
September 22, 1995, 1977 new cases have been filed and 86 settled.
Defense has been tendered to and accepted by the Company's insurance
carriers; however, the Company has been unable to identify solvent
insurance carriers for all of the claim periods. The Company believes
that the subsidiary has substantial defenses against alleged secondary
and indirect liability. The Company has provided a reserve for the
estimated uninsured legal costs to defend the suits and the estimated
cost of reaching reasonable no-fault liability settlements. The amount
of the reserve has been estimated based on the number of claims filed
and settled to date, number of claims outstanding, current estimates of
future filings, trends in costs and settlements, and the advice of the
insurance carriers and counsel.
On November 22, 1994, the Company and its former subsidiary
instituted litigation in Los Angeles Superior Court against 24 of its
general liability insurers for the purpose of obtaining a declaratory
judgment regarding the aggregate amount of insurance available for the
defense and satisfaction of asbestos claims, the right of carriers to
unilaterally allocate losses and defense costs among themselves, the
obligation of certain excess insurance carriers to "drop down" their
coverage to lower levels resulting from lost policies or policies
issued by currently insolvent carriers, and certain insurance coverage
issues that could impact the Company's ultimate liability for asbestos
and other claims.
The Internal Revenue Service has completed an examination of the
Company s income tax returns for the period 1985 through 1988 and
proposed several adjustments, the most significant of which related to
deductions taken by the Company for expenses incurred in the LBO. A
settlement of these matters has been approved by the Internal Revenue Service
and is currently under review by the Joint Committee on Taxation.
See Note 15 to the Consolidated Financial Statements as of December 31, 1994.
The Company has retained certain liability in connection with its
1989 divestiture of its major electrical contracting business,
Dynalectric Company ("Dynalectric"). The Company and Dynalectric were
sued on September 22, 1988 in the Superior Court of Bergen County, New
Jersey by Computran, a former Dynalectric company subcontractor. The
subcontractor has alleged that its subcontract to furnish certain
software and services in connection with a major municipal traffic
signalization project was improperly terminated by Dynalectric and that
Dynalectric is liable to the former subcontractor for a variety of
additional claims, the aggregate dollar amount of which has not been
formally recited in the subcontractor's complaint. Dynalectric has
filed certain counterclaims against the former subcontractor. The
Company and Dynalectric believe that they have valid defenses, and/or
that any liability would be offset by recoveries under the counterclaims.
For each of the material legal proceedings described above, the
Company has established reserves for the contemplated defense costs,
expenses and for those amounts that can be reasonably estimated as probable
may be either paid by the Company in settlement of the proceedings or
which may be assessed against the Company by court order or through
arbitration. There can be no assurance that the amount of such
reserves will be adequate to cover all the costs, expenses, settlements
and judgments involved in the material legal proceedings.
The Company and its various subsidiaries are occasionally the
subjects of investigations by the Department of Justice and other
investigative organizations, resulting from employee and other
allegations regarding business practices. The Company does not
anticipate any action as a result of such inquiries and investigations
which would have a material adverse effect on its consolidated
financial position or results of operations or its ability to conduct
business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
During the second quarter of 1995, the Company's Board of Directors
concluded that it was in the best interests of the Company to divest
its Commercial Aviation Business. On June 30,
1995, the Company sold the stock of all its subsidiaries engaged in the
business of commercial aircraft maintenance (the
"Aircraft Maintenance Unit") for $12.5 million (subject to adjustment)
to Sabreliner Corporation. The subsidiaries sold were DynAir Tech of
Florida, DynAir Tech of Texas and DynAir Avionics, Inc. On August 31,
1995 the Company sold to ALPHA Airports Group Plc. all of its
subsidiaries engaged in commercial airline ground handling, passenger
services, aircraft fueling, aircraft line maintenance and cargo
handling (the "Ground Handling Unit"). The subsidiaries were DynAv
Services, Inc., Air Carrier Services, Inc., DynAir CFE Services, Inc.,
DynAir Services, Inc., DynAir Maintenance, Inc., DynCorp/DynAir
Corporation, DAPSCO Inc., DynAir Technologies International, Inc.,
DynAir Fueling Inc., DynAir Fueling of Nevada Inc., DynAir Euroservices
(UK) Ltd., and DynAir Euroservices (Italia) S.p.A. See Note 2 to the
Consolidated Financial Statements as of December 31, 1994.
As a result of the decision to divest itself of the entire
Commercial Aviation Business, the related accounts have been classified
as discontinued operations for financial reporting purposes. The
following discussion and amounts exclude the discontinued operations of
the Commercial Aviation Business unless stated otherwise.
Following is a summary of operations, cash flow and long-term debt
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 29, June 30, 1994 1993 1992
1995 1994
<C> <S> <S> <S> <S> <S>
Operations
Revenues $421,576 $391,161 $818,683 $777,216 $728,244
Gross Profit 17,631 16,833 35,588 34,761 20,339
Selling and corporate
administrative (9,308) (8,558) (16,887) (17,547) (18,503)
Interest, net (6,605) (6,994) (12,505) (12,349) (12,227)
Other (997) (2,026) (7,654) (7,109) (3,553)
Provision (benefit) for
income taxes 545 520 (2,236) 1,289 168
Earnings (loss) from continuing
operations before
minority interest and extra-
ordinary item $ 176 $ (1,265) $ 778 $ (3,533) $(14,112)
June 29, June 30, December 31,
1995 1994 1994 1993 1992
Cash Flow
Net loss $ (875) $ (2,519) $(12,831) $(13,414) $(23,342)
Depreciation and amortization 5,427 6,404 16,340 13,151 12,180
Pay-in-kind interest - 7,370 15,329 13,142 6,590
Working capital items 2,878 (1,362) (28,098) (8,069) (10,861)
Other (2,830) (1,057) (577) (1,228) 316
Discontinued operations (761) (77) 19,198 4,767 5,547
Cash provided (used) by
operating activities 3,839 8,759 9,361 8,349 (9,570)
Investing activities 29,163 (10,808) (22,235) (18,527) (18,130)
Financing activities (17,149) 4,204 8,840 7,817 23,868
Increase (decrease) in cash
and short-term investments $ 15,853 $ 2,155 $ (4,034) $ (2,361) $ (3,832)
</TABLE>
<TABLE>
<CAPTION>
June 29, June 30, December 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Long-term Debt (including
current maturities)
Junior Subordinated Debentures $ 99,620 $ 94,499 $102,658 $ 86,947 $ 73,489
Contract Receivable
Collateralized Notes 100,000 100,000 100,000 100,000 100,000
Mortgages payable 3,983 22,885 22,285 23,416 19,436
Other notes payable and
capitalized leases 7,028 9,912 8,505 8,785 8,129
$210,631 $227,296 $233,448 $219,148 $201,054
</TABLE>
Comparison of Six Months Ended June 29, 1995 with Six Months Ended June 30, 1994
Revenues - Revenues from continuing operations for the second quarter
and first half of 1995 were $209.9 million and $421.6 million, up $11.4
million and $30.4 million over comparative periods in 1994. Increases
in revenue attributable to an acquisition completed in the fourth
quarter of 1994 ($16.3 million and $32.7 million for the second quarter
and first half of 1995, respectively) and new contract awards
(approximately $20.3 million and $36.8 million for the second quarter
and first half of 1995, respectively) were partially offset by declines
from contracts lost in recompetition and reduced levels of services on
continuing contracts.
Cost of Services/Gross Margins - Cost of services from continuing
operations for the second quarter of 1995 was 95.3% of revenue compared
to 95.2% for the same period in 1994, and for the first half of 1995,
cost of services was 95.8% compared to 95.7% in 1994. This resulted in
gross margins of $9.8 million (4.7%) for the second quarter of 1995
compared to $9.5 million (4.8%) for the second quarter of 1994 and $17.6
million (4.2%) and $16.8 million (4.3%) for the first half of 1995 and 1994,
respectively. The slight decrease in gross margin percentages from
1994 to 1995 was the result of numerous operating changes in contract profit
levels and a reduction in the amortization of costs assigned to acquired
contracts. Gross margins in absolute terms followed the changes in revenue.
Selling and Corporate Administrative - Selling and corporate
administrative expense was up slightly to 2.4% of revenue compared to
2.2% for the second quarter of 1994. For the first half of each of
1994 and 1995, selling and corporate administrative expense was 2.2% of
revenue.
Interest - Interest expense for the second quarter of 1995 was $4.0
million, the same as the second quarter of 1994. For the first half of
1995, interest expense was $8.5 million compared to $8.1 million in the
first half of 1994. The increase due to the compounding of interest on
the 16% Junior Subordinated Debentures was offset in the second quarter
by the effect of the repurchase of $3.5 million of debentures and the
elimination of interest expense on the Company's headquarters due to
repayment of the mortgage.
Interest income for both the quarter and first half of 1995 was greater
than during comparable periods in 1994 due to higher cash and short
term investment balances which yielded greater interest income and also
to the compounding of interest at 17% on the Cummings Point Industries,
Inc. note receivable.
Other - Other consists of the following items (in thousands):
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1995 1994 1995 1994
Amortization of costs in excess
of net assets acquired $ 456 $ 469 $ 912 $ 916
Amortization of deferred ESOP costs (a) - 192 - 384
ESOP repurchase premium (a) - 302 - 620
Miscellaneous (94) 18 85 106
$ 362 $ 981 $ 997 $2,026
(a) Deferred ESOP costs and ESOP repurchase premium were fully
amortized and expensed over the period of the original ESOP
agreement (1988-94).
Income Taxes - The provision for income taxes for the second quarter
and first half of 1995 is based on an estimated annual effective tax
rate excluding expenses not deductible for income tax purposes, and, in
addition, includes the tax provision of a majority owned subsidiary
required to file a separate return. The 1994 tax provision reflects
only that of the majority owned subsidiary referred to above. No tax
benefit was recorded for the losses in 1994 due to the uncertainty of
future realization.
Comparison of the Fiscal Years Ended December 31, 1994, December 31,
1993 and December 31, 1992
Revenues - Revenues from continuing operations were $818.7 million in
1994 compared to $777.2 million in 1993, an increase of $41.5 million
(5.3%). The increase in revenue was primarily attributable to
businesses acquired in November and December 1993 and October 1994
($52.5 million), new contract awards or contracts which were in the
start-up phase in 1993 but became fully operational in 1994 ($73.3
million) and a retroactive adjustment on one contract for wage
increases mandated by the Department of Labor under the Service
Contract Act ($7.0 million). These increases were offset by declines
from contracts lost in recompetition and reduced level of services on
existing contracts.
Revenues from continuing operations for 1993 were $777.2 million
compared to 1992 revenues of $728.2 million, an increase of $49.0
million (6.7%). The increase in revenue included approximately $15.1
million from businesses acquired in December 1992 and November and
December 1993, $16.0 million from the U.S. Postal Service contracts
which were in the start-up phase in 1992 but became fully operational
in 1993, and $17.9 million from new contract awards (net of
contracts completed and/or not renewed).
Cost of Services/Gross Margins - Cost of services from continuing
operations was 95.7% of revenues in 1994, 95.5% in 1993 and 97.2% in
1992, which resulted in gross margins of $35.6 million (4.3%), $34.8
million (4.5%) and $20.3 million (2.8%), respectively. The increase in
the 1994 gross margin amount was attributable to acquisitions
consummated in November and December 1993 and October 1994, and new
contract awards which were partially offset by decreases related to
lost contracts and reduced level of services on existing contracts.
The increase in the gross margin levels from 1992 to 1993 was principally due
to improved profit performance on new contracts started in 1992 and the
early part of 1993 (in particular the Postal Service and the Department
of Energy contracts which incurred start-up costs in 1992) and non-
recurring claims of $6.0 million recorded in 1992.
Selling and Corporate Administrative - Selling and corporate
administrative expenses as a percentage of revenues were 2.1%, 2.3% and
2.5% in 1994, 1993 and 1992, respectively. The decrease of $0.7
million in 1994 from 1993 was primarily attributable to a decrease in
Restricted Stock Plan expense due to the award of fewer shares in 1994.
There were both increases and decreases in 1993 over 1992 of the
various elements and components of these expenses. However, the most
significant factor contributing to the decrease of $1.0 million from
1992 to 1993 was a reduction in bid and proposal costs from the
unusually high amount incurred in 1992 on a contract proposal for the
Department of Energy's Strategic Petroleum Reserve in Louisiana.
Interest - Interest expense was $14.9 million in 1994, virtually
unchanged from $14.8 million in 1993. Increases resulting from the
compounding of the pay-in-kind interest on the Junior Subordinated
Debentures and the inclusion of a full year of interest on mortgages
assumed in conjunction with an acquisition in the fourth quarter of
1993 were offset by the reversal of interest accruals resulting from a
favorable settlement with the Internal Revenue Service of the Company's
tax liability for the period 1985-1988.
Interest expense in 1993 of $14.8 million was $0.2 million higher
than 1992. This small increase was primarily the result of the
Contract Receivable Collateralized Notes being outstanding for the full
year of 1993 compared to approximately eleven months in 1992, interest
on the mortgage for the Company's headquarters was for the full year of
1993 compared to five months in 1992 and an increase in the amount of
capitalized leases outstanding, all of which were partially offset by a
reduction in the accrual of interest on possible payments of federal
income taxes.
The net increase in interest income in 1994 over that of 1993 was due
to the compounding of interest on the 17% Cummings Point Industries,
Inc. note receivable, offset by decreases due to the recording in 1993
of prior years' interest income (and offsetting bank fee expense) on
cash balances in various operating accounts. Interest income in 1993
was approximately the same as that in 1992 with increases from the
interest on the Cummings Point Industries note receivable and the above
noted prior year adjustments being offset by decreases resulting from
lower balances of excess funds available for investment.
Other - Other expense in 1994 as compared to 1993 contained several
variances: (i) the write-off of the Company's 50.1% investment in an
unconsolidated subsidiary, (ii) accrual of legal fees and environmental
costs related to divested businesses, (iii) reversal of reserves for
legal and other expenses associated with events which predated the
Company's acquisition of another business and (iv) absence of
amortization for acquired assets.
The increase in 1993 over 1992 was caused primarily by the
accelerated amortization of cost in excess of net assets of an acquired
business for assets that were subsequently determined to have been
overvalued at the time of acquisition, and the initial accrual of legal
and other costs mentioned above.
Years Ended December 31,
1994 1993 1992
Other Expense consists of (in thousands):
Amortization of costs in excess of
net assets acquired $2,347 $3,408 $2,371
ESOP Repurchase Premium (a) 1,323 1,507 2,787
Write-off of investment in unconsolidated subsidiary (b)3,250 - -
Legal and other expense accruals
associated with an acquired business (b) (1,830) 2,070 -
Environmental costs of businesses divested in 1988 (347) 366 1,000
Gain on sale of warrants obtained in divestitures - - (756)
Other adjustments of businesses divested in 1988 (b) 2,665 (73) (1,600)
Miscellaneous 246 (169) (249)
Total Other $7,654 $7,109 $3,553
(a)Refer to Note 8 to Consolidated Financial Statements as of December 31,1994.
(b)Refer to Note 14 to Consolidated Financial Statements as of December 31,1994.
Income Taxes - During 1994, the Company reached a favorable settlement
with the IRS of disputes over tax deductions related to the leveraged
buyout in 1988 and, as a result, applicable tax reserves of $4.1
million were reversed in the fourth quarter of 1994. See Note 15 to
the Consolidated Financial Statements as of December 31, 1994.
The 1994 Federal tax benefit resulted from the reversal of the aforementioned
tax reserves for the IRS examination, net of a partial valuation allowance, less
the Federal tax provision of a majority owned subsidiary required to file a
separate Federal income tax return. In 1994, 1993 and 1992, the Company did
not record any additional Federal income tax benefit because of the uncertainty
regarding the level of future income. The Federal tax provision
recognized in 1993 and 1992 was that of a majority owned subsidiary which
was required to file a separate return. Additionally, the Company
recognized a foreign income tax provision in 1994, 1993 and 1992 and a
state tax credit in 1992.
Working Capital and Cash Flow
Working capital at June 29, 1995 was $96.6 million compared to $85.1
million at December, 1994, an increase of $11.5 million. Cash from
operations, investing and financing activities and the reclassification
of the Cummings Point Industries, Inc. note receivable to current
assets (the note was paid in full on August 10, 1995) increased working
capital by $25.7 million. Offsetting these increases was the
reclassification of $15 million of the 16% Subordinated Debentures to
current liabilities. The ratio of current assets to current
liabilities at June 29, 1995 was 1.77 compared to 1.70 at December 31,
1994. At June 29, 1995, $101.7 million of accounts receivable were
restricted as collateral for the Contract Receivable Collateralized
Notes. Additionally, $3.0 million of cash was restricted as collateral for the
Contract Receivable Collateralized Notes, and $5.2 million of cash was
restricted as collateral for letters of credit securing various contractual
obligations. This restricted cash has been classified as other assets on
the balance sheet.
Working capital at December 31, 1994, was $85.1 million compared to
$67.9 million at December 31, 1993. The increase in working capital
was primarily the result of cash flow from operations and various
investing and financing activities being reinvested in acquisitions and an
increase of accounts receivable. The 1994 ratio of current assets to current
liabilities was 1.70 compared to 1.57 in 1993. At December 31, 1994,
$5.9 million of cash and short-term investments and $124.2 million of
accounts receivable were restricted as collateral for the Contract
Receivable Collateralized Notes.
Operations produced cash flow of $3.8 million for the first half of
1995 compared to $8.8 million for the comparable period in 1994.
Excluding the effects of the changes in current assets and liabilities,
continuing operations produced $1.0 million in the first half of 1995,
down from $10.1 million in the first half of 1994. This was primarily
attributable to the $8.2 million cash payment of accrued interest on
the 16% Junior Subordinated Debentures made in 1995, as opposed to
payment in kind in 1994. For the year 1994, operating activities
produced cash flow of $9.4 million compared to $8.3 million in 1993 and
a negative $9.6 million in 1992. The principal reason for the 1994 and
1993 improvements was a reduction in net losses over each previous year
and increased non-cash amortization and pay-in-kind interest.
Investing activities provided funds of $29.2 million for the first
half of 1995, principally due to the sale/leaseback of the Company's
headquarters building and the refinancing of equipment associated with
discontinued operations. For the year 1994, investing activities used
$22.2 million of cash, of which $14.3 million was used for the
acquisition of businesses and another $3.7 million was used for the
purchase of property and equipment. For the year 1993, investing
activities used $18.5 million of cash which included $10.9 million for
acquisitions of businesses and $3.6 million for the purchase of
property and equipment.
Financing activities used funds of $17.1 million for the first half
of 1995, principally for the payment of debt and repurchase of $3.5
million of the Company's 16% Junior Subordinated Debentures. For the
year 1994, financing activities provided cash of $8.8 million. The
sale of stock to the ESOP contributed $17.1 million, and cash of $4.5
million was used for payments on indebtedness, and $3.2 million was
used to purchase treasury stock. For the year 1993, financing
activities provided cash of $7.8 million. Payments of $16.1 million
were received on the loan to the ESOP, $5.8 million was used for
payments on indebtedness and $2.0 million was used to purchase treasury
stock. The treasury stock purchases were primarily to meet ERISA
requirements to repurchase ESOP shares.
Liquidity and Capital Resources
At June 29, 1995, the Company's debt totaled $210.6 million compared
to $233.4 million at December 31, 1994, $219.1 million at December 31,
1993 and $201.1 million at December 31, 1992. The decrease in debt
from December 31, 1994 to June 29, 1995 resulted from the liquidation
of the $18.2 million mortgage on the Company's headquarters building
and the purchase of $3.5 million of Junior Subordinated Debentures.
The funds used for the liquidation of debt were obtained from the
sale/leaseback of the Company's headquarters building and equipment
refinancing related to discontinuance of the Ground Handling Unit of the
Commercial Aviation Business. The increase in debt for 1994 and 1993 resulted
principally from the pay-in-kind interest on the Junior Subordinated Debentures.
The Company had an increase in cash and short-term investments of
$15.9 million from December 31, 1994 to June 29, 1995, which resulted
primarily from the aforementioned refinancing of equipment. The Company had a
net decrease in cash and short-term investments of $4.0 million, $2.4
million and $3.8 million in 1994, 1993 and 1992, respectively. The
decrease for 1994 was caused to a large degree by net investments in
acquired businesses of $14.3 million and an increase in accounts
receivable and contracts in process of $22.5 million. The latter
increase was largely attributable to a delay in finalizing the terms on
a new contract and an internal disruption in a government finance
office, both of which occurred in the fourth quarter of 1994. The
Company's cash flow was favorably impacted in 1994, 1993 and 1992
through the utilization of pay-in-kind interest on the Junior
Subordinated Debentures and the sale of stock to the ESOP totaling
$32.4 million, $29.2 million and $22.7 million, respectively. The
Company paid in cash the June 29, 1995 interest payment on its 16%
Junior Subordinated Debentures.
On July 19, 1995 and August 10, 1995, the Board of Directors
authorized the redemption of $15 million and $12.5 million,
respectively, of Junior Subordinated Debentures.
On August 10, 1995, the Company received full payment (including
interest) on the Cummings Point Industries, Inc. note receivable. This
note receivable had been classified as a deduction in the stockholders'
equity section of the balance sheet at December 31, 1994, but was re-
classified to current assets at June 29, 1995.
On June 30, 1995, the Company sold the stock of all its subsidiaries
engaged in the business of aircraft maintenance to Sabreliner
Corporation for $12.5 million in cash, subject to final adjustments based on
the closing balance sheet and to possibe additional payments based on future
business revenue of the sold subsidiaries.
On August 31, 1995, the Company sold to ALPHA Airports Group Plc. ("Alpha")
all of its subsidiaries engaged in ground handling for $122 million
in cash, subject to final adjustments based on the closing balance sheet.
The net proceeds from these transactions are in excess of the book value of the
net assets of these discontinued businesses. The proceeds will be
used primarily to retire debt and satisfy existing equipment financing
obligations of the Ground Handling Unit.
On July 25, 1995, the Company entered into a revolving credit facility
with Citicorp North America, Inc. under which the Company may borrow up
to $20 secured by
specified eligible government contract receivables ($15 million) and
other receivables ($5 million). The agreement requires the Company to
maintain compliance with certain covenants
and will expire on the earlier of July 23, 1996 or the
refinancing of the existing $100 million Contract Receivable
Collateralized Notes. In the event that the financing facility underlying
the Contract Receivable Collateralized Notes is expanded, the Company
is required to pay down the Citicorp North America, Inc. revolving credit
facility.
The Company has agreed to contribute up to $18,000,000 in cash or
stock to the ESOP to satisfy ESOP funding obligations for 1995 and a portion
of 1996. The amount of the Company's annual contribution to the ESOP is
determined by, and within the discretion of, the Board of Directors and
may be in the form of cash, Common Stock or other qualifying securities. In
accordance with ERISA requirements and ESOP plan documents, in the event
that an employee participating in the ESOP is terminated, retires, dies or
becomes disabled while employed by the Company, the ESOP Trust or the Company
is obligated to repurchase shares of Common Stock distributed
to such former employee under the ESOP, until such time as the Common Stock
becomes "Readily Tradable Stock," as defined in the ESOP plan documents.
See Note 8 to the Consolidated Financial Statements as of December 31, 1994.
Through December 31, 1996, the Company will be obligated to
pay the higher of $27.00 per share or the fair market value at the time
of repurchase for any such shares. In the event the fair market value of a
share is less than $27.00, the Company is committed to pay through
December 31, 1996, up to an aggregate of $16,000,000,
the difference ("Premium") between the fair market value and $27.00 per share.
As of February 1, 1995, the Company had paid a total of $4.1 million of
the $16,000,000 to such former employees. As of
December 31, 1994, fair market value was determined to be $18.20 per share
(for shares with a control premium) for shares allocated in the years 1988
through 1993, and $14.60 per share (for shares without a control premium)
for shares allocated in 1994. Although the
Company estimates total Premium of $8,500,000 there can be no
guarantee that the Company will not be required to fund the entire $16,000,000
Premium. The Company estimates an aggregate annual
commitment to repurchase shares from the ESOP participants as follows:
$5,500,000 in 1995, $4,000,000 in 1996, $5,400,000 in 1997, $5,100,000
in 1998, $4,900,000 in 1999 and $65,559,000 thereafter. To the extent that the
Company repurchases shares as described above, its ability to purchase
shares on the Internal Market will be adversely affected. See "Risk Factors --
Obligations to Repurchase Shares."
The Company believes that with the sale of the Commercial Aviation
Business and the collection of the Cummings Point Industries, Inc. note
receivable, it will have sufficient cash to retire substantially all of
the high interest rate Junior Subordinated Debentures. Assuming the
retirement of the Junior Subordinated Debentures, improved cash flow
from the Company's continuing operations, the continuation of the ESOP
to purchase Common Stock to fund the ESOP retirement benefits, the potential
expansion of the financing facility underlying the Contract Receivable
Collateralized Notes and the continuation of other programs which have been
initiated to improve operations and cash flows, management believes the
Company will be able to meet its debt obligations and working capital
requirements.
The Company's primary source of cash and cash equivalents is its
operations. The Company's principal customer is the U.S. Government.
This limits the Company's credit risk and provides for a dependable
flow of cash from the collection of its accounts receivable.
Additionally, many of the contracts with the U.S. Government provide
for progress billings based on costs incurred. These progress billings
reduce the amount of cash that would otherwise be required during the
performance of these contracts. Other than existing cash and short
term investments, the unused amounts which may be available under
the July 25, 1995 revolving credit facility with Citicorp North America, Inc.
and the potential expansion of the Contract Receivable Collateralized Notes,
the Company has no unused sources of liquid assets.
Although the Company has made some progress towards diversification
into non-defense business activities, the Company is still heavily
dependent on contracts from the Department of Defense. Due to the
procurement cycles of its customers (generally three to five years),
the Company's revenues and margins are subject to continual
recompetition. In a typical annual cycle approximately 20% to 30% of
the Company's Government Contracts will be recompeted and the Company
will bid on several new contracts. Existing contracts can be lost or
re-won at lower margins at anytime and new contracts can be won. The
net outcome of this bidding process, which in any one year can have a
dramatic impact on future revenues and earnings, is impossible to
predict. Also, if the U.S. Government budget is reduced or spending
shifts away from locations or contracts for which the Company provides
services, the Company's ability to retain current contracts or obtain
new contracts could be significantly reduced.
EMPLOYEE BENEFIT PLANS
The Company maintains several employee benefit plans pursuant to
which certain of the shares of Common Stock being offered hereby may be
offered or sold. The primary purpose of these plans is to motivate the
Company's employees and directors to contribute to the growth and
development of the Company by encouraging them to achieve and surpass
annual goals of the Company and of the operations for which they are
responsible. The following is a summary description of each of these
plans. All capitalized terms, unless otherwise defined, have the
meanings ascribed to them in the employee benefit plan to which they
relate.
Savings and Retirement Plan ("SARP")
The most recent amendments to the SARP (originally adopted in 1983)
which added a Company match for certain investments in Common Stock
were adopted on March 28, 1995, to become effective July 1, 1995.
Trustee
Merrill Lynch Trust Company, 265 Stevenson Avenue, Somerset, NJ
08873, serves as trustee of the SARP, except that the Company serves as
trustee of the Company Stock Fund.
Administration
The Company administers the SARP through an Administrative Committee
consisting of T. E. Blanchard, J. L. Sullivan, and H. M. Hougen,
officers of the Company, whose address is 2000 Edmund Halley Drive,
Reston, VA 22091.
Eligibility and Participation
Generally, all employees (as defined in the SARP) are eligible to
participate in the SARP upon commencing employment, except for
employees in groups or units designated as ineligible. As of December
31, 1994, there were approximately 4,492 participants in the SARP.
Contributions and Allocations
The SARP permits a participant to elect to defer a portion of his or
her compensation for the Plan Year and to have such deferred amount
contributed directly by the Company to the participant's SARP account.
Amounts deferred by participants, including rollovers from qualified
plans, totaled approximately $9.0 million for the Plan Year ended
December 31, 1994. Under the terms of the SARP, deferred amounts are
treated as contributions made by the Company. The maximum amount of
compensation that a participant may elect to defer is determined by the
SARP Administrative Committee, but in no event may the deferral exceed
$9,240 per year during 1995 (adjusted for cost-of-living under rules
prescribed by the Secretary of the Treasury). For 1996, the limitation
will be set by the Internal Revenue Service. In addition to amounts
deferred by participants, the Company may, but is not obligated to,
make a matching contribution to the SARP accounts of those participants
who have elected to defer a portion of their compensation equal to a
percentage or percentages of the amounts which such participants have
elected to defer. This Company matching contribution is determined
periodically by the Board of Directors and is allocated to the SARP
accounts of those participants who have elected to defer a portion of
their compensation. Commencing July 1, 1995, the Company intends to
contribute 100% of the first 1% of a participant's compensation
deferred under the SARP for investment in the Company Stock Fund and
25% of the next 4% of such deferred compensation (the "Stock Match").
The Company's Stock Match contribution to the SARP will be made in
shares of Common Stock unless the Board of Directors determines to make
the contribution in cash, which would then be used to purchase Company
Stock on the Internal Market. 850,000 shares of Common Stock have been
reserved for possible issuance in satisfaction of the Company's Stock
Match obligations during 1995 through 2001.
Certain acquired subsidiaries of the Company previously made matching
cash contributions to separately maintained 401(k) qualified deferred
savings plans without regard to the nature of the investment of the
employee's contribution. Effective January 1, 1995, these plans were
merged into the SARP. In certain instances, the prior matching
contribution practices followed under the predecessor plan will be
continued by the Company, either in addition or as an alternative to
the Stock Match.
Company contributions to the SARP are made by the due date (including
extensions) for the Company's federal income tax return for the
applicable year except contributions resulting from amounts deferred by
participants, which must be made within 30 days of deferral. The
Company's practice has been to make matching contributions quarterly
based on current participant bi-weekly deferrals, and the Company plans
to make a Stock Match in conjunction with each applicable Trade Date.
Any additional Company contribution, if required, will be made after
the end of the Plan Year.
An Eligible Employee may transfer to the trust fund maintained for
the SARP a rollover contribution from another qualified retirement plan
pursuant to applicable regulations and SARP Administrative Committee
procedures. A participant in the SARP who has made a deferral election
may terminate or alter the rate of his or her deferrals at any time
under the terms of the SARP.
Investment of Funds
The SARP Administrative Committee is authorized to establish a choice
of investment alternatives including securities of the Company, in
which contributions to the SARP (including that portion of compensation
which participants elect to defer) may be invested. The investment
alternatives currently available to participants in the SARP include a
Company Stock Fund, and six Merrill Lynch & Company funds ("Merrill
Lynch Funds") described below. Under the terms of the SARP, (i) a
participant's entire interest in his or her SARP account may be
invested in the Company Stock Fund or in a mixture of the Company Stock
Fund and/or any of the Merrill Lynch Funds, provided that, in order to
obtain the Stock Match, the matched portion of a participant's
compensation deferred under the SARP must be invested in the Company
Stock Fund that is not exchangeable for other investment alternatives
until after a period of 18 months. The Company's Stock Match will also
be invested in the Company's Stock Fund, which contribution will not be
allowed to be exchanged for another investment alternative.
Participants may elect at such time, in such manner and subject to such
restrictions as the SARP Administrative Committee may specify, to have
contributions allocated or apportioned among the different investment
alternatives. Separate SARP accounts are established for each
investment alternative selected by a participant and each such account
is valued separately. Except for restrictions on investments in the
Company Stock Fund, participants may transfer amounts from one
investment alternative to one or more other investment alternatives on
a daily basis.
Investments in the Company Stock Fund (other than the non-
exchangeable Company contribution described in the preceding paragraph)
may be exchanged into other investment choices (subject to the 18-month
limitation mentioned above) only on a Trade Date. It is the current
policy of the SARP Administrative Committee to keep all amounts related
to the Company's Stock Fund invested in Common Stock, except for
estimated cash-equivalent reserves which are primarily used to provide
future benefit distributions, future investment exchanges and other
cash needs as determined by the SARP Administrative Committee.
Residual cash remaining after accounting for estimated cash reserves
generally will be used to purchase Common Stock. If cash reserves in
the Company Stock Fund are insufficient at any given time to provide
benefit distributions and/or investment exchanges, shares held by the
Company Stock Fund may be offered for sale on the Internal Market.
Exchanges out of the Company Stock Fund may be deferred until such
time, if ever, that sufficient cash is available to make required
benefit distributions and provide for investment exchanges.
Accordingly, investment exchanges of participants investments held in
the Company Stock Fund may be restricted. See "Risk Factors -- Absence
of a Public Market" and "Market Information -- The Internal Market."
The following tables summarize as of the dates indicated, the
investment performance of each of Merrill Lynch s six nationally traded
mutual funds for the last six years (except for the Equity Index Trust,
for which there is no data available during the period from 1988 to
1992). The summary is based on an initial investment of $100 in each
investment alternative.
Corporate Bond Fund
% Increase
Unit Value From Prior Year
12/31/88 100 ---
12/31/89 113.61 13.61%
12/31/90 121.53 6.97%
12/31/91 142.29 17.08%
12/31/92 153.00 7.53%
12/31/93 172.11 12.49%
12/31/94 163.40 (5.06%)
Capital Fund
Unit Value % Increase
12/31/88 100 ---
12/31/89 122.98 22.98%
12/31/90 124.31 1.08%
12/31/91 155.00 24.69%
12/31/92 162.80 5.03%
12/31/93 185.12 13.71%
12/31/94 186.80 0.91%
Basic Value Fund
Unit Value % Increase
12/88 100 ---
12/89 117.54 17.54%
12/90 102.18 (13.07%)
12/91 130.00 27.23%
12/92 143.47 10.36%
12/93 175.26 22.16%
12/94 178.71 1.97%
Retirement Preservation Trust Fund
Unit Value % Increase
12/88 100 ---
12/89 108.70 8.70%
12/90 117.89 8.46%
12/91 126.94 7.67%
12/92 135.56 6.79%
12/93 143.70 6.01%
12/94 151.99 5.77%
Equity Index Trust
Unit Value % Increase
12/92 100 ---
12/93 109.66 9.66%
12/94 110.97 1.19%
Global Allocation Fund
Unit Value % Increase
12/89 100 ---
12/90 101.88 1.88%
12/91 131.17 28.75%
12/92 147.16 12.19%
12/93 178.08 21.01%
12/94 174.52 (2.00%)
Company Stock Fund
Because the Company's Common Stock has not been publicly traded
since 1988, there has not been any historical market-determined price.
However, there have been valuations of the Common Stock made by an independent
appraiser as required by the ESOP, the Board of Directors has (based upon such
valuations) periodically determined the fair
market value of the Common Stock for purposes of offers and sales of
Common Stock made pursuant to the Stockholders Agreement, and there
have also been private share transactions based upon such
determinations. The prices of Common Stock set forth in the table below
are based on these various valuations, determinations and transactions, and
(with the exception of the price for July 1, 1995) not on the Formula Price
that will be utilized for purchases and sales of Common Sock on the
Internal Market.
Effective with the commencement of the LBO in January
1988, the price was based on a "package" consisting of one share of
Common Stock plus Warrants to purchase 6.6767 additional shares. The
exercise price of the Warrants was reduced from $5.00 per share to
$0.25 per share during the period 1988 to as 1993; as each third of the
outstanding balance of the initial ESOP loan was repaid, the exercise price was
reduced by one-third.
The average price per share figures shown below for July 1, 1988 and
1989 ($3.47 and $3.79, respectively) represent the weighted average of the
actual costs to the Company's employee stockholders based on a purchase
price of $24.25 per unit, each unit being comprised of one share of
Common Stock and Warrants to purchase 6.6767 shares of Common Stock at
an exercise price of $0.25 per share.
Other than an isolated block transaction in November 1991, as a result
of which the Company repurchased approximately $1.2 million of Common
Stock at a per share price of $7.04, the average price per share figures
shown below for July 1, 1990 through July 1, 1994 reflect fair market values
established by the Board of Directors based on valuations (adjusted as
described below) of the Common Stock made an independent appraiser as required
by the ESOP. Prior to December 31, 1993, the appraiser's calcuation
produced annually a single control share valuation, which applied to shares
allocated to ESOP participants' accounts during the period from 1988 through
1993. This control share premium was not applicable to shares of Common
Stock outside the ESOP, and therefore the appraisal amount was adjusted by the
Company's Chief Financial Officer in his recommendation to the Board of
Directors to apply a discount for lack of liquidity and to eliminate the control
share premium. Since December 31, 1993, the independent appraiser has also
produced annually a valuation for the Common Stock not having such a control
premium, which has thereupon been adopted by the Board of Directors without
further adjustment.
From and after May 10, 1995, the Board of Directors has determined that the
price per share will equal the Formula Price described herein. There can be no
assurance that the Common Stock will in the future provide returns comparable
to historical returns, or that the Formula Price will provide returns similar
to those for past transactions that were based on prices other than the Formula
Price.
Average price
Date per share % Increase
July 1, 1988 $3.47 ---
July 1, 1989 $3.79 9.22%
July 1, 1990 $5.20 37.20%
July 1, 1991 $5.72 10.00%
July 1, 1992 $7.68 34.27%
July 1, 1993 $7.97 3.78%
July 1, 1994 $11.86 48.81%
July 1, 1995 $14.90 25.63%
Vesting
Under the SARP as currently in effect, each participant is 100%
vested in those portions of his or her SARP account which are
attributable to the participant's salary deferrals and earnings
thereon. Entitlement to the Stock Match will vest at the rate of 50%
after two years of service and 100% after three years of service,
provided the underlying matched investment in the Company Stock Fund is
held the requisite 18-month period.
Loans
Loans are available from the SARP account to all participants. Loans
have a maximum limit of $50,000 reduced by the participant's highest
aggregate outstanding loan balance during the preceding 12-month
period. Loans are further limited to 50% of a participant's vested
interest in his or her eligible accounts (these loans from SARP may not
exceed the vested value in the SARP less vested amounts invested in the
Company Stock Fund). Loans must (i) bear a reasonable rate of
interest, (ii) be adequately secured, (iii) state the date upon which
the loans must be repaid, which in any event may not exceed five years
from the date on which the loan is made, unless the proceeds are used
for the purchase of a principal residence, in which case repayment may
not exceed 30 years, and (iv) be amortized with level payments, made
not less frequently than quarterly, over the term of the loan. The
Company currently requires that loans be repaid through payroll
deductions. The loan documents provide that 50% of the participant's
vested account balances are security for the loan, and the SARP,
therefore, has a lien against such balances. A loan will result in a
withdrawal of the borrowed amounts from the participant's interest in
the Funds against which the loan is made and, to the extent that cash
assets in accounts other than the Company Stock Fund are required, a
portion of the investment in the Company Stock Fund may need to be
transferred. Principal and interest payments on the loan are allocated
to the account(s) of the borrowing participant in accordance with the
current investment choices of the participant.
Distributions and Withdrawals
If a participant's employment with the Company terminates, the
participant is entitled to receive a single distribution of his or her
entire interest in his or her SARP account as soon as practicable
following the date of such termination. In the event a participant
dies while employed by the Company, the SARP Administrative Committee
will direct the Trustee to make a single distribution of the
participant's entire interest in his or her SARP account to the
participant's spouse, or, if such spouse has given proper consent or if
the participant has no spouse, to the Beneficiary designated by the
participant. In the event the Company determines that the participant
has suffered a permanent disability while employed by the Company, the
Company will direct the Trustee to make a single distribution of the
participant's entire interest in his or her SARP account to the
disabled participant.
Except in the case of qualifying hardship, no withdrawals may be made
from the salary deferral portion of a participant's SARP account prior
to his or her termination of employment unless and until he or she
attains the age of 59 1/2. Any withdrawals made thereafter may be made
only once in each Plan Year. In the absence of a qualified court order
to the contrary, a participant's interest in the SARP may not be
voluntarily or involuntarily assigned or hypothecated. The Company has
established procedures for hardship withdrawals including (i)
definition of qualifying hardships, (ii) requirements for having first
withdrawn all voluntary after-tax contributions from any other Company
retirement plans and having received the maximum loans available under
such plans, and (iii) requirement for a 12-month suspension from making
elective deferrals into SARP following the hardship withdrawal.
All distributions, including withdrawals, from the SARP are paid in
cash, except that the portion of SARP balances represented by Common
Stock shall be distributed in kind, which shares of Common Stock will
be subject to the Company's right of first refusal in the event that
the participant desires to sell such shares other than on the Internal
Market. See "Description of Capital Stock -- Restrictions on Common
Stock."
Employee Stock Ownership Plan
The ESOP was established effective January 1, 1988 as the Company's
principal retirement plan. It succeeded the DynCorp defined benefit
qualified Pension Plan which was terminated in November, 1988,
following the LBO. Following termination of the Pension Plan,
approximately $10 million of excess Pension Plan assets were rolled
over into the ESOP for the benefit of ESOP participants who were also
Pension Plan participants.
At the time of the establishment of the ESOP, it entered into a
Subscription Agreement with the Company under which it agreed to
purchase 4,123,711 shares of Common Stock for $24.25 per share. The
purchases were made by the ESOP with funds obtained under a $100
million loan from the Company. Upon acquisition of the shares
effective September 9, 1988, they were held by the ESOP trustee to be
allocated to employee participants during the period from 1988 through
1993, pro rata to the ESOP's projected pay-off of the Company loan.
During the period September, 1988, through December, 1993, the
Company made cash contributions to the ESOP of approximately $16
million per year, which in turn was used by the ESOP to repay the loan
to the Company. The loan, including interest of approximately $22.3
million, was repaid in its entirety effective December 31, 1993.
In March, 1994, the ESOP purchased an additional 316,189 shares of Common
Stock from the Company at $11.86 per share. In June, 1994, the ESOP purchased
an additional 996,270 shares of Common Stock from the Company at $13.40 per
share. All shares of Common Stock acquired by the ESOP in 1994 were allocated
to ESOP participants during 1994. In March, 1995, the ESOP purchased 1,208,059
additional shares of Common Stock from the Company at $14.90 per share, which
are expected to be allocated to participants accounts in 1995 and 1996.
Trustees and Administration
The ESOP is administered by the ESOP Committee, consisting of J. P.
Schelling, a former employee of the Company, and L. E. Emmerichs and J.
Zall, employees of the Company. Their address is 2000 Edmund Halley
Drive, Reston, VA 22091. The members of the ESOP Committee also serve
as trustees of the ESOP.
Eligibility and Participation
Generally, all employees, except groups or units designated as
ineligible, participate in the ESOP. As of December 31, 1994, there
were approximately 33,000 participants in the ESOP, including
terminated, vested participants.
Contributions, Allocations, and Forfeitures
For the Plan Year ended December 31, 1994, the Company contributed
approximately $17,100,000 to the ESOP. The Company has agreed to contribute
up to $18,000,000 in cash or stock to the ESOP to satisfy ESOP funding
obligations for 1995 and a portion of 1996. The amount of the Company's
annual contribution to the ESOP is determined
by, and within the discretion of, the Board of Directors, subject to
certain limitations. See "General Provisions of the ESOP and SARP."
The Company's annual contribution to the ESOP may be in the form of cash,
Common Stock or other qualifying securities.
Participants may not make voluntary contributions to the ESOP. The
Company s current practice has been to make pro-rata contributions
quarterly.
Company contributions to the ESOP for each Plan Year are generally
allocated to the accounts of participants in the ratio which each such
participant's eligible compensation bears to the total eligible
compensation of all such participants. Forfeitures, if any, of the
non-vested portion of terminated participants accounts are allocated
to the accounts of remaining participants who are entitled to receive
an allocation of the Company contribution. Forfeitures are allocated
in the ratio which each such remaining participant's allocation bears
to the total allocation of all such remaining participants.
Investment of Funds
Although it is generally intended that the assets of the ESOP will be
invested in Company stock,
the ESOP may hold cash pending purchase of Company stock and current
cash needs. The exact number of shares of Common Stock, if any, which
may be purchased by the Trustee of the ESOP in the future will depend
on various factors, including any modifications to the ESOP adopted
either in response to changes or modifications in the laws and
regulations governing the ESOP or at the discretion of the Company's
management. Participants who have attained the age of 55 and have ten
or more years of participation are entitled, pursuant to the terms of
the ESOP and ESOP Committee procedures, to receive distributions of a
percentage of their balances in the ESOP. It is the current policy of
the ESOP Committee to keep all amounts
invested in Common Stock, except for estimated cash reserves which
are primarily used to provide future benefit distributions, future
investment exchanges and other cash needs as determined by the ESOP
Committee. If residual cash reserves in the ESOP are insufficient to
provide cash benefit distributions and/or investment exchanges and the
"put option" described below is not applicable, the ESOP Committee may
offer shares of Common Stock for sale on the Internal Market.
Exchanges out of Company stock may be deferred until such
time, if ever, that sufficient cash is available to make required
benefit distributions and provide for investment exchanges.
Accordingly, investment exchanges of participant's investments held in
the ESOP may be restricted. See "Risk Factors -- Absence of a Public
Market" and "Market Information -- The Internal Market."
Vesting
The ESOP vesting schedule currently provides that a participant's
interest vests 50% after two years of service, 75% after 3 years of
service, and 100% after 4 years of service, so that each participant's
interest becomes fully vested after the participant is credited with
four years of service. A participant's interest also becomes fully
vested, notwithstanding the fact that the participant has not yet been
credited with four years of service, at the time of such participant's
attainment of the age of 65, permanent disability, or death while
employed by the Company.
Distributions and Withdrawals
In the event that an employee participating in the ESOP is
terminated, retires, dies or becomes disabled while employed by the
Company, the Company is obligated to repurchase shares of
Common Stock distributed to such former employee under the ESOP
until such time as the Common Stock becomes "Readily
Tradable Stock," as defined in the ESOP plan documents. This "put
option" gives the holder of such shares the right to require the
Company to purchase all or a portion of such shares at their fair market value
during two limited time periods. The first of these periods is the 60-
day period following the date on which the shares are distributed out
of the ESOP and the second is the 60-day period
following notification by the Company of the valuation of the Common
Stock as soon as practicable after the beginning of the Plan Year
commencing after such distribution. Such shares will also be subject
to a right of first refusal by the Company in the event that the
participant desires to sell such shares other than on the Internal
Market. See "Description of Capital Stock -- Restrictions on Common Stock."
Through December 31, 1996, the Company is obligated to pay the
higher of $27.00 per share or the fair market value at the time of
repurchase for any such shares. In the event the fair market value of a share
is less than $27.00, the Company is committed to pay through December 31, 1996,
up to an aggregate of $16,000,000, the difference ("Premium") between the fair
market value and $27.00 per share. As of February 1, 1995, the Company had
paid a total of $4.1 million of the $16,000,000 to such former employees.
As of December 31, 1994, fair market value was determined
to be $18.20 per share (with a control premium) for shares allocated in the
years 1988 through 1993 and $14.60 per share (for shares without a control
premium) for shares allocated in 1994. Although the Company estimates total
Premium of $8,500,000 there can be no guarantee that the Company will not be
required to fund the entire $16,000,000 Premium. The Company estimates an
aggregate annual commitment to repurchase shares from the ESOP participants as
follows: $5,500,000 in 1995, $4,000,000 in 1996, $5,400,000 in 1997, $5,100,000
in 1998, $4,900,000 in 1999 and $65,559,000 thereafter. To the extent
that the Comapany repurchases shares as described above, its ability to purchase
shares on the Internal Market will be adversely affected. See "Risk Factors --
Obligations to Repuchase Shares."
After December 31, 1996, or at any earlier time that the $16 million
limitation is reached, for any purchases by the Company at times when
shares distributed from the ESOP are not Readily Tradable Stock, the
Company will honor its put obligation by paying for each such share the
fair market value required to be paid pursuant to the ESOP plan document.
Until such time as such shares of Common Stock satisfy the ERISA
requirements to become Readily Tradable Stock, the shares of Common
Stock that are distributed out of the ESOP will continue to be subject
to the put option, and would not trade on the Internal Market unless a
distributee declines to exercise his put option with respect to such
shares. See "Risk Factors -- Absence of a Public Market."
Participants are not permitted to make withdrawals under the ESOP
prior to termination of employment. In the absence of a qualified
domestic relations order to the contrary, a participant's interest in
the ESOP may not be voluntarily or involuntarily assigned or
hypothecated. Any permitted designee will be subject to the same rules
and limitations applicable to the participant.
General Provisions of the ESOP and SARP
The ESOP and SARP (collectively, the "Plans") each contain the
following provisions:
Contribution Limitations
The maximum contribution for any Plan Year which the Company may make
to all Plans for the benefit of a participant (including contributions
to the SARP as a result of salary deferral elections by participants),
plus forfeitures, may not exceed the lesser of (i) $30,000 or (ii) 25%
of the participant's compensation.
Administration
The Plans are administered, respectively, by the SARP Administrative
Committee and the ESOP Committee, whose members are appointed by and
serve at the discretion of the Company's Board of Directors. The
members of the Committees receive no compensation from the Plans for
services rendered in connection therewith.
The Committees have the power to supervise administration and control
of each Plan's operations including the power and authority to (i)
allocate fiduciary responsibilities, other than trustee
responsibilities, among the Named Fiduciaries, (ii) designate agents to
carry out responsibilities relating to the Plan, other than fiduciary
responsibilities, (iii) employ legal, actuarial, medical, accounting,
programming and other assistance as the Committee may deem appropriate
in carrying out the Plan, (iv) establish rules and regulations for the
conduct of the Committee's business and the administration of the Plan,
(v) administer, interpret, construe and apply the Plan and determine
questions relating to the eligibility, the amount of any participant's
service and the amount of benefits to which any participant or
beneficiary is entitled, (vi) determine the manner in which Plan assets
are disbursed and (vii) direct the Trustee regarding investment of Plan
assets, subject to the directions of participants when provided for in
the Plans.
Pass Through Voting and Tendering of Common Stock
Each participant in the Plans has the right to instruct the Trustee
on a confidential basis as to how to vote his or her proportionate
interest in all shares of Common Stock held in the various Plans. The
Trustee will vote all allocated shares held in the Plans, together with
all unallocated shares held in the ESOP, as to which no voting
instructions are received in the same proportion as the allocated
shares in each Plan for which voting instructions have been received
are voted. The Committees are required to notify participants of their
pass through voting rights prior to each meeting of stockholders.
In the event of a tender or exchange offer for the Company's
securities, each participant in the Plans has the right, under current
Plan procedures, to instruct the Trustee on a confidential basis
whether or not to tender or exchange his or her proportionate interest
in all shares of Common Stock held in the various Plans. The Trustee
will not tender or exchange any allocated shares with respect to which
no instructions are received from participants. Shares held in the
Plans which have not yet been allocated to the accounts of participants
will be tendered or exchanged by the Trustee, on a Plan-by-Plan basis,
in the same proportion as the allocated shares held in each Plan are
tendered or exchanged.
The Trustee's duties with respect to voting and tendering of Common
Stock are governed by the fiduciary provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). These
fiduciary provisions of ERISA may require, in certain limited
circumstances, that the Trustee override the votes, or decisions
whether or not to tender, of participants with respect to Common Stock
and to determine, in the Trustee's best judgment, how to vote the
shares or whether or not to tender the shares.
Trustee
Generally, the Trustee has all the rights afforded a trustee under
applicable law, although the Trustee generally may exercise those
rights at the direction of the Committee. Subject to this limitation
and those set forth in the Plans and master trust agreement, the
Trustee's rights include, but are not limited to, the right to (i)
invest and reinvest the funds held in the Plans trust in any
investment of any kind, including qualifying employer securities and
qualifying employer real property as such investments are defined in
Section 407(d) of ERISA, and contracts issued by insurance companies,
including contracts under which the insurance company holds Plan assets
in a separate account or commingles separate accounts managed by the
insurance company, (ii) retain or sell the securities and other
property held in the Plans trust, (iii) consent or participate in any
reorganization or merger in regard to any corporation whose securities
are held in the Plans trust (subject, in the case of the Company's
securities, to the participants' pass-through voting rights and right
to instruct the Trustee in the event of a tender or exchange offer) and
to pay calls or assessments imposed on the holder thereof and to
consent to any contract, lease, mortgage or purchase or sale of any
property between such corporation and any other parties, (iv) exercise
all the rights of the holder of any security held in the Plans trust,
including the right to vote such securities (subject, in the case of
the Company's securities, to the participants' pass-through voting
rights), convert such securities into other securities, acquire
additional securities and exchange such securities (subject, in the
case of the Company's securities, to the participants' right to
instruct the Trustee in the event of a tender or exchange offer), (v)
vote proxies and exercise any other similar rights of ownership,
subject to the Committee's right to instruct the Trustee as to how (or
the method of determining how) the proxies should be voted or such
rights should be exercised and (vi) lend to participants in the Plans
such amounts as the Committee directs.
The Trustee s compensation and all other expenses incurred in the
establishment, administration and operation of the Plans are borne by
the respective Plans unless the Company elects to pay such expenses.
Administrative and Custodial Services
The Company has entered into an administrative services agreement
with Merrill Lynch, pursuant to which Merrill Lynch performs specified
administrative services for the SARP, principally related to accounting
and recordkeeping. Merrill Lynch's fees for these administrative
services are borne by the SARP. Prior to the first Trade Date, the
administrative responsibility of Merrill Lynch will be assumed by Buck
Consultants, Inc.
Account Statements
Each participant is furnished with a statement of his or her accounts
in the respective Plans, no less than annually.
Amendment and Termination
The Company has reserved the right to amend each of the Plans at any
time and for any reason, except that no such amendment may have the
effect of (i) generally causing any assets of the Plan trusts to be
used for or diverted to any purposes other than providing benefits to
participants and their beneficiaries and defraying expenses of the
Plans, except as permitted by applicable law, (ii) depriving any
participant or beneficiary, on a retroactive basis, of any benefit to
which they would otherwise be entitled had the participant's employment
with the Company terminated immediately prior to the amendment or (iii)
increasing the liabilities or responsibilities of a Trustee or an
investment manager without its written consent.
The Company has also retained the right to terminate any of the Plans
at any time and for any reason. In addition, the Company may
discontinue contributions to the Plans; provided, however, that any
such discontinuation of contributions shall not automatically terminate
the Plans as to funds and assets then held by the Trustee.
ERISA
Each of the Plans is subject to ERISA, including reporting and
disclosure obligations, fiduciary standards, and the prohibited
transaction rules of Title I thereof. Since each of the Plans is an
individual account plan under ERISA, neither of the Plans is subject to
the jurisdiction of the Pension Benefit Guaranty Corporation ("PBGC")
under Title IV of ERISA and the Plans benefits are not guaranteed by
the PBGC.
Federal Income Tax Consequences
Each of the Plans is qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Qualification of the
Plans under Section 401(a) of the Code has the following federal income
tax consequences:
(a) A participant will not be subject to federal income tax on
Company contributions to the Plans at the time such contributions are
made.
(b) A participant will not be subject to federal income tax on any
income or appreciation with respect to such participant's accounts
under the Plans until distributions are made (or deemed to be made) to
such participant.
(c) A participant and the Company will not be subject to federal
employment taxes on Company contributions to the Plans, except as set
forth below with respect to certain Company contributions to the SARP.
(d) The Plans will not be subject to federal income tax on the
contributions to them by the Company and will not be subject to federal
income tax on any of their income or realized gains, assuming that the
Plans do not realize any unrelated business taxable income.
(e) Eligibility for participation in the Plans will preclude or
restrict an employee from making deductible contributions to an
Individual Retirement Account ("IRA"), depending on the employee's
marital status and adjusted gross income ("AGI") for the year. If an
employee or his or her spouse is covered by an employer-maintained
retirement plan (such as any of the Plans), an IRA deduction is
available only if the participant's AGI does not exceed a certain
phase-out level. To the extent that the IRA deduction is limited under
these provisions, a non-deductible IRA contribution is permitted (in an
amount equivalent to the reduction in the deductible IRA amount).
(f) Subject to the contribution limitations contained in the Plans,
the Company will be able to deduct the amounts that it contributes
under the Plans, with the amount of such deduction generally equaling
the amount of the contributions.
(g) Distributions from the Plans will be subject to federal income
tax under special, complex rules that apply generally to distributions
from tax-qualified retirement plans. In general, a single distribution
from any of the Plans will be taxable in the year of receipt at regular
ordinary income rates (on the full amount of the distribution,
exclusive of the amount of the participant's voluntary, non-deductible
contributions made to those Plans which previously permitted such
contributions) unless the distributee is eligible for and elects (i) to
make a qualifying "rollover" of the amount distributed to an IRA or
another qualified plan or (ii) to utilize 10-year averaging, 5-year
averaging or partial capital gains taxation of the distribution.
However, the tax on any portion of the qualifying lump sum distribution
represented by "net unrealized appreciation" in Common Stock
distributed shall be deferred until a subsequent sale or taxable
disposition of the shares, unless the distributee elects not to have
this deferral apply.
A "lump sum distribution," for purposes of eligibility for deferral
of tax on net unrealized appreciation, is defined as a distribution of
the employee's entire vested interest under the Plan within one taxable
year (i) on account of the participant's death or other separation from
service or (ii) after the participant has attained age 59 1/2. For a lump
sum distribution to be eligible for 5-year averaging, the participant
also must have been a participant in the Plan from which the
distribution is made for at least five years prior to the year of
distribution and must have attained age 59 1/2 when the distribution is
received. Under a special transition rule, an individual who had
attained age 50 on January 1, 1986, and who would otherwise be entitled
to elect 5-year averaging (without regard to the age 59 1/2 requirement)
may instead make a one-time election of 10-year averaging (at 1986
rates) and may elect to have the pre-1974 portion of the distribution
taxed at 1986 capital gains rates. The special 5-year or 10-year
averaging treatment, as well as partial capital gains treatment, of
lump sum distributions is applicable to a lump sum distribution from a
Plan only if all other lump sum distributions (whether or not from the
same Plan or plans of a similar type) received during the same taxable
year by the participant are treated in the same manner. Hence, for
example, if a participant receives a lump sum distribution from the
SARP and ESOP in the same taxable year, he or she could not elect to
use 5-year or 10-year averaging on the SARP distributions while
electing a rollover to an IRA of the distribution from the ESOP.
"Early" distributions from the Plans will result in an additional 10%
tax on the taxable portion of the distribution, except to the extent
the distribution (i) is rolled over into an IRA or other qualified plan
or (ii) is used for deductible medical expenses. "Early" distributions
are in-service distributions (i.e., prior to termination of employment)
prior to the date the participant attains age 59 1/2 unless due to the
permanent disability of the participant, and distributions made
following termination of service unless due to the death of the
participant or made to a participant who terminated employment during
or after the calendar year the participant attained the age of 55.
(h) A participant (or his or her spouse in the event of the
participant's death) who (i) receives a distribution from the Plans
(other than certain mandatory distributions after age 70 1/2) and (ii)
wishes to defer immediate tax upon receipt of such distributions, may
transfer (i.e., "rollover") all or a portion thereof, exclusive of the
amount of the participant's voluntary nondeductible contributions (made
to those Plans which previously permitted the participant to make
voluntary nondeductible contributions) received in the distribution, to
either an IRA or, in the case of a participant, another qualified
retirement plan. To be effective, the "rollover" must be completed
within 60 days of receipt of the distribution. Alternatively, the
participant or spouse may request a direct rollover from the Plans to
an IRA or, in the case of a participant, to another qualified
retirement plan.
A participant (or his or her spouse) who does not arrange a direct
rollover to an IRA or another qualified plan will be subject to
mandatory federal income tax withholding at a rate of 20% of the
taxable distribution, even if the participant or spouse later makes a
rollover within the 60-day period.
A participant (or his or her spouse) who makes a valid "rollover" to
an IRA will defer payment of federal income tax until such time as such
participant (or his or her spouse) actually begins to receive
distributions from the IRA. IRA earnings accumulate on a tax-deferred
basis until actually distributed; however, IRA funds generally may not
be withdrawn without penalty until a participant (or his or her spouse)
(i) attains the age of 59 1/2, (ii) becomes disabled or (iii) dies. The
Code requires that distributions from an IRA or a qualified retirement
plan begin no later than April 1 of the taxable year following the year
in which an individual attains the age of 70 1/2, at which time periodic
distributions may continue for the participant's lifetime or for a
lifetime of the participant and the participant's spouse.
(i) The Code imposes a 15% excise tax on "excess distributions" to
an individual from all qualified retirement plans and IRAs (whether or
not plans of the same employer). In general, an "excess distribution"
is a distribution or distributions in excess of $112,500 in any
calendar year (adjusted for cost-of-living increases). This limit is
increased to $562,500 (also adjusted for cost-of-living) in the case of
a lump sum distribution as to which a qualified recipient elects 5-year
or 10-year averaging treatment. Also, an individual was entitled to
elect on his or her 1988 federal income tax return to exclude benefits
accrued as of August 1, 1996, but these benefits are considered in
determining whether additional accrued benefits are subject to the tax.
For those individuals who did not elect this special rule, the
$112,500/$562,500 limit is increased to $150,000/$750,000.
In addition to the federal income tax consequences applicable to all
of the Plans, the Deferred Fund of the SARP is intended to be a
qualified "cash or deferred arrangement" under Section 401(k) of the
Code. A participant in the SARP who elects to defer a portion of his
or her compensation and have the Company contribute it to the SARP will
not be subject to federal income tax on the amounts contributed at the
time the contributions are made. However, these contributions will be
subject to social security taxes and certain federal unemployment
taxes. Elective deferrals by a participant to his or her SARP account
is limited to $7,000 annually (adjusted for cost-of-living). This
annual limit applies on an employee-by-employee basis to all 401(k)
plans (including plans of other employers) in which the employee
participates. For calendar year 1995, the adjusted limit is $9,240.
Generally, the Company will be able to deduct the amounts that it
contributes to the SARP pursuant to employee elections to defer a
portion of their compensation, as well as any matching or additional
Company contributions it makes to the Deferred Fund. The deduction
will be equal to the amount of contributions made.
With respect to loans from the SARP commencing after December 31,
1986, any interest paid by the participant will not be deductible,
regardless of the purpose of the loan or use of the loan proceeds.
Moreover, interest paid on any loan from any of the Plans by a "key
employee," as defined in Section 416(i) of the Code, will not be
deductible.
The foregoing discussion is intended only as a summary of certain
relevant federal income tax consequences and does not purport to be a
complete discussion of all of the tax consequences of participation in
the Plans. Accordingly, participants should consult their own tax
advisors with respect to all federal, state and local tax effects of
participation in the Plans. Moreover, the Company does not represent
that the foregoing tax consequences will apply to any particular
participant's specific circumstances or will continue to apply in the
future and makes no undertaking to maintain the tax-qualified status of
the Plans.
1995 Employee Stock Purchase Plan
General
The 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan" or
"ESPP") was adopted on May 10, 1995, and it became effective July 1, 1995,
subject to approval at the stockholders meeting scheduled for October 23, 1995.
The Stock Purchase Plan is intended to qualify under Section
423(b) of the Code. The Stock Purchase Plan provides for the purchase
of Common Stock by participating employees through voluntary payroll
deductions. At each Trade Date, the Stock Purchase Plan will purchase
for the account of each participant that whole number of shares of
Common Stock which may be acquired with the funds available in the
participant's stock purchase account, together with the Company's
contribution described below. The Stock Purchase Plan is not subject
to ERISA.
Eligibility
Generally, all of the Company's employees are eligible to participate
in the Stock Purchase Plan. No employee, however, who owns capital
stock of the Company having more than five percent of the voting power
or value of such capital stock will be able to participate. An
employee's eligibility to participate in the Stock Purchase Plan will
terminate immediately upon termination of employment with the Company.
Employees may participate in the Stock Purchase Plan by completing a
payroll deduction authorization in accordance with Company policy. The
minimum payroll deduction allowed is $7.00 per week and the maximum
allowable deduction is $450 per week. Further, no employee is entitled
to purchase an amount of Common Stock having a fair market value
(measured as of its purchase date) in excess of $25,000 in any calendar
year pursuant to the Stock Purchase Plan and any other employee stock
purchase plan that may be adopted by the Company.
Purchase of Shares/Discount
Shares of Common Stock purchased under the Stock Purchase Plan will
be acquired by the ESPP on the Internal Market. See "Market
Information -- The Internal Market." Contributions by participants
under the Stock Purchase Plan will be used by the ESPP to purchase
shares at a discount established from time to time by the Compensation
Committee, but not to exceed 15% of the prevailing Formula Price. The
Company will either pay the discount portion to the ESPP in cash, or
will deliver to the ESPP a sufficient number of shares having a value
equal on the applicable Trade Date to the aggregate amount of the
discount. The Board of Directors has established the discount rate at
5%. A total of 100,000 shares has been reserved for possible issuance
under the ESPP in satisfaction of this contribution obligation.
Distribution and Withdrawals
Shares of Common Stock acquired under the Stock Purchase Plan will be
allocated to each participant's account immediately following each
quarterly Trade Date in which the acquisition occurred.
Pursuant to the By-Laws, all shares of Common Stock purchased
pursuant to the Stock Purchase Plan will be subject to the Company's
right of first refusal in the event that the participant desires to
sell such shares other than on the Internal Market. See "Description
of Capital Stock -- Restrictions on Common Stock."
Participants may withdraw the money held in their stock purchase
accounts at any time prior to the acquisition of shares of Common Stock
therewith, although upon doing so the participant will not be eligible
to participate in the Stock Purchase Plan until 12 months after such
withdrawal. No interest will be paid on the money held in the stock
purchase accounts of the participants.
Amendment and Termination
The Board of Directors of the Company may suspend or amend the Stock
Purchase Plan in any respect, except that no amendment may (i) increase
the maximum number of shares authorized to be issued by the Company
under the Plan, (ii) increase the Company's contribution for each share
purchased above 15% of the applicable purchase price for such share,
(iii) cause the Stock Purchase Plan to fail to qualify under Section
423(b) of the Code or (iv) deny to participating employees the right at
any time to withdraw from the Stock Purchase Plan and thereupon obtain
all amounts then due to their credit in their Stock Purchase Accounts.
The Stock Purchase Plan will terminate on December 31, 1999, unless
extended by the Board of Directors.
Administration
The Stock Purchase Plan is administered by the Compensation
Committee. Members of the Compensation Committee receive no
compensation from the Stock Purchase Plan for services rendered in
connection therewith. The current members of the Compensation
Committee are H. S. Winokur, Jr. and R. E. Dougherty. The address of
each such person is 2000 Edmund Halley Drive, Reston, Virginia 22091.
Federal Income Tax Consequences
For federal income tax purposes, no taxable income will be recognized
by a participant in the Stock Purchase Plan until the taxable year of
sale or other disposition of the shares of Common Stock acquired under
the ESPP. However, there is some authority to the effect that FICA and
federal and state unemployment insurance withholding may be required
with respect to the discount portion only. When the shares are
disposed of by a participant two years or more from the date such
shares were purchased for the participant's account by the ESPP, the
participant must recognize ordinary income for the taxable year of
disposition to the extent of the lesser of (i) excess of the fair
market value of the shares on the purchase date over the amount of the
purchase price paid by the participant (the "Discount") or (ii) the
amount by which the fair market value of the shares at disposition or
death exceeds the purchase price, with any gain in excess of such
ordinary income amount being treated as a long term capital gain,
assuming that the shares are a capital asset in the hands of the
participant. In the event of a participant's death while owning shares
acquired under the Stock Purchase Plan, ordinary income must be
recognized in the year of death in the amount specified in the
foregoing sentence. When the shares are disposed of prior to the
expiration of the two-year holding period (a "disqualifying
disposition"), the participant must recognize ordinary income in the
amount of the Discount, even if the disposition is by gift or is at a
loss.
In the case discussed above (other than death), the amount of
ordinary income recognized by a participant is added to the purchase
price paid by the participant and this amount becomes the tax basis for
determining the amount of the capital gain or loss for the disposition
of the shares.
The Company will not be entitled to a deduction at any time for the
shares issued in satisfaction of the discount obligation, if a
participant holding such shares continues to hold his or her shares or
disposes of his or her shares after the required two-year holding
period or dies while holding such shares. If, however, a participant
disposes of such shares representing the discount portion prior to the
expiration of the two-year holding period, the Company is allowed a
deduction to the extent of the amount of ordinary income includable in
gross income by such participant for the taxable year as a result of
the premature disposition of the shares.
The foregoing discussion is intended only as a summary of certain
relevant federal income tax consequences and does not purport to be a
complete discussion of all of the tax consequences of participation in
the Stock Purchase Plan. Accordingly, participants should consult
their own tax advisors with respect to all federal, state and local tax
effects of participation in the Stock Purchase Plan. Moreover, the
Company does not represent that the foregoing tax consequences will
apply to any participant's specific circumstances or will continue to
apply in the future and makes no undertaking to maintain the tax-
qualified status of the Stock Purchase Plan.
1995 Stock Option Plan
General
The 1995 Stock Option Plan ("1995 Option Plan") was approved by the
Company's Board of Directors on February 10, 1995, and it became
effective July 1, 1995, subject to approval at the stockholders meeting
scheduled for October 23, 1995. The 1995 Option Plan authorizes the granting
of non-qualified stock options with respect to an aggregate of
1,250,000 shares of Common Stock, during the period July 1, 1995
through December 31, 1999. The Plan will terminate and all unexercised
options will expire on December 31, 2007.
The exercise price of options granted under the 1995 Option Plan is
determined by the Compensation Committee and may not be less than 100%
of the most recent Formula Price of the Common Stock on the date of
grant. Upon the exercise of an option, the exercise price is fully
payable, in whole or in part, in cash or in shares of Common Stock
valued at the Formula Price on the date of exercise. Any withholding
required as a result of the exercise of a non-qualified option may, at
the discretion of the Compensation Committee, be satisfied by
withholding in shares of Common Stock of the Company valued at the
Formula Price on the date of exercise. All options granted pursuant to
the 1995 Option Plan are non-transferable except by will or the laws of
intestate succession.
Options granted under the 1995 Option Plan may be exercised over a
period specified in the stock option agreement (which period may not
exceed seven years), subject to vesting provisions described below. If
an optionee's employment terminates as a result of death, permanent
disability, or retirement before reaching age 65, all options may be
exercised, to the extent vested at the date of termination, during the
six month period following termination, but in no event after their
respective expiration dates. If an optionee retires at or after age
65, all options, to the extent vested at the date of retirement, may,
for up to one additional year (but in no event later than their
respective expiration dates), be exercised by the optionee or by his
legal representative or permitted assignee. Upon termination of
employment for any other reason, all options (whether or not vested)
will terminate as of the date of such termination of employment, unless
otherwise authorized by the Compensation Committee (but in no event
shall the option be exercisable for a period extending beyond 90 days
following such termination).
Eligibility and Participation
The persons eligible to receive options under the 1995 Option Plan
are key employees designated by the Compensation Committee and
directors. No option may be granted to any individual who, at the time
the option is granted, owns more than 10% of the total combined voting
power of all classes of capital stock of the Company.
Vesting of Options
The right to exercise options granted under the 1995 Option Plan
shall vest at the rate of 20% per year during the five year period
following the date of the grant. Options that are forfeited due to
termination of employment or expiration shall be available for new
grants under the Plan. All options shall expire seven years after the
date of grant unless earlier exercised upon vesting. No grant of
options will be made under the 1995 Option Plan that permits exercise
after more than seven years from the date of the grant.
In the event of a change of control involving the Company, all
optionees will be guaranteed either the continuation of a comparable
stock option plan with comparable rights (including identical rights
with respect to options granted prior to such change of control), or
the right within a reasonable period of time following such change of
control, not to exceed one year, to exercise all granted options under
the 1995 Option Plan, whether or not vested.
Amendment and Termination
The 1995 Option Plan may be amended, suspended or terminated by the
Board of Directors, except that no such amendment may, without the
approval of the holders of outstanding shares of the Company having a
majority of the general voting power, (i) increase the maximum number
of shares for which options may be granted (other than by reason of
changes in capitalization and similar adjustments), (ii) change the
provisions of the 1995 Option Plan relating to the establishment of the
exercise price (other than the provisions relating to the manner of
determination of fair market value of the Company's capital stock to
conform to any applicable requirements of the Code or regulations
issued thereunder), or (iii) permit the granting of options to members
of the Compensation Committee. No options will be granted under the
1995 Option Plan after December 31, 1999.
General Provisions
All shares issued upon exercise of options granted under the 1995
Option Plan are subject to (i) the Company's right of first refusal in
the event that the optionee desires to sell his or her shares other
than on the Internal Market and (ii) the Company's right of repurchase
upon termination of the optionee's employment or affiliation. See
"Description of Capital Stock -- Restrictions on Common Stock."
Grants of stock options may be contingent upon a requirement that
such individuals purchase a specified number of shares of Common Stock
on the Internal Market at the prevailing Formula Price. The
Compensation Committee may also establish other terms relating to
vesting and exercise, such as a target Formula Price.
If the outstanding shares of the Common Stock of the Company are
changed into, or exchanged for a different number or kind of shares or
securities of the Company through reorganization, merger,
recapitalization, reclassification, or similar transaction, or if the
number of outstanding shares is changed through a stock split, stock
dividend, stock consolidation, or similar transaction, an appropriate
adjustment (determined by the Board of Directors in its sole
discretion) will be made in the number and kind of shares and the
exercise price per share of options which are outstanding or which may
be granted thereafter.
Administration
The 1995 Option Plan is administered by the Compensation Committee.
The Compensation Committee is appointed annually by the Board of
Directors, which may also fill vacancies or replace members of the
Compensation Committee. Subject to the express provisions of the 1995
Option Plan, the Compensation Committee has the authority to (i)
interpret the 1995 Option Plan, (ii) prescribe, amend and rescind rules
and regulations relating to the 1995 Option Plan, (iii) determine the
individuals to whom and the time or times at which options may be
granted and the number of shares to be subject to each option granted
under the 1995 Option Plan, (iv) determine the terms and conditions of
the option agreements under the 1995 Option Plan (which need not be
identical), and (v) make all other determinations necessary or
advisable for the administration of the 1995 Option Plan. In addition,
the Compensation Committee may, with the consent of the affected
optionees and subject to the general limitations of the 1995 Option
Plan, make any adjustment in the exercise price, the number of shares
subject to, or the term of, any outstanding option by cancellation of
such option and a subsequent re-granting of such option, or by
amendment or substitution of such option. Options which have been so
amended, re-granted or substituted may have higher or lower exercise
prices, cover a greater or lesser number of shares of capital stock, or
have longer or shorter terms, than the prior options. The members of
the Compensation Committee receive no compensation from the 1995 Option
Plan for services rendered in connection therewith.
Federal Income Tax Consequences
All options granted under the 1995 Option Plan are non-qualified
options. Generally, the optionee will not be taxed upon grant of any
non-qualified option but rather, at the time of exercise of such
option, the optionee will recognize ordinary income for federal income
tax purposes in an amount equal to the excess of the fair market value
at the time of exercise of the capital stock purchased over the
exercise price. The Company will generally be entitled to a tax
deduction at such time and in the same amount that the optionee
realizes ordinary income.
If capital stock acquired upon the exercise of a non-qualified option
is later sold or exchanged, then the difference between the sale price
and the fair market value of such capital stock on the date which
governs the determination of ordinary income is generally taxable
(provided the stock is a capital asset in the holder's hands) as long-
term or short-term capital gain or loss depending upon whether the
holding period for such capital stock at the time of disposition is
more or less than one year.
If payment of the exercise price of a non-qualified option is made by
surrendering previously owned shares of capital stock, the following
rules apply:
(a) No gain or loss will be recognized as a result of the surrender
of shares in exchange for an equal number of shares subject to the non-
qualified option;
(b) The number of shares received equal to the shares surrendered
will have a basis equal to the shares surrendered and a holding period
that includes the holding period of the shares surrendered;
(c) Any additional shares received (i) will be taxed as ordinary
income in an amount equal to the fair market value of the shares at the
time of exercise, (ii) will have a basis equal to the amount included
in taxable income by the optionee, and (iii) will have a holding period
that begins on the date of the exercise.
The foregoing discussion is intended only as a summary of certain
federal income tax consequences and does not purport to be a complete
discussion of all of the tax consequences of participation in the 1995
Option Plan. Accordingly, holders of options granted under the Option
Plan should consult their own tax advisors for specific advice with
respect to all federal, state or local tax effects before exercising
any options and before disposing of any shares of capital stock
acquired upon the exercise of an option. Moreover, the Company does
not represent that the foregoing tax consequences apply to any
particular option holder's specific circumstances or will continue to
apply in the future.
Executive Incentive Plan
General
The Company's current Executive Incentive Plan (the "EIP") became
effective in 1993. The EIP provides for the annual award of
discretionary bonuses based on the achievement of specific financial
and individual performance goals. The EIP will be amended effective
January 1, 1996, to provide for the payment of up to 20% of each award
in the form of shares of Common Stock, based on the most recent Formula
Price. 300,000 shares have been reserved for possible issuance under
the EIP for calendar years 1996 through 2000. The EIP is not subject
to ERISA and is not intended to be qualified under Section 401(a) of
the Code.
Eligibility and Participation
The officers and key managerial employees of the Company designated
by the Compensation Committee are eligible to participate in and
receive bonuses under the EIP.
Awards
Each year the Company establishes bonus pools representing the
aggregate targeted bonuses negotiated in advance with EIP participants.
Awards under the EIP are generally made based upon the achievement of
certain individual and financial performance criteria. Awards under
the EIP are made based on recommendations of the CEO to the
Compensation Committee. Awards of bonuses under the EIP are generally
distributed after the end of the fiscal year to which the bonus
relates. Pursuant to the By-Laws, all shares of Common Stock awarded
under the EIP will be subject to the Company s right of first refusal
in the event that the participant desires to sell such shares other
than on the Internal Market. See "Description of Capital Stock --
Restrictions on Common Stock." Awards of bonuses, including potential
shares of Common Stock may also be subject to forfeiture, in whole or
in part, in the event of the termination of the recipient s employment
or affiliation with the Company prior to the date for payment of
awards.
Pursuant to the EIP, bonuses to the Chief Executive Officer must be
approved by the Compensation Committee. Members of the Compensation
Committee are ineligible to receive awards under the EIP. For services
rendered during the fiscal year ended December 31, 1994, a total of 56
individuals received an aggregate of approximately $2.1 million in cash
bonuses under the EIP. No shares of Common Stock were issued under the
EIP in 1994.
Federal Income Tax Consequences
Awards under the EIP of cash bonuses and shares of Common Stock that
are not subject to forfeiture are taxable as ordinary income to the
recipient in the year received.
The foregoing discussion is intended only as a summary of certain
federal income tax consequences and does not purport to be a complete
discussion of all of the tax consequences of participation in the EIP.
Accordingly, recipients of awards under the EIP should consult their
own tax advisors with respect to all federal, state, and local tax
effects of participation in the EIP. Moreover, the Company does not
represent that the foregoing tax consequences will apply to any
particular participant s specific circumstances.
Amendment and Termination
The EIP may at any time be amended or terminated by the Board of
Directors, except that no amendment or termination may, without a
recipient s consent, affect any bonus award previously made to such
recipient.
Administration
The EIP is administered by the Compensation Committee.
Multiemployer Pension Plans
Union employees who are not participants in the ESOP are covered by
multiemployer pension plans under which the Company pays fixed amounts,
generally per hours worked, according to the provisions of the various labor
contracts covering such employees. In 1994, 1993 and 1992, the Company
expensed $2,367,000, $2,321,000 and $2,604,000 respectively, for these plans.
In the event of the termination of, or withdrawl of the Company's participation
in, any such plans, the Company may be liable for its proportinate share of the
plan's unfunded vested benefits liability, if any.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are:
Herbert S. Winokur, Jr., 51 Director and Chairman of the Board since
1988, term expires 1996. President,
Winokur Holdings, Inc. (investment
company). Formerly Senior Executive Vice
President, Member, Office of the
President, and Director, Penn Central
Corporation. Director of ENRON
Corporation; NacRe Corp.; NHP, Inc.; and
Marine Drilling Companies, Inc.
Dan R. Bannister, 64* Director since 1985, term expires 1995.
Chief Executive Officer since 1985;
President since 1984. Director of
Industrial Training Corporation.
T. Eugene Blanchard, 64* Director since 1988, term expires 1997.
Senior Vice President and Chief Financial
Officer since 1979.
Russell E. Dougherty, 74 Director since 1989, term expires 1996.
Attorney, McGuire, Woods, Battle & Boothe (law
firm). Retired General, United States Air
Force; served as Commander-in-Chief, Strategic
Air Command and Chief of Staff, Allied
Command, Europe. From 1980 to 1986 served as
Executive Director of the Air Force
Association and Publisher of Air Force
Magazine. Former member of the Defense
Science Board; Trustee of the Institute for
Defense Analysis; and Vice Chairman and
Director of The Aerospace Corp.
James H. Duggan, 59* Director since 1988, term expires 1996.
Executive Vice President since 1987;
President of Advanced Technology Services
Sector since July, 1994; President of
Applied Sciences Group from 1991 to 1994.
Paul V. Lombardi, 53* Director since July, 1994, term expires
1997. Executive Vice President since
1994; President, Government Services
Sector since July 1994; Vice President
1992 to 1994; President of Government
Services Group from 1992 to 1994. Senior
Vice President and Group General Manager,
Planning Research Corporation from 1990
to 1992. Senior Vice President and Group
General Manager, Advanced Technology Inc.
from 1988 to 1990.
Dudley C. Mecum II, 60 Director since 1988, term expires 1997.
Partner, G. L. Ohrstrom & Co. (investment
company). Formerly Chairman of Mecum
Associates, Inc. Served as Group Vice
President and Director, Combustion
Engineering, Inc. Director of The Travelers
Inc., Lyondell Petrochemical Company, Vicorp
Restaurants Inc., Fingerhut Companies, Inc.,
and Roper Industries Inc.
David L. Reichardt, 52* Director since 1988, term expires 1995.
Senior Vice President and General Counsel
since 1986. President of Dynalectric Company,
a subsidiary of DynCorp, from 1984 to 1986.
Vice President and General Counsel of DynCorp
from 1977 to 1984.
Gerald A. Dunn, 61* Vice President since 1973; Controller since
1967.
Mark C. Filteau, 44* President of Federal Sector, Information
and Engineering Technology since
December, 1994. President of PRC Public
Sector, March 1992 to November 1994.
Vice President and Senior Vice President
of BDM International from 1986 to 1992.
H. Montgomery Hougen, 60 Vice President since July, 1994; Corporate
Secretary and Deputy General Counsel since
1984.
Richard A. Hutchinson, 50 Treasurer since 1978.
Marshal J. Hyman, 49 Vice President since 1993; Director of
Taxes since 1986.
Marshall S. Mandell, 52 Vice President, Business Development,
Government Sector since July, 1994; Vice
President, Business Development, Applied
Science Group from February 1992 to 1994.
Carl H. McNair, Jr., 61* Vice President since July, 1994; President,
Federal Sector, Enterprise Management since
July, 1994; President, Government Services
Group, Support Services Division from 1990 to
1994.
Ruth Morrel, 40 Vice President, Law & Compliance since July,
1994; Group General Counsel from 1984 to 1994.
Henry H. Philcox, 54 Vice President & Chief Information
Officer since August, 1995. Chief
Information Officer, Internal Revenue
Service from 1990 to June, 1995.
Richard E. Stephenson, 59 Vice President, Technology & Government
Relations since July, 1994; Vice
President Strategic Planning, Government
Services Group from 1991 to 1994.
John L. Sullivan, 59 Vice President of Human Resources,
Quality & Administration since January,
1995; Vice President of Human Resources,
Unisys Corporation Government Systems
Group from 1985 to 1995.
Harold J. M. Williams, 59* Vice President since July, 1994;
President, Federal Sector, Aerospace
Technology since July, 1994; President,
Aerospace Operations Division from 1993
to 1994; Vice President, Business
Development, Government Services Group
from 1990 to 1993.
Robert G. Wilson, 54 Vice President and General Auditor since
1985.
*Officers designated by an asterisk are deemed to be officers for
purposes of Rule 16a-1(f), as promulgated in SEC Release No. 34-28869.
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and
long-term compensation for the chief executive officer and the other
four most highly compensated executive officers of the Company. The
table does not include information for any fiscal year during which a
named executive officer did not hold such a position with the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Long-Term Compensation
Compensation Awards Payouts
(a) (b) (c) (d) (f) (g) (h) (i)
Restricted Securities
Name and Stock Underlying LTPI All Other
Principal Salary Bonus Award(s) Options/ Payouts Compensation
Position Year ($)(1) ($)(2) ($)(3) SARs ($) ($)(4)
<C> <C> <S> <S> <S> <S> <S> <S>
Dan R. Bannister 1994 350,000 165,000 27,159
President & Chief 1993 339,896 155,000 17,465
Executive Officer 1992 317,800 140,000 16,634
James H. Duggan 1994 243,147 95,000 19,875
Executive Vice 1993 248,736 90,000 12,813
President & 1992 234,688 80,000 13,767
Sector President
Paul V. Lombardi 1994 240,405 95,000 19,394
Executive Vice 1993 219,663 100,000 105,000 11,960
President & 1992 47,859 60,000 105,000 2,338
Sector President
T. Eugene Blanchard 1994 196,915 95,000 19,876
Senior Vice 1993 200,591 90,000 17,018
President & Chief 1992 189,131 75,000 16,634
Financial Officer
David L. Reichardt 1994 190,547 95,000 17,906
Senior Vice 1993 193,371 90,000 11,793
President & General 1992 181,934 75,000 10,360
Counsel
<FN>
(1) 1993 salary included special year-end adjustment.
(2) Column (d) reflects bonuses earned and expensed during year,
whether paid during or after such year.
(3) Value of restricted stock units determined in accordance with
Restricted Stock Plan. There is no provision to pay dividends on
restricted stock units. The following table reflects the number of
restricted stock units in the respective accounts of the named
individuals, whether vested or unvested, and the aggregate valuation as
of December 31, 1994.
Name No. of Units Value ($)
Dan R. Bannister 54,661 994,830
James H. Duggan 58,212 1,059,458
Paul V. Lombardi 12,000 218,400
T. Eugene Blanchard 47,467 863,899
David L. Reichardt 32,030 582,946
(4) Column (i) includes individual's pro rata share of the
Company's contribution to the ESOP trust, estimated for 1994, and the
Company-paid portion of group term-life insurance and split-premium
life insurance premiums covering the individual, as reflected in the
following table.
ESOP
Contributions ($) Insurance Premiums ($)
Name 1994 1993 1992 1994 1993 1992
Dan R. Bannister 6,832 8,912 8,912 20,327 8,553 7,722
James H. Duggan 6,832 8,912 8,912 13,043 3,901 4,855
Paul V. Lombardi 6,832 8,912 1,810 12,562 3,048 528
T. Eugene Blanchard 6,832 8,912 8,912 13,044 8,106 7,722
David L. Reichardt 6,832 8,912 8,912 11,074 2,881 1,448
</TABLE>
Compensation of Directors
Non-employee directors of the Company receive an annual retainer fee
of $16,500 as directors and $2,750 for each committee on which they
serve. The Company also pays non-employee directors a meeting fee of
$1,000 for attendance at each Board meeting and $500 for attendance at
committee meetings. Directors are reimbursed for expenses incurred in
connection with attendance at meetings and other Company functions.
Directors and Officers Liability Insurance
The Company has purchased and paid the premium for insurance in
respect of claims against its directors and officers and in respect of
losses for which the Company may be required or permitted by law to
indemnify such directors and officers. The directors insured are the
directors of the Company named herein and all directors of the
Company's subsidiaries. The officers insured are all officers and
assistant officers of the Company and its subsidiaries. There is no
allocation or segregation of the premium as regards specific
subsidiaries or individual directors and officers.
Employment-Type Contracts
While the Company has not entered into employment agreements with any
of its management personnel, in September, 1987, the Company entered
into change-in-control severance agreements with Messrs. Bannister,
Blanchard, Duggan, Dunn and Reichardt. In 1995, the Company entered
into a change-in-control severance agreement with Mr. Lombardi. The
change-in-control agreements of these individuals are collectively
referred to herein as the "Severance Agreements". Each Severance
Agreement provides that certain benefits, including a lump-sum payment,
will be triggered if such executive is terminated following a change-
in-control during the term of that executive's Severance Agreement,
unless such termination occurs under certain circumstances set forth in
the Severance Agreements. The Severance Agreements expire on December
31, 1995, but they are automatically extended unless the Board of
Directors determines otherwise. The amount of such lump sum payment
would be equal to 2.99 times the sum of the executive's annual salary
and the average annual amount paid to the executive pursuant to certain
applicable compensation-type plans in the three years preceding the
year in which the termination occurs. Other benefits include payment
of any incentive compensation which has been allocated or awarded but
not yet paid to the executive for a fiscal year or other measuring
period preceding termination and a pro rata portion to the date of
termination of the aggregate value of incentive compensation awards for
uncompleted periods under such plans. Each Severance Agreement also
provides that, if the aggregate of the lump sum payment to the
executive and any other payment or benefit included in the calculation
of "parachute payments" within the meaning of Section 280G of the Code
exceeds the amount the Company is entitled to deduct on its federal
income tax return, the severance payments shall be reduced until no
portion of the aggregate termination payments to the executive is not
so deductible or the severance payment is reduced to zero. The
Severance Agreements also provide that the Company will reimburse the
executive for legal fees and expenses incurred by the executive as a
result of termination except to the extent that the payment of such
fees and expenses would not be, or would cause any other portion of the
aggregate termination payments not to be, deductible by reason of
Section 280G of the Code.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors
during 1994 were: Herbert S. Winokur, Jr., Chairman of the Board and
Director and Russell E. Dougherty, Director.
Mr. Winokur is the President of Winokur Holdings, Inc., which is the
managing partner of Capricorn Holdings, G. P., which in turn is the
general partner of Capricorn, the holder of the Class C Preferred
Stock. See "Risk Factors -- Class C Preferred Stock Veto Rights" and
"Risk Factors -- Corporate Control Implications of Stockholders
Agreement."
On February 12, 1992, the Company loaned $5,500,000 to Cummings Point
Industries, Inc. ("CPI"), a Delaware corporation of which Capricorn
owns more than 10%. The indebtedness, which was represented by a
promissory note bearing interest at the annual rate of 17% (the
"Note"), was repaid in full on August 10, 1995. The Note was due six
months after issuance, but it was extended for three-month periods
until it was repaid.
No executive officer of the Company serves on the board of directors
or compensation committee of any entity (other than subsidiaries of the
Company) whose directors or executive officers served on the Board of
Directors or Compensation Committee of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Voting Securities
As of August 21, 1995, the Company had 8,719,268 shares of Common
Stock and 123,711 shares of Class C Preferred outstanding, which
constituted all the outstanding voting securities of the Company. If
all the shares issuable upon exercise of outstanding options and
warrants, all the shares issuable upon conversion of outstanding Class
C Preferred and exercise of related warrants, and shares issuable as a
result of immediate vesting and expiration of deferrals or otherwise under the
former Restricted Stock Plan were to be issued, the outstanding voting
securities following such dilution would consist of 13,721,000 shares
of Common Stock (and no shares of Class C Preferred). The following
tables show beneficial ownership of issued voting shares as a
percentage of currently outstanding stock and beneficial ownership of
issued and issuable shares as a percentage of Common Stock on a fully
diluted basis assuming all such conversions, exercises, and issuances.
Security Ownership of Certain Beneficial Owners
The following table presents information as of August 21, 1995,
concerning the only known beneficial owners of five percent or more of
the Company's Common Stock and Class C Preferred.
<TABLE>
<CAPTION>
Amount & Amount &
Nature of Nature of
Ownership of Ownership of Percent of
Name and Address of Title of Outstanding Percent Diluted Diluted
Beneficial Owner Class Shares of Class Shares (3) Shares
<S> <C> <C> <C> <C> <C>
Trustees of the Common 6,235,687 71.5% 6,235,687 45.5%
DynCorp Employee Direct(1) Direct(1)
Stock Ownership Trust
c/o DynCorp
2000 Edmund Halley Dr.
Reston, VA 22091-3436
Capricorn Investors, LP(2) Common 292,369 3.4% 4,117,127 30.0%
72 Cummings Point Road Direct Direct
Stamford, CT 06902
Capricorn Investors, LP(2) Class C 123,711 100.0% N/A N/A
72 Cummings Point Road Preferred Direct
Stamford, CT 06902
<FN>
(1) Shares are held for the accounts of participants in the ESOP.
When allocated to individual participant accounts, shares are voted
upon instruction of the individual participants. Unallocated shares
and shares for which no instructions have been received are voted
proportionately with instructed shares.
(2) Herbert S. Winokur, Jr., Chairman of the Board and a Director
of the Company, is the President of Winokur Holdings, Inc., which is
the managing partner of Capricorn Holdings, G. P., which in turn is the
general partner of Capricorn Investors, LP. No other natural person
who is also an affiliate of the Company may be deemed the beneficial
owner of the shares held by Capricorn Investors, LP.
(3) Assumes exercise of all outstanding options and warrants,
conversion of Class C Preferred, exercise of warrants issuable upon
such conversion, full vesting of all remaining Restricted Stock Plan
units, and distribution of all deferred units or otherwise issuable shares
under Restricted Stock Plan.
</TABLE>
Security Ownership of Management(1)
Beneficial ownership of the Company's equity securities by
directors, and all current officers and directors as a group, are set
forth below:
<TABLE>
<CAPTION>
Amount & Amount &
Nature of Nature of
Ownership of Percent Ownership of Percent of
Name and Title of Title of Outstanding of Class Diluted Diluted
Beneficial Owner Class Shares (2) (3) Shares (4) Shares (3)(4)
<C> <S> <S> <S> <S> <S>
D. R. Bannister Common 308,820 Direct} 3.5% 371,784 Direct} 2.8%
President & Chief 7,342 Indirect} 7,342 Indirect}
Executive Officer
T. E. Blanchard Common 160,325 Direct} 1.8% 205,191 Direct} 1.6%
Senior Vice President 14,306 Indirect} 14,306 Indirect}
& Director
R. E. Dougherty Common 1,870 Direct * 2,331 Direct *
Director
J. H. Duggan Common 135,015 Direct} 1.6% 193,564 Direct} 1.5%
Executive Vice 12,709 Indirect} 12,709 Indirect}
President & Director
P. V. Lombardi Common 5,683 Direct} * 19,514 Direct} *
Executive Vice 408 Indirect} 817 Indirect}
President & Director
D. C. Mecum II Common -- -- -- 2,331 Direct *
Director
D. L. Reichardt Common 78,345 Direct} * 88,739 Direct} *
Senior Vice President 11,009 Indirect} 11,009 Indirect}
& Director
H. S. Winokur, Jr. (5) Common 292,369 Indirect 3.4% 4,117,127 Indirect 30.0%
Chairman of the Board
Director Class C 123,711 Indirect 100.0% N/A N/A
Preferred
All officers and Common 808,498 Direct} 13.66% 1,122,236 Direct} 38.8%
directors as a group 382,558 Indirect} 4,208,333 Indirect}
Class C 123,711 Indirect 100.0% N/A -- --
Preferred
<FN>
(1) Includes information as of August 21, 1995. Shares held by the
ESOP trustee but within individual voting control are included in the
table, whether or not vested.
(2) Restricted stock units which have not been vested and converted
into shares of Common Stock and distributed pursuant to the Company's
Restricted Stock Plan as of August 21, 1995 are not transferable by or
within the voting control of the participants. Such units are not
included in outstanding shares.
(3) An asterisk indicates that beneficial ownership is less than
one percent of the class.
(4) Assumes exercise of all outstanding options and warrants,
conversion of Class C Preferred, exercise of warrants issuable upon
such conversion, full vesting of all remaining Restricted Stock Plan
units, and distribution of all deferred units or otherwise issuable shares
under Restricted Stock Plan.
(5) Includes securities owned by Capricorn. See preceding table
for relationship of Mr. Winokur thereto.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Business Relationships
Mr. Dougherty is of counsel to the law firm of McGuire, Woods,
Battle & Boothe, which firm has provided legal services to the Company
from time to time. See also "Compensation Committee Interlocks and Insider
Participation."
Indebtedness of Related Entities
See "Executive Compensation -- Compensation Committee Interlocks
and Insider Participation" and "Business -- Factoring of Receivables."
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 15 million
shares of Common Stock, par value $0.10 per share, and 123,711 shares
of Class C Preferred, par value $0.10 per share. As of August 21,
1995, there were approximately 439 holders of record of Common Stock
and one holder of record of Class C Preferred. The authorized capital
stock of the Company also includes 3,500,000 shares of 17% Redeemable
Pay-in-Kind Class A Preferred Stock, Par value $0.10 per share, all of
the outstanding shares of which were redeemed in February, 1992, and
620,000 shares of 18% Redeemable Pay-in-Kind Class B Preferred Stock,
par value $24.25 per share, all of the outstanding shares of which were
redeemed in July, 1989; no shares of either class are outstanding.
As of August 21, 1995, there were also outstanding 3,393,798 million
Warrants to acquire an identical number of shares of Common Stock at an
exercise price of $0.25 per warrant. Warrants were issued at the rate
of 6.6767 Warrants for each share of Common Stock acquired by certain
management and other stockholders on March 11, 1988 prior to the LBO,
and 942,563 Warrants were issued to an affiliate of the lead bank
financing the LBO. A total of 5,066,009 Warrants were issued in 1988,
of which 1,672,211 or 33% have been exercised or surrendered through
August 21, 1995. Upon conversion of the Class C Preferred, 825,981
additional Warrants will be issued.
The following is a summary of certain of the detailed provisions of
the Certificate of Incorporation and by-laws of the Company regarding
the Company's capital stock. The summary is not complete and is
qualified in its entirety by reference to the Certificate of
Incorporation and to the by-laws, copies of which are filed as exhibits
to the Registration Statement of which this Prospectus is a part.
Amendment of Certificate of Incorporation
The Board of Directors has recommended to the stockholders a
resolution amending the Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 15 million to 20
million. Approval of such amendment is expected to take place at the
stockholders meeting scheduled for October 23, 1995, and the amendment
will be necessary in order to permit the Company to issue or sell a
substantial portion of the shares being offered hereby. The amendment
will also eliminate the Class A and Class B Preferred Stock currently
authorized.
Common Stock
The holders of Common Stock are entitled to one vote per share of
each share held of record in elections for directors and on all other
matters required or permitted to be approved by a vote of stockholders
of the Company. Each share of Common Stock is equal in respect of
rights and liquidation and rights to dividends and to distributions.
Stockholders of the Company do not and will not have any preferred or
preemptive rights to subscribe for, purchase or receive additional
shares of any class of capital stock of the Company, or any options or
warrants for such shares, or any rights to subscribe for or purchase
such shares, for any securities convertible into or exchangeable for
such shares, which may be issued, sold or offered for sale by the
Company.
Restrictions on Common Stock
The Board of Directors of the Company amended the By-Laws on May 10,
1995, to provide that, as to any share of Common Stock issued on or
after May 11, 1995, such share may not be sold or transferred by the
holder thereof to any third party, other than (1) by descent or
distribution, (2) by bona fide gift, or (3) by bona fide sale after the
holder thereof has first offered in writing to sell the share to the
Company at the same price and under substantially the same terms as
apply to the intended sale and the Company has failed or declined in
writing to accept such terms within 14 days of receipt of such written
offer or has refused to proceed to a closing on the transaction within
a reasonable time after such acceptance; provided, however, that the
sale to the third party following such failure, declination, or refusal
must be made on the same terms which were not previously accepted by
the Company and within 60 days following such event, or the Company
must again be offered such refusal rights prior to a sale of such
share; provided further, however, that this right does not apply to (A)
any transactions made at the current Formula Price through the Internal
Market; (B) any transactions made at any time while the Common Stock is
listed for trading on a national securities exchange or on the over-
the-counter market; (C) sales to the ESOP; or (D) shares which have
been reissued to the holder in exchange for shares issued prior to May
11, 1995 to the extent such previously issued shares were not subject
to any right of first refusal by the Company or its shareholders. See
"Risk Factors -- Company's Right of First Refusal."
Class C Preferred Stock
The Class C Preferred ranks senior and prior to the Common Stock in
the case of a liquidation, dissolution or winding-up of the affairs of
the Company, and bears annual dividends in the amount of $4.365 per
share, which while unpaid compound quarterly at 18% per annum, but are
only paid in the event of a liquidation of the Company or the payment
by the Company of dividends on its Common Stock. The aforementioned
dividends are forfeited upon conversion of the Class C Preferred into
Common Stock. The holder of the Class C Preferred is entitled to
convert each share of Class C Preferred into a share of Common Stock
upon the giving of appropriate notice. The holder of Class C Preferred
is entitled to vote, one vote for each share of Class C Preferred, with
the holders of the outstanding shares of Common Stock of the Company.
The holder of Class C Preferred shares have the right to vote as a
separate class on certain major corporate actions, such as corporate
borrowings, issuance of stock, payment of dividends and the repurchase
of more than $250,000 per annum fair market value of shares of Common
Stock held by employees of the Company (other than shares of Common
Stock distributed to retiring or terminated employees by the ESOP).
These voting rights give the holder of Class C Preferred the ability to
effectively control the Company with respect to certain major corporate
decisions. Consequently, actions that might otherwise be approved by a
majority of the holders of Common Stock could be vetoed by the holder
of Class C Preferred. See "Risk Factors -- Class C Preferred Stock
Rights and Preferences."
Stockholders Agreement
Certain of the management group of the Company, Capricorn and other
outside investors who hold shares of Common Stock are parties to a
Stockholders Agreement originally dated March 11, 1988 and restated
March 11, 1994 (the "Stockholders Agreement"). Under the terms of the
Stockholders Agreement, stockholders who own approximately 54% of the
fully diluted outstanding shares of Common Stock have agreed, among
other things, to vote for the election of a Board of Directors
consisting of four management group nominees, four Capricorn nominees
and a joint nominee who would be elected if needed to break a tie vote.
Since the management group stockholders, directly and through ESOP
shareholdings, and Capricorn represent a majority of the shares of
Common Stock necessary to elect the Company's Board of Directors on a
fully diluted basis, it is unlikely that other stockholders acting in concert
or otherwise will be able to change the composition of the Board of Directors.
Unless extended, the Stockholders Agreement expires on March 10, 1999.
See "Description of Capital Stock -- Stockholders Agreement." See "Risk
Factors -- Corporarte Control Implications of Stockholders Agreement."
VALIDITY OF COMMON STOCK
The validity of the Common Stock offered hereby will be passed upon
for the Company by H. Montgomery Hougen, Vice President and Corporate
Secretary and Deputy General Counsel of the Company. As of August 21, 1995,
Mr. Hougen owned directly and indirectly 19,798 shares of Common Stock.
Mr. Hougen is the beneficial owner of an additional 7,526 shares
through the Company's benefit plans.
EXPERTS
The financial statements and schedules included in this Prospectus
and elsewhere in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement (which
term shall include any amendments thereto) on Form S-1 under the
Securities Act, with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits thereto, and the financial statements
and notes and schedules filed as a part thereof. Statements made in
this Prospectus concerning the contents of any document referred to
herein are not necessarily complete. With respect to each such
document filed with the SEC as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits thereto, and the
financial statements and notes and schedules filed as a part thereof,
as well as such reports and other information filed with the SEC, may
be inspected without charge at the SEC's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the Commission's
regional offices, 75 Park Place, New York, New York 10007 and
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of all or part thereof may be obtained
from those offices upon payment of certain fees prescribed by the
Commission.
The Company undertakes to provide, without charge, to any person,
including a beneficial owner, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of
any document incorporated by reference into this Prospectus, without
exhibits (unless such exhibits are incorporated by reference into such
documents). Requests for such copies should be directed to: DynCorp,
2000 Edmund Halley Drive, Reston, Virginia 22091-3436; Attention:
Corporate Secretary (telephone (703) 264-9108).
COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant
to provisions described in Item 14 below, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
No dealer, salesperson or any
other person has been authorized
to give any information or to
make any representations other
than those contained in this
Prospectus in connection with PROSPECTUS
the offer contained herein, and,
if given or made, information or
representations must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute
an offer of any securities other 11,969,313 Shares
than those to which it relates
or an offer to sell, or a
solicitation of an offer to buy,
to any person in any
jurisdiction in which such offer
or solicitation is not
authorized, or to any person to
whom it is not lawful to make
such an offer or solicitation.
Neither delivery of this
Prospectus nor any sale made
hereunder at any time implies
that information contained
herein is correct as of any time
subsequent to the date hereof.
TABLE OF CONTENTS
The Company DynCorp
Risk Factors
Use of Proceeds
Selected Financial Data Common Stock
Business par value $0.10 per share
Legal Matters
Management's Discussion and
Analysis of Financial
Condition and Results of October 6, 1995
Management
Security Ownership of Certain
Beneficial Owners and Management
Description of Capital Stock
Experts
Available Information
Index to Consolidated Financial
Statements
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable by the Company in connection with the sale
of the Common Stock offered hereby are as follows:
Registration fee-Securities and Exchange Commission $61,498
Printing and engraving expenses 25,000
Blue sky registration and filing fees 50,000
Accounting fees and expenses 75,000
Legal fees and expenses 250,000
Miscellaneous 50,000
Total $511,498
Item 14. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of Delaware
("GCL") allows a corporation to eliminate the personal liability of a
director to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except in cases where the
director breached his duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or a knowing violation of law,
authorized the unlawful payment of a dividend or approved an unlawful
stock redemption or repurchase or obtained an improper personal
benefit. The Registrant's Amended and Restated Certificate of
Incorporation, a copy of which is filed as an exhibit to this
Registration Statement, contains a provision which eliminates
directors' personal liability as set forth above.
The Amended and Restated Certificate of Incorporation of the
Registrant and the Bylaws of the Registrant provide in effect that the
Registrant shall indemnify its directors, officers and employees to the
extent permitted by Section 145 of the GCL. Section 145 of the GCL
provides that a Delaware corporation has the power to indemnify its
officers and directors in certain circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal administrative or investigative (other than an action
by or in the right of the corporation), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit
or proceeding provided that such director or officer acted in good
faith in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, provided that such director or officer had no
cause to believe his or her conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person
acted in any of the capacities set forth above, against expenses
actually and reasonably incurred in connection with the defense or
settlement of such action or suit provided that such director or
officer acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation, except that
no indemnification may be made in respect of any claim, issue or matter
as to which such director or officer shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her
duty to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action was brought shall determine
that despite the adjudication of liability such director or officer is
fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense
of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of a director
or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising
out of his or her status as such whether or not the corporation would
have the power to indemnify him or her against such liabilities under
Section 145.
Item 15. Recent Sales of Unregistered Securities.
On November 12, 1993, the Company sold 125,714 shares of Common Stock
to James I. Chatman, as partial purchase price for the acquisition of
stock of Technology Applications, Inc. The price per share was $17.50,
and the total price for the Common Stock sold to Mr. Chatman was
$2,199,995. The sale was exempt from registration by reason of Rule
505 of Regulation D, as promulgated under the Securities Act of 1933,
as amended.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of exhibits to this
Registration Statement:
Exhibit No. Description
3.1 Certificate of Incorporation of the Registrant, as amended.**
3.2 By-laws of the Registrant, as amended.**
4.1 Employee Stock Ownership Plan, as amended.**
4.2 Savings and Retirement Plan, as amended.**
4.3 1995 Employee Stock Purchase Plan.**
4.4 1995 Stock Option Plan.**
4.5 Executive Incentive Plan, as amended.**
4.6 Equity Target Ownership Policy.**
5 Opinion of H. M. Hougen.+
9 New Stockholders Agreement.**
10.1 Form of Severance Agreement with Management Personnel.++
10.2 Dyn Funding Corporation Note Purchase Agreement.++
10.3 Indenture for 16% Junior Subordinated Debentures.++
10.4 Credit Agreement with Citicorp North America, Inc.++
11 Computations of Earnings per Common Share.++
12 Computation of Ratios.***
13 Annual Report on Form 10-K.++
21 Subsidiaries of the Registrant.+
23 Consent of Arthur Andersen LLP.++
24 Powers of Attorney (included on signature page).**
** Previously filed with the Securities and Exchange Commission.
*** Previously filed with the Securities and Exchange Commission.
However, a revised version of the Exhibit is filed herewith.
++ Filed herewith.
+ To be filed by pre-effective amendment.
(b) Financial Statement Schedules.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Pre-Effective Amendment No. 1
to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Commonwealth of
Virginia, County of Fairfax, on October 6, 1995.
DynCorp
David L. Reichardt
By: David L. Reichardt
Its: Director, Senior Vice President
and General Counsel
POWER OF ATTORNEY
Pursuant to the requirements of the Securities act of 1933, as
amended, this Pre-Effective Amendment No. 1 to Registration Statement
has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title
Herbert S. Winokur, Jr. Director and Chairman of the Board
Herbert S. Winokur, Jr.
Dan R. Bannister Director, President and Chief Executive Officer
Dan R. Bannister (Principal Executive Officer)
T. Eugene Blanchard Director, Senior Vice President and Chief
T. Eugene Blanchard Financial Officer (Principal Financial
Officer)
Russell E. Dougherty Director
Russell E. Dougherty
Gerald A. Dunn Vice President and Controller
Gerald A. Dunn (Principal Accounting Officer)
James H. Duggan Director and Executive Vice President
James H. Duggan
Paul V. Lombardi Director and Executive Vice President
Paul V. Lombardi
Dudley C. Mecum II Director
Dudley C. Mecum II
By: David L. Reichardt Director, Senior Vice President and
David L. Reichardt General Counsel
(Attorney-in-Fact)
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 29, 1995 AND DECEMBER 31, 1994
(Dollars in Thousands)
UNAUDITED
June 29, December 31,
1995 1994 (a)
Current Assets:
Cash and short-term investments (b) $ 23,591 $ 7,738
Notes and current portion of long-term receivables
(Note 3) 9,924 87
Accounts receivable and contracts in process
(net of allowance for doubtful accounts
of $9 in 1995 and 1994) (Note 5) 158,929 172,731
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out) or market 612 793
Other current assets 7,955 6,733
Net current assets of discontinued operations (Note 2) 21,788 18,316
Total current assets 222,799 206,398
Long-Term Receivables 305 433
Property and Equipment (net of accumulated depreciation
and amortization of $30,740 in 1995 and $26,937
in 1994) (Note 6) 18,688 37,849
Intangible Assets (net of accumulated amortization
of $38,415 in 1995 and $37,290 in 1994) 50,712 51,837
Other Assets (Note 5) (b) 16,752 15,355
Net Noncurrent Assets of Discontinued Operations (Note 2) 47,595 67,128
Total $356,851 $379,000
(a) Restated for discontinued operations. See Note 2.
(b) Restricted cash has been reclassified at December 31, 1994 to
conform with current period presentation. See Note 5.
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 29, 1995 AND DECEMBER 31, 1994
(Dollars in Thousands)
UNAUDITED
June 29, December 31,
1995 1994 (a)
Current Liabilities:
Notes payable and current portion of
long-term debt (Note 7) $ 17,874 $ 3,004
Accounts payable 19,275 18,878
Advances on contracts in process 2,775 3,863
Accrued liabilities 86,304 95,512
Total current liabilities 126,228 121,257
Long-Term Debt (Notes 6 and 7) 192,757 230,444
Other Liabilities and Deferred Credits 13,278 17,761
Total liabilities 332,263 369,462
Contingencies and Litigation (Note 10) - -
Redeemable Common Stock at Redemption Value;
$18.20 per share, 125,714 shares outstanding 2,288 2,288
Common Stock Held by ESOP, at Fair Value;
3,674,207 shares at $18.20 and 2,520,518 shares
at $14.90 issued and outstanding in 1995 and
3,691,003 shares at $18.20 and 1,312,459 shares
at $14.60 issued and outstanding in 1994 104,426 86,338
Preferred Stock Class C, 18% cumulative, convertible,
$24.25 liquidation value, 123,711 shares authorized,
issued and outstanding (Note 4) 3,000 3,000
Common Stock, par value ten cents per share, authorized
15,000,000 shares; issued 2,913,401 shares in 1995
and 2,765,393 shares in 1994 291 277
Common Stock Warrants 11,486 11,486
Unissued Common Stock under restricted stock plan 7,565 9,923
Paid-in Surplus 34,479 32,242
Deficit (119,131) (118,256)
Common Stock Held in Treasury, at cost; 543,634 shares
and 173,988 warrants in 1995 and 459,309 shares
and 173,988 warrants in 1994 (10,316) (8,817)
Cummings Point Industries Note Receivable (Note 3) - (8,943)
Unearned ESOP shares (Note 8) (9,500) -
Total $356,851 $379,000
(a) Restated for discontinued operations. See Note 2.
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
UNAUDITED
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1995 1994 (a) 1995 1994 (a)
Revenues $209,940 $198,573 $421,576 $391,161
Costs and expenses:
Cost of services 200,124 189,091 403,945 374,328
Selling and corporate administrative 4,968 4,401 9,308 8,558
Interest income (1,077) (567) (1,913) (1,102)
Interest expense 4,041 4,041 8,518 8,096
Other 362 981 997 2,026
208,418 197,947 420,855 391,906
Earnings (loss) from continuing
operations before income taxes, minority
interest and extraordinary item 1,522 626 721 (745)
Provision for income taxes (Note 9) 573 535 545 520
Earnings (loss) from continuing operations
before minority interest and extraordinary
item 949 91 176 (1,265)
Minority Interest 355 311 657 560
Earnings (loss) from continuing operations
before extraordinary item 594 (220) (481) (1,825)
Earnings (loss) from discontinued
operations net of income taxes (Note 2) 80 (710) (267) (694)
Earnings (loss) before extraordinary item 674 (930) (748) (2,519)
Extraordinary loss from early
extinguishment of debt, net of tax
benefit of $89 (Note 7) - - (127) -
Net Earnings (Loss) $ 674 $ (930) $ (875) $ (2,519)
Weighted average number of common shares
outstanding and dilutive common stock
equivalents:
Primary and fully diluted 12,704,956 6,251,341 8,246,421 5,862,005
Earnings (loss) per common share - primary
and fully diluted:
Continuing operations for common
stockholders $ 0.01 $ (0.10) $ (0.17) $ (0.44)
Discontinued operations 0.01 (0.11) (0.03) (0.12)
Extraordinary item - - (0.02) -
Net earnings (loss) for common
stockholders $ 0.02 $ (0.21) $ (0.22) $ (0.56)
(a) Restated for discontinued operations. See Note 2.
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
UNAUDITED
Six Months Ended
June 29, June 30,
1995 1994(a)
Cash Flows from Operating Activities:
Net loss $ (875) $ (2,519)
Adjustments to reconcile net loss from operations
to net cash provided (used) by operating activities:
Depreciation and amortization 5,427 6,404
Pay-in-kind interest on Junior Subordinated Debentures - 7,370
Restricted Stock Plan - 862
Loss on repurchase of Junior Subordinated Debentures (Note 7) 216 -
Noncash interest income (767) (657)
Other (2,279) (1,262)
Changes in current assets and liabilities,
net of acquisitions:
Decrease in current assets except cash,
short-term investments and notes receivable 12,761 7,146
Decrease in current liabilities except notes payable
and current portion of long-term debt (9,883) (8,508)
Cash provided by continuing operations 4,600 8,836
Cash used by discontinued operations (761) (77)
Cash provided by operating activities 3,839 8,759
Cash Flows from Investing Activities:
Sale of property and equipment (Note 6) 16,003 90
Purchase of property and equipment (1,889) (1,415)
Assets and liabilities of acquired businesses
excluding cash acquired - (6,812)
Investment activities of discontinued operations (Note 2) 17,726 (1,775)
Deposits for letters of credit (Note 5) (2,353) (191)
Other (324) (705)
Net cash provided (used) by investing activities 29,163 (10,808)
Cash Flows from Financing Activities:
Treasury stock purchased (1,499) (1,541)
Payment on indebtedness (Note 6) (19,780) (2,371)
Repurchase of Junior Subordinated Debentures (Note 7) (3,422) -
Sale of stock to Employee Stock Ownership Plan (Note 8) 8,500 8,200
Treasury stock sold - 159
Financing activities of discontinued operations (919) (287)
Other (29) 44
Net cash provided (used) from financing activities (17,149) 4,204
Net Increase in Cash and Short-term Investments 15,853 2,155
Cash and Short-term Investments at Beginning of the Period 7,738 11,772
Cash and Short-term Investments at End of the Period $ 23,591 $ 13,927
Supplemental Cash Flow Information:
Cash paid for income taxes $ 1,497 $ 35
Cash paid for interest $ 12,911 $ 5,542
(a) Restated for discontinued operations. See Note 2.
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. The unaudited consolidated condensed financial statements
included herein have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements as of
December 31, 1994 and 1993 and the notes thereto that follow.
In the opinion of the Company, the unaudited consolidated
condensed financial statements included herein reflect all
adjustments necessary to present fairly the financial position,
the results of operations and the cash flows for such interim
periods. The results of operations for such interim periods
are not necessarily indicative of the results for the full
year.
In order to more clearly present the relationship between the
ESOP shareholders and the Management and Outside Investor
shareholders, the individual stockholder accounts have been
presented separately. In previously issued financial
statements, the stockholders' accounts were aggregated. The
Common Stock Held by ESOP is presented at fair
value to reflect the obligation of the Company to purchase ESOP
shares as long as the Company's common stock is not publicly
traded.
2. The components of discontinued operations of the Commercial
Aviation Business on the consolidated condensed balance sheets and
statements of operations are as follows (in thousands):
June 29, December 31,
1995 1994
Notes and current portion of
long term receivables $ 276 $ 306
Accounts receivable 42,360 35,788
Inventories of purchased products 5,161 5,561
Other current assets 1,662 1,059
Accounts payable (10,235) (7,921)
Other current liabilities (17,436) (16,477)
Net current assets of discontinued
operations $ 21,788 $ 18,316
Property and equipment (net) (a) $ 18,362 $ 22,513
Goodwill 42,212 42,955
Other assets 2,486 1,863
Deferred gain on equipment refinancing (a) (15,294) -
Other liabilities (171) (203)
Net noncurrent assets
of discontinued operations $ 47,595 $ 67,128
(a) In separate transactions on January 20, and February 7,
1995, the Company secured $24,000,000 from the
refinancing of some of Commercial Aviation's equipment.
The book value of the equipment totalling $8,063,000
was removed from the balance sheet and a $15,937,000
gain was deferred.
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1995 1994 1995 1994
Revenues $55,317 $49,978 $103,883 $116,928
Costs of services 52,466 47,702 98,209 111,187
Interest expense and other 2,560 3,161 5,611 6,411
Income tax provision (benefit) 211 (175) 330 24
Earnings (loss) from
discontinued operations $ 80 $ (710) $ (267) $ (694)
3. In February 1992, the Company loaned $5,500,000 to Cummings
Point Industries, Inc. ("CPI"), of which Capricorn Investors,
L.P. ("Capricorn") owns more than 10%. The indebtedness was
represented by a promissory note (the "Note"), bearing interest
at the annual rate of 17%, which provides that interest was
payable quarterly but that interest payments may not be payable
in cash but may be added to the principal of the Note. The
Note was due three months after issuance; however, the Company,
at its option, extended the maturity date in three month
increments to no later than August 12, 1995. By separate
agreement and as security to the Company, Capricorn agreed to
purchase the Note from the Company upon three months notice,
for the amount of outstanding principal plus accrued interest.
As additional security, Capricorn's purchase obligation was
collateralized by certain common stock and warrants issued by
the Company and owned by Capricorn. The note had been
reflected as a reduction in stockholders' equity. On August
10, 1995, the note was paid in full; therefore, the note has
been reclassified to current notes receivable as of June 29,
1995.
4. At June 29, 1995, $7,864,000 of Class C Preferred Stock
cumulative dividends have not been accrued or paid. These
dividends are payable only to the extent that dividends are
paid on the Company's common stock and they will not be paid in
the event the Class C Preferred stock is converted into common
stock.
5. At June 29, 1995, $101,665,000 of accounts receivable are
restricted as collateral for the Contract Receivable
Collateralized Notes, Series 1992-1 ("Notes"). Additionally,
$3,000,000 of cash is restricted as collateral for the Notes
and $5,290,000 of cash is restricted as collateral for letters
of credit required for certain contracts, most with terms of
from three to five years. This restricted cash has been
included in Other Assets on the balance sheet at June 29, 1995.
To conform with the current period presentation, restricted
cash of $3,000,000 and $2,937,000 representing collateral for
the notes and letters of credit, respectively, has been
reclassified to Other Assets at December 31, 1994.
6. On February 7, 1995, the Company sold its corporate
headquarters to RREEF America Reit Corp. C and entered into a
12-year lease with RREEF as the landlord. The facility was
sold for $13,780,000 and the proceeds were applied to the
mortgage on the building which was due to mature on March 27,
1995. A net gain of $2,573,000 was realized on the transaction
and is being amortized over the life of the lease.
7. During the first half of 1995, the Company repurchased
$3,500,000 face value of its 16% Junior Subordinated
Debentures. The gain on the repurchase, net of the write-off
of the related unamortized discount and deferred debt expense
and associated transaction fees, has been reported as an
extraordinary loss, net of income tax.
On July 19, 1995, the Board of Directors authorized the
redemption of $15,000,000 of the Company's 16% Junior
Subordinated Debentures in accordance with the terms of the
indenture. As a result, the amount subject to the call has
been reclassified to the current portion of long term debt.
8. In March, 1995, the Employee Stock Ownership Plan issued a
promissory note to the Company in the amount of $18,000,000 and
the Company issued 1,208,059 shares of common stock to the
ESOP. The unpaid balance of the note has been reflected as a
reduction in stockholders' equity. As payments are made on the
note, the shares will be allocated to the participants'
accounts. ESOP expense for continuing operations was
$3,544,000 and $7,470,000 for the quarter and first half of
1995, respectively.
9. The provision for income taxes for the quarter and first half
of 1995 is based on an estimated annual effective tax rate
excluding expenses not deductible for income tax purposes and,
in addition, includes the tax provision of a majority owned
subsidiary required to file a separate return. The 1994 tax
provision reflects only that of the majority owned subsidiary
referred to previously.
The income tax provision or benefit for the items shown net of
tax (i.e. discontinued operations and extraordinary item), is
calculated in the same manner as that of continuing operations.
10. The Company is involved in various claims and lawsuits,
including contract disputes and claims based on allegations
of negligence and other tortious conduct. The Company is
also potentially liable for certain environmental, personal
injury, tax and contract dispute issues related to the prior
operations of divested businesses. In most cases, the
Company has denied, or believes it has a basis to deny,
liability, and in some cases has offsetting claims against
the plaintiffs or third parties. Damages currently claimed
by the various plaintiffs for these items, some of which may
not be covered by insurance and which have not been fully
reserved for in the financial statements, aggregate
approximately $32,000,000 (including compensatory and
possible punitive damages and penalties).
A former subsidiary, which discontinued its business activities
in 1986, has been named as one of many defendants in civil
lawsuits which have been filed in various state courts against
manufacturers, distributors and installers of asbestos
products. (The subsidiary had discontinued the use of asbestos
products prior to being acquired by the Company.) The Company
has also been named as a defendant in several of these actions.
At the beginning of 1993, 2,115 claims had been filed and
during the year 711 additional claims were filed with 1,275
claims being settled. In 1994, 1,135 additional claims were
filed and 353 were settled. In the first half of 1995, 1,774
new claims were filed with 86 claims being settled. Defense
has been tendered to and accepted by the Company's insurance
carriers. The former subsidiary was a nonmanufacturer that
installed or distributed industrial insulation products.
Accordingly, the Company strongly believes that the subsidiary
has substantial defenses against alleged secondary and indirect
liability. The Company has provided a reserve for the
estimated uninsured legal costs to defend the suits and the
estimated cost of reaching reasonable no-fault liability
settlements. The amount of the reserve has been estimated
based on the number of claims filed and settled to date, number
of claims outstanding, current estimates of future filings,
trends in costs and settlements, and the advice of the
insurance carriers and counsel.
The Company has retained certain liability in connection with
its 1989 divestiture of its major electrical contracting
business, Dynalectric Company ("Dynalectric"). The Company and
Dynalectric were sued in 1988 by a former Dynalectric
subcontractor. The subcontractor has alleged that its
subcontract to furnish certain software and services in
connection with a major municipal traffic signalization project
was improperly terminated by Dynalectric and that Dynalectric
is liable to the former subcontractor, for a variety of
additional claims, the aggregate dollar amount of which have
not been formally recited in the subcontractor's complaint.
Dynalectric has also filed certain counterclaims against the
former subcontractor. The Company and Dynalectric believe that
they have valid defenses, and/or that any liability would be
offset by recoveries under the counterclaims. The
Company has established reserves for the contemplated defense
costs and for the cost of obtaining enforcement of arbitration
provisions contained in the contract.
The Company is a party to other civil lawsuits which have
arisen in the normal course of business for which potential
liability, including costs of defense, are covered by insurance
policies.
The Company has recorded its best estimate of the liability
that will result from these matters. While it is not possible
to predict with certainty the outcome of the litigation and
other matters discussed above, it is the opinion of the
Company's management, based in part upon opinions of counsel,
insurance in force and the facts presently known, that
liabilities in excess of those recorded, if any, arising from
such matters would not have a material adverse effect on the
results of operations, the consolidated financial position or
the liquidity of the Company.
A majority of the Company's business involves contracting with
departments and agencies of, and prime contractors to, the U.S.
government and such contracts are subject to possible termination for
the convenience of the government and to audit and possible
adjustment to give effect to unallowable costs under cost-type
contracts or to other regulatory requirements affecting both
cost-type and fixed-price contracts. In management's opinion,
there are no outstanding issues of this nature at June 29, 1995
that will have a material adverse effect on the Company's
consolidated financial position or results of operations.
<TABLE>
DYNCORP AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1995 1994 1995 1994
PRIMARY AND FULLY DILUTED
<C> <S> <S> <S> <S>
Earnings:
Net earnings (loss) from continuing operations $ 594 $ (220) $ (481) $(1,825)
Preferred stock Class C dividends not accrued
or paid (468) (392) (915) (768)
Net earnings (loss) from continuing operations
for common stockholder 126 (612) (1,396) (2,593)
Earnings (loss) from discontinued operations 80 (710) (267) (694)
Extraordinary item - - (127) -
Net earnings (loss) for common stockholder $ 206 $(1,322) $(1,790) $(3,287)
Earnings (loss) per common share:
Continuing operations for common stockholder $ 0.01 $ (0.10) $ (0.17) $ (0.44)
Discontinued operations 0.01 (0.11) (0.03) (0.12)
Extraordinary item - - (0.02) -
$ 0.02 $ (0.21) $ (0.22) $ (0.56)
Shares:
Weighted average common shares outstanding 12,704,956 6,251,341 8,246,421 5,862,005
</TABLE>
Report of Independent Public Accountants
To DynCorp:
We have audited the accompanying consolidated balance sheets of
DynCorp (a Delaware corporation) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' accounts and cash flows for each of the
three years in the period ended December 31, 1994. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of DynCorp and subsidiaries as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules
listed in Item 16(b) of the Form S-1 are presented for purposes
of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
Washington, D.C.,
September 25, 1995.
ARTHUR ANDERSEN LLP
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994(a) 1993(a)
Current Assets:
Cash and short-term investments (Notes 1 and 5) $ 7,738 $ 11,772
Notes and current portion of long-term receivables (Note 3) 87 147
Accounts receivable and contracts in process
(Notes 3, 4 and 5) 172,731 135,675
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out) or market 793 326
Deferred income taxes (Note 15) 2,698 -
Other current assets 4,035 12,690
Net current assets of discontinued operations (Note 2) 18,316 25,480
Total Current Assets 206,398 186,090
Long-term Receivables, due through 2001 (Note 3) 433 41
Property and Equipment, at cost (Notes 1 and 19):
Land 5,372 5,517
Buildings and leasehold improvements 24,348 23,692
Machinery and equipment 25,868 26,552
55,588 55,761
Accumulated depreciation and amortization (17,739) (16,186)
Net property and equipment 37,849 39,575
Intangible Assets, net of accumulated amortization
(Notes 1, 14 and 20) 51,837 44,602
Other Assets (Notes 3 and 5) 15,355 19,078
Net Noncurrent Assets of Discontinued Operations (Note 2) 67,128 70,717
Total $379,000 $360,103
(a) Restated for the discontinuance of the Commercial Aviation business
(see Note 2).
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994(a) 1993(a)
Current Liabilities:
Notes payable and current portion of long-term debt
(Notes 3 and 5) $ 3,004 $ 3,209
Accounts payable (Note 3) 18,878 18,327
Deferred revenue and customer advances (Note 1) 3,863 1,177
Accrued income taxes (Notes 1 and 15) 30 3,074
Accrued expenses (Note 6) 95,482 92,433
Total Current Liabilities 121,257 118,220
Long-term Debt (Notes 3, 5 and 20) 230,444 215,939
Deferred Income Taxes (Notes 1 and 15) 1,210 1,269
Other Liabilities and Deferred Credits (Note 3) 16,551 16,309
Total Liabilities 369,462 351,737
Contingencies and Litigation (Note 21) - -
Redeemable Common Stock, at Redemption Value;
$18.20 per share in 1994 and $17.50 per share
in 1993, 125,714 shares outstanding (Note 7) 2,288 2,200
Common Stock Held by ESOP, at Fair Value;
3,691,003 shares at $18.20 and 1,312,459 shares at $14.60
issued and outstanding in 1994 and 3,821,295 shares
issued and outstanding at $17.99 in 1993 (Note 8) 86,338 68,745
Preferred Stock, Class C 18% cumulative, convertible,
$24.25 liquidation value, 123,711 shares authorized,
issued and outstanding (Note 9) 3,000 3,000
Common Stock, par value ten cents per share, authorized
15,000,000 shares; issued 2,765,393 shares in 1994
and 1,068,117 shares in 1993 (Note 10) 277 107
Common Stock Warrants (Note 11) 11,486 15,119
Unissued Common Stock under restricted stock plan (Note 11) 9,923 10,395
Paid-in Surplus 32,242 27,633
Deficit (118,256) (105,425)
Common Stock Held in Treasury, at cost; 459,309 shares
and 173,988 warrants in 1994 and 285,987 shares and
178,100 warrants in 1993 (8,817) (5,840)
Cummings Point Industries Note Receivable (Note 12) (8,943) (7,568)
Total $379,000 $360,103
(a) Restated for the discontinuance of the Commercial Aviation business
(see Note 2).
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31
(Dollars in thousands except per share data)
1994(a) 1993(a) 1992(a)
Revenues (Note 1) $ 818,683 $777,216 $728,244
Costs and expenses:
Cost of services 783,095 742,455 707,905
Selling and corporate administrative 16,887 17,547 18,503
Interest expense 14,903 14,777 14,629
Interest income (2,398) (2,428) (2,402)
Other (Note 14) 7,654 7,109 3,553
Total costs and expenses 820,141 779,460 742,188
Loss from continuing operations before income taxes,
minority interest and extraordinary item (1,458) (2,244) (13,944)
Provision (benefit) for income taxes (Note 15) (2,236) 1,289 168
Earnings (loss) from continuing operations before
minority interest and extraordinary item 778 (3,533) (14,112)
Minority interest (Note 1) 1,130 952 -
Loss from continuing operations before
extraordinary item (352) (4,485) (14,112)
Loss from discontinued operations,
net of income taxes (Note 2) (12,479) (8,929) (6,704)
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early extinguishment
of debt (Note 5) - - (2,526)
Net loss (12,831) (13,414) (23,342)
Preferred Class A dividends declared and
paid and accretion of discount - - 959
Net loss for common stockholders $ (12,831) $(13,414)$ (24,301)
Loss Per Common Share (Note 17)
Primary and fully diluted:
Continuing operations before
extraordinary item $ (0.29) $ (1.13) $ (3.18)
Discontinued operations (1.83) (1.74) (1.31)
Extraordinary item - - (0.49)
Net loss for common stockholders $ (2.12) $ (2.87) $ (4.98)
(a) Restated for the discontinuance of the Commercial Aviation business
(see Note 2).
See accompanying notes.
<TABLE>
<CAPTION>
DynCorp and Subsidiaries
Consolidated Statements of Stockholders' Accounts
For the Years Ended December 31
(Dollars in thousands)
Unissued
Common
Stock
Under
Redeemable Stock Held Preferred Common Stock Restricted Paid-in
Stock By ESOP(a) Stock Stock(a) Warrants Stock Plan Surplus(a) Deficit
<C> <S> <S> <S> <S> <S> <S> <S> <S>
Balance, December 31, 1991 $ - $ - $3,000 $ 474 $15,119 $ 9,688 $101,483 $ (67,710)
Adjustment to restate December 31,1991
balance (Note 1) 70,240 (401) (69,839)
Restated Balance, December 31, 1991 - 70,240 3,000 73 15,119 9,688 31,644 (67,710)
Pay-in-kind Preferred Stock
Class A dividends (934)
Accretion of Preferred Stock Class A
discount and issuance costs (25)
Stock issued under Restricted Stock
Plan (Note 11) 17 (3,011) 2,994
Purchase of Preferred Stock Class A (8,047)
Treasury stock purchased (Notes 8 and 10) (2,340) 13 2,327
Stock issued under the Management
Employees Stock Purchase Plan (Note 10) (22)
Accrued compensation (Note 11) 3,264
Payments received on Employee Stock
Ownership Plan (ESOP) (Note 13)
Cummings Point Industries note
receivable (Note 12)
Accrued interest on note receivable (Note 12)
Net loss (23,342)
Balance December 31, 1992 - 67,900 3,000 103 15,119 9,941 28,896 (92,011)
Stock issued under Restricted Stock
Plan (Note 11) 11 (1,781) 1,770
Treasury stock purchased (Notes 8 and 10) (1,465) 8 1,457
Stock issued under the Management
Employees Stock Purchase Plan (Note 10) 5
Accrued compensation (Note 11) 2,235
Payments received on Employee Stock
Ownership Plan (Note 13)
Contribution of stock to ESOP (Note 13) 437 (3)
Stock issued in conjunction with (12) (434)
acquisition (Note 20) 2,200 (2,188)
Accrued interest on note receivable (Note 12)
Net loss (13,414)
Adjustment of ESOP shares to fair value 1,873 (1,873)
Balance, December 31, 1993 2,200 68,745 3,000 107 15,119 10,395 27,633 (105,425)
Stock issued under Restricted Stock
Plan (Note 11) 9 (1,694) 1,685
Treasury stock purchased (Notes 8 and 10 ) (2,344) 14 (57) 2,054
Stock issued under the Management Employees
Stock Purchase Plan (Note 10) (2)
Warrants exercised (Note 11) 147 (3,576) 3,797
Accrued compensation (Note 11) 1,222
Contribution of stock to ESOP (Note 13) 17,100
Accrued interest on note receivable (Note 12)
Adjust redeemable common stock
to fair market value (Note 7) 88 (88)
Net loss (12,831)
Adjustment of ESOP shares to fair value 2,837 (2,837)
Balance, December 31, 1994 $2,288 $86,338 $3,000 $ 277 $11,486 $ 9,923 $ 32,242 $(118,256)
<FN>
(a) Restated to conform to the balance sheet presentation (see Note 1).
See accompanying notes.
</TABLE>
Cummings
Employee Point
Stock Industries
Treasury Ownership Note
Stock Plan Loan Receivable
Balance, December 31, 1991 $(3,241) $(32,215) $ -
Adjustment to restate December 31,1991
balance (Note 1)
Restated Balance, December 31, 1991 (3,241) (32,215) -
Pay-in-kind Preferred Stock
Class A dividends
Accretion of Preferred Stock Class A
discount and issuance costs
Stock issued under Restricted Stock
Plan (Note 11)
Purchase of Preferred Stock Class A
Treasury stock purchased (Notes 8 and 10) (3,448)
Stock issued under the Management
Employees Stock Purchase Plan (Note 10) 151
Accrued compensation (Note 11)
Payments received on Employee Stock
Ownership Plan (ESOP) (Note 13) 16,099
Cummings Point Industries note
receivable (Note 12) (5,500)
Accrued interest on note receivable (Note 12) (910)
Net loss
Balance December 31, 1992 (6,538) (16,116) (6,410)
Stock issued under Restricted Stock
Plan (Note 11)
Treasury stock purchased (Notes 8 and 10) (1,980)
Stock issued under the Management
Employees Stock Purchase Plan (Note 10) 41
Accrued compensation (Note 11)
Payments received on Employee Stock
Ownership Plan (Note 13) 16,116
Contribution of stock to ESOP (Note 13) 437
Stock issued in conjunction with
acquisition (Note 20) 2,200
Accrued interest on note receivable (Note 12) (1,158)
Net loss
Adjustment of ESOP shares to fair value
Balance, December 31, 1993 (5,840) - (7,568)
Stock issued under Restricted Stock
Plan (Note 11)
Treasury stock purchased (Notes 8 and 10 ) (2,690)
Stock issued under the Management Employees
Stock Purchase Plan (Note 10) 32
Warrants exercised (Note 11) (319)
Accrued compensation (Note 11)
Contribution of stock to ESOP (Note 13)
Accrued interest on note receivable (Note 12) (1,375)
Adjust redeemable common stock
to fair market value (Note 7)
Net loss
Adjustment of ESOP shares to fair value
Balance, December 31, 1994 $(8,817) $ - $ (8,943)
(a) Restated to conform to the balance sheet presentation (see Note 1).
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31
(Dollars in thousands)
1994(a) 1993(a) 1992(a)
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 16,340 13,151 12,180
Pay-in-kind interest on Junior Subordinated
Debentures (Note 5) 15,329 13,142 6,590
Loss on purchase of Junior Subordinated
Debentures (Note 5) - - 2,526
Deferred income taxes (2,258) 521 (2,114)
Accrued compensation under Restricted Stock Plan 1,222 2,235 3,264
Noncash interest income (1,375) (1,158) (910)
Other 1,834 (2,826) (2,450)
Change in assets and liabilities, net of
acquisitions and dispositions:
Increase in accounts receivable and contracts
in process (22,502) (2,030) (14,182)
(Increase) decrease in inventories (466) 96 (62)
(Increase) decrease in other current assets 5,648 (1,223) (1,535)
Increase (decrease) in current liabilities
except notes payable and current portion
of long-term debt (10,778) (4,912) 4,918
Cash provided (used) by continuing operations (9,837) 3,582 (15,117)
Cash provided by operating activities of
discontinued operations 19,198 4,767 5,547
Cash provided (used) by operating activities 9,361 8,349 (9,570)
Cash Flows from Investing Activities:
Sale of property and equipment 1,944 927 911
Proceeds received from notes receivable 6 446 919
Purchase of property and equipment (3,742) (3,576) (5,683)
Increase in notes receivable (Note 12) - - (5,934)
Increase in investments in affiliates - - (1,888)
Deferred income taxes from "safe harbor"
leases (Note 15) (499) (441) (314)
Assets and liabilities of acquired businesses
(excluding cash acquired) (Notes 1 and 20) (14,312) (10,890) (905)
Cash on deposit for letters of credit (Note 5) (21) (2,916) -
Investing activities of discontinued operations (4,781) (1,424) (4,934)
Other (830) (653) (302)
Cash used by investing activities (22,235) (18,527) (18,130)
Cash Flows from Financing Activities:
Purchase of Class A Preferred Stock and
Junior Subordinated Debentures (Note 5) - - (42,466)
Treasury stock purchased (Notes 8 and 10) (3,182) (1,980) (3,448)
Payment on indebtedness (4,499) (5,844) (40,564)
Refinancing proceeds (Note 5) - - 100,000
Deferred financing expenses (Note 5) - - (1,524)
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership
Plan (Note 13) - 16,116 16,099
Sale of stock to Employee Stock Ownership
Plan (Note 13) 17,100 - -
Financing activities of discontinued operations (697) (521) (476)
Other (41) - (3,000)
Cash provided by financing activities 8,840 7,817 23,868
Net Decrease in Cash and Short-term Investments (4,034) (2,361) (3,832)
Cash and Short-term Investments at Beginning
of the Year 11,772 14,133 17,965
Cash and Short-term Investments at End of the Year $ 7,738 $ 11,772 $ 14,133
(a) Restated for the discontinuance of the Commercial Aviation business
(see Note 2).
See accompanying notes.
DynCorp and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
Principles of Consolidation -- All majority-owned subsidiaries have
been included in the financial statements and all significant
intercompany accounts and transactions have been eliminated (see Note 2).
Outside investors' interest in the majority owned subsidiaries
is reflected as minority interest. Investments less than 50% owned
are accounted for using the equity method of accounting.
Contract Accounting -- Contracts in process are stated at the lower
of actual cost incurred plus accrued profits or net estimated
realizable value of incurred costs, reduced by progress billings. The
Company records income from major fixed-price contracts,
extending over more than one accounting period, using the percentage-
of-completion method. During performance of such contracts,
estimated final contract prices and costs are periodically reviewed
and revisions are made as required. The effects of these revisions
are included in the periods in which the revisions are made. On
cost-plus-fee contracts, revenue is recognized to the extent of costs
incurred plus a proportionate amount of fee earned, and on time-and-
material contracts, revenue is recognized to the extent of billable
rates times hours delivered plus material and other reimbursable costs
incurred. Losses on contracts are recognized when they become
known. Disputes arise in the normal course of the Company's business
on projects where the Company is contesting with customers for
collection of funds because of events such as delays, changes in
contract specifications and questions of cost allowability or
collectibility. Such disputes, whether claims or unapproved changes
in the process of negotiation, are recorded at the lesser of their
estimated net realizable value or actual costs incurred and only when
realization is probable and can be reliably estimated. Claims
against the Company are recognized where loss is considered probable
and reasonably determinable in amount.
It is the Company's policy to provide reserves for the
collectibility of accounts receivable when it is determined that it
is probable that the Company will not collect all amounts due and the
amount of reserve requirement can be reasonably estimated.
Property and Equipment -- The Company computes depreciation and
amortization using both straight-line and accelerated methods. The
estimated useful lives used in computing depreciation and amortization
on a straight-line basis are: building, 15-33 years;
machinery and equipment, 3-20 years; and leasehold improvements, the
lesser of the useful life or the term of the lease. Accelerated
depreciation is based on a 150% declining balance method with light-
duty vehicles assigned a three-year life and machinery and equipment
assigned a five-year life. Depreciation and amortization expense was
$4,978,000 for 1994, $4,468,000 for 1993, and $3,597,000 for 1992.
Cost of property and equipment sold or retired and the related
accumulated depreciation or amortization is removed from the accounts
in the year of disposal, and any gains or losses are reflected in the
consolidated statements of operations. Expenditures for maintenance
and repairs are charged to expense as incurred, and major additions
and improvements are capitalized.
Intangible Assets -- At December 31, 1994, intangible assets consist
of $48,869,000 of unamortized goodwill and $2,968,000 of value
assigned to contracts. Goodwill is being amortized on a straight-
line basis over periods up to forty years ($48,445,000 forty years,
$164,000 thirty years and $260,000 ten years). Amortization expense
was $4,343,000, $2,568,000 and $1,531,000 in 1994, 1993 and 1992,
respectively. Amounts allocated to contracts are being amortized
over the lives of the contracts for periods up to ten years.
Amortization of amounts allocated to contracts was $2,051,000,
$3,555,000 and $4,566,000 in 1994, 1993 and 1992, respectively.
Cumulative amortization of $12,920,000 and $29,271,000 has been
recorded through December 31, 1994, of goodwill and value assigned to
contracts, respectively.
The Company assesses impairment of intangible assets including
goodwill on a continuing basis. The Company uses an estimate of its
future undiscounted net income to evaluate whether the intangible
assets including goodwill are recoverable. The amount of impairment,
if any, is measured based on projected discounted cash flows using a
discount rate reflecting the Company's average cost of funds.
Income Taxes -- As prescribed by Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" the Company
utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of
existing assets and liabilities.
Contingent Liabilities -- The Company's accounting policy is to
accrue an estimated loss from a loss contingency when it is probable
that an asset has been impaired or a liability has been incurred at
the date of the financial statements and the amount of the loss can
be reasonably estimated. The accrual for a loss contingency may
include such costs as legal costs, settlement and compensating
amounts, estimated punitive damages and penalties.
Treasury Stock -- The Company records the purchase of treasury stock
at the lower of acquired cost or fair value. The amount in excess of
fair value, as in the case of shares acquired from ESOP participants
(see Note 8), is recorded as expense.
Postretirement Health Care Benefits -- The Company provides no
significant postretirement health care or life insurance benefits to
its retired employees other than allowing them to continue as a
participant in the Company's plans with the retiree paying the full
cost of the premium. The Company has determined, based on an
actuarial study, that it has no liability under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."
Postemployment Benefits -- The Company has no liability under
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," as it provides no benefits
as defined.
New Accounting Pronouncements -- The Financial Accounting Standards
Board issued Statement No. 114, "Accounting by Creditors for
Impairment of a Loan," and Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," in May 1993 and Statement
No. 119, "Disclosure About Derivative Financial Instruments," in
October 1994. The Company holds no significant financial
instruments of the nature described in these pronouncements and
therefore believes the statements do not have a material effect on
its results of operations or financial condition.
The Company has adopted Statement of Position (SOP) 93-6,
"Employers Accounting for Employee Stock Ownership Plans," issued in
November 1993 and effective for financial statements issued after
December 15, 1993.
Consolidated Statements of Cash Flows -- For purposes of these
Statements, short-term investments which consist of certificates of
deposit and government repurchase agreements with a maturity of
ninety days or less are considered cash equivalents. Cash and short-
term investments at December 31, 1994 exclude $5,937,000 of
restricted cash which is classified as Other Assets.
Cash paid for income taxes was $1,145,000 for 1994, $1,059,000
for 1993 and $3,726,000 for 1992.
Cash paid for interest, excluding the interest paid under the
Employee Stock Ownership Plan term loan, was $10,984,000 for 1994,
$11,545,000 for 1993 and $16,965,000 for 1992.
Noncash investing and financing activities consist of the
following (in thousands):
1994 1993 1992
Acquisitions of businesses:
Assets acquired $30,302 $31,675 $ 3,524
Liabilities assumed (15,990) (17,198) (1,248)
Stock issued - (2,200) -
Notes issued and other liabilities - (1,382) (592)
Cash acquired - (5) (779)
Net cash 14,312 10,890 905
Pay-in-kind interest on Junior
Subordinated Debentures (Note 5) 15,329 13,142 6,590
Unissued common stock under restricted
stock plan (Note 11) 1,222 2,235 3,264
Capitalized equipment leases
and notes secured by property and equipment 121 - 789
Mortgage note assumed (Note 5) - - 19,456
Change in Presentation of Stockholders' Accounts -- In order to
more clearly present the relationship between the ESOP shareholders
and the Management and Outside Investor shareholders, the individual
stockholder accounts have been presented separately. In previously
issued financial statements, the stockholders' accounts were
aggregated. The Common Stock Held by ESOP is presented
at fair value to reflect the obligation of the Company to purchase
ESOP shares as long as the Company's common stock is not publicly
traded (see Note 8).
(2) Discontinued Operations
During the second quarter of 1995, the Company's Board of Directors
determined that it would be in the Company's best interest to
discontinue its Commercial Aviation Business operations. On June 30,1995,
the Company sold all of its subsidiaries engaged in the
business of commercial aircraft maintenance and modification to
Sabreliner Corporation for $12,500,000 in cash, subject to adjustment
to the final closing date balance sheet and subject to additional
payments based on future business revenues of the sold companies. On
August 31, 1995 the Company sold all of its subsidiaries engaged in
the business of commercial aviation ground handling services, cargo
handling, and refueling to ALPHA Airports Group Plc for $122,000,000
in cash, subject to adjustment to the final closing date balance
sheet. The net proceeds received were in excess of the book value of
the net assets of the businesses and will be used primarily to retire
debt and satisfy existing equipment funding obligations of the Ground
Handling Unit. As a result of these
divestitures, these businesses have been classified as discontinued
operations for financial reporting purposes.
The components of discontinued operations on the consolidated
condensed balance sheets and statements of operations are as follows
(in thousands):
December 31,
1994 1993
Notes and current portion of long term receivables $ 306 $ 89
Accounts receivable and contracts in process 35,788 41,795
Inventories of purchased products and supplies 5,561 6,140
Other current assets 1,059 987
Accounts payable (7,921) (8,757)
Other current liabilities (16,477) (14,774)
Net current assets of discontinued operations $ 18,316 $ 25,480
Property and equipment (net) $ 22,513 $ 21,372
Goodwill 42,955 49,288
Other assets 1,863 588
Other liabilities (203) (531)
Net noncurrent assets of discontinued operations $ 67,128 $ 70,717
Years Ended December 31,
1994 1993 1992
Revenues $203,389 $175,928 $183,178
Cost of services (a) 195,109 171,132 175,371
Interest expense and other (c) 14,237 13,685 14,511
Asset impairment (b) 9,492 - -
Income tax provision (benefit) (2,970) 40 -
Loss from discontinued operations $(12,479) $ (8,929)$ (6,704)
(a) During 1994 the Company revised its estimate of the useful
lives of certain machinery and equipment to conform to its
actual experience with fixed asset lives. It was determined
the useful lives of these assets ranged from three to ten
years as compared to the two to seven year lives previously
utilized. The effect of this change was to reduce
depreciation expense and net loss from discontinued
operations for the year ended December 31, 1994 by
approximately $2,115,000 or $0.31 per share.
(b) The Company continually evaluated its alternatives in
respect to the unsatisfactory performance by the aircraft
maintenance unit which posted its fourth consecutive year of
operating losses in 1994. The Company engaged an investment
advisor to market the maintenance unit and at December 31,
1994, the status of the unit was unresolved pending the
outcome of discussions with potential investors and a major
customer. These discussions could have resulted in one of a
number of alternatives, including the consummation of a
joint venture, the procurement of long-term contracts, sale
of the entire unit or the failure to negotiate any
transaction at all. Management projections indicated that
the maintenance unit should be profitable in 1995 with the
exception of one site. The Company believed that if it was
unable to consummate a satisfactory resolution through any
of these alternatives, the most likely course of action
would be to consolidate its operations by closing one of the
maintenance facilities. In management's opinion, no single
alternative (i.e., entering into a joint venture, the
curtailment of operations or shut down of one or more
facilities, or the divestiture of the unit as a whole) was
more or less likely to occur; however, the Company believed
that it had suffered at least a partial impairment of its
investment in this unit. Accordingly, it recorded an
estimate of the applicable goodwill ($5,242,000) and other
assets ($4,250,000) that would be written down in the event
the consolidation or shut-down of one of the facilities
became necessary. On June 30, 1995, the Company sold this
unit to Sabreliner (see the first paragraph of this Note 2).
(c) The Company has allocated interest expense to discontinued
operations of $10,715,000, $10,761,000 and $10,847,000 in
1994, 1993 and 1992, respectively. The interest expense
allocated is the sum of the interest on the debt of the
discontinued operations assumed by the buyer plus an
allocation of other consolidated interest that was not
directly attributable to the continuing operations of the
Company. The amount allocated was based on the ratio of net
assets of the discontinued operations to the sum of total
net assets of the Company plus consolidated debt other than
debt of the discontinued operation that was assumed by the
buyer and debt that was directly attributed to the
continuing operations of the Company.
(3) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate the value:
Accounts Receivable and Accounts Payable - The carrying amount
of accounts receivable and accounts payable approximates their fair
value due to the short maturity of these instruments.
Notes and long-term receivables - The carrying value is net of
valuation allowances and approximates the fair value of those
instruments.
Investments (included in "Other Assets") - The Company had an
investment in convertible debentures and preferred stock of an
untraded company. Based on the financial statements of this
business, the carrying value of these instruments approximated their
fair value.
Long-term debt and other liabilities - The fair value of the
Company's long-term debt is based on the quoted market price for its
Junior Subordinated Debentures and the current rate as if the issue
date was December 31, 1994 for its Collateralized Notes. For the
remaining long-term debt (see Note 5) and other liabilities the
carrying amount approximates the fair value.
Cummings Point Industries Note Receivable - The carrying value
approximates the fair value (see Note 12).
The estimated fair values of the Company's financial instruments at
December 31, are as follows (in thousands):
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and short-term investments $ 7,738 $ 7,738 $ 11,772 $ 11,772
Accounts receivable 172,731 172,731 135,675 135,675
Notes and long-term receivables 520 520 188 188
Investments - - 2,000 2,000
Accounts Payable 18,878 18,878 18,327 18,327
Long-term debt and other liabilities 232,830 228,951 218,758 229,012
Cummings Point Industries
note receivable 8,943 8,943 7,568 7,568
(4) Accounts Receivable and Contracts in Process
The components of accounts receivable and contracts in process were
as follows at December 31 (in thousands):
1994 1993
U.S. Government:
Billed and billable $111,950 $ 83,822
Recoverable costs and accrued profit
on progress completed but not billed 28,546 25,523
Retainage due upon completion of contracts 4,046 1,287
144,542 110,632
Other Customers (primarily sub-contracts from
U.S. Government prime contractors and other state,
local and quasi-government agencies):
Billed and billable (less allowance for
doubtful accounts of $9 in 1994 and 1993) 22,781 18,047
Recoverable costs and accrued profit on
progress completed but not billed 5,408 6,996
28,189 25,043
$172,731 $135,675
Billed and billable include amounts earned and contractually
billable at year-end but which were not billed because customer
invoices had not yet been prepared at year-end. Recoverable costs
and accrued profit not billed is composed primarily of amounts
recognized as revenues, but which are not contractually billable at
the balance sheet dates. It is expected that all amounts at December
31, 1994 will be collected within one year except for approximately
$11,500,000.
(5) Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of (in thousands):
1994 1993
Contract Receivable Collateralized Notes, Series 1992-1 $100,000 $100,000
Junior Subordinated Debentures, net of
unamortized discount of $4,793 and $5,175 102,658 86,947
Mortgages payable (see Note 23) 22,285 23,416
Notes payable, due in installments through
2002, 9.98% weighted average interest rate 6,993 6,689
Capitalized equipment leases (see Note 19) 1,512 2,096
233,448 219,148
Less current portion 3,004 3,209
$230,444 $215,939
Debt maturities as of December 31, 1994, were as follows (in thousands):
1995 ($18,206 extinguished with non-current assets
subsequent to December 31, 1994, Note 23) $ 21,211
1996 2,948
1997 102,269
1998 1,271
1999 339
Thereafter 105,410
$233,448
On January 23, 1992, the Company's wholly owned subsidiary, Dyn
Funding Corporation (DFC), completed a private placement of
$100,000,000 of 8.54% Contract Receivable Collateralized Notes,
Series 1992-1 (the "Notes"). The Notes are collateralized by the
right to receive proceeds from certain U.S. Government contracts and
certain eligible accounts receivable of commercial customers of the
Company and its subsidiaries. Credit support for the Notes is
provided by overcollateralization in the form of additional
receivables. The Company retains an interest in the excess balance
of receivables through its ownership of the common stock of DFC.
Additional credit and liquidity support is provided to the Notes
through a cash reserve fund. Interest payments are made monthly with
monthly principal payments beginning February 28, 1997. (The period
between January 23, 1992 and January 30, 1997 is referred to as the
Non-Amortization Period.) The notes are projected to have an average
life of five years and two months and to be fully repaid by July 30,
1997.
Upon receiving the proceeds from the sale of the Notes, DFC
purchased from the Company an initial pool of receivables for
$70,601,000, paid $1,524,000 for expenses and deposited $3,000,000
into a reserve fund account and $24,875,000 into a collection account
with Bankers Trust Company as Trustee pending additional purchases of
receivables from the Company. Of the proceeds received from DFC, the
Company used $38,112,000 to pay the outstanding balances of the
Employee Stock Ownership Plan term loan and revolving loan facility
under the Restated Credit Agreement and $33,280,000 was used for the
redemption of all of the outstanding Class A Preferred Stock plus
accrued dividends (the redemption price per share was $25.00 plus
accrued dividends of $.66). The Company expensed $1,432,000
(reported as an extraordinary loss) of unamortized deferred debt
expense pertaining to the term loan and revolving loan facility which
was paid in full. The Company also charged $8,047,000 of unamortized
discount and deferred issuance costs associated with the redemption
of the Class A Preferred Stock to paid-in surplus.
On an ongoing basis, cash receipts from the collection of the
receivables are used to make interest payments on the Notes, pay a
servicing fee to the Company, and purchase additional receivables
from the Company. Beginning February 28, 1997, instead of purchasing
additional receivables, the cash receipts will be used to repay
principal on the Notes. During the Non-Amortization Period, cash in
excess of the amount required to purchase additional receivables and
meet payments on the Notes is to be paid to the Company subject to
certain collateral coverage tests. The receivables pledged as
security for the Notes are valued at a discount from their stated
value for purposes of determining adequate credit support. DFC is
required to maintain receivables, at their discounted values, plus
cash on deposit at least equal to the outstanding balance of the
Notes.
Commencing March 30, 1994, the Notes may be redeemed in whole, but
not in part, at the option of DFC at a price equal to the principal
amount of the Notes plus accrued interest plus a premium (as defined).
Mandatory redemption (payment of the Notes in full plus a premium)
is required in the event that (i) the collateral value ratio test is
equal to or less than .95 as of three consecutive monthly
determination dates and the Company has not substituted receivables
or deposited cash into the collection account to bring the collateral
value ratio above .95; or (ii) three special redemptions are required
within any consecutive 12-month period; or (iii) the aggregate stated
value of all ineligible receivables which have been ineligible
receivables for more than 30 days exceeds 7% of the aggregate
collateral balance and the collateral value ratio is less than 1.00.
Special redemption (payment of a portion of the Notes plus a
premium) is required in the event that the collateral value ratio
test is less than 1.00 as of two consecutive monthly determination
dates and the Company has not substituted receivables or deposited
cash into the collection account to bring the collateral value ratio
to 1.00.
Also, DFC may not purchase additional eligible receivables if the
Company has an interest coverage ratio (as defined) of less than
1.10; or if the Company has more than $40 million of scheduled
principal debt (as defined) due within 24 months prior to the
amortization date or $20 million of scheduled principal debt due
within 12 months prior to the amortization date.
At December 31, 1994, $3,000,000 of cash and $108,806,000 of
accounts receivable are restricted as collateral for the Notes. The
restricted cash has been included with Other Assets on the balance
sheet at December 31, 1994.
In September 1994, the Company negotiated an agreement which
provides for a $5,000,000 revolving letter of credit facility. For
each letter of credit issued, the Company must assign a cash
collateral deposit in favor of the bank for 100% of the face value of
the letter of credit. The Company will pay a fee of 1.5% per annum
computed on the face amount of the letter of credit for the period
the letter of credit is scheduled to be outstanding. As of December
31, 1994, $2,937,000 was on deposit in conjunction with this letter
of credit facility and classified as Other Assets on the balance sheet.
The Junior Subordinated Debentures (Debentures) mature on June 30,
2003, and bear interest of 16% per annum, payable semi-annually. The
effective interest rate, considering the original issue discount, is
19.4%. The Company may, at its option, prior to September 9, 1995,
pay the interest either in cash or issue additional Debentures. The
Debentures are subject to annual mandatory redemption beginning June
30, 1999. The Company may, at its option, redeem in whole or in
part, at any time, the Debentures at their face value plus accrued
interest. During 1994, 1993 and 1992, $15,329,000, $13,142,000 and
$6,590,000, respectively, of additional Debentures were issued in
lieu of cash interest payments.
Using a lottery selection method, the Company called for partial
redemption of $10,000,000 face value plus accrued interest for cash
redemption on August 10, 1992. The lottery resulted in redeeming
$9,698,000 face value of the Debentures. Open market purchases
during 1992 retired $219,000 of the Debentures. The related
unamortized discount, deferred debt expense and other expenses, net
of applicable income taxes, were reported as an extraordinary loss in
1992.
The Company obtained title to its corporate office building on July
31, 1992 by assuming a mortgage of $19,456,000. At the Company's
option, the interest on the mortgage was to be computed from time to
time under one of three methods based on the Certificate of Deposit
Rate, LIBOR Rate or the Prime Rate, all as defined. Also, the
Company was required to pay additional interest through May 27, 1993.
The additional interest was the difference between a fixed rate of
9.36% and a floating rate based upon an imputed amount of
$31,900,000. The original mortgage maturity date was May 27, 1993;
however, as provided, the Company extended the mortgage to March 27,
1995 with an increase in the interest rate of 1/2% per annum plus an
extension fee (based on the principal amount of the mortgage
outstanding) of .42% on May 27, 1993 and .50% on March 27, 1994, all
as defined (see Note 23 Subsequent Events).
The Company acquired the Alexandria, VA headquarters of Technology
Applications, Inc. on November 12, 1993, in conjunction with the
acquisition of TAI. A mortgage of $3,344,000 bearing interest at 8%
per annum was assumed. Payments are made monthly and the mortgage
matures in April 2003. Additionally, a $1,150,000 promissory note
was issued. The note bears interest at 7% per annum. Payments under
the note shall be made quarterly through October 1998.
Deferred debt issuance costs are being amortized using the
effective interest rate method over the terms of the related debt.
At December 31, 1994, unamortized deferred debt issuance costs were
$1,015,000 and amortization for 1994, 1993 and 1992 was $324,000,
$328,000 and $420,000, respectively.
(6) Accrued Expenses
At December 31, 1994 and 1993, accrued expenses consisted of the
following (in thousands):
1994 1993
Salaries and wages $ 45,181 $ 37,914
Insurance 9,564 16,950
Interest 4,716 6,233
Payroll and miscellaneous taxes 8,881 9,095
Accrued contingent liabilities and operating reserves 19,875 17,815
Other 7,265 4,426
$ 95,482 $ 92,433
(7) Redeemable Common Stock
In conjunction with the acquisition of Technology Applications, Inc.
in November 1993, the Company issued put options on 125,714
shares of common stock. The holder may, at any time commencing on
December 31, 1998 and ending on December 31, 2000, sell these shares
to the Company at a price per share equal to the greater of $17.50;
or, if the stock is publicly traded, the market value at a specified
date; or, if the Company's stock is not publicly traded, the fair
market value at the time of exercise ($18.20 at December 31, 1994).
(8) Common Stock Held by ESOP
In accordance with ERISA regulations and the Employee Stock
Ownership Plan (the Plan) documents, the ESOP Trust or the Company is
obligated to purchase vested common stock shares from ESOP
participants (see Note 13) at the fair value (as determined by an
independent appraiser) as long as the Company's common stock is not
publicly traded. The shares initially bought by the ESOP in 1988
were bought at a "control price," reflecting the higher price that
buyers typically pay when they buy an entire company (as the ESOP and
other investors did in 1988). A special provision in the ESOP's 1988
agreement permits participants to receive a "control price" when they
sell these shares back to the Company under the ESOP's "put option"
provisions. This "control price," determined by the appraiser as of
December 31, 1994, was $18.20 per share. The additional shares
received by the ESOP in 1993 and 1994 were at a "minority interest
price," reflecting the lower price that buyers typically pay when
they are buying only a small piece of a company (as the ESOP did in
these years). Participants do not have the right to sell these
shares at the "control price." The minority interest price
determined by the independent appraiser as of December 31, 1994 was
$14.60 per share. Participants receive their vested shares upon
retirement, becoming disabled, or death, over a period of one
to five years and for other reasons of termination over a period of
one to ten years, all as set forth in the Plan documents. In the
event the fair value of a share is less than $27.00, the Company is
committed to pay through December 31, 1996, up to an aggregate of
$16,000,000, the difference (Premium) between the fair value and
$27.00 per share. As of December 31, 1994, the Company has purchased
427,307 shares from participants and has expended $3,969,000 of the
$16,000,000 commitment. Based on the fair values of $18.20 and
$14.60 per share at December 31, 1994, the Company estimates a total
Premium of $8,500,000 and an aggregate annual commitment to repurchase
shares from the ESOP participants upon death, disability,
retirement and termination as follows; $5,500,000 in 1995, $4,000,000
in 1996, $5,400,000 in 1997, $5,100,000 in 1998, $4,900,000 in 1999
and $65,559,000 thereafter. The fair value is charged to treasury
stock at the time of repurchase. The estimated Premium of $8,500,000
has been recorded as Other Expense in the Consolidated Statements of
Operations in 1989 through 1994 (see Note 14). At December 31, 1994
and 1993, $4,121,000 and $3,796,000, respectively, of the estimated
Premium is included in Accrued Expenses and $86,338,000 and
$68,745,000 (shares outstanding at fair values of $18.20 and $14.60
per share at December 31, 1994 and $17.99 per share at December 31,
1993) is included in Common Stock Held by ESOP.
(9) Preferred Stock Class C
Class C Preferred Stock is convertible, at the option of the
holder, into one share of common stock, adjusted for any stock
splits, stock dividends or redemption. At conversion, the holders of
Class C Preferred Stock are also entitled to receive such warrants as
have been distributed to the holders of the common stock. Dividends
accrue at an annual rate of 18%, compounded quarterly. At December
31, 1994, cumulative dividends of $6,948,000 have not been recorded
or paid. Dividends will be payable only when cash dividends are
declared with respect to common stock and only in an aggregate amount
equal to the aggregate amount of dividends that such holders would
have been entitled to receive if such Class C Preferred Stock had
been converted into common stock. Each holder of Class C Preferred
Stock is entitled to one vote per share on any matter submitted to
the holders of common stock for stockholder approval. In addition,
so long as any Class C Preferred Stock is outstanding, the Company is
prohibited from engaging in certain significant transactions without
the affirmative vote of the holders of a majority of the outstanding
Class C Preferred Stock.
(10) Common Stock
Common stock includes those shares issued to outside and management
investors pursuant to the merger in 1988 (Investor Shares), shares
issued through the Restricted Stock Plan (see Note 11) and shares
issued through the Management Employees Stock Purchase Plan (the
Stock Purchase Plan). The Stock Purchase Plan allowed employees in
management, supervisory or senior administrative positions to
purchase shares of the Company's common stock along with warrants at
current fair value. The Board of Directors was responsible for
establishing the fair value for purposes of the Stockholders
Agreement and the Stock Purchase Plan. The Stock Purchase Plan was
discontinued in 1994. Treasury stock, which the Company acquired
from terminated employees who had previously purchased Investor
Shares from the Company, was issued to employees purchasing stock
under the Stock Purchase Plan.
Under the DynCorp Stockholders Agreement which expired on March 11,
1994, the Company was committed, upon an employee's termination of
employment, to purchase common stock shares held by employees
pursuant to the merger (Management Investor Shares), through the
Stock Purchase Plan or through the Restricted Stock Plan. If the
Company's common stock becomes publicly traded, the commitment by the
Company to purchase these shares is terminated. The share price at
December 31, 1994 for Management Investor Shares and Stock Purchase
shares was $14.60 per common share and $14.35 ($14.60 per common
share less warrant exercise price of $0.25) for each unexercised
warrant. The share price for Restricted Stock Plan shares ($18.20 at
December 31, 1994) is the fair value as set forth in the appraisal of
shares held by the ESOP. However, the Company may not purchase more
than $250,000 of Management Investor Shares or Restricted Stock
shares in any fiscal year without the approval of the Class C
Preferred stockholders. A new stockholders agreement, adopted March
11, 1994, contains similar repurchase obligations and expires March
10, 1999. On May 10, 1995, the Board of Directors, with the consent
of the Class C Preferred stockholder, approved the establishment of
an Internal Market as a replacement for the resale procedures
included in the DynCorp Stockholders Agreement.
(11) Common Stock Warrants and Restricted Stock
The Company initially issued warrants on September 9, 1988 to the
Class C Preferred stockholders and to certain common stockholders to
purchase a maximum of 5,891,987 shares of common stock of the
Company. The warrants issued to Class C Preferred stockholders and
to certain common stockholders were recorded at their fair value of
$2.43 per warrant and warrants issued to a lender were recorded at
$3.28 per warrant. Each warrant is exercisable to obtain one share
of common stock. The stockholder may exercise the warrant and pay in
cash the exercise price of $0.25 for one share of common stock or may
sell back to the Company a sufficient number of the exercised shares
to equal the value of the warrants to be exercised. (The shares sold
back to the Company during 1994 were valued by the Board of Directors
at $11.86 per share.) During 1994, 1,471,470 warrants were exercised
and 4,246,529 warrants were outstanding at December 31, 1994. Rights
under the warrants lapse no later than September 9, 1998.
The Company has a Restricted Stock Plan (the Plan) under which
management and key employees may be awarded shares of common stock
based on the Company's performance. The Company initially reserved
1,023,037 shares of common stock for issuance under the Plan. Under
the Plan, Restricted Stock Units (Units) are granted to participants
who are selected by the Compensation Committee of the Board of
Directors. Each Unit will entitle the participant upon achievement
of the performance goals (all as defined) to receive one share of the
Company's common stock. Units cannot be converted into shares of
common stock until the participant's interest in the Units has
vested. Vesting occurs upon completion of the specified periods as
set forth in the Plan. In 1994, 1993 and 1992, the Company accrued
as compensation expense $1,222,000, $2,235,000 and $3,264,000,
respectively, under the Plan which was charged to cost of services
and selling and corporate administrative expenses.
(12) Cummings Point Industries Note Receivable
The Company loaned $5,500,000 to Cummings Point Industries, Inc.
("CPI"), of which Capricorn Investors, L.P. ("Capricorn") owns more
than 10%. The indebtedness is represented by a promissory note (the
"Note"), bearing interest at the annual rate of 17%, which provides
that interest is payable quarterly but that interest payments may not
be payable in cash but may be added to the principal of the Note.
The Note is subordinated to all senior debt of CPI. The Note, which
was issued February 12, 1992, was due three months thereafter;
however, the Company, at its option, has extended and may further
extend the maturity date in three month increments to no later than
February 12, 1996. By separate agreement and as security to the
Company, Capricorn has agreed to purchase the Note from the Company
upon three months' notice, for the amount of
outstanding principal plus accrued interest. As additional security,
Capricorn's purchase obligation is collateralized by certain common
stock and warrants issued by the Company and owned by Capricorn.
(The Note was repaid in full, including interest, on August 10, 1995.
See Note 23.)
(13) Employee Stock Ownership Plan
In September 1988, the Company established an Employee Stock
Ownership Plan (the Plan). The Company borrowed $100 million and
loaned the proceeds, on the same terms as the Company's borrowings,
to the Plan to purchase 4,123,711 shares of common stock of the
Company (the "ESOP loan"). The common stock purchased by the Plan
was held in a collateral account as security for the ESOP loan from
the Company. The Company was obligated to make contributions to the
Plan in at least the same amount as required to pay the principal and
interest installments under the Plan's borrowings. The Plan used the
Company contributions to repay the principal and interest on the ESOP
loan. As the ESOP loan was liquidated, shares of the Company's
common stock were released from the collateral account and allocated
to participants of the Plan. As of December 31, 1993, the loan was
fully repaid.
In accordance with subsequent amendments to the Employee Stock
Ownership Plan, the Company contributed an additional 25,000 shares
of common stock in December 1993 and in 1994 contributed cash of
$17,435,000 which the ESOP used to acquire 1,312,459 shares and to
pay interest and administrative expenses. In March, 1995, the
Company sold 1,208,059 additional shares of common stock to the ESOP
for a cash purchase price of approximately $18,000,000; the cash paid
was generated by a contribution from the Company of $4,250,000 and a
loan by the Company to the ESOP in the amount of $13,750,000 payable
in quarterly installments through 1996. To enable it to satisfy its
loan commitments, the Company is obligated to contribute cash to the
ESOP.
The Plan covers a majority of the employees of the Company. Participants
in the Plan become fully vested after four years of
service. All of the 5,461,170 shares acquired by the ESOP have been
either issued or allocated to participants as of December 31, 1994.
The Company recognizes ESOP expense each year based on the fair value
of the shares committed to be released. The Company's cash
contributions were determined based on the ESOP's debt service and
other expenses. Stock contributions are determined in accordance
with the amended agreement. In 1994, cash contributions to the ESOP
were $17,435,000; 1993 cash and stock contributions were $16,608,000
and $437,000 respectively, and 1992 cash contributions were
$17,275,000. These amounts were charged to cost of services and
selling and corporate administrative expenses (including interest on
the ESOP term loan of $491,000 and $1,450,000 in 1993 and 1992,
respectively).
(14) Other Expenses
Years Ended December 31,
(In thousands)
1994 1993 1992
Amortization of costs in excess
of net assets acquired $ 2,347 $ 3,408 $ 2,371
ESOP Repurchase Premium (See Note 8) 1,323 1,507 2,787
Write-off of investment in
unconsolidated subsidiary (a) 3,250 - -
Legal and other expense accruals
associated with an acquired business (b) (1,830) 2,070 -
Environmental costs of businesses
divested in 1988 (347) 366 1,000
Gain on sale of warrants obtained in
divestitures - - (756)
Other adjustments of businesses
divested in 1988 (c) 2,665 (73) (1,600)
Miscellaneous 246 (169) (249)
Total Other $ 7,654 $ 7,109 $ 3,553
(a) In June 1994, the Company paid an additional $1,250,000 to
increase its holdings in an unconsolidated subsidiary from 40%
to 50.1% and the subsidiary concurrently borrowed $6.0 million
from another investor. The total acquisition cost exceeded
the underlying equity in net assets by $2,582,000. The
subsidiary's stockholders' agreement defined certain trigger
events which, upon their occurrence, transferred control of
the subsidiary from DynCorp to the other shareholders. These
trigger events occurred in the fourth quarter of 1994 and the
subsidiary's lenders called the loans in 1995. These actions,
coupled with financial and cash flow projections provided by
the subsidiary's management, have caused the Company to
determine that its investment has been permanently impaired.
As such, $3,250,000 representing the investment and excess
purchase price has been charged to Other Expenses.
(b) In 1993, an accrual was established for estimated legal costs
and possible fines and penalties associated with a federal
investigation of a pricing proposal submitted by an acquired
business prior to its acquisition in 1991. The investigation
was concluded in 1994 with the Company incurring only net
legal costs of $240,000; consequently, the unused portion of
the accrual was reversed in 1994.
(c) The increase in 1994 over 1993 is the result of unexpected
escalation in the estimated legal costs to defend a lawsuit
filed by a subcontractor of a former subsidiary (see Note 21).
The credits in 1993 and 1992 are a combination of reductions
of reserves established for potential liabilities and receipts
of additional unrecorded proceeds related to the 1988
discontinued operations of the Company.
(15) Income Taxes
Earnings (loss) from continuing operations before income taxes and
minority interest (but including extraordinary item - see Note 5)
were derived from the following (in thousands):
1994 1993 1992
Domestic operations $ (642) $ (2,317) $(16,467)
Foreign operations (816) 73 (3)
$ (1,458) $ (2,244) $(16,470)
The provision (benefit) for income taxes consisted of the following
(in thousands):
1994 1993 1992
Current:
Federal $ (91) $ 683 $ 416
Foreign 54 170 168
State 59 (85) 193
22 768 777
Deferred:
Federal (2,199) 500 (416)
State (59) 21 (193)
(2,258) 521 (609)
Total $(2,236) $ 1,289 $ 168
The components of and changes in deferred taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
Deferred Deferred Deferred
Dec. 31, Expense Dec. 31, Expense Dec. 31, Expense
1994 (Benefit) 1993 (Benefit) 1992 (Benefit)
<S> <C> <C> <C> <C> <C> <C>
Increase due to federal rate change $ 335 $ - $ 335 $ (335) $ - $ -
Benefit of state tax on temporary differences
and state net operating loss carryforwards 5,574 (716) 4,858 (1,135) 3,723 (2,211)
Benefit of foreign, targeted jobs and AMT
tax credit carryforwards 2,812 (282) 2,530 (1,073) 1,457 -
Difference between book and tax method of
accounting for depreciation and amortization 459 (632) (173) 204 31 201
Difference between book and tax method of
accounting for income on U.S. Government
contracts (8,901) 38 (8,863) 1,216 (7,647) 2,986
Deferred compensation expense 4,052 1,346 5,398 (380) 5,018 (2,059)
Operating reserves and other accruals 20,275 (5,358) 14,917 (2,604) 12,313 (3,584)
Difference between book and tax method of
accounting for certain employee benefits 375 223 598 (1,194) (596) 145
Amortization of intangibles (1,073) 925 (148) (204) (352) (945)
Other, net (53) 37 (16) 178 162 18
Deferred taxes of discontinued operations,
retained by the Company 4,018 (1,517) 2,501 901 3,402 (3,402)
Net deferred tax asset before
valuation allowance 27,873 (5,936) 21,937 (4,426) 17,511 (8,851)
Federal valuation allowance (14,262) 2,962 (11,300) 3,812 (7,488) 6,031
State valuation allowance (5,574) 716 (4,858) 1,135 (3,723) 2,211
Total temporary differences affecting
tax provision 8,037 (2,258) 5,779 521 6,300 (609)
Deferred taxes from "safe harbor"
lease transactions (6,549) (499) (7,048) (441) (7,489) (314)
Net deferred tax asset (liability) $ 1,488 $ (2,757)$ (1,269) $ 80 $(1,189) $ (923)
</TABLE>
The tax provision (benefit) differs from the amounts
obtained by applying the statutory U.S. Federal income tax rate
to the pre-tax loss from continuing operations amounts. The
differences can be reconciled as follows (in thousands):
1994 1993 1992
Expected Federal income tax benefit $ (510) $ (763) $ (5,600)
Valuation allowance 2,962 3,812 6,031
State and local income taxes, net of
Federal income tax benefit - (42) -
Tax benefit of discontinued operations (191) (2,721) (1,984)
Reversal of tax reserves for IRS examination (4,069) - -
Nondeductible amortization of intangibles
and other costs 635 1,069 1,817
Foreign income tax 54 96 167
Foreign, targeted job and fuel tax credits (537) (189) (75)
Other, net (580) 27 (188)
Tax provision (benefit) $(2,236) $ 1,289 $ 168
The Company's U.S. Federal income tax returns have been
cleared through 1984. The Internal Revenue Service completed an
examination of the Company's tax returns for the period 1985-88
and proposed several adjustments, the most significant of which
related to deductions taken by the Company for expenses incurred
in the 1988 leveraged buyout. Taxes and accrued interest
associated with these adjustments are approximately $15,000,000.
During 1994, the Company reached a settlement with the IRS of
disputes over the tax deductions related to the leveraged buyout
in 1988. This settlement was approved by the IRS and a billing
was received and paid in 1995. Accordingly, excess tax reserves
of $4,069,000 were reversed in the fourth quarter of 1994. The
Company has since been advised that the settlement is presently
under review by the Joint Congressional Committee on Taxation.
In the opinion of management, based upon advice from its tax
advisors, the effect of the review will not have a material
impact on the Company's financial statements.
In 1994, the federal tax benefit resulted from reversal of
tax reserves for the IRS examination and the tax benefit for
operating losses, net of a valuation allowance, less the federal
tax provision of a majority owned subsidiary required to file a
separate Federal return. In 1993 and 1992, the Company did not
record any Federal income tax benefit because of the uncertainty
regarding the level of future income. The Federal tax provision
recognized in those years was that of a majority owned subsidiary
which is required to file a separate return. Additionally, the
Company recognized a foreign income tax provision in 1994, 1993
and 1992 and a state tax credit in 1992.
The Company has state net operating losses and various tax
credit carryforwards available to offset future taxable income
and income taxes. Following are the net operating losses and
foreign, targeted jobs and AMT tax credits by year of expiration
(in thousands):
Year of AMT Tax Targeted Jobs Foreign State Net
Expiration Credits Tax Credits Tax Credits Operating Losses
1996 $ $ $ 81 $
1998 6,254
1999 272
2000 338
2003 55
2006 249
2007 314
2008 119 16,302
2009 118
No Expiration 1,659
$1,659 $ 800 $ 353 $22,949
(16) Pension Plans
Union employees who are not participants in the ESOP are covered
by multiemployer pension plans under which the Company pays fixed
amounts, generally per hours worked, according to the provisions of
the various labor contracts. In 1994, 1993 and 1992, the Company
expensed $2,367,000, $2,321,000 and $2,604,000, respectively, for
these plans. Under the Employee Retirement Income Security Act of
1974 as amended by the Multiemployer Pension Plan Amendments Act of
1980, an employer is liable upon withdrawal from or termination of a
multiemployer plan for its proportionate share of the plan's
unfunded vested benefits liability. Based on information provided
by the administrators of the majority of these multiemployer plans,
the Company does not believe there is any significant amount of
unfunded vested liability under these plans.
The Company makes contributions to a defined benefit pension plan
for employees working on one U.S. government contract. The plan is
accounted for in accordance with the requirements of Statement of
Financial Accounting Standards No. 87, Employers' Accounting for
Pensions. The pension plan had assets of $6,761,000 and projected
benefit obligations of $7,607,000 at September 30, 1994 (the plan's
fiscal year end). This pension plan remains in effect regardless of
changes in contractors which may occur as a result of the
recompetition process.
(17) Loss Per Common Share
Primary loss per share is based on the weighted average number of
common and dilutive common equivalent shares outstanding during the
period. In addition, 1994 and 1993 include as outstanding common
stock, shares earned and vested but unissued under the Restricted
Stock Plan. For years 1994, 1993 and 1992 the outstanding warrants
and shares which would be issued under the assumed conversion of
Class C Preferred Stock have been excluded from the calculation of
loss per share as their effect is antidilutive because of the losses
incurred during the periods (see also Note 11). The loss per common
share for 1994, 1993 and 1992 includes the effect of the unpaid
dividends on the Class C Preferred Stock ($1,606,000 in 1994,
$1,347,000 in 1993 and $1,129,000 in 1992) and, in addition, for
1992 the dividends paid on Class A Preferred Stock. The average
number of shares used in determining primary loss per share was
6,802,012 in 1994, 5,141,319 for 1993 and 5,102,621 for 1992.
(18) Incentive Compensation Plans
The Company has several formal incentive compensation plans which
provide for incentive payments to officers and key employees.
Incentive payments under these plans are based upon operational
performance, individual performance, or a combination thereof, as
defined in the plans. Incentive compensation expense was $7,067,000
for 1994, $6,180,000 for 1993 and $5,159,000 for 1992.
(19) Leases
The Company has capitalized all significant leases which meet the
criteria for classification as capital leases, principally leases
for vehicles and equipment. Capitalized leases are amortized over
the shorter of the useful lives of the assets or the lease term.
Future minimum lease payments required under operating leases that
have remaining noncancellable lease terms in excess of one year at
December 31, 1994 and capitalized leases are summarized below (in
thousands):
Operating Capitalized
Leases Leases
Years Ending December 31,
1995 $ 9,327 $ 664
1996 6,822 596
1997 5,767 444
1998 4,877 46
1999 4,049 -
Thereafter 3,660 -
Total minimum lease payments $34,502 1,750
Less interest on capitalized leases 238
Present value of capitalized leases
as of December 31, 1994 (Note 5) $ 1,512
Net rent expense for leases, excluding amounts for capitalized
leases, was $14,286,000 for 1994, $10,425,000 for 1993 and
$9,055,000 for 1992.
(20) Acquisitions
On October 31, 1994, the Company acquired all of the issued and
outstanding shares of stock of CBIS Federal Inc. (CBIS) for a cash
payment of $8,159,000 including out of pocket costs. CBIS,
headquartered in Fairfax, Virginia, provides a full range of
services across the life cycle of information solutions and services
primarily to federal government civilian agencies and also to the
Department of Defense and state and local governments. The
acquisition was accounted for as a purchase and $5,868,000 of
goodwill was recorded which will be amortized over 40 years.
On November 12, 1993 the Company acquired Technology Applications,
Inc. Aggregate cash paid, notes issued and mortgages assumed
totaled $11,419,000 and 125,714 shares of common stock valued at
$2,200,000 were issued. The Company also acquired certain assets of
Science Management Corporation ("SMC") and NMI Systems Inc. ("NMI")
on February 18, 1993 and December 10, 1993, respectively, for an
aggregate of $5,352,000 in cash, notes and other liabilities. The
1993 acquisitions were accounted for as purchases. Goodwill of
$6,083,000 was recorded and is being amortized over periods up to 40
years. The allocation period for the NMI acquisition still remains
open at December 31, 1994 pending resolution of certain billing
rates used on U.S. Government contracts.
Consolidated revenues, loss before extraordinary item, net loss
and loss per share for the years ended December 31, 1994 and 1993,
adjusted on an unaudited pro forma basis as if the above
acquisitions had been consummated at the beginning of the respective
periods, are as follows (in thousands except per share amounts):
1994 1993
Revenues $ 870,671 $ 890,115
Loss before extraordinary item $ (12,050) $ (12,282)
Net loss for common stockholders $ (13,656) $ (13,629)
Net loss per common share $ (2.01) $ (2.71)
Additionally, in June 1994, the Company paid $3.0 million for a
25% interest in Composite Technology, Inc. (CTI). Goodwill of
$1,375,000 was recorded and will be amortized over 40 years.
(21) Contingencies and Litigation
The Company is involved in various claims and lawsuits, including
contract disputes and claims based on allegations of negligence and
other tortious conduct. The Company is also potentially liable for
certain environmental, personal injury, tax and contract dispute
issues related to the prior operations of divested businesses. In
most cases, the Company has denied, or believes it has a basis to
deny liability, and in some cases has offsetting claims against the
plaintiffs or third parties.
Damages currently claimed by the various plaintiffs for these
items which may not be covered by insurance and which have not been
fully reserved for in the financial statements, aggregate
approximately $22,000,000 (including compensatory and possible
punitive damages and penalties).
A former subsidiary, which discontinued its business activities in
1986, has been named as one of many defendants in civil lawsuits
which have been filed in various state courts against manufacturers,
distributors and installers of asbestos products. (The subsidiary
had discontinued the use of asbestos products prior to being
acquired by the Company.) The Company has also been named as a
defendant in several of these actions. At the beginning of 1992,
408 claims had been filed and during the year 1,784 additional
claims were filed with 74 claims being settled. In 1993, 711
additional claims were filed and 1,275 were settled. In 1994, 1,135
new claims were filed with 353 claims being settled. Defense has
been tendered to and accepted by the Company's insurance carriers.
The former subsidiary was a nonmanufacturer that installed or
distributed industrial insulation products. Accordingly, the
Company strongly believes that the subsidiary has substantial
defenses against alleged secondary and indirect liability. The
Company has provided a reserve for the estimated uninsured legal
costs to defend the suits and the estimated cost of reaching
reasonable no-fault liability settlements. The amount of the
reserve has been estimated based on the number of claims filed and
settled to date, number of claims outstanding, current estimates of
future filings, trends in costs and settlements, and the advice of
the insurance carriers and counsel.
The Company has retained certain liability in connection with its
1989 divestiture of its major electrical contracting business,
Dynalectric Company ("Dynalectric"). The Company and Dynalectric
were sued in 1988 by a former Dynalectric subcontractor. The
subcontractor has alleged that its subcontract to furnish certain
software and services in connection with a major municipal traffic
signalization project was improperly terminated by Dynalectric and
that Dynalectric is liable to the former subcontractor for a variety
of additional claims, the aggregate dollar amount of which has not
been formally recited in the subcontractor's complaint. Dynalectric
has also filed certain counterclaims against the former
subcontractor. The Company and Dynalectric believe that they have
valid defenses, and/or that any liability would offset
by recoveries under the counterclaims. The Company has established
reserves for the contemplated defense costs and for the cost of
obtaining enforcement of arbitration provisions contained in the
contract.
The Company is a party to other civil lawsuits which have arisen
in the normal course of business for which potential liability,
including costs of defense, are covered by insurance policies.
The major portion of the Company's business involves contracting
with departments and agencies of, and prime contractors to, the U.S.
government and such contracts are subject to possible termination for the
convenience of the government and to audit and possible adjustment
to give effect to unallowable costs under cost-type contracts or to
other regulatory requirements affecting both cost-type and fixed-
price contracts. In addition, the Company is occasionally the
subject of investigations by the Department of Justice and other
investigative organizations, resulting from employee and other
allegations regarding business practices. In management's opinion,
there are no outstanding issues of this nature at December 31, 1994
that will have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
The Company has recorded its best estimate of the liability that
will result from these matters. While it is not possible to predict
with certainty the outcome of the litigation and other matters
discussed above, it is the opinion of the Company's management,
based in part upon opinions of counsel, insurance in force and the
facts presently known, that liabilities in excess of those recorded,
if any, arising from such matters would not have a material adverse
effect on the results of operations, consolidated financial position
or liquidity of the Company.
The Company is highly leveraged. However, it believes that with
the sale of the Commercial Aviation business and the collection of
the Cummings Point Industries note receivable, it will have
sufficient cash to retire a substantial portion of the high interest
rate Junior Subordinated Debentures. Assuming the retirement of
the Junior Subordinated Debentures, improved
cash flow from the continuing operations, the continuation of the
ESOP to purchase Company common stock to fund the ESOP retirement
benefit, the new $20,000,000 bank financing facility (see Note 23),
the potential expansion of the Contract Receivable Collateralized Notes,
and the continuation of other programs which have been initiated to
improve operations and cash flows, the Company expects that it will
be able to meet its debt obligations and working capital
requirements.
(22) Business Segment
The Company operates in one line of business: that of providing
management, technical and professional services to industry and
government organizations primarily to support the customers'
facilities and/or operations on a turn-key (full) service basis.
The Company does not have significant foreign operations or assets
outside the United States. The largest single customer of the
Company is the U.S. Government. The Company had prime contract
revenues from the U.S. Government of $723 million in 1994, $663
million in 1993 and $673 million in 1992. Included in revenues from
the U.S. Government are revenues from the Department of Defense of
$487 million in 1994, $539 million in 1993 and $530 million in 1992.
No other customer accounted for more than 10% of revenues in any
year.
(23) Subsequent Events
On February 7, 1995, the Company sold its corporate headquarters
to RREEF America Reit Corp. C and entered into a 12-year lease with
RREEF as the landlord. The proceeds from the sale-leaseback were
used to satisfy the mortgage on the building which was due to mature
on March 27, 1995. Since the Company had the intent to discharge
its obligation under the mortgage with noncurrent assets, the amount
was included in long-term debt at December 31, 1994.
In February and March 1995, the Company purchased $3,500,000 of
Junior Subordinated Debentures. On July 19, 1995 and August 10,
1995, the Board of Directors authorized the redemption of
$15,000,000 and $12,500,000, respectively, of Junior Subordinated
Debentures.
On August 10, 1995, the Company received full payment (including
interest) on the Cummings Point Industries note receivable.
On June 30, 1995, the Company sold the stock of all its
subsidiaries engaged in the business of commercial aircraft
maintenance and modification to Sabreliner Corporation for
$12,500,000 in cash subject to final adjustments of the closing date
balance sheet and to additional payments based on future business
revenue of the sold subsidiaries. On August 31, 1995, the Company
sold to ALPHA Airports Group Plc all of its subsidiaries engaged in
ground handling, cargo handling and refueling for $122,000,000
n cash, subject to final adjustments of the closing balance
sheet. The net proceeds from these transactions are in excess of
the book value of the net assets of the discontinued business. The
net gain will be recorded during the third quarter of 1995. The
proceeds will be used primarily to retire debt and satisfy existing
equipment financing obligations of the Ground Handling Unit.
On July 25, 1995, the Company entered into a senior credit
agreement with Citicorp North America, Inc. under which the Company
may borrow up to $20,000,000 advanced under a borrowing base
determination of specified eligible government contract and
commercial receivables. The agreement requires the Company to
maintain compliance with certain covenants
and will expire the earlier of July 23, 1996 or the
refinancing of the existing $100,000,000 Contract Receivable
Collateralized Notes.
(24) Quarterly Financial Data (Unaudited)
A summary of quarterly financial data for 1994 and 1993 is as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
1994 Quarters 1993 Quarters
First Second Third Fourth(a) First Second Third Fourth(b)
<C> <S> <S> <S> <S> <S> <S> <S> <S>
Revenues $192,589 $198,573 $205,764 $221,757 $188,035 $195,519 $199,137 $194,525
Gross profit 7,352 9,481 9,665 9,090 5,061 9,476 9,944 10,280
Earnings (loss) from continuing
operations before income taxes
and minority interest (1,370) 626 322 (1,036) (3,157) 1,516 139 (742)
Minority interest 249 311 226 344 118 386 113 335
Discontinued operations 16 (710) (2,772) (9,013) (2,893) (4,064) (3,104) 1,132
Net loss for common stockholders (1,589) (930) (4,245) (6,067) (6,186) (2,979) (3,854) (395)
Earnings (loss) per common share:
Primary and fully diluted:
Continuing operations $ (0.36)$ (0.10)$ (0.24)$ 0.21 $ (0.70)$ 0.07 $ (0.21)$ (0.37)
Discontinued operations - (0.11) (0.35) (0.74) (0.56) (0.38) (0.61) 0.22
Net loss for common
stockholders $ (0.36)$ (0.21)$ (0.59)$ (0.53)$ (1.26)$ (0.31)$ (0.82)$ (0.15)
<FN>
(a) 1994 Fourth Quarter includes:
- $3,250,000 write-off of investment in unconsolidated subsidiary, $2,700,000 accrual
for escalated legal fees and credit of $1,830,000 for reversal of legal costs accrued
in the fourth quarter of 1993 (see Note 14).
- Reversal of income tax reserves of $4,069,000 (see Note 15).
(b) 1993 Fourth Quarter includes:
- Legal costs accrual of $2,070,000 (see Note 14).
- Accelerated amortization of $988,000 of cost in excess of net assets of acquired
business for assets that were subsequently determined to be over valued at time of
acquisition.
Quarterly financial data may not equal annual totals due to rounding.
Quarterly earnings per share data will not equal annual total.
</TABLE>
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
December 31,
1994(a) 1993(a)
Current Assets:
Cash and short-term investments $ 6,000 $ 3,978
Accounts receivable and contracts in process,
net of allowance for doubtful accounts (Note 3) 35,689 20,723
Inventories of purchased products and supplies 977 513
Other current assets 5,027 3,718
Total current assets 47,693 28,932
Investment in and advances to subsidiaries and affiliates 76,265 70,427
Property and Equipment, net of accumulated depreciation
and amortization 7,956 9,666
Intangible Assets, net of accumulated amortization 35,753 37,523
Other Assets 7,409 8,956
Net Noncurrent Assets of Discontinued Operations 42,874 49,165
Total $ 217,950 $ 204,669
(a) Restated for the discontinuance of the Commercial Aviation business.
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements"
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
December 31,
1994(a) 1993(a)
Current Liabilities:
Notes payable and current portion of long-term
debt (Note 2) $ 2,636 $ 2,830
Accounts payable 13,068 11,594
Advances on contracts in process 2,711 864
Accrued liabilities 65,117 71,083
Net current liabilities of discontinued operations 283 562
Total current liabilities 83,815 86,933
Long-Term Debt (Note 2) 108,502 92,857
Other Liabilities and Deferred Credits 16,095 16,513
Total Liabilities 208,412 196,303
Contingencies and Litigation - -
Redeemable Common Stock, at Redemption Value 2,288 2,200
Common Stock Held by ESOP, at Fair Value 86,338 68,745
Preferred Stock, Class C 3,000 3,000
Common Stock 277 107
Common Stock Warrants 11,486 15,119
Unissued Common Stock under restricted stock plan 9,923 10,395
Paid-in Surplus 32,242 27,633
Deficit (118,256) (105,425)
Common Stock Held in Treasury (8,817) (5,840)
Cummings Point Industries Note Receivable (8,943) (7,568)
Total $ 217,950 $ 204,669
(a) Restated for the discontinuance of the Commercial Aviation business.
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Operations
(Dollars in Thousands)
For the Years Ended December 31,
1994(a) 1993(a) 1992(a)
Revenues $ 545,581 $ 552,662 $ 557,675
Costs and Expenses:
Cost of services 523,029 528,776 542,783
Selling and corporate administrative 12,286 13,133 14,769
Interest expense 4,643 4,350 4,608
Interest income (1,946) (1,969) (1,693)
Other (Note 3) 30,178 22,479 22,068
568,190 566,769 582,535
Loss from continuing operations before
income taxes, equity in net income of
subsidiaries and extraordinary item (22,609) (14,107) (24,860)
Benefit for income taxes (8,793) (1,561) (3,900)
Loss from continuing operations before equity
in net income of subsidiaries and
extraordinary item (13,816) (12,546) (20,960)
Equity in net income of subsidiaries 13,464 8,061 6,848
Loss from continuing operations before
extraordinary item (352) (4,485) (14,112)
Loss from discontinued operations, net of
income taxes (12,479) (8,929) (6,704)
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early
extinguishment of debt - - (2,526)
Net Loss (12,831) (13,414) (23,342)
Preferred Stock Class A dividends declared
and paid and accretion of discount - - 959
Net Loss for Common Stockholders $ (12,831) $ (13,414) $ (24,301)
(a) Restated for the discontinuance of the Commercial Aviation business.
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Cash Flows(Dollars in Thousands)
For the Years Ended December 31,
1994(a) 1993(a) 1992(a)
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss from operations
to net cash (used) provided by operating activities:
Depreciation and amortization 5,911 6,413 7,971
Pay-in-kind interest on Junior Subordinated
Debentures 15,329 13,142 6,590
Loss on purchase of Junior Subordinated Debentures - - 2,526
Deferred income taxes (59) 521 (666)
Accrued compensation under Restricted Stock Plan (329) 2,047 2,354
Noncash interest income (1,375) (1,158) (910)
Other (414) (3,071) (3,821)
Change in assets and liabilities, net of acquisitions
and dispositions and sale of accounts receivable in 1992:
Increase in accounts receivable and contracts
in process (14,966) (2,570) (10,173)
Increase in inventories (465) (93) (72)
(Increase) decrease in other current assets (1,309) 1,992 986
Increase (decrease) in current liabilities except notes
payable and current portion of long-term debt (2,511) (4,492) 5,416
Cash used by continuing operations (13,019) (683) (13,141)
Cash provided by discontinued operations 6,664 1,434 1,550
Cash (used) provided by operating activities (6,355) 751 (11,591)
Cash Flows from Investing Activities:
Sale of property and equipment 660 829 130
Proceeds received from notes receivable - - 1,346
Purchase of property and equipment, net of
capitalized leases 1,734 (928) (2,381)
Increase in notes receivable - - (5,500)
Increase in investments in affiliates 1,500 - (1,888)
Cash on deposit for letters of credit (21) (2,916) -
Other (1,334) 345 (221)
Cash provided (used) from investing activities 2,539 (2,670) (8,514)
Cash Flows from Financing Activities:
Purchase of Preferred Stock Class A
and Junior Subordinated Debentures - - (42,466)
Treasury stock purchased (3,182) (1,979) (3,448)
Payment on indebtedness (3,349) (4,219) (40,534)
Accounts receivable sold (Note 3) - - 63,682
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership Plan - 16,116 16,099
Sale of stock to Employee Stock Ownership Plan 17,100 - -
Financing activities of discontinued operations (652) (506) (476)
Other financing transactions 49 - -
Change in intercompany balances, net (4,287) (9,383) 14,771
Cash provided from financing activities 5,838 75 6,875
Net Increase (Decrease) in Cash and Short-term
Investments 2,022 (1,844) (13,230)
Cash and Short-term Investments at Beginning
of the Year 3,978 5,822 19,052
Cash and Short-term Investments at End of the Year $ 6,000 $ 3,978 $ 5,822
(a) Restated for the discontinuance of the Commercial Aviation business.
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Notes to Condensed Financial Statements
December 31, 1994
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities
and Exchange Commission, the Condensed Financial Statements of
the Registrant do not include all of the information and notes
normally included with financial statements prepared in
accordance with generally accepted accounting principles. It
is, therefore, suggested that these Condensed Financial
Statements be read in conjunction with the Consolidated
Financial Statements and Notes included elsewhere in this
Prospectus.
2. Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of
(in thousands):
1994 1993
Junior Subordinated Debentures, net of unamortized
discount of $4,793 and $5,175 $102,659 $86,947
Notes payable, due in installments through 1999,
9.98% weighted average interest rate 6,966 6,643
Capitalized equipment leases 1,513 2,097
111,138 95,687
Less current portion 2,636 2,830
$108,502 $92,857
Maturities of long-term debt as of December 31, 1994, were as follows
(in thousands):
1995 $ 2,636
1996 2,597
1997 1,907
1998 956
1999 185
Thereafter 102,857
$111,138
3. Accounts Receivable
At December 31, 1992, the Company had sold $63,682,000 of
its accounts receivable to Dyn Funding Corporation (DFC), a
wholly owned subsidiary of the Company. DFC was established
in January, 1992 to issue $100,000,000 of Contract Receivable
Collateralized Notes (Notes) and to purchase eligible accounts
receivable from the Company and its subsidiaries. On an
ongoing basis, the cash received by DFC from collection of the
receivables is used to make interest payments on the Notes,
pay a servicing fee to the Company and purchase additional
receivables from the Company (see Note 5 to Consolidated
Financial Statements included elsewhere in this Prospectus).
The Company receives 97% of the face value of the accounts
receivable sold to DFC. The 3% discount from the face value
of the accounts receivable is recorded as an expense by the
Company at the time of sale. In 1994 and 1993, the Company
recorded as expense $16,032,000 and $16,298,000 which is
reflected in "Other" in the accompanying "Statements of
Operations" (in the "Consolidated Statements of Operations" of
DynCorp and Subsidiaries this expense is offset by the gain
recognized by DFC).
<TABLE>
DynCorp and Subsidiaries
SCHEDULE II - Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993, and 1992
(Dollars in Thousands)
<CAPTION>
Balance at Charged to Charged Balance
Beginning Costs and to Other Deduct- at End of
Description of Period Expenses Accounts ions Period
<C> <S> <S> <S> <S> <S>
Year Ended December 31, 1994
Allowance for doubtful accounts (1) $ 9 $ - $ - $ - $ 9
Year Ended December 31, 1993
Allowance for doubtful accounts (1) $ 9 $ - $ - $ - $ 9
Year Ended December 31, 1992
Allowance for doubtful accounts (1) $ 9 $ - $ - $ - $ 9
<FN>
(1) Restated for discontinuance of the Commercial Aviation business (see Note 2).
</TABLE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF DYNCORP
FIRST: The name of the corporation is DynCorp.
SECOND: Its registered office in the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name and address of its registered
agent are The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or
purposes to be transacted, promoted or carried on are to engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware (the "DGCL").
FOURTH: The total number of shares of capital stock
which the corporation shall have authority to issue is 19,243,711
shares, consisting of four classes of capital stock:
(i) 3,500,000 shares of 17% Redeemable Pay-in-Kind
Class A Preferred Stock, par value $0.10 per share (the "Class A
Preferred Stock");
(ii) 620,000 shares of 18% Redeemable Pay-in-Kind Class
B Preferred Stock, par value $24.25 per share (the "Class B
Preferred Stock");
(iii) 123,711 shares of Class C Convertible Preferred
Stock, par value $0.10 per share (the "Class C Preferred Stock";
and
(iv) 15,000,000 shares of Common Stock, par value $0.10
per share (the "Common Stock").
The designations, preferences, powers, qualifications, special or
relative rights or privileges of the Class A Preferred Stock,
Class B Preferred Stock, Class C Preferred Stock and Common Stock
shall be as follows:
A. Class A Preferred Stock
1. Rank. The Class A Preferred Stock shall, with respect
to the payment of dividends, mandatory redemption payments and
rights upon liquidation, dissolution or winding up of the affairs
of the corporation rank (i) senior and prior to the Class B
Preferred Stock (except with respect to mandatory redemption
payments for Class B Preferred Stock), the Class C Preferred
Stock, the Common Stock and to any other class or series of
capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such class or series shall
rank prior to or on a parity with the shares of Class A Preferred
Stock (shares of Class B Preferred Stock, Class C Preferred
Stock, Common Stock and any other class or series of capital
stock of the corporation hereafter issued the terms of which do
not specifically provide that shares of such class or series
shall rank prior to or on a parity with the shares of Class A
Preferred Stock are collectively referred to in this Section A of
Article FOURTH as the "Junior Securities"); (ii) on a parity with
any other class or series of capital stock of the corporation
hereafter issued for fair value as determined by the Board of
Directors the terms of which specifically provide that shares of
such class or series shall rank on a parity with the shares of
Class A Preferred Stock (shares of such class or series are
collectively referred to in this Section A of Article FOURTH as
the "Parity Securities"); and (iii) junior to any other class or
series of capital stock of the corporation hereafter issued with
the consent of the holders of a majority of the outstanding
shares of Class A Preferred Stock, Class B Preferred Stock and
Class C Preferred Stock pursuant to subparagraph (b) of paragraph
5 hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class A
Preferred Stock (shares of such class or series are collectively
referred to in this Section A of Article FOURTH as the "Senior
Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL, and before any dividend
or other distribution is declared or paid with respect to the
outstanding Junior Securities, cumulative dividends payable
quarterly in arrears on March 31, June 30, September 30 and
December 31 in each year (each such date is referred to herein as
a "Dividend Payment Date" and the quarterly period between
consecutive Dividend Payment Dates is referred to herein as a
"Dividend Period") commencing on [June 30, 1988]. The per annum
dividend rate on outstanding shares of Class A Preferred Stock
shall be 17% of the Redemption Price per share thereof as defined
in subparagraph (a) of paragraph 4 hereof (the "Class A Rate").
The amount of dividends payable on shares of Class A Preferred
Stock shall be calculated (a) for each full quarterly Dividend
Period during which such shares are outstanding by dividing by
four the Class A Rate per share and (b) for each Dividend Period
which is less than a full quarter during which such shares are
outstanding by multiplying the Class A Rate by a fraction, the
numerator of which is the actual number of days elapsed in such
quarter and the denominator of which is 365. Such dividends
shall be payable to the holders of record of outstanding shares
of Class A Preferred Stock as their names shall appear on the
stock register of the corporation on such record date, not more
than sixty or less than ten days preceding each such Dividend
Payment Date, as shall be fixed by the Board of Directors in
advance of payment of each such dividend. Any dividend payments
made with respect to shares of Class A Preferred Stock for (i)
any Dividend Period ending prior to the seventh anniversary of
the date of the initial issuance of the Class A Preferred Stock
and (ii) that portion of the next succeeding Dividend Period
which ends on the seventh anniversary of the date of the initial
issuance of the Class A Preferred Stock, may be made, in the sole
discretion of the corporation, in cash or, in whole or in part,
in additional fully paid and nonassessable shares of Class A
Preferred Stock at the rate of 0.04 of a share for each $1.00 of
such dividend not paid in cash, and the issuance of such
additional shares of Class A Preferred Stock (notwithstanding the
amount of net proceeds received with respect to the Fractional
Shares (as hereinafter defined) as described below) shall
constitute payment in full of such dividend. All dividends paid
in cash, in additional shares of Class A Preferred Stock or in
any combination thereof shall be paid pro rata to the holders of
outstanding shares of Class A Preferred Stock entitled thereto.
All shares of Class A Preferred Stock issued as a dividend on the
outstanding shares of Class A Preferred Stock (including shares
sold pursuant to the next sentence), will when so issued be duly
authorized, validly issued, fully paid and nonassessable and free
of all liens and charges. In lieu of issuing certificates
representing fractions of a share of Class A Preferred Stock
("Fractional Shares") in payment of any dividend on Class A
Preferred Stock, at the option of the corporation, each record
holder of Class A Preferred Stock otherwise entitled to receive a
Fractional Share with respect to a dividend payable thereon,
shall receive payment in cash equal to such holder's
proportionate interest in the net proceeds received from the sale
or sales in the open market or pursuant to an auction process (at
the direction of the corporation) by an agent selected by the
corporation on behalf of all such holders of the Fractional
Shares otherwise payable as a dividend. If the corporation so
elects, the holders of Class A Preferred Stock shall have no
other right against the corporation related to such sale other
than the receipt of their proportionate interest in such sale.
(b) Dividends on outstanding shares of Class A
Preferred Stock shall be fully cumulative and shall accrue,
whether or not declared, from the respective dates of issuance of
such shares of Class A Preferred Stock until paid. Accumulated
unpaid dividends for past Dividend Periods may be declared by the
Board of Directors and paid to the holders of record of
outstanding shares of Class A Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
the date of payment, as shall be fixed by the Board of Directors,
whether or not such date is a Dividend Payment Date. Holders of
outstanding shares of Class A Preferred Stock shall not be
entitled to receive any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends to
which such holders are entitled as herein provided. No interest
or sum of money in lieu of interest shall be payable in respect
of any accumulated unpaid dividends on outstanding shares of
Class A Preferred Stock.
(c) Dividends shall not be paid on the outstanding
shares of Class A Preferred Stock for any Dividend Period in
which dividends for any prior Dividend Period have not been paid
in full on any Senior Securities or Parity Securities from time
to time outstanding; provided, however, that in the event such
failure to pay accrued dividends is with respect only to Parity
Securities, cash dividends may be declared, paid or set apart for
payment, without interest, pro rata on shares of the Class A
Preferred Stock and outstanding shares of such Parity Securities
so that the amounts of any cash dividends declared, paid or set
apart for payment on outstanding shares of Class A Preferred
Stock and outstanding shares of such Parity Securities shall in
all cases bear to each other the same ratio that, at the time of
such declaration, payment or setting apart for payment, the
amounts of all accrued but unpaid cash dividends on outstanding
shares of Class A Preferred Stock and outstanding shares of such
Parity Securities bear to each other.
(d) So long as any shares of Class A Preferred Stock
are outstanding, the corporation shall not (i) except as set
forth in subparagraph (c) of this paragraph 2, declare, pay or
set apart for payment any dividend on any outstanding Parity
Securities or Junior Securities (other than a dividend which is
payable in shares of Parity Securities or Junior Securities) or
(ii) except with respect to redemption payments for outstanding
shares of Class B Preferred Stock (a) make any payment on account
of, or set apart for payment, money for a sinking or other
similar fund for the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or
otherwise acquire for value any of, any outstanding Parity
Securities or Junior Securities or any convertible securities,
warrants, rights, calls or options exercisable for or convertible
into any Parity Securities or Junior Securities, (b) make any
distribution in respect of any outstanding Parity Securities or
Junior Securities or any convertible securities, warrants,
rights, calls or options exercisable for or convertible into any
Parity Securities or Junior Securities, in any such case either
directly or indirectly, and whether in cash, obligations or
shares of the corporation or other property (other than
distributions or dividends of a particular class or series of
Parity Securities or Junior Securities) or (c) permit any
corporation or other entity directly or indirectly controlled by
the corporation to purchase, redeem or otherwise acquire for
value any outstanding Parity Securities or Junior Securities or
any convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase,
redemption, retirement, other acquisition for value or
distribution described in clause (i) and clause (ii) above, as
the case may be, all accrued and unpaid dividends, if any, on
outstanding shares of Class A Preferred Stock to the date fixed
for such declaration, payment, setting apart for payment,
purchase, redemption, retirement, other acquisition for value or
distribution described in clause (i) and clause (ii) above shall
have been paid in full; provided, however, that nothing contained
herein shall limit or restrict the corporation from purchasing,
redeeming or otherwise retiring, to the extent required by law or
by contractual obligation, any shares of capital stock of the
corporation distributed by the corporation's employee stock
ownership plan to participants in such plan.
(e) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class A Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class A
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $25.00 per share, together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class A Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the preceding sentence, the holders of outstanding shares of
Class A Preferred Stock shall not be entitled to any distribution
in the event of the liquidation, dissolution or winding up of the
affairs of the corporation. If, upon any such liquidation,
dissolution or winding up of the affairs of the corporation, the
assets of the corporation available for distribution to the
holders of outstanding shares of Class A Preferred Stock and
outstanding Parity Securities shall be insufficient to permit the
payment in full to such holders and to the holders of any Parity
Securities of the full amount of the preferential liquidation
amounts to which they are then entitled, the entire assets of the
corporation thus available for distribution shall be distributed
among the holders of outstanding shares of Class A Preferred
Stock and Parity Securities ratably in proportion to the full
amount to which such holders would otherwise be entitled if such
assets were sufficient to permit payment in full. After the
payment of all preferential liquidation amounts to which the
holders of outstanding shares of Class A Preferred Stock shall be
entitled, such holders shall not be entitled to any further
participation in any distribution of the assets of the
corporation to its stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Redemption.
(a) The outstanding shares of Class A Preferred Stock
shall be subject to optional redemption by the corporation, in
whole or in part, at any time and from time to time as
hereinafter provided in this subparagraph (a) of paragraph 4;
provided, however, that so long as any shares of Class B
Preferred Stock are outstanding, the Corporation may not make any
optional redemption of outstanding shares of Class A Preferred
Stock. The price at which outstanding shares of Class A
Preferred Stock may be redeemed pursuant to this subparagraph (a)
of paragraph 4 shall be $25.00 per share (the "Redemption
Price"), together with an amount in cash equal to all accrued but
unpaid dividends on such shares to the date fixed for such
redemption, without interest (each such date being referred to
herein as an "Optional Redemption Date"). The shares of
outstanding Class A Preferred Stock to be redeemed by the
corporation on any Optional Redemption Date shall be selected by
the corporation; provided, however, that to the extent
practicable such redemptions shall be made ratably among the
holders of outstanding shares of Class A Preferred Stock, in
proportion to the number of shares of Class A Preferred Stock
held by each such holder.
(b) Commencing June 30, 1999 and on each June 30
thereafter through June 30, 2003 (each such date being herein
referred to as a "Mandatory Redemption Date"), prior to the
payment of any required mandatory redemption payment then due
with respect to outstanding Junior Securities, the corporation
shall, to the extent permitted by the DGCL, redeem such number of
outstanding shares of Class A Preferred Stock as shall be equal
to 20% of the highest number of shares of Class A Preferred Stock
outstanding at any time. Notwithstanding the foregoing, the
holders of outstanding shares of Class A Preferred Stock shall
not be entitled to receive such mandatory redemption payments
until all required mandatory redemption payments then due with
respect to outstanding Senior Securities and Class B Preferred
Stock have been paid in full. The shares of outstanding Class A
Preferred Stock to be redeemed by the corporation on any
Mandatory Redemption Date shall be selected by the corporation;
provided, however, that to the extent practicable such
redemptions shall be made ratably among the holders of
outstanding shares of Class A Preferred Stock, in proportion to
the number of shares of Class A Preferred Stock held by each such
holder. The corporation shall, at its option as hereinafter
provided, be entitled to credit against the number of shares of
Class A Preferred Stock to be redeemed on any Mandatory
Redemption Date as provided in the immediately preceding
sentences, shares of Class A Preferred Stock acquired on or prior
to such Mandatory Redemption Date by the corporation through
purchase in the open market or privately, redemption pursuant to
subparagraph (a) of this paragraph 4, or otherwise and not
previously credited against any mandatory redemption obligations
of the corporation. Shares so acquired shall be credited against
the number of shares to be redeemed on each Mandatory Redemption
Date in the chronological order of such Mandatory Redemption
Dates. The price at which outstanding shares of Class A
Preferred Stock shall be redeemed pursuant to this subparagraph
(b) of paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(c) Notice of redemption of outstanding shares of Class
A Preferred Stock pursuant to subparagraphs (a) or (b) of this
paragraph 4 shall be sent by or on behalf of the corporation,
postage prepaid, to the holders of record of outstanding shares
of Class A Preferred Stock selected for redemption not less than
thirty or more than sixty days prior to the applicable Optional
Redemption Date or Mandatory Redemption Date, as the case may be.
Such notice shall specify the applicable Optional Redemption Date
or Mandatory Redemption Date, as the case may be, the number of
shares of Class A Preferred Stock held by such holder which are
to be redeemed and the place at which such shares are to be
surrendered for redemption on the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be. If less
than all of the shares of Class A Preferred Stock represented by
a certificate or certificates surrendered for redemption are to
be redeemed, the corporation shall issue and deliver to or upon
the written order of the holder of the certificate or
certificates surrendered for redemption a replacement certificate
or certificates representing the shares of Class A Preferred
Stock not redeemed as soon as practicable following the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be. Notice having been so given, from and after
the date specified in such notice as the Optional Redemption Date
or Mandatory Redemption Date, as the case may be, unless default
shall be made by the corporation on the applicable Optional
Redemption Date or Mandatory Redemption Date, as the case may be,
in providing funds for the payment of the Redemption Price
payable pursuant to such notice, all dividends on the shares of
Class A Preferred Stock thereby called for redemption shall cease
to accrue, and from and after the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be, so
specified, unless default shall be made by the corporation as
aforesaid, all rights of the holders of the shares of Class A
Preferred Stock called for redemption, except the right to
receive the Redemption Price in respect of such shares, shall
cease and terminate.
(d) Shares of Class A Preferred Stock which have been
issued and reacquired by the corporation in any manner, including
shares purchased or redeemed pursuant to the provisions of this
paragraph 4, shall be cancelled and shall not be reissued, and
the stated capital of the corporation shall be reduced in
accordance with Sections 243 and 244 of the DGCL.
5. Voting Rights.
(a) Except as otherwise provided by the DGCL and by
subparagraphs (b) and (c) of this paragraph 5, the holders of
outstanding shares of Class A Preferred Stock shall not be
entitled to vote on or otherwise consent to any matter requiring
the vote or consent of the stockholders of the corporation under
the laws of the State of Delaware.
(b) So long as any shares of Class A Preferred Stock
are outstanding, the corporation will not (i) without the
affirmative consent or vote at an annual or special meeting of
stockholders (a "Vote") of the holders of at least a majority of
the outstanding shares of Class A Preferred Stock, Class B
Preferred Stock and Class C Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, create any class or series of capital stock
ranking prior to the Class A Preferred Stock as to dividends,
redemption payments or upon the liquidation, dissolution or
winding up of the affairs of the corporation, or (ii) without a
Vote of the holders of at least a majority of the outstanding
shares of Class A Preferred Stock (excluding treasury shares and
shares held by subsidiaries of the corporation), voting as a
class, amend, alter or repeal the corporation's Certificate of
Incorporation to affect adversely the powers, rights or
preferences of the shares of Class A Preferred Stock.
(c) In the event that the corporation shall be
delinquent in the payment of dividends with respect to shares of
Class A Preferred Stock in an aggregate amount equal to the
amount of dividends payable for at least four full Dividend
Periods, the holders of outstanding shares of Class A Preferred
Stock, voting as a class, shall be entitled to elect one director
of the corporation until all accrued dividends from prior
Dividend Periods shall have been paid. Upon the vesting of the
right of the holders of outstanding shares of Class A Preferred
Stock to elect one director, the maximum authorized number of
members of the Board of Directors of the corporation shall
automatically be increased by one and the one vacancy so created
shall be filled by vote of the holders of outstanding shares of
Class A Preferred Stock (either alone or together with the
holders of shares of any one or more other classes or series of
Parity Securities hereafter issued the terms of which provide for
the right to vote, together with the holders of outstanding
shares of Class A Preferred Stock, for one director in the event
of delinquent payment of four quarterly dividends, without
distinction as to class or series) as hereinafter set forth. If
there shall not be one director serving who has been elected by
the holders of outstanding shares of Class A Preferred Stock,
voting as a class (together with holders of Parity Securities, if
applicable), at any time when such holders shall be entitled to
elect one director of the corporation, a meeting of the
stockholders of the corporation shall be held for the election of
such director at the request in writing of any holder of
outstanding shares of Class A Preferred Stock (or Parity
Securities, if applicable), addressed to the Secretary of the
corporation, as soon as practicable after the receipt of such
request and after notice similar to that then provided in the
By-Laws of the corporation for holding a special meeting of
stockholders. At such meeting, the holders of outstanding shares
of Class A Preferred Stock (together with holders of Parity
Securities, if applicable) shall be entitled to elect one
director, and if at such meeting other directors are to be
elected, the holders of capital stock of the corporation entitled
to vote with respect to the election of such other directors
shall be entitled to elect the remaining directors, except as the
rights of the holders of such capital stock may be further
limited by the provisions of any other outstanding security, by
the Certificate of Incorporation or By-Laws of the corporation,
or by operation of the General Corporation Law of the State of
Delaware. At any meeting at which the holders of Class A
Preferred Stock (together with the holders of outstanding Parity
Securities, if applicable) shall be entitled to elect one
director, each holder of shares of Class A Preferred Stock (and
Parity Securities, if applicable) shall be entitled to one vote
per share, the holders of a majority of the then outstanding
shares of Class A Preferred Stock (together with the holders of a
majority of outstanding Parity Securities, if applicable) shall
be sufficient to constitute a quorum, whether present in person
or by proxy, and the vote of the holders of a majority of the
shares of Class A Preferred Stock (and the holders of a majority
of outstanding Parity Securities, if applicable) so present or
represented at any such meeting at which there shall be a quorum
shall be sufficient to elect one director. Whenever all
arrearages in payment of quarterly dividends on the shares of
Class A Preferred Stock shall have been paid, the shares of Class
A Preferred Stock shall thereupon be divested of the right to
elect one director as hereinabove provided and such director so
elected by the holders of shares of Class A Preferred Stock
(together with the holders of outstanding Parity Securities, if
applicable) shall thereupon cease to be a director of the
corporation (and the number of members of the Board of Directors
shall automatically be reduced accordingly) subject to revesting
in the event of subsequent arrearages which result in the right
to so elect one director under the first sentence of this
subparagraph (c) of paragraph 5.
B. Class B Preferred Stock
1. Rank. The Class B Preferred Stock shall, with respect
to the payment of dividends, mandatory redemption and upon the
liquidation, dissolution or winding up of the affairs of the
corporation rank (i) senior and prior to the Class C Preferred
Stock, the Common Stock and to any other class or series of
capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such class or series shall
rank prior to or on a parity with the shares of Class B Preferred
Stock (shares of Class C Preferred Stock, Common Stock and any
other class or series of capital stock of the corporation
hereafter issued the terms of which do not specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class B Preferred Stock are
collectively referred to in this Section B of Article FOURTH as
the "Junior Securities"); (ii) on a parity with any other class
or series of capital stock of the corporation hereafter issued
for fair value as determined by the Board of Directors the terms
of which specifically provide that shares of such class or series
shall rank on a parity with the shares of Class B Preferred Stock
(shares of such class or series are collectively referred to in
this Section B of Article FOURTH as the "Parity Securities"); and
(iii) junior to the Class A Preferred Stock (except with respect
to redemption payments for Class B Preferred Stock), and to any
other class or series of capital stock of the corporation
hereafter issued with the consent of the holders of a majority of
the outstanding shares of Class B Preferred Stock and Class C
Preferred Stock pursuant to subparagraph (b) of paragraph 6
hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class B
Preferred Stock (shares of Class A Preferred Stock and such class
or series are collectively referred to in this Section B of
Article FOURTH as the "Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class B Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL and before any dividend or
other distribution is declared or paid with respect to the
outstanding Junior Securities, cumulative dividends payable
quarterly in arrears on March 31, June 30, September 30 and
December 31 in each year (each such date is referred to herein as
a "Dividend Payment Date" and the quarterly period between
consecutive Dividend Payment Dates is referred to herein as a
"Dividend Period") commencing June 30, 1988. The per annum
dividend rate on outstanding shares of Class B Preferred Stock
shall be 18% of the Redemption Price per share thereof as defined
in subparagraph (a) of paragraph 4 hereof (the "Class B Rate").
The amount of dividends payable on shares of Class B Preferred
Stock shall be calculated (a) for each full quarterly Dividend
Period during which such shares are outstanding by dividing by
four the Class B Rate per share and (b) for each Dividend Period
which is less than a full quarter during which such shares are
outstanding by multiplying the Class B Rate by a fraction, the
numerator of which is the actual number of days elapsed in such
quarter and the denominator of which is 365. Such dividends
shall be payable to the holders of record of outstanding shares
of Class B Preferred Stock as their names shall appear on the
stock register of the corporation on such record date, not more
than sixty or less than ten days preceding each such Dividend
Payment Date, as shall be fixed by the Board of Directors in
advance of payment of each such dividend. Any dividend payments
made with respect to shares of Class B Preferred Stock for any
Dividend Period ending on or prior to June 30, 1995 may be made,
in the sole discretion of the corporation, in cash or, in whole
or in part, in additional fully paid and nonassessable shares of
Class B Preferred Stock at the rate of 0.04124 of a share for
each $1.00 of such dividend not paid in cash, and the issuance of
such additional shares of Class B Preferred Stock
(notwithstanding the amount of net proceeds received with respect
to the Fractional Shares (as hereinafter defined) as described
below) shall constitute payment in full of such dividend. All
dividends paid in cash, in additional shares of Class B Preferred
Stock or in any combination thereof shall be paid pro rata to the
holders of outstanding shares of Class B Preferred Stock entitled
thereto. All shares of Class B Preferred Stock issued as a
dividend on the outstanding shares of Class B Preferred Stock
(including shares sold pursuant to the next sentence), will, when
so issued be duly authorized, validly issued, fully paid and
nonassessable and free of all liens and charges. In lieu of
issuing certificates representing fractions of a share of Class B
Preferred Stock ("Fractional Shares") in payment of any dividend
on Class B Preferred Stock, at the option of the corporation,
each record holder of Class B Preferred Stock otherwise entitled
to receive a Fractional Share with respect to a dividend payable
thereon, shall receive payment in cash equal to such holder's
proportionate interest in the net proceeds received from the sale
or sales in the open market or pursuant to an auction process (at
the direction of the corporation) by an agent selected by the
corporation on behalf of all such holders of the Fractional
Shares otherwise payable as a dividend. If the corporation so
elects, the holders of Class B Preferred Stock shall have no
other right against the corporation related to such sale other
than the receipt of their proportionate interest in such sale.
(b) Dividends on outstanding shares of Class B
Preferred Stock shall be fully cumulative and shall accrue,
whether or not declared, from the respective dates of issuance of
such shares of Class B Preferred Stock until paid. Accumulated
unpaid dividends for past Dividend Periods may be declared by the
Board of Directors and paid to the holders of record of
outstanding shares of Class B Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
the date of payment, as shall be fixed by the Board of Directors,
whether or not such date is a Dividend Payment Date. Holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to receive any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends to
which such holders are entitled as herein provided. No interest
or sum of money in lieu of interest shall be payable in respect
of any accumulated unpaid dividends on outstanding shares of
Class B Preferred Stock.
(c) Dividends shall not be paid on the outstanding
shares of Class B Preferred Stock for any Dividend Period in
which dividends for any prior Dividend Period have not been paid
in full on any Senior Securities or Parity Securities; provided,
however, that in the event such failure to pay accrued dividends
is with respect only to Parity Securities, cash dividends may be
declared, paid or set apart for payment, without interest, pro
rata on shares of Class B Preferred Stock and outstanding shares
of such Parity Securities so that the amounts of any cash
dividends declared, paid or set apart for payment on outstanding
shares of Class B Preferred Stock and outstanding shares of such
Parity Securities shall in all cases bear to each other the same
ratio that, at the time of such declaration, payment or setting
apart for payment, the amounts of all accrued but unpaid cash
dividends on outstanding shares of Class B Preferred Stock and
outstanding shares of such Parity Securities bear to each other.
(d) So long as any shares of Class B Preferred Stock
are outstanding, the corporation shall not (i) except as set
forth in subparagraph (c) of this paragraph 2, declare, pay or
set apart for payment any dividend on any outstanding Parity
Securities or Junior Securities (other than a dividend which is
payable in shares of Parity Securities or Junior Securities),
(ii) make any payment on account of, or set apart for payment,
money for a sinking or other similar fund for the purchase,
redemption, retirement or other acquisition for value of any of,
or redeem, purchase, retire or otherwise acquire for value any
of, any outstanding Parity Securities or Junior Securities or any
convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, (iii) make any distribution in respect of any
outstanding Parity Securities or Junior Securities or any
convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, in any such case either directly or
indirectly, and whether in cash, obligations or shares of the
corporation or other property (other than distributions or
dividends of a particular class or series of Parity Securities or
Junior Securities), or (iv) permit any corporation or other
entity directly or indirectly controlled by the corporation to
purchase, redeem or otherwise acquire for value any outstanding
Parity Securities or Junior Securities or any convertible
securities, warrants, rights, calls or options exercisable for or
convertible into any Parity Securities or Junior Securities,
unless prior to or concurrently with such declaration, payment,
setting apart for payment, purchase, redemption, retirement,
other acquisition for value or distribution described in clauses
(i) through (iv) above, as the case may be, all accrued and
unpaid dividends, if any, on outstanding shares of Class B
Preferred Stock to the date fixed for such declaration, payment,
setting apart for payment, purchase, redemption, retirement,
other acquisition for value or distribution described in clause
(i) and clause (ii) above shall have been paid in full; provided,
however, that nothing contained herein shall limit or restrict
the corporation from purchasing, redeeming or otherwise retiring,
to the extent required by law or contractual obligation, any
shares of capital stock of the corporation distributed by the
corporation's employee stock ownership plan to participants in
such plan.
(e) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class B Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class B
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $24.25 per share together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class B Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the preceding sentence, the holders of outstanding shares of
Class B Preferred Stock shall not be entitled to any distribution
in the event of the liquidation, dissolution or winding up of the
affairs of the corporation. If, upon any such liquidation,
dissolution or winding up of the affairs of the corporation, the
assets of the corporation available for distribution to the
holders of outstanding shares of Class B Preferred Stock and
outstanding Parity Securities shall be insufficient to permit the
payment in full to such holders and to the holders of any Parity
Securities of the full amount of the preferential liquidation
amounts to which they are then entitled, the entire assets of the
corporation thus distributable shall be distributed among the
holders of outstanding shares of Class B Preferred Stock and
Parity Securities ratably in proportion to the full amount to
which such holders would otherwise be entitled if such assets
were sufficient to permit payment in full. After the payment of
all preferential liquidation amounts to which the holders of
outstanding shares of Class B Preferred Stock shall be entitled,
such holders shall not be entitled to any further participation
in any distribution of the assets of the corporation to its
stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Redemption.
(a) The outstanding shares of Class B Preferred Stock
shall be subject to optional redemption by the corporation, in
whole or in part, at any time and from time to time as
hereinafter provided in this subparagraph (a) of paragraph 4,
provided that dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the date of such
redemption shall have been paid in full prior to such redemption.
The price at which outstanding shares of Class B Preferred Stock
may be redeemed pursuant to this subparagraph (a) shall be $24.25
per share (the "Redemption Price"), together with an amount in
cash equal to all accrued but unpaid dividends on such shares to
the date fixed for such redemption, without interest (each such
date being referred to herein as an "Optional Redemption Date").
The shares of outstanding Class B Preferred Stock to be redeemed
by the corporation on any Optional Redemption Date shall be
selected by the corporation; provided, however, that such
redemptions shall be made ratably among the holders of
outstanding shares of Class B Preferred Stock, in proportion to
the number of shares of Class B Preferred Stock held by each such
holder, to the extent practicable.
(b) The outstanding shares of Class B Preferred Stock
shall be subject to mandatory redemption by the corporation on a
single date (such date being herein referred to as the "First
Mandatory Redemption Date") beginning on the Initial B Redemption
Date (as such term is defined in the Credit Agreement dated as of
March 2, 1988 among the corporation, Bankers Trust Company as
Agent and the banks listed on Schedule I thereto, (as such
agreement is in effect on the date hereof, the "Credit
Agreement"), a copy of which is on file with the secretary of
corporation) and ending on the date occurring 90 days after such
Initial B Redemption Date; provided that such redemption may be
made only on the terms and subject to the conditions set forth in
Section 11.03(a)(ii) of the Credit Agreement, and provided
further that dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the First Mandatory
Redemption Date shall have been paid in full prior to such
redemption. The number of outstanding shares of Class B
Preferred Stock to be redeemed pursuant to this subparagraph (b)
of paragraph 4 shall be the number of shares, rounded to the
nearest whole share, obtained by dividing the dollar amount of
funds available for such redemption by the Redemption Price. The
shares of outstanding Class B Preferred Stock to be redeemed by
the corporation on the First Mandatory Redemption Date shall be
selected by the corporation; provided, however, that such
redemption shall be made ratably among the holders of outstanding
shares of Class B Preferred Stock, in proportion to the number of
shares of Class B Preferred Stock held by each such holder, to
the extent practicable. The corporation shall, at its option as
hereinafter provided, be entitled to credit against the number of
shares of Class B Preferred Stock to be redeemed on the First
Mandatory Redemption Date as provided in the immediately
preceding sentences, shares of Class B Preferred Stock acquired
on or prior to the First Mandatory Redemption Date by the
corporation through purchase in the open market or privately,
redemption pursuant to subparagraph (a) of this paragraph 4, or
otherwise. The price at which outstanding shares of Class B
Preferred Stock shall be redeemed pursuant to this subparagraph
(b) of Paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(c) Commencing June 30, 1995 and on each June 30
thereafter through June 30, 1998 (each such date being herein
referred to as a "Mandatory Redemption Date"), prior to the
payment of any required mandatory redemption payment then due
with respect to outstanding Junior Securities, the corporation
shall, to the extent permitted by the DGCL, redeem such number of
outstanding shares of Class B Preferred Stock as shall be equal
to 25% of the number of shares of Class B Preferred Stock
outstanding at June 30, 1995 (or, if less than such number of
shares shall be outstanding on any such Mandatory Redemption
Date, all shares of Class B Preferred Stock outstanding on such
date). Notwithstanding the foregoing, the holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to receive such mandatory redemption payments until (i)
all required mandatory redemption payments then due with respect
to outstanding Senior Securities, excluding the Class A Preferred
Stock, and (ii) dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the date of such
redemption shall have been paid in full. The shares of
outstanding Class B Preferred Stock to be redeemed by the
corporation on any Mandatory Redemption Date shall be selected by
the corporation; provided, however, that such redemptions shall
be made ratably among the holders of outstanding shares of Class
B Preferred Stock, in proportion to the number of shares of Class
B Preferred Stock held by each such holder, to the extent
practicable. The price at which outstanding shares of Class B
Preferred Stock shall be redeemed pursuant to this subparagraph
(c) of paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(d) Notice of redemption of outstanding shares of Class
B Preferred Stock pursuant to subparagraphs (a), (b) and (c) of
this paragraph 4 shall be sent by or on behalf of the
corporation, postage prepaid, to the holders of record of
outstanding shares of Class B Preferred Stock selected for
redemption (i) in the case of the First Mandatory Redemption
Date, not less than ten or more than twenty days prior to the
First Mandatory Redemption Date and (ii) in the case of any
Optional Redemption Date or Mandatory Redemption Date, not less
than thirty or more than sixty days prior to the applicable
Optional Redemption Date or Mandatory Redemption Date, as the
case may be. Such notice shall specify the First Mandatory
Redemption Date or the applicable Optional Redemption Date or
Mandatory Redemption Date, as the case may be, the number of
shares of Class B Preferred Stock held by such holder which are
to be redeemed and the place at which such shares are to be
surrendered for redemption on the First Mandatory Redemption Date
or the applicable Optional Redemption Date or Mandatory
Redemption Date, as the case may be. If less than all of the
shares of Class B Preferred Stock represented by a certificate or
certificates surrendered for redemption are to be redeemed, the
corporation shall issue and deliver to or upon the written order
of the holder of the certificate or certificates surrendered for
redemption a replacement certificate or certificates representing
the shares of Class B Preferred Stock not redeemed as soon as
practicable following the First Mandatory Redemption Date or the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be. Notice having been so given, from and after
the date specified in such notice as the First Mandatory
Redemption Date, Optional Redemption Date or Mandatory Redemption
Date, as the case may be, unless default shall be made by the
corporation on the First Mandatory Redemption Date or the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be, in providing funds for the payment of the
Redemption Price payable pursuant to such notice, all dividends
on the shares of Class B Preferred Stock thereby called for
redemption shall cease to accrue, and from and after the First
Mandatory Redemption Date or the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be, so
specified, unless default shall be made by the corporation as
aforesaid, all rights of the holders of the shares of Class B
Preferred Stock called for redemption, except the right to
receive the Redemption Price in respect of such shares, shall
cease and terminate.
(e) Shares of Class B Preferred Stock which have been
issued and reacquired by the corporation in any manner, including
shares purchased or redeemed pursuant to the provisions of this
paragraph 4, shall be retired and shall not be reissued, and the
stated capital of the corporation shall be reduced in accordance
with Sections 243 and 244 of the DGCL.
5. Exchange.
(a) At any time on or after (i) the First Mandatory
Redemption Date or (ii) if the corporation shall determine that
no shares of Class B Preferred Stock are redeemable pursuant to
subparagraph (b) of paragraph 4 of this Section B of Article
FOURTH, the date of such determination, each share of Class B
Preferred Stock shall be exchangeable, at the option of the
holder thereof, for 16% Pay-in-Kind Junior Subordinated
Debentures of the corporation due 2003 (the "Debentures"), which
Debentures shall be issued pursuant to the Indenture which also
governs all Debentures theretofore issued by the corporation or
an Indenture having substantially identical terms; provided
however, no such exchange shall be permitted (i) if a Default or
Event of Default exists under the Credit Agreement on the date of
any proposed exchange or would result from such exchange and (ii)
unless the corporation shall have delivered to the Required Banks
(as defined in the Credit Agreement) the opinions or letters
required by section 11.05 (vii)(b) of the Credit Agreement. The
number of Debentures for which a share of Class B Preferred Stock
shall be exchanged shall be equal to the number obtained by
dividing (a) the Redemption Price (as set forth in subparagraph
(a) of paragraph 4 in this Section B of Article FOURTH) per share
of Class B Preferred Stock to be exchanged, plus accrued and
unpaid dividends to the Exchange Date (as hereinafter defined)
payable thereon by (b) the market value of one of the Debentures
to be issued upon such exchange (determined as of the date of
exchange by a nationally recognized investment banking or
independent appraisal firm selected by the corporation and
reasonably satisfactory to a majority of the holders of the
shares of Class B Preferred Stock then being exchanged for
Debentures).
(b) To exercise such exchange option, the holder of
shares of Class B Preferred Stock shall surrender the certificate
or certificates representing the shares of Class B Preferred
Stock to be exchanged, duly endorsed for transfer to the
corporation, at the principal executive office of the corporation
and shall give written notice, postage prepaid, by certified or
registered mail, return receipt requested, or by hand delivery,
to the corporation at its principal executive office, of the
election of such holder to exchange all or a portion of the
shares of Class B Preferred Stock represented by the certificate
or certificates surrendered into Debentures which notice shall
set forth the name or names in which the certificate or
certificates representing the Debentures to be issued upon
exchange are to be issued. Exchange shall be deemed to have been
effected on the date of receipt by the corporation of such notice
together with the certificate or certificates surrendered for
exchange (the "Exchange Date"). As promptly as practicable
thereafter, the corporation shall issue to or upon the written
order of such holder, a certificate or certificates for the
aggregate principal amount of Debentures to which such holder is
entitled. The exchange of shares of Class B Preferred Stock into
Debentures shall be deemed to be effective, and such holder, or
the person or persons designated by such holder, shall cease to
be a holder of record of shares of Class B Preferred Stock and
shall be deemed to have become a holder of record of the
Debentures issuable upon exchange of such shares of Class B
Preferred Stock, on the applicable Exchange Date unless the
transfer books of the corporation are closed on such date, in
which event such holder shall be deemed to have become a holder
of record of Debentures issued upon exchange of the shares of
Class B Preferred Stock on the next succeeding date on which the
transfer books of the corporation are open. Upon exchange of
only a portion of the number of shares of Class B Preferred Stock
represented by a certificate or certificates surrendered for
exchange, the corporation shall issue and deliver to or upon the
written order of the holder of the certificate or certificates so
surrendered a new certificate or certificates representing the
number of shares of Class B Preferred Stock not so exchanged.
6. Voting Rights.
(a) Except as otherwise provided by the DGCL and by
subparagraphs (b) and (c) of this paragraph 6, the holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to vote on or otherwise consent to any matter requiring
the vote or consent of the stockholders of the corporation under
the laws of the State of Delaware.
(b) So long as any shares of Class B Preferred Stock
are outstanding, the corporation will not, (i) without the
affirmative consent or vote at an annual or special meeting of
stockholders (a "Vote") of the holders of at least a majority of
the outstanding shares of Class B Preferred Stock and Class C
Preferred Stock (excluding treasury shares and shares held by
subsidiaries of the corporation), voting as a class, create any
class or series of capital stock ranking prior to the Class B
Preferred Stock but junior to the Class A Preferred Stock as to
dividends, mandatory redemption payments or upon the liquidation,
dissolution or winding up of the affairs of the corporation, or
(ii) without a Vote of the holders of at least a majority of the
outstanding shares of Class B Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, amend, alter or repeal the corporation's
Certificate of Incorporation to affect adversely the powers,
rights or preferences of the shares of Class B Preferred Stock.
(c) In the event that the corporation shall be
delinquent in the payment of dividends with respect to shares of
Class B Preferred Stock in an aggregate amount equal to the
amount of dividends payable for at least four full Dividend
Periods, the holders of outstanding shares of Class B Preferred
Stock, voting as a class, shall be entitled, as their sole
remedy, to elect two directors of the corporation until all
accrued dividends from prior Dividend Periods shall have been
paid. Upon the vesting of the right of the holders of
outstanding shares of Class B Preferred Stock to elect two
directors, the maximum authorized number of members of the Board
of Directors of the corporation shall automatically be increased
by two and the two vacancies so created shall be filled by vote
of the holders of outstanding shares of Class B Preferred Stock
as hereinafter set forth. If there shall not be two directors
serving who have been elected by the holders of outstanding
shares of Class B Preferred Stock, voting as a class, at any time
when such holders shall be entitled to elect two directors of the
corporation, a meeting of the stockholders of the corporation
shall be held for the election of such directors at the request
in writing of any holder of outstanding shares of Class B
Preferred Stock, addressed to the Secretary of the corporation,
as soon as practicable after the receipt of such request and
after notice similar to that then provided in the By-Laws of the
corporation for holding a special meeting of stockholders. At
such meeting, the holders of outstanding shares of Class B
Preferred Stock shall be entitled to elect two directors, and if
at such meeting other directors are to be elected, the holders of
capital stock of the corporation entitled to vote with respect to
the election of such other directors shall be entitled to elect
the remaining directors, except as the rights of the holders of
such capital stock may be further limited by the provisions of
any other outstanding security, by the Certificate of
Incorporation or By-Laws of the corporation, or by operation of
the DGCL. At any meeting at which the holders of Class B
Preferred Stock shall be entitled to elect two directors, each
holder of shares of Class B Preferred Stock shall be entitled to
one vote per share, the holders of a majority of the then
outstanding shares of Class B Preferred Stock shall be sufficient
to constitute a quorum, whether present in person or by proxy,
and the vote of the holders of a majority of the shares of Class
B Preferred Stock so present or represented at any such meeting
at which there shall be a quorum shall be sufficient to elect two
directors. Whenever all arrearages in payment of quarterly
dividends on the shares of Class B Preferred Stock shall have
been paid, the shares of Class B Preferred Stock shall thereupon
be divested of the right to elect two directors as hereinabove
provided and such directors so elected by the holders of shares
of Class B Preferred Stock shall thereupon cease to be directors
of the corporation (and the number of members of the Board of
Directors shall automatically be reduced accordingly) subject to
revesting in the event of subsequent arrearages which result in
the right to so elect two directors under the first sentence of
this subparagraph (c) of paragraph 6.
C. Class C Preferred Stock
1. Rank. The shares of Class C Preferred Stock shall,
upon the liquidation, dissolution or winding up of the affairs of
the corporation, rank (i) senior and prior to the Common Stock
and to any other class or series of capital stock of the
corporation hereafter issued unless the terms of such class or
series of capital stock of the corporation specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class C Preferred Stock (shares of
Common Stock and any other class or series of capital stock of
the corporation the terms of which do not specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class C Preferred Stock are
collectively referred to in this Section C of Article FOURTH as
the "Junior Securities"); (ii) on a parity with any other class
or series of capital stock of the corporation hereafter issued
for fair value as determined by the Board of Directors the terms
of which specifically provide that shares of such class or series
shall rank on a parity with the shares of Class C Preferred Stock
(shares of such class or series are collectively referred to in
this Section C of Article FOURTH as the "Parity Securities"); and
(iii) junior to the Class A Preferred Stock, the Class B
Preferred Stock and to any other class or series of capital stock
of the corporation hereafter issued with the consent of the
holders of a majority of the outstanding shares of Class C
Preferred Stock pursuant to subparagraph (c) of paragraph 5
hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class C
Preferred Stock (shares of Class A Preferred Stock, Class B
Preferred Stock and any other class or series of capital stock of
the corporation hereafter issued the terms of which provide that
shares of such class or series shall rank prior to shares of
Class C Preferred Stock are collectively referred to in this
Section C of Article FOURTH as the "Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class C Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL, cumulative cash dividends
in the amount of $4.365 per annum per share of Class C Preferred
Stock. Dividends on outstanding shares of Class C Preferred
Stock shall be fully cumulative and shall accrue, whether or not
declared, from the respective dates of issuance of such shares of
Class C Preferred Stock until paid. Accumulated unpaid dividends
shall compound quarterly from each March 31, June 30, September
30 and December 31 at the rate of 18% per annum. For purposes of
this Paragraph 2(a), shares of Class C Preferred Stock issued by
the corporation upon the consummation of the merger of DME
Holdings, Inc. into DynCorp shall be deemed to have been issued
on March 11, 1988. Dividends shall be computed on the basis of a
365-day year and the actual number of days elapsed.
(b) Accumulated and unpaid dividends shall be declared
by the Board of Directors and paid to the holders of record of
outstanding shares of Class C Preferred Stock on each dividend
payment date selected by the Board of Directors of the
corporation (each such date is referred to herein as a "Common
Dividend Payment Date") for payment of cash dividends on any
outstanding shares of Common Stock. On each Common Dividend
Payment Date, each holder of outstanding shares of Class C
Preferred Stock shall be entitled to receive dividends on its
shares of Class C Preferred Stock in an aggregate amount equal to
the aggregate amount of dividends that such holder would have
been entitled to receive if all of such holder's shares of Class
C Preferred Stock had been converted to Common Stock pursuant to
Paragraph 4 of this Section C of Article FOURTH immediately prior
to the payment of such dividend, provided that the aggregate
amount of such dividends shall not in any event exceed the
aggregate amount of accrued and unpaid dividends computed in
accordance with Paragraph 2(a) of this Section C of Article
Fourth. Such dividends shall be payable to the holders of record
of outstanding shares of Class C Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
each such Dividend Payment Date, as shall be fixed by the Board
of Directors in advance of payment of each such dividend. All
dividends shall be paid pro rata to the holders of outstanding
shares of Class C Preferred Stock entitled thereto. Dividends
shall not be declared or paid with respect to Class C Preferred
Stock except in connection with the payment of dividends on
Common Stock as provided in this Paragraph 2(b).
(c) Dividends shall not be paid on the outstanding
shares of Class C Preferred Stock for any period in which
dividends for the current or any prior period or mandatory
redemption payments due in the current or any prior period have
not been paid in full on any outstanding Senior Securities.
(d) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class C Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class C
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $24.25 per share, together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class C Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the first sentence of this paragraph, the holders of outstanding
shares of Class C Preferred Stock shall not be entitled to any
distribution in the event of the liquidation, dissolution or
winding up of the affairs of the corporation. If, upon any such
liquidation, dissolution or winding up of the affairs of the
corporation, the assets of the corporation available for
distribution to the holders of outstanding shares of Class C
Preferred Stock and outstanding Parity Securities shall be
insufficient to permit the payment in full to such holders and to
the holders of any Parity Securities of the full amount of the
preferential liquidation amounts to which they are then entitled,
the entire assets of the corporation thus distributable shall be
distributed among the holders of outstanding shares of Class C
Preferred Stock and Parity Securities ratably in proportion to
the full amount to which such holders would otherwise be entitled
if such assets were sufficient to permit payment in full. After
the payment of all preferential liquidation amounts to which the
holders of outstanding shares of Class C Preferred Stock shall be
entitled, such holders shall not be entitled to any further
participation in any distribution of the assets of the
corporation to its stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Conversion.
(a) From and after the date of issuance, each share of
Class C Preferred Stock shall be convertible, at the option of
the holder thereof, into one fully paid and nonassessable share
of Common Stock, subject to adjustment as hereinafter set forth
in subparagraph (d) of this paragraph 4 and, to the extent
provided in subparagraph (e) of this paragraph 4, into a warrant
or option to purchase shares of Common Stock.
(b) To exercise such conversion option, the holder of
shares of Class C Preferred Stock shall surrender the certificate
or certificates representing the shares of Class C Preferred
Stock to be converted, duly endorsed for transfer to the
corporation, at the principal executive office of the corporation
and shall give written notice, postage prepaid, by certified or
registered mail, return receipt requested, or by hand delivery,
to the corporation at its principal executive office, of the
election of such holder to convert all or a portion of the shares
of Class C Preferred Stock represented by the certificate or
certificates surrendered into shares of Common Stock which notice
shall set forth the name or names in which the certificate or
certificates representing the shares of Common Stock to be issued
upon conversion are to be issued. Conversion shall be deemed to
have been effected on the date of receipt by the corporation of
such notice and the certificate or certificates to be surrendered
for conversion (the "Conversion Date"). As promptly as
practicable thereafter, the corporation shall issue to or upon
the written order of such holder, (i) a certificate or
certificates for the number of full shares of Common Stock to
which such holder is entitled and (ii) a certificate or
certificates or other appropriate instrument representing the
number of warrants and or options, if any, to which such holder
is entitled. The conversion of shares of Class C Preferred Stock
into shares of Common Stock shall be deemed to be effective and
such holder, or the person or persons designated by such holder,
shall be deemed to have become a holder of record of the shares
of Common Stock issuable upon conversion of such shares of Class
C Preferred Stock at the beginning of business on the applicable
Conversion Date unless the transfer books of the corporation are
closed on such date, in which event such holder shall be deemed
to have become a holder of record of the shares of Common Stock
issued upon conversion of the shares of Class C Preferred Stock
on the next succeeding date on which the transfer books of the
corporation are open. Upon conversion of only a portion of the
number of shares of Class C Preferred Stock represented by a
certificate or certificates surrendered for conversion, the
corporation shall issue and deliver to or upon the written order
of the holder of the certificate or certificates so surrendered a
new certificate or certificates representing the number of shares
of Class C Preferred Stock not so converted.
(c) No fractional shares of Common Stock shall be
issued upon conversion of shares of Class C Preferred Stock. In
lieu of issuing fractional shares of Common Stock upon conversion
of shares of Class C Preferred Stock, the corporation shall pay a
cash adjustment in respect of such fractional shares of Common
Stock equal to the fair market value thereof, as determined in
good faith by the Board of Directors of the corporation. The
corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of outstanding shares of
Class C Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all shares of Class C
Preferred Stock from time to time outstanding.
(d) The number of shares of Common Stock into which a
share of Class C Preferred Stock shall be convertible as set
forth in subparagraph (a) of this paragraph 4, shall be subject
to adjustment from time to time as follows:
(1) In case the corporation shall at any time subdivide
its outstanding shares of Common Stock or shall issue a dividend
or other distribution payable in shares of Common Stock, then
effective immediately after the effective date of such
subdivision or from and after the record date fixed by the Board
of Directors of the corporation for such dividend or other
distribution, as the case may be, the number of shares of Common
Stock issuable upon conversion of a share of Class C Preferred
Stock shall be adjusted to equal the sum of (i) that number of
shares of Common Stock issuable upon conversion of a share of
Class C Preferred Stock immediately prior to such date and (ii)
that number of shares of Common Stock as would have been issuable
on such shares as a result of such subdivision, dividend or
distribution, as the case may be, had such conversion occurred
immediately prior to such subdivision, dividend or distribution;
(2) In case the corporation shall at any time combine
its outstanding shares of Common Stock, then effective
immediately after the effective date of such combination the
number of shares of Common Stock issuable upon conversion of a
share of Class C Preferred Stock shall be adjusted to equal the
number obtained by multiplying the number of shares of Common
Stock issuable upon conversion of a share of Class C Preferred
Stock immediately prior to such date by the Combination Ratio (as
hereinafter defined). The Combination Ratio shall equal a
fraction, the numerator of which shall be the number of shares of
Common Stock issuable on such shares as a result of such
combination, had such such conversion occurred immediately prior
to such combination and the denominator of which shall be the
number of shares of Common Stock issuable upon conversion of a
share of Class C Preferred Stock immediately prior to such
combination.
(3) In case the corporation shall at any time
recapitalize or reclassify its capital stock, or in case of any
consolidation or merger of the corporation with or into any other
person (other than a consolidation or merger in which the
corporation is the continuing entity and which does not result in
any change in the capital stock of the corporation) or in case of
the sale or other disposition of all or substantially all the
assets of the corporation as an entirety to any other person,
then in each such case each outstanding share of Class C
Preferred Stock shall after such recapitalization,
reclassification, consolidation, merger, sale or other
disposition be convertible into the kind and number of shares of
capital stock or other securities or assets of the corporation or
of the entity resulting from such consolidation or surviving such
merger or to which such assets shall have been sold or otherwise
disposed of to which the holder thereof would have been entitled
if immediately prior to such recapitalization, reclassification,
consolidation, merger, sale or other disposition such holder had
converted its shares of Class C Preferred Stock. The provisions
set forth above shall apply to successive recapitalizations,
reclassifications, consolidations, mergers, sales or other
dispositions.
(e) In the case the corporation shall, at any time,
make a distribution to the holders of Common Stock of warrants or
options to purchase shares of Common Stock, then, effective from
and after the record date fixed by the Board of Directors of the
corporation for such distribution, upon the conversion of a share
of Class C Preferred Stock, the holder of such share shall be
entitled to receive, in addition to any shares of Common Stock
issuable upon such conversion, warrant(s) or option(s) (the
"Conversion Warrants") to purchase that number of shares of
Common Stock as would have been purchasable pursuant to the
warrant(s) or option(s) that such holder would have been entitled
to receive had the conversion occurred immediately prior to such
distribution; provided, however, the number of shares issuable
upon exercise of such Conversion Warrants shall be adjusted upon
issuance of such Conversion Warrants in accordance with the terms
thereof to reflect all such adjustments as would have been made
if such Conversion Warrants had been issued on the date of
original distribution of warrants or options to the holders of
Common Stock. Any such Conversion Warrants shall have terms
identical to the terms of the applicable warrants or options
previously issued to the holders of Common Stock (the "Underlying
Warrants"), provided that such Conversion Warrants shall be
exercisable, commencing on the date of their issuance pursuant to
this paragraph 4, for a number of years equal to the total number
of years during which the Underlying Warrants are or were
exercisable; and provided further that the exercise price per
share of Common Stock issuable upon exercise of the Conversion
Warrants shall, so long as any Underlying Warrants remain
outstanding and in effect, be equal to the exercise price per
Common Share under such Underlying Warrants, and thereafter shall
be adjusted in accordance with the terms of the Conversion
Warrants.
(f) Upon the occurrence of any event described in
subparagraph (d) or (e) of this paragraph 4, the corporation
shall promptly furnish to each holder of Class C Preferred Stock
a certificate of an officer of the corporation setting forth the
number of shares of Common Stock and/or Conversion Warrants
issuable upon conversion of such holder's Class C Preferred Stock
after all adjustments required by such subparagraph (d) or (e)
and a brief statement of the facts accounting for such
adjustment.
(g) All shares of Common Stock issued upon conversion
of shares of Class C Preferred Stock shall, upon issuance, be
duly and validly issued, fully paid and nonassessable and free
from all liens and charges. All accrued and unpaid dividends on
outstanding shares of Class C Preferred Stock surrendered for
conversion shall be forfeited.
5. Voting Rights.
(a) So long as any shares of Class C Preferred Stock
are outstanding, the holders of shares of Class C Preferred Stock
shall be entitled (voting, except with respect to those matters
enumerated below in subparagraph (d) of this paragraph 5,
together with the holders of outstanding shares of Common Stock
of the corporation as a class) to vote on or otherwise consent to
any matter requiring the voter consent of the stockholders of the
corporation under the laws of the State of Delaware.
(b) Each holder of outstanding shares of Class C
Preferred Stock shall be entitled to one vote for each share of
Class C Preferred Stock held of record by such holder on the
record date fixed by the Board of Directors of the corporation
for determining the stockholders of the corporation entitled to
vote or otherwise consent to any matter.
(c) So long as any shares of Class C Preferred Stock
are outstanding, the corporation will not, without the
affirmative consent or vote at an annual or special meeting of
stockholders of the holders of at least a majority of the
outstanding shares of Class C Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, create any class or series of capital stock
ranking prior to the Class C Preferred Stock but junior to the
Class B Preferred Stock as to dividends, mandatory redemption
payments or upon the liquidation, dissolution or winding up of
the affairs of the corporation, or amend, alter or repeal the
corporation's Certificate of Incorporation to affect adversely
the powers, rights or preferences of the shares of Class C
Preferred Stock.
(d) So long as any shares of Class C Preferred Stock
are outstanding, the affirmative consent or vote at an annual or
special meeting of stockholders (or, in lieu of such a meeting,
the written consent) of the holders of at least a majority of the
outstanding shares of Class C Preferred Stock (excluding treasury
shares), voting as a class, shall be required for the corporation
to, or to permit any of its subsidiaries to:
(i) directly or indirectly, create, incur,
assume, guarantee or otherwise become liable with respect to
indebtedness for borrowed money in an aggregate amount
outstanding at any time in excess of $15,000,000 other than (A)
indebtedness under the Credit Agreement, as such agreement may be
amended from time to time, provided that, in the event that any
amendment to the Credit Agreement results in an increase in the
aggregate amount of commitments to loan funds under the Credit
Agreement (it being understood and agreed that neither the
extension of commitments then in effect nor the waiver or
extension of any commitment reduction shall constitute such an
increase in commitments), the amount of such increased
commitments shall be included in the $15,000,000 limitation set
forth in this paragraph 5(d)(i); (B) indebtedness evidenced by
16% Pay-in-Kind Junior Subordinated Debentures Due 2003,
including in-kind dividends thereon, Debentures issued in
exchange for shares of Class B Preferred Stock pursuant to the
applicable provisions of this Article FOURTH and in-kind
dividends thereon; (C) indebtedness under any interest rate
protection agreement entered into pursuant to Section 10.11 of
the Credit Agreement; and (D) indebtedness permitted under
Section 11.05 (x), (xi), (xii) or (xiii) of the Credit Agreement;
(ii) directly or indirectly, create, incur,
assume, guarantee or otherwise become or remain liable with
respect to (A) any agreement for the lease, hire or use of any
real or personal property required to be characterized as a
capital lease in accordance with generally accepted accounting
principles in an amount in excess of $2,000,000 or (B) any
agreement for the lease, hire or use of any real or personal
property required to be characterized as an operating lease in
accordance with generally accepted accounting principles in an
amount payable during the term of such lease in excess of
$2,000,000;
(iii) issue shares of capital stock (common or
preferred), capital stock equivalents, securities convertible
into capital stock, or options, warrants, or other rights to
acquire capital stock; provided, however, that the corporation
may (A) pay in-kind dividends on the Class A Preferred Stock and
the Class B Preferred Stock in accordance with the applicable
provisions of this Article FOURTH, (B) issue and sell up to
4,123,715 shares of Common Stock to an employee stock ownership
plan established by the corporation, (C) issue to Bankers Trust
Company or its designee pursuant to the terms of a warrant dated
March 11, 1988 issued by DME Holdings, Inc. to Pyramid Ventures,
Inc. a warrant or warrants to purchase up to 10% of the shares of
Common Stock of the corporation on a fully diluted basis (the
"Bank Warrant"), (D) issue and sell to the holders of Common
Stock, in connection with the sale of Common Stock to the
employee stock ownership plan, warrants entitling such holders to
acquire up to an aggregate of 5,066,275 additional shares of
Common Stock, provided that such aggregate number of shares shall
include a number of shares reserved for issuance upon the
exercise of warrants issuable upon conversion of the Class C
Preferred Stock in accordance with the terms of Paragraph 4(e) of
this Section C of Article FOURTH (the "Shareholder Warrants") and
(E) issue shares of Common Stock pursuant to the Bank Warrant and
the Shareholder Warrants.
(iv) declare, make or pay any dividends on any
shares of capital stock, by any means whatsoever, or purchase,
redeem, or otherwise acquire, any shares of its capital stock, or
set aside any funds for any such purpose; provided, however, that
the corporation may (A) pay dividends on the Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock in
accordance with the applicable provisions of this Article FOURTH,
(B) redeem the Class A Preferred Stock and the Class B Preferred
Stock in accordance with the applicable provisions of this
Article FOURTH, (C) repurchase, as and to the extent required by
law or contractual obligation, shares of Common Stock distributed
by the corporation's employee stock ownership plan to
participants in such plan, (D) repurchase shares of Common Stock
held by employees of the corporation (other than shares
distributed to employees by the corporation's employee stock
ownership plan), provided that the aggregate cost of such
repurchases pursuant to this clause D shall not exceed $250,000
in any fiscal year of the corporation, (E) exchange the Class B
Preferred Stock for the Debentures in accordance with the
applicable provisions of this Article FOURTH and (F) convert
shares of Class C Preferred Stock into shares of Common Stock and
warrants or options in accordance with the applicable provisions
of this Article FOURTH;
(v) employ or terminate the employment of the
chief executive officer or the chief operating officer of the
corporation or any executive officer reporting directly to either
of them, or materially alter the terms of any employment
agreement or other arrangement with the corporation of such
officer or officers;
(vi) directly or indirectly, lend any amount to,
incur any indebtedness to, or enter into any contracts material
to its business or operations with, any of its officers or
directors, any of its shareholders, any member of the immediate
families of such officers, directors or shareholders, or any firm
or corporation in which such persons have an ownership interest;
provided that the corporation may make advances and loans to
officers in the ordinary course of business in an aggregate
amount outstanding at any time not to exceed $1,500,000 and may
incur indebtedness to officers in the ordinary course of business
in form of deferred compensation and accrued vacation
compensation;
(vii) sell, lease, license, transfer or cause or
permit the sale, lease, license or transfer of the assets of the
corporation or its subsidiaries (other than (A) inventory in the
ordinary course of business or uneconomic or obsolete equipment
in the ordinary course of business (B) the Specialty Contracting
Business (as defined in the Credit Agreement) and (C) Scheduled
Asset Sales (as defined in the Credit Agreement)) if the
aggregate book value of such assets, when added to all other
assets sold, leased, licensed or transferred (excluding sales
described in clauses (A), (B) and (C) above) within the four
consecutive preceding fiscal quarters exceeds $2,000,000;
(viii) acquire, whether by purchase, lease,
license, merger, joint venture or otherwise, any assets (other
than inventory, materials and equipment in the ordinary course of
business) if the cost thereof, when added to the cost of all
other assets acquired during the four consecutive preceding
fiscal quarters, exceeds $2,000,000; or
(ix) alter or repeal those provisions of the
By-Laws of the corporation which pertain generally to the
election and duties of the directors of the corporation or which
affect the rights and powers of the shareholders of the
corporation.
D. Common Stock
1. Rank. The Common Stock shall, with respect to the
payment of dividends and upon the liquidation, dissolution or
winding up of the affairs of the corporation, rank (i) senior and
prior to any class or series of capital stock of the corporation
hereafter issued the terms of which specifically provide that
shares of such class or series shall rank junior to the shares of
Common Stock (shares of such class or series are collectively
referred to in this Section D of Article FOURTH as the "Junior
Securities"); (ii) on a parity with and any other class or series
of capital stock of the corporation hereafter issued the terms of
which specifically provide that shares of such class or series
shall rank on a parity with the shares of Common Stock (shares of
such class or series are collectively referred to in this Section
D of Article FOURTH as the "Parity Securities"); and (iii) junior
to the shares of Class A Preferred Stock, Class B Preferred
Stock, Class C Preferred Stock and to any other class or series
of capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such series or class shall
rank junior to or on a parity with shares of Common Stock (shares
of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and any other class or series of capital stock of
the corporation hereafter issued the terms of which do not
specifically provide that shares of such class or series shall
rank junior to or on a parity with the shares of Common Stock are
collectively referred in this Section D of Article FOURTH as the
"Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Common Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, to the extent
permitted under the DGCL, cash dividends on each dividend payment
date selected by the Board of Directors of the corporation (each
such date is referred to herein as a "Dividend Payment Date"), in
such amounts as the Board of Directors shall from time to time
determine; provided, however, that no dividends on outstanding
shares of Common Stock shall be declared or paid unless,
concurrently with such declaration or payment, dividends in an
equal amount per share are also declared or paid, as the case may
be, on any outstanding Parity Securities. Such dividends shall
be payable to the holders of record of outstanding shares of
Common Stock as their names shall appear on the stock register of
the corporation on such record date, not more than sixty or less
than ten days preceding each such Dividend Payment Date, as shall
be fixed by the Board of Directors in advance of payment of each
such dividend. All dividends shall be paid pro rata to the
holders of outstanding shares of Common Stock entitled thereto.
(b) Dividends shall not be paid on the outstanding
shares of Common Stock for any period in which dividends for the
current or any prior period or mandatory redemption payments due
in the current or any prior period have not been paid in full on
any outstanding Senior Securities, or, with respect to the Class
C Preferred Stock, unless dividends thereon are paid concurrently
with such payment in accordance with Paragraph 2(a) of Section C
of this Article FOURTH.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, after the payment of all preferential liquidation
payments on outstanding Senior Securities, subject to rights of
creditors, the holders of outstanding shares of Common Stock, the
holders of any warrants exercisable for shares of Common Stock
(to the extent the terms of such warrants entitle the holders
thereof to receive any assets of the corporation available for
distribution) and any other Parity Securities shall be entitled
to receive the entire assets of the corporation available for
distribution to such holders. Each such holder of outstanding
shares of Common Stock shall be entitled to receive that portion
of the assets of the corporation available for distribution which
the number of shares of Common Stock held by such holder bears to
the total number of shares of Common Stock and shares of any
Parity Securities outstanding on the effective date of such
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the corporation.
4. Voting Rights. The holders of shares of Common Stock
shall be entitled to vote on or otherwise consent to any matter
requiring the vote or consent of the stockholders of the
corporation under the laws of the State of Delaware. Each holder
of outstanding shares of Common Stock shall be entitled to one
vote for each share of Common Stock held of record by such holder
on the record date fixed by the Board of Directors of the
corporation for determining the stockholders of the corporation
entitled to vote or otherwise consent to such matter.
FIFTH: The corporation is to have perpetual
existence.
SIXTH: The private property of the stockholders shall
not be subject to the payment of corporate debts to any extent
whatever.
SEVENTH: In furtherance, and not in limitation of the
powers conferred by statute, the Board of Directors is expressly
authorized:
To make, alter or repeal the By-Laws of the
corporation;
To authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation; and
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper
purpose or to abolish any such reserve in the manner in which it
was created.
By resolution or resolutions passed by a majority of
the whole Board of Directors to designate one or more committees,
each committee to consist of two or more of the directors of the
corporation, which to the extent provided in said resolution or
resolutions or in the By-Laws of the corporation, shall have and
may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation, and
may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be stated in the
By-Laws of the corporation or as may be determined from time to
time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the
holders of a majority of the capital stock issued and outstanding
having voting power given at a stockholders meeting duly called
for that purpose, or when authorized by the written consent of
the holders of a majority of the voting stock issued and
outstanding, to sell, lease or exchange all of the property and
assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock
in, and/or other securities of, any other corporation or
corporations, as its Board of Directors shall deem expedient and
for the best interests of the corporation.
The corporation may in its By-Laws confer powers upon
its Board of Directors in addition to the foregoing, and in
addition to the powers and authorities expressly conferred upon
it by statute.
EIGHTH: Meetings of stockholders may be held outside
the State of Delaware, if the By-Laws so provide. The books of
the corporation may be kept (subject to any provision contained
in the statutes) outside of the State of Delaware at such place
or places as may be from time to time designated by the Board of
Directors.
NINTH: The corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
TENTH: No stockholder of this corporation shall have
any preemptive or preferential right, nor shall any stockholder
be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of capital stock
of the corporation of any class, whether now or hereafter
authorized, and whether issued for money or for a consideration
other than money, or of any issue of securities or obligations
convertible into stock.
ELEVENTH: In all elections of directors of the
corporation each holder of a share of Class C Preferred Stock of
the corporation and each holder of a share of Common Stock of the
corporation entitled to vote for the election of directors shall
be entitled to as many votes as shall equal the number of votes
which, except for the provisions of this Article ELEVENTH, such
holder would be entitled to cast for the election of directors
with respect to the number of shares of Class C Preferred Stock
or Common Stock, as the case may be, held by such holder which
are eligible to so vote multiplied by the number of directors to
be elected. Each holder of shares of Class C Preferred Stock and
each holder of a share of Common Stock entitled to vote for the
election of directors may cast all of such votes for a single
director or may distribute such votes among the number of
directors to be elected, or any two or more of them, as such
holder sees fit. No director so elected may be removed by the
stockholders of the corporation if the votes cast against his
removal would be sufficient to elect him at an election at which
the same total number of votes were cast in favor of such
director and the entire Board of Directors, or class of directors
of which such director is a member, were then being elected.
TWELFTH: The property, business and affairs of the
corporation shall be managed and controlled by the Board of
Directors. Subject to the other provisions of this Restated
Certificate of Incorporation providing for the expansion of the
number of directors constituting the whole Board of Directors in
certain circumstances, the number of directors of the corporation
shall not be less than nine (9), nor more than twelve (12), the
exact number of directors to be determined from time to time by
resolution of a majority of the whole Board of Directors, and
such exact number shall be nine (9) until otherwise determined by
resolution adopted by affirmative vote of a majority of the whole
Board of Directors. As used herein, the term "whole Board" means
the total number of directors which the corporation would have if
there were no vacancies. The Board of Directors shall be divided
into three classes, as nearly equal in number as the then total
number of directors constituting the whole Board permits, with
the term of office of one class expiring each year. The initial
term of office of directors of the first class shall expire at
the next succeeding annual meeting of stockholders of the
corporation; the initial term of office of directors of the
second class shall expire at the second succeeding annual meeting
of stockholders of the corporation; and the initial term of
office of directors of the third class shall expire at the third
succeeding annual meeting of stockholders of the corporation. At
the conclusion of each term, nominated directors of the class
whose term of office has expired shall stand for election for a
three year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year
in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office;
provided further that the policy regarding mandatory retirement
of directors shall be as established by a majority of the whole
Board of Directors, and any incumbent director reaching the
mandatory retirement age last established prior to his most
recent election to the Board of Directors shall be eligible to
serve only through the date he attains such mandatory retirement
age (regardless of the remaining term of such incumbent
director's class). Any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled
by a majority of the whole Board of Directors, and any other
vacancy occurring in the Board of Directors may be refilled by a
majority of the whole Board of Directors, although less than a
quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his
predecessor.
THIRTEENTH: A director of this corporation shall not
be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except that this Article THIRTEENTH shall not eliminate or limit
a director's liability (i) for any breach of the director s duty
of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper
personal benefit. If the General Corporation Law of the State of
Delaware is amended after approval by the stockholders of this
Article THIRTEENTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then
the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended
from time to time. Any repeal or modification of this Article
THIRTEENTH shall not increase the personal liability of any
director of this corporation or otherwise adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification. The provisions of this
Article THIRTEENTH shall not be deemed to limit or preclude
indemnification of a director by the corporation for any
liability of a director which has not been eliminated by the
provisions of this Article THIRTEENTH.
FOURTEENTH: (a) Each person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest
extent authorized or permitted by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be
amended, against all expense, liability and loss (including
attorneys fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and
reasonably incurred by such person in connection with such
action, suit or proceeding, and such indemnification shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person; provided, however,
that, except as provided in this clause (a) of Article
FOURTEENTH, the corporation shall indemnify any such person
seeking indemnification in connection with an action, suit or
proceeding (or part thereof) initiated by such person only if
such action, suit or proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to
indemnification conferred in this clause (a) of Article
FOURTEENTH shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending
any such action, suit or proceeding in advance of its final
disposition; provided, however, that if the General Corporation
Law of the State of Delaware requires, the payment of such
expenses incurred by a director or officer in his capacity as
such in advance of the final disposition of any such action, suit
or proceeding shall be made only upon receipt by the corporation
of an undertaking by or on behalf of such director or officer to
repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this clause (a) of Article FOURTEENTH or
otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) If a claim under clause (a) of Article FOURTEENTH
is not paid in full by the corporation within thirty days after a
written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant
has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including
its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable
standard of conduct set forth in the General Corporation Law of
the State of Delaware, nor an actual determination by the
corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the
applicable standard of conduct.
(c) The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition set forth herein shall not be exclusive of any
other right which any person may have or hereafter acquire under
any statute, provision of the Certificate of Incorporation,
By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such
expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State
of Delaware.
EXHIBIT 3.2
DYNCORP BY-LAWS
ARTICLE I
Office
Section 1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the name of the
resident agent is The Company Corporation.
Section 2. The Corporation may also have offices in the Reston area of
Fairfax County, Commonwealth of Virginia, and at such other places either
within or without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
Stockholders' Meetings
Section 1. All meetings of the stockholders for the election of directors
shall be held at the office of the Corporation in the Reston area of Fairfax
County, Virginia, or at such other place either within or without the State of
Delaware as may be fixed from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such place and time as shall be stated in the notice of
the meeting or in a duly executed waiver of notice thereof.
Section 2. An annual meeting of stockholders shall be held on the second
Monday of May in each year if not on a legal holiday, and if a legal holiday
then on the next secular day following, at 1:30 p.m. or at such other date
and/or time as shall be designated by the Board of Directors and stated in the
notice of meeting, at which they shall elect directors by a plurality vote and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting or any special meeting shall
be served upon or mailed to each stockholder entitled to vote thereat at such
address as appears on the books of the Corporation, except as provided by the
statutes or these By-Laws, at least ten days prior to the meeting.
Section 4. At least ten days before every election of directors, a complete
list of stockholders entitled to vote at said election, arranged in
alphabetical order, with the address of each and the number of voting shares
held by each, shall be prepared by the Secretary. Such list shall be open at
the place where the election is to be held, during ordinary business hours,
for said ten days, to the examination of any stockholder for any purpose
germane to the meeting, and shall be produced and kept at the time and place
of election during the whole time thereof and subject to the inspection of any
stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called by the Chairman of the Board or the President and shall be
called by the President or Secretary at the request in writing of a majority
of the Board of Directors or at the request in writing of stockholders owning
a majority in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Business transacted at all special meetings shall be confined to
the objects stated in the notice.
Section 7. The holders of at least one-third of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, the Certificate of Incorporation, or these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or
represented by proxy and voting thereon shall decide any question brought
before such meeting, unless the question is one upon which by express
provision of the statutes or the Certificate of Incorporation, or these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
Section 9. At any meeting of the stockholders, every stockholder having the
right to vote thereat shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting, unless said
instrument provides for a longer period. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the
books of the Corporation, and except where the transfer books of the
Corporation shall have been closed or a date shall have been fixed as a record
date for the determination of its stockholders entitled to vote, no share of
stock shall be voted on at any election of directors which shall have been
transferred on the books of the Corporation within twenty days next preceding
such election of directors. At the elections of directors of the Corporation,
each stockholder having voting power shall be entitled to exercise the right
of cumulative voting, if any, as provided in the Certificate of Incorporation.
Section 10. Unless otherwise provided by the statutes or the Certificate of
Incorporation, whenever the vote of stockholders is required or permitted to
be taken in connection with any corporate action, the meeting and vote of
stockholders may be dispensed with, if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action if such meeting and vote were held shall consent in
writing to such corporate action being taken. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Directors
Section 1. Subject to the provision of the Certificate of Incorporation, the
number of directors of the Corporation shall not be less than nine (9), nor
more than twelve (12), the exact number of directors to be determined from
time to time by resolution of a majority of the whole Board of Directors, and
such exact number shall be nine (9) until otherwise determined by resolution
adopted by affirmative vote of a majority of the whole Board of Directors. As
used in these By-Laws, the term "whole Board" means the total number of
directors which the Corporation would have if there were no vacancies. The
Board of Directors shall be divided into three classes, as nearly equal in
number as the then-total number of directors constituting the whole Board
permits, with the term of office of one class expiring each year. The initial
term of directors of the first class shall expire at the next succeeding
annual meeting, the initial term of directors of the second class shall expire
at the second succeeding annual meeting, and the initial term of directors of
the third class shall expire at the third succeeding annual meeting.
Thereafter at the conclusion of each term, each class of nominated directors
shall stand for election for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office; provided further that the policy regarding mandatory
retirement of directors shall be as established by a majority of the whole
Board of Directors, and any incumbent director reaching any mandatory
retirement age last established prior to his most recent election to the Board
of Directors shall be eligible to serve only through the date he attains such
mandatory retirement age (regardless of the remaining term of such incumbent
director's class).
Section 2. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the whole
Board of Directors, and any other vacancy occurring in the Board of Directors
may be refilled by a majority of the whole Board of Directors, although less
than a quorum, or by a sole remaining director. Any director elected to fill
a vacancy not resulting from an increase in the number of directors shall have
the same remaining term as that of his predecessor.
Section 3. The property, business, and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, the Certificate of Incorporation, or these
By-Laws directed or required to be exercised or done by the stockholders.
Committees of Directors
Section 4. The Board of Directors at its first meeting after each annual
meeting of the stockholders shall designate three or more of its members, to
include the Chairman of the Board and the Chief Executive Officer, if the
Chief Executive Officer is a member of the Board of Directors, who shall
constitute the Executive Committee of the Board of Directors. The Executive
Committee shall have and may exercise all of the powers of the Board of
Directors as may be lawfully delegated in the management of the business and
affairs of the Corporation and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it. The Board
of Directors may designate one or more of its members as alternate members of
the Executive Committee, who may replace any absent or disqualified member at
any meeting of the Executive Committee. In the absence or disqualification of
a member of the Executive Committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member; provided however, that in no event shall the Executive
Committee have the authority to consider or act upon matters concerning United
States Government security.
Section 5. The Board of Directors may, by resolution or resolutions passed by
a majority of the whole Board, designate one or more additional committees
consisting of two or more of the directors of the Corporation. Such
additional committee or committees shall have and may exercise such powers and
shall have such names as are provided in said resolution or resolutions.
Section 6. The committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
Advisory Directors
Section 7. The Board of Directors may appoint advisory directors whose
experience and knowledge would be useful to the Board, said advisory directors
to be former members of the Board or current stockholders. Such advisory
directors shall be no more than four in number and shall serve at the pleasure
of the Board, with terms expiring as of each annual meeting of stockholders.
Advisory directors shall be given notice of and may attend meetings of the
Board of Directors but shall not be considered members of the Board of
Directors. Advisory directors shall have no right to vote and shall not be
counted in determining whether a quorum is present at any meeting. Advisory
directors shall not be charged with responsibilities, nor shall they be
subject to the liabilities of directors. An advisory director may be
appointed as an advisory member of any committee of the Board.
Compensation of Directors and Advisory Directors
Section 8. Directors or advisory directors, as such, shall not receive any
stated salary for their services but, by resolution of the Board, may be
allowed an annual retainer fee and/or a fixed sum for attendance at each
regular or special meeting of the Board, together with any expenses of
attendance; provided that nothing herein contained shall be construed to
preclude any director or advisory director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 9. Members of special or standing committees may, by resolution of
the Board, be allowed an annual retainer fee and/or a fixed sum for attending
committee meetings, together with any expenses of attendance.
Meetings of the Board
Section 10. The first meeting of the Board after each annual meeting of
stockholders shall be held at such time and place either within or without the
State of Delaware as shall be fixed by the vote of the stockholders at the
annual meeting or by the Board of Directors prior to the annual meeting, and
no notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present,
or they may meet at such place and time as shall be fixed by the consent in
writing of all the directors.
Section 11. Regular meetings of the Board may be held without notice at such
time and place either within or without the State of Delaware as shall from
time to time be determined by the Board.
Section 12. Special meetings of the Board may be called by the Chairman of
the Board or by the President on one day's notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
Chairman of the Board or the President or the Secretary in like manner and on
like notice on the written request of two directors.
Section 13. At all meetings of the Board, the presence of four directors, or,
if fewer, a majority of the whole Board, shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors, except as otherwise specifically provided
by statute, the Certificate of Incorporation, or these By-Laws. If a quorum
shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 14. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 15. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, members of the Board of Directors, or any committee, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the
meetings.
ARTICLE IV
Reimbursement and Indemnification of
Officers, Directors, and Advisory Directors
Section 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was or has agreed to become a
director, advisory director, officer, employee, or agent of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation
as a director, advisory director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him
or on his behalf in connection with such action, suit, or proceeding and any
appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was or has agreed to become a
director, advisory director, officer, employee, or agent of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation
as a director, advisory director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection with the defense or
settlement of such action or suit and any appeal therefrom, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
costs, charges, and expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Notwithstanding the other provisions of these By-Laws, to the
extent that a director, advisory director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, or proceeding referred to in this Article IV or in defense of
any claim, issue, or matter therein, he shall be indemnified against all
costs, charges, and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 4. Any indemnification under these By-Laws (unless ordered by a
court) shall be made by the Corporation unless a determination is made that
indemnification of the director, advisory director, officer, employee, or
agent is not proper in the circumstances, because he has not met the
applicable standard of conduct set forth in these By-Laws. Such determination
may be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by the stockholders.
Section 5. Costs, charges, and expenses (including attorneys' fees) incurred
by a person referred to in this Article IV in defending a civil or criminal
action, suit, or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit, or proceeding; provided, however, that
the payment of such costs, charges, and expenses incurred by a director,
advisory director, or officer in his capacity as a director, advisory
director, or officer (and not in any other capacity in which service was or is
rendered while a director, advisory director, or officer) in advance of the
final disposition of such action, suit, or proceeding shall be made only upon
receipt of an undertaking by or on behalf of the director, advisory director,
or officer to repay all amounts so advanced in the event that it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article IV. Such costs, charges, and
expenses incurred by other employees and agents maybe so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate. The Board
of Directors may, in the manner set forth above, and upon approval of such
director, advisory director, officer, employee, or agent of the Corporation,
authorize the Corporation's counsel to represent such person in any action,
suit, or proceeding, whether or not the Corporation is a party to such action,
suit, or proceeding.
Section 6. Any indemnification or advance of costs, charges, and expenses
under these By-Laws shall be made promptly, and in any event within 60 days,
upon the written request of the director, advisory director, officer,
employee, or agent. The right to indemnification or advances as granted by
these By-Laws shall be enforceable by the director, advisory director,
officer, employee, or agent in any court of competent jurisdiction, if the
Corporation denies such request, in whole or in part, or if no disposition
thereof is made within 60 days. Such person's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in
whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of costs, charges, and expenses
under Section 5 of this Article IV where the required undertaking, if any, has
been received by the Corporation) that the claimant has not met the standard
of conduct set forth in these By-Laws, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that the indemnification of the claimant is proper in the
circumstances, because he has met the applicable standard of conduct set forth
in these By-Laws, or the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 7. The rights of indemnity provided in these By-Laws shall not be
deemed exclusive, and the Corporation may, by contract, the Certificate of
Incorporation, vote of stockholders or disinterested directors, or otherwise,
further indemnify directors, advisory directors, officers, employees, or
agents of the Corporation to the full extent permitted under the laws of the
State of Delaware or any other applicable laws, now or hereafter in effect,
both as to matters in such person's official capacity and as to action in
another capacity while holding such office, and the provisions of these
By-Laws shall inure to the benefit of a person who has ceased to be a
director, advisory director, officer, employee, or agent and to the benefit of
the heirs, executors, and administrators of such a person. All rights to
indemnification under these By-Laws shall be deemed to be a contract between
the Corporation and each director, advisory director, officer, employee, or
agent of the Corporation who serves or served in such capacity at any time
while these By-Laws are in effect. Any repeal or modification of these
By-Laws or any repeal or modification of relevant provisions of the Delaware
General Corporation Law or any other applicable laws shall not in any way
diminish any rights to indemnification of such director, advisory director,
officer, employee, or agent or the obligations of the Corporation arising
hereunder.
Section 8. The foregoing rights shall be available in respect of any claim,
action, suit, or proceeding whether or not based upon matters which antedate
the adoption or amendment of these By-Laws.
Section 9. If this Article IV or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, advisory director, officer, employee,
and agent of the Corporation as to costs, charges, expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with
respect to any action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, including an action by or in
the right of the Corporation, to the full extent permitted by any applicable
portion of these By-Laws that shall not have been so invalidated and to the
full extent permitted by applicable law.
ARTICLE V
Notices
Section 1. Whenever, under the provisions of the statutes, the Certificate of
Incorporation, or these By-Laws, notice is required to be given to any
director or stockholder, it shall not be construed solely to mean personal
notice, but such notice may be given in writing, by mail, by depositing the
same in a post office or letter box, in a post-paid sealed wrapper, addressed
to such director or stockholder at such address as appears on the books of the
Corporation and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes, the Certificate of Incorporation, or these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE VI
Officers
Section 1. The officers of the Corporation shall be chosen by the Directors
and shall include a Chairman of the Board, a President, a Vice President, a
Secretary, a Treasurer and a General Auditor. The Board of Directors may also
choose one or more Executive Vice Presidents, one or more Senior Vice
Presidents, and additional Vice Presidents, and the Board of Directors or the
Chief Executive Officer may also choose one or more Assistant Vice Presidents,
Assistant Secretaries, and Assistant Treasurers. Two or more offices may be
held by the same person, unless the Certificate of Incorporation or these
By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of the stockholders shall choose a Chairman of the Board from its
members, and a President, one or more Vice Presidents, a Secretary, and a
Treasurer, none of whom need be a member of the Board.
Section 3. The Board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board.
Section 4. The salaries of all officers, other than assistant officers, of
the Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If any office
becomes vacant for any reason, the vacancy may be filled as provided above.
The Chairman of the Board
Section 6. The Chairman of the Board shall preside at all meetings of the
stockholders, Board of Directors, and Executive Committee and shall be
ex-officio a member of all of the standing committees, excepting, however,
such Audit Committee or Committees as may be established by the Board of
Directors from time to time. He shall see that all votes and resolutions of
the Board are carried into effect. He shall also perform such other duties as
may from time to time be assigned to him by the Board of Directors or the
Executive Committee.
The President and Chief Executive Officer
Section 7. The President shall be the Chief Executive Officer of the
Corporation. He shall report to the Board of Directors and shall have active
and general charge and control of all affairs of the Corporation. He may
execute bonds, mortgages, and other contracts requiring a seal, under the seal
of the Corporation, except where required by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation. He shall also perform such other duties as the Executive
Committee or the Board of Directors shall prescribe.
Vice Presidents
Section 8. The Executive Vice President shall, subject to the direction of
the President, be responsible for the operations of the Corporation. He
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as
the President, the Executive Committee, or the Board of Directors may
prescribe.
Section 9. The Senior Vice Presidents shall perform such duties as the
President, the Executive Committee, the Board of Directors, or the Executive
Vice President to whom they may report shall prescribe.
Section 10. The Vice Presidents shall perform such duties as the President,
the Executive Committee, the Board of Directors, or the Executive Vice
President or any Senior Vice President to whom they may report directly or
indirectly may prescribe.
The Secretary and Assistant Secretaries
Section 11. The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of
proceedings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors, and in his capacity as Secretary shall perform such
other duties as may be prescribed by the Board of Directors, the Executive
Committee, the Chairman of the Board, or the President. He shall keep in a
safe custody the seal of the Corporation and, when authorized by the Board,
affix the same to any instrument requiring it, and, when so affixed, it shall
be attested by his signature or by the signature of the Treasurer or an
Assistant Secretary or an Assistant Treasurer or such other officer who may be
so authorized by the Board of Directors.
Section 12. The Assistant Secretaries in the order designated from time to
time by the Secretary shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties as the Board of Directors shall prescribe.
The Treasurer and Assistant Treasurers
Section 13. The Treasurer shall have the custody of the corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Executive Committee or the Board of Directors.
Section 14. He shall disburse the funds of the Corporation as may be ordered
by the Executive Committee or the Board, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at the regular meetings of the Board or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation.
Section 15. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board for the
faithful performance of the duties of his office and for the restoration to
the Corporation in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 16. The Assistant Treasurers in the order of their seniority shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties as the
Executive Committee or the Board of Directors shall prescribe.
General Auditor
Section 17. The General Auditor shall, subject to guidance from the Audit
Committee of the Board of Directors, organize and maintain an effective audit
program for the Corporation, including coordination of the internal audit
activities of the Corporation with those of the independent public accountants
who are called upon to certify the Corporation's annual financial statements.
The scope of the audit shall encompass all of the managerial, administrative,
financial, and operational functions of the Corporation.
ARTICLE VI
Certificates of Stock
Section 1. The certificates of stock of the Corporation shall be numbered and
shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by
the Chairman of the Board or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent, or registrar at the date of
issuance. Any of or all the signatures on the certificate may be a facsimile.
Transfer of Stock
Section 2. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its
books.
Closing of Transfer Books
Section 3. The Board of Directors shall have the power to close the stock
transfer books of the Corporation for a period not exceeding sixty days
preceding the date of any meeting of stockholders or the date for payment of
any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect or for
a period not exceeding sixty days in connection with obtaining the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, and any adjournment thereof,
or entitled to receive payment of any such dividend, or any such allotment or
rights, or to exercise the rights in respect of any such change, conversion,
or exchange of capital stock or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
Registered Stockholders
Section 4. The Corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
Lost Certificate
Section 5. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
ARTICLE VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors, from time to time in its absolute discretion, thinks proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board shall think conducive to the interest of the Corporation,
and the Board may modify or abolish any such reserve in the manner in which it
was created.
Directors' Annual Statement
Section 3. The Board of Directors shall present at each annual meeting, and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
Checks
Section 4. All checks or demands for money and notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Fiscal Year
Section 5. The fiscal year shall begin the first day of January in each year.
Seal
Section 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal,
Delaware", and said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
Amendments
Section 1. These By-Laws may be altered, amended, or repealed at any regular
meeting of the stockholders or at any special meeting of the stockholders at
which a quorum is present or represented, provided notice of the proposed
alteration, amendment, or repeal be contained in the notice of such special
meeting, by the affirmative vote of a majority of the stock entitled to vote
at such meeting and present or represented thereat, or by the affirmative vote
of a majority of the Board of Directors at any regular meeting of the Board or
at any special meeting of the Board if notice of the proposed alteration or
repeal be contained in the notice of such special meeting.
Exhibit 4.1
(As amended through January 1, 1995)
DYNCORP EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE I: GENERAL
1.1 Nature of Plan. The purpose of the DynCorp Employee
Stock Ownership Plan, as adopted effective as of January l, 1988,
is to provide Employees of the Company and of Participating Units
with the opportunity to obtain beneficial interests in the stock
of the Company as set forth herein and in the Trust adopted as a
part of this Plan. Any corporation which shall, by merger,
consolidation, purchase or otherwise, succeed to substantially
all the business of DynCorp shall, upon such succession and
without any appointment or other action of the Trustee,
Committee, or DynCorp be and become the successor employer
hereunder.
The Plan and Trust are intended to qualify as a stock bonus
plan and trust which are qualified and exempt from taxation under
Sections 401(a) and 501(a) of the Code, and as an employee stock
ownership plan, as defined by Section 4975(e)(7) of the Code and
Section 407(d)(6) of the Act, designed to invest primarily in
shares of stock of the Company which meet the requirements for
"employer securities" under Section 409(l) of the Code and for
"qualifying employer securities" under Section 407(d)(5) of the
Act and to incur debt in order to purchase such shares, and all
provisions of the Plan and Trust shall be construed accordingly.
All Trust Fund assets acquired under the Plan as a result of
debt incurred to purchase Shares, Company contributions, income
and other additions to the Trust Fund shall be administered,
distributed, forfeited and otherwise governed by the provisions
of the Plan.
1.2 Name of the Plan and Trust. The Plan shall be known as
the "DynCorp Employee Stock Ownership Plan", and the Trust
established in connection with this Plan shall be known as the
"DynCorp Employee Stock Ownership Trust".
1.3 Effective Date. The effective date of this Plan is
January l, 1988.
1.4 Defined Terms. All capitalized terms used in this Plan
shall have the meanings set forth in Article II, unless the
context clearly indicates otherwise or such terms are not defined
in Article II.
ARTICLE II: DEFINITIONS
2.1 "Account" means the account (including any subaccounts
established from time to time under each such account) maintained
to record the interest of a Participant in the Trust Fund.
2.2 "Act" means the Employee Retirement Income Security Act
of 1974, as now in effect or as hereafter amended.
2.3 "Affiliate" means the Company and any entity affiliated
with the Company within the meaning of Sections 414(b), (c) or
(m) of the Code, or under Regulations, if any, prescribed under
Section 414(o) of the Code, except that for purposes of applying
the provisions of Article XI and Sections 17.5(a) and 17.6 with
respect to the limitation on contributions, Section 415(h) of the
Code shall apply.
2.4 "Anniversary Date" means the last day of each Plan
Year.
2.5 "Authorized Leave of Absence" means:
(a) a leave of absence authorized in writing by the
Affiliate under the Affiliate's standard personnel practices,
provided that all persons under similar circumstances must be
treated alike in the granting of such leaves of absence, and
provided further that the Employee returns within the period
specified in the leave of absence;
(b) an absence which shall entitle the Employee to be
reemployed by the Affiliate pursuant to the provisions of the
Military Selective Service Act of 1967, or any predecessor
thereof or successor thereto, provided that the Employee shall
return to the service of the Affiliate during the period within
which his employment rights are so guaranteed; and
(c) for a Participant who has at least one Year of
Service prior to transfer from employment with an Affiliate to
employment with a corporation, partnership, or joint venture
which is not an Affiliate but as to which entity the Company or
an Affiliate, or a combination thereof, owns at least fifty
percent of the voting stock or has at least fifty percent of the
voting control, such Participant's period of employment with such
entity.
2.6 "Beneficiary" means the beneficiary or beneficiaries
designated by a Participant pursuant to Article X to receive the
amount, if any, payable under the Plan upon the death of such
Participant, or, where there has been no such designation or an
invalid designation, the individual or individuals to whom such
amount is payable under the terms of this Plan.
2.7 "Board of Directors" means the Board of Directors of
the Company or authorized committee thereof.
2.8 "Break in Service" means the period of time commencing
on the date of a Termination of Service and ending on the
Employee's new Entry Date upon reemployment with the Company, an
Affiliate or any Participating Unit. Solely for purposes of
determining whether a Break in Service of 12 months has occurred,
an individual shall be credited with the Service which such
individual would have completed but for one of the following
causes:
(i) leaves of absence duly granted by the Company or
an Affiliate continuing for a period of not more than two years,
with all Employees under similar circumstances being treated
alike;
(ii) layoff for a lack of work or other cause
continuing for a period of not more than one year; and
(iii) a maternity or paternity absence, as
determined by the Committee in accordance with the Code and
Regulations; provided, however, that the Service so credited
shall not exceed the Service necessary to prevent a Break in
Service of 12 months, and that the individual shall timely
provide the Committee with such information as it shall require.
Service credited for a maternity or paternity absence shall be
credited in the twelve month period which commences on the date
the maternity or paternity absence begins if necessary to prevent
a Break in Service of 12 months during the 12 month period which
commences on the first anniversary of such absence. For purposes
of this Section 2.8, maternity or paternity absence shall mean an
absence from work by reason of the individual's pregnancy, the
birth of the individual's child or the placement of a child with
the individual in connection with the adoption of the child by
such individual, or for purposes of caring for a child for the
period immediately following such birth or placement.
2.9 "Code" means the Internal Revenue Code of 1986, as now
in effect or as hereafter amended. All citations to sections of
the Code are to such sections as they may from time to time be
amended or renumbered.
2.10 "Committee" means the committee provided for in Article
XIII.
2.11 "Company" means DynCorp, a Delaware corporation, and
any successor to such corporation.
2.12 "Compensation" means, unless otherwise indicated, base
salary or wages plus overtime and bonuses received by an Employee
during the Plan Year from a Participating Unit for services
performed for a Participating Unit, including any amount that is
deferred or reduced pursuant to a salary reduction agreement in
respect of which any Participating Unit makes contributions to a
qualified profit sharing or stock bonus plan which includes a
"qualified cash or deferred arrangement" (within the meaning of
Section 401(k) of the Code) or to a "cafeteria plan" (within the
meaning of Section 125 of the Code); provided, however, that
Compensation in excess of $200,000 (as automatically adjusted,
when applicable, to the extent permitted by the Code and
Regulations) shall not be taken into account.
2.13 "Disability" means that in the event the Committee
determines that a participant is totally and permanently
disabled, he will become 100% vested in his Account. For
purposes of this Section 2.13, a Participant shall be considered
totally and permanently disabled if by reason of bodily injuries
or sickness occurring before he terminates employment with a
Participating Unit he is unable to perform the duties of his
occupation and he satisfies either (a) or (b) below:
(a) He is eligible for and receiving disability
benefits under the Federal Social Security Act; or if he does not
have the quarters of coverage required to qualify for Social
Security disability benefits, he is sufficiently disabled so that
he would qualify for Social Security disability benefits if he
had the quarters of coverage required to qualify for Social
Security disability benefits;
(b) He is eligible for and receiving disability
benefits under a Participating Unit's long-term disability plan
or if he is not covered by a Participating Unit's long-term
disability plan, he is sufficiently disabled so that he would
qualify for disability benefits under a Participating Unit's
long-term disability plan if he were covered by a Participating
Unit's long-term disability plan.
All determinations of permanent and total disability
hereunder shall be made by the Committee in a uniform and
nondiscriminatory manner based on appropriate medical advice and
examination.
2.14 "Effective Date" means January l, 1988.
2.15 "Employee" or "Eligible Employee" means a person who is
an employee of a Participating Unit, excluding any such employee
who is a non-resident alien or who is included in a unit of
employees covered by a negotiated collective bargaining agreement
unless such agreement provides for his participation in the Plan.
A director of the Company is not eligible for participation
unless he is also an Employee.
2.16 "Entry Date" means the date of hire of an Employee.
2.17 "Exempt Loan" means any loan to the Plan or Trust not
prohibited by Section 4975(c) of the Code and Section 406 of the
Act because the loan meets the requirements set forth in Section
4975(d)(3) of the Code and Section 408(b)(3) of the Act, and the
Regulations promulgated thereunder, the proceeds of which loan
are used to finance the acquisition of Shares or refinance or
repay such a loan.
2.18 "Forfeiture" means the portion of a Participant's
Account which is forfeited under Article VII.
2.19 "IRS" means the United States Internal Revenue Service.
2.20 "Normal Retirement Date" means the date described in
Section 8.1.
2.21 "Participant" means any Employee who begins to
participate in the Plan as provided in Article III, and whose
participation is not terminated as provided in such Article.
2.22 "Participating Unit" means the Company and any
subsidiary, division, organization unit or other corporation or
entity affiliated or associated with the Company, if the Board of
Directors by appropriate action consents to the participation in
the Plan of such subsidiary, division, organization unit or other
corporation or entity affiliated or associated with the Company;
provided that the Board of Directors shall not give such consent
with respect to such adopting entity unless, with respect to such
entity, Shares held under the Plan then constitute "employer
securities" within the meaning of Section 409(l) of the Code and
"qualifying employer securities" within the meaning of Section
407(d)(5) of the Act. By its participation in the Plan, a
Participating Unit shall be deemed to appoint the Company as its
exclusive agent to exercise on its behalf all of the power and
authority conferred by the Plan or by the Trust Agreement upon
the Company and accepts the delegation to the Committee and the
Trustee of all the power and authority conferred upon them by the
Plan and the Trust Agreement. The authority of the Company, the
Committee and the Trustee to act as such agent or in accordance
with such delegation shall continue until the Plan is terminated
as to the Participating Unit and the relevant Trust Fund assets
have been distributed by the Trustee as provided in Article XIV
of the Plan.
2.23 "Pension Plan" means the Pension Plan for Employees of
DynCorp and Associated Companies as in effect on January 1, 1988,
as the same may be amended from time to time.
2.24 "Plan" means the DynCorp Employee Stock Ownership Plan,
as the same may be amended from time to time.
2.25 "Plan Administrator" means the Committee.
2.26 "Plan Year" means the period beginning on January 1 and
ending on December 31.
2.27 "Regulations" means the applicable regulations issued
under the Code, the Act or other applicable law, by the IRS, the
Department of Labor or any other governmental authority and any
temporary regulations or rules promulgated by such authorities
pending the issuance of final regulations.
2.28 "Retirement Date" means the date of a Participant's
Normal Retirement Date, Deferred Retirement Date, Disability
Retirement Date, or Early Retirement Date as provided in Article
VIII.
2.29 "Service" means employment on the payroll (whether or
not as an Employee) with an Affiliate and any period of an
Authorized Leave of Absence within the meaning of Section 2.5(c).
2.30 "Shares" means the common stock issued by the Company.
If the Board of Directors so resolves, or if the Board of
Directors has not so resolved and stock described in the first
sentence of this Section 2.30 does not satisfy the requirements
of both (i) Section 409(l) of the Code for "employer securities"
and (ii) Section 407(d)(5) of the Act for "qualifying employer
securities", then "Shares" shall also mean any stock satisfying
such requirements.
2.31 "Surviving Spouse" means the survivor of a deceased
former Participant to whom such deceased former Participant had
been legally married (as determined by the Committee) throughout
the one-year period ending on the earlier of (i) the date as of
which payments commence under the Plan, or (ii) the date of the
Participant's death. For purposes of Article X, if a Participant
becomes married within one year of the date as of which payments
commence under the Plan and remains married to that spouse for at
least a one-year period ending on or before the date of the
Participant's death, such Participant and his spouse shall be
treated as having been married throughout the one-year period
ending on the date as of which payments commence.
2.32 "Suspense Subfund" means the subfund established under
Section 6.2 as part of the Trust Fund to hold Shares purchased
with the proceeds of an Exempt Loan pending the allocation of
such Shares to individual Accounts.
2.33 "Termination of Service" means a termination of
employment with an Affiliate as determined by the Committee in
accordance with reasonable standards and policies adopted by the
Committee; provided, however, that the transfer of an Employee
from employment by an Affiliate to employment by another
Affiliate or a transfer of the nature described in Section 2.5(c)
shall not constitute a Termination of Service; and provided
further that a Termination of Service shall occur (i) on the date
as of which an Employee quits, is discharged, terminates his
employment in connection with his incurring a Disability,
retires, dies, or fails to return to employment at the expiration
of an Authorized Leave of Absence of more than 12 months duration
or (ii) in the case of an absence from employment with an
Affiliate for any other reason, on the date which is 12 months
after the date on which such absence commenced.
Notwithstanding the foregoing, an Employee who is absent on
account of service in the armed forces of the United States of
America shall not incur a Termination of Service in contravention
of federal law.
2.34 "Trust" means the DynCorp Employee Stock Ownership
Trust, created by the Trust Agreement entered into between the
Company and the Trustee.
2.35 "Trust Agreement" means the agreement by and between
the Company and the Trustee, as said Agreement may from time to
time be amended.
2.36 "Trustee" means the entity or individual(s) serving as
a trustee under the Trust Agreement.
2.37 "Trust Fund" means all Shares, cash and other
securities and all other assets deposited with or acquired by the
Trustee in its capacity as such hereunder, together with
accumulated income, subject to all liabilities incurred by the
Trustee in its capacity as such and less all disbursements made
in respect thereof.
2.38 "Valuation Date" means December 31, or any other date
during the Plan Year specified by the Committee, upon or as of
which the assets and liabilities of the Trust Fund are valued, as
prescribed by Section 5.6.
2.39 "Vested Interest" means the portion of a Participant's
Account which has become nonforfeitable pursuant to Sections 7.1,
7.3 and 17.4.
2.40 "Years of Service" means, subject to the requirements
of Section 1.410(a)-7(d)(iii) of the IRS Regulations, an
Employee's period of Service measured in years from his date of
hire or rehire (whichever is applicable) with an Affiliate (or
the date such Affiliate became affiliated with the Company, if
later than his date of hire or rehire, unless the Board
determines otherwise) to the applicable Termination of Service of
the Employee. If an Employee's Termination of Service occurs
prior to or on an anniversary date, and he is subsequently
rehired more than 12 months after such Termination of Service,
the Employee shall be recredited as of his rehire date (provided,
with respect to nonvested Employees, that such date occurs before
he has incurred five consecutive Breaks in Service of 12 months
each) with each prior Year of Service and with a partial Year of
Service for any other period of Service completed since (i) such
anniversary date, (ii) his hire date, (iii) his rehire date or
(iv) the date the Affiliate became affiliated with the Company,
whichever is applicable.
ARTICLE III: PARTICIPATION IN THE PLAN
3.1 Participation.
(a) Any individual shall become eligible to
participate when he becomes an Employee.
(b) An Employee shall participate in the Plan on the
later of (i) the Effective Date, or (ii) his Entry Date.
3.2 Participation and Adjustments. The Committee shall
take any necessary or appropriate action to ensure that each
Eligible Employee becomes a Participant under this Article III
and, if it is determined that an Eligible Employee has for any
reason not been made a Participant in the Plan or an
administrative adjustment is required, each such Employee shall
retroactively become a Participant or such administrative
adjustment shall be made. The Account of an Employee who
retroactively becomes a Participant or for whom an administrative
adjustment is made shall, upon becoming a Participant or upon
such adjustment, consist solely of the aggregate amount of
contributions which would have been allocated to his Account had
he become a Participant when first eligible.
3.3 Duration. The participation of a Participant shall end
when no further benefits are payable to him or on his account
under the Plan. However, subject to Sections 6.1(c) and 6.4, no
contributions shall be made for the benefit of, and no
contributions, allocations of transfers of assets from another
plan or Forfeitures shall be allocated, added or otherwise
credited to the Account of, such a Participant in the Plan after
the Plan Year in which he has a Termination of Service or
otherwise ceases to be an Employee and before the Plan Year, if
any, in which he is rehired as an Employee.]
ARTICLE IV: COMPANY CONTRIBUTIONS
4.1 Contributions to Trust Fund.
(a) Subject to Article XI hereof and the provisions of
any applicable loan or contribution agreement, the Participating
Units shall contribute to the Trust Fund for each Plan Year such
sum as the Board of Directors may, in its sole discretion,
determine. The Company may contribute all or part of the entire
amount due on behalf of each Participating Unit and charge the
amount thereof to the Participating Unit responsible therefor.
In any Plan Year, the contribution on behalf of the Participants
who are Eligible Employees of a Participating Unit, when
expressed as a percentage of the aggregate Compensation of such
Participants, may, but need not be, the same as the contribution
on behalf of the Participants who are Eligible Employees of
another Participating Unit; provided, however, that no such
percentage may be applicable in such Plan Years with respect to
less than 50 Participants unless the Board of Directors
determines that the Code and Regulations permit otherwise. Also
subject to the provisions of any applicable loan or contribution
agreement, the contribution under this Section 4.1 for any given
Plan Year shall be paid to the Trustee on a quarterly basis.
Subject to the foregoing provisions of this Section 4.1(a), the
contribution (if any) for any Plan Year shall be allocated except
as otherwise required by law among Participating Units as
follows:
(1) First, an amount shall be allocated to
Participating Units to the extent required under a negotiated
collective bargaining agreement.
(2) Second, the portion (if any) of the
contribution for any Plan Year not allocated under Section
4.1(a)(1) shall be allocated to the Participating Unit known as
the Aerospace Operations Field Teams. The amount of such
allocation shall be the amount of such portion which does not
exceed one and one-half percent of the base salary or wages
(excluding overtime and bonuses, but including any amount of such
base salary or wages that is deferred or reduced as described in
Section 2.12) paid in such Plan Year by such Participating Units
to Participants whose accounts are eligible under the terms of
the Plan to be credited with Shares for such Plan Year ("Eligible
Participants").
(3) Third, subject to Section 4.1(a)(4), the
portion (if any) of the contribution for any Plan Year not
allocated under Section 4.1(a)(1) or Section 4.1(a)(2) shall be
allocated to all Participating Units (other than those within the
scope of Section 4.1(a)(1)) pro rata based on each Participating
Unit's share of Compensation paid in such Plan Year to Eligible
Participants.
(4) If the foregoing allocation process would not
result in (i) satisfaction of the pertinent fringe benefit
requirements of the Service Contract Act of 1965, or (ii)
satisfaction of the minimum benefits safe harbor set forth in
Treasury Regulations 1.414(r)-5(g), as to one or more
Participating Units, the allocation to each Participating Unit
set forth in Section 4.1(a)(3) shall be reduced pro rata to the
extent necessary to provide an allocation amount which will
satisfy such requirements as to the Participating Unit for which
the requirements or safe harbor would otherwise would be
unsatisfied and such amount shall be so allocated; provided that
this Section 4.1(a)(4) shall not require that the allocation in
Section 4.1(a)(3) be reduced to below zero
(b) All or part of the contributions made under
Section 4.1(a) may be applied to repay any outstanding Exempt
Loan and interest thereon. The Committee may, subject to any
pledge or similar agreement, direct or determine the proportions
of such contributions which are applied to repay each such Exempt
Loan.
(c) All or part of the contributions made under
Section 4.1(a) may be used to purchase Shares allocated to the
Account of any Participant or Beneficiary in order to make a
distribution under Articles VIII, IX, or X to such Participant or
Beneficiary.
(d) At the sole discretion of the Board of Directors,
any part or all of a contribution to the Plan may be in the form
of Shares. To the extent that any contribution is made in the
form of Shares, such Shares shall be allocated in the same manner
as a contribution of cash (other than cash used for the repayment
of an Exempt Loan).
4.2 No Participant Contributions. No Participant shall be
allowed to contribute to the Trust Fund.
4.3 Transfers of Assets from Other Plans. Notwithstanding
the provisions of Section 4.1, in the event that assets are
transferred to the Plan from another plan which is qualified and
exempt from taxation under Sections 401(a) and 501(a) of the
Code, and the Committee determines that Section 4980(c)(3) of the
Code is applicable to such transfer, the Company shall not be
permitted to make contributions to the Trust Fund for any Plan
Year with respect to which such transfer is made or for any Plan
Year following such transfer until the "allocation requirements"
for any such Plan Year are satisfied. For purposes of the
preceding sentence the "allocation requirements" for any such
Plan Year are satisfied when, subject to the limitations
contained in Article XI, the maximum number of Shares which could
be released for such Plan Year from the Suspense Subfund in
connection with the use of such transferred amounts to repay an
Exempt Loan are allocated to the Accounts of Participants who
were participants in the plan from which the transfer is made.
Except to the extent otherwise required in connection with the
application to individual Accounts of the limitations contained
in Article XI, the number of Shares allocable to a Participant's
Account shall be the number of Shares which bears the same ratio
to the total Shares so released for such Plan Year and
attributable to the transfer as the "transfer factor" of such
Participant bears to the total "transfer factor" of all
Participants entitled to an allocation under this Section 4.3 for
that Plan Year. For purposes of the preceding sentence,
"transfer factor" refers to the product of a Participant's
Compensation for the Plan Year preceding the year of transfer and
the Participant's years of participation under the plan from
which the transfer is made. The Plan Administrator shall make
final, to the extent permitted by law, all estimated allocations
of assets pursuant to this Section.
4.4 Company Not Responsible for Adequacy of Trust Fund.
Except as and if required by applicable law, neither the Board of
Directors, any Affiliate, any Participating Unit, the Committee,
any member of the Committee, nor the Trustee shall be responsible
for the adequacy of the Trust Fund to meet and discharge Plan
liabilities.
ARTICLE V: TRUST FUND
5.1 Plan Assets. The Company has entered into the Trust
Agreement providing for the establishment of a single Trust to
hold the assets of the Plan. All contributions shall be paid
over to the Trustee and held pursuant to the provisions of the
Plan and the Trust Agreement.
5.2 Accounts. A Participant's interest in the Trust Fund
shall be reflected in his Account. One or more subaccounts may
be established under each Participant's Account for such purposes
as the Committee deems appropriate. Notwithstanding the
foregoing, the Trust Fund shall be treated as a single trust for
purposes of investment administration and payment of benefits,
and nothing contained herein shall require the physical
segregation of assets for any Account.
5.3 Investment of Trust Fund. The Trust Fund shall be
invested exclusively in Shares, except for cash or cash
equivalent investments held (i) for the limited purpose of making
Plan distributions to Participants and Beneficiaries, (ii)
pending the investment of contributions or other cash receipts in
Shares, (iii) pending use to repay an Exempt Loan and interest
thereon, (iv) for purposes of paying, under the terms described
in the Plan or Trust Agreement, fees and expenses incurred with
respect to the Plan or Trust and not paid for by the Company or
Participating Units or (v) in the form of de minimis cash
balances. To the maximum extent permitted by law, neither any
Participating Unit, Affiliate, the Committee nor the Trustee
shall have any responsibility or duty to time any transaction
involving Shares in order to anticipate market conditions or
changes in stock value, nor shall any such person have any
responsibility or duty to sell Shares held in the Trust Fund (or
otherwise to provide investment management for Shares held in the
Trust Fund) in order to maximize return or minimize loss.
Company contributions made in cash, and other cash received by
the Trustee, may be used to acquire Shares from shareholders of
the Company or directly from the Company. Any Shares acquired,
or released from the Suspense Subfund, with the proceeds of a
transfer of assets to the Plan described in Section 4.3 must
remain in the Plan until distributed to Participants in
accordance with Article VIII.
5.4 Exempt Loan.
(a) The terms of any Exempt Loan shall comply with
each of the following requirements:
(1) The terms shall be as favorable to the Plan
as the terms of a comparable loan negotiated at arm's length by
independent parties;
(2) The interest rate shall be no more than a
reasonable interest rate considering all relevant factors
including the amount and duration of the Exempt Loan, the
security and guarantee involved, if any, the credit standing of
the Plan and the guarantor of the Exempt Loan, if any, and the
interest rate prevailing for comparable loans;
(3) The Exempt Loan shall be without recourse
against the Plan;
(4) The Exempt Loan must be for a specific term;
(5) The Exempt Loan may not be payable at the
demand of any person except in the case of default;
(6) The only assets of the Plan that may be given
as collateral on the Exempt Loan are Shares acquired with the
proceeds of the same Exempt Loan or Shares used as collateral for
a prior Exempt Loan, which prior loan is repaid with the proceeds
of the same Exempt Loan;
(7) No person entitled to payment under the
Exempt Loan shall have any right to assets of the Plan other than
collateral given for that Exempt Loan, contributions made to the
Plan (other than contributions of employer securities) to enable
it to meet its obligations under that Exempt Loan and earnings
attributable to such collateral and such contributions, including
dividends on allocated Shares to the extent permitted by the law
("Eligible Earnings");
(8) The value of Plan assets transferred in
satisfaction of the Exempt Loan upon an event of default shall
not exceed the amount of the default;
(9) If the lender is a "disqualified person" (as
such term is defined in section 4975(e) of the Code), or a "party
in interest" (as such term is defined in Section 3(14) of the
Act), Plan assets may only be transferred upon default only upon
and to the extent of the failure of the Plan to meet the payment
schedule of the Exempt Loan;
(10) Upon payment of any portion of the balance
due on the Exempt Loan, the assets pledged as collateral for such
portion shall be released from encumbrance in accordance with
Section 6.3; and
(11) Payments made from the Trust Fund with
respect to the Exempt Loan during a Plan Year shall not exceed an
amount equal to the sum of amounts contributed to the Plan to pay
off an Exempt Loan by the Participating Units, Eligible Earnings
(as defined in Subsection (7) above) and transfers under Section
4.3 hereof, less any such payments made in prior Plan Years.
Such contributions and earnings shall be accounted for separately
in the books of accounts of the Plan maintained by the Committee
or the Trustee until the Exempt Loan is repaid.
(b) Any Exempt Loan must be primarily for the benefit
of Participants and their Beneficiaries.
(c) Notwithstanding any other provision of the Plan or
the Trust, all proceeds of an Exempt Loan shall be used, within a
reasonable time after receipt by the Trust, only for any or all
of the following purposes:
(1) To acquire Shares;
(2) To repay the same Exempt Loan; or
(3) To repay any previous Exempt Loan.
5.5 Legal Limitation. The Committee shall not be required
to engage in any transaction, including, without limitation,
directing the purchase or sale of Shares, which it determines in
its sole discretion might tend to subject itself, its members,
the Plan, any Participating Unit, or any Participant to liability
under federal or state laws.
5.6 Accounting and Valuation.
(a) Subject to the requirements of Section 5.6(e), the
fair market value of the assets of the Trust Fund shall be
determined by the Committee as of each Valuation Date, in
accordance with generally accepted valuation methods and
practices including, but not limited to, in the case of Shares,
the use of one or more independent investment bankers or
appraisers.
(b) The value of a Participant's Account as of any
Valuation Date shall equal the sum of:
(1) The aggregate value (as determined under
Section 5.6(a)) of all Shares previously allocated to such
Participant's Account as of the Anniversary Date coinciding with
or immediately preceding such Valuation Date;
(2) Subject to Section 5.6(c), the aggregate
value (as defined under Section 5.6(a)) of undistributed
dividends, if any, received during the Plan Year on Shares
allocated to such Participant's Account; and
(3) Such Participant's allocable share
(determined in accordance with the rules set forth in Section 6.4
for determining Participants' allocable shares of Shares released
from the Suspense Subfund) of the undistributed earnings, if any,
on all amounts contributed to the Trust Fund for purposes other
than the repayment of an Exempt Loan.
(c) Dividends payable, if any, with respect to Shares
held by the Trust Fund will be, in the discretion of the Board of
Directors (or, in the absence of action by the Board of
Directors, the Committee) and in conformity with the terms of the
Shares on which such dividends are paid, (1) to the extent
permitted by law and not inconsistent with any controlling loan
documents, used for the purpose of repaying one or more Exempt
Loans, (2) distributed from the Trust Fund to Participants or
their Beneficiaries not later than 90 days after the close of the
Plan Year in which they are paid to the Trust Fund, (3) paid
directly to such Participants or their Beneficiaries, (4)
retained in the Trust Fund and allocated pursuant to Section
5.6(b), or (5) paid or utilized in a combination of any or all of
the foregoing four options.
(d) The Committee shall establish accounting
procedures for the purpose of making the allocations, valuations
and adjustments to Participants' Accounts in accordance with
provisions of the Plan. From time to time, the Committee may
modify its accounting procedures for the purpose of achieving
equitable and nondiscriminatory allocations among the Accounts of
Participants in accordance with the provisions of the Plan.
(e) All valuations of Shares, where such Shares are
not readily tradable on an established securities market and
where such valuations relate to activities carried on by the
Plan, shall be made by one or more independent appraisers who
meet the requirements, if any, of the Code and Regulations. To
the extent and in the manner required by the Code and
Regulations, all independent appraisers, if any, making
appraisals pursuant to the foregoing sentence shall be registered
with the IRS.
(f) The determination of fair market value shall
consider, to the extent permitted by law (and in conformity,
where applicable, with the provisions of this Article V), the
same methodology used to value the initial purchase by the Trust
and shall, to the extent permitted by law, include enterprise
value as a valuation factor to the same extent that enterprise
value was taken into account as a valuation factor at the time of
such purchase of Shares.
5.7 Limitations on Trustee. Except where so provided in
the Trust Agreement or the Plan, the Trustee may act only as
directed by the Committee.
ARTICLE VI: ALLOCATION OF CONTRIBUTIONS TO THE TRUST FUND
6.1 Allocation of Contributions.
(a) The Account maintained for each Participant will
be credited as of each Anniversary Date with his allocable share
of (1) Shares purchased by the Trust Fund using cash contributed
by or on behalf of such Participant's employer (or contributed
directly to the Trust Fund) and (2) Shares released from the
Suspense Subfund pursuant to Section 6.3 and allocable to the
contribution made by or on behalf of such Participant's employer
pursuant to Section 6.4. Shares released from the Suspense
Subfund in connection with the application of a transfer of
assets described in Section 4.3 to repay an Exempt Loan shall be
allocated pursuant to Section 4.3. Shares released from the
Suspense Subfund in connection with the utilization by the Plan
of dividends on Shares to repay an Exempt Loan shall be allocated
pursuant to Section 6.4 and Forfeitures shall be allocated
pursuant to Section 7.4. A Participant who (i) terminates
Service after his or her Early or Normal Retirement Date, (ii)
begins receiving distributions in installments pursuant to
Section 8.5, and (iii) returns to Service prior to the completion
of such distributions, shall have future allocations credited to
a separate subaccount, the distribution of which shall commence
following his or her subsequent Termination of Service pursuant
to Article VIII.]
(b) For purposes of Section 6.1(a)(1), Shares
purchased by the Trust Fund for a Plan Year shall be considered
purchased with cash contributed by or on behalf of a
Participating Unit in the same proportion that the cash
contributed by or on behalf of such Participating Unit bears to
the total contributions made (in each case, for the purpose of
enabling the Plan to purchase Shares) by or on behalf of all
Participating Units for the Plan Year for such purpose. Except
as provided in Section 7.2, Shares purchased using cash
contributed by or on behalf of a Participating Unit shall be
allocated among Participants employed by such Participating Unit
and entitled to an allocation of Shares for such Plan Year in the
same proportion that the Compensation for the Plan Year that each
such Participant earned while an Eligible Employee of such
Participating Unit bears to the total Compensation for the Plan
Year that all such Participants earned while Eligible Employees
of such Participating Unit.
(c) A Participant shall be entitled to an allocation
for his first Plan Year of participation only if he is either:
(i) a Participant as of the Effective Date, or (ii) a Participant
during some portion of the last payroll period for such Plan
Year. Except for a Participant's first Plan Year of
participation, if a Participant is an Eligible Employee when his
employment terminates, the Participant, or his Beneficiary, as
the case may be, shall be entitled to an allocation for the Plan
Year in which the Participant's employment terminates regardless
of whether the Participant was an Eligible Employee on the last
day of such Plan Year.
(d) Allocations of Shares shall be expressed in terms
of numbers of whole and fractional interests in Shares.
(e) For any Plan Year, if a negotiated collective
bargaining agreement requires a Participating Unit to make
contributions with respect to the hours worked by an Employee
included in a bargaining unit covered by such agreement (his
"Hours Worked"), then, notwithstanding Sections 6.1(b) and 6.4,
and in lieu of the allocations otherwise provided thereunder, (i)
any Shares purchased with such contribution shall be allocated to
his Account and (ii) the number of Shares released from the
Suspense Subfund which shall be allocable to his Account shall be
the number of Shares which bears the same ratio to the total
Shares released for such Plan Year and allocable to the total
contribution made by or on behalf of his Participating Unit on
account of hours worked as his Hours Worked for the Plan Year
bear to the total hours worked (by all similarly situated
Participants) that gave rise to such total contributions.
6.2 Suspense Subfund. Shares acquired by the Trust Fund
through an Exempt Loan shall be added to and maintained in the
Suspense Subfund and shall thereafter be released from the
Suspense Subfund and allocated to Accounts of Participants as
provided in Sections 4.3, 6.3 and 6.4.
6.3 Release from Suspense Subfund. Shares acquired by the
Trust Fund with the proceeds of an Exempt Loan shall be released
from the Suspense Subfund as the Exempt Loan is repaid, in
accordance with the provisions of this Section 6.3.
(a) For each Plan Year until the Exempt Loan is fully
repaid, the number of Shares released from the Suspense Subfund
shall equal the number of unreleased Shares immediately before
such release for the current Plan Year multiplied by the "Release
Fraction". As used herein, the term "Release Fraction" shall mean
a fraction, the numerator of which is the amount of principal and
interest paid on the Exempt Loan for the Plan Year and the
denominator of which is the sum of the numerator plus the
principal and interest to be paid on such Exempt Loan for all
future years during the term of such Exempt Loan (determined
without reference to any possible extensions or renewals
thereof). For purposes of computing the denominator of the
Release Fraction, if the interest rate on the Exempt Loan is
variable, the interest to be paid in subsequent Plan Years shall
be calculated by assuming that the interest rate in effect as of
the end of the applicable Plan Year will be the interest rate in
effect for the remainder of the term of the Exempt Loan.
Notwithstanding the foregoing, in the event such Exempt Loan
shall be repaid with the proceeds of a subsequent Exempt Loan
(the "Substitute Loan"), such repayment shall not operate to
release all such Shares in the Suspense Subfund, but, rather,
such release shall be effected pursuant to the foregoing
provisions of this Section 6.3(a) on the basis of payments of
principal and interest on such Substitute Loan.
(b) If required by any pledge or similar agreement, or
if permitted by such pledge or agreement and required by the
Board of Directors pursuant to a one-time, irrevocable
designation (which shall be made, if at all, upon the making of
an Exempt Loan) by the Board of Directors, then, in lieu of
applying the provisions of Section 6.3(a) hereof with respect to
an Exempt Loan, Shares shall be released from the Suspense
Subfund as the principal amount of such Exempt Loan is repaid
(without regard to interest payments), provided the following
three conditions are satisfied:
(1) The Exempt Loan shall provide for payments
for each year of principal and interest at a cumulative rate that
is not less rapid at any time than level annual payments of such
amounts for ten years;
(2) The interest portion of any payment shall be
disregarded only to the extent it would be treated as interest
under standard loan amortization tables; and
(3) If the Exempt Loan is renewed, extended or
refinanced, the sum of the expired duration of the Exempt Loan
and the renewal, extension or new Exempt Loan period shall not
exceed ten years.
(c) If at any time there is more than one Exempt Loan
outstanding, then separate accounts may be established under the
Suspense Subfund for each such Exempt Loan. Each Exempt Loan for
which a separate account is maintained shall be treated
separately for purposes of the provisions governing the release
of Shares from the Suspense Subfund under this Section 6.3
(including for purposes of determining whether Section 6.3(a) or
Section 6.3(b) governs the release of Shares from any particular
Suspense Subfund) and for purposes of the provisions governing
the application of Participating Unit contributions to repay an
Exempt Loan under Section 4.1.
(d) Except as provided in Section 4.3, all Shares
released from the Suspense Subfund during any Plan Year shall be
allocated among Participants as prescribed by Section 6.4.
6.4 Allocation of Shares Released from Suspense Subfund.
Shares released from the Suspense Subfund for a Plan Year in
accordance with Section 6.3 shall be held in the Trust Fund on an
unallocated basis until allocated by the Committee as of the
Anniversary Date for that Plan Year. A Participant shall be
entitled to an allocation for his first Plan Year of
participation only if he is either: (i) a Participant as of the
Effective Date, or (ii) a Participant during some portion of the
last payroll period for such Plan Year. Except for a
Participant's first Plan Year of participation, if a Participant
is an Eligible Employee when his employment terminates, the
Participant, or his Beneficiary, as the case may be, shall be
entitled to an allocation for the Plan Year in which the
Participant's employment terminates regardless of whether the
Participant was an Eligible Employee on the last day of such Plan
Year. Except as provided in Section 4.3, the number of Shares
allocable to a Participant's Account shall be the number of
Shares which bears the same ratio to the total Shares released
for such Plan Year and allocable to the contribution made by or
on behalf of such Participant's Participating Unit as the
Compensation for the Plan Year of such Participant while an
Eligible Employee of such Participating Unit bears to the total
Compensation for the Plan Year of all Participants while Eligible
Employees of such Participating Unit entitled to an allocation
under this Section 6.4 for that Plan Year. If Shares are
released in connection with the utilization by the Plan of
dividends on Shares to repay an Exempt Loan, such Shares shall be
allocated for the Plan Year in which they are released (subject,
with respect to dividends on allocated Shares, to the
requirements, if any, of Section 404(k) of the Code and Section
5.6(b)(2) of the Plan) to each Participant's Account, if he is
entitled to an allocation under this Section 6.4, in the ratio
that his allocation of Shares bears to the total number of Shares
allocated to all Participants, as such Shares have been allocated
for such Plan Year pursuant to Section 6.1 but excluding any
allocation of Shares attributable to a transfer of assets
pursuant to Section 4.3. Subject to the provisions of the
foregoing sentence, the total Shares allocable to the
contribution of such Participant's Participating Unit shall be
the number of Shares which bears the same ratio to the total
Shares released from the Suspense Subfund for the Plan Year as
the contribution made by or on behalf of such Participant's
Participating Unit for the Plan Year bears to the total
contributions for the Plan Year made by or on behalf of all
Participating Units. All Shares in the Trust Fund, other than
Shares held in the Suspense Subfund as of an Anniversary Date,
must be allocated to Accounts as of the Anniversary Date.
6.5 Limitation on Allocations to Certain Participants.
Notwithstanding the foregoing provisions of this Article VI:
(a) If more than one-third of the Company's
contributions for a Plan Year which are deductible under Section
404(a)(9) of the Code would be allocated, within the meaning of
Section 415(c)(6)(C) of the Code, in the aggregate, to the
Accounts of Participants described in Section 414(q) of the Code,
then such allocations to the Accounts of Participants described
in Section 414(q) of the Code shall be reduced, pro rata, in an
amount sufficient to reduce the amounts actually allocated to the
Accounts of such Participants to an amount not in excess of
one-third of such deductible contributions with respect to such
Plan Year; and
(b) Any Shares which are prevented from being
allocated due to the restriction contained in Section 6.5(a)
shall be allocated as of the Anniversary Date pursuant to
Sections 6.1 and 6.4 as though those Participants described in
Section 414(q) of the Code did not participate in the Plan.
6.6 Stock Dividends, Splits, Recapitalizations, Etc. Any
Shares received by the Trustee as a result of a stock split,
dividend, conversion, or as a result of a reorganization or other
recapitalization of the Company shall be allocated as of the day
on which the Shares are received by the Trustee in the same
manner as the Shares to which they are attributable are then
allocated.
ARTICLE VII: VESTING
7.1 Vesting Schedule. For all purposes of the Plan, a
Participant's Vested Interest shall be the percentage of the
amount credited to his Account determined by the Committee from
the following vesting schedule on the basis of the number of
Years of Service which he has completed as of the date of his
Termination of Service.
Vested Interest in
Years of Service Participant's Account
Less than 2 years 0%
2 years but less than 3 50%
3 years but less than 4 75%
4 years or more 100%
Notwithstanding the foregoing, where
government regulations, including the Federal Procurement
Regulations and agency supplemental procurement regulations, or
contracts issued by government agencies require, for Participants
who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of
service when the Participant is performing a government contract
shall be 100% vested for any such Participant who has completed
one Year of Service, then each such Participant shall be 100%
vested in that portion of his Account attributable to
contributions for the period during which he is subject to such
regulation or contract, upon completion of one Year of Service.
However, if for any Plan Year the application of the preceding
sentence would result in discrimination in favor of highly
compensated employees (as defined in Code Section 414(s)) in
violation of Code Section 401(a)(4), then for such Plan Year the
preceding sentence shall not apply to any such highly compensated
employee.
7.2 Forfeitures; Return to Employment. The unvested
portion of a Participant's Account shall be deemed to be a
Forfeiture upon the last day of the Plan Year in which the
Employee incurs a Break in Service of at least 12 months
duration. If the Employee has not had five consecutive Breaks in
Service of at least 12 months each when he returns to Service,
any amounts forfeited pursuant to the preceding sentence (but
with no earnings thereon) shall be reinstated, first from
Forfeitures, then, if necessary, from Shares otherwise released
from a Suspense Subfund in connection with the repayment of an
Exempt Loan, and then, if necessary, from Company contributions,
and shall be distributed upon his subsequent Termination of
Service in accordance with the applicable Plan provisions
(without regard to the prior Termination of Service). In the
event of a reinstatement, appropriate adjustments to take into
account any prior distributions shall be made in connection with
any subsequent determination of a Participant's Vested Interest.
If a Participant or former Participant has had five consecutive
Breaks in Service of at least 12 months each, there shall be no
reinstatement of any amounts forfeited by him pursuant to the
vesting schedule under Section 7.1.
7.3 Full Vesting. Notwithstanding Section 7.1, a
Participant who is then an Employee of the Company or an
Affiliate shall be fully vested in his Account on the earlier of
his Normal Retirement Date, his Disability Retirement Date or his
death.
7.4 Treatment of Forfeitures. All Forfeitures occurring
pursuant to Section 7.2 shall be used (1) to reinstate the
Account of a reemployed Participant in accordance with Section
7.2, (2) to reinstate the Account of a Participant whose Account
was understated due to an administrative error, and (3) any
remaining Forfeitures shall be allocated as of the last day of a
Plan Year to the Account of each Participant who is entitled to
an allocation of Shares for such Plan Year in the ratio that his
allocation of Shares bears to the total number of Shares
allocated to all Participants, as such Shares have been allocated
for such Plan Year pursuant to Section 6.1 but excluding any
allocation of Shares attributable to a transfer of assets
pursuant to Section 4.3. In the event of a Forfeiture of a
portion of a Participant's Account, Shares held in such Account
that were acquired with the proceeds of an Exempt Loan shall be
forfeited only after all other assets held in the Participant's
Account have been forfeited.
ARTICLE VIII: RETIREMENT BENEFITS
8.1 Normal Retirement Date. Subject to Section 8.2, any
Participant who is an Employee of the Company or an Affiliate
when he attains his Normal Retirement Date shall have a
nonforfeitable right to his Account and may retire on his Normal
Retirement Date, which shall be the Participant's attainment of
age 65.
8.2 Deferred Retirement Date. If a Participant remains an
Employee after his Normal Retirement Date, he shall participate
in the contributions and benefits of the Plan in the same manner
as any other Participant. The Deferred Retirement Date of a
Participant who remains an Employee after his Normal Retirement
Date shall be the first day of any month coincident with or
following the date of his Termination of Service.
8.3 Disability Retirement Date. A Participant shall be
considered, if he so elects, to have retired for the purposes of
the Plan on his Disability Retirement Date which shall be the
date of his Termination of Service on account of his Disability,
regardless of his age. The determination of the Committee as to
whether a Participant has a Disability and the date of such
Disability shall be final, binding and conclusive.
8.4 Early Retirement Date. A Participant shall be
considered, if he so elects, to have retired for the purposes of
the Plan on his Early Retirement Date which shall be the date of
his Termination of Service, provided that the sum of the
Participant's age and Years of Service equals or exceeds 75. If
on such date of his Termination of Service such sum is less than
75, then a Participant's Early Retirement Date shall be, if he so
elects, the subsequent date (if any) on which such sum equals 75.
8.5 Method of Distribution. Subject to Article XII and
Sections 8.7 and 9.1, distribution of a Participant's Vested
Interest shall be made in substantially equal periodic
installments not less frequently than annually (in a manner
prescribed by the Committee and uniformly applicable to all
Participants) over a period equal to the greater of (a) five
years, or (b) in the case of a Participant with an Account which
has a value in excess of $500,000 (as adjusted pursuant to
Section 409(o)(2) of the Code) on the Valuation Date coincident
with or immediately preceding the date distributions are
scheduled to commence, five years plus one additional year (but
not more than five additional years) for each $100,000 (as
adjusted pursuant to Section 409(o)(2) of the Code) or fraction
thereof by which the value of such Account exceeds $500,000 (as
adjusted pursuant to Section 409(o)(2) of the Code); provided,
however, that, unless prohibited by the terms of an Exempt Loan,
distributions with a value of less than the "Applicable Amount"
may be paid at the election of the Participant or his
Beneficiary, as applicable, in one single distribution. The
"Applicable Amount" shall be the amount, if any, established in a
uniform and nondiscriminatory manner by the Committee; provided
that the Applicable Amount, once established, may only be changed
in conformity with the requirements of Section 411(d)(6) of the
Code and the Regulations promulgated thereunder.
8.6 Distribution of Vested Interest.
(a) Distribution of a Participant's Vested Interest
from his Account will be made entirely in whole Shares, with the
value of any fractional interest in Shares paid in cash. To the
extent a distribution is to be made in Shares, any cash or other
property in a Participant's Account will be used to acquire
Shares for distribution. Notwithstanding the foregoing, if
applicable corporate charter or bylaw provisions restrict
ownership of substantially all outstanding Shares to Employees or
to a plan or trust described in Section 401(a) of the Code, then
any distribution of a Participant's Vested Interest shall be in
cash.
(b) Distribution to a Participant shall be based upon
the value of the Vested Interest in his Account on the Valuation
Date coinciding with or immediately preceding the date of
distribution.
8.7 Commencement of Benefits.
(a) General Rule For Determining Plan Year in which
Benefit Commences. Subject to Sections 8.7(c), 8.7(f), 8.7(h)
and 16.6, the payment of any benefit to which a Participant is
entitled under the Plan shall commence not later than the
earliest of:
(1) 60 days after the close of the Plan Year in
which the Participant has a Termination of Service on or after
the Participant's Retirement Date;
(2) 60 days after the close of the Plan Year in
which occurs the latest of (i) the 10th anniversary of the year
in which the Participant commenced Plan participation; (ii) the
Participant's 65th birthday; or (iii) the Participant's
Termination of Service;
(3) one year after the close of the Plan Year in
which the Participant dies; or
(4) unless subsequent to such Termination of
Service the Participant has again become an Employee, the close
of the fifth Plan Year following the Plan Year in which the
Participant's Termination of Service occurs, provided that
distribution of Shares held in a Participant's Account shall not
commence by reason of this Section 8.7(a)(4) prior to the close
of the Plan Year in which any Exempt Loan used to acquire such
Shares is repaid in full.
(b) Exception to General Rule. Notwithstanding the
provisions of Section 8.7(a), distribution to a Participant may
commence as soon as practicable after (i) the Participant's
Retirement Date, or the date a Participant who is not an Employee
attains age 65, if the Participant so elects in writing or (ii)
the date of his death if the Beneficiary so elects in writing.
If such an election is made, distribution of such Participant's
Vested Interest from his Account shall be made in installments
with (i) the number and timing of such installments (but not the
amounts thereof) determined pursuant to Section 8.5 and (ii) the
amount of each installment determined by dividing the value of
the Vested Interest in such Participant's Account as of the
Valuation Date coinciding with or next preceding the making of
such installment by the number of installments remaining to be
paid immediately preceding the making of such installment;
provided that the final installment shall in all events consist
of the full remaining Vested Interest in such Participant's
Account immediately prior to such installment.
(c) Deferral of Certain Payments until 65.
Notwithstanding any other provision of this Plan, if a
Participant's Vested Interest either (i) has a present value of
greater than $3,500 or (ii) is 100 Shares or more, payment of
benefits under this Plan to such Participant shall not commence
prior to the Participant's attainment of age 65 unless the
Participant consents in writing to an earlier commencement of
payments..
(d) Time for Commencement of Benefits within
Applicable Plan Year. To the extent consistent with the Code and
Regulations, in the case of any payment of benefit which is to
commence within a particular Plan Year in accordance with this
Section 8.7, payment shall commence as soon as practicable
following (i) the allocation, if any, of Shares released from the
Suspense Subfund for the prior Plan Year in accordance with
Article VI and (ii) the receipt by the Committee of data relating
to the Compensation of Participants in Participating Units and
such other information as the Committee may reasonably require to
determine the allocations to Participants' Accounts in accordance
with Article VI.
(e) Accelerated Commencement of Small Benefits. If,
as of the time such distribution would first be made to a
Participant in accordance with this sentence, (i) such
Participant has not again become an Employee, (ii) the value of
such Participant's Vested Interest (using the value per share
established as of the most recent Valuation Date) is not greater
than $3,500, and (iii) such Participant's Vested Interest is
smaller than 100 Shares, then distribution of such Vested
Interest shall be made in the form of a single distribution of
the entire Vested Interest then allocated to such Participant's
Account, as soon as practicable following (A) the occurrence of
the Participant's death or Retirement Date, or (B) the end of the
Plan Year following a Break in Service of at least 12 months
duration, as the case may be. If any Shares or other amounts are
allocated to his account following such distribution, such Shares
or other amounts shall be distributed to the Participant as soon
as practicable after such allocation is made and in no event
later than the date required for the commencement of benefits to
such Participant otherwise prescribed in Section 8.7(a).
(f) Latest Date for Commencement of Benefits. Except
as provided in Section 16.6, in no event may payments commence
later than the April l of the calendar year following the
calendar year in which such Participant attains age 70 1/2 and shall
be paid, in accordance with the Regulations, over a period not
extending beyond the life expectancy of such Participant or the
joint life expectancies of such Participant and his Beneficiary.
(g) Distributions Which Commenced Prior To Death. If
distribution of a Participant's benefit has commenced prior to a
Participant's death, and such Participant dies before his entire
benefit is distributed, the remaining portion of the
Participant's benefit shall be distributed at least as rapidly as
under the method of distribution in effect on the date of the
Participant's death.
(h) Administrative Delays. If the amount payable
cannot be ascertained, or, subject to the provisions of Section
16.6, the Participant cannot be located after reasonable efforts,
a payment retroactive to the date determined under the preceding
provisions of this Section 8.7 may be made not later than 60 days
after the earliest date on which the amount of such payment can
be ascertained under the Plan or the date on which the
Participant is located (whichever is applicable).
8.8 Diversification.
(a) "Qualified Election Period" means the six Plan
Year period beginning with the later of (i) the Plan Year in
which the Participant attains age 55; or, (ii) the Plan Year in
which the Participant first becomes a Qualified Participant.
(b) "Qualified Participant" means a Participant who
has attained age 55 and who has completed at least 10 years of
participation under the Plan. Periods of time following a
Termination of Service shall not be treated as participation for
purposes of this Section 8.8.
(c) A Qualified Participant may file a written
election with the Committee within 90 days after the close of
each Plan Year (the "Notice Period") during the first five Plan
Years of his Qualified Election Period to have twenty-five
percent of the shares of employer securities acquired by or
contributed to the Plan and allocated to his Account (less the
number of shares previously distributed pursuant to this Section
8.8) distributed to him in kind in the form of a single payment.
If a Qualified Participant makes a timely election to have shares
distributed, such shares shall be distributed no later than 90
days after the end of the Notice Period during which such
election was made.
(d) A Qualified Participant may elect during the
Notice Period of the sixth and final Plan Year of his Qualified
Election Period to have fifty percent of the shares of employer
securities acquired by or contributed to the Plan and allocated
to his Account (less the number of shares previously distributed
pursuant to this Section 8.8) distributed to him in kind in the
form of a single payment. If a Qualified Participant makes a
timely election to have shares distributed, such shares shall be
distributed no later than 90 days after the end of the Notice
Period during which such election was made.
(e) The diversification requirements of this Section
8.8 for any Plan Year shall be treated as having been satisfied
with respect to a Qualified Participant if such Participant fails
to file a timely election by the end of the applicable Notice
Period.
8.9 Straight Life Annuity. Notwithstanding any provision
of this Plan to the contrary, unless the provisions of Section
8.7(e) are applicable to such Participant, a Participant shall be
permitted, in his sole discretion, to elect to receive a
straight-life annuity on his life, commencing upon the later of
the date his benefits are otherwise due to commence or his
Retirement Date.
(a) Such election must be made in writing prior to the
time when benefits to the Participant would otherwise first
commence and shall apply to all subsequent distributions from the
Participant's Account unless the Participant revokes the
election, in writing and at a reasonable time prior to the
subsequent distribution date, as to subsequent distributions;
provided, however, that such election shall automatically be
revoked prospectively, at such time as the Plan Administrator has
been advised of the death of the Participant. Such election
shall otherwise be irrevocable.
(b) Upon receipt of such election, the Trustee shall,
as the contents of the Participant's Account become otherwise
distributable to the Participant according to the Plan, cause
Shares then distributable from such Account to be converted into
cash at the fair market value thereof and the proceeds, together
with any other cash then distributable from the Account, to be
used to purchase a nontransferable immediate or deferred payment
annuity from an insurance or annuity company selected by the
Committee. The annuity contract so purchased shall be delivered
to the Participant.
ARTICLE IX: DEATH BENEFITS
9.1 Death During a Period of Service. Subject to Section
8.6(a), upon the death of a Participant during a period of
Service, all amounts then credited to his Account shall be
distributed to the Participant's Beneficiary in accordance with
Sections 8.5 and 8.7.
9.2 Death After Termination of Employment. Upon the death
of a Participant after retirement, Disability or Termination of
Service, but prior to the distribution of his entire Vested
Interest, his Account shall be distributed to the Participant's
Beneficiary in accordance with Section 8.5.
9.3 Other Amounts. Any amounts credited to a Participant's
Account after his death shall be distributed as soon as
administratively practicable or, if later, at the time any
amounts previously credited are distributed in accordance with
the other provisions of this Article.
ARTICLE X: DESIGNATION OF BENEFICIARIES
10.1 Beneficiary Designation. Each Participant shall file
with the Committee a written designation of one or more persons
as the Beneficiary who, subject to Section 9.1, shall be entitled
to receive the amount, if any, payable under the Plan upon his
death. A Participant may from time to time revoke or change his
beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Committee.
Notwithstanding the foregoing, no designation of a Beneficiary
other than a Surviving Spouse by a Participant shall be given
effect unless such Participant's Surviving Spouse, if any, had
consented in writing to such designation and, unless otherwise
provided by the Committee in conformity with Section 417(a)(2)(A)
of the Code and the Regulations, to all future designations;
provided, that (a) spousal consent shall not be required where
the spouse cannot be located or on account of such other
circumstances, if any, as are set forth in the Regulations, and
(b) spousal consent, if required, must acknowledge the effect of
such designation and be witnessed by a Plan representative or
notary public. The last such designation received by the
Committee shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective
unless received by the Committee prior to the Participant's
death, and in no event shall it be effective as of a date prior
to such receipt. All decisions of the Committee concerning the
effectiveness of any beneficiary designation, and the identity of
any Beneficiary, shall be final. If a Beneficiary shall die
prior to receiving the distribution that would have been made to
such Beneficiary had such Beneficiary's death not occurred, and
no alternate Beneficiary has been designated, then for the
purposes of the Plan the distribution that would have been
received by such Beneficiary shall be made to the Beneficiary's
estate.
10.2 Failure to Designate Beneficiary. Subject to Section
9.1, if no beneficiary designation is in effect at the time of a
Participant's death, the payment of the amount, if any, payable
under the Plan upon his death shall be made to the Participant's
Surviving Spouse, if any, or, if the Participant has no Surviving
Spouse, to the Participant's estate. If the Committee is in
doubt as to the right of any person to receive such amount, the
Committee may direct the Trustee to retain such amount, without
liability for any interest thereon, until the rights thereto are
determined, or the Committee may direct the Trustee to pay such
amount into any court of appropriate jurisdiction, and such
payment shall be a complete discharge of the liability of the
Plan and the Trust therefor.
ARTICLE XI: MAXIMUM AMOUNT OF ALLOCATION
11.1 Application of Article XI. The provisions of this
Article XI shall govern notwithstanding any other provisions of
the Plan. Notwithstanding any other provision of this Article
XI, in no event shall allocations to Participants under the Plan
fail to comply with Section 415 of the Code.
11.2 Maximum Additions to Account. Annual additions to a
Participant's Account may not exceed the lesser of (a) $30,000 or
(b) 25 percent of the Participant's compensation (as defined in
Section 415(c) of the Code and the Regulations promulgated under
Section 415 of the Code), provided that said $30,000 limitation
shall be adjusted annually for increases in cost of living on or
after January l, 1988 in accordance with the Regulations. For
any Plan Year in which the conditions of Section 415(c)(6)(A) of
the Code are satisfied by the Plan, the limitations contained in
the preceding sentence shall be adjusted to the maximum amount
permitted under such Section of the Code. For this purpose, the
term "Annual Additions" shall mean the following amounts which,
without regard to this Article XI, would have been credited to
the Participant's Account for any Plan Year: (a) Company
contributions, which are used to repay principal on one or more
Exempt Loans, or to purchase Shares, which are deemed to be
allocated to such Participant's Account, (b) Forfeitures of
Shares not acquired with the proceeds of an Exempt Loan, which
Forfeitures arise under the Plan and are allocable to such
Participant in respect of such Plan Year, and (c) such other
amounts as may be required to be included under the Code and
Regulations. For purposes of this Section 11.2, the portion of
the contribution of a Participating Unit which is deemed
allocated to a Participant's Account shall be an amount which
bears the same ratio to the total contribution made by or on
behalf of such Participating Unit for such Plan Year which is
used to repay principal on one or more Exempt Loans, or to
purchase Shares, as the number of Shares allocated to such
Participant's Account on the Anniversary Date of such Plan Year,
bears to the total number of Shares allocated to the Accounts of
all Participants employed by such Participating Unit on the
Anniversary Date of such Plan Year. The term "Annual Additions"
shall not include any amounts credited to the Participant's
Account (i) resulting from rollover contributions, (ii) due to
Participating Unit contributions relating to interest payments on
an Exempt Loan, or (iii) attributable to a Forfeiture of Shares
acquired with the proceeds of an Exempt Loan.
11.3 Order of Reduction. After reducing the annual
additions to a Participant's account in any other defined
contribution plan maintained by a Participating Unit or an
Affiliate, if the amounts which would otherwise be allocated to a
Participant's Account still must be reduced by reason of the
limitations of Section 11.2, such reduction shall be made in the
following order of priority, but only to the extent necessary,
and such amounts shall be allocated as follows:
(a) Forfeitures of Shares not acquired with the
proceeds of an Exempt Loan arising under the Plan and allocable
to such Participant in respect of such Plan Year shall be
allocated to the Accounts of other Participants as of the end of
the Plan Year for which such reduction is made in the manner
provided for under Section 7.4 above; and then
(b) First, Shares which are attributable to amounts
transferred from other plans pursuant to Section 4.3 and, second,
Shares which are attributable to Company contributions shall be
allocated to a suspense account until a date prior to the end of
the first quarter of the succeeding Plan Year as selected by the
Committee (the "reallocation date") and then reallocated as of
the reallocation date: (i) for Shares attributable to assets
transferred from other plans pursuant to Section 4.3, to the
Participants who are, as of the reallocation date, eligible for
allocation pursuant to Section 4.3, and such reallocation shall
be made in accordance with Section 4.3; and (ii) for Shares
attributable to Company contributions, to the Participants who
are, as of the reallocation date, Employees of the Participating
Units described in Section 4.1(a)(3), and such reallocation shall
be made in accordance with Section 4.1(a)(3).
11.4 Additional Account Limitations.
(a) Subject to paragraph (c) of this Section 11.4, in
the event that, in any Plan Year and with respect to any
Participant, the sum of the "Defined Contribution Fraction" (as
defined in paragraph (b)) and the "Defined Benefit Fraction" (as
defined in paragraph (b)) would otherwise exceed 1.0, the benefit
payable under the defined benefit plan shall be reduced in
accordance with the provisions of that plan, but only to the
extent necessary to ensure that such limitation is not exceeded.
If this reduction does not ensure that the limitation is not
exceeded, then the annual addition to any defined contribution
plan, other than the Plan, shall be reduced in accordance with
the provisions of that plan but only to the extent necessary to
ensure that such limitation is not exceeded. If this reduction
does not ensure that the limitation is not exceeded, then the
Annual Addition to the Plan shall be reduced in accordance with
the provisions of the Plan, but only to the extent necessary to
ensure that such limitation is not exceeded.
(b) For purposes of paragraph (a) of this Section
11.4, the following terms shall have the following meanings:
(1) "Defined Contribution Fraction" shall mean,
as to any Participant for any Plan Year, a fraction, (A) the
numerator of which is the sum of Annual Additions, for the Plan
Year and all prior Plan Years, as of the close of the Plan Year
and (B) the denominator of which is the sum of the lesser of the
following amounts, determined for such Plan Year and for each
prior Plan Year in which a Participant had an Hour of Service and
was a Participant in the Plan (i) the product of 1.25 multiplied
by the dollar limitation in effect for such year under Section
415(c)(1)(A) of the Code, or (ii) the product of 1.4 multiplied
by the amount which may be taken into account under Section
415(c)(1)(B) of the Code with respect to the Participant for such
year; provided, however, that for years ending prior to January
l, 1976, the numerator of such fraction shall in no event be
deemed to exceed the denominator of such fraction; further
provided, that, at the election of the Committee, in determining
the Defined Contribution Fraction for Plan Years ending after
December 31, 1982, the portion of the denominator for all years
ending before January 1, 1983 with respect to each Participant
shall be an amount equal to the product of the denominator
determined as provided in (B) above (as in effect for the year
ending in 1982) for the year ending in 1982, multiplied by a
fraction, the numerator of which is the lesser of $51,875, or 25
percent of the Participant's compensation for the year ending in
1981 multiplied by 1.4, and the denominator of which is the
lesser of $41,500, or 25 percent of the Participant's
compensation for the year ending in 1981.
(2) "Defined Benefit Fraction" shall mean, as to
any Participant for any Plan Year, a fraction, (A) the numerator
of which is the projected annual benefit (determined as of the
close of the Plan Year and in accordance with the Regulations) of
the Participant under any defined benefit plan (as defined in
Sections 414(j) and 415(k) of the Code) maintained by the Company
or any Affiliate and (B) the denominator of which is the lesser
of (i) the product of 1.25 multiplied by the dollar limitation in
effect under Section 415(b)(1)(A) of the Code for such Plan Year
or (ii) the product of 1.4 multiplied by an amount equal to 100
percent of the Participant's average compensation for his high
three years within the meaning of Section 415(b)(3) of the Code
for such Plan Year.
(c) In the case of a Participant with respect to whom
the sum of the Defined Contribution Fraction and the Defined
Benefit Fraction exceeds 1.0 with respect to the last Plan Year
beginning before January l, 1983, an amount, determined in
accordance with the Regulations, may be subtracted from the
numerator of the Defined Contribution Fraction (not exceeding
such numerator) so that the sum of such Participant's Defined
Contribution Fraction and his Defined Benefit Fraction computed
under paragraph (a) of this Section 11.4 does not exceed 1.0 for
the last Plan Year beginning before January 1, 1983.
ARTICLE XII: RIGHTS AND OPTIONS CONCERNING DISTRIBUTED SHARES
12.1 Right of First Refusal.
(a) During any period when Shares are not publicly
traded, all distributions of such Shares from Accounts to any
participant or his Beneficiary (the "Distributee") by the Trust
shall be subject to a "right of first refusal" upon the terms and
conditions hereinafter set forth. The "right of first refusal"
shall provide that prior to any transfer (as determined by the
Committee) of the Shares, the Distributee must first offer to
sell such Shares to the Trust, and if the Trust refuses to
exercise its right to purchase the Shares, then the Company shall
have a "right of first refusal" to purchase such Shares. Neither
the Trust nor the Company shall be required to exercise the
"right of first refusal".
(b) The terms and conditions of the "right of first
refusal" shall be determined as follows:
(1) If the Distributee receives a bona fide offer
for the purchase of all or any part of his Shares from a third
party, the Distributee shall forthwith deliver (by registered
mail, return receipt requested) a copy in writing of any such
offer to the Committee and the Trustee. The Trustee (as directed
by the Committee) or the Company, as the case may be, shall then
have 14 days after receipt by the Committee of the written offer
to exercise the right to purchase all or any portion of the
Shares. Subject to Section 12.1(b)(2), the purchase price to be
paid by the Trust or the Company for the Shares shall be the
purchase price stated in the bona fide offer received by the
Distributee; and
(2) The selling price and other terms under the
"right of first refusal" must not be less favorable to the
Distributee than the greater of the value of the security
determined pursuant to the Regulations or the purchase price and
other terms offered by a buyer other than the Company or the
Trust, making a good faith offer to purchase the security from
the Distributee.
12.2 Put Option. If at the time of distribution, Shares
distributed from the Trust Fund are not treated as "readily
tradable on an established market" within the meaning of Section
409(h) of the Code and the Regulations, such Shares shall be
subject to a put option in the hands of a Qualified Holder by
which such Qualified Holder may sell all or any part of the
Shares distributed to him by the Trust to the Trust. Should the
Trust decline to purchase all or any part of the Shares put to it
by the Qualified Holder, the Company shall purchase those Shares
that the Trust declines to purchase. The put option shall be
subject to the following conditions:
(a) The term "Qualified Holder" shall mean the
Participant or Beneficiary receiving the distribution of such
Shares, any other party to whom the Shares are transferred by
gift or by reason of death, and also any trustee of an individual
retirement account (as defined under Code Section 408) to which
all or any portion of the distributed Shares is transferred
pursuant to a tax-free "rollover" transaction satisfying the
requirements of Sections 402 and 408 of the Code.
(b) During the "put option period", as hereafter
defined, with respect to any distribution of such Shares, a
Qualified Holder shall have the right to require the Company to
purchase all or a portion of the distributed Shares held by the
Qualified Holder. Such "put option period" shall commence on the
date of the distribution of such Shares and shall end on the 60th
day following the later of (i) the date of such distribution or
(ii) the date on which the Committee shall, pursuant to Section
5.6(a), have determined the fair market value of such Shares as
of the Valuation Date coinciding with or next preceding the
distribution thereof. The purchase price to be paid for any such
Shares shall be their fair market value determined (1) as of the
Valuation Date coinciding with or next preceding the exercise of
the put option under this Section 12.2(b) or, (2) in the case of
a transaction between the Plan and a "disqualified person" within
the meaning of Section 4975(e)(2) of the Code, as of the date of
the transaction.
(c) If a Qualified Holder shall fail to exercise his
put option right under Section 12.2(b), the option right shall
temporarily lapse upon the expiration of the "put option period".
As soon as practicable following the last day of the Plan Year in
which the "put option period" expires, the Company shall notify
the non-electing Qualified Holder (if he is then a shareholder of
record) of the valuation of the Shares as of that date. During
the 60-day period following receipt of such valuation notice, the
Qualified Holder shall again have the right to require the
Company to purchase all or any portion of the distributed Shares.
The purchase price to be paid therefor shall be their fair market
value determined (1) as of the Valuation Date coinciding with or
next preceding the exercise of the put option under this Section
12.2(c) or (2) in the case of a transaction between the Plan and
a "disqualified person" within the meaning of Section 4975(e)(2)
of the Code, as of the date of the transaction.
(d) The foregoing put options under Section 12.2(b)
and (c) shall not obligate the Plan or Trust in any manner if the
Trust declines to purchase all or any part of the Shares so
offered, and, in such event, shall be effective solely against
the Company.
(e) The period during which the put option is
exercisable does not include any time when a Qualified Holder is
unable to exercise it because the Company is prohibited from
honoring it by applicable Federal or state laws.
(f) Except as otherwise required or permitted by the
Code, the put options under Section 12.2 shall satisfy the
requirements of Section 54.4975-7(b) of the Treasury Regulations
to the extent, if any, that such requirements apply to such put
options.
12.3 Exercise of Put Option. A Qualified Holder must
exercise his put option in writing on a form supplied by the
Committee. Unless otherwise determined by the Committee, if a
Qualified Holder exercises his put option under Section 12.2,
payment for the Shares repurchased shall be made, (a) in the case
of a total distribution of a Participant's Account within a
single taxable year as described in Section 409(h)(5) of the
Code, (i) if the Vested Interest of the Participant has a value
of $3,500 or less, in one installment not later than 30 days
after exercise, or (ii) or if the Vested Interest of the
Participant has a value of more than $3,500, in accordance with
uniform rules established by the Committee, in substantially
equal periodic payments (not less frequently than annually) over
a period beginning not later than 30 days after the exercise of
the put option and not exceeding five years (provided that
adequate security and reasonable interest are provided with
respect to unpaid amounts) or, (b) in the case of other
distributions, not later than 30 days after such exercise. For
purposes of this Section 12.3, the interest rate shall be
determined by reference to the prevailing Prime Rate as listed in
the Wall Street Journal unless the Code requires a higher rate.
12.4 Other Rights. Except as provided in Sections 12.1,
12.2, 12.3 or 8.6(a), no Shares acquired with the proceeds of an
Exempt Loan may be subject to a put, call or other option, or
buy-sell or similar arrangement while held by or distributed from
the Plan. Rights and protection set forth in this Article XII
shall be non-terminable to the extent, if any, provided in
Section 15.1(d).
12.5 Actions To Carry Out the Rights and Options. The
Company shall take any and all actions as it may deem necessary
or desirable to effectuate and carry out the "right of first
refusal" and the put option provided under this Article XII,
including, but not limited to, the placing of appropriate legends
on the certificates representing the Shares and the issuance of
appropriate stop transfer instructions to the transfer agent for
Shares.
12.6 Stock Transfer Taxes. Subject to applicable law, the
stock transfer or similar taxes, if any, arising in connection
with the purchase of Shares pursuant to this Article XII shall be
the obligation of the purchaser of such Shares.
ARTICLE XIII: ADMINISTRATION OF THE PLAN
13.1 Powers and Duties of the Committee. The Committee
shall have general responsibility for the administration and
interpretation of the Plan (including but not limited to
complying with reporting and disclosure requirements, and
establishing and maintaining Plan records). Such interpretations
(including, without limitation, interpretations relating to the
determination of eligibility under the Plan and the disposition
of claims for benefits under the Plan) and other actions of the
Committee shall be afforded the maximum deference allowed by law.
The Committee shall engage such certified public accountants and
other advisers and service providers, who may be accountants,
advisers or service providers for the Company, as it shall
require or may deem advisable for purposes of the Plan.
To the extent that the Trust Fund is invested in assets
other than Shares, the Committee shall have the power to appoint
or remove one or more investment advisers and to delegate to such
adviser authority and discretion to manage (including the power
to acquire and dispose of) the assets of the Plan, provided that
(i) each adviser with such authority and discretion shall be
either a bank, an insurance company or a registered investment
adviser under the Investment Advisers Act of 1940, and shall
acknowledge in writing that it is a fiduciary with respect to the
Plan and (ii) the Committee shall periodically review the
investment performance and methods of each adviser with such
authority and discretion.
13.2 Powers and Duties of Trustee. The Trustee shall have
responsibility under the Plan for the management and control of
the assets of the Plan and shall have discretionary
responsibility for the investment and management of such assets;
provided, however, that the Trustee shall invest all assets in
Shares except as is otherwise required under an Exempt Loan
agreement or the terms of the Trust.
13.3 Named Fiduciary. The Committee shall be the named
fiduciary for purposes of the Act, except that (i) the Trustee
shall be the named fiduciary with respect to the exercise of
powers set forth in Section 13.2 of this Plan and Sections 4.2,
4.5 and 5.6 of the Trust, and (ii) each Participant shall be the
named fiduciary with respect to the exercise of voting and tender
or exchange offer rights for Shares held as part of the Trust
Fund to the extent such Participant is entitled to exercise such
rights pursuant to Article XI of the Trust Agreement and Section
16.20.
13.4 Agents; Report of Committee to Board. The Committee
may arrange for the engagement of such legal counsel, who may be
counsel for the Company, and make use of such agents and clerical
or other personnel as it shall require or may deem advisable for
purposes of the Plan. The Committee may rely upon the written
opinion of such counsel and the accountants engaged by the
Committee and may delegate to any such agent or to any
subcommittee or member of the Committee its authority to perform
any act hereunder, including, without limitation, those matters
involving the exercise of discretion, provided that such
delegation shall be subject to revocation at any time at the
discretion of the Committee. The Committee shall report to the
Board of Directors, or to a committee of the Board of Directors
designated for that purpose, as frequently as shall be specified
by the Board of Directors or such committee, with regard to the
matters for which it is responsible under the Plan.
13.5 Structure of Committee. The Committee shall consist of
three or more members, each of whom shall be appointed by, shall
remain in office at the will of, and may be removed, with or
without cause by, the Board of Directors. A majority of the
members of the Committee shall be Employees (who may also be
members of the Board of Directors). Any member of the Committee
may resign at any time. No member of the Committee shall be
entitled to act on or decide any matter relating solely to
himself or any of his rights or benefits under the Plan. In the
event that the Committee is unable to act in any matter by reason
of the foregoing restriction, the Board of Directors shall act on
such matter. The members of the Committee who are active
employees of a Participating Unit shall not receive any special
compensation for serving in their capacities as members of the
Committee but shall be reimbursed for any reasonable expenses
incurred in connection therewith. Except as otherwise required
by the Act, no bond or other security need be required of the
Committee or any member thereof in any jurisdiction. Any member
of the Committee, any subcommittee or agent to whom the Committee
delegates any authority, and any other person or group of
persons, may serve in more than one fiduciary capacity (including
service both as a trustee and administrator) with respect to the
Plan.
13.6 Adoption of Procedures of Committees. The Committee
shall establish its own procedures and the time and place for its
meetings, and provide for the keeping of minutes of all meetings.
A majority of the members of the Committee shall constitute a
quorum for the transaction of business at a meeting of the
Committee. Any action of the Committee may be taken upon the
affirmative vote of a majority of the members of the Committee at
a meeting or without a meeting, by mail, telegraph or telephone,
provided that all of the members of the Committee are informed by
mail, teletransmission or telegraph of their right to vote on the
proposal and of the outcome of the vote thereon.
13.7 Demands for Money. All demands for money from the Plan
shall be signed by a member of the Committee or such other person
or persons as the Committee may from time to time designate in
writing. This person shall cause to be kept full and accurate
accounts of receipts and disbursements of the Plan, shall cause
to be deposited all funds of the Plan to the name and credit of
the Plan, in such depositories as may be designated by the
Committee, shall cause to be disbursed the monies and funds of
the Plan when so authorized by the Committee and shall generally
perform such other duties as may be assigned to him from time to
time by the Committee.
13.8 Claims for Benefits. All claims for benefits under the
Plan shall be submitted in writing to, and within a reasonable
period of time decided by a majority of, the Committee. Written
notice of the decision on each such claim shall be furnished
reasonably promptly to the claimant. If the claim is wholly or
partially denied, such written notice shall set forth an
explanation of the specific findings and conclusions on which
such denial is based. A claimant may review all pertinent
documents and may request a review by the Committee of such a
decision denying the claim. Such a request shall be made in
writing and filed with the Committee within a reasonable period
of time, as specified by the Committee in writing from time to
time, after delivery to said claimant of written notice of said
decision. Such written request for review shall contain all
additional information which the claimant wishes the Committee to
consider. The Committee may hold any hearing or conduct any
independent investigation which it deems necessary to render its
decision, and the decision on review shall be made as soon as
possible after the Committee's receipt of the request for review.
Written notice of the decision on review shall be promptly
furnished to the claimant and shall include specific reasons for
such decision. For all purposes under the Plan, such decisions
on claims (where no review is requested) and decisions on review
(where review is requested) shall be final, binding and
conclusive on all interested parties as to participation and
benefit eligibility, the Employee's amount of Compensation and as
to any other matter of fact or interpretation relating to the
Plan.
13.9 Hold Harmless. To the maximum extent permitted by law,
no member of the Committee shall be personally liable by reason
of any contract or other instrument executed by him or on his
behalf in his capacity as a member of the Committee nor for any
mistake of judgment made in good faith, and the Company shall
indemnify and hold harmless, directly from its own assets
(including the proceeds of any insurance policy the premiums of
which are paid from the Company's own assets), each member of the
Committee and each other officer, employee, or director of the
Company to whom any duty or power relating to the administration
or interpretation of the Plan or to the management and control of
the assets of the Plan may be delegated or allocated, against any
cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim with the approval of the
Company) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or
bad faith.
13.10 Service of Process. The General Counsel of the
Company or such other person as may from time to time be
designated by the Board of Directors shall be the agent for
service of process under the Plan.
13.11 Purchase of Shares; Valuation. The Committee
shall be the named fiduciary of the Plan with responsibility for
directing the Trustee as to whether and under what terms it shall
enter into an Exempt Loan or shall purchase or otherwise acquire,
or sell or otherwise dispose of, Shares. In the event that there
is no generally recognized market for Shares, the Committee shall
be the named fiduciary with responsibility for determining the
fair market value of the Shares, provided, that any such
determination shall be in accordance with applicable Regulations,
if any, and the Committee shall, in making such determination,
retain an independent appraiser to make such valuation on behalf
of the Committee in accordance with Section 5.6(e). In no event
may the Plan obligate itself to acquire securities from a
particular security holder at an indefinite time determined upon
the happening of an event such as the death of the holder.
ARTICLE XIV: WITHDRAWAL OF PARTICIPATING UNIT
14.1 Withdrawal of Participating Unit. Any Participating
Unit (other than the Company) may, with the consent of the Board
of Directors, withdraw from participation in the Plan by giving
the Committee and the Trustee prior written notice in a
resolution by its board of directors specifying a withdrawal date
which shall be the last day of a month at least 30 days (or such
other time as the Committee may permit) subsequent to the date
such notice is received by the Committee or the Trustee,
whichever receives such notice the latest. The Committee (a) may
require any Participating Unit to withdraw from the Plan, as of
any withdrawal date specified by the Committee, for the failure
of the Participating Unit to make proper Contributions or to
comply with any other provision of the Plan, and (b) shall
require a Participating Unit's withdrawal (i) upon complete and
final discontinuance of the contributions or (ii) unless the
Committee determines otherwise, at such time (if any) as the
Participating Unit ceases to be an Affiliate. In the event of
any such withdrawal, the Committee may promptly notify the IRS
and request such determination as counsel to the Plan may
recommend and as the Committee may deem desirable.
14.2 Distribution after Withdrawal. Upon withdrawal from
the Plan by any Participating Unit, no further contributions
shall be made under the Plan by or on behalf of any Participating
Unit, and, unless otherwise directed by the Committee, no amount
shall thereafter be payable under the Plan to or in respect of
any Participants then employed by such Participating Unit except
as provided under the regular distribution provisions of the
Plan. To the maximum extent permitted by the Act, any rights of
Participants no longer employed by such Participating Unit and of
former Participants and their Beneficiaries under the Plan shall
be unaffected by such withdrawal, and any transfers,
distributions or other dispositions of the assets of the Plan as
provided in this Article XIV shall constitute a complete
discharge of all liabilities under the Plan with respect to such
Participating Unit's participation in the Plan and any
Participant then employed by such Participating Unit.
All determinations, approvals and notifications referred to
above shall be in form and substance and from a source
satisfactory to counsel for the Plan. To the maximum extent
permitted by the Act, the withdrawal from the Plan by any
Participating Unit shall not in any way affect any other
Participating Unit's participation in the Plan.
14.3 Transfer to Successor Plan. No transfer of the Plan's
assets and liabilities to a successor employee benefit plan
(whether by merger or consolidation with such successor plan or
otherwise) shall be made unless (a) the Committee authorizes such
transfer and (b) each Participant would, if either the Plan or
such successor plan then terminated, receive a benefit
immediately after such transfer which (after taking account of
any distributions or payments to the Participants as part of the
same transaction) is equal to or greater than the benefit he
would have been entitled to receive immediately before such
transfer if the Plan had then been terminated. The Committee may
also request appropriate indemnification from the employer or
employers maintaining such successor plan before making such a
transfer.
14.4 Transfer of Shares in a Suspense Subfund.
Notwithstanding any provision of this Article XIV to the
contrary, any Shares allocated to a Suspense Subfund shall not be
transferred to a successor employee benefit plan except as is
required or permitted by the Committee in accordance With the
terms of an Exempt Loan and the Regulations.
ARTICLE XV: AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
15.1 Right to Amend, Suspend or Terminate Plan.
(a) Subject to the provisions of paragraph (c) and any
applicable contribution or loan agreement, the Board of Directors
reserves the right at any time to amend, suspend or terminate the
Plan, any contributions thereunder, the Trust or any contract
issued by an insurance carrier forming a part of the Plan, in
whole or in part and for any reason and without the consent of
any Participating Unit, Participant, Beneficiary, Surviving
Spouse or other eligible survivor. Each Participating Unit by
its adoption of the Plan shall be deemed to have delegated this
authority to the Board of Directors. The Plan shall
automatically be terminated upon complete and final
discontinuance of contributions thereunder.
(b) The Committee may adopt any amendment which may be
necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan
thereto, or to qualify or maintain the Plan and the Trust as a
plan and trust meeting the requirements of Sections 401(a),
501(a) and 4975(e)(7) of the Code, Section 407(d)(6) of the Act
or any other applicable section of law and the Regulations issued
thereunder, provided said amendment does not have any material
effect on the currently estimated cost to the Company of
maintaining the Plan. Each Participating Unit by its adoption of
the Plan shall be deemed to have delegated this authority to the
Committee.
(c) No amendment or modification shall be made which
would retroactively (i) reduce in contravention of Section
411(d)(6) of the Code any accrued benefits or (ii) make it
possible for any part of the funds of the Plan (other than such
part as is required to pay taxes, if any, and administrative
expenses as provided in Section 16.19) to be used for, or
diverted to, any purposes other than for the exclusive benefit of
Participants and their Beneficiaries and Surviving Spouses and
other eligible survivors under the Plan prior to the satisfaction
of all liabilities with respect thereto.
(d) To the extent, if any, required under Section
54.4975-11(a)(3)(ii) of the Treasury Regulations, the rights and
protections provided under Sections 12.2 and 12.4 shall be
non-terminable.
(e) Except as otherwise required to meet the
requirements of the Act, the Code, or the Regulations, to the
extent that the contribution provisions of Article IV or the
allocation provisions of Article VI affect any contribution on
behalf of or any allocation to an Employee who is an officer of
the Company for purposes of Section 16 of the Securities Exchange
Act of 1934, as amended, no such contribution provision or
allocation provision may be amended within six months after the
date of any previous amendment of such provision having such
effect.
15.2 Retroactivity. Subject to the provisions of Section
15.1 (except Section 15.l(c)(i)), any amendment, modification,
suspension or termination of any provisions of the Plan may be
made retroactively if necessary or appropriate to qualify or
maintain the Plan, the Trust and any contract with an insurance
company which may form a part of the Plan as a plan and trust
meeting the requirements of Sections 401(a), 501(a) and
4975(e)(7) of the Code, Section 407(d)(6) of the Act or any other
applicable section of law and the Regulations issued thereunder.
15.3 Notice. Notice of any amendment, modification,
suspension or termination of the Plan shall be given by the Board
of Directors or the Committee, whichever adopts the amendment, to
the other and to the Trustee and all Participating Units.
15.4 No Further Contributions. Upon termination of the Plan
or a complete discontinuance of contributions, no Participating
Unit shall make any further contributions under the Plan and no
amount shall thereafter be payable under the Plan to or in
respect of any Participant except as provided in this Article XV.
To the maximum extent permitted by the Act, transfers,
distributions or other dispositions of the assets of the Plan as
provided in this Article shall constitute a complete discharge of
all liabilities under the Plan. The Committee shall remain in
existence and all of the provisions of the Plan which in the
opinion of the Committee are necessary for the execution of the
Plan and the administration, distribution, transfer or other
disposition of the assets of the Plan in accordance with this
Section 15.4 shall remain in force.
After (i) appropriate adjustment of the Accounts of
Participants who are employed as of the date of such termination
or complete discontinuance of contributions in the manner
described in Section 7.4 for any Forfeitures arising under the
Plan prior to such date and (ii) adjustment for profits and
losses of the Trust Fund to such date in the manner described in
Section 5.6, the interest of each Participant who is employed as
of such date in the amount, if any, credited to his Account shall
be nonforfeitable as of such date; provided that the Board of
Directors may by appropriate resolution provide that amounts
credited to the Accounts of other Participants shall be
nonforfeitable as of such date.
Upon or after the termination of the Plan, the Board of
Directors may maintain the Trust as an existing trust or may
terminate the Trust and upon such termination the Trustee may pay
in a single sum to each Participant the full amount credited to
his individual Account and the unallocated Shares in the Suspense
Subfund attributable to an Exempt Loan from the Company to the
Trust shall, to the extent permitted by the Code and Regulations,
be returned to the Company in full satisfaction of any
outstanding Exempt Loan from the Company to the Trust. Without
limiting the foregoing, any such distributions may be made in
cash, Shares, other property, or any combination, as the
Committee in its sole discretion may direct.
All determinations, approvals and notifications referred to
above shall be in form and substance and from a source
satisfactory to counsel for the Plan.
15.5 Partial Termination. In the event that a "partial
termination" (within the meaning of Section 411(d)(3) of the
Code) of the Plan has occurred then (i) the interest of each
affected Participant in his Account as to whom such termination
occurred shall thereupon be nonforfeitable, but shall otherwise
be payable as though such termination had not occurred and (ii)
the provisions of Sections 15.2, 15.3, 15.4 and 14.2 which in the
opinion of the Committee are necessary for the execution of the
Plan and the allocation and distribution of the assets of the
Plan shall apply; provided, however, that the Board of Directors,
in its discretion, subject to any necessary governmental
approval, may direct that the amounts held in the Accounts of
such Participants as to whom such partial termination occurred be
segregated by the Trustee as a separate plan and applied for the
benefit of such Participants in the manner described in Section
15.4 above.
ARTICLE XVI: GENERAL LIMITATIONS AND PROVISIONS
16.1 All Risk on Participants and Beneficiaries.
Participants and Beneficiaries shall assume all risk in
connection with any decrease in the value of the assets of the
Trust and the Participants' Accounts. Neither any Participating
Unit nor the Committee nor the Trustee shall be liable or
responsible for any decrease in the value of the assets of the
Trust and the Participants' Accounts.
16.2 Trust Fund is Sole Source of Benefits. The Trust Fund
shall be the sole source of benefits under the Plan, and, except
as otherwise required by the Act, the Company and the Committee
assume no liability or responsibility for payment of such
benefits, and each Participant, Beneficiary or other person who
shall claim the right to any payment under the Plan shall be
entitled to look only to the Trust Fund for such payment and
shall not have any right, claim or demand therefor against the
Company, the Committee or any member thereof, or any employee or
director of the Company.
16.3 No Right to Continued Employment. Nothing contained in
the Plan shall give any employee the right to be retained in the
employment of the Company or any of its subsidiaries or
affiliated or associated corporations or affect the right of any
such employer to dismiss any employee. The adoption and
maintenance of the Plan shall not constitute a contract between
the Company and any employee or consideration for, or an
inducement to or condition of, the employment of any employee.
16.4 Payment on Behalf of Payee. If the Committee shall
find that any person to whom any amount is payable under the Plan
is unable to care for his affairs because of illness or accident,
or is a minor, or has died, then any payment due him or his
estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Committee so elects,
be paid to his spouse, a child, a relative, an institution
maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of
such person otherwise entitled to payment. Any such payment
shall be a complete discharge of the liability of the Plan and
the Trust therefor.
16.5 Non-Alienation. Except insofar as applicable law may
otherwise require or pursuant to a Qualified Domestic Relations
Order, no economic interest, expectancy, benefit, payment, claim
or right of any Participant or Beneficiary under the Plan and the
Trust shall be subject in any manner to any claims of any
creditor of any Participant or Beneficiary, nor to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind. If any person
shall attempt to take any action contrary to this Section 16.5,
such action shall be null and void and of no effect, and the
Trustee shall disregard such action and shall not in any manner
be bound thereby and shall suffer no liability on account of its
disregard thereof.
For purposes of the Plan, a "Qualified Domestic Relations
Order" means any judgment, decree or order (including approval of
a property settlement agreement) which has been determined by the
Committee in accordance with procedures established under the
Plan, to constitute a qualified domestic relations order within
the meaning of Section 414(p)(1) of the Code.
16.6 Missing Payee. If the Committee cannot ascertain the
whereabouts of any person to whom a payment is due under the
Plan, and if, after five years from the date such payment is due,
a notice of such payment due is mailed to the last known address
of such person, as shown on the records of the Committee or the
Company, and within three months after such mailing such person
has not made written claim therefor, the Committee, if it so
elects, after receiving advice from counsel to the Plan, may
direct that such payment and all remaining payments otherwise due
to such person be canceled on the records of the Plan and the
amount thereof applied to reduce the contributions of the
Participating Unit that had employed the Participant, and upon
such cancellation, the Plan and Trust shall have no further
liability therefor, except that, subject to applicable law, in
the event such person later notifies the Committee of his
whereabouts and requests the payment or payments due to him under
the Plan, the amounts so applied shall be paid to him as provided
herein.
16.7 Required Information. Each Participant shall file with
the Committee such pertinent information concerning himself, his
spouse and his Beneficiary, or other person as the Committee may
specify, and no Participant, or Beneficiary, or other person
shall have any rights.or be entitled to any benefits under the
Plan unless such information is filed by or with respect to him.
16.8 Subject to Trust Agreement. Any and all rights or
benefits accruing to any persons under the Plan shall be subject
to the terms of the Trust Agreement which the Company shall enter
into with the Trustee, providing for the administration of the
Trust Fund.
16.9 Subject to Insurance Contract. If the payment of any
benefit under the Plan is provided for by a contract with an
insurance company, the payment of such benefit shall also be
subject to all the provisions of such contract.
16.10 Communications to Committee. All elections,
designations, requests, notices, instructions, and other
communications from a Participating Unit, a Participant,
Beneficiary or other person to the Committee required or
permitted under the Plan shall be in such form as is prescribed
from time to time by the Committee, shall be mailed by first
class mail or delivered to such location as shall be specified by
the Committee, and shall be deemed to have been given and
delivered only upon actual receipt thereof by the Committee at
such location.
16.11 Communications from Participating Unit or
Committee. All notices, statements, reports and other
communications from a Participating Unit or the Committee to any
employee, Participant, Surviving Spouse, Beneficiary or other
person required or permitted under the Plan shall be deemed to
have been duly given when delivered to, or when mailed by first
class mail, postage prepaid and addressed to, such Employee,
Participant, Surviving Spouse, Beneficiary or other person at his
address last appearing on the records of the Committee, or when
posted by the Participating Unit or the Committee as permitted by
law.
16.12 Transfers and Rollovers. Neither the Plan nor the
Trust shall accept funds transferred, directly or indirectly from
any individual retirement account, an individual retirement
annuity or a retirement bond as described in Sections 408 and 409
of the Code.
16.13 Gender. Whenever used in the Plan, the masculine
gender includes the feminine.
16.14 Captions. The captions preceding the sections of
the Plan have been inserted solely as a matter of convenience and
in no way define or limit the scope or intent of any provisions
of the Plan.
16.15 Applicable Law. The Plan and all rights
thereunder shall be governed by and construed in accordance with
the Act and, to the extent state law is found to be applicable,
the laws of the State of Virginia.
16.16 Mistake of Fact. Notwithstanding any other
provisions herein contained, if any contribution is made due to a
mistake of fact, such contribution shall upon the direction of
the Committee, which shall be given in conformity with the
provisions of the Act, be returned to the Company or the parties
who made it, as directed by the Company, without liability to any
person (including, but not limited to, Participants and
Beneficiaries); provided, however, that this Section shall not
apply (i) with respect to any contribution made to enable the
Plan to repay principal or interest on any Exempt Loan made in
connection with the adoption of the Plan (unless such mistake of
fact relates to a misapplication of one or more controlling
agreements pertinent to one or more Exempt Loans) or (ii) where
the return of a contribution or contributions would jeopardize
the availability, with respect to any loan, of the interest
exclusion provided for under Section 133 of the Code.
16.17 Qualification of Plan. Notwithstanding any other
provisions herein contained, this Plan is entered into on the
condition that (a) the Plan, and the Trust Agreement established
hereunder shall be approved by the IRS as a qualified and exempt
plan and trust under the provisions of the Code and Regulations,
so that contributions to the Trust may be deducted for Federal
income tax purposes, within the limits of such Code and
Regulations, and be non-taxable to Participants and Beneficiaries
when contributed and (b) the Plan shall be approved by the IRS as
an "employee stock ownership plan" within the meaning of Section
4975(e)(7) of the Code. If such approval should be denied for
any reason (including failure to comply with any conditions for
such approval imposed by the IRS), contributions made after the
execution of the Trust Agreement and prior to such denial and all
assets in the Trust Fund shall be returned to the Company or the
party who made it, as directed by the Company, without any
liability to any person, within one year after the date of denial
of such approval. All remaining assets in the Trust shall be
returned to the Company.
16.18 Deductibility of Contributions. Notwithstanding
any other provisions herein contained, all contributions are
hereby expressly conditioned upon their deductibility under
Section 404 of the Code and Regulations, as amended from time to
time, and if the deduction for any contribution is disallowed in
whole or in part, then such contribution (to the extent the
deduction is disallowed) shall upon direction of the Committee,
which shall be given in conformity with the provisions of the
Act, be returned, without liability to any person, within one
year after such disallowance; provided, however, that this
Section shall not apply (i) with respect to any contribution made
to enable the Plan to repay principal or interest on any Exempt
Loan made in connection with the adoption of the Plan or (ii)
where the return of a contribution or contributions would
jeopardize the availability, with respect to any loan, of the
interest exclusion provided for under Section 133 of the Code.
16.19 Fees and Expenses. The expenses of administering
the Plan including (i) the fees of the Trustee for the
performance of its duties under the Trust, (ii) the expenses
incurred by any employee or member of the Committee in the
performance of their duties under the Plan (including reasonable
compensation for any legal counsel, certified public accountants
and any agents and cost of services rendered in respect of the
Plan), and (iii) all other proper charges and disbursements of
any employee or member of the Committee (including settlements of
claims or legal actions brought against any party, including the
Trustee, approved by the Company and the Committee, after
consulting with counsel to the Plan), are to be paid
proportionately by the Participating Units to the extent not paid
by the Company. In estimating costs under the Plan,
administrative costs may be anticipated. Any expenses and
disbursements of the Trustee (including the fees of its legal
counsel, certified public accountants and agents) shall be paid
by the Trustee unless paid by the Company.
16.20 Voting and Tender or Exchange Rights. Except as
otherwise required by the Act, the Code and Regulations, all
voting rights of Shares held by the Trust Fund shall be exercised
by the Trustee only as directed by the Committee, the
Participants or their Beneficiaries in accordance with the
following provisions of this Section 16.20:
(a) (1) If any Participating Unit has a registration
type class of securities (as defined in Section 409(e)(4) of the
Code), then, with respect to all corporate matters submitted to
shareholders, all Shares allocated and credited to the Accounts
of Participants shall be voted only in accordance with the
directions of such Participants as given to the Committee and
communicated in turn by the Committee to the Trustee, or as given
directly by such Participants to the Trustee. Each Participant
shall be entitled to direct the voting only of the Shares
(including fractional interests in Shares) allocated and credited
to his Account.
(2) If no Participating Unit has a registration
type class of securities (as defined in Section 409(e)(4) of the
Code), then, only with respect to corporate matters relating to a
corporate merger or consolidation, recapitalization (including
increases or decreases in the number of authorized shares of one
or more classes of capital stock, the creation of one or more new
classes of capital stock or the elimination of one or more former
classes of capital stock), reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such other similar transaction that Regulations
require, all Shares allocated and credited to the Accounts of
Participants shall be voted in accordance with the directions of
such Participants as given to the Committee and communicated in
turn by the Committee to the Trustee, or as given directly by
such Participants to the Trustee. Each Participant shall be
entitled to direct the voting only of the Shares (including
fractional interests in Shares) allocated to his Account.
(3) A Participant who gives directions for voting
pursuant to this Section 16.20 shall be deemed to be acting as a
"named fiduciary", as such term is defined in Section 402(a)(1)
of the Act.
(b) If Participants are entitled under Section
16.20(a) to direct the vote with respect to allocated Shares,
then, at least 30 days before each annual or special shareholders
meeting of the Company (or, if such schedule cannot be met, as
early as practicable before such meeting), the Committee, through
the Trustee, shall furnish to each Participant at his last known
address a copy of the proxy solicitation material sent generally
to shareholders, together with a form requesting confidential
instructions on how the Shares allocated to such Participant's
Account (including fractional Shares to 1/1000th of a Share) are
to be voted. Upon timely receipt of such instructions, the
Trustee (after combining votes of fractional Shares to give
effect to the greatest extent possible to Participants'
instructions) shall vote the Shares as instructed. The
instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be
divulged or released to any person including officers or
Employees of any Participating Unit, or of any other Company.
(c) The Trustees shall vote the Shares for which no
instructions are received, including unallocated shares if any,
in the same proportion as the shares for which instruictions have
been received.
(d) The Trustee shall notify each Participant of each
tender or exchange offer for the Shares and utilize its best
efforts to distribute or cause to be distributed to each
Participant in a timely manner all information distributed to
shareholders of the Company in connection with any such tender or
exchange offer. Each Participant shall have the right from time
to time with respect to the Shares allocated to his Account
(including fractional Shares to 1/1000th of a Share) to instruct
the Trustee in writing as to the manner in which to respond to
any tender or exchange offer which shall be pending or which may
be made in the future for all Shares or any portion thereof. A
Participant's instructions shall remain in force until superseded
in writing by the Participant. The Trustee shall tender or
exchange whole Shares only as and to the extent so instructed and
shall aggregate Participants' responses with respect to
fractional Shares and tender or exchange fractional Shares in a
manner designed to comply with the aggregate responses of all
Participants with respect to such fractional Shares. If the
Trustee shall not receive instructions from a Participant
regarding any tender or exchange offer for Shares, the Trustee
shall have no discretion in such matter and shall not tender or
exchange any such Shares in response thereto. Unless and until
Shares are tendered or exchanged, the individual instructions
received by the Trustee from Participants shall be held by the
Trustee in strict confidence and shall not be divulged or
released to any person, including officers or Employees of any
Participating Unit, or of any other company; provided, however,
that the Trustee shall advise the Company, at any time upon
request, of the total number of Shares not subject to
instructions to tender or exchange.
(e) Except as may otherwise be required by ERISA,
neither the Committee nor the Trustee shall have the discretion
or power to sell, convey or transfer any unallocated Shares held
in the Trust Fund in response to a tender or exchange offer
unless a court of competent jurisdiction determines that the
Trustee is authorized to sell, convey or transfer any unallocated
Shares held in the Trust in response to any tender or exchange
offer. In exercising any discretion or power, the Committee
shall consider, to the extent permitted by applicable law,
including the Regulations, not only the potential increase in
value, if any, in the Accounts of the Participants as a result of
a tender or exchange of the unallocated Shares, but also the
impact of any change in the management or control of the Company
on the status of the Participants as Employees in the long run,
but not over the short run, including but not limited to whether
they will receive larger or smaller employee benefits than at
present under the Plan.
(f) A Participant's Beneficiary shall be entitled to
exercise all notice, voting, tender, or exchange rights provided
for in this Section 16.20 with respect to Shares allocated to the
Account of a deceased Participant as if such Beneficiary were the
Participant.
16.21 Exclusive Benefit of Participants and
Beneficiaries. In no event shall any part of the funds of the
Plan be used for, or diverted to, any purposes other than for the
exclusive benefit of Participants and their Beneficiaries under
the Plan except as permitted under Section 403(c) of the Act or
other applicable law. Upon the transfer by a Participating Unit
of any money to the Trustee, all interest of the Participating
Unit therein shall cease and terminate.
16.22 Additional Powers of the Committee.
Notwithstanding any provision of the Plan to the contrary, the
Committee shall have those additional powers, rights and
obligations provided under the Trust Agreement.
ARTICLE XVII: TOP HEAVY PROVISIONS
17.1 Top Heavy Plan. The Plan will be considered a Top
Heavy Plan for any Plan Year if it is determined to be a Top
Heavy Plan as of the "Determination Date", which is defined as
the last day of the preceding Plan Year or, with respect to the
first Plan Year, the last day of such Plan Year. Notwithstanding
any other provisions in the Plan, the provisions of this Article
XVII shall apply and supersede all other provisions in the Plan
with respect to a Plan Year with respect to which the Plan is
determined to be a Top Heavy Plan.
17.2 Definitions for Article XVII. For purposes of this
Article XVII and as otherwise used in this Plan, the following
terms shall have the meanings set forth below:
(a) "Aggregation Group" shall mean the group composed
of each qualified retirement plan of the Company or an Affiliate
in which a Key Employee is a participant and each other qualified
retirement plan of the Company or an Affiliate which enables a
plan of the Company or an Affiliate in which a Key Employee is a
participant to satisfy Sections 401(a)(4) or 410 of the Code.
The Aggregation Group referred to in the preceding sentence is
the "Required Aggregation Group". In addition, the Company may
choose to treat any other qualified retirement plan as a member
of the Aggregation Group if such Aggregation Group will continue
to satisfy Sections 401(a)(4) and 410 of the Code with such plan
being taken into account. The Aggregation Group referred to in
the preceding sentence is the "Permissive Aggregation Group".
For purposes of determining whether the Plan is part of an
Aggregation Group, all qualified retirement plans (whether or not
terminated) maintained by the Company or an Affiliate in which a
Key Employee or an Affiliate in which a Key Employee participates
in the Plan Year containing the Determination Date or any of the
preceding four Plan Years shall be taken into account to the
extent required by Section 416(g) of the Code and the Regulations
thereunder.
(b) "Key Employee" shall mean a "Key Employee" as
defined in Section 416(i)(1) and (5) of the Code or Regulations.
For purposes of determining which employee is a Key Employee,
compensation shall mean "compensation" as defined in Section
1.415-2(d) of the Regulations.
(c) "Top Heavy Plan" shall mean a "Top Heavy Plan" as
defined in Section 416(g) of the Code and Regulations, and the
Plan shall accordingly be considered a Top Heavy Plan for any
Plan Year for which the Top Heavy Ratio exceeds 60%.
(d) "Top Heavy Ratio" shall mean the ratio of (i) the
account balances (in the case of a defined contribution plan) and
present value of accrued benefits (in the case of a defined
benefit plan) for Key Employees under all plans in the
Aggregation Group to (ii) the account balances and present value
of accrued benefits for all employees in all plans in the
Aggregation Group, but without regard to the account balances and
accrued benefits, as applicable, for Key Employees who performed
no services for the Company or an Affiliate during the five-year
period ending on the Determination Date, calculated in accordance
with Section 416 of the Code and Regulations thereunder.
(e) "Non-Key Employee" should mean any employee who is
not a Key Employee.
17.3 Compensation. For any Plan Year that the Plan is a Top
Heavy Plan, only the first $200,000 (adjusted for Plan Years
beginning on or after January l, 1988, in accordance with
Regulations) of compensation shall be credited to a Participant.
17.4 Minimum Contribution and Vesting.
(a) Subject to Section 17.5, for each Plan Year that
the Plan is a Top Heavy Plan, the Company contribution (including
Forfeitures) allocable to the Account of each Participant who has
performed an Hour of Service at the end of the Plan Year and who
is not a Key Employee, shall not be less than the lesser of (i)
three percent of such Participant's compensation, within the
meaning of Section 415 of the Code, or (ii) the percentage at
which contributions and Forfeitures for such Plan Year are made
and allocated on behalf of the Key Employee for whom such
percentage is the highest. For the purpose of determining the
appropriate percentage under clause (ii), all defined
contribution plans required to be included in an Aggregation
Group shall be treated as one plan. Clause (ii) shall not be
applicable if the Plan is required to be included in an
Aggregation Group which enables a defined benefit plan also
required to be included in said Aggregation Group to satisfy
Sections 401(a)(4) or 410 of the Code.
(b) For each Plan Year that the Plan is a Top Heavy
Plan, each Participant with three or more Years of Service shall
be 100 percent vested in his Account.
17.5 Limitations on Contributions.
(a) For each Plan Year that the Plan is a Top Heavy
Plan, 1.0 shall be substituted for 1.25 as the multiplicand of
the dollar limitation in determining the denominator of the
defined benefit plan fraction and of the defined contribution
plan fraction for purposes of Section 415(e) of the Code.
(b) If, after substituting 90 percent for 60 percent
wherever the latter appears in Section 416(g) of the Code, the
Plan is not determined to be a Top Heavy Plan, the provisions of
paragraph (a) shall not be applicable if the minimum Company
contribution (including Forfeitures) allocable to the Account of
any Participant who is not a Key Employee as specified in Section
17.4 is determined by substituting "4" for "3".
17.6 Other Plans. The Committee shall, to the extent
permitted by the Code and in accordance with the Regulations,
apply the provisions of this Article XVII by taking into account
the benefits payable and the contributions made under any other
plans maintained by the Company or any of its subsidiaries or
affiliated or associated entities which are qualified under
Section 401(a) of the Code, to prevent inappropriate omissions or
required duplication of minimum benefits or contributions.
Exhibit 4.2
DYNCORP SAVINGS AND RETIREMENT PLAN
AMENDED AND RESTATED
AS OF JANUARY 1,1989
WHEREAS, DynCorp (hereinafter sometimes referred to as the "Company")
has previously adopted the Deferred Savings Plan of DynCorp and Participating
Subsidiaries (hereinafter referred to as the "Plan"), effective as of April 1,
1983, which is to continue to be funded through the medium of a Trust Fund;
and
WHEREAS, the Company desires to rename and amend and restate the Plan in
order to comply with the Tax Reform Act of 1986, the Omnibus Reconciliation
Acts of 1986 and 1987, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Reconciliation Act of 1989, and
the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93");
NOW, THEREFORE, the Company hereby renames, amends, and restates the
Plan, effective January 1, 1989, unless otherwise indicated, with such Plan to
be hereafter known as the DynCorp Savings and Retirement Plan, as follows:
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
ARTICLE II - PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
2.02 Plan Participation.
2.03 Re-employment.
2.04 Change in Status.
ARTICLE III - CONTRIBUTIONS
3.01 Salary Deferral Contributions.
3.02 After-Tax Contributions.
3.03 Method of Contribution.
3.04 Matching Employer Contributions.
3.05 Discretionary Employer Contributions.
3.06 Non-Discrimination Test.
3.07 Forfeitures.
3.08 Maximum Contributions.
3.09 Time of Payment.
3.10 Annual Additions Limitation.
3.11 Return of Contribution.
3.12 Rollover/Direct Transfer Contributions.
3.13 Change of Contribution Rate and Suspension of Contributions.
ARTICLE IV - ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
4.02 Investment Elections.
4.03 Change of Elections.
4.04 Restrictions on Changes.
4.05 Allocation of Contributions.
4.06 Valuation of Assets.
4.07 Voting of Shares.
4.08 Tender Offer Procedure.
4.09 ERISA Section 404(c) Plan.
4.10 Confidentiality.
4.11 Fiduciary Designation.
ARTICLE V - RETIREMENT BENEFITS
5.01 Normal Retirement Benefit.
5.02 Deferred Retirement Benefit.
5.03 Disability Retirement Benefit.
5.04 Payment of Benefits.
5.05 Installment Payments
5.06 Joint-and-Survivor Annuity
5.07 Life Annuity.
5.08 Additional Allocations on Retirement.
5.09 Crediting of Investment Earnings.
5.10 Common Stock.
ARTICLE VI - DEATH BENEFITS
6.01 Death Benefits.
6.02 Additional Allocations on Death.
6.03 Beneficiary Designation.
ARTICLE VII - VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
7.02 Payment of Benefits to Terminated Participants.
7.03 Re-employment After Distribution and Restoration of Contributions.
ARTICLE VIII - WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
8.02 Loans.
ARTICLE IX - ADMINISTRATION
9.01 Plan Administrator.
9.02 Administrative Procedures.
9.03 Other Plan Administrator.
9.04 Claims Procedures.
9.05 Expenses.
ARTICLE X - AMENDMENT, TERMINATION, AND MERGERS
10.01 Amendment.
10.02 Plan Termination.
10.03 Permanent Discontinuance of Employer Contributions
10.04 Suspension of Employer Contributions.
10.05 Mergers and Consolidations of Plans.
10.06 Former Participants in Merged Plans
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
11.02 No Contract of Employment.
11.03 Severability of Provisions.
11.04 Heirs, Assigns, and Personal Representatives.
11.05 Headings and Captions.
11.06 Gender and Number.
11.07 Funding Policy.
11.08 Title to Assets.
11.09 Payment to Minors, etc.
11.10 Situs.
ARTICLE XII - TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
12.03 Adjustment to Maximum Benefits.
12.04 Minimum Vesting
12.05 Discontinuance of Article.
ARTICLE I - DEFINITIONS 1.01 "Account" shall mean with respect to a
Participant all of the various accounts, as applicable, maintained to define
such Participant's proportionate interest in the Trust Fund as follows:
(a) A "Salary Deferral Contribution Account" includes the Salary
Deferral Contributions made on behalf of the Participant, the appreciation or
depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account;
(b) An "After-Tax Contribution Account" includes the Participant's
After-Tax Contributions, the appreciation or depreciation of the investments
allocated to that Account, and the income earned on such investments, less the
expenses incurred as to such Account;
(c) A "Matching Employer Contribution Account" reflects the Matching
Employer Contributions allocated to the Participant, the appreciation or
depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account;
(d) A "Discretionary Employer Contribution Account" reflects the
Discretionary Employer Contributions allocated to the Participant, the
appreciation or depreciation of the investments allocated to that Account, and
the income earned on such investments, less the expenses incurred as to such
Account;
(e) A "Rollover Contribution Account" reflects any rollover/direct
transfer contribution made in accordance with Section 3.12, the appreciation
or depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account; and
(f) A "Stock Account" means an Account maintained for an individual
Participant reflecting the Participant's investment in Company Stock
1.02 "Affiliated Organization" shall mean (i) any corporation on or after the
date it becomes a member of a controlled group of corporations which includes
the Company, as determined under the provisions of Section 414(b) of the Code,
(ii) any trade or business, whether or not incorporated, on or after it comes
under common control with the Company, as determined under Section 414(c) of
the Code, (iii) any organization which is an affiliated service organization
within the meaning of Section 414(m) of the Code, and (iv) any other entity
required to be aggregated pursuant to regulations under Section 414(o) of the
Code.
1.03 "Age" or "age" shall mean the chronological age attained by the
Participant at his most recent birthday or as of such other date of reference
as set forth in this Plan.
1.04 "Board of Directors" shall mean the board of directors of the Company
and/or any authorized committee thereof.
1.05 "Break-in-Service" shall mean a twelve-month period commencing on the
day following an Employee's termination of employment with an Affiliated
Organization, or on each anniversary thereof, during which period such person
does not incur at least one Hour of Service.
1.06 "Code" means the Internal Revenue Code of 1986 as the same currently
exists, and as it may hereafter be amended or clarified by regulations,
rulings, notices or other publications of the Internal Revenue Service having
legal effect.
1.07 "Company Stock" means shares of the common stock of the Company.
1.08 "Compensation" shall mean, for any applicable period, base salary or
wages plus bonuses, overtime, and commissions received by an Employee for
services performed for an Employer, including any Salary Deferral
Contribution made on behalf of the Participant under this Plan, and any
contributions made by salary reduction to a plan established in accordance
with Section 125 or 129 of the Code. Compensation shall exclude premiums paid
to a life insurance plan of the Company for additional coverage above $50,000;
the value of Company car or commuting allowances; reimbursements for expenses;
and any other fringe benefits, and, for Highly-Paid Employees, shall also
exclude distributions of compensation deferred during a prior period and
earnings thereon, supplemental executive retirement plans, and long-term
incentive plan awards or distributions, such as restricted stock and stock
options.
For any Plan Year commencing after December 31, 1988, Compensation shall
not exceed $200,000, or such other maximum amount as set forth under Section
401(a)(17) of the Code, adjusted at the same time and in the same manner as
under Section 415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for Plan Years beginning in such
calendar year and the first adjustment to the $200,000 limitation is effected
on January 1, 1990. If Compensation is determined over a Plan Year that
contains fewer than 12 calendar months, the annual compensation limit is an
amount equal to the annual compensation limit for the calendar year in which
the compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination period consists
of fewer than 12 months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of months in
the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year.
1.09 "Contribution" shall mean any or all of the various types of
contributions made under the Plan by Participants or the Employer, as
described below:
(a) "Salary Deferral Contribution" shall mean that portion of the
Contribution made to the Plan on behalf of a Participant by his Employer
through a salary reduction agreement, as described under Sections 2.02 and
3.01.
(b) "After-Tax Contribution" shall mean that portion of a
Participant's Contribution to the Plan which he elects to make independent of
a salary reduction agreement, as described under Section 3.02.
(c) "Matching Employer Contribution" shall mean a Contribution made by
an Employer as described under Section 3.04, based on a Participant's Salary
Deferral Contribution (including any Salary Deferral Contributions
re-characterized as After-Tax Contributions pursuant to Section 3.06).
(d) "Discretionary Employer Contribution" shall mean a Contribution
made by an Employer which is unrelated to any Participant Contributions, as
described under Section 3.05.
(e) "Qualified Non-elective Contribution" shall mean a Contribution
made by an Employer (other than those listed above) in order that the Plan
will satisfy the requirements of Section 3.06 for a Plan Year. The allocation
may be made to all Active Participants who are not Highly-Paid Employees or,
with respect to satisfaction of the ADP test, only to those Active
Participants who have made Salary Deferral Contributions for a Plan Year and
who are not Highly-Paid Employees. Such Contributions shall be treated as
Salary Deferral Contributions for all purposes under the Plan.
1.10 "Contribution Percentage" shall mean the percentage determined by
dividing (i) the sum of the Salary Deferral Contribution, After-Tax
Contribution, Matching Employer Contribution, and any Qualified Non-elective
Contribution used to satisfy the non-discrimination requirements of Section
3.06 or any combination of such Contributions, whichever is applicable, made
by or on behalf of a Participant for the applicable period by (ii) his
compensation as defined under Code Section 414(s). "ADP" shall sometimes be
used herein to refer to the average Contribution Percentage with respect to
Salary Deferral Contributions or amounts treated as Salary Deferral
Contributions. "ACP" shall sometimes be used herein to refer to the average
Contribution Percentage with respect to Matching Employer Contributions and
After-Tax Contributions, if applicable.
1.11 "Disability" shall mean a physical or mental condition of such severity
and probable prolonged duration as to cause the Participant to be unable to
continue his duties as an Employee. The existence of any Disability shall be
determined by a physician approved by the Plan Administrator or the Employer's
designated disability insurance carrier, based on medical evidence of a
physical or mental impairment that can be expected to last more than 12 months
or result in death, or on other uniform and non-discriminatory criteria as
established by the Plan Administrator. Notwithstanding the foregoing,
eligibility for Social Security Disability benefits or for long term
disability benefits under an insured plan sponsored by the Employer shall be
deemed conclusive proof of disability.
1.12 "Effective Date" of this Plan shall mean April 1, 1983. The effective
date of this amended and restated Plan is January 1, 1989.
1.13 "Eligible Employee" shall mean an Employee of an Employer.
Notwithstanding the foregoing, the term "Eligible Employee" shall not include
any person whose terms and conditions of employment are determined by
collective bargaining with a third party and with respect to whom inclusion in
this Plan has not been provided for in the collective bargaining agreement
setting forth those terms and conditions of employment, nor shall the term
"Eligible Employee" include any independent contractor or a leased employee.
1.14 "Employee" shall mean any employee of the Employer or an Affiliated
Organization, including a leased employee as defined under Section 414(n) of
the Code.
The term "leased employee" means any person (other than an employee of
the recipient organization) who pursuant to an agreement between the recipient
organization and any other person ("leasing organization") has performed
services for the recipient organization (including related persons determined
in accordance with Section 414(n)(6) of the Code) on a substantially full-time
basis for at least one year, and such services are of a type historically
performed by employees in the business field of the recipient organization.
Contributions or benefits provided a leased employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer.
A leased employee shall not be considered an employee of the recipient
organization if: (i) such employee is covered by a money purchase pension plan
providing immediate participation, full and immediate vesting and a
non-integrated employer contribution rate of at least ten percent (10%) of
compensation (as defined in Section 415(c)(3) of the Code, but including
amounts contributed by the employer pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section 125,
Section 402(a)(8), Section 401(h) or Section 403(b) of the Code). Also, the
leased employees must not constitute more than twenty percent (20%) of the
recipient organization's non-highly compensated workforce.
1.15 "Employer" shall mean DynCorp (hereinafter sometimes referred to as the
"Company"), and any successor thereto which adopts this Plan and joins in the
corresponding Trust Agreement. The term "Employer" shall also include any
subsidiary, division, organizational unit, or other entity affiliated or
associated with the Company or an Employer, including joint ventures, which,
with the consent of the Plan Administrator, adopts this Plan. The term
"Employer" shall not include any subsidiary or affiliate of the Company,
unless such subsidiary or affiliate is specifically designated as an Employer
in accordance with the foregoing sentence.
1.16 "Entry Date" shall mean the first day of every calendar month during
which the Plan remains in effect.
1.17 "ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406), including all amendments thereto.
1.18 "Fund" or "Trust Fund" shall mean all of the assets of the Plan held by
the Trustees (or any nominees thereof) at any time under the Trust Agreement.
1.19 "Highly-Paid Employee" shall mean any Employee who during the current or
preceding Plan Year ("determination year" and "look-back year", respectively):
(a) was at any time a 5% owner of the Employer or an Affiliated
Organization; or
(b) received compensation for such Plan Year in excess of $75,000 or
such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code;
or
(c) received compensation for such Plan Year in excess of $50,000 or
such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code,
provided such compensation exceeded that of 80% of all Employees for the
applicable Plan Year; or
(d) was at any time an officer of the Employer or an Affiliated
Organization, and received compensation for such Plan Year in excess of
$45,000, as adjusted at the same time and in the same manner as under Section
415(d) of the Code (or, if higher, 50% of the amount in effect under Section
415(b)(1)(A) of the Code for such Plan Year).
For each Plan Year for which a determination in accordance with the
above paragraph is being made, any individual not described in sub-paragraph
(b), (c), or (d) for the preceding Plan Year (without regard to this
paragraph) shall not be treated as described in sub-paragraph (b), (c), or (d)
for the current Plan Year unless such individual is among the one-hundred
(100) highest paid Employees for the current Plan Year.
In no event shall the number of officers taken into account under
sub-paragraph (d) exceed the lesser of (i) fifty (50), and (ii) the greater of
(A) three or (B) 10% of the total Employees. Furthermore, if no officer of
the Employer or an Affiliated Organization is described in sub-paragraph (d)
for a Plan Year, then the highest paid officer shall be treated as described
in sub-paragraph (d) for such Plan Year.
The term "Highly-Paid Employee" shall include any highly paid former
employee who separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer during the
determination year, and was a Highly-Paid Employee for either the separation
year or any determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a five percent (5%) owner who is an active or former
Employee or a Highly-Paid Employee who is one of the ten most highly
compensated Employees ranked on the basis of Compensation paid by the Employer
during such year, then the family member and the five percent (5%) owner or
top-ten Highly-Paid Employee shall be aggregated. In such case, the family
member and five percent (5%) owner or top-ten Highly-Paid Employee shall be
treated as a single Employee receiving compensation and plan contributions or
benefits equal to the sum of such compensation and contributions or benefits
of the family member and five percent owner or top-ten Highly-Paid Employee.
For purposes of this Section, family member includes the spouse, lineal
ascendants and descendants of the Employee or former Employee and the spouses
of such lineal ascendants and descendants.
The determination of who is a Highly-Paid Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with Section
414(q) of the Code. In determining the identity of Highly-Paid Employees for
a determination year, the Company may make the calendar year election provided
for in Answer 14(b) of Treasury Regulation 1.414(q)-IT.
1.20 "Hour of Service" shall mean the following:
(a) An Hour of Service includes each hour for which an Employee is
paid, or entitled to payment, for the performance of duties for the Employer
or an Affiliated Organization during the Plan Year.
(b) An Hour of Service includes each hour for which an Employee is
paid, or entitled to payment, (either directly or indirectly) by the Employer
or an Affiliated Organization on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), paid lay-off, jury duty, military duty, or leave of absence.
Notwithstanding the preceding sentence:
(i) An hour for which an Employee is directly or indirectly
paid, or entitled to payment, on account of a period during which no duties
are performed shall not constitute an Hour of Service, if such payment is made
or due under a plan maintained solely for the purpose of complying with
applicable workers compensation, unemployment compensation, or disability
insurance laws.
(ii) Hours of Service are not required to be credited for a
payment which solely reimburses an Employee for medical or medically related
expenses incurred by the Employee.
(c) An hour worked at overtime or premium pay will count as only one
Hour of Service under the Plan.
(d) An Hour of Service includes each hour for which back pay,
irrespective of mitigation of damages, is either awarded to or agreed to by
the Employer. The same Hours of Service shall not be credited both under
paragraph (a) or paragraph (b), as the case may be, and under this paragraph
(d). Crediting of Hours of Service for each pay awarded shall be subject to
the limitations set forth in paragraphs (a), (b) and (c).
(e) For purposes of vesting, an Hour or Service includes any period of
leave of absence from work which commences after December 31, 1984 and which
is due to the pregnancy of the Employee, the birth of a child of the
Employee, the adoption of a child by the Employee, of the caring for a child
for a period beginning immediately following the birth or adoption of the
child; provided, however, that the period extending beyond the first
anniversary of such absence and ending on the day before the Employee returns
to work for the Employer.
(f) An Hour of Service shall also be credited for reasons other than
the performance of duties in accordance with Department of Labor Regulations,
Section 2530.200b-2(b). Further, the computation periods used for purposes of
crediting Hours of Service shall be in accordance with Department of Labor
Regulations, Section 2530.200b-2(c). If an Employer does not maintain hourly
records with respect to any Employee, such Employee shall be credited with 45
Hours of Service for each week in which he is entitled to be credited with an
Hour of Service.
1.21 "Merged Plan" shall mean a qualified plan previously maintained by an
Affiliated Organization which has been merged with or consolidated into this
Plan.
1.22 "Named Fiduciary" shall mean the Employer, the Trustees and the Plan
Administrator. Each named Fiduciary shall have only those particular powers,
duties, responsibilities and obligations as are specifically given him under
the Plan and/or the Trust Agreement.
1.23 "Non-Highly-Paid Employee" shall mean any Employee who during the
applicable period was not a Highly-Paid Employee.
1.24 "Normal Retirement Date" shall mean the date on which the Participant
has attained Age 65.
1.25 "Participant" shall mean any person who is eligible to receive benefits
under the Plan, including, if applicable, Beneficiaries and alternate payees
pursuant to QDROs. The term "Participant" shall include Active Participants
(Eligible Employees who have satisfied the participation requirements of
Section 2.02 as of an applicable Entry Date or who have made a Rollover
Contribution, and are not Terminated Vested Participants or Inactive
Participants), Terminated Vested Participants (former Employees who are
entitled at some future date to the distribution of benefits from this Plan),
and Inactive Participants (former Participants who are not Terminated Vested
Participants and who continue to be employed in a non-covered class by an
Employer or by an Affiliated Organization). Unless the QDRO expressly
provides otherwise, an alternate payee pursuant to a QDRO shall be treated as
a Terminated Vested Participant for purposes of Article 8.
1.26 "Plan" shall mean the DynCorp Savings and Retirement Plan as set forth
herein, and as the same may from time to time hereafter be amended.
1.27 "Plan Administrator" or "Administrator" shall mean the Company, or the
persons or committee named as such pursuant to the provisions of Article IX
hereof.
1.28 "Plan Year" shall mean a twelve-month period beginning on January 1st
and ending on each December 31st.
1.29 "QDRO" shall mean a qualified domestic relations order as such term is
defined under Section 414(p) of the Code.
1.30 "Reduced Compensation" shall mean Compensation reduced by any Salary
Deferral Contributions made by the Participant and also reduced by any
contributions made by salary reduction to a plan established in accordance
with Sections 125 or 129 of the Code.
1.31 "Service" shall mean employment on the payroll of an Affiliated
Organization during a period which would constitute an Hour of Service.
1.32 "Treasury Regulation" shall mean a regulation or temporary regulation
issued pursuant to the Code.
1.33 "Trust Agreement" shall mean the DynCorp Savings and Retirement Trust
Agreement as the same presently exists and as it may from time to time
hereafter be amended.
1.34 "Trustees" shall mean the party or parties so designated pursuant to the
Trust Agreement.
1.35 "Valuation Date" shall mean the last day of each Plan Year and any other
date as of which the Plan Administrator elects to make a valuation of Plan
Accounts.
1.36 "Vested Account Balance" shall mean so much of a Participant's Account
as is vested in accordance with Sections 7.01 and 10.02(a).
1.37 "Wage Base" shall mean the amount of compensation with respect to which
old age and survivors insurance benefits would be provided for a Participant
under the Social Security Act, as in effect for the calendar year in which the
Plan Year commences.
1.38 "Years of Service" shall mean an Employee's period of Service, measured
in years from his date of hire or rehire (whichever is applicable) with an
Affiliated Organization until his termination of employment with any
Affiliated Organization. If an Employee's employment is terminated before an
anniversary date and he is subsequently rehired before he has incurred five
twelve-month Breaks-in-Service, he will be re-credited as of his date of
rehire with each prior Year of Service and with a partial Year of Service for
any other period of Service completed since his hire date, rehire date, or
anniversary date, as applicable. All periods of Service shall be counted
regardless of whether or not such periods are continuous, but no single period
shall be counted toward more than one Year of Service.
ARTICLE II - PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
Each Eligible Employee who is a Participant immediately prior to the
effective date of this amended and restated Plan shall continue to participate
as of such effective date. Each other Employee shall be eligible to become a
Participant on the first Entry Date at least thirty (30) days following the
date he first becomes an Eligible Employee.
2.02 Plan Participation.
Each Employee who is eligible to participate in accordance with Section
2.01 shall complete such forms and provide such data as are reasonably
required by the Plan Administrator as a precondition to Plan participation.
In order to receive a Salary Deferral Contribution, a Participant must enter
into a salary reduction agreement to be effective as of an Entry Date,
electing to reduce his salary by an amount equal to his Salary Deferral
Contribution. Except as otherwise established by the Plan Administrator on a
non-discriminatory basis, a Participant's Salary Deferral Contribution for any
Plan Year shall not exceed the lesser of (i) 15% of his Compensation for the
Plan Year or portion of such Plan Year during which he was an Active
Participant, subject to the limitations set forth in Article III, and (ii)
$7,627, or such higher maximum contribution for a taxable year as may be
permitted under Section 402(g) of the Code. The Plan Administrator shall
determine the minimum and/or maximum permitted salary reduction. Any maximum
permitted salary reduction may apply to all Employees or to Employees of one
or more Employers or solely to those Employees of one or more Employers who
are Highly-Paid Employees. Participants shall make separate elections with
respect to Salary Deferral and After-Tax Contributions, and the election of
either type of contribution shall not, in any way, be contingent upon any
other election made under the Plan. By becoming a Participant, an Employee
shall for all purposes be deemed conclusively to have assented to the
provisions of the Plan, the corresponding Trust Agreement, and to all
amendments to such instruments.
2.03 Re-employment.
In the event a Participant terminates employment, and is re-employed, he
shall be eligible to be admitted or readmitted as an Active Participant on the
date of his re-employment or, if later, the Entry Date coincident with or next
following the date he becomes an Eligible Employee.
2.04 Change in Status.
In the event that a person who has been an Employee in an employment
status not eligible for participation in this Plan subsequently becomes
eligible by reason of a change in status, he shall be eligible to become a
Participant on the Entry Date coincident with or next following the date on
which he becomes an Eligible Employee.
ARTICLE III - CONTRIBUTIONS
3.01 Salary Deferral Contributions.
The Employer will make a Salary Deferral Contribution to the Plan for
each Active Participant who has entered into a salary reduction agreement, in
accordance with Section 2.02, as determined by such salary reduction
agreement. In addition, for any Plan Year, an Employer may elect to make a
Qualified Non-elective Contribution (including a qualified matching
Contribution) allocable only to those Participants who are Employees of the
Employer but are not Highly-Paid Employees, in order that the Plan will
satisfy requirements of Section 3.06 for such Plan Year. Any Contribution
made in accordance with the preceding sentence shall be allocated among
applicable Participants in proportion to the ratios of each such Participant's
Compensation or, with respect to satisfaction of the ADP test, only to those
Participants who have made Salary Deferral Contributions (under the same
allocation procedure used for Matching Employer Contributions or pro-rata).
Matching Employer Contributions used to satisfy the test described under
Section 3.06 must comply with Treasury Regulation 1.401(k)-1(b)(3).
"Excess Elective Deferrals" shall mean any Salary Deferral Contributions
which exceed the dollar limitation under Code Section 402(g). Such Excess
Elective Deferrals shall be treated as annual additions under the Plan unless
they are distributed in accordance with this Article.
A Participant may assign to this Plan any Excess Elective Deferrals made
during a taxable year of the Participant by providing fifteen (15) days
written notification to the Administrator of the amount of the Excess Elective
Deferrals to be assigned to this Plan. Such notice shall be provided no later
than the first March 1st following the close of the individual's tax year.
Excess Elective Deferrals with respect to the combination of Excess Elective
Deferrals and deferrals under another plan of deferred compensation of an
Employer or an Affiliated Organization may automatically be returned to the
Participant.
Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15th to any Participant to whose Account
Excess Elective Deferrals were assigned for the preceding year and who claims
Excess Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be adjusted for any income or loss. The
income or loss allocable to Excess Elective Deferrals is the income or loss
allocable to the Participant's Account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's Excess Elective
Deferrals for the year and the denominator of which is the Participant's
Salary Deferral Contribution Account without regard to any income or loss
occurring during such taxable year.
3.02 After-Tax Contributions.
With the consent of the Plan Administrator as to the Employer by which
an Employee is then employed, Participants may elect to make After-Tax
Contributions to the Trust for each Plan Year in amounts not less than one
percent (1%) of Compensation, nor more than ten percent (10%) of Compensation
for such Plan Year and all prior Plan Years during which the Plan was in
effect, reduced by the total After-Tax Contributions previously made by the
Participant not to exceed the maximums permitted under Section 3.06 and 3.10.
Such consent may be given in the Plan Administrator's sole discretion, but
shall be applied on a non-discriminatory basis and shall apply to all
Participants employed by the applicable Employer. After-Tax Contributions
shall not be used to reduce the Participant's taxable income.
3.03 Method of Contribution.
Salary Deferral and After-Tax Contributions may be made by periodic
payroll deductions or on such other basis as shall be determined from time to
time by the Plan Administrator. Nothing contained herein shall preclude the
Plan Administrator from not allowing Salary Deferral or After-Tax
Contributions to be made by any Participant in accordance with Section 3.06 or
from limiting the number of payroll periods in a Plan Year during which such
Contributions are permitted. A Participant may elect an increase or decrease
in his Salary Deferral Contributions or After-Tax Contributions, provided that
written notice of such change (including amendment of a salary reduction
agreement, if applicable) is submitted to the Plan Administrator at least 15
days in advance of the effective date, which date shall be the first day of a
calendar month. A Participant may cease Contributions as of any payroll
period upon 15 days' written notice.
No contributions may be made by or on behalf of any Participant during
any period that he is receiving long term disability benefits, worker's
compensation benefits or while the Participant is on a leave of absence for
which no Compensation is being paid from the Employer.
3.04 Matching Employer Contributions.
If authorized by the Plan Administrator, an Employer may elect, in its
sole discretion, to make Matching Employer Contributions, either in cash,
Company Stock, or a combination thereof, for a Plan Year to the Account of
each Active Participant employed by such Employer on whose behalf Salary
Deferral Contributions have been made during the Plan Year or, in the case of
Matching Employer Contributions in the form of Company Stock, to the Accounts
of Active Participants who have invested in such an Account during the Plan
Year.
3.05 Discretionary Employer Contributions.
For any Plan Year, an Employer may elect, in its sole discretion, to
make an additional Discretionary Employer Contribution to the Plan. If a
Discretionary Employer Contribution is made, then it shall be allocated on a
non-discriminatory basis as of the last day of the Plan Year to the Accounts
of Participants who were employed by the applicable Employer and retired at or
after age 65, retired due to a Disability or died during such Plan Year and
Active Participants who are employed by the Employer as of the last day of
such Plan Year. An individual who has terminated employment prior to the last
day of a Plan Year, but who is receiving severance pay as of such date, shall
not be deemed to be actively employed as of the last day of a Plan Year.
The amount allocated to each such Participant shall be an amount chosen
by the Employer to be allocated under (a) below. If any Discretionary
Employer Contribution remains, such amount shall be allocated in accordance
with (b) below.
(a) An amount shall be allocated equal to a percentage of each such
Participant's Compensation earned while a Participant for such Plan Year, plus
the same percentage of the excess of (i) such Participant's Compensation
earned while a Participant for the Plan Year above (ii) the Wage Base for such
Plan Year. However, the percentage of Compensation used for allocations above
the Wage Base shall not exceed 5.7% (or such other percentage which equals the
maximum percentage permitted under Code Section 401(l)).
(b) Any remaining Discretionary Employer Contribution shall be
allocated to each such Participant in proportion to the ratio that each such
Participant's Compensation earned while a Participant bears to such eligible
Compensation of all eligible Participants for the Plan Year.
3.06 Non-Discrimination Test.
For any Plan Year, the average Contribution Percentage for Highly-Paid
Employees determined based on Salary Deferral Contributions (ADP) and
separately based on the sum of After-Tax Contributions and any Matching
Employer Contributions (ACP) shall not exceed the greater of:
(a) 1.25 multiplied by the average Contribution Percentage for all
Eligible Employees who are not Highly-Paid Employees; or
(b) the lesser of (i) twice the average Contribution Percentage for
all Eligible Employees who are not Highly-Paid Employees; and (ii) the average
Contribution Percentage for all Eligible Employees who are not Highly-Paid
Employees, plus two percent (2%).
If the limitation described under subsection (b) above is applied with
respect to Salary Deferral Contributions, it shall not be applied with respect
to the sum of After-Tax Contributions and Matching Employer Contributions, and
vice-versa, except as otherwise permitted under the following Definitions and
Special Rules Section describing the multiple use test.
For purposes of this Section, an Excess Contribution shall mean the
excess of a Highly-Paid Employee's Salary Deferral Contribution (or amounts
treated as Salary Deferral Contributions) over the maximum amount of such
Contributions as provided under the above test.
For purposes of this Section, Excess Aggregate Contributions shall mean
the excess of the aggregate amount of After-Tax Contributions and Matching
Employer Contributions which were made on behalf of Highly-Paid Employees for
any Plan Year, over the maximum amount of such Contributions as provided under
the above test.
The Excess Contributions or Excess Aggregate Contributions, whichever is
applicable, shall be allocated by reducing the actual Contribution Percentage
of the Highly-Paid Employee with the highest actual Contribution Percentage.
Such Contribution Percentage shall be reduced until the Highly-Paid Employee
with the highest actual Contribution Percentage is equal to that of the
Highly-Paid Employee with the next highest actual Contribution Percentage or
until the above test is passed. This process shall be repeated until the test
is passed and such leveling method shall determine the amount of Excess
Contributions attributable to each Highly-Paid Employee. The Excess Aggregate
Contribution amount shall be determined after any Salary Deferral
Contributions are re-characterized as After-Tax Contributions.
Definitions and Special Rules:
"Aggregate Limit" shall mean the sum of (i) one hundred twenty-five
percent (125%) of the greater of the ADP of the Non-Highly-Paid Employees for
the Plan Year or the ACP of Non-Highly-Paid Employees under the Plan subject
to Code Section 401(m) for the Plan Year beginning with or within the Plan
Year of the cash or deferred arrangement ("CODA") and (ii) the lesser of two
hundred percent (200%) or two plus the lesser of such ADP or ACP. "Lesser" is
substituted for "greater" in (i) above and "greater" is substituted for
"lesser" after "two plus the" in (ii) if it would result in a larger Aggregate
Limit.
A multiple use method may be used in order to satisfy the
non-discrimination test if one or more Highly-Paid Employees participate in
both a CODA and a plan maintained by the Employer subject to the ACP test. If
the sum of the ADP and ACP of those Highly-Paid Employees subject to either or
both tests exceeds the Aggregate Limit, then the ACP of those Highly-Paid
Employees who also participate in a CODA will be reduced (beginning with such
Highly-Paid Employee whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly-Paid Employee's Contribution
Percentage amount is reduced shall be treated as an Excess Aggregate
Contribution. The ADP and ACP of the Highly-Paid Employees are determined
after any corrections required to meet the ADP and ACP tests. Multiple use
does not occur if both the ADP and ACP of the Highly-Paid Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Paid Employees.
Effective prior to the first Plan Year beginning after December 31,
1991, the Plan Administrator shall also have discretionary authority to
restructure the Plan and satisfy the above test based on specific common
attributes among Employees.
For purposes of determining the Contribution Percentage test, After-Tax
Contributions are considered to have been made in the Plan Year in which
contributed to the trust. Salary Deferral Contributions, Matching Employer
Contributions, and Qualified Non-elective Contributions will be considered
made for a Plan Year only if made no later than the end of the twelve-month
period beginning on the day after the close of the Plan Year.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the above tests and the amount of Qualified Non-elective
Contributions, including qualified matching Contributions, if applicable, used
in the test.
The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
If in such Plan Year the Employer permits Participants to make After-Tax
Contributions, a Participant may treat his Excess Contributions under Section
3.01 as an amount distributed to the Participant and then contributed by such
Participant to the Plan as an After-Tax Contribution. Such re-characterized
amounts will remain non-forfeitable and subject to the same distribution
requirements as Salary Deferral Contributions. Amounts may not be
re-characterized by a Highly-Paid Employee to the extent that such amount, in
combination with other After-Tax Contributions made by that Employee, would
exceed any stated limit under the Plan on After-Tax Contributions.
Re-characterization must occur no later than 2 months after the last day
of the Plan Year in which such Excess Contributions arose and is deemed to
occur no earlier than the date the last Highly-Paid Employee is informed in
writing of the amount re-characterized and the consequences thereof.
Re-characterized amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have received them in
cash.
If a Highly-Paid Employee is subject to the family aggregation rules of
the Code, the combined actual Contribution Percentage (based on Salary
Deferral Contributions and separately based on After-Tax Contributions and
Matching Employer Contributions) for the family group shall be treated as one
Highly-Paid Employee. The combined actual Contribution Percentage shall be
determined as the combined actual Contribution Percentage of all eligible
family members.
The Excess Contributions or Excess Aggregate Contributions for the
family members shall be allocated in proportion to the ratio of such
Contributions for each family member.
Any distribution or forfeiture of Excess Contributions or Excess
Aggregate Contributions for any Plan Year shall be made based on the
respective portions of such amounts attributable to each Highly-Paid Employee.
Excess Contributions or Excess Aggregate Contributions shall be adjusted
for any income or loss. The income or loss allocable to such Contributions is
the income or loss allocable to the Participant's Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Contributions or Excess Aggregate Contributions for the year and the
denominator of which is the Participant's Account attributable to satisfaction
of ADP and ACP test (as applicable) without regard to any income or loss
occurring during such Plan Year.
Notwithstanding the preceding paragraph, any other reasonable method for
computing the income allocable to Excess Contributions or Excess Aggregate
Contributions may be used, provided that the method is non-discriminatory, is
used consistently for all Participants and for all corrective distributions
under the Plan for the Plan Year, and is used by the Plan for allocating
income to Participants' Accounts.
Excess Contributions and Excess Aggregate Contributions shall be
forfeited, or if not forfeitable, distributed from the Participant's various
Accounts in proportion to the ratio of such Participant's applicable Accounts.
Excess Contributions shall be distributed from the Participant's Qualified
Non-elective Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Salary Deferral Account
and Matching Contribution Account.
Forfeitures of Excess Aggregate Contributions shall be applied to reduce
Employer Contributions in accordance with Section 3.07.
Excess Contributions or Excess Aggregate Contributions, plus any income
and minus any loss allocable thereto, shall be forfeited, or if not
forfeitable, distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2
months after the last day of the Plan Year in which such excess amounts arose,
a ten percent (10%) excise tax will be imposed on the Employer maintaining the
Plan with respect to such amounts to the extent required by law.
In the event that this Plan satisfies the requirements of Sections
401(k), 401(m), 401(a)(4), or 410(b) of the Code only if aggregated with one
or more other plans, or if one or more other plans satisfy the requirements of
such Sections of the Code only if aggregated with this Plan, then this Section
3.06 shall be applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy section 401(k)
or 401(m) of the Code only if they have the same Plan Year.
The ADP for any Participant who is a Highly-Paid Employee for the Plan
Year and who is eligible to have Salary Deferral Contributions (or amounts
treated as Salary Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single arrangement. If
a Highly-Paid Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
In the event that any provisions of this Section 3.06 are no longer
required or applicable for qualification of the Plan under the Code, then any
applicable provisions of this Section 3.06 shall thereupon be void.
3.07 Forfeitures.
Upon termination of employment for reasons other than retirement,
disability, or death, an Employee shall forfeit his unvested Contributions,
subject to reinstatement as described below.
As of the end of each calendar quarter, any forfeitures occurring during
such Plan Year resulting from an Employee's termination of employment shall
first be applied to restore the previously forfeited accounts, if applicable,
of former Terminated Vested Participants who have been re-employed.
Any portion of the total forfeiture not applied in accordance with the
preceding paragraphs may be used to reduce a Matching Employer Contribution
and allocated to remaining Active Participants in the same manner as provided
under Section 3.04.
Any portion of the total forfeiture remaining shall be treated as a
Discretionary Employer Contribution, and shall be allocated to remaining
Active Participants in the same manner as provided under Section 3.05.
Should a Participant who is not fully vested in his Matching Employer
Contribution and Discretionary Employer Contribution Accounts under Section
7.01 terminate employment, the resulting forfeiture of his Matching and
Discretionary Employer Contribution Accounts, combined with the distribution
of the vested portions thereof, shall be deemed a full distribution of such
Accounts.
If a terminated Participant who was not fully vested in his Matching
Employer Contribution and Discretionary Employer Contribution Accounts is
subsequently re-employed by the Employer prior to the occurrence of five
consecutive twelve-month Breaks-in-Service after the date of his termination
of employment, any amount forfeited shall be reinstated to his Account,
subject to the repayment requirements of Section 7.03.
3.08 Maximum Contributions.
Notwithstanding the above, the total amount of Salary Deferral
Contributions, Matching Employer Contributions, and Discretionary Employer
Contributions for any Plan Year shall not exceed an amount equal to fifteen
percent (15%) of the total Reduced Compensation of all Participants for such
Plan Year. The excess, if any, of fifteen percent (15%) of the total
Compensation of all Participants earned in any year commencing before January
1, 1987 above the actual aggregate Employer Contributions for such years may
be added to the total contribution provided the Plan was then in effect.
3.09 Time of Payment.
Matching Employer Contributions and Discretionary Employer Contributions
may be made at any time on or before the date required for deduction of such
Contributions on the Employer's Federal income tax return.
3.10 Annual Additions Limitation.
Notwithstanding the above provisions of this Article, in no event shall
the annual additions to a Participant's Account exceed the maximum amount
permitted under Section 415 of the Code, and all provisions of such Section
are hereby incorporated in the Plan by reference. The term "limitation year",
as defined under the Code, shall mean the Plan Year.
The term "Defined Contribution Fraction" shall mean a fraction, the
numerator of which is the sum of the annual additions to the Participant's
Account under all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior limitation years
(including the annual additions attributable to the Participant's
nondeductible employee contributions to all defined benefit plans maintained
by the Employer, whether or not terminated, and the annual additions
attributable to all welfare benefits funds, as defined in Section 419(e) of
the Code, and individual medical accounts, as defined in Section 415(1)(2) of
the Code, maintained by the Employer), and the denominator of which is the sum
of the maximum aggregate amounts for the current and all prior limitation
years of service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum aggregate
amount in any limitation year is the lesser of 125 percent of the dollar
limitation determined under Sections 415(b) and (d) of the Code in effect
under Section 415(c)(1)(A) of the Code or 35 percent of the Participant's
compensation for such year.
If the Employee was a participant as of the end of the first day of the
first limitation year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence
on May 5, 1986, the numerator of this fraction will be adjusted if the sum of
this fraction and the defined benefit fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the fractions
as they would be computed as of the end of the last limitation year beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the plan made after May 5, 1986, but using the Code Section 415
limitation applicable to the first limitation year beginning on or after
January 1, 1987.
The annual addition for any limitation year beginning before January 1,
1987, shall not be recomputed to treat all employee contributions as annual
additions.
The term "Defined Benefit Fraction" shall mean a fraction, the
numerator of which is the sum of the Participant's projected annual benefits
under all the defined benefit plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the limitation year under Sections 415(b) and
(d) of the Code or 140 percent of the highest average compensation, including
any adjustments under Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a participant as of
the first day of the first limitation year beginning after December 31, 1986,
in one or more defined benefit plans maintained by the Employer which were in
existence on May 5, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such plans which the
participant had accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate satisfied the
requirements of Section 415 for all limitation years beginning before January
1, 1987.
As soon as administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be
determined on the basis of the Participant's actual compensation for the
limitation year.
If due to the maximum permitted above or as a result of the allocation
of forfeitures there is an excess amount, the excess will be disposed of as
follows:
(1) Any After-Tax Contributions, to the extent they would reduce the
excess amount, will be returned to the Participant;
(2a) If an excess amount still exists, and the Participant is covered
by the Plan at the end of the limitation year, the excess amount in the
Participant's Account will be used first to reduce the Participant's Salary
Deferral Contribution for such Plan Year (and the excess will be returned to
the Participant) and thereafter to reduce other Employer Contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary; or
(2b) If an excess amount still exists, and the Participant is not
covered by the Plan at the end of a limitation year, the excess amount will be
held unallocated in a suspense account. The suspense account will be applied
to reduce future Employer Contributions for all remaining Participants in the
next limitation year, and each succeeding limitation year if necessary.
If a suspense account is in existence at any time during a limitation
year pursuant to this Section, such account will not receive an allocation of
the trust's investment gains and losses. If a suspense account is in
existence at any time during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to Participant's Accounts
before any Employer or any employee contributions may be made to the Plan for
that limitation year. Excess amounts may not be distributed to Participants
or former Participants, except as provided below.
Notwithstanding the method for disposing of excess amounts as indicated
above, in the case where a reasonable error is made so that the limitations of
Section 415 are violated, the Plan may distribute Salary Deferral
Contributions (within the meaning of Section 402(g)(3) of the Code) to the
extent that the distribution would reduce the excess amounts in the
Participant's Account. These amounts are disregarded for purposes of the ADP
and ACP tests.
3.11 Return of Contribution.
Except as provided in Section 3.10 and this Section, and notwithstanding
any other provision of this Plan or of the Trust Agreement, the Employer
irrevocably divests itself of any interest or reversion whatsoever in any sums
contributed by it to the Trust Fund, and it shall be impossible for any
portion of the Trust Fund to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants or their Beneficiaries.
(a) If a contribution by the Employer is conditioned upon initial
qualification of the Plan or any amendment thereto under Section 401 of the
Code, and the Plan or any amendment thereto under Section 401 of the Code, and
the Plan or amendment does not so qualify, the contribution shall be returned
to the Employer within one year of the date of denial of such qualification or
of the failure to qualify.
(b) If a contribution made by the Employer is based upon a good faith
mistake of fact, the contribution shall be returned to the Employer within one
year after the payment of the contribution.
(c) If a contribution which is intended to be deductible for Federal
income tax purposes is determined to not be deductible and part or all of the
deduction is disallowed, the contribution, to the extent disallowed, shall be
returned to the Employer within one year after the disallowance of the
deduction.
(d) Earnings attributable to any mistaken or non-deductible
contribution may not be returned to the Employer, but losses attributable
thereto must reduce the amount to be so returned.
(e) If the withdrawal of the amount attributable to the mistaken or
nondeductible contribution would cause the balance of the individual Account
of any Participant to be reduced to less than the balance which would have
been in the Account had the mistaken or nondeductible amount not been
contributed, then the amount to be returned to the Employer must be limited so
as to avoid such reduction. In the case of a reversion due to initial
disqualification of the Plan, the entire assets of the Plan attributable to
Employer contributions may be returned to the Employer.
(f) A contribution may be returned to the Employer or an Employee,
whichever is applicable, in order to satisfy the requirements of Section 3.06.
3.12 Rollover/Direct Transfer Contributions.
(a) Direct Inter-Plan Transfers. Any Employee of an Employer
(including Employees who are not yet Eligible Employees) may, no less than 15
days following written notification to the Plan Administrator of such action,
direct the appropriate trustee of any qualified retirement plan of the
Employer or a former employer to distribute directly to the Trustee such
Participant's entire interest in the distributing plan, exclusive of any
after-tax contributions made by the Participant as an employee or participant
thereunder, provided that the transferor plan is not subject to the
requirements of Section 401(a)(11) of the Code, as a rollover or a direct
plan-to-plan transfer.
(b) Cash Transfers. Only cash, subject to outstanding loans, if any,
may be transferred in accordance with paragraph (a) of this Section. Property
other than cash cannot be transferred.
(c) Investment of Rollover Contribution Accounts. Rollover
Contribution Accounts shall be invested as provided under Section 4.01 of the
Plan.
(d) Direct Rollovers. This paragraph applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
paragraph, a distributee may elect, at the time and in the manner prescribed
by the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. Such distribution may commence less than 30
days after the notice required under Treasury Regulation 1.411(a)-1(k) is
given, provided that (i) the Plan Administrator clearly informs the
Participant that the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or not to elect
a distribution (and, if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution.
For purposes of this Section, the following definitions shall apply:
Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the portion
of any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities).
Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
Distributee: A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a QDRO, are distributees with regard to the interest of the spouse
or former spouse.
Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
3.13 Change of Contribution Rate and Suspension of Contributions.
A Participant may elect to change the percentage rate of his Salary
Deferral Contribution or After-Tax Contribution by executing a new salary
reduction agreement or written election, respectively. Such change will
become effective with the first pay check paid to the Participant during the
month following the Employer's receipt of such agreement or election or, if
later, the first pay check covering the payroll period including the date of
such receipt.
A Participant may elect to suspend all of his Salary Deferral
Contribution and/or After-Tax Contribution by executing a form approved by the
Plan Administrator; provided, however, that any suspension shall be for a
period of not less than three (3) months. Such suspension will become
effective for the payroll period ending after the date the Employer receives
the executed form. Contributions may be resumed following execution of a new
salary reduction agreement or written election.
ARTICLE IV - ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
Participant Accounts will be invested as determined by the Plan Trustee,
unless the Plan Administrator elects to permit Plan Participants to direct the
investment of their Accounts, and directs the Trustees accordingly, in which
event such Participant Accounts will be invested as described below and in
Section 4.02 and 4.03. Should individual investment elections be permitted
under the plan, then the available investment alternatives may include any or
all of the alternatives described below:
(a) Common or capital stocks, bonds, convertible debentures or
preferred stocks, money market investments and other short term corporate and
government investments and fixed debt obligations of corporations and of
Federal, state, and local governments, or any pooled or mutual fund invested
in such instruments.
(b) One or more guaranteed interest funds which shall be invested
under a contract (or contracts) with a bank, or an insurance company licensed
in the state in which an office of the Employer is domiciled and whereby terms
of such contract guarantee both the repayment of principal and the payment of
interest at a pre-determined minimum rate for a fixed period of time. Any
such contract is subject to approval of the Plan Administrator and may be
renewed or discontinued in its discretion. Should such contract be
discontinued and should the Plan Administrator not enter into or instruct the
Trustee to enter into a successor contract providing similar guarantees as to
principal and interest, then any Participant whose Account was invested under
the contract shall be given the opportunity to make a new investment election.
(c) Any other managed fund which the Plan Administrator deems
appropriate for investment of plan assets.
(d) A fund invested in shares of Common Stock. Any dividends received
on such shares shall be reinvested in this fund. Contributions designated for
the fund, or dividends paid on shares held in the fund, shall be temporarily
invested in a short-term investment fund while the Trustee awaits the
opportunity to purchase additional shares. The shares of Common Stock from
time to time required to be acquired for the purposes of this Plan shall be
acquired by the Trustees by purchase in the open market, or, if applicable, in
an internal market maintained by the Company, at prevailing prices, or, if
directed by the Company, by contribution in kind or by purchase privately from
the Company or any other person at a price per share equal to the closing
market price per share at which the shares of Common Stock were sold on the
last business day preceding the day of the purchase; it being understood that
shares purchased from the Company may be either treasury shares or authorized
but unissued shares, if the Company shall make such shares available for that
purpose. Timing on purchases or sales of such shares shall be dependent upon
liquidity and ability of the Trustee to purchase or sell such shares for cash.
The Plan Administrator may, in its discretion, discontinue the use of
any investment alternatives maintained under the Plan, without obligation to
substitute new alternatives, provided that Participants with Accounts invested
in a discontinued investment alternative are given an opportunity to make an
election to transfer the affected portion of their Accounts to another
investment alternative permitted under the Plan.
4.02 Investment Elections.
If investment elections are permitted, then each Participant will
designate in which investment alternative or combination of alternatives he
desires his Contributions to be invested; provided, however, that the portion
invested in any alternative which he elects shall be one percent (1%) or any
multiple thereof, or such other percentage as may be designated by the Plan
Administrator.
4.03 Change of Elections.
Changes in investment elections shall (subject to Section 4.04) be
permitted, in the manner specified by the Plan Administrator. Following such
procedure, a Participant may alter his election with respect to the investment
of his future contributions and/or alter his election with respect to the
investment alternatives in which his prior contributions have been invested
and may direct the Trustee to transfer all or any portion of the balance in
his Account to any investment alternative or combination of alternatives.
4.04 Restrictions on Changes.
The Plan Administrator may, in its sole discretion, establish
restrictions, limitations or prohibitions with respect to changes in
investment elections, or transfers, permitted under the Plan. Any such
restrictions, limitations, or prohibitions which may apply to elections
related to, or transfers among, any or all investment funds maintained under
the Plan, shall be communicated in advance of their applicability to Plan
Participants, and shall apply in a non-discriminatory manner to all
Participants in similar circumstances.
4.05 Allocation of Contributions.
The Plan Administrator shall allocate Contributions to the Account of
each Participant as frequently as is administratively feasible.
4.06 Valuation of Assets.
As of each Valuation Date, the assets of the Trust shall be valued at
fair market value, and any gains or losses shall be allocated to the same
investment alternatives in which they arose.
4.07 Voting of Shares.
If a Participant's Account is invested in Common Stock, before each
annual or special meeting of shareholders of the Company, the Company shall
cause the Trustee to send to each Participant whose Account is invested in
Common Stock, a copy of the proxy solicitation material therefor, together
with a form providing confidential instructions to the Trustee on how to vote
the shares of Common Stock held within the Participant's Account. Upon
receipt of such instructions in conformance with said proxy solicitation
material, the Trustee shall vote the shares of Common Stock as instructed.
Instructions received from individual Participants by the Trustee shall be
held in strictest confidence and shall not be divulged or released to any
person, including officers or Employees of an Employer. The Trustees shall
vote the shares of Common Stock for which no instructions have been received
in the same proportion as the shares for which instructions have been
received.
4.08 Tender Offer Procedure.
In the event an offer is received by the Trustee (including, but not
limited to, a tender offer or exchange offer) to purchase any shares of Common
Stock held by the Trustee in the Trust, the Company shall cause the Trustee to
send to each Participant whose Account is invested in Common Stock such
information as will be distributed to shareholders of the Company in
connection with such offer, and to notify each Participant in writing of the
number of shares of Common Stock which are then credited to such Participant's
Account. The Trustee shall provide to each Participant a form requesting
confidential directions as to the manner in which the Trustee is to respond to
the offer with respect to shares of Common Stock allocated to such
Participant's Account. Upon timely receipt of such directions, the Trustee
shall respond as directed with respect to the tender or exchange of such
shares. Instructions received from individual Participants by the Trustee
shall be held in the strictest confidence and shall not be divulged or
released to any person, including officers or Employees of an Employer. The
Trustee shall not tender or exchange shares of Common Stock allocated to a
Participant's Account for which the Trustee has not received directions from
the Participant.
A Participant who has directed the Trustee to tender or exchange shares
of Common Stock allocated to such Participant's Account may, at any time prior
to the offer withdrawal date, direct the Trustee to withdraw such shares from
the offer prior to the withdrawal deadline, in which case the Trustee shall
carry out such directive.
In the event that shares of Common Stock held in a Participant's Account
are tendered or exchanged pursuant to this Section 4.08, the proceeds received
upon the acceptance of such tender or exchange shall be credited to such
Participant's Account, and shall be invested in the manner determined by the
Company or as otherwise provided in the Plan.
4.09 ERISA Section 404(c) Plan.
The Plan is intended to constitute a plan described in Section 404(c) of
ERISA and shall be administered in accordance with such intent. Beginning
with the Plan Year commencing January 1, 1994, the Plan shall be administered
in compliance with Department of Labor Regulations Section 2550.440c-1.
4.10 Confidentiality.
Information relating to the purchase, holding, and sale of Common Stock
in a Participant's Account and the exercise of voting, tender, and similar
rights with respect to such stock by Participants and their beneficiaries
shall be maintained in accordance with such procedures as the Administrator
shall establish designed to safeguard the confidentiality of such information,
except to the extent necessary to comply with Federal laws or state laws not
preempted by ERISA.
4.11 Fiduciary Designation.
Effective for Plan Years commencing on or after January 1, 1994, the
Administrator is designated as the Plan fiduciary responsible for ensuring
that the procedures implemented pursuant to Section 4.10 are sufficient to
safeguard the confidentiality of information described in that Section, that
such procedures are being followed, and that an independent fiduciary is
appointed to carry out activities which the Administrator determines involve a
potential for undue influence by any Employer upon Participants and
beneficiaries with regard to the direct or indirect exercise of shareholder
rights with respect to Common Stock. A Participant who gives instructions to
the Trustee pursuant to Sections 4.07 and 4.08 shall be deemed to be acting as
a "named fiduciary", as such term is defined in Section 402(a)(1) of ERISA.
ARTICLE V - RETIREMENT BENEFITS
5.01 Normal Retirement Benefit.
A Normal Retirement Benefit shall be payable to any Participant upon his
Normal Retirement, unless such Participant has elected to receive a Deferred
Retirement Benefit. Payment of the Normal Retirement Benefit shall commence
no later than 60 days following the last day of the Plan Year in which his
Normal Retirement Date occurs.
5.02 Deferred Retirement Benefit.
If a Participant so elects in writing to defer his receipt of benefits
until some date or event after his Normal Retirement Date, a Deferred
Retirement Benefit shall be payable to the Participant upon the occurrence of
such date or event.
5.03 Disability Retirement Benefit.
A Disability Retirement Benefit (collectively with Normal Retirement
Benefits and Deferred Retirement Benefits "Retirement Benefits") shall be
payable to any Participant who has suffered a Disability and who retires from
service of the Employer by reason of such Disability, Payment shall commence
no later than sixty (60) days following the last day of the Plan Year in which
such retirement occurs.
5.04 Payment of Benefits.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is less than $3,500, the Administrator
may direct the Trustee to distribute the Participant's Retirement Benefit in a
single lump sum, without any requirement for such Participant's consent.
For Active Participants, benefit payments as mandated by Code Section
401(a)(9) shall not commence later than the April 1st following the calendar
year in which the Participant attains age 70 or such later date as permitted
under the Code, unless the Participant was (i) over age 70 before January 1,
1988 and was not a 5% owner of the Employer during the Plan Year ending within
the calendar year in which the Participant attained age 66, or any subsequent
year, or (ii) the Participant made a designation under Section 242(b)(2) of
the Tax Equity and Fiscal Responsibility Act of 1982, in which event benefit
payments may commence after the April 1st following the calendar year in which
the Participant reaches age 70 but as soon after the Participant terminates
employment as is practical. All distributions required under this Section
shall be determined and made in accordance with the proposed or, if
applicable, final Treasury Regulations under Code Section 401(a)(9), including
the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed or final Treasury Regulations.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is equal to or greater than $3,500, the
amount of his Vested Account Balance shall be paid in a lump sum, unless the
Participant elects in writing to receive Installment Payments, a Life
Annuity, or a Joint-and-Survivor Annuity, in which case payments shall be made
accordingly. No less than 30, and no more than 90. days before payment of the
Retirement Benefit of a Participant is due to commence, the Employer shall
explain to the Participant the material features of, and explain the relative
values of, a Joint-and-Survivor Annuity and other forms of benefits available
under the Plan. An election may be changed at any time by delivery of a
written change to the Administrator, up to the time the Administrator has
ordered payment of a Retirement Benefit by the Trustee or has paid for the
purchase of an annuity described below.
5.05 Installment Payments
A Participant may elect to receive his entire Vested Account Balance in
up to ten approximately equal annual installments ("Installment Payments"), as
elected by the Participant. Until such time as his entire Vested Account
Balance has been distributed by such method, the Account will continue to
incur appreciation and depreciation, earnings, expenses, and similar
adjustments, and the amount of each subsequent installment will reflect a
proportional amount of such adjustments.
5.06 Joint-and-Survivor Annuity
A Participant may elect to receive an annuity, payable monthly,
quarterly, semi-annually, or annually at the Participant's option, of a level
annual amount for his lifetime, with a provision for continuation of no less
than fifty percent (50%), up to one hundred percent (100%), of such amount
payable to the Participant's spouse for the duration of the spouse's lifetime
after the death of the Participant (a "Joint-and-Survivor Annuity"). The
Administrator will purchase the Joint-and-Survivor Annuity from a legal
reserve life insurance company in the name of the Participant with the
lump-sum value of the Participant's Vested Account Balance. Payments of the
annuity shall commence as soon as practicable following the date of such
purchase (the "Annuity Starting Date")
5.07 Life Annuity.
A Participant who is not married at the time payment of his Retirement
Benefit is due to commence, or who has received a Spousal Consent or qualifies
within one of the exceptions from the requirement for a Spousal Consent set
forth in the following paragraph, may elect to receive an annuity, payable
quarterly, semi-annually, or annually at the Participant's election, of a
level annual amount for his lifetime (a "Life Annuity"). The Administrator
will purchase the Life Annuity from a legal reserve life insurance company in
the name of the Participant with the lump-sum value of the Participant's
Vested Account Balance, and payments shall commence on the Annuity Starting
Date.
If a Participant is married at the time payment of his Retirement
Benefit is due to commence, he must receive a Joint-and-Survivor Annuity, in
lieu of a Life Annuity, unless (a) the Participant is legally separated from
the spouse, by order of a court; (b) the Participant has been abandoned by the
spouse, in accordance with local law; (c) the spouse consents in writing to
the election of a Life Annuity, within the 90-day period ending on such
commencement date (a "Spousal Consent"); (d) if the spouse is not legally
competent to give consent, the legal guardian of the spouse, including the
Participant if the Participant is such legal guardian, gives such Spousal
Consent on behalf of the spouse; or (e) it is established to the satisfaction
of the Plan Administrator that Spousal Consent cannot be obtained because the
spouse cannot be located. A Spousal Consent must be witnessed by a notary
public or by a person so designated by the Plan Administrator. A Spousal
Consent shall be irrevocable. Purchase of a Life Annuity on behalf of a
Participant in reliance upon information submitted by or on behalf of the
Participant, including a form of Spousal Consent, shall discharge the
responsibility of the Employer, the Plan Administrator, and the Trustees.
5.08 Additional Allocations on Retirement.
Any allocation for a Participant, made as of a Valuation Date subsequent
to the date of his retirement shall be paid to such Participant, or his
Beneficiary, as soon after such Valuation Date as is practical.
5.09 Crediting of Investment Earnings.
Investment earnings shall be credited to a Participant's Account through
the Valuation Date coincident with or last preceding the date that
distribution of the Account is made. No earnings shall be credited after such
Valuation Date.
5.10 Common Stock.
A Participant may elect to have the portion, if any, of his Vested
Account Balance attributable to a fund invested in Common Stock distributed
all in cash or all in kind or in a combination thereof. In the case of an
in-kind distribution, the value of fractional shares shall be paid in cash.
ARTICLE VI - DEATH BENEFITS
6.01 Death Benefits.
In the event of the death of a Participant who has not yet received
payment of his Vested Account Balance, the Vested Account Balance shall be
paid to his Beneficiary in a single lump sum. Any payment under this Section
shall be paid as soon as practicable at the Beneficiary's election and no
later than five years after the Participant's death. The distribution shall
be equal to the Participant's Vested Account Balance as of the Valuation Date
coincident with or immediately preceding the date of payment.
6.02 Additional Allocations on Death.
Any allocation for a Participant, made as of a Valuation Date subsequent
to the date of his death, shall be paid to such Participant's Beneficiary as
soon after such Valuation Date as is practical.
6.03 Beneficiary Designation.
"Beneficiary" shall mean the person or persons designated to receive any
death benefits which may become payable under the Plan, and shall include any
contingent beneficiary.
If a Participant has a qualified spouse, then such spouse shall
automatically be the Beneficiary eligible to receive the Account of the
Participant pursuant to the Participant's death, unless the Participant names
an alternate Beneficiary, and the qualified spouse has given a Spousal Consent
to the Participant's naming of an alternate Beneficiary, which consent must
acknowledge the effect of such designation. For purposes of this paragraph, a
qualified spouse is a spouse to whom the Participant is married at the date of
death and to whom the Participant has been married for at least one year.
Each Participant shall have the right by written notice to the Plan
Administrator, in the form prescribed by the Plan Administrator, to designate,
and from time to time to change the designation of, one or more Beneficiaries
and contingent Beneficiaries to receive any benefit which may become payable
under the Plan pursuant to his death, provided his qualified spouse, if any,
consents to the designation of an alternate Beneficiary as set forth in the
preceding sentence. A qualified spouse may also expressly permit a
Participant to subsequently change an alternative Beneficiary designation
without any further Spousal Consent.
If it is established to the satisfaction of the Plan Administrator that
there is no qualified spouse or that such spouse cannot be located, an
alternative Beneficiary designation will be deemed a proper election without
any Spousal Consent.
Any consent by a qualified spouse obtained under this provision (or
establishment that the consent of a qualified spouse may not be obtained)
shall be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further consent by
the qualified spouse must acknowledge that such spouse has the right to limit
consent to a specific beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to relinquish either or
both of such rights. A revocation of a prior beneficiary designation may be
made by a Participant without the consent of the qualified spouse at any time
before the commencement of benefits. The number of revocations shall not be
limited.
In the event that a Participant who does not have a qualified spouse as
described above fails to designate a Beneficiary to receive a benefit under
the Plan that becomes payable pursuant to his death, or in the event that the
Participant is pre-deceased by all automatic or designated primary and
contingent beneficiaries, the death benefit shall be payable to the
Participant's estate.
ARTICLE VII - VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested in his Salary
Deferral Contribution Account, After-Tax Contribution Account, and Rollover
Contribution Account, and in any restoration contributions made pursuant to
Section 7.03.
A Participant shall be vested in his Matching Employer Contribution
Account and his Discretionary Employer Contribution Account based on his Years
of Service in accordance with the following table:
Years of Service Vesting Percentage
Less than 2 0%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Notwithstanding the foregoing, an Active Participant shall be fully
(100%) vested in his entire Account at his Normal Retirement Date, the date of
his retirement due to Disability, or the date of his death.
Notwithstanding the foregoing, where government regulations, including
the Federal Procurement Regulations and agency supplemental procurement
regulations, or contracts issued by government agencies require, for
Participants who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of service when the
Participant is performing a government contract shall be 100% vested for any
such Participant who has completed one Year of Service, then each such
Participant shall be 100% vested in that portion of his Account attributable
to contributions for the period during which he is subject to such regulation
or contract, upon completion of one Year of Service. However, if for any Plan
Year the application of the preceding sentence would result in discrimination
in favor of Highly-Paid Employees in violation of Code Section 401(a)(4), then
for such Plan Year the preceding sentence shall not apply to any such
Highly-Paid Employee.
7.02 Payment of Benefits to Terminated Participants.
An Active Participant who is vested in any portion of his Account and
terminates employment prior to his Normal Retirement Date shall be deemed a
Terminated Vested Participant. Payment of his Vested Account Balance shall be
made in a single lump sum no later than sixty (60) days following the
Valuation Date coincident with or next following the Participant's Normal
Retirement Date. However, any such Participant may elect in writing that
payment of his vested Account be made as of any Valuation Date coincident with
or following the date of his termination of employment, provided that he makes
such election on or before the applicable Valuation Date.
A Terminated Vested Participant's Account shall continue to be credited
with investment earnings through the last Valuation Date coincident with or
immediately preceding the date that payment of the Account is made. No
earnings shall be credited after such Valuation Date.
If, after a Participant terminates employment, the total value of his
Vested Account Balance is $3,500 or less, the Administrator may direct the
Trustee to cash-out the Participant's entire Vested Account Balance in a
single lump sum after the Valuation Date coincident with or following the date
of his or her termination of employment, without any requirement for such
Participant's consent. and regardless of any election to the contrary by the
Participant
7.03 Re-employment After Distribution and Restoration of Contributions.
Any former Participant who once again qualifies as an Active Participant
and who has received a distribution of any portion of his Account attributable
to his prior participation in this Plan may restore to the Trustee the full
amount of the distribution he previously received which was derived from
Employer Contributions. In order to reinstate his full Matching or
Discretionary Employer Contribution Account, a re-employed Participant must
repay the full amount of the distribution from such Accounts prior to the
earlier of (i) the fifth anniversary of the date such participant is
re-employed or (ii) five consecutive twelve-month Breaks-in-Service after the
date of distribution. Any Participant who fails to make his restoration
contribution within such time period shall waive his right to the portion of
his Account which was not vested when he received his distribution.
ARTICLE VIII - WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
In-service withdrawals may be made by Active or Inactive Participants,
but not by Terminated Vested Participants, upon 15 days' written notice, as
permitted below, but not more frequently than once per calendar month, in the
following order:
(a) A Participant may withdraw all or any portion of his After-Tax
Contribution Account as follows. Such withdrawal shall come first from
After-Tax Contributions made prior to January 1, 1987. Next, such withdrawal
shall be allocated proportionately between the Participant's After-Tax
Contributions made after December 31, 1986 and the investment earnings on such
contributions. A Participant may then withdraw the investment earnings on his
After-Tax Contributions made prior to January 1, 1987.
(b) After a Participant has withdrawn all of his After-Tax
Contributions Account, if any, he may withdraw all or any portion of so much
of his vested Matching Employer Contribution Account, Rollover Contribution
Account, and/or vested Employer Discretionary Contribution Account as has been
in such Account(s) for a period of at least two years.
(c) A Participant may withdraw all or any portion of (i) his Salary
Deferral Contribution Account for any reason after he has attained Age 59 and
prior to Age 59 solely in the event of a financial hardship and then solely to
the extent required to satisfy the hardship. The amount that may be
distributed due to a hardship may include the amount necessary to pay income
taxes or penalties resulting from the distribution. Such hardship must be an
immediate and heavy financial need of the Participant where such Participant
lacks other available resources. Expenses in connection with a death in a
Participant's immediate family would constitute such an immediate and heavy
financial need and the following conditions would automatically be deemed an
immediate and heavy financial need:
(i) medical expenses as described under Code Section 213(d)
incurred by the Participant, his spouse, or his dependents or obtainment of
medical care if the withdrawal is necessary for such persons to obtain medical
care;
(ii) costs directly related to the purchase of a primary
residence (excluding mortgage payments);
(iii) payment of tuition or related educational fees for the next
twelve months of post-secondary education for the Employee, his spouse, or his
dependents;
(iv) payment to prevent eviction of the Participant from a
primary residence or foreclosure of mortgage on his primary residence; and
(v) any other occurrence as authorized by Treasury Regulations,
Rulings, Notices, and other documents of general applicability.
A Participant must submit a written certification on the form prescribed
by the Plan Administrator that the hardship distribution is necessary to
satisfy an immediate and heavy financial need. The written certification must
indicate that the need cannot reasonably be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the employee's
assets, by cessation of Salary Deferral Contributions or After Tax
Contributions (if applicable) under the Plan, by other distributions or
nontaxable loans from plans maintained by the Employer or any other employer,
or by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need. The Employer must not have actual
knowledge to the contrary that the need cannot reasonably be relieved as
described above.
A Participant may not withdraw any investment earnings included in his
Salary Deferral Contribution Account which were accumulated after December 31,
1988, or any Qualified Non-elective Contributions (including investment
earnings), unless he has attained Age 59.
A Participant may not withdraw any portion of his Matching Employer
Contribution Account, except as set forth in (b) above, or his Discretionary
Employer Contribution Account for any reason prior to his retirement or other
termination of employment.
In no event will any hardship withdrawal of Salary Deferral
Contributions be granted until any applicable distributions and loans have
been taken from this Plan and from all other qualified retirement plans of the
Employer.
Upon a withdrawal for financial hardship, the Participant's Salary
Deferral Contributions shall be suspended for a minimum period of twelve
months, and the Participant shall not, for such period, be permitted to make
any elective contribution to any qualified or non-qualified deferred
compensation plan of the Employer, including any defined benefit retirement
plan or any stock option, stock purchase, or similar plan, but not including
contributions to a health or welfare benefit plan.. In addition, for the
taxable year following the year in which such a withdrawal is made, the
Participant's elective contributions to this and all other contributory plans
maintained by the Company, if any, shall be subject to the applicable limit
under Code Section 402(g) for that year minus the Participant's elective
contributions for the year of the hardship withdrawal.
8.02 Loans.
(a) Loans to Active or Inactive Participants, but not Vested
Terminated Participants, from their Accounts in amounts of not less than
$1,000 shall be allowed upon 15 days' written notice. No more than two Plan
loans may be outstanding to each Participant at any time.
(b) No Participant shall, under any circumstances, be entitled to
loans in excess of the lesser of (i) 50% of his Vested Account Balance,
excluding any portion thereof held in the form of Common Stock and excluding
the amount of his After-Tax Contribution Account, as of the Valuation Date
coincident with or immediately preceding the date on which the loan is made,
and (ii) $50,000 less the highest outstanding loan balance over the 12-month
period immediately preceding the issuance of the loan. For purposes of this
paragraph, all outstanding loans to a Participant under this Plan or any other
qualified retirement plan of the Employer shall be aggregated.
(c) Any loan to a Participant shall be evidenced by the Participant's
promissory note and secured by the pledge of the Participant's Account in the
Trust Fund and by the pledge of such further collateral as the Trustee deems
necessary or desirable to assure repayment of the borrowed amount and all
interest payable thereon in accordance with the terms of the loan.
(d) Interest shall be charged at an annual rate equal to the prime
interest rate in effect as of the date the loan is processed, plus one percent
(1%). The rate may be revised from time to time, but no more frequently than
quarterly. The Administrator shall have sole discretion in determining the
interest rate, and its decision shall be final and binding. Principal
repayments and interest payments shall be credited to the Account of the
Participant to whom the loan was made.
(e) Loans shall be for such term as the Participant elects, except
that loans shall not be for a period of less than one year or in excess of
five years unless they are made for the purposes of purchasing the primary
residence of the Participant. In no event shall a loan be for a period in
excess of 30 years or such longer period of time as established by the
Administrator to be used on a uniform and non-discriminatory basis.
(f) Loans shall be repaid in approximately level installments made no
less frequently than quarterly. The Plan Administrator may require that loans
be repaid by payroll deduction or any other convenient manner. The manner and
frequency of payment shall be determined by the Plan Administrator.
(g) If not previously repaid in full, the unpaid portion of any
outstanding loans (including interest thereon) shall be deducted at the time
of a distribution due to retirement, death, disability, or other termination
of employment, from the amount of the Account otherwise available to pay or
purchase any benefit to which a Participant (or his beneficiary) is entitled
under this Plan, and any other security pledge shall be sold as soon as is
practicable after such default by the Trustee at private or public sale. The
proceeds of such sale shall be applied first to pay the expenses of conducting
the sale, including reasonable attorney's fees, and then to pay any sums due
from the borrower to the Trust Fund, with such payment to be applied first to
accrued interest and then to principal. The Participant shall remain liable
for any deficiency, and any surplus remaining shall be paid to the
Participant.
(h) If a required periodic payment is not made within 60 days of the
date it was due, this shall be deemed a default, but foreclosure on the note
and attachment of security will not occur until a distributable event occurs
in the Plan.
ARTICLE IX - ADMINISTRATION
9.01 Plan Administrator.
The Plan shall be administered by the Company in accordance with its
provisions and for purposes of such Plan administration the Company is hereby
deemed to be Plan Administrator within the meaning of ERISA. All aspects of
Plan administration shall be the responsibility of the Plan Administrator,
except those specifically delegated to the Trustees or other parties in
accordance with provisions of the Plan or Trust Agreement.
9.02 Administrative Procedures.
The Administrator shall have discretionary authority based on a
reasonable interpretation of the Plan to determine the eligibility for
benefits and the benefits payable under the Plan, and shall have discretionary
authority to construe all terms of the Plan, including uncertain terms, to
determine questions of fact and law arising under the Plan and make such rules
as may be necessary for the administration of the Plan. Any determination by
the Plan Administrator shall be given deference in the event it is subject to
judicial review, and shall be overturned only if it is arbitrary and
capricious or an abuse of discretion. The Administrator may require
Participants to apply in writing for benefits hereunder and to furnish
satisfactory evidence of their date of birth and such other information as may
from time to time be deemed necessary.
The Plan Administrator shall appoint such Trustees, investment managers,
or other professional advisors as the Administrator, in its sole discretion,
deems necessary or appropriate.
9.03 Other Plan Administrator.
Anything to the contrary notwithstanding, the Company may appoint a
committee or an individual or individuals, whether or not employed by an
Employer, to carry out any of the duties of the Plan Administrator. Such
duties may include, but are not limited to, determining the eligibility of any
Employee for any benefits and the amount of such benefits under the Plan,
maintaining custody of all documents and elections made by an Employee,
directing the investment of any payment made by an Employer within any limits
which may be imposed by the Employer, and retaining suitable agents and
advisors. Any committee or individual shall be considered an agent of the
Employer with respect to the Plan and shall be indemnified by the Employer
against any and all claims, losses, damages, expenses, and liabilities arising
from any action or failure to act, except when the same is determined to be
due to the gross negligence or willful misconduct of such individual or a
member of a committee.
9.04 Claims Procedures.
(a) If a Participant or Beneficiary (hereinafter referred to as
"Claimant") is denied any vested benefits under this Plan, either partially or
in total, the Plan Administrator shall advise the Claimant of the method of
computation of his benefit, if any, and the specific reason for the denial.
The Administrator shall also furnish the Claimant at that time with:
(i) a specific reference to pertinent Plan provisions,
(ii) a description of any additional material or
information necessary for the Claimant to perfect his claim, if possible, and
an explanation of why such material or information is needed, and
(iii) an explanation of the Plan's claim review procedure.
(b) Within 60 days of receipt of the information stated in (a) above,
the Claimant shall, if he desires further review, file a written request for
reconsideration with the Administrator.
(c) So long as the Claimant's request for review is pending (including
the 60 day period in (b) above), the Claimant or his duly authorized
representative may review pertinent Plan documents and may submit issues and
comments in writing to the Administrator.
(d) A final and binding decision shall be made by the Administrator
within 60 days of the filing by the Claimant of his request for
reconsideration, provided, however, that if the Administrator, in its
discretion, determines that a hearing with the Claimant or his representative
present is necessary or desirable, this period shall be extended an additional
60 days.
(e) The Administrator's decision shall be conveyed to the Claimant in
writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the Claimant, with specific references
to the pertinent Plan provisions on which the decision is based.
9.05 Expenses.
Expenses incidental to loans shall be paid by the borrower. Brokerage
fees attributable to individually directed transactions may be charged to the
Account of the Participant directing such transaction. Other expenses of the
Plan shall be paid from the Trust Fund unless the Employer elects to pay such
expenses.
ARTICLE X - AMENDMENT, TERMINATION, AND MERGERS
10.01 Amendment.
The provisions of this Plan may be amended at any time and from time to
time by action of the Board of Directors; provided, however, that:
(a) no amendment shall increase the duties or liabilities of the Plan
Administrator or of the Trustee without the consent of such party;
(b) no amendment shall deprive any Participant or beneficiary of a
deceased Participant of any of the benefits to which he is entitled under this
Plan with respect to contributions previously made, nor shall any amendment
decrease the balance in any Participant's Account. For purposes of this
paragraph, a plan amendment which has the effect of decreasing the balance of
a Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment shall be
treated as reducing an accrued benefit;
(c) no amendment shall provide for the use of funds or assets held to
provide benefits under this Plan other than for the benefit of Employees and
their beneficiaries or provide that funds may revert to the Employer except as
permitted by law; and
(d) no amendment may change the vesting schedule with respect to any
Participant, unless each Participant with three or more Years of Service is
permitted to elect to have the vesting schedule which was in effect before the
amendment used to determine his vested benefit. The period during which the
election may be made shall commence with the date the amendment is adopted or
deemed to be made and shall end on the latest of:
(i) 60 days after the amendment is adopted;
(ii) 60 days after the amendment becomes effective; or
(iii) 60 days after the Participant is issued written notice of
the amendment by the Board of Directors.
In the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
non-forfeitable percentage (determined as of such date) of such Employee's
right to his Employer-derived accrued benefit will not be less than his
percentage computed under the Plan without regard to such amendment.
Each amendment shall be approved by the Board of Directors by resolution
and shall be filed with the Trustee.
10.02 Plan Termination.
(a) Right Reserved. While it is the Company's intention to continue
the Plan indefinitely, the right is, nevertheless, reserved to terminate the
Plan in whole or in part by action of the Board of Directors. Termination or
partial termination of the Plan shall result in full and immediate vesting of
each affected Participant in his entire Account, and there shall not
thereafter be any forfeitures with respect to any Participant for any reason.
Notwithstanding any other provision of this Plan, complete or partial
termination of the Plan shall not be conditioned solely upon any resolution or
other action of the Company, the Board of Directors or any other party.
(b) Effect on Retired Persons, etc. Termination of the Plan shall
have no effect upon payment of benefits due to former Participants, their
beneficiaries, and their estates. The Trustee shall retain sufficient assets
to complete any such payments due and shall have the right, including the
right to accelerate Installment Payments without the consent of the
Participant, upon direction by the Employer, to make such payments as of the
effective date of the Plan termination.
(c) Effect on Remaining Participants, etc. The Company shall instruct
the Trustees either (i) to continue to manage and administer the assets of the
Trust for the benefit of the Participants and their beneficiaries pursuant to
the terms and provisions of the Trust Agreement, or (ii) to pay over to each
Participant (and vested former Participant) the value of his Vested Account
Balance, and to thereupon dissolve the Trust.
Upon termination of this Plan, if the Company or any entity within the
same controlled group as the employer does not maintain another defined
contribution plan (other than an employer stock ownership plan as defined in
Section 4975(e)(7) of the Code), the Participant's Account may, without the
Participant's consent, be distributed to the Participant. However, if any
entity within the same controlled group as the Employer maintains another
defined contribution plan (other than an employer stock ownership plan as
defined in Section 4975(e)(7) of the Code), then the Participant's Account
will be transferred, without the Participant's consent, to the other plan if
She Participant does not consent to an immediate distribution.
10.03 Permanent Discontinuance of Employer Contributions
While it is the Company's intention to make substantial and recurrent
contributions to the Trust Fund pursuant to the provisions of this Plan, the
right is, nevertheless, reserved to at any time permanently discontinue
Employer contributions. Such permanent discontinuance shall be established by
resolution of the Board of Directors and shall have the effect of a
termination of the Plan, except that the Trustee shall not have authority to
dissolve the Trust Fund except upon adoption of a further resolution by the
Board of Directors to the effect that the Plan is terminated and upon receipt
from the Company of instructions to dissolve the Trust Fund pursuant to
Section 10.02(c).
10.04 Suspension of Employer Contributions.
The Employer shall have the right at any time, and from time to time, to
suspend Employer contributions to the Trust Fund pursuant to this Plan. Such
suspension shall have no effect on the operation of the Plan unless the Board
of Directors determines by resolution that such suspension shall be permanent.
A permanent discontinuance of contributions will be deemed to have occurred as
of the date of such resolution or such earlier date as is therein specified.
10.05 Mergers and Consolidations of Plans.
In the event of any merger or consolidation with, or transfer of assets
or liabilities to, any other plan, each Participant shall have a benefit in
the surviving or transferee plan (determined as if such plan were then
terminated immediately after such merger, etc.) that is equal to or greater
than the benefit he would have been entitled to receive immediately before
such merger, etc., in the Plan in which he was then a Participant (had such
Plan been terminated at that time). For the purposes hereof, former
Participants and beneficiaries shall be considered Participants.
10.06 Former Participants in Merged Plans
Notwithstanding any other provision of this Plan, in the case of a
Participant who was a participant in a Merged Plan, such Participant shall be
entitled to all benefits as to contributions made to such Merged Plan,
including all forms of benefits to which he was entitled under the Merged Plan
and all credit for Service toward vesting of Accounts, and the Plan
Administrator is authorized to make such interpretations and such exceptions,
on a non-discriminatory basis, as will prevent such merger from decreasing the
benefits due to any such Participant which are attributable to the time of his
participation in the Merged Plan.
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
None of the payments, benefits, or rights of any Participant or
beneficiary shall be subject to any claim of any creditor, and in particular,
to the fullest extent permitted by law, all such payments, benefits, and
rights shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable process available to any creditor of such Participant
or beneficiary. Notwithstanding the foregoing, the Plan Administrator shall
assign or recognize an alternate payee with respect to all or a portion of a
Participant's benefit, as may be required in accordance with a QDRO. The
Administrator shall develop such guidelines and procedures as it deems
appropriate to determine, in accordance with Section 414 of the Code, and
regulations issued pursuant thereto, whether, and in what manner, to comply
with any document it receives which is intended to be a QDRO. No Participant
or beneficiary shall have the right to alienate, anticipate, commute, pledge,
encumber, or assign any of the benefits or payments which he may expect to
receive, contingently or otherwise, under this Plan, except the right to
designate a beneficiary or beneficiaries as hereinbefore provided.
11.02 No Contract of Employment.
Neither the establishment of the Plan, nor any modification thereof, nor
the creation of any fund, trust, or account, nor the payment of any benefits
shall be construed as giving any Participant or Employee, or any person
whomsoever, the right to be retained in the service of the Employer, and all
Participants and other Employees shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
11.03 Severability of Provisions.
If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions
had not been included.
11.04 Heirs, Assigns, and Personal Representatives.
This Plan shall be binding upon the heirs, executors, administrators,
successors, and assigns of the parties, including each Participant and
beneficiary, present and future.
11.05 Headings and Captions.
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
11.06 Gender and Number.
Except where otherwise clearly indicated by context, the masculine and
the neuter shall include the feminine and the neuter, the singular shall
include the plural, and vice-versa.
11.07 Funding Policy.
The Plan Administrator, in consultation with the Company, shall
establish and communicate to the Trustees a funding policy consistent with the
objectives of this Plan and of the corresponding Trust. Such policy shall
reflect due regard for the emerging liquidity needs of the Trust. Such
funding policy shall also state the general investment objectives of the Trust
and the philosophy upon which maintenance of the Plan is based.
11.08 Title to Assets.
No Participant or Beneficiary shall have any right to, or interest in,
any assets of the Trust Fund upon termination of his employment or otherwise,
except as provided from time to time under this Plan, and then only to the
extent of the benefits payable under the Plan to such Participant out of the
assets of the Trust Fund. All payments of benefits as provided for in this
Plan shall be made from the assets of the Trust Fund, and neither the Employer
nor any other person shall be liable therefor in any manner.
11.09 Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Trustees, the Plan Administrator, the Employer and all other
parties with respect thereto.
11.10 Situs.
This Plan shall, to the extent not pre-empted by ERISA or other Federal
law, be construed according to the laws of the Commonwealth of Virginia, where
such state statutes may be applicable to an employee benefit plan.
ARTICLE XII - TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
For any Plan Year commencing in 1984 or thereafter, the Plan shall be a
Top-Heavy Plan, as such term is defined under Section 416 of the Internal
Revenue Code, if the Value of Accumulated Benefits for Key Employees under all
Aggregated Plans exceeds 60% of the Value of Accumulated Benefits for all
Group Participants under all Aggregated Plans, determined as of the
Determination Date immediately preceding such Plan Year. If the Plan is a
Top-Heavy Plan for a Plan Year and, as of the Determination Date immediately
preceding such Plan Year, the Value of Accumulated Benefits for Key Employees
under all Aggregated Plans exceeds 90% of the Value of Accumulated Benefits
for all Group Participants under all Aggregated Plans, then the Plan shall be
a Super Top-Heavy Plan for such Plan Year. For such purposes, the terms "Key
Employees" and "Group Participants" shall include all persons who are or were
Key Employees or Group Participants during the Plan Year ending on such
Determination Date or during any of the four (4) immediately preceding Plan
Years.
The value of Accounts and the present value of accrued benefits will be
determined as of the most recent Valuation Date that falls within or ends with
the 12-month period ending on the Determination Date, except as provided in
Section 416 of the Code for the first and second plan years of a defined
benefit plan. The Accounts and accrued benefits of a Participant (1) who is
not a Key Employee but who was a Key Employee in a prior year, or (2) who has
not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the 5-year period ending on the
Determination Date will be disregarded. The calculation of the top-heavy
ratio, and the extent to which distributions, rollovers, and transfers are
taken into account will be made in accordance with Section 416 of the Code.
Deductible employee contributions will not be taken into account for purposes
of computing the top-heavy ratio. When aggregating plans the value of
Accounts and accrued benefits will be calculated with reference to the
determination dates that fall within the same calendar year.
The accrued benefit of a participant other than a Key Employee shall be
determined under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Section
411(b)(1)(c) of the Code.
For purposes of this Article, the following definitions shall apply in
addition to those set forth in Article I:
"Affiliated Employer Group" shall mean the Employer and each other
employer which must be aggregated with the Employer for purposes of Sections
414(b), 414(c) or 414(m) of the Code.
"Aggregated Plans" shall mean (i) all plans of the Employer or an
Affiliated Employer Group which are required to be aggregated with the Plan,
and (ii) all plans of the Employer or an Affiliated Employer Group which are
permitted to be aggregated with the Plan and which the Plan Administrator
elects to aggregate with the Plan, for purposes of determining whether the
Plan is a Top-Heavy Plan. A plan shall be required to be aggregated with the
Plan if such plan includes as a participant a Key Employee (and the
beneficiary of such employee) or if such plan enables any plan of the Employer
or of a member of the Affiliated Employer Group in which a Key Employee
participates to qualify under Section 401(a)(4) or Section 410 of the Code. A
plan of the Employer or the Affiliated Employer Group shall be permitted to be
aggregated with the Plan if such plan satisfies the requirements of Sections
401(a)(4) and 410 of the Code, when considered together with the Plan and all
plans which are required to be aggregated with the Plan. No plan shall be
aggregated with the Plan unless it is a qualified plan under Section 401 of
the Code. The required aggregation group shall include plans terminated
within the five year period ending on the Determination Date.
"Annual compensation" shall mean compensation as defined in Section
415(c)(3) of the Code but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under Section 125, Section 402(a)(8), Section 402(h)
or Section 403(b) of the Code.
"Determination Date" shall mean the date as of which it is determined
whether a plan is a Top-Heavy Plan or Super Top-Heavy Plan for the Plan Year
immediately following such Determination Date. The Determination Date for the
Plan shall be:
(a) in the case of a defined benefit plan, the date as of which the
actuarial valuation of the Plan, as used for determination of minimum funding
standards under Section 412 of the Code, is performed; and
(b) in the case of a defined contribution plan, the last day of the
Plan Year.
"Group Participant" shall mean anyone who is or was a participant in any
plan included in the Aggregated Plans during the Plan Year which includes the
Determination Date or any of the four (4) immediately preceding Plan Years,
and who received compensation from an Employer during the five (5) year period
ending on the Determination Date. Any beneficiary of a Group Participant who
has received, or is expected to receive, a benefit from a plan included in the
Aggregated Plans shall be considered a Group Participant solely for purposes
of determining whether the Plan is a Top-Heavy Plan or Super Top-Heavy Plan.
"Key Employee" shall mean any employee or former employee of the
Employer or of an Affiliated Employer Group who during the Plan Year which
includes the Determination Date, or during any of the four (4) Plan Years
immediately preceding such Plan Year, was:
(a) an officer of the Employer whose compensation is at least $45,000
(or such higher amount as is permitted in accordance with the Code); or
(b) a five percent (5%) owner of the Employer; or
(c) a one percent (1%) owner of the Employer whose total annual
compensation from the Affiliated Employer Group exceeds $150,000; or
(d) an employee whose compensation equals or exceeds $30,000 (or such
higher amount as may be defined under Section 415(c)(1)(A) of the Code), and
whose ownership interest in the Affiliated Employer Group is among the ten
largest.
In no event shall a partner of an employer be considered an officer
under paragraph(a) above. Further, the number of officers counted under (a)
above as of any Determination Date shall not exceed the lesser of:
(1) the greater of (i) ten percent (10%) of the total number of
employees of the Affiliated Employer Group, and (ii) three ; and
(2) 50.
If the application of the preceding paragraph results in a reduction in
the number of officers to be included as Key Employees, then individuals who
are officers shall be eliminated from the group of Key Employees beginning
with the individual who had the lowest one-year compensation in the five (5)
year period including the Plan Year which includes the Determination Date, and
the four (4) immediately preceding Plan Years, and eliminating each individual
with the next higher one-year compensation in such period, until the maximum
number of officers remain in the Key Employee group.
In addition, the beneficiary of a Key Employee shall be deemed to be a
Key Employee.
"Non-Key Employee" shall mean an Employee who is not a Key Employee. An
Employee who was a Key Employee in a previous Plan Year but who is no longer a
Key Employee in the current Plan Year, shall not be considered a Non-Key
Employee for the current Plan Year.
"Value of Accumulated Benefits" shall mean:
(a) In the case of a Group Participant or beneficiary covered under a
defined benefit plan, the sum of
(i) the present value of the accrued pension benefit (as such
term is defined under the applicable plan) of the Group Participant or
beneficiary determined as of the Determination Date using reasonable actuarial
assumptions as to interest and mortality, and taking into account any
non-proportional subsidies in accordance with regulations issued by the
Secretary of the Treasury; plus
(ii) the sum of any amounts distributed to the Group Participant
and his beneficiary during the plan year ending on the Determination Date and
during the four (4) immediately preceding plan years.
(b) In the case of a Group Participant or beneficiary covered under a
defined contribution plan, the sum of the accounts of the Group Participant or
beneficiary under the plan as of the plan's Determination Date derived from:
(i) employee contributions credited to such accounts and
investment earnings thereon; and
(ii) employer contributions credited to such accounts and
investment earnings thereon; and
(iii) rollover contributions made prior to January 1, 1984, and
investment earnings thereon; and
(iv) any contributions which would have been credited to such
accounts on or before the Determination Date, but which were waived as
provided under the Code and resulted in a funding deficiency; and
(v) any amount distributed from the accounts described in (i)
through (iv) above during the Plan Year ending on the Determination Date, and
the four (4) immediately preceding Plan Years.
If the Plan is determined to be a Top-Heavy Plan or Super Top-Heavy Plan
as of any Determination Date, then it shall be subject to the rules set forth
in the remainder of this Article for the Plan Year next following such
Determination Date. If, as of a subsequent Determination Date, the Plan is
determined to no longer be a Top-Heavy Plan or Super Top-Heavy Plan, then the
rules set forth in the remainder of this Article shall no longer apply, except
where expressly indicated otherwise. Notwithstanding the foregoing, if the
Plan changes from being a Super Top-Heavy Plan to a Top-Heavy Plan, the rules
applicable to a Top-Heavy Plan shall apply.
"Year of Super Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a Super
Top-Heavy Plan.
"Year of Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a
Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
For any Plan Year in which the Plan is a Top-Heavy Plan the minimum rate
of contributions and forfeitures allocated to the account of any Participant
shall be the lesser of:
(a) The highest rate of employer contributions and forfeitures
(determined as a percentage of compensation as defined under Section 415 of
the Code) allocated to the account of any Key Employee; and
(b) 3% of such compensation.
Notwithstanding the above paragraph, if a Participant is also a
participant in another defined contribution plan of the Affiliated Employer
Group, all or a portion of the minimum allocation described above may be
provided under such other plan and the minimum allocation provided under this
Plan shall be eliminated or reduced accordingly. If the Employee is a
Participant in one or more defined benefit plans of the Affiliated Employer
Group, all or a portion of the minimum required benefits or allocations under
Section 416 of the Code may be provided under such plans as set forth in
regulations issued by the Secretary of the Treasury, and the minimum
allocation provided in the preceding paragraph shall be eliminated or reduced
accordingly. Employer contributions resulting from a salary reduction
election by an Employee shall not be counted toward meeting the minimum
required allocations under this Section. Matching Employer Contributions may
be used to satisfy the minimum required allocations under this Section, if
such contributions are not counted under the ACP test described in Section
3.06.
Participants who are Non-Key Employees and who are not separated from
service as of the last day of the Plan Year, and who have (1) failed to
complete 1000 Hours of Service (or the equivalent), (2) declined to make
mandatory contributions to the Plan, or (3) been excluded from the Plan
because such individual's compensation is less than a stated amount, are
considered Participants solely for purposes of this Section.
The minimum allocation required (to the extent required to be
non-forfeitable under Section 416(b)) may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D).
12.03 Adjustment to Maximum Benefits.
If the Plan is a Top-Heavy Plan for any Plan Year, then the maximum
benefit which can be provided under Section 3.10 shall be determined by
substituting "1.00" for "1.25" in the applicable fractions. However, if the
Plan is not a Super Top-Heavy Plan for such Plan Year, than the preceding
sentence shall not apply provided that "4%" (or such higher rate as is
required by Treasury Regulations) is substituted for "3%" in the first
paragraph of Section 12.02.
12.04 Minimum Vesting
If the Plan is determined to be a Top-Heavy Plan for any Plan Year, then
an Active Participant's vested interest in his Account determined as of the
first day of such Plan Year, and determined as of any future date while the
Plan continues to be a Top-Heavy Plan, shall be no less than as determined
under the following Table:
Years of Service Vesting Percentage
Less than 2 years None
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 years or more 100%
If the Plan subsequently is determined to no longer be a Top-Heavy Plan,
then the above minimum vesting schedule shall not apply to any portion of a
Participant's Account which is accrued after the first day of the first Plan
Year in which the Plan is no longer a Top-Heavy Plan, provided that the
Account for any Participant with three (3) or more Years of Service as the
first date as of which the Plan is no longer a Top-Heavy Plan shall continue
to be vested in accordance with a schedule not less than the minimum vesting
schedule applicable during the period that the Plan was a Top-Heavy Plan.
The minimum vesting schedule applies to all benefits within the meaning
of Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of section
416 and benefits accrued before the Plan became top-heavy.
12.05 Discontinuance of Article.
In the event that the provisions of this Article are no longer required
to qualify the Plan under the Code, then this Article XII shall thereupon be
void without the necessity of further amendment of the Plan.
IN WITNESS WHEREOF, and as evidence of the adoption of the foregoing,
the Company has caused this instrument to be executed by a duly authorized
officer as of this 8th day of November, 1994.
DYNCORP
By: H. Montgomery Hougen
H. Montgomery Hougen
Vice President & Corporate Secretary
AMENDMENT NO. ONE
TO THE
DYNCORP SAVINGS AND RETIREMENT PLAN
The DynCorp Savings and Retirement Plan is hereby amended in the following
respects, effective as provided below:
(A) Section 1.01(f) is deleted in its entirety effective as of July 1, 1995.
(B) Section 1.07 of the Plan is amended, effective as of July 1, 1995, to
read in its entirety as follows:
"1.07
"Company Stock" or "Common Stock" means shares of common stock of the
Company."
(C)Section 1.07A is added to the Plan, effective as of July 1, 1995 to read in
its entirety as follows:
"1.07A "Company Stock Fund" means an investment fund primarily invested in
Company Stock.
(D) Section 1.10 is amended, effective as of January 1, 1995, to read in its
entirety as follows:
"1.10 "Contribution Percentage" shall mean the percentage determined by
dividing (i) the sum of the Salary Deferral Contribution, After-Tax
Contribution, Matching Employer Contribution, and any Qualified Non-elective
Contribution used to satisfy the non-discrimination requirements of Section
3.06 or any combination of such Contributions, whichever is applicable, made
by or on behalf of a Participant for the applicable period by (ii) his
compensation, as defined under Code Section 414(s), earned while eligible to
participate in the Plan. "ADP" shall sometimes be used herein to refer to the
average Contribution Percentage with respect to Salary Deferral Contributions
or amounts treated as Salary Deferral Contributions. "ACP" shall sometimes be
used herein to refer to the average Contribution Percentage with respect to
Matching Employer Contributions and After-Tax Contributions, if applicable."
(E) Section 1.16 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.16 "Entry Date" shall mean, prior to July 1, 1995, the first day of
each calendar month. On and after July 1, 1995, the term Entry Date shall
mean the first day of each payroll period."
(F) Section 1.20A is added to the Plan, effective as of July 1, 1995, to
read in its entirety as follows:
"1.20A "Internal Market" means an arrangement administered and maintained by
the Company whereby individuals desiring to sell Company Stock and individuals
desiring to purchase Company Stock who are designated by the Company as
eligible to participate in the arrangement may execute sales and purchases of
Company Stock at a price established by the Board of Directors."
(G) Section 1.22A is added to the Plan, effective as of July 1, 1995, to
read in its entirety as follows:
"1.22A "Non-Company Stock Investment Fund" means an investment fund
primarily invested in assets other than Company Stock."
(H) Section 1.26 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.26 "Plan" shall mean the DynCorp Savings and Retirement Plan as set
forth herein, and as the same may from time to time hereafter be amended. The
Plan is a "profit sharing plan" as described in regulations under Section
401(a) of the Code."
(I) Section 1.35 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.35 "Valuation Date" shall mean the last day of each Plan Year and
any other date as of which the Plan Administrator elects to make a valuation
of Plan Accounts. On and after July 1, 1995, the term Valuation Date shall
mean with respect to portions of Plan Accounts invested in the Company Stock
Fund, the last day of each calendar quarter and any other date as of which the
Plan Administrator elects to make a valuation of such portions of Plan
Accounts."
(J) Section 2.01 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"2.01 Initial Eligibility.
Each Eligible Employee who is a Participant immediately prior to the
effective date of this amended and restated Plan shall continue to participate
as of such effective date. Each other Employee shall be eligible to become a
Participant on the first Entry Date following the date he first becomes an
Eligible Employee."
(K) The following paragraph is added to the end of Section 3.01, effective
as of January 1, 1989:
"Any Matching Employer Contributions attributable to Excess Elective
Deferrals, with the income allocable to such Matching Employer Contributions
calculated in accordance with regulations under Section 401(m) of the Code,
shall be withdrawn from the affected Participant's Matching Employer
Contribution Account and used by the Employer as future Matching Employer
Contributions or Discretionary Employer Contributions."
(L) Section 3.03 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
3.03 Method of Contribution/Change of Contribution Rate.
Salary Deferral and After-Tax Contributions may be made by periodic
payroll deductions or on such other basis as shall be determined from time to
time by the Plan Administrator. Nothing contained herein shall preclude the
Plan Administrator from not allowing Salary Deferral or After-Tax
Contributions to be made by any Participant in accordance with Section 3.06 or
from limiting the number of payroll periods in a Plan Year during which such
Contributions are permitted. A Participant may elect an increase or decrease
in his Salary Deferral Contributions or After-Tax Contributions, provided that
such election is made in the manner and within the time prescribed by the Plan
Administrator. Such election shall become effective as soon as practicable
after notice of the election is received by the Plan Administrator or its
delegate.
A Participant may elect to suspend all of his Salary Deferral
Contributions or After-Tax Contributions provided such election is made in the
manner and within the time prescribed by the Plan Administrator. Such
suspension shall become effective as soon as practicable after notice of the
Participant's election is received by the Plan Administrator or its delegate.
Any suspension of contributions pursuant to this Section shall continue for a
period of not less than 3 months. A Participant may elect to resume
contributions in the manner prescribed by the Plan Administrator.
No contributions may be made by or on behalf of any Participant during
any period that he is receiving long term disability benefits or worker's
compensation benefits or while the Participant is on a leave of absence for
which no Compensation is being paid from the Employer."
(M) Section 3.04 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"3.04 Matching Employer Contributions.
The Employer, at its discretion, shall make a Matching Employer
Contribution with respect to those Salary Deferral Contributions made on and
after July 1, 1995 by each Participant who has directed the investment of such
Salary Deferral Contributions in the Company Stock Fund. The Matching
Employer Contribution for each calendar quarter will equal 100% of the first
1% of the Participant's Compensation for the quarter contributed on the
Participant's behalf as a Salary Deferral Contribution and 25% of the next 4%
of the Participant's Compensation for the calendar quarter so contributed.
The Employer may make Matching Employer Contributions in the form of cash,
Company Stock or a combination thereof.
Notwithstanding any provision of this Section to the contrary, the
Employer shall, at its discretion, make a Matching Employer Contribution for
the calendar quarter with respect to each Participant who is employed by a
participating Employer that on or after July 1, 1995 does not make Matching
Employer Contributions in the form of Company Stock, in an amount equal to
100% of the first 1% of the Participant's Compensation for the quarter
contributed on the Participant's behalf as a Salary Deferral Contribution and
invested in the Company Stock Fund; 25% of the next 4% of the Participant's
Compensation for the calendar quarter so contributed and invested; 100% of the
first 2% of the Participant's Compensation for the quarter contributed on the
Participant's behalf as a Salary Deferral Contribution and invested among
Non-Company Stock Investment Funds; and 50% of the next 6% of the
Participant's Compensation so contributed and invested. Notwithstanding the
foregoing, in no event shall a Matching Employer Contribution exceed 5% of a
Participant's Compensation for a calendar quarter with any limitation on
Matching Employer Contributions applied first with respect to Matching
Employer Contributions on Salary Deferral Contributions invested in the
Non-Company Stock Investment Funds."
(N) The following shall be substituted for the last six paragraphs of
Section 3.06, effective as of January 1, 1989:
"Excess Contributions (adjusted for income or loss) shall be returned to
affected Highly-Paid Employees, to the extent not recharacterized. In
addition, any Matching Employer Contributions attributable to returned Excess
Contributions (adjusted for income or loss in the manner described in
regulations under Section 401(m) of the Code) shall be withdrawn from the
affected Participants' Matching Employer Contribution Accounts and used to
reduce future Employer contributions.
Excess Aggregate Contributions (adjusted for income or loss) that are
After-Tax Contributions shall be returned to affected Highly-Paid Employees.
Any Matching Employer Contributions attributable to returned After-Tax
Contributions (adjusted for income or loss in the manner described in
regulations under Section 401(m) of the Code) shall be withdrawn from the
affected Participants' Matching Employer Contribution Accounts and used to
reduce future Employer contributions.
Excess Aggregate Contributions (adjusted for income or loss) that are
Matching Employer Contributions not attributable to returned After-Tax
Contributions, shall be distributed to affected Highly-Paid Employees to the
extent vested. To the extent such Matching Employer Contributions are not
vested they shall be withdrawn from the affected Participants' Matching
Employer Contribution Accounts and used to reduce future Employer
contributions.
The return of Excess Contributions and Excess Aggregate Contributions
shall occur within 12 months following the end of the Plan Year in which the
nondiscrimination tests described in this Section are not satisfied and shall
be accomplished by a reduction in the respective Accounts' investments in the
Plan's investment funds in amounts determined by the Administrator.
In the event that this Plan satisfies the requirements of Sections
401(k), 401(m), 401(a)(4), or 410(b) of the Code only if aggregated with one
or more other plans, or if one or more other plans satisfy the requirements of
such Sections of the Code only if aggregated with this Plan, then this Section
3.06 shall be applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy Section 401(k)
or 401(m) of the Code only if they have the same Plan Year.
The ADP for any Participant who is a Highly-Paid Employee for the Plan
Year and who is eligible to have Salary Deferral Contributions (or amounts
treated as Salary Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single arrangement. If
a Highly-Paid Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
In lieu of applying the nondiscrimination test described in this Section
to a single group composed of all Eligible Employees as of the end of the Plan
Year, the Administrator may elect to separately apply the test to two groups
of Eligible Employees: one group consisting of those Eligible Employees who
have not completed the minimum age and service conditions described in Section
410(a) of the Code as of the end of the Plan Year, and the other group
consisting of the remaining Eligible Employees.
In the event that any provisions of this Section 3.06 are no longer
required or applicable for qualification of the Plan under the Code, then any
applicable provisions of this Section 3.06 shall thereupon be void."
(O) The last sentence of the second paragraph of Section 3.10 is amended,
effective as of January 1, 1989, to read in its entirety as follows:
"The maximum aggregate amount in any limitation year is the lesser of
(i) $30,000 or one-fourth of the dollar amount described in Section
415(b)(1)(A) of the Code as such amount may be adjusted pursuant to Section
415(d) of the Code, whichever is greater or (ii) 25% of the Participant's
compensation (within the meaning of Section 415(c)(3) of the Code and
regulations thereunder) for such year."
(P) The first clause of the eighth paragraph of Section 3.10 is amended,
effective as of July 1, 1995, to read in its entirety as follows:
"If due to the maximum permitted above there is an excess amount, the
excess will be disposed of as follows (before any reduction in annual
additions for the limitation year to the DynCorp Employee Stock Ownership
Plan):"
(Q) Subparagraph (2a) of Section 3.10 is amended, effective as of July 1,
1995, to read in its entirety as follows:
"(2a) If an excess amount still exists, and the Participant is covered
by the Plan at the end of a limitation year, the excess amount shall next be
adjusted as follows:
(i) first by a reduction in the Participant's Salary Deferral
Contribution Account by the amount of unmatched Salary Deferral Contributions
for the Plan Year, initially from those unmatched contributions invested among
Non-Company Stock Investment Funds, on a proportionate basis, and thereafter
from those unmatched contributions invested in the Company Stock Fund;
(ii) next by a reduction in the Participant's Salary Deferral
Contribution Account by the amount of matched Salary Deferral Contributions
for the Plan Year, initially from those matched contributions invested among
Non-Company Stock Investment Funds, on a proportionate basis, and thereafter
from those matched contributions invested in the Company Stock Fund; and by a
reduction in the Matching Employer Contributions attributable to matched
Salary Deferral Contributions and earnings for the Plan Year attributable to
such Matching Employer Contributions, initially from those Matching Employer
Contributions invested among Non-Company Stock Investment Funds (if any) and
thereafter from Matching Employer Contributions invested in the Company Stock
Fund;
(iii) next by a reduction in the Participant's Discretionary Employer
Contribution Account by the amount of any Discretionary Employer Contributions
for the Plan Year."
(R) The last paragraph of Section 3.10 is amended, effective as of July 1,
1995, to read in its entirety as follows:
"In the case where a reasonable error is made so that the limitations of
Section 415 are violated, the aggregate amount of any corrective adjustments
to the Salary Deferral Contribution Account of a Participant covered by the
Plan shall be accomplished by distributing the excess Salary Deferral
Contributions to the affected Participant. The aggregate amount of corrective
adjustments that are attributable to Matching Employer Contributions shall be
held in suspense and applied to reduce any later contributions by the Employer
on behalf of all Participants."
(S) Section 3.12 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"3.12 Rollover Contributions.
An Employee who has received or is entitled to receive an "eligible
rollover distribution" within the meaning of Section 402 of the Code from a
qualified retirement plan may, with the approval of the Plan Administrator,
contribute or, on and after January 1, 1993, authorize the direct rollover of,
all or part of such distribution to the Trust Fund for this plan, regardless
of whether he is presently eligible to contribute to this Plan; provided,
however, no such contribution may be made unless all of the following
conditions are satisfied:
(a) If the distribution is contributed by the Employee, such
contribution occurs on or before the 60th day following the Employee's receipt
of the distribution from the other plan;
(b) The amount contributed or included in the direct rollover is not
more than the distribution from the other plan less the amount, if any,
considered to be a return of employee after-tax contributions; and
(c) The contribution or transfer consists of cash via check (unless
the Plan Administrator authorizes another type of contribution or transfer).
The Plan Administrator may develop procedures, and may require the
information from the Employee desiring to make a rollover contribution or
direct rollover, as it deems necessary or desirable to determine that the
proposed rollover contribution or direct rollover shall satisfy the
requirements of this Section. Upon approval by the Plan Administrator, the
amount contributed or included in the direct rollover shall be credited to a
Rollover Contribution Account established on the Employee's behalf. Rollover
contributions shall be invested in the manner described in Section 4.02. Upon
a rollover contribution or direct rollover by an Employee who is not yet
making contributions to this Plan, his Rollover Contribution Account adjusted
for Plan earnings and losses attributable to that amount shall represent his
sole interest in this Plan until he begins making contributions."
(T) Section 3.13 is deleted in its entirety effective as of July 1, 1995.
(U) Section 4.01 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.01 Investment of Funds.
There shall be established within the Plan's trust fund one or more
separate investment funds selected by the Company, one of which shall be a
Company Stock Fund and the remainder which shall be Non-Company Stock
Investment Funds. The Company may add, modify, or eliminate investment funds
at its discretion without amending the Plan."
(V) Section 4.02 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.02 Investment Elections - Future Contributions.
A Participant may direct the investment of his future Salary Deferral
Contributions among any of the Plan's investment funds according to procedures
prescribed by the Plan Administrator. A Participant may direct the investment
of future Rollover Contributions among the Plan's Non-Company Stock Investment
Funds. In the absence of any investment direction by the Participant, a
Participant's Accounts shall be invested in the investment fund the Plan
Administrator directs.
Matching Employer Contributions attributable to Salary Reduction
Contributions made on or after July 1, 1995, and any investment earnings on
such Matching Employer Contributions, shall remain invested in the Company
Stock Fund at all times. Notwithstanding the foregoing, Matching Employer
Contributions made with respect to Salary Deferral Contributions of
Participants employed by Participating Employers that do not make Matching
Employer Contributions in the form of Company Stock on or after July 1, 1995,
shall be invested among the Plan's investment funds in the same proportions as
the Salary Deferral Contributions."
(W) Section 4.03 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
4.03 Change of Elections - Future Contributions.
A Participant may elect to change the investment of his future Salary
Deferral Contributions among the Plan's investment funds in the manner and at
the times prescribed by the Plan Administrator. Any such election shall be
effective as soon as practicable following receipt of the election by the Plan
Administrator or its delegate. Notwithstanding the foregoing or any provision
of Section 4.04 to the contrary, Salary Deferral Contributions which the
Participant elects to initially invest in the Company Stock Fund must remain
so invested for at least six full calendar quarters following the end of the
payroll period to which the contributions relate."
(X) Section 4.04 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.04 Change of Election - Current Accounts.
A Participant may elect to change the investment direction of the
balance of his Accounts, other than that portion of his Matching Contribution
Account attributable to Salary Deferral Contributions made on or after July 1,
1995 invested in the Company Stock Fund, among the Plan's investment funds at
such times and in accordance with procedures prescribed by the Plan
Administrator. A Participant's investment direction given pursuant to this
Section shall be given effect as soon as administratively practicable
following receipt of the investment direction by the Plan Administrator or its
delegate.
Notwithstanding the foregoing, a Participant, including a Terminated
Vested Participant, shall not be permitted to change investment of Accounts
from any Non-Company Stock Investment Fund to the Company Stock Fund.
With respect to a direction to change investment of Accounts from the
Company Stock Fund to Non-Company Stock Investment Funds, a sale of Company
Stock in satisfaction of the direction shall not occur before the trading
period on the Internal Market next following receipt of the investment
direction and shall be subject to the Trustee's ability to sell shares for
fair market value on the Internal Market. If the Trustee is unable to sell a
sufficient number of shares for fair market value on the Internal Market to
fully satisfy all outstanding Participant directions to change investment of
account balances from the Company Stock Fund to Non-Company Stock Investment
Funds and other directions requiring the sale of Company Stock, the Trustee
shall prorate the sale of shares among directing Participants' Accounts based
on the total number of shares in each Account required to be sold to fully
satisfy the investment direction over the total number of shares required to
be sold to satisfy all directions requiring sale of Company Stock. In such
event, no further action will be required by the Trustee in satisfaction of
the Participants' elections."
(Y) Section 5.04 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"5.04 Payment of Benefits.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is $3,500 or less, (and was not more than
$3,500 at the time of any prior distribution or in-service withdrawal) the
Administrator shall direct the Trustee to distribute the Participant's
Retirement Benefit in a single lump sum, without any requirement for such
Participant's consent.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is greater than $3,500, the portion of
his Vested Account Balance accrued on and after July 1, 1995 shall be payable
in a single lump sum payment. The portion of a Participant's Vested Account
Balance accrued prior to July 1, 1995 shall be paid in a lump sum, unless the
Participant elects in writing to receive Installment Payments, a Life Annuity,
or a Joint-and-Survivor Annuity, in which case payments shall be made
accordingly. No less than 30, and no more than 90 days before payment of the
Retirement Benefit of a Participant is due to commence, the Employer shall
explain to affected Participants the material features of, and explain the
relative values of, a Joint-and-Survivor Annuity and other forms of benefit
available under the Plan. An election may be changed at any time by delivery
of a written change to the Administrator, up to the time the Administrator has
ordered payment of a Retirement Benefit by the Trustee or has paid for the
purchase of an annuity described below.
Any benefits that become distributable to the Participant pursuant to
this Article shall be paid as soon as reasonably practicable after the
Participant's termination of employment subject, where applicable, to the
Trustee's ability to sell shares of Company Stock in which the Participant's
Accounts are invested for fair market value on the Internal Market. Unless
the Participant otherwise elects, benefits shall be paid no later than 60 days
after the end of the Plan Year in which occurs the latest of:
(i) the Participant's Normal Retirement Date;
(ii) the 10th anniversary of the commencement of his Plan
participation; or
(iii) his termination of employment.
Notwithstanding the foregoing, if the value of a terminating
Participant's Accounts following his termination of employment is more than
$3,500 (or was more than $3,500 at the time of any prior distribution or
in-service withdrawal), payments from the Participant's Accounts shall not be
made prior to the Participant's Normal Retirement Date, without the written
consent of the Participant obtained within 90 days prior to the date
distribution commences.
Notwithstanding any provision of the Plan to the contrary, an Active
Participant's benefits shall commence or otherwise be paid, in accordance with
Section 401(a)(9) of the Code and regulations thereunder, no later than April 1
of the calendar year immediately following the date he attains Age 70 1/2, even
if he is still employed, unless the Participant reached Age 70 1/2 prior to
January 1, 1988, and the Participant is not a greater than 5% owner (as
defined in Section 416(i) of the Code) at any time following the Plan Year
ending before the calendar year in which the Participant reached Age 66 1/2, in
which event the Participant's benefits shall commence no later than the first
day of April of the calendar year immediately following the date he retires.
Benefits shall be paid over a period not longer than the lives (or, if
applicable, joint life expectancies) of the Participant and any designated
Beneficiary. The Retirement Benefit or Vested Account Balance of a
Participant who is no longer employed shall commence or otherwise be paid, no
later than April 1 of the calendar year immediately following the date he
attains Age 70 1/2. Benefits attributable to the portion of the Participant's
Account accrued prior to July 1, 1995 shall be paid in the form of payment
elected by the Participant, but in no event in an amount less than required by
Section 401(a)(9) of the Code and regulations thereunder. If no election is
made, such benefits shall automatically be paid in a single lump sum.
Benefits attributable to the portion of the Participant's Account accrued on
and after July 1, 1995 shall be paid in a single lump sum."
(Z) Section 5.08 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"5.08 Additional Allocations on Retirement.
Except as otherwise provided in Section 5.05, any allocation for a
Participant, made as of a Valuation Date subsequent to the date of his
retirement, shall be paid to such Participant, or his Beneficiary, as soon
after such Valuation Date as is practical."
(AA) Section 5.10 is amended, effective as of July 1, 1995, to read in
its entirety as follows:
"5.10 Company Stock.
A Participant may elect to have the portion, if any, of his Vested
Account Balance accrued prior to July 1, 1995 and attributable to a fund
invested in Company Stock distributed all in cash or all in kind or in a
combination thereof. In the case of an in kind distribution, the value of a
fractional share shall be paid in cash. A Participant may elect to have that
portion of the Participant's Vested Account Balance accrued on and after July
1, 1995, and invested in Company Stock, distributed all in cash or all in
kind; provided however, any such distribution in cash shall be subject to the
Trustee's ability to sell the shares of Company Stock for fair market value on
the Internal Market. If the Trustee is unable to sell all the Company Stock
in the Participant's Accounts within the time required to make distribution of
the Participant's Accounts in accordance with Section 401(a)(14) of the Code,
distribution of the remaining Company Stock shall be made in kind.
On and after January 1, 1996, the portion of a Participant's Vested
Account Balance accrued prior to July 1, 1995 and invested in the Company
Stock Fund may be distributed in cash or in kind or in a combination thereof;
provided, however, a cash distribution of that portion of a Participant's
Accounts invested in Company Stock shall be subject to the Trustee's ability
to sell the shares of Company Stock allocated to the Participant's Accounts on
the Internal Market. If the Trustee is unable to sell all the Company Stock
in the Participant's Accounts within the time required to make distribution of
the Participant's Accounts in accordance with Section 401(a)(14) of the Code,
distribution of the remaining Company Stock shall be made in kind. The
provisions of this paragraph shall become operative only upon a determination
by the Internal Revenue Service that the terms of the Plan, including these
provisions, will continue to qualify under Section 401(a) of the Code."
(BB) Section 7.01 is amended, effective as of January 1, 1995, to read in its
entirety as follows:
"7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested in his Salary
Deferral Contribution Account, After-Tax Contribution Account, and Rollover
Contribution Account, and in any restoration contributions made pursuant to
Section 7.03.
A Participant shall be vested in his Matching Employer Contribution
Account and his Discretionary Employer Contribution Account based on his Years
of Service in accordance with the following table:
Years of Service Vesting Percentage
Less than 2 0%
2 but less than 3 50%
3 or more 100%
Notwithstanding the foregoing, a Participant formerly employed by
Meridian Corporation at the time of the merger of the Meridian 401(k) Plan
with this Plan, shall be vested in his Matching Employer Contribution Account
and Discretionary Employer Contribution Account based on his Years of Service
in accordance with the foregoing table; provided, however, for purposes of
determining his Years of Service, the Participant's third Year of Service
shall be determined in accordance with Section 1.38 or determined based upon
the Participant's completion of at least 1000 Hours of Service in a Plan Year
commencing after the Participant's completion of two Years of Service
(determined in accordance with Section 1.38), whichever will produce the
greater Years of Service.
Notwithstanding the foregoing, an Active Participant shall be fully
(100%) vested in his entire Account at his Normal Retirement Date, the date of
his retirement due to Disability, or the date of his death.
Notwithstanding the foregoing, where government regulations, including
the Federal Procurement Regulations and agency supplemental procurement
regulations, or contracts issued by government agencies require, for
Participants who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of service when the
Participant is performing a government contract shall be 100% vested for any
such Participant who has completed one Year of Service, then each such
Participant shall be 100% vested in that portion of his Account attributable
to contributions for the period during which he is subject to such regulation
or contract, upon completion of one Year of Service. However, if for any Plan
Year the application of the preceding sentence would result in discrimination
in favor of Highly-Paid Employees in violation of Code Section 401(a)(4), then
for such Plan Year the preceding sentence shall not apply to any such
Highly-Paid Employee."
(CC) Section 7.02 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"7.02 Payment of Benefits to Terminated Participants.
An active Participant who is vested in any portion of his Account and
terminates employment prior to his Normal Retirement Date shall be deemed a
Terminated Vested Participant. Payment of his Vested Account Balance shall be
made no later than 60 days after the end of the Plan Year in which the
Participant's Normal Retirement Date occurs. However, a Terminated Vested
Participant may elect, in the manner prescribed by the Plan Administrator,
that his Vested Account Balance be paid as soon as practicable following his
Termination of Employment. If the value of the Terminated Vested
Participant's Vested Account Balance is not more than $3,500 (and was not more
than $3,500 at the time of any prior distribution or in-service withdrawal)
the Plan Administrator shall automatically direct that the Participant's
entire Vested Account Balance be distributed in a single lump sum as soon as
practicable following the Participant's termination of employment. If the
value of the Terminated Vested Participant's Vested Account Balance is more
than $3,500 (or was more than $3,500 at the time of any prior distribution or
in-service withdrawal) no payment shall be made prior to the Participant's
Normal Retirement Date without the written consent of the Participant obtained
no more than 90 days prior to the date payment is made. For purposes of this
Section, the transfer of a Participant's employment to a buyer, concurrent
with the sale of a subsidiary or trade or business of an Employer or Affiliate
to such buyer, or any other change in the Participant's employment status with
an Employer or Affiliated Organization not considered a "separation from
service" (within the meaning of Section 401(k)(2)(B) of the Code), will not be
considered a termination of the Participant's employment."
(DD) Section 8.01 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"8.01 Withdrawals While Employed.
In-service withdrawals of amounts not held as security for a loan from
the Plan may be made by Active or Inactive Participants, but not by Terminated
Vested Participants, in accordance with procedures prescribed by the Plan
Administrator, but not more frequently than once per calendar month, in the
following order:
(a) A Participant may withdraw all or any portion of his After-Tax
Contribution Account as follows. Such withdrawal shall come first from
After-Tax Contributions made prior to January 1, 1987. Next, such withdrawal
shall be made proportionately from Participant's After-Tax Contributions made
after December 31 1986 and investment earnings on After-Tax Contributions.
(b) After a Participant has withdrawn all of his After-Tax
Contributions Account, if any, he may withdraw all or any portion of the
amount of his vested Matching Employer Contribution Account accrued prior to
July 1, 1995 and vested Discretionary Employer Contribution Account accrued
prior to July 1, 1995 that has been in such Account(s) for a period of at
least two years.
(c) After a Participant has withdrawn all of his available Matching
Employer Contribution Account and Discretionary Employer Contribution Account,
if any, he may withdraw all or any portion of his Rollover Contribution
Account.
(d) After a Participant who has attained Age 59 1/2 has withdrawn all of
his available Rollover Contribution Account, if any, he may withdraw all or
any portion of his Salary Deferral Contribution Account provided however,
amounts accrued in the Participant's Salary Deferral Contribution Account may
only be withdrawn if invested in Non-Company Stock Investment Funds.
(e) After a Participant who has not attained Age 59 1/2 has withdrawn
all of his available Rollover Contribution Account and obtained all non-taxable
loans available from this Plan and all distributions and non-taxable loans
available from any other plans maintained by the Employer, he may withdraw so
much of his available Salary Deferral Contribution Account as is necessary to
alleviate a financial hardship, and the amount reasonably estimated as
necessary to pay income taxes or penalties resulting from the distribution.
Such hardship must be an immediate and heavy financial need of the Participant
where such Participant lacks other available resources. Expenses in
connection with a death in a Participant's immediate family would constitute
such an immediate and heavy financial need and the following conditions would
automatically be deemed an immediate and heavy financial need:
(i) medical expenses as described under Code Section 213(d)
incurred by the Participant, his spouse, or his dependents or obtainment of
medical care if the withdrawal is necessary for such persons to obtain medical
care;
(ii) costs directly related to the purchase of a primary
residence (excluding mortgage payments);
(iii) payment of tuition, related educational fees and room and
board expenses for the next twelve months of post-secondary education for the
Employee, his spouse, or his dependents;
(iv) payment to prevent eviction of the Participant from a
primary residence or foreclosure of mortgage on his primary residence; and
(v) any other occurrence as authorized by Treasury Regulations,
Rulings, Notices, and other documents of general applicability.
A Participant must submit a written certification on the form prescribed
by the Plan Administrator that the hardship distribution is necessary to
satisfy an immediate and heavy financial need. The written certification must
indicate that the need cannot reasonably be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the employee's
assets, by cessation of Salary Deferral Contributions or After-Tax
Contributions (if applicable) under the Plan, by other distributions or
non-taxable loans from plans maintained by the Employer or any other employer,
or by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need. The Employer must not have actual
knowledge to the contrary that the need cannot reasonably be relieved as
described above.
A Participant may not withdraw any investment earnings included in his
Salary Deferral Contribution Account which were accumulated after December 31,
1988, or any Qualified Non-elective Contributions (including investment
earnings), unless he has attained Age 59 1/2.
A Participant may not withdraw any portion of his Matching Employer
Contribution Account or his Discretionary Employer Contribution Account,
except as set forth in subparagraph (b) above, for any reason prior to his
retirement or other termination of employment.
In no event will any hardship withdrawal of Salary Deferral
Contributions be granted until any applicable distributions and loans have
been taken from this Plan and from all other qualified retirement plans of the
Employer.
Hardship withdrawals shall first reduce that portion of the affected
Participant's Salary Deferral Contribution Account, if any, invested in
Non-Company Stock Investment funds; next that portion of the Salary Deferral
Contribution Account invested in the Company Stock Fund but not yet invested
in Company Stock; and finally that portion of the Salary Deferral Contribution
Account invested in Company Stock. Notwithstanding any provision of this
Section to the contrary, withdrawal of amounts invested in shares of Company
Stock shall be subject to the Trustee's ability to sell such shares on the
Internal Market.
Upon a withdrawal for financial hardship, the Participant's Salary
Deferral Contributions shall be suspended for a minimum period of twelve
months, and the Participant shall not, for such period, be permitted to make
any elective contribution to any qualified or non-qualified deferred
compensation plan of the Employer, including any defined benefit retirement
plan or any stock option, stock purchase, or similar plan, but not including
contributions to a health or welfare benefit plan. In addition, for the
taxable year following the year in which such a withdrawal is made, the
Participant's elective contributions to this and all other contributory plans
maintained by the Company, if any, shall be subject to the applicable limit
under Code Section 402(g) for that year minus the Participant's elective
contributions for the year of the hardship withdrawal.
Notwithstanding any provision of this Section to the contrary, any
withdrawal from an Account invested in a Non-Company Stock Investment Fund
shall be conditioned upon such withdrawal being permitted without penalty
under the terms of such investment fund."
(EE) Subparagraphs (a), (b) and (c) of Section 8.02 are amended, effective as
of July 1, 1995, to read in their entirety as follows:
"8.02 Loans.
(a) Active or Inactive Participants who have not previously
defaulted on a loan from the Plan, (but not Vested Terminated Participants),
may obtain a loan from their Accounts in amounts of not less than $1,000 under
procedures prescribed by the Plan Administrator. No more than two Plan loans
may be outstanding to a Participant at any time.
(b) No Participant shall, under any circumstances, be entitled
to loans in excess of the lesser of:
(i) 50% of his Vested Account Balance;
(ii) $50,000 less the highest outstanding loan balance in
the preceding 12 month period over the outstanding loan balance on the day
immediately preceding issuance of the loan; or
(iii) the amount of the Participant's Accounts invested in
Non-Company Stock Investment Funds the terms of which permit withdrawals
without penalty, but excluding the amount of the Participant's After-Tax
Contribution Account, if any.
For purposes of this paragraph, all outstanding loans to a
Participant under this Plan or any other qualified retirement plan of the
Employer shall be aggregated.
(c) Any loan to a Participant shall be evidenced by the
Participant's promissory note and secured by the pledge of up to 50% of the
balance of the Participant's Accounts and by the pledge of such further
collateral as the Trustee deems necessary or desirable to assure repayment of
the borrowed amount and all interest payable thereon in accordance with the
terms of the loan. ..."
(FF) Subparagraph (d) of Section 8.02 is amended, effective as of January 1,
1989, to read in its entirety as follows:
"8.02 Loans.
(d) Interest on any loan shall be at a reasonable rate determined by
the Administrator commensurate with interest rates charged by persons in the
business of lending money for loans which would be made under similar
circumstances. The Administrator shall have sole discretion in determining
the interest rate, and its decision shall be final and binding. ..."
(GG) Subparagraphs (g) and (h) of Section 8.02 are amended, effective as of
January 1, 1989, to read in their entirety as follows:
"8.02 Loans.
(g) If not previously repaid in full, the unpaid portion of any
outstanding loans (including interest thereon) shall be deducted at the time
of a distribution due to retirement, death, disability, or other termination
of employment, from the amount of the Account otherwise available to pay or
purchase any benefit to which a Participant (or his beneficiary) is entitled
under this Plan.
(h) If a required periodic payment is not made within 60 days of the
date it was due, this shall be deemed a default. Upon a default, the entire
amount of unpaid loan principal and interest shall immediately become due and
payable. Without further action or notice to the Participant, the
Administrator may direct the Trustee to reduce the Participant's Plan Accounts
by the lesser of the total amount due and payable or the amount of the
Accounts pledged as security for the loan. The Administrator, at its
discretion, may delay the direction, for as long as it deems appropriate,
provided such delay is applied on a consistent basis that is not
discriminatory in favor of Highly-Paid Employees. Notwithstanding the
foregoing, no reduction in a Participant's Salary Deferral Contribution
Account shall occur upon the default of a Participant's loan until one of the
distributable events described in Code Sections 401(k)(2) or 401(k)(10) has
occurred. If such action does not fully repay the loan, the Administrator may
take such other action as may be necessary or appropriate to secure repayment,
including foreclosure upon other property, if any, pledged as security for the
loan. ..."
(HH) Subparagraph (i) of Section 8.02 is added, effective as of July 1, 1995,
to read in its entirety as follows:
"8.02 Loans.
(i) Loan proceeds shall be taken from that portion of a
Participant's Plan Accounts invested in Non-Company Stock Investment Funds in
the following order:
1) Rollover Contribution Account
2) Matching Employer Contribution Account
3) Discretionary Employer Contribution Account
4) Salary Deferral Contribution Account
Repayments of loan principal shall reduce the outstanding balance of the
loan and shall be credited to the Participant's Plan Accounts in reverse order
from which loan proceeds were taken until principal repayments equal the
amount of the proceeds taken from the respective Accounts. Interest payments
shall be credited to the Account from which loan proceeds were taken until
principal repayments to the Account equal the proceeds taken from the Account.
The Plan Account from which loan proceeds are last taken shall be
reduced proportionately from the applicable Account's investments in the
Non-Company Stock Investment Funds.
Repayments of loan principal and interest shall be invested among the
Plan's Non-Company Stock Investment Funds in the same proportion as the
Participant's then current investment election for Salary Deferral
Contributions among the Non-Company Investment Funds. If there is no such
current election, repayments of loan principal and interest shall be invested
in the investment fund the Plan Administrator directs."
(II) Section 9.06 is added to the Plan, effective as of January 1, 1993, to
read in its entirety as follows:
"9.06 Direct Rollovers of Accounts to Other Qualified Plans.
At the election of a Participant or surviving spouse who is eligible for
a distribution from the Plan on or after January 1, 1993, that is an "eligible
rollover distribution" (within the meaning of Section 402 of the Code), the
Administrator shall authorize the direct rollover of the distributed amount
from the trust fund of this Plan (i) in the case of a Participant, to an
"eligible retirement plan" (within the meaning of Section 401(a)(31) of the
Code) or (ii) in the case of a surviving spouse, to an "individual retirement
account" or "individual retirement annuity" (within the meaning of Section 408
of the Code). Direct rollovers shall be made according to the procedures
established by the Administrator conforming to the requirements of Section
401(a)(31) of the Code and regulations thereunder."
(JJ) The following is substituted for subparagraphs (b) and (c) of Section
10.02, effective as of January 1, 1989:
"10.02 Plan Termination.
(b) Disposition of Accounts Upon termination of the plan, the
Accounts of each affected Participant shall be distributed as soon as
administratively feasible in the manner provided in Article VI and VII through
payments from the trust or purchase of an annuity contract unless the Company,
in its discretion, and if permitted by the Code and the regulations
thereunder, directs that the Accounts of the affected Participants continue to
be held in the Trust Fund to be distributed upon each Participant's
retirement, death, disability, termination of employment or otherwise in
accordance with the terms of the Plan. The distribution of Accounts shall be
made in accordance with the Participant and spousal consent provisions of
Sections 411(a)(11) and 401(a)(11) of the Code to the extent the consent
provisions are applicable to Accounts having a value at the time of such
distribution or any prior distribution of more than $3,500.
Notwithstanding the foregoing, if the Company or any entity within
the same controlled group as the employer does not maintain another defined
contribution plan (other than an employer stock ownership plan as defined in
Section 4975(e)(7) of the Code), the Participant's Accounts may, without the
Participant's consent, be distributed to the Participant. However, if any
entity within the same controlled group as the Employer maintains another
defined contribution plan (other than an employer stock ownership plan as
defined in Section 4975(e)(7) of the Code), then the Participant's Account
will be transferred, without the Participant's consent, to the other plan if
the Participant does not consent to an immediate distribution."
SUMMARY OF CHANGES CONTAINED
IN AMENDMENT NO. ONE
TO THE
DYNCORP SAVINGS AND RETIREMENT PLAN
A.Section 1.01(f), defining the term "Stock Account," is deleted.
B. Section 1.07, defining the term "Company Stock," is amended to apply the
same definition to the term "Common Stock."
C. Section 1.07A is added to the Plan to define the term "Company Stock
Fund."
D. Section 1.10, defining the term "Contribution Percentage," is amended to
specify that only a Participant's compensation earned while eligible to
participate in the Plan will be taken into account in determining his
Contribution Percentage.
E. Section 1.16, defining the term "Entry Date," is amended to provide that
the term shall mean the first day of each payroll period.
F. Section 1.20A is added to the Plan to define the term "Internal Market."
G. Section 1.22A is added to the Plan to define the term "Non-Company Stock
Investment Fund."
H. Section 1.26, defining the term "Plan," is amended to specify that the
Plan is a profit sharing plan.
I. Section 1.35, defining the term "Valuation Date," is amended to specify
that Accounts invested in the Company Stock Fund shall be valued as of the
last day of each calendar quarter.
J. Section 2.01 is amended to specify that an Employee shall be eligible to
become a participant on the first Entry Date following the date he becomes an
Eligible Employee.
K. Section 3.01 is amended to specify that any Matching Employer
Contributions attributable to Excess Elective Deferrals returned to the
Participant shall be withdrawn from the Participant's Matching Employer
Contribution Account and used to reduce future Employer contributions.
L. Section 3.03 is amended to describe how Participants may suspend
contributions to the Plan and to describe the mechanics of Participants'
change of contribution elections in a way compatible with a voice response
system.
M. Section 3.04 is amended (i) to describe the general matching formula
that will apply on and after July 1, 1995; (ii) to specify that Matching
Employer Contributions are conditioned upon the Participant investing his
Salary Deferral Contributions in the Company Stock Fund; and (iii) to
describe the special matching formula applicable to Participants whose
Employers match Salary Deferral Contributions in the form of cash.
N. Section 3.06 is amended to describe the disposition of Excess
Contributions, Excess Aggregate Contributions and Matching Employer
Contributions attributable thereto upon failure of an ADP or ACP test, in a
manner compatible with the regulations under Sections 401(k) and 401(m) of the
Code.
O. The second paragraph of Section 3.10 is amended to accurately describe
the limits on annual additions to a defined contribution plan under Section
415 of the Code.
P. The eighth paragraph of Section 3.10 is amended to clarify that if a
reduction in annual additions to a defined contribution plan is needed, the
reduction shall occur first in the DynCorp Savings and Retirement Plan before
any reduction in contributions to the DynCorp Employee Stock Ownership Plan.
Q. Subparagraph (2a) of Section 3.10 is amended to describe the hierarchy
in which Plan accounts will be reduced if annual additions in excess of the
annual Section 415 limits occur.
R. The last paragraph of Section 3.10 is amended to describe the
disposition of any corrective adjustments to Salary Deferral Contribution
Accounts and Matching Employer Contribution Accounts needed to satisfy Code
Section 415.
S. Section 3.12 is amended to more clearly describe the circumstances under
which Rollover Contributions will be accepted by the Plan.
T. Section 3.13 is deleted. The information previously contained in
Section 3.13 describing suspension of contributions is now set forth in
Section 3.03, as amended.
U. Section 4.01 is amended to describe the establishment of a Company Stock
Fund and Non-Company Stock Investment Funds in the Plan.
V. Section 4.02 is amended to describe that Salary Deferral Contributions
may be invested among any of the Plan's investment funds including the Company
Stock Fund. Rollover Contributions may be invested only among the Plan's
Non-Company Stock Investment Funds. Matching Contributions attributable to
Salary Reduction Contributions made on or after July 1, 1995 will remain
invested in the Company Stock Fund at all times; provided, however, Matching
Employer Contributions on Salary Deferral Contributions made by Participants
whose Employers match Salary Deferral Contributions in the form of cash will
be invested among the Plan's investment funds, including the Non-Company Stock
Investment Funds, in the same proportions as the Participant's Salary Deferral
Contributions.
W. Section 4.03 is amended to specify that Salary Deferral Contributions
which the Participant elects to initially invest in the Company Stock Fund
must remain so invested for at least six full calendar quarters following the
end of the payroll period to which the contributions relate.
X. Section 4.04 is amended to provide (i) that a Participant may not
change the investment of accounts from any Non-Company Stock Investment Fund
to the Company Stock Fund; (ii) that a direction to change investment of
accounts from the Company Stock Fund to Non-Company Stock Investment Funds
shall be subject to the Trustee's ability to sell shares for fair market value
on the Internal Market; and (iii) to provide language describing the mechanics
for changing investment directions in a manner compatible with a voice
response system.
Y. Section 5.04 is amended to provide that the portion of a Participant's
Vested Account Balance accrued on and after July 1, 1995 shall be payable only
in a single lump-sum payment and to describe the payment of benefits payable
to both Active and terminated participants upon attainment of Age 70 1/2.
Z. Section 5.08 is amended to provide that any allocation for a Participant
made as of a Valuation Date following retirement shall be paid to such
Participant or beneficiary as soon as after such Valuation Date as
practicable.
AA. Section 5.10 is amended to provide that a Participant may elect to have
that portion of his Vested Account Balance accrued on and after July 1, 1995
distributed in cash or in kind, provided, however, cash distributions
attributable to Company Stock shall be subject to the Trustee's ability to
sell shares for fair market value on the Internal Market. If the Trustee is
unable to sell all the Participant's Company Stock within the time required to
make distributions under the terms of the Code, distribution of any remaining
stock shall be made in kind. On and after January 1, 1996, the foregoing
limitations shall also apply to that portion of the Participant's Vested
Account Balance accrued prior to July 1, 1995, subject to approval of the
limitations by the IRS.
BB. Section 7.01 is amended to describe the general vesting schedule and to
also describe the special vesting schedule that applies to former Participants
in the Meridian 401(k) Plan at the time of its merger with the DynCorp Savings
and Retirement Plan.
CC. Section 7.02 is amended to specify that an automatic distribution of a
Vested Account Balance of not more than $3,500 will occur only if the balance
was not more than $3,500 at the time of any prior distribution or in-service
withdrawal. This section is also amended to specify that a transfer of a
Participant's employment to a buyer upon the sale of a subsidiary trade of
business by the Company to the buyer, shall not be considered a termination of
employment for purposes of Section 401(k) of the Code.
DD. Section 8.01 is amended to (i) describe the hierarchy of accounts from
which in-service withdrawals may be taken and (ii) to describe that hardship
withdrawals from a Participant's Salary Deferral Contribution Account shall be
taken last from the amounts invested in Company Stock and subject to the
Trustee's ability to sell the shares on the Internal Market.
EE. Sections 8.02(a) and (b) are amended to provide that (i) only
Participants who have not previously defaulted on a loan may obtain a loan
from the Plan, and (ii) to provide that the maximum amount available for a
Plan loan will be limited to amounts invested in Non-Company Stock Investment
Funds which permit withdrawals, but excluding amounts in the Participant's
After-Tax Contribution Account if any.
FF. Section 8.02(d) is amended to simply state that interest on any loan
shall be at a reasonable rate determined by the Administrator commensurate
with interest rates that would be charged under similar circumstances by
persons in the business of lending money.
GG. Sections 8.02(g) and (h) are amended to describe the circumstances under
which outstanding Plan loans will be repaid in the event of the Participant's
retirement, death, disability or other termination of employment, or in the
event of a default on a loan.
HH. Section 8.02(i) is amended to describe the hierarchy in which loan
proceeds will be taken from Participants' Accounts and the manner in which
loan repayments will be allocated among Plan Accounts and Plan investment
funds.
II. Section 9.06 is amended to specify the circumstances under which a
Participant may elect a direct rollover of a Plan distribution to another
qualified plan, as required by Section 401(a)(31) of the Code.
JJ. Sections 10.02(b) and (c) are combined into Section 10.02(b) to clarify
that distributions upon Plan termination shall be made in accordance with the
requirements of Sections 411 and 401(a)
(11) of the Code.
Exhibit 4.3
DYNCORP 1995 EMPLOYEE STOCK PURCHASE PLAN
(Effective July 1, 1995)
The Purpose of this DynCorp 1995 Employee Stock Purchase
Plan (the "Plan") is to provide a method by which eligible
employees of DynCorp and its wholly owned subsidiaries, divisions
and business units, and other partially owned entitles so
designated by the Board of Directors or authorized committee
thereof, (the "Company") may purchase shares of Common Stock of
DynCorp ("Shares" or "Stock") by payroll deduction and at
favorable prices. As a result, eligible employees will be given
an opportunity to acquire an additional interest in the growth
and earnings of the Company and a further incentive to promote
the best interests of the Company.
1. ELIGIBILITY TO PARTICIPATE
All employees of the Company shall be eligible to
participate in the Plan, subject to limitations that are imposed
by the rules and regulations of the Securities and Exchange
Commission or similar state regulatory agencies (the "Securities
Laws"). Employees on temporary leave of absence may continue to
participate in the Plan provided authorization is given by the
Vice President of Human Resources or designee thereof, to the
extent of payroll deductions effected prior to such leave of
absence are available.
2. SHARES THAT MAY BE PURCHASED
No participant shall be permitted to purchase less than
$7.00 nor more than $450.00 of Stock, at the Plan Stock Price
discussed below, per week of participation in the Plan. In the
event the total of all Plan purchase authorizations during any
calendar quarter exceeds the total number of Shares that are
authorized to be purchased on behalf of all Plan participants
through the DynCorp Internal Stock Market (the "Internal Market")
on a scheduled trading date (a "Trade Date") for the Internal
Market, purchase authorizations shall be filled first up to
$150.00 per Trade Date, per participant, and the remainder shall
be filled on a pro-rata basis determined by the ratio of the
amount of each participant's unsatisfied purchase authorization
to the amount of all participants' unsatisfied purchase
authorizations as of such Trade Date. In the event there are not
sufficient Shares available in the Internal Market to fulfill the
first $150.00 per participant, purchase authorizations shall be
filled on a pro-rata basis based on the ratio of the amount of
each participant's purchase authorization up to $150.00 to the
amount of the aggregate of first $150.00 of all participants'
purchase authorizations. Any payroll deductions not used to
purchase Shares on a specific Trade Date as a result of the
foregoing limitations will be refunded to the participant,
without interest.
For example, if the total value of Shares available for purchase
on behalf of all Plan participants in the Internal Market on a
Trade Date equals $100,000, and the total of all purchase
authorizations resulting from payroll deductions under the Plan
during the quarter equals $125,000, of which $75,000 represents
individual participants' purchase authorizations for the first
$150.00 of Shares, all of those authorizations would be accepted
first, and the remaining $25,000 of Shares available for purchase
would be allocated on a pro-rata basis to the remaining $50,000
of Share purchase authorizations amounts in excess of $150. This
would mean that a purchaser with a quarterly payroll deduction
authorization of $500 would be entitled to purchase $325 of Stock
[$150 +(($500-$150) x ($25,000/$50,000))] on that Trade Date.
3. PLAN STOCK PRICE AND PAYROLL DEDUCTIONS
The purchase price of each share acquired under the Plan
shall be as determined from time to time by the DynCorp Board of
Directors, but in no event less than 85% of the fair market value
of the Stock as determined under the rules and procedures of the
Internal Market on each quarterly Trade Date (the "Plan Stock
Price"). The Plan Stock Price initially established by the Board
for Shares is 95% of the Internal Market fair market trading
price established under the rules of the Internal Market (the
"Market Price"), subject to change by the Board. Purchasers
under this Plan may acquire Shares only by means of individual
payroll deductions. The Company shall accumulate payroll
deductions of all participants on its financial books and records
during each calendar quarter and shall, no later than the
required settlement date following a Trade Date, (a) pay an
amount equal to all employee Plan deductions during the quarter,
less statutory withholding as required (if any) with respect to
the 5% discount (the "Discount") to the broker handling trades on
the Internal Market (the "Broker"), and (b) at the Company's
option, either (i) pay to the Broker a cash amount equal to the
Discount or (ii) transfer to the Broker or other custodian of
Plan-purchased Shares a number of Shares, either in certificated
or electronic form, equal in value to the amount of the aggregate
Discount of Shares purchased. The Broker shall, to the extent
Shares are available for purchase, purchase the required number
of Shares through the Internal Market on each Trade Date. No
interest will be paid on employee funds held under the Plan.
4. APPLICATION FOR ENROLLMENT IN PLAN -- WITHDRAWAL
Any eligible employee may enroll to participate in the Plan
electronically, with initial confirmation in writing, in such
form as DynCorp may prescribe. Employees may enroll at any time.
There will be no confirmation of the commencement or continuation
of payroll deductions other than the deduction information that
will appear on the participant's pay stub. Participants may
cancel their participation in the Plan at any time by giving
electronic notice to the Plan recordkeeper, in which event, all
payroll deductions that have not be invested will be refunded to
the participant at the earliest practicable time, unless the
participant specifically elects to have amounts accumulated to
date used to purchase Shares. Any participant who elects to
withdraw from the Plan will not be permitted to re-enroll for a
period of three months following withdrawal.
5. EMPLOYEE STATEMENTS -- QUARTERLY ALLOCATION
As soon as practicable after each Trade Date, the Plan
recordkeeper shall cause the appropriate number of Shares to be
allocated to the Stock ownership accounts of the Plan
participants, and each participant shall receive a quarterly
statement showing his or her ownership of Shares purchased under
the Plan and the fair market value of such Shares based on the
most recent Market Price. Fractional Shares may be allocated.
Any amounts of payroll deductions not used to purchase Shares
because of pro-rated purchases shall be carried over and added to
deductions authorized by the employee for subsequent quarterly
periods or, upon the employee's withdrawal from the Plan,
refunded to the employee in cash. Shares purchased under the
Plan will be held by the recordkeeper in uncertificated form.
6. DISPOSITION OF SHARES ACQUIRED UNDER THE PLAN
Shares acquired under the Plan must be held at least one
year following their purchase and may thereafter at any time be
sold in the Internal Market on any Trade Date, subject, however,
to applicable Securities Laws which may impose additional
limitations and holding periods and Section 8. Subject to the
other provisions of the Plan, a participant desiring to sell
Shares previously purchased under the Plan may sell Shares
through the Internal Market by notifying the Plan recordkeeper
accordingly. Also see discussion below concerning certain taxes
that may be payable if Shares purchased under the Plan are sold
less than two years after the date of purchase. Notwithstanding
the foregoing, participants may cause shares purchased under the
Plan to be issued in the name of the participant and another as
joint tenants with right of survivorship and may transfer
ownership of Shares purchased under the Plan by will or intestate
succession; provided, however, that the surviving owner or
beneficiary shall otherwise be subject to the provisions of the
Plan relating to first refusal and sale of Shares.
7. TAX MATTERS
The Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code, as
amended (the "Code) and shall be interpreted in accordance with
Section 423.
8. RIGHTS ON TERMINATION OF EMPLOYMENT
In the event the employment by an employee-participant under
the Plan is terminated for any reason, DynCorp shall have a
right, exercisable in its sole discretion, to purchase from the
participant or his or her estate or legal representative any
Shares acquired under the Plan at the then-most-recent Market
Price; provided, however, if required under the state securities
laws of the state where the employee resides, such option shall
be exerciseable at the higher of the then-most recent Market
price or the participant's acquisition cost for such Shares.
Should DynCorp fail to exercise its option within 45 days of the
participant's termination, the participant shall have the option
of retaining the Shares or offering to sell the Shares in the
Internal Market on any Trade Date. Notwithstanding the foregoing
provisions, in no event will DynCorp be required or obligated to
maintain the Internal Market.
9. AMENDMENT AND TERMINATION OF THE PLAN
The term of this Plan shall commence on July 1, 1995, and
shall continue through December 31, 1999, unless extended or
earlier terminated by the Board of Directors of DynCorp. The
Board further reserves the right at any time to amend the terms
of the Plan; provided that such amendments shall in no event
adversely affect the right of participants to receive Shares
previously purchased under the Plan. In the event of the
termination of the Plan, all payroll deductions not previously
used to purchase Shares will be refunded to participants at the
earliest practicable time.
10. MISCELLANEOUS TERMS AND CONDITIONS
a. For purposes of this Plan, the adoption of this Plan as
of its effective date shall commence and constitute a continuing
"offer" for participants to participate in the Plan, and the
concurrent granting as of such date to the participant of an
option to purchase Shares through the Plan in accordance with its
terms.
b. For purposes of this Plan, a participant's enrollment
for payroll deductions pursuant to the Plan shall be deemed an
acceptance of the aforementioned option granted by DynCorp to the
employee-participant to purchase Shares pursuant to the Plan.
The provisions of the Plan to the contrary notwithstanding, if
any participant entitled to purchase Shares under the Plan would
be deemed for purposes of Section 423(b)(3) of the Code to own
Stock (including any number of Shares which such person would be
entitled to purchase hereunder and under any other similar plan
or stock option plan of the Company, the parent of the Company or
any subsidiary) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company, the
maximum number of Shares which such participant shall be entitled
to purchase under the Plan shall be reduced to that number which,
when added to the number of Shares of the Company, which such
participant is so deemed to own (excluding any number of Shares
which such participant would be entitled to purchase hereunder)
is one less than such 5%, and any balance remaining in such
participant's Stock purchase account shall be refunded.
c. Notwithstanding any other provision of the Plan, if at
any time a participant is entitled to complete the purchase of
any Shares pursuant to the Plan, taking into account such
person's rights, if any, to purchase Stock under all other
employee stock purchase plans of the Company, the result would be
that during the then current calendar year, such participant
would have first become entitled to purchase under the Plan and
all other such plans a number of Shares which would exceed the
maximum number of Shares permitted by the provisions of Section
423(b)(8) of the Code, then the number of Shares which such
participant shall be entitled to purchase pursuant to the Plan
shall be reduced by the number which is one more than the number
of Shares which represents the excess, and any balance remaining
in such person's Stock purchase account shall be refunded.
d. This Plan shall be governed by the laws of the
Commonwealth of Virginia, without regard to the conflicts-of-law
provisions thereof.
e. Nothing herein shall be implied to constitute a
contract of employment for any person.
f. This Plan shall not become effective until approved by
vote of the shareholders of the Company.
Exhibit 4.4
DYNCORP 1995 STOCK OPTION PLAN
(Effective July 1, 1995)
1. PURPOSE OF PLAN
(a) The Board of Directors of DynCorp hereby adopts the
DynCorp 1995 Stock Option Plan as of the effective date specified
above to provide a means to encourage exceptional performance by
key members of the company's management team, and to provide a
mechanism for use in furtherance of the DynCorp Equity Target
Ownership Plan ("ETOP") which has been adopted concurrently with
this Plan.
(b) Equity ownership of DynCorp common stock ("Stock" or
"Shares") by key members of management is considered by the Board
to be an important element in securing superior performance by
management on behalf of all of the stockholders. While
management compensation is important, equity participation and
equity ownership provide additional valuable incentives to
achieve outstanding management performance which translates into
enhanced share value.
(c) Under the Plan, the Compensation Committee of the Board
of Directors (the "Committee" ) is authorized to approve periodic
grants of options to acquire Stock to key members of the
management organizations of the company and its various wholly
owned subsidiaries, divisions and strategic business units (the
"Company"). All grants under this Plan shall be made in strict
accordance with the terms of the Plan.
2. NAME AND TERM OF THE PLAN
The name of the Plan shall be the "DynCorp 1995 Stock Option
Plan" which shall be referred to herein as the "Plan". The term
of the Plan shall commence as of the effective date and continue
through a date which is seven (7) years from the date of the last
grant of options under the Plan; provided, that all options must
be granted under the Plan by June 30, 2000. The Plan has been
initially adopted as a so-called "non-qualified stock option
plan". See tax discussion below.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee which shall
have the sole authority in its complete discretion to interpret
the Plan and carry out its intent and purpose. The Committee
shall also have the right from time to time to amend the Plan.
See miscellaneous provisions below.
4. ELIGIBILITY - PARTICIPATION UNDER THE PLAN
(a) All full-time employees of the Company who are
participants under any Company-sponsored bonus or incentive
compensation plan, all members of the Board of Directors, and
other employees as approved by the Committee shall be eligible to
become participants under the Plan; provided, however, that the
granting of options under the Plan shall be within the sole
discretion of the Committee. In approving the granting of
options under this Plan, the Committee shall act on
recommendations of the DynCorp Chief Executive Officer who shall
in turn act on recommendations of the Company's Sector
Presidents. Specific recommendations by the Sector Presidents
shall be reviewed by the CEO who shall forward such
recommendations as he deems appropriate together with
recommendations for awards to non-operating participants to the
Committee for approval.
(b) In the granting of options under the Plan,
consideration may be given to the following nonexcluxive factors:
The obligations of the proposed optionee under the ETOP;
The ability of the proposed optionee to have a significant
positive impact on the Company's business success and improved
Stock value;
The potential for the proposed optionee to accept increased
responsibility within the Company;
The need to offer a competitive compensation and benefit package
in order to attract and retain qualified and highly motivated key
personnel; and
Performance and results
5. SHARES AUTHORIZED FOR ISSUANCE
A total of 1,250,000 shares of DynCorp Common Stock, par
value $0.10 per share, shall be authorized for issuance under the
Plan. When issued upon the valid exercise of options granted
under the Plan, such Shares shall be fully paid, non-assessable
shares of DynCorp's common stock. Options shall not be granted
for more than the total number of Shares authorized for issuance
hereunder from time to time; provided, that Shares represented by
forfeited options will be considered authorized again for
issuance hereunder.
6. MAKING OF GRANTS - PRICE
(a) Grants of options under the Plan shall be made only in
writing and shall only be valid if signed by the President or any
Senior Vice President of DynCorp. Recipients of grants shall be
entitled to receive same only upon the execution of an Optionee's
Agreement in the form appended as Attachment A to this Plan,
under which the optionee will agree to hold and exercise options
hereunder in accordance with the Plan. Among other things, the
Agreement will provide that upon termination of employment for
certain reasons, all unexercised options will be forfeited.
(b) Grants will be made in the following way, and in
accordance with the following guidelines:
Grants will be made only in increments of 100 Shares;
All grants will be subject to the vesting requirements of the
Plan described below;
The exercise price contained in all options issued under the Plan
shall be no less than the most recently determined fair market
value of the Stock as of the date of grant as determined in
connection with trading on the DynCorp Internal Stock Market (the
"Market Price");
Grants will be non-transferable except as specifically provided
and permitted under the Plan, and shall be exercisable only
during the specified term of the Plan;
Grants may be made without conditions (other than the execution
of the Optionee's Agreement) or with conditions approved by the
Committee -- such as a condition that the proposed optionee
acquire additional Shares in the DynCorp Internal Stock Market
("Internal Market"); and
Grants of options under the Plan may also be made conditional
upon a proposed optionee becoming an employee of the Company.
7. VESTING OF OPTIONS
(a) Options issued under the Plan may be exercised only
when the right to exercise vests under the Plan terms, and only
then to the extent of the vesting percentage. The right to
exercise options granted under the Plan shall vest over a period
of five (5) years following the grant of the option at the annual
rate of 20% of the options granted. For example, if an optionee
receives the grant of an option to purchase 1,000 Shares on June
30, 1995, he or she could exercise the option to the extent of
200 Shares after June 30, 1996, and to the extent of an
additional 200 Shares after each successive June 30th through
June 30, 2000.
(b) Options which are not exercised within seven (7) years
from the date of grant shall expire, and the optionee shall have
no further rights with respect to such options under the Plan or
otherwise.
(c) The Committee shall have the authority under this Plan
to grant options hereunder that are subject to special
performance vesting provisions. For example, notwithstanding the
fact that options hereunder are vested, exercise may be
conditioned upon any of the following additional performance
criteria:
The achievement of a specified stock price; or
The achievement of a specified percentage stock price increase
over the option price--e.g., vested options can only be exercised
in the event the price as of the exercise date is at least 25%
higher than the grant price.
Moreover, the Committee shall have the authority to grant
special vesting period reductions, contingent on the Company's
achievement of a specified stock price or percentage of increase
over the grant price. For example, options might be granted with
the understanding that in the event the stock price rose to some
specified price per share for at least two quarters, all of some
portion of unvested options should immediately vest.
8. MECHANICS FOR EXERCISING OPTIONS
An optionee may exercise a vested option by sending a
completed and signed Optionee Exercise Form (as prescribed by
DynCorp) to the DynCorp Corporate Secretary together with his or
her personal check in the amount of the exercise price times the
number of vested-option Shares that are being purchased. The
Corporate Secretary will either cause the Company to issue Shares
in the name of the optionee for each option exercised or will
cause such Shares to be purchased in the Internal Market and
recorded on the Optionee's Stock account within 10 days following
the next scheduled Internal Market trade day. Under the terms of
the Optionee Agreement, the optionee will specify whether the
Company shall withhold taxes as required upon the exercise of the
option from the Optionee's compensation, whether the optionee
shall pay such required amount in cash, or whether such
withholding shall be satisfied in Shares (at the market value).
See discussion below concerning taxation.
9. FORFEITURE OF CERTAIN UNEXERCISED OPTIONS - SHORTENING
OF OPTION PERIOD
The right to exercise vested options, and all interests in
unvested options, shall terminate and be forfeited in the event
an Optionee's employment is terminated for any reason except
retirement, death or disability; provided that the Committee in
its sole discretion may permit a terminated optionee a period of
no more than 30 days after termination of employment within which
to exercise previously vested options. In the event of the death
of an optionee, all unvested options shall immediately become
vested, and his or her estate or legal representative shall be
entitled to exercise any unexercised options; provided, that such
exercise must be made prior to the earliest to occur of the
expiration date of such options, or the 180th day after the
Optionee's death. An optionee who is permanently and totally
disabled as established by evidence satisfactory to the Committee
may exercise all options which are vested as of his or her
termination date; provided such exercise is made within the same
period described in the immediately preceding sentence. In the
event of an Optionee's retirement at age 65 or older, all options
shall immediately become vested, and the optionee shall have a
period of 360 days from his or her retirement date in which to
exercise such options. All other optionees who retire prior to
achieving the age of 65 years shall be entitled for a period of
180 days after retirement to exercise those options which were
vested as of his or her retirement date. All Shares obtained
pursuant to the exercise of options under these circumstances
following termination of employment due to death, disability or
retirement shall be subject to the Company's right of first
refusal to purchase such Shares at the prevailing Market Price,
which right shall be exercised by the Company in accordance with
the procedures set forth in the Optionee Agreement.
10. TAX INFORMATION
The Company will withhold from the Optionee's compensation,
or require as a condition of option exercise that the optionee
pay to the Company, an amount sufficient to comply with
applicable federal and state withholding statutes. DynCorp may,
however, permit optionees to satisfy withholding requirements, to
the extent permitted by law, through the transfer to the Company
of Shares having a fair market value equal to the withholding
requirement.
11. MISCELLANEOUS PROVISIONS
(a) The granting of an option shall impose no obligation
upon the optionee to exercise such option.
(b) Options shall not be transferable other than by will or
by the laws of descent and distribution and during an Optionee's
lifetime shall be exercisable only by such optionee.
(c) The aggregate number of Shares available for options
under the Plan, the Shares subject to any option, and the price
per share shall all be proportionately adjusted for any increase
or decrease in the number of issued Shares subsequent to the
effective date of the Plan resulting from (1) a subdivision or
consolidation of Shares or any other capital adjustment, (2) the
payment of a Stock dividend. If DynCorp shall be the surviving
corporation in any merger or consolidation, any option shall
pertain, apply, and relate to the securities to which a holder of
the number of Shares subject to the option would have been
entitled after the merger or consolidation. Upon dissolution or
liquidation of DynCorp, or upon a merger or consolidation in
which DynCorp is not the surviving corporation, this Plan or an
identical successor plan shall continue in force, or, should such
successor plan not be adopted or this Plan continued, all options
outstanding under the Plan shall immediately vest and each
optionee (and each other person entitled under the Plan to
exercise an option) shall have the right, immediately prior to
such dissolution or liquidation, or such merger or consolidation,
to exercise such Optionee's options in whole or in part. Upon
the consummation of any such dissolution, liquidation, merger, or
consolidation, all unexercised options shall terminate.
(d) The Board or Committee, by resolution, may terminate,
amend, or revise the Plan with respect to any Shares as to which
options have not been granted. Neither the Board nor the
Committee may, without the consent of the holder of an option,
alter or impair any option previously granted under the Plan,
except as authorized herein. Unless sooner terminated, the Plan
shall remain in effect for a period of five (5) years from the
date of the Plan's adoption by the Board. Termination of the
Plan shall not affect any option previously granted.
(e) As a condition to the exercise of any portion of an
option, DynCorp may require the person exercising such option to
represent and warrant at the time of such exercise that any
Shares acquired at exercise are being acquired only for
investment and without any present intention to sell or
distribute such Shares, if, in the opinion of counsel for
DynCorp, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of
any governmental agency.
(f) DynCorp, during the term of this Plan, will at all
times reserve and keep available, and will seek or obtain from
any regulatory body having jurisdiction any requisite authority
necessary to issue and to sell, the number of Shares that shall
be sufficient to satisfy the requirements of this Plan. The
inability of DynCorp to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for
DynCorp for the lawful issuance and sale of its Stock hereunder
shall relieve the Company of any liability in respect of the
failure to issue or sell Stock as to which the requisite
authority has not been obtained.
(g) This Plan shall be governed by the laws of the
Commonwealth of Virginia, without regard to the conflicts-of-law
provisions thereof.
(h) Nothing herein shall be implied to constitute a
contract of employment for any person.
(h) The plan shall be become effective as of the effective
date upon approval by the DynCorp Board of Directors.
Exhibit 4.5
1996 EXECUTIVE INCENTIVE PLAN
I. PURPOSE
The purpose of the Executive Incentive Plan (the Plan) is to motivate
and reward key executives for their achievement of preestablished,
measurable objectives that have significant and direct impact on the
overall success of the company and its business.
II. GENERAL DESCRIPTION
At the beginning of the Plan year, company and unit financial objectives,
individual objectives, and target incentive award level will be established
and confirmed in writing for each Plan participant.
At the conclusion of the Plan year, the achievement of the specified financial
objectives and individual objectives will be scored and weighted for each
participant according to established formulae to determine the actual
incentive amount to be awarded.
III. RESPONSIBILITIES
A. The Corporate Vice President Human Resources is responsible for
administering the Plan.
B. Sector and Strategic Business Unit (SBU) Executives and Corporate
Staff Officers are responsible for nominating Plan participants,
recommending appropriate individual performance objectives for Plan
participants from their respective organizations or functions,
evaluating participant performance and recommending individual incentive
award amounts.
C. The CEO is responsible for approving Plan participants, approving
group financial and individual objectives, approving individual target
award levels, recommending actual incentive payments, and recommending
any deviations from the Plan.
D. The Compensation Committee of the Board of Directors (the Committee)
is responsible for amending the Plan, approving plan participants,
establishing company financial objectives, and approving actual
incentive payments.
IV. DEFINITIONS
A. Adjusted Operating Profit (AOP)
Operating profit plus incentive plan accruals less a Net Asset Adjustment.
B. Average Net Assets
The average of the net assets assigned to the organizational unit at the
beginning of the Plan Year and at the end of each month during the year
through November. The net asset base will be the total assets assigned
to said operation reduced by any non-interest bearing liabilities
attributable to the unit, and exclusive of intercompany accounts,
marketable securities and other non-operating accounts assigned to the
Company.
C. Base Salary
The base annual salary rate of a participant as of January 1 of the Plan
year or, if later, the time he or she is approved as a potential participant
for a given year, exclusive of overtime, per diem, bonuses, or any other
premiums, special payments, or allowances.
D. EBITDA
Earnings of DynCorp before deductions for interest, taxes, depreciation,
discontinued operations, and merger/acquisition costs, as recorded on the
books and records of the Corporation.
E. Net Asset Adjustment
The average net assets times a Net Asset Adjustment. The percentage
adjustment shall be at least equal to the weighted average of the company's
projected cost of debt capital for the Plan Year. Only under extraordinary
circumstances will this percentage be set at less than 12%.
F. Operating Profit
Earnings of the applicable organizational unit (i.e., branch, division,
subsidiary, group, etc.,) after ESOP and after all accruals, but before
the Company's G&A Expense, Interest and Dividend Income, Interest Expense,
Net Asset Allocation and taxes on income.
G. Plan Year
The period commencing January 1 and ending December 31 of the year for which
performance is being measured.
H. Target Award
The dollar amount that a participant is eligible to receive if the combined
weighted performance against company, organizational unit and individual
objectives equals an overall achievement level of 100%.
V. ELIGIBILITY
Eligibility for participation in the Plan will be limited to key executives in
Corporate Headquarters and in the operating sectors who have significant
impact on company strategy, performance and profitability and who hold selected
positions as senior line executives at the Sector, SBU or major P&L Center
level, or as a major staff functional head at the corporate, sector or SBU
level.
All participants in the Plan must be approved by the Committee upon
recommendation by the CEO.
A minimum of six months in an eligible position is required for participation
in the Plan. Participation for individuals with less than six months must be
approved by the CEO as an exception to the plan.
With the exception of disability, retirement or death, participants must
be actively (on the payroll) employed on the date the awards are paid in
order to receive an incentive award. At its sole discretion, DynCorp may make
an award to a former employee, or to the former employee's estate, in such
amount as the Company may deem appropriate.
Participation in the Plan terminates on the date the employee terminates
employment with the Company, whether voluntary or involuntary.
Participation in the Plan precludes eligibility for participation in any
other annual incentive plan provided by the company.
VI. FUNDING
At the beginning of each Plan year, a target pool, equal to 100% of the
target award amounts for all participants, will be established and accrued
for during the year. The target pool represents the maximum amount that
can be awarded unless overall company EBITDA achievement exceeds the plan
objective. Payment of an amount greater than or less than the target pool
will be at the sole discretion of the Committee.
VII. TARGET AWARDS
At the beginning of each Plan year, a target award, expressed in the
form of a dollar amount, will be established for each participant based
on the percentage of base salary applicable to the salary grade to which
he or she has been assigned. Target awards range from approximately 30%
to 60% (in 5% increments) of the participant's base salary. Target awards
that deviate from the standard for a given position require CEO approval.
VIII. PERFORMANCE MEASUREMENT COMPONENTS
In order to reinforce the need for DynCorp executives to achieve a
balanced performance against financial and non-financial criteria,
incentive awards under the EIP will be based on team and individual
achievements in the following three areas:
A. The Financial Performance of DynCorp:
DynCorp will reward participants for the results of their team efforts,
as measured by the financial performance of the company in relation to
established financial objectives. This component seeks to reinforce the
need for participants to support achievement of the company's objectives
by sharing people, technology, information, and resources across organizations.
The financial performance of the company will have a weighting of 60% for
Corporate Staff participants and 20% for all other participants.
B. The Financial Performance of the Organizational Unit:
The financial performance of the appropriate Sector, SBU or major P&L Center
will be given the heaviest weighting in the determination of incentive awards
for participants from those organizations in order to motivate and reward
participants for financial achievements over which they have the most direct
control and accountability.
The financial performance of the appropriate organizational unit (i.e.,
Sector, SBU, or major P&L Center) will have a weighting of 40% for Plan
participants at that organization level.
C. The Individual Performance of the Participant:
The individual performance of the Plan participant against preestablished
objectives is an important measurement component that reinforces and
rewards executives for their performance and achievements in areas such
as human resources management, process/quality improvement, customer
satisfaction and business development. The Individual Performance factor
will have a weighting of 40% of which up to 1/2 (20%) may be discretionary
and the balance must be applied against pre-established objectives.
The following table summarizes the weighting of each of three
performance measurement components:
TABLE 1
Weighting of Performance Measurement Components
PERFORMANCE MEASUREMENT & ORGANIZATIONAL WEIGHTING
IX. PERFORMANCE MEASUREMENT CRITERIA
A. Establishment and Measurement of Financial Objectives
At the beginning of each Plan year, specific financial objectives will
be established for company EBITDA and for AOP at the sector, SBU and
major P&L Center level. At the conclusion of the Plan year, the
financial performance of the company and of each organizational unit
will be measured in relation to the applicable preestablished
objectives. Performance will be expressed as a percentage of the
objective that was achieved.
In setting the financial objectives for purposes of the Plan, the target
for EBITDA and AOP should reflect an achievement probability of
approximately 80%. At this level of probability an above average
performance from the management team is required in order to achieve the
objectives A threshold achievement level of 75% of the target objective
for EBITDA and AOP will be required in order for a formula award to be
made relative to each of these factors.
B. Establishment and Measurement of Individual Performance Objectives
At the beginning of each Plan year, specific individual performance
objectives will be established and documented for each participant. At
year end, the individual's performance will be measured in relation to
these preestablished objectives to produce an individual performance
achievement level.
Individual performance objectives should be established according to the
following guidelines:
1. Each participant will have 6-8 written objectives that have been
jointly agreed to by the participant and his or her supervisor.
2. Objectives will evolve from, respond to, and/or reflect the company
objectives established and communicated by the CEO. Objectives covering
each of the following areas will typically be included;
Key operational objectives
Human resources management
Quality and process improvement
Business development
Customer satisfaction
3. Objectives will be both quantitative and qualitative in nature and
will include non financial as well as appropriate financial related
goals.
4. Objectives will be highly measurable.
5. Objectives will have performance criteria thoroughly established in
advance to enable individuals to monitor their own performance in
relation to their objectives, and to provide an objective measurement at
year-end.
At least 50% of the Individual Performance factor must be tied to
specific objectives which are documented and agreed upon.
X. AWARD DETERMINATION
Awards will be determined by weighting the Company's financial
performance percentage, the Organizational Unit's financial performance
percentage, and the individual performance percentage by the percentages
indicated in Table 1 above, adding the resulting percentages together
and then multiplying the target award by the composite percentage. To
illustrate, the formula for determining the incentive award for an
individual participant at the Sector, SBU, or major P&L Center level is
as follows:
Actual Award Amount =
[(Company Financial Performance Factor x .20) +
(Organizational Unit Financial Performance Factor x .40) +
(Individual Performance Factor x .40)]
x Target Award Amount
The maximum award for any participant will be 150% of the established
target amount. Actual award amounts will be rounded to the nearest
$100.00.
If the performance achievement level on either of the two financial
performance factors falls below the 75% threshold, the participant will
not generally receive an award for that component. However, the CEO may
on a discretionary basis recommend the payment of awards where unusual
or extraordinary circumstances contributed to the below-threshold
performance. If the combined weighted achievement level for EBITDA and
AOP does not meet the stated threshold of 75%, the award for the
individual performance component shall also be at the discretion of the
CEO and the Committee.
Should a participant transfer to another organization during the plan
year, the final award will be jointly determined and prorated for the
time spent in each organization.
All incentive awards proposed under the Plan are subject to the approval
of the CEO and the Committee, who may at their discretion adjust the
amounts to be awarded in order to reflect exceptional performance,
performance that falls below objectives, or other performance factors
that affect or potentially affect the ability of the company or any of
its units to meet its business and financial goals.
XI. ADMINISTRATION
Bonus awards will be calculated at the Sector level and submitted to the
Corporate Vice President Human Resources by the end of January for company
level consolidation and approval by the CEO and the Committee. Documentation
of objectives, accomplishments and individual evaluations will be required
to be submitted along with the individual award recommendations.
Effective with the Plan Year beginning 1996 (which is paid in 1997) and
thereafter, payments will be made in the form of 80% cash and 20%
DynCorp Common Stock; payments will be made as soon as practical after
the Compensation Committee meeting in early March following final year
end closing.
Any exceptions to the Plan must be approved by the CEO.
Nothing in the plan or in any action taken hereunder shall affect the
Company's right to terminate at any time and for any reason the
employment of any employee who is a participant in the plan.
XII. SAMPLE AWARD CALCULATIONS
The examples on the following pages illustrate how the Plan formula will
be applied to calculate the incentive award for a Corporate Staff executive
and for a Division line executive.
A. Sample Award Calculation: Corporate Staff Executive
ASSUMPTIONS:
Base Salary $108,000
Target Award Percentage 30%
Target Award $ 32,400
Company Financial Performance Factor 80%
(EBITDA Act. $36M EBITDA Obj. $45M)
Individual Performance Factor 90%
AWARD CALCULATION:
(80% x .60) + (90% x .40) =
48% + 36.0% = 84.0%
Actual Award Amount (.84 x $32,400) =$27,216
B. Sample Award Calculation: Sector, Strategic Business Unit,
and major P&L center manager.
ASSUMPTIONS:
Base Salary $ 108,000
Target Award Percentage 30%
Target Award $ 32,400
Company Financial Performance 80%
Operational Unit Financial Performance 105%
(AOP Act. $10.5M AOP Obj. $10.0M)
Individual Performance Factor 75%
AWARD CALCULATION:
(80% x 20%) + (105% x 40%) + (75% x 40%) =
16% + 42% + 30% = 88%
Actual Award Amount (88% x $32,400) = $28,512
Exhibit 4.6
DYNCORP EQUITY TARGET OWNERSHIP POLICY
Effective July 1, 1995
BACKGROUND AND PURPOSE
In order to more closely align the interests of management
and the stockholders, the ownership of DynCorp common stock by
officers and key management members must be significant relative
to the executive's level of responsibility and compensation.
Accordingly, the Board of Directors has adopted the DynCorp
Equity Target Ownership Policy or "ETOP", the purpose of which
is to set forth and administer guidelines for minimum levels of
DynCorp Common Stock ("stock" or "share") ownership by a defined
group of covered executives .
The Board believes that the adoption of guidelines for
recommended levels of stock ownership over reasonable periods of
time, will result in long range improvements in company
performance and shareholder value.
COVERED EXECUTIVES
The following managers and key personnel will be covered by
the ETOP:
All Officers (except Assistant Officers) of DynCorp
All DynCorp Strategic Business Unit (SBU) Presidents and Vice
Presidents
All other managers and key personnel of DynCorp or any
wholly-owned subsidiary, division, or business unit of DynCorp
(or any less than wholly owned business as approved by the
Compensation Committee of the Board of Directors) including
Assistant Officers whose annual salary is $100,000 or more and
(i) are either a participant in the DynCorp Executive Incentive
Plan or (ii) are participants under a DynCorp stock option plan.
The foregoing managers and key executives shall be referred
to in this Policy as "Covered Executives". The Policy may be
modified by the Board in the future to apply to other employees.
The Compensation Committee of the Board will determine
whether certain executives and key managers who are hired for and
assigned to specific contracts may be exempted from the
requirements of the ETOP, or whether special goals shall be
established for such individuals considering their unique status.
SHARES THAT COUNT TOWARD ETOP GOALS
Personal Holdings, including...
Shares owned as of the effective date of this Policy;
Shares purchased directly in the DynCorp Internal Market;
Shares purchased under the DynCorp Stock Purchase Plan (ESPP);
Shares resulting from the vesting of units under the DynCorp
Restricted Stock Plan, including shares deferred for tax
purposes;
Shares obtained from the exercise of options granted under the
DynCorp 1995 or any subsequently adopted Stock Option Plan;
Shares allocated to the Covered Executive's account under the
terms of the DynCorp Employee Stock Ownership Plan, whether or
not vested;
Investments in stock through the DynCorp Savings and Retirement
Plan --the DynCorp qualified 401(k) deferred saving plan,
including Company-matching contributions;
Shares to which the Covered Executive is entitled under any
Company sponsored or approved arrangement for deferred income or
deferred delivery of shares, including shares held under IRAs;
Any of the above ownership by spouses, children and family
trusts; and
The amount of the spread (difference between grant price and most
recently determined higher fair market value) on vested options
granted under any Company stock option plan.
SHARES THAT DO NOT COUNT TOWARD ETOP GOALS
Unexercised options (except the "spread" mentioned above); and
Shares anticipated to be purchased under the ESPP.
STOCK OWNERSHIP REQUIREMENTS
The Policy's purpose is to encourage sound management and
operational practices that will directly benefit the value of the
Company's stock. Stock ownership by key managers is essential to
successfully instilling such practices, but the levels of
ownership must be reasonable in relation to the Covered
Executive's compensation.
Accordingly, the following stock ownership goals are
established:
Salary of $300,000 or more 3.0 times base salary
Salary of $200,000 up to $299,999 2.5 times base salary
Salary of $100,000 up to $199,999 1.5 times base salary
For purposes of the Policy, the value of a share will be
based on the most recent fair market value of DynCorp Common
stock determined in connection with the operation of the
Company's Internal Market, or the public market (if one exists),
or by the Board of Directors or authorized committee thereof in
the case of ESOP shares, and Restricted Stock Plan shares, or if
neither internal nor public markets exist. Covered Executives
will not be required to increase stock ownership as a result of a
temporary drop in the value of the stock. The Compensation
Committee shall determine when a drop in the stock price is
temporary.
The Compensation Committee of the Board shall review these
guidelines periodically and may make changes consistent with the
Company's organization or other market or competitive factors.
TIMEFRAME TO ACHIEVE OWNERSHIP
Covered Executives will use their best efforts to meet their
individual ownership targets within a period of seven (7) years,
commencing on the later of (i) January 1, 1996, or (ii) January
1 of the year following the calendar year during which a Covered
Executive becomes employed by the Company or any affiliate.
Transfers between such affiliate companies will be ignored for
purposes of the Policy.
In the event of financial needs that require a Covered
Executive to sell stock under conditions that could result in
the Covered Executive being unable to comply with the ETOP
guidelines, notification of the circumstances shall be given to
the Covered Executive's immediate superior or to the Vice
President of Human Resources. In the event the Covered Executive
intends to continue to work toward his or her ETOP goal
notwithstanding the sale of stock, the Compensation Committee may
make reasonable accommodations to the Policy requirements.
MEETING OWNERSHIP OBJECTIVES
The Compensation Committee of the Board will monitor the
progress of Covered Executives against the Policy requirements.
In this connection, the CEO will, no less than annually, report
to the Committee information regarding the stock ownership status
of the Covered Executives. The progress of Covered Executives
toward ETOP goals will be a factor in periodic evaluations of the
Covered Executive's performance.
NOTIFICATION UPON EMPLOYMENT
Since the ETOP is being adopted as an integral part of the
Company's overall employment criteria for Covered Executive-level
employees, all offers of employment to potential Covered
Executives shall include a written notification regarding
compliance with the ETOP together with a copy of the most recent
version of the Policy.
Exhibit 9
NEW STOCKHOLDERS AGREEMENT
THIS AGREEMENT is entered into effective the 11th day of
March, 1994, by and among the following parties:
DynCorp, a Delaware corporation with offices at 2000
Edmund Halley Drive, Reston, Virginia 22091
(herein, "DynCorp" or the "Company");
The Management Stockholders of DynCorp, represented by
the Management Stockholders Committee, c/o DynCorp, 2000 Edmund
Halley Drive, Reston, Virginia 22091
(herein, the "Management Stockholders"); and
The Private Investors in DynCorp, represented by
Herbert S. Winokur, Jr. (the "Investors' Representative"),
President of Winokur Holdings, Inc., Managing Partner of
pricorn Holdings, L.P., General Partner of Capricorn Investors,
L.P., a Delaware limited partnership with offices at 2 Cummings
Point Road, Stamford, Connecticut 06902
(herein, the "Investors").
RECITALS:
A. On or about March 11, 1988, each of the Investors and
certain of the Management Stockholders purchased shares of common
stock and common stock warrants of DME Holdings, Inc, which in
turn were exchanged on September 9, 1988 for common stock of the
Company, par value $0.10 per share (the "Common Shares"), and
warrants to acquire Common Shares ("Warrants"). In addition,
other Management Stockholders and DynCorp employees purchased
Common Shares and Warrants under the DynCorp Management Employees
Stock Purchase Plan or from other Management Stockholders during
the period between September 9, 1988 and the date of this
Agreement. During the period May, 1990 through December, 1993,
certain Management Stockholders and other employees of the
Company were also awarded restricted stock units under the
DynCorp Restricted Stock Plan (the "RSP") which in turn have been
or will be exchanged for Common Shares.
B. On September 9, 1988, the Company established an
Employee Stock Ownership Plan (the "ESOP"), effective January 1,
1988. During the period September 9, 1988 through December 31,
1993, the ESOP acquired from the Company a total of 4,148,711
Common Shares, which have been fully allocated to the accounts of
employee participants under the ESOP as a retirement benefit. On
March 26, 1991, the Company and the ESOP Trustee entered into an
amendment to the ESOP Subscription Agreement, under which the
Company agreed to contribute an additional 625,000 Common Shares
to the ESOP, or to fund the purchase of so many Common Shares by
the ESOP, during 1994 and to pay, to retiring and terminating
employees who sold their Common Shares to the ESOP or the Company
through 1996, a premium representing the difference between the
amount of $27.00 and the put purchase price determined in
accordance with the ESOP, if such amount should be lower than
$27.00, provided that the aggregate premium amount so paid would
not exceed $16,000,000.
C. On March 11, 1988, the Investors and other private
investors purchased $8,495,000 of the Company's Common Shares and
Warrants, $10,000,000 of the Company's Class B Preferred Stock
(all of which was redeemed on July 25, 1989), and $3,000,000 of
the Company's Class C Preferred Stock (the "Class C Preferred
Stock"), which is convertible into 123,711 Common Shares and
825,981 Warrants. In addition, on September 9, 1988, the Company
issued approximately $55,000,000 of 16% Pay-in-Kind Debentures
and $26,200,000 of 17% Pay-in-Kind Class A Preferred Stock to the
former public stockholders of DynCorp. The Class A Preferred
Stock was redeemed on February 27, 1992. The current balance of
the 16% Debentures is approximately $92,100,000.
D. On September 9, 1988, the Company issued to Pyramid
Investments, Ltd, an affiliate of Bankers Trust Company, in
consideration of loan and letter of credit commitments totalling
$190,000,000, a warrant (the "Pyramid Warrant") convertible into
942,563 Common Shares. The Pyramid Warrant was acquired by
Capricorn Investors, L.P., one of the Investors, on September 28,
1990. (Hereafter, the term "Warrant" shall include the Pyramid
Warrant unless specifically indicated to the contrary.)
E. As of the date of this Agreement, the ownership of the
Company's Common Shares is as follows (assuming the conversion of
the Class C Preferred Stock, exercise of the Warrants, and
distribution of remaining restricted stock units):
Number of Shares Percentage
ESOP 3,816,841 33.7%
Management Stockholders 2,867,726 25.3%
Investors 4,503,994 39.8%
Others 129,865 1.1%
F. The ESOP has purchased 316,189 of the Company's Common
Shares for allocation during 1994, and the Company is obligated
to sell or contribute at least 308,811 additional shares for
allocation in 1994. After such allocation, assuming the
conversion of the Class C Preferred Stock and the exercise of the
Warrants, the ownership of the Company's Common Shares would be
substantially as follows:
Number of Shares Percentage
ESOP 4,441,841 37.2%
Management Stockholders 2,867,726 24.0%
Investors 4,503,994 37.7%
Others 129,865 1.1%
G. As of March 11, 1988, the parties entered into a
Stockholders Agreement (the "Original Stockholders Agreement")
under which they agreed to the composition of the Company's Board
of Directors, to certain restrictions on the sale of Common
Shares, and to a procedure for the purchase of securities of
retiring, disabled, and terminating Management Stockholders by
other Management Stockholders, the Investors, or the Company.
Since the inception of the Original Stockholders Agreement, the
Company, the Investors, or other Management Stockholders have
repurchased Common Shares and Warrants having an aggregate value
of $2,516,600 from such retiring, disabled, or terminating
Management Stockholders, which includes all the Common Shares and
Warrants offered for purchase under the Original Stockholders
Agreement through December 31, 1993.
H. The Management Stockholders, the Investors, and the
Company now wish to enter into a new stockholders agreement for
the purpose of facilitating the establishment of a limited
internal market for the Common Shares and, pending establishment
of the internal market, to provide for the disposition of
Management Stockholder and Investor Common Shares and Warrants
upon retirement, termination, or in the event of any other
planned liquidation of such Common Shares.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged concurrently with the execution
of this Agreement, the undersigned parties to this Agreement
hereby agree as follows:
1. Composition of the Board of Directors - The Investors
and the Management Stockholders agree that the composition of the
Board of Directors of the Company shall be as currently
constituted, subject to the understanding that the Board shall
consist of an equal number of directors nominated by each of (a)
Capricorn, acting on behalf of the Investors, and (b) the
Management Stockholders Committee, acting on behalf of the
Management Stockholders, plus one director to be elected in
accordance with the following procedures, if applicable.
Capricorn, acting on behalf of the Investors, and the Management
Stockholders Committee, acting on behalf of the Management
Stockholders, shall, upon the request of a majority of the entire
Board of Directors, jointly select an additional or "tie-breaker"
member of the Board, to serve until expiration of his term in
accordance with the Company's certificate of incorporation or
until removed by unanimous vote of all the directors except such
"tie-breaker" member. Each Investor and Management Stockholder
agrees to vote his or her Common Shares and Class C Preferred
Stock in favor of the nominees nominated for election in
accordance with this provision.
2. Participation in Internal Stock Market - The Company,
the Investors, and the Management Stockholders agree to use their
best efforts to establish a limited internal stock market at the
earliest practicable time for the trading of Common Shares (the
"Internal Market"). It is understood that the timing of the
Internal Market will depend on the availability of sufficient
numbers of sellers and buyers who are ready and willing to engage
in purchases and sales of Common Shares at a market price. The
viability of such a market will therefore be determined by the
level of Company earnings, the Company's future prospects, and
the ability of the Company to secure independent professional
appraisals of the fair market value of the Common Shares so as to
attract buyers and sellers to the Internal Market. Since many of
these circumstances are beyond the Company's direct control,
there can be no guarantee that an Internal Market for Common
Shares can be established or, if established, that such a Market
can be sustained on a basis sufficient to continue to attract
future buyers and sellers. Once established, the Internal Market
will be considered to be suspended only when so suspended by
formal resolution of the Board of Directors of the Company. The
Company shall have no obligation to initiate or maintain the
Internal Market if a public market for Common Shares exists or is
contemplated within a 120-day period.
3. Restrictions on Sales Outside the Internal Market -
In consideration of the proposed establishment of the Internal
Market and the other commitments of the Company set forth herein,
the Investors and Management Stockholders agree that they will
not sell or offer to sell any Common Shares, Warrants, or Class C
Preferred Stock outside of the Internal Market, except as
permitted under paragraphs 4 or 5 below. Certificates
representing Common Shares, Warrants, and Class C Preferred Stock
shall bear restrictive legends described in paragraph 12.
4. Permitted Sales of Common Shares and Warrants -
Notwithstanding the restrictions described in paragraphs 2 and 3
above, and without regard to the existence of the Internal
Market, the following sales of Common Shares and Warrants shall
be permitted:
(a) Any sale in response to a tender offer or other
offer to acquire pro rata or otherwise more than 30% of the
authorized and outstanding Common Shares and Warrants, or any
sale in response to any offer to buy (regardless of quantity or
percentage) made by the Company, the ESOP, or any other qualified
or non-qualified benefit plan maintained by the Company;
(b) Any sale made as part of a public offering of
Common Shares that has been registered with the Securities
Exchange Commission or through a public market on which the
Common Shares are registered to trade;
(c) Any sale or exchange of Common Shares and/or
Warrants in connection with a recapitalization, reorganization,
spin-off, or split-off of the Company or parts thereof, involving
only parties to this Agreement and/or the ESOP;
(d) Any sale or transfer of Common Shares or Warrants
to any member of a Management Stockholder's or an Investor's
immediate family or legal representative, including a transfer
pursuant to a domestic relations order, or to any majority-owned
affiliate of any Investor or an owner of or investor in any
Investor organization, provided such transferee has agreed in
writing to be bound by the terms of this Agreement (a "Permitted
Transferee");
(e) Any sale or transfer in accordance with paragraph
5 below concerning retiring, disabled, deceased, or otherwise
terminated Management Stockholders; and
(f) Any other sale or disposition of Common Shares
approved by a majority of the Board of Directors.
Sales, exchanges, or transfers under (c) and (d) above shall be
conditioned upon the agreement by the transferee to be bound by
the terms of this Agreement. No sales or transfers of Class C
Preferred Stock shall be permissible; however, upon conversion of
the Class C Preferred Stock, the underlying Common Shares and
Warrants shall be subject to this paragraph 4.
5. Disposition of Common Shares Owned by Retiring and
Certain Other Management Stockholders - Management Stockholders
who retire or otherwise terminate their employment with the
Company, other than those described in (c) below, and the
representatives of deceased Management Stockholders, will be
entitled to dispose of their Common Shares and Warrants through
transactions in the Internal Market. Until such time as the
Internal Market is established, or during any period when such
Internal Market may be suspended, the following procedures will
apply with respect to Common Shares and Warrants owned by
retiring, terminating, or deceased Management Stockholders.
(a) Management Stockholders who retire on or after a
"Retirement Date" as defined in the ESOP, Management Stockholders
whose positions are eliminated as part of a reduction-in-force,
and representatives of deceased Management Stockholders shall
have the option, exercisable on a one-time basis as to all or any
portion of their holdings of Common Shares or Warrants and within
a reasonable time before or after the event which gives rise to
such option, of (i) retaining their Common Shares and Warrants or
(ii) offering such Common Shares and Warrants in accordance with
the procedures set forth in paragraph 6 below. Prior to the
establishment of the Internal Market, or during any period such
Internal Market is suspended, the price for such offered Common
Shares and Warrants shall be the fair market value as of such
time determined from time to time by the Board of Directors (the
"Board-Determined Fair-Market-Value Price").
(b) Management Stockholders who voluntarily elect to
leave the employ of the Company under circumstances other than
those described in (a) above shall be required to resell their
Common Shares and Warrants in accordance with the procedures set
forth in paragraph 6 below, at the Board-Determined
Fair-Market-Value Price.
(c) Management Stockholders whose employment with the
Company is terminated for cause shall be required to resell their
Common Shares and Warrants to the Company at the lower of the
Board-Determined Fair-Market-Value Price or the Management
Stockholder's original cost for such securities; provided that
payment therefor shall be made in four equal annual installments
commencing one year after the date of termination and shall
further be subject each year to such restrictions regarding
securities repurchases as may be contained in any Company debt
instrument and the rights and preferences of the Class C
Preferred Stock.
(d) Management Stockholders who elect to retain Common
Shares and Warrants under (a)(i) above, or their legal
representatives or Permitted Transferees, shall be entitled to
participate in the Internal Market and shall further be entitled
to participate as a purchaser in any Periodic Offer (as hereafter
defined), in accordance with, but subject to all Management
Stockholder obligations under, this Agreement.
6. Procedures for Offering Common Shares for Sale - The
following procedures shall be followed to effect sales of Common
Shares and Warrants pursuant to paragraphs 5(a) and (b):
(a) Prior to the time the Internal Market is
initiated, or during any period such Internal Market is
suspended, any Management Stockholder entitled to sell Common
Shares and Warrants in accordance with paragraphs 5(a) and (b)
above shall notify the Corporate Secretary in writing regarding
the number of Common Shares and Warrants to be sold and the
circumstance of such sale. In cases where a Management
Stockholder is required to sell, the Corporate Secretary may so
notify the Management Stockholder. Periodically, but no less
frequently than once per year, the Corporate Secretary shall
initiate the appropriate procedures outlined below (the "Periodic
Offer"). Securities shall be offered first to the other
Management Stockholders and then to the Investors, at the
Board-Determined Fair-Market-Value Price. Sales and purchases
shall be allocated on a pro rata basis, based respectively on the
total numbers of securities then being offered by each seller and
the respective holdings of the prospective purchasers. Trades
shall be settled as soon as practicable.
(b) Any Common Shares or Warrants not sold under the
above procedure shall be purchased by the Company at the
Board-Determined Fair-Market-Value Price; subject, however, each
year to such restrictions on securities repurchases as may be
contained in any Company debt instrument or the rights and
preferences of the Class C Preferred Stock. Payments for such
purchases will normally be made as soon as practicable following
the end of the year, following calculation of the effect of
annual limitation restrictions; provided, however, that as to
Common Shares and Warrants purchased by the Company from
Management Stockholders selling their Common Shares and Warrants
pursuant to paragraph 5(b) above, payment therefor shall be made
in four annual increments commencing no earlier than the year
following the year of termination of employment. Securities not
sold to other Management Stockholders or Investors or purchased
by the Company in the course of a Periodic Offer as a result of
such restrictions shall, at the seller's request, be carried over
until the following Periodic Offer(s), and the same procedures
shall be repeated.
(c) Sales in the Internal Market shall be in
accordance with such procedures as shall be approved by the Board
of Directors in keeping with sound industry practices for
securities transactions. Without specifying in particular the
procedures to be adopted, the Company intends to use its best
efforts to establish an Internal Market which will engage in
trades based on an independently determined fair market price
(the "Internal Market Price") no less than two times a year. The
maintenance of the Internal Market may, among other things, be
dependent upon the ability of the Internal Market to sustain a
minimum volume of trades on each trading date. The Company shall
have no obligation to continue the Internal Market once it is
established. The cost of maintaining the Internal Market shall be
recovered through the assessment of reasonable commissions only
on sales of Common Shares and Warrants through the Internal
Market. The Company shall have no obligation to maintain the
Internal Market during any period when a public market for the
Common Shares exists.
(d) Notwithstanding the provisions of (a), (b), and
(c) above, if a Management Stockholder or legal representative or
Permitted Transferee thereof sells Common Shares obtained
directly by such Management Stockholder as a distribution from
the RSP, whether effected through the Internal Market at the
Internal Market Price or under the procedures described in (a)
above based on the Board-Determined Fair-Market-Value Price, and
if the Internal Market Price or the Board-Determined
Fair-Market-Value Price, as applicable, is lower than the most
recent annual or quarterly ESOP Control Premium Share Valuation
(hereafter defined), the Company shall be obligated to pay to the
selling Management Stockholder or representative an additional
amount per Common Share equal to the difference between the
Internal Market Price or the Board-Determined Fair-Market-Value
Price, as applicable, and the most recent annual or quarterly
ESOP Control Premium Share Valuation. This obligation shall only
apply to the first sale of any Common Shares received by the
Management Stockholder upon conversion of Units awarded under the
RSP; it shall be extinguished following either (i) the first sale
of any of any such RSP-derived Common Shares by such Management
Stockholder, his estate or heir(s), or Permitted Transferee, or
(ii) any transfer of the RSP-derived Common Shares to any party
other than a Permitted Transferee. For purposes of this
paragraph, the surrender or conversion of restricted stock units
for payment of withholding and payroll taxes shall not constitute
a "sale", and Control Premium Share Valuation shall mean the most
recent ESOP share valuation provided by the ESOP's independent
financial advisor, which includes a so-called control block or
enterprise value premium. Such valuation as of December 31, 1993
is $17.99 per share.
7. Management Stockholders Committee - There is hereby
established a Management Stockholders Committee, the membership
of which shall consist of the individuals identified on Exhibit A
hereto. In the event any of the named members of the Committee
shall refuse or be unable to serve, a simple majority of the
Committee shall have the authority to select a replacement member
from among those who are Management Stockholders. A member of
the Committee may be removed by a vote of two-thirds of the
members of the Committee. The Committee members shall serve
without compensation and shall be authorized to make any and all
decisions required to be made by the Management Stockholders
Committee under this Agreement. No Committee member shall have
any liability to any Management Stockholder for any of his or her
acts or omissions while serving as a Committee member, each
Management Stockholder signatory to this Agreement hereby
agreeing to hold such Committee members harmless from any and all
liability to such Management Stockholder related to service on
the Committee.
8. Reports - During the term of this Agreement, each
Management Stockholder and Investor shall be entitled to receive
copies of the following reports and financial information:
(a) The most recent Form 10-K or Form 10-Q filed with
The Securities and Exchange Commission (upon request);
(b) DynCorp Employee Annual Report; and
(c) Selected quarterly financial and operational data.
9. Exercise of Warrants - In partial consideration of
the undertakings of the Management Stockholders and Investors
under this Agreement, the Company agrees, during the period
between the individual Management Stockholder's or Investor's
execution of a copy of this Agreement and June 1, 1994, to pay
for the exercise of Warrants with previously issued Common
Shares, at the rate of $11.86 per Common Share. Investors or
Management Stockholders who do not avail themselves of this
opportunity shall be free to pay a cash price for exercise of the
Warrants or retain the Warrants, which may be exercised at any
time through September 9, 1998 at the regular warrant exercise
price of $0.25 per Warrant; however, if an individual elects to
pay cash for exercise of a portion of the Warrants held directly
by such individual, the election must be so made for all Warrants
held by such individual. The foregoing proviso shall not apply
to Warrants held in a trust or individual retirement account.
10. Term of Agreement - The term of this Agreement shall
commence on March 11, 1994, and shall continue through March 10,
1999, unless earlier terminated by agreement on behalf of the
parties hereto. No amendment to this Agreement shall be valid
unless reduced to writing and signed on behalf of all parties.
For purposes of termination or amendment, the Management
Investors shall be represented by the Management Stockholders
Committee, and the Investors shall be represented by the General
Partner of Capricorn Investors, L.P.
11. Adherence to this Agreement - A Management
Stockholder or an Investor, respectively, shall become a
Management Stockholder or Investor party to this Agreement only
upon personally executing a copy of the signature page of this
Agreement and delivering such executed copy to the Corporate
Secretary of the Company.
12. Legends and Stop Transfer Orders - Each Management
Stockholder and Investor agrees that substantially the following
legends shall be placed on certificates representing Common
Shares and Warrants held by them:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED
AS OF MARCH 11, 1994, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES UNLESS THE
ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE ISSUER STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND OTHER STATE SECURITIES LAW OR THAT THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT.
13. Public Market - If the Company shall have filed (a) a
registration statement relating to any class of its securities
pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (b) a
final registration statement on Form S-1, S-2, or S-3, relating
to its Common Shares pursuant to the requirements of the
Securities Act of 1933 (the "Securities Act"), the Company shall
file the reports required to be filed by it under the Securities
Act, the Exchange Act, and the rules and regulations adopted by
the Securities and Exchange Commission (the "Commission")
thereunder, to the extent required from time to time to enable
Management Stockholders or Investors to sell Common Shares in the
public securities market, within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. During any period when the
Common Shares are tradable on a national securities exchange or
in the over-the-counter market, the Company shall have no
obligation to maintain the Internal Market.
14. Registration Rights - In the event that the Company
files for registration on Form S-1, S-2, or S-3 under the
Securities Act for a public offering of Common Shares which
includes shares being sold by any Management Stockholders or
Investors, the Company shall notify all Management Stockholders
and Investors of such intent and afford them the opportunity to
participate in such registration and public sale, from time to
time and pro rata with other offerors, based on the ratio of the
number of Common Shares held by each interested seller to the
number of Common Shares (fully diluted, on an after-sale basis)
available for registration at such time; provided, however, that
the parties who participate in such registration shall be
responsible with other participating sellers for a proportional
share of underwriting expenses, pro rata according to the total
number of shares sold on behalf of all participating sellers and
shall be subject to any restrictions, such as stand-still
obligations, that may be applicable to the registration and sale;
and provided further, however, that the underwriter shall have
the full authority, in its sole discretion, to determine the size
and composition of any public offering.
15. Specific Performance - The parties hereto each
acknowledge and agree that, in the event of any breach of this
Agreement, the non-breaching party would be irreparably harmed
and could not be made whole by monetary damages. It is
accordingly agreed that such parties, in addition to any other
remedy to which they may be entitled at law or in equity, shall
be entitled to compel specific performance of this Agreement in
any action instituted in the United States District Court for the
Eastern District of Virginia, or, in the event such court would
not have jurisdiction for such action, in any court of the United
States or any state having subject matter jurisdiction. The
parties hereto each consent to personal jurisdiction in any such
action brought in the United States District Court for the
Eastern District of Virginia and to service of process upon it in
the manner set forth in paragraph 19.
16. Entire Agreement; Amendments - This Agreement
contains the entire understanding of the parties with respect to
the subject matter hereof. There are no restrictions,
agreements, promises, warranties, covenants, or undertakings with
respect to such matters other than those expressly set forth
herein or as set forth in the Company's Certificate of
Incorporation. This Agreement supersedes all prior agreements
and understandings among the parties with respect to its subject
matter, including specifically the Original Stockholders
Agreement, except for the provisions thereof which remain in
effect pursuant to paragraph 13 thereof. This Agreement may not
be amended except by an instrument in writing signed on behalf of
all of the parties hereto. Any agreement to any extension or
waiver on the part of a party hereto shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
For all purposes of this paragraph 16, the Management
Stockholders Committee shall be empowered to act on behalf of the
Management Stockholders, and the Investors' Representative shall
be empowered to act on behalf of the Investors.
17. Interpretation - The paragraph headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
18. Severability - Every provision of this Agreement is
intended to be severable. If any term or provision hereof is
illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this
Agreement.
19. Notices - All notices hereunder shall be in writing
and shall be deemed to have been given or made when delivered
personally or when transmitted by telex or telecopy, or three
days after the date deposited in the mail, first-class mail,
registered or certified, return receipt requested and postage
prepaid to the party at the address set forth below or such other
address as any party hereto may have furnished to the others in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt:
To the Company: DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22091
Attention: T. Eugene Blanchard
or, where specified: Attention: Corporate Secretary
To the Management Management Stockholders Committee
Stockholders: c/o DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22091
Attention: David L. Reichardt, Esq.
To the Investors: Capricorn Investors, L.P.
72 Cummings Point Road
Stamford, Connecticut 06902
Attention: Herbert S. Winokur, Jr.
Any notice hereunder shall be deemed to have been given to each
Management Stockholder if given to the Management Stockholders
Committee, and to each Investor if given to the Investors'
Representative at the addresses set forth above.
20. Governing Law - This Agreement shall be governed by
and construed in all respects in accordance with the laws of the
State of Delaware, without regard to the principles of conflicts
of laws thereof which might refer such interpretation to the laws
of a different state or jurisdiction.
21. Counterparts - This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed to be an original but all of which together shall
constitute one and the same instrument.
22. Assignment - No party hereto may assign or delegate
or otherwise transfer any of its rights hereunder, and any
agreement, act, or deed purporting to effect any such assignment,
delegation, or transfer without such prior written consent shall
be void; provided however that such prohibition shall not exclude
assignment by operation of law, such as by merger of a party into
another corporation.
23. Binding Effect - Subject to the provisions of
paragraph 22, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
24. No Third-Party Beneficiaries - The provisions of this
Agreement are intended solely for the benefit of the parties
hereto, and no other party is entitled to any rights, benefits,
or privileges created hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered as of the date first above written.
DYNCORP
By: Dan R. Bannister, President
Dan R. Bannister, President
CAPRICORN INVESTORS, L.P.
By: Herbert S. Winokur, Jr.
Herbert S. Winokur, Jr., President
of Winokur Holdings, Inc., Managing
Partner of Capricorn Holdings,
L.P., General Partner of Capricorn
Investors, L.P.
SECURITY INSURANCE COMPANY OF HARTFORD
By:
Title:
GUARANTY NATIONAL INSURANCE COMPANY
By:
Title:
MANAGEMENT STOCKHOLDERS:
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Exhibit A
Management Stockholders Committee
Dan R. Bannister
T. Eugene Blanchard
David L. Reichardt
Date
DynCorp
1313 Dolley Madison Boulevard
McLean, Va 22101-3980
Dear Mr.
DynCorp (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment
of key management personnel. In this connection, the Board of
Directors of the Company (the "Board"), acting through the
Special Committee of the Board of Directors, recognizes that, as
is the case with many publicly held corporations, the possibility
of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among
management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including
yourself, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the
Company and in consideration of your agreement set forth in
Subsection 2(ii)hereof, the Company agrees that you shall receive
the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as
defined in Section 2 hereof) under the circumstances described
below.
1. Terms of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1990; provided, however, that commencing on January 1, 1990 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period
of thirty-six (36) months beyond the month in which such change
in control occurred; provided further, however, that this
Agreement shall not extend beyond the Company's mandatory
retirement age, unless such mandatory retirement age is waived by
the Board.
2. Change in Control. (i) Except as provided in Section
5(i), no benefits shall be payable hereunder unless there shall
have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a "change in control of the
Company" shall be deemed to have occurred if (A) any "person" (as
such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other
than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or its subsidiaries, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing more than 25% of the combined voting power
of the Company's then outstanding securities; or (B) during any
period of two consecutive years (not including any period prior
to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new
directors (other than a director designated by a person who has
entered into an agreement with, the Company to effect a
transaction described in clauses (A) or (C) of this Subsection)
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute a m majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if (A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a change
in control of the Company; (B) any person (including the Company)
publicly announces an intention to take or to consider taking
actions which if consummated would constitute a change in control
of the Company; (C) any person, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company or its subsidiaries, who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the
Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (D) the Board adopts
a resolution to the effect that, for purposes of this Agreement,
a potential change in control of the Company has occurred. You
agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the
Company, you will remain in the employ of the Company until the
earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company,
(ii) the termination by you of your employment by reason of
Disability or Retirement (at the Company's mandatory retirement
age), as defined in Subsection 3(i), or (iii) the occurrence of a
change in control of the Company.
(iii) Notwithstanding anything in the
foregoing to the contrary, no change in control of the Company
shall be deemed to have occurred for purposes of this Agreement
by virtue of any transaction which results in you, or a group of
persons which includes you, acquiring, directly or indirectly,
more than 25% of the combined voting power of the Company's then
outstanding securities.
3. Termination Following Change in Control. If any of the
events described in Subsection 2(i) hereof constituting a change
in control of the Company shall have occurred, you shall be entitled
to the benefits provided in Subsection 4(iii) hereof
upon the subsequent termination of your employment during the
term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for
cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Company for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your
employment may be terminated for "Disability". Termination by
the Company or you of your employment based on "Retirement" shall
mean termination in accordance with the Company's retirement
policy, including early or mandatory retirement, generally
applicable to its salaried employees or in accordance with any
retirement arrangement established with your consent with respect
to you.
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness,
or any such actual or anticipated failure after the issuance of a
Notice of Termination by you for Good Reason, as such terms are
defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in
which the Board believes that you have not substantially
performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not
in good faith and without reasonable belief that your action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this Subsection and specifying
the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean, without your express written
consent, the occurrence after a change in control of the Company
of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G) or (H), such circumstances are
fully corrected prior to the Date of Termination specified in the
Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties
inconsistent with your status as a senior executive officer of
the Company or a substantial adverse alteration in the nature or
status of your responsibilities from those in effect immediately
prior to the change in control of the Company other than any such
alteration primarily attributable to the fact that the Company
may no longer be a public company;
(B) a reduction by the Company in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the
Company and all senior executives of any person in control of the
Company;
(C) the relocation of the Company's principal
executive offices to a location outside the Washington, D. C.
Metropolitan Area (or, if different, the metropolitan area in
which such offices are located immediately prior to the change in
control of the Company) or the Company's requiring you to be
based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to
an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your
consent, to pay to you any portion of your current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and all
senior executives of any person in control of the Company, or to
pay, to you any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is
due;
(E) the failure by the Company to continue in
effect any compensation plan in which you participate immediately
prior to the change in control of the Company which is material
to your total compensation, including but not limited to the
Management Incentive Compensation Plan, Long-Term Performance
Plan, Pension Plan, Deferred Savings Plan (401K) and/or any
substitute plans adopted prior to the change in control, unless
an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue your participation therein (or
in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) the failure by the Company to continue to
provide you with benefits substantially similar to those enjoyed
by you under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the change in control of the Company, or the failure by
the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation
policy in effect at the time of the change in control of the
Company;
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for
purposes of this Agreement, no such purported termination shall
be effective.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination
of your employment by the Company or by you shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of
your duties during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a
termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant
to Subsection (iii) above shall not be less than fifteen (15) nor
more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen
(15) days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to
this proviso), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has been
perfected); provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given
in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by
Subsection 2(i), upon termination of your employment or during a
period of disability you shall be entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due
to physical or mental illness, you shall continue to receive the
benefits provided by the Company's insurance, disability and
other compensation plans then in effect during such period, until
your employment is terminated pursuant to Section 3(i) hereof.
Thereafter, or in the event your employment shall be terminated
by the Company or by you for Retirement, or by reason of your
death, your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason,
Disability, death or Retirement, the Company shall pay you your
full base salary through the 30th day immediately following the
time Notice of Termination is given at the rate in effect at the
time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company
at the time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
(iii) If your employment by the Company shall
be terminated (a) by the Company other than for Cause, Retirement
or Disability or (b) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you your full base
salary through the 30th day immediately following the time Notice
of Termination is given at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraphs (C) and (D),
below, the "Severance Payments") equal to 2.99 times the sum of
(x) your annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination given in respect thereof and (y) the average annual
amount paid to you pursuant to the Management Incentive
Compensation Plan, Long-Term Performance Plan, Pension Plan, 1981
Stock Option Plan, Tax Credit Employee Stock Ownership Plan
(PAYSOP), and Deferred Savings Plan (401K) in the three years
preceding that in which the Date of Termination occurs;
(C) notwithstanding any provision of the
Management Incentive Compensation Plan or Long-Term Performance
Plan, the Company shall pay to you a lump sum amount equal to the
sum of (x) any incentive compensation which has been allocated or
awarded to you for a fiscal year or other measuring period
preceding the Date of Termination but has not yet been paid, and
(y) a pro rata portion to the Date of Termination of the
aggregate value of all contingent incentive compensation awards
to you for all uncompleted periods under such plans;
(D) in lieu of shares of common stock of the
Company ("Company Shares") issuable upon exercise of outstanding
options, other than options qualifying as incentive stock options
("ISOs") under Section 422A of the Internal Revenue Code of 1986
(the "Code") which ISOs were granted on or before the date
hereof, ("Options"), if any, granted to you under the Company's
1981 Stock Option Plan (which Options shall be cancelled upon the
making of the payment referred to below), you shall receive an
amount in cash equal to the product of (i) the excess of, in the
case of ISOs granted after the date hereof, the closing price of
Company Shares as reported on the New York Stock Exchange on or
nearest the Date of Termination (or, if not listed on such
exchange, on a nationally recognized exchange or quotation system
on which trading volume in Company Shares is highest), and, in
the case of all other Options, the higher of such closing price
or the highest per share price for Company Shares actually paid
in connection with any change in control of the Company, over the
per share exercise price of each option held by you (whether or
not then fully exercisable), times (ii) the number of Company
Shares covered by each such Option;
(E) in the event that any payment or benefit
received or to be received by you in connection with a change in
control of the Company or the termination of your employment
(whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose
actions result in a change in control or any person affiliated
with the Company or such person) (collectively with the Severance
Payments, "Total Payments") would not be deductible (in whole or
part) as a result of Section 280G of the Code by the Company, an
affiliate or other person making such payment or providing such
of the Total Payments is not deductible, or the Severance
benefit, the Severance Payments shall be reduced until no portion
Payments are reduced to zero. For purposes of this limitation
(i) no portion of the Total Payments the receipt or enjoyment of
which you shall have effectively waived in writing prior to the
date of payment of the Severance Payments shall be taken into
account, (ii) no portion of the Total Payments shall be taken
into account which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of Section
28OG(b)(2) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of Section 28OG(b)(4) of the Code or
are otherwise not subject to disallowance as deductions, in the
opinion of the tax counsel referred to in clause (ii); and (iv)
the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles
of Sections 28OG(d)(3) and (4) of the Code.
(F) the payments provided for in paragraphs (B),
(C) and (D), above, shall be made not later than the tenth
business day following the Date of Termination, provided,
however, that if the amounts of such payments, and the limitation
on such payments set forth in paragraph (E), above, cannot be
finally determined on or before such day, the Company shall pay
to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(G) the Company also shall pay to you all
reasonable legal fees and expenses incurred by you in good faith
as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application
of Section 4999 of the Code to any payment or benefit provided
hereunder) except to the extent that the payment of such fees and
expenses would not be, or would cause any other portion of the
Total Payments not to be, deductible by reason of Section 2BOG of
the Code. Such payments shall be made at the later of the times
specified in paragraph (E) above, or within five (5) days after
your request for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
(iv) If your employment shall be terminated (A) by the
Company other than for Cause, Retirement or Disability or (B) by
you for Good Reason, then for a thirty-six (36) month period
after such termination, the Company shall arrange to provide you
with life, disability, accident and health insurance benefits
substantially similar to those which you are receiving
immediately prior to the Notice of Termination; provided,
however, that you shall not be entitled to any benefits under
this Section 4 (iv) while you are a full-time employee of any
other company.
(v) If your employment shall be terminated (A) by the
Company other than for Cause, Retirement or Disability or (B) by
you for Good Reason, then in addition to the retirement benefits
to which you are entitled under the Pension Plan or any successor
plans thereto, the Company shall pay you in cash at the time and
in the manner provided in paragraph (F) of Subsection 4(iii), a
lump sum equal to the actuarial equivalent of the excess of (x)
the retirement pension (determined as a straight life annuity
commencing at age 65) which you would have accrued under the
terms of the Pension Plan (without regard to any amendment to the
Pension Plan made subsequent to a change in control of the
Company and on or prior to the Date of Termination, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if you were fully
vested thereunder and had accumulated (after the Date of
Termination) thirty-six (36) additional months of service credit
thereunder at your highest annual rate of compensation during the
twelve (12) months immediately preceding the Date of Termination
(but in no event shall you be deemed to have accumulated
additional months of service credit after your sixty-fifth (65))
which you had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Subsection, "actuarial
equivalent" shall be determined using the same methods and
assumptions utilized under the Pension Plan immediately prior to
the change in control of the Company.
(vi) Except as expressly provided in Section 4(iv), you
shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(vii) In addition to all other amounts payable
to you under this Section 4, you shall be entitled to receive all
benefits payable to you under the Pension Plan and any other plan
or agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason
following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. Unless otherwise provided herein, if you
should die while any amount would still be payable to you
hereunder, all such amounts shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention
of the Board with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of the Agreement shall be governed by the laws of the
State of Delaware. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in McLean, Virginia in accordance with the rules
of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
DynCorp
Raymond J. Mulligan
Chairman of the Special
Committee
Agreed, to this day of ,1987
Date
DynCorp
2000 Edmund Halley Drive
Reston, VA 22091-3436
Dear Mr.
DynCorp (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment
of key management personnel. In this connection, the Company
recognizes that, as is the case with many businesses, the
possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders.
The Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the
Company.
In order to induce you to remain in the employ of the
Company and in consideration of your agreement set forth in
Subsection 2(ii)hereof, the Company agrees that you shall receive
the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as
defined in Section 2 hereof) under the circumstances described below.
1. Terms of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1995; provided, however, that commencing on January 1, 1996 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period
of thirty-six (36) months beyond the month in which such change
in control occurred; provided further, however, that this
Agreement shall not extend beyond the Company's mandatory
retirement age, unless such mandatory retirement age is waived by
the Board.
2. Change in Control. (i) Except as provided in Section
5(i), no benefits shall be payable hereunder unless there shall
have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a 'change in control of the
Company' shall be deemed to have occurred if (A) any "person" (as
such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act')), other
than Capricorn Investors LP ("Capricorn")a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company or its subsidiaries, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
more than 25% of the combined voting power of the Company's then
outstanding securities; or (B) during any period of two
consecutive years (not including any period prior to the
execution of this Agreement), individuals who at the beginning of
such period constitute the Board and any new directors (other
than a director designated by a person who has entered into an
agreement with, the Company to effect a transaction described in
clauses (A) or (C) of this Subsection) whose election by the
Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a m majority thereof; or (C) the shareholders of the
Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
the Company's assets.
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if (A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a change
in control of the Company; (B) any person (including the Company)
publicly announces an intention to take or to consider taking
actions which if consummated would constitute a change in control
of the Company; (C) any person, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company or its subsidiaries, who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the
Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (D) the Board adopts
a resolution to the effect that, for purposes of this Agreement,
a potential change in control of the Company has occurred. You
agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the
Company, you will remain in the employ of the Company until the
earliest of (i) a date which is six (6) months from the
occurrence of such potential change in control of the Company,
(ii) the termination by you of your employment by reason of
Disability or Retirement (at the Company's mandatory retirement
age), as defined in Subsection 3(i), or (iii) the occurrence of a
change in control of the Company.
(iii) Notwithstanding anything in the
foregoing to the contrary, no change in control of the Company
shall be deemed to have occurred for purposes of this Agreement
by virtue of any transaction which results in you, or a group of
persons which includes you, acquiring, directly or indirectly,
more than 25% of the combined voting power of the Company's then
outstanding securities.
3. Termination Following Change in Control. If any of the
events described in Subsection 2(i) hereof constituting a change
in control of the Company shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof
upon the subsequent termination of your employment during the
term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for
cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Company for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your
employment may be terminated for "Disability". Termination by
the Company or you of your employment based on "Retirement" shall
mean termination in accordance with the Company's retirement
policy, including early or mandatory retirement, generally
applicable to its salaried employees or in accordance with any
retirement arrangement established with your consent with respect
to you.
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness,
or any such actual or anticipated failure after the issuance of a
Notice of Termination by you for Good Reason, as such terms are
defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in
which the Board believes that you have not substantially
performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not
in good faith and without reasonable belief that your action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this Subsection and specifying
the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean, without your express written
consent, the occurrence after a change in control of the Company
of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G) or (H), such circumstances are
fully corrected prior to the Date of Termination specified in the
Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties
inconsistent with your status as a senior executive officer of
the Company or a substantial adverse alteration in the nature or
status of your responsibilities from those in effect immediately
prior to the change in control of the Company;
(B) a reduction by the Company in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the
Company and all senior executives of any person in control of the
Company;
(C) the relocation of the Company's principal
executive offices to a location outside the Washington, D. C.
Metropolitan Area (or, if different, the metropolitan area in
which such offices are located immediately prior to the change in
control of the Company) or the Company's requiring you to be
based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to
an extent substantially consistent with your present business
travel obligations;
(D) the failure by the Company, without your
consent, to pay to you any portion of your current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and all
senior executives of any person in control of the Company, or to
pay, to you any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(E) the failure by the Company to continue in
effect any compensation plan in which you participate immediately
prior to the change in control of the Company which is material
to your total compensation, including but not limited to the
Executive Incentive Plan, the Restricted Stock Plan, the Employee
Stock Ownership Plan (ESOP), the Supplemental Executive
Retirement Plan, Stock Option Plan, Deferred Savings Plan (401K)
and/or any substitute plans adopted prior to the change in
control (hereafter "Benefit Plans"), unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such Benefit Plans, or the
failure by the Company to continue your participation therein (or
in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as existed at the time of the change in control;
(F) the failure by the Company to continue to
provide you with benefits substantially similar to those enjoyed
by you under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the change in control of the Company, or the failure by
the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation
policy in effect at the time of the change in control of the
Company;
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for
purposes of this Agreement, no such purported termination shall
be effective. Your right to terminate your employment pursuant to
this Subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination
of your employment by the Company or by you shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of
your duties during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a
termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant
to Subsection (iii) above shall not be less than fifteen (15) nor
more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen
(15) days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to
this proviso), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has been
perfected); provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given
in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by
Subsection 2(i), upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due
to physical or mental illness, you shall continue to receive the
benefits provided by the Company's insurance, disability and
other compensation plans then in effect during such period, until
your employment is terminated pursuant to Section 3(i) hereof.
Thereafter, or in the event your employment shall be terminated
by the Company or by you for Retirement, or by reason of your
death, your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason,
Disability, death or Retirement, the Company shall pay you your
full base salary through the 30th day immediately following the
time Notice of Termination is given at the rate in effect at the
time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company
at the time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
(iii) If your employment by the Company shall
be terminated (a) by the Company other than for Cause, Retirement
or Disability or (b) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you your full base
salary through the 30th day immediately following the time Notice
of Termination is given at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraphs (C) and (D),
below, the "Severance Payments") equal to 2.99 times the sum of
(x) your annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination given in respect thereof and (y) the average annual
amount paid to you pursuant to the Benefit Plans in the three
years preceding that in which the Date of Termination occurs;
(C) notwithstanding any provision of the
Executive Incentive Plan, the Company shall pay to you a lump sum
amount equal to the sum of (x) any incentive compensation which
has been allocated or awarded to you for a fiscal year or other
measuring period preceding the Date of Termination but has not
yet been paid, and (y) a pro rata portion to the Date of
Termination of the aggregate value of all contingent incentive
compensation awards to you for all uncompleted periods under such
plans;
(D) in lieu of shares of common stock of the
Company ("Company Shares") issuable upon exercise of outstanding
options, ("Options"), if any, granted to you under the Company's
Stock Option Plans (which Options shall be canceled upon the
making of the payment referred to below), you shall receive an
amount in cash equal to the excess of the fair market value of
the shares covered by such options, over the exercise price for
such shares, such "fair market value" to equal the most recent
transaction or "minority" value determined by the ESOP financial
advisor, or, if such shares are traded on a national stock
exchange, the closing price as of the trade date immediately
preceding the Date of Termination.
(E) in the event that any payment or benefit
received or to be received by you in connection with a change in
control of the Company or the termination of your employment
(whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose
actions result in a change in control or any person affiliated
with the Company or such person) (collectively with the Severance
Payments, "Total Payments") would not be deductible (in whole or
part) as a result of Section 280G of the Code by the Company, an
affiliate or other person making such payment or providing such
benefit, the Severance Payments shall be reduced until no portion
of the Total Payments is not deductible, or the Severance
Payments are reduced to zero. For purposes of this limitation
(i) no portion of the Total Payments the receipt or enjoyment of
which you shall have effectively waived in writing prior to the
date of payment of the Severance Payments shall be taken into
account, (ii) no portion of the Total Payments shall be taken
into account which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of Section
28OG(b)(2) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of Section 28OG(b)(4) of the Code or
are otherwise not subject to disallowance as deductions, in the
opinion of the tax counsel referred to in clause (ii); and (iv)
the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles
of Sections 28OG(d)(3) and (4) of the Code.
(F) the payments provided for in paragraphs (B),
(C) and (D), above, shall be made not later than the tenth
business day following the Date of Termination, provided,
however, that if the amounts of such payments, and the limitation
on such payments set forth in paragraph (E), above, cannot be
finally determined on or before such day, the Company shall pay
to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(G) the Company also shall pay to you all
reasonable legal fees and expenses incurred by you in good faith
as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application
of Section 4999 of the Code to any payment or benefit provided
hereunder) except to the extent that the payment of such fees and
expenses would not be, or would cause any other portion of the
Total Payments not to be, deductible by reason of Section 2BOG of
the Code. Such payments shall be made at the later of the times
specified in paragraph (E) above, or within five (5) days after
your request for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
(iv) If your employment shall be terminated (A) by the
Company other than for Cause, Retirement or Disability or (B) by
you for Good Reason, then for a thirty-six (36) month period
after such termination, the Company shall arrange to provide you
with life, disability, accident and health insurance benefits
substantially similar to those which you are receiving
immediately prior to the Notice of Termination; provided,
however, that you shall not be entitled to any benefits under
this Section 4 (iv) while you are a full-time employee of any
other company.
(v) If your employment shall be terminated (A) by the
Company other than for Cause, Retirement or Disability or (B) by
you for Good Reason, then in addition to the retirement benefits
to which you are entitled under the ESOP and Supplemental
Execution Retirement Plan or any successor plans thereto, the
Company shall pay you in cash at the time and in the manner
provided in paragraph (F) of Subsection 4(iii), a lump sum equal
to the present value discounted at 5% of the excess of (x) the
payments which you would have received under the terms of the
ESOP, Supplemental Executive Retirement Plan or any successor
plan, (assuming the immediate sale back to the Company of all
ESOP Shares distributed to you), but without regard to any
amendment to the aforementioned Plans made subsequent to a change
in control of the Company and on or prior to the Date of
Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if
you were fully vested thereunder and had accumulated (after the
Date of Termination) thirty-six (36) additional months of service
thereunder at your highest annual rate of compensation during the
twelve (12) months immediately preceding the Date of Termination
(but in no event shall you be deemed to have accumulated
additional months of service after your sixty-fifth (65th)
birthday), over (y) the payments you are entitled to under the
aforementioned Plans as of the Date of Termination.
(vi) Except as expressly provided in Section 4(iv), you
shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(vii) In addition to all other amounts payable to you
under this Section 4, you shall be entitled to receive all
benefits payable to you under the ESOP and any other plan or
agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason
following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. Unless otherwise provided herein, if you
should die while any amount would still be payable to you
hereunder, all such amounts shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention
of the President with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and the
President of the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of the Agreement
shall be governed by the laws of the State of Delaware. All
references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net
of any applicable withholding required under federal, state or
local law. The obligations of the Company under Section 4 shall
survive the expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Washington D. C. in accordance with the rules
of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
By
Name: Dan R. Bannister
President and Chief Executive Officer
Agreed, to this day of ,1995
By:
DYN FUNDING CORPORATION,
Issuer
and
BANKERS TRUST COMPANY,
Trustee
INDENTURE
Dated as of January 1, 1992
$100,000,000
8.54% CONTRACT RECEIVABLE COLLATERALIZED NOTES,
SERIES 1992-1, DUE 1997
Table of Contents
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions
ARTICLE TWO
NOTE FORM
Section 2.01. Form Generally
Section 2.02. Form of Notes
Section 2.03. Denominations
Section 2.04. Execution, Authentication, Delivery and
Dating
Section 2.05. Registration, Registration of Transfer and
Exchange
Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes
Section 2.07. Payment of Principal and Interest; Principal
and Interest Rights Preserved
Section 2.08. Persons Deemed Owners
Section 2.09. Cancellation
Section 2.10. Purchase of Notes by the Issuer
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF NOTES
Section 3.01. General Provisions
Section 3.02. The Receivables
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture
Section 4.02. Application of Trust Money
ARTICLE FIVE
DEFAULTS AND REMEDIES
Section 5.01. Events of Default
Section 5.02. Acceleration of Maturity
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee
Section 5.04. Remedies
Section 5.05. Trustee May Enforce Claims Without Possession
of Notes
Section 5.06. Application of Proceeds
Section 5.07. Limitation on Suits
Section 5.08. Unconditional Rights of Noteholders to
Receive Principal and Interest
Section 5.09. Restoration of Rights and Remedies
Section 5.10. Rights and Remedies Cumulative
Section 5.11. Delay or Omission Not Waiver
Section 5.12. Control by Noteholders
Section 5.13. Waiver of Past Defaults
Section 5.14. Undertaking for Costs
Section 5.15. Waiver of Stay or Extension Laws
Section 5.16. Sale of Trust Estate
Section 5.17. Action on Notes
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities
Section 6.02. Notice of Default
Section 6.03. Certain Rights of Trustee
Section 6.04. Not Responsible for Recitals or Issuance of
Notes
Section 6.05. May Hold Notes
Section 6.06. Money Held in Trust
Section 6.07. Compensation and Reimbursement
Section 6.08. Corporate Trustee Required; Eligibility
Section 6.09. Resignation and Removal; Appointment of
Successor
Section 6.10. Acceptance of Appointment by Successor
Section 6.11. Merger, Conversion, Consolidation or
Succession to Business of Trustee
Section 6.12. Trustee as Successor Servicer
Section 6.13. Co-trustees and Separate Trustees
Section 6.14. Rights of the Trustee Upon Appointment of
Successor Servicer
ARTICLE SEVEN
NOTEHOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
Section 7.01. Issuer to Furnish Trustee Names and Addresses
of Noteholders
Section 7.02. Preservation of Information; Communications
to Noteholders
Section 7.03. Reports by and Inspections of Issuer
Section 7.04. Annual and Quarterly Statements as to Compliance
Section 7.05. Contract Schedule
Section 7.06. Primary Contract List
ARTICLE EIGHT
REPRESENTATIONS AND COVENANTS OF ISSUER
Section 8.01. Payment of Principal and Interest
Section 8.02. Maintenance of Office or Agency
Section 8.03. Unclaimed Funds
Section 8.04. Corporate Existence
Section 8.05. Protection of Trust Estate
Section 8.06. Representations and Covenants of the Issuer
Section 8.07. Negative Covenants
Section 8.08. Issuer May Consolidate, Etc., Only on Certain
Terms
Section 8.09. Successor Substituted
Section 8.10. Money for Note Payments to Be Held in Trust
Section 8.11. Performance of Obligations; Servicing
Agreement
Section 8.12. Corporate Separateness of Issuer
ARTICLE NINE
ACCOUNTS, ACCOUNTING AND RELEASES
Section 9.01. Collection of Money
Section 9.02. Collection Account; Distribution Account
Section 9.03. General Provisions Regarding Accounts and the
Reserve Fund
Section 9.04. Reports by Trustee; Contract Schedule
Section 9.05. Trust Estate; Contract Documents
Section 9.06. Amendments to Servicing Agreement
Section 9.07. Servicer as Custodian and Bailee of Trustee
Section 9.08. Reserve Fund
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures
Section 10.02. Execution of Supplemental Indentures
Section 10.03. Effect of Supplemental Indenture
Section 10.04. Reference in Notes to Supplemental
Indentures
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional Redemption
Section 11.02. Special and Mandatory Redemption
Section 11.03. Notice of Optional Redemption by the Issuer
Section 11.04. Deposit of Redemption Price for Optional,
Special and Mandatory Redemptions
Section 11.05. Notes Payable on Redemption Date
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01. Acts of Noteholders
Section 12.02. Notices, Etc., to Trustee and Issuer
Section 12.03. Notices to Noteholders; Waiver
Section 12.04. Effect of Headings and Table of Contents
Section 12.05. Successors and Assigns
Section 12.06. Separability
Section 12.07. Benefits of Indenture
Section 12.08. Governing Law
Section 12.09. Counterparts
Section 12.10. Corporate Obligation
Exhibit A Form of Notes
Exhibit B Form of Credit and Collections Statement of Policy
Exhibit C Form of Opinion of Counsel to the Issuer
Exhibit D Form of Accountants' Certificate
Exhibit E Form of Sale and Purchase Agreement
Exhibit F Form of Assignment of Claims Act Notice
Schedule A Contract Schedule
Schedule B Receivable Schedule
Schedule C List of Sellers
Schedule D Primary Contract List
INDENTURE, dated as of January 1, 1992 (herein, as amended,
modified or supplemented from time to time as permitted hereby,
called this "Indenture"), between Dyn Funding Corporation, a
corporation organized and existing under the laws of the State of
Delaware (herein, together with its permitted successors and
assigns, called the "Issuer"), and Bankers Trust Company, a New
York State banking corporation, as trustee (herein, together with
its successors in the trusts hereunder, called the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of
this Indenture to provide for an issue of its 8.54% Contract
Receivable Collateralized Notes, Series 1992-1, due 1997 (the
"Notes") as provided in this Indenture. All covenants and
agreements made by the Issuer herein are for the benefit and security
of the holders of the Notes. The Issuer is entering into this Indenture,
and the Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
Simultaneously with the delivery of this Indenture (a) the
Issuer is entering into Sale and Purchase Agreements with
DynCorp, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), and with certain other
separately incorporated subsidiaries of the Company named in such
Sale and Purchase Agreements (each referred to herein as a
"Seller" and, with the Company when the Company is being referred
to as a seller of Receivables, collectively referred to as the
"Sellers") pursuant to which each of the Sellers will sell
certain of its receivables specified therein to the Issuer and
(b) the Issuer, the Company and the Trustee are entering into the
Servicing Agreement pursuant to which the Company will agree to
service the Receivables and make collections thereon on behalf of
the holders from time to time of the Notes.
Subsequent to the delivery of this Indenture the Issuer may
enter into Sale and Purchase Agreements with certain separately
incorporated subsidiaries of the Company named in such Sale and
Purchase Agreements (each referred to herein as a "Seller")
pursuant to which each of such Sellers, if any, will sell certain
of its receivables specified therein to the Issuer.
GRANTING CLAUSES
The Issuer hereby Grants to the Trustee, for the exclusive
benefit of the Holders of the Notes, all of the Issuer's right,
title and interest in and to (a) the Receivables and all proceeds
received in respect of such Receivables, (b) all of the Sale and
Purchase Agreements, (c) the Servicing Agreement as it relates to
such Receivables, (d) the Collection Account, including all
Eligible Investments therein and all income from the investment
of funds therein, (e) the Distribution Account, including all
Eligible Investments therein and all income from the investment
of funds therein, (f) the Reserve Fund, including all Eligible
Investments therein and all income from the investment of funds
therein, (g) any Lockbox Account, including all Eligible
Investments therein and all income from the investment of funds
therein and (h) all proceeds in any way derived from any of the
foregoing items. Such Grants are made in trust to secure the
Notes equally and ratably without prejudice, priority or
distinction, except as expressly provided in the Indenture, between
any Note and any other Notes, and to secure (i) the
payment of all amounts due on the Notes in accordance with their
terms, (ii) the payment of all other sums payable under this
Indenture and (iii) compliance with the provisions of this
Indenture, all as provided in this Indenture.
The Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions hereof and agrees to
perform the duties herein required to the end that the interests
of the Noteholders may be adequately and effectively protected.
ARTICLE ONE
DEFINITIONS
I. A. Definitions.
Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture, and
the definitions of such terms are equally applicable both to the
singular and plural forms of such terms and to the masculine,
feminine and neuter genders of such terms.
Accountants' Certificate: A certificate of a firm of
independent certified public accountants of national reputation
appointed by the Issuer and reasonably acceptable to the Trustee,
which may be the firm of independent accountants that audits the
financial statements of the Issuer or the Company.
Accounts: The collective reference to the Collection
Account, the Distribution Account and any Lockbox Account.
Act and Acts of Noteholders: The meanings specified in
Section 12.01.
Administrative Expenses: The sum of: (a) the amounts due
the Trustee under Section 6.07; (b) federal and state taxes of
the Issuer and the cost of preparing tax returns; (c) expenses
relating to the maintenance of the Receivables; (d) expenses
incurred for general business operations of the Issuer; and (e)
all other expenses of the Issuer relating to the maintenance of
the Notes (to the extent not paid out of the proceeds of the
issuance of the Notes or by the Servicer), including but not
limited to, legal fees and expenses of counsel and accountants' fees;
provided, however, that Administrative Expenses shall not
include (a) the release of Excess Cash, (b) the Servicing Fee,
(c) any Deferred Purchase Price or (d) any damages or indemnities
payable by the Issuer to any Noteholder.
Affiliate: With respect to any Person, any other Person
controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control", when
used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise, the terms "controlling" and
"controlled" having meanings correlative to the foregoing.
Aggregate Collateral Balance: As of any date of
determination, the sum of (a) the aggregate Stated Value of the
Receivables Granted to the Trustee and (b) all amounts on deposit
in the Collection Account.
Amortization Date: February 28, 1997.
Amortization Period: The period commencing with the day
after the Payment Date next preceding the Amortization Date to
and including the date on which principal of the Notes is paid in
full.
Assignment of Claims Act Notice: Any Assignment of Claims
Act Notice substantially in the form of Exhibit F hereto.
Authorized Officer: With respect to the Company, the Issuer
or any Seller, the President or any Vice President, Secretary or
Treasurer of such entity.
Average Daily Revenue: As of any Determination Date or
Purchase Date during the Non-Amortization Period and with respect
to any Government Contract or Government Subcontract, (a) the
aggregate amount of revenue recognized by the Company in its
unaudited financial statements and reports under such Government
Contract or Government Subcontract during the three immediately
preceding Determination Periods divided by (b) the number of
Calendar Days in such three preceding Determination Periods;
provided, that if the related Seller has performed under such
Government Contract or Government Subcontract for a period of
less than three months as of such Determination Date or Purchase
Date, Average Daily Revenue will be calculated on the basis of
such lesser period; provided, further, that Average Daily Revenue
shall not be calculated on the basis of a period of less than 28
Calendar Days. With respect to any Government Contract or
Government Subcontract if the amount of average daily revenue is
expected to permanently decrease by more than 10% from the
Average Daily Revenue for such Government Contract or Government
Subcontract as of the preceding Determination Date or Purchase
Date for which Average Daily Revenue was calculated, then Average
Daily Revenue will be adjusted immediately to an amount equal to
such decreased level to the same extent as if such decrease had
been in effect since the first day of the period over which
Average Daily Revenue is being calculated.
Board of Directors: The Board of Directors of the Issuer or
any committee of that Board duly authorized to act on behalf of
that Board with respect to any matters arising under the
Indenture.
Board Resolution: Any action by the Board of Directors, as
evidenced by a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Issuer to have been duly adopted by
the Board of Directors and to be in full force and effect on the
date of such certification and delivery to the Trustee.
Business Day: Any day that is not a Saturday, Sunday, holi
day, or other day on which commercial banking institutions in New
York are authorized or obligated by law or executive order to be
closed.
Calendar Day: Any day of a month.
Called Principal: With respect to any Note, the Note
Principal Balance that is declared to be due and payable pursuant
to (i) an Optional Redemption, Mandatory Redemption or Special
Redemption pursuant to Article Eleven or (ii) an acceleration of
maturity pursuant to Section 5.02.
Closing Date: The date on which the Notes are first
executed and delivered to the Purchasers.
Code: The Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
Collateral Value Percentage: With respect to (a) any
Government Receivable, 92% of its Stated Value, (b) any
Government Subcontract Receivable, 76% of its Stated Value and
(c) any Commercial Receivable, 76% of its Stated Value.
Collateral Value Ratio: As of any date of determination,
the ratio obtained by dividing (a) the sum of (i) the aggregate
Stated Value of the Receivables Granted to the Trustee, less the
aggregate Stated Value of Excluded Receivables, all valued at the
applicable Collateral Value Percentage, and (ii) all amounts on
deposit in the Collection Account by (b) the Outstanding Note
Principal Balance.
Collection Account: The account so denominated and
established pursuant to Section 9.02(a) herein. As used herein,
except if otherwise specifically provided and except in Section
3.01 and Sections 4.03(m), 4.04 and 5.02(d) of each Sale and
Purchase Agreement, the term Collection Account shall include any
Lockbox Accounts.
Collections: With respect to any Receivable, to the extent
that such Receivable has not been repurchased by a Seller
pursuant to its Sale and Purchase Agreement, all cash collections
and other cash proceeds of such Receivable that are collected in
available funds by the Issuer or the Servicer for deposit into a
Lockbox Account or a Seller's Lockbox Account.
Commercial Receivable: Any Receivable other than a
Government Receivable or a Government Subcontract Receivable.
Commission: The Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange
Act of 1934, as amended, or any successor agency having similar
power.
Company: DynCorp, a Delaware corporation.
Compliance Audit: The meaning specified in Section 7.04.
Consolidated EBDAIT: For any period, (a) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii)
provision for taxes based on income, (iii) Consolidated Interest
Expense, (iv) depreciation expense, (v) amortization expense,
(vi) Restricted Stock Plan expense and (vii) Net ESOP Contri
butions, less (b) the amount for such period of interest income
(such amount of interest income not to exceed $1,500,000 for any
rolling twelve-month period), all as determined on a consolidated
basis in accordance with GAAP.
Consolidated Interest Expense: For any period, the sum of
(a) total interest expense of the Company and its subsidiaries on a
consolidated basis with respect to all outstanding indebtedness
of the Company and its subsidiaries, including, without
limitation, all commissions, discounts, and other fees and
charges owed with respect to letters of credit and bankers'
acceptance financings and net costs under interest rate
agreements, all as determined in accordance with GAAP, and (b)
interest expense on the Company's ESOP-related loan, which is
reported as cost of services.
Consolidated Net Cash Interest Expense: For any period,
(a) Consolidated Interest Expense, but excluding, however,
interest expense not payable in cash, amortization of debt
discount and deferred financing costs, less (b) interest income
(such amount of interest income not to exceed $1,500,000 for any
rolling twelve-month period).
Consolidated Net Income: For any period, the net income
(or loss) of the Company and its subsidiaries on a consolidated
basis for such period, excluding the sum of (i) extraordinary
items, net of taxes based on income, (ii) dividends on preferred
stock, and (iii) amortization of issuance discount on preferred
stock, all as determined in accordance with GAAP.
Contract: An agreement between one of the Sellers and an
Obligor, or an open account of an Obligor evidenced by an invoice
of a Seller, pursuant to which such Obligor is obligated to pay
for merchandise or services. Receivables under Government
Contracts or Government Subcontracts of a Seller may be combined
and aggregated in accordance with the following restrictions:
(i) the aggregate Stated Value of Receivables arising under each
Government Contract which is combined and aggregated must be less
than $500,000; (ii) the Stated Value of Receivables arising under
each Government Subcontract, which is combined and aggregated
must be less than $250,000; (iii) Government Contracts may only
be combined with other Government Contracts from the same Seller
and Government Subcontracts may only be combined with other
Government Subcontracts of the same Seller and the Contract
Schedule must separately identify each Contract included within
each aggregate; and (iv) the aggregate Stated Value of all
Receivables so combined and aggregated may not exceed 5% of the
Aggregate Collateral Balance.
Contract Schedule: The list in the form set forth in
Schedule A hereto identifying (a) each Government Contract and
Government Subcontract as to which Receivables arising thereunder
are initially Granted hereunder, (b) each Government Contract and
Government Subcontract as to which Receivables arising thereunder
are Granted hereunder subsequent to the Closing Date and (c)
each Obligor as to which Commercial Receivables arising
thereunder are initially Granted hereunder and subsequent to the
Closing Date.
Corporate Trust Office: The principal office of the Trustee
at which at any particular time its corporate trust business
shall be administered, which office at the date of the execution
of this Agreement is located at Four Albany Street, 10th Floor,
New York, New York 10006 (Attention: Corporate Trust and Agency
Group, Structured Finance Team).
Credit and Collection Practices: The Company's normal
credit extension practices and procedures and collection
practices relating to the Contracts and the Receivables applied
in accordance with the statement of policy set forth in Exhibit B
hereto.
Cut-off Date: January 15, 1992.
Date of Execution: The actual date of execution of this
Indenture by the Issuer and the Trustee as indicated by their
respective acknowledgements hereto annexed, and if the Issuer and
the Trustee shall have executed this Indenture at different
dates, the later date.
Default: Any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default or, when
used in association with obligations created by an agreement
other than this Indenture, the meaning specified in such agree
ment.
Defaulted Receivable: Any Receivable that is not a Disputed
Receivable or an Ineligible Receivable and:
(a) with respect to Government Receivables, that
portion of a Receivable (i) as to which any payment, or part
thereof, remains unpaid for 180 days from the original
billing date, (ii) that portion of which, consistent with
the Credit and Collection Policy, would be written off on
the Company's financial statements or books of account as
uncollectible (excluding, however, any portion as to which
non-payment is the result of a dispute between the
Government and the Company regarding amounts payable by the
Government to the Company under the related Contract), or (iii) as
to which the Government has given notice to the
Company, or the Company has reason to believe, that such
Receivable or portion thereof will not be paid (excluding,
however, any portion as to which non-payment is the result
of a dispute between the Government and the Company
regarding amounts payable by the Government to the Company
under the related Contract) and
(b) with respect to Commercial Receivables or
Government Subcontract Receivables, that portion of a
Receivable (i) as to which any payment, or part thereof,
remains unpaid for 180 days from the original billing date,
(ii) as to which the related Obligor or Prime Contractor
becomes bankrupt, unless such Obligor or Prime Contractor
has the approval of a bankruptcy court of competent
jurisdiction to make payments under the related Contract and
such payments are not the subject of any legal challenge,
(iii) that portion of which, consistent with the Credit and
Collection Policy, would be written off on the Company's
financial statements or books of account as uncollectible
(excluding, however, any portion as to which non-payment is
the result of a dispute regarding amounts payable to the
Company under the related Contract); provided, that with
respect to an Obligor or Prime Contractor that is not rated
Investment Grade and the Commercial Receivables or
Government Subcontract Receivables of which are Defaulted
Receivables pursuant to any of clauses (i) through (iv) of
this paragraph (b), all remaining Commercial Receivables or
Government Subcontract Receivables of such Obligor or Prime
Contractor will be deemed Defaulted Receivables unless the
Company delivers to the Trustee an Officer's Certificate to
the effect that: (i) the Company has no reason to believe
that the remaining Commercial Receivables or Government
Subcontract Receivables of such Obligor or Prime Contractor
will not be paid or will become Defaulted Receivables; and
(ii) the aggregate of the Stated Values of all Defaulted
Receivables of such Obligor (including Defaulted Receivables
which have previously been repurchased or substituted for)
net of any collections on such Defaulted Receivables, does
not exceed the greater of $50,000 or 10% of the total of the
Stated Values of all Commercial Receivables and Government
Subcontract Receivables of such Obligor or Prime Contractor
(including Defaulted Receivables which have previously been
repurchased or substituted for) net of any collections on
such Defaulted Receivables. If all of the Receivables of an
Obligor or Prime Contractor become Defaulted Receivables, the
receivables of such Obligor or Prime Contractor will
subsequently be deemed to be Eligible Receivables upon
consent of the Required Holders.
Deferred Purchase Price: On any date of determination, any
portion of the Purchase Price of an Eligible Receivable that is
unpaid on the Purchase Date on which such Eligible Receivable was
purchased and is still unpaid as of such date of determination.
Determination Date: With respect to any Payment Date, the
twenty-fifth day of the month in which such Payment Date occurs,
or would occur but for the 30th day of such month not being a
Business Day.
Determination Date Statement: The statement required to be
delivered by the Servicer, on or before the Determination Date,
pursuant to Section 4.02 of the Servicing Agreement.
Determination Period: With respect to any Determination
Date, the approximately one-calendar month period, as set forth
in Schedule A to the Servicing Agreement, most recently ended
prior to such Determination Date.
Discounted Value: With respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from
their respective scheduled due dates to the Redemption Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on a monthly
basis) equal to the applicable Reinvestment Yield with respect to
such Called Principal.
Disputed Receivable: As to any date of determination, that
portion of a Receivable (a) with respect to which the related
Obligor has disputed the amount billed by the Company, whether
such dispute arises over alleged unsatisfactory performance of
work under the related Contract or the contractual amount owed
the Company for services rendered, costs incurred or work
completed, or (b) as to which the related Obligor has withheld
payment because of a dispute, or settlement, with respect to a
debt of the Company due such Obligor including, but not limited
to, a notification from the Government of its intention to offset
to satisfy any such claim; provided, however, that all remaining
Receivables of (i) the related Commercial Obligor or (ii) under
the related Government Contract or Government Subcontract will be
deemed Disputed Receivables unless the Company delivers to the Trustee
an Officer's Certificate to the effect that the Company
has no reason to believe that all such remaining Receivables (A)
will become Defaulted Receivables or, (B) will become Disputed
Receivables.
Distribution Account: The account so denominated and
established pursuant to Section 9.02(a) herein.
Eligible Investments: One or more of the following:
(a) obligations of, or guaranteed as to principal and
interest by, the United States or any agency or
instrumentality thereof when such obligations are backed by
the full faith and credit of the United States;
(b) repurchase agreements on obligations specified in
clause (a) maturing not more than one month from the date of
acquisition thereof, provided that the long-term unsecured
obligations of the party agreeing to repurchase such obliga
tions are at the time rated by Standard & Poor's Corporation
in one of the three highest rating categories (without
regard to numerical modifiers) available from Standard &
Poor's Corporation; and provided further that the short-term
debt obligations of the party agreeing to repurchase shall
be rated A-1 or higher by Standard & Poor's Corporation;
(c) federal funds, certificates of deposit, time
deposits and bankers' acceptances, each of which shall not
have an original maturity of more than 90 days, of any
depository institution or trust company incorporated under
the laws of the United States or any state; provided that
the long-term unsecured debt obligations of such depository
institution or trust company at the date of acquisition
thereof have been rated by Standard & Poor's Corporation in
one of the three highest rating categories (without regard
to numerical modifiers) available from Standard & Poor's
Corporation; and provided further that the short-term
obligations of such depository institution or trust company
shall be rated A-1 or higher by Standard & Poor's
Corporation;
(d) commercial paper or commercial paper funds (having
original maturities of not more than 90 days) of any
corporation incorporated under the laws of the United States
or any state thereof; provided that any such commercial
paper or commercial paper funds shall be rated A-1 by Standard &
Poor's Corporation; and
(e) any no-load money market fund rated Am or Am-G or
higher by Standard & Poor's Corporation;
provided that, Eligible Investments purchased from funds in the
Collection Account, Distribution Account or Reserve Fund shall
include only such obligations or securities that either may be
redeemed daily or mature no later than the Business Day next
preceding the next Payment Date; and provided further, that no
instrument shall be an Eligible Investment if such instrument
evidences a right to receive only interest payments with respect
to the obligations underlying such instrument.
Eligible Receivable: (a) At any time, except as specified below,
any Government Receivable or Government Subcontract Receivable:
(i) which is not a Defaulted Receivable;
(ii) which is not a Disputed Receivable;
(iii) which represents either (A) amounts payable for
services performed or costs incurred under a Contract which have
been billed to the related Obligor or (B) amounts payable for
services performed or costs incurred under a Contract and which
are unbilled but billable (pursuant to the Company's policies)
within 60 days of the Purchase Date on which such Government
Receivable is sold to the Issuer or (C) accrued fixed fees, award
fees, general and administrative expenses or overhead expenses
which arose under a Contract;
(iv) which is an "account" or a "general intangible"
as defined in the UCC, but only to the extent that it constitutes
rights fully earned by performance;
(v) is denominated and payable only in United States
dollars;
(vi) which arose under a Contract which has been duly
authorized and is in full force and effect and which, together
with such Contract, constitutes the legal, valid and binding
obligation enforceable against such Obligor in accordance with
its terms and is not the subject of, as of the Purchase Date on
which such Receivable is sold to the Issuer, any material
dispute, asserted offset, counterclaim or defense;
(vii) which, together with the Contract related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto and with respect to which
no party to the Contract related thereto is in violation of any
such law, rule or regulation in any material respect;
(viii) which, with respect to accrued and unbilled
Receivables described in clauses (iii)(B) and (C) above, arose
under a Contract as to which the related Seller has been
performing for at least thirty days prior to the Purchase Date on
which such Receivable is sold to the Issuer; and
(ix) as to which, with respect to any Government
Subcontract Receivable arising under such Subcontract, if it
relates to an Obligor which is under the protection of a
bankruptcy court, such bankruptcy court has approved payment by
such Obligor under the related Contract to the related Seller.
(b) At any time, any Commercial Receivable:
(i) which is not a Defaulted Receivable;
(ii) which is not a Disputed Receivable;
(iii) which represents amounts payable for services
performed or costs incurred under a Contract which have been
billed to the related Obligor;
(iv) which is an "account" or a "general intangible"
as defined in the UCC, but only to the extent that it constitutes
rights fully earned by performance;
(v) is denominated and payable only in United States
dollars;
(vi) which arose under a Contract which has been duly
authorized and is in full force and effect and which, together
with such Contract, constitutes the legal, valid and binding
obligation of the Obligor of such Receivable enforceable against
such Obligor in accordance with its terms and is not the subject
of, as of the Purchase Date on which such Receivable is sold to
the Issuer, any material dispute, asserted offset, counterclaim
or defense whatsoever (except the discharge in bankruptcy of such
Obligor);
(vii) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or
regulations applicable thereto and with respect to which no party
to the Contract related thereto is in violation of any such law,
rule or regulation in any material respect; and
(viii) as to which, if it relates to an Obligor which
is under the protection of a bankruptcy court, such bankruptcy
court has approved payment by such Obligor under the related
Contract to the related Seller.
ESOP: The Company's Employee Stock Ownership Plan,
including the trust fund established thereby.
Event of Default: The meaning specified in Section 5.01.
Excess Cash: With respect to each Determination Date, the
amount, if any, by which the Aggregate Collateral Balance, less
the Stated Value of any Excluded Receivables, exceeds the level
required to maintain the Collateral Value Ratio at 1.00 as of the
last day of the preceding Determination Period.
Excluded Receivables: As of any date of determination:
(a) all Receivables which are Defaulted Receivables;
(b) all Receivables which are Disputed Receivables;
(c) all Receivables which are Ineligible
Receivables;
(d) the excess of (i) the aggregate Stated Value of
all Receivables, or any specified portion of Receivables,
which are outstanding more than 120 days from their
respective billing dates over (ii) in the case of Commercial
Receivables, 7% of the Aggregate Collateral Balance on such
date of determination, and in the case of Government
Receivables together with Government Subcontract
Receivables, 3%, of the Aggregate Collateral Balance as
calculated on each Determination Date;
(e) all Commercial Receivables or Government
Subcontract Receivables of an Obligor when the aggregate
Stated Value of Disputed Receivables and Ineligible
Receivables due from such Obligor exceeds 25% of the
aggregate Stated Value of all Receivables due from such
Obligor; and
(f) (i) on each Determination Date only and with
respect to each Government Contract and Government
Subcontract, the excess, if any, of the aggregate Stated
Value of all Government Receivables and Government
Subcontract Receivables accrued and unbilled under such
Contract as of the last day of the preceding Determination
Period, less the aggregate Stated Value of Government
Receivables and Government Subcontract Receivables billed
under such Contract since the last day of such preceding
Determination Period, over the amount of Permitted Accrued
Receivables for such Government Contract and Government
Subcontract and (ii) if after giving effect to the limita
tion set forth in (i), the total allowable accrued and
unbilled Government Receivables and Government Subcontract
Receivables under all Contracts and Subcontracts with the
Government exceeds 40% of the Aggregate Collateral Balance
as of the last day of the preceding Determination Period,
those Receivables in excess of 40%; and (iii) if after
giving effect to the limitations set forth in (i) and (ii)
above, the total allowable accrued and unbilled Government
Subcontract Receivables under all Government Subcontracts
exceeds 5% of the Aggregate Collateral Balance as of the
last day of the preceding Determination Period, those
Government Subcontract Receivables in excess of 5%.
GAAP: Generally Accepted Accounting Principles applied on
a basis consistent with the Company's financial statements as set
forth in its Form 10-K.
Government: The federal government of the United States of
America or any department, division, agency or instrumentality
thereof.
Government Contract: Any Contract the Obligor on which is
the Government.
Government Receivable: Any Receivable under a Government
Contract, or any Receivable the payment of which is an obligation
of or is funded by the Government.
Government Subcontract: A Contract between a Seller and a
Prime Contractor, through which the Seller is acting as a
subcontractor to the Government, and where the Seller is not
itself in privity of contract with the Government.
Government Subcontract Receivable: Any Receivable under a
Government Subcontract.
Grant: To grant, bargain, sell, warrant, alienate, remise,
demise, release, convey, assign, transfer, mortgage, pledge,
create and grant a first priority security interest in and right
of set-off against, deposit, set over and confirm. A Grant of
the Receivables shall include all rights, powers and options (but
none of the obligations) of the granting party thereunder, includ
ing without limitation, the immediate continuing right to collect
and receive payments in respect of the Receivables; provided,
however, that a Grant of Government Receivables does not include
the right of a Seller to enforce a claim for payment of such
Receivables under the related Contract.
Guarantee: The General Guarantee Agreement, dated as of
the Closing Date, by the Company in favor of the Issuer and the
Trustee.
Holder or Noteholder: The Person in whose name a Note is
registered in the Note Register.
Implied Rating: An Obligor with respect to Commercial
Receivables will have an "Implied Rating" if it meets one of the
following conditions as so certified by the Servicer to the
Trustee: (i) if any debt securities of such Obligor are rated by
Standard & Poor's Corporation the Implied Rating will be equal to
the senior unsecured debt rating of such Obligor, (ii) if the
debt obligations of such Obligor are not rated by Standard &
Poor's Corporation, but such obligations are guaranteed by a
holding company, an Affiliate or other entity which has a senior
unsecured debt rating from Standard & Poor's Corporation, the
Implied Rating will be equal to such senior unsecured rating or
(iii) if such Obligor is a Non-U.S. Obligor whose debt
obligations are not rated by Standard & Poor's Corporation, but
such obligations are either guaranteed by the related national
government or a majority of its stock is owned by such national
government, the Implied Rating of such Obligor will be equal to
the Standard & Poor's Corporation rating of such related national
government.
Indenture: This instrument as supplemented or amended. All
references in this instrument to designate "Articles,"
"Sections," "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions
of this instrument as originally executed. The words "herein,"
"hereof," "hereunder" and other words of similar import refer to
this Indenture as a whole and not to any particular Article,
Section, Subsection or other subdivision.
Independent: When used with respect to any specified Person
means such a Person, who (a) is in fact independent of the Issuer
and any other obligor upon the Notes or a Related Person of the
Issuer or such other obligor, (b) does not have any direct finan
cial interest or any material indirect financial interest in the
Issuer or in any such other obligor or in a Related Person of the
Issuer or such other obligor, and (c) is not connected with the
Issuer or any such other obligor as an officer, employee,
promoter, underwriter, trustee, partner, director or person
performing similar functions. Whenever it is provided herein
that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by
Issuer Order and approved by the Trustee and the Required Holders
in the exercise of reasonable care and such opinion or
certificate shall state that the signer has read this definition
and that the signer is independent within the meaning thereof.
Ineligible Receivable: Any Receivable as to which a breach,
on any date, of any representation or warranty set forth in
Section 4.02 of the Sale and Purchase Agreement has occurred and
is continuing.
Interest Coverage Ratio: For any period, (a) Consolidated
EBDAIT, divided by (b) Consolidated Net Cash Interest Expense.
Issuer: Dyn Funding Corporation, a Delaware corporation,
unless a successor Person shall have become the Issuer pursuant
to the applicable provisions of this Indenture, and thereafter
"Issuer" shall mean such successor Person.
Issuer Officer: The Chairman of the Board of Directors, the
President or any Vice President of the Issuer.
Issuer Order and Issuer Request: A written order or request
signed in the name of the Issuer by an Issuer Officer and by its
Treasurer, an Assistant Treasurer, Controller, an Assistant
Controller, Secretary, or an Assistant Secretary, and delivered
to the Trustee.
Lien: Any lien, mortgage, security interest, pledge,
charge, equity, encumbrance or right of any kind whatsoever
(except any lien, mortgage, security interest, pledge, charge,
equity, encumbrance or right of any kind granted under the Sale and
Purchase Agreement) with respect to the Receivables.
Lockbox Account: Each lockbox account established and
maintained by the Issuer with a depositary institution solely in
the name of the Trustee.
Lockbox Bank: Each depositary institution with which a
Lockbox Account is maintained.
Lockbox Notices: The collective reference to the notices by
each Seller to the depository institution with which such Seller
maintains its Seller's Lockbox authorizing control by the Trustee
of such Seller's Lockbox in the event of the removal or resigna
tion of the Company as Servicer.
Mandatory Redemption: A redemption by the Issuer of all of
the Notes pursuant to Section 11.02(b).
Mandatory Redemption Level: A Collateral Value Ratio of
0.95.
Net ESOP Contributions: For any period (a) cash
contributions to the ESOP, but only to the extent that such
contributions are repaid by the ESOP to the Company in the form
of either (i) cash payments under loan agreements between the
Company and the ESOP, or (ii) cash proceeds from the sale of the
Company's common stock to the ESOP, plus (b) to the extent
expensed, the fair market value of the Company's common stock
contributed to the ESOP, less (c) the amount of principal
payments pursuant to third party ESOP related financing
agreements, but excluding the payment of approximately
$31,941,502.43 to retire the ESOP related Term Loan under the
March 2, 1988 Credit Agreement among the Company, various banks
and Bankers Trust Company (as Agent) made contemporaneously with
the Closing Dates, all determined on a consolidated basis in
accordance with GAAP.
Non-Amortization Period: The period from the Closing Date
to the close of business on the Payment Date preceding the
Amortization Date.
Non-U.S. Obligor: An Obligor on a Contract relating to
Commercial Receivables that maintains its principal place of
business outside the United States of America.
Note Interest Payment: The total amount of interest payable on
the Notes on any Payment Date, as specified in the form of Notes.
Note Interest Rate: 8.54% per annum.
Note Payments: The total amount of principal and interest
payable on the Notes on any Payment Date, as specified in the
forms of Notes.
Note Principal Balance: With respect to any Note on any
date of determination, the principal balance thereof on the date
of initial issuance minus all amounts distributed to the
Noteholders as of such date in respect thereof on account of
principal.
Note Purchase Agreement: The Note Purchase Agreement dated
the date hereof by and among the Issuer, the Company and the
Purchasers, as it may be supplemented or amended.
Note Register and Note Registrar: The respective meanings
specified in Section 2.05.
Noteholder or Holder: The Person in whose name a Note is
registered in the Note Register.
Notes: Any notes authorized by, and authenticated and
delivered under, this Indenture.
Obligor: Each Person who is obligated to pay for
merchandise or services pursuant to a Contract, including any
guarantor thereof and, in the case of a Government Subcontract,
the related Prime Contractor.
Officer: With respect to any corporation, the Chairman of
the Board of Directors, the President, any Vice President, the
Secretary, any Assistant Secretary or the Treasurer of such
corporation.
Officer's Certificate: For any Person, a certificate
delivered to the Trustee that has been signed on behalf of that
Person by an individual who is identified in that certificate as
being an Officer of that Person or any other individual autho
rized to execute the certificate.
Opinion of Counsel: A written opinion of an attorney at law
admitted to practice before the highest court of any state of the
United States or the District of Columbia or a law firm that may,
except as otherwise expressly provided in this Indenture, be
counsel for the Issuer and who shall be satisfactory to the
Trustee and the Required Holders. Whenever an Opinion of Counsel
is required hereunder, such opinion may rely on opinions of other
counsel who are so admitted, provided, any such other opinion
expressly permits such reliance.
Optional Redemption: A redemption by the Issuer of all of
the Notes pursuant to Section 11.01.
Outstanding: As of any date of determination, "Outstanding"
refers to all Notes theretofore authenticated and delivered under
this Indenture except:
(a) Notes theretofore canceled by the Note Registrar
or delivered to the Note Registrar for cancellation;
(b) Notes or portions thereof for which payment or
redemption money in the necessary amount has been thereto
fore deposited pursuant to Section 4.01 with the Trustee or
any Paying Agent (other than the Issuer) in trust or set
aside and segregated in trust by the Issuer for the Holders
of such Notes; provided that, if such Notes or portions
thereof are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture;
(c) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to this
Indenture unless proof satisfactory to the Trustee is
presented that any such Notes are held by a holder in due
course; and
(d) Notes alleged to have been destroyed, lost or
stolen for which replacement Notes have been issued as
provided in Section 2.06;
provided that, in determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Issuer or any other obligor
upon the Notes or any Related Person of the Issuer or of such
other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes
that a Trustee Officer knows to be so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer or
any other obligor upon the Notes or any Related Person of the
Issuer or such other obligor.
Outstanding Note Principal Balance: As of the time of
reference thereto, the unpaid principal amount of the Notes
Outstanding as of such time of reference.
Paying Agent: Any Person authorized by the Issuer to pay
the principal of or interest on any Notes on behalf of the
Issuer.
Payment Date: The 30th day of each month (except that
Payment Dates in the month of February shall be the last day of
such month), or, if such day is not a Business Day, the next
succeeding Business Day, commencing on January 30, 1992.
Permitted Accrued Receivables: As to any Determination Date
and any Government Contract or Government Subcontract, an amount
equal to the product of (A) 60 and (B) the Average Daily Revenue
for such Government Contract or Government Subcontract; provided,
that the related Seller has performed services, incurred costs or
completed work under such Government Contract or Government
Subcontract during the period for which such Average Daily
Revenue was calculated.
Person: Any individual, corporation, partnership, joint
venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
Primary Contract List: The list of Obligors on Contracts
relating to Commercial Receivables and Government Subcontract
Receivables delivered to the Trustee by the Issuer on the Closing
Date and held by the Trustee, as such list may be amended from
time to time as provided in Section 7.06. The initial Primary
Contract List is attached hereto as Schedule D.
Prime Contractor: In the case of a Government Subcontract,
the Person other than a Seller, which is in privity of contract
with the Government.
Principal Distribution Amount: With respect to each Payment
Date during the Amortization Period, the excess of (a) all
amounts on deposit in the Collection Account representing Col
lections on the Receivables received from and including the next
preceding Determination Date (or, in the case of the Amortization
Date, from and including the first day of the Amortization
Period) through the day immediately preceding such current
Determination Date, including reinvestment income thereon, and
any other amounts on deposit in the Collection Account and the
Distribution Account over (b) the sum of the amounts payable on
such Payment Date in respect of (i) all interest due on the
Notes, (ii) the amount payable pursuant to any Special Redemption
or Mandatory Redemption, (iii) any amounts to be deposited in the
Reserve Fund pursuant to Section 9.02(e) and (iv) the Servicing
Fee plus any previously unpaid Servicing Fee.
Proceeding: Any suit in equity, action at law or other
judicial or administrative proceeding.
Purchase Date: Each date on which any Receivable is
purchased by the Issuer pursuant to the terms of any Sale and
Purchase Agreement.
Purchase Price: The Purchase Price for each Receivable
being purchased on any Purchase Date, determined as set forth in
Section 2.01 of each Sale and Purchase Agreement.
Purchasers: The purchasers of the Notes pursuant to, and
identified in, the Note Purchase Agreement.
Qualified Bank: A bank having long term unsecured debt
obligations rated "A" or higher by Standard & Poor's Corporation.
For purposes of the next preceding sentence, a bank shall be
deemed to have long term unsecured debt obligations rated "A" or
higher by Standard & Poor's Corporation if such bank is the
principal subsidiary of a bank holding company and the long term
unsecured debt obligations of such bank holding company are
currently rated "A" or higher by Standard & Poor's Corporation.
A bank shall be deemed the principal subsidiary of a bank holding
company if the bank's net worth exceeds 66-2/3% of the consoli
dated net worth of such bank holding company.
Rating Agencies: Collectively, Standard & Poor's
Corporation and Duff & Phelps Credit Rating Co.
Receivable: All right to payments from an Obligor under a
Contract listed on the Contract Schedule for such amounts which
have been purchased by the Issuer from time to time pursuant to a
Sale and Purchase Agreement, whether constituting an account or
general intangible, including the right to payment of any
interest or finance charges and other obligations of such Obligor
with respect thereto. The term Receivables includes Commercial
Receivables, Government Subcontract Receivables and Government
Receivables and excludes that portion of any Receivable (i) that
has been repurchased or substituted for by a Seller pursuant to
Section 4.04 or 4.05 of the related Sale and Purchase Agreement
and (ii) as to which all amounts payable have been collected by
the Servicer.
Receivables Information: Any information provided in
writing by an Authorized Officer of the Sellers under the Sale
and Purchase Agreements to the Purchasers.
Receivable Schedule: The schedule attached as Schedule B
hereto and setting forth the following information as of the Cut-
off Date:
(a) With respect to Commercial Receivables:
(i) the name of each Obligor;
(ii) the aggregate Stated Value of the
Receivables of each Obligor; and
(iii) the invoice number of each Commercial
Receivable.
(b) With respect to Government Receivables:
(i) identification of each Government Contract;
(ii) the aggregate amount of billed Receivables
for each Government Contract;
(iii) the aggregate amount of accrued and
unbilled Receivables for each Government Contract; and
(iv) the Average Daily Revenue for each
Government Contract.
(c) With respect Government Subcontract Receivables:
(i) identification of each Government Subcontract and the
related Prime Contractor;
(ii) the aggregate amount of billed Receivables
for each Government Subcontract;
(iii) the aggregate amount of accrued and
unbilled Receivables for each Government Subcontract; and
(iv) the Average Daily Revenue for each
Government Subcontract.
(d) A calculation of the Collateral Value Ratio, including a
statement of the amount of cash to be deposited into the
Collection Account pursuant to Section 3.01(k) in order to
produce a Collateral Value Ratio of 1.00 as of the Cut-off Date.
Record Date: With respect to the Notes, the date on which
the Holders of Notes entitled to receive the payment due on the
Notes on the next succeeding Payment Date are determined, such
date as to any Payment Date being the fifteenth day of the month
in which such Payment Date occurs, or would occur but for the
30th day of such month not being a Business Day.
Redemption Date: With respect to the Called Principal of
any Note, the date on which such Called Principal is declared to
be due and payable pursuant to a Redemption or an acceleration of
maturity pursuant to Section 5.02. With respect to a Special
Redemption or Mandatory Redemption, the Redemption Date shall be
the Payment Date next succeeding the Determination Date on which
such Special Redemption or Mandatory Redemption is determined to
be required.
Redemption Price: With respect to any Note to be redeemed
pursuant to a Special Redemption, Mandatory Redemption or
Optional Redemption by the Issuer, 100% of the Outstanding Note
Principal Balance of the Notes to be redeemed together with
accrued and unpaid interest thereon to the applicable Redemption
Date plus, in the case of an Optional Redemption, Special
Redemption or Mandatory Redemption, the applicable Yield
Maintenance Premium.
Registered Holder: The Person whose name appears on the
Note Register as the registered holder of a Note.
Reinvestment Yield: With respect to the Called Principal of
any Note, the sum of (A) the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City time) on (a)
with respect to an Optional Redemption, the 16th Business Day
preceding the Redemption Date with respect to such Called
Principal and (b) with respect to a Special Redemption, Mandatory
Redemption or an acceleration pursuant to Section 5.02(c), the
Business Day next preceding the Redemption Date with respect to
such Called Principal, on the display designated as "Page 678" on
the Telerate Service (or such other display as may replace Page
678 on the Telerate Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Redemption Date, or (ii) if
such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series yields reported, for the latest day for
which such yields shall have been so reported as of (a) with
respect to an Optional Redemption, the 16th Business Day
preceding the Redemption Date with respect to such Called
Principal and (b) with respect to a Special Redemption, Mandatory
Redemption or an acceleration pursuant to Section 5.02(c), the
Business Day next preceding the Redemption Date with respect to
such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal
to the Remaining Average Life of such Called Principal as of such
Redemption Date and (B) with respect to an Optional Redemption,
0%, with respect to a Special Redemption, a Mandatory Redemption
pursuant to Section 11.02(b) and with respect to an acceleration
pursuant to Section 5.02(c), 0.50% and with respect to a
Mandatory Redemption pursuant to Section 11.02(c), 1.00%. Such
implied yield in (A) above shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between reported yields.
Related Person: With respect to any Person, any trade or
business, whether or not incorporated, which, together with such
Person, is under common control, as described in Section 414(b)
or (c) of the Code.
Remaining Average Life: With respect to the Called
Principal of any Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will
elapse between (x) with respect to an Optional Redemption, the
15th Business Day prior to the Redemption Date with respect to
such Called Principal and (y) with respect to a Special
Redemption or Mandatory Redemption, the Redemption Date with
respect to such Called Principal and the Amortization Date.
Remaining Scheduled Payments: With respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Redemption
Date with respect to such Called Principal if no payment of such
Called Principal were made prior to the Amortization Date and
assuming such Called Principal is paid in full on the
Amortization Date.
Repurchase Date: The date determined as described in
Section 4.04 of the Sale and Purchase Agreement.
Repurchase Price: The amount calculated as described in
Section 4.04 of the Sale and Purchase Agreement.
Required Holder(s): As of any date of determination, the
Registered Holder or Registered Holders of at least 66-2/3% of
the Outstanding Note Principal Balance at such time.
Required Reserve Balance: With respect to any Payment Date,
3% of the initial Note Principal Balance.
Reserve Fund: The fund established pursuant to Section
9.08.
Responsible Officer: Any officer of the Issuer, the
Servicer or a Seller who is familiar with, and customarily
performs functions relating to, the Issuer's, the Servicer's or a
Seller's obligations under the Indenture, the Servicing Agreement
and the Sale and Purchase Agreements, as the case may be.
Retainages: Amounts to be contractually withheld by an
Obligor pursuant to an underlying Contract.
Sale: The meaning specified in Section 5.16.
Sale and Purchase Agreement: Each Sale and Purchase Agree
ment, substantially in the form of Exhibit E hereto, between the
Issuer and a Seller whereby the Receivables securing the Notes
are sold by such Seller to the Issuer.
Scheduled Principal Debt: The amount of principal scheduled
to be due but not yet paid, on indebtedness of the Company and
its subsidiaries on a consolidated basis, including amounts due
by reason of acceleration. Indebtedness shall include notes,
debentures, capitalized lease obligations, mortgages and other
obligations recorded as notes payable or debt in the Company's
financial statements, all as determined in accordance with GAAP;
provided, however, that all amounts due under (i) term loans,
letters of credit, revolving credit facilities, and lines of
credit due to banking institutions and (ii) the Notes shall be
excluded, unless payment of such amounts has been accelerated as
a result of a default by the Company under the related
agreements.
Seller: Each of the Company and any majority-owned subsidiaries
of the Company that (a) enters into Sale and Purchase Agreements
following the Closing Date, each being party to a Sale and Purchase
Agreement and (b) the obligations of which, pursuant to the Guarantee,
are guaranteed by DynCorp. Major divisions of a Seller will be deemed
to be Sellers, provided that such divisions will not enter into separate
Sale and Purchase Agreements.
Seller's Lockbox: Each lockbox account established and
maintained by a Seller or the Servicer in its own name with a
depository institution.
Servicer: DynCorp, or any successor thereto, in its
capacity as Servicer pursuant to the Servicing Agreement.
Servicing Agreement: The Servicing Agreement dated as of
the date hereof by and among the Issuer, the Trustee and the
Servicer, as it may be supplemented or amended.
Servicing Fee: With respect to each Payment Date, an amount
equal to one-twelfth of one percent of the aggregate Stated Value
of all Eligible Receivables as of the end of the preceding
Determination Period.
Special Redemption: A redemption by the Issuer of the Notes
pursuant to Section 11.02(a).
Stated Maturity: With respect to any Note, the date
specified in such Note as the fixed date on which the final
installment of the principal of such Note is due and payable.
Stated Value: (a) As to any Receivable that has been
billed, the amount billed (net of any Retainages under the re
lated Contract) for services rendered, cost incurred or work
completed pursuant to the related Contract, (b) as to any
Government Receivable or Government Subcontract Receivable that
is accrued and unbilled, including any accrued fixed fee, award
fee, general and administrative expense and overhead expense, the
amount which has been determined with respect to a Determination
Period, and without regard to the 0.15 discount under clause
(c)(iii) below, and (c) as to that portion of a Government
Receivable or Government Subcontract Receivable that is accrued
and unbilled (other than amounts in (b) above), the product of
(i) the Average Daily Revenue for the related Contract, (ii) the
number of Calendar Days since the Purchase Date on which accrued
and unbilled Government Receivables arising under such Contract
were last sold to the Issuer (taking into account any adjustment
to the related Average Daily Revenue during such period) and
(iii) 0.85; provided, that on each Determination Date, the Stated
Value of accrued and unbilled Government Receivables and
Government Subcontract Receivables, as determined in clause (c)
above shall be the actual amount of such accrued and unbilled Re
ceivables as of the last day of the preceding Determination
Period as determined by the Seller on such current Determination
Date, without regard to the 0.15 discount under clause (c)(iii)
above.
Successor Servicer: Any servicer appointed by the Issuer or
the Trustee pursuant to Section 5.03 of the Servicing Agreement.
Trust Estate: All money, instruments and other property
subject or intended to be subject to the lien of this Indenture,
pursuant to the Granting Clauses of this Indenture, for the
benefit of the Holders of the Notes as of any particular time
(including, without limitation, all property and interests
Granted to the Trustee in this Indenture) and all right, title
and interest of the Trustee in, to and under the Servicing
Agreement, each Sale and Purchase Agreement and all money and
property received or receivable by the Trustee pursuant thereto
or otherwise in respect of the Receivables and Eligible Invest
ments, including all proceeds thereof.
Trustee: Bankers Trust Company, a New York State banking
corporation, or its agents, attorneys, custodians or nominees
unless a successor Person shall have become the Trustee pursuant
to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Person.
Trustee Officer: With respect to the Trustee, any officer
within the Corporate Trust office of the Trustee, including any
vice-president, assistant vice-president, secretary, assistant
secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the
above designated officers and, with respect to a particular
matter, any other officer or to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
UCC: The Uniform Commercial Code as in effect in the rele
vant jurisdiction.
Vice President: Any vice president, irrespective of whether
such title is modified by any other forms preceding or following.
Yield Maintenance Premium: With respect to any Note, as of
the related Redemption Date, a premium equal to the excess, if
any, of the Discounted Value of the Called Principal of such Note
over the sum of (i) such Called Principal plus (ii) interest
accrued thereon as of (including interest due on) such Redemption
Date with respect to such Called Principal. The Yield-
Maintenance Premium shall in no event be less than zero.
ARTICLE TWO
NOTE FORM
Section 2.01. Form Generally.
The Notes and the Trustee's certificate of authentication
shall be in substantially the form set forth in this Article with
such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of identification,
as may, consistently herewith, be determined by the Officers of
the Issuer executing such Notes, as evidenced by their execution
of such Notes. Any portion of the text of any Note may be set
forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, litho
graphed or engraved or produced by any combination of these
methods, all as determined by the Officers of the Issuer execut
ing such Notes, as evidenced by their execution of such Notes.
Section 2.02. Form of Notes.
The Notes shall be substantially in the form set forth as
Exhibit A.
Section 2.03. Denominations.
The Notes shall be issuable in registered certificated form,
in the minimum principal amount of $500,000 and integral
multiples of $100,000 in excess thereof, provided that one Note
may be issued in such denomination as may be necessary to
represent the remainder of the Note Principal Balance.
Section 2.04. Execution, Authentication, Delivery and Dating.
The Notes shall be executed by manual signature on behalf of
the Issuer by its President or one of its Vice Presidents.
Notes bearing the manual signature of an individual who was
at any time a proper Officer of the Issuer shall bind the Issuer,
notwithstanding the fact that such individual has ceased to hold
such offices prior to the authentication and delivery of such
Notes or did not hold such offices at the date of issuance of
such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Issuer may deliver Notes executed
by the Issuer to the Trustee for authentication; and the Trustee
shall authenticate and deliver such Notes as in this Indenture
provided and not otherwise.
Notes which are authenticated and delivered by the Trustee
to or upon the order of the Issuer on the Closing Date shall be
dated the Closing Date. All other Notes which are authenticated
after the Closing Date for any other purpose hereunder shall be
dated the date of their authentication.
No Note shall be entitled to any benefit under this Inden
ture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication substan
tially in the form provided for herein executed by the Trustee by
manual signature, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
Section 2.05. Registration, Registration of Transfer and Exchange.
The Issuer shall cause to be kept a "Note Register" in
which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes
and the registration of transfers of Notes. The Trustee is
hereby initially appointed "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided.
If a Person other than the Trustee is appointed by the
Issuer as Note Registrar, the Issuer will give the Trustee prompt
written notice of the appointment of a Note Registrar and of the
location, and any change in the location, of the Note Register,
and the Trustee shall have the right to inspect the Note Register
at all reasonable times and to obtain copies thereof and the
Trustee shall have the right to rely upon a certificate executed
on behalf of the Note Registrar by an Officer thereof as to the
names and addresses of the Holders of the Notes and the principal
amounts and numbers of such Notes.
Upon surrender for registration of transfer of any Note in
certificated form at the office or agency of the Issuer to be
maintained as provided in Section 8.02, the Issuer shall execute,
and, upon an Issuer Order, the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees,
one or more new Notes of any authorized denominations of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for
other Notes in any authorized denominations and of the like
aggregate principal amount, upon surrender of such Notes to be
exchanged at the office or agency of the Issuer. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute,
and upon an Issuer Order, the Trustee shall authenticate and
deliver, the Notes that the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Notes surrendered upon such registration
of transfer or exchange.
Every such Note presented or surrendered for registration of
transfer or exchange shall (if so required by the Issuer or the
Trustee) be duly endorsed, or be accompanied by a written instru
ment of transfer in form satisfactory to the Issuer and the
Trustee duly executed by the Holder thereof or his attorney duly
authorized in writing, and by such other documents as the Trustee
may reasonably require, provided that the Trustee shall not
require legal opinions in connection with any such transfer or
exchange.
No service charge shall be made to a Holder for any registra
tion of transfer or exchange of Notes, but the Issuer may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of such Notes.
Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes.
If (a) any mutilated Note is surrendered to the Trustee, or
the Issuer and the Trustee receive evidence to their reasonable
satisfaction of the destruction, loss or theft of any Note (the
written statement of an institutional Noteholder shall be deemed
satisfactory for such purpose), and (b) there is delivered to the
Issuer and the Trustee such security or indemnity as may be
required by them to save each of them harmless (the unsecured
agreement of indemnity of an institutional Noteholder shall be
deemed satisfactory for such purpose), then, in the absence of
notice to the Issuer or the Note Registrar that such Note has
been acquired by a bona fide purchaser, the Issuer shall execute
and upon an Issuer Order the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a new Note of the same tenor and
principal amount, bearing a number not contemporaneously
outstanding; provided, however, that if any such mutilated,
destroyed, lost or stolen Note shall have become or shall be
about to become due and payable, or shall have been selected or
called for redemption, instead of issuing a new Note, the Issuer
may pay such Note without surrender thereof, except that any
mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section, the
Issuer may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether
or not the mutilated, destroyed, lost or stolen Note shall be at
any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated, destroy
ed, lost or stolen Notes.
Section 2.07. Payment of Principal and Interest; Principal and Interest
Rights Preserved.
(a) The Notes shall bear interest from the Closing Date until
paid at the Note Interest Rate. Thirty days of interest shall be
due and payable on each Payment Date (other than the first and,
if applicable, last Payment Date) on the Note Principal Balance
of the Notes, determined as of the Closing Date with respect to
the first Payment Date, and thereafter, the preceding Payment
Date (after giving effect to any principal payment made on such
Notes on such date). Interest will be calculated on the basis of
a 360 day year consisting of 12 months of 30 days each. If the
amount available in the Distribution Account is insufficient to
pay the amount of interest due and payable on the Notes on any
Payment Date, such shortfall will be carried forward and added to
the amount due on such Notes on the next Payment Date. Any such
amount carried forward will bear interest, to the extent legally
permissible, at a rate per annum which shall be equal to 200
basis points in excess of the greater of (i) the Note Interest
Rate and (ii) the prime rate announced by Bankers Trust Company
in effect on the Payment Date on which such shortfall first
accrued.
(b) The principal of the Notes shall be payable on the
Amortization Date and each Payment Date thereafter, to the extent
of the amount available after payment of all interest payable on
the Notes, to the extent that funds remain in the Collection
Account, as provided in Section 9.02 herein.
(c) Payments on the Notes shall be made by the Trustee by wire
transfer of immediately available funds to the account of the
Person entitled thereto at a bank or other entity having
appropriate facilities therefor if such Person shall have so
notified the Trustee in writing by the Record Date immediately
prior to such Payment Date and is the registered owner of Notes
in the initial aggregate principal amount equal to or in excess
of $500,000. The final installment of principal of and interest
on each Note (or the Redemption Price thereof in the case of a
Note called for Optional Redemption) shall be payable on or after
its Stated Maturity. The Trustee shall notify the Person in
whose name a Note is registered at the close of business on the
twenty-fifth day of the month next preceding the month of the
Payment Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be
paid. Such notice shall be mailed no earlier than the sixtieth
day, and no later than the thirty-fifth day (or, in the case of a
final Payment Date occurring in the month of February, the thirty-
third day), prior to such Payment Date. Within 30 days after the
final installment of principal of and interest on each Note (or
the Redemption Price thereof in the case of a Note called for
Optional Redemption), the Holders will return the Notes to the
Issuer.
(d) The Holders of the Notes as of the Record Date in respect
of a Payment Date shall be entitled to the interest accrued and
payable and principal payable on such Payment Date. Payments of
principal to such Holders shall be made in the proportion that
the unpaid principal balance of the Notes registered in the name
of each such Holder on such Record Date bears to the aggregate
unpaid principal balance of all the Notes on such Record Date.
All payment obligations under a Note are discharged to the extent
such payments are made to the Holder of record.
(e) Each Note delivered under this Indenture upon registration
of transfer of or in exchange for or in lieu of any other Note
shall carry the rights to unpaid interest and principal that were
carried by such other Note.
Section 2.08. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any
Note, the Issuer, the Trustee and any agent of the Issuer or of
the Trustee may treat the Person in whose name any Note is regis
tered as the owner of such Note for the purpose of receiving
payments of principal, premium, if any, and interest on such Note
and for all other purposes whatsoever, (whether or not such Note
is overdue), and neither the Issuer, the Trustee nor any agent of
the Issuer or the Trustee shall be bound by notice to the
contrary.
Section 2.09. Cancellation.
All Notes surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be
promptly canceled by it. The Issuer may at any time deliver to
the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Issuer may have acquired in any
lawful manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Trustee. No Notes shall be authenti
cated in lieu of or in exchange for any Notes canceled as pro
vided in this Section, except as expressly permitted by this
Indenture. All canceled Notes held by the Trustee shall be
destroyed unless the Issuer shall direct by a timely Issuer Order
that they be returned to it.
Section 2.10. Purchase of Notes by the Issuer.
If the Issuer or any Affiliate of the Issuer offers to
purchase Notes, the Issuer must make such offer to all
Noteholders pro rata in proportion to the Note Principal Balance
held by each Noteholder.
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF NOTES
III. 01. General Provisions.
The aggregate amount of Notes that may be authenticated and
delivered under this Indenture is limited to $100,000,000, except
for Notes authenticated and delivered upon registration and transfer
of, or in exchange for, or in lieu of, other Notes pursuant
to Section 2.05 or 2.06.
Notes complying with the foregoing requirements may be
executed by the Issuer and delivered to the Trustee for authentication
and thereupon the same shall be authenticated and deliver
ed by the Trustee upon Issuer Request and upon receipt by the
Trustee on the Closing Date of the following:
(a) an Officer's Certificate from the Issuer: (i) evidencing
the authorization of the execution, authentication and delivery
of the Notes and specifying the Stated Maturity, aggregate
principal amount and Note Interest Rate of the Notes to be
authenticated and delivered; (ii) certifying the Certificate of
Incorporation and Bylaws of the Issuer (copies of which are
attached); (iii) stating that no approval, authorization, consent,
order, registration, qualification, license or permit of
or with any court or governmental agency or body (other than
those that have already been obtained, copies of which are
attached) is required for the execution and delivery of the
Notes, or the execution, delivery and performance of the
Indenture, by the Issuer; and (iv) stating that the issuance of
the Notes will not result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the
Issuer's articles of incorporation or bylaws or any indenture,
mortgage, deed of trust or other agreement or instrument to which
the Issuer is a party or by which it is bound, or any order of
any court or administrative agency entered in any Proceeding to
which the Issuer is a party or by which it may be bound or to
which it may be subject;
(b) a Board Resolution of the Issuer authorizing the
execution, performance and delivery of the Indenture and the
execution, authentication by the Trustee and delivery of the
Notes and specifying the Stated Maturity and principal amounts of
Notes to be authenticated and delivered, certified by the
secretary or assistant secretary of the Issuer, which certificate
shall state that such Board Resolution has not been amended,
modified, revoked or rescinded as of the date of such
certification;
(c) [reserved];
(d) evidence of the good standing of the Issuer;
(e) an Opinion of Counsel to the Issuer dated not earlier than
such Issuer Request, to the effect set forth in Exhibit C hereto;
(f) an Accountant's Certificate (1) confirming the information
with respect to the Receivables set forth in Schedule B by
reference to sources provided by the Company and (2) specifying
procedures undertaken by them to review data and computations
relating to the following statements and confirming that the
following statements are accurate:
(i) as of the Cut-off Date the aggregate Stated Value of all
Receivables included in the Trust Estate, valued at the
applicable Collateral Value Percentage, together with any amount
required to be deposited in the Collection Account pursuant to
Section 3.01(k) is sufficient to produce a Collateral Value Ratio
of not less than 1.00; and
(ii) as of the Cut-off Date the composition of
the Receivables included in the Trust Estate satisfies the
requirements of Section 2.02(j)(i)-(vi), (k) and (l) of the Sale
and Purchase Agreement.
(g) an Officer's Certificate from the Issuer, dated as of the
date of such Issuer Request, to the effect (which may be combined
with the Officer's Certificate required by Section 3.01(a)
hereof) that, in the case of each Contract securing the Notes and
immediately prior to the delivery thereof on the Closing Date:
(i) the Issuer is the owner of such Receivables arising
under such Contract;
(ii) the Issuer has not assigned any interest or
participation in such Receivable (or, if any, such interest or
participation has been assigned, it has been released);
(iii) the Issuer has full right to Grant a security
interest in and assign and pledge the Trust Estate to the Trustee;
and
(iv) UCC financing statements with respect to the Trust
Estate have been filed with the Secretary of State of the State of
Delaware;
(h) an executed copy of the Servicing Agreement;
(i) an executed copy of each Sale and Purchase Agreement;
(j) such other documents as the Trustee may reasonably
require;
(k) $24,399,488.23 to be deposited in the Collection Account
representing the amount of cash required to result in a
Collateral Value Ratio of 1.00 as of the Cut-off Date and
Collections on the Receivables during the period from the Cut-off
Date through the third Business Day preceding the Closing Date,
which deposit shall be made from the proceeds of the sale of the
Notes; and
(l) any required deposit to the Reserve Fund pursuant to
Section 9.03(a), which deposit shall be made out of the proceeds
of the sale of the Notes; and
(m) an Officer's Certificate from the Issuer certifying as of
the Cut-off Date the information set forth in Sections 2.02(g),
2.02(j)(i)-(vi) and 2.02(k) and (l) of the Sale and Purchase Agreements.
Section 3.02. The Receivables.
The Issuer represents and warrants to the Trustee that the
Receivables listed on Schedule B hereof conform as of the Cut-off
Date, and additional Receivables purchased by the Issuer on any
Purchase Date after the Closing Date, will conform, to each of
the representations and warranties contained in Section 4.02 of
the applicable Sale and Purchase Agreement.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with
respect to the Notes except as to (a) rights of registration of
transfer and exchange, (b) substitution of mutilated, destroyed,
lost or stolen Notes, (c) the rights of Noteholders to receive
payments of principal thereof and interest thereon, (d) the
rights, obligations and immunities of the Trustee hereunder, and
(e) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Trustee and payable
to all or any of them, and the Trustee, on demand of and at the
expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with
respect to the Notes when:
(i) all Notes theretofore authenticated and delivered (other
than (1) Notes which have been destroyed,lost or stolen and which
have been replaced, or paid as provided in Section 2.06, and (2)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 8.03) have been delivered to the Trustee for
cancellation or an indemnity reasonably satisfactory to the
Trustee on account thereof has otherwise been provided (the
unsecured agreement of indemnity of the Noteholders shall be
deemed satisfactory for such purpose);
(ii) the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer with respect to the Notes; and
Notes; and
(iii) the Issuer has delivered to the Trustee an Officer's
Certificate stating that all amounts payable hereunder to the
Noteholders have been paid.
Notwithstanding the satisfaction and discharge of this Inden
ture, the obligations of the Issuer to the Trustee under Section
6.07 and of the Trustee to the Noteholders under Section 4.02
shall survive.
Section 4.02. Application of Trust Money.
All monies deposited with the Trustee pursuant to Section
4.01 shall be held in trust and applied by it, in accordance with
the provisions of the Notes and this Indenture, to make payments,
either directly or through any Paying Agent, as the Trustee may
determine, to the Person entitled thereto of the principal and
interest payable on the Notes in respect of which such money has
been deposited with the Trustee.
ARTICLE FIVE
DEFAULTS AND REMEDIES
Section 5.01. Events of Default.
"Event of Default" with respect to any Note wherever used
herein, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be volun
tary or involuntary or be effected by operation of law or pur
suant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) Default by the Issuer in the payment of any principal,
interest or premium in respect of any Note when the same becomes
due and payable, which Default shall continue for a period of one
Business Day after the related Payment Date; or
(2) Default in the performance, or breach, of any covenant or
warranty of the Issuer in this Indenture (other than a covenant
or warranty a Default in the performance of which or breach of
which is elsewhere in this Section or in Article Nine
specifically dealt with) or in the Servicing Agreement or a Sale
and Purchase Agreement (other than those representations in
Section 4.02 thereof), as applicable, that would have a material
adverse effect on the interests of the Noteholders, and
continuance of such Default or breach for a period of 30 days
after the earlier to occur of (a) receipt by the Issuer of
written notice thereof or (b) a Responsible Officer of the Issuer
shall have had actual knowledge thereof; or
(3) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Issuer under the Federal Bankruptcy Code or any
other applicable federal or state law, or appointing a receiver,
liquidator, assignee, or sequestrator (or other similar official)
of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(4) the institution by the Issuer of Proceedings to be
adjudicated as bankrupt or insolvent or for the appointment of or
taking possession by, a trustee, a receiver, custodian, liquidator
or similar official of the Issuer, or any such proceedings are
commenced against the Issuer and the Issuer by any act indicates
its approval thereof, consent thereto or acquiescence therein, or
the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or
any other similar applicable federal or state law, or the
consent by it to the filing of any such petition; or
(5) any order, judgment or decree is entered in any Proceeding
decreeing the dissolution of the Issuer and such order, judgment
or decree remains unstayed and in effect for more than 60 days;
or
(6) a final judgment is rendered against the Issuer in an
amount greater than $100,000 and, within 60 days after entry
thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of
any such stay, such judgment is not discharged; or
(7) the Issuer makes an assignment for the benefit of
creditors or is generally not paying its debts as such debts
become due; or
(8) any representation or warranty (other than those
representations in Article IV of the Sale and Purchase Agreement
for which the sole remedy is the obligation to repurchase such
Receivables pursuant to Section 4.04 thereof) made in writing by
or on behalf of the Issuer herein or in any instrument furnished
in compliance herewith or in reference to this Indenture or
otherwise in connection with the transactions contemplated by
this Indenture shall be false in any material respect on the date
as of which made and such breach shall not have been remedied
within 30 days after the earlier to occur of (a) receipt by the
Issuer of written notice thereof or (b) a Responsible Officer of
the Issuer shall have had actual knowledge thereof; or
(9) the Issuer fails to perform or observe, or fails to cause
to be performed or observed, any other agreement, term or
condition contained herein that would have a material adverse
effect on the interests of the Noteholders and such default shall
not have been remedied within 30 days after the earlier to occur
of (a) receipt by the Issuer of written notice thereof and (b) a
Responsible Officer of the Issuer shall have had actual knowledge
thereof; or
(10) the occurrence of an event of default pursuant
to Section 5.01 of the Servicing Agreement.
Section 5.02. Acceleration of Maturity.
(a) If an Event of Default specified in clause (3), (4) or (5)
of Section 5.01 occurs, all of the Notes at the time Outstanding
shall be immediately due and payable at par together with
interest accrued thereon and all other accrued amounts owing
under this Indenture;
(b) If any Event of Default other than that specified in
Section 5.02(a) occurs, the Trustee, if directed by an Act of the
Required Holders, shall by notice in writing to the Issuer and
the Noteholders, declare all of the Notes and other accrued
amounts owing under this Indenture, to be, and all of such Notes
and such other amounts owing under this Indenture shall thereupon
be and become, immediately due and payable together with interest
accrued on such Notes; and
(c) If an Event of Default specified in clause (1), (2), (8),
(9) or (10) (as to clause (10), with respect to Sections 5.01(c)
and (d) only of the Servicing Agreement) of Section 5.01 occurs,
the amounts payable pursuant to Section 5.02(b) shall include
Yield Maintenance Premium.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee
The Issuer covenants that upon the acceleration of the
maturity of the Notes pursuant to Section 5.02, the Issuer will,
upon demand of the Trustee, immediately pay to the Trustee for
the benefit of the Holder of each Note the whole amount then due
and payable on such Note for principal and interest, with
interest upon the overdue principal and, to the extent that
payments of such interest shall be legally enforceable, upon
overdue installments of interest pursuant to Section 2.07(a), in
the order set forth in Section 5.06 herein and, in addition
thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as Trustee of an express
trust, may institute a Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment
or final decree, and may enforce the same against the Issuer and
collect the monies adjudged or decreed to be payable in the
manner provided by law.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate proceedings
as the Trustee shall deem most effectual to protect and enforce
any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise
of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Trustee by this
Indenture or by law.
In case there shall be pending Proceedings relative to the
Issuer under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the
Issuer or its property, or in case of any other comparable
judicial Proceedings relative to the Issuer or the creditors or
property of the Issuer, the Trustee, regardless whether the
principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and regardless whether
the Trustee shall have made any demand pursuant to the provisions of this
Section 5.03, shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the
Notes, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee
and each predecessor Trustee, and their respective agents,
attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in any Proceedings relative
to the Issuer or other obligor upon the Notes, or to the
creditors or property of the Issuer or such other obligor,
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of the Notes in any election of a
trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency Proceedings or
Person performing similar functions in comparable Proceedings,
and
(c) to collect and receive any monies or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Noteholders
and of the Trustee on their behalf; and any trustee, receiver or
liquidator, custodian or other similar official is hereby
authorized by each of the Noteholders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to the Noteholders, to pay to the
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other expenses
and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of negligence or
bad faith.
Amounts payable to the Trustee under this section are
intended to constitute Administrative Expenses. Nothing herein
contained shall be deemed to authorize the Trustee to authorize
or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Noteholder in any such Proceeding except, as aforesaid,
to vote for the election of a trustee in bankruptcy or similar person.
In any Proceedings brought by the Trustee (and also any
Proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee
shall be held to represent all the Holders of the Notes, and it
shall not be necessary to make any Holders of the Notes parties
to any such Proceedings.
Section 5.04. Remedies.
If an Event of Default shall have occurred and be continu
ing, the Trustee shall, at the direction of the Required Holders,
do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on the Notes or under this Indenture, whether by
declaration or otherwise, enforce any judgment obtained, and
collect from the Trust Estate securing the Notes monies adjudged
due;
(b) sell all or a portion of the Trust Estate securing
the Notes or rights of interest therein, at one or more public
or private sales called and conducted in any manner permitted
by law; provided, that the Trustee must obtain the prior consent
of all Noteholders if the proceeds of such sale are expected to
be less than the Outstanding Note Principal Balance;
(c) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to
the Trust Estate securing the Notes; and
(d) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce
the rights and remedies of the Trustee or the Holders of the
Notes hereunder.
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any
Proceeding relating thereto, and any such Proceeding instituted
by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Notes.
Section 5.06. Application of Proceeds.
Any money collected by the Trustee pursuant to this Article
Five shall be applied in the following order, at the date or
dates fixed by the Trustee and, in the case of the distribution
of the entire amount due on account of principal of and any
interest on such Notes, upon presentation and surrender thereof:
First: To the payment of any amounts due the Trustee
under Section 6.07;
Second: To the payment of the amounts then due and
owing upon the Notes, first, for interest and then for
principal, including interest on any principal of or accrued
interest on such Notes which was not paid when due, which
amounts shall bear interest as provided in the last sentence
of Section 2.07(a), but only to the extent that the payment
of interest on overdue interest shall be legally enforce
able, plus Yield Maintenance Premium, if any;
Third: To the payment of any unpaid amount, known to
the Trustee, due other Persons in respect of expenses of the
Issuer; and
Fourth: To the payment of any balance to the Issuer.
Section 5.07. Limitation on Suits.
No Holder of any Note shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Inden
ture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) the Trustee has failed to declare all of the Outstanding
Notes due and payable as required by Section 5.02;
(b) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(c) such Holder shall have made written request to the Trustee
to institute Proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(d) such Holder has offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(e) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
Proceeding; and
(f) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the
Required Holders;
it being understood and intended that no one or more Holders of
Notes shall have any right in any manner whatever by virtue of,
or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holders of Notes or
to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and
ratable benefit of all the Holders of Notes.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of
Holders of Notes, each representing less than a majority of the
then aggregate Outstanding amount of the Outstanding Notes, the
Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.08. Unconditional Rights of Noteholders to Receive Principal and
Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right which is absolute and
unconditional to receive payment of the principal of and interest
in respect of such Note as such principal and interest becomes
due and payable and to institute suit for the enforcement of any
such payment, and such right shall not be impaired without the
consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned, or has
been determined adversely to the Trustee or to such Noteholder,
then and in every such case the Issuer, the Trustee and the
Noteholder shall, subject to any determination in such Proceed
ing, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of
the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Trustee or to the Noteholder is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter exist
ing at law or in equity or otherwise. The assertion or employ
ment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appro
priate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy occurring upon any Event of
Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the
Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the
Noteholders, as the case may be.
Section 5.12 Control by Noteholders.
So long as any Notes are Outstanding, the Required Holders
shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Trustee
with respect to the Notes or exercising any trust or power
conferred on the Trustee with respect to the Notes; provided
that:
(a) the Trustee shall have the right to decline any such
direction if the Trustee, being advised by counsel, determines
that the action so directed is in conflict with any rule of law
or with this Indenture, and
(b) the Trustee may take any other action deemed proper by a
Trustee Officer that is not inconsistent with such direction; provided,
however, that, subject to Section 6.01, the Trustee need not take any
action that a Trustee Officer determines might involve the Trustee in
liability or be unjustly prejudicial to the Noteholders not consenting.
Section 5.13. Waiver of Past Defaults.
The Required Holders may on behalf of the Holders of all the
Notes waive in writing any past Default with respect to the Notes
and its consequences, except a Default:
(a) in the payment of the principal or interest in respect of
any Note, or
(b) in respect of a covenant or provision hereof that under
Section 10.01 (except subsection (b)(iii) thereof) cannot be
modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such written waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Note by his acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant
in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the pro
visions of this Section shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Noteholder, or group
of Noteholders, (in compliance with Section 5.07 hereof), holding
in the aggregate more than 10% in principal amount of the
Outstanding Notes, or to any suit instituted by any Noteholder
for the enforcement of the payment of the principal or interest
in respect of any Note on or after the Payment Date on which any
of such amounts was due (or, in the case of redemption, on or after
the applicable Redemption Date).
Section 5.15. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any
stay or extension law wherever enacted, now or at any time here
after in force, which may adversely affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that
it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.16. Sale of Trust Estate.
(a) The method, manner, time, place and terms of any Sale of
all or any portion of the Trust Estate pursuant to Section 5.04
shall be commercially reasonable. The Trustee may from time to
time postpone any Sale by public announcement made at the time
and place of such Sale. The Trustee hereby expressly waives its
right to any amount fixed by law as compensation for any Sale.
(b) In connection with a Sale of all or any portion of the
Trust Estate pursuant to Section 5.04, any Noteholder may bid for
and purchase the property offered for Sale, and upon compliance
with the terms of such Sale may hold, retain and possess and
dispose of such property, without further accountability, and
may, in paying the purchase money therefor, deliver any Outstand
ing Notes or claims for interest thereon in lieu of cash up to
the amount that shall, upon distribution of the net proceeds of
such Sale, be payable thereon, and such Notes, in case the
amounts so payable thereon shall be less than the amount due
thereon, shall be returned to the Holders thereof after being
appropriately stamped to show such partial payment.
(c) The Trustee may bid for and acquire any portion of the
Trust Estate securing the Notes in connection with a public sale
thereof, and may pay all or part of the purchase price by credit
ing against amounts owing on the Notes other amounts secured by
this Indenture, all or part of the net proceeds of such Sale
after deducting the costs, charges and expenses incurred by the
Trustee in connection with such Sale notwithstanding the pro
visions of Section 6.07 hereof. The Notes need not be produced
in order to complete any such Sale, or in order for the net
proceeds of such Sale to be credited against amounts owing on the
Notes. The Trustee may hold, lease, operate, manage or otherwise
deal with any property so acquired in any manner permitted by
law.
(d) The Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion
of the Trust Estate in connection with a Sale thereof. In addi
tion, the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its
interest in any portion of the Trust Estate in connection with a
Sale thereof, and to take all action necessary to effect such
Sale. No purchaser or transferee at such a Sale shall be bound
to ascertain the Trustee's authority, inquire into the satisfac
tion of any conditions precedent or see to the application of any
monies.
Section 5.17. Action on Notes.
The Trustee's right to seek and recover judgment on the
Notes or under this Indenture shall not be affected by the seek
ing or obtaining of or application for any other relief under or
with respect to this Indenture. Neither the lien of this Inden
ture nor any rights or remedies of the Trustee or the Noteholders
shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the
assets of the Issuer.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith or gross negligence on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case
of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to
determine whether or not they substantially conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing
and a Trustee Officer shall have actual knowledge or written
notice of such Event of Default, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct
of his own affairs. Prior to the occurrence of an Event of
Default or after all Events of Default which may have occurred
have been cured or waived, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and shall use
the same degree of care and skill in their exercise as a
corporate trustee would exercise or use under the circumstances
in the administration of a corporate trust indenture.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own grossly negligent
action, its own grossly negligent failure to act, or its own
willful misconduct, except that:
(i) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made reasonably and in good faith by a Trustee Officer, unless it
shall be proved that the Trustee was grossly negligent in
ascertaining the pertinent facts;
(iii) to the extent required by the terms hereof, the Trustee
shall act in accordance with the directions of the Required
Holders and, to the extent not so provided herein, with respect
to any act requiring the Trustee to exercise its own discretion,
the Trustee shall act in accordance with the direction of the
Required Holders relating to the time, method and place of
conducting any Proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture and the Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in
good faith in accordance with any such instruction; and
(iv) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it unless such risk or liability relates to
its ordinary services under this Indenture.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
(e) The Trustee shall, at its own expense, maintain at all
times during which any Notes are Outstanding and keep in full
force and effect, (i) fidelity insurance, (ii) theft of documents
insurance, (iii) forgery insurance and (iv) errors and omissions
insurance. All such insurance shall be in amounts, with standard
coverage and subject to deductibles customary for insurance
typically maintained by banks which act as trustee.
Section 6.02. Notice of Default.
Upon the occurrence of any Event of Default of which a
Trustee Officer has actual knowledge or has received notice
thereof, the Trustee shall transmit by mail to all Holders of
Notes, as their names and addresses appear on the Note Register,
notice of such Event of Default hereunder known to the Trustee.
Section 6.03. Certain Rights of Trustee.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document
reasonably believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officer's Certificate, a copy of which is
provided to the Noteholders at or prior to the time the Trustee
receives such Officer's Certificate;
(d) as a condition to the taking, suffering or omitting of any
action by it hereunder, the Trustee may consult with counsel and
the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or to
honor the request or direction of any of the Noteholders pursuant
to this Indenture, unless such Noteholders shall have offered to
the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document,
but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books,
records and premises of the Issuer, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents, attorneys, custodians or nominees and the
Trustee shall not be responsible for any (i) misconduct or
negligence on the part of any agent, attorney, custodians or
nominees appointed with due care by it hereunder or (ii) the
supervision of such agents, attorneys, custodians or nominees
after such appointment with due care;
(h) the Trustee shall not be liable for any actions taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights conferred upon the
Trustee by this Indenture;
(i) the Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables for the purpose of establishing the presence or
absence of defects, the compliance by the Issuer with its
representations and warranties or for any other purpose; and
(j) in the event that the Trustee is also acting as Paying
Agent and Note Registrar, the rights and protections afforded to
the Trustee pursuant to this Article Six shall also be afforded
to such Paying Agent and Note Registrar.
Section 6.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the
certificate of authentication, shall be taken as the statements
of the Issuer, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the
validity or sufficiency of this Indenture, the Notes, any
Receivable or any related document. The Trustee shall not be
accountable for the use or application by the Issuer of Notes or
the proceeds thereof, including deposits, or withdrawals from,
the Collection Account or any other account established to
effectuate the transactions contemplated herein in accordance
herewith.
Section 6.05. May Hold Notes.
The Trustee, any Paying Agent, Note Registrar or any other
agent of the Issuer, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with
the Issuer with the same rights it would have if it were not
Trustee, Paying Agent, Note Registrar or such other agent.
Section 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds held by the Trustee in trust here
under except to the extent required herein or required by law.
The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed upon by the
Trustee and the Issuer.
Section 6.07. Compensation and Reimbursement.
The Issuer agrees:
(a) to pay or cause the Servicer to pay the Trustee from time
to time reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(b) except as otherwise expressly provided herein, to
reimburse or cause the Servicer to reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision
of this Indenture (including, without limitation, all costs and
expenses incurred by the Trustee in connection with the exercise
by the Trustee of any remedies under the Indenture and the
reasonable compensation and the expenses and disbursements of its
agents and counsel, except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith);
and
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability, expense, damage or injury suffered
or sustained by reason of any acts or omissions, or alleged acts
or omissions without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The Trustee's right to receive amounts pursuant to this
Section 6.07 shall at all times be subordinate to the lien of the
Notes, except as provided in Sections 5.06, 9.02(f) and 9.02(g),
and the Trustee shall receive amounts pursuant to Sections 5.06,
9.02(f) and 9.02(g) only to the extent that the payment thereof
will not result in an Event of Default and the failure to pay
such amounts to the Trustee will not constitute an Event of
Default. The Trustee hereby agrees not to cause the filing of a
petition in bankruptcy against the Issuer for the non-payment to
the Trustee of any amounts provided by this Section 6.07 until at
least 91 days after the payment in full of all Notes issued under
this Indenture.
Section 6.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall
be a corporation organized and doing business under the laws of
the United States of America or of any State, authorized under
such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $100,000,000, subject to super
vision or examination by federal or state authority and having an
office within the United States of America; provided, however,
that in the event Bankers Trust Company or its corporate
successor is not Trustee, the Trustee must be a Qualified Bank.
If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately
in the manner and with the affect hereinafter specified in this
Article.
Section 6.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appoint
ment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor
Trustee under Section 6.10.
(b) The Trustee may resign at any time by giving written
notice thereof to the Issuer. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Required Holders, delivered to the Trustee and to the Issuer.
(d) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.08
and shall fail to resign after written request therefor by the
Issuer or by any such Noteholder, or
(ii) the Trustee shall become legally incapable of acting with
respect to the Notes or shall be adjudged a bankrupt or insolvent
or a receiver or liquidator of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (1) the Issuer by a Board Resolution may
remove the Trustee, or (2) subject to Section 5.14, any
Noteholder who has been a bona fide Holder of a Note for at least
six months may, on behalf of himself and all other similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting in accordance with the provisions of this
Section 6.09, or if a vacancy shall occur in the office of the
Trustee for any cause, the Issuer, by a Board Resolution, shall
promptly appoint a successor Trustee subject to the approval of
the Required Holders. If within 90 days after such resignation,
removal or incapability or the occurrence of such vacancy, a
successor Trustee shall not have been appointed by the Issuer, a
successor Trustee shall be appointed by Act of the Required
Holders delivered to the Issuer and the retiring Trustee. The
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee. To
qualify, the successor so appointed shall satisfy the
requirements set forth in Section 6.08. If no successor Trustee
shall have been so appointed by the Issuer or the Noteholders and
shall have accepted appointment in the manner hereinafter
provided, any Noteholder who has been a bona fide Holder of a
Note for at least six months may, on behalf of himself and all
other similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of the Notes as their names
and addresses appear in the Note Register. Each notice shall
include the name of the successor Trustee and the address of its
Corporate Trust Office.
(g) The obligations of the Issuer under this Indenture shall
survive the resignation or removal of the Trustee.
(h) No Trustee under this Indenture shall be personally liable
for any action or omission of any successor Trustee.
Section 6.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Noteholders and the
retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, duties and obligations of the retiring
Trustee; but, on request of the Issuer, the Required Holders or
the successor Trustee, such retiring Trustee shall, upon payment
of any amounts due it under Section 6.07 then unpaid, execute and
deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder,
subject nevertheless to its lien, if any, provided for in Section
6.07. Upon request of any such successor Trustee or the Required
Holders, the Issuer shall execute any and all instruments for
more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
Section 6.11. Merger, Conversion, Consolidation or Succession to Business
of Trustee.
Any Person into which the Trustee may be merged or converted
or with which it may be consolidated, or any Person resulting
from any merger, conversion or consolidation to which the Trustee
shall be a party, or any Person succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided such
Person shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case
any Notes have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated
such Notes.
Section 6.12. Trustee as Successor Servicer.
The Trustee hereby expressly agrees to assume the
obligations of the successor to the Servicer pursuant to and in
accordance with the provisions of Section 5.03 of the Servicing Agreement,
subject to the right of the Trustee to appoint a successor servicer
contained in such Section 5.03.
Section 6.13. Co-trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any of a Trust Estate
may at any time be located, the Issuer and the Trustee shall have
power to appoint, and, upon the written request of the Trustee or
of the Required Holders, the Issuer shall for such purpose join
with the Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Trustee either to act as co-
trustee, jointly with the Trustee, of all or any part of such
Trust Estate, or to act as separate trustee of any such Property,
in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons
in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of
this Section. If the Issuer does not join in such appointment
within 15 days after the receipt by it of a request so to do, or
in case an Event of Default has occurred and in continuing, the
Trustee alone shall have power to make such appointment.
Should any written instrument from the Issuer be required by
any co-trustee or separate trustee so appointed for more fully
confirming to such co-trustee or separate trustee such property,
title, right or power, any and all such instruments shall, on
request, be executed, acknowledged and delivered by the Issuer.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject
to the following terms, namely:
(1) The Notes shall be authenticated and delivered and
all rights, powers, duties and obligations hereunder in
respect of the custody of securities, cash and other
personal property held by, or required to be deposited or
pledged with, the Trustee hereunder, shall be exercised,
solely by the Trustee.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee or by
the Trustee and such co-trustee or separate trustee jointly,
as shall be provided in the instrument appointing such co-trustee
or separate trustee, except to the extent that under
any law of any jurisdiction in which any particular act is
to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(3) The Trustee at any time, by an instrument in
writing executed by it, with the concurrence of the Issuer
evidenced by a Board Resolution, may accept the resignation
of or remove any co-trustee or separate trustee appointed
under this Section 6.13, and, in case an Event of Default
has occurred and is continuing, the Trustee shall have power
to accept the resignation of, or remove, any such co-trustee
or separate trustee without the concurrence of the Issuer.
Upon the written request of the Trustee, the Issuer shall
join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or
proper to effectuate such resignation or removal. A
successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this
Section 6.13.
(4) No co-trustee or separate trustee hereunder shall
be personally liable by reason of any act or omission of the
Trustee, or any other such trustee hereunder.
(5) Any Act of Noteholders delivered to the Trustee
shall be deemed to have delivered to each such co-trustee
and separate trustee.
Section 6.14. Rights of the Trustee Upon Appointment of Successor Servicer
At any time following the effective date of a designation of
a Successor Servicer pursuant to Section 5.03 of the Servicing
Agreement, the Trustee is authorized at any time to date and to
deliver to the Lockbox Banks the Lockbox Notices, and to the
Government Contract Obligors the Assignment of Claims Act
Notices. In case any authorized signatory of a Seller whose
signature appears on a Lockbox Notice or an Assignment of Claims
Act Notice shall cease to have such authority before the delivery
of such Lockbox Notice or such Assignment of Claims Act Notice,
such signature shall nevertheless be valid following the
designation of a Successor Servicer as if such authority had
remained in force. The Trustee may notify the Obligors, at any
time following the effective date of the designation of a Successor
Servicer, of the ownership of the Company under this
Agreement and may also direct that payments of all amounts due,
or that become due, under any or all Receivables be made directly
to the Trustee or its designee. In furtherance of the foregoing,
the Trustee shall be entitled to take all such actions as it
deems necessary or advisable to exercise dominion and control
over the collection and servicing of the Receivables, including
such action as shall be necessary or desirable to cause all
Collections to come into the possession of the Trustee rather
than the Seller or the Company.
ARTICLE SEVEN
NOTEHOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
Section 7.01. Issuer to Furnish Trustee Names and Addresses of
Noteholders.
The Issuer will furnish or cause to be furnished to the
Trustee (a) upon each transfer of a Note, a list, in such form as
the Trustee may reasonably require, of the names, addresses and
taxpayer identification numbers of the Holders of Notes as they
appear on the Note Register as of such Record Date, and (b) at
such other times, as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request, a list
of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that
for so long as the Trustee is the Note Registrar, no such list
shall be required to be furnished; provided, further, that for so
long as the Trustee is the Note Registrar, the Trustee shall
furnish to the Issuer such list in the same manner prescribed in
clause (b) hereof.
Section 7.02. Preservation of Information; Communications to Noteholders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of
Notes contained in the most recent list furnished to the Trustee
as provided in Section 7.01 and the names, addresses and taxpayer
identification numbers of the Holders of Notes received by the
Trustee in its capacity as Note Registrar. The Trustee may
destroy any list furnished to it as provided in Section 7.01 upon
receipt of a new list so furnished.
(b) If any Holder of Notes applies in writing to the Trustee
stating that it desires to communicate with other Holders of Notes or
with the Holders of all Notes with respect to their rights under this
this Indenture or under the Notes, then the Trustee shall, within five
Business Days after the receipt of such application, afford such Holder
access to the information preserved at the time by the Trustee in
with Subsection (a) of this Section.
Section 7.03. Reports by and Inspections of Issuer.
(a) Issuer will deliver or cause to be delivered, in dupli
cate, to each Noteholder and the Trustee:
(i) as soon as practicable and in any event within 50 days
after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, statements of income and
cash flows for the Issuer for the period from the beginning of
the current fiscal year to the end of such quarterly period, and
a balance sheet of the Issuer as at the end of such quarterly
period, setting forth in each case figures for the corresponding
period in the preceding fiscal year, all in reasonable detail and
certified by the authorized financial officer of the Issuer,
subject to changes resulting from normal year-end adjustments;
(ii) as soon as practicable and in any event within
95 days after the end of each fiscal year, audited statements of
income and cash flows for the Issuer for such year, and a balance
sheet of the Issuer as at the end of such year, setting forth in
each case corresponding figures from the preceding annual
financial statements, all in reasonable detail and certified by a
firm of independent accountants;
(iii) promptly upon receipt thereof, a copy of any
report submitted to the Issuer by independent accountants in
connection with any annual, interim or special audit made by them
of the financial records of the Issuer;
(iv) together with each delivery of financial state
ments required by clauses (i) and (ii) above, the Issuer will
deliver to each Purchaser that is also a Noteholder and to any
other Noteholder who so requests in writing and to the Trustee,
an Officer's Certificate stating that the signer has reviewed the
terms of this Indenture, the Servicing Agreement, the Sale and
Purchase Agreements and the Notes and has made, or caused to be
made under his supervision, a review in reasonable detail of the
transactions and condition of the Issuer during the fiscal period
covered by such financial statements and that (a) such review has
not disclosed the existence during or at the end of such fiscal
period, and that the signer has no knowledge of the existence, as
at the date of the Officer's Certificate, of any condition or
event which constitutes a Default or Event of Default under any
of the aforementioned agreements or Notes or which constitutes a
breach of a representation, warranty or covenant with respect to
any of the aforementioned agreements or Notes, or (b) if any such
condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Issuer has taken
or is taking or proposes to take with respect thereto;
(v) promptly upon an Officer of the Issuer obtaining
knowledge (a) both that a condition or event exists and that such
condition or event constitutes an Event of Default, (b) that any
Holder of a Note has given any notice or taken any other action
with respect to a claimed Default or Event of Default under this
Agreement, (c) of any condition or event which, in the opinion of
management of the Issuer, would have a material adverse effect on
the business, condition (financial or other), assets, properties
or operations of the Issuer, or (d) of the institution of any
litigation involving claims against the Issuer equal to or
greater than $100,000 with respect to any single cause of action
or of any adverse determination in any litigation involving a
potential liability to the Issuer equal to or greater than
$100,000 with respect to any single cause of action, or with
respect to all related causes of action, an aggregate amount
equal to or greater than $200,000, an Officer's Certificate
specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action
taken by such holder or Person and the nature of such claimed
Default, Event of Default, event or condition, and what action
the Issuer has taken, is taking or proposes to take with respect
thereto; and
(vi) with reasonable promptness, such other information
and data with respect to the Issuer as from time to time may
be reasonably requested by a Noteholder.
(b) The Issuer will permit any authorized representative
designated by the Trustee or any Noteholder, to visit and inspect
any of the properties of the Issuer, to examine the corporate
books and financial records of the Issuer, and make copies there
of or extracts therefrom and to discuss the affairs, finances,
and accounts of the Issuer with its principal officers, as appli
cable, and its independent public accountants, all at such reason
able times and as often as the Trustee or any holder of Notes may
reasonably request. Any expense incident to the exercise by the
Trustee or any Noteholder of any right under this Section 7.03
shall be borne by the Trustee, subject to Section 6.01(c)(iv), or
the Noteholder, as the case may be; provided that, if an
inspection is begun during the continuance of an Event of Default
hereunder or under any other indenture of the Issuer, the expense
incident to such audit shall be borne by the Issuer.
Section 7.04. Annual and Quarterly Statements as to Compliance.
(a) The Issuer shall cause a firm of independent public
accountants which is a member of the American Institute of
Certified Public Accountants to deliver to the Trustee on or
before April 15 of each year, beginning April 15, 1993, an
Accountants' Certificate stating whether, based upon their audit
of the Issuer's financial statements for the preceding fiscal
year, the Issuer has maintained the Collateral Value Ratio at not
less than 1.00 as reported on each Determination Date, or, if
such independent public accountants have knowledge of an Event of
Default in the fulfillment of any such obligations, and such
Event of Default shall be continuing, specifying each such Event
of Default known to such firm of independent public accountants
and the nature and status thereof (a "Compliance Audit").
(b) The Issuer shall cause such firm of independent public
accountants to deliver an Accountants' Certificate containing a
quarterly Compliance Audit, within 50 days following the end of
such calendar quarter, upon:
(i) a request by the Required Holders, provided such
request covers either the first, second or third quarter (but
limited to not more than one such request per fiscal year) of the
Issuer's fiscal year and is given with 90 days' notice; and
(ii) the occurrence of a Special Redemption, after which a
Compliance Audit shall be delivered, unless waived by the
Required Holders, for the succeeding four quarters following such
Special Redemption, excluding the fourth quarter of any fiscal
year following which an annual Compliance Audit shall be deemed
to satisfy this clause (ii).
Section 7.05. Contract Schedule.
(a) At any time during the Non-Amortization Period, the
Issuer may add, remove or replace Government Contracts, Government
Subcontracts or Commercial Obligors on the Contract Schedule.
(b) Within 10 days of each anniversary of the date of this
Indenture, or upon the written request of a Noteholder at any
other time, the Trustee shall provide to such Noteholder a
Contract Schedule, as provided to the Trustee by the Issuer, as
of the most recent Determination Date.
Section 7.06. Primary Contract List.
(a) On the Closing Date the Issuer shall deliver to the
Trustee the Primary Contract List.
(b) The Issuer may add Obligors to the Primary Contract List:
(i) without the consent of the Noteholders if the Obligor to
be added has an Implied Rating of BBB or higher by Standard &
Poor's Corporation; and
(ii) with the consent of the Required Holders, provided,
that the Issuer shall notify the Noteholders, in writing, of its
desire to add such Obligor and, if the Required Holders do not
reject such Obligor within 30 days after notice has been sent by
the Issuer, such consent shall be deemed given and the Obligor
may be added to the Primary Contract List.
(c) The Issuer shall review the Primary Contract List on each
Determination Date and shall remove an Obligor from the Primary
Contract List if:
(i) all of the Receivables of such Obligor become
Defaulted Receivables; or
(ii) that the Implied Rating of such Obligor was BBB
or higher at the time such Obligor was placed on the Primary
Contract List and the Issuer has actual knowledge such Implied
Rating subsequently drops below BBB, or is withdrawn, by Standard
& Poor's Corporation; provided, however, that such Obligor may be
subsequently added to the Primary Contract list pursuant to the
provisions of clause (b) above.
ARTICLE EIGHT
REPRESENTATIONS AND COVENANTS OF ISSUER
Section 8.01. Payment of Principal and Interest.
The Issuer will duly and punctually pay the principal and
interest in respect of the Notes.
Section 8.02 Maintenance of Office or Agency.
The Issuer will maintain an office or agency within the
United States of America where Notes may be presented or surren
dered for payment, where Notes may be surrendered for registra
tion of transfer or exchange and where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Trustee such
office or agency. The Issuer will give prompt written notice to
the Trustee and the Noteholders of the location, and of any
change in the location, of any such office or agency. If at any
time the Issuer shall fail to maintain any such office or agency
or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office, and the Issuer hereby
appoints the Trustee at its Corporate Trust Office as its agent
to receive all such presentations, surrenders, notices and
demands.
Section 8.03. Unclaimed Funds.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuer, in trust for the payment of the prin
cipal of or interest on any Note and remaining unclaimed for five
years after such principal or interest has become due and payable
shall be paid to the Issuer on Issuer Request, or (if then held
by the Issuer) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to
such trust money (but only to the extent of the amounts so paid
to the Issuer), and all liability of the Issuer as trustee there
of, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such release
or payment, may at the expense of the Issuer cause to be publish
ed once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York,
New York and in the city in which the Corporate Trust Office is located,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer. The Trustee may also adopt and employ, at the expense
of the Issuer, any other reasonable means of notification of such
release of payment (including, but not limited to, mailing notice
of such release to Holders whose Notes have been called but have
not been surrendered for redemption or whose right to or interest
in monies due and payable but not claimed is determinable from
the records of any Paying Agent, at the last address of record of
each such Holder).
Section 8.04. Corporate Existence.
The Issuer will keep in full effect its existence, rights
and franchises as a corporation under the laws of the State of
Delaware and will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which
such qualification is or shall be necessary to protect the validity
and enforceability of this Indenture and the Notes. The Issuer
shall at all times operate in accordance with its Certificate of
Incorporation and By-laws.
Section 8.05. Protection of Trust Estate.
The Issuer will from time to time prepare, or cause to be
prepared, execute and deliver all such supplements and amendments
hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will take
such other action as the Trustee or the Required Holders deem necessary
or advisable to:
(a) grant more effectively all or any portion of the Trust
Estate for the Notes;
(b) maintain or preserve the lien (and the priority
thereof) of this Indenture or to carry out more effectively the
purposes hereof;
(c) perfect, publish notice of, or protect the validity
of any Grant made or to be made by this Indenture; or
(d) preserve and defend title to the Trust Estate
securing the Notes and the rights therein of the Trustee and the
Holders of the Notes secured thereby against the claims of all
persons and parties.
The Issuer hereby designates the Trustee its agent and
attorney-in-fact to execute any financing statement, continuation
statement or other instrument required by the Trustee pursuant to this
Section 8.05.
The Issuer shall pay or cause to be paid any taxes levied on
the account of the beneficial ownership by the Issuer of
Contracts that secures the Notes.
Section 8.06. Representations and Covenants of the Issuer.
(a) As of the Closing Date, the Issuer hereby represents
and warrants to the Noteholders that as of such date:
(i) Organization and Good Standing; Licensing. The Issuer is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power
to own its assets and to transact the business in which it is currently
engaged. The Issuer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Issuer.
(ii) Authorization; Binding Obligations. The Issuer has the
power and authority to make, execute, deliver and perform this
Indenture and all the transactions contemplated under this
Indenture, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Indenture. When executed and delivered, this Indenture will
constitute the legal, valid and binding obligation of the Issuer
enforceable in accordance with its terms, except as enforcement
of such terms may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and
by the availability of equitable remedies.
(iii) No Consent Required. The Issuer is not required to
obtain the consent of any other party or any consent, license, approval
or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of
this Indenture, except such as have been obtained.
(iv) No Violations. The execution, delivery and performance
of this Indenture by the Issuer will not violate any provision of
any existing law or regulation or any order or decree of any
court applicable to the Issuer or the charter or bylaws of the
Issuer, or constitute a breach of any mortgage, indenture, contract
or other agreement to which the Issuer is a party or by which the
Issuer may be bound.
(v) Litigation. No litigation or administrative proceeding
of or before any court, tribunal or governmental body is currently
pending, or to the knowledge of the Issuer threatened, against
the Issuer or any of its properties or with respect to this
Indenture or the Notes which, if adversely determined, would in
the opinion of the Issuer have a material adverse effect on the
transactions contemplated by this Indenture.
(vi) Offering of Notes. Neither the Issuer nor any agent
acting on its behalf has, directly or indirectly, offered any
Note or any similar security of the Issuer for sale to, or
solicited any offer to buy any Note or any similar security of
the Issuer from, or otherwise approached or negotiated with
respect thereto with, any Person which, and neither the Issuer
nor any agent acting on its behalf has taken or will take any
action which, would subject the issuance or sale of any Note to
the provisions of Section 5 of the Securities Act of 1933, as
amended, or to the provisions of any securities or Blue Sky law
of any applicable jurisdiction.
(vii) Disclosure. Neither this Indenture nor any other
document, certificate or statement in writing furnished by or on
behalf of the Issuer in connection with the offering of the Notes
issued hereunder contains any untrue statement of a material fact
or omits to state a fact material to the issuance of the Notes
necessary in order to make the statements contained herein and
therein not misleading.
(viii) Investment Company Act. The Issuer is not an "investment
company", or a company "controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940, as amended.
(ix) Taxes. The Issuer has no delinquent amounts owing to any
governmental entity in respect of taxes.
(x) Use of Proceeds. The Issuer shall use the proceeds from
the sale of the Notes issued hereunder, simultaneously with such
sale, to purchase the Receivables securing the Notes from the
Sellers, make the required initial deposit to the Reserve Fund
and pay expenses relating to the issuance of the Notes.
(xi) Regulation G. The Issuer does not own and has no
intention of acquiring any "margin stock" as defined in Regulation
G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). None of the proceeds of
sale of any Note issued hereunder will be used, directly or
indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently
a margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such Regulation G.
Neither the Issuer nor any agent acting on its behalf has taken or will
take any action which might cause this Indenture or the Notes to
violate Regulation G, Regulation T or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, as amended, in each case as in effect
now or as the same may hereafter be in effect, nor will the Issuer
at any time acquire or hold any margin stock at any time during the
term of this Indenture. Notwithstanding the foregoing, nothing herein
shall prevent the Issuer from repurchasing its own stock.
(b) As of the Closing Date, the Issuer hereby covenants that
it will exercise all due diligence in order to assure that it complies
with the requirements of all applicable laws, rules, regulations and orders
of any governmental authority, noncompliance with which would materially
adversely affect its business, condition (financial or other), prospects,
assets, property or operations.
Section 8.07. Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange, pledge or otherwise dispose of
any part of the Trust Estate except as expressly permitted by
this Indenture; or
(b) claim any credit on, or make any deduction from, the
principal or interest payable in respect of the Notes by reason
of the payment of any taxes levied or assessed upon any part of
the Trust Estate; or
(c) incur any debt other than as permitted in its Certificate
of Incorporation;
(d) relocate its chief executive office without providing the
Trustee with 90 days' notice thereof; or
5. without the consent of the Required Holders (i) amend its
Certificate of Incorporation, (ii) amend, or waive the provisions
of the Servicing Agreement or any Sale and Purchase Agreement or
(iii) consent to the assignment of the Seller's or the Servicer's
rights or obligations under any Sale and Purchase Agreement or
the Servicing Agreement, respectively.
Section 8.08. Issuer May Consolidate, Etc., Only on Certain Terms.
The Issuer shall not consolidate or merge with or into any
other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) such consolidation, merger, conveyance, or transfer is
permitted by the Issuer's Certificate of Incorporation;
(b) the Person (if other than the Issuer) formed or surviving
such consolidation or merger or that acquires by conveyance or
transfer the properties and assets of the Issuer substantially as
an entirety shall be a Person (i) organized and existing under
the laws of the United States of America or any State or the
District of Columbia and (ii) which is subject to the limitations
on conduct contained in Articles 9 and 10 of the Amended
Certificate of Incorporation of the Issuer, and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee and the Noteholders, in form
satisfactory to the Trustee and the Noteholders, the due and
punctual payment of the principal of and interest on all Notes
and the performance of every covenant of this Indenture on the
part of the Issuer to be performed or observed;
(c) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing; and
(d) the Issuer shall have delivered to the Trustee and the
Noteholders an Officer's Certificate and an Opinion of Counsel
each stating that (i) such consolidation, merger, conveyance or
transfer and such supplemental indenture comply with this
Article, (ii) all conditions precedent in this Article provided
for relating to such transaction have been complied with, (iii)
such supplemental indenture is duly authorized, executed and
delivered and is valid, binding and enforceable against such person
and (iv) such consolidation, merger, conveyance or transfer shall
not have a material adverse effect on the corporate separateness of
the Issuer from the Servicer.
Section 8.09. Successor Substituted.
Upon any consolidation or merger, or any conveyance or
transfer of the properties and assets of the Issuer substantially
as an entirety in accordance with Section 8.08, the Person formed
by or surviving such consolidation or merger (if other than the
Issuer) or the Person to which such conveyance or transfer is
made shall succeed to, and be substituted for, and may exercise
every right and power of, the Issuer under this Indenture with
the same effect as if such Person had been named as the Issuer
herein. In the event of any such conveyance or transfer, the
Person named as the "Issuer" in the first paragraph of this
instrument or any successor which shall theretofore have become
such in the manner prescribed in this Article may be dissolved,
wound-up and liquidated at any time thereafter, and such Person
thereafter shall be released from its liabilities as obligor and
maker on all the Notes and from its obligations under this
Indenture.
Section 8.10. Money for Note Payments to Be Held in Trust.
As provided in Section 9.02(a), all payments of amounts due
and payable with respect to the Notes which are to be made from
amounts withdrawn from the Collection Account pursuant to Section
9.02(c) shall be made on behalf of the Issuer by the Trustee or
by Paying Agent, and no amounts so withdrawn from the Collection
Account shall be paid over to or at the direction of the Issuer
except as provided in this Section 8.10 and Section 9.02.
Whenever the Issuer shall have a Paying Agent other than the
Trustee, it will, on or before the Business Day next preceding
each Payment Date, direct the Trustee to deposit with such Paying
Agent on or before such Payment Date an aggregate sum sufficient
to pay the amounts then becoming due, such sum to be (i) held in
trust for the benefit of Persons entitled thereto and (ii)
invested, pursuant to an Issuer Order, by the Paying Agent in an
Eligible Investment in accordance with the terms of Section 9.03,
the earned income of such investment to be remitted to the
Issuer, unless an Event of Default, Mandatory Redemption or
Special Redemption has occurred and is continuing. For all
investments made by a Paying Agent under this Section 8.10, such
Paying Agent shall be entitled to all of the rights and obligations
of the Trustee under Section 9.03, such rights and obligations
being incorporated in this Paragraph by this reference.
The Issuer will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee (and if the
Trustee acts as Paying Agent, it hereby so agrees), subject to
the provisions of this Section 8.10, that such Paying Agent, in
acting as Paying Agent, is an express agent of the Trustee and,
further, that such Paying Agent will:
(a) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to
such Persons as herein provided;
(b) give the Trustee notice of any Default by the Issuer (or
any other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes; and
(c) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other
purpose, by Issuer Order direct any Paying Agent to pay to the
Trustee all sums held in trust by such Paying Agent, such sums to
be held by the Trustee upon the same trusts as those upon which
such sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Section 8.11. Performance of Obligations; Servicing Agreement.
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Servicing Agreement.
(b) The Issuer will not take any action or permit any action
to be taken by others which would release any Person from any of
such Person's covenants or obligations under any instrument
included in the Trust Estate, or which would result in the
amendment, hypothecation, subordination, termination or discharge of,
or impair the validity or effectiveness of any such instrument, except
as expressly provided in this Indenture, the Servicing Agreement or such
other instrument.
(c) If the Issuer shall have knowledge of the occurrence of an
Event of Default under the Servicing Agreement, the Issuer shall
promptly notify the Trustee thereof, and shall specify in such
notice the action, if any, the Issuer is taking in respect of
such Event of Default. If such Event of Default arises from the
failure of the Servicer to perform any of its duties or
obligations under the Servicing Agreement with respect to the
Receivables securing the Notes, the Issuer may remedy such
failure, provided that a failure by the Servicer to pay the fees
and expenses of the Trustee pursuant to Section 3.06 of the
Servicing Agreement shall not release the Issuer from its obligation
to pay such fees and expenses pursuant to Section 6.07. So
long as any such Event of Default under the Servicing Agreement
shall be continuing, the Trustee may, and upon the direction of
the Issuer or the Required Holders the Trustee shall, terminate
all of the rights and powers of the Servicer under the Servicing
Agreement pursuant to Section 5.02 of the Servicing Agreement.
Unless directed or permitted by the Trustee and the Required
Holders, the Issuer may not waive any such Event of Default under
the Servicing Agreement or terminate the rights and powers of the
Servicer under the Servicing Agreement.
(d) Upon any termination of the Servicer's rights and powers
pursuant to Section 5.02 of the Servicing Agreement, all rights,
powers, duties, obligations and responsibilities of the Servicer
(other than any rights of the Servicer as a Seller) with respect
to the Receivables (including, without limitation, the
obligations set forth in Section 5.02 of the Servicing Agreement)
shall vest in and be assumed by the Trustee, and the Trustee
shall be the successor in all respects to the Servicer in its
capacity as servicer with respect to such Receivables under the
Servicing Agreement, except for any obligations of the Servicer
under Section 4.04 of the Servicing Agreement. The Trustee may
resign as the Servicer by giving written notice of such
resignation to the Issuer and in such event will be released from
such duties and obligations, such release not to be effective
until the date a new servicer enters into a servicing agreement
with the Issuer as provided below. Upon delivery of any such
notice to the Issuer, the Issuer shall obtain a new servicer,
satisfactory in all respects to the Trustee and the Required
Holders, which successor servicer shall enter into a servicing
agreement with the Issuer and the Trustee, such agreement to be
substantially similar to the Servicing Agreement. If, within 30
days after the delivery of the notice referred to above, the
Issuer shall not have obtained such a new servicer, the Trustee
may appoint, or may petition a court of competent jurisdiction to
appoint, a successor servicer to service the Receivables. In
connection with any such appointment, the Trustee may make such
arrangements for the compensation of such successor as it, such
successor, and the Issuer shall agree and shall enter into an
agreement with such successor for the servicing of such
Receivables, such agreement to be in form and substance
satisfactory to the Trustee and the Required Holders. Any such
compensation of the successor servicer shall not be in excess of
that payable to the Servicer under the Servicing Agreement,
unless the Servicer or some other Person agrees to pay such
additional compensation or such additional compensation as is
approved by the Required Holders. If the Trustee shall succeed
to the Servicer's duties as servicer of the Contracts as provided
herein, it shall do so in its individual capacity and not in its
capacity as Trustee and, accordingly, the provisions of Article
Six shall be inapplicable to the Trustee in its duties as the
successor to the Servicer and the servicing of the Receivables.
Neither the Trustee nor the Issuer shall appoint a successor
servicer whose appointment would result in the rating assigned to
the Notes on the Closing Date by the Rating Agencies being
reduced to a lower rating so long as there is a Person who
satisfies the requirements of this Section for a successor
servicer and is willing to accept an appointment as successor
servicer as provided in this Section and whose appointment as
successor servicer would not so lower such rating.
Section 8.12. Corporate Separateness of Issuer.
The Issuer shall at all times hold itself out to the public,
including its parent, under the Issuer's own name and as a
separate and distinct entity from its parent. At all times at
least one director and one executive officer of the Issuer (or
one individual serving in both capacities) shall be a Person who
is not a director, officer or employee of any Person owning of
record more than 10% of the outstanding shares of common stock of
the Issuer or any Person which owns beneficially more than 10% of
the outstanding common stock of the Issuer. The Issuer shall
maintain separate corporate records and books of account from
those of its parent, shall not commingle its assets with any
other Person (except to the limited extent permitted by Section
3.02 of the Servicing Agreement) and shall take appropriate Board
of Directors action to authorize its corporate actions. The
Issuer shall not engage in business transactions (other than the
transactions contemplated in this Indenture) with any of its
Affiliates on terms and conditions less favorable to the Issuer
than those available to the Issuer for comparable transactions
with Persons who are not Affiliates of the Issuer. The Issuer
shall maintain its chief executive office and principal place of
business in the State of Delaware and separate and apart from any
office of the Servicer.
ARTICLE NINE
ACCOUNTS, ACCOUNTING AND RELEASES
Section 9.01. Collection of Money.
Except as otherwise expressly provided herein, the Trustee
may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal
agent or other intermediary, all money and other property payable
to or receivable by the Trustee pursuant to this Indenture,
including all payments due on account of any of the Receivables
pledged to secure the Notes. The Trustee shall hold all such
money and property received by it in trust for the Holders of the
Notes and shall apply it as provided in this Indenture. Except
as otherwise expressly provided in this Indenture, if any Default
occurs in the making of any payment or performance under the
Servicing Agreement, the Trustee may, and upon the request of the
Required Holders (as evidenced by the Note Register) shall, take
such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appro
priate Proceedings. Any such action shall be without prejudice
to any right to claim a Default or Event of Default under this
Indenture and to proceed thereafter as provided in Article Six.
Section 9.02. Collection Account; Distribution Account.
(a) Prior to the initial authentication and delivery of Notes,
the Issuer shall open, at a depository institution (which may be
the Trustee), (i) an account denominated "Collection Account --
Bankers Trust Company, as trustee in respect of 8.54% Contract
Receivable Collateralized Notes, Series 1992-1, Due 1997", (ii)
an account denominated "Distribution Account -- Bankers Trust
Company, as trustee in respect of 8.54% Contract Receivable
Collateralized Notes, Series 1992-1, Due 1997" and (iii) an
account denominated "Lockbox Account -- Bankers Trust Company,
Trustee for Dyn Funding Corporation under its 8.54% Contract
Receivable Collateralized Notes, Series 1992-1, Due 1997"
(collectively, the "Accounts"). The Accounts shall be held, in
the corporate trust department of such depositary institution, in
trust and relate solely to the Notes and Eligible Investments
securing the Notes, and funds in the Accounts shall be held as
provided in Section 6.06. The Issuer shall give the Trustee at
least five Business Days' written notice of any change in the
location of any Account and any related account identification
information. All payments to be made from time to time to the
Holders of Notes, out of funds in any Account pursuant to this
Indenture shall be made by the Trustee as the Paying Agent of the
Issuer or, pursuant to Section 8.10, by any other Paying Agent
appointed by the Issuer. All moneys deposited from time to time
in the Accounts, including the deposits to be made by the
Servicer in the Accounts pursuant to the Servicing Agreement, and
all investments made with such moneys, shall be held by the
Trustee as part of the Trust Estate as herein provided. All
funds withdrawn from the Collection Account pursuant to Section
9.02(d) and (e) for the purpose of making payments to holders
shall be applied in accordance with Section 8.10.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the Accounts
shall be invested and reinvested by the Trustee at the Issuer's
direction in one or more Eligible Investments bearing interest or
sold at discount. All income or other gain from investment of
moneys deposited in the Accounts shall be deposited in the appro
priate Account immediately upon receipt, and any loss resulting
from such investment shall be charged to such appropriate
Account. Notwithstanding the definition of "Eligible
Investments", in the case of an Account maintained with the
Paying Agent, Eligible Investments on which the Paying Agent is
the obligor (including repurchase agreements on which the Paying
Agent in its commercial capacity is liable as principal), may
mature on the Payment Date next succeeding the date of
investment.
(c) So long as the Notes have not been declared due and
payable pursuant to Section 5.02, the Trustee shall take the
following actions in the following order of priority, as
applicable:
(i) on any Business Day, if the amount on deposit in
the Reserve Fund is less than the Required Reserve Balance,
withdraw funds from the Collection Account for deposit in the
Reserve Fund until the amount on deposit therein equals the
Required Reserve Balance;
(ii) on any Business Day, upon receipt of a
request from the Servicer pursuant to Section 3.04 of the
Servicing Agreement, withdraw funds from the Collection Account
to repay the Servicer any amounts that duplicate other payments
in the account or that are not part of the Trust Estate,
including, but not limited to, funds deposited in error into the
Collection Account;
(iii) on any Business Day during the Non-Amortization
Period, upon receipt of an Issuer Request including a
certification that the Collateral Value Ratio, taking into
account the proposed withdrawal of funds, is at least 1.00 on
such Business Day, withdraw funds from the Collection Account in
an amount equal to any Deferred Purchase Price and release such
funds to the Issuer;
(iv) on any Business Day during the Non-Amortization
Period, upon receipt of an Issuer Request including a
certification that the Collateral Value Ratio, taking into
account the proposed withdrawal of funds, is at least 1.00 on
such Business Day, withdraw funds from the Distribution Account
in an amount equal to the unpaid portion, if any, of Excess Cash
that was payable to the Issuer on a prior Payment Date pursuant
to Section 9.02(f) and release such funds to the Issuer; and
(v) on any Business Day during the Non-Amortization
Period, upon receipt of an Issuer Order, withdraw funds from
the Collection Account and apply such funds to the purchase of
Eligible Receivables, subject to Section 2.02 of each Sale and
Purchase Agreement.
provided, however, that the Trustee shall not withdraw funds from
the Collection Account, any Lockbox Account or the Distribution
Account pursuant to clauses (iii) or (iv) above unless on such
Business Day (a) no Default or Event of Default exists, (b) no
Special Redemption amounts remain unpaid, (c) no Mandatory
Redemption is in effect and (d) amounts on deposit in the Reserve
Fund are at least equal to the Required Reserve Balance.
(d) So long as the Notes have not been declared due and
payable pursuant to Section 5.02, no later than the Business Day
preceding each Payment Date during the Non-Amortization Period,
the Trustee shall withdraw funds from the Collection Account, in
the amounts required, for application as follows:
first, to the Reserve Fund, until the amount on deposit
therein equals the Required Reserve Balance;
second, to the Distribution Account the sum of (i) an
amount equal to all interest due and payable on the Notes on
the succeeding Payment Date, (ii) the amount, if any,
required for a Special Redemption, Mandatory Redemption or
Optional Redemption on such Payment Date and (iii) all
amounts owing to the Servicer on such Payment Date; and
third, to the Distribution Account, all amounts that
are determined to be Excess Cash and distributable to the
Issuer.
(e) So long as the Notes have not been declared due and
payable pursuant to Section 5.02, on the Business Day preceding
each Payment Date on and after the Amortization Date, the aggre
gate of the amount on deposit in the Collection Account as of the
Business Day preceding the related Determination Date shall be
withdrawn from the Collection Account, in the amounts required,
for application as follows:
first, to the Reserve Fund, until the amount on deposit
therein equals the Required Reserve Balance;
second, to the Distribution Account, an amount equal to
all interest and principal due and payable on the Notes,
either as a Principal Distribution Amount or to redeem such
Notes, on the succeeding Payment Date; and
third, to the Distribution Account, an amount equal to
all amounts owing to the Servicer on the succeeding Payment
Date.
(f) On each Payment Date during the Non-Amortization Period,
amounts that have been deposited in the Distribution Account
pursuant to Section 9.02(d) or Section 11.04 will be distributed
as follows:
first, to the payment (or distribution to the Issuer
for payment) of all Administrative Expenses, to be applied
first to amounts due to the Trustee pursuant to Section 6.07(a),
in an amount not to exceed (i) $10,000 on any Payment Date and
and (ii) $75,000, cumulatively, in any calendar year;
second, to the payment of all interest due on the
Notes;
third, to the payment of all principal due on any Notes
that have been called for redemption;
fourth, to the payment of any Yield Maintenance
Premium;
fifth, to the payment (or distribution to the Issuer
for payment) of any Administrative Expenses not paid
pursuant to clause (i) above;
sixth, to the payment of all amounts due the Servicer
pursuant to the Servicing Agreement; and
seventh, Excess Cash, if any, to the Issuer.
(g) On each Payment Date during the Amortization Period,
amounts that have been deposited in the Distribution Account
pursuant to Section 9.02(e) or Section 11.04 will be distributed
as follows:
first, to the payment (or distribution to the Issuer
for payment) of all Administrative Expenses, to be applied
first to amounts due to the Trustee pursuant to Section
6.07(a), in an amount not to exceed (i) $10,000 on any
Payment Date and (ii) $75,000, cumulatively, in any calendar
year;
second, to the payment of all interest due on the
Notes;
third, to the payment of all principal due on any Notes
that have been called for redemption;
fourth, to the payment (or distribution to the Issuer
for payment) of the Principal Distribution Amount due on the
Notes; and
fifth, to the payment (or distribution to the Issuer
for payment) of any Administrative Expenses not paid
pursuant to clause (i) above;
sixth, to the payment of all amounts due the Servicer
pursuant to the Servicing Agreement.
(h) On any Payment Date if amounts on deposit in the Distri
bution Account are not sufficient to make any portion of the Note
Interest Payment on such Payment Date, an amount equal to the
amount by which the amount available in the Distribution Account
is less than the Note Interest Payment will be withdrawn from the
Reserve Fund and deposited in the Distribution Account for appli
cation to pay, to the extent available, all interest payable on
the Notes on such Payment Date.
Section 9.03. General Provisions Regarding Accounts and the Reserve Fund.
(a) The Issuer shall not direct the Trustee to make any
investment of any funds in an Account or the Reserve Fund or to
sell any investment held in an Account or the Reserve Fund except
under the following terms and conditions: (i) (A) each such
investment shall be made in the name of the Trustee (in its capa
city as such) or its agents, custodians or nominees (or, if, as
indicated by an Opinion of Independent Counsel delivered to the
Trustee, applicable law provides for perfection of pledges of an
investment not evidenced by a certificate or other instrument
through registration of such pledge on books maintained by or on
behalf of the issuer of such investment, such pledge may be so
registered), (B) the Trustee shall have sole investment control
over such investment, the income thereon and the proceeds
thereof, and (C) any instrument evidencing such investment shall
be delivered directly to the Trustee or its agent; and (ii) the
proceeds of each such sale of an investment shall be remitted by
the purchaser thereof directly to the Trustee for deposit in the
Account or the Reserve Fund in which such investment was held.
(b) If any amounts are needed for disbursement from an Account
or the Reserve Fund and sufficient uninvested funds are not
available to make such disbursement, in the absence of an Issuer
Order for the liquidation of investments in an amount sufficient
to provide the required funds, the Trustee shall cause to be sold
or otherwise converted to cash a sufficient amount of the
investments in such Account or the Reserve Fund; provided, that
such investments shall be sold in arms-length transactions, for
not less than their fair market value and provided, further, that
the Trustee may rely upon the appraisal of an independent
appraiser in determining such fair market value.
(c) The Trustee shall not in any way be held liable by reason
of any insufficiency in any Account or the Reserve Fund resulting
from any loss on any Eligible Investment included therein except
that Trustee shall remain liable on Eligible Investments which
are obligations of the Trustee in its commercial capacity.
(d) All investments of funds in an Account or the Reserve Fund
and all sales of Eligible Investments held in an Account or the
Reserve Fund shall, except as otherwise expressly provided in
this Indenture, be made by the Trustee in accordance with an
Issuer Order. Such Issuer Order may prescribe specific actions
(including, without limitation, that such funds shall not be
invested, in which case such funds shall remain deposited in the
Accounts or Reserve Fund) or may be a general, standing order
authorizing the Trustee to act within certain general parameters
or to act on written, telegraphic or telephonic instructions of
specified personnel or agents of the Issuer.
In the event that:
(i) the Issuer shall have failed to give investment directions
to the Trustee by 12:01 p.m. New York time on any Business Day
authorizing the Trustee to invest the funds then in an Account or
the Reserve Fund,
(ii) a Default or Event of Default shall have
occurred and be continuing but the Notes shall not have been
declared due and payable pursuant to Section 5.02, or
(iii) an Event of Default shall have occurred and be
continuing, the Notes shall have been declared due and payable
pursuant to Section 5.02, and amounts collected or receivable
from the related Trust Estate are being applied in accordance
with Section 5.06,
the Trustee shall invest and reinvest the funds then in each
Account or the Reserve Fund to the fullest extent practicable, in
such manner as the Trustee shall from time to time determine, but
only in one or more Eligible Investments bearing interest or sold
at a discount. All investments made pursuant to clause (i) above
shall mature on the next Business Day following the date of such
investment, all such investments made pursuant to clause (ii)
above shall mature no later than the latest maturity date
therefor permitted for Eligible Investments, and all investments
made pursuant to clause (iii) above shall mature no later than
the first date following the date of such investment on which the
Trustee proposes to make a distribution to Noteholders pursuant
to Section 5.06.
Section 9.04. Reports by Trustee; Contract Schedule.
(a) The Trustee shall report to the Issuer and the Servicer
with respect to the amount of each Account or the Reserve Fund
and the identity of the investments included therein, as the
Issuer or the Servicer may from time to time request and shall
provide accounting of deposits into and withdrawals from the
Accounts and the Reserve Fund, and of the investments made
therein.
(b) The Trustee shall hold the Contract Schedule and the
Receivable Schedule as provided to the Trustee by the Servicer.
Section 9.05. Trust Estate; Contract Documents.
(a) Subject to the payment of its fees and expenses, the
Trustee may, and when required by the provisions of this Inden
ture shall, execute instruments to release property from the lien
of this Indenture, or convey the Trustee's interest in the same,
in a manner and under circumstances which are not inconsistent
with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article
Nine shall be bound to ascertain the Trustee's authority, inquire
into the satisfaction of any conditions precedent or see to the
application of any moneys.
(b) In order to facilitate the servicing of the Receivables by
the Servicer, the Servicer is hereby authorized in the name and
on behalf of the Trustee and the Issuer, to execute instruments
of satisfaction or cancellation, or of partial or full release or
discharge, and other comparable instruments with respect to the
Receivables (and the Trustee shall execute any such documents on
request of the Servicer), subject to the obligations of the
Servicer under the Servicing Agreement.
(c) Upon Issuer Order, the Trustee shall, at such time as
there are no Notes Outstanding, release and transfer, without
recourse, all of the Trust Estate that secured the Notes (other
than any cash held for the payment of the Notes pursuant to
Section 4.02).
Section 9.06. Amendments to Servicing Agreement.
The Trustee may, without the consent of any Noteholder,
enter into or consent to any amendment or supplement to the
Servicing Agreement for the purpose of increasing the obligations
or duties of any party other than the Trustee or the Noteholders.
The Trustee may, in its discretion, decline to enter into or
consent to any such supplement or amendment if its own rights,
duties or immunities shall be adversely affected.
Section 9.07. Servicer as Custodian and Bailee of Trustee.
In order to facilitate the servicing of the Receivables by
the Servicer, the Servicer shall retain all proceeds of any
Collections which it receives, prior to their deposit in the
Collection Account, any Lockbox Account or the Distribution
Account, as the case may be, in accordance with the Servicing
Agreement, solely as custodian and bailee of the Trustee. Solely
for purposes of perfection under Section 9-305 of the UCC of the
state in which such property is held by the Servicer, the Trustee
hereby acknowledges that the Servicer is acting as custodian and
bailee of the Trustee in holding such property pursuant to the
Servicing Agreement, and any other items constituting a part of
the Trust Estate which from time to time come into the possession
of the Servicer. It is intended that, by the Servicer's
acceptance of such custodianship and bailment pursuant to the
Servicing Agreement, the Trustee, as a secured party, will be
deemed to have possession of such monies and such other items for
purposes of Section 9-305 of the UCC of the state in which such
property is held by the Servicer.
Section 9.08. Reserve Fund.
(a) On or before the Closing Date the Issuer shall establish
with the Trustee, an account in the corporate trust department of
the Trustee denominated "Reserve Fund -- Bankers Trust Company,
as Trustee in respect of 8.54% Contract Receivable Collateralized
Notes, Series 1992-1, Due 1997". The Issuer shall deposit in
such account on or before the Closing Date, and maintain
thereafter, an amount equal to 3% of the initial Note Principal
Balance. All moneys received by the Trustee pursuant to Sections
9.02(d) or (e) or otherwise from the Issuer for deposit in the
Reserve Fund, together with any Eligible Investments in which
such moneys are or will be invested or reinvested during the term
of this Indenture, shall be held by the Trustee in the Reserve
Fund as part of the Trust Estate granted to secure the Notes,
subject to disbursement and withdrawal as herein provided.
Income earned on Eligible Investments held in the Reserve Fund
will not be a part of the Trust Estate and will be released to
the Issuer on any Business Day upon receipt by the Trustee of an
Issuer Request, so long as the Reserve Fund is fully funded.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of any moneys in the
Reserve Fund shall be invested and reinvested by the Trustee at
the Issuer's direction in one or more Eligible Investments bear
ing interest or sold at discount. Notwithstanding the definition
of "Eligible Investments", investments on which the Paying Agent
in its commercial capacity is the obligor may mature on the
Payment Date next succeeding the date of investment. All income
or other gain from investments of money held in the Reserve Fund
shall be deposited by the Trustee in the Reserve Fund immediately
upon receipt, and any loss resulting from such investments shall
be charged to the Reserve Fund.
(c) Unless the Notes have been declared due and payable
pursuant to Section 5.02, on each Payment Date the Trustee shall
withdraw from the Reserve Fund and deposit in the Distribution
Account an amount equal to the amount, if any, by which the Note
Interest Payment for such Payment Date exceeds the amount on
deposit in the Distribution Account on such Payment Date that is
available for such payment (before giving effect to any with
drawal from the Reserve Fund on such date for deposit in the
Distribution Account).
(d) On any Redemption Date on which an Optional Redemption
has been declared by the Issuer, the Trustee shall upon receipt
of an Issuer Order withdraw from the Reserve Fund, to the extent
of funds on deposit therein, and deposit in the Distribution
Account the amount, if any, by which the Redemption Price exceeds
the amount on deposit in the Distribution Account on such
Redemption Date that is available for such payment (before giving
effect to any withdrawal from the Reserve Fund on such date for
deposit in the Distribution Account); provided that on such
Redemption Date the full Redemption Price is paid to the
Outstanding Noteholders.
(e) On the Stated Maturity of the Notes, a Mandatory
Redemption Date or an Optional Redemption Date, the Trustee shall
withdraw from the Reserve Fund and deposit in the Distribution
Account the amount, if any, by which the Note Payment for such
Payment Date exceeds the amount on deposit in the Distribution
Account on such Payment Date that is available for such payment
(before giving effect to any withdrawal from the Reserve Fund on
such date for deposit in the Distribution Account); provided, in
the case of Mandatory Redemption or an Optional Redemption, that
on such Payment Date the full Redemption Price is paid to the
Outstanding Noteholders.
Upon the satisfaction and discharge of this Indenture in
accordance with Article Four, the Trustee shall pay or transfer
to the Issuer all money or Eligible Investments then in the
Reserve Fund.
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures.
(a) The Issuer and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto
for the purpose of modifying this Indenture without the consent
of the Noteholders for the following purposes:
(i) to add to the duties or obligations of the Issuer
or the Trustee hereunder;
(ii) to maintain or improve the rating of the Notes
then given by a Rating Agency; or
(iii) to evidence and provide for the acceptance of
appointment by a successor Trustee and to add to or change
any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the Trust
Estate by more than one Trustee.
(b) With the consent of the Required Holders of the Notes, the
Issuer and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto for the
purpose of modifying this Indenture; provided, however, that no
such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of principal or interest on, any Note, or reduce the
principal amount thereof or the Note Interest Rate thereon or the
Redemption Price with respect thereto, change the provisions of
this Indenture relating to the application of proceeds of the
Trust Estate to the payment of principal of Notes or change any
place where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or
after the applicable Redemption Date);
(ii) reduce the percentage in principal amount of the
Outstanding Notes, the consent of the Holders of which is
required for the execution of any such supplemental indenture, or
the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain
Defaults hereunder and their consequences provided for in this
Indenture;
(iii) impair or adversely affect the Trust Estate
except as otherwise permitted herein;
(iv) permit the creation of any lien ranking prior to
or on a parity with the lien of this Indenture with respect to
any part of a Trust Estate or terminate the lien of this
Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security afforded by the lien of
this Indenture;
(v) change the percentage required to direct the
Trustee to sell or liquidate the Trust Estate pursuant to Section
5.04; or
(vi) modify any of the provisions of this Section or
Section 5.13, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Note as evidenced by the Note Register affected
thereby.
(c) The Trustee is hereby authorized to join in the execution
of any such supplemental indenture and to make any further
appropriate agreements and stipulations that may be therein con
tained, but the Trustee shall not be obligated to enter into any
such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
(d) Promptly after the execution by the Issuer and the Trustee
of any supplemental indenture pursuant to this Section 10.01,
the Issuer shall mail to the Holders of the Notes as their names
appear on the Note Register to which such supplemental indenture
relates, a copy of such supplemental indenture. Any failure of
the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such
supplemental indenture.
Section 10.02. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by
any supplemental indenture permitted by this Article or the
modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may,
but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 10.03. Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance there
with, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Notes theretofore
or thereafter authenticated and delivered hereunder shall be
bound thereby.
Section 10.04. Reference in Notes to Supplemental
Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if
required by the Trustee shall, bear a notation in form approved
by the Trustee as to any matter provided for in such supplemental
indenture. If the Issuer shall so determine, new Notes so modi
fied as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed
by the Issuer and authenticated and delivered by the Trustee in
exchange for the Outstanding Notes.
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional Redemption.
(a) On any Payment Date on or after February 28, 1994 until
the Amortization Date, the Notes will be redeemable in whole, at
the option of the Issuer, at the Redemption Price for an Optional
Redemption; and
(b) On any Payment Date on or after the Amortization Date, the
Notes will be redeemable in whole, at the option of the Issuer,
at a price equal to 100% of the then Outstanding Note Principal
Balance, plus accrued and unpaid interest.
Section 11.02. Special and Mandatory Redemption.
(a) Special. If, on any Determination Date, (i) the
Collateral Value Ratio as set forth in the Determination Date
Statement prepared in accordance with Section 4.02 of the
Servicing Agreement is below 1.00 and the Issuer does not
substitute Receivables or deposit cash into the Collection
Account such that the Collateral Value Ratio, as set forth in
such Determination Date Statement, is raised to 1.00 prior to the
related Payment Date and (ii) such ratio was below 1.00 on the
previous Determination Date and the Company did not substitute
Receivables or deposit cash into the Collection Account such that
the Collateral Value Ratio, as set forth in the Determination
Date Statement for such previous Determination Date, was raised
to 1.00 prior to the current Determination Date, the Trustee
shall immediately give notice that it will redeem a portion of
the Notes on the next Payment Date. The Trustee shall call for a
Special Redemption of the Notes in an amount equal to the lesser
of (i) (A) the Outstanding Note Principal Balance minus (B) the
sum of (1) the aggregate Stated Value of the Receivables, less
the aggregate Stated Value of any Excluded Receivables, in each
case valued at the applicable Collateral Value Percentage and (2)
the amount on deposit in the Collection Account and (ii) the
Outstanding Note Principal Balance. The amounts in clauses (A)
and (B)(1) above shall be calculated as of the end of the
Determination Period preceding such Determination Date. Such
redemption will be at the Redemption Price for a Special
Redemption.
During the period from the Determination Date on which the
Trustee gives notice of a Special Redemption until the succeeding
Payment Date, subject to Section 9.02(c), Collections will be
retained in the Collection Account until the amount of funds on
deposit therein is equal to the Redemption Price for such Special
Redemption. If, after the Payment Date on which a Special
Redemption is to be made during the Non-Amortization Period, any
portion of the related Redemption Price has not been paid, funds
may not be withdrawn from the Collection Account to purchase
Eligible Receivables pursuant to Section 9.02(c) until the amount
required for such Special Redemption is on deposit in the
Collection Account and transferred to the Distribution Account.
Any Special Redemption will be paid, to the extent of funds
available in the Collection Account and the Distribution Account,
to the Noteholders as of the Record Date immediately preceding
such Payment Date in the proportion that the Note Principal
Balance of each Note to be redeemed bears to the Outstanding Note
Principal Balance.
(b) Mandatory. The Trustee shall on any Determination Date
immediately give notice of a Mandatory Redemption of all the
Outstanding Notes if (i) on the preceding Determination Date, the
Collateral Value Ratio was determined to be less than or equal to
the Mandatory Redemption Level as of the last day of the second
preceding Determination Period and the Company has not caused the
Collateral Value Ratio to be increased above the Mandatory
Redemption Level by substitution of Receivables or depositing
cash into the Collection Account; (ii) three Special Redemptions
(including such current Determination Date) are required within
any consecutive 12-month period; or (iii) on any Determination
Date (a) the aggregate Stated Value of all Ineligible Receivables
which have been Ineligible Receivables for more than 30 days
exceeds 7% of the Aggregate Collateral Balance and (b) the
Collateral Value Ratio is less than 1.00. In the case of clause
(i) above, the payment of principal pursuant to the Mandatory
Redemption will be due on the Payment Date following the
Determination Date next succeeding such notice of a Mandatory
Redemption, and in the case of clauses (ii) or (iii) above, such
payment will be due on the Payment Date next succeeding such
notice. Such redemption will be at the Redemption Price for a
Mandatory Redemption. Any Mandatory Redemption will be paid, to
the extent of funds available in the Collection Account and the
Distribution Account, to the Noteholders in the proportion that
the Note Principal Balance of each Note to be redeemed bears to
the Outstanding Note Principal Balance; provided, that if funds
available on such Payment Date in the Collection Account and the
Distribution Account are insufficient therefor, payment of a
Mandatory Redemption may include funds on deposit in the Reserve
Fund, provided, further, that the aggregate of funds available on
such Payment Date in the Collection Account, the Distribution
Account and the Reserve Fund are sufficient to pay in full the
Outstanding Note Principal Balance.
(c) Mandatory. If on any date of determination the Issuer is
prohibited from purchasing additional Eligible Receivables
pursuant to Section 3.03 of the Sale and Purchase Agreements, the
Issuer shall give notice thereof referencing this Section
11.02(c) relating to Mandatory Redemption to the Noteholders. If
the Required Holders so direct the Trustee within ten Business
Days of receipt of such notice by such Holders, the Trustee shall
give notice of a Mandatory Redemption of all the Outstanding
Notes. Payment will be due on the Payment Date next succeeding
such direction from the Trustee at the Redemption Price for a
Mandatory Redemption.
Section 11.03. Notice of Optional Redemption by the Issuer.
The Issuer shall give the Trustee and each Noteholder
fifteen Business Days prior written notice of any Optional
Redemption.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) that interest thereon shall cease to accrue on the date
specified on the notice;
(d) the place where such Notes are to be surrendered (or an
indemnity reasonably satisfactory to the Trustee provided) for
payment of the Redemption Price, which shall be the office or
agency of the Trustee to be maintained as provided herein.
Failure to give notice of redemption, or any defect therein, to
any Holder of any Note selected for redemption shall not impair
or affect the validity of the redemption of any other Note.
Section 11.04. Deposit of Redemption Price for Optional,
Special and Mandatory Redemptions.
(a) In the case of an Optional Redemption, on or before the
Business Day next preceding the Payment Date on which such
Optional Redemption is to be made, the Issuer shall deposit with
the Trustee cash in an amount sufficient to provide for payment
of the Redemption Price of all of the Notes (unless such payment
is to be made from funds on deposit in the Collection Account,
any Lockbox Account, the Distribution Account and the Reserve
Fund).
(b) In the case of all Special Redemptions and any Mandatory
Redemption, on or before the Business Day next preceding the
Payment Date on which a Special Redemption or Mandatory
Redemption is to be made, the Issuer shall deposit into the
Distribution Account cash in an amount sufficient to provide
payment of the Redemption Price for all of the Notes that are to
be redeemed on such Payment Date. If during the Non-Amortization
Period any portion of the amount to be paid on a Payment Date as
a Special Redemption or Mandatory Redemption remains outstanding
after such Payment Date, cash will not be released from the
Collection Account for the purpose of acquiring additional
Eligible Receivables or for the payment of the Servicing Fee
until such unpaid Special Redemption or Mandatory Redemption
Amount is paid or cash therefor is on deposit in the Distribution
Account. Any Special Redemption and Mandatory Redemption will be
paid to the Noteholders in the proportion that the Note Principal
Balance of each Note to be redeemed bears to the Outstanding Note
Principal Balance.
Section 11.05. Notes Payable on Redemption Date.
Notice of redemption having been given as provided in
Section 11.03, the Notes or portions thereof so to be redeemed
shall, on the applicable Redemption Date, become due and payable
at the Redemption Price and on such Redemption Date (unless the
Issuer shall Default in the payment of the Redemption Price) such
Notes (or portion thereof) shall cease to bear interest as
specified in the Indenture. On or after the Redemption Date,
such Notes shall be paid by the Issuer at the Redemption Price;
provided, however, that payments due on a Payment Date on or
prior to the Redemption Date shall be payable to the Holders of
such Notes registered as such on the relevant Record Dates
according to their terms.
If any Outstanding Note called for Optional Redemption
pursuant to Section 11.01 shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at a per annum rate equal to
200 basis points in excess of the greater of (i) the Note
Interest Rate and (ii) the prime rate announced by Bankers Trust
Company in effect on the Redemption Date.
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given or taken by Noteholders may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agent duly appointed in writing
and satisfying any requisite percentages as to minimum number or
dollar value of outstanding principal amount represented by such
Noteholders; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby
expressly required, to the Issuer. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Noteholders sign
ing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Issuer, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any manner which the
Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall
bind the Holder (and any transferee thereof) of every Note issued
upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be
done by the Trustee or the Issuer in reliance thereon, whether or
not notation of such action is made upon such Note.
Section 12.02. Notices, Etc., to Trustee and Issuer.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or other documents provided
or permitted by this Indenture to be made upon, given or furnish
ed to, or filed with:
(a) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished
or filed in writing to a Trustee Officer, by facsimile
transmission or by other means acceptable to the Trustee to or
with the Trustee at its Corporate Trust Office; or
(b) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder (except as provided in
Section 6.01(2)) if in writing and mailed, first-class postage
prepaid, to the Issuer addressed to it at 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19899, Attention:
President, or at any other address previously furnished in
writing to the Trustee by the Issuer. A copy of each notice to
the Issuer shall be sent in writing and mailed, first-class
postage prepaid, to the Company at 2000 Edmund Halley Drive,
Reston, Virginia 22091-3436, Attention: Senior Vice President
and Chief Financial Officer.
Unless otherwise instructed by the Purchaser, the Trustee
and the Issuer shall send a duplicate copy to the Purchaser of
every notice sent by each hereunder.
Section 12.03. Notices to Noteholders; Waiver.
Where this Indenture provides for notice to Noteholders of
any event, such notice shall be sufficiently given (unless other
wise herein expressly provided) if in writing and mailed by regis
tered or certified mail, postage prepaid or national overnight
courier service to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular
Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice which is mailed in
the manner herein provided shall conclusively be presumed to have
been duly given. Notwithstanding the foregoing, notice to be
given pursuant to Sections 7.06(b)(ii) and 11.02(c) shall be sent
in duplicate in such manner and to such officers of each
Noteholder as such Noteholder may from time to time specify,
which, in the case of The Prudential Insurance Company of America
and The Northwestern Mutual Life Insurance Company, shall be by
national overnight courier, Attention: (i) Karen Keatley, and
Senior Managing Director and (ii) Jeff Leuken, Securities
Department, respectively.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Trustee but such filing shall
not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In the event that, by reason of the suspension of regular
mail service as a result of a strike, work stoppage or similar
activity, it shall be impractical to mail notice of any event to
Noteholders when such notice is required to be given pursuant to
any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to
be a sufficient giving of such notice.
The Issuer shall give prompt written notice to the Rating
Agencies, of any of the following occurrences: (a) the
appointment of a successor Trustee, (b) the execution of a
supplemental indenture pursuant to Article Ten, (c) the adoption
of any amendment to the Servicing Agreement, and (d) the payment
of the entire principal of the Notes. Such notice shall be
sufficient if furnished in writing to Standard & Poor's
Corporation, 25 Broadway, New York, New York 10004, Attention:
Asset Backed Surveillance Group and Duff & Phelps Credit Rating
Co., 55 East Monroe, Suite 4000, Chicago, Illinois 60603,
Attention: Andrew Leszezynski.
Section 12.04. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the con
struction hereof.
Section 12.05. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer
shall bind its successors and assigns, whether so expressed or
not.
Section 12.06. Separability.
In case any provision in this Indenture or in the Notes
shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
Section 12.07. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto
and their successors hereunder, and the Noteholders, any benefit
or any legal or equitable right, remedy or claim under this
Indenture.
Section 12.08. Governing Law.
This Indenture and each Note shall be construed in accor
dance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 12.09. Counterparts.
This instrument may be executed in any number of counter
parts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
Section 12.10. Corporate Obligation.
No recourse may be taken, directly or indirectly, against
any incorporator, subscriber to the capital stock, stockholder,
officer, director or employee of the Issuer or of any predecessor
or successor of the Issuer with respect to the Issuer's obligations
on the Notes or under this Indenture.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Indenture to be duly executed by their respective officers
thereunto duly authorized and attested, all as of the day and
year first above written.
DYN FUNDING CORPORATION
By:
Name: John H. Saunders
Title: Vice President
BANKERS TRUST COMPANY, not in
its individual capacity,
but solely as Trustee
By:
Name:
Title:
DYNCORP
TO
TRUSTEE
The Riggs National Bank of Washington, D. C.
INDENTURE
Dated as of September 1, 1988
16% Pay-In-Kind Junior Subordinated Debentures Due 2003
TABLE OF CONTENTS
Parties
Recitals of the Company
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions
Act
Affiliate
Agent under the Bank Credit
Agreement
Authenticating Agent
Bank Credit Agreement
Board of Directors
Board Resolution
Business Day
Commission
Company
Company Request; Company Order
Corporate Trust office
corporation
Defaulted Interest
Distribution in Kind
DME Holdings, Inc.
Event of Default
Holder
Incur
Indebtedness
Indenture
Insolvency or Liquidation
Proceeding
Interest Payment Date
Lien
Maturity
Merger
Merger Agreement
Officer
Officers'Certificate
Opinion of Counsel
Outstanding
Paying Agent
Payment in Full
Person
Predecessor Security
Principal
Redemption Date
Redemption Price
Regular Record Date
Reorganization securities
Representative
Responsible Officer
Securities
Security Register; Security
Registrar
Senior Indebtedness
Significant Subsidiary
Special Record Date
Stated Maturity
Subsidiary
Trustee
Trust Indenture Act
U.S. Government Obligations
Vice President
Voting Stock
SECTION 102. Compliance Certificates and
opinions
SECTION 103. Form of Documents Delivered to
Trustee
SECTION 104. Acts of Holders
SECTION 105. Notices, Etc., to Trustee and
Company
SECTION 106. Notice to Holders; Waiver
SECTION 107. Conflict with Trust Indenture
Act
SECTION 108. Effect of Headings and Table
of Contents
SECTION 109. Successors and Assigns
SECTION 110. Severability Clause
SECTION 111. Benefits of Indenture
SECTION 112. Choice of Law: Consent to Juris-
diction; Jury Trial
SECTION 113. Legal Holidays
SECTION 114. Limitation on Agreements
SECTION 115. Immunity of Incorporators, Stockholders, Officers
and Directors
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally
SECTION 202. Form of Face of Security
SECTION 203. Form of Reverse of Security
SECTION 204. Form of Trustee's Certificate
of Authentication
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms
SECTION 302. Denominations
SECTION 303. Execution, Authentication,
Delivery and Dating
SECTION 304. Temporary securities
SECTION 305. Registration of Transfer
and Exchange
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities
SECTION 307. Payment of Interest; Interest
Rights Preserved
SECTION 308. Persons Deemed Owners
SECTION 309. Cancellation
SECTION 310. Computation of Interest
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of
Indenture
SECTION 402. Application of Trustee Money;
Indemnification
SECTION 403. Defeasance and Discharge of
Securities
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default
SECTION 502. Acceleration of Maturity; Recision
and Annulment
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee
SECTION 504. Trustee May File Proofs of Claim
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities
SECTION 506. Application of Money Collected
SECTION 507. Limitation on Suits
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium
and Interest
SECTION 509. Restoration of Rights and
Remedies
SECTION 510. Rights and Remedies Cumulative
SECTION 511. Delay or Omission Not Waiver
SECTION 512. Control by Holders
SECTION 513. Waiver of Past Defaults
SECTION 514. Undertaking for Costs
SECTION 515. Waiver of Stay, Extension and Usury
Laws
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities
SECTION 602. Notice of Defaults
SECTION 603. Certain Rights of Trustee
SECTION 604. Not Responsible for Recitals or
Issuance of Securities
SECTION 605. May Hold Securities
SECTION 606. Money Held in Trust
SECTION 607. Compensation and Reimbursement
SECTION 608. Disqualification; Conflicting
Interests
SECTION 609. Corporate Trustee Required;
Eligibility
SECTION 610. Resignation and Removal;
Appointment of Successor
SECTION 611. Acceptance of Appointment by
Successor
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business
SECTION 613. Preferential Collection of Claims
Against Company
SECTION 614. Appointment of Authenticating Agent
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names
and Addresses Holders
SECTION 702. Preservation of Information;
Communications to Holders
SECTION 703. Reports by Trustee
SECTION 704. Reports by Company
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER
OR LEASE
SECTION 801. Company May Consolidate, Etc.,
only on Certain Terms
SECTION 802. Successor Substituted
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without
Consent of Holders
SECTION 902. Supplemental Indentures with
Consent of Holders
SECTION 903. Execution of Supplemental
Indentures
SECTION 904. Effect of Supplemental
Indentures
SECTION 905. Conformity with Trust
Indenture Act
SECTION 906. Reference in Securities to Supplemental
Indentures
SECTION 907. Limitations of Amendments
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Securities
SECTION 1002. Maintenance of Office or Agency
SECTION 1003. Money for Security Payments to Be Held in
Trust
SECTION 1004. Preservation of Corporate Existence
SECTION 1005. Maintenance of Properties
SECTION 1006. Payment of Taxes and Other Claims
SECTION 1007. Statement by Officers as to Default
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption
SECTION 1102. Applicability of Article
SECTION 1103. Election to Redeem; Notice to Trustee
SECTION 1104. Selection by Trustee of Securities
to be Redeemed
SECTION 1105. Notice of Redemption
SECTION 1106. Deposit of Redemption Price
SECTION 1107. Securities Payable on Redemption
Date
SECTION 1108. Securities Redeemed in Part
SECTION 1109. Notice of Redemption to Agent
ARTICLE TWELVE
SINKING FUND
SECTION 1201. Sinking Fund Payments
SECTION 1202. Satisfaction of Sinking Fund
Payments with Securities
SECTION 1203. Redemption of Securities for
Sinking Fund
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior
Indebtedness
SECTION 1302. Payment Over of Proceeds Upon
Dissolution, Etc.
SECTION 1303. Default on Senior Indebtedness
SECTION 1304. Subrogation to Rights of Holders of
Senior Indebtedness
SECTION 1305. Rights of Holders Not to Be
Impaired
SECTION 1306. Trustee to Effectuate Subordination
SECTION 1307. No Waiver of Subordination
Provisions
SECTION 1308. Notice to Trustee
SECTION 1309. Reliance on Court Orders; Evidence
of Status
SECTION 1310. Payment
SECTION 1311. Right of Trustee an Holder of Senior Indebtedness
SECTION 1312. Article Not to Prevent Events of Default
SECTION 1313. Trustee's Compensation Not Prejudiced
SECTION 1314. Limitation on Obligation of Trustee and Holders
of securities
SECTION 1315. Distribution or Notice to Representative
SECTION 1316. Application by Trustee of Nonies
Paid to It
INDENTURE, dated as of September 1, 1988, between DynCorp, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company", which termincludes any successor corporation or
corporations under the Indenture), having its principal office at McLean,
Virginia 22101, and The Riggs National Bank of Washington, D.C., a national
association duly organized and existing under the laws of the United States,
as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 16%
Pay-in-Kind Junior Subordinated Debentures (hereincalled the "Securities"
which term shall include any additional 16% Junior Subordinated Debentures
paid in lieu of cash interest payments pursuant to the terms hereof and
thereof), of substantially the tenor and amount hereinafter set forth, and to
provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company,in accordance with their and its terms have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and otherwords of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that Article.
"Act" when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate"of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent under the Bank Credit Agreement" shall mean the then acting Agent
(or if there is more than one Agent, a majority of the Agents) under the Bank
Credit Agreement or any successor thereto exercising substantially the same
rights and powers and, if there is then no acting agent under the Bank Credit
Agreement, or there is then no such successor, holders of Senior Indebtedness
under or with respect to the Bank Credit Agreement holding a majority of the
principal amount of Senior Indebtedness outstanding thereunder.
"Authenticating Agent" means any Person authorized by the Trustee to act
Trustee to act on behalf of the Trustee to authenticate Securities.
"Bank Credit Agreement" means (i) the Credit Agreement dated as of March 2,
1988 among DME Holdings, Inc., Bankers Trust Company as Agent and the Banks
listed on Schedule I thereto, as the same may from time to time be amended,
renewed, supplemented or otherwise modified, and any other agreement pursuant
to which any of the indebtedness, commitments, obligations, costs, expenses,
fees, reimbursements and other indemnities payable or owing thereunder may be
refinanced, restructured, renewed or refunded, as any such other agreement
may from time to time be amended, supplemented, renewed or othermodified;
and (ii) after the Agent under the Bank Credit Agreement referred to in
clause (i) hereof has acknowledged in writing that such Bank Credit Agreement
has been terminated and all outstanding indebtedness and obligations thereunder
or with respect thereto have been repaid in full in cash and discharged, any
successor to or replacement of (as designated by the Board of Directors of the
Company, in its sole judgment, and evidenced by a resolution) such Bank
Credit Agreement, as such successor or replacement may from time to time be
amended, renewed, supplemented or, otherwise modified.
"Board of Directors" means either the board of
directors of the Company (or, as the context may require, any other obligor
upon the Securities) or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company (or, as the context may
require, any other obligor upon the Securities) to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in any place of
payment are authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934,
or, if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee
(which office at the date of execution of this Indenture is located at
Trust Department, 808 17th Street, Second Floor, Washington, D.C. 20006) at
which at any particular time its corporate trust business shall be
administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Distribution in Kind" means any payment or distribution, on
account of interest on the Securities, made by delivery of additional
Securities of the same or any different series upon substantially the same
terms as the Securities.
"DME Holdings, Inc." means DME Holdings, Inc., a Delaware
corporation, which is to be merged with and into the Company pursuant to
the Merger Agreement.
"Event of Default" has the meaning specified in Section 501.
"Holder" means a Person in whose name a Security is registered in
the Security Register and any Person who is the holder of a Security which
is deemed to be Outstanding hereunder.
"Incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, assume, guarantee, incur or otherwise become
liable in respect of such Indebtedness or other obligation (and "Incurrence",
"Incurred" and "Incurring"shall have meanings correlative to the foregoing),
provided that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, and without
and without duplication, (i) all indebtedness, obligations and other
liabilities (contingent or otherwise) of such Person for borrowed money or
evidenced by bonds, debentures, notes or similar instruments (whether or not
the recourse of the lender is to the whole of the assets of such Person or to
only a portion thereof), (ii) all reimbursement obligations and other
(contingent or otherwise) of such Person with respect to letters of credit
or bankers, acceptances issued for the account of such Person or with respect
to interest rate protection agreements or currency exchange agreements, (iii)
all obligations and other liabilities (contingent or otherwise) of such Person
with respect to any conditional sale, installment sale or other title retention
agreement, purchase money mortgage or security interest, or otherwise to pay
the deferred purchase price of property or services (except trade accounts
payable and accrued expenses arising in the ordinary course of business) or in
respect of any sale and leaseback arranagement, (iv) all obligations and
liabilities (contingent or otherwise) in respect of leases by such Person as
lessee which, in conformity with generally accepted accounting principles, are
required to be accounted for as capitalized lease obligations on the
balance sheet of such Person and (v) all direct or indirect guaranties or
similar agreements in respect of, and obligations or liabilities (contingent
or otherwise) to purchase or otherwise acquire or otherwise to assure a
creditor against loss in respect of, indebtedness, obligations or liabilities
of others.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding, relative to the Company
or to its creditors, as such, or to its assets, or (ii) any liquidation,
dissolution, reorganization or winding up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (iii)
any assignment for the benefit of creditors or any other marshalling of assets
and liabilities of the Company.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind
or nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Merger" means the Merger of DME Holdings, Inc. with and into the
Company, pursuant to the Merger Agreement.
"Merger Agreement" means the Amended and Restated Agreement and Plan
of Merger, dated as of January 24, 1988, as the same may be amended from time
to time, among the Company, DME Holdings, Inc., Capricorn Investors, L.P. and
Pittsfield Finance Company.
"Officer" means the Chairman of the Board, the President, any Vice
President, or the Treasurer or chief financial officer of the Company.
"Officers' Certificate" means a certificate signed by two officers,
one of whom must be the Chairman of the Board, the President or the Treasurer
or chief financial officer of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except
(i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption
money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company)
in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities
are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section
306 or in exchange for or in lieu of which other securities have
been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect
to such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Payment in Full" means, for purposes of Article Thirteen, (i) with
respect to Senior Indebtedness under or with respect to the Bank Credit
Agreement, payment in full in cash thereof, and (ii) with respect to other
Senior Indebtedness (other than Senior Indebtedness under or with respect to
the Bank Credit Agreement) payment in full thereof or due provision for payment
thereof (x) in accordance with the term of the agreement or instrument pursuant
to which such Senior Indebtedness was issued or is governed or (y) otherwise
to the reasonable satisfaction of the holders of such Senior Indebtedness (or
their Representatives).
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutiliated, destroyed, lost
lost or stolen Security.
"Principal" of any Indebtedness means the outstanding principal
amount owing under the agreement or instrument creating, evidencing or
governing such Indebtedness, any amount payable under any intereset rate
protection agreements or currency exchange agreements, any amount owing
under any capitalized lease obligation which is required to be capitalized
in accordance with generally accepted accounting principles, the amount
of reimbursement obligations under any letters of credit or bankers'
acceptances, the base purchase price payable under any conditional sale or
title retention agreement, and other comparable amounts analogous to the
principal amount of any obligation, exclusive, in each case, of any amounts
in respect of interest, fees, expenses, indemnities or other similar items.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means June 10 or December 10 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Reorganization Securities" means shares of stock of the Company,
or its successor, as reorganized, or other securities of the Company or any
other person provided for by a plan of reorganization, the payment of which
is subordinated, at least to the same extent as the Securities, to the
payment of all Senior Indebtedness which may at the time be outstanding and
the principal of which is due no earlier than the principal of the Securities,
provided that the rights of the holders of the Senior Indebtedness are not
impaired thereby or such holders as a class shall have approved such plan of
reorganization.
"Representative" means the trustee, agent or other representative
for holders of all or any of the Senior Indebtedness, if any, designated in
the indenture, agreement or other document governing such senior Indebtedness
or pursuant to which it was issued, or otherwise duly designated by the
holders of such Senior Indebtedness, and with respect to the holders of
Senior Indebtedness under the Bank Credit Agreement shall include the Agent
under the Bank Credit Agreement.
"Responsible officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the
chairman or any vice-chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, the secretary, any assistant vice president, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Securities" has the meaning specified in the recitals of this
Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means all Indebtedness other than the
Securities payable directly or indirectly by the Company, whether outstanding
on the date of this Indenture or hereafter created, incurred or assumed by the
Company, including, without limitation, (1) the principal of and interest
on all loans, letters of credit and other extensions of credit under the Bank
Credit Agreement, and all expenses, fees, reimbursements, indemnities and other
amounts owing by the Company pursuant to the Bank Credit Agreement, (2) all
amounts due under the Letter of Credit Agreement dated as of December 14, 1987
between the Company and Bankers Trust Company, as the same may from time to
time be amended, renewed, supplemented or otherwise modified, (3) all
amounts due under the interest rate protection agreements entered into with
respect to payment obligations under the Bank Credit Agreement, as the same
may from time to time amended, renewed, supplemented or otherwise modified,
and (4) renewals, extensions, refinancings, refundings, and replacements of
items described in Subsections (1) and (2) of this paragraph. Notwithstanding
anything to the contrary set forth above, "Senior Indebtedness" shall not
include any accounts payable or other obligations owing to trade creditors
created or assumed by the Company in the ordinary course of business in
connection with the obtaining of materials or services.
All interest accrued on any Senior Indebtedness, in accordance
with and at the contract rates specified in the agreement or instrument
creating, evidencing or governing such Senior Indebtedness, shall
constitute Senior Indebtedness both for periods before and for periods after
the commencement ofany Insolvency or Liquidation Proceeding, even if the claim
for such interest is not allowed pursuant to applicable law; provided, that
no increase in the rate of interest applicable by reason of a default or event
of default under or in respect of Senior Indebtedness shall constitute Senior
Indebtedness after the commencement of such Insolvency or Liquidation
Proceeding if and to the extent such increase results in an increase of more
than 2% per annum over the rate of interest that would have been in effect
had such default not occurred and the claim for such excess increased
interest is not allowed; provided that (i) amounts bearing interest at a fixed
rate prior to the time of default or event of default may bear interest
thereafter at a fluctuating rate per annum and, to the extent the rate based
upon such fluctuating rate per annum does not exceed by more than 2% the
rate of interest which would otherwise be applicable to loans based upon such
fluctuating rate per annum, such default rate shall not be deemed to cause the
increase to exceed 2% and (ii) fluctuations in the default rate of interest
to attributable fluctuations in the underlying rate with respect to which such
default rate is computed shall not be deemed to cause the increase to exceed
2%.
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to a trustee, receiver or other similar party under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment is recovered by, or paid over to, such trustee, receiver
or other similar party, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as
if such payment had not occurred. To the extent the obligation to repay any
Senior Indebtedness is declared to be fraudulent, invalid or otherwise set
aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then the obligations so declared fraudulent, invalid or otherwise
set aside (and all other amounts which would have come due with respect thereto
had such obligations not been so affected) shall be deemed to be reinstated
and outstanding as Senior Indebtedness for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
"Significant Subsidiary" means, with respect to any Person or Persons,
a subsidiary of such Person or Persons which would be a Significant Subsidiary
of such Person or Persons pursuant to the definition of Significant Subsidiary
under Rule 1-02(v) of regulation S-X promulgated under the Securities Act
(17 C.F.R. Section 210.1-02(b)) if such Person or Persons were deemed to be the
registrant thereunder.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
subsidiaries.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 905.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which in either case,
is not callable or redeemable at the option of the issuer thereof.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means stock which ordinarily has voting power for
the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company and any other
obligor upon the Securities to the Trustee to take any action under any
provision of this Indenture, the Company and any other obligor upon the
other obligor upon the Securities shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture
relating to such particular application or request no additional certificate
or opinion need be furnished.
Every certificate.or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion
of, only one such Person, or that they be so certified or covered by only
one document but one such Person may certify or give an opinion with respect
to some matters and one or more other such Persons as to other matters, and
any such Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Section 601) conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
public or other officer authorized by law to take acknowledgment of deeds,
certifying that the individual signing such instrument or writing acknowledged
to him the execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit
shall also constitute sufficient proof of his authority. The fact and date
of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate Trust
Office,
Attention: Corporate Trust Department; or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company (Attention: Senior Vice President and
General Counsel addressed to it at the address of its principal
office or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 106.- Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Indenture
by any of the provisions of the Trust Indenture Act, such required provision
shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience of reference only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Severability Clause. In case any provision in this Indenture or
in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders of Securities,
any benefit or legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Choice of Law: Consent to Jurisdiction;
Jury Trial,
(a) This Indenture and the Securities shall be governed
by and construed and interpreted in accordance with the laws of the State
of New York without giving effect to the conflict of laws provisions thereof.
(b) All judicial proceedings brought against the Company
with respect to this Indenture or the Securities may be brought in any state or
federal court of competent jurisdiction in the State of New York, and by
execution and delivery of this Indenture, the Company acceptse for itself and
in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Indenture
from which no appeal has been taken or is available. The company irrevocably
designates and appoints The Corporation Trust Company, 1633 Broadway, New York,
New York 10019 as its agent to receive on its behalf service of all process in
any such proceedings in any such court, such service being hereby acknowledged
by such persons to be effective and binding service in every respect. The
Company irrevocably consents to the service of process of any of the
aforementioned courts in any such acting or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to its notice address
specified in Section 105, such service to become effective ten (10) days after
such mailing. The Company irrevocably waives, to the fullest extent permitted
by applicable law, trial by jury and any objection, including, without
limitation, any objection of the laying of venue or based on the grounds of
forum non conveniens which it may not or hereafter have to the bringing of any
such action or proceeding in any such jurisdiction. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of the Trustee or the Holders, in accordance with the
with the provisions of this Indenture, to bring proceedings against the
Company in the courts of any other jurisdiction.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding
any other provision of this Indenture or of the Securities) payment of interest
or principal need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, provided,
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 114. Limitation on Agreements.
All obligations of the Company under this Indenture whether now
existing or hereafter arising and whether written or oral, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
by reason of demand being made on the Securities or otherwise, shall the
amount paid, or agreed to be paid to the Holders of Securities or for the
payment or performance of any covenant or obligation contained herein exceed
the maximum amount permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provisions hereof or of any such
documents at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable usury law,
then, ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity, and if, from any such circumstance, the Company shall ever
receive interest or anything which is deemed interest under applicable law
which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal amount
owing on account of the Securities and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of the
Securities, such excess shall be refunded to the Holders. All sums paid or
or agreed to be paid to the Company for the use, forbearance or detention of
the indebtedness of the Company shall, to the extent permitted by applicable
law, be amortized, pro rated, allocated and spread throughout the full term
of such indebtedness until payment in full of the principal (including the
period of any renewal or extension thereof) so that the interest on account of
such indebtedness shall not exceed the maximum amount permitted by applicable
law. The terms and provisions of this Section 114 shall control and supersede
every other provision of this Indenture.
SECTION 115. Immunity of Incorporators, Stockholders,
Officers and Directors.
No recourse for the payment of the principal of or interest on any
Security, or for any claim based thereon or otherwise in respect thereof, and
no recourse underor upon any obligation, covenant or agreement of the Company
in this Indenture or in any supplemental indenture, or in any Security, or
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company, or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of and as a consideration for, the execution of this
Indenture and the issue of Securities.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions,substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the securities. The definitive
Securities shall be printed, lithographed or engraved or produced by any
combination of these methods on steel engraved borders or may be produced in
any other manner permitted by the rules of any securities exchange on which
the Securities
the Securities may be listed, all as determined by the officers executing
such Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
DYNCORP
16% Pay-in-Kind Junior Subordinated Debentures
Due 2003
AS STATED IN ARTICLE THIRTEEN OF THE INDENTURE, THE RIGHTS OF THE
HOLDER HEREOF HAVE BEEN SUBORDINATED TO ALL SENIOR INDEBTEDNESS (AS DEFINED
IN THE INDENTURE REFERRED TO HEREIN) OF THE COMPANY.
AS REQUIRED BY SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986 AND THE
TREASURY REGULATIONS PROMULGATED THEREUNDER, THE COMPANY HEREBY SETS FORTH THE
FOLLOWING INFORMATION: THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY
IS _% OF ITS PRINCIPAL AMOUNT; THE ISSUE DATE IS 19-; THE YIELD TO MATURITY IS
%; THE METHOD USED TO DETERMINE THE YIELD IS ; AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF
19_ TO 19 IS _ % OF THE PRINCIPAL AMOUNT OF THIS SECURITY.
HOLDERS SHOULD BE AWARE THAT THIS SECURITY IS ISSUED WITH ORIGINAL
ISSUE DISCOUNT AND THAT DENOMINATION OF PAYMENTS RECEIVED ON THIS SECURITY
(WHETHER AS INTEREST OR PRINCIPAL) WILL NOT BE DETERMINATIVE FOR FEDERAL
INCOME TAX PURPOSES.
No. $
DynCorp, a corporation duly organized and existing under the laws of
Delaware (herein called the "Company", which term includes any successor
Person under the Indenture hereinafter referred to) , for value received,
hereby promises to pay to , or registered assigns, the principal
sum of Dollars on June 30, 2003, and to pay interest thereon,
from the date of this Security, or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, semiannually on June 30
and December 31 in each year, commencing the first Interest Payment Date
following the date of this Security, at the rate of 16% per annum. The
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the June 10 or December 10 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may
be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture. Payment of the principal of and
interest on this Security will be made at the Corporate Trust Office of the
Trustee or at the office or agency of the Company maintained for that purpose
in the District of Columbia, and at any other office or agency maintained by
the Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts or, at the option of the company, but only for interest on
this Security accruing during the period prior to September 1, 1995, additional
Securities in a principal amount not to exceed the amount of such interest
payment, rounded to the nearest dollar; provided, however, that at the option
of the Company payment of interest may be made by check (or, for interest
accrued prior to September 1, 1995 which the Company elects to pay in
additional Securities, such additional Securities) mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register. Interest shall accrue on such additional Securities from and
including the date of issuance of such additional Securities.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its facsimile corporate seal.
Dated: DYNCORP
(Seal)
By Vice President
Secretary
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 16% Pay-in-Kind Junior Subordinated Debentures Due
2003 (herein called the "Securities"), issued and to be issued under an
Indenture, dated as of September 1, 1988 (herein called the "Indenture"),
between the Company and The Riggs National Bank of Washington, D. C., as
trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the Holders of the Securities
and of the terms upon which the Securities are, and are to be, authenticated
and delivered. The Securities are subject to redemption upon not less than 30
days' nor more than 60 days' notice by mail, at any time at the option of the
Company, at a Redemption Price equal to 100% of the principal amount of
Securities so redeemed, together in the case of any such redemption with
accrued interest to the Redemption Date, but interest installments whose
whose Stated Maturity is on or prior to such Redemption Date will be payable
to the Holders of such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture.
The sinking fund provides for the redemption on June 30 in each year
beginning with the year 1999 and ending with the year 2003 of twenty percent
(20%) of the highest amount at any time outstanding at any time prior to such
date of redemption. Securities previously retired (other than through the
mandatory redemption) and not previously credited against the Securities
mandatory redemption requirement, may be used to satisfy the annual mandatory
redemption requirement, in whole or in part, at the Company's option.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and this Security is issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Security, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination so provided and (c) appoints
the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default (as defined in the Indenture) shall occur and
be continuing, the principal of all the Securities may, subject to the
provisions of the Indenture, be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding and, under certain limited circumstances, without the consent of
the Holders of the Securities under the Indenture. The Indenture also
contains provisions permitting the Holders of a majority in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
Subject to the provisions of this Indenture, no provision of this
Security shall alter or impair the right of the Holder, which is absolute and
unconditional, to receive payment of the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this security is registerable in the
Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Security Registrar in the District
of Columbia, or any other office or agency maintained by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons
and, subject to Section 302 of the Indenture, in denominations of $100 or any
integral multiple thereof. The Company reserves the right to issue fractional
Securities in amounts less than $100, which fractional Securities may, at the
option of the Company (a) be aggregated by the Company for sale in the open
market or in an auction process, with cash proceeds therefrom being distributed
to Holders otherwise entitled to fractional Securities on a pro rata basis, or
(b) be redeemed by the Company for cash consideration equal to $100 multiplied
by such fraction of a Security. If the Company elects to sell fractional
Securities, Holders will have no right against the Company related to such sale
other than the receipt of their proportionate interest in the proceeds of such
sale. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security may be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by any
notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: The Riggs National Bank of
Washington, D.C.
as Trustee
By
Authorized Signature
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture shall be equal to
$161,900,000, except for (i) Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities pursuant to Section 304, 305, 306, 906 or 1008, (ii) additional
Securities issued in exchange for shares of the Class B Preferred Stock of
the Company pursuant to the Restated Certificate of Incorporation of the
Company, which is on file with the Secretary of State of Delaware; and (iii)
additional Securities issued pursuant to the terms of the Securities in
respect of interest accruing thereon.
The Securities shall be known and designated as the
designated as the "16% Junior Subordinated Debentures" of the Company.
Their Stated Maturity shall be June 30, 2003, and they shall bear interest
at the rate of 16% per annum from the date of the Security of from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, as the case may be, payable semi-annually on June 30 and December 31,
commencing with the first Interest Payment Date following the date on which
Securities are first Outstanding under this Indenture, until the principal
thereof is paid or made available for payment. The Securities are issuable,
at the option of the Company, in series, denominated Series A through Series Z,
with all terms of such series being identical except for the legend, if any,
on such series with respect to any original issue discount and except that
Securities of each series shall bear interest from the date on which Securities
of such series first are issued.
The principal of and interest on the Securities shall be payable
at the Corporate Trust Office of the Trustee or at the office or agency of the
Company in McLean, Virginia, maintained for such purpose and at any other
office or agency maintained by the Company for such purpose and shall be
payable in such coin or currency of the United States of America as at such
time is legal tender for payment of public and private debts, or at the option
of the Company but only for interest accruing prior to September 1, 1995, be
paid in whole or in part in lieu of the payment of interest in cash, in
additional Securities in an aggregate principal amount equal to the amount
of such interest payment or portion thereof, rounded to the nearest dollar;
provided, however, that at the option of the Company payment of interest may
be made by check (or, for interest accrued prior to September 1, 1995, which
the Company elects to pay in additional Securities, such additional Securities)
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register; and provided further, that interest shall not
be so payable in whole or in part in additional Securities in lieu of cash from
and after the date of any deposit of money pursuant to Section 401.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen.
The Securities shall be entitled to the benefits, and be redeemable
through operation, of the sinking fund as provided in Article Twelve.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons. The Securities may be issued in denominations of $100 and any
integral multiple thereof. Notwithstanding anaything herein to the contrary,
the Company reserves the right to issue Securities in denominations of less
than $100. SECTION 303. Execution,
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents and signed
or countersigned by its Treasurer or Secretary, with the corporate seal of the
Company reproduced or printed thereon. The signature of any of these officers
on the Securities may be manual or facsimile. Securities bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and delivery of
this Indenture and after authentication and delivery of the original issue of
Securities issued and delivered under this Indenture, the Company may deliver
securities executed by the Company to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities
(including specific directions as to the amount of original issue discount, if
any, to be stated on such Securities); and the Trustee in accordance with
such Company Order shall authenticate and deliver such Securities as provided
in this Indenture and not otherwise; provided, however, that the only
Securities that shall be executed by the Company and authenticated and
delivered by the Trustee shall be (x) Securities issued in exchange for shares
of the Class B Preferred Stock of the Company pursuant to the Restated
Certificate of Incorporation of the Company, (y) Securities issued in respect
of interest pursuant to the terms of the Securities and (z) Securities issued
upon registration of transfer or, or in exchange for in lieu of, other
Securities pursuant to Section 304, 305, 306, 906 or 1008.
Each Security shall be dated the date of its authentication. No Security
shall be entitled to any benefit under this Indenture or be valid or obligatory
for any purpose unless there appears on such Security a certificate of
authentication substantially in the form provided for herein executed by the
Trustee by manual signature. In all cases, such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security has
been duly authenticated and delivered hereunder.
SECTION 304. Temporary securities.
Pending the preparation of definitive Securities, the Company may
execute and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation
of definitive Securities, the temporary securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive
Securities of authorized denominations. Until so exchange the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities. SECTION 305. Registration of Transfer
SECTION 305. Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at any
office or agency of the Company designated pursuant to Section 1002 for such
purpose,
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated trasnferee or transferees, one or more
now Securities of any authorized denominations and of a like aggregate
principal amount. At the option of the
At the option of the Holder, Securities may be exchanged for other
securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive; provided, however, that such exchange shall not (without the
authorization of the Company) increase the number of outstanding Securities
the principal amounts of which are other than $100 or an integral multiple of
$100.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1108, not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeamed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 306, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 306 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen securities.
SECTION 307. Payment of Interest: Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, if permitted pursuant
to Article 13, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money (or, for Defaulted
Interest accruing prior to September 1, 1995, a principal amount of
additional Securities) equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money (or additional Securities, as the case may be) when deposited to
be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as provided in this Clause. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class
postage prepaid to each Holder at his address as it appears in the Security
Register not less than 10 days prior to such Special Record Date. Notice
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 307, each
Security delivered under this Indenture upon registration of transfers of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by any notice
to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment pursuant
to Section 1202 shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this
Section 309, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be destroyed unless otherwise
directed by a Company Order.
SECTION 310. Computation of Interest.
Interest on Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE.
SECTION 401. Satisfaction and Discharae of Indenture.
This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been delivered
to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust
for the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid
all other sums payable hereunder by the Company;
(3) no Event of Default under clause (1) or (2) of Section 501 is
then in existence;
(4) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with;
(5) if the Bank Credit Agreement is then in effect, not more than
than 30 days prior to the acceptance by the Trustee of any deposit of funds
with the Trustee pursuant to clause (1) hereof, the Trustee shall have given
written notice of such proposed deposit of funds to the Agent under the Bank
Credit Agreement and (i) the Trustee shall have received, within 15 days
after such notice shall have been given, a written notice from such Agent
to the effect that such deposit of funds is, at the time, permitted under the
Bank Credit Agreement, or (ii) if, within such 15-day period, the Trustee
shall not have received such notice from the Agent, the Trustee shall have
received an opinion of Counsel to the effect that such deposit is, at the time,
permitted under the Bank Credit Agreement. Notwithstanding the satisfaction
and discharge of this Indenture, the obligations of the Company to the Trustee
under Section 607, the obligations of the Trustee to any Authenticating Agent
under Section 614 and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of
the Trustee under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money; Indemnification
(a) Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to section 401, all money and
U.S. Government obligations deposited with the Trustee pursuant to Section 403
and all money received by the Trustee in respect of U.S. Government obligations
deposited with the Trustee pursuant to Section 403, (i) shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest
for whose payment such monoey has been deposted with the Trustee and (ii) if
each and all of the conditions are met, including, without limitation, those in
Sections 401(5) and 403(6) at the time of such deposit, shall not be subject
to the provisions of Article Thirteen hereof.
(b) The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against U.S. Government
Obligations deposited pursuant to Section 403 or the interest and principal
received in respect of such obligations other than any payable by or on
behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any U.S. Government Obligations or money held by it as
provided in Section 403 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are then in excess of the amount thereof which then
would have been required to be deposited for the purpose for which such U.S.
Government Obligations or money were deposited or received.
SECTION 403. Defeasance and Discharge of Securities.
Notwithstanding Section 401, the Company shall be deemed to have paid
and discharged the entire indebtedness of this Indenture as it relates to such
outstanding Securities (except as to (A) the rights of Holders of Securities to
receive payment of the principal of, or interest on, such Securities on the
Stated Maturity of such principal or interest applicable to the Securities on
the day on which such payments are due and payable in accordance with the terms
of this Indenture and of such Securities, (B) the Company's obligations with
respect to such Securities under Sections 305, 306, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, under Section 607, and (D) Sections 401, 402,
610 and this Section 403, which in each case shall survive until otherwise
terminated or discharged hereunder), and this Indenture shall no longer be in
effect, and the Trustee, at the expense of the Company, shall, upon company
Request, execute proper instruments acknowledging the same, provided that each
of the following conditions have been satisfied:
(1) the Company has deposited or caused to be deposited with the
Trustee (or another trustee satisfying the requirements of Section 609),
irrevocably (irrespective of whether the conditions in paragraphs (2), (3), (4)
or (5) below have been satisfied), as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders
of the Securities, with reference to this Section 403, (A) money in an amount,
or (B) U.S. Government Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms will provide, not
later than one day before any Stated Maturity referred to below in this
subparagraph, money in an amount, of (C) a combination thereof, sufficient, in
the case of (B) or (C) in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge the principal of, and interest
on, such Outstanding Securities on the Stated Maturity of such principal or
interest;
(2) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound;
(3) no Event of Default or event which with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit
and no Event of Default under Section 501(7) or Section 501(8) or event which
with the giving of notice or lapse of time, or both, would become an Event of
Default under Section 501(7) or Section 501(8) shall have occurred and be
continuing on the 91st day after such date; (4) the Company has delivered to
(4) the Company has delivered to the Trustee an Opinion of
Counsel, substantially free of any qualifications, other than those
relating to laws of bankruptcy, insolvency or reorganization and to
general equity principles, to the effect that (A) (i) since the date
of this Indenture there has been a change in the applicable Federal income
tax law (including a change in the official interpretation thereof) or (ii)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, in either case, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to Federal income tax on the same amounts and in the same manner and
at the same times, as would have been the case if such deposit, defeasance and
discharge had not occurred and (B) the defeasance of this Indenture and the
deposit of trust funds pursuant to this Section 403 will not create an
"investment company" (as defined in the Investment Company Act of 1940) or
in any way result in a violation of any of the provisions of the Investment
Company Act of 1940;
(5) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the defeasance and discharge of the entire
indebtedness on all Outstanding Securities as contemplated by this Section have
have been complied with.
(6) if the Bank Credit Agreement is then in effect, not more than 30
days prior to the acceptance by the Trustee of any deposit of funds with the
Trustee pursuant to this Section 403 hereof, the Trustee shall have given
written notice of such proposed deposit of funds to the Agent under the Bank
Credit Agreement and (i) the Trustee shall have received, within 15 days
after such notice shall have been given, a written notice from such Agent to
the effect that such deposit of funds is, at the time, permitted under the Bank
Credit Agreement, or (ii) if, within such 15-day period, the Trustee shall not
have received such notice from the Agent, the Trustee shall have received an
opinion of Counsel to the affect that such deposit is, at the time, permitted
under the Bank Credit Agreement. In the event that any other trustee is
appointed by the Company pursuant to subparagraph (1) above, the Trustee shall
have no responsibility with respect to the performance by such other trustee
of its duties or with respect to any monies or U.S. Government Obligations
deposited with such other trustee.
ARTICLE FIVE
REMEDIES SECTION 501.
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and
whether it shall be occasioned by the provisions of Article Thirteen or be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of any Security at its
Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of Sections 1201 and 1203; or
(4) default in the due performance or observance, or breach, of any
covenant or warranty of the Company in this Indenture (other than a covenant
or warranty a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with) and continuance of such default or breach for
a period of 30 days after there has been given, by registered or certified
mail, to the Company by the rustee or to the Company and the Trustee by the
Holders of at least 33-1/3% in principal amount of the Outstanding Securities
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(5) (i) default by the Company or any of its Subsidiaries in the due
payment after any applicable stated grace period of any Indebtedness or issue
or series of Indebtedness having an outstanding principal amount of $15,000,000
or more or (ii) default of or breach in the due performance or observance, of
any covenant or agreement contained in any bond, debenture, note or instrument
evidencing any such Indebtedness or contained in any mortgage, indenture or
other instrument or agreement under which there may be issued or secured any
such Indebtedness (including the Bank Credit Agreement), whether any such
Indebtedness now exists or shall hereafter be created or any circumstance shall
occur with respect to such Indebtedness, and the effect of such default, breach
or circumstance described in either clause (i) or clause (ii) above is to cause
Indebtedness in an aggregate principal amount of $15,000,000 or more to become
due and payable prior to the date it would otherwise become due and payable; or
(6) the entry of a judgment or judgments or order for the payment of
money in excess of $15,000,000 against the Company or any of its Significant
Subsidiaries which has become final and not subject to appeal, and the
continuance of such judgment or order unstayed, in effect and unpaid for a
period of 60 consecutive days; or
(7) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
(B) a decree or order adjudging the Company or any Significant Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any Significant Subsidiary under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and in the case of (A) and (B), the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(8) the commencement by the Company or any Significant
Subsidiary of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of
any other voluntary case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief
in respect of the company or any significant Subsidiary in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee sequestrator or similar official of
the Company or any Significant Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company or any
Significant Subsidiary in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
Subject to the provisions of Article Thirteen, if an Event of Default
occurs and is continuing, then in every such case the Trustee or the Holders of
not less than 33-1/3% in principal amount of the Outstanding Securities may,
the Outstanding Securities may, upon ten days' prior written notice to the
Agent under the Bank Credit Agreement (and provided that the Event of Default
is continuing at the end of such ten-day period), or,
if the Bank Credit Agreement
is no longer in effect, immediately declare the principal of all the Securities
to be due and payable immediately, by a notice in writing to the Company (and
the Trustee if given by Holders), and upon any such declaration such principal
shall become immediately due and payable. At any time after such a declaration
of acceleration has been made and before a judgment or decree for payment of
the decree for payment of the money due has been obtained by the Trustee as
hereinafter provided in this Article, the Holders of a majority in principal
amount of the Outstanding Securities, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) The Company has paid or deposted with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration, including
any amounts due under Section 1106, hereof, and interest thereon
at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if: (1) default is
(1) default if made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of any Security
at the Maturity thereof or the payment of any amount due under Section 1106
hereof, the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal and interest, and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and on any overdue interest, at the rate borne by the Securities,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid may prosecute such proceeding to judgment or final decree and
may prosecute such proceeding to judgment or final decree
and may enforce the same against the company or any other
obligor upon the Securities and collect the moneys
adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default occurs and is
continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce
any such rights, whether for the specific enforcement of
any covenants or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other Judicial
proceeding relative to the Company or any other obligor
upon the Securities or the property of the Company or of
such other Obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the
payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole
amount of principal and interest owing and unpaid in
respect of the Securities and to file such other
papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims
and to distribute the same;
and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in
any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 607.
Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims under this Indenture
or the Securities may be prosecuted and enforced by the
Trustee without the possession of any of the Securities or the
production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought
in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment
of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of
which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Thirteen, any money collected by
the Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and,
in the case of the distribution of such money on account of
principal or interest, upon presentation of the Securities and
the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
First: To the payment of all amounts due the
Trustee under Section 607;
Second: To the holders of Senior Indebtedness
in accordance with Article Thirteen;
Third: To the payment of the amounts then due
and unpaid for principal of and interest on the Securities
in respect of which or for the benefit of which such money
has been collected, ratably, without preference or
priority of any kind, according to the amounts due and
payable on such Securities for principal and interest,
respectively; and
Fourth: The balance, if any, shall be paid to
the Company, its successors and assigns, or to whomever
may be lawfully entitled to receive the same, or as a
court of competent jurisdiction may direct.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to
institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 33-1/3% in principal
amount of the outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60 day
period by the Holders of a majority in principal amount
of the Outstanding Securities;
it being understood and intended that no one or more Holders
shall have any right in any manner whatsoever by virtue of,
or by availing of, any provision of this Indenture to take
any action inconsistent with Article Thirteen or to affect,
disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this
Indenture but subject to the provisions of Article Thirteen,
the Holder of any Security shall have the right, which
is absolute and unconditional, to receive payment of the
principal of and (subject to Section 307) interest on such
Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding
to enforce any right oi remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such
Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively
to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as
though no such proceeding has been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or
stolen Securities in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right or remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder
of any Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be
exercised, subject to the provisions of Article Thirteen,
from time to time, and as often as may be deemed expedient,
by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power
conferred on the Trustee, provided that
(1) such direction shall not be in conflict
with any rule of law or with this Indenture, and
(2) the Trustee may take any other action
deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal
amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past default hereunder
and its consequences, except a default
(1) in the payment of the principal of or interest
on any Security, or
(2) in respect of a covenant or provision hereof
which under Article Nine cannot be modified or amended
without the consent of the Holder of each Outstanding
Security affected.
Upon any such waiver, such default shall cease to
exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder
of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims
or defenses made by such party litigant; but the provisions
of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the
aggregate more than 10% in principal amount of the outstanding
Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of or interest on
any Security on or after the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on
or after the Redemption Date).
SECTION 515. Waiver of Stay, Extension and Usury Laws.
The Company covenants (to the extent that it
may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force,
which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event
of Default,
(1) the Trustee undertakes to perform
such duties and only such duties as are specifically set forth
in this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements
of this Indenture.
(b) In case an Event of Default has occurred and
is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be
construed to relieve the Trustee from liability for its
own negligent action, its own negligent failure to act, or
its own willful misconduct, except that
(1) this Subsection shall not be construed
to limit the effect of Subsection (a) of this Section 601;
(2) the Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of a
majority in principal amount of Outstanding Securities relating
to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture
shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 601.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any
default hereunder, the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security
Register, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the
payment of principal of or interest on any Security or in the
payment of any sinking fund installment, the Trustee shall
be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust
committee of directors or Responsible Officers of the
Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders; and provided,
further, that in the case of any default of the character
specified in the Section 501(4), no such notice to
Holders shall be given until at least 10 days after the
occurrence thereof. For the purpose of this Section 602, the
term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the
Company mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order and any resolution of the Board
of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of
this Indenture the Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or omitting
any action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel
and the written advice of such counsel or any opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it
by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and may hire
experts to perform any calculations necessary for tax reporting
to the extent such calculations are not provided by the Company,
and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with
due care by it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance
of Securities.
The recitals contained herein and in the
securities, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds
thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying
Agent, any Security Registrar or any other agent of the Company,
in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on
any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to
time reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly
provided herein, to reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents, experts and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to
hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
SECTION 608. Disqualification: Conflicting Interests.
(a) If the Trustee has or shall acquire any
conflicting interest, as defined in this Section 608, it shall,
within 90 days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign
in the manner and with the effect hereinafter specified in
this Article.
(b) In the event that the Trustee shall fail to
comply with the provisions of Subsection (a) of this Section
608, the Trustee shall, within 10 days after the expiration of
such 90-day period, transmit by mail to all Holders, as
their names and addresses appear in the Security Register,
notice of such failure.
(c) For the purposes of this Section 608, the
Trustee shall be deemed to have a conflicting interest if
(1) the Trustee is trustee under
another indenture under which any other securities, or
certificates of interest or participation in any other
securities, of the Company are outstanding, unless such other
indenture is a collateral trust indenture under which the only
collateral consists of securities issued under this Indenture,
provided that there shall be excluded from the operation of this
paragraph any indenture or indentures under which other
securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if
(i) this Indenture and such
other indenture or indentures are wholly unsecured and such
other indentures or indentures are hereafter qualified under the
Trust Indenture Act, unless the Commission shall have found and
declared by order pursuant to Section 305(b) or Section 307(c) of
the Trust Indenture Act that differences exist between the
provisions of this Indenture and the provisions of such other
indenture or indentures which are so likely to involve a material
conflict of interest as to make it necessary in the public
interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture and such other
indenture or indentures, or
(ii) the Company shall
have sustained the burden of proving, on application to the
Commission and after opportunity for hearing thereon, that
trusteeship under this Indenture and such other indenture or
indentures is not so likely to involve a material conflict of
interest as to make it necessary in the public interest or for
the protection of investors to disqualify the Trustee from
acting as such under one of such indentures;
(2) the Trustee or any of its directors or executive
officers is an obligor upon the Securities or an underwriter for
the Company;
(3) the Trustee directly or indirectly controls or
is directly or indirectly controlled by or is under direct or
indirect common control with the Company or an underwriter for
the Company;
(4) the Trustee or any of its directors or executive
officers is a director, officer, partner, employee, appointee or
representative of the Company, or of an underwriter (other than
the Trustee itself) for the Company who is currently engaged in
the business of underwriting, except that (i) one individual may
be a director or an executive officer, or both, of the Trustee
and a director or an executive officer, or both, of the Company
but may not be at the same time an executive officer of both the
Trustee and the Company; (ii) if and so long as the number of
directors of the Trustee in office is more than nine,
one additional individual may be a director or an executive
officer, or both, of the Trustee and a director of the Company;
and (iii) the Trustee may be designated by the Company or by
any underwriter for the Company to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal
agent, escrow agent or depositary, or in any other similar
capacity, or, subject to the provisions of paragraph (1) of
this Subsection, to act as trustee, whether under an indenture
or otherwise;
(5) 10% or more of the voting securities of the Trustee
is beneficially owned either by the Company or by any
director, partner or executive officer thereof, or 20% or
more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or 10% or
more of the voting securities of the Trustee is beneficially
owned either by an underwriter for the Company or by any
director, partner or executive officer thereof, or is
beneficially owned, collectively, by any two or more such
persons;
(6) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default
(as hereinafter in this subsection defined), (i) 5% or more
of the voting securities, or 10% or more of any other class of
security, of the Company not including the Securities issued
under this Indenture and securities issued under any other
indenture under which the Trustee is also trustee, or (ii) 10%
or more of any class of security of an underwriter for the
Company;
(7) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default
(as hereinafter in this Subsection defined), 5% or more of the
voting securities of any person who, to the knowledge of the
Trustee, owns 10% or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect
common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default
(as hereinafter in this Subsection defined), 10% or more of any
class of security of any person who, to the knowledge of the
Trustee, owns 50% or more of the voting securities of the
Company; or
(9) the Trustee owns, on May 15 in any calendar year,
in the capacity of executor, administrator, testamentary or
inter vivos trustee, guardian, committee or conservator, or in
any other similar capacity, an aggregate of 25% or more of
the voting securities, or of any class of security, of any
person, the beneficial ownership of a specified percentage of
which would have constituted a conflicting interest under
paragraph (6), (7) or (8) of this Subsection. As to any such
securities of which the Trustee acquired ownership through
becoming executor, administrator or testamentary trustee of an
estate which included them, the provisions of the preceding
sentence shall not apply, for a period of two years from the
date of such acquisition, to the extent that such securities
included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after
May 15 in each calendar year, the Trustee shall make a check of
its holdings of such securities in any of the above-mentioned
capacities as of such date. If the Company fails to make payment
in full of the principal of or interest on any of the Securities
when and as the same becomes due and payable, and such failure
continues for 30 days thereafter, the Trustee shall make a prompt
check of its holdings of such securities in any of the
abovementioned capacities as of the date of the expiration of
such 30-day period, and after such date, notwithstanding the
foregoing provisions of this paragraph, all such securities so
held by the Trustee, with sole or joint control over such
securities vested in it, shall, but only so long as such failure
shall continue, be considered as though beneficially owned by the
Trustee for the purposes of paragraphs (6), (7) and (8) of this
Subsection.
The specification of percentages in paragraph (5)
to (9), inclusive, of this Subsection shall not be construed as
indicating that the ownership of such percentages of the
securities of a person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes
of paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9)
of this Subsection only, (i) the terms "security" and
"securities" shall include only such securities as are
generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to
evidence an obligation to repay moneys lent to a person by one
or more banks, trust companies or banking firms, or any
certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed
to be "in default" when a default in payment of principal
shall have continued for 30 days or more and shall not have been
cured; and (iii) the Trustee shall not be deemed to be the owner
or holder of (A) any security which it holds as collateral
security, as trustee or otherwise, for an obligation which
is not in default as defined in clause (ii) above, or (B) any
security which it holds as collateral security under this
Indenture, irrespective of any default hereunder, or (C)
any security which it holds as agent for collection, or as
custodian, escrow agent or depositary, or in any similar
representative capacity.
(d) For the purposes of this Section 608:
(1) The term "underwriter", when used
with reference to the Company, means every person who, within
three years prior to the time as of which the determination is
made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the
distribution of any security of the Company outstanding at such
time, or has participated or has had a direct or indirect
participation in any such undertaking, or has participated or
has had a participation in the direct or indirect underwriting
of any such undertaking, but such term shall not include a
person whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
(2) The term "director" means any
director of a corporation or any individual performing similar
functions with respect to any organization, whether incorporated
or unincorporated.
(3) The term "person" means an individual,
a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or a government
or political subdivision thereof. As used in this paragraph, the
term "trust" shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a
security.
(4) The term "voting security" means any
security presently entitling the owner or holder thereof to vote
in the direction or management of the affairs of a person, or any
security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for
the owner or holder of such security are presently entitled to
vote in the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the
Securities.
(6) The term "executive officer" means the
president, every vice president, every trust officer, the
cashier, the secretary and the treasurer of a corporation, and
any individual customarily performing similar functions with
respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the
board of directors.
(e) The percentages of voting securities and
other securities specified in this Section 608 shall be
calculated in accordance with the following provisions:
(1) A specified percentage of the voting securities of
the Trustee, the Company or any other person referred to in
this Section 608 (each of whom is referred to as a "person"
in this paragraph) means such amount of the outstanding voting
securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate
votes which the holders of all the outstanding voting securities
of such person are entitled to cast in the direction or
management of the affairs of such person.
(2) A specified percentage of a class of securities of
a person means such percentage of the aggregate amount of
securities of the class outstanding.
(3) The term "amount", when used in regard to
securities, means the principal amount if relating to evidences
of indebtedness, the number of shares if relating to capital
shares and the number of units if relating to any other kind of
security.
(4) The term "outstanding" means issued and not held by
or for the account of the issuer. The following securities
shall not be deemed outstanding within the meaning of this
definition:
(i) securities of an issuer held in a sinking
fund relating to securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking
fund relating to another class of securities of this issuer, if
the obligation evidenced by such other class of securities is not
in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as
security for an obligation of the issuer not in default as
to principal or interest or otherwise; and
(iv) securities held in escrow if placed in escrow
by the issuer thereof;
provided, however, that any voting securities of an issuer
shall be deemed outstanding if any person other than the issuer
is entitled to exercise the voting rights thereof.
(5) A security shall be deemed to be of the same
class as another security if both securities confer upon the
holder or holders thereof substantially the same rights and
privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a single
indenture, differences in the interest rates or maturity dates
of various series thereof shall not be deemed sufficient to
constitute such series of different classes and provided,
further, that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity dates
thereof shall not be deemed sufficient to constitute them
securities of different classes, whether or not they are issued
under a single indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder
which shall be a corporation organized and doing business under
the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to
exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000, and subject to supervision or
examination by Federal, State or District of Columbia
authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section 609, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 609, it shall resign
immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and
no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by
the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company and any other obligor upon
the Securities. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by the
Act of the Holders of a majority in principal amount of the
outstanding Securities, delivered to the Trustee and to the
Company and any other obligor upon the securities.
(d) If at any time:
(1) the Trustee shall fail to comply with
Section 608(a) after written request therefor by the Company (and
any other obligor upon the Securities) or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible
under Section 609 and shall fail to resign after written request
therefor by the Company (and any other obligor upon the
Securities) or by any such Holder, or
(3) the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or a receiver
of the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the
Company (and any other obligor upon the Securities) by a Board
Resolution may remove the Trustee or (ii) subject to Section
514, any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all other
Holders similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
(e) If the Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the
office of Trustee for any cause, the Company (and any other
obligor upon the Securities), by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year
after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be
appointed by the Act of the Holders of a majority in principal
amount of the Outstanding Securities delivered to the Company
(and any other obligor upon the Securities) and the retiring
Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed by the
Company (and any other obligor upon the Securities). If no
successor Trustee shall have been so appointed by the Company
(and any other obligor upon the Securities) or the Holders and
accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all other Holders
similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company (and any other obligor upon
the Securities) shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of any such event by first
class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Each notice
shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) Every successor Trustee appointed hereunder
shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
SECTION 612. Mercer, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the
corporate trust business of the Trustee shall be the
successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.
In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by
merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if
such successor Trustee had itself authenticated such
Securities.
SECTION 613. Preferential Collection of Claims Against
(a) Subject to Subsection (b) of this Section 613,
if the Trustee shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Company within four
months prior to a default, as defined in Subsection (c) of this
Section 613, or subsequent to such a default, then, unless and
until such default shall be cured, the Trustee shall set apart
and hold in a special account for the benefit of the Trustee
individually, the Holders of the Securities and the holders of
other indenture securities, as defined in Subsection (c) of this
Section:
(1) an amount equal to any and all
reductions in the amount due and owing upon any claim as such
creditor in respect of principal or interest, effected after the
beginning of such four months' period and valid as against the
Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property
described in paragraph (2) of this Subsection, or from the
exercise of any right of set-off which the Trustee could have
exercised if a petition in bankruptcy had been filed by or
against the Company upon the date of such default; and
(2) all property received by the Trustee
in respect of any claims as such creditor, either as security
therefor, or in satisfaction or composition thereof, or
otherwise, after the beginning of such four months' period, or an
amount equal to the proceeds of any such property, if disposed
of, subject, however, to the rights, if any, of the Company and
its other creditors in such property of such proceeds.
Nothing herein contained, however, shall affect the right of
the Trustee:
(A) to retain for its own account (i)
payments made on account of any such claim by any Person (other
than the Company) who is liable thereon, and (ii) the proceeds of
the bona fide sale of any such claim by the Trustee to a third
Person and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Code or applicable State law;
(B) to realize, for its own account, upon
any property held by it as security for any such claim, if such
property was so held prior to the beginning of such four months'
period;
(C) to realize, for its own account, but
only to the extent of the claim hereinafter mentioned, upon any
property held by it as security for any such claim, if such
claim was created after the beginning of such four months,'
period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee
shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to
believe that a default, as defined in Subsection (c) of this
Section 613, would occur within four months; or
(D) to receive payment on any claim
referred to in paragraph (B) or (C), against the release of any
property held as security for such claim as provided in paragraph
(B) or (C), as the case may be, to the extent of the fair value
of such property.
For the purposes of paragraph (B), (C) and (D),
property substituted after the beginning of such four months'
period for property held as security at the time of such
substitution shall, to the extent of the fair value of the
property released, have the same status as the property released,
and, to the extent that any claim referred to in any of such
paragraphs is created in renewal of or in substitution for or for
the purposes of repaying or refunding any pre-existing claim of
the Trustee as such creditor, such claim shall have the same
status as such pre-existing claim.
If the Trustee shall be required to account, the
funds and property held in such special account and the proceeds
thereof shall be apportioned among the Trustee, the Holders and
the holders of other indenture securities in such manner that
the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special
account and payment of dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Code or
applicable State law, the same percentage of their respective
claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the
funds and property in such special account and before crediting
to the respective claims of the Trustee, the Holders and the
holders of other indenture securities dividends on claims filed
against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Federal Bankruptcy
Code or applicable State law, but after crediting thereon
receipts on account of the indebtedness represented by their
respective claims from all sources other than from such dividends
and from the funds and property so held in such special account.
As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such
claim, in bankruptcy or receivership or proceedings for
reorganization pursuant to the Federal Bankruptcy Code or
applicable State law, whether such distribution is made in
cash, securities or other property, but shall not include
any such distribution with respect to the secured portion,
if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall
have jurisdiction (i) to apportion among the Trustee, the
Holders and the holders of other indenture securities, in
accordance with the provision of this paragraph, the funds and
property held in such special account and proceeds thereof or
(ii) in lieu of such apportionment, in whole or in part, to
give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to the
Trustee, the Holders and the holders of other indenture
securities with respect to their respective claims, in
which event it shall not be necessary to liquidate or to
appraise the value of any securities or other property held in
such special account or as security for any such claim, or to
make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise
to apply the provisions of this paragraph as a mathematical
formula.
Any Trustee which has resigned or been removed after
the beginning of such four months' period shall be subject to
the provisions of this Subsection as though such resignation
or removal had not occurred. If any Trustee has resigned or
been removed prior to the beginning of such four months'
period, it shall be subject to the provisions of this Subsection
if and only if the following conditions exist:
(i) the receipt of property or
reduction of claim, which would have given rise to the obligation
to account if such Trustee had continued as Trustee, occurred
after the beginning of such four months' period; and
(ii) such receipt of property
or reduction of claim occurred within four months after such
resignation or removal.
(b) There shall be excluded from the operation
of Subsection (a) of this Section 613 a creditor relationship
arising from:
(1) the ownership or acquisition
of securities issued under any indenture, or any security or
securities having a maturity of one year or more at the time of
acquisition by the Trustee;
(2) advances authorized by a
receiver ship or bankruptcy court of competent jurisdiction or
by this Indenture, for the purpose of preserving any property
which shall at any time be subject to the lien of this Indenture
or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances
surrounding the making thereof is given to the Holders at the
time and in the manner provided in this Indenture;
(3) disbursements made in the
ordinary course of business in the capacity of trustee under
an indenture, transfer agent, registrar, custodian, paying agent,
fiscal agent or depositary, or other similar capacity;
(4) an indebtedness created as a
result of services rendered or promises rented, or an
indebtedness created as a result of goods or securities sold in a
cash transaction, as defined in Subsection (c) of this Section;
(5) the ownership of stock or of
other securities of a corporation organized under the provisions
of Section 25(a) of the Federal Reserve Act, as amended, which is
directly or indirectly a creditor of the Company; and
(6) the acquisition, ownership,
acceptance or negotiation of any drafts, bills of exchange,
acceptances or obligations which fall within the classification
of self-liquidating paper, as defined in Subsection (c) of this
Section 613.
For the purposes of this Section 613 only:
(1) the term "def ault" means any failure to make
a payment in full of the principal of or interest on any of the
Securities or upon the other indenture securities when and as
such principal or interest become due and payable;
(2) the term "other indenture securities" means
securities upon which the Company is an obligor outstanding
under any other indenture (i) under which the Trustee is also
trustee, (ii) which contains provisions substantially similar
to the provisions of this Section 613 and (iii) under which
a default exists at the time of the apportionment of the
funds and property held in such special account;
(3) the terms "cash transaction" means any
transaction in which full payment for goods or securities sold is
made within seven days after delivery of the goods or securities
in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand;
(4) the term "self-liquidating paper" means any
draft, bill of exchange, acceptance or obligation which is
made, drawn, negotiated or incurred by the Company for the
purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and
which is secured by documents evidencing title to, possession of,
or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security,
provided the security is received by the Trustee simultaneously
with the creation of the creditor relationship with the Company
arising from the making, drawing, negotiating or incurring of
the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the
Securities; and
(6) the term "Federal Bankruptcy Code" means the
Bankruptcy Code or Title 11 of the United States Code.
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent
or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Securities issued upon original issue
and upon exchange, registration of transfer or partial
redemption or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. Wherever reference
is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and
shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws
to act as Authenticating Agent, having a combined capital and
surplus or not less than $50,000,000 and subject to supervision
or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section 614, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this
Section 614, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section 614.
Any corporation into which an Authenticating Agent
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any mergers, conversion or
consolidation to which such Authenticating Agent shall be party,
or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section 614, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time
by giving written notice thereof to the Trustee and to the
Company. The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to
such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case
at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section
614, the Trustee may appoint a successor Authenticating Agent
which shall be acceptable to the Company and shall mail written
notice of such appointment by first class mail, postage prepaid,
to all Holders as their names and addresses appear in the
Security Register. Any successor Authenticating Agent, upon
acceptance of its appointment hereunder, shall become vested with
all the rights, powers, and duties of its predecessor hereunder,
with like effect as if originally named as an Authenticating
Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 614.
The Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its
services under this Section 614, and the Trustee shall be
entitled to be reimbursed for such payments, subject to the
provisions of section 607.
If an appointment is made pursuant to this Section
614, the Securities may have endorsed thereon, in addition
to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities described in the
within mentioned Indenture.
As Trustee
By
As Authenticating Agent
By
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders.
The Company and any other obligor upon the Securities
will furnish or cause to be furnished to the Trustee:
(a) for purposes of the initial Securities Registry,
a list, in such form as the Trustee may reasonably require, of the
names, addresses, and, to the extent feasible, certified tax
identification numbers of those persons in whose name the Securities
are to be registered,
(b) not more than 15 days after each
Regular Record Date, and in any event no less frequently than
semi-annually, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such
Regular Record Date, and
(c) at such other times as the Trustee may
request in writing, within 30 days after the receipt by the
Company and any other obligor upon the Securities of any such
request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished; excluding
from any such list names and addresses received by the Trustee in
its capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications
to Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to
as "applicants") apply in writing to the Trustee, and furnish to
the Trustee reasonable proof that each such applicant has owned
a Security for a period of at least six months preceding the
date of such application, and such application states that the
applicants desire to communicate with other Holders with respect
to their rights under this Indenture or under the Securities and
is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of
such application, at its election, either
(i) afford such applicants access to
the information preserved at the time by the Trustee in
accordance with Section 702(a), or
(ii) inform such applicants as to
the approximate number of Holders whose names and addresses
appear in the information preserved at the time by the Trustee in
accordance with Section 702(a) and as to the approximate cost of
mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such
applicants access to such information, the Trustee shall, upon
the written request of such applicants, mail to each Holder
whose name and address appears in the information preserved at
the time by the Trustee in accordance with Section 702(a) a copy
of the form of proxy or other communication which is specified in
such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision
for the payment, of the reasonable expenses of mailing, unless
within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a
copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such mailing would be
contrary to the best interest of the Holders or would be in
violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all
such Holders with reasonable promptness after the entry of such
order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Company and the Trustee
that neither the Company nor the Trustee nor any agent of
either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses
of the Holders in accordance with Section 702 (b), regardless of
the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year
commencing with the year Securities are first issued pursuant to
this Indenture, the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security
Register, a brief report dated as of such May 15 with respect to:
(1) its eligibility under Section 609 and
its qualifications under Section 608, or in lieu thereof, if to
the best of its knowledge it has continued to be eligible and
qualified under said Sections, a written statement to such
effect;
(2) the character and amount of any
advances (and if the Trustee elects so to state, the
circumstances surrounding the making thereof) made by the Trustee
(as such) which remain unpaid on the date of such report, and
for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities, on any property or funds
held or collected by it as Trustee, except that the Trustee shall
not be required (but may elect) to report such advances if such
advances so remaining unpaid aggregate not more than 1/2 of l% of
the principal amount of the Securities Outstanding on the date of
such report.
(3) the amount, interest rate and
maturity date of all other indebtedness owing by the Company (or
by any other obligor on the Security) to the Trustee in its
individual capacity, on the date of such report, with a brief
description of any property held as collateral security therefor,
except an indebtedness based upon a creditor relationship arising
in any manner described in Section 613(b)(2), (3), (4) or (6);
(4) the property and funds, if any,
physically in the possession of the Trustee (as such), or of a
depository for it, on the date of such report;
(5) any additional issue of Securities
which the,Trustee has not previously reported; and
(6) any action taken by the Trustee in
the performance of its duties hereunder which it has not
previously reported and which in its opinion materially affects
the Securities, except action in respect of a default, notice of
which has been or is to be withheld by the Trustee in accordance
with Section 602.
(b) The Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the security
Register, a brief report with respect to the character and
amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted
pursuant to Subsection (a) of this Section 703 (or if no such
report has yet been so transmitted, since the date of execution
of this instrument) for the reimbursement of which it claims or
may claim a lien or charge, prior to that of the Securities, on
property or funds held or collected by it as Trustee and which
it has not previously reported pursuant to this Subsection,
except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any
time aggregate 10% or less of the principal amount of the
Securities outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time
of such transmission to Holders, be filed by the Trustee with each
stock exchange upon which the Securities are listed, with
the Commission and with the Company. The Company will notify the
Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15
days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules
and regulations prescribe) which the Company may be required to
file with the Commission pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934; or, if the Company is not
required to file information documents or reports pursuant to
either of said Sections, then it shall file with the Trustee and
the commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(2) file with the Trustee and the
Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such additional
information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture
as may be required from time to time by such rules and
regulations; and
(3) transmit by mail to all Holders, as
their names and addresses appear in the Security Register, within
30 days after the filing thereof with the Trustee, such summaries
of any information, documents and reports required to be filed by
the Company pursuant to paragraphs (1) and (2) of this Section as
may be required by rules and regulations prescribed from time to
time by the commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.
The Company shall not (whether in a transaction or
a series of transactions) consolidate with or merge into any other
Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or
merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the
Company, unless:
(1) in case the company shall consolidate with or merge
into another Person or convey, transfer or lease its
properties and assets substantially as an entirety to any
Person, the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation,
partnership or trust, shall be organized and validly existing
under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee,
the due and punctual payment of the principal of and interest on
all the Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such
transaction, no Event of Default shall have happened and be
continuing;
(3) immediately after giving effect to such transaction,
the consolidated net worth plus Indebtedness, if any, subordinate
to the Senior Indebtedness (as determined on the basis of
generally accepted accounting principles) of the Person surviving
such merger or to which such conveyance, transfer or lease is
made is equal to or greater than the consolidated net worth
plus Indebtedness, if any, subordinate to the Senior Indebtedness
(as determined in accordance with generally accepted accounting
principles) of the Company and its Subsidiaries immediately prior
to such transaction (provided, however, that this clause (3) of
Section 801 shall not apply to the Merger); and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of counsel, each stating
that such consolidation, merger, conveyance, transfer or lease
and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of
the Company into, any other Person or any conveyance, transfer
or lease of the properties and assets of the Company
substantially as an entirety in accordance with Section 801, the
successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance,transfer or lease
is made shall succeed to, and besubstituted for, and may exercise
every right and power of, the Company under this Indenture with
the same effect as if such successor Person had been named as the
Company herein,and thereafter, except in the case of a lease,
the predecessor Person shall be relieved of all obligations
andcovenants under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company,when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for
any of the following purposes:
(1) to evidence the succession of
another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the
Securities; or
(2) to add to the covenants of the
Company for the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company; or
(3) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with
any other provision herein, or to make any other provisions with
respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (3) shall
not adversely affect the interests of the Holders; or
(4) notwithstanding any provisions herein
to the contrary, to conform this Indenture to the requirements
of the Trust Indenture Act or the requirements of any securities
exchange on which the Securities are listed or traded at any time
that there are no Holders of Outstanding Securities.
SECTION 902. SuppleMental Indentures With Consent of Holders.
With the consent of the Holders of not less than
a majority in principal amount of the outstanding Securities, by
the Act of said Holders delivered to the Company and the Trustee,
the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby
(1) change the Stated Maturity of the
principal of, or any installment of interest on, any Security,
or reduce the principal amount thereof or reduce the rate of
interest thereon, or change the place of payment where, or the
coin or currency in which, any security or any premium or
the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal
amount of the Outstanding Securities, the consent of whose
Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of
this Section 902, Section 512 or Section 513, except to increase
any such percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders
under this Section 902 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if
such Act shall approve the substance thereof.
Upon the request of any Holder and subject to
the provisions set forth in this Section 902, if this Indenture
does not then conform to the requirements of, and may not be
qualified under, the Trust Indenture Act, the Company shall
authorize by a Board Resolution, and prepare, a supplemental
indenture, in form satisfactory to the Trustee, for the
purpose of changing the provisions of this Indenture to
conform to the requirements of the Trust Indenture Act, as then
in effect.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts
created by any supplemental indenture permitted by this Article
or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying
upon, an Opinion of counsel stating that the execution of
such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture
under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act .
Every supplemental indenture executed pursuant to
this Article shall conform to the requirements of the Trust
Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after
the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company
shall so determine, now Securities so modified as to conform,
in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 907. Limitations of Amendments.
Notwithstanding any other provisions in this
Indenture to the contrary, no amendment, supplement or
modification of any provision of Article Thirteen will be
effective against any holder of Senior Indebtedness and any
successor or assign of any such holder unless such amendment,
supplement or modification is expressly consented to in
writing by such holder of Senior Indebtedness or its
Representative (or by any specified percentage of holders of a
class of Senior Indebtedness required to consent thereto
pursuant to the terms of the agreement or instrument creating,
evidencing or governing such Senior Indebtedness) in which
event such amendment, supplement or modification shall be
binding on all successors and assigns of such holder and on all
Persons who become holders of Senior Indebtedness issued
after the date of such amendment, supplement or modification;
and so long as any Senior Indebtedness under or with respect
to the Bank Credit Agreement is outstanding, no amendment,
supplement or modification of any provision of this Indenture
or the Securities relating to any provision of Article Thirteen
shortening the tenor, advancing the time or schedule for payments
(by increasing the payment amount or otherwise) in respect of
redemptions (whether mandatory or optional), sinking fund,
principal, interest or other payments, making more restrictive,
or adding, covenants, breaches, defaults, or events
of default or cure periods or loosening the requirements for
acceleration or which would result in the benefits to the
Company or the holders of Senior Indebtedness provided by
this Indenture or the securities being limited or in any way
restricted or diminished, shall be effective unless expressly
agreed to in writing by the specified percentage of holders of
Senior Indebtedness required to consent thereto pursuant to the
terms of the Bank Credit Agreement.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Securities.
The Company will duly and punctually pay the
principal of and interest on the Securities in accordance with
the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in McLean, Virginia, an
office or agency where Securities may be presented or surrendered
for payment of principal, where Securities may be surrendered
for registration of transfer or exchange and where notices and
demands to or upon the company in respect of the Securities
or this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one
or more other offices or agencies (in or outside Virginia) where the
Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such
designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in McLean, Virginia
for such purposes. The company will give prompt written notice to
the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own
Paying Agent it will, one day before each due date of the
principal of or interest on any of the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto
a sum (or, where permitted and the Company so elects, additional
Securities) sufficient to pay the principal or interest so
becoming due until such sums (or Securities) shall be paid to
such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act;
provided that such trust shall arise and be enforceable only on
the date payment is due; and only to the extent payment is then
due, and only as to funds actually segregated and appropriated to
such payments; and only if payment with respect to the
Securities is permitted at the time under Article Thirteen.
Whenever the Company shall have one or more Paying
Agents, it will, prior to each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum
(or, where permitted and the Company so elects, additional
Securities) sufficient to pay the principal or interest so
becoming due, such sum (or Securities) to be held in trust for
the benefit of the Persons entitled to such principal or
interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent other than
the Trustee to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section 1003, that such Paying Agent
will:
(1) hold all sums (or Securities) hold by
it for the payment of the principal of or interest on Securities
in trust for the benefit of the Persons entitled thereto until
such sums (or Securities) shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default
by the Company (or any other obligor upon the Securities) in the
making of any payment of principal or interest; and
(3) at any time during the continuance of any
such default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums (or Securities) so held in trust by
such Paying Agent.
The Company may at any time, for the purpose
of obtaining the satisfaction and discharge of this Indenture or
for any other purpose, pay, or by Company Order direct any
Paying Agent to pay, to the Trustee all sums (or Securities)
hold in trust by the Company or such Paying Agent, such sums (or
Securities) to be hold by the Trustee upon the same trusts as
those upon which such sums were held by the company or such
Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further
liability with respect to such money (or Securities).
Any money (or Securities) deposited with the Trustee
or any Paying Agent, or then held by the Company in trust for
the payment of the principal of or interest on any Security and
remaining unclaimed for two years after such principal or
interest has become due and payable shall be paid (or
delivered) to the Company on Company Request, or (if then hold
by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to
such trust money (or Securities), and all liability of the
Company as trustee there of, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being
required to make any such repayment (or delivery), may at the
expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each
Business Day and of general circulation in New York City, notice
that such money (or Securities) remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such
money (or Securities) then remaining will be repaid (or
delivered) to the Company.
SECTION 1004. Preservation of Corporate Existence.
Subject to Article Eight, the Company will do or cause
to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory)
and corporate franchises except where the failure to preserve and
keep in full force and effect such corporate franchises would
not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries taken
as a whole.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful
in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that
nothing in this Section 1005 shall prevent the Company from
discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the
business of any of its subsidiaries and would not have a material
adverse effect on the Company and its Subsidiaries taken as a
whole.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any of its Subsidiaries or upon the income,
profits or property of the Company or any of its Subsidiaries
and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of
the Company or any of its subsidiaries; provided, however, that
the Company shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested
in good faith by appropriate proceedings if adequate reserves
therefor have been established in accordance with generally
accepted accounting principles, or where the failure to pay or
discharge or cause to be paid or discharged any such tax,
assessment, charge or claim would not have a material adverse
effect on the company and its Subsidiaries taken as a whole.
SECTION 1007. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120
days after the end of each fiscal year of the Company ending
after the date hereof, an Officers' Certificate, stating
whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance
of any of the terms, provisions and conditions of this Indenture
and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have
knowledge.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
Subject to restrictions contained in the Bank Credit
Agreement, the Securities may be redeemed at the election of the Company,
as a whole or from time to time in part, at any time at a Redemption
Price equal to 100% of the principal amount of Securities so redeemed,
together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the
Company or otherwise, as permitted or required by any provision
of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities
pursuant to Section 1101 shall be evidenced by a Board
Resolution. In case of any redemption at the election of the
Company of less than all the Securities, the Company shall,
at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed by
selecting for redemption in full, or on a lot-by-lot basis to
the extent possible (commencing with the smallest denominations
outstanding in order of increasing amount), all Securities with
denominations of less than $1,000 and then allocating the
remaining principle amount to be redeemed, if any, among the
outstanding Securities and selecting for redemption such
Securities by lot; provided, however, that the Company may by
Company Order direct the Trustee to redeem Securities of greater
than $1,000 denomination on a pro rata basis, or by any other
method which the Trustee shall deem fair and appropriate; and
provided further, that any method chosen is in compliance with
any applicable rules or regulations of any stock exchange on
which the Securities may be listed.
The Trustee shall promptly notify the Company and
each Security Registrar in writing of the Securities selected
for redemption and, in the case of any Securities selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the
redemption of Securities shall relate, in the case of any
Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has
been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first class
mail, postage prepaid, mailed not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of
Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are
to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities
to be redeemed,
(4) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that interest thereon will cease to accrue on and
after said date,
(5) the place or places where such Securities are to
be surrendered for payment of the Redemption Price, and
(6) that the redemption is for the sinking fund, if
such is the case.
Notice of redemption of Securities to be redeemed at
the election of the Company shall be given by the Company or,
at the Company's request, by the Trustee in the name and at
the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Not later than the Business Day prior to any
Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money sufficient to pay the Redemption Price
of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are
to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid,
the Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor
Securities, registered as such, at the close of business on the
relevant Record Dates according to their terms and the provisions
of Section 307.
If any Security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal
shall, until paid, bear interest from the Redemption Date at
the rate borne by the Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part
shall be surrendered at an office or agency of the Company
designated for that purpose pursuant to Section 1002 (with, if
the Company or the Trustee so require, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the
Holder of such security, without service charge, a new Security
or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the
Security so surrendered.
SECTION 1109. Notice of Redemption to Agent.
No redemption of Securities pursuant to Section 1101,
and no deposit of funds with the Trustee pursuant to such
redemption, shall be made by the Company at any time when the
Bank Credit Agreement is in effect unless the Trustee has not
more than 45 days prior to the Redemption Date given written
notice thereof to the Agent under the Bank Credit Agreement and
(i) the Trustee has received, within 15 days after such notice is
given, a written notice from such Agent to the effect that such
payment is, or will be at the time, or will be at the Redemption
Date, permitted under the Bank Credit Agreement, or (ii) if,
within such 15-day period, the Trustee shall not have received
such notice from the Agent, the Trustee shall have received an
opinion of Counsel to the effect that such deposit is, at the
time, permitted under the Bank Credit Agreement.
ARTICLE TWELVE
SINKING FUND
SECTION 1201. Sinking Fund Payments.
As and for a sinking fund for the retirement of the
Securities, the Company will, until all Securities are paid or
payment thereof provided for, deposit in accordance with Section
1106, prior to June 30 in each year, commencing in 1999 and
ending in 2003, an amount in cash sufficient to redeem on each
such June 30 twenty percent (20%) of the highest amount at any
time outstanding of the Securities and the remaining amount of
the issue to be redeemed at maturity, at 100% of the principal
amount of the Securities to be redeemed, together with interest
accrued to the date of each such redemption. The cash amount of
any sinking fund payment is subject to reduction as provided in
Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities on such June 30 as herein provided.
SECTION 1202. Satisfaction of Sinking Fund Payments
with Securities.
The Company may (1) deliver Outstanding Securities
(other than any previously called for redemption) and (2) apply
as a credit Securities which have been redeemed at the election
of the Company pursuant to Section 1101 in satisfaction of all or
any part of any sinking fund payment required to be made pursuant
to Section 1201, provided that such Securities have not been
previously credited to the Securities mandatory redemption
requirement. Each such Security shall be received and credited
for such purpose by the Trustee at 100% of the principal amount
of such Security and the amount of such sinking fund payment
shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
On or before the 60th day prior to the Redemption
Date in each year commencing with the year 1999 and ending in
2003 the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking
fund payment pursuant to Section 1201, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 1202 and will also
deliver to the Trustee any Securities to be so delivered. Before
the 30th day prior to the Redemption Date in each such year, the
Trustee shall select the securities to be redeemed upon the next
ensuing Redemption Date in the manner specified in Section 1104
and cause notice of the redemption thereof to be given in the
name of and at the expense of the Company in the manner provided
in Section 1105. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in
the manner stated in Sections 1107 and 1108.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior Indebtedness.
The provisions of this Article apply notwithstanding
anything to the contrary contained in the Securities or
this Indenture. The Company covenants and agrees, and each
Holder of a Security, by such Holder's acceptance thereof,
likewise covenants and agrees, that, to the extent and in the
manner hereinafter set forth in this Article, the
indebtedness represented by the Securities and the payment of
the principal of and the interest on all of the Securities are
hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior
Indebtedness. This Article Thirteen constitutes a continuing
offer to all Persons who have become holders of, or continue to
hold, Senior Indebtedness, each of whom is an obligee hereunder
and is entitled to enforce such holder's rights hereunder,
subject to the provisions hereof, without any act or notice of
acceptance hereof or reliance hereon.
SECTION 1302. Payment Over of Proceeds Upon Dissolution,
Etc.
(a) In the event of any Insolvency or
Liquidation Proceeding, (1) all Senior Indebtedness under or
with respect to the Bank Credit Agreement and (2) all amounts
payable in respect of any other Senior Indebtedness shall first
be paid in full in cash before the Holders of the Securities
are entitled to receive any direct or indirect payment or
distribution of any cash, property or securities (excluding
Reorganization securities) on account of principal of or interest
on the Securities.
(b) The holders of Senior Indebtedness (or their
respective Representatives) shall be entitled to receive
directly, for application to the payment thereof(to the
extent necessary to pay all such Senior Indebtedness in full in
cash after giving effect to any substantially concurrent payment
or distribution to the holders of such senior Indebtedness), in
the following order of priority, any payment or distribution of
any kind or character, whether in cash property or securities
(excluding Reorganization Securities but including any
payment or distribution, except Reorganization Securities,
which may be payable or deliverable by reason of the payment
of any other indebtedness of the Company being subordinated to
the payment of the Securities) which may be payable or
deliverable in respect of the securities in any such
Insolvency or Liquidation Proceeding: first, so long as
any Senior Indebtedness under or with respect to the Bank
Credit Agreement is outstanding, to the holders of such Senior
Indebtedness (pro rata on the basis of the respective amounts of
such Senior Indebtedness held by them) (or their
Representatives) ; and, second, if and only if all Senior
Indebtedness under or with respect to the Bank Credit Agreement
is paid in full in cash, to the holders of any other Senior
Indebtedness (pro rata on the basis of the respective amounts of
such other Senior Indebtedness held by them) (or their respective
Representatives).
(c) In the event that, notwithstanding the
foregoing provisions of this Section 1302, the Trustee or
any Paying Agent or the Holder of any Security shall have
received any payment from or distribution of assets of the
Company or the estate created by the commencement of any
such Insolvency or Liquidation Proceeding, of any kind or
character in respect of the Securities, whether in cash,
property or securities (excluding Reorganization Securities
but including any payment or distribution, except Reorganization
Securities, which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being
subordinated to the payment of the Securities) before all Senior
Indebtedness is paid in full in cash, then and in such event such
payment or distribution shall be received and held in trust for
and shall be paid over, in the following order of priority, to
the holders of the Senior Indebtedness remaining unpaid (or
their respective Representatives), to the extent necessary to pay
all such Senior Indebtedness in full in cash after giving effect
to any substantially concurrent payment or distribution to the
holders of such Senior Indebtedness, for application to the
payment in full in cash of such Senior Indebtedness: first, so
long as any Senior Indebtedness under or with respect to the Bank
Credit Agreement is outstanding, to the holders of such Senior
Indebtedness (pro rata on the basis of the respective amounts of
such Senior Indebtedness held by them) (or their respective
Representatives); and, second, if and only if all Senior
Indebtedness under or with respect to the Bank Credit Agreement
is paid in full in cash, to the holders of any other Senior
Indebtedness (pro rata on the basis of the respective amounts of
such other Senior Indebtedness hold by them) (or their
respective Representatives).
SECTION 1303. Default on Senior Indebtedness.
(a) If there exists a default in the payment when due
(whether at maturity or upon acceleration or mandatory
prepayment, or on any principal installment payment date or
interest payment date, or otherwise) of any Senior Indebtedness
(a "Payment Default") and such default shall not have been cured,
or such default, or the benefits of this sentence, shall not have
been waived in writing by or on behalf of the holders of such
Senior Indebtedness (or their Representative, if any), then any
payment on account of principal of or interest on the Securities
to which the Holders of the Securities would then be entitled
(other than payment with Indebtedness which is subordinated to at least
the same extent as the Securities to (a) Senior Indebtedness and (b)
(b) any securities issued in exchange for Senior Indebtedness) to
receive, but for the provisions of this Section 1303(a), shall instead
be paid over, in the following order of prior, to the holders of such
Senior Indebtedness (or their Representative, if any) until all amounts
of Senior Indebtedness then due and payable have been paid in full in
cash, prior to any direct or indirect payment by or on behalf of the Company
to the Trustee or such Holders of any principal of or interest on
the Securities: first, so long as any Senior Indebtedness then
due and payable under or with respect to the Bank Credit
Agreement is outstanding, to the holders of such Senior
Indebtedness (pro rata on the basis of the respective amounts of
such Senior Indebtedness held by them) (or their respective
Representatives) and, second, if and only if all Senior
Indebtedness then due and payable under or with respect to the
Bank Credit Agreement is paid in full in cash to the holders of
any other Senior Indebtedness then due and payable (pro rata on
Indebtedness held by them) (or their respective Representatives).
(b) The Company may not, directly or indirectly,
make any payment on account of the principal of or interest
on the Securities (other than payment with Indebtedness which
is subordinated to at least the same extent as the Securities to
(a) Senior Indebtedness and (b) any securities issued in exchange
for Senior Indebtedness) during the period (a "Covenant Deferral
Period") from the date the Company receives (1) from the Agent
under the Bank Credit Agreement, (2) from a Representative or
(3) from a holder of Senior Indebtedness that has no
Representative, an effective notice (a "Covenant Deferral
Notice") of the existence of any event of default (other than a
Payment Default) of the general type referred to in, or resulting
from, the Company's failure to perform obligations of the general
type referred to in Sections 10.07, 10-10, 10.11, 11, 12.02 and
12.04, through 12.13 of the Bank Credit Agreement as originally
executed, whether such event of default arises under the Bank
Credit Agreement or under any other agreement or instrument
pursuant to which any other Senior Indebtedness is issued, in
each instance as now in effect or as hereafter from time to time
modified or amended, without necessity of consent by or notice to
the Trustee or any Holders of the Securities (a "Specified
Covenant Default"), until the earlier of (i) the date all
Payment Defaults and all Specified Covenant Defaults are cured
(if capable of being cured), waived in writing or otherwise
cease to exist, (ii) the date application of this Section 1303(b)
has been waived in writing by the Agent under the Bank Credit
Agreement in accordance with the terms of the Bank Credit
Agreement (or if all Senior Indebtedness under or with respect
to the Bank Credit Agreement has been paid in full in cash, the
holders of not less than 50% in aggregate principal amount of
all other Senior Indebtedness (or their respective
Representatives) waive in writing the application of this
Section 1303(b)), and (iii) the 180th day after receipt by the
Company of such Deferral Notice. So long as any Senior
Indebtedness is outstanding under the Bank Credit Agreement, only
the Agent under the Bank Credit Agreement may deliver an
effective Covenant Deferral Notice under this Section 1303(b),
and thereafter such a Covenant Deferral Notice may only be given
in accordance with Section 1308.
(c) Upon termination of any Covenant Deferral
Period, the Company shall resume payments on account of
principal of and interest on the Securities subject to the
obligation of the Company, the Trustee and the Holders of
securities (or their Representatives) to pay over to the
holders of Senior Indebtedness amounts otherwise payable on
account of the principal of and interest on the Securities
pursuant to the provisions of, and in the circumstances
specified in, this Article Thirteen.
(d) During any period that any Senior Indebtedness
is outstanding under the Bank Credit Agreement, payment on
account of the Securities may not be accelerated during any
Covenant Deferral Period or any Payment Deferral Period (as
hereinafter defined) unless (1) payment of any Indebtedness in
an aggregate principal amount exceeding $15,000,000 has been
accelerated and remains unpaid, or (2) the provisions of Section
1302 are applicable. So long as any Senior Indebtedness is
outstanding under or with respect to the Bank Credit Agreement,
the Trustee or the Holders of the Securities shall give the Agent
under the Bank Credit Agreement ten days prior notice of any
proposed acceleration with respect to the Securities (which
notice may be given during a Covenant or Payment Deferral Period
provided that the proposed acceleration is not to be effective
until the expiration of such Deferral Period). A copy of each
Covenant Deferral Notice and each Payment Deferral Notice (as
hereinafter defined) shall be sent to the Trustee but the
failure to do so shall not modify or limit in any way the
operation of any Covenant or Payment Deferral Notice given
hereunder. The term "Payment Deferral Period" shall mean
the period commencing on the date the Company receives (1) from
the Agent under the Bank Credit Agreement, (2) from a
Representative or (3) from a holder of Senior Indebtedness that
has no Representative, an effective notice (a "Payment Deferral
Notice") of the existence of a Payment Default and ending on the
earlier of (i) the date such Payment Default and all Specified
Covenant Defaults are cured, waived in writing or otherwise cease
to exist, (ii) the date application of this Section 1303(d) has
been waived in writing by the Agent under the Bank Credit
Agreement in accordance with the terms of the Bank Credit
Agreement (or, if all Senior Indebtedness under or with respect
to the Bank Credit Agreement has been paid in full in cash, the
holders of not less than 50% in aggregate principal amount of
all other Senior Indebtedness (or their respective
Representatives) waive in writing the application of this Section 1303(d)),
and (iii) the 180th day after receipt by the Company of
such Payment Deferral Notice. So long as any Senior Indebtedness
is outstanding under the Bank Credit Agreement, only the Agent
under the Bank Credit Agreement may deliver an effective Payment
Deferral Notice under this Section 1303(d), and thereafter such
a Payment Deferral Notice may only be given in accordance with
Section 1308. For purposes of this Section 1303(d) and for
purposes of Section 1303(b), (w) only one Covenant Deferral
Notice relating to the same specified Covenant Default may be
given and only one Payment Deferral Notice relating to the same
Payment Default may be given; (x) a single Deferral Notice may
serve as both a Covenant and a Payment Deferral Notice, if
Specified Covenant and Payment Defaults exist simultaneously; (y)
no subsequent Deferral Notice may be given with respect to any
Specified Covenant Default or any Payment Default existing at the
time an effective Covenant and/or Payment Deferral Notice is
given; and (z) if any such Covenant and/or Payment Deferral
Notice has been given and is effective, no subsequent Covenant
and/or Payment Deferral Notice with respect to any number of
different Specified Covenant Defaults or Payment Defaults shall
be effective until the later of (X) the date such subsequent
Covenant and/or Payment Deferral Notice is received by the
company or (Y) the 365th day after receipt of the then most
recent prior effective Deferral Notice (whether respecting a
Specified Covenant Default or a Payment Default or both). The
provisions of this Section 1363(d) shall not in any way alter or
affect the provisions of Section 1303(a).
(e) In the event that, notwithstanding the foregoinq
provisions of Section 1303(a), any payment shall be made by or
on behalf of the Company from assets of the Company and received
by any Holder or the Trustee on behalf of any Holder at a time
when such payment was prohibited by the provisions of Section
1303(a), then such payment shall be held in trust for the benefit
of and shall be immediately paid over, in the following order of
priority, to the holders of Senior Indebtedness remaining unpaid
or their respective Representatives, for application to the
payment in full of all Senior Indebtedness then due and payable
in accordance with its terms (after giving effect to any prior
or substantially concurrent payment to the holders of such
Senior indebtedness): first, so long as any Senior Indebtedness
then due and payable under or with respect to the Bank Credit
Agreement is outstanding, to the holders of such Senior
Indebtedness (pro rata, on the basis of the respective amount
of such Senior Indebtedness held by them) or their respective
Representatives; and, second, if and only if all Senior
Indebtedness then due and payable under or with respect to the
Bank Credit Agreement is paid in full in cash, to the holders
of any other Senior Indebtedness then due and payable (pro
rata, on the basis of the respective amount of such other
Senior Indebtedness held by them) or their respective
Representatives.
In the event that, notwithstanding the foregoing
provisions of Section 1303(b), any payment shall be made by or
on behalf of the Company from assets of the Company and received
by any Holder or the Trustee on behalf of any Holder at a time
when such payments was prohibited by the provisions of Section
1303(b) then such payment shall be held in trust for the benefit
of and shall be immediately paid over, in the following order of
priority, to the holders of Senior Indebtedness remaining unpaid
or their respective Representatives, for application to the
payment of all Senior Indebtedness in full in accordance with
its terms (after giving effect to any prior or substantially
concurrent payment to the holders of such Senior Indebtedness);
first, so long as any Senior Indebtedness under or with respect
to the Bank Credit Agreement is outstanding, to the holders of
such Senior Indebtedness (pro rata, on the basis of the
respective amount of such Senior Indebtedness held by them) or
their respective Representatives; and, second, if and only if all
Senior Indebtedness under or with respect to the Bank Credit
Agreement is paid in full in cash, to the holders of any other
Senior Indebtedness (pro rata, on the basis of the respective
amount of such other Senior Indebtedness held by them) or their
respective Representatives.
(f) The provisions of this Section 1303 shall
not modify or limit in any way the application of Section 1302.
The provisions of Sections 1303(b), (c) and (d) shall not modify
or limit in any way the application of Section 1303(a).
SECTION 1304. Subrogation to Rights of Holders of
Senior Indebtedness.
After all amounts payable under or in respect of
Senior Indebtedness are paid in full in cash, the Holders
of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of, or otherwise
applied to payment of, such Senior Indebtedness pursuant to the
provisions of this Article Thirteen (equally and ratably with the
holders of all indebtedness of the Company which by its express
terms is subordinate and subject in right of payment to Senior
Indebtedness to substantially the same extent as the Securities
are so subordinate and subject in right of payment and which is
entitled to like rights and subrogation), to the rights of the
holders of such Senior Indebtedness (or their respective
Representatives) to receive payments and distributions of cash,
property and securities applicable to the Senior Indebtedness
until the principal of and interest on the Securities shall be
paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness (or
their respective Representatives) of any cash, property or
securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this
Article Thirteen, and no payments over pursuant to the
provisions of this Article Thirteen to the holders of Senior
Indebtedness (or their respective Representatives) by the Company,
Holders of the Securities or the Trustee shall, as
among the Company and its creditors (other than holders of
Senior Indebtedness and the Holders of the Securities), be
deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness, it being understood that
the provisions of this Article Thirteen are solely for the
purpose of defining the relative rights of the holders of
Senior Indebtedness on the one hand and the Holders of Securities
on the other hand.
If any payment or distribution to which the Holders
of the Securities would otherwise have been entitled but for
the provisions of this Article Thirteen shall have been applied,
pursuant to the provisions of the Article Thirteen, to the
payment of all amounts payable under the Senior Indebtedness,
then and in such case, the Holders of the Securities shall be
entitled to receive (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is
subordinate and subject in right of payment to Senior
Indebtedness to substantially the same extent as the Securities
are subordinate and subject in right of payment and which is
entitled to like rights) from the holders of such Senior
Indebtedness (or their respective Representatives) any
substantially contemporaneous payments or distributions
received by such holders of Senior Indebtedness (or their
respective Representatives) in excess of the amount sufficient
to pay in full in cash all obligations payable under or in
respect of such Senior Indebtedness.
SECTION 1305. Rights of Holders Not To Be Impaired.
Nothing contained in this Article Thirteen or elsewhere
in this Indenture or in the Securities is intended to or shall:
(a) impair, as among the Company, its creditors and
the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of
the Securities the principal of and interest on the Securities as
and when the same shall become due and payable in accordance with
their terms; or
(b) affect the relative rights against the Company
of the Holders of the Securities and creditors of the Company;
or
(c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to
the rights, if any, under this Article Thirteen of the holders
of Senior Indebtedness to receive payments or distributions
otherwise payable or deliverable to, or received by, the
Trustee or such Holder upon the exercise of any such remedy
and subject to the restriction on acceleration set forth in
Section 1303(d) hereof.
SECTION 1306. Trustee to Effectuate Subordination.
Each Holder of a Security by such Holder*s
acceptance thereof authorizes and directs the Trustee on such
Holder's behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in
this Article Thirteen and appoints the Trustee such Holder's
attornoy-in-fact for any and all such purposes including,
in any Insolvency or Liquidation Proceeding, the timely filing
of a claim for the unpaid balance of such Holder's Securities
in the form required in said proceedings and causing said claim
to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding prior to 30
days before the expiration of the time to file such claims or
proofs, then, so long as any Senior Indebtedness under or with
respect to the Bank Credit Agreement is outstanding, the Agent
under the Bank Credit Agreement is hereby authorized, and upon
payment in full in cash of all Senior Indebtedness outstanding
under the Bank Credit Agreement, the holders of the other Senior
Indebtedness, or their Representatives, are hereby authorized,
and shall have the right (without any duty), to file an
appropriate claim for and on behalf of such Holders of the
Securities.
SECTION 1307. No Waiver of Subordination Provisions.
No right of any present or future Agent under the
Bank Credit Agreement, holder of any Senior Indebtedness, or
Representative thereof, to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired
by any act or failure to act on the part of the Company or by
any act or failure to act by any such Agent under the Bank
Credit Agreement, holder or Representative thereof, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture or the Securities regardless
of any knowledge thereof which any such Agent under the
Bank Credit Agreement, holder or Representative thereof
may have or be otherwise charged with.
Without in any way limiting the generality of
the foregoing paragraph, the Agent under the Bank Credit
Agreement and the holders of Senior Indebtedness (or their
Representatives, if applicable) may, at any time and from time
to time, without the consent of or notice to the Trustee
or the Holders of the Securities, without incurring
responsibility to the Trustee or any Holders of the Securities
and without impairing or releasing the subordination and other
benefits provided in this Article Thirteen or the obligations
hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following all
without notice to the Trustee or any Holder of Securities
and even if any right of reimbursement or subrogation or other
right or remedy of the Trustee or any Holder of the Securities
is affected, impaired or extinguished thereby:
(1) change the manner, place or terms
of payment or change or extend the time of payment of, or renew,
exchange, amend or alter, the terms of any Senior Indebtedness,
any security therefore or guaranty thereof or any liability of
the Company or any guarantor to such holder, or any liability
incurred directly or indirectly in respect thereof, or otherwise
amend, renew, exchange, modify or supplement in any manner Senior
Indebtedness or any instrument evidencing or guaranteeing or
securing the same or any agreement under which Senior
Indebtedness is outstanding;
(2) sell, exchange, release, surrender,
realize upon, enforce, or otherwise deal with in any manner and
any order any property pledged, mortgaged or otherwise securing
Senior Indebtedness or any liability of the Company or any
guarantor to such holder, or any liability incurred directly or
indirectly in respect thereof;
(3) settle or compromise any Senior
Indebtedness or any other liability of the Company or any
guarantor of the Senior Indebtedness to such holder or any
security therefore or any liability incurred directly or
indirectly in respect thereof and apply any sums by whomsoever
paid and however realized to any liability (including, without
limitation, Senior Indebtedness) in any manner or order; and
(4) fail to take or to record or otherwise
perfect, for any reason or for no reason, any lion or security
interest securing Senior Indebtedness by whomsoever granted,
exercise or delay in or refrain from exercising any right or
remedy against the Company or any security or any guarantor or
any other Person, elect any remedy and otherwise deal freely
with the Company and any security and any guarantor of the Senior
Indebtedness or any liability of the Company or any guarantor to
such holder or any liability incurred directly or indirectly in
respect thereof.
SECTION 1308. Notice to Trustee.
The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit
the making of any payment to or by the Trustee in respect of the
Securities, but failure to give such notice shall not affect
the subordination of the Securities to the Senior Indebtedness
provided in this Article Thirteen and shall not result in any
default or Event of Default under this Indenture or the
Securities. Notwithstanding the provisions of this Article
Thirteen or any other provision of this Indenture or the
Securities, the Trustee shall not be charged with knowledge
of the existence of any facts which would prohibit pursuant
to this Article Thirteen the making of any payment (other than
payments pursuant to Articles Four or Eleven) to or by the
Trustee in respect of the Securities, unless and until a Responsible
officer of the Trustee shall have received written
notice thereof from the Company, the Agent under the Bank Credit
Agreement or a holder of Senior Indebtedness or, when applicable,
the Representative therefor, together, in the case of any holder
of Senior Indebtedness or any Representative therefor other than
the Agent under the Bank Credit Agreement, with reasonable proof
satisfactory to the Trustee of such holding of Senior
Indebtedness or of the authority of such Representative; and,
prior to the receipt of any such written notice, the Trustee,
subject to the provision of Section 601, shall be entitled in
all respect to assume that no such facts exist. If the Trustee
shall not have received the notice provided for in this Section
1308 at least three Business Days prior to the date upon which
by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of
or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the
same to the purpose for which such money was received and shall
not be affected by any notice to the contrary which may be
received by it within three Business Days prior to such date.
Notwithstanding any provision in this Indenture to the contrary,
only the Company, the Agent under the Bank Credit Agreement or
other Representative, or a holder of Senior Indebtedness that has
no Representative, may give notice to the Trustee that a payment
on account of principal or interest on the Securities would
violate the provisions of this Article Thirteen.
Nothing in this Section 1308 is intended to or shall
relieve any Holder of the Securities from the obligations imposed
under Section 1302 and 1303 with respect to monies or other
distributions received in violation of the provisions hereof.
SECTION 1309. Reliance on Court Orders; Evidence of Status.
Upon any payment or distribution of assets of the
Company referred to in Section 1302, the Trustee and Holders of
Securities shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution delivered to
the Trustee or to Holders of Securities for the purpose of
ascertaining the Persons entitled to participate in such payment
or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article Thirteen.
In the absence of any such receiver, trustee in
bankruptcy, liquidating trustee or other Person, the Trustee
shall be entitled to rely upon a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or is
such a Representative) to establish that any notice pursuant to
Section 1308 has been duly given or for any other relevant purpose.
In the event that the Trustee determined in good faith
that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness (or such a
Representative), as to the extent to which such Person is
entitled to participate in such payment or distribution, and as
to other facts pertinent to the rights of such Person under
this Article Thirteen, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee
as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the
rights of such Person under this Article Thirteen, and if such
evidence is not furnished, the Trustee may defer (without
liability to any holder of Senior Indebtedness or any
Representative of such holder) any payment to such Person pending
judicial determination as to the right of such Person to receive
such payment or until such time as the Trustee shall be
otherwise satisfied as to the right of such Person to receive
such payment.
SECTION 1310. Payment.
A payment with respect to a Security or with respect
to principal of or interest on a Security shall include, without
limitation, payment of principal of and interest on any Security,
any depositing of funds under Article Four, any sinking fund, any
payment on account of mandatory or optional redemption provisions
and any payment or recovery on any claim (whether for rescission
or damages and whether based on contract or tort) relating to or
arising out of the offer, sale or purchase of any Security,
provided that any such payment, depositing, sinking fund, other
payment or recovery not prohibited pursuant to this Article
Thirteen (and in accordance with Article Four and Article
Eleven, to the extent applicable) at the time actually made shall
not be subject to any recovery by any holder of Senior
Indebtedness or Representative therefor or other Person pursuant
to this Article Thirteen at any time thereafter, notwithstanding
the fact that the Trustee or any paying agent may be holding any
such amounts.
SECTION 1311. Right of Trustee as Holder of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled
to all the rights set forth in this Article Thirteen with respect
to any Senior Indebtedness which may at any time be held by it,
to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
SECTION 1312. Article Not To Prevent Events of Default.
The failure to make a payment on account of principal
of or interest on the Securities by reason of any provision of this
Article Thirteen shall not be construed as preventing the
occurrence of a default or an Event of Default under this
Indenture. Except as expressly provided in Section 1303(d),
nothing in this Article Thirteen shall affect the rights of
the Holders of the Trustee to accelerate the maturity of the
Securities in accordance with their terms.
SECTION 1313. Trustee's Compensation Not Prejudiced.
Nothing in this Article Thirteen shall apply to any
amounts due to the Trustee pursuant to Section 607.
SECTION 1314. Limitation on Obligation of Trustee and Holders
of Securities.
With respect to the holders of Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this
Article Thirteen, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into
this Indenture against the Trustee. Neither the Holders of
Securities nor the Trustee shall be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and the Trustee
shall not be liable to any holder of Senior Indebtedness if in
good faith it shall mistakenly pay over or deliver to Holders of
Securities, the Company or any other Person monies or assets
to which any holder of Senior Indebtedness shall be entitled by
virtue of this Article Thirteen or otherwise.
SECTION 1315. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given
to holders of Senior Indebtedness, the distribution may be made
and the notice given to their Representative.
SECTION 1316. Application by Trustee of Monies Paid to It.
Nothing contained in this Article Thirteen or elsewhere
in this Indenture shall (i) affect the obligations of the Company
to make, prevent the Company from making at any time, except as
specified in Section 1302 or 1303 to the extent provided therein,
payment at any time of principal of or interest on the
Securities, or (ii) prevent the application by the Trustee of
any monies paid to it on account of the principal of or interest
on the Securities if, at the time of such application, such
payment vould not have been prohibited by the foregoing
provisions of this Article Thirteen.
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to
be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year
first above written.
DYNCORP
By
[SEAL]
Attest
Secretary
THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C., as Trustee
By
[SEAL] Alexander C. Baker
Senior Vice President and
Trust Officer
Attest
CREDIT AGREEMENT
Dated as of July 25, 1995
among
DYNCORP,
a Delaware corporation
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
and
CITICORP NORTH AMERICA, INC.
as Agent
CREDIT AGREEMENT
This Credit Agreement dated as of July 25, 1995 (as
amended, supplemented or modified from time to time, the "Agree
ment") is entered into among DynCorp, a Delaware corporation (the
"Borrower"), the institutions from time to time a party hereto as
Lenders, whether by execution of this Agreement or an Assignment
and Acceptance, and Citicorp North America, Inc., a Delaware
corporation ("Citicorp"), in its capacity as agent for the
Lenders hereunder (in such capacity, the "Agent").
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used
in this Agreement shall have the following meanings, applicable
both to the singular and the plural forms of the terms defined:
"Accommodation Obligation" means any Contractual Obliga
tion, contingent or otherwise, of one Person with respect to any
Indebtedness, obligation or liability of another, if the primary
purpose or intent thereof by the Person incurring the
Accommodation Obligation is to provide assurance to the obligee
of such Indebtedness, obligation or liability of another that
such Indebtedness, obligation or liability will be paid or
discharged, or that any agreements relating thereto will be
complied with, or that the holders thereof will be protected (in
whole or in part) against loss in respect thereof including,
without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of busi
ness), notes co-made or discounted, recourse agreements, take-or-
pay agreements, keep-well agreements, agreements to purchase or
repurchase such Indebtedness, obligation or liability or any
security therefor or to provide funds for the payment or dis
charge thereof, agreements to maintain solvency, assets, level of
income, or other financial condition, and agreements to make
payment other than for value received. The amount of any Accom
modation Obligation shall be equal to the amount of the
Indebtedness, obligation or liability so guaranteed or otherwise
supported; provided, that (i) if the liability of the Person
extending such guaranty or support is limited with respect
thereto to an amount less than the Indebtedness, obligation or
liability guaranteed or supported, or is limited to recourse
against a particular asset or assets of such Person, the amount
of the corresponding Accommodation Obligation shall be limited
(in the case of a guaranty or other support limited by amount) to
such lesser amount or (in the case of a guaranty or other support
limited by recourse to a particular asset or assets) to the
higher of the Fair Market Value of such asset or assets at the
date for determination of the amount of the Accommodation Obliga
tion or the value at which such asset or assets would, in con
formity with GAAP, be reflected on or valued for the purposes of
preparing a consolidated balance sheet of such Person as at such
determination date; and (ii) if any obligation or liability is
guaranteed or otherwise supported jointly and severally by a
Person and others, then the amount of the obligation or liability
of such Person with respect to such guaranty or other support to
be included in the amount of such Person's Accommodation
Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"Affiliate", as applied to any Person, means any other
Person that directly or indirectly controls, is controlled by, or
is under common control with, that Person. For purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly
or indirectly, of the power to vote five percent (5.0%) or more
of the Securities having voting power for the election of
directors of such Person or otherwise to direct or cause the
direction of the management and policies of that Person, whether
through the ownership of voting Securities or by contract or
otherwise.
"Agent" means Citicorp and each successor agent
appointed pursuant to the terms of Article XII of this Agreement.
"Agreement" is defined in the preamble hereto.
"Applicable Lending Office" means, with respect to a
particular Lender, its Eurodollar Lending Office in respect of
provisions relating to Eurodollar Rate Loans and its Domestic
Lending Office in respect of provisions relating to Base Rate
Loans.
"Assignment and Acceptance" means an Assignment and
Acceptance in substantially the form of Exhibit A attached hereto
and made a part hereof (with blanks appropriately completed)
delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement in accordance with the
provisions of Section 14.01.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. 101 et seq.), as amended from time to time,
and any successor statute.
"Base Eurodollar Rate" means, with respect to any Euro
dollar Interest Period applicable to a Borrowing of Eurodollar
Rate Loans, an interest rate per annum determined by the Agent to
be the average (rounded upward to the nearest whole multiple of
one-sixteenth of one percent (0.0625%) per annum if such average
is not such a multiple) of the rates per annum specified by
notice to the Agent by Citibank as the rate per annum at which
deposits in Dollars are offered by the principal office of
Citibank in London, England to major banks in the London
interbank market at approximately 11:00 a.m. (London time) on the
Eurodollar Interest Rate Determination Date for such Eurodollar
Interest Period for a period equal to such Eurodollar Interest
Period and in an amount substantially equal to the amount of the
Eurodollar Rate Loan to be outstanding to Citicorp for such
Eurodollar Interest Period.
"Base Rate" means, for any period, a fluctuating
interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the higher
of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; and
(b) the sum (adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent, to
the next higher 1/4 of one percent) of (i) 1/2 of one
percent per annum, plus (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of
secondary market morning offering rates in the United States
for three-month certificates of deposit of major United
States money market banks, such three-week moving average
being determined weekly on each Monday (or, if any such date
is not a Business Day, on the next succeeding Business Day)
for the three-week period ending on the previous Friday by
Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by Citibank,
by (B) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by
the Federal Reserve Board for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve
requirement) for Citibank in respect of liabilities
consisting of or including (among other liabilities) three-
month U.S. dollar nonpersonal time deposits in the United
States, plus (iii) the average during such three-week period
of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by
Citibank to the Federal Deposit Insurance Corporation (or
any successor) for insuring U.S. dollar deposits of Citibank
in the United States.
"Base Rate Loans" means all Loans which bear interest
at a rate determined by reference to the Base Rate as provided in
Section 4.01(a).
"Base Rate Margin" means a rate equal to one and one-
quarter percent (1.25%) per annum.
"Benefit Plan" means a defined benefit plan as defined
in Section 3(35) of ERISA (other than a Multiemployer Plan or
Foreign Employee Benefit Plan) in respect of which the Borrower
or any ERISA Affiliate is, or within the immediately preceding
six (6) years was, an "employer" as defined in Section 3(5) of
ERISA.
"Borrower" is defined in the preamble of this
Agreement.
"Borrower Pledge Agreement" means that certain Pledge
Agreement of even date herewith executed by the Borrower in favor
of the Agent for the benefit of the Holders pursuant to which the
issued and outstanding Capital Stock of certain of Borrower's
Subsidiaries is pledged as part of the Collateral securing the
payment and performance of the Obligations.
"Borrower Security Agreement" means that certain
Security Agreement of even date herewith executed by the Borrower
in favor of the Agent for the benefit of the Holders pursuant to
which the personal Property and interests in Property of the
Borrower more specifically described therein are pledged as part
of the Collateral securing the payment and performance of the
Obligations.
"Borrowing" means a borrowing consisting of Loans of
the same type made, continued or converted on the same day.
"Borrowing Base" means, as of any date of determina
tion, an amount equal to up to (i) eighty-five percent (85%) of
the face amount of Dyn Funding Eligible Receivables set forth on
the Borrowing Base Certificate dated as of such date of
determination plus (ii) twenty percent (20%) (not to exceed
$5,000,000 in the aggregate at any time) of the face amount of
Non-Dyn Funding Eligible Receivables plus (iii) one hundred
percent (100%) of the amount of Cash Collateral. For purposes of
this definition, Dyn Funding Eligible Receivables and Non-Dyn
Funding Eligible Receivables as of any date of determination
shall be determined after deduction of all Eligibility Reserves
then effective with respect to such items.
"Borrowing Base Certificate" means a certificate, in
substantially the form of Exhibit B attached hereto and made a
part hereof, setting forth Eligible Receivables, respective
advance percentages with respect thereto, and the resultant
Borrowing Base, in each instance, as of the date of such certificate.
"Business Activity Report" means (A) a Notice of
Business Activities Report from the State of New Jersey Division
of Taxation or (B) a Minnesota Business Activity Report from the
Minnesota Department of Revenue.
"Business Day" means a day, in the applicable local
time, which is not a Saturday or Sunday or a legal holiday and on
which banks are not required or permitted by law or other govern
mental action to close (i) in New York, New York and (ii) in the
case of Eurodollar Rate Loans, in London, England.
"Capital Expenditures" means, for any period, the aggre
gate of all expenditures (whether payable in cash or other
Property or accrued as a liability (but without duplication))
during such period that, in conformity with GAAP, are required to
be included in or reflected by the Borrower's or any of its
Subsidiaries' fixed asset accounts as reflected in any of their
respective balance sheets; provided, however, (i) Capital
Expenditures shall include, whether or not such a designation
would be in conformity with GAAP, (A) that portion of Capital
Leases which is capitalized on the consolidated balance sheet of
the Borrower and its Subsidiaries and (B) expenditures for
Equipment which is purchased simultaneously with the trade-in of
existing Equipment owned by the Borrower or any of its
Subsidiaries, to the extent the gross purchase price of the
purchased Equipment exceeds the book value of the Equipment being
traded in at such time.
"Capital Lease" means any lease of any property
(whether real, personal or mixed) by a Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capital Stock" means, with respect to any Person, any
capital stock of such Person, regardless of class or designation,
and all warrants, options, purchase rights, conversion or ex
change rights, voting rights, calls or claims of any character
with respect thereto.
"Cash Collateral" means cash or Cash Equivalents held
by the Agent or any of the Lenders as security for the
Obligations.
"Cash Equivalents" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the
United States government; and (ii) domestic and Eurodollar
certificates of deposit and time deposits, bankers' acceptances
and floating rate certificates of deposit issued by any
commercial bank organized under the laws of the United States,
any state thereof, the District of Columbia, any foreign bank, or
its branches or agencies (fully protected against currency
fluctuations), which, at the time of acquisition, are rated A-1
(or better) by Standard & Poor's Corporation or P-1 (or better)
by Moody's Investors Services, Inc.; provided, that (x) the
maturities of such Cash Equivalents shall not exceed one year and
(y) such Cash Equivalents shall be maintained in investment and
other accounts of the Agent at Citibank.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
9601 et seq., any amendments thereto, any successor statutes, and
any regulations promulgated thereunder.
"Change of Control" means either of (i) any transaction
or series of transactions (including, without limitation, a
tender offer, merger or consolidation) the result of which is
that any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act) other than an
Affiliate of the Borrower, becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Securities Exchange Act) of
more than forty percent (40%) of the total aggregate voting power
of all classes of the Capital Stock which is voting stock of the
Borrower and/or warrants or options to acquire such Capital
Stock, calculated on a fully diluted basis or (ii) individuals
who as of the Closing Date constituted the Borrower's Board of
Directors (together with any new directors whose election by the
Borrower's Board of Directors or whose nomination for election by
the Borrower's stockholders was approved by a vote of at least
two-thirds of the directors then still in officer who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office.
"Citibank" means Citibank, N.A., a national banking
association.
"Citicorp" is defined in the preamble of this
Agreement.
"Claim" means any claim or demand, by any Person, of
whatsoever kind or nature for any alleged Liabilities and Costs,
whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, Permit, ordinance or
regulation, common law or otherwise.
"Closing Date" means July 25, 1995.
"Collateral" means all Property and interests in Prop
erty now owned or hereafter acquired by the Borrower and the
Guarantors upon which a Lien is granted under the Borrower Pledge
Agreement, the Borrower Security Agreement, and the Guarantor
Pledge Agreements.
"Collection Account" means each lock-box and blocked
depository account maintained by the Borrower or any of its
Subsidiaries for the collection of Receivables and other proceeds
of Collateral subject to a written agreement among the Borrower
or a Subsidiary of the Borrower, the Agent, and Citibank,
substantially in the form attached hereto as Exhibit C with such
modifications as the Agent, from time to time, deems acceptable.
"Commercial Contract" means an agreement, in writing,
between the Borrower or a Guarantor and an account debtor, or an
open account of an account debtor of the Borrower or a Guarantor
evidenced by an invoice of the Borrower or a Guarantor, pursuant
to which such account debtor is obligated to pay for merchandise
or services; provided, however, that no Government Contract shall
be a Commercial Contract.
"Commercial Letter of Credit" means any documentary
letter of credit for the account of the Borrower or any of the
Borrower's Subsidiaries which is drawable upon presentation of
documents evidencing the sale or shipment of goods purchased by
the Borrower or such Subsidiary in the ordinary course of its
business.
"Commission" means the Securities and Exchange Commis
sion and any Person succeeding to the functions thereof.
"Commitment" means, with respect to any Lender at the
time of determination thereof, the aggregate amount of such
Lender's Revolving Credit Commitment and "Commitments" means the
aggregate amount of all Revolving Credit Commitments.
"Compliance Certificate" is defined in Section 7.01(c)
"Consolidated EBITDA" means, without duplication, for
any period, (i) the sum of the amounts for such period of (a)
Consolidated Net Income, plus (b) provision for taxes based on
income, plus (c) Consolidated Interest Expense, plus (d)
depreciation expense, plus (e) amortization expense, plus (f)
Restricted Stock Plan expense, plus (g) Net ESOP Contributions,
plus (h) non-cash 401(k) matching contributions and other
compensation expense payable in Capital Stock of the Borrower
which is common stock, minus (ii) the amount for such period of
interest income, all as determined on a consolidated basis in
accordance with GAAP. Notwithstanding the foregoing, the
calculation of Consolidated EBITDA shall not include the gain or
loss derived from the sale of assets permitted by Section 9.02(e)
and the sale of DynAir Tech.
"Consolidated Interest Expense" means, for any period,
the total interest expense of the Borrower and its Subsidiaries
on a consolidated basis for such period with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries,
including, without limitation, all commissions, discounts, and
other fees and charges owed with respect to Letters of Credit and
bankers' acceptance financings and net costs under Hedge
Agreements, all as determined in accordance with GAAP.
"Consolidated Net Cash Interest Expense" means, for any
period, (i) Consolidated Interest Expense for such period, but
excluding interest expense not payable in cash, amortization of
debt discount and deferred financing costs, minus (ii)
consolidated cash interest income for such period.
"Consolidated Net Income" means, for any period, the
net income (or loss) of the Borrower and its Subsidiaries on a
consolidated basis for such period, excluding the sum of (i)
extraordinary items for such period, net of taxes based on
income, plus (ii) dividends for such period on Capital Stock
which is preferred stock plus (iii) amortization of issuance
discount on Capital Stock which is preferred stock for such
period, all as determined in accordance with GAAP.
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, radioactive
materials, asbestos-containing material, polychlorinated
biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as
defined in federal, state or local laws or regulations.
"Contractual Obligation", as applied to any Person,
means any provision of any Securities issued by that Person or
any indenture, mortgage, deed of trust, security agreement,
pledge agreement, guaranty, contract, undertaking, agreement or
instrument to which that Person is a party or by which it or any
of its properties is bound, or to which it or any of its
properties is subject.
"Crestar Account" means Borrower's depository account
no. 01521489 at Crestar Bank in Alexandria, Virginia.
"Cummings Point Note" means that certain promissory
note in the original principal amount of $9,108,230.87 dated
February 12, 1995 payable to the Borrower and executed by
Cummings Point Industries, Inc., which note constitutes part of
the Collateral.
"Cure Loans" is defined in Section 3.02(b)(v)(C).
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and
Liens in favor of the PBGC) with respect to the payment
of taxes, assessments or governmental charges in all
cases which are not yet due or which are being
contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other
appropriate provisions are being maintained in
accordance with GAAP;
(ii) Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or
workmen and other Liens imposed by law created in the
ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves
or other appropriate provisions are being maintained in
accordance with GAAP;
(iii) Liens (other than any Lien in favor of the
PBGC) incurred or deposits made in the ordinary course
of business in connection with worker's compensation,
unemployment insurance or other types of social
security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment
of borrowed money), surety, appeal and performance
bonds; provided that (A) all such Liens do not in the
aggregate materially detract from the value of the
Borrower's or any of its Subsidiaries' assets or
Property or materially impair the use thereof in the
operation of their respective businesses, and (B) all
Liens of attachment or judgment and Liens securing
bonds to stay judgments or in connection with appeals
do not secure at any time an aggregate amount exceeding
$2,000,000; and
(iv) Liens arising with respect to zoning
restrictions, easements, licenses, reservations,
covenants, rights-of-way, utility easements, building
restrictions and other similar charges or encumbrances
on the use of Real Property which do not interfere with
the ordinary conduct of the business of the Borrower or
any of its Subsidiaries.
"DOL" means the United States Department of Labor and
any Person succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United
States.
"Domestic Lending Office" means, with respect to any
Lender, such Lender's office, located in the United States,
specified as the "Domestic Lending Office" under its name on the
signature pages hereof or on the Assignment and Acceptance by
which it became a Lender or such other United States office of
such Lender as it may from time to time specify by written notice
to the Borrower and the Agent.
"DynAir Tech" means Borrower's aircraft maintenance and
repair business conducted primarily through DynAir Tech of
Arizona, Inc., DynAir Tech of Florida, Inc. and DynAir Tech of
Texas.
"Dyn Funding" means Dyn Funding Corporation, a Delaware
corporation and Wholly-Owned Subsidiary of the Borrower.
"Dyn Funding Eligible Receivables" means those
Receivables of the Borrower and its Subsidiaries which comply
with the criteria set forth on Schedule A to Exhibit B.
"Eligibility Reserves" means, as of three (3) Business
Days after the date of written notice of any determination
thereof to the Borrower by the Agent, or to the Borrower and the
Agent by the Requisite Lenders, such amounts as the Agent, or the
Requisite Lenders, as the case may be, in the exercise of its or
their reasonable credit judgment, may from time to time establish
against the gross amounts of Eligible Receivables to reflect
risks or contingencies arising after the Closing Date which may
affect such items.
"Eligible Assignee" means (i) a Lender or any Affiliate
thereof; (ii) a commercial bank having total assets in excess of
$2,500,000,000; (iii) the central bank of any country which is a
member of the Organization for Economic Cooperation and
Development; or (iv) a finance company, insurance company, other
financial institution or fund, acceptable to the Agent, which is
regularly engaged in making, purchasing or investing in loans and
having total assets in excess of $300,000,000.
"Eligible Receivables" means, collectively, the Dyn
Funding Eligible Receivables and the Non-Dyn Funding Eligible
Receivables.
"Environmental, Health or Safety Requirements of Law"
means all Requirements of Law derived from or relating to any
federal, state or local law, ordinance, rule, regulation, Permit,
license or other binding determination of any Governmental
Authority relating to, imposing liability or standards
concerning, or otherwise addressing, the environment, health
and/or safety, including, but not limited to the Clean Air Act,
the Clean Water Act, CERCLA, RCRA, any so-called "Superfund" or
"Superlien" law, the Toxic Substances Control Act, OSHA, and
public health codes, each as from time to time in effect.
"Environmental Lien" means a Lien in favor of any
Governmental Authority for any (i) liabilities under any
Environmental, Health or Safety Requirement of Law, or
(ii) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Environmental Property Transfer Acts" means any
applicable Requirement of Law that conditions, restricts,
prohibits or requires any notification or disclosure triggered by
the transfer, sale, lease or closure of any Property or deed or
title for any Property for environmental reasons, including, but
not limited to, any so-called "Industrial Site Recovery Acts" or
"Responsible Property Transfer Acts".
"Equipment" means, with respect to any Person, all of
such Person's present and future (i) equipment, including,
without limitation, machinery, manufacturing, distribution,
selling, data processing and office equipment, assembly systems,
tools, molds, dies, fixtures, appliances, furniture, furnishings,
vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal property (other than such
Person's Inventory), and (iii) any and all accessions, parts and
appurtenances attached to any of the foregoing or used in
connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security
Act of 1974, 29 U.S.C. 1000 et seq., any amendments thereto,
any successor statutes, and any regulations or guidance
promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the
Borrower; (ii) a partnership or other trade or business (whether
or not incorporated) which is under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with the
Borrower; and (iii) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Internal Revenue
Code) as the Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause
(ii) above.
"ESOP Documents" means, collectively, that certain
Subscription Agreement dated as of September 9, 1988 between
Borrower and Manufacturers Hanover Trust Company, as trustee of
the DynCorp Employee Stock Ownership Trust established pursuant
to the DynCorp Employee Stock Ownership Trust Agreement ("Trust
Agreement") adopted as part of the ESOP, the Trust Agreement, the
Plan, and that certain 1995 Stock Issuance Agreement dated March
30, 1995 between Borrower and the DynCorp Employee Stock
Ownership Trust.
"ESOP" means the DynCorp Employee Stock Ownership Plan
dated as of January 1, 1988 as amended through the Closing Date.
"Eurodollar Affiliate" means, with respect to each
Lender, the Affiliate of such Lender (if any) set forth below
such Lender's name under the heading "Eurodollar Affiliate" on
the signature pages hereof or on the Assignment and Acceptance by
which it became a Lender or such Affiliate of a Lender as it may
from time to time specify by written notice to the Borrower and
the Agent.
"Eurodollar Interest Payment Date" means (i) with
respect to any Eurodollar Rate Loan, the last day of each
Eurodollar Interest Period applicable to such Loan and (ii) with
respect to any Eurodollar Rate Loan having a Eurodollar Interest
Period in excess of three (3) calendar months, the last day of
each three (3) calendar month interval during such Eurodollar
Interest Period.
"Eurodollar Interest Period" is defined in
Section 4.02(b).
"Eurodollar Interest Rate Determination Date" is
defined in Section 4.02(c).
"Eurodollar Lending Office" means, with respect to any
Lender, the office or offices of such Lender (if any) set forth
below such Lender's name under the heading "Eurodollar Lending
Office" on the signature pages hereof or on the Assignment and
Acceptance by which it became a Lender or such office or offices
of such Lender as it may from time to time specify by written
notice to the Borrower and the Agent.
"Eurodollar Rate" means, with respect to any Eurodollar
Interest Period applicable to a Eurodollar Rate Loan, an interest
rate per annum obtained by dividing (i) the Base Eurodollar Rate
applicable to that Eurodollar Interest Period by (ii) a
percentage equal to 100% minus the Eurodollar Reserve Percentage
in effect on the relevant Eurodollar Interest Rate Determination
Date.
"Eurodollar Rate Loans" means those Loans outstanding
which bear interest at a rate determined by reference to the
Eurodollar Rate and the Eurodollar Rate Margin as provided in
Section 4.01(a).
"Eurodollar Rate Margin" means a rate equal to two and
three-quarters percent (2.75%) per annum.
"Eurodollar Reserve Percentage" means, for any day,
that percentage which is in effect on such day, as prescribed by
the Federal Reserve Board for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member
bank of the Federal Reserve System in New York, New York with
deposits exceeding Five Billion Dollars ($5,000,000,000) in
respect of "Eurocurrency Liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to
which the interest rate on Eurodollar Rate Loans is determined or
any category of extensions of credit or other assets which
includes loans by a non-United States office of any bank to
United States residents).
"Event of Default" means any of the occurrences set
forth in Section 11.01 after the expiration of any applicable
grace period, as expressly provided in Section 11.01.
"Existing Securitization Program" means the financing
transactions set forth in the Receivables Purchase Documents.
"Fair Market Value" means, with respect to any asset,
the value of the consideration obtainable in a sale of such asset
in the open market, assuming a sale by a willing seller to a
willing purchaser dealing at arm's length and arranged in an
orderly manner over a reasonable period of time, each having
reasonable knowledge of the nature and characteristics of such
asset, neither being under any compulsion to act, and, if in
excess of $5,000,000, as determined in good faith by the Board of
Directors of the Borrower.
"Federal Funds Rate" means, for any period, a fluctu
ating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day in New York, New York, for the
next preceding Business Day) in New York, New York by the Federal
Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day in New York, New York, the
average of the quotations for such day on such transactions
received by the Agent from three federal funds brokers of recog
nized standing selected by the Agent.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any Governmental Authority succeed
ing to its functions.
"Fee Letter" means that certain letter agreement dated
July 25, 1995 between the Borrower and Citicorp.
"Financial Officer" means any of the Borrower's senior
vice president and chief financial officer; vice president,
finance; vice president and controller; treasurer; and assistant
treasurer.
"Financial Statements" means (i) statements of income
and retained earnings, statements of cash flow, and balance
sheets and (ii) such other financial statements as the Borrower
and its Subsidiaries shall routinely and regularly prepare.
"Fiscal Month" means each period commencing on the date
immediately succeeding the "Effective Close Date" for the prior
fiscal month and ending on the "Effective Close Date" for the
applicable fiscal month as set forth on Schedule 1.01.1 attached
hereto.
"Fiscal Quarter" means each period commencing on the
date immediately succeeding the "Effective Close Date" for the
prior fiscal quarter and ending on the "Effective Close Date" for
the applicable fiscal quarter as set forth on Schedule 1.01.1
attached hereto.
"Fiscal Year" means the fiscal year of the Borrower and
its Subsidiaries for accounting and tax purposes, which shall be
the 12-month period ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" means, for any period,
the ratio of (a) the amount calculated as (i) Consolidated EBITDA
minus (ii) all federal income taxes paid in cash during such
period minus (iii) the aggregate amount of Capital Expenditures
made in cash during such period to (b) Consolidated Net Cash
Interest Expense plus (ii) the aggregate amount of scheduled
payments of principal of Funded Debt during such period plus
(iii) the aggregate amount of cash dividends and cash stock
repurchases under the ESOP Documents paid by the Borrower during
such period other than those permitted by Section 9.06(d) and
(e).
"Foreign Employee Benefit Plan" means any employee bene
Exhibit 11
DynCorp and Subsidiaries
Computations of Earnings Per Common Share
(Dollars in thousands except per share data)
Year Ended December 31,
Primary and Fully Diluted 1994 1993 1992
Earnings:
Loss from continuing operations before
extraordinary item $ (352) $ (4,485) $ (14,112)
Loss from discontinued operations (12,479) (8,929) (6,704)
Extraordinary loss - - (2,526)
Net loss (12,831) (13,414) $ (23,342)
Preferred stock Class A dividends declared
and paid and accretion of discount - - (959)
Preferred stock Class C dividends
not accrued or paid (1,606) (1,347) (1,129)
Net loss for common stockholders $ (14,437) $ (14,761) $ (25,430)
Shares:
Weighted average common shares
outstanding 6,802,012 5,141,319 5,102,621
Loss per common share:
Loss from continuing operations before
extraordinary item $ (0.29) $ (1.13) $ (3.18)
Loss from discontinued operations (1.83) (1.74) (1.31)
Extraordinary loss - - (0.49)
Net loss for common stockholders $ (2.12) $ (2.87) $ (4.98)
<TABLE>
Exhibit 12
DynCorp and Subsidiaries
Computation of Ratios
(Dollars in Thousands)
(1) Ratio of earnings to fixed charges
<CAPTION>
For the Six Months
Ended For the Years Ended December 31, (a)
June 29, June 30,
1995 1994(a) 1994 1993 1992 1991 1990
<C> <S> <S> <S> <S> <S> <S> <S>
Fixed Charges
Interest on debt $ 8,310 $ 7,876 $14,453 $14,431 $ 14,246 $ 10,892 $ 7,760
Amortization of debt
discount and expenses 208 220 451 346 383 1,243 1,388
Interest element of rentals 4,551 2,153 4,762 3,475 3,018 2,960 2,367
$13,069 $10,249 $19,666 $18,252 $ 17,647 $ 15,095 $ 11,515
Earnings
Earnings (loss) from continuing
operations and before income
taxes and extraordinary items $ 721 $ (745) $(1,458)$(2,244)$(13,944) $(13,130) $(11,397)
Interest on debt 8,310 7,876 14,453 14,431 14,246 10,892 7,760
Amortization of debt discount
and expense 208 220 451 346 383 1,243 1,388
Interest element of rentals 4,551 2,153 4,762 3,475 3,018 2,960 2,367
Minority interest (pre-tax) (992) (773) (1,660) (1,418) - - -
$12,798 $ 8,731 $16,548 $14,590 $ 3,703 $ 1,965 $ 118
Deficiency in earnings available
to cover fixed charges $ 271 $ 1,518 $ 3,118 $ 3,662 $ 13,944 $ 13,130 $ 11,397
<FN>
(a) Restated for the discontinued operations of the Commercial Aviation business.
</TABLE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-3879
DynCorp
(Exact name of registrant as specified in its charter)
Delaware 36-2408747
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
2000 Edmund Halley Drive, Reston, VA 22091-3436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 264-0330
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
17% Redeemable Pay-In-Kind Class A Preferred Stock, par value $0.10
per share
(Title of class)
16% Pay-In-Kind Junior Subordinated Debentures due 2003
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. The registrant's voting stock
is not publicly traded; therefore the aggregate market value of
the 2.5% of outstanding voting stock held by nonaffiliates is not
available.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date. 7,425,963 shares of common stock having a par
value of $0.10 per share were outstanding March 15, 1995.
TABLE OF CONTENTS
1994 FORM 10-K
Item
Part I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
Part II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
8. Financial Statements and Supplementary Data
Report of Independent Public Accountants
Financial Statements
Consolidated Balance Sheets
Assets
Liabilities, Redeemable Common Stock and Stockholders' Equity
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
Part III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and
Management
13. Certain Relationships and Related Transactions
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
PART I
ITEM 1. BUSINESS
General Information
The Company provides diversified management, technical and
professional services to government and commercial customers
throughout the United States and, to a limited extent, in certain
foreign countries. Generally, these services are provided under
written contracts which may be fixed-price, time-and-material or
cost-type depending on the work requirements and other
individual circumstances. For business reporting purposes, these
operations are classified into two sectors, Government and
Commercial. (In 1992, the Company had reported on four operating
groups: Government, Applied Sciences, Commercial Aviation and
Postal Operations.)
The Government Sector provides services to all branches of
the Department of Defense and to NASA, the Department of State,
the Department of Energy, the Environmental Protection Agency,
the Centers for Disease Control, the National Institutes of
Health, the Postal Service and other U.S. Government agencies and
foreign governments. These services encompass a wide range of
management, technical and professional services covering the
following areas:
Information and Engineering Technology includes software
development and maintenance, computer center operations, data
processing and analysis, database administration,
telecommunications support and operations, maintenance and
operation of integrated electronic systems and networking of
electronic systems in a local and wide area environment.
Energy, Environment and National Security Programs include
environmental regulation development, quality assurance
studies and research, and management of information relating
to the proper handling of hazardous materials and substances,
alternative energy research and evaluation, energy security
studies and assessments.
Aerospace Technology includes engineering, maintenance,
modification, operational and logistical support of military
aircraft; technical and evaluation services at test and
training ranges; engineering, manufacturing and installation
of aircraft system upgrades; structural repairs that extend
airframe life for the aging fleet of military and civil
aircraft; ground based logistical support and staff
augmentation; and engineering and technical services for
high-technology space and missile systems programs.
Enterprise Management includes the operation, maintenance and
management of major governmental and private enterprises and
installations, ranging from the turnkey responsibility for
operation of all aspects of a single base (such as a military
installation) to assumption of responsibility for the
staffing of particular functions at various locations for a
single customer. Disciplines included within operational
responsibility vary, but generally include scientific
support, operation of sophisticated electronic and mechanical
systems, construction and demolition, environmental
remediation and the handling of and accountability for
inventories of equipment and materials/supplies and other
property. Also included are testing and evaluation of
military hardware systems at government test ranges,
collection and processing of data, maintenance of targets,
ranges and laboratory facilities, developmental testing of
complex weapon systems, security systems work and technology
transfer into commercial applications.
Advanced Technology Services currently provides data
processing and management and operations of facilities in
support of the U.S. Postal Service Remote Encoding System and
biomedical and health care research and support services
under a contract with the National Institutes of Health.
Further, Advanced Technology Services will serve as an
incubator for new businesses and/or possible future business
in new market areas which focus on emerging technologies or
novel processing applications.
The Commercial Sector provides ground support, line
maintenance and aircraft repair services to various commercial
airline customers, both domestic and international. These
services are provided at over 50 airports and include the
following functional areas:
Ground support services at commercial airports include cargo
handling, cabin cleaning, line maintenance, ticketing and
passenger handling and boarding services. Auxiliary support
services include bus and limousine operation, security,
baggage service and passenger screening operations. They
also include into-plane fueling services and the management
and operation of tank farms and fuel distribution systems.
Aircraft repair includes maintenance checks, component
overhaul, heavy structural maintenance, airframe and systems
maintenance and modification on a wide variety of passenger
and cargo aircraft, including wide body aircraft. The
Company has three major aircraft maintenance overhaul
facilities (Miami, Florida, Amarillo, Texas and Phoenix,
Arizona).
Industry Segments
The Company has one line of business, which is to provide
management, technical and professional services to commercial and
government organizations in support of the customers' facilities
or operations.
Backlog
The Company's backlog of business (including estimated value
of option years on government contracts) was $2.206 billion at
the close of 1994, compared to a year-end 1993 backlog of $2.772
billion. Several procurements originally scheduled for 1994 were
delayed into 1995 and, as a result, in the first two and one-half
months of 1995, $503 million of new contract awards were added to
the Company's backlog. Of the total backlog at December 31,
1994, $1.299 billion is expected to produce revenues after 1995.
Contracts with the U.S. Government are generally written for
periods of three to five years. Because of appropriation
limitations in the federal budget process, firm funding is
usually made for only one year at a time, with the remainder of
the years under the contract expressed as a series of one-year
options. The Company's experience has been that the Government
generally exercises these options. U.S. Government contracts
contain standard provisions for termination at the convenience of
the U.S. Government, pursuant to which the Company is generally
entitled to recover costs incurred, settlement expenses, and
profit on work completed to termination.
The Company's ground support service contracts with airlines
generally run for one to three years. Some contracts are
terminable on short notice, but the Company's experience has been
that few airlines choose to exercise this option given the
difficulty of integrating a replacement provider into the
airlines' schedule. The Company is usually paid for its ground
services at a fixed contract rate on a per-flight basis (every
takeoff and landing). For heavy aircraft maintenance services,
carriers solicit bids for the required services. Awards are made
on the basis of price, quality of service and past performance.
For routine line maintenance, the Company charges a flat rate
based on the service and the frequency of visits.
Competition
The general fields in which the Company conducts business are
all highly competitive, with competition based on a variety of
factors including, but not limited to, price, service and past
experience. Competitors of the Company vary in size with some
having a larger financial resource base. However, the Company
believes that it has been awarded many contracts because of its
technical know-how and past service record. Some of the major
competitors of the Company are as follows:
Government Sector Commercial Sector
Brown and Root AMR Services, Inc.
CDSI ASI-Dial
Computer Science Corp. Dalfort Aviation Inc.
EG&G Hudson General Corp.
E Systems Lockheed-Martin
Johnson Controls Ogden Aviation Services
Lockheed-Martin Page Avjet
SAIC
Tracor
Foreign Operations
The Company has a minority investment in an unaffiliated
company in Saudi Arabia. Discussions are currently underway
regarding the sale of the Company's minority interest to one or
more of the other Saudi stockholders. In addition, the Company
in 1993 established operations in Mexico and Russia. None of
these foreign operations is material to the Company's financial
position or results of operations.
Other activities of the Company presently include the
providing of services within the United States to certain foreign
customers, especially airlines. These services for foreign
customers are generally paid for in United States dollars. The
Company also performs services in foreign countries under
contracts with the U.S. Government and the United Nations.
The risks associated with the Company's foreign operations in
regard to foreign currency fluctuation, and political and
economic conditions in foreign countries, are not significant.
Incorporation
The Company was incorporated in Delaware in 1946.
Employees
The Company had approximately 23,600 employees at December 31,
1994.
ITEM 2. PROPERTIES
The Company is a service-oriented company, and as such the
ownership or leasing of real property is an activity which is not
material to an understanding of the Company's operations.
Properties owned or leased include office facilities, hangars,
warehouses used in connection with the storage of inventories and
fabrication of materials associated with various services
rendered and servicing facilities used in the Company's
commercial aviation operations. None of the properties is
unique; however, several of the leases constitute a partially
exclusive right to operate at certain airports. All of the
Company's owned facilities are located within the United States.
In the opinion of management, the facilities employed by the
Company are adequate for the present needs of the business.
Reference is made to the Consolidated Financial Statements and
Notes, included elsewhere in this Annual Report on Form 10-K, for
additional information concerning capital expenditures and lease
commitments for property.
ITEM 3. LEGAL PROCEEDINGS
This item is incorporated herein by reference to Note 18 to
the Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
DynCorp's common stock is not publicly traded. There were
approximately 394 record holders of DynCorp common stock at
December 31, 1994. In addition, the DynCorp Employee Stock
Ownership Plan Trust owns stock on behalf of approximately 30,000
present and former employees of the Company. Cash dividends have
not been paid on the common stock since 1988.
ITEM 6. SELECTED FINANCIAL DATA
The following table of selected financial data of the Company
should be read in conjunction with the Company's Consolidated
Financial Statements included elsewhere in this Annual Report on
Form 10-K. (Dollars in thousands except per share data.)
<TABLE>
Years Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Revenues $1,022,072 $953,144 $911,422 $807,186 $717,391
Loss before extraordinary item $ (12,831) $(13,414) $(20,816) $(12,595) $(14,417)
Extraordinary gain (loss) (a) - - (2,526) 192 726
Net Loss $ (12,831) $(13,414) $(23,342) $(12,403) $(13,691)
Net loss for common stockholders $ (12,831) $(13,414) $(24,301) $(17,583) $(18,752)
Earnings (loss) per common share:
Primary -
Loss before extraordinary item $ (2.12) $ (2.87) $ (4.49) $ (3.97) $ (4.28)
Extraordinary gain (loss) (a) - - (0.49) 0.04 0.15
Net loss $ (2.12) $ (2.87) $ (4.98) $ (3.93) $ (4.13)
Fully Diluted $ (2.12) $ (2.87) $ (4.98) $ (3.93) $ (4.13)
Cash dividends per common share $ - $ - $ - $ - $ -
YEAR-END DATA
Long-term debt (excluding
current maturities) $ 230,608 $ 216,425 $ 199,762 $ 121,251 $ 103,584
Redeemable preferred stock $ - $ - $ - $ 24,884 $ 19,705
Redeemable common stock $ 2,288 $ 2,200 $ - $ - $ -
Stockholders' equity $ 7,250 $ 6,166 $ 3,884 $ 26,598 $ 27,416
Total assets $ 402,330 $ 382,456 $ 348,273 $ 316,361 $ 289,354
<FN>
(a) The extraordinary gain (loss) in 1992, 1991 and 1990 results from the
early extinguishment of debt.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
In June, 1994, the Company announced its intent to restructure
its government operations to better serve its customers and
address the declining business base of certain of the existing
operating units. A detailed implementation plan was developed
during the second half of the year and the new organization was
substantially in place by January 1995. The restructuring
resulted primarily in the elimination and/or consolidation of
business units in order to achieve improved efficiency and
economy of scale. Additionally, the Company acquired the
following businesses during the year.
CBIS Federal, Inc., which provides full life cycle integrated
information solutions, primarily to civilian agencies of the
federal government.
A 25% interest in Composite Technology Inc., a Texas based
aerospace technology company that specializes in repair of
aircraft components through the use of composite materials.
A 25% interest in Gateway Passenger Services LP, a California
based airport ground handling operation expected to provide
expansion opportunities into the Pacific rim area and Hawaii.
In August, the Company initiated the Asset Management Program,
which delineates management's plan to replace its high interest
rate Junior Subordinated Debentures utilizing proceeds from the
refinancing of equipment, expansion of the receivable backed
financing, tighter control of cash disbursements, and the sale of
certain assets. See Liquidity and Capital Resources for further
explanation.
The Company ended the year with revenues in excess of $1
billion, and continued to improve gross profit and margins.
However, as in 1993, several unusual items, primarily commercial
aviation maintenance operating losses and the recognition of
asset impairment related to this unit, the write-off of an
investment in a 50.1% owned subsidiary, expenses related to
divested businesses and the pay-in-kind interest differential
yielded a net loss for the year. The table below reflects the
proforma effect of the above mentioned items on the Company's
earnings had these items not been incurred (dollars in
thousands):
Years Ended December 31,
1994 1993
Loss before income taxes and minority interest $(16,907) $(11,133)
Commercial Sector - aircraft maintenance losses 5,351 6,629
Commercial Sector - aircraft maintenance
facilities asset impairment 9,492 -
Write-offs related to acquisitions/investments 5,499 3,602
Divested business expenses 2,318 293
PIK interest differential on debentures (a) 3,811 4,092
Proforma earnings before income taxes
and minority interest $ 9,564 $ 3,483
(a) Estimated reduction in interest expense if refinanced at current market
rate (11.5% and 10.5% in 1994 and 1993 respectively) for cash pay debt.
Revenues from the Department of Defense were $551 million in
1994 compared to $543 million in 1993 and $538 million in 1992.
These revenues represented 53.9% of total 1994 revenues compared
to 56.9% in 1993 and 59.0% in 1992. This represents the
Company's fourth year of its strategic long range plan to
continue to grow or maintain its defense business while focusing
primarily on the growth of non-defense business.
Following is a three-year summary of operations, cash flow and
long-term debt (in thousands):
Years Ended December 31,
1994 1993 1992
Operations
Revenues $ 1,022,072 $ 953,144 $ 911,422
Gross profit 43,868 39,557 28,146
Selling and corporate administrative (17,199) (18,267) (20,476)
Interest, net (23,150) (23,099) (22,458)
Aircraft maintenance impairment (9,492) - -
Other (10,934) (9,324) (5,860)
Loss before income taxes, minority
interest and extraordinary item $ (16,907) $ (11,133) $ (20,648)
Cash Flow
Net loss $ (12,831) $ (13,414) $ (23,342)
Depreciation and amortization 27,077 19,818 19,372
Pay-in-kind interest 15,329 13,142 6,590
Working capital items (26,818) (7,704) (7,559)
Other 215 (1,222) 283
Cash provided (used) by operations 2,972 10,620 (4,656)
Investing activities (22,214) (15,611) (18,130)
Financing activities 8,840 7,817 26,868
Increase (decrease) in cash
and short-term investments $ (10,402) $ 2,826 $ 4,082
December 31,
Long-term Debt (including current maturities) 1994 1993 1992
Junior Subordinated Debentures $ 102,659 $ 86,947 $ 73,489
Contract Receivable Collateralized Notes 100,000 100,000 100,000
Mortgages payable 22,285 23,416 19,436
Other notes payable and capitalized leases 9,008 9,899 9,507
$ 233,952 $ 220,262 $ 202,432
The following discussion of the Company's results of operations
is directed toward the two operating sectors, Government and
Commercial.
Results of Operations
Revenues - Revenues for 1994 were $1,022.1 million compared to
1993 revenues of $953.1 million, an increase of $69.0 million
(7.2%) with the Government Sector contributing $41.5 million and
the Commercial Sector adding $27.5 million. The increase in the
Government Sector's revenue was primarily attributable to
businesses acquired in October 1994, and November and December
1993 ($52.5 million), new contract awards or contracts which were
in the start-up phase in 1993 but were fully operational in 1994
($73.3 million) and a retroactive adjustment on one contract for
wage increases mandated by the Department of Labor under the
Service Contract Act ($7.0 million). These increases were offset
by declines from contracts lost in recompetition and reduced
level of effort on existing contracts. Revenue for the
Commercial Sector's aircraft maintenance operations and ground
support services operations were $73.1 million and $130.3
million, respectively, up $15.8 million and $11.7 million over
1993 revenues.
Revenues for 1993 were $953.1 million compared to 1992 revenues
of $911.4 million, an increase of $41.7 million (4.6%). The
Government Sector had an increase of $49.1 million (6.7%) while
the Commercial Sector had a decrease of $7.4 million (4.0%). The
increase in Government Sector's revenue includes approximately
$15.1 million from businesses acquired in December 1992 and
November and December 1993, $16.0 million from the Postal
contracts which were in the start-up phase in 1992 but were fully
operational in 1993, and $17.9 million from new contract awards
offset partially by contracts completed and/or not renewed. The
overall decline in Commercial Sector's 1993 revenue resulted from
low volume in the aircraft maintenance activities and the impact
of relocating the Miami, Florida maintenance operation to a new
hanger facility; offset partially by increases in ground support
services. Aircraft maintenance 1993 revenue decreased to $57.3
from $74.3 million in 1992 while ground support services' 1993
revenue increased to $118.6 million from $109.0 million in 1992.
Cost of Services/Gross Margins - Cost of services was 95.7% of
revenues in 1994, 95.8% in 1993 and 96.9% in 1992 which resulted
in gross margins of $43.9 million (4.3%), $39.6 million (4.1%)
and $28.1 million (3.1%), respectively. Both the Government and
Commercial Sectors' margins increased from that of the prior
year. The increase in Government Sector's gross margin was
attributable to acquisitions consummated in November and
December, 1993 and October, 1994, and new contract awards which
were partially offset by decreases related to lost contracts,
reduced level of effort on existing contracts and increased costs
incurred in support of proposal efforts. Commercial Sector's
gross margin as a percent of revenue was up 1.4% over 1993. The
ground services and fueling operations increase of 1.4% was due
to several factors including improved operations and an
adjustment to the depreciable lives of certain assets (see Note 4
to the Consolidated Financial Statements included elsewhere in
the Annual Report on Form 10-K). The aircraft maintenance
operations reflected an improvement of 2.8%, but still had a
negative margin of 6.4%, primarily because of inadequate workload
to cover fixed costs. See Liquidity and Capital Resources for
further comments.
Government Sector's 1993 gross margins were improved while the
Commercial Sector's 1993 margins declined from those of the prior
year. The improvement in Government Sector's gross margins was
principally due to improved profit performance on new contracts
started in 1992 and the early part of 1993 (in particular the
Postal and the Department of Energy contracts). Commercial
Sector's decline in gross margin was the result of reduced volume
in the aircraft maintenance activities, offset partially by
improved gross margins of the ground support activities.
Aircraft maintenance had gross margin losses of $6.6 million in
1993 compared to $0.4 million in 1992. Also contributing to the
decline in Commercial Sector's margins were approximately $0.6
million of costs associated with the relocation of the Miami,
Florida aircraft maintenance operations to larger hangar
facilities at the Miami, Florida airport.
Selling and Corporate Administrative - Selling and corporate
administrative expenses as a percentage of revenues were 1.7%,
1.9% and 2.2% in 1994, 1993 and 1992, respectively. The decrease
of $1.1 million in 1994 from 1993 is attributable to cost
reductions associated with Commercial Sector's general and
administrative functions and also a decrease in Restricted Stock
Plan expense due to the award of fewer shares in 1994.
There were both increases and decreases in 1993 over 1992 of the
various elements and components of these expenses; however, the
two most significant factors contributing to the decrease of $2.2
million from 1992 were cost reductions made in Commercial
Sector's general and administrative expenses and a decrease in
Government Sector's marketing and bid and proposal costs from the
unusually high amount incurred in 1992 on a contract proposal for
the Department of Energy's Strategic Petroleum Reserve in
Louisiana.
Interest - Interest expense was $25.6 million in 1994, virtually
unchanged from $25.5 million in 1993. Increases resulting from
the compounding of the pay-in-kind interest on the Junior
Subordinated Debentures and the inclusion of a full year of
interest on mortgages assumed in conjunction with an acquisition
in the fourth quarter of 1993 were offset by the reversal of
interest accruals resulting from a favorable settlement with the
Internal Revenue Service of the Company's tax liability for the
period 1985-1988.
Interest expense in 1993 of $25.5 million was $0.6 million higher
than 1992. This small increase was primarily the result of the
Contract Receivable Collateralized Notes being outstanding for
the full year of 1993 compared to approximately eleven months in
1992, interest on the mortgage for the Corporate office building
was for the full year of 1993 compared to five months in 1992 and
an increase in the amount of capitalized leases outstanding, all
of which were partially offset by a reduction in the accrual of
interest on possible payments of federal income taxes.
The net increase in interest income in 1994 over that of 1993 is
due to the compounding of interest on the 17% Cummings Point
Industries, Inc. note receivable, offset by decreases due to the
recording in 1993 of prior years' interest income (and offsetting
bank fee expense) on cash balances in various operating accounts.
Interest income in 1993 was approximately the same as that in
1992 with increases from the interest on the Cummings Point
Industries note receivable and the above noted prior year
adjustments being offset by decreases resulting from lower
balances of excess funds available for investment.
Other - The increase in other expense in 1994 as compared to 1993
is attributable to the write-off of the Company's 50.1%
investment in an unconsolidated subsidiary, an increase in the
provision for nonrecovery of commercial receivables and accrual
of adjustments for legal fees and environmental costs related to
divested businesses. These increases were partially offset by an
adjustment to reserves for legal and other expenses associated
with events which predated the Company's acquisition of another
business.
The increase in 1993 over 1992 is caused primarily by the
accelerated amortization of cost in excess of net assets of an
acquired business and the initial accrual of legal and other
costs mentioned above.
Years Ended December 31,
(In thousands)
Other Expense consists of: 1994 1993 1992
Amortization of costs in excess
of net assets acquired $ 3,813 $ 4,830 $ 3,793
Provision for nonrecovery of receivables 2,526 1,141 965
ESOP Repurchase Premium 1,323 1,507 2,787
Write-off of investment in
unconsolidated subsidiary 3,250 - -
Legal and other expense accruals
associated with an acquired business (1,830) 2,070 -
Environmental costs of divested
businesses (347) 366 1,000
Gain on sale of warrants obtained in
divestitures - - (756)
Other divested business adjustments 2,665 (73) (1,600)
Miscellaneous (466) (517) (329)
Total Other $10,934 $ 9,324 $ 5,860
Income Taxes - During 1994, the Company reached a favorable
settlement with the IRS of disputes over tax deductions related
to the leveraged buyout in 1988. This settlement was approved
by the IRS in February 1995, and applicable tax reserves were
reversed in the fourth quarter of 1994.
In 1994, the federal tax benefit resulted from the reversal of tax
reserves for the IRS examination and the tax benefit of operating
losses, net of a valuation allowance, less the federal tax
provision of a majority owned subsidiary required to file a
separate Federal return. In 1993 and 1992, the Company did not
record any Federal income tax benefit because of
the uncertainty regarding the level of future income. The
Federal tax provision recognized in those years was that of a
majority owned subsidiary which is required to file a separate
return. Additionally, the Company recognized a foreign income
tax provision in 1994, 1993 and 1992 and a state tax credit in
1992.
Cash Flow
Cash and short-term investments were $12.4 million at December
31, 1994, down from $22.8 million at the prior year-end. Working
capital at December 31, 1994, was $91.1 million compared to $73.8
million at December 31, 1993. The increase in working capital
was primarily the result of growth in business volume, an
increase of accounts receivable and acquisitions. The 1994 ratio
of current assets to current liabilities was 1.63 compared to
1.53 in 1993. At December 31, 1994, $8.7 million of cash and
short-term investments and $124.2 million of accounts receivable
were restricted as collateral for the Contract Receivable
Collateralized Notes.
In 1994, operating activities produced cash flow of $3.0
million compared to $10.6 million in 1993 and a negative $4.7
million in 1992. The principal reason for this decline was the
increased requirement for working capital noted above.
In 1994, investing activities used $22.2 million of cash, of
which $15.3 million was used for the acquisition of businesses
(see Note 17 to the Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K) and another $7.4
million was used for the purchase of property and equipment.
In addition, $0.9 million of contract phase-in costs were incurred
and deferred. These costs will be amortized over the duration of
the contracts. In 1993, investing activities used $15.6 million of
cash which included $10.9 million for acquisitions and $5.4 million
for the purchase of property and equipment.
In 1994, financing activities provided cash of $8.8 million.
The sale of stock to the Employee Stock Ownership Plan
contributed $17.1 million. Cash of $5.1 million was used for
payments on indebtedness and $3.2 million was used to purchase
treasury stock. In 1993, financing activities provided cash of
$7.8 million. Payments of $16.1 million were received on the
loan to the ESOP, $6.4 million was used for payments on
indebtedness and $2.0 million was used to purchase treasury
stock. The treasury stock purchases are primarily to meet ERISA
requirements to repurchase ESOP shares when there is no
alternative public market.
Liquidity and Capital Resources
At December 31, 1994, the Company's debt totaled $234.0
million compared to $220.3 million the prior year-end and $202.4
million at December 31, 1992. The increase in debt resulted from
pay-in-kind interest of $15.3 million on the Junior Subordinated
Debentures. The Company had a net decrease in cash and short-
term investments of $10.4 million in 1994 and an increase of $2.8
million and $4.1 million in 1993 and 1992, respectively. The
decrease for 1994 was caused to a large degree by net investments
in acquired businesses of $15.3 million and an increase in
accounts receivable and contracts in process of $16.5 million.
The latter increase was largely attributable to a delay in
finalizing the terms on a new contract and an internal disruption
in a government finance office, both of which occurred in the
fourth quarter of 1994. The Company's cash flow was favorably
impacted in 1994, 1993 and 1992 through the utilization of pay-
in-kind (PIK) interest on the Junior Subordinated Debentures and
the sale of stock to the Employee Stock Ownership Plan (ESOP)
totalling $32.4 million, $29.2 million and $22.7 million,
respectively.
The only significant debt maturing in the next two years is
the mortgage of approximately $19 million on the Corporate
Office. This debt was retired in March 1995 through a sale-
leaseback of the facility; see Note 20 to the Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K.
Annualized interest expense at January 1, 1995 is approximately
$28.4 million of which $8.6 million of interest on the Junior
Subordinated Debentures is payable in kind (interest becomes
payable in cash effective with the December 31, 1995 payment).
The Company believes that it can achieve the increased cash
flow required to meet its future cash debt and interest
obligations (including annualized interest exclusive of the PIK
interest) by continued profit improvement, curtailment of
aircraft maintenance losses, reduced debt service cost and
continuation of its contribution to the ESOP. The Company plans
to continue its Value Improvement Program which was initiated in
late 1992 to reduce and/or eliminate operating costs and loss
operations, curtail the losses in Commercial Sector's aircraft
maintenance operations and to improve the gross margins in the
Government Sector. To reduce its debt service costs, the Company
intends to reduce its high interest rate Junior Subordinated
Debentures utilizing proceeds from the refinancing of equipment
($23.5 million completed in February 1995; see Note 20 to the
Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K), expansion of the collateralized
receivable financing (estimated $20.0 - $25.0 million), tighter
management control of working capital (estimated $20.0 million), the
sale of assets (estimated $5 million) and the collection of notes
receivable (estimated $10.0 million). These sources are expected
to provide approximately $80 million cash which the Company plans
to use to repurchase the PIK securities. The Company and the
ESOP have an agreement in principle under which the ESOP will
continue during 1995 to purchase Company common stock to fund the
ESOP retirement benefit. Other possible sources of cash flow to
retire debt are cash from future operations and the sale or
divestiture of other operating units. From time to time, the
Company receives inquiries to buy the Company and/or one or more
of its significant subsidiaries. With the exception of the
commercial aircraft maintenance business, the Company is not
soliciting any such offers, nor does it have any such offers in
hand. On the other hand, the Company treats such inquiries
seriously and attempts to determine if any such proposals are in
the best interests of the shareholders.
The Company continues to evaluate its alternatives in respect
to the unsatisfactory performance by the Commercial Sector's
aircraft maintenance unit which posted its fourth consecutive
year of operating losses. The Company has engaged an investment
advisor to market the maintenance unit. The status of the unit
presently remains unresolved pending the outcome of discussions
with potential investors and a major customer. These discussions
could result in one of a number of alternatives, including the
consummation of a joint venture, the procurement of long-term
contracts, sale of the entire unit or, worst case, the failure to
negotiate any transaction at all. Current management projections
indicate that the maintenance unit should be profitable in 1995.
The Company believes that if it is unable to consummate a
satisfactory resolution through any of these alternatives, the
most likely course of action would be to consolidate its
operations by closing one of the heavy maintenance facilities.
In management's opinion, no single alternative (i.e. entering
into a joint venture, the curtailment of operations or shut down
of one or more facilities, or the divestiture of the unit as a
whole) is more or less likely to occur; however, the Company
believes that it has suffered at least a partial impairment of
its investment in this unit. Accordingly, it has recorded an
estimate of the applicable goodwill ($5.2 million) and other
assets ($4.3 million) that would be written down in the event the
consolidation or shut-down of one of the facilities becomes
necessary. This does not fully reserve for the potential write-
off that would be necessary for the complete closure or sale of
the business in the event that the Company is unable to curtail
the operating losses in the future.
Selected financial operating data of the commercial aircraft
maintenance unit is as follows (in thousands except number of
employees):
1994 1993 1992
Revenues $ 73,045 $ 57,288 $ 74,253
Operating losses $ (5,351) $ (6,629) $ (428)
Asset impairment provision $ (9,492) $ - $ -
Net assets (after write-down) including
Goodwill at December 31 $ 30,315 $ 44,354 $ 43,328
Backlog at December 31 $ 12,730 $ 11,368 $ -
Number of employees 634 701 631
Although the Company has made some progress to diversify into
non-defense business activities, the Company is still heavily
dependent on the Department of Defense. Due to the procurement
cycles of its customers (generally three to five years), the
Company's revenues and margins are subject to continual
recompetition. In a typical annual cycle approximately 20% to
30% of the Company's business will be recompeted and the Company
will bid on several new contracts. Existing contracts can be
lost or rewon at lower margins at any time and new contracts can
be won. The net outcome of this bidding process, which in any
one year can have a dramatic impact on future revenues and
earnings, is impossible to predict. Also, if the U.S. Government
budget is reduced or spending shifts away from locations or
contracts for which the Company provides services, the Company's
success in retaining current contracts or obtaining new contracts
could be significantly reduced. The Company's Commercial
Services business is likewise highly competitive and subject to
the economic conditions of the domestic and foreign airline
industry.
In summary, the Company continues to be highly leveraged, and
its ability to meet its future debt service and working capital
requirements is dependent upon increased future earnings and cash
flow from operations, the expansion of an accounts receivable
facility financing, continuation of ESOP stock purchases in lieu
of cash retirement contributions and the reduction of its debt
expense.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is contained in the
Company's Consolidated Financial Statements and Financial
Statement Schedules included elsewhere in this Annual Report on
Form 10-K.
Report of Independent Public Accountants
To DynCorp:
We have audited the accompanying consolidated balance sheets of
DynCorp (a Delaware corporation) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of DynCorp and subsidiaries as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules
listed in Item 14 of the Form 10-K are presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
Washington, D.C.,
March 21, 1995.
ARTHUR ANDERSEN LLP
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994 1993
Assets
Current Assets:
Cash and short-term investments (includes restricted
cash and short-term investments of $8,748 in 1994
and $17,632 in 1993) (Notes 2 and 5) $ 12,404 $ 22,806
Notes and current portion of long-term receivables (Note 2) 393 235
Accounts receivable and contracts in process
(Notes 2, 3 and 5) 208,519 177,470
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out) or market 6,354 6,467
Deferred income taxes (Note 12) 2,698 -
Other current assets 5,094 6,851
Total Current Assets 235,462 213,829
Long-term Receivables, due through 2004 (Note 2) 1,594 274
Property and Equipment, at cost (Notes 1, 4 and 16):
Land 5,394 5,539
Buildings and leasehold improvements 34,321 33,498
Machinery and equipment 68,803 64,907
108,518 103,944
Accumulated depreciation and amortization (48,156) (42,996)
Net property and equipment 60,362 60,948
Intangible Assets, net of accumulated amortization
(Notes 1, 11 and 17) 94,792 93,890
Other Assets (Notes 2 and 5) 10,120 13,515
Total Assets $402,330 $382,456
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994 1993
Liabilities, Redeemable Common Stock and Stockholders' Equity
Current Liabilities:
Notes payable and current portion of long-term debt
(Notes 2 and 5) $ 3,344 $ 3,837
Accounts payable (Note 2) 25,529 25,376
Deferred revenue and customer advances (Note 1) 5,389 2,178
Accrued income taxes (Notes 1 and 12) 30 3,074
Accrued expenses (Note 6) 110,091 105,578
Total Current Liabilities 144,383 140,043
Long-term Debt (Notes 2, 5 and 17) 230,608 216,425
Deferred Income Taxes (Notes 1 and 12) 1,210 1,269
Other Liabilities and Deferred Credits (Note 2) 16,591 16,353
Total Liabilities 392,792 374,090
Commitments, Contingencies and Litigation (Notes 16 and 18) - -
Redeemable Common Stock
redemption value per share of $18.20 in 1994 and
$17.50 in 1993, 125,714 shares issued and outstanding
(Note 7) 2,288 2,200
Stockholders' Equity (Note 8)
Capital stock, par value ten cents per share -
Preferred stock, Class C, 18% cumulative,
convertible, $24.25 liquidation value,
123,711 shares authorized and issued and outstanding 3,000 3,000
Common stock, authorized 15,000,000 shares;
issued 7,894,569 shares in 1994
and 5,015,139 shares in 1993 789 502
Common stock warrants 11,486 15,119
Unissued common stock under restricted stock plan 9,923 10,395
Paid-in surplus 118,068 95,983
Retained earnings (deficit) (118,256) (105,425)
Common stock held in treasury, at cost; 459,309
shares and 173,988 warrants in 1994 and 285,987
shares and 178,100 warrants in 1993 (8,817) (5,840)
Cummings Point Industries Note Receivable (Note 9) (8,943) (7,568)
Total stockholders' equity 7,250 6,166
Total Liabilities, Redeemable Common Stock
and Stockholders' Equity $402,330 $382,456
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31
(Dollars in thousands except per share data)
1994 1993 1992
Revenues (Note 1) $1,022,072 $953,144 $911,422
Costs and expenses:
Cost of services (Note 4) 978,204 913,587 883,276
Selling and corporate administrative 17,199 18,267 20,476
Interest expense 25,618 25,538 24,876
Interest income (2,468) (2,439) (2,418)
Aircraft maintenance facilities - consolidation
and asset impairment (Note 21) 9,492 - -
Other (Note 11) 10,934 9,324 5,860
Total costs and expenses 1,038,979 964,277 932,070
Loss before income taxes, minority interest
and extraordinary item (16,907) (11,133) (20,648)
Provision (benefit) for income taxes (Note 12). (5,206) 1,329 168
Loss before minority interest and extraordinary item(11,701) (12,462) (20,816)
Minority interest (Note 1) 1,130 952 -
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early extinguishment
of debt (Note 5) - - 2,526
Net loss (12,831) (13,414) (23,342)
Preferred Class A dividends declared and paid and
accretion of discount - - 959
Net loss for common stockholders $ (12,831)$ (13,414)$(24,301)
Loss Per Common Share (Note 14)
Primary and fully diluted:
Loss before extraordinary item $ (2.12)$ (2.87) $ (4.49)
Extraordinary item (0.49)
Net loss for common stockholders $ (2.12)$ (2.87) $ (4.98)
See accompanying notes.
<TABLE>
DynCorp and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31
(Dollars in thousands)
<CAPTION>
Unissued
Common Cummings
Stock Employee Point
Under Retained Stock Industries
Preferred Common Stock Restricted Paid-in Earnings Treasury Ownership Note
Stock Stock Warrants Stock Plan Surplus (Deficit) Stock Plan Loan Receivable
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $3,000 $ 474 $15,119 $ 9,688 $101,483 $ (67,710) $(3,241) $(32,215) $ -
Pay-in-kind Preferred Stock
Class A dividends (934)
Accretion of Preferred Stock
Class A discount and
discount and issuance costs (25)
Stock issued under Restricted
Stock Plan (Note 8) 17 (3,011) 2,994
Purchase of Preferred Stock Class A (8,047)
Treasury stock purchased (Note 8) (3,448)
Stock issued under the Management
Employees Stock Purchase Plan (Note 8) (22) 151
Accrued compensation (Note 8) 3,264
Payments received on Employee Stock
Ownership Plan (ESOP) (Note 10) 16,099
Cummings Point Industries note receivable
(Note 9) (5,500)
Accrued interest on note receivable (Note 9) (910)
Net loss (23,342)
Balance December 31, 1992 3,000 491 15,119 9,941 96,408 (92,011) (6,538) (16,116) (6,410)
Stock issued under Restricted
Stock Plan (Note 8) 11 (1,781) 1,770
Treasury stock purchased (Note 8) (1,980)
Stock issued under the Management
Employees Stock Purchase Plan (Note 8) 5 41
Accrued compensation (Note 8) 2,235
Payments received on Employee Stock
Ownership Plan (Note 10) 16,116
Contribution of stock to ESOP (Note 10) 437
Stock issued in conjunction with acquisition
(Note 17) (2,200) 2,200
Accrued interest on note receivable
(Note 9) (1,158)
Net loss (13,414)
Balance December 31, 1993 3,000 502 15,119 10,395 95,983 (105,425) (5,840) - (7,568)
Stock issued under Restricted
Stock Plan (Note 8) 9 (1,694) 1,685
Treasury stock purchased (Note 8) (57) (276) (2,690)
Stock issued under the Management Employees
Stock Purchase Plan (Note 8) (2) 32
Warrants exercised (Note 8) 147 (3,576) 3,797 (319)
Accrued compensation (Note 8) 1,222
Contribution of stock to ESOP (Note 10) 131 16,969
Accrued interest on note receivable (Note 9) (1,375)
Adjust redeemable common stock
to fair market value (Note 7) (88)
Net loss (12,831)
Balance December 31, 1994 $3,000 $ 789 $11,486 $ 9,923 $118,068 $(118,256) $(8,817) $ - $ (8,943)
See accompanying notes.
</TABLE>
DynCorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31
(Dollars in thousands)
1994 1993 1992
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 27,077 19,818 19,372
Pay-in-kind interest on Junior
Subordinated Debentures (Note 5) 15,329 13,142 6,590
Loss on purchase of Junior
Subordinated Debentures (Note 5) - - 2,526
Deferred income taxes (2,258) 521 (2,114)
Accrued compensation under Restricted
Stock Plan 1,222 2,235 3,264
Noncash interest income (1,375) (1,158) (910)
Other 2,626 (2,820) (2,483)
Change in assets and liabilities, net
of acquisitions and dispositions:
Increase in accounts receivable and contracts
in process (16,495) (9,698) (14,904)
(Increase) decrease in inventories 113 (326) 280
(Increase) decrease in other current assets (1,250) 1,159 2,797
Increase (decrease) in current liabilities
except notes payable and current portion
of long-term debt (9,186) 1,161 4,268
Cash provided (used) by operating activities 2,972 10,620 (4,656)
Cash Flows from Investing Activities:
Sale of property and equipment 2,406 1,422 1,262
Proceeds received from notes receivable 98 558 1,353
Purchase of property and equipment (7,364) (5,423) (11,400)
Increase in notes receivable (Note 9) - - (5,934)
Increase in investments in affiliates - (99) (1,888)
Deferred income taxes from "safe harbor"
leases (Note 12) (499) (441) (314)
Assets and liabilities of acquired businesses
(excluding cash acquired) (Notes 1 and 17) (15,312) (10,890) (905)
Other (1,543) (738) (304)
Cash used by investing activities (22,214) (15,611) (18,130)
Cash Flows from Financing Activities:
Purchase of Class A Preferred Stock and
Junior Subordinated Debentures (Note 5) - - (42,466)
Treasury stock purchased (Note 8) (3,182) (1,980) (3,448)
Payment on indebtedness (5,110) (6,365) (41,040)
Refinancing proceeds (Note 5) - - 100,000
Deferred financing expenses (Note 5) - - (1,524)
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership
Plan (Note 10) - 16,116 16,099
Sale of stock to Employee Stock Ownership
Plan (Note 10) 17,100 - -
Other (127) - -
Cash provided by financing activities 8,840 7,817 26,868
Net Increase (Decrease) in Cash and Short-term
Investments (10,402) 2,826 4,082
Cash and Short-term Investments at Beginning
of the Year 22,806 19,980 15,898
Cash and Short-term Investments at End
of the Year $ 12,404 $ 22,806 $ 19,980
See accompanying notes.
DynCorp and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
Principles of Consolidation -- All majority-owned subsidiaries have
been included in the financial statements and all significant
intercompany accounts and transactions have been eliminated. Outside
investors' interest in the majority owned subsidiaries is reflected
as minority interest. Investments less than 50% owned are accounted
for using the equity method of accounting.
Contract Accounting -- Contracts in process are stated at the lower
of actual cost incurred plus accrued profits or net estimated
realizable value of incurred costs, reduced by progress billings.
The Company records income from major fixed-price contracts,
extending over more than one accounting period, using the percentage-
of-completion method. During performance of such contracts,
estimated final contract prices and costs are periodically reviewed
and revisions are made as required. The effects of these revisions
are included in the periods in which the revisions are made. On
cost-plus-fee contracts, revenue is recognized to the extent of costs
incurred plus a proportionate amount of fee earned, and on time-and-
material contracts, revenue is recognized to the extent of billable
rates times hours delivered plus material and other reimbursable
costs incurred. Losses on contracts are recognized when they become
known. Disputes arise in the normal course of the Company's business
on projects where the Company is contesting with customers for
additional funds because of events such as delays or changes in
contract specifications. For fixed-price contracts, such disputes,
whether claims or unapproved changes in the process of negotiation,
are recorded at the lesser of their estimated net realizable value or
actual costs incurred and only when realization is probable and can
be reliably estimated. Claims against the Company are recognized
where loss is considered probable and reasonably determinable in
amount.
It is the Company's policy to provide reserves for the
collectibility of accounts receivable when it is determined that it
is probable that the Company will not collect all amounts due and the
amount of reserve requirement can be reasonably estimated.
Property and Equipment -- The Company computes depreciation and
amortization using both straight-line and accelerated methods. The
estimated useful lives used in computing depreciation and
amortization on a straight-line basis are: building, 15-33 years;
machinery and equipment, 3-20 years; and leasehold improvements, the
lesser of the useful life or the term of the lease.
Accelerated depreciation is based on a 150% declining
balance method with light-duty vehicles assigned a three-year life
and machinery and equipment assigned a five-year life. Depreciation
and amortization expense was $8,964,000 for 1994, $9,670,000 for
1993, and $9,275,000 for 1992 (See also Note 4).
Cost of property and equipment sold or retired and the related
accumulated depreciation or amortization is removed from the accounts
in the year of disposal, and any gains or losses are reflected in the
consolidated statement of operations. Expenditures for maintenance
and repairs are charged to expense as incurred, and major additions
and improvements are capitalized.
Intangible Assets -- At December 31, 1994, intangible assets consist
of $91,824,000 of unamortized goodwill and $2,968,000 of value
assigned to contracts. Goodwill is being amortized on a straight-
line basis over periods up to forty years. Amortization expense
(including impairment write-off in 1994; see Note 21) was
$11,051,000, $3,990,000 and $2,953,000 in 1994, 1993 and 1992,
respectively. Amounts allocated to contracts are being amortized
over the lives of the contracts for periods up to ten years.
Amortization of amounts allocated to contracts was $2,051,000,
$3,555,000 and $4,566,000 in 1994, 1993 and 1992, respectively.
Cumulative amortization of $27,167,000 and $33,771,000 has been
recorded through December 31, 1994, of goodwill and value assigned to
contracts, respectively.
The Company assesses and measures impairment of intangible assets
including goodwill based on several factors including the probable
fair market value, probable future cash flows and net income and the
aggregate value of the business as a whole (See Note 21, Commercial
Aircraft Maintenance Facilities - Consolidation and Asset Impairment).
Income Taxes -- As prescribed by Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" the Company
utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of
existing assets and liabilities.
Postretirement Health Care Benefits -- The Company provides no
significant postretirement health care or life insurance benefits to
its retired employees other than allowing them to continue as a
participant in the Company's plans with the retiree paying the full
cost of the premium. The Company has determined, based on an
actuarial study, that it has no liability under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."
Postemployment Benefits -- The Company has no liability under
Statement of Financial Accounting Standard 112, "Employers'
Accounting for Postemployment Benefits," as it provides no benefits
as defined.
New Accounting Pronouncements -- The Financial Accounting Standards
Board issued Statement 114, "Accounting by Creditors for Impairment
of a Loan," and Statement 115, "Accounting for Certain Investments in
Debt and Equity Securities," in May 1993 and Statement 119,
"Disclosure About Derivative Financial Instruments," in October
1994. Statement 114 is required to be adopted in 1995 and Statements
115 and 119 in 1994. The Company holds no significant financial
instruments of the nature described in these pronouncements and
therefore believes the statements will not have a material effect on its
results of operations or financial condition.
The Company has adopted Statement of Position (SOP) 93-6,"Employers
Accounting for Employee Stock Ownership Plans," issued in November
1993 and effective for financial statements issued after December 15,
1993.
Consolidated Statement of Cash Flows -- For purposes of this
Statement, short-term investments which consist of certificates of
deposit and government repurchase agreements with a maturity of
ninety days or less are considered cash equivalents.
Cash paid for income taxes was $1,567,000 for 1994, $1,232,000
for 1993 and $4,054,000 for 1992.
Cash paid for interest, excluding the interest paid under the
Employee Stock Ownership Plan term loan, was $11,098,000 for 1994,
$11,706,000 for 1993 and $17,212,000 for 1992.
Noncash investing and financing activities consist of the
following (in thousands):
1994 1993 1992
Acquisitions of businesses:
Assets acquired $31,302 $31,675$ 3,524
Liabilities assumed (15,990)(17,198)(1,248)
Stock issued - (2,200) -
Notes issued and other liabilities - (1,382) (592)
Cash acquired - (5) (779)
Net cash 15,312 10,890 905
Pay-in-kind interest on Junior
Subordinated Debentures (Note 5) 15,329 13,142 6,590
Unissued common stock under
restricted stock plan (Note 8) 1,222 2,235 3,264
Capitalized equipment leases
and notes secured by property and equipment 3,088 5,294 1,792
Mortgage note assumed (Note 5) - - 19,456
(2) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate the value:
Accounts Receivable and Accounts Payable - The carrying amount
of accounts receivable and accounts payable approximates their
fair value due to the short maturity of these instruments.
Notes and long-term receivables - The carrying value is net of
valuation allowances and approximates the fair value of those
instruments.
Investments (included in "Other Assets") - The Company had
an investment in convertible debentures and preferred stock
of an untraded company. Based on the financial statements
of this business, the carrying value of these investments
approximated their fair value.
Long-term debt and other liabilities - The fair value of the
Company's long-term debt is based on the quoted market price for
its Junior Subordinated Debentures and the current rate as if the
issue date was December 31, 1994 for its Collateralized Notes.
For the remaining long-term debt (see Note 5) and other
liabilities the carrying amount approximates the fair value.
Cummings Point Industries, Inc. Note Receivable - The carrying
value approximates the fair value. (See Note 9.)
The estimated fair values of the Company's financial instruments
are as follows (in thousands):
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and short-term
investments $ 12,404 $12,404 $ 22,806 $ 22,806
Accounts receivable 208,519 208,519 177,470 177,470
Notes and long-term receivables 1,987 1,987 509 509
Investments - - 2,000 2,000
Accounts Payable 25,529 25,529 25,376 25,376
Long-term debt and other
liabilities 232,830 228,951 218,758 229,012
Cummings Point note receivable 8,943 8,943 7,568 7,568
(3) Accounts Receivable and Contracts in Process
The components of accounts receivable and contracts in process were
as follows (in thousands):
1994 1993
U.S. Government:
Billed and billable $111,950 $ 83,822
Recoverable costs and accrued profit on progress
completed but not billed 28,546 25,473
Retainage due upon completion of contracts 4,046 1,287
144,542 110,582
Commercial Customers:
Billed and billable (less allowances for doubtful
accounts of $3,992 in 1994 and $1,469 in 1993) 49,786 43,660
Recoverable costs and accrued profit on progress
completed but not billed 14,191 23,228
63,977 66,888
$208,519 $177,470
Billed and billable include amounts earned and contractually
billable at year-end but which were not billed because customer
invoices had not yet been prepared at year-end. Recoverable costs
and accrued profit not billed is composed primarily of amounts
recognized as revenues, but which are not contractually billable at
the balance sheet dates.
The Company performs substantial services for the commercial
aviation industry. Receivables from domestic and foreign airline and
leasing companies were approximately $35,226,000 and $38,700,000 at
December 31, 1994 and 1993, respectively.
(4) Depreciation of Property and Equipment
During 1994 the Company revised its estimate of the useful lives of
certain of the Commercial Sector's machinery and equipment to conform
to its actual experience with fixed asset lives. It was determined
the useful lives of these assets ranges from three to ten years as
compared to the two to seven year lives previously utilized. The
effect of this change was to reduce depreciation expense and net loss
for the year ended December 31, 1994 by approximately $2,115,000 or
$0.31 per share.
(5) Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of (in
thousands):
1994 1993
Contract Receivable Collateralized Notes,
Series 1992-1 $100,000 $100,000
Junior Subordinated Debentures, net of
unamortized discount of $4,793 and $5,175 102,658 86,947
Mortgages payable (see Note 20) 22,285 23,416
Notes payable, due in installments through
2002, 9.98% weighted average interest rate 6,993 6,689
Capitalized equipment leases 2,016 3,210
233,952 220,262
Less current portion 3,344 3,837
$230,608 $216,425
Debt maturities as of December 31, 1994, were as follows (in
thousands):
1995 ($18,206 extinguished with non-current assets $ 21,550
subsequent to December 31, 1994, Note 20)
1996 2,995
1997 102,327
1998 1,317
1999 339
Thereafter 105,424
$233,952
On January 23, 1992, the Company's wholly owned subsidiary, Dyn
Funding Corporation (DFC), completed a private placement of
$100,000,000 of 8.54% Contract Receivable Collateralized Notes,
Series 1992-1 (the "Notes"). The Notes are collateralized by the
right to receive proceeds from certain U.S. Government contracts and
certain eligible accounts receivable of commercial customers of the
Company and its subsidiaries. Credit support for the Notes is
provided by overcollateralization in the form of additional
receivables. The Company retains an interest in the excess balance
of receivables through its ownership of the common stock of DFC.
Additional credit and liquidity support is provided to the Notes
through a cash reserve fund. Interest payments are made monthly with
monthly principal payments beginning February 28, 1997. (The period
between January 23, 1992 and January 30, 1997 is referred to as the
Non-Amortization Period.) The notes are projected to have an average
life of five years and two months and to be fully repaid by July 30,
1997.
Upon receiving the proceeds from the sale of the Notes, DFC
purchased from the Company an initial pool of receivables for
$70,601,000, paid $1,524,000 for expenses and deposited $3,000,000
into a reserve fund account and $24,875,000 into a collection account
with Bankers Trust Company as Trustee pending additional purchases of
receivables from the Company. Of the proceeds received from DFC, the
Company used $38,112,000 to pay the outstanding balances of the
Employee Stock Ownership Plan term loan and revolving loan facility
under the Restated Credit Agreement and $33,280,000 was used for the
redemption of all of the outstanding Class A Preferred Stock plus
accrued dividends (the redemption price per share was $25.00 plus
accrued dividends of $.66). The Company expensed $1,432,000
(reported as an extraordinary loss) of unamortized deferred debt
expense pertaining to the term loan and revolving loan facility which
was paid in full. The Company also charged $8,047,000 of unamortized
discount and deferred issuance costs associated with the redemption
of the Class A Preferred Stock to paid-in surplus.
On an ongoing basis, cash receipts from the collection of the
receivables are used to make interest payments on the Notes, pay a
servicing fee to the Company, and purchase additional receivables
from the Company. Beginning February 28, 1997, instead of purchasing
additional receivables, the cash receipts will be used to repay
principal on the Notes. During the Non-Amortization Period, cash in
excess of the amount required to purchase additional receivables and
meet payments on the Notes is to be paid to the Company subject to
certain collateral coverage tests. The receivables pledged as
security for the Notes are valued at a discount from their stated
value for purposes of determining adequate credit support. DFC is
required to maintain receivables, at their discounted values, plus
cash on deposit at least equal to the outstanding balance of the
Notes.
Commencing March 30, 1994, the Notes may be redeemed in whole, but
not in part, at the option of DFC at a price equal to the principal
amount of the Notes plus accrued interest plus a premium (as
defined).
Mandatory redemption (payment of the Notes in full plus a premium)
is required in the event that (i) the collateral value ratio test is
equal to or less than .95 as of three consecutive monthly
determination dates and the Company has not substituted receivables
or deposited cash into the collection account to bring the collateral
value ratio above .95; or (ii) three special redemptions are required
within any consecutive 12-month period; or (iii) the aggregate stated
value of all ineligible receivables which have been ineligible
receivables for more than 30 days exceeds 7% of the aggregate
collateral balance and the collateral value ratio is less than 1.00.
Special redemption (payment of a portion of the Notes plus a
premium) is required in the event that the collateral value ratio
test is less than 1.00 as of two consecutive monthly determination
dates and the Company has not substituted receivables or deposited
cash into the collection account to bring the collateral value ratio
to 1.00.
Also, DFC may not purchase additional eligible receivables if the
Company has an interest coverage ratio (as defined) of less than
1.10; or if the Company has more than $40 million of scheduled
principal debt (as defined) due within 24 months prior to the
amortization date or $20 million of scheduled principal debt due
within 12 months prior to the amortization date.
At December 31, 1994, $8,748,000 of cash and short-term investments
and $124,220,000 of accounts receivable are restricted as collateral
for the Notes.
In September 1994, the Company negotiated an agreement which
provides for a $5,000,000 revolving letter of credit facility.
Advances under the letter of credit will bear interest at a per annum
interest rate equal to 1% plus the prime interest rate established by
the bank. For each letter of credit issued, the Company must assign
a cash collateral deposit in favor of the bank for 100% of the face
value of the letter of credit. The Company will pay a fee of 1.5%
per annum computed on the face amount of the letter of credit for the
period the letter of credit is scheduled to be outstanding. As of
December 31, 1994, $2,900,000 was on deposit in conjunction with this
letter of credit.
The Junior Subordinated Debentures (Debentures) mature on June 30,
2003, and bear interest of 16% per annum, payable semi-annually. The
effective interest rate, considering the original issue discount, is
19.4%. The Company may, at its option, prior to September 9, 1995,
pay the interest either in cash or issue additional Debentures. The
Debentures are subject to annual mandatory redemption beginning June
30, 1999. The Company may, at its option, redeem in whole or in
part, at any time, the Debentures at their face value plus accrued
interest. During 1994, 1993 and 1992, $15,329,000, $13,142,000 and
$6,590,000, respectively, of additional Debentures were issued in
lieu of cash interest payments.
Using a lottery selection method, the Company called for partial
redemption of $10,000,000 face value plus accrued interest for cash
redemption on August 10, 1992. The lottery resulted in redeeming
$9,698,000 face value of the Debentures. Open market purchases
during 1992 retired $219,000 of the Debentures. The related
unamortized discount, deferred debt expense and other expenses, net of
applicable income taxes, were reported as an extraordinary loss in
1992.
The Company obtained title to its corporate office building on July
31, 1992 by assuming a mortgage of $19,456,000. At the Company's
option, the interest on the mortgage may be computed from time to
time under one of three methods based on the Certificate of Deposit
Rate, LIBOR Rate or the Prime Rate, all as defined. Also, the
Company was required to pay additional interest through May 27, 1993.
The additional interest was the difference between a fixed rate of
9.36% and a floating rate based upon an imputed amount of
$31,900,000. The original mortgage maturity date was May 27, 1993;
however, as provided, the Company extended the mortgage to March 27,
1995 with an increase in the interest rate of 1/2% per annum plus an
extension fee (based on the principal amount of the mortgage
outstanding) of .42% on May 27, 1993 and .50% on March 27, 1994, all
as defined (see Note 20 Subsequent Events).
The Company acquired the Alexandria, VA headquarters of Technology
Applications, Inc. on November 12, 1993, in conjunction with the
acquisition of TAI. A mortgage of $3,344,000 bearing interest at 8%
per annum was assumed. Payments are made monthly and the mortgage
matures in April 2003. Additionally, a $1,150,000 promissory note
was issued. The note bears interest at 7% per annum. Payments under
the note shall be made quarterly through October 1998.
Deferred debt issuance costs are being amortized using the
effective interest rate method over the terms of the related debt.
At December 31, 1994, unamortized deferred debt issuance costs were
$1,015,000 and amortization for 1994, 1993 and 1992 was $324,000,
$328,000 and $420,000, respectively.
(6) Accrued Expenses
At December 31, 1994 and 1993, accrued expenses consisted of the
following (in thousands):
1994 1993
Salaries and wages $ 51,180 $ 43,698
Insurance 9,675 17,202
Interest 4,716 6,233
Payroll and miscellaneous taxes 10,205 10,412
Accrued contingent liabilities and
operating reserves 24,586 19,028
Other 9,729 9,005
$110,091 $105,578
(7) Redeemable Common Stock
In conjunction with the acquisition of Technology Applications,
Inc. in November 1993, the Company issued put options on 125,714
shares of common stock. The holder may, at any time commencing on
December 31, 1998 and ending on December 31, 2000, sell these shares
to the Company at a price per share equal to the greater of $17.50;
or, if the stock is publicly traded, the market value at a specified
date; or, if the Company's stock is not publicly traded, the fair
market value at the time of exercise.
(8) Stockholders' Equity
Class C Preferred Stock is convertible, at the option of the
holder, into one share of common stock, adjusted for any stock
splits, stock dividends or redemption. At conversion, the holders of
Class C Preferred Stock are also entitled to receive such warrants as
have been distributed to the holders of the common stock. Dividends
accrue at an annual rate of 18%, compounded quarterly. At December
31, 1994, cumulative dividends of $6,948,000 have not been recorded
or paid. Dividends will be payable only when cash dividends are
declared with respect to common stock and only in an aggregate amount
equal to the aggregate amount of dividends that such holders would
have been entitled to receive if such Class C Preferred Stock had
been converted into common stock. Each holder of Class C Preferred
Stock is entitled to one vote per share on any matter submitted to
the holders of common stock for stockholder approval. In addition,
so long as any Class C Preferred Stock is outstanding, the Company is
prohibited from engaging in certain significant transactions without
the affirmative vote of the holders of a majority of the outstanding
Class C Preferred Stock.
The Company initially issued warrants to the Class C Preferred
stockholders and to certain common stockholders to purchase a maximum
of 5,891,987 shares of common stock of the Company. Each warrant is
exercisable to obtain one share of common stock. The stockholder may
exercise the warrant and pay in cash the exercise price of $0.25 for
one share of common stock or may sell back to the Company a
sufficient number of the exercised shares to equal the value of the
warrants to be exercised. (The shares sold back to the Company
during 1994 were valued by the Board of Directors at $11.86 per
share.) During 1994, 1,471,470 warrants were exercised. Rights under
the warrants lapse no later than September 9, 1998.
The Company has a Restricted Stock Plan (the Plan) under which
management and key employees may be awarded shares of common stock
based on the Company's performance. The Company initially reserved
1,023,037 shares of common stock for issuance under the Plan. Under
the Plan, Restricted Stock Units (Units) are granted to participants
who are selected by the Compensation Committee of the Board of
Directors. Each Unit will entitle the participant upon achievement
of the performance goals (all as defined) to receive one share of the
Company's common stock. Units cannot be converted into shares of
common stock until the participant's interest in the Units has
vested. Vesting occurs upon completion of the specified periods as
set forth in the Plan. In 1994, 1993 and 1992, the Company accrued
as compensation expense $1,222,000, $2,235,000 and $3,264,000,
respectively, under the Plan which was charged to cost of services
and corporate administrative expenses.
The Company had a Management Employees Stock Purchase Plan (the
Stock Purchase Plan) whereby employees in management, supervisory or
senior administrative positions could purchase shares of the
Company's common stock along with warrants at current fair value.
The Board of Directors was responsible for establishing the fair
value for purposes of the Stockholders Agreement and the Management
Employees Stock Purchase Plan. The Stock Purchase Plan was
discontinued in 1994. Treasury stock, which the Company acquired
from terminated employees who had previously purchased the stock from
the Company, was issued to employees purchasing stock under the Stock
Purchase Plan.
In accordance with ERISA regulations and the Employee Stock
Ownership Plan Documents, the ESOP Trust or the Company are obligated
to purchase vested common stock shares from ESOP participants (see
Note 10) at the fair value (as determined by an independent
appraiser) as long as the Company's common stock is not publicly
traded. Participants receive their vested shares upon retirement,
becoming totally disabled, or death, over a period of one to five
years and for other reasons of termination over a period of one to
ten years, all as set forth in the Plan. In the event the fair
value of a share is less than $27.00, the Company is committed to pay
through December 31, 1996, up to an aggregate of $16,000,000, the
difference (Premium) between the fair value and $27.00 per share. As
of December 31, 1994, the Company has purchased 427,307 shares from
participants and has expended $3,969,000 of the $16,000,000
commitment. Based on the fair value of $18.20 per share at December
31, 1994, the Company estimates a total Premium of $8,500,000 and an
aggregate annual commitment to repurchase shares from the ESOP
participants upon death, disability, retirement and termination as
follows; $5,400,000 in 1995, $4,000,000 in 1996, $3,300,000 in 1997,
$6,300,000 in 1998, $5,800,000 in 1999 and $58,800,000 thereafter.
The fair value is charged to Treasury Stock at the time of
repurchase. The estimated Premium of $8,500,000 has been recorded as
Other Expense in the Consolidated Statement of Operations in 1989
through 1994 (see Note 11).
Under the DynCorp Stockholders Agreement which expired on March 11,
1994, the Company was committed, upon an employee's termination of
employment, to purchase common stock shares held by employees
pursuant to the merger (Management Investor Shares), through the
Stock Purchase Plan or through the Restricted Stock Plan. The share
price at December 31, 1994 for Management Investor shares and Stock
Purchase shares was $14.60 per common share and $14.35 ($14.60 per
common share less warrant exercise price of $0.25) for each
unexercised warrant. The price established for each Restricted Stock
Plan common share is the fair market value as set forth in the
appraisal of shares held by the ESOP. At December 31, 1994, 262,914
common shares were outstanding and 1,755,397 warrants were
unexercised. The share price for Restricted Stock Plan shares
($18.20 at December 31, 1994) is the fair value as set forth in the
appraisal of shares held by the ESOP. However, the Company may not
purchase more than $250,000 of Management Investor shares or
Restricted Stock shares in any fiscal year without the approval of
the Class C Preferred stockholders. A new Stockholders' agreement,
adopted March 11, 1994, contains similar repurchase obligations and
expires March 10, 1999.
(9) Cummings Point Industries Note Receivable
The Company loaned $5,500,000 to Cummings Point Industries, Inc.
("CPI"), of which Capricorn Investors, L.P. ("Capricorn") owns more
than 10%. The indebtedness is represented by a promissory note (the
"Note"), bearing interest at the annual rate of 17%, which provides
that interest is payable quarterly but that interest payments may not
be payable in cash but may be added to the principal of the Note.
The Note is subordinated to all senior debt of CPI. The Note, which
was issued February 12, 1992, was due three months thereafter;
however, the Company, at its option, has extended and may further
extend the maturity date in three month increments to no later than
February 12, 1996. By separate agreement and as security to the
Company, Capricorn has agreed to purchase the Note from the Company
upon three months' notice, for the amount of outstanding principal
plus accrued interest. As additional security, Capricorn's purchase
obligation is collateralized by certain common stock and warrants
issued by the Company and owned by Capricorn. The note has been
reflected as a reduction in stockholders' equity.
(10) Employee Stock Ownership Plan
In September 1988, the Company established an Employee Stock
Ownership Plan (the Plan). The Company borrowed $100 million and
loaned the proceeds, on the same terms as the Company's borrowings,
to the Plan to purchase 4,123,711 shares of common stock of the
Company (the "ESOP loan"). The common stock purchased by the Plan
was held in a collateral account as security for the ESOP loan from
the Company. The Company was obligated to make contributions to the
Plan in at least the same amount as required to pay the principal and
interest installments under the Plan's borrowings. The Plan used the
Company contributions to repay the principal and interest on the ESOP
loan. As the ESOP loan was liquidated, shares of the Company's
common stock were released from the collateral account and allocated
to participants of the Plan. As of December 31, 1993, the loan has
been fully repaid.
In accordance with subsequent amendments to the Employee Stock
Ownership Plan, the Company contributed an additional 25,000 shares
of common stock in December 1993 and in 1994 contributed cash of
$17,435,000 which the ESOP used to acquire 1,312,459 shares and to
pay interest and administrative expenses. The Company has an
agreement in principle with the ESOP to contribute up to $18,000,000
in cash or stock in 1995 to satisfy its funding obligations.
The Plan covers a majority of the employees of the Company.
Participants in the Plan become fully vested after four years of
service. All of the 5,461,170 shares acquired by the ESOP have been
either issued or allocated to participants as of December 31, 1994.
The Company recognizes ESOP expense each year based on contributions
committed to be made to the Plan. The Company's cash contributions
were determined based on the ESOP's debt service and other expenses.
Stock contributions are determined in accordance with the amended
agreement. In 1994, cash contributions to the ESOP were $17,435,000;
1993 cash and stock contributions were $16,608,000 and $437,000
respectively, and 1992 cash contributions were $17,275,000. These
amounts were charged to cost of services and selling and corporate
administrative expenses (including interest on the ESOP term loan of
$491,000 and $1,450,000 in 1993 and 1992, respectively).
(11) Other Expenses
Years Ended December 31,
(In thousands)
1994 1993 1992
Amortization of costs in excess
of net assets acquired $3,813 $4,830 $ 3,793
Provision for nonrecovery of
receivables 2,526 1,141 965
ESOP Repurchase Premium (Note 8) 1,323 1,507 2,787
Write-off of investment in
unconsolidated subsidiary (a) 3,250 - -
Legal and other expense accruals
associated with an acquired
business (1,830) 2,070 -
Environmental costs of divested
businesses (347) 366 1,000
Gain on sale of warrants obtained in
divestitures - - (756)
Other divested business
adjustments 2,665 (73) (1,600)
Miscellaneous (466) (517) (329)
Total Other $10,934 $9,324 $ 5,860
(a) In June 1994 the Company paid an additional $1,250,000 to
increase its holdings in an unconsolidated subsidiary from 40%
to 50.1% and the subsidiary concurrently borrowed $6.0 million
from another investor. The total acquisition cost exceeded
the underlying equity in net assets by $2,582,000. The
subsidiary's stockholders' agreement defined certain trigger
events which, upon their occurrence, transferred control of
the subsidiary from DynCorp to the other shareholders. These
trigger events occurred in the fourth quarter of 1994 and the
subsidiary's lenders called the loans in 1995. These actions,
coupled with financial and cash flow projections provided by
the subsidiary's management, have caused the Company to
determine that its investment has been permanently impaired.
As such, $3,250,100 representing the investment and excess
purchase price has been charged to Other Expense.
(12) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Earnings (loss) before income taxes and minority interest (but
including extraordinary item - see Note 5) were derived from the
following (in thousands):
1994 1993 1992
Domestic operations $(15,297) $(11,240) $(23,378)
Foreign operations (1,610) 107 204
$(16,907) $(11,133) $(23,174)
The provision (benefit) for income taxes (and including
extraordinary item - see Note 5) consisted of the following (in
thousands):
1994 1993 1992
Current:
Federal $(3,061) $ 723 $ 416
Foreign 54 170 168
State 59 (85) 193
(2,948) 808 777
Deferred:
Federal (2,199) 500 (416)
State (59) 21 (193)
(2,258) 521 (609)
Total $(5,206) $ 1,329 $ 168
The components of and changes in deferred taxes are as follows (in
thousands):
<TABLE>
Deferred Deferred Deferred
Dec. 31, Expense Dec. 31, Expense Dec. 31, Expense
1994 (Benefit) 1993 (Benefit) 1992 (Benefit)
<S> <C> <C> <C> <C> <C> <C>
Increase due to federal rate change $ 402 $ - $ 402 $ (402) $ - $ -
Benefit of state tax on temporary differences
and state net operating loss carryforwards 5,574 (716) 4,858 (1,135) 3,723 (2,211)
Benefit of foreign, targeted jobs and AMT
tax credit carryforwards 2,812 (282) 2,530 (1,073) 1,457 -
Difference between book and tax method of
accounting for depreciation and amortization (167) (223) (390) 1,020 630 (398)
Difference between book and tax method of
accounting for income on U.S. Government
contracts (9,395) 551 (8,844) 1,195 (7,649) 2,988
Deferred compensation expense 4,069 1,347 5,416 (113) 5,303 (2,344)
Operating reserves and other accruals 25,389 (7,816) 17,573 (2,644) 14,929 (6,200)
Difference between book and tax method of
accounting for certain employee benefits 496 223 719 (1,243) (524) 73
Amortization of intangibles (1,073) 925 (148) (204) (352) (945)
Other, net (234) 55 (179) 173 (6) 186
Net deferred tax asset before
valuation allowance 27,873 (5,936) 21,937 (4,426) 17,511 (8,851)
Federal valuation allowance (14,262) 2,962 (11,300) 3,812 (7,488) 6,031
State valuation allowance (5,574) 716 (4,858) 1,135 (3,723) 2,211
Total temporary differences affecting
tax provision 8,037 (2,258) 5,779 521 6,300 (609)
Deferred taxes from "safe harbor"
lease transactions (6,549) (499) (7,048) (441) (7,489) (314)
Net deferred tax asset (liability) $ 1,488 $(2,757) $(1,269) $ 80 $(1,189) $ (923)
</TABLE>
The tax provision (benefit) differs from the amounts
obtained by applying the statutory U.S. Federal income tax rate
to the pre-tax loss amounts. The differences can be reconciled
as follows (in thousands):
1994 1993 1992
Expected Federal income tax benefit $(5,917) $(3,785) $(7,879)
Valuation allowance 2,962 3,812 6,031
State and local income taxes, net of
Federal income tax benefit - (42) -
Reversal of tax reserves for IRS examination (4,069) - -
Nondeductible amortization of intangibles
and other costs 2,331 1,552 2,300
Foreign income tax 54 84 99
Foreign, targeted job and fuel tax credits (734) (359) (222)
Other, net 167 67 (161)
Tax provision (benefit) $(5,206) $1,329 $ 168
During 1994, the Company reached a favorable settlement with
the IRS of disputes over tax deductions related to the leveraged
buyout in 1988. This settlement was formally approved by the IRS in
February 1995. Applicable tax reserves were reversed in the
fourth quarter of 1994.
In 1994, the federal tax benefit resulted from reversal of
tax reserves for the IRS examination and the tax benefit for
operating losses, net of a valuation allowance, less the federal tax
provision of a majority owned subsidiary required to file a separate.
Federal return. In 1993 and 1992 the Company did not record any
Federal income tax benefit because of the uncertainty regarding the
the level of future income. The Federal tax provision recognized in
those years was that of a majority owned subsidiary which is
required to file a separate return. Additionally, the Company
recognized a foreign income tax provision in 1994, 1993 and 1992 and
a state tax credit in 1992.
The Company's U.S. Federal income tax returns have been
cleared through 1984. The Internal Revenue Service completed an
examination of the Company's tax returns for the period 1985-88
and proposed several adjustments, the most significant of which
related to deductions taken by the Company for expenses incurred
in the 1988 leveraged buyout. The Company and the IRS settled
these proposed adjustments in 1994. Taxes and accrued interest
associated with these adjustments, which have not yet been
assessed, are approximately $6,000,000.
The Company has state net operating losses and various tax
credit carryforwards available to offset future taxable income
and income taxes. Following are the net operating losses and
foreign, targeted jobs and AMT tax credits by year of expiration
(in thousands):
Year of ATM Tax Targeted Jobs Foreign State Net
Expiration Credits Tax Credits Tax Credits Operating Losses
1996 81
1998 6,254
1999 272
2000 338
2003 55
2006 249
2007 314
2008 119 16,302
2009 118
No Expiration 1,659
$1,659 $ 800 $ 353 $22,949
(13) Pension Plans
Union employees who are not participants in the ESOP are covered
by multiemployer pension plans under which the Company pays fixed
amounts, generally per hours worked, according to the provisions of
the various labor contracts. In 1994, 1993 and 1992, the Company
expensed $2,440,000, $2,400,000 and $2,693,000, respectively, for
these plans. Under the Employee Retirement Income Security Act of
1974 as amended by the Multiemployer Pension Plan Amendments Act of
1980, an employer is liable upon withdrawal from or termination of a
multiemployer plan for its proportionate share of the plan's
unfunded vested benefits liability. Based on information provided
by the administrators of the majority of these multiemployer plans,
the Company does not believe there is any significant amount of
unfunded vested liability under these plans.
The Company makes contributions to a defined benefit pension plan
for employees working on one U.S. government contract. The plan is
accounted for in accordance with the requirements of Statement of
Financial Accounting Standards No. 87. The pension plan had assets
of $6,761,000 and projected benefit obligations of $7,607,000 at
September 30, 1994 (the plan's fiscal year end). This pension plan
remains in effect regardless of changes in contractors which may
occur as a result of the recompetition process.
(14) Loss Per Common Share
Primary loss per share is based on the weighted average number
of common and dilutive common equivalent shares outstanding during
the period. In addition, 1994 and 1993 include as outstanding
common stock, shares earned and vested but unissued under the
Restricted Stock Plan. For years 1994, 1993 and 1992 the
outstanding warrants and shares which would be issued under the
assumed conversion of Class C Preferred Stock have been excluded
from the calculation of loss per share as their effect is
antidilutive because of the losses incurred during the periods (see
also Note 8). The loss per common share for 1994, 1993 and 1992
includes the effect of the unpaid dividends on the Class C Preferred
Stock ($1,606,000 in 1994, $1,347,000 in 1993 and $1,129,000 in
1992) and, in addition, for 1992 the dividends paid on Class A
Preferred Stock. The average number of shares used in determining
primary loss per share was 6,802,012 in 1994, 5,141,319 for 1993
and 5,102,621 for 1992.
(15) Incentive Compensation Plans
The Company has several formal incentive compensation plans which
provide for incentive payments to officers and key employees.
Incentive payments under these plans are based upon operational
performance, individual performance, or a combination thereof, as
defined in the plans. Incentive compensation expense was $7,979,000
for 1994, $7,067,000 for 1993 and $6,058,000 for 1992.
(16) Leases
The Company has capitalized all significant leases which meet the
criteria for classification as capital leases, principally leases
for vehicles and equipment. Capitalized leases are amortized over
the shorter of the useful lives of the assets or the lease term.
Future minimum lease payments required under operating leases that
have remaining noncancellable lease terms in excess of one year at
December 31, 1994 and capitalized leases are summarized below:
Operating Capitalized
Leases Leases
Years Ending December 31,
1995 $11,174 $ 1,021
1996 8,659 661
1997 7,572 509
1998 6,672 105
1999 5,844 -
Thereafter 12,093 -
Total minimum lease payments $52,014 2,296
Less interest on capitalized leases 281
Present value of capitalized leases
as of December 31, 1994 (Note 5) $ 2,015
Net rent expense for leases, excluding amounts for capitalized
leases, was $22,117,000 for 1994, $16,553,000 for 1993 and
$14,706,000 for 1992.
(17) Acquisitions
On October 31, 1994, the Company acquired all of the issued and
outstanding shares of stock of CBIS Federal Inc. (CBIS) for a cash
payment of $8,159,000 including out of pocket costs. CBIS,
headquartered in Fairfax, Virginia, provides a full range of
services across the life cycle of information solutions and services
primarily to federal government civilian agencies and also to the
Department of Defense and state and local governments. The
acquisition was accounted for as a purchase and $5,868,000 of
goodwill was recorded which will be amortized over 40 years.
On November 12, 1993 the Company acquired Technology Applications,
Inc. Aggregate cash paid, notes issued and mortgages assumed
totaled $11,419,000 and 125,714 shares of common stock valued at
$2,200,000 were issued. The Company also acquired certain assets of
Science Management Corporation ("SMC") and NMI Systems Inc. ("NMI")
on February 18, 1993 and December 10, 1993, respectively, for an
aggregate of $5,352,000 in cash, notes and other liabilities.
The 1993 acquisitions were accounted for as purchases.
Goodwill of $6,083,000 was recorded and is being amortized over
periods up to 40 years. The allocation period for the NMI
acquisition still remains open at December 31, 1994 pending
resolution of certain billing rates used on U.S. Government
contracts.
Consolidated revenues, loss before extraordinary item, net loss
and loss per share for the years ended December 31, 1994 and 1993,
adjusted on an unaudited pro forma basis as if the above
acquisitions had been consummated at the beginning of the respective
periods, are as follows (in thousands except per share amounts):
1994 1993
Revenues $1,074,060 $1,066,043
Loss before extraordinary item $ ( 12,050) $ (12,282)
Net loss for common stockholders $ (13,656) $ (13,629)
Net loss per common share $ (2.01) $ (2.71)
Additionally, in June 1994, the Company paid an aggregate $4.0
million for a 25% interest in each of Composite Technology, Inc.
(CTI) and Gateway Passenger Services, L.P. Goodwill of $1,750,000
was recorded and will be amortized over periods up to 40 years.
(18) Commitments, Contingencies and Litigation
The Company is involved in various claims and lawsuits, including
contract disputes and claims based on allegations of negligence and
other tortious conduct. The Company is also potentially liable for
certain environmental, personal injury, tax and contract dispute
issues related to the prior operations of divested businesses. In
most cases, the Company has denied, or believes it has a basis to
deny liability, and in some cases has offsetting claims against the
plaintiffs or third parties.
Damages currently claimed by the various plaintiffs for these
items which may not be covered by insurance aggregate approximately
$22,000,000 (including compensatory and possible punitive damages
and penalties).
A former subsidiary, which discontinued its business activities in
1986, has been named as one of many defendants in civil lawsuits
which have been filed in various state courts against manufacturers,
distributors and installers of asbestos products. (The subsidiary
had discontinued the use of asbestos products prior to being
acquired by the Company.) The Company has also been named as a
defendant in several of these actions. At the beginning of 1992,
403 claims had been filed and during the year 1,785 additional
claims were filed with 73 claims being settled. In 1993, 709
additional claims were filed and 1,273 were settled. In 1994, 1,135
new claims were filed with 353 claims being settled. Defense has
been tendered to and accepted by the Company's insurance carriers.
The former subsidiary was a nonmanufacturer that installed or
distributed industrial insulation products. Accordingly, the
Company strongly believes that the subsidiary has substantial
defenses against alleged secondary and indirect liability. The
Company has provided a reserve for the estimated uninsured legal
costs to defend the suits and the estimated cost of reaching
reasonable no-fault liability settlements. The amount of the
reserve has been estimated based on the number of claims filed and
settled to date, number of claims outstanding, current estimates of
future filings, trends in costs and settlements, and the advice of
the insurance carriers and counsel.
The Company has retained certain liability in connection with its
1989 divestiture of its major electrical contracting business,
Dynalectric Company ("Dynalectric"). The Company and Dynalectric were
sued in 1989 by a former Dynalectric subcontractor. The subcontractor
has alleged that its subcontract to furnish certain software and
services in connection with a major municipal traffic signalization
project was improperly terminated by Dynalectric Company and that
Dynalectric is liable to the former subcontractor for a variety of
additional claims, the aggregate dollar amount of which have not
been formally recited in the subcontractor's complaint. Dynalectric
has also filed certain counterclaims against the former
subcontractor. The Company and Dynalectric believe that they have
valid defenses, and/or that any liability would be more than offset
by recoveries under the counterclaims. The Company has established
reserves for the contemplated defense costs and for the cost of
obtaining enforcement of arbitration provisions contained in the
contract.
The Company is a party to other civil lawsuits which have arisen
in the normal course of business for which potential liability,
including costs of defense, are covered by insurance policies.
The major portion of the Company's business involves contracting
with departments and agencies of, and prime contractors to, the U.S.
government and as such are subject to possible termination for the
convenience of the government and to audit and possible adjustment
to give effect to unallowable costs under cost-type contracts or to
other regulatory requirements affecting both cost-type and fixed-
price contracts. In management's opinion, there are no outstanding
issues of this nature at December 31, 1994 that would have a
material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has recorded its best estimate of the liability that
will result from these matters. While it is not possible to predict
with certainty the outcome of the litigation and other matters
discussed above, it is the opinion of the Company's management,
based in part upon opinions of counsel, insurance in force and the
facts presently known, that liabilities in excess of those recorded,
if any, arising from such matters would not have a material adverse
effect on the results of operations or consolidated financial
position of the Company.
The Company is highly leveraged, and its ability to meet its future
debt service and working capital requirements is dependent upon
increased future earnings and cash flow from operations, the expansion
of an accounts receivable facility financing, continuation of ESOP
stock purchases in lieu of cash retirement contributions and the
reduction of its debt expense.
(19) Business Segment
The Company operates in one line of business: that of providing
management, technical and professional services to industry and
government organizations primarily to support the customers'
facilities and/or operations on a turn-key (full) service basis.
The Company has no significant foreign operations or assets
outside the United States. The largest single customer of the
Company is the U.S. Government. The Company had prime contract
revenues from the U.S. Government of $723 million in 1994, $663
million in 1993 and $674 million in 1992. Included in revenues from
the U.S. Government are revenues from the Department of Defense of
$551 million in 1994, $543 million in 1993 and $538 million in 1992.
No other customer accounted for more than 10% of revenues in any
year.
(20) Subsequent Events
On February 7, 1995, the Company sold its Corporate headquarters
to RREEF America Reit Corp. C and entered into a 12-year lease with
RREEF as the landlord. The proceeds from the sale-leaseback were
used to satisfy the mortgage on the building which was due to mature
on March 27, 1995. Since the Company had the intent to discharge
its obligation under the mortgage with noncurrent assets, the amount
has been included in long-term debt at December 31, 1994.
In separate transactions on January 20 and February 7, 1995, the
Company secured $24 million of equipment financing. The proceeds
raised will serve to reduce the balance of the 16% Subordinated
Debentures outstanding.
(21) Aircraft Maintenance Facilities - Consolidation and Asset
Impairment
The Company continues to evaluate its alternatives in respect to
the unsatisfactory performance by the Commercial Sector's aircraft
maintenance unit which posted its fourth consecutive year of
operating losses. The Company has engaged an investment advisor to
market the maintenance unit. The status of the unit presently
remains unresolved pending the outcome of discussions with potential
investors and a major customer. These discussions could result in
one of a number of alternatives, including the consummation of a
joint venture, the procurement of long-term contracts, sale of the
entire unit or, worst case, the failure to negotiate any transaction
at all. Current management projections indicate that the maintenance
unit should be profitable in 1995. The Company believes that if it
is unable to consummate a satisfactory resolution through any of
these alternatives, the most likely course of action would be to
consolidate its operations by closing one of the heavy maintenance
facilities. In management's opinion, no single alternative (i.e.
entering into a joint venture, the curtailment of operations or shut
down of one or more facilities, or the divestiture of the unit as a
whole) is more or less likely to occur; however, the Company
believes that it has suffered at least a partial impairment of its
investment in this unit. Accordingly, it has recorded an estimate
of the applicable goodwill ($5.2 million) and other assets ($4.3
million) that would be written down in the event the consolidation
or shut-down of one of the facilities becomes necessary. This does
not fully reserve for the potential write-off that would be
necessary for the complete closure or sale of the business in the
event that the Company is unable to curtail the operating losses in
the future.
Selected financial operating data of the commercial aircraft
maintenance unit is as follows (in thousands except number of
employees):
1994 1993 1992
Revenues $73,045 $57,288 $74,253
Operating losses $(5,351) $(6,629) $ (428)
Asset impairment provision $(9,492) $ - $ -
Net assets (after write-down)
including Goodwill
at December 31 $30,315 $44,354 $43,328
Backlog at December 31 $12,730 $11,368 $ -
Number of employees 634 701 631
(22) Quarterly Financial Data (Unaudited)
A summary of quarterly financial data for 1994 and 1993 is as
follows (in thousands, except per share data):
<TABLE>
1994 Quarters 1993 Quarters
First Second Third Fourth First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $259,537 $248,551 $244,928 $269,056 $231,560 $235,567 $239,013 $247,005
Gross profit 10,815 11,757 8,892 12,404 6,726 9,507 8,219 15,104
Earnings (loss) before income
taxes and minority interest (1,156) (259) (3,686) (11,806) (6,015) (2,548) (2,953) 383
Minority interest 249 311 226 344 118 386 113 335
Net loss for common stockholders (1,589) (930) (4,245) (6,067) (6,186) (2,979) (3,854) (395)
Loss per common share:
Primary and fully diluted:
Net loss for common
stockholders (0.36) (0.21) (0.59) (0.82) (1.26) (0.65) (0.82) (0.15)
</TABLE>
Quarterly data may not equal annual totals due to rounding
ITEM 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Herbert S. Winokur, Jr., 51 Director and Chairman of the Board since 1988,
term expires 1996. President, Winokur Holdings, Inc.
(investment company). Formerly Senior Executive Vice
President, Member, Office of the President, and
Director, Penn Central Corporation. Director of ENRON
Corporation; NacRe Corp.; NHP, Inc.; and Marine
Drilling Companies, Inc.
Dan R. Bannister, 64* Nominee; Director since 1985, term expires 1995.
Chief Executive Officer since 1985; President since
1984. Director of Industrial Training Corporation.
T. Eugene Blanchard, 64* Director since 1988, term expires 1997. Senior
Vice President and Chief Financial Officer since 1979.
Russell E. Dougherty, 74 Director since 1989, term expires 1996.
Attorney, McGuire, Woods, Battle & Boothe (law firm).
Retired General, United States Air Force; served as
Commander-in-Chief, Strategic Air Command and Chief of
Staff, Allied Command, Europe. From 1980 to 1986
served as Executive Director of the Air Force
Association and Publisher of Air Force Magazine.
Former member of the Defense Science Board. Trustee
of the Institute for Defense Analysis. Director of
The Aerospace Corp.
James H. Duggan, 59* Director since 1988, term expires 1996. Executive
Vice President since 1987; President of Advanced
Technology Services Sector since July, 1994; President
of Applied Sciences Group from 1991 to 1994.
Paul V. Lombardi, 53* Director since July, 1994, term expires 1997.
Executive Vice President since 1994; President,
Government Services Sector since July 1994; Vice
President 1992 to 1994; President of Government
Services Group 1992 to 1994. Senior Vice President
and Group General Manager, Planning Research Corpora-
tion from 1990 to 1992. Senior Vice President and
Group General Manager, Advanced Technology Inc. from
1988 to 1990.
Michael T. Masin, 50 Nominee; Director since November, 1994, term expires,
1995. Vice Chairman of GTE Corporation since 1993.
Partner, O Melveny & Meyers, Washington, DC 1976
through 1993. Director of GTE Corporation, Trust
Company of the West, and Contel Cellular, Inc. Member
of the Board of Trustees of American University;
Member of Council on Foreign Relations and a Member of
Business Committee for Board of Trustees of Museum of
Modern Art.
Dudley C. Mecum II, 60 Director since 1988, term expires 1997. Partner, G.L.
Ohrstrom & Co. (investment company). Formerly
Chairman of Mecum Associates, Inc. Served as Group
Vice President and Director, Combustion Engineering,
Inc. Director of The Travelers Inc., Lyondell
Petrochemical Company, Vicorp Restaurants Inc.,
Fingerhut Companies, Inc., and Roper Industries Inc.
David L. Reichardt, 52* Nominee; Director since 1988, term expires 1995.
Senior Vice President and General Counsel since 1986.
President of Dynalectric Company, a subsidiary of
DynCorp, from 1984 to 1986. Vice President and
General Counsel of DynCorp from 1977 to 1984.
OTHER EXECUTIVE OFFICERS
Patrick G. Deasy, 56* Vice President since 1993; President of DynAir
Services Inc. since 1985.
Gerald A. Dunn, 61* Vice President since 1973; Controller since 1967.
Edward B. Fernstrom, 46 Vice President, Chief Information Officer since July,
1994, Director, Management Information Systems from
June 1990 to 1994.
Mark Filteau, 44* President of the Federal Sector Information and
Engineering Technology Strategic Business Unit ("SBU")
since December 1, 1994. President of PRC Public
Sector, March 1992 to 1994. Vice President and Senior
Vice President of BDM International from 1986 to 1992.
H. Montgomery Hougen, 59 Vice President since July, 1994; Corporate
Secretary and Deputy General Counsel since 1984.
Richard A. Hutchinson, 50 Treasurer since 1978.
Marshal J. Hyman, 49 Vice President since 1993; Director of Taxes since
1986.
Marshall S. Mandell, 52 Vice President, Business Development, Government
Sector since July, 1994; Vice President Business
Development Applied Science Group from February 1992
to 1994.
Carl H. McNair, Jr., 61* Vice President since July, 1994; President,
Federal Sector Enterprise Management SBU since July,
1994; President, Support Services Division from 1990
to 1994.
Ruth Morrel, 40 Vice President, Law & Compliance since July, 1994;
Group General Counsel from 1984 to 1994.
John H. Saunders, 38* Vice President, Finance since 1993; Director of
Corporate Finance since 1990; Vice President, Finance,
Government Services Group from 1987 to 1990.
Holton B. Shipman, Jr., 48* Vice President since July, 1994; President,
Federal Sector Environmental, Energy & National
Security Programs SBU since July, 1994.
Richard E. Stephenson, 59 Vice President, Technology & Government
Relations since July, 1994; Vice President Strategic
Planning, Government Services Group from 1991 to 1994.
John L. Sullivan, 59 Vice President of Human Resources, Quality &
Administration since January, 1995; Vice President of
Human Resources, Paramax Systems Corporation from 1986
to 1994.
Richard L. Webb, 62* Vice President since 1988; President of DynAir
Technical Services Group since 1993, President of
Aviation Services Group from 1985 to 1993.
Harold J. M. Williams, 58* Vice President since July, 1994;
President, Federal Sector Aerospace Technology SBU
since July, 1994; President, Aerospace Operations
Division from 1993 to 1994; Vice President Business
Development Government Services Group from 1990 to
1993.
Robert G. Wilson, 53 Vice President and General Auditor since 1985.
* Officers designated by an asterisk are deemed to be officers for
purposes of Rule 16a-1(f), as promulgated in Release No. 34-28869.
Stockholders Agreement
Under the terms of the New Stockholders Agreement which expires on March
10, 1999, which has been adopted by substantially all management stockholders,
including the officers named above, the management stockholders and outside
investors who control approximately 56% of the voting stock on a fully diluted
basis have agreed to the following procedure for election of directors.
Capricorn Investors, discussed below, on behalf of itself and certain outside
investors nominates four of the total number of directors; Company management
nominates four directors; and the two groups agree on a ninth director, for
whom all of the parties have agreed to vote. All of the current directors and
nominees have been selected by this process.
ITEM 11. EXECUTIVE COMPENSATION
Compensation
The following table sets forth information regarding annual and long-
term compensation for the chief executive officer and the other four most
highly compensated executive officers of the Company. The table does not
include information for any fiscal year during which a named executive officer
did not hold such a position with the Company.
<TABLE>
<CAPTION> SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (f) (g) (h) (i)
Restricted Securities All Other
<S> <C> <C> <C> <C> <C>
Dan R. Bannister 1994 350,000 165,000 27,159
President & Chief 1993 339,896 155,000 17,465
Executive Officer 1992 317,800 140,000 16,634
James H. Duggan 1994 243,147 95,000 19,875
Executive Vice President & 1993 248,736 90,000 12,813
Sector President 1992 234,688 80,000 13,767
Paul V. Lombardi 1994 240,405 95,000 19,394
Executive Vice President & 1993 219,663 100,000 105,000 11,960
Sector President 1992 47,859 60,000 105,000 2,338
T. Eugene Blanchard 1994 196,915 95,000 19,876
Senior Vice President & 1993 200,591 90,000 17,018
Chief Financial Officer 1992 189,131 75,000 16,634
David L. Reichardt 1994 190,547 95,000 17,906
Senior Vice President & 1993 193,371 90,000 11,793
General Counsel 1992 181,934 75,000 10,360
</TABLE>
(1) Column (d) reflects bonuses earned and expensed during year, whether
paid during or after such year.
(2) Value of restricted stock units determined in accordance with Restricted
Stock Plan. There is no provision to pay dividends on restricted stock
units. The following table reflects the number of restricted stock
units in the respective accounts of the named individuals, whether
vested or unvested, and the aggregate valuation as of December 31, 1994.
Name No. of Units Value ($)
Dan R. Bannister 54,661 994,830
James H. Duggan 58,212 1,059,458
Paul V. Lombardi 12,000 218,400
T. Eugene Blanchard 47,467 863,899
David L. Reichardt 32,030 582,946
(3) Column (i) includes individual's pro rata share of the Company's
contribution to the ESOP Trust, estimated for 1994, and the Company-paid
portion of group term-life insurance and split-premium life insurance
premiums covering the individual, as reflected in the following table.
ESOP Contributions ($) Insurance Premiums ($)
Name 1994 1993 1992 1994 1993 1992
Dan R. Bannister 6,832 8,912 8,912 20,327 8,553 7,722
James H. Duggan 6,832 8,912 8,912 13,043 3,901 4,855
Paul V. Lombardi 6,832 8,912 1,810 12,562 3,048 528
T. Eugene Blanchard 6,832 8,912 8,912 13,044 8,106 7,722
David L. Reichardt 6,832 8,912 8,912 11,074 2,881 1,448
Compensation of Directors
Non-employee directors of the Company receive an annual retainer fee of
$16,500 as directors and $2,750 for each committee on which they serve. The
Company also pays non-employee directors a meeting fee of $1,000 for
attendance at each Board meeting and $500 for attendance at committee
meetings. Directors are reimbursed for expenses incurred in connection with
attendance at meetings and other Company functions.
Directors and Officers Liability Insurance
The Company has purchased and paid the premium for insurance in respect
of claims against its directors and officers and in respect of losses for
which the Company may be required or permitted by law to indemnify such
directors and officers. The directors insured are the directors named herein
and all directors of the Company's subsidiaries. The officers insured are all
officers and assistant officers of the Company and its subsidiaries. There is
no allocation or segregation of the premium as regards specific subsidiaries
or individual directors and officers.
Employment-Type Contracts
In September, 1987, the Company entered into change-in-control severance
agreements with Messrs. Bannister, Duggan, Blanchard, and Reichardt, and
certain other executive officers of DynCorp (the "Severance Agreements").
Each Severance Agreement provides that certain benefits, including a lump-sum
payment, will be triggered if such executive is terminated following a change
in control during the term of that executive's Severance Agreement, unless
such termination occurs under certain circumstances set forth in the Severance
Agreements. The Severance Agreements expire on December 31, 1995, but they
are automatically extended. The amount of such lump sum payment would be
equal to 2.99 times the sum of the executive's annual salary and the average
annual amount paid to the executive pursuant to certain applicable
compensation-type plans in the three years preceding the year in which the
termination occurs. Other benefits include payment of any incentive
compensation which has been allocated or awarded but not yet paid to the
executive for a fiscal year or other measuring period preceding termination
and a pro rata portion to the date of termination of the aggregate value of
incentive compensation awards for uncompleted periods under such plans. Each
Severance Agreement also provides that, if the aggregate of the lump sum
payment to the executive and any other payment or benefit included in the
calculation of "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code exceeds the amount the Company is entitled to deduct on
its federal income tax return, the severance payments shall be reduced until
no portion of the aggregate termination payments to the executive is not so
deductible or the severance payment is reduced to zero. The Severance
Agreements also provide that the Company will reimburse the executive for
legal fees and expenses incurred by the executive as a result of termination
except to the extent that the payment of such fees and expenses would not be,
or would cause any other portion of the aggregate termination payments not to
be, deductible by reason of Section 280G of the Code.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors
during 1994 were: Herbert S. Winokur, Jr., Chairman of the Board and
Director; and Russell E. Dougherty, Director, and, as of November, 1994,
Michael T. Masin, Director. None of the members are current or former
employees of the Company, and, except for Mr. Winokur, whose relationship to
Capricorn Investors, L.P. ("Capricorn") is described in Item 12, none have any
relationship with the Company of the nature contemplated by Rule 404 of
Regulation S-K.
On February 12, 1992, the Company loaned $5,500,000 to Cummings Point
Industries, Inc. ("CPI"), a Delaware corporation of which Capricorn owns more
than 10%. The indebtedness is represented by a promissory note (the "Note"),
bearing interest at the annual rate of 17%, which provides that interest is
payable quarterly but that interest payments may be added to the principal of
the Note rather than being paid in cash. The Note is subordinated to all
senior debt of CPI. The Note was due six months after issuance, but it has
been, and may continue to be, automatically extended for three-month periods
until no later than February 12, 1996. By separate agreement, Capricorn
agreed to purchase the Note from the Company upon three months' notice, for
the amount of outstanding principal plus accrued interest. The purchase
obligation is secured by certain common stock and warrants issued by the
Company and owned by Capricorn.
No executive officer of the Company serves on the board of directors or
compensation committee of any entity (other than subsidiaries of the Company)
whose directors or executive officers served on the Board of Directors or
Compensation Committee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Voting Securities
As of March 1, 1995, the Company had 7,405,153 shares of Common Stock
and 123,711 shares of Class C Preferred Convertible Stock outstanding, which
constituted all the outstanding voting securities of the Company. If all the
shares issuable upon exercise of outstanding warrants, all the shares issuable
upon conversion of outstanding Class C Preferred Convertible Stock and
exercise of related warrants, and shares issuable as a result of immediate
vesting and expiration of deferrals under the Restricted Stock Planer were to
be issued, the outstanding voting securities following such dilution would
consist of 12,435,676 shares of Common Stock (and no shares of Class C Stock).
The following tables show beneficial ownership of issued voting shares as a
percentage of currently outstanding stock and beneficial ownership of issued
and issuable shares as a percentage of common stock on a fully diluted basis
assuming all such conversions, exercises, and issuances.
Security Ownership of Certain Beneficial Owners
The following table presents information as of March 1, 1995, concerning
the only known beneficial owners of five percent or more of the Company's
Common Stock and Class C Preferred Stock.
<TABLE>
<CAPTION>
Amount & Amount &
Nature of Nature of Percent
Ownership of Ownership of of
Name and Address of Title of Outstanding Percent Diluted Diluted
Beneficial Owner Class Shares of Class Shares (3) Shares (3)
<S> <S> <C> <C> <C> <C>
Trustee of the DynCorp Common 5,027,628 67.7% 5,027,628 40.0%
Employee Stock Ownership Trust Direct(1) Direct(1)
c/o DynCorp
2000 Edmund Halley Dr.
Reston, VA 22091
Capricorn Investors, L.P.(2) Common 292,369 3.9% 4,117,127 32.8%
72 Cummings Point Road Direct Direct
Stamford, CT 06902
Capricorn Investors, L.P.(2) Class C 123,711 100% N/A -
72 Cummings Point Road Preferred Direct
Stamford, CT 06902
</TABLE>
(1) Shares are held for the accounts of participants in the ESOP. When
allocated to individual participant accounts, shares are voted upon
instruction of the individual participants. Until so allocated, shares
are voted upon the instruction of the ESOP Administrative Committee,
2000 Edmund Halley Drive, Reston, Virginia 22091.
(2) Herbert S. Winokur, Jr., Chairman of the Board and a Director of the
Company, is the President of Winokur Holdings, Inc., which is the
managing partner of Capricorn Holdings, G.P., which in turn is the
general partner of Capricorn Investors, L.P.
(3) Assumes exercise of all outstanding warrants, conversion of Class C
Stock, exercise of warrants issuable upon such conversion, full vesting
of all remaining Restricted Stock Plan units, distribution of all
deferred units under Restricted Stock Plan, and sale and distribution of
Common Stock which is the subject of this registration statement.
Security Ownership of Management(1)
Beneficial ownership of the Company's equity securities by
directors and nominees for election to the Board, and all current officers and
directors as a group, are set forth below:
<TABLE>
<CAPTION>
Amount & Nature Amount & Nature Percent
of Ownership Percent of Ownership of
Name and Title of Title of of Outstanding of of Diluted Diluted
Beneficial Owner Class Shares(2) Class(3) Shares(4) Shares(3)(4)
<S> <S> <C> <C> <C> <C>
D. R. Bannister Common 300,337 Direct} 4.1% 354,998 Direct} 2.9%
President & Director 7,356 Indirect) 7,356 Indirect}
T. E. Blanchard Common 146,019 Direct} 2.2% 193,486 Direct} 1.7%
Senior Vice President 14,292 Indirect) 14,292 Indirect}
& Director
R. E. Dougherty Common -- -- -- 1,870 Direct *
Director
J. H. Duggan Common 121,610 Direct} 1.8% 179,882 Direct} 1.5%
Executive Vice 12,723 Indirect) 12,723 Indirect}
President & Director
P. V. Lombardi Common 5,275 Direct} * 17,275 Direct} *
Executive Vice 831 Indirect) 831 Indirect}
President & Director
Michael T. Masin -- -- -- -- -- --
Director
D. C. Mecum II Common -- -- -- 1,870 Direct *
Director
D. L. Reichardt Common 57,428 Direct} * 89,458 Direct} *
Senior Vice President 10,983 Indirect) 10,983 Indirect}
& Director
H. S. Winokur, Jr.(5) Common 292,369 Indirect 3.9% 4,117,127 Indirect 33.1%
Chairman of the
Board & Director Class C 123,711 Indirect 100% N/A --
Preferred
All officers and Common 823,006 Direct} 17.2% 1,170,584 Direct} 43.4%
directors as a group 456,077 Indirect 4,280,835 Indirect}
Class C 123,711 Indirect) 100% N/A -- --
Preferred Indirect
</TABLE>
(1) As disclosed in filings under the Securities Exchange Act of 1934 or
otherwise known to the Company as of March 1, 1995. Shares held by the
ESOP trustee but within individual voting control are included in the
table, whether or not vested.
(2) Restricted stock units which have not been vested and converted into
shares of stock and distributed pursuant to the Company's Restricted
Stock Plan as of March 1, 1995 are not transferable by or within the
voting control of the participants. Such units are not included in
outstanding shares.
(3) An asterisk indicates that beneficial ownership is less than one percent
of the class.
(4) Assumes exercise of all outstanding warrants, conversion of Class C
Stock, exercise of warrants issuable upon such conversion, full vesting
of all remaining Restricted Stock Plan units, distribution of all
deferred units under Restricted Stock Plan, and sale and distribution of
Common Stock which is the subject of this registration statement.
(5) Includes securities owned by Capricorn. See preceding table for
relationship of Mr. Winokur thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Dougherty is of counsel to the law firm of McGuire, Woods, Battle &
Boothe, which firm has provided legal services to the Company from time to
time.
Officers and directors who obtained securities through the Company's
Management Employees Stock Purchase Plan and Restricted Stock Plan are subject
to the New Stockholders Agreement described above. Under the terms of the New
Stockholders Agreement, the Company's securities can not be sold individually
to outside parties. Management employees of the Company whose employment is
terminated may elect to retain their securities indefinitely, or under certain
circumstances may be required to sell such securities, at the fair market
price established by the Board of Directors from time to time, to the other
stockholders or to the Company, and the Company is required to repurchase such
securities at such price, subject to restrictions imposed by its Certificate
of Incorporation and various financing agreements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
Pages
1. All financial statements.
See Table of Contents
2. Financial statement Schedules.
Schedule I - Condensed Financial Information of Registrant
DynCorp (Parent Company)
Balance Sheets
Assets
Liabilities and Stockholders' Equity
Statements of Operations
Statements of Cash Flows
Notes to Condensed Financial Statements
Schedule II - Valuation and Qualifying Accounts for the
Years Ended December 31, 1994, 1993, and 1992.
All other financial schedules not listed have been omitted
since the required information is included in the Consolidated
Financial Statements or the notes thereto, or is not applicable
or required.
3. Exhibits
Exhibit 3
(1) Certificate of Incorporation, as currently in effect,
consisting of Restated Certification of Incorporation
(incorporated by reference to Registrant's Form 10-K
for 1992, File No. 1-3879)
(2) Registrant's By-laws (incorporated by reference to
Registrant's Form 10-K for 1993, File No. 1-3879)
Exhibit 4
(1) Specimen 16% Pay-in-Kind Junior
Subordinated Debentures due 2003 Certificate.
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(2) Indenture for $100,000,000 of 8.54% Contract Receivables
Collateralized Notes, Series 1992-1, Due 1997, dated
as of January 1, 1992, between Dyn Funding Corporation
(wholly owned subsidiary of the Registrant) and Bankers
Trust Company, as trustee (incorporated by reference to
Registrant's Form 8-K filed February 7, 1992, File No. 1-3879)
(3) Specimen 18% Class C Preferred Stock Certificate.
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(4) Specimen Common Stock Certificate.
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(5) Specimen Class A Common Stock Warrant Certificate.
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(6) Specimen Class B Common Stock Warrant Certificate.
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(7) Indenture Agreement for 16% Pay-in-kind Junior Subordinated
Debenture (incorporated by reference to Exhibit 4.1 to
Form S-4 filed July 27, 1988)
(8) Statement Respecting Warrants and Lapse of Certain Restrictions
(incorporated by reference to Registrant's
Form 10-K for 1988, File No. 1-3879)
(9) Amendment (effective March 26, 1991) to Statement Respecting
Warrants and Lapse of Certain Restrictions (incorporated by
reference to Registrant's Form 10-K for 1990, File No. 1-3879)
(10) Article Four of the Restated Certificate of Incorporation
(incorporated by reference to Registrant's Form 10-K for 1992,
File No. 1-3879)
The Registrant, by signing this Report, agrees to furnish the Securities
and Exchange Commission, upon its request, a copy of any instrument which
defines the rights of holders of long-term debt of the Registrant.
Exhibit 10
(1) Deferred Compensation Plan.
(incorporated by reference to Registrant's Form 10-K for 1987,
File No. 1-3879)
(2) Management Incentive Plan (MIP)
(incorporated by reference to Registrant's Form 10-K for 1993,
File No. 1-3879)
(3) DynCorp Executive Incentive Plan (EIP)
(incorporated by reference to Registrant's Form 10-K for 1994,
File No. 1-3879)
(4) Management Severance Agreements.
(incorporated by reference to Exhibits (c)(4) through (c)(12)
to Schedule 14D-9 filed by Registrant January 25, 1988.
(5) Employment agreement of Richard L. Webb, Vice President,
Aviation Services, dated June 24, 1992 (incorporated by
reference to Registrant's Form 10-K for 1992, File No. 1-3879)
(6) Employment agreement of Paul V. Lombardi,
Vice President, Government Services Group
(incorporated by reference to Registrant's Form 10-K for 1993,
File No. 1-3879)
(7) Restricted Stock Plan.
(incorporated by reference to Registrant's Form 10-K for 1993,
File No. 1-3879)
Exhibit 11
(1) Computations of Earnings Per Common Share for the
Years Ended December 31, 1994, 1993, and 1992
Exhibit 21
(1) Subsidiaries of the Registrant
Exhibit 24
(1) Consent of Independent Public Accountants
(b) Reports on Form 8-K
None filed during the fourth quarter
ended December 31, 1994
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DYNCORP
March 31, 1995 By: D. R. Bannister
D. R. Bannister
President and Chief
Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
D. R. Bannister President and Director March 31, 1995
D. R. Bannister (Principal Executive Officer)
J. H. Duggan Executive Vice President- March 31, 1995
J. H. Duggan and Director
P. V. Lombardi Executive Vice President- March 31, 1995
P. V. Lombardi and Director
T. E. Blanchard Senior Vice President- March 31, 1995
T. E. Blanchard Chief Financial Officer
and Director
D. L. Reichardt Senior Vice President- March 31, 1995
D. L. Reichardt General Counsel and Director
G. A. Dunn Vice President March 31, 1995
G. A. Dunn and Controller
(Principal Accounting Officer)
D. C. Mecum II Director March 31, 1995
D. C. Mecum II
H. S. Winokur, Jr. Director March 31, 1995
H. S. Winokur, Jr.
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
ASSETS
December 31,
1994 1993
Current Assets:
Cash and short-term investments $ 8,937 $ 6,894
Accounts receivable and contracts in process,
net of allowance for doubtful accounts (Note 3) 35,689 20,723
Inventories of purchased products and supplies 977 513
Other current assets 5,027 3,718
Total current assets 50,630 31,848
Investment in and advances to subsidiaries and affiliates
affiliates 74,278 70,277
Property and Equipment, net of accumulated depreciation
and amortization 8,126 9,836
Intangible Assets, net of accumulated amortization 78,377 86,811
Other Assets 4,559 6,040
Total Assets $215,970 $204,812
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements"
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY
December 31,
1994 1993
Current Liabilities:
Notes payable and current portion of long-term
debt (Note 2) $ 2,919 $ 3,392
Accounts payable 13,068 11,594
Advances on contracts in process 2,711 864
Accrued liabilities 64,303 71,855
Total current liabilities 83,001 87,705
Long-Term Debt (Note 2) 108,508 93,150
Other Liabilities and Deferred Credits 14,923 15,591
Total Liabilities 206,432 196,446
Commitments, Contingencies and Litigation - -
Redeemable Common Stock redemption value per share
of $18.20 in 1994 and $17.50 in 1993, 125,714 shares
issued and outstanding 2,288 2,200
Stockholders' Equity:
Capital stock, $0.10 par value:
Preferred stock, Class C 3,000 3,000
Common stock 789 502
Common stock warrants 11,486 15,119
Unissued common stock under restricted stock plan 9,923 10,395
Paid-in surplus 118,068 95,983
Deficit (118,256) (105,425)
Common stock held in treasury (8,817) (5,840)
Cummings Point Industries, Inc. note receivable (8,943) (7,568)
Total Stockholders' Equity 7,250 6,166
Total Liabilities, Redeemable Common Stock
and Stockholders' Equity $215,970 $204,812
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Operations
(Dollars in Thousands)
For the Years Ended December 31,
1994 1993 1992
Revenues $545,581 $552,662 $557,675
Costs and Expenses:
Cost of services 523,029 528,776 542,901
Selling and corporate administrative 10,654 10,994 12,534
Interest expense 15,243 14,950 14,608
Interest income (1,946) (1,969) (1,693)
Other (Note 3) 36,842 23,902 23,490
583,822 576,653 591,840
Loss before income taxes, equity
in net income of subsidiaries
and extraordinary item (38,241) (23,991) (34,165)
Benefit for income taxes (14,593) (1,561) (3,900)
Loss before equity in net income of subsidiaries
and extraordinary item (23,648) (22,430) (30,265)
Equity in net income of subsidiaries (10,817) (9,016) (9,449)
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early retirement
of debt - - 2,526
Net Loss (12,831) (13,414) (23,342)
Preferred Stock Class A dividends declared
and paid and accretion of discount - - 959
Net Loss for Common Stockholders $(12,831) $(13,414) $(24,301)
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Cash Flows
(Dollars in Thousands)
For the Years Ended December 31,
1994 1993 1992
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss from operations
to net cash provided by operating activities:
Depreciation and amortization 12,575 7,834 9,510
Pay-in-kind interest on Junior Subordinated
Debentures 15,329 13,142 6,590
Loss on purchase of Junior Subordinated Debentures - - 2,526
Deferred income taxes (59) 521 (666)
Accrued compensation under Restricted Stock Plan (329) 2,047 2,354
Noncash interest income (1,375) (1,158) (910)
Other (665) (1,936) (4,363)
Change in assets and liabilities, net of acquisitions
and dispositions and sale of accounts receivable in 1993:
Increase in accounts receivable and contracts
in process (14,966) (2,570) (10,173)
Increase in inventories (465) (93) (72)
(Increase) decrease in other current assets (1,309) 1,992 986
Increase (decrease) in current liabilities except notes
payable and current portion of long-term debt(4,097) (976) 6,690
Cash provided (used) by operating activities(8,192) 5,389 (10,870)
Cash Flows from Investing Activities:
Sale of property and equipment 660 829 130
Proceeds received from notes receivable - - 1,346
Purchase of property and equipment, net of
capitalized leases 1,734 (928) (2,381)
Increase in notes receivable - - (5,500)
Increase in investments in affiliates 1,500 - (1,888)
Other (1,334) 345 (221)
Cash provided (used) from investing activities 2,560 246 (8,514)
Cash Flows from Financing Activities:
Purchase of Preferred Stock Class A and
Junior Subordinated Debentures - - (42,466)
Treasury stock purchased (3,182) (1,979) (3,448)
Payment on indebtedness (3,914) (4,725) (41,010)
Accounts receivable sold (Note 3) - - 63,682
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership Plan - 16,116 16,099
Sale of stock to Employee Stock Ownership Plan 17,100 - -
Other financing transactions (38) - -
Change in intercompany balances, net (2,450) (14,021) 14,050
Cash provided (used) from financing activities 7,675 (4,563) 6,154
Net Increase (Decrease) in Cash and Short-term
Investments 2,043 1,072 (13,230)
Cash and Short-term Investments at Beginning
of the Year 6,894 5,822 19,052
Cash and Short-term Investments at End of the
Year 8,937 6,894 5,822
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
Schedule I - Notes to Condensed Financial Statements
December 31, 1994
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the Condensed Financial Statements of the Registrant do not
include all of the information and notes normally included with financial
statements prepared in accordance with generally accepted accounting
principles. It is, therefore, suggested that these Condensed Financial
Statements be read in conjunction with the Consolidated Financial Statements
and Notes included elsewhere in this Annual Report on Form 10-K.
2. Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of (in
thousands):
1994 1993
Junior Subordinated Debentures, net of unamortized
discount of $4,793 and $5,175 $102,659 $86,947
Notes payable, due in installments through 1999,
9.98% weighted average interest rate 6,966 6,643
Capitalized equipment leases 1,802 2,952
111,427 96,542
Less current portion 2,919 3,392
$108,508 $93,150
Maturities of long-term debt as of December 31, 1994, were as follows (in
thousands):
1995 $ 2,919
1996 2,593
1997 1,907
1998 956
1999 185
Thereafter 102,867
$111,427
3. Accounts Receivable
At December 31, 1992, the Company had sold $63,682,000 of its accounts
receivable to Dyn Funding Corporation (DFC), a wholly owned subsidiary of the
Company. DFC was established in January, 1992 to issue $100,000,000 of
Contract Receivable Collateralized Notes (Notes) and to purchase eligible
accounts receivable from the Company and its subsidiaries. On an ongoing
basis, the cash received by DFC from collection of the receivables is used to
make interest payments on the Notes, pay a servicing fee to the Company and
purchase additional receivables from the Company (see Note 5 to Consolidated
Financial Statements included elsewhere in this Form 10-K).
The Company receives 97% of the face value of the accounts receivable sold
to DFC. The 3% discount from the face value of the accounts receivable is
recorded as an expense by the Company at the time of sale. In 1994 and 1993,
the Company recorded as expense $16,032,000 and $16,298,000 which is reflected
in "Other" in the accompanying "Statements of Operations" (in the
"Consolidated Statements of Operations" of DynCorp and Subsidiaries this
expense is offset by the gain recognized by DFC).
DynCorp and Subsidiaries
SCHEDULE II - Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993, and 1992
(Dollars in Thousands)
Balance at Charged to Charged Balance
Beginning Costs and to other Deduct- at End of
Description of period Expenses Accounts (1) ions Period
Year Ended December 31, 1994
Allowance for doubtful
accounts $1,469 $2,503 $ 367 $ 347 $3,992
Year Ended December 31, 1993
Allowance for doubtful
accounts $3,415 $1,141 $ 79 $3,166 $1,469
Year Ended December 31, 1992
Allowance for doubtful
accounts $2,532 $ 965 $ 254 $ 336 $3,415
(1) Includes recovery of prior year write-offs.
(2) Write-off of uncollectible accounts.
EXHIBIT 11
DynCorp and Subsidiaries
Computations of Earnings Per Common Share
(Dollars in thousands except per share data)
Year Ended December 31,
1994 1993 1992
Primary and Fully Diluted
Earnings:
Loss before extraordinary item $ (12,831) $ (13,414) $ (20,816)
Extraordinary gain (loss) - - (2,526)
Net loss (12,831) (13,414) $ (23,342)
Preferred stock Class A dividends declared
and paid and accretion of discount - - 959
Preferred stock Class C dividends
not accrued or paid 1,606 1,347 1,129
Net loss for common stockholders $ (14,437) $ (14,761) $ (25,430)
Shares:
Weighted average common shares
outstanding 6,802,012 5,141,319 5,102,621
Earnings (loss) per common share:
Loss before extraordinary item $ (2.12) $ (2.87) $ (4.49)
Extraordinary gain (loss) - - (0.49)
Net loss for common stockholders $ (2.12) $ (2.87) $ (4.98)
EXHIBIT 21
SUBSIDIARIES OF DYNCORP
Name of Subsidiary Domicile
Aerotherm Corporation California
Air Carrier Services, Inc. Virginia
DAPSCO Inc. California
Dyn Funding Corporation Delaware
Dyn Marine Services, Inc. California
Dye Marine Services of Virginia, Inc. Virginia
Dyn/Mexico Holdings, Inc. Virginia
Dyn Network Management, Inc. Virginia
Dyn Pacific Aerospace jServices, Inc. Delaware
Dyn Realty Corporation Virginia
Dyn Systems Technology, Inc. Virginia
DynAir CFE Services, Inc. Delaware
DynAir de Mexico S.A. de C.V. Mexico
DynAir Euroservices (UK) Ltd. United Kingdom
DynAir Fueling Inc. Delaware
DynAir Fueling of Nevada Inc. Nevada
DynAir Maintenaance, Inc. New York
DynAir Services Inc. Delaware
DynAir Services Russia Inc. Delaware
DynAir Tech of Arizona, Inc. Arizona
DynAir Tech of Florida, Inc. Florida
DynAir Tech of Texas, Inc. Texas
DynAir Technologies International, Inc. Virginia
DynCorp Advanced Repair Technology, Inc. Virginia
DynCorp Advanced Technology Service, Inc. Virginia
DynCorp Aerospace Operations, Inc. Delaware
DynCorp Aerospace Operations (UK) Ltd. United Kingdom
DynCorp Aviation Services, Inc. Virginia
DynCorp/DynAir Corporation California
DynCorp Environmental, Energy & National
Security Programs, Inc. Virginia
DynCorp of Colorado, Inc. Delaware
DynCorp Information & Engineering
Technology, Inc. Delaware
DynCorp International Services GmbH Germany
DynCorp International Services, Inc. Virginia
DynCorp International Services Ltd. Cayman Is.
DynCorp Viar Inc. Virginia
DynCorp West Virginia West Virginia
DynTel Corporation Virginia
General Systems Engineering, Inc. Virginia
Grupo DynCorp de Mexico Mexico
Kwajalein Services, Inc. Virginia
TAI Realty Corporation Virginia
Other Affiliated Companies
Advanced Repair Technology, Int'l Ltd. Texas LLC
Business Mail Express, Inc. Delaware
DynKePRO L.L.C. Delaware LLC
DynMcDermott Petroleum Operations Company Louisiana
Exhibit 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation of our report dated March 21, 1995,
included in this Form 10-K, into the Company's previously
filed Amendment No. 3 to Form S-4 Registration Statement No.
33-21412 and Amendment No. 1 to Form S-8 Registration
Statement No. 33-24927.
ARTHUR ANDERSEN LLP
Washington, D.C.,
March 31, 1995.
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use
of our reports (and to all references to our Firm) included in or
made a part of this registration statement.
October 6, 1995
Washington, D. C.
ARTHUR ANDERSEN LLP
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature to this Amendment to Registration Statement appears
below hereby appoints Dan R. Bannister, David L. Reichardt and H.
Montgomery Hougen, and each of them, any one of whom may act
without the joiner of the others, as his or her attorney-in-fact
with full power of substitution and resubstitution to sign on his
or her behalf individually and in the capacity stated below, and
to sign and file all amendments and post-effective amendments to
this Amendment to Registration Statement and any and all other
documents that may be required in connection with the filing of
this Amendment to Registration Statement, which amendments may
make such changes and additions to this Amendment to Registration
Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities act of 1933,
as amended, this Amendment to Registration Statement has been
signed by the following person sin the capacities and on the
dates indicated.
Signature Title
Herbert S. Winokur, Jr. Director and Chairman of the Board
Herbert S. Winokur, Jr.
Dan R. Bannister Director, President and Chief Executive Officer
Dan R. Bannister (Principal Executive Officer)
T. Eugene Blanchard Director,Senior Vice President and Chief Financial
T. Eugene Blanchard Officer (Principal Financial Officer)
Russell E. Dougherty Director
Russell E. Dougherty
Gerald A. Dunn Vice President and Controller
Gerald A. Dunn (Principal Accounting Officer)
James H. Duggan Director and Executive Vice President
James H. Duggan
Paul V. Lombardi Director and Executive Vice President
Paul V. Lombardi
Dudley C. Mecum II Director
Dudley C. Mecum II
Michael T. Masin Director
Michael T. Masin
David L. Reichardt Director, Senior Vice President and General Counsel
David L. Reichardt
