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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1993 1-3985
EDO CORPORATION
Exact name of Registrant as specified in its charter.
State of Incorporation: IRS Employer Identification No.:
New York 11-0707740
Address of principal executive offices:
14-04 111th Street, College Point, New York 11356-1434
Telephone No.:
(718) 321-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Shares New York Stock Exchange
par value $1 per share
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 by delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 8, 1994............... $32,257,162
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock as of March 8, 1994.................5,473,955
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1993 are incorporated by reference into Part I and Part II.
Portions of the Definitive Proxy Statement of the Registrant, dated March 23,
1994, are incorporated by reference into Part III.
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EDO Corporation
Table of Contents
PART I...................................................................... 1
ITEM 1. BUSINESS............................................................ 1
MILITARY SYSTEMS.......................................................... 1
Aircraft Stores Suspension and Ejection Systems......................... 1
Sonar Systems........................................................... 1
Airborne Mine Countermeasure Systems.................................... 1
Command, Control and Communications (C3) Systems........................ 1
COMMERCIAL AND OTHER PRODUCTS............................................. 1
Acoustic Instrument Systems............................................. 1
Ceramic Components...................................................... 1
Spaceflight Systems..................................................... 2
Infrared Instrumentation................................................ 2
Fiber-Reinforced Structures............................................. 2
Composite Sports Products............................................... 2
Compressed Natural Gas Vehicle Products................................. 2
RESEARCH AND DEVELOPMENT.................................................. 2
MARKETING AND INTERNATIONAL SALES......................................... 2
BACKLOG................................................................... 3
GOVERNMENT CONTRACTS...................................................... 3
COMPETITION AND OTHER FACTORS............................................. 3
EMPLOYEES................................................................. 4
EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 4
ITEM 2. PROPERTIES.......................................................... 4
ITEM 3. LEGAL PROCEEDINGS................................................... 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 5
PART II..................................................................... 5
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.............................. 5
ITEM 6. SELECTED FINANCIAL DATA............................................. 5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 5
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 5
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 5
PART III.................................................................... 5
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 5
ITEM 11. EXECUTIVE COMPENSATION............................................. 5
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 5
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 5
PART IV..................................................................... 5
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K... 5
(a) Financial Statements And Financial Statement
Schedules And Exhibits.............................................. 5
1. Financial Statements............................................ 5
2. Financial Statement Schedules................................... 5
3. Exhibits........................................................ 6
(b) Reports on Form 8-K................................................. 7
SIGNATURES.................................................................. 8
INDEPENDENT AUDITORS' REPORT................................................ 9
Schedule V.................................................................. 9
Schedule VI................................................................. 10
Schedule X.................................................................. 10
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PART I
ITEM 1. BUSINESS
The term "Registrant" as used in this Annual Report refers to EDO Corporation.
The term "Company" as used in this Annual Report, except where the context
otherwise requires, includes the Registrant and its subsidiaries.
EDO Corporation was incorporated in New York in 1925 by Earl Dodge Osborn, from
whose initials "EDO" is derived. In the early days of modern aviation, the
Company pioneered in the development of seaplane floats and continues to
manufacture floats for general aviation aircraft.
Presently, the Company designs and manufactures advanced electronic, acoustic,
aerodynamic and hydrodynamic equipment for military applications and for
marine, aviation and other commercial markets. In response to defense spending
reductions, the Company has been aggressively pursuing the application of its
sophisticated and diverse defense-related technologies to civilian and
commercial markets.
The Company organizes its business into two segments: Military Systems; and
Commercial and Other Products. A description of the principal products of the
Company within the two industry segments is set forth below. The Company
recently adopted a restructuring plan which consists of the discontinuance of
the Company's defense business in Canada, the relocation of some United States
production from New York to less costly locations, the related disposition of
non-productive assets (principally land and buildings), and work force
reductions. Additionally, information about the Company's restructuring plan is
contained on page 14 and Note 2 on page 21 of the Company's 1993 Annual Report
to Shareholders, and is incorporated by reference. Certain business segment
information on the Company's operations is set forth under Note 18 on pages 27
and 28 of the Company's 1993 Annual Report to Shareholders and is incorporated
by reference.
MILITARY SYSTEMS
The Company's operations in the Military Systems segment consist of the
development and production of sophisticated electronic, acoustic, hydrodynamic
and aerodynamic military systems. The Company additionally provides logistic
support for its products following initial hardware deliveries. Such support
consists of training operators and support personnel, supplying spare parts,
and providing repair and refurbishment services. The revenues from such support
services have been a significant portion of Military Systems' net sales.
AIRCRAFT STORES SUSPENSION AND EJECTION SYSTEMS
The Company developed and manufactures: bomb release units ("BRUs") for the
U.S. Air Force F-15E; ejection release units ("ERUs") used on Tornado
Multirole Combat Aircraft; and jettison release mechanisms ("JRMs") for the
U.S. Navy F-14.
The Company designed and is developing the Advanced Medium Range Air-to-Air
Missile ("AMRAAM") for the F-22 Advanced Tactical Fighter. Funded development
is expected to continue through 1994.
For 1993, 1992 and 1991, respectively, sales of aircraft stores suspension and
ejection systems represented 12%, 11% and 12% of consolidated net sales.
SONAR SYSTEMS
The Company develops and produces advanced sonar systems for use in a variety
of military applications. These sonar systems are an important element in
anti-submarine warfare. The Company's sonar products include active and
passive, and variable depth and hull-mounted systems, covering an extensive
range of size and capability.
The Company developed and produces "Flat-Pak" hydrophones and associated
electronics for a submarine-mounted passive listening sonar system.
The Company also produces the acoustic portion of the MK-39 "EMATT" training
target. This program is expected to be in production until late in the decade.
For 1993, 1992 and 1991, respectively, sales of military sonar systems and
acoustic products represented 21%, 25% and 32% of consolidated net sales.
AIRBORNE MINE COUNTERMEASURE SYSTEMS
The Company is the only manufacturer of the MK-105, a helicopter-towed magnetic
minesweeping system designed and developed by the Company in cooperation with
the U.S. Navy. During 1991 and early 1992, the Company received contracts to
develop a major upgrade of the MK-105. For 1993, 1992 and 1991, respectively,
sales of helicopter-towed mine countermeasure systems represented 13%, 13% and
9% of consolidated net sales.
COMMAND, CONTROL AND COMMUNICATIONS (C3) SYSTEMS
The Company manufactures Command, Control and Communications ("C3") systems and
develops software for these systems using commercial off-the-shelf hardware and
software components.
COMMERCIAL AND OTHER PRODUCTS
ACOUSTIC INSTRUMENT SYSTEMS
The Company manufactures data/voice communications, velocity measurement and
navigation sonar commercial undersea acoustic instruments. Although designed
for commercial markets, these products are also supplied to military markets
worldwide.
CERAMIC COMPONENTS
Piezoelectric materials transform acoustic or other mechanical energy into
electrical energy and vice versa. The
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Company designs and manufactures piezoelectric materials and components, which
have applications in sonar systems, medical instruments, ultrasonics, actuators
and other specialized products.
SPACEFLIGHT SYSTEMS
The Company designs and manufactures electro-optical products for space
including horizon sensors that provide the stabilization and orientation
signals for spacecraft. In addition, the Company manufactures scientific
payloads, which measure various characteristics of planets, their atmosphere
and other phenomena or events observable from orbiting satellites.
For 1993, 1992 and 1991, respectively, sales of spaceflight systems represented
13%, 14% and 12% of consolidated net sales.
INFRARED INSTRUMENTATION
The Company manufactures a line of microthermal imagers for design and
reliability analysis of semiconductors in commercial applications. This line
includes instrumentation used to identify thermal stresses in integrated
circuits, hybrids and printed circuit boards, and an emission microscope.
FIBER-REINFORCED STRUCTURES
The Company designs and manufactures fiber-reinforced composite structures,
including filament-wound and layup processes. The Company has applied its
filament-winding technology to produce stator rings for power turbines, VT-1
missile launch tubes, and water and waste-holding tanks for commercial
aircraft, as well as laid-up, autoclave cured, aerodynamic structures for
commercial aircraft and laid-up sonar dome structures for ships. The Company
maintains an active business in the supply of spare parts and repairs for water
and waste tanks for virtually every commercial airline in the world.
COMPOSITE SPORTS PRODUCTS
A wholly-owned subsidiary of the Registrant, EDO Sports was formed in 1991 to
commercialize advancements in composite sporting goods through the use of new,
proprietary fabrication techniques. EDO Sports designs, manufactures and
distributes premium-grade, high-performance golf club and sport bicycle
components.
COMPRESSED NATURAL GAS VEHICLE PRODUCTS
The Company designed, developed and manufactures all-composite fuel tanks for
vehicles operating on compressed natural gas. These tanks have been certified
for use in Canada and the U.S. In December 1993, the Company purchased the
assets of Automotive Natural Gas, Inc., a manufacturer of refueling stations
and conversion kits for compressed natural gas vehicles.
RESEARCH AND DEVELOPMENT
Research and development, performed both under development contracts with
customers and at Company expense, are important factors in the Company's
business. The Company's research and development efforts involve approximately
140 employees in the fields of acoustic, electronic, hydrodynamic, aerodynamic,
structural and material engineering. Research and development programs are
designed to develop technology for new products or to extend the capability of
existing products and to assess their commercial potential.
Customer-sponsored research and development programs are principally related to
military programs in the Military Systems segment. Major customer-sponsored
research and development programs include: continued development of
improvements to the AN/SQR-18A(V) TACTAS system; improvements to the MK-105
mine countermeasures system; development of a new surface ship sonar system;
development of a combat integration system; and development of new and improved
stores launchers.
Expenditures under development contracts with customers vary in amount from
year to year because of the timing of contract funding. During 1993,
expenditures for customer-sponsored research and development was down 13%
primarily as a result of less available funding consistent with the general
decline in military spending.
Company-sponsored research and development has contributed to a number of
advances in sonar systems, transducers, filament-wound structures, and a new
technique for manufacturing golf club shafts.
Principal current research and development involves image and signal processing
and other improvements for sonars, improvements to minesweeping technology;
continued development of its satellite-based sensors; new advancements in
sporting goods products; and new products for the compressed natural gas
market.
The following table sets forth research and development expenditures for the
periods presented.
Year Ended December 31,
1993 1992 1991
(in thousands)
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Customer-sponsored $14,100 $16,100 $20,700
Company-sponsored 6,000 5,300 3,800
Total $20,100 $21,400 $24,500
MARKETING AND INTERNATIONAL SALES
Military sales of the Company's products to both the U.S. and foreign
governments are usually made under negotiated long-term contracts or
subcontracts covering one or more years of production. The Company believes
that its long history of association with its military customers is an
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important factor in the Company's overall business, and that the experience
gained through this history has enhanced the Company's ability to anticipate
its customers' needs. The Company's approach to its military business is to
anticipate specific customer needs and to develop systems to meet those needs
either at its own expense or pursuant to research and development contracts.
The Company sells products in its Military Systems segment as a prime
contractor and through subcontracts with other military prime contractors. In
addition to military sales to the U.S. Department of Defense, the Company also
sells Military Systems segment equipment to the U.S. Government for resale to
foreign governments under the Foreign Military Sales program and, subject to
approval by the U.S. Department of State, directly to foreign governments.
Products within the Commercial and Other Products segment are sold in
industrial and commercial markets. In foreign markets piezoelectric and
electronic products are generally sold commercially through a network of sales
representatives. Fiber-reinforced composite products are sold, in certain
product areas, on a direct basis and, in other product areas, through sales
representatives. The Company's sports products are generally sold through
independent distributors, dealers, and original equipment manufacturers.
It is the Company's policy to denominate all foreign contracts from its U.S.
operations in U.S. dollars and to incur no significant costs in connection with
long-term foreign contracts until the Company has received advance payments or
letters of credit on amounts due under the contracts. The Company's only
significant asset outside the United States is its majority-owned subsidiary,
EDO (Canada) Limited, which represents approximately 5% of the Company's total
consolidated assets.
BACKLOG
A significant portion of the Company's sales are made to the U.S. armed
services and foreign governments pursuant to long-term contracts. Accordingly,
the Company's backlog of unfilled orders consists in large part of orders under
these government contracts. As of December 31, 1993, the Company's total
backlog was approximately $89.2 million, as compared with $94.2 million on
December 31, 1992. Of the total backlog as of December 31, 1993, approximately
66% was scheduled for delivery in 1994. Total backlog as of December 31, 1993,
divided between the Company's two industry segments, was Military Systems,
$64.2 million, and Commercial and Other Products, $25.0 million, as compared,
respectively, with $66.8 million and $27.4 million as of December 31, 1992.
GOVERNMENT CONTRACTS
Sales to the U.S. Government, as a prime contractor and through subcontracts
with other prime contractors, accounted for 56% of the Company's 1993 net sales
compared with 60% in 1992 and 61% in 1991, and consisted primarily of sales to
the Department of Defense. Such sales do not include sales of military
equipment to the U.S. Government for resale to foreign governments under the
Foreign Military Sales program.
The Company's military business can be and has been significantly affected by
changes in national defense policy and spending. The Company's U.S. Government
contracts and subcontracts and certain foreign government contracts contain the
usual required provisions permitting termination at any time for the
convenience of the government with payment for work completed and committed
along with associated profit at the time of termination.
The Company's contracts with the Department of Defense consist of fixed price
contracts, cost-reimbursable contracts and incentive contracts of both types.
Fixed-price contracts provide fixed compensation for specified work.
Cost-reimbursable contracts require the Company to perform specified work in
return for reimbursement of costs (to the extent allowable under government
regulations) and a specified fee. In general, while the risk of loss is greater
under fixed-price contracts than under cost-reimbursable contracts, the
potential for profit under such contracts is greater than under
cost-reimbursable contracts. Under both fixed-price incentive contracts and
cost-reimbursable incentive contracts, an incentive adjustment based on
attainment of scheduling, cost, quality or other goals is made in the Company's
fee. The distribution of the Company's government contracts among the
categories of contracts referred to above varies from time to time, although in
recent years only a small percentage of the Company's contracts have been on a
cost-reimbursable basis.
COMPETITION AND OTHER FACTORS
The Company's products are sold in competitive markets containing a number of
competitors substantially larger than the Company with greater financial
resources. Direct sales of military products to U.S. and foreign governments
are based principally on product performance and reliability. Such products are
generally sold in competition with products of other manufacturers which may
fulfill an equivalent function, but which are not direct substitutes.
The Company purchases certain materials and components used in its systems and
equipment from independent suppliers. These materials and components are
normally not purchased under long-term contracts unless the Company has
actually received a long-term sales contract requiring them. The Company
believes that most of the items it purchases are obtainable from a variety of
suppliers and it normally obtains alternative sources for major items, although
the Company is sometimes dependent on a single supplier or a few suppliers for
some items.
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It is difficult to state precisely the Company's market position in all of its
market segments because information as to the volume of sales of similar
products by its competitors is not generally available and the relevant markets
are often not precisely defined. However, the Company believes that it is a
significant factor in the markets for stores ejectors for military aircraft,
military sonar systems, helicopter-towed mine countermeasure systems,
piezoelectric ceramics, satellite horizon sensors, and natural gas vehicle
refueling stations.
Although the Company owns some patents and has filed applications for
additional patents, it does not believe that its operations depend upon its
patents. In addition, most of the Company's U.S. Government contracts license
it to use patents owned by others. Similar provisions in the U.S. Government
contracts awarded to other companies make it impossible for the Company to
prevent the use by other companies of its patents in most domestic defense
work. However, several patents recently granted to the Company and pending in
the areas of sports products and compressed natural gas vehicle products may
prove to be important to the Company's business in these areas.
EMPLOYEES
As of December 31, 1993, the Company employed 1,051 persons.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position and Term of Office
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Gerald Albert 69 Chairman of the Board since November 1993, Chief
Executive Officer since 1984 and Director
since 1971.
Frank A. Fariello 59 President and Chief Operating Officer since November
1993, Executive Vice President from 1989 to 1993,
and Director since 1982.
Marvin D. Genzer 53 Vice President since 1990, General Counsel since
1988, and Assistant Secretary since 1987.
Michael J. Hegarty 54 Vice President-Finance since 1981, Treasurer since
1967, Secretary since 1985 and Director since 1982.
Each executive officer is appointed by the Board of Directors (the "Board"),
and holds office until the first meeting of the Board following the next
succeeding annual meeting of shareholders, and thereafter until a successor is
appointed and qualified, unless the executive officer dies, is disqualified,
resigns or is removed in accordance with the Company's By-Laws.
ITEM 2. PROPERTIES
All operating properties are leased facilities, except for the College Point
corporate headquarters and manufacturing facility. The Company's facilities are
adequate for present purposes. Although all facilities in the following listing
are suitable for expansion by using available but unused space, leasing
additional available space, or by physical expansion of leased or owned
buildings, the Company is offering for sale a material portion of its College
Point facility. The Company's obligations under the various leases are set
forth in Note 16 on page 27 of the Company's 1993 Annual Report to
Shareholders, which is incorporated by reference.
Set forth below is a listing of the Company's principal plants and other
materially important physical properties.
Approximate
Floor Area
Location (in sq. ft.)
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Military Systems:
Marine and Aircraft College Point, NY 318,000
Marine and Aircraft Systems Salt Lake City, UT 28,000
Command Systems Chesapeake, VA 17,000
Undersea Warfare Systems Salt Lake City, UT 70,000
Commercial and Other Products:
Acoustic Products Salt Lake City, UT 47,000
Electro-Optics Division Shelton, CT 71,000
Fiber Science Salt Lake City, UT 90,000
EDO (Canada) Limited Calgary, Alberta, Canada 65,000
ANGI Milton, WI 31,000
Sports Salt Lake City, UT 15,000
ITEM 3. LEGAL PROCEEDINGS
The information set forth under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 14, 15 and
16, and in Note 17 on page 27 of the Company's 1993 Annual Report to
Shareholders is incorporated by reference.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the headings "Common Share Prices" and
"Dividends" on page 16, together with dividend information contained in the
"Consolidated Statements of Shareholders' Equity" table on page 19 and Notes 9
and 10 on pages 23 and 24 of the Company's 1993 Annual Report to Shareholders
are incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the heading "Selected Financial Data" on page
13 of the Company's 1993 Annual Report to Shareholders is incorporated by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 14, 15 and
16 of the Company's 1993 Annual Report to Shareholders is incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company, together with the
Independent Auditors' Report thereon of KPMG Peat Marwick and the unaudited
"Quarterly Financial Information" are set forth on pages 17 through 29 of the
Company's 1993 Annual Report to Shareholders, which are incorporated by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is set forth under "Election of Directors" on
pages 1 and 2 of the Company's Proxy Statement dated March 23, 1994, which is
incorporated by reference.
Information regarding executive officers is set forth in Part I of this Report
under "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of the Company's executive officers is set
forth under "Compensation of Executive Officers" on pages 4 through 7 of the
Company's Proxy Statement dated March 23, 1994, which is incorporated by
reference, except for such information required by Item 402(k) and (l) of
Regulation S-K, which shall not be deemed to be filed as part of this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is set forth on pages 3 and 8 of the Company's Proxy Statement dated
March 23, 1994, which is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements And Financial Statement Schedules And Exhibits
1. Financial Statements.
The consolidated financial statements for the years ended December 31, 1993,
1992 and 1991, together with the report thereon of KPMG Peat Marwick,
independent auditors, dated March 4, 1994, appearing on pages 17 through 28 of
the Company's 1993 Annual Report to Shareholders, are attached as Exhibit 13 to
this Report.
2. Financial Statement Schedules.
Schedule V - Property, Plant and Equipment for the years ended December 31,
1993, 1992 and 1991.
Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and
Equipment for the years ended December 31, 1993, 1992 and 1991.
Schedule X - Supplementary Income Statement Information for the years ended
December 31, 1993, 1992 and 1991.
The above schedules have been included elsewhere in this Report.
The Financial Statement Schedules should be read in conjunction with the
consolidated financial statements in the 1993 Annual Report to Shareholders.
The opinion of KPMG Peat Marwick, independent auditors, precedes the
aforementioned schedules. Schedules not included in these Financial Statement
Schedules have been omitted
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either because they are not applicable or the required information is shown in
the consolidated financial statements or notes thereto.
3. Exhibits.
Exhibits which are noted with an asterisk (*) are management contracts or
compensatory plans or arrangements.
3(i) Certificate of Incorporation of the Company and amendments thereto dated
June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to
Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989.
3(ii) By-Laws of the Company.
4(a) Indenture dated December 1, 1986 between Manufacturers Hanover Trust
Company, as Trustee, and EDO Corporation. Incorporated by reference to Exhibit
4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the
Company in favor of National Westminster Bank USA as successor in interest to
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The
Bank of New York, as trustee of the trust established under the EDO Corporation
Employee Stock Ownership Plan, and National Westminster Bank USA as successor
in interest to Manufacturers Hanover Trust Company. Incorporated by reference
to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York,
as trustee of the trust established under the EDO Corporation Employee Stock
Ownership Plan, and National Westminster Bank USA as successor in interest to
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended,
between The Bank of New York, as trustee of the trust established under the EDO
Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as
successor in interest to Manufacturers Hanover Trust Company. Incorporated by
reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
4(f) First Amended and Restated Credit Agreement, dated as of March 3, 1994,
amongst The Bank of New York, individually and as agent, Chemical Banking
Corporation, National Westminster Bank USA and EDO Corporation.
4(g) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b)
above. Incorporated by reference to Exhibit 4(i) to the Company's Annual Report
on Form 10-Q for the fiscal year ended December 31, 1992.
4(h) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 3, 1994.
10(a)* EDO Corporation 1980 Stock Option Plan, as amended through July 22,
1988. Incorporated by reference to Exhibit 10(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
10(b)* EDO Corporation 1985 Stock Option Plan, as amended through January 24,
1989. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989.
10(c)* EDO Corporation 1988 Stock Option Plan as amended through July 22,
1988.
10(d)* EDO Corporation 1983 Long-Term Incentive Plan as amended through July
22, 1988.
10(e)* EDO Corporation 1988 Long-Term Incentive Plan as amended through July
22, 1988.
10(f)* EDO Corporation Executive Termination Agreements, as amended through
November 24, 1989, between the Company and four employees. Incorporated by
reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.
10(g)* Executive Life Insurance Plan Agreements, as amended through January
23, 1990, between the Company and thirty-four employees and retirees.
Incorporated by reference to Exhibit 10(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989.
10(h)* Form of Directors' and Officers' Indemnification Agreements between EDO
Corporation and twenty current or former Company directors and officers.
Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991.
10(i) Subscription Agreement, dated December 18, 1987, between EDO (Canada)
Limited and Her Majesty the Queen in right of the Province of Alberta, as
represented by the Minister of Economic Development
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and Trade. Incorporated by reference to Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.
10(j) Consent Decree, entered on November 25, 1992, amongst the United States,
EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc.
Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.
13 Annual Report to Shareholders of EDO Corporation for fiscal year ended
December 31, 1993. Such report is furnished for the information of the
Commission only and, except for those portions thereof which are expressly
incorporated by reference in this Annual Report on Form 10-K, is not to be
deemed filed as part of this Report (not filed electronically).
13(a) Pages 13-29 of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1993.
21 List of Subsidiaries.
23 Accountants' Consent to the incorporation by reference in the Company's
Registration Statements on Form S-8 of their reports included in the 1993
Annual Report to Shareholders and in Item 14(a)2 hereto.
24 Powers of Attorney used in connection with the execution of this Annual
Report on Form 10-K.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on December 2, 1993 reporting on the
acquisition by the Company of substantially all the assets of Automotive
Natural Gas, Inc. Financial statements associated with and required by such
Report were filed on February 14, 1994.
- 7 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EDO CORPORATION (Registrant)
Dated: March 28, 1994 By: Michael J. Hegarty
Michael J. Hegarty
Vice President-Finance
Pursuant to the requirements of Instruction D to Form 10-K under the Securities
Exchange Act of 1934, this Report has been signed below on March 28, 1994 by
the following persons on behalf of the Registrant and in the capacities
indicated.
Signature Title Date
- - -------------------------------------------------------------------------------
Michael J. Hegarty Vice President- March 28, 1994
(Michael J. Hegarty) Finance, Secretary,
Treasurer
and Director
Gerald Albert Chairman of the Board,
Chief Executive Officer
and Director
Frank A. Fariello President,
Chief Operating Officer
and Director
Marvin D. Genzer Vice President,
General Counsel and
Assistant Secretary
Kenneth A. Paladino Controller By: Michael J. Hegarty
Alfred Brittain III Director
Joseph F. Engelberger Director Michael J. Hegarty
Robert M. Hanisee Director Attorney-in-Fact
Robert A. Lapetina Director March 28, 1994
John H. Meyn Director
Richard Rachals Director
Ralph O. Romaine Director
William R. Ryan Director
- 8 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
EDO Corporation:
Under date of March 4, 1994, we reported on the consolidated balance sheets of
EDO Corporation and subsidiaries as of December 31, 1993 and 1992 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993,
as contained in the 1993 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1993. In connection with our audits
of the aforementioned consolidated financial statements, we also have audited
the related financial statement schedules as listed in item 14(a)2. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
As discussed in the notes to the consolidated financial statements, the Company
changed its methods of accounting for income taxes and postretirement health
care and life insurance benefits in 1993.
KPMG PEAT MARWICK
Jericho, New York
March 4, 1994
SCHEDULE V
EDO CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS)
Balance Retirements,
at sales or Balance at
beginning Additions other end of
Classification of period at cost changes period
- - -------------------------------------------------------------------------------
Year ended December 31, 1993:
Land and land $2,014 -- -- 2,014
improvements
Buildings and 28,167 418 -- 28,585
building improvements
Machinery and 49,341 2,786 (341) 51,786
equipment
Leasehold 8,715 1,313 (24) 10,004
improvements -------- ------- ------- -------
$88,273 4,517 (365) 92,389
- - -------------------------------------------------------------------------------
Year ended December 31, 1992:
Land and land $2,014 -- -- 2,014
improvements
Buildings and 27,835 335 (3) 28,167
building improvements
Machinery and 45,906 4,093 (658) 49,341
equipment
Leasehold 8,621 138 (44) 8,715
improvements -------- ------- ------- -------
$84,376 4,566 (705) 88,237
- - -------------------------------------------------------------------------------
Year ended December 31, 1991:
Land and land $2,014 -- -- 2,014
improvements
Buildings and 27,523 312 -- 27,835
building improvements
Machinery and 41,177 5,388 (659) 45,906
equipment
Leasehold 8,850 (91) (138) 8,621
improvements -------- ------- ------- -------
$79,564 5,609 (797) 84,376
- - -------------------------------------------------------------------------------
- 9 -
<PAGE>
SCHEDULE VI
EDO CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS)
Additions
Balance charged Retirements,
at to costs sales or Balance
beginning and other at end
Classification of period expenses changes of period
- - -------------------------------------------------------------------------------
Year ended December 31, 1993:
Land and land $267 29 -- 296
improvements
Buildings and 10,767 1,260 5,200 17,227
building improvements
Machinery and 31,220 4,318 594 36,132
equipment
Leasehold 3,605 844 408 4,857
improvements -------- ------- ------- -------
$45,859 6,451 6,202* 58,512
- - -------------------------------------------------------------------------------
Year ended December 31, 1992:
Land and land $238 29 -- 267
improvements
Buildings and 9,374 1,396 (3) 10,767
building improvements
Machinery and 27,437 4,440 (657) 31,220
equipment
Leasehold 3,055 595 (45) 3,605
improvements -------- ------- ------- -------
$40,104 6,460 (705) 45,859
- - -------------------------------------------------------------------------------
Year ended December 31, 1991:
Land and land $207 31 -- 238
improvements
Buildings and 7,929 1,438 7 9,374
building improvements
Machinery and 23,966 4,137 (666) 27,437
equipment
Leasehold 2,603 590 (138) 3,055
improvements -------- ------- ------- -------
$34,705 6,196 (797) 40,104
- - -------------------------------------------------------------------------------
* Includes $7,011 valuation allowance associated with restructuring.
SCHEDULE X
EDO CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS)
Charged to Costs and Expenses
Item 1993 1992 1991
- - ----------------------------------------------------------
Maintenance and repairs $2,653 $2,999 $3,380
Amounts for depreciation and amortization of intangible assets, pre-operating
costs and similar deferrals, taxes other than payroll and income taxes,
royalties and advertising costs are not presented as such amounts are less than
1% of total sales.
- 10 -
<PAGE>
EXHIBIT INDEX
Exhibits which are noted with an asterisk (*) are management contracts or
compensatory plans or arrangements.
3(i) Certificate of Incorporation of the Company and amendments thereto dated
June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to
Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989.
3(ii) By-Laws of the Company.
4(a) Indenture dated December 1, 1986 between Manufacturers Hanover Trust
Company, as Trustee, and EDO Corporation. Incorporated by reference to Exhibit
4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the
Company in favor of National Westminster Bank USA as successor in interest to
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The
Bank of New York, as trustee of the trust established under the EDO Corporation
Employee Stock Ownership Plan, and National Westminster Bank USA as successor
in interest to Manufacturers Hanover Trust Company. Incorporated by reference
to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York,
as trustee of the trust established under the EDO Corporation Employee Stock
Ownership Plan, and National Westminster Bank USA as successor in interest to
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended,
between The Bank of New York, as trustee of the trust established under the EDO
Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as
successor in interest to Manufacturers Hanover Trust Company. Incorporated by
reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
4(f) First Amended and Restated Credit Agreement, dated as of March 3, 1994,
amongst The Bank of New York, individually and as agent, Chemical Banking
Corporation, National Westminster Bank USA and EDO Corporation.
4(g) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b)
above. Incorporated by reference to Exhibit 4(i) to the Company's Annual Report
on Form 10-Q for the fiscal year ended December 31, 1992.
4(h) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 3, 1994.
10(a)* EDO Corporation 1980 Stock Option Plan, as amended through July 22,
1988. Incorporated by reference to Exhibit 10(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
10(b)* EDO Corporation 1985 Stock Option Plan, as amended through January 24,
1989. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989.
10(c)* EDO Corporation 1988 Stock Option Plan as amended through July 22,
1988.
10(d)* EDO Corporation 1983 Long-Term Incentive Plan as amended through July
22, 1988.
10(e)* EDO Corporation 1988 Long-Term Incentive Plan as amended through July
22, 1988.
10(f)* EDO Corporation Executive Termination Agreements, as amended through
November 24, 1989, between the Company and four employees. Incorporated by
reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.
10(g)* Executive Life Insurance Plan Agreements, as amended through January
23, 1990, between the Company and thirty-four employees and retirees.
Incorporated by reference to Exhibit 10(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989.
10(h)* Form of Directors' and Officers' Indemnification Agreements between EDO
Corporation and twenty current or former Company directors and officers.
Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991.
10(i) Subscription Agreement, dated December 18, 1987, between EDO (Canada)
Limited and Her Majesty the Queen in right of the Province of Alberta, as
represented by the Minister of Economic Development and Trade. Incorporated by
reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
10(j) Consent Decree, entered on November 25, 1992, amongst the United States,
EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc.
Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.
13 Annual Report to Shareholders of EDO Corporation for fiscal year ended
December 31, 1993. Such report is furnished for the information of the
Commission only and, except for those portions thereof which are expressly
incorporated by reference in this Annual Report on Form 10-K, is not to be
deemed filed as part of this Report (not filed electronically).
13(a) Pages 13-29 of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1993.
21 List of Subsidiaries.
23 Accountants' Consent to the incorporation by reference in the Company's
Registration Statements on Form S-8 of their reports included in the 1993
Annual Report to Shareholders and in Item 14(a)2 hereto.
24 Powers of Attorney used in connection with the execution of this Annual
Report on Form 10-K.
<PAGE>
EXHIBIT 3(ii)
<PAGE>
================================================================================
EDO CORPORATION
(A New York Corporation)
BY-LAWS
As Amended November 15, 1993
================================================================================
<PAGE>
EDO CORPORATION
(A New York Corporation)
By-Laws
TABLE OF CONTENTS
Page
ARTICLE I
Meetings of Shareholders
Section 1.01 Annual Meetings ................................................ 1
Section 1.02 Special Meetings ............................................... 1
Section 1.03 Place of Meetings .............................................. 1
Section 1.04 Notice of Meetings ............................................. 1
Section 1.05 Quorum ......................................................... 2
Section 1.06 Inspectors of Election ......................................... 2
Section 1.07 Voting ......................................................... 2
Section 1.08 Proxies ........................................................ 3
Section 1.09 Record Date .................................................... 3
Section 1.10 Adjourned Meetings ............................................. 3
ARTICLE II
Board of Directors
Section 2.01 General Powers ................................................. 3
Section 2.02 Number, Term of Office, Election and Qualifications ............ 3
Section 2.03 Regular Meetings ............................................... 4
Section 2.04 Special Meetings ............................................... 4
Section 2.05 Quorum and Voting .............................................. 5
Section 2.06 Resignations ................................................... 5
Section 2.07 Removal of Directors ........................................... 5
Section 2.08 Newly Created Directorship and Vacancies ....................... 5
Section 2.09 Action by Written Consent ...................................... 6
Section 2.10 Participation in a Meeting by Telephone ........................ 6
i
<PAGE>
Page
ARTICLE III
Executive Committee and Other Committees
Section 3.01 How Constituted ................................................ 6
Section 3.02 Powers of the Executive Committee .............................. 6
Section 3.03 Other Committees ............................................... 7
Section 3.04 Proceedings, Quorum and Manner of Acting ....................... 7
ARTICLE IV
Notices
Section 4.01 Form and Delivery .............................................. 7
Section 4.02 Waiver ......................................................... 7
ARTICLE V
Officers
Section 5.01 Number and Qualification ....................................... 8
Section 5.02 Appointment and Term of Office ................................. 8
Section 5.03 Subordinate Officers ........................................... 8
Section 5.04 Resignations ................................................... 8
Section 5.05 Removal ........................................................ 8
Section 5.06 Vacancies ...................................................... 8
Section 5.07 The Chairman of the Board of Directors ......................... 8
Section 5.08 The President .................................................. 9
Section 5.09 The Vice Presidents ............................................ 9
Section 5.10 The Secretary .................................................. 9
Section 5.11 The Treasurer .................................................. 9
ARTICLE VI
Fiscal Matters
Section 6.01 Execution of Instruments ...................................... 10
Section 6.02 Loans, etc. ................................................... 11
Section 6.03 Deposits ...................................................... 11
Section 6.04 Checks, Drafts, etc. .......................................... 11
ii
<PAGE>
Page
ARTICLE VII
Capital Stock
Section 7.01 Certificates for Shares ....................................... 11
Section 7.02 Transfer of Shares; Registered Shareholders ................... 12
Section 7.03 Transfer Agents and Registrars ................................ 12
Section 7.04 Record Date ................................................... 12
Section 7.05 Lost or Destroyed Certificates ................................ 12
ARTICLE VIII
Books and Records
Section 8.01 Books and Records ............................................. 13
Section 8.02 Examination of Books .......................................... 13
ARTICLE IX
Indemnification
Section 9.01 Indemnification - Third Party and Derivative Actions .......... 13
Section 9.02 Payment of Indemnification; Repayment ......................... 15
Section 9.03 Procedure for Indemnification ................................. 15
Section 9.04 Survival; Preservation of Other Rights ........................ 16
Section 9.05 Savings Clause ................................................ 16
ARTICLE X
Miscellaneous
Section 10.01 Corporate Seal ............................................... 17
Section 10.02 Fiscal Year .................................................. 17
ARTICLE XI
Amendments
Section 11.01 Amendments ................................................... 17
Section 11.02 Notice of Amendment .......................................... 17
iii
<PAGE>
EDO CORPORATION
(A New York Corporation)
BY-LAWS
ARTICLE I
Meetings of Shareholders
Section 1.01. Annual Meetings. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as
properly may come before such meeting shall be held on the fourth Tuesday in
April in each year, if not a legal holiday, or, if a legal holiday, then on the
next succeeding day not a legal holiday, at such time as the Board of Directors
may fix. [Sec. 602(a), (b)]*
Section 1.02. Special Meetings. Special meetings of shareholders may be called
at any time by the Chairman of the Board of Directors, or by the President, or
by order of the Board of Directors, or by a majority of the directors then in
office acting without a meeting. At any special meeting of shareholders, only
such business may be transacted as is related to the purpose or purposes set
forth in the notice required by Section 1.04. [Sec. 602(c)]
Section 1.03. Place of Meetings. Each meeting of shareholders shall be held at
the principal office of the Corporation in the State of New York or at such
other place within or without the State of New York as may be specified in the
notice of the meeting. [Sec. 602(a)]
Section 1.04. Notice of Meetings. Written notice of the place, date and hour of
each meeting of the shareholders shall be given as provided in Section 4.01 to
each shareholder entitled to vote thereat, or otherwise entitled by law to
notice thereof, not less than 10 nor more than 50 days before the meeting.
Notice of a special meeting shall also state the purposes for which the meeting
is called and indicate by or at whose direction the notice is being issued. If
any action is proposed to be taken at any shareholders' meeting which would, if
taken, entitle shareholders fulfilling the requirements of section 623 of the
New York Business Corporation Law (relating to a shareholder's statutory
appraisal rights) to receive payment for their shares, the notice shall also
include
- - ------------------------
* Except as otherwise noted, citations are to the New York Business Corporation
Law as in effect on September 26, 1986 for Sections 1 to 800 and October 2,
1986 for Sections 801 to end. Bracketed citations are for reference only and do
not constitute a part of the By-Laws.
1
<PAGE>
a statement to that effect. Notice of any meeting need not be given to any
shareholder with whom communication is then unlawful by virtue of any law of
the State of New York or of the United States of America now or hereafter
enacted or amended or any rule, regulation, proclamation or executive order
issued under any such law. [Secs. 108, 605*]
Section 1.05. Quorum. Except as otherwise provided by law and subject to the
provisions of Section 1.07 and Section 6.02(b), the holders of a majority of
the shares issued and outstanding entitled to vote thereas, present in person
or by proxy, shall constitute a quorum for the transaction of business at any
meeting of shareholders. Once a quorum is present to organize a meeting, the
subsequent withdrawal of any shareholders shall not be deemed to break the
quorum. [Sec. 608]
Section 1.06. Inspectors of Election. At each meeting of shareholders for the
election of directors the chairman of the meeting, if requested to do so by any
shareholder entitled to vote for the election of directors, whether or not
present at such meeting, shall appoint two persons, who may but need not be
shareholders or officers, to act as Inspectors of Election at the meeting. If
any Inspector so appointed be absent or refuse or fail to act, the chairman of
the meeting shall fill the vacancy by appointing a successor Inspector. If
there be a failure so to appoint Inspectors, or to fill a vacancy, the
shareholders present at the meeting in person or by proxy and entitled to vote,
by a per capita vote, may choose temporary Inspectors of the number required.
The Inspectors appointed to act at any meeting of shareholders, before entering
upon the discharge of their duties, shall be sworn faithfully to execute the
duties of Inspectors at such meeting with strict impartiality, and according to
the best of their ability, and the oath so taken shall be subscribed by them.
[Secs. 610, 611]
Section 1.07. Voting. At each meeting of shareholders each holder of record of
shares entitled to vote at such meeting shall be entitled to one vote for each
such share standing in his name on the books of the Corporation on the record
date as determined pursuant to Section 1.09. Except as at the time otherwise
expressly required by statute, by the Certificate of Incorporation of the
Corporation or by Section 1.06 (regarding appointment of Inspectors), Section
2.02 (regarding election of directors) or Section 2.07 (regarding removal of
directors), all corporate action to be taken by vote of the shareholders shall
be authorized by a majority of the votes cast by the holders of shares entitled
to vote thereon at a meeting of the shareholders at which a quorum is present.
Treasury shares and shares held by any other corporation (if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held by the Corporation) shall not be shares entitled to vote or to be
counted in determining the total number of outstanding shares. [Secs. 612, 614]
- - ------------------------
* As in effect prior to passage of 1982 N.Y. Laws ch. 202, sec. 2 and 1986 N.Y.
Laws ch. 735, sec. 1, amending Sec. 605(a).
2
<PAGE>
Section 1.08. Proxies. Any shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. Each proxy must be in
writing, signed by the shareholder or by his attorney-in-fact and shall be
filed with the secretary of any meeting at which the holder thereof votes
thereunder. No proxy shall be valid after the expiration of 11 months from the
date thereof unless otherwise provided in the proxy. Each proxy shall be
revocable at the pleasure of the shareholder executing it, except if and to the
extent that an irrevocable proxy is given and is permitted by law. [Sec. 609]
Section 1.09. Record Date. The Board of Directors may fix, in advance, a date
as the record date for determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting. Such date shall be
not more than 50 nor less than 10 days before the date of such meeting. [Sec.
604]
Section 1.10. Adjourned Meetings. The holders of a majority of the shares
present in person or by proxy at a meeting and entitled to vote thereat may
from time to time adjourn the meeting, whether or not a quorum was present at
the meeting. When a determination of shareholders of record entitled to notice
of or to vote at any meeting of shareholders has been made pursuant to Section
1.09, such determination shall apply to any adjournment of the meeting unless
the Board of Directors fixes a new record date for the adjourned meeting. When
a meeting is adjourned to another time or place, no notice need be given if
such time or place is announced at the meeting at which the adjournment is
taken. However, if the Board of Directors fixes a new record date for the
adjourned meeting, notice of the adjourned meeting shall be given to each
shareholder of record on the new record date entitled to notice. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called. [Secs.
604(c), 605(b), 608(d)]
ARTICLE II
Board of Directors
Section 2.01. General Powers. The property, affairs and business of the
Corporation shall be managed under the direction of the Board of Directors.
[Sec. 701]
Section 2.02. Number, Term of Office, Election and Qualifications. The full
Board of Directors shall consist of not less than nine nor more than fifteen
directors, all of whom shall be at least 21 years of age, and no more than 73
years of age on the date of the annual meeting of shareholders. The Board of
Directors may also appoint a retiring Chairman of the Board to emeritus status
which shall not include the right to vote, or to be counted toward the
determination of the full Board of Directors or for the determination of a
quorum. Past or present officers or employees of the Corporation shall not
comprise more than one third of the
3
<PAGE>
Board of Directors. Each director shall hold at least 100 shares of any class
of the Corporation; provided that failure to hold such number of shares shall
not prevent or disqualify any person not a director from being elected a
director pursuant to this Section 2.02 or Section 2.08 or from serving as a
director for a period of 60 days from the time of such election. Subject to the
provisions of this Section and of Section 2.08, the number of directors, within
the limits provided, necessary to constitute a full Board shall be determined
from time to time by vote of a majority of the entire Board of Directors.
Directors shall be elected at the annual meeting of shareholders. If the number
of directors be increased between annual meetings of shareholders, the
additional directors to fill the vacancies thus created shall be elected as
provided in Section 2.08. There shall be three classes of directors. All
classes shall be as nearly equal in number as possible, and no class shall
include less than three directors. At each annual meeting of shareholders, each
director elected to replace a director whose term expires at such annual
meeting shall be elected to hold office for a term expiring at the third
succeeding annual meeting after his election. Each director shall hold office
until the expiration of his term and until his successor is elected and
qualified or until his earlier death, resignation or removal. A director
elected to fill a vacancy, unless elected by the shareholders, shall be elected
to hold office for a term expiring at the next meeting of shareholders at which
the election of directors is in the regular order of business. If the number of
directors is changed, (a) any newly created directorship or any decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal in number as possible, and (b) when the number of directors is
increased by the Board and any newly created directorships are filled by the
Board, there shall be no classification of the additional directors until the
next annual meeting of shareholders. At each meeting of shareholders for the
election of directors the directors shall be chosen and elected by a plurality
of the votes cast at such meeting by the holders of shares entitled to vote in
the election. [Secs. 701-05]
Section 2.03. Regular Meetings. Promptly after the close of each annual meeting
of the shareholders, the Board of Directors shall, without notice, meet where
such annual meeting was held, or at such other place as may be fixed by
resolution of the Board of Directors, for the purpose of appointing officers
and committees for the ensuing year and transacting other proper business.
Other regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be scheduled by resolution of
the Board of Directors, and such schedule may be changed at any regular meeting
of the Board of Directors or at any special meeting called for that purpose,
provided that notice of the change shall be given to all directors no later
than 5 days prior to the first meeting held under such schedule as so changed.
[Secs. 710, 711]
Section 2.04. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board of Directors, the President, or any two
directors. If such a meeting is called by the Chairman of the Board of
Directors or by the President, such officer shall, or shall direct the
Secretary to, fix a time and place for and give notice of
4
<PAGE>
the time, place, and purposes of such meeting. If such a meeting is called by
any two directors, upon delivery to the Chairman of the Board of Directors,
President or Secretary, in person or by registered mail, of a request in
writing for a special meeting, specifying the purposes thereof, it shall be the
duty of the officer to whom the request is delivered to fix a time and place
for (unless the requesting directors shall have fixed such time and place) and
give notice of the time, place and purposes of such meeting. All such notices
of meetings shall be given as provided in Section 4.01, if by mail, at least
three days before the day on which the meeting is to be held, or, if by
personal delivery, telephone or telegram, not later than the day before the day
on which the meeting is to be held. [Secs. 710, 711]
Section 2.05. Quorum and Voting. One third of the total number of directors
which the Corporation would have if there were no vacancies shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors, but if a quorum shall not be present thereat, a majority of the
directors present may from time to time adjourn any such meeting until a quorum
shall be present, and the meeting may be held at adjourned without further
notice. If a quorum is present at any meeting, the vote of a majority of the
directors present shall be the act of the Board of Directors, except as
otherwise provided by law. The directors shall act only as a Board and, except
as provided in Section 1.02 (relating to calling special meetings of the
shareholders), Section 2.04 (relating to calling special meetings of the Board
of Directors) and this Section 2.05 (relating to the adjournment of meetings in
the absence of a quorum), individual directors shall have no powers as such.
[Secs. 707, 708, 711(d)]
Section 2.06. Resignations. Any director may resign at any time by delivering a
written resignation to either the Chairman of the Board of Directors, the
President, a Vice President or the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon such delivery.
Section 2.07. Removal of Directors. Any director may be removed at any time,
either for or without cause, by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote for the
election of directors, given at a meeting of the shareholders called for the
purpose. Any vacancy in the Board of Directors caused by any such removal may
be filled at such meeting by the shareholders entitled to vote for the election
of directors; if the shareholders do not fill such vacancy at such meeting,
such vacancy may be filled in the manner provided in Section 2.08. The
provisions of this Section may be amended, altered or repealed only by the
shareholders in the manner specified in clause (1) of Section 11.01. [Sec. 706]
Section 2.08. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors without cause may be filled (unless theretofore filled by the
shareholders in accordance with the provisions of Section 2.07) by vote of a
majority of the directors then in office, al-
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though less than a quorum exists. Any such newly created directorship or
vacancy (unless theretofore filled by the directors in accordance with the
provisions of this Section) may also be filled by the shareholders entitled to
vote for the election of directors at any meeting held during the existence of
such vacancy provided that the notice of the meeting shall have mentioned such
vacancy or expected vacancy. [Sec. 705]
Section 2.09. Action by Written Consent. Any action required or permitted to be
taken by the Board of Directors or any committee thereof may be taken without a
meeting if all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board of Directors or
committee shall be filed with the minutes of the proceedings of the Board of
Directors or committee. [Sec. 708(b)]
Section 2.10. Participation in a Meeting by Telephone. Any one or more members
of the Board of Directors or any committee thereof may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at such meeting. [Sec. 708(c)]
ARTICLE III
Executive Committee and Other Committees
Section 3.01. How Constituted. By resolution adopted by a majority of the
entire Board of Directors, the Board may designate one or more committees,
including an Executive Committee, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the Board. [Sec. 712]
Section 3.02. Powers of the Executive Committee. Unless otherwise provided by
resolution adopted by a majority of the entire Board of Directors, when the
Board of Directors is not in session the Executive Committee shall have and may
exercise all the powers of the Board of Directors, except that the Executive
Committee shall not have the authority as to the following matters:
(a) the submission to shareholders of any action as to which shareholders'
approval is required by law;
(b) the filling of vacancies in the Board of Directors or in any committee
thereof;
(c) the fixing of compensation of the directors for serving on the Board of
Directors or any committee thereof;
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(d) the amendment or repeal of the By-Laws, or the adoption of new By-Laws; or
(e) the amendment or repeal of any resolution of the Board of Directors which
by its terms shall not be so amendable or repealable. [Sec. 712]
Section 3.03. Other Committees. To the extent provided by resolution adopted by
a majority of the entire Board of Directors, other committees shall have and
may exercise any of the powers of the Board of Directors except that no such
committee shall have authority as to the matters set forth in Section
3.02(a)-(e). [Sec. 712]
Section 3.04. Proceedings, Quorum and Manner of Acting. Subject to the control
of the Board of Directors, each committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting as it shall deem proper
and desirable, provided that a quorum shall not be less than two directors.
ARTICLE IV
Notices
Section 4.01. Form and Delivery. Except as otherwise expressly provided by law
or by these By-Laws, any written notice required to be given by law, the
Certificate of Incorporation or these By-Laws to any shareholder, director or
other person may be delivered personally or by mail or, in the case of notices
to directors, by telephone or telegram. Notice by mail shall be deemed to have
been given at the time when such notice is deposited in the United States mail,
postage prepaid, addressed to such shareholder, director or other person at his
last known address as the same appears on the records of the Corporation or, if
a shareholder shall have filed with the Secretary a written request that
notices to him be mailed to some other address, then directed to him at such
other address. [Secs. 605(a), 711(b)]
Section 4.02. Waiver. No notice required to be given by any statute, by the
Certificate of Incorporation or by these By-Laws need be given to any person
otherwise entitled to notice who signs in person or, if a shareholder, by
proxy, a waiver of notice, whether signed before or after the time of the
action to which the notice relates. In addition, the attendance by any
shareholder at any meeting of the shareholders in person or by proxy without
protesting prior to the conclusion of such meeting the absence of notice
thereof to him, and the attendance by any director at any meeting of the Board
of Directors without protesting prior to such meeting or at its commencement
such absence of notice, shall, in each such case, constitute a waiver of notice
of such meeting. [Secs. 606, 711(c)]
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ARTICLE V
Officers
Section 5.01. Number and Qualification. The officers of the Corporation shall
be a Chairman of the Board of Directors, a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such other officers as may be
appointed in accordance with the provisions of Section 5.03. Any one person may
hold more than one of such offices except those of President and Secretary. The
Chairman of the Board of Directors and the President shall be chosen from among
the directors. No other officer need be a director. Officers shall be at least
21 years of age and, except for the Chairman of the Board of Directors, no more
than 70 years of age on the date of the annual meeting of shareholders. [Sec.
715]
Section 5.02. Appointment and Term of Office. Each officer (unless appointed
under power delegated pursuant to the second sentence of Section 5.03) shall be
appointed by the Board of Directors and (unless appointed under the provisions
of Section 5.03 for a different term) shall hold office until the first meeting
of the Board of Directors following the next succeeding annual meeting of
shareholders and thereafter until his successor shall have been appointed and
qualified or until his earlier death or disqualification or until he shall have
resigned in the manner provided in Section 5.04 or shall have been removed in
the manner provided in Section 5.05. [Sec. 715]
Section 5.03. Subordinate Officers. The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of
whom shall have such title, hold office for such period, have such authority
and perform such duties as the Board of Directors from time to time may
determine. The Board of Directors may delegate to any officer or agent the
power to appoint any such subordinate officers or agents and to prescribe their
respective titles, terms of office, authorities and duties.
Section 5.04. Resignations. Any officer may resign at any time by delivering a
written resignation to the Board of Directors, the Chairman of the Board of
Directors, the President or the Secretary. Unless otherwise specified therein,
such resignation shall take effect upon such delivery.
Section 5.05. Removal. Any officer may be removed at any time, either for or
without cause, by action of the Board of Directors. [Sec. 716]
Section 5.06. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause, may be filled in the manner
prescribed in this Article for regular appointment to such office. [Sec. 715]
Section 5.07. The Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of shareholders and the Board of
Directors at which he shall be present. He shall
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have such other powers and perform such other duties as may be assigned to him
from time to time by the Board of Directors.
Section 5.08. The President. In the absence of the Chairman of the Board of
Directors, the President shall preside at all meetings of the shareholders and
of the Board of Directors at which he shall be present. He shall have such
other powers and perform such other duties as may be assigned to him from time
to time by the Board of Directors.
Section 5.09. The Vice Presidents. Each Vice President shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board of Directors or the President. The Vice President
designated by the Board of Directors (or, in the absence of such designation,
by the Chairman of the Board of Directors) shall, at the request of the
Chairman of the Board of Directors or the President, or in the event of the
absence or disability of both of such officers, perform all the duties of the
Chairman of the Board of Directors or the President or both, as the case may
be. When so acting, such designated Vice President shall have all the powers of
and be subject to all the restrictions upon the Chairman of the Board of
Directors or the President or both, as the case may be.
Section 5.10. The Secretary. The Secretary shall:
(a) Keep the minutes of meetings of shareholders and of the Board of Directors
and cause the same to be recorded in books provided by him for that purpose.
(b) Upon the request of any shareholder given at or prior to any meeting of
shareholders, produce at such meeting a list of shareholders as of the record
date for such meeting, certified by the corporate officer responsible for its
preparation or by a transfer agent. [Sec. 607]
(c) Cause all notices to be duly given in accordance with the provisions of
these By-Laws and as required by statute. [Sec. 605]
(d) Be custodian of the records and seal of the Corporation, and cause such
seal (or a facsimile thereof) to be affixed to all certificates for shares of
the Corporation the issuance of which shall have been authorized by the Board
of Directors, and to all instruments the execution of which under the seal of
the Corporation shall have been duly authorized. [Sec. 508]
(e) Cause a record of shareholders to be kept in accordance with Section 8.01.
(f) In general, perform all duties incident to the office of the Secretary and
such other duties as from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board of Directors or the President.
Section 5.11. The Treasurer. The Treasurer shall:
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(a) Have charge of and supervision over and be responsible for the funds,
securities, receipts and disbursements of the Corporation.
(b) Cause the moneys and other valuable effects of the Corporation not
otherwise employed to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 6.03.
(c) Cause the moneys of the Corporation to be disbursed by checks or drafts
(signed as provided in Section 6.04) upon the authorized depositaries of the
Corporation, and cause to be taken and preserved proper vouchers for all moneys
disbursed.
(d) Render to the Board of Directors, the Chairman of the Board of Directors,
or the President, whenever requested, a statement of the financial condition of
the Corporation and of all his transactions as Treasurer, and render a full
financial report at any annual meeting of shareholders if called upon to do so.
(e) Cause to be kept at the principal office of the Corporation correct books
of account of all its business and transactions and exhibit such books to any
director upon application at such office during business hours.
(f) Be empowered from time to time to require from all officers or agents of
the Corporation reports or statements giving such information as he may desire
with respect to any and all financial transactions of the Corporation.
(g) In general, perform all duties incident to the office of the Treasurer and
such other duties as from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board of Directors or the President.
ARTICLE VI
Fiscal Matters
Section 6.01. Execution of Instruments. The Chairman of the Board of Directors,
the President, any Vice President or the Treasurer may enter into any contract
or execute and deliver any instrument in the name and on behalf of the
Corporation in the ordinary course of its business. Subject to the approval of
the Board of Directors, any officer or agent of the Corporation may enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation. The Board of Directors may authorize any officer or agent to
enter into any contract or execute and deliver any instrument in the name and
on behalf of the Corporation. Any such authorization may be general or confined
to specific instances.
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Section 6.02. Loans, etc.
(a) No loans or advances to or by the Corporation shall be contracted, and no
notes or other evidences of indebtedness shall be issued in its name, unless
and except as authorized by the Board of Directors. Any such authorization may
be general or confined to specific instances. So far as may be lawful, any
officer or agent of the Corporation thereunto so authorized may effect loans
and advances to or by the Corporation, and for loans and advances made to the
Corporation may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. So far as may be lawful, any
officer or agent of the Corporation thereunto so authorized may pledge,
hypothecate or transfer, as security for the payment of any and all loans or
advances to or indebtedness and liabilities of the Corporation, any and all
stocks, bonds, claims and other personal property, securities or receivables at
any time owned by the Corporation or to which it is or will be at any time
entitled, and to that end may endorse, assign and deliver the same and take any
action necessary or proper in connection therewith.
(b) No loan shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders. For this purpose, the shares of the
director who would be the borrower shall not be shares entitled to vote. [Sec.
714]
Section 6.03. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to its credit in such banks or trust
companies or with such bankers or other depositaries as the Board of Directors
from time to time may select, or as may be selected by any officer or agent
authorized to do so by the Board of Directors.
Section 6.04. Checks, Drafts, etc. All notes, drafts, acceptances, checks,
endorsements, and all evidences of indebtedness of the Corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine.
ARTICLE VII
Capital Stock
Section 7.01. Certificates for Shares. Shares of the Corporation shall be
represented by certificates, in form approved by the Board of Directors, signed
by the Chairman of the Board of Directors, the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation. Such seal may be a
facsimile, engraved, lithographed, printed or otherwise reproduced. The
signatures of the officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation itself or its employee. In case any such officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such before such certificate is issued, it may be
issued by
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the Corporation with the same effect as if such officer had not ceased to be
such at the date of its issue. [Sec. 508(a)*]
Section 7.02. Transfer of Shares; Registered Shareholders.
(a) Shares of the Corporation shall be transferable only upon the books of the
Corporation kept for such purpose upon surrender to the Corporation or its
transfer agent or agents of a certificate representing shares, duly endorsed or
accompanied by appropriate evidence of succession, assignment or authority to
transfer.
(b) The Board of Directors, subject to applicable law and these By-Laws, may
make such rules, regulations and conditions as it may deem expedient concerning
the subscription for, issue, transfer and registration of, shares of the
Corporation. Except as otherwise provided by law, the Corporation, prior to due
presentment for registration of transfer, may treat the registered owner of
shares as the person exclusively entitled to vote, to receive notifications,
and otherwise to exercise all the rights and powers of an owner. [Sec. 508(d),
UCC** Secs. 8-207, 8-401, 8-402, 8-403]
Section 7.03. Transfer Agents and Registrars. The Board of Directors may
appoint one or more transfer agents and may appoint one or more registrars of
the shares of the Corporation, and upon such appointments being made, no
certificate representing shares shall be valid unless and until countersigned
by one of such transfer agents, if any, and registered by one of such
registrars, if any. The same person may act as transfer agent and registrar for
the shares of any class of the Corporation.
Section 7.04. Record Date. The Board of Directors may fix, in advance, a date
as the record date for determining the shareholders entitled to receive payment
of any dividend, the allotment of any rights, the making of any distribution,
or for the delivery of evidences of rights or evidences of interests arising
out of any change, conversion or exchange of shares. Such date shall be not
more than 50 days prior to any such action. [Sec. 604(a)]
Section 7.05. Lost or Destroyed Certificates. The Corporation may issue a new
certificate in the place of any certificate theretofore issued by it alleged to
have been lost or destroyed, and the Board of Directors may require the owner
of the lost or destroyed certificate, or his legal representative, to give the
Corporation a bond in such sum as the Board may direct, with such surety or
sureties as may be satisfactory to the Board, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate or the issuance of any such new
certificate. A new certificate may be issued without requiring any bond when,
in the judgment of the Board of Directors, it is proper to do so. [Sec. 508(e);
UCC Sec. 8-405]
- - ------------------------
* As in effect prior to passage of 1985 N.Y. Laws ch. 578, sec. 1, amending
sec. 508(a).
** New York Uniform Commercial Code, as in effect on September 15, 1986.
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ARTICLE VIII
Books and Records
Section 8.01. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the shareholders, the Board of Directors and the Executive Committee, if
any. The Corporation shall keep at the principal office of the Corporation in
the State of New York or at the office of its transfer agent or registrar in
the State of New York a record containing the names and addresses of all
shareholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof. Any of the foregoing
books, minutes or records may be in written form or in any other form capable
of being converted into written form within a reasonable time. Unless otherwise
expressly required by statute or by these By-Laws, the books and records of the
Corporation shall be kept, within or outside the State of New York, at such
place or places as may be designated from time to time by the Board of
Directors. [Sec. 624(a)]
Section 8.02. Examination of Books. So far as permitted by law, the Board of
Directors shall have power to determine from time to time whether, to what
extent, at what times and places and under what conditions and regulations, the
books, records, documents and accounts of the Corporation, or any of them,
shall be open to inspection by shareholders; and no shareholder shall have any
right to inspect any books, records, documents or accounts of the Corporation,
except as conferred by statute or these By-Laws or authorized by resolution of
the shareholders or the Board of Directors. [Sec. 624(b)]
Article IX
Indemnification
Section 9.01. Indemnification--Third Party and Derivative Actions.
(a) The Company shall indemnify any person made, or threatened to be made, a
party to an action or proceeding (other than one by or in the right of the
Company to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the Company
served in any capacity at the request of the Company, by reason of the fact
that he, his testator or intestate, was a director or officer of the Company,
or served such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in, or, in the case of service
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for any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
Company and, in criminal actions or proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service forany other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Company or that he had reasonable
cause to believe that his conduct was unlawful.
(c) The Company shall indemnify any person made, or threatened to be made, a
party to an action by or in the right of the Company to procure a judgment in
its favor by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of any other corporation of any type or kind,
domestic or foreign, of any partnership, joint venture, trust, employee benefit
plan or other enterprise, against amounts paid in settlement and reasonable
expenses, including attorneys' fees, actually and necessarily incurred by him
in connection with the defense or settlement of such action, or in connection
with an appeal therein, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in, or, in the case of service for
any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
Company, except that no indemnification under this subparagraph (c) shall be
made in respect of (1) a threatened action, or a pending action which is
settled or otherwise disposed of, or (2) any claim, issue or matter as to which
such person shall have been adjudged to be liable to the Company, unless and
only to the extent that the court in which the action was brought, or, if no
action was brought, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper.
(d) For the purpose of this Section 1, the Company shall be deemed to have
requested a person to serve an employee benefit plan where the performance by
such person of his duties to the Company also imposes duties on, or otherwise
involves services by, such person to the plan or participants or beneficiaries
of the plan; excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be considered fines; and action
taken or omitted by a person with respect to an employee benefit plan in the
performance of such person's duties for a purpose reasonably believed by such
person to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the best interests
of the Company. [Sec. 722]
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Section 9.02. Payment of Indemnification; Repayment.
(a) A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 of this Article shall be entitled to indemnification as authorized
in such Section.
(b) Except as provided in the foregoing sentence, any indemnification under
Section 1 of this Article, unless ordered by a court under Section 724 of the
New York Business Corporation Law as from time to time amended, shall be made
by the Company, only if authorized in the specific case:
(1) by the Board of Directors acting by a quorum consisting of directors who
are not parties to such action or proceeding upon a finding that the director
or officer has met the standard of conduct set forth in Section 1 of this
Article or otherwise established by the Company pursuant to the last sentence
of Section 4 of this Article; or
(2) if a quorum under the foregoing subparagraph (1) is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs:
(i) by the Board of Directors upon the opinion in writing of independent
legal counsel that indemnification is proper in the circumstances because the
applicable standard of conduct set forth in such Section 1 of this Article or
otherwise established by the Company pursuant to the last sentence of Section 4
of this Article has been met by such director or officer, or
(ii) by the shareholders upon a finding that the director or officer has
met such applicable standard of conduct.
(c) Expenses incurred in defending a civil or criminal action or proceeding
shall be paid by the Company in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount as, and to the extent, required by Section 2(d)
of this Article.
(d) All expenses incurred in defending a civil or criminal action or proceeding
which are advanced by the Company under this Article or allowed by a court
shall be repaid in case the person receiving such advancement or allowance is
ultimately found, under the procedure set forth in this Article, not to be
entitled to indemnification or, where indemnity is granted, to the extent the
expenses so advanced by the Company or allowed by the court exceed the
indemnification to which he is entitled. [Secs. 723,72 5(a)]
Section 9.03. Procedure for Indemnification. Any indemnification of a director
or officer of the Company under Section 1, or advance of costs, charges and
expenses under Section 2(c) of this Article, shall be made promptly, and in any
event within 60 days, upon the written request of the director or officer. The
right to indemnification or advances as granted by this Article shall be
enforceable by the director or
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officer in any court of competent jurisdiction if the Company 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 Company. 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 2(c) of this Article where the
required undertaking, if any, has been received by the Company) that the
claimant has not met the standard of conduct set forth in Section 1 of this
Article or otherwise established by the Company pursuant to the last sentence
of Section 4 of this Article, but the burden of proving such defense shall be
on the Company. Neither the failure of the Company (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 indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 1 of this Article or otherwise
established by the Company pursuant to the last sentence of Section 4 of this
Article, nor the fact that there has been an actual determination by the
Company (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 9.04. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the Company
and each director and officer (and each director and officer of any of its
subsidiaries) who serves in such capacity at any time while these provisions as
well as the relevant provisions of the New York Business Corporation Law are in
effect and any repeal or modification thereof shall not affect any right or
obligation then existing with respect to any state of facts then or previously
existing or any action, suit, or proceeding previously or thereafter brought or
threatened based in whole or in part upon any such state of facts. Such a
"contract right" may not be modified retroactively without the consent of such
director or officer. The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. The Company is hereby authorized to
provide further indemnification if it deems it advisable by resolution of
shareholders or directors or by agreement. [Sec. 721]
Section 9.05. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each director or officer of the Company as
to costs, charges and expenses (including
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attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Company, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extent permitted by applicable law.
ARTICLE X
Miscellaneous
Section 10.01. Corporate Seal. The seal of the Corporation shall be circular in
form and shall bear the name of the Corporation and the words and figures
"Corporate Seal - 1925 - New York". [Sec. 202(a)(3)]
Section 10.02. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
ARTICLE XI
Amendments
Section 11.01. Amendments. All By-Laws of the Corporation, whether adopted by
the Board of Directors or the shareholders, shall be subject to amendment,
alteration or repeal, and new by-laws may be made, either
(1) by vote of the holders of the shares of the Corporation at the time
entitled to vote in the election of directors, given at any annual or special
meeting of shareholders the notice of which shall have specified or summarized
the proposed amendment, alteration, repeal or new by-laws, or
(2) by the affirmative vote of at least a majority of the total number of
directors then necessary to constitute a full Board, as determined pursuant to
Section 2.02, given at any annual, regular or special meeting the notice or
waiver of notice of which, unless none is required under the provisions of
Section 4.02, shall have specified or summarized the proposed amendment,
alteration, repeal or new by-law, provided that the shareholders may at any
time provide in the By-Laws that any specified provision or provisions of the
By-Laws may be amended, altered or repealed only in the manner specified in the
foregoing clause (1), in which event such provision or provisions shall be
subject to amendment, alteration or repeal only in such manner. [Sec. 601(a)]
Section 11.02. Notice of Amendment. If any by-law regulating an impending
election of directors is adopted, amended or repealed by the
17
<PAGE>
Board of Directors, there shall be set forth in the notice of the next meeting
of shareholders for the election of directors the by-law so adopted, amended or
repealed, together with a concise statement of the changes made. [Sec. 601(b)]
18
<PAGE>
EXHIBIT 4(f)
<PAGE> 1
______________________________________________________________________________
______________________________________________________________________________
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
by and among
EDO CORPORATION
THE SIGNATORY BANKS HERETO,
AND
THE BANK OF NEW YORK,
AS AGENT
________________
$15,000,000
_________________
Dated as of March 3, 1994
______________________________________________________________________________
______________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions. . . . . . . . . . . . 17
2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT . . . . . . 18
2.1. Loans. . . . . . . . . . . . . . . . . . . . . . . . 18
2.2. Notes. . . . . . . . . . . . . . . . . . . . . . . . 18
2.3. Procedure for Borrowing. . . . . . . . . . . . . . . 19
2.4. Termination or Reduction of Commitments. . . . . . . 20
2.5. Prepayments of the Loans. . . . . . . . . . . . . . . 20
2.6. Intentionally Omitted. . . . . . . . . . . . . . . . 21
2.7. Interest Rates and Payment Dates. . . . . . . . . . . 21
2.8. Letter of Credit Sub-Facility. . . . . . . . . . . . 22
2.9. Letter of Credit Participation and Funding
Commitments. . . . . . . . . . . . . . . . . . . . . 24
2.10. Absolute Obligation with respect to Letter of
Credit Payments. . . . . . . . . . . . . . . . . . . 25
2.11. Increased Costs Based on Letters of Credit. . . . . 26
2.12. Intentionally Omitted. . . . . . . . . . . . . . . . 26
2.13. Taxes; Net Payments. . . . . . . . . . . . . . . . . 26
2.14. Intentionally Omitted. . . . . . . . . . . . . . . . 27
2.15. Intentionally Omitted. . . . . . . . . . . . . . . . 27
2.16. Intentionally Omitted. . . . . . . . . . . . . . . . 27
2.17. Intentionally Omitted. . . . . . . . . . . . . . . . 27
2.18. Use of Proceeds. . . . . . . . . . . . . . . . . . . 27
2.19. Capital Adequacy. . . . . . . . . . . . . . . . . . 27
2.20. Transaction Record. . . . . . . . . . . . . . . . . 28
3. FEES; PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 28
3.1. Commitment Fee. . . . . . . . . . . . . . . . . . . . 28
3.2. Facility Fee. . . . . . . . . . . . . . . . . . . . . 29
3.3. Agent's Fee. . . . . . . . . . . . . . . . . . . . . 29
3.4. Letter of Credit Commissions. . . . . . . . . . . . . 29
3.5. Pro Rata Treatment and Application of Payments. . . . 29
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 30
4.1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 30
4.2. Corporate Existence and Power. . . . . . . . . . . . 30
4.3. Corporate Authority. . . . . . . . . . . . . . . . . 31
4.4. Binding Agreement. . . . . . . . . . . . . . . . . . 31
4.5. Litigation. . . . . . . . . . . . . . . . . . . . . . 31
4.6. No Conflicting Agreements. . . . . . . . . . . . . . 32
4.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 32
4.8. Compliance with Applicable Laws. . . . . . . . . . . 32
4.9. Governmental Regulations. . . . . . . . . . . . . . . 33
4.10. Property. . . . . . . . . . . . . . . . . . . . . . 33
4.11. Federal Reserve Regulations; Use of Loan Proceeds. . 33
4.12. Plans. . . . . . . . . . . . . . . . . . . . . . . . 33
4.13. Financial Statements. . . . . . . . . . . . . . . . 34
<PAGE> 3
4.14. Environmental Matters. . . . . . . . . . . . . . . . 34
4.15. Franchises, Intellectual Property, Etc. . . . . . . 35
4.16. Labor Relations. . . . . . . . . . . . . . . . . . . 35
4.17. Status as Senior Indebtedness. . . . . . . . . . . . 35
4.18. Brazilian Letter of Credit. . . . . . . . . . . . . 36
5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . 36
5.1. Evidence of Corporate Action. . . . . . . . . . . . . 36
5.2. Notes. . . . . . . . . . . . . . . . . . . . . . . . 36
5.3. ESOP Guaranty Amendment. . . . . . . . . . . . . . . 36
5.4. Compliance. . . . . . . . . . . . . . . . . . . . . . 36
5.5. Intentionally Omitted. . . . . . . . . . . . . . . . 37
5.6. Facility Fee. . . . . . . . . . . . . . . . . . . . . 37
5.7. Fees of Special Counsel. . . . . . . . . . . . . . . 37
5.8. Opinion of Counsel to the Company. . . . . . . . . . 37
5.9. Opinion of Special Counsel. . . . . . . . . . . . . . 37
5.10. Collateral. . . . . . . . . . . . . . . . . . . . . 37
5.11. Other Documents. . . . . . . . . . . . . . . . . . . 37
6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT. . . 37
6.1. Compliance. . . . . . . . . . . . . . . . . . . . . . 38
6.2. Loan Closings. . . . . . . . . . . . . . . . . . . . 38
6.3. Borrowing Request. . . . . . . . . . . . . . . . . . 38
7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 38
7.1. Financial Statements. . . . . . . . . . . . . . . . . 38
7.2. Certificates; Other Information. . . . . . . . . . . 40
7.3. Legal Existence. . . . . . . . . . . . . . . . . . . 41
7.4. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 42
7.5. Insurance. . . . . . . . . . . . . . . . . . . . . . 42
7.6. Payment of Indebtedness and Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . 42
7.7. Condition of Property. . . . . . . . . . . . . . . . 43
7.8. Observance of Legal Requirements. . . . . . . . . . . 43
7.9. Inspection of Property; Books and Records;
Discussions. . . . . . . . . . . . . . . . . . . . . 43
7.10. Environmental Matters. . . . . . . . . . . . . . . . 43
7.11. Licenses, Etc. . . . . . . . . . . . . . . . . . . . 44
7.12. Significant Subsidiaries. . . . . . . . . . . . . . 44
7.13. Audit Report. . . . . . . . . . . . . . . . . . . . 44
8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 44
8.1. Borrowing. . . . . . . . . . . . . . . . . . . . . . 45
8.2. Liens. . . . . . . . . . . . . . . . . . . . . . . . 45
8.3. Merger and Acquisition or Sale of Property. . . . . . 46
8.4. Dividends; Purchase of Stock and Subordinated Debt. . 46
8.5. Investments, Loans, Etc. . . . . . . . . . . . . . . 46
8.6. Business Changes. . . . . . . . . . . . . . . . . . . 47
8.7. Sale of Property. . . . . . . . . . . . . . . . . . . 47
8.8. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 48
8.9. Quick Ratio. . . . . . . . . . . . . . . . . . . . . 48
8.10. Current Ratio. . . . . . . . . . . . . . . . . . . . 49
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<PAGE> 4
8.11. Leverage Ratio. . . . . . . . . . . . . . . . . . . 49
8.12. Interest Coverage Ratio. . . . . . . . . . . . . . . 49
8.13. Minimum Consolidated Capital Funds. . . . . . . . . 49
8.14. Minimum Consolidated Net Worth. . . . . . . . . . . 49
8.15. Capital Expenditures. . . . . . . . . . . . . . . . 49
8.16. Compliance with ERISA. . . . . . . . . . . . . . . . 50
8.17. Certificate of Incorporation and By-laws. . . . . . 50
8.18. Prepayments of Indebtedness. . . . . . . . . . . . . 50
8.19. Sale and Leaseback. . . . . . . . . . . . . . . . . 50
8.20. Amendments, Etc. of Certain Agreements. . . . . . . 50
8.21. Issuance of Additional Capital Stock. . . . . . . . 51
8.22. Fiscal Year. . . . . . . . . . . . . . . . . . . . . 51
8.23. Transactions with Affiliates. . . . . . . . . . . . 51
9. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.1. Appointment. . . . . . . . . . . . . . . . . . . . . 54
10.2. Delegation of Duties. . . . . . . . . . . . . . . . 55
10.3. Exculpatory Provisions. . . . . . . . . . . . . . . 55
10.4. Reliance by Agent. . . . . . . . . . . . . . . . . . 55
10.5. Notice of Default. . . . . . . . . . . . . . . . . . 56
10.6. Non-Reliance on Agent and Other Banks. . . . . . . . 56
10.7. Indemnification. . . . . . . . . . . . . . . . . . . 57
10.8. Agent in Its Individual Capacity. . . . . . . . . . 58
10.9. Successor Agent. . . . . . . . . . . . . . . . . . . 58
11. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 59
11.1. Amendments and Waivers. . . . . . . . . . . . . . . 59
11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . 59
11.3. No Waiver; Cumulative Remedies. . . . . . . . . . . 60
11.4. Survival of Representations and Warranties. . . . . 61
11.5. Payment of Expenses and Taxes; Indemnities. . . . . 61
11.6. Successors and Assigns. . . . . . . . . . . . . . . 62
11.7. Counterparts. . . . . . . . . . . . . . . . . . . . 64
11.8. Adjustments; Set-off. . . . . . . . . . . . . . . . 64
11.9. Lending Offices. . . . . . . . . . . . . . . . . . . 65
11.10. Governing Law. . . . . . . . . . . . . . . . . . . 66
11.11. Headings, Plurals. . . . . . . . . . . . . . . . . 66
11.12. Severability. . . . . . . . . . . . . . . . . . . . 66
11.13. Integration. . . . . . . . . . . . . . . . . . . . 66
11.14. Consent to Jurisdiction. . . . . . . . . . . . . . 66
11.15. Service of Process. . . . . . . . . . . . . . . . . 67
11.16. No Limitation on Service or Suit. . . . . . . . . . 67
11.17. WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . 67
11.18. Confidentiality. . . . . . . . . . . . . . . . . . 67
11.19. Return of Notes. . . . . . . . . . . . . . . . . . 68
11.20. Savings Clause. . . . . . . . . . . . . . . . . . . 68
11.21. Waiver of Certain Covenants under the Existing
Credit Agreement. . . . . . . . . . . . . . . . . . 68
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<PAGE> 4
EXHIBITS
Exhibit A Commitments
Exhibit B Form of Note
Exhibit C Form of Borrowing Base Certificate
Exhibit D Form of Borrowing Request
Exhibit E Form of Compliance Certificate
Exhibit F Form of Assignment and Acceptance Agreement
Exhibit G Form of Opinion of Counsel to the Company and the
Guarantors
Exhibit H Form of Opinion of Special Counsel
SCHEDULES
Schedule 1.1 List of Lending Offices
Schedule 4.1 List of Subsidiaries
Schedule 4.5 List of Litigation
Schedule 4.12 List of Plans
Schedule 4.14 Exceptions to Paragraph 4.14 (Environmental Matters)
Schedule 8.1 List of Existing Indebtedness
Schedule 8.2 List of Existing Liens
- 4 -
<PAGE> 5
FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 3,
1994, between EDO CORPORATION a New York corporation (the "Company"), the
signatory Banks hereto (each a "Bank" and, collectively, the "Banks"), and THE
BANK OF NEW YORK, as agent for the Banks (in such capacity, the "Agent").
RECITALS
A. The Company, the Banks and the Agent entered into a Credit
Agreement dated as of June 10, 1992 (as amended by Amendment No. 1, dated as of
November 15, 1992, Amendment No. 2, dated as of March 27, 1993, and Amendment
No. 3, dated as of November 5, 1993, the "Existing Credit Agreement").
Capitalized terms not defined in the Recitals have the meanings set forth in
paragraph 1.1.
B. The Company, the Banks and the Agent desire to amend the Existing
Credit Agreement by amending and restating it in its entirety as hereinafter
set forth.
C. For convenience, this Agreement is dated as of March 3, 1994 (the
"Restatement Effective Date") and references to certain matters related to the
period prior hereto have been deleted.
In consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS
1.1. Defined Terms.
As used in this Agreement, terms defined in the recitals have the
meanings therein indicated, and the following terms have the following
meanings:
"Accountants": KPMG Peat Marwick, or such other firm of certified
public accountants of recognized national standing selected by the Company and
reasonably satisfactory to the Required Banks.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (i) to vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person or
(ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise. Each director or
<PAGE> 6
officer of a Person shall be deemed to be an Affiliate of such Person.
"Agent's Fee": as defined in paragraph 3.3.
"Agreement": this First Amended and Restated Credit Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate": on any date, a rate of interest per annum equal
to the higher of (i) the BNY Rate in effect on such date or (ii) 1/2 of 1% plus
the Federal Funds Rate in effect on such date.
"Assignment and Acceptance Agreement": an assignment and acceptance
agreement executed by an assignor and an assignee pursuant to which such
assignor assigns all or any portion of such assignor's Notes and Commitment,
substantially in the form of Exhibit F.
"Assignment Fee": as defined in paragraph 11.6(b).
"Authorized Signatory": as to any corporation, the president, the vice
president of finance or other chief financial officer or any other duly
authorized officer (acceptable to the Agent) thereof, and, as to any
partnership, a general partner thereof.
"BNY Rate": a rate of interest per annum equal to the prime commercial
lending rate of BNY as publicly announced by BNY to be in effect from time to
time, such rate of interest per annum to be adjusted automatically (without
notice) on the effective date of any change in such publicly announced rate.
"Benefited Bank": as defined in paragraph 11.8.
"BNY": The Bank of New York.
"Borrowing Base": at any time, (i) the sum of (a) 85% of Eligible
Billed Receivables and (b) 60% of Eligible Unbilled Receivables less (ii) the
amount of any Net Sales Proceeds not applied to the prepayment of Loans
pursuant to paragraph 2.5(c), provided that such percentages shall be adjusted
in the discretion of the Agent and the Required Banks upon receipt by the Agent
and the Required Banks of the audit report referred to in paragraph 7.13.
"Borrowing Base Certificate": a certificate in the form of Exhibit C.
"Borrowing Date": any date specified in a Borrowing Request delivered
pursuant to paragraph 2.3 as a date on which the
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<PAGE> 7
Company requests the Banks to make Loans or BNY to issue a Letter of Credit.
"Borrowing Request": a request in the form of Exhibit D.
"Brazil Letter of Credit": Standby Letter of Credit No. 29748, dated
December 12, 1993, issued by BNY for the account of the Company and in favor of
Brazil Naval Commission in a face amount of $260,400.
"Business Day": any day other than a Saturday, Sunday or other day on
which commercial banks located in New York are authorized or required by law or
other governmental action to close.
"Capitalized Leases": as to any Person, at a particular time, all
leases under which such Person is the lessee or obligor, the future rental
payment obligations of which are required to be capitalized on a balance sheet
of such Person in accordance with GAAP.
"CERCLA": the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. section 9601, et seq.
"Code": the Internal Revenue Code of 1986, as the same may be amended
from time to time, or any successor thereto, and the rules and regulations
issued thereunder, as from time to time in effect.
"Commitment": as to any Bank, the amount set forth next to the name of
such Bank in Exhibit A under the heading "Commitment," as such Commitment may
be reduced from time to time pursuant to paragraph 2.4.
"Commitment Fee": as defined in paragraph 3.1.
"Commitments": the aggregate Commitments of all Banks.
"Commitment Percentage": as to any Bank, the percentage set forth
opposite the name of such Bank on Exhibit A under the heading "Commitment
Percentage".
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Company or any Subsidiary within the
meaning of Section 414(b) or 414(c) of the Code.
"Compliance Certificate": a certificate in the form of Exhibit E.
"Consolidated": the Company and its Subsidiaries taken together.
- 3 -
<PAGE> 8
"Consolidated Capital Funds": at any date of determination, the sum of
Consolidated Net Worth plus the outstanding principal amount of Subordinated
Debt at such date.
"Consolidated Current Assets": at any date of determination, all
amounts which would, in conformity with GAAP, be included under current assets
on a Consolidated balance sheet of the Company and its Subsidiaries as at such
date; provided, however, that such amount shall not include (a) any amounts for
any Indebtedness owing by an Affiliate of the Company, unless such Indebtedness
arose in connection with the sale of goods or other property in the ordinary
course of business and would otherwise constitute current assets in conformity
with GAAP, (b) any shares of Stock issued by an Affiliate of the Company, (c)
the cash surrender value of any life insurance policy or (d) any Consolidated
Intangibles.
"Consolidated Current Liabilities": at any date of determination, all
amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of the Company and its Subsidiaries
as at such date, including, without limitation, (a) all Indebtedness of the
Company or any Subsidiary payable on demand or, at the option of the Person to
whom such Indebtedness is owed, not more than twelve months after such date,
(b) any payments in respect of any Indebtedness of the Company or any
Subsidiary (whether installment, serial maturity or sinking fund payments or
otherwise) required to be made not more than twelve months after such date and
(c) all reserves in respect of liabilities or Indebtedness payable on demand
or, at the option of the Person to whom such Indebtedness is owed, not more
than twelve months after such date, the validity of which is contested at such
date.
"Consolidated Intangibles": at any date of determination, all assets
of the Company and its Subsidiaries, determined on a Consolidated basis at such
date, that would be classified as intangible assets in accordance with GAAP,
including, without limitation, unamortized debt discount and expenses,
unamortized organization and reorganization expense, costs in excess of the net
asset value of acquired companies, patents, trade or servicemarks, franchises,
trade names, goodwill and the amount of any write-up in the book value of any
assets resulting from any revaluation (other than revaluations arising out of
foreign currency valuations in accordance with GAAP) thereof after the Original
Effective Date.
"Consolidated Interest Expense": for any period, the sum of the
amounts deducted for Consolidated interest expense in determining Consolidated
Net Income for such period, excluding any amount contributed to the ESOP by the
Company to enable the ESOP to pay interest on the ESOP Note.
- 4 -
<PAGE> 9
"Consolidated Interest Income": for any period, the sum of the amounts
included as Consolidated interest income in determining Consolidated Net Income
for such period.
"Consolidated Net Income": for any period, the net income (or deficit)
of the Company and its Subsidiaries for such period determined on a
Consolidated basis in accordance with GAAP; provided that there shall be
excluded therefrom (a) the income (or deficit) of any Person accrued prior to
the date it becomes a Subsidiary or is merged into or consolidated with the
Company or any Subsidiary, (b) the income (or deficit) of any Person (other
than a Subsidiary) in which the Company or any Subsidiary has an ownership
interest, except to the extent that such income has been actually received by
the Company or such Subsidiary in the form of dividends or similar
distributions, (c) the undistributed earnings of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of the certificate of
incorporation or by-laws or other organizational documents thereof, by any
agreement to which such Subsidiary is a party or by which its Property is
bound, or by any order of any Governmental Body applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period, (e) any aggregate net gain (but not any aggregate net loss) during such
period arising from the sale, exchange or other disposition of capital assets
(such term to include all fixed assets, all inventory sold in conjunction with
the disposition of fixed assets and all securities), provided, however, that
any amounts so excluded by this clause, (e) shall be included in the
determination of Consolidated Net Income in any year in which the Company and
Subsidiaries did not incur a Consolidated operating loss as determined under
GAAP, (f) any write-up of any assets, (g) any gain arising from the acquisition
of any securities, (h) in the case of a successor to the Company by
consolidation or merger or as a transferee of its assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets, and (i) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in such
Subsidiary. For purposes of computing the Interest Coverage Ratio for the
fiscal quarter of the Company ending on March 31, 1993 and for the fiscal year
of the Company ending on December 31, 1993, $9,400,000 shall be added to the
amount determined under the preceding sentence.
"Consolidated Net Worth": at any date of determination, the sum of all
amounts which would be included under shareholders' equity on a Consolidated
balance sheet of the Company and its Subsidiaries determined in accordance with
GAAP as of such date.
"Consolidated Tangible Net Worth": at any date of determination,
Consolidated Net Worth minus Consolidated Intangibles.
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<PAGE> 10
"Consolidated Total Liabilities": at any date of determination, all
items which would, in conformity with GAAP, be classified as liabilities on a
Consolidated balance sheet of the Company and its Subsidiaries as of such date,
minus the initial charge incurred by the Company under FAS 106 in an aggregate
amount not in excess of $14,000,000.
"Consolidating": the Company and its Subsidiaries taken separately.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend
or other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (c) to purchase Property, securities or
services primarily for the purpose of assuring the beneficiary of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the
beneficiary of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include the
indorsement of instruments for deposit or collection in the ordinary course of
business. The term Contingent Obligation shall also include the liability of a
general partner for the liabilities of the partnership in which it is a general
partner. The amount of any Contingent Obligation of a Person shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, where
such Contingent Obligation is expressly limited to a portion of any such
primary obligation, that portion to which it is so limited, or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Current Ratio": at any time, the ratio of Consolidated Current Assets
to Consolidated Current Liabilities.
"Debentures": the 7% Convertible Subordinated Debentures, due 2011,
issued pursuant to the Indenture, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with paragraph 8.20.
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<PAGE> 11
"Default": any of the events specified in paragraph 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Dividend Limitation": for any fiscal year of the Company, an amount
equal to the greater of (i) the sum of the product, for each fiscal quarter in
such fiscal year in which a cash dividend was declared on such common Stock by
the Company pursuant to paragraph 8.4(iii)(a), of (x) $0.07 multiplied by (y)
the number of shares of common Stock of the Company issued and outstanding
(other than treasury Stock) as of the applicable quarterly record date for each
such quarter in each such year and (ii) an amount equal to 28% of Earnings
Available to Common Shareholders for such immediately preceding fiscal year
determined in accordance with GAAP, provided, however, that for the 1995 fiscal
year of the Company and each fiscal year thereafter, the Dividend Limitation
shall in no event exceed the net earnings of the Company for such fiscal year.
"Documentary Trade Letter of Credit": a Letter of Credit issued for
the account of the Company in support of the obligation of the Company in
respect of the purchase of goods or services from the beneficiary of such
Letter of Credit.
"Dollars" and "$": lawful currency of the United States of America.
"Earnings Available to Common Shareholders": for any fiscal year of
the Company, an amount equal to the product of (i) the earnings per share of
Common Stock as set forth on the financial statements of the Company for such
fiscal year delivered pursuant to paragraph 7.1, multiplied by (ii) the
weighted number of shares of Common Stock outstanding during such fiscal year,
all as determined in accordance with GAAP.
"EDO Automotive": EDO Automotive Natural Gas, Inc., a Delaware
corporation.
"EDO Canada": EDO (Canada) Limited, a Canadian corporation.
"EDO Canada Line": the $1,000,000 unsecured line of credit extended by
Canadian Imperial Bank of Commerce to EDO Canada.
"EDO Energy": EDO Energy Corporation, a Delaware corporation.
"EDO Sports": EDO Sports Inc., formerly EDO Sub Acquisition Corp., a
Delaware corporation.
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<PAGE> 12
"Eligible Billed Receivable": a Receivable (other than an Eligible
Unbilled Receivable) arising in the ordinary course of business as to which the
following requirements have been fulfilled to the satisfaction of the Agent:
(a) such Receivable is payable to the Company or any Guarantor and the Company
or such Guarantor, as the case may be, has lawful and absolute title thereto:
(b) none of such Receivable is subject to any Lien in favor of any Person other
than Permitted Liens; (c) such Receivable did not arise out of a transaction
with any employee, officer, director or Affiliate of the Company or any
Subsidiary (other than a Receivable arising out of a transaction with an
Affiliate of the Company in the ordinary course of business); (d) the Company
is not aware and has no reason to be aware of any reorganization, bankruptcy,
receivership, custodianship, insolvency or other like condition in respect of
the account debtor of such Receivable; (e) such Receivable has not been
outstanding more than 91 days from the original invoice date thereof; (f) such
Receivable is a good and valid account representing a bona fide indebtedness
incurred by the account debtor therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an absolute sale upon the stated
terms of goods sold or to be sold by the Company or any Guarantor and (g) the
Agent and the Required Banks are, and continue to be reasonably satisfied with
the credit standing of the account debtor in relation to the amount of credit
extended and the collectibility of such Receivable; provided, however, that a
Receivable arising out of a transaction with an Affiliate of the Company which
would otherwise be an Eligible Billed Receivable shall not be an Eligible
Billed Receivable if it arises out of the same sale of goods or rendering of
services with respect to which a Receivable is already included in the
Borrowing Base as an Eligible Billed Receivable.
"Eligible Unbilled Receivable": a Receivable arising in the ordinary
course of business consisting of cost input and related profit recognized as
revenues on customer contracts based upon percentage completion accounting in
accordance with GAAP, which amounts cannot be billed to customers because of
contract terms until a future date, as to which the following requirements have
been fulfilled to the satisfaction of the Agent: (a) such Receivable is payable
to the Company or any Guarantor and the Company or such Guarantor, as the case
may be, has lawful and absolute title thereto: (b) none of such Receivable is
subject to any Lien in favor of any Person other than Permitted Liens; (c) such
Receivable did not arise out of a transaction with any employee, officer,
director or Affiliate of the Company or any Subsidiary (other than a Receivable
arising out of a transaction with an Affiliate of the Company in the ordinary
course of business); (d) the Company is not aware and has no reason to be aware
of any reorganization, bankruptcy, receivership, custodianship, insolvency or
other like condition in respect of the account debtor of such Receivable; and
(e) the Agent and the Required Banks are, and continue to be reasonably
satisfied with the credit standing of the
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<PAGE> 13
account debtor in relation to the amount of credit extended and the
collectibility of such Receivable; provided, however, that a Receivable arising
out of a transaction with an Affiliate of the Company which would otherwise be
an Eligible Unbilled Receivable shall not be an Eligible Unbilled Receivable if
it arises out of the same sale of goods or rendering of services with respect
to which a Receivable is already included in the Borrowing Base as an Eligible
Unbilled Receivable.
"Environmental Complaint": as defined in paragraph 7.10.
"Environmental Laws": all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment or governing
the use, storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and Hazardous Wastes, and the
rules, regulations, decisions, orders and directives of all Governmental Bodies
with respect thereto.
"EPA Litigation": the proceeding of the United States Environmental
Protection Agency relating to a site in Norwalk, Connecticut, formerly occupied
by the Company's former Elinco Division, in which the Company has been named as
a potentially responsible party.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time, any successor statute thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"ERISA Liabilities": without duplication, the aggregate of all
unfunded vested benefits under all Plans and all potential withdrawal
liabilities under all Multiemployer Plans.
"ESOP": the EDO Corporation Employee Stock Ownership Plan.
"ESOP Guaranty": the Guarantee Agreement, dated as of July 12, 1988,
made by the Company to NatWest as successor in interest to MHT, as amended by
an Amendment and Waiver, dated as of April 12, 1990, Amendment No. 2, dated as
of October 9, 1990, Amendment No. 3, dated as of April 8, 1991, Amendment No.
4, dated March 26, 1992, Amendment No. 5, dated June 9, 1992 and Amendment No.
6, dated July 30, 1993 and the ESOP Guaranty Amendment, as the same may
hereafter be amended, supplemented or otherwise modified, from time to time in
accordance with paragraph 8.20.
"ESOP Guaranty Amendment": Amendment No. 7 to the ESOP Guaranty, dated
March 3, 1994.
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<PAGE> 14
"ESOP Loan Documents": collectively, the ESOP Loan Agreement, the ESOP
Guaranty, the ESOP Note, the ESOP Pledge Agreement and all other documents
executed and delivered in connection therewith as each may be amended,
supplemented or otherwise modified from time to time in accordance with
paragraph 8.20.
"ESOP Note": the Term Note, dated July 22, 1988, made by the ESOP
Trustee to NatWest as successor in interest to MHT, as amended by an Amendment
and Waiver, dated as of April 12, 1990, and as the same may hereafter be
amended, supplemented or otherwise modified, from time to time in accordance
with paragraph 8.20.
"ESOP Pledge Agreement": the Pledge and Security Agreement, dated as
of July 22, 1988, made by the ESOP Trustee to NatWest as successor in interest
to MHT, as amended by an Amendment and Waiver, dated as of April 12, 1990, and
as the same may hereafter be amended, supplemented or otherwise modified, from
time to time in accordance with paragraph 8.20.
"ESOP Preferred Stock": the ESOP Convertible Cumulative Preferred
Shares, Series A of the Company, $213.72 par value per share.
"ESOP Trustee": the trustee of the Trust under which the ESOP is
funded.
"Event of Default": any of the events specified in paragraph 9,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Existing Credit Agreement": as defined in the Recitals.
"Existing Notes" the Notes, dated June 10, 1992, made by the Company
to the respective Banks, each an "Existing Note".
"Facility Fee": as defined in paragraph 3.2.
"FAS 106": Statement of Financial Accounting Standards Board No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, issued
on December 21, 1990.
"Federal Funds Rate": for any day, 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, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by BNY and reported to the Agent from three
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<PAGE> 15
Federal funds brokers of recognized standing selected by the Agent and the
Required Banks.
"Financial Statements": as defined in paragraph 4.13.
"GAAP": generally accepted accounting principles as in effect from
time to time, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, the Accounting Principles Board and the
American Institute of Certified Public Accountants, in each case consistently
applied.
"Governmental Body": any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator.
"Guarantor": collectively, (i) EDO Western, Barnes, EDO Sports, EDO
Energy and EDO Automotive and (ii) each other Significant Subsidiary of the
Company other than EDO Canada and EDO Op (Israel) Ltd.
"Guaranty": collectively, (i) the Guaranty and Subordierations nation
Agreement, dated as of June 10, 1992, made by EDO Western, Barnes and EDO
Sports to the Agent, (ii) the Guaranty and Subordination Agreement, dated as of
June 22, 1993, made by EDO Energy, (iii) the Guaranty and Subordination
Agreement, dated as of December 1, 1993, made by EDO Automotive, and (iv) the
Guaranty and Subordination Agreement, made by a Guarantor described in clause
(ii) of the definition thereof, substantially in the form of the foregoing
guaranties, as each may be amended, supplemented or otherwise modified from
time to time.
"Hazardous Discharge": as defined in paragraph 7.10.
"Hazardous Substance": without limitation, any hazardous materials,
Hazardous Wastes, hazardous or toxic substances or related materials as defined
in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), RCRA or any other applicable Environmental Law.
"Hazardous Wastes": without limitation, all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Highest Lawful Rate": the maximum rate of interest, if any, that at
any time or from time to time may be contracted for, taken, charged or received
on the Notes or which may be owing to any Bank pursuant to this Agreement under
the laws applicable to such Bank and this transaction.
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<PAGE> 16
"Indebtedness": as to any Person, at a particular time, all items
which constitute, without duplication, (a) indebtedness for borrowed money or
the deferred purchase price of Property (other than trade payables incurred in
the ordinary course of business), (b) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (c) indebtedness in respect of ERISA
Liabilities, (d) obligations with respect to any conditional sale or title
retention agreement, (e) indebtedness arising under acceptance facilities and
the amount available to be drawn under all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn thereunder to
the extent such Person shall not have reimbursed the issuer in respect of the
issuer's payment of such drafts, (f) all liabilities secured by any Lien on any
Property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof (other than carriers',
warehousemen's, mechanics', repairmen's or other like non-consensual Liens
arising in the ordinary course of business), (g) all obligations under
Capitalized Leases and (h) all Contingent Obligations.
"Indemnified Liabilities": as defined in paragraph 11.5.
"Indemnified Person": as defined in paragraph 11.5.
"Indenture": the Indenture, dated as of November 15, 1986, made by the
Company to MHT, as trustee, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with paragraph 8.20.
"Information": as defined in paragraph 11.18.
"Intellectual Property": all copyrights, trademarks, patents, trade
names and service marks and names.
"Interest Coverage Ratio": at any time of determination, the ratio of
(a) the sum of (i) the product of Consolidated Net Income for the immediately
preceding fiscal quarter of the Company multiplied by 4, (ii) the product of
income taxes to the extent deducted in determining such Consolidated Net Income
for such immediately preceding fiscal quarter of the Company multiplied by 4
and (iii) the product of Consolidated Interest Expense for such fiscal quarter
multiplied by 4 minus the product of Consolidated Interest Income for such
fiscal quarter multiplied by 4 to (b) the product of Consolidated Interest
Expense for such fiscal quarter multiplied by 4 minus the product of
Consolidated Interest Income for such fiscal quarter multiplied by 4.
"Interest Payment Date": in respect of any Loan, the last day of each
month commencing on the first of such days to occur after such Loan is made.
"Investments": as defined in paragraph 8.5.
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<PAGE> 17
"Lending Office": in respect of any Bank, initially, the office or
offices of such Bank designated as such on Schedule 1.1; thereafter, such other
office or offices of such Bank, if any, which shall be making or maintaining
Loans, as reported by such Bank to the Agent.
"Letter of Credit Commissions": as defined in paragraph 3.4.
"Letter of Credit Commitment": the commitment of BNY to issue Letters
of Credit having an aggregate outstanding face amount of up to $15,000,000, and
the commitment of the Banks to participate in the Letter of Credit Exposure as
set forth in paragraph 2.9.
"Letter of Credit Exposure": at a particular date, the sum of (a) the
undrawn face amounts of the outstanding Letters of Credit at such date and (b)
the aggregate unpaid reimbursement obligations in respect of the outstanding
Letters of Credit at such date (after giving effect to any Loans made on such
date to pay any such reimbursement obligations).
"Letters of Credit": as defined in paragraph 2.8(a).
"L/C 27902": Performance Letter of Credit No. 27902 issued by BNY for
the account of the Company and for the benefit of FR. Lurssen Werft (GMBH &
Co.) in the face amount of $84,140 and with an expiration date of September 30,
1995.
"Leverage Ratio": at any time, the ratio of (a) Consolidated Total
Liabilities minus Subordinated Debt to (b) Consolidated Tangible Net Worth plus
Subordinated Debt.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or other security
agreement or security interest of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement and
any financing lease having substantially the same economic effect as any of the
foregoing.
"Loan Documents": collectively, this Agreement, the Notes, the
Guaranty and the Reimbursement Agreements.
"Loan" or "Loans": as defined in paragraph 2.1.
"Margin Stock": any "margin stock", as said term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, as the
same may be amended or supplemented from time to time.
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<PAGE> 18
"Material Adverse Change": a material adverse change in the financial
condition, operations, business, prospects or Property of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect": a material adverse effect on the financial
condition, operations, business, prospects or Property of the Company and its
Subsidiaries taken as a whole.
"Maturity Date": June 30, 1995, or such earlier date on which the
Loans shall become due and payable pursuant to the provisions hereof, whether
by acceleration or otherwise.
"MHT": Manufacturers Hanover Trust Company.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA under which the Company or any Subsidiary is an
employer.
"NatWest": National Westminster Bank USA.
"Net Sales Proceeds": the aggregate gross sales proceeds received by
the Company or any Subsidiary from each sale or other disposition, direct or
indirect, of Property (other than inventory sold in the ordinary course of
business) less (a) sales and other commissions and legal and other expenses
incurred in connection with such sale, (b) taxes reasonably estimated to be
payable in cash by the Company or any Subsidiary for the taxable year in which
such sale occurred (taking into consideration the Company's overall
Consolidated tax position for such year) and (c) the amount of Indebtedness
(other than the Indebtedness under the Loan Documents) secured by such Property
which is required to be repaid upon such sale.
"Note" or "Notes": as defined in paragraph 2.2.
"Original Effective Date": June 10, 1992.
"Party" or "Parties": the Agent, the Banks and the Company, or any one
or more of them as the context requires.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA, or any Governmental Body succeeding to the
functions thereof.
"Performance Letter of Credit": a Letter of Credit issued for the
account of the Company in support of an obligation (other than a financial
obligation) of the Company to the beneficiary of such Letter of Credit.
"Permitted Liens": Liens permitted to exist pursuant to paragraph 8.2.
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<PAGE> 19
"Person": an individual, a partnership, a corporation, a joint stock
company, a trust, an unincorporated association, a Governmental Body or any
other entity of whatever nature.
"Plan": any pension plan which is covered by Title IV of ERISA or any
other employee benefit plan which is subject to the minimum funding standards
of Section 412 of the Code and in respect of which the Company, any Subsidiary
or a Commonly Controlled Entity or Subsidiary is an "employer" as defined in
Section 3(5) of ERISA.
"Property": all types of real, personal, tangible, intan- gible or
mixed property.
"Quick Ratio": at any time, the ratio of (a) cash and cash equivalents
plus Receivables, in each case of the Company and its Subsidiaries on a
Consolidated basis to (b) Consolidated Current Liabilities.
"Real Property": all real Property from time to time owned or leased
by the Company or any Subsidiary.
"Receivable": the right to payment arising as a result of, or in
connection with, a sale of inventory, equipment or any other Property or the
rendering of services by, and in the ordinary course of business of, the
Company, any Guarantor or EDO Canada.
"Release": any release, spill, discharge, leak or disposal, the
reporting of which is required by an applicable Environmental Law.
"RCRA": the Resource Conservation and Recovery Act, 42 U.S.C. sections
6901, et seq., as the same may be amended from time to time.
"Reimbursement Agreement": as defined in paragraph 2.8(b).
"Required Banks": at any time when no Loans or Letters of Credit are
outstanding, Banks having Commitments equal to at least 67% of the aggregate
Commitments of all the Banks, and at any time when Loans or Letters of Credit
are outstanding, Banks holding Notes and participation interests in Letters of
Credit having an aggregate unpaid principal balance and Letter of Credit
Exposure equal to at least 67% of the aggregate of Loans outstanding and Letter
of Credit Exposure.
"Reportable Event": any event described in Section 4043(b) of ERISA,
other than an event (excluding an event described in Section 4043(b)(1)
relating to tax disqualification)
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<PAGE> 20
with respect to which the 30-day notice requirement has been waived.
"Restatement Effective Date": as defined in the Recitals.
"Significant Subsidiary": (i) each wholly-owned Subsidiary, (ii) each
Subsidiary (other than a wholly-owned Subsidiary) once the aggregate amount of
investments (whether by way of equity contributions, advances, loans or
otherwise) in such Subsidiary exceeds $2,000,000 and (iii) each Subsidiary
(whether or not a wholly-owned Subsidiary) once the aggregate amount of
investments (whether by way of equity contributions, advances, loans or
otherwise) in all Subsidiaries (other than wholly-owned Subsidiaries) exceeds
$4,000,000.
"Single Employer Plan": any Plan which is not a Multiemployer Plan.
"Special Counsel": Emmet, Marvin & Martin.
"Standby Letter of Credit": a Letter of Credit issued for the account
of the Company in support of a financial obligation of the Company to the
beneficiary of such Letter of Credit.
"Stock": any and all shares, interests, participations or other
equivalents (however designated) of corporate stock.
"Subordinated Debt": the Indebtedness of the Company under the
Debentures and the Indenture, as each may be amended, supplemented or otherwise
modified from time to time in accordance with paragraph 8.20.
"Subsidiary": any corporation, association, partnership, joint venture
or other business entity of which the Company alone or together with any
Subsidiary of the Company, directly or indirectly, either (a) in respect of a
corporation, owns or controls more than 50% of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors or similar
managing body, irrespective of whether or not a class or classes shall or might
have voting power by reason of the happening of any contingency, or (b) in
respect of an association, partnership, joint venture or other business entity,
is entitled or obligated to share in more than 50% of the profits or losses,
however determined.
"Surety Letter of Credit": a Letter of Credit issued for the account
of the Company to back a surety bond issued for the account of the Company.
"Taxes": any present or future income, stamp or other taxes, levies,
imposts, duties, fees, assessments, deductions,
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<PAGE> 21
withholdings, or other charges of whatever nature, now or hereafter imposed,
levied, collected, withheld, or assessed by any government or taxing authority.
"Transaction Record": as defined in paragraph 2.20.
1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the meanings given
such terms herein when used in the Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto, unless otherwise defined
therein.
(b) As used herein, in the other Loan Documents and in any certificate
or other document made or delivered pursuant hereto or thereto, accounting
terms not defined in paragraph 1.1, and accounting terms partly defined in
paragraph 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and similar
words when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and paragraph, schedule and exhibit
references contained herein shall refer to paragraphs hereof or schedules or
exhibits hereto unless otherwise expressly provided herein.
(d) The word "or" shall not be exclusive; "may not" is
prohibitive and not permissive; and the singular includes the plural.
(e) Notwithstanding the foregoing, the Parties agree that in the event
that any change in accounting principles from those used in the preparation of
the Financial Statements is hereafter occasioned by the promulgation of rules,
regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or Accounting Principles Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and such change materially affects the calculation of
any component of any financial covenant, standard or term contained in this
Agreement, the Agent and the Company shall negotiate in good faith to amend
such financial covenants, standards or terms found in this Agreement (other
than in respect of financial statements to be delivered hereunder) so that,
upon adoption of such changes, the criteria for evaluation of the Company's and
its Subsidiaries' financial condition shall be the same in substance after such
change as if such change had not been made; provided, however, that any such
amendments shall not become effective for purposes of this Agreement unless
approved by the Agent and the Required Banks, and if the Company,
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<PAGE> 22
the Agent and the Required Banks cannot agree on such an amendment, then the
calculations under such financial covenants, standards or terms shall continue
to be computed without giving effect to such change in accounting principles.
2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT
2.1 Loans.
Subject to the terms and conditions of this Agreement, each Bank
severally agrees to make revolving credit loans (each a "Loan" and,
collectively, the "Loans") to the Company from time to time during the period
from the Restatement Effective Date to, but excluding, the Maturity Date in an
aggregate principal amount at any one time outstanding not to exceed such
Bank's Commitment. At no time shall the sum of (i) the aggregate outstanding
principal balance of the Loans and (ii) the Letter of Credit Exposure exceed
the lesser of (a) the Commitments or (b) the Borrowing Base. During the period
from the Restatement Effective Date to, but excluding, the Maturity Date, the
Company may borrow, prepay in whole or in part and reborrow under the
Commitments, all in accordance with the terms and conditions hereof.
2.2. Notes.
The Loans made by each Bank shall be evidenced by an amended and
restated promissory note of the Company, substantially in the form of Exhibit
B, with appropriate insertions therein as to date and principal amount (each as
indorsed or modified from time to time, including all replacements thereof and
substitutions therefor, a "Note" and, collectively with the Notes of all other
Banks, the "Notes"), payable to the order of such Bank and representing the
obligation of the Company to pay the lesser of (a) the amount of the Commitment
of such Bank and (b) the aggregate unpaid principal balance of all Loans made
by such Bank, with interest thereon as prescribed in paragraph 2.7. Each Bank
is hereby authorized to record (i) the outstanding principal amount of its
Loans on the Restatement Effective Date, (ii) the date and amount of each Loan
made by such Bank after the Restatement Effective Date and (iii) the date and
amount of each payment or prepayment of principal of, any Loans, either on the
schedule (and any continuations thereof) annexed to and constituting a part of
its Note or in such Bank's internal records. No failure to so record or any
error in so recording shall affect the obligation of the Company to repay the
Loans, with interest thereon, as herein provided. Each Note shall (a) be dated
the Restatement Effective Date, (b) be stated to mature on the Maturity Date,
and (c) bear interest for the period from and including the date of such
borrowing on the unpaid principal balance thereof from time to time outstanding
at the applicable interest rate or rates per annum determined as provided in
paragraph 2.7 and until such borrowing
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<PAGE> 23
is repaid. Interest on each Note shall be payable as specified in paragraph
2.7.
2.3. Procedure for Borrowing.
(a) The Company may borrow under the Commitments from time to time on
any Business Day occurring on or after the Restatement Effective Date and
before the Maturity Date, provided, that the Company shall give the Agent
irrevocable written notice in the form of a Borrowing Request of any borrowing
(which Borrowing Request must be received by the Agent prior to 10:00 A.M., New
York City time one Business Day prior to the requested Borrowing Date,
specifying (i) the aggregate amounts to be borrowed under the Commitments and
(ii) the requested Borrowing Date. Each borrowing shall be in an aggregate
principal amount equal to $500,000 or such amount plus a multiple of $100,000
in excess thereof. Upon receipt of each Borrowing Request, the Agent shall
notify each Bank thereof, not later than 12:00 Noon, New York City time at
least one Business Day prior to a Borrowing Date. Each Bank will make the
amount of its Commitment Percentage of each borrowing available to the Agent
for the account of the Company at the office of the Agent set forth in
paragraph 11.2 not later than 12:00 Noon, New York City time, on the Borrowing
Date requested by the Company, in funds immediately available to the Agent at
such office. The amounts so made available to the Agent on a Borrowing Date
will then, subject to the satisfaction of the terms and conditions of this
Agreement as determined in good faith by the Agent, be made available on such
date to the Company by the Agent at the office of the Agent specified in
paragraph 11.2 by crediting the account of the Company on the books of such
office with the aggregate of said amounts received by the Agent.
(b) Unless the Agent shall have received prior notice from a Bank (by
telephone or otherwise, such notice to be promptly confirmed by telex, telecopy
or other writing) that such Bank will not make available to the Agent such
Bank's pro rata share of the Loans requested by the Company, the Agent may
assume that such Bank has made such share available to the Agent on such
Borrowing Date in accordance with this paragraph, provided that such Bank
received notice of the proposed borrowing from the Agent, and the Agent may, in
reliance upon such assumption, make available to the Company on such Borrowing
Date a corresponding amount. If and to the extent such Bank shall not make such
pro rata share available to the Agent and the Agent shall have made available a
corresponding amount, such Bank and the Company severally agree to pay to the
Agent forthwith on demand such corresponding amount (to the extent not
previously paid by the other), together with interest thereon for each day from
the date such amount is made available to the Company until the date such
amount is paid to the Agent, at a rate per annum equal to, in the case of the
Company, the applicable interest rate set forth in paragraph 2.7, and, in the
case of such Bank, the Federal Funds Rate in effect on such date
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<PAGE> 24
(as determined by the Agent). Such payment by the Company, however, shall be
without prejudice to its rights against such Bank. If such Bank shall pay to
the Agent such corresponding amount, such amount so paid shall constitute such
Bank's Loan as part of such Loans for purposes of this Agreement, which Loan
shall be deemed to have been made by such Bank on the Borrowing Date applicable
to such Loans.
2.4. Termination or Reduction of Commitments.
(a) Voluntary Reductions. The Company shall have the right, upon at
least three Business Days' prior written notice to the Agent, at any time to
reduce permanently the Commitments in whole at any time, or in part from time
to time, to an amount not less than the sum of (i) the aggregate principal
balance of the Loans then outstanding (after giving effect to any
contemporaneous prepayment thereof) and (ii) the Letter of Credit Exposure and,
concurrently with any such reduction, the Company shall prepay the Loans in the
amount, if any, by which the sum of (x) the aggregate unpaid principal balance
of the Loans, plus (y) the Letter of Credit Exposure exceeds the Commitments as
so reduced, provided that each partial reduction of the Commitments shall be in
an amount equal to $1,000,000 or such amount plus a whole multiple thereof.
(b) In General. Reductions of the Commitments shall be applied pro
rata according to the Commitment Percentage of each Bank. Simultaneously with
each reduction of the Commitments under this paragraph 2.4, the Company shall
pay the Commitment Fee accrued on the amount by which the Commitments have been
reduced and prepay the amount, if any, by which the aggregate unpaid principal
balance of the Loans plus the Letter of Credit Exposure exceeds the amount of
the Commitments as so reduced.
2.5. Prepayments of the Loans.
(a) Voluntary Prepayments. The Company may, at its option, prepay the
Loans, in whole or in part, at any time and from time to time by notifying the
Agent in writing at least one Business Day prior to the proposed prepayment
date specifying the amount of the Loans to be prepaid and the date of
prepayment. Upon receipt of such notice, the Agent shall promptly notify each
Bank thereof. If any such notice by the Company is given pursuant to this
paragraph 2.5, such notice shall be irrevocable and payment of the amount
specified in such notice shall be due and payable on the date specified,
together with accrued interest to the date of such payment on the amount
prepaid. Partial prepayments shall be in an aggregate principal amount of
$500,000 or such amount plus a multiple of $100,000 in excess thereof or, if
less, the outstanding principal balance of the Loans.
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(b) Mandatory Borrowing Base Prepayment of Loans. If on any day the
sum of (i) the aggregate outstanding principal balance of the Loans and (ii)
the Letter of Credit Exposure shall exceed the Borrowing Base, the Company
shall, within one Business Day of such day, prepay the Loans by an amount equal
to such excess. If, after giving effect to such prepayment, the Letter of
Credit Exposure exceeds the Borrowing Base, the Company shall deposit with the
Agent collateral in cash or cash equivalents acceptable to the Agent to be held
and applied in accordance with paragraph 2.8(d). Until such excess has been
prepaid, the Company shall not be entitled to effect additional Loans, request
the issuance of new Letters of Credit or request amendments to any Letters of
Credit.
(c) Mandatory Prepayments of the Loans Relating to Sales of Property.
The Borrower shall prepay the Loans in the amounts, at the times and to the
extent required by Section 8.7(d) in connection with certain sales of Property,
provided that to the extent that the Net Sales Proceeds of any sale described
therein exceeds the then outstanding principal balance of the Loans, such
excess shall be applied as a permanent reduction of the Borrowing Base as
described in the definition thereof.
2.6. Intentionally Omitted.
2.7. Interest Rates and Payment Dates.
(a) Prior to Maturity. Prior to maturity, the outstanding principal
balance of the Loans shall bear interest at the Alternate Base Rate plus 1/4%.
(b) Default Rate. After the occurrence and during the continuance of
an Event of Default, the outstanding principal amount of the Loans and any
overdue interest or other amount payable by the Company to the Agent or any
Bank under the Loan Documents shall, to the extent permitted by applicable law,
bear interest at a rate per annum equal to the Alternate Base Rate plus 2-1/4%.
All such interest shall be payable on demand.
(c) General. Interest shall be calculated on the basis of a 360 day
year for the actual number of days elapsed. Interest shall be payable in
arrears on each Interest Payment Date and upon payment (including prepayment)
of the Loans. Any change in the interest rate on the Loans resulting from a
change in the Alternate Base Rate shall become effective as of the opening of
business on the day on which such change in the Alternate Base Rate shall
become effective. The Agent shall, as soon as practicable, notify the Company
and the Banks of the effective date and the amount of each such change in the
Alternate Base Rate, but failure to so notify shall not in any manner affect
the obligation of the Company to pay interest on the Loans in the amounts and
on the dates required. Each determination of the Alternate Base Rate by
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<PAGE> 26
the Agent pursuant to this Agreement shall be conclusive and binding on the
Company and the Banks absent manifest error. At no time shall the interest rate
payable on the Loans, together with the Commitment Fee, the Facility Fee, the
Agent's Fee, the Letter of Credit Commissions and all other fees and other
amounts payable hereunder, to the extent the same are construed to constitute
interest, exceed the Highest Lawful Rate. If interest payable on any date would
exceed the maximum amount permitted by the Highest Lawful Rate, such interest
payment shall automatically be reduced to such maximum permitted amount, and
interest for any subsequent period, to the extent less than the maximum amount
permitted for such period by the Highest Lawful Rate, shall be increased by the
unpaid amount of such reduction. Any interest actually received for any period
in excess of such maximum allowable amount for such period shall be deemed to
have been applied as a prepayment of the Loans. The Company acknowledges that
to the extent interest payable on the Loans is based on the BNY Rate, such Rate
is only one of the bases for computing interest on loans made by the Banks, and
by basing interest on the BNY Rate, the Banks have not committed to charge, and
the Company has not in any way bargained for, interest based on a lower or the
lowest rate at which the Banks may now or in the future make loans to other
borrowers.
2.8. Letter of Credit Sub-Facility.
(a) Subject to the terms and conditions of this Agreement, BNY agrees,
in reliance on the agreement of the other Banks set forth in paragraph 2.9, to
issue Standby, Performance, Documentary Trade and Surety Letters of Credit (the
"Letters of Credit"; each, individually, an "Letter of Credit") for the account
of the Company. The sum of the aggregate face amount of the Letters of Credit
at any one time outstanding shall not exceed the lesser of (i) the excess, if
any, of the sum of the Commitments over the sum of the aggregate outstanding
principal balance of the Loans or (ii) the excess, if any, of the Borrowing
Base over the sum of the aggregate outstanding principal balance of the Loans.
Except for the L/C 27902, each Letter of Credit shall have an expiration date
which shall be not later than one Business Day prior to the Maturity Date,
provided, however, if the Company so requests, a Letter of Credit may, in the
discretion of the Required Banks, be issued with an expiration date which is
later than one Business Day prior to the Maturity Date if the Company deposits
collateral in cash or cash equivalents acceptable to the Agent with the Agent
in an amount equal to the face amount of such requested Letter of Credit in
accordance with paragraph 2.8(d). Notwithstanding the foregoing, BNY shall not
issue a Letter of Credit which constitutes a Surety Letter of Credit without
the consent of the Banks if, after giving effect to the issuance thereof, the
Letter of Credit Exposure attributable to Surety Letters of Credit will exceed
$1,000,000. No Letter of Credit shall be issued if the Agent shall have
determined that the conditions set forth in paragraph 6 have not been
satisfied.
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<PAGE> 27
(b) Each Letter of Credit shall be issued for the account of the
Company in support of an obligation of the Company in favor of a beneficiary
who has requested the issuance of such Letter of Credit as a condition to a
transaction entered into in connection with the Company's or a Subsidiary's
business. The Company shall give the Agent a Borrowing Request for the issuance
of each Letter of Credit by 10:00 A.M., New York City time, three Business Days
prior to the requested date of issuance. Such Borrowing Request shall be
accompanied by BNY's standard Application and Agreement for a Standby,
Performance, Documentary Trade or Surety Letter of Credit, as the case may be,
then in use by BNY (each a "Reimbursement Agreement"), executed by an
Authorized Signatory of the Company, and shall specify (i) the beneficiary of
such Letter of Credit and the obligations of the Company in respect of which
such Letter of Credit is to be issued, (ii) the Company's proposal as to the
conditions under which a drawing may be made under such Letter of Credit and
the documentation, if any, to be required in respect thereof, (iii) the maximum
amount to be available under such Letter of Credit, and (iv) the requested date
of issuance. In the case of a request for a Letter of Credit (other than one
for a Documentary Trade Letter of Credit), BNY shall determine, based on such
criteria as it, in its sole discretion, shall deem appropriate, whether the
Letter of Credit to be issued shall be a Standby or Performance letter of
credit. Upon receipt of such Borrowing Request from the Company, the Agent
shall promptly notify each Bank thereof. BNY shall, on the proposed date of
issuance and subject to the other terms and conditions of this Agreement, issue
the requested Letter of Credit. Each Letter of Credit shall be in form and
substance reasonably satisfactory to BNY, with such provisions with respect to
the conditions under which a drawing may be made thereunder and the
documentation required in respect of such drawing as BNY shall reasonably
require. Each Letter of Credit shall be used solely for the purposes described
therein.
(c) Each payment by BNY of a draft drawn under a Letter of Credit
shall give rise to an obligation on the part of the Company to reimburse BNY
immediately for the amount thereof. If the Company shall have failed to
reimburse BNY in full on or before 12:00 noon, New York City time, on the date
BNY shall make payment on a draft drawn under a Letter of Credit, except as
provided in paragraph 2.8(d), the Company's obligations to make such
reimbursement shall be satisfied by the automatic making of a Loan by each Bank
under its Note in the principal amount equal to its Commitment Percentage of
the amount of such draft paid by BNY. BNY agrees to notify each Bank (in
accordance with paragraph 2.8(c)) and the Company of the making of each such
Loan.
(d) In the event that the Company is required to deposit collateral in
cash or cash equivalents acceptable to the Agent with the Agent, such deposit
shall be made in immediately
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available funds, the Agent shall have no liability for interest thereon and the
Agent shall hold such collateral for the ratable benefits of the Banks to be
applied as set forth herein. With respect to such collateral delivered to the
Agent in respect of a Letter of Credit issued with an expiration date which is
later than one Business Day prior to the Maturity Date pursuant to paragraph
2.8(a), including, without limitation, the L/C 27902, in the event of a drawing
on such Letter of Credit, the Agent shall apply all or a portion of such
collateral to the reimbursement of BNY in respect of such drawing. In the event
of the termination of such Letter of Credit prior to the Maturity Date and its
return to BNY, the Agent shall return the unapplied portion of such collateral
to the Company.
2.9. Letter of Credit Participation and Funding Commitments.
(a) Each Bank hereby unconditionally, irrevocably, and severally for
itself only and without any notice to or the taking of any action by such Bank,
hereby takes an undivided participating interest in the obligations of BNY
under and in connection with each Letter of Credit outstanding on the
Restatement Effective Date (including, without limitation, the Brazil Letter of
Credit) and each Letter of Credit issued on or after the Restatement Effective
Date in accordance with the provisions of paragraph 2.8 (including, without
limitation, the L/C 27902 and each other Letter of Credit which has an
expiration date later than one Business Day prior to the Maturity Date in an
amount equal to such Bank's Commitment Percentage of the amount of such Letter
of Credit. Each Bank shall be liable to BNY for its Commitment Percentage of
the unreimbursed amount of any draft drawn and honored under each Letter of
Credit. Each Bank shall also be liable for an amount equal to the product of
its Commitment Percentage and any amounts paid by the Company pursuant to
paragraph 2.10 that are subsequently rescinded or avoided, or must otherwise be
restored or returned. Such liabilities shall be unconditional and without
regard to the occurrence of any Default or Event of Default or the compliance
by the Company with any of its obligations under the Loan Documents. Each
payment by a Bank of such Commitment Percentage of the amount of such Letter of
Credit or of any amounts so rescinded, avoided, restored or returned shall be
treated as the making by such Bank of an automatic Loan.
(b) The Agent will promptly notify each Bank (which notice shall be
promptly confirmed in writing) of the date and the amount of any draft
presented under any Letter of Credit with respect to which full reimbursement
of payment is not made by the Company as provided in paragraph 2.8, and
forthwith upon receipt of such notice, such Bank (other than BNY) shall make
available to the Agent for the account of BNY its Commitment Percentage of the
amount of such unreimbursed draft (which shall constitute such Bank's automatic
Loan) at the office of the Agent specified in
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<PAGE> 29
paragraph 11.2, in lawful money of the United States and in immediately
available funds, before 4:00 P.M., New York City time, on the day such notice
is given by the Agent, if the relevant notice is given by the Agent at or prior
to 1:00 P.M., New York City time, on such day, and before 12:00 noon, New York
City time, on the next Business Day, if the relevant notice is given by the
Agent after 1:00 P.M., New York City time, on such day. The Agent shall
distribute the payments made by each Bank (other than BNY) pursuant to the
immediately preceding sentence to BNY promptly upon receipt thereof in like
funds as received. If a Bank does not make available to the Agent when due such
Bank's Commitment Percentage of any unreimbursed payment made by BNY under a
Letter of Credit (other than payments made by BNY by reason of its gross
negligence or willful misconduct), such Bank shall be required to pay interest
to the Agent for the account of BNY on such Bank's Commitment Percentage of
such payment at a rate per annum equal to the Federal Funds Rate plus 1% from
the date such Bank's payment is due until the date such payment is received by
the Agent. The Agent shall distribute such interest payments to BNY upon
receipt thereof in like funds as received. If the Agent receives a Bank's
Commitment Percentage of any unreimbursed payment under a Letter of Credit
after the date when due and the Agent receives interest on any late payment
from such Bank in accordance with the provisions of the preceding sentence,
such Bank's automatic Loan shall be deemed to have been made to the Company on
the date BNY made payment under such Letter of Credit.
(c) Whenever the Agent is reimbursed by the Company, for the account
of BNY, for any payment under a Letter of Credit and such payment relates to an
amount previously paid by a Bank in respect of its Commitment Percentage of the
amount of such payment under such Letter of Credit, the Agent will pay over
such payment to such Bank (i) before 4:00 P.M., New York City time on the day
such payment from the Company is received, if such payment is received at or
prior to 1:00 P.M., New York City time, on such day, or (ii) before 12:00 Noon,
New York City time, on the next succeeding Business Day, if such payment from
the Company is received after 1:00 P.M., New York City time, on such day.
2.10. Absolute Obligation with respect to Letter of Credit Payments.
The Company's obligation to reimburse the Agent for the account of BNY
in respect of a Letter of Credit for each payment under or in respect of such
Letter of Credit shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Company may have or have had against the beneficiary of such
Letter of Credit, the Agent, BNY or other issuer of such Letter of Credit, any
Bank or any other Person, including, without limitation, any defense based on
the failure of any drawing to conform to the terms of such Letter of Credit,
any drawing document proving to be
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<PAGE> 30
forged, fraudulent or invalid, or the legality, validity, regularity or
enforceability of such Letter of Credit; provided, however, that the Company
shall not be obligated to reimburse the Agent for the account of BNY or other
issuer of a Letter of Credit for any wrongful payment under such Letter of
Credit made as a result of BNY's or such other issuer's gross negligence or
willful misconduct.
2.11. Increased Costs Based on Letters of Credit.
If any law or regulation or any change in the interpretation or
application thereof by any Governmental Body charged with the administration
thereof or GAAP shall either (a) impose, modify or make applicable any reserve,
special deposit, assessment or similar requirement against letters of credit
issued by, or participated in, by any Bank, or (b) impose on the Agent or such
Bank any other condition regarding the Letters of Credit (except for the
imposition of, or changes in the rate of, tax on the overall net income of the
Agent or such Bank) and the result of any event referred to in clause (a) or
(b) above shall be to increase the cost to BNY (or any successor thereto as
issuer of Letters of Credit) of issuing or maintaining the Letters of Credit or
the cost to any Bank of making or maintaining any Loan pursuant to paragraph
2.8 or its obligations pursuant to paragraph 2.9, or the cost to the Agent of
performing its functions hereunder with respect to the Letters of Credit, in
any case by an amount which the Agent, BNY, or any Bank, as the case may be,
deems material, then, upon demand by the Agent, BNY or such Bank, as the case
may be, such demand to be made within 90 days after the officer of the Agent,
BNY or such Bank, as the case may be, having primary responsibility for this
Agreement has obtained knowledge of such increased cost, the Company shall
immediately pay to the Agent, BNY or such Bank, as the case may be, from time
to time as specified by the Agent, BNY or such Bank, additional amounts which
shall be sufficient to compensate the Agent, BNY or such Bank, as the case may
be, for such increased cost. A statement in reasonable detail as to such
increased cost incurred by the Agent, BNY or such Bank, as the case may be, as
a result of any event mentioned in clauses (a) or (b) above, submitted to the
Company shall be conclusive, absent manifest error, as to the amount thereof.
2.12. Intentionally Omitted.
2.13. Taxes; Net Payments.
(a) All payments under the Loan Documents shall be made free and clear
of, and without reduction for or on account of, any Taxes required by law to be
withheld from any amounts payable under the Loan Documents.
(b) Each Bank which is not organized under the laws of the United
States or any State thereof (and any holder (which is
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<PAGE> 31
not organized under the laws of the United States or any State thereof) of a
participation interest from such Bank) shall deliver to the Company such
certificates, documents, or other evidence as the Company may reasonably
request from time to time as are necessary to establish that such Bank (or such
participant) is not subject to withholding under Section 1441 or 1442 of the
Code or as may be necessary to establish, under any law imposing upon the
Company, whether existing now or hereafter, an obligation to withhold any
portion of the payments made by the Company under the Loan Documents, that
payments to the Agent on behalf of such Bank (or such participant) are not
subject to withholding. Notwithstanding any provision herein to the contrary,
the Company shall have no obligation to pay to any Bank (or participant) any
amount which the Company is liable to withhold due to the failure of such Bank
(or such participant) to file any statement of exemption required by the Code.
2.14. Intentionally Omitted.
2.15. Intentionally Omitted.
2.16. Intentionally Omitted.
2.17. Intentionally Omitted.
2.18. Use of Proceeds.
The proceeds of the Loans shall be used to reimburse the Banks in
respect of any Letters of Credit upon which amounts have been drawn and for the
general working capital needs of the Company. All Loans and the use to which
the proceeds thereof are put shall conform with the provisions of paragraph
4.11.
2.19. Capital Adequacy.
If (i) the introduction of, or any change or phasing in of any law or
regulation or in the interpretation thereof by any United States or foreign
Governmental Body charged with the administration thereof, (ii) compliance with
any directive, guideline or request from any central bank or United States or
foreign Governmental Body (whether or not having the force of law) promulgated
or made after the date hereof, or (iii) compliance with the Risk-Based Capital
Guidelines of the Federal Reserve System as set forth in 12 C.F.R. Parts 208
and 225, or of the Comptroller of the Currency, Department of the Treasury, as
set forth in 12 C.F.R. Part 3, or other comparable or similar law, rule or
regulation, affects or would affect the amount of capital required or expected
to be maintained by a Bank (or any lending office of such Bank) or any
corporation directly or indirectly owning or controlling such Bank, and such
Bank shall have determined that such introduction, change or compliance has or
would have the effect of reducing the rate of return on such Bank's or such
corporation's capital or the
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<PAGE> 32
asset value to such Bank or such corporation of any Loan made by, or Letter of
Credit issued or participated in, such Bank as a consequence, directly or
indirectly, of its obligations to make and maintain the funding of Loans and
issue and participate in Letters of Credit hereunder to a level below that
which such Bank could have achieved but for such introduction, change or
compliance (after taking into account such Bank's or such corporation's
policies regarding capital adequacy) by an amount deemed by such Bank to be
material, then, upon demand by such Bank, the Company shall promptly pay to
such Bank such additional amount or amounts as shall be sufficient to
compensate such Bank for any such reduction. A certificate as to such amounts
submitted to the Company and the Agent setting forth the determination of such
amounts that will compensate such Bank for such reduction shall be presumed
correct absent manifest error.
2.20. Transaction Record.
The Agent has established a transaction record (the "Transaction
Record") with respect to this Agreement. The Transaction Record shall set forth
each Bank's Loans and the amount of its participation in each Letter of Credit,
each payment by the Company of principal and interest on the Loans, repayment
of amounts drawn under the Letters of Credit and certain additional
information. The Transaction Record shall be presumptively correct absent
manifest error as to the amount of each Bank's Loans hereunder, as to the
Letter of Credit Exposure and as to the amount of principal and interest paid
by the Company in respect of such Loans and as to the other information
relating to the Loans, the Letters of Credit and amounts paid and payable by
the Company hereunder and under the Notes set forth in the Transaction Record.
3. FEES; PAYMENTS
3.1. Commitment Fee.
The Company agrees to pay to the Agent, for the pro-rata account of
the Banks in accordance with each Bank's Commitment Percentage, a fee (the
"Commitment Fee"), for the period from and including the Original Effective
Date to and including the Maturity Date or earlier termination of such Bank's
Commitment, equal to 3/8% per annum on the excess of (a) the Commitments over
(b) the average daily sum of the outstanding principal balance of the Loans and
the Letter of Credit Exposure. The Commitment Fee shall be payable quarterly in
arrears on the last day of each March, June, September and December of each
year, commencing on the first such day following the Original Effective Date,
and ending on the date that the Commitments shall expire or otherwise
terminate. The Commitment Fee shall be calculated on the basis of a 360 day
year.
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3.2. Facility Fee.
The Company agrees to pay to the Agent, for the pro-rata account of
the Banks in accordance with each Bank's Commitment Percentage, a fee (the
"Facility Fee") in an amount equal to 1/2% of the Commitments ($75,000),
payable on the Restatement Effective Date.
3.3. Agent's Fee.
The Company agrees to pay to the Agent, for its own account, a fee
(the "Agent's Fee") for its services hereunder in the amount of $40,000 per
year, payable quarterly in arrears on the last day of each March, June,
September and December and continuing so long as this Agreement is in effect,
any Loan remains outstanding and unpaid, or any other amount is owing under any
of the Loan Documents to any Bank or the Agent. The Agent's Fee shall be
prorated in the event that the Loans and all other amounts due under the Loan
Documents are paid in full on any day other than the last day of March, June,
September and December and the Commitments are terminated.
3.4 Letter of Credit Commissions.
The Company agrees to pay the Agent, for the account of the Banks,
commissions (the "Letter of Credit Commissions") with respect to each Letter of
Credit for the period from and including the date of issuance thereof to, but
not including the expiration date thereof, at a rate equal to 2% of the average
daily face amount of each Letter of Credit. The Letter of Credit Commissions
shall be payable quarterly in arrears and are non-refundable. In addition to
the foregoing fees, the Company agrees to pay to BNY for its own account, (i)
an additional fee equal to 1/8% of the face amount of each Letter of Credit and
(ii) its standard fees and charges customarily charged to customers similar to
the Company with respect to any Letter of Credit.
3.5 Pro Rata Treatment and Application of Payments.
Each borrowing by the Company from the Banks and any reduction of the
Commitments, shall be made pro rata according to the Commitment Percentage of
each Bank. All payments (including prepayments) made by the Company to the
Agent on account of principal of or interest on the Loans or the Letters of
Credit shall be applied by the Agent pro rata according to the outstanding
principal balance of each Bank's Loans. All payments by the Company shall be
made without set-off or counterclaim and shall be made prior to 12:00 Noon (New
York City time) on the date such payment is due, to the Agent for the account
of the Banks at the Agent's office specified in paragraph 11.2, in each case in
lawful money of the United States of America and in immediately available
funds, and, as between the Company and the Banks, any payment by
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<PAGE> 34
the Company to the Agent for the account of the Banks shall be deemed to be
payment by the Company to the Banks. The failure of the Company to make any
such payment by 12:00 Noon (New York City time) on such due date shall not
constitute a Default or Event of Default hereunder, provided that such payment
is made on such due date, but any such payment received by the Agent on any
Business Day after 12:00 Noon (New York City time) shall be deemed to have been
received on the immediately succeeding Business Day for the purpose of
calculating any interest payable in respect thereof. The Agent agrees promptly
to notify the Company if the Agent shall not have received any such payment by
12:00 Noon (New York City time) on the due date thereof, provided that the
failure of the Agent to give such prompt notice shall in no way affect the
Company's obligation to make any payment hereunder on the date such payment is
due. The Agent shall distribute such payments to the Banks promptly upon
receipt thereof in like funds as received. If any payment hereunder or on any
Note becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this
Agreement, to make the Loans and participate in Letters of Credit, and BNY to
issue Letters of Credit, the Company hereby makes the following representations
and warranties to the Agent and to each Bank:
4.1. Subsidiaries.
The Company has only the Subsidiaries set forth on Schedule 4.1. The
Subsidiaries designated as Significant Subsidiaries on Schedule 4.1 are the
only Significant Subsidiaries of the Company. The shares of each such
Subsidiary owned by the Company are duly authorized, validly issued, fully paid
and nonassessable and are owned free and clear of all Liens, except Permitted
Liens.
4.2. Corporate Existence and Power.
The Company and each Subsidiary is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation, has all requisite power and authority to own its Property and to
carry on its business as now conducted, and is in good standing and authorized
to do business in each jurisdiction in which the failure to be so authorized
could reasonably be expected to have a Material Adverse Effect.
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4.3 Corporate Authority.
The Company has full corporate power and authority to enter into,
execute, deliver and carry out the terms of the Loan Documents to which it is a
party, to make the borrowings contemplated thereby, to execute, deliver and
carry out the terms of the Notes and to incur the obligations provided for
herein and therein, all of which have been duly authorized by all proper and
necessary corporate action and are in full compliance with its certificate of
incorporation and by-laws. Each Guarantor has full power and authority to enter
into, execute, deliver and carry out the terms of Loan Documents to which it is
a party and to incur the obligations provided therein, all of which have been
duly authorized by all proper and necessary corporate or other action and are
in full compliance with its certificate of incorporation and by-laws or other
governing documents. No consent or approval of, or exemption by, shareholders,
any Governmental Body having jurisdiction over the Company or any Subsidiary or
any other Person is required to authorize, or is required in connection with
the execution, delivery and performance of, the Loan Documents or is required
as a condition to the validity or enforceability of the Loan Documents which
has not been obtained and which is not in full force and effect.
4.4. Binding Agreement.
The Loan Documents (other than the Notes) constitute, and the Notes,
when issued and delivered pursuant hereto for value received, will constitute,
the valid and legally binding obligations of the Company and each Guarantor, in
each case to the extent it is a party thereto, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally.
4.5. Litigation.
Except as set forth on Schedule 4.5, there are no actions, suits,
arbitration proceedings or claims (whether or not purportedly on behalf of the
Company or any Subsidiary) pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or maintained by the Company
or any Subsidiary, at law or in equity, before any Governmental Body having
jurisdiction over the Company or any Subsidiary which, if determined adversely
to the Company or such Subsidiary, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 4.5, there are no
judgments against the Company or any Subsidiary. There are no proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary which call into question the validity or enforceability of any
of the Loan Documents.
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4.6. No Conflicting Agreements.
Neither the Company nor any Subsidiary is in default under any
mortgage, indenture, contract, agreement, judgment, decree or order to which it
is a party or by which it or any of its Property is bound, including, without
limitation, the ESOP Loan Documents, which defaults, taken as a whole, could
reasonably be expected to have a Material Adverse Effect. The execution,
delivery or performance of the terms of the Loan Documents and the transactions
contemplated thereby will not constitute a default under, conflict with,
require any consent under (other than consents which have been obtained), or
result in the creation or imposition of, or obligation to create, any Lien upon
the Property of the Company or any Subsidiary pursuant to the terms of any such
mortgage, indenture, contract, agreement, judgment, decree or order, which
defaults, conflicts and consents, if not obtained, could reasonably be expected
to have a Material Adverse Effect.
4.7 Taxes.
The Company and each Subsidiary has filed or caused to be filed all
tax returns required to be filed and has paid, or has made adequate provision
for the payment of, all Taxes shown to be due and payable on said returns or in
any assessments made against it (other than those being contested pursuant to
paragraph 7.4) which, if unpaid, could reasonably be expected to have a
Material Adverse Effect and no tax Liens have been filed. The charges, accruals
and reserves on the books of the Company and each Subsidiary with respect to
all Taxes are adequate for the payment of all such Taxes, and the Company knows
of no unpaid assessment which is due and payable against it or any Subsidiary
or any claims being asserted which could reasonably be expected to have a
Material Adverse Effect, except such thereof as are being contested in good
faith and by appropriate proceedings diligently conducted, and for which
adequate reserves have been set aside in accordance with GAAP.
4.8. Compliance with Applicable Laws.
Neither the Company nor any Subsidiary is in default with respect to
any judgment, order, writ, injunction, decree or decision obtained or issued by
any Governmental Body against or otherwise applicable to the Company or any
Subsidiary, which default could reasonably be expected to have a Material
Adverse Effect. The Company and each Subsidiary is complying in all material
respects with all statutes and regulations of all Governmental Bodies
applicable to the Company or such Subsidiary, the violation of which could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, ERISA, the Federal Acquisition Regulations and any applicable
Environmental Laws.
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4.9. Governmental Regulations.
Neither the Company nor any Subsidiary is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, and neither the Company nor any Subsidiary is
subject to any statute or regulation which prohibits or restricts the
incurrence of Indebtedness under the Loan Documents, including, without
limitation, statutes or regulations relative to common or contract carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
4.10. Property.
The Company and each Subsidiary has good and marketable title to, or a
valid license or leasehold interest in, all Property which is material to the
Company or such Subsidiary, subject to no Liens, except Permitted Liens, and,
to the best of the Company's knowledge, no Property material to the Company or
any Subsidiary is being condemned, expropriated or otherwise taken by any
Governmental Body having jurisdiction over the Company, any Subsidiary or such
Property, with or without compensation therefor, and, to the best of the
Company's knowledge, no such condemnation, expropriation or taking has been
proposed.
4.11. Federal Reserve Regulations; Use of Loan Proceeds.
Neither the Company nor any Subsidiary is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No part of the proceeds of
the Loans will be used, directly or indirectly, for a purpose which violates
the provisions of Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System, as amended. No part of the proceeds of the Loans will
be used, directly or indirectly, to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock.
4.12. Plans.
The Company and its Subsidiaries have only the Plans listed on
Schedule 4.12. Each Single Employer Plan and, to the best knowledge of the
Company, each Multiemployer Plan, is in compliance in all material respects
with the applicable provisions of ERISA and the Code, and the Company and each
Subsidiary has filed all reports required to be filed by it under ERISA and the
Code with respect to each such Plan, which filing, if not timely made, could
reasonably be expected to have a Material Adverse Effect. The Company and each
Subsidiary has met all material requirements imposed by ERISA and the Code with
respect to the funding of all Plans, including Multiemployer Plans. Since the
effective date of ERISA, there have not been, nor are there now existing, any
events
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or conditions which would permit any Single Employer Plan or, to the best
knowledge of the Company, Multiemployer Plan to be terminated under
circumstances which would cause the Lien provided under Section 4068 of ERISA
to attach to the Property of the Company or any Subsidiary. Within the last 5
years, no Reportable Event which may constitute grounds for the termination of
any Single Employer Plan or, to the best knowledge of the Company,
Multiemployer Plan under Title IV of ERISA has occurred and no Single Employer
Plan or Multiemployer Plan has been terminated in whole or in part.
4.13. Financial Statements.
The Company has heretofore delivered to the Agent and each Bank copies
of the audited Consolidated Balance Sheets of the Company and its Subsidiaries
as of December 31, 1991 and December 31, 1992, and the related Consolidated
Statements of Earnings, Shareholders' Equity and Cash Flows for the years then
ended as filed with the Securities and Exchange Commission on Form 10-K and the
unaudited Consolidated Balance Sheets of the Company and its Subsidiaries for
the fiscal quarter of the Company ended September 25, 1993, together with the
related Statements of Earnings and Cash Flows for the three month period then
ended, as filed with the Securities and Exchange Commission on Form 10-Q
(collectively, with the related notes and schedules, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of the operations of the Company and its Subsidiaries as of the
dates and for the periods indicated therein and have been prepared in
accordance with GAAP. Except as reflected in the Financial Statements as of the
dates and for the periods indicated therein or in the footnotes thereto,
neither the Company nor any Subsidiary has any obligation or liability of any
kind (whether fixed, accrued, contingent, unmatured or otherwise) which, in
accordance with GAAP, should have been shown on the Financial Statements and
was not. Since December 31, 1992, the Company and each Subsidiary has conducted
its business only in the ordinary course and there has been no Material Adverse
Change.
4.14. Environmental Matters.
Except as set forth on Schedule 4.14, neither the Company nor any
Subsidiary (i) has received written notice of, or been threatened with, any
claim, demand, action, event, condition, report or investigation indicating or
concerning any threatened or actual liability which individually or in the
aggregate could reasonably be expected to result in any liability of the
Company or any Subsidiary in an aggregate amount (including the amount of any
liabilities described in clauses (ii), (iii) and (iv) of this paragraph) in
excess of $1,000,000 arising in connection with: (a) any non-compliance with or
violation of the requirements of any applicable Environmental Laws or (b) the
release or threatened release of any Hazardous Substance into the environment,
(ii) to
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the actual knowledge of the corporate officers of the Company, has any
threatened or actual liability in connection with the release or threatened
release of any Hazardous Substance into the environment which individually or
in the aggregate could reasonably be expected to result in any liability of the
Company or any Subsidiary in an aggregate amount (including the amount of any
liabilities described in clauses (i), (iii) and (iv) of this paragraph) in
excess of $1,000,000, (iii) has received written notice of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release or threatened release of any Hazardous Waste or Hazardous Substance
into the environment for which the Company or any Subsidiary is or may be
liable, which individually or in the aggregate could reasonably be expected to
result in any liability of the Company or any Subsidiary in an aggregate amount
(including the amount of any liabilities described in clauses (i), (ii) and
(iv) of this paragraph) in excess of $1,000,000, or (iv) has received notice
that the Company or any Subsidiary is or may be liable to any Person under
CERCLA or any analogous state law in an aggregate amount (including the amount
of any liabilities described in clauses (i), (ii) and (iii) of this paragraph)
in excess of $1,000,000.
4.15. Franchises, Intellectual Property, Etc.
The Company and each Subsidiary possesses or has the right to use all
franchises, Intellectual Property, licenses and other rights as are material to
the conduct of its business, and with respect to which each of the Company and
each such Subsidiary is in compliance, with no known conflict with the valid
rights of others which could reasonably be expected to have a Material Adverse
Effect. No event has occurred which permits or, to the best knowledge of the
Company, after notice or lapse of time or any other condition, would permit,
the revocation or termination of any such franchise, Intellectual Property,
license or other right which could reasonably be expected to have a Material
Adverse Effect.
4.16. Labor Relations.
There are no material controversies pending between the Company and
any of its employees, which could reasonably be expected to have a Material
Adverse Effect.
4.17. Status as Senior Indebtedness.
The Indebtedness of the Company under the Loan Documents constitutes
Senior Indebtedness within the meaning of the Indenture and is either senior
to, or pari passu with, all other Indebtedness of the Company.
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4.18. Brazilian Letter of Credit.
The Brazilian Letter of Credit is the only letter of credit
outstanding on the Restatement Effective Date which was not theretofore issued
under Section 2.8.
5. CONDITIONS TO CLOSING
In addition to the conditions precedent set forth in paragraph 6, the
obligation of the Agent and the Banks to execute and deliver this Agreement
shall be subject to the fulfillment of the following conditions precedent:
5.1. Evidence of Corporate Action.
The Agent shall have received a certificate, dated the Restatement
Effective Date, of the Secretary or an Assistant Secretary of the Company (i)
attaching a true and complete copy of the resolutions of the Executive
Committee of its Board of Directors (in form and substance satisfactory to the
Agent and Special Counsel) taken by it to authorize this Agreement, the Notes
and the ESOP Guaranty Amendment and the respective transactions contemplated
thereby, (ii) certifying that there has been no change to its certificate of
incorporation and by-laws since June 10, 1992 or, if so, setting forth the
same, (iii) setting forth the incumbency of its officer or officers who may
sign the Loan Documents, including therein a signature specimen of such officer
or officers, and (iv) attaching a certificate of good standing of the Secretary
of State of the State of New York and of each other state in which it is
qualified to do business, together with such other documents as the Agent or
Special Counsel shall reasonably require; and
5.2. Notes.
The Agent shall have received and be in possession of the Notes duly
executed by an Authorized Signatory of the Company which Notes shall be
delivered by the Agent to the Banks.
5.3. ESOP Guaranty Amendment.
The Agent and each Bank shall have received a fully executed copy of
the ESOP Guaranty Amendment, duly executed by the parties thereto, and the ESOP
Guaranty Amendment shall be in form and substance satisfactory to the Agent.
5.4. Compliance.
The Company is in compliance with all of the terms, covenants and
conditions of the Loan Documents, there exists no Default or Event of Default
and no Material Adverse Change shall
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have occurred since December 31, 1992, and the Agent shall have received a
certificate of an Authorized Signatory of the Company to such effect.
5.5. Intentionally Omitted.
5.6. Facility Fee.
The Facility Fee shall have been paid.
5.7. Fees of Special Counsel.
The fees and expenses of Special Counsel shall have been paid.
5.8. Opinion of Counsel to the Company.
The Agent shall have received an opinion of Marvin D. Genzer, Vice
President, General Counsel and Assistant Secretary of the Company and the
Guarantors, addressed to the Agent and the Banks, dated the Restatement
Effective Date, substantially in the form of Exhibit G.
5.9. Opinion of Special Counsel.
The Agent shall have received an opinion of Special Counsel, addressed
to the Agent and the Banks, dated the Restatement Effective Date, substantially
in the form of Exhibit H.
5.10. Collateral.
The Agent shall have received collateral in cash or cash equivalents
acceptable to the Agent pursuant to paragraph 2.8(d) in respect of the L/C
27902 in the sum of $84,140.
5.11. Other Documents.
The Agent shall have received such other documents and assurances as
the Agent or Special Counsel shall reasonably require.
6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT.
The obligation of each Bank to make any Loan or BNY to issue a Letter of
Credit on a Borrowing Date is subject to the satisfaction of the following
conditions precedent as of the date of such Loan:
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<PAGE> 42
6.1. Compliance.
On each Borrowing Date and after giving effect to the Loans to be made
or Letter of Credit to be issued thereon, (a) the Company shall be in
compliance with all of the terms, covenants and conditions of the Loan
Documents, (b) there shall exist no Default or Event of Default, (c) the
representations and warranties contained in the Loan Documents and in any
certificate, report, or other information furnished in connection with the
transactions contemplated hereby, shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on such Borrowing Date, except such exceptions to such
representations and warranties as are indicated in each Borrowing Request which
shall be satisfactory to the Agent and the Required Banks in their sole
discretion and (d) after giving effect to the transactions contemplated by the
Loan Documents, there shall have occurred no Material Adverse Change since
December 31, 1992. Each borrowing by the Company shall constitute a
certification by the Company as of the date of such borrowing that each of the
foregoing matters is true and correct in all respects.
6.2. Loan Closings.
All documents required by the provisions of this Agreement to be
executed or delivered to the Agent on or before the applicable Borrowing Date
shall have been executed and shall have been delivered at the office of the
Agent set forth in paragraph 11.2 on or before such Borrowing Date.
6.3. Borrowing Request.
The Agent shall have received a Borrowing Request duly executed by an
Authorized Signatory of the Company.
7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as this Agreement is in effect,
any Loan or reimbursement obligation (contingent or otherwise) in respect of
any Letter of Credit remains outstanding and unpaid, or any other amount is
owing under any Loan Document, the Company shall:
7.1. Financial Statements.
Maintain, and cause each Subsidiary to maintain, a standard system of
accounting in accordance with GAAP, and furnish or cause to be furnished to the
Agent and each Bank:
(a) As soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of
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(i) the Consolidated and Consolidating Balance Sheets of the Company and its
Subsidiaries as at the end of such fiscal year and (ii) the Consolidated and
Consolidating Statements of Earnings, Shareholders' Equity and Cash Flows of
the Company and its Subsidiaries as of and through the end of such fiscal year,
setting forth in each case in comparative form the figures for the preceding
fiscal year. Such Consolidated Balance Sheets and Statements of Income,
Retained Earnings and Cash Flows shall be certified by the Accountants, which
certification shall (1) state that the examination by such Accountants in
connection with such Consolidated financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances and (2) include
the opinion of such Accountants that such Consolidated financial statements
have been prepared in accordance with GAAP in all material respects in a manner
consistent with prior fiscal periods, except as otherwise specified in such
opinion. Notwithstanding any of the foregoing, the Company may satisfy its
obligation to furnish Consolidated Balance Sheets and Consolidated Statements
of Earnings, Shareholders' Equity and Cash Flows of the Company by furnishing
to the Agent and each Bank a copy of the Company's annual report on Form 10-K
in respect of such fiscal year together with the financial statements required
to be attached thereto, provided the Company is required to file such annual
report on Form 10-K with the Securities and Exchange Commission and such filing
is actually made.
(b) As soon as available, but in no event later than 45 days after the
end of each of the first three quarterly accounting periods in each fiscal year
of the Company a copy of (i) the Consolidated and Consolidating Balance Sheets
of the Company as at the end of each such quarterly period and (ii) the
Consolidated and Consolidating Statements of Earnings and Cash Flows for such
period and for the elapsed portion of the fiscal year through such date and the
Consolidated Statements of Cash Flows for the elapsed portion of the fiscal
year through such date, setting forth in each case in comparative form the
figures for the corresponding periods of the preceding fiscal year, subject to
year end audit adjustments, certified by a senior financial officer or senior
accounting officer of the Company (or such other officer acceptable to the
Agent) as being complete and correct in all material respects and as presenting
fairly the financial condition and results of operations and cash flows of the
Company and its Subsidiaries on a Consolidated basis. Notwithstanding any of
the foregoing, the Company may satisfy its obligation to furnish quarterly
Consolidated Balance Sheets and Consolidated Statements of Earnings and Cash
Flows of the Company by furnishing to the Agent and each Bank a copy of the
Company's quarterly report on Form 10-Q in respect of such fiscal quarter
together with the financial statements required to be attached thereto,
provided the Company is
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required to file such quarterly report on Form 10-Q with the Securities and
Exchange Commission and such filing is actually made.
(c) The financial statements required to be delivered pursuant to
paragraphs 7.1(a) and 7.1(b) shall be accompanied by a certificate of a senior
financial officer or senior accounting officer of the Company (or such other
officer as shall be acceptable to the Agent), in detail reasonably satisfactory
to the Agent (i) stating that there has occurred no condition or event which
would constitute a Default or Event of Default, and, if so, specifying in such
certificate all such violations, conditions and events, and the nature and
status thereof, (ii) containing computations showing compliance with the
provisions of paragraphs 8.1, 8.3(ii), 8.4, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14
and 8.15 and (iii) setting forth the Receivables included in the Borrowing Base
that are due from account debtors not located in the United States and which
either (x) are not due from a foreign Governmental Body or (y) are not backed
by a commercial letter of credit issued and/or confirmed by a financial
institution reasonably satisfactory to the Agent and the Required Banks.
(d) Within (i) 45 days after the end of each fiscal month of the
Company (except 60 days after the end of the last fiscal month of the fiscal
year), a Borrowing Base Certificate prepared as of the close of such month, and
(ii) 45 days after the end of each fiscal quarter of the Company (except 90
days after the end of the last fiscal quarter of the fiscal year) a Compliance
Certificate, prepared as of the close of such fiscal quarter, in each case
certified by the Chief Financial Officer of the Company (or such other officer
as shall be acceptable to the Agent).
7.2 Certificates; Other Information.
Furnish to the Agent and each Bank:
(a) Prompt written notice if: (i) any Indebtedness of the Company or
any Subsidiary, individually or in the aggregate in excess of $25,000, is
declared or shall become due and payable prior to its stated maturity, or
called and not paid when due, (ii) a default shall have occurred under any note
(other than the Notes) which could result individually or in the aggregate in a
liability in excess of $25,000, or the holder of any such note, or other
evidence of Indebtedness, certificate or security evidencing any such
Indebtedness or any obligee with respect to any other Indebtedness of the
Company or any Subsidiary has the right to declare any such Indebtedness due
and payable prior to its stated maturity as a result of such default, or (iii)
there shall occur and be continuing a Default or an Event of Default;
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(b) Prompt written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming the Company or any Subsidiary a party
to any proceeding before any Governmental Body (including, without limitation,
proceedings relating to any alleged non-compliance with or alleged violation of
the requirements of any applicable Environmental Law) which could reasonably be
expected to have a Material Adverse Effect or which calls into question the
validity or enforceability of any of the Loan Documents, and include with such
notice a copy of such citation, summons, subpoena, order to show cause or other
order, (ii) any lapse or other termination of any material license, permit,
franchise or other authorization issued to the Company by any Governmental
Body, (iii) any refusal by any Governmental Body to renew or extend any such
material license, permit, franchise or other authorization and (iv) any
cancellation or termination of any material contract or any dispute between the
Company and any Person, which lapse, termination, refusal, cancellation,
termination or dispute could reasonably be expected to have a Material Adverse
Effect;
(c) Prompt written notice in the event that (i) the Company or any
Subsidiary shall receive notice from the Internal Revenue Service or the
Department of Labor that the Company shall have failed to meet the minimum
funding requirements of Section 412 of the Code with respect to a Single
Employer Plan or a Multiemployer Plan, if applicable, and include therewith a
copy of such notice, or (ii) the Company gives or is required to give notice to
the PBGC of any Reportable Event with respect to a Plan, or knows that the plan
administrator of a Plan or a Multiemployer Plan has given or is required to
give notice of any such Reportable Event;
(d) With respect to a Single Employer Plan, copies of
any request for a waiver of the funding standards or any extension
of the amortization periods required by Sections 303 and 304 of
ERISA or Section 412 of the Code promptly after any such request is
submitted to the Department of Labor or the Internal Revenue
Service, as the case may be;
(e) Any other information regarding the condition (financial or
otherwise), operations, business, prospects or Property of the Company or any
Subsidiary which may reasonably be requested by the Agent or any Bank.
7.3. Legal Existence.
Maintain, and cause each Subsidiary to maintain, its corporate or
other existence in good standing in the jurisdiction of its incorporation or
formation and in each other jurisdiction in which the failure so to do could
reasonably be expected to have a Material Adverse Effect.
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7.4. Taxes.
Pay and discharge when due, and cause each Subsidiary so to do, all
Taxes upon or with respect to the Company or such Subsidiary and upon the
income, profits and Property of the Company and its Subsidiaries, which if
unpaid, could reasonably be expected to have a Material Adverse Effect or
become a Lien on the Property of the Company or such Subsidiary (other than a
Permitted Lien) individually or in the aggregate in excess of $25,000, unless
and to the extent that such Taxes, shall be contested in good faith and by
appropriate proceedings diligently conducted by the Company or such Subsidiary
and provided that any such contested Tax shall not constitute, or create, a
Lien on any Property of the Company or such Subsidiary other than a Permitted
Lien individually or in the aggregate in excess of $25,000, and further
provided that such reserve or other appropriate provision, if any, as shall be
required by the Accountants in accordance with GAAP shall have been made
therefor.
7.5. Insurance.
Maintain, and cause each Subsidiary to maintain, insurance with
financially sound insurance carriers on such of its Property, against at least
such risks, and in at least such amounts, as are usually insured against by
similar businesses and which, in the case of property insurance, shall be in
amounts sufficient to prevent the Company from becoming a co-insurer,
including, without limitation, public liability (bodily injury and property
damage), fidelity, and workers' compensation with deductibles not exceeding
$25,000 per occurrence, and file with the Agent within 10 days after request
therefor a detailed list of such insurance then in effect, stating the names of
the carriers thereof, the policy numbers, the insureds thereunder, the amounts
of insurance, dates of expiration thereof, and the Property and risks covered
thereby, together with a certificate of the Chief Financial Officer (or such
other officer as shall be acceptable to the Agent) of the Company certifying
that in the opinion of such officer such insurance is adequate in nature and
amount, complies with the obligations of the Company under this paragraph 7.5,
and is in full force and effect.
7.6. Payment of Indebtedness and Performance of Obligations.
Pay and discharge, and cause each Subsidiary to pay and discharge,
when due all lawful Indebtedness, obligations (including, without limitation,
royalties and fees due third parties) and claims for labor, materials and
supplies or otherwise which, if unpaid, (i) could reasonably be expected to
have a Material Adverse Effect, or (ii) would become a Lien upon Property of
the Company or such Subsidiary other than a Permitted Lien, unless and to the
extent that the validity of such Indebtedness, obligation
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or claim shall be contested in good faith and by appropriate proceedings
diligently conducted by the Company or such Subsidiary, and further provided
that such reserve or other appropriate provision, if any, as shall be required
by the Accountants in accordance with GAAP shall have been made therefor.
7.7. Condition of Property.
At all times and to the extent that it is within the control of the
Company or a Subsidiary, maintain, protect and keep in good repair, working
order and condition (ordinary wear and tear excepted), and cause each
Subsidiary so to do, all Property material to the operation of the Company's,
or such Subsidiary's, business.
7.8. Observance of Legal Requirements.
Observe and comply, and cause each Subsidiary to observe and comply,
in all material respects with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Bodies, which now or at any time hereafter may
become applicable to the Company or such Subsidiary, the violation of which
could reasonably be expected to have a Material Adverse Effect, except such
thereof as shall be contested in good faith and by appropriate proceedings
diligently conducted by the Company or such Subsidiary, provided that such
reserve or other appropriate provision, if any, as shall be required by the
Accountants in accordance with GAAP shall have been made therefor.
7.9. Inspection of Property; Books and Records; Discussions.
Keep, and cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities; and permit representatives of the Agent and
each Bank to visit the offices of the Company and its Subsidiaries during
normal business hours, to inspect any of its Property and examine and, at the
Company's expense, make copies or abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, prospects, Property and financial condition
of the Company and its Subsidiaries with the officers thereof and with the
Accountants.
7.10. Environmental Matters.
Notify the Agent and each Bank in writing within 5 Business Days, and
cause each Subsidiary so to do, in the event the Company or such Subsidiary
obtains, gives or receives notice of any new Release or threat of Release of
any Hazardous Substances
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or Hazardous Wastes at any Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that the Company or such Subsidiary is
potentially responsible for investigation or cleanup of environmental
conditions at any Real Property, demand letter, complaint, order, citation, or
other written notice with regard to any Hazardous Discharge or violation of
Environmental Laws affecting any Real Property or the Company's or such
Subsidiary's interest therein (each of the foregoing, an "Environmental
Complaint") from any Person, including any state agency responsible in whole or
in part for environmental matters in the state in which such Real Property is
located or the United States Environmental Protection Agency (each such Person,
an "Authority") and which the Company has not previously disclosed to the
Agent. The receipt of such information shall not create any obligation upon the
Agent or any Bank with respect thereto other than as provided in paragraph
11.18.
7.11. Licenses, Etc.
Maintain and cause each Subsidiary to maintain, in full force and
effect, all licenses, copyrights, patents and other Intellectual Property,
including all licenses, permits, applications, reports, authorizations and
other rights as are necessary for the conduct of its business, the loss of
which would have a Material Adverse Effect.
7.12. Significant Subsidiaries.
Furnish to the Agent and each Bank prompt written notice if any Person
which is not a Guarantor becomes a Significant Subsidiary and thereupon cause
such Subsidiary promptly to execute and deliver to the Agent, a Guaranty and
such other documentation, including, without limitation, resolutions,
certificates and opinions of counsel, as the Agent shall reasonably request.
7.13. Audit Report.
Furnish (at the Company's reasonable expense) to the Agent and each
Bank within fourteen days after the Restatement Effective Date an audit report
with respect to the Receivables of the Company and its Subsidiaries prepared by
a Person selected by or satisfactory to the Agent.
8. NEGATIVE COVENANTS
The Company hereby agrees that, so long as this Agreement is in effect,
any Loan or reimbursement obligation (contingent or otherwise) in respect of
any Letter of Credit remains outstanding and unpaid, or any other amount is
owing under any Loan Document, the Company shall not, directly or indirectly:
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8.1. Borrowing.
Create, incur, assume or suffer to exist any liability for
Indebtedness, or permit any Subsidiary so to do, except (i) Indebtedness under
the Loan Documents and in respect of the Letters of Credit, (ii) Indebtedness
of the Company and its Subsidiaries existing on the Restatement Effective Date
as set forth on Schedule 8.1, (iii) Indebtedness of EDO Canada under the EDO
Canada Line not in excess of $1,000,000 at any one time outstanding, (iv) other
Indebtedness of the Company and its Subsidiaries not exceeding the aggregate
sum of $3,000,000 less the amount described in clause (v) below, (v) purchase
money indebtedness incurred in connection with the purchase, after the date
hereof, of any Property, in an aggregate principal amount not to exceed
$500,000 at any one time outstanding, (v) the Subordinated Debt, (vi)
Indebtedness in respect of the Letters of Credit and under the ESOP Guaranty
and (vii) Indebtedness of a Subsidiary to another Subsidiary in respect of
advances for working capital purposes in the ordinary course of business.
8.2. Liens.
Create, incur, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, or covenant or agree with
any Person not to grant a Lien in favor of any other Person (other than in
favor of the Agent and the Banks hereunder), or permit any Subsidiary so to do,
except (i) Liens for taxes, assessments or similar charges incurred in the
ordinary course of business which are not delinquent or which are being
contested in accordance with paragraph 7.4, provided that enforcement of such
Liens is stayed pending such contest, (ii) Liens in connection with workers'
compensation, unemployment insurance or other social security obligations (but
not ERISA), (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business, (iv) zoning ordinances, easements, subleases,
rights-of-way, minor defects, irregularities, and other similar restrictions
affecting real property which do not materially adversely affect the value of
such real property or the financial condition of the Company or such Subsidiary
or materially impair its use for the operation of the business of the Company
or such Subsidiary, (v) statutory Liens arising by operation of law such as
mechanics', materialmen's, carriers', warehousemen's, landlord's and other
similar liens incurred in the ordinary course of business which are not
delinquent or which are being contested in accordance with paragraph 7.6,
provided that enforcement of such Liens is stayed pending such contest, (vi)
Liens arising out of judgments or decrees (other than any judgment or decree
issued with respect to the EPA Litigation) not in excess of $1,000,000 in the
aggregate which have not been in existence
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for more than 60 days or which are being contested in accordance with paragraph
7.6, provided that enforcement of such Liens is stayed during such contest,
(vii) purchase money Liens in Property of the Company acquired after the date
hereof to secure Indebtedness of the Company, to the extent permitted by
paragraph 8.1(v), incurred in connection with the acquisition of such Property,
provided that the Lien thereof is limited to such Property so acquired, (viii)
Liens to secure Indebtedness permitted by paragraph 8.1(iv) or (ix) Liens on
Property of the Company and its Subsidiaries existing on the Restatement
Effective Date as set forth on Schedule 8.2 and renewals thereof.
8.3. Merger and Acquisition or Sale of Property.
Consolidate with, be acquired by, or merge into or with any Person, or
sell, lease or otherwise dispose of all or substantially all of its Property or
its Stock, or acquire all or substantially all of the Stock or Property of any
Person, or permit any Subsidiary to do any of the foregoing without the prior
written consent of the Agent and the Banks.
8.4. Dividends; Purchase of Stock and Subordinated Debt.
Declare any dividends (other than dividends payable solely in common
Stock) on, or make any payment on account of, or set apart Property for a
sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Stock or other
similar equity interests or warrants or other rights issued in respect thereof,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash, Property or otherwise,
or permit any Subsidiary so to do, except (i) a wholly-owned Subsidiary may
declare and pay dividends to the Company, (ii) the Company may declare and pay
cash dividends on its ESOP Preferred Stock in an amount not in excess of $17.10
per share in any fiscal year of the Company provided that the Company has
sufficient cash and cash equivalents on hand on the date of payment to make
such payment, and (iii) provided that no Default or Event of Default has
occurred and is then continuing or would occur giving effect to such
declaration or payment, (a) the Company may declare and pay cash dividends for
a fiscal year of the Company on its common Stock in an aggregate amount not in
excess of the Dividend Limitation for such fiscal year and (b) the Company may
repurchase shares of ESOP Preferred Stock to the extent required for the normal
operation of the ESOP.
8.5. Investments, Loans, Etc.
At any time, purchase or otherwise acquire, hold or invest in the
Stock of, or any other interest in, any Person (including, without limitation,
any investment in a partnership with respect to which the Company is a general
partner), or make any
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loan or advance to, or enter into any arrangement for the purpose of providing
funds or credit to, or make any other investment, whether by way of capital
contribution or otherwise, in or with any Subsidiary or any other Person (all
of which are sometimes referred to herein as "Investments"), or permit any
Subsidiary so to do, except:
(a) Investments in short-term certificates of deposit or overnight
bank deposits issued by any Bank, or any other commercial bank, trust company
or banking association incorporated under the laws of the United States or any
State having undivided capital surplus and retained earnings exceeding
$250,000,000; and
(b) Investments in short-term direct obligations of the United States
of America or agencies thereof whose obligations are guaranteed by the United
States of America;
(c) Investments in commercial paper rated A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Services, Inc.;
(d) Investments made for working capital purposes in the ordinary
course of business in wholly-owned Subsidiaries, provided that such Investments
are made in the form of demand loans; and
(e) (i) Investments in Subsidiaries (other than wholly-owned
Subsidiaries) and (ii) Investments in any other Person constituting a minority
interest in such Person, provided that such Investment shall not exceed (x)
$2,000,000 in the case of each such Subsidiary or other Person and (y)
$4,000,000 in the aggregate with respect to all such Subsidiaries and other
Persons.
Nothing herein shall be deemed to permit any Investment by the Company
in any partnership in which the Company is a general partner.
8.6. Business Changes.
Except to the extent expressly permitted by paragraph 8.3, materially
change the nature of the business of the Company and its Subsidiaries taken as
a whole as conducted on the date hereof, or alter or modify its corporate name
or capital structure or alter its accounting principles, treatment or recording
practices, except as required by GAAP, or permit any Subsidiary so to do.
8.7. Sale of Property.
Sell, exchange, lease, transfer or otherwise dispose of any Property
to any Person, or permit any Subsidiary so to do, except (a) sales of inventory
in the ordinary course of business,
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(b) sales, transfers or dispositions of equipment in the ordinary course of
business if effected for the purpose of replacing such equipment with equipment
to be owned by the Company or such Subsidiary, (c) the sale of the Salt Lake
City, Utah property and [(d) sales or other dispositions of other Property by
the Company or any Subsidiary resulting in aggregate Net Sales Proceeds in
excess of $1,000,000 for all such sales, as to which the following conditions
have been satisfied:
(i) no Default or Event of Default shall exist immediately before or
after giving effect to such sale,
(ii) the consideration received or to be received by the Company or
any Subsidiary shall be payable in cash on or before the closing of such sale
and shall not be less than the fair market value of the Property so sold as
reasonably determined by the Board of Directors of the Company or such
Subsidiary,
(iii) 100% of the Net Sales Proceeds shall be applied to the
prepayment of Loans and the reduction of the Borrowing Base pursuant to Section
2.5(c), and
(iv) within 10 Business Days prior to each such sale, the Agent and
the Banks shall have received a certificate in respect of each such sale signed
by an Authorized Signatory of the Company identifying the Property to be sold
and stating (x) that immediately before or after giving effect to such sale, no
Default or Event of Default shall exist, (y) that the consideration received or
to be received by the Company or such Subsidiary for the Property so sold has
been determined by the Board of Directors thereof to be not less than the fair
market value of such Property and (z) the total consideration to be paid in
respect of such sale.
8.8. Subsidiaries.
Except as otherwise permitted by paragraph 8.5(e), create or acquire
any Significant Subsidiary, or permit any Subsidiary so to do, unless
simultaneously therewith, such Significant Subsidiary shall become a Guarantor
under a Guaranty and shall deliver such other documentation, including, without
limitation, resolutions, certificates and opinions of counsel, as the Agent
shall reasonably request.
8.9. Quick Ratio.
Permit at any time the Quick Ratio to be less than 1.50:1.0.
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8.10. Current Ratio.
Permit at any time the Current Ratio to be less than 2.0:1.0.
8.11. Leverage Ratio.
Permit at any time the Leverage Ratio to exceed 1.0:1.0.
8.12. Interest Coverage Ratio.
Permit (i) as of the end of the fiscal year of the Company ending
December 31, 1994, the Interest Coverage Ratio to be less than 1.375:1.00 and
(ii) as of the end of the fiscal quarters set forth below, the Interest
Coverage Ratio to be less than the ratios set forth below:
Fiscal Quarter Ending Ratio
September 25, 1993 Not tested
December 31, 1993 Not tested
March 26, 1994 0.25:1.00
June 25, 1994 1.25:1.00
September 24, 1994 1.75:1.00
December 31, 1994 and
each fiscal quarter
thereafter 2.25:1.00.
8.13. Minimum Consolidated Capital Funds.
Permit at any time (i) prior to December 31, 1994, Consolidated
Capital Funds to be less than $62,300,000 and (ii) on and after December 31,
1994, Consolidated Capital Funds to be less than $63,300,000.
8.14. Minimum Consolidated Net Worth.
Permit at any time (i) prior to December 31, 1994, Consolidated Net
Worth to be less than $33,000,000 and (ii) on and after December 31, 1994,
Consolidated Net Worth to be less than $34,000,000.
8.15. Capital Expenditures.
During any fiscal year, make any capital expenditures or fixed asset
acquisitions, or, without duplication, incur any obligation so to do or permit
any Subsidiary so to do, in an aggregate Consolidated amount exceeding
$4,000,000. Capital expenditures and fixed asset acquisitions shall be
calculated on a non-cumulative basis so that amounts not expended in any fiscal
year may not be carried over and expended in subsequent fiscal years.
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8.16. Compliance with ERISA.
Adopt any Plan other than those listed on Schedule 4.12 or engage in
any "prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, with respect to any Plan which could reasonably
be expected to result in any fine or tax in excess of $25,000, or incur any
"accumulated funding deficiency," as such term is defined in Section 412 of the
Code or Section 302 of ERISA in excess of $25,000, or terminate any Plan which
could reasonably be expected to result in any liability to the PBGC, or permit
the occurrence of any Reportable Event or any other event or condition which
could reasonably be expected to result in a termination by the PBGC of any
Plan, or withdraw or effect a partial withdrawal from any Multiemployer Plan,
if any such withdrawal would result in any withdrawal liability in excess of
$25,000, or permit any Subsidiary so to do.
8.17. Certificate of Incorporation and By-laws.
Amend or otherwise modify its certificate of incorporation or by-laws,
or permit any Subsidiary so to do, in any way which would adversely affect the
interests of the Banks under any of the Loan Documents or the obligations of
the Company and the Guarantors under the Loan Documents.
8.18. Prepayments of Indebtedness.
Prepay, purchase or redeem, or obligate itself to prepay, purchase or
redeem, in whole or in part, any Indebtedness (except the Notes), or permit any
Subsidiary so to do.
8.19. Sale and Leaseback.
Enter into any arrangement with any Person (the "Transferee Person"),
or permit any Subsidiary so to do, providing for the leasing by the Company (or
such Subsidiary) of Property which has been or is to be sold or transferred by
the Company (or such Subsidiary) to such Transferee Person or to any other
Person to whom funds have been or are to be advanced by such transferee Person
on the security of such Property or rental obligations of the Company (or such
Subsidiary).
8.20. Amendments, Etc. of Certain Agreements.
Enter into or agree to any amendment, modification or waiver of any
term or condition of, or, to the extent that it has the power or right to
control the ESOP or the ESOP Trustee, permit the ESOP or the ESOP Trustee so to
do, (a) the Debentures, the Indenture, in any way which would adversely affect
the interests of the Agent or any Bank under any of the Loan Documents or the
obligations of the Company or the Guarantors under the Loan Documents, (b)
Sections 10(b)(i), 10(b)(iv), 10(b)(v), 10(b)(vi),
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10(b)(vii), 10(b)(viii), 10(b)(ix), 10(b)(x), 10(b)(xi), 10(b)(xii),
10(b)(xiii), 10(b)(xiv), 12, 13, 20 or 21, of the ESOP Guaranty, or any defined
term applicable thereto, in any way which would be more restrictive on, or
increase the liability of, the Company, (c) any provision of the ESOP Loan
Agreement or the ESOP Note which directly or indirectly increases the amount of
the Contingent Obligations of the Company or (d) Section 10 of the ESOP Pledge
Agreement in any way which would be more restrictive on, or increase the
liability of, the Company.
8.21. Issuance of Additional Capital Stock.
Issue any additional Stock or other equity interests, or permit any
Subsidiary so to do, except for (i) common Stock and (ii) such shares of ESOP
Preferred Stock as may be required for the normal operation of the ESOP.
8.22. Fiscal Year.
Change its fiscal year from that in effect on the Restatement
Effective Date, or permit any Subsidiary to do so.
8.23. Transactions with Affiliates.
Become, or permit any Subsidiary to become, a party to any transaction
with an Affiliate of the Company or such Subsidiary unless the terms and
conditions relating to such transaction are at least as favorable to the
Company or such Subsidiary as those which would be obtainable at that time in
an arm's length transaction with a Person other than an Affiliate. For purposes
of this paragraph, (i) non-cash transactions with Affiliates, such as the
loaning of employees, corporate manuals, in house accounting services and
similar items, (ii) transactions with Affiliates (other than those described in
clause (i)) which, in the good faith and sound business judgment of a corporate
executive of the Company or such Subsidiary, will produce a benefit to the
Company or to the Company and its Subsidiaries taken as a whole, in each case
which are entered into in the ordinary course of the Company's or such
Subsidiary's business as currently conducted, and (iii) transactions between
(x) the Company and one or more Guarantors and (y) between two or more
Guarantors shall not be deemed to be prohibited by this paragraph.
9. DEFAULT
The following shall each constitute an "Event of Default" hereunder:
(a) The failure of the Company to pay any installment of principal or
interest on any Note or any fees, expenses or
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other amounts due under the Loan Documents on the date when due and payable; or
(b) The use by the Company of the proceeds of any Loan in a manner
inconsistent with or in violation of paragraph 2.18; or
(c) The failure of the Company to observe or perform any covenant or
agreement contained in paragraph 7.3 or paragraph 8; or
(d) The failure of the Company to observe or perform any other term,
covenant, or agreement contained in this Agreement and such failure shall have
continued unremedied for a period of 45 days after the Company shall have
obtained knowledge thereof; or
(e) Any representation or warranty of the Company or any Subsidiary
(or of any officer of the Company or any Subsidiary on its behalf) made in this
Agreement or in any certificate, report, opinion (other than an opinion of
counsel) or other document delivered or to be delivered pursuant to this
Agreement, shall prove to have been incorrect in any material respect when
made; or
(f) Obligations of the Company (other than its obligations under the
Notes) and its Subsidiaries, whether as principal, guarantor, surety or other
obligor, for the payment of Indebtedness in excess of $1,000,000 in the
aggregate (i) shall become or shall be declared to be in default and due and
payable prior to the expressed maturity or expiration thereof, or (ii) shall
not be paid when due or within any grace period for the payment thereof, or
(iii) the holder of any thereof shall have the right to declare the same in
default and due and payable prior to the expressed maturity thereof; or
(g) The Company or any Subsidiary shall (i) suspend or discontinue its
business, or (ii) make an assignment for the benefit of creditors, or (iii)
generally not be paying its debts as such debts become due, or (iv) admit in
writing its inability to pay its debts as they become due, or (v) file a
voluntary petition in bankruptcy or be the subject of a petition for compulsory
winding up or shall pass a resolution to wind up by means of a creditor's
voluntary winding up, or (vi) become insolvent (however such insolvency shall
be evidenced), or (vii) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, or (viii) petition or apply to any tribunal for
any receiver, custodian, administrator liquidator, fiscal agent or any trustee
for any substantial part of its Property, or (ix) be the subject of any such
proceeding filed against it which
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remains undismissed for a period of 60 days, or (x) file any answer admitting
or not contesting the allegations of any such petition filed against it or any
order, judgment or decree approving such petition in any such proceeding, or
(xi) seek, approve, consent to, or acquiesce in any such proceeding, or in the
appointment of any trustee, receiver, custodian, liquidator, or fiscal agent
for it, or any substantial part of its Property, or an order is entered
appointing any such trustee, receiver, custodian, liquidator or fiscal agent
and such order remains in effect for 60 days, or (xii) take any formal action
for the purpose of effecting any of the foregoing or looking to the winding up,
liquidation or dissolution of the Company or any Subsidiary; or
(h) An order for relief is entered under any bankruptcy, insolvency or
similar laws or any other decree or order is entered by a court having
jurisdiction (i) adjudging the Company or any Subsidiary, a bankrupt or
insolvent, or (ii) approving as properly filed a petition seeking the
reorganization, liquidation, arrangement, adjustment, winding up or composition
of or in respect of the Company or any Subsidiary, under the United States
bankruptcy laws or any other applicable Federal or state law, or (iii)
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
fiscal agent (or other similar official) of the Company or any Subsidiary, or
of any substantial part of the Property thereof, or (iv) ordering the winding
up or liquidation of the affairs of the Company or any Subsidiary, and any such
decree or order continues unstayed and in effect for a period of 60 days; or
(i) Judgments or decrees against the Company and/or its Subsidiaries
in excess of $3,500,000 in the aggregate which are not covered by insurance
shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed
for a period of 90 days; or
(j) The occurrence of an Event of Default under and as defined in the
Guaranty or any Guarantor shall disavow its obligations under the Guaranty; or
(k) Any Loan Document shall cease, for any reason, to be in full force
and effect or the Company or any Subsidiary shall so assert in writing.
Upon the occurrence of an Event of Default or at any time thereafter
during the continuance thereof, (a) if such event is an Event of Default
specified in clauses (g) or (h) above, the Commitments shall immediately and
automatically terminate and the Loans, all accrued and unpaid interest thereon,
any reimbursement obligations owing or contingently owing in respect of all
outstanding Letters of Credit, and all other amounts owing under the Loan
Documents shall immediately become due and payable without declaration or
notice to the Company, and the Company shall forthwith deposit an amount equal
to the Letter of Credit Exposure in a
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cash collateral account with and under the exclusive control of the Agent, and
the Agent may, and upon the direction of the Required Banks shall, exercise any
and all remedies and other rights provided pursuant to the Loan Documents, and
(b) if such event is any other Event of Default, any or all of the following
actions may be taken: (i) with the consent of the Required Banks, the Agent
may, and upon the direction of the Required Banks shall, by notice to the
Company, declare the Commitments to be terminated, forthwith, whereupon the
Commitments shall immediately terminate, and (ii) with the consent of the
Required Banks, the Agent may, and upon the direction of the Required Banks
shall, by notice of default to the Company, declare the Loans, all accrued and
unpaid interest thereon, any reimbursement obligations owing or contingently
owing in respect of all outstanding Letters of Credit, and all other amounts
owing under the Loan Documents to be due and payable on demand or forthwith,
whereupon the same shall immediately become so due and payable, and the Company
shall forthwith deposit an amount equal to the Letter of Credit Exposure in a
cash collateral account with and under the exclusive control of the Agent, and
the Agent may, and upon the direction of the Required Banks shall, exercise any
and all remedies and other rights provided pursuant to the Loan Documents.
Except as otherwise provided in this paragraph 9, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
In the event that the Commitments shall have been terminated or the Notes
shall have been declared due and payable pursuant to the provisions of this
paragraph 9, any funds received by the Agent and the Banks from or on behalf of
the Company shall be applied by the Agent and the Banks in liquidation of the
Loans and the obligations of the Company hereunder and under the Letters of
Credit and the Notes and the obligations of Guarantors in the following manner
and order: (i) first, to reimburse the Agent and the Banks for any expenses due
from the Company pursuant to the provisions of paragraph 11.5; (ii) second, to
the payment of accrued and unpaid Commitment Fees, the Facility Fee and all
other fees, expenses and amounts due hereunder and in the Loan Documents (other
than principal and interest on the Notes); (iii) third, to the payment of
interest due on the Notes; (iv) fourth, to the payment of principal outstanding
on the Notes and the Letter of Credit Exposure; and (v) fifth, to the payment
of any other amounts owing to the Agent and the Banks under any of the Loan
Documents.
10. THE AGENT
10.1. Appointment.
Each Bank hereby irrevocably designates and appoints BNY as the Agent
of such Bank under the Loan Documents and each such Bank hereby irrevocably
authorizes BNY, as the Agent for such
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Bank, to take such action on its behalf under the provisions of the Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of the Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or any of the other Loan
Documents, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein or therein, or any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Loan Documents or otherwise
exist against the Agent.
10.2. Delegation of Duties.
The Agent may execute any of its duties under the Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to rely upon the
advice of counsel concerning all matters pertaining to such duties.
10.3. Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except the Agent for its own gross
negligence or willful misconduct), or (ii) responsible in any manner to any of
the Banks for any recitals, statements, representations or warranties made by
any Person or any officer thereof contained in the Loan Documents or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, the Loan Documents or
for the value, validity, perfection of Liens, effectiveness, genuineness,
enforceability or sufficiency of any of the Loan Documents or for any failure
of any party thereto, or any other Person to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Loan Documents, or to inspect
the properties, books or records of the Company or any Subsidiary. The Agent
shall not be under any liability or responsibility whatsoever, as Agent, to the
Company or any Subsidiary or any other Person as a consequence of any failure
or delay in performance, or any breach, by any Bank of any of its obligations
under any of the Loan Documents.
10.4. Reliance by Agent.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
opinion, letter, telegram, telecopy, telex or teletype message, statement,
order or other document reasonably believed by it to be genuine and correct and
to have been
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signed, sent or made by the proper Person and upon the advice and statements of
counsel (including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent may treat each
Bank, or the Person designated in the last notice filed with it under this
paragraph, as the holder of all of the interests of such Bank in its Loans and
in its Notes until written notice of transfer, signed by such Bank (or the
Person designated in the last notice filed with the Agent) and by the Person
designated in such written notice of transfer, in form and substance
satisfactory to the Agent, shall have been filed with the Agent. The Agent
shall not be under any duty to examine or pass upon the validity, effectiveness
or genuineness of the Loan Documents or any instrument, document or
communication furnished pursuant thereto or in connection therewith, and the
Agent shall be entitled to assume that the same are valid, effective and
genuine, have been signed or sent by the proper parties and are what they
purport to be. The Agent shall be fully justified in failing or refusing to
take any action under the Loan Documents unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate. The Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under the Loan Documents in accordance with a request of the Required Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Banks and all future holders of the Notes.
10.5. Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless one of the
officers of the Agent immediately responsible for matters concerning this
Agreement has received written notice thereof from a Bank or the Company. In
the event that the Agent receives such a notice, the Agent shall promptly give
notice thereof to the Banks. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the
Required Banks; provided, however, that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem to be in the best interests of the Banks.
10.6. Non-Reliance on Agent and Other Banks.
Each Bank expressly acknowledges that neither the Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Agent, including any review of the affairs of the Company or any
Subsidiaries thereof, shall be deemed to constitute any representation or
warranty by the Agent to any Bank. Each Bank represents to the Agent that it
has, independently and without reliance upon the Agent or any
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other Bank, and based on such documents and information as it has deemed
appropriate, made its own evaluation of and investigation into the business,
operations, Property, financial and other condition and creditworthiness of the
Company and its Subsidiaries and made its own decision to enter into this
Agreement. Each Bank also represents that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, evaluations and decisions in taking or not taking action under
this Agreement or any of the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, Property, financial and other condition and creditworthiness of the
Company and its Subsidiaries. Each Bank acknowledges that a copy of the Loan
Documents and all exhibits and schedules hereto and thereto have been made
available to it and its individual legal counsel for review, and each Bank
acknowledges that it is satisfied with the form and substance of the Loan
Documents and the exhibits and schedules hereto and thereto. Except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, Property, financial and other condition or
creditworthiness of the Company or its Subsidiaries which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7. Indemnification.
Each Bank agrees to indemnify the Agent in its capacity as such,
ratably according to its Commitment Percentage from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever,
including, without limitation, any amounts paid to the Banks (through the
Agent) by the Company or any Guarantor pursuant to the terms hereof, that are
subsequently rescinded or avoided, or must otherwise be restored or returned
which may at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of this Agreement, the other Loan
Documents or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Agent under or in connection with any of the foregoing; provided, however,
that no Bank shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent resulting solely from the
gross negligence or willful misconduct of the Agent. The agreements in this
paragraph shall survive the payment of the Notes and all other amounts payable
under the other Loan Documents.
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<PAGE> 62
10.8. Agent in Its Individual Capacity.
BNY and its respective affiliates may make loans to, accept deposits
from, issue letters of credit for the account of and generally engage in any
kind of business with, the Company and its Subsidiaries as though BNY was not
Agent hereunder. With respect to the Commitment made or renewed by BNY and any
Note issued to BNY, BNY shall have the same rights and powers under the Loan
Documents as any Bank and may exercise the same as though it was not the Agent,
and the terms "Bank" and "Banks" shall in each case include BNY.
10.9. Successor Agent.
If at any time the Agent deems it advisable, in its sole discretion,
it may submit to each of the Banks a written notification of its resignation as
Agent under the Loan Documents, such resignation to be effective on the
thirtieth day after the date of such notice. Upon any such resignation, the
Required Banks shall have the right, with the prior written consent of the
Company (which consent shall not be unreasonably withheld) if at such time no
Default or Event of Default exists, to appoint from among the Banks a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks
and accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, then the retiring Agent may, on behalf of the Banks,
with the prior written consent of the Company (which consent shall not be
unreasonably withheld) if at such time no Default or Event of Default exists,
appoint a successor Agent, which successor Agent shall be a commercial bank
organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent's rights, powers, privileges and duties as Agent under the Loan Documents
shall be terminated. The Company and the Banks shall execute such documents as
shall be necessary to effect such appointment. After any retiring Agent's
resignation or removal under the Loan Documents as Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under the Loan Documents. If at any time
hereunder there shall not be a duly appointed and acting Agent, the Company
agrees to make each payment due under the Loan Documents directly to the Banks
entitled thereto.
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11. OTHER PROVISIONS.
11.1. Amendments and Waivers.
With the written consent of the Required Banks (or, if the Letter of
Credit Exposure attributable to Surety Letters of Credit exceeds $1,000,000,
all of the Banks), the Agent and the appropriate parties to the Loan Documents
may, from time to time, enter into written amendments, supplements or
modifications thereof and, with the consent of the Required Banks (or, if the
Letter of Credit Exposure attributable to Surety Letters of Credit exceeds
$1,000,000, all of the Banks), the Agent on behalf of the Banks may execute and
deliver to any such parties a written instrument waiving or consenting to the
departure from, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of the Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such
amendment, supplement, modification, waiver or consent shall (i) increase the
Commitment of any Bank or the aggregate Commitments of the Banks, (ii) change
the maturity date of any Note, (iii) change the rate of interest of, extend the
time or manner of payment of or increase or forgive the principal amount of any
Note, (iv) decrease the Commitment Fee, Letter of Credit Commissions or extend
the time of payment thereof, (v) release any guarantor under any guarantee,
(vi) increase the advance rate under the Borrowing Base with respect to the
Loans and Letters of Credit or (vii) change the provisions of paragraphs 3.5,
8.3 or 11.1 without the consent of all of the Banks; and provided further that
no such amendment, supplement, modification or waiver shall amend, modify or
waive any provision of paragraph 10 or otherwise change any of the rights or
obligations of the Agent under the Loan Documents without the written consent
of the Agent. Any such amendment, supplement, modification, waiver or consent
shall apply equally to each of the Banks and shall be binding upon the parties
to the applicable Loan Document, the Banks, the Agent and all future holders of
the Notes. In the case of any waiver, the parties to the applicable Loan
Document, the Banks and the Agent shall be restored to their former position
and rights under the Loan Documents, and any Default or Event of Default waived
shall not extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2. Notices.
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or two Business Days after being deposited in the mail, first-class
postage prepaid, or, in the case of telecopier notice, when sent, addressed as
follows in the case of the Company and the Agent, and as set forth on Schedule
1.1 in the case of each of the Banks, or to such
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other addresses as to which the Agent may be hereafter notified by the
respective parties hereto or any future holders of the Notes:
if to the Company, at:
EDO Corporation.
14-04 111th Street
College Point, New York 11356-1434
Attention: Vice President-Finance
Telecopy: (718) 321-4194
Telephone: (718) 321-4050
if to the Agent, at:
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose
Telephone: (212) 635-4693
Telecopy: (212) 635-6365
with a copy to:
The Bank of New York
530 Fifth Avenue
New York, New York 10036
Attention: Joanne Collett,
Vice President
Telephone: (212) 852-4047
Telecopy: (212) 852-4252
except that any notice, request or demand by the Company to or upon the Agent
or the Banks pursuant to paragraphs 2.3, 2.4 or 2.5 shall not be effective
until received.
11.3. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of any
Party, any right, remedy, power or privilege under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges under the Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
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<PAGE> 65
11.4. Survival of Representations and Warranties.
All representations and warranties in any Loan Document or any other
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of the Loan Documents so long
as any amount remains outstanding under any Loan Document.
11.5. Payment of Expenses and Taxes; Indemnities.
(a) The Company agrees, promptly upon presentation of a statement or
invoice therefor, and whether or not any Loan is made, (a) to pay or reimburse
the Agent and the Banks for all their reasonable out-of-pocket costs and
expenses reasonably incurred in connection with the development, preparation
and execution of, and any amendment, waiver, consent, supplement or
modification to, the Loan Documents, any documents prepared in connection
therewith and the consummation of the transactions contemplated thereby,
including, without limitation, the reasonable fees and disbursements of Special
Counsel and counsel to each Bank, (b) to pay or reimburse the Agent and the
Banks for all of their respective costs and expenses incurred in connection
with the enforcement or preservation of any rights under the Loan Documents and
any such documents, including, without limitation, reasonable fees and
disbursements of counsel, (c) to pay, indemnify, and hold each Bank and the
Agent harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, which may be payable or determined to
be payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, the Loan
Documents and any such other documents, and (d) to pay, indemnify and hold each
Bank and the Agent and each of their respective officers, directors and
employees harmless from and against any and all other liabilities, obligations,
claims, losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever (including, without
limitation, reasonable counsel fees and disbursements) with respect to the
execution, delivery, enforcement and performance of the Loan Documents or the
use of the proceeds of the Loans (all the foregoing, collectively, the
"Indemnified Liabilities") and, if and to the extent that the foregoing
indemnity may be unenforceable for any reason, the Company agrees to make the
maximum payment permitted under applicable law; provided, however, that the
Company shall have no obligation hereunder to pay Indemnified Liabilities to
the Agent or any Bank arising from the gross negligence or willful misconduct
of the Agent or such Bank. The agreements in this paragraph shall survive the
termination of the Commitments and the payment of the Notes, and all other
amounts payable under the Loan Documents.
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<PAGE> 66
(b) The Company agrees to indemnify and hold harmless the Agent and
each Bank and their respective affiliates, directors, officers, employees,
attorneys and agents (each an "Indemnified Person") from and against any loss,
cost, liability, damage or expense (including the reasonable fees and
out-of-pocket expenses of counsel of such Indemnified Person) incurred by such
Indemnified Person in investigating, preparing for, defending against, or
providing evidence, producing documents or taking any other action in respect
of, any commenced or threatened litigation, administrative proceeding or
investigation under any federal securities law or any other statute of any
jurisdiction, or any regulation, or at common law or otherwise, which is
alleged to arise out of or is based upon (a) any untrue statement or alleged
untrue statement of any material fact by the Company or any Subsidiary in any
document or schedule executed or filed with any Governmental Body by or on
behalf of the Company or any Subsidiary; (b) any omission or alleged omission
to state any material fact required to be stated in such document or schedule;
(c) any acts, practices or omissions or alleged acts, practices or omissions of
the Company, any Subsidiary or its respective agents relating to the use of the
proceeds of any or all borrowings made by the Company which are alleged to be
in violation of paragraph 2.18, or in violation of any federal securities law
or of any other statute, regulation or other law of any jurisdiction applicable
thereto; (d) any acquisition or proposed acquisition by the Company or any
Subsidiary of all or a portion of the Stock, or all or a portion of the assets,
of any Person whether or not such Indemnified Person is a party thereto or (e)
any purchase by the Company of its Stock. Notwithstanding the foregoing, in the
event that the Indemnified Persons do not, in the determination of the Agent,
have conflicting interests, the Company shall not be obligated to pay for more
than one counsel for the Indemnified Persons and one local counsel in each
jurisdiction in which the Indemnified Persons determined that local counsel is
necessary. The indemnity set forth herein shall be in addition to any other
obligations or liabilities of the Company to each Indemnified Person hereunder
or at common law or otherwise, and shall survive any termination of this
Agreement, the expiration of the Commitments and the payment of all
indebtedness of the Company under the Loan Documents, provided that the Company
shall have no obligation under this paragraph to an Indemnified Person with
respect to any of the foregoing to the extent found in a final judgment of a
court to have resulted from the gross negligence or wilful misconduct of such
Indemnified Person.
11.6. Successors and Assigns.
(a) The Loan Documents to which the Company is a party shall be
binding upon and inure to the benefit of the Company, the Banks, the Agent, all
future holders of the Notes and their respective successors and assigns, except
that the Company may not
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assign, delegate or transfer any of its rights or obligations under any Loan
Document without the prior written consent of the Agent and each Bank.
(b) Each Bank shall have the right at any time, upon written notice to
the Agent of its intent to do so, to sell, assign, transfer or negotiate all or
any part of its Loans, its Commitment, its Letter of Credit Commitment and its
Notes to one or more affiliates of such Bank, to one or more of the other Banks
(or to affiliates of such other Banks) or with the prior written consent of the
Company (which consent shall not be unreasonably withheld), to any other bank,
insurance company, pension fund, mutual fund or other financial institution,
provided that each such sale, assignment, transfer or negotiation shall be in a
minimum amount equal to 10% of the Commitments, and for each assignment, the
parties to such assignment shall execute and deliver to the Agent an Assignment
and Acceptance Agreement along with a fee (the "Assignment Fee") of $2,000.
Upon execution, delivery, acceptance and consent, and recording by the Agent,
from and after the effective date specified in such Assignment and Acceptance
Agreement and agreed to by the Agent, the assignee thereunder shall be a party
hereto and a "Bank" and, to the extent provided in such Assignment and
Acceptance Agreement, the assignor Bank thereunder shall be released from its
obligations under this Agreement. No Bank shall sell, assign, transfer or
negotiate more than 50% of the initial amount of its Note or Commitment without
the written consent of the Company and the Agent. The Company agrees upon
written request of the Agent to execute and deliver (i) to such assignee,
Notes, dated the effective date of such Assignment and Acceptance Agreement, in
an aggregate principal amount equal to the Loans assigned to, and Commitments
assumed by, such assignee and (ii) to such assignor Bank, Notes, dated the
effective date of such Assignment and Acceptance Agreement, in an aggregate
principal amount equal to the balance of such assignor Bank's Loans and
Commitments. Upon any such sole assignment or other transfer, the Commitments
and the Commitment Percentages set forth in Exhibit A shall be adjusted
accordingly.
(c) Each Bank may grant participations in all or any part of its
Loans, its Notes, its Letter of Credit Commitment and its Commitment only to
one or more banks, insurance companies, pension funds, mutual funds or other
financial institutions, provided that (i) such Bank's obligations under this
Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the Company, the Agent and the other Banks shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement, (iv) no sub-participations shall be
permitted, (v) no Bank may sell participations in more than 50% of the initial
amount of its Note or Commitment and (vi) the rights of any holder of any such
participation shall be limited to the right to consent to any action
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<PAGE> 68
taken or omitted to be taken by such Bank under the Loan Documents except any
action which would (A) increase the Commitments of such Bank, (B) reduce the
Commitment Fee, Letter of Credit Commissions or the interest rate payable on
the Notes, (C) extend the maturity date of the Notes or postpone the payment or
scheduled due dates for payments of principal, interest and Commitment Fees, or
(D) result in the release of any guarantor under any guarantee. The Company
hereby acknowledges and agrees that any such participant shall for purposes of
paragraphs 2.11, 2.13, 2.19 and 11.9 be deemed to be a "Bank"; provided,
however, that the Company shall not, at any time, be obligated to pay any
participant in any interest of any Bank hereunder any sum in excess of the sum
which the Company would have been obligated to pay to such Bank in respect of
such interest had such Bank not sold such participation.
(d) Any Bank may at any time assign all or any portion of its rights
under the Loan Documents to a Federal Reserve Bank. No such assignment shall
release such Bank from its obligations thereunder.
(e) No Bank shall, as between and among the Company, the Agent, BNY
and such Bank, be relieved of any of its obligations under the Loan Documents
as a result of any sale, assignment, transfer or negotiation of, or granting of
participations in, all or any part of its Loans, its Commitments or its Notes,
except that a Bank shall be relieved of its obligations to the extent of any
such sale, assignment, transfer, or negotiation of all or any part of its
Loans, its Commitments or its Notes pursuant to paragraph (b) above.
11.7. Counterparts.
The Loan Documents (other than the Notes) may be executed by one or
more of the parties on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. In making proof of the Loan Documents (other than the Notes) it
shall not be necessary to produce or account for more than one counterpart
thereof executed by the party to be charged.
11.8. Adjustments; Set-off.
(a) If any Bank (a "Benefited Bank") shall at any time receive any
payment of all or any part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
paragraph 9 (g) or (h), or otherwise) in a greater proportion than any such
payment to and collateral received by any other Bank, if any, in respect of
such other Bank's Loans, or interest thereon, such Benefited Bank shall
purchase for cash from the other Banks such portion of each such other Bank's
Loans, or shall provide such other Banks with the
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<PAGE> 69
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Bank to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Banks; provided, however, that
if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefited Bank, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. The Company agrees that each Bank so purchasing a portion of
another Bank's Loans may exercise all rights of payment (including, without
limitation, rights of set-off, to the extent permitted by law) with respect to
such portion as fully as if such Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, upon the occurrence of an Event of Default and acceleration of the
obligations owing in connection with this Agreement, or at any time upon the
occurrence and during the continuance of an Event of Default under paragraph
9(a), each Bank shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the extent permitted by
applicable law, to set-off and apply against any indebtedness, whether matured
or unmatured, of the Company to such Bank, any amount owing from such Bank to
the Company, at, or at any time after, the happening of any of the
above-mentioned events. To the extent permitted by applicable law, the
aforesaid right of set-off may be exercised by such Bank against the Company or
against any trustee in bankruptcy, custodian, debtor in possession, assignee
for the benefit of creditors, receiver, or execution, judgment or attachment
creditor of the Company, or against anyone else claiming through or against the
Company or such trustee in bankruptcy, custodian, debtor in possession,
assignee for the benefit of creditors, receivers, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set-off shall
not have been exercised by such Bank prior to the making, filing or issuance,
or service upon such Bank of, or of notice of, any such petition, assignment
for the benefit of creditors, appointment or application for the appointment of
a receiver, or issuance of execution, subpoena, order or warrant. Each Bank
agrees promptly to notify the Company and the Agent after any such set-off and
application made by such Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
11.9. Lending Offices.
Each Bank shall have the right at any time and from time to time on
notice to the Agent and the Company to transfer any Loan to a different office.
Such office shall thereupon become such Bank's Lending Office.
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11.10. Governing Law.
The Loan Documents and the rights and obligations of the parties
thereunder shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York, without regard to principles
of conflict of laws.
11.11. Headings, Plurals.
Paragraph headings have been inserted herein and in the other Loan
Documents for convenience only and shall not be construed to be a part hereof
or thereof. Unless the context otherwise requires, words in the singular number
include the plural, and words in the plural include the singular.
11.12. Severability.
Every provision of the Loan Documents is intended to be severable, and
if any term or provision hereof or thereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions hereof or thereof shall not be affected or impaired
thereby, and any invalidity, illegality or unenforceability in any jurisdiction
shall not affect the validity, legality or enforceability of any such term or
provision in any other jurisdiction.
11.13. Integration.
All exhibits to this Agreement shall be deemed to be a part of this
Agreement or the applicable other Loan Document, as the case may be. The Loan
Documents embody the entire agreement and understanding among the Company, the
Agent and the Banks with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings among the Company, the Agent
and the Banks with respect to the subject matter thereof.
11.14. Consent to Jurisdiction.
The Parties hereby irrevocably submit to the jurisdiction of any New
York State or Federal Court sitting in the City of New York over any suit,
action or proceeding arising out of or relating to the Loan Documents. The
Parties hereby irrevocably waive, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. The Parties hereby agree that a final judgment in any such
suit, action or proceeding brought in such a court, after all appropriate
appeals, shall be conclusive and binding upon it.
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11.15. Service of Process.
Process may be served in any suit, action, counterclaim or proceeding
of the nature referred to in paragraph 11.14 by mailing copies thereof by
registered or certified mail, postage prepaid, return receipt requested, to the
respective addresses of the Parties set forth in paragraph 11.2 or to any other
address of which a Party shall have given written notice to the Agent. The
Parties hereby agree that such service (a) shall be deemed in every respect
effective service of process upon it in any such suit, action, counterclaim or
proceeding, and (b) shall to the fullest extent enforceable by law, be taken
and held to be valid personal service upon and personal delivery to it.
11.16. No Limitation on Service or Suit.
Nothing in the Loan Documents or any modification, waiver, consent or
amendment thereto shall affect the right of any Party to serve process in any
manner permitted by law or limit the right of any Party to bring proceedings
against any other Party in the courts of any jurisdiction or jurisdictions.
Except as otherwise provided in paragraph 11.14, nothing herein shall be deemed
a consent by the Company to the jurisdiction of the courts of any particular
state.
11.17. WAIVER OF TRIAL BY JURY.
THE PARTIES EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE PARTIES EACH HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF ANY OTHER PARTY OR COUNSEL TO ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION. EACH PARTY ACKNOWLEDGES THAT EACH OTHER PARTY HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS
PARAGRAPH.
11.18. Confidentiality.
(a) Each Bank agrees that it will use any information with respect to
the Company which is non-public, confidential or proprietary in nature which is
furnished by the Company to the Bank, or made available pursuant to paragraph
7.1, 7.2 or 7.9 (collectively, "Information") only for the purpose of making
its credit decisions under the Loan Documents and decisions incident thereto,
that it will take all reasonable steps to insure that the confidentiality of
the Information is maintained and that it will not disclose any Information,
provided, however, that a Bank may disclose any such Information (i) to its
directors, employees, auditors or counsel, or those of its Subsidiaries or
Affiliates
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<PAGE> 72
(collectively "representatives") to whom it is necessary to show such
Information, each of which shall be informed by such Bank of the confidential
nature thereof; (ii) in any statements or testimony pursuant to a subpoena or
order by any Governmental Body or as may otherwise be required by law (provided
that the Bank shall give the Company prior written notice of the disclosure
permitted by this clause (ii) unless such notice is prohibited by the subpoena,
order or law); (iii) upon the request or demand of any Governmental Body having
jurisdiction over such Bank (provided that such Bank shall give the Company
prior written notice of the disclosure permitted by this clause (iii) unless
such notice is prohibited by the request or demand); and (iv) to prospective
participants and assignees in connection with the contemplated participation or
assignment of any Loan or Commitment, provided that the prospective participant
and assignee executes and delivers to such Bank a confidentiality agreement
containing provisions comparable to those set forth above and such Bank has
provided a copy thereof to the Company prior to disclosure of the Information.
(b) The restrictions contained herein shall not apply to Information
which (i) is or becomes generally available to the public other than as a
result of a disclosure by a Bank or such Bank's representatives; or (ii)
becomes available to the Bank on a non-confidential basis from a source other
than the Company or one of its respective agents, the Agent or the other Banks,
or (iii) was known to a Bank on a non-confidential basis prior to its
disclosure to such Bank by the Company or one of its agents.
11.19. Return of Notes.
Each Bank agrees that upon receipt of its new Note referred
to in paragraph 2.2, it will return to the Company for cancellation
its superceded Note.
11.20. Savings Clause.
This Agreement is intended solely as an amendment of, and
contemporaneous restatement of, the terms and conditions of the Existing Credit
Agreement and is not intended and should not be construed as in any way
extinguishing or terminating any rights which the Agent or any Bank may have
under the Existing Credit Agreement.
11.21. Waiver of Certain Covenants under the Existing Credit Agreement.
The Agent and the Banks hereby waive compliance by the Company with
the provisions of (a) paragraph 8.12 of the Existing Credit Agreement (Interest
Coverage Ratio) for the fiscal quarter of the Company ending September 25, 1993
and (b) paragraphs 8.12 (Interest Coverage Ratio), 8.13 (Consolidated Capital
Funds) and
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8.14 (Consolidated Net Worth) for the fiscal quarter of the Company ending
December 31, 1993.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
EDO CORPORATION
By: Michael J. Hegarty
Name: Michael J. Hegarty
Title: Vice President-Finance
THE BANK OF NEW YORK,
Individually and as Agent
By: Joanne M. Collett
Name: Joanne M. Collett
Title: Vice President
CHEMICAL BANK
By: Jonathan Russell
Name: Jonathan Russell
Title: Vice President
NATIONAL WESTMINSTER BANK USA
By: Richard S. Ferrari
Name: Richard S. Ferrari
Title: V P
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<PAGE> 75
Each of the undersigned Guarantors hereby consents to the amendment
and restatement of the Existing Credit Agreement as herein set forth and agrees
that its Guaranty remains in full force and effect.
EDO WESTERN CORPORATION
BARNES ENGINEERING COMPANY
EDO SPORTS, INC.
EDO ENERGY CORPORATION
EDO AUTOMOTIVE NATURAL GAS, INC.
AS TO EACH OF THE FOREGOING
By: Michael J. Hegarty
Name: Michael J. Hegarty
Title: Vice President
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EDO EXHIBIT A
LIST OF COMMITMENTS
Commitment
Bank Commitment Percentage
The Bank of
New York $ 6,000,000 40%
Chemical Bank $ 4,500,000 30%
National Westminster
Bank USA $ 4,500,000 30%
TOTAL $15,000,000 100%
<PAGE> 77
EDO EXHIBIT B
FORM OF AMENDED AND RESTATED NOTE
$________. March 3, 1994
New York, New York
FOR VALUE RECEIVED, EDO CORPORATION, a New York corporation (the
"Company") hereby promises to pay to the order of _______________ (the "Bank"),
on the Maturity Date, at the office of THE BANK OF NEW YORK, as Agent (the
"Agent), located at 530 Fifth Avenue, New York New York, or at such other
address as the Bank may specify from time to time, in lawful money of the
United States of America, the principal sum of _______________________________
($_________) or such lesser unpaid principal balance as shall be outstanding
hereunder, together with interest on the unpaid principal balance hereof,
payable on the dates and at the rate or rates provided for in the First Amended
and Restated Credit Agreement, dated as of March 3, 1994, by and among the
Company, the signatory Banks thereto and the Agent (as the same may be amended
or otherwise modified from time to time, the "Agreement"). Capitalized terms
used herein which are not herein defined shall have the meanings set forth in
the Agreement. In no event shall the interest payable hereon exceed the Highest
Lawful Rate.
This Note is one of the Notes referred to in the Agreement and is
entitled to the benefits of, and is subject to the terms, set forth therein.
The principal of this Note is payable in the amounts and under the
circumstances, and its maturity is subject to acceleration upon the terms, set
forth in the Agreement. Except as otherwise provided in the Agreement, if any
payment on this Note becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next Business Day and
interest shall be payable at the applicable rate or rates specified in the
Agreement during such extension period.
This Note is a partial substitute, and together with the other Notes,
a whole substitute, for the Existing Notes (as defined in the Existing Credit
Agreement), and does not extinguish the debt thereunder.
The Bank is hereby authorized to record (i) the outstanding principal
amount of its Loans on the Restatement Effective Date, (ii) the date and amount
of each Loan made by such Bank after the Restatement Effective Date and (iii)
the date and amount of each payment or prepayment of principal of, any Loan, on
the schedule annexed hereto (and any continuation
<PAGE> 78
thereof) or in such Bank's internal records. No failure to so record or any
error in so recording shall affect the obligation of the Company to repay the
Loans, together with interest thereon, as provided in the Agreement.
Presentment for payment, demand, notice of dishonor, protest, notice
of protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as
specifically otherwise provided herein or in the Agreement.
This Note is being delivered in, is intended to be performed in, shall
be construed and interpreted in accordance with, and be governed by the
internal laws of, the State of New York without regard to principles of
conflict of laws.
This Note may only be amended by an instrument in writing executed
pursuant to the provisions of paragraph 11.1 of the Agreement.
EDO CORPORATION
By:_____________________________
Name: __________________________
Title: _________________________
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<PAGE> 79
SCHEDULE TO NOTE
Amount of
Principal
Amount of paid or Notation
Date Loan prepaid Made By
<PAGE> 80
EDO EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
I, ____________________, do hereby certify that I am the _____________
of EDO Corporation, a New York corporation (the "Company"), and that, as such,
I am duly authorized to execute and deliver this Borrowing Base Certificate on
the Company's behalf pursuant to paragraph 7.1(d) of the First Amended and
Restated Credit Agreement, dated as of March 3, 1994, by and between the
Company, the signatory Banks thereto and The Bank of New York, as Agent (the
"Agent") (as the same may be amended or otherwise modified from time to time,
the "Agreement"). Capitalized terms used herein that are defined in the
Agreement shall have the meanings therein defined.
I hereby certify that:
1. The Borrowing Base as of the last day of the immediately preceding
month is $____________, computed as shown on Schedule 1.
2. The sum of (i) the aggregate outstanding principal balance of Loans
and (ii) the Letter of Credit Exposure is less than or equal to the Borrowing
Base set forth in paragraph 1.
IN WITNESS WHEREOF, I have executed this Compliance Certificate on
this ___ day of ______________, 19__.
_________________________
<PAGE> 81
Schedule 1 to the Borrowing Base
Certificate dated __/__/__
Computation of Borrowing Base
(As of the Last Day of the Preceding Month)
Eligible Billed Receivables.
1. Total Receivables of the Company,
and the Guarantors (other than Eligible
Unbilled Receivables (see below)) ........... $________
2. Deductions:
(a) Receivables subject to any
Lien in favor of any Person
other than Permitted Liens $________
(b) Receivables from employees
officers, directors or
Affiliates of the Company
or any Subsidiary (other than
Receivables from Affiliates
in the ordinary course of
business) $________
(c) Receivables from account
debtors with respect to which
the Company is aware or has
reason to be aware of
any reorganization,
bankruptcy, receivership,
custodianship, insolvency or
other like condition $________
(d) Receivables more than
91 days past due $________
(e) Receivables which are not
a good and valid accounts
representing a bona
fide indebtedness
incurred by the account
debtor therein named,
for a fixed sum as set forth
in the invoice relating thereto
with respect to an absolute
sale upon the stated terms
of goods sold or to be sold
by the Company or a Guarantor $________
<PAGE> 82
(f) Receivables from account
debtors whose credit standing
or collectibility are not
reasonably satisfactory to
the Agent and the Required
Banks $________
(g) Receivables arising out of
a transaction with an
Affiliate of the Company
which would otherwise be
an Eligible Billed Receivable
but which arises out of the
same sale of goods or rendering
of services with respect to
which a Receivable is already
included in the Borrowing Base
as an Eligible Billed
Receivable $________
Total Deductions................... $__________
3. Total Eligible Billed Receivables
[item 1 less item 2]......................... $__________
Eligible Unbilled Receivables.
4. Receivables of the Company or
the Guarantors consisting of
cost input and related profit
recognized as revenues on
customer contracts based upon
percentage completion accounting in accordance
with GAAP, which amounts cannot be billed
to customers because of contract terms
until a future date, arising in the ordinary
course of business .......................... $__________
5. Deductions:
(a) Receivables subject to any
Lien in favor of any Person
other than Permitted Liens $________
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<PAGE> 83
(b) Receivables from employees
officers, directors or
Affiliates of the Company
or any Subsidiary (other than
Receivables from Affiliates
in the ordinary course of
business) $________
(c) Receivables from account
debtors with respect to which
the Company is aware or has
reason to be aware of
any reorganization,
bankruptcy, receivership,
custodianship, insolvency or
other like condition $________
(d) Receivables from account
debtors whose credit standing
or collectibility are not
reasonably satisfactory to
the Agent and the Required
Banks $________
(e) Receivables arising out of
a transaction with an
Affiliate of the Company
which would otherwise be
an Eligible Unbilled Receivable
but which arises out of the
same sale of goods or rendering
of services with respect to
which a Receivable is already
included in the Borrowing Base
as an Eligible Unbilled
Receivable $________
Total Deductions................... $__________
6. Total Eligible Unbilled Receivables
[item 4 less item 5]......................... $__________
7. Sum of 85% of item 3 plus
60% of item 6....................... $__________
8. Net Sales Proceeds applied to the Reduction
of the Borrowing Base.................... $__________
= 3 =
<PAGE> 84
9. Borrowing Base
Item 7 minus Item 8 ....................... $__________
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<PAGE> 85
EDO EXHIBIT D
FORM OF BORROWING REQUEST
_____________, 199_
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose
The Bank of New York, as Agent
530 Fifth Avenue
New York, New York 10036
Attention: Joanne Collett,
Vice President
Re: First Amended and Restated Credit Agreement, dated as of March 3,
1994, by and among EDO CORPORATION, the signatory Banks thereto, and
THE BANK OF NEW YORK, as Agent (the "Agreement")
Capitalized terms used herein which are defined in the Agreement shall
have the meanings therein defined.
1. Pursuant to paragraph 2.3 of the Agreement, the Company hereby gives
notice of its intention to borrow $_____________ on ________________, 199_.
2. Pursuant to paragraph 2.8, the Company hereby requests that BNY issue
Letters of Credit totalling $_________ pursuant to one or more Applications
therefor submitted herewith.
3. The Company hereby certifies that on the date hereof and on the
Borrowing Date set forth above, and after giving effect to the Loans and the
Letters of Credit requested hereby:
(a) The Company is and shall be in compliance with all of the terms,
covenants and conditions of the Loan Docu- ments.
(b) There exists and there shall exist no Default or Event of Default
under the Agreement.
<PAGE> 86
(c) The proceeds of such Loans will be used in accordance with
paragraph 2.18 of the Agreement.
(d) Each of the representations and warranties contained in the
Agreement which is required to be made on such Borrowing Date is and shall be
true and correct in all material respects.
(e) Since December 31, 1992, there has occurred no Material Adverse
Change.
(f) After giving effect to the Loans, if any, requested to be made
hereby, the sum of (i) the aggregate outstanding principal balance of the Loans
and (ii) the Letter of Credit Exposure (including the Letters of Credit, if
any, requested to be issued hereby) does not exceed the lesser of (x) the
Commitments or (y) the Borrowing Base.
(g) After giving effect to the Letters of Credit, if any, requested to
be issued hereby, (i) the aggregate face amount of the Letters of Credit does
not exceed the lesser of (1) the excess, if any, of the sum of the Commitments
over the sum of the aggregate outstanding principal balance of the Loans or (2)
the excess, if any, of the Borrowing Base over the sum of the aggregate
outstanding principal balance of the Loans, and (ii) the aggregate outstanding
face amount of the Letters of Credit does not exceed the Letter of Credit
Commitment.
IN WITNESS WHEREOF, the Company has caused this certificate to be executed
by their respective duly authorized officers as of the date and year first
written above.
EDO CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
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<PAGE> 87
EDO EXHIBIT E
FORM OF COMPLIANCE CERTIFICATE
I, ______________, do hereby certify that I am the __________ of EDO
Corporation, a New York corporation (the "Company"), and that, as such, I am
duly authorized to execute and deliver this Compliance Certificate on the
Company's behalf pursuant to paragraph 7.1(d) of the First Amended and Restated
Credit Agreement, dated as of March 3, 1994, by and between the Company, the
signatory Banks thereto and The Bank of New York, as Agent (the "Agent") (as
the same may be amended or otherwise modified from time to time, the
"Agreement"). Capitalized terms used herein that are defined in the Agreement
shall have the meanings therein defined.
I hereby certify that:
1. The Quick Ratio (determined as of the end of the immediately
preceding fiscal quarter of the Company) is ____:1.00, computed as shown on
Schedule 1. Nothing has come to my attention to indicate that subsequent to the
end of such fiscal quarter through the date hereof, the Company is not in
compliance with paragraph 8.9 of the Agreement.
2. The Current Ratio (determined as of the end of the immediately
preceding fiscal quarter of the Company) is ____:1.00, computed as shown on
Schedule 2. Nothing has come to my attention to indicate that subsequent to the
end of such fiscal quarter through the date hereof, the Company is not in
compliance with paragraph 8.10 of the Agreement.
3. The Leverage Ratio (determined as of the end of the immediately
preceding fiscal quarter of the Company) is ____:1.00, computed as shown on
Schedule 3. Nothing has come to my attention to indicate that subsequent to the
end of such fiscal quarter through the date hereof, the Company is not in
compliance with paragraph 8.11 of the Agreement.
4. The Interest Coverage Ratio (determined as of the end of the
immediately preceding fiscal quarter of the Company) is ____:1.00, computed as
shown on Schedule 4. Nothing has come to my attention to indicate that
subsequent to the end of such fiscal quarter through the date hereof, the
Company is not in compliance with paragraph 8.12 of the Agreement.
5. Consolidated Capital Funds (determined as of the last day of the
immediately preceding fiscal quarter of the
<PAGE> 88
Company) is $______, computed as shown on Schedule 5. Nothing has come to my
attention to indicate that subsequent to the end of such fiscal quarter through
the date hereof, the Company is not in compliance with paragraph 8.13 of the
Agreement.
6. Consolidated Net Worth (determined as of the last day of the
immediately preceding fiscal quarter of the Company) is $______, computed as
shown on Schedule 6. Nothing has come to my attention to indicate that
subsequent to the end of such fiscal quarter through the date hereof, the
Company is not in compliance with paragraph 8.14 of the Agreement.
IN WITNESS WHEREOF, I have executed this Compliance Certificate on
this ___ day of ______________, 19__.
_______________________
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<PAGE> 89
Schedule 1 to Compliance Certificate
dated __/__/__
Computation of Quick Ratio
1. Cash and Cash Equivalents
of the Company and its
Subsidiaries (as
determined in accordance
with GAAP on a Consolidated
basis).................................. $_________
2. Receivables of the Company
and its Subsidiaries (as
determined in accordance
with GAAP on a Consolidated
basis).................................. $_________
3. Item 1 plus Item 2...................... $_________
4. Consolidated Current Liabilities ....... $_________
5. Quick Ratio
(Item 3:Item 4)......................... ____:1.00
6. Minimum Quick Ratio required
by paragraph 8.9 ....................... 1.50:1.00
<PAGE> 90
Schedule 2 to Compliance Certificate
dated __/__/__
Computation of Consolidated Current Ratio
1. Consolidated Current Assets ............ $_________
2. Consolidated Current Liabilities........ $_________
3. Current Ratio
(Item 1:Item 2)......................... ____:1.00
4. Minimum Current Ratio required
by paragraph 8.10....................... 2.00:1.00
<PAGE> 91
Schedule 3 to Compliance Certificate
dated __/__/__
Computation of Leverage Ratio
1. Consolidated Total Liabilities ......... $_________
2. Subordinated Debt....................... $_________
3. Item 1 less Item 2...................... $_________
4. Consolidated Tangible Net Worth......... $_________
5. Item 4 plus Item 2...................... $_________
6. Leverage Ratio
[Item 3:Item 5]......................... ____:____
7. Maximum Leverage Ratio permitted
by paragraph 8.11....................... 1.00:1.00
<PAGE> 92
Schedule 4 to Compliance Certificate
dated __/__/__
Computation of Interest Coverage Ratio
1. Consolidated Net Income for the
immediately preceding fiscal
quarter..................................$________
2. Item 1x4.................................$________
3. Consolidated Interest Expense
for such fiscal quarter................. $________
4. Item 3x4.................................$________
5. Income tax expense deducted in determining
Item 1.................................. $________
6. Item 5X4................................ $________
7. Sum of Items 2, 4 and 6................. $________
8. Consolidated Interest Income
for such fiscal quarter................. $________
9. Item 8X4................................ $________
10. Item 7 minus Item 9..................... $________
11. Item 4 minus Item 9..................... $________
12. Interest Coverage Ratio
[Item 10:Item 11]...................... ____:1.00
13. Minimum Interest Coverage Ratio
required by paragraph 8.12.............. _.__:1.00
<PAGE> 93
Schedule 5 to the Compliance Certificate
dated __/__/__
Computation of Consolidated Capital Funds
1. Consolidated Net Worth (See Schedule 6). $_________
2. Subordinated Debt....................... $_________
3. Capital Funds
(Item 1 plus Item 2).................... $__________
4. Minimum Capital Funds required by
paragraph 8.13.......................... $__________
<PAGE> 94
Schedule 6 to the Compliance Certificate
dated __/__/__
Computation of Consolidated Tangible Net Worth
1. Consolidated Net Worth.................. $________
2. Minimum Consolidated Net Worth
required by paragraph 8.14.............. $________
<PAGE> 95
EDO EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Dated _______________, 19__
Reference is made to the First Amended and Restated Credit Agreement,
dated as of March 3, 1994 (the "Credit Agreement"), among EDO CORPORATION, a
New York corporation (the "Company"), the signatory Banks thereto and THE BANK
OF NEW YORK, as Agent for the Banks (in such capacity, the "Agent").
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.
____________________ (the "Assignor") and _________________________
(the "Assignee") hereby agree as follows:
1. Assignment.
In consideration of the payment to be made by the Assignee to the
Assignor pursuant to the provisions of paragraph 2 of this Assignment and
Acceptance Agreement (this "Agreement"), effective as of the __________ __,
19__ (the "Effective Date hereof"), the Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
without recourse, a __% interest in and to all the Assignor's rights and
obligations under the Loan Documents with respect to the Assignor's Loans and
the Letters of Credit, including, without limitation, such percentage interest
in the Assignor's Commitment on the Effective Date hereof (without giving
effect to the assignments thereof hereunder).
2. Payments by Assignee.
In consideration of the assignment made pursuant to paragraph 1 of
this Agreement, the Assignee agrees to pay to the Assignor on the Effective
Date hereof, the sum of $________________ representing, without duplication,
the (i) aggregate principal amount of the outstanding Loans made by the
Assignor pursuant to the Credit Agreement and (ii) unreimbursed reimbursement
obligations in respect of Letters of Credit participated in by the Assignor
pursuant to he Credit Agreement, multiplied by the percentage of the Assignor's
interest which is being assigned hereunder.
<PAGE> 96
[3. Payments by Assignor.
In consideration for acceptance of the assignment made pursuant to
paragraph 1 of the Agreement, the Assignor shall pay to the Assignee a fee in
the amount of $__________ payable on the Effective Date hereof.]
4. Representations and Warranties of the Assignor.
The Assignor represents and warrants that (i) as of the date hereof,
(x) its Commitment (without giving effect to assignments thereof which have not
yet become effective) is $_______, (y) the outstanding balance of its Loans
(unreduced by any assignments thereof which have not yet become effective) is
$________ and (z) its Commitment Percentage of unreimbursed reimbursement
obligations in respect of Letters of Credit is $________ and (ii) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim created by the
Assignor. The Company may rely on the foregoing representations and warranties.
5. Representations, Warranties and Agreements of the Assignee.
The Assignee (a) represents and warrants that it is legally authorized
to enter into this Agreement; (a) represents and warrants that it is an
"accredited investor" (as such term is used in Regulation D of the SEC under
the Securities Act of 1933, as amended); (c) confirms that it has received a
copy of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to paragraphs 7.1 and 7.2 thereof and such other
documents and information, including, without limitation, the Loan Documents,
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Agreement; (d) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (e) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (f) agrees that it will become a party to the
Credit Agreement on the Effective Date hereof and will perform in accordance
with their terms all the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Bank; and (g) agrees that it will keep
confidential all information with
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<PAGE> 97
respect to the Company furnished to it by the Company or the Assignor (other
than information generally available to the public or otherwise available to
the Assignor on a nonconfidential basis). The Company may rely on the foregoing
representations and warranties.
6. Recording and Acknowledgment by Agent.
(a) Following the execution of this Agreement, the Assignor will
deliver a duly executed copy of this Agreement to the Agent for acknowledgment
and recording by the Agent and will also deliver the Assignor's Notes. The
Agent shall cause the Company to exchange such Notes for new Notes as provided
in paragraph 11.6 of the Credit Agreement.
(b) Upon such acknowledgment and recording, from and after the
Effective Date hereof, the Agent shall make all payments in respect of the
interest assigned hereby (including payments of principal, interest, fees and
other amounts) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustment in payments under the Credit Agreement for periods prior
to the Effective Date hereof directly between themselves.
7. Effect of this Agreement.
Upon recording and acknowledgment of this assignment by the Agent,
from and after the Effective Date hereof, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Agreement, have the
rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the
extent provided in this Agreement, relinquish its right and be released from
its obligations under the Credit Agreement, provided, however, that if the
Assignor is not assigning its entire interest under the Loan Documents, it
shall remain a Bank entitled to all of the benefits and subject to all of the
obligations thereunder.
8. Payment Instructions.
1. All payments to be made to the Assignor by the Assignee hereunder
shall be made by wire transfer of immediately available funds to the Assignor
at its ___________ office, Attention: ____________, Reference: ______.
2. All payments to be made to the Assignee by the Assignor hereunder
shall be made by wire transfer of immediately available funds to the Assignee
at ___________ for the Account of ___________________, Account No. _______, ABA
No. _________, Attention: _____________, Reference: ________.
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<PAGE> 98
9. Assignee's Lending Office and Office for Notices.
The Assignee specifies as its address for notices and as its Lending
Office for all Loans, the offices set forth below:
Notice Address:
_______________________
_______________________
_______________________
Telephone: (___) ___-____
Telecopy: (___) ___-____
Lending Office:
_______________________
_______________________
_______________________
Telephone: (___) ___-____
Telecopy: (___) ___-____
10. Conditions Precedent.
The obligations of the Assignor and the Assignee hereunder are
conditioned upon [(a)] the performance by the Assignee of its obligations under
paragraph 2 [and (b) the performance by the Assignor of its obligations under
paragraph 3 of this Agreement].
11. Headings
Paragraph headings have been inserted herein for convenience only and
shall not be construed to be a part hereof or thereof.
12. Amendments; Waivers.
This Agreement may not be amended, changed, waived or modified except
by a writing executed by the parties hereto.
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<PAGE> 99
13. Entire Agreement.
This Agreement embodies the entire agreement between the Assignor and
the Assignee with respect to the subject matter hereof and supersedes all other
prior arrangements and understandings relating to the subject matter hereof.
14. Counterparts.
This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original. Each such counterpart shall become
effective when counterparts have been executed by all parties hereto. It shall
not be necessary in making proof of this Agreement to produce or account for
more than one counterpart signed by the party to be charged.
15. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Assignor and the Assignee and their respective successors and permitted
assigns, except that neither party may assign or transfer any of its rights or
obligations hereunder without the prior written consent of the other party.
16. Applicable Law.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to principles of
conflicts of law.
[NAME OF ASSIGNOR]
By: ______________________
Name: ____________________
Title: ___________________
[NAME OF ASSIGNEE]
By: ______________________
Name: ____________________
Title: ___________________
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<PAGE> 100
Accepted this __ day
of __________, 19__
THE BANK OF NEW YORK, as Agent
By: ___________________________
Name: _________________________
Title: ________________________
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<PAGE> 101
EDO EXHIBIT G
FORM OF OPINION OF COUNSEL TO THE COMPANY
AND THE GUARANTORS
March 3, 1994
To The Parties
Listed on Schedule A
Attached Hereto
Re: First Amended and Restated Credit Agreement,
dated as of March 3, 1994, by and among EDO
Corporation, the signatory Banks thereto, and
The Bank of New York, as Agent (the "Agreement")
I am the Vice President, General Counsel and Assistant Secretary of
EDO Corporation, a New York corporation (the "Company") and have represented
the Company and EDO Western Corporation, a Utah corporation, Barnes Engineering
Company, a Delaware corporation, EDO Sports, Inc., a Delaware corporation
(formerly EDO Sub Acquisition Corp.), EDO Energy Corporation, a Delaware
corporation, and EDO Automotive Natural Gas, Inc., a Delaware corporation (each
a "Guarantor") in connection with the Agreement, the amended and restated
promissory notes to be delivered in connection therewith (the "Notes"), the
other Loan Documents and the ESOP Guaranty Amendment. Capitalized terms used
herein which are not defined herein and which are defined in the Agreement
shall have the meanings therein defined.
In furnishing this opinion, I have examined and relied upon originals
or copies, certified or otherwise identified to my satisfaction as being true
copies, of such instruments, documents and certificates of officers of the
Company or of government officials, and have conducted such investigations of
fact and law, as I have deemed necessary or appropriate as the basis for the
opinions hereinafter expressed, including, without limitation,
<PAGE> 102
(i) the Certificate of Incorporation and By-Laws of the Company, (ii) the
Agreement and (iii) the Notes. With respect to questions of fact material to
any opinions expressed herein, I have relied upon inquiries made of the
appropriate officers of the Company.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company has only the Subsidiaries set forth on Schedule 4.1 to
the Agreement. The Significant Subsidiaries set forth on such Schedule 4.1 are
the only Significant Subsidiaries of the Company. The shares of each Subsidiary
of the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned free and clear of any Liens, except Permitted
Liens.
2. The Company and each of its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own its
Property and to carry on its business as now conducted, and is in good standing
and authorized to do business in each jurisdiction in which the failure to be
so authorized would have a Material Adverse Effect.
3. The Company has full corporate power and authority to enter into,
execute, deliver and carry out the terms of the Loan Documents to which it is a
party and the ESOP Guaranty Amendment, to make the borrowings contemplated by
the Loan Documents, to execute, deliver and carry out the terms of the Notes
and to incur the obligations provided for therein, all of which have been duly
authorized by all proper and necessary corporate action and are in full
compliance with its charter and by-laws. Each Guarantor has full corporate
power and authority to carry out the terms of Loan Documents to which it is a
party and to incur the obligations provided therein, all of which have been
duly authorized by all proper and necessary corporate action and are in full
compliance with its certificate of incorporation and by-laws. No consent or
approval of, or exemption by, shareholders, any Governmental Body having
jurisdiction over the Company or any Guarantor or any other Person is required
to authorize, or is required in connection
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<PAGE> 103
with the execution, delivery and performance of, the Loan Documents or is
required as a condition to the validity or enforceability of the Loan Documents
which has not been obtained and which is not in full force and effect.
4. The Loan Documents and the ESOP Guaranty Amendment constitute the
valid and legally binding obligations of the Company and each Guarantor, in
each case to the extent it is a party thereto, enforceable in accordance with
their respective terms.
5. Except as set forth on Schedule 4.5 to the Agreement, to the best
of my knowledge after due inquiry, there are no actions, suits, arbitration
proceedings or claims pending or threatened against the Company or any of its
Subsidiaries, at law or in equity, before any Governmental Body having
jurisdiction over the Company or any Guarantor which, if adversely determined
to the Company or such Subsidiary, could reasonably be expected to have a
Material Adverse Effect. To the best of my knowledge after due inquiry, there
are no proceedings pending or threatened against the Company or any of its
Subsidiaries which call into question the validity or enforceability of any of
the Loan Documents.
6. To the best of my knowledge after due inquiry, neither the Company
nor any Subsidiary is in default under any mortgage, indenture, contract,
agreement, judgment, decree or order to which it is a party or by which it or
any of its Property is bound, including, without limitation, the ESOP Loan
Documents, which defaults, taken as a whole, could reasonably be expected to
have a Material Adverse Effect. To the best of my knowledge after due inquiry,
the delivery or performance of the terms of the Loan Documents and the
transactions contemplated thereby will not constitute a default under, conflict
with, require any consent under (other than consents which have been obtained),
or result in the creation or imposition of, or obligation to create, any Lien
upon the Property of the Company or any Subsidiary pursuant to the terms of any
such mortgage, indenture, contract, agreement, judgment, decree or order, which
defaults, conflicts and consents, if not obtained, could reasonably be expected
to have a Material Adverse Effect.
- 3 -
<PAGE> 104
7. To the best of my knowledge, after due inquiry, neither the Company
nor any Subsidiary is in default with respect to any judgment, order, writ,
injunction, decree or decision obtained or issued by any Governmental Body
against or otherwise applicable to the Company or such Subsidiary, which
default could reasonably be expected to have a Material Adverse Effect. To the
best of my knowledge, after due inquiry, the Company and each Subsidiary is
complying in all material respects with all statutes and regulations applicable
to the Company or such Subsidiary, including ERISA, of all Governmental Bodies
applicable to the Company or such Subsidiary, the violation of which could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, ERISA, the Federal Acquisition Regulations and any applicable
Environmental Laws.
8. Neither the Company nor any Subsidiary is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940, and, to the best of my knowledge, neither
the Company nor any Subsidiary is subject to any statute or regulation which
prohibits or restricts the incurrence of Indebtedness under the Loan Documents,
including, without limitation, statutes or regulations relative to common or
contract carriers or to the sale of electricity, gas, steam, water, telephone,
telegraph or other public utility services.
9. The Company is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock. If used in accordance with paragraph 2.18 of the
Agreement, no part of the proceeds of the Loans would be used, directly or
indirectly, for a purpose which violates the provisions of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System, as amended.
10. The Indebtedness of the Company under the Loan Documents
constitutes Senior Indebtedness within the meaning of the Indenture and is
either senior to, or pari passu with, all other Indebtedness of the Company.
- 4 -
<PAGE> 105
All opinions, to the extent they relate to the enforceability of any
agreement or obligation, are subject to and qualified by the following:
1. the effect and application of bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws now or
hereafter in effect which relate to or limit creditors' rights generally; and
2. the effect and application of general principles of equity, whether
considered in a proceeding in equity or an action at law.
3. the effect and application of federal and state
fraudulent conveyance and other similar laws.
I am admitted to practice in the State of New York and express no
opinion as to any question of law other than with respect to the laws of the
State of New York, the corporate laws of the States of Delaware and Utah and
the United States of America.
This opinion is intended solely for your benefit in connection with
the transactions contemplated herein and may not be relied upon by any other
Person except Special Counsel in connection with the issuance of its opinion.
Very truly yours,
Marvin D. Genzer
- 5 -
<PAGE> 106
SCHEDULE A
The Bank of New York,
individually and as Agent
530 Fifth Avenue
New York, New York 10036
Chemical Bank
95-25 Queens Blvd.
Rego Park, New York 11374
National Westminster Bank USA
300 Cadman Plaza West
Brooklyn, New York 11201
<PAGE> 107
EDO EXHIBIT H
FORM OF OPINION OF SPECIAL COUNSEL
March 3, 1994
To The Parties
Listed on Schedule A
Attached Hereto
Re: First Amended and Restated Credit Agreement,
dated as of March 3, 1994, by and among EDO
Corporation, the signatory Banks thereto, and
The Bank of New York, as Agent (the "Agreement")
We have acted as Special Counsel to you in connection with the
Agreement. Capitalized terms used herein which are defined in the Agreement
shall have the meanings therein defined, unless the context hereof otherwise
requires.
We have examined originals or copies certified to our satisfaction of
the documents required to be delivered pursuant to the provisions of paragraph
5 of the Agreement. In conducting such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, and the conformity to originals of all documents submitted to
us as copies.
Based upon the foregoing examination, and relying with your permission
upon the opinion of Marvin D. Genzer, Esq., Vice President, General Counsel and
Assistant Secretary of the Company and upon the representations and warranties
of the Company and the Guarantors, we are of the opinion that all legal
preconditions to the closing of the Agreement have been satisfactorily met or
waived. We call your attention to the provisions of paragraph 6 of the
Agreement which contain conditions precedent to the making of Loans and the
issuance of Letters of Credit. We express no opinion as to the satisfaction of
such preconditions.
This opinion is rendered solely for your benefit in connection with
the transactions referred to herein and may not be relied upon by any other
Person.
<PAGE> 108
In rendering the foregoing opinion, we express no opinion as to laws
other than the laws of the State of New York and the federal laws of the United
States of America.
Very truly yours,
EMMET, MARVIN & MARTIN
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<PAGE> 109
SCHEDULE A
The Bank of New York,
individually and as Agent
530 Fifth Avenue
New York, New York 10036
Chemical Bank
95-25 Queens Blvd.
Rego Park, New York 11374
National Westminster Bank USA
300 Cadman Plaza West
Brooklyn, New York 11201
<PAGE> 110
EDO SCHEDULE 1.1
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF LENDING OFFICES
1. The Bank of New York
530 Fifth Avenue
New York, New York 10036
Attention: Joanne Collett,
Vice President
Telephone: (212) 852-4047
Telecopy: (212) 852-4252
2. Chemical Bank
95-25 Queens Blvd.
Rego Park, New York 11374
Attention: Jonathan Russell,
Vice President
Telephone: (718) 830-5812
Telecopy: (718) 830-5835
3. National Westminster Bank USA
300 Cadman Plaza West
Brooklyn, New York 11201
Attention: Richard Ferrari,
Vice President
Telephone: (718) 403-6617
Telecopy: (718) 403-6605
<PAGE> 111
EDO SCHEDULE 4.1
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF SUBSIDIARIES
I. Subsidiaries
Jurisdiction of
Name of Incorporation or
Subsidiary Formation
EDO Western Corporation Utah
Barnes Engineering Company Delaware
EDO Sports, Inc. (formerly,
EDO Sub Acquisition Corp.) Delaware
EDO (Canada), Ltd. Canada
EDO Operations (Israel) Ltd. Israel
EDO Foreign Sales Corp. Virgin Islands
EDO International Corp. Delaware
EDO Energy Corporation Delaware
EDO Automotive Natural Gas, Inc. Delaware
II. Significant Subsidiaries
Name of Jurisdiction of
Significant Incorporation or
Subsidiary Formation
EDO Western Corporation Utah
Barnes Engineering Company Delaware
EDO Sports, Inc. (formerly,
EDO Sub Acquisition Corp.) Delaware
EDO (Canada), Ltd. Canada
EDO Operations (Israel) Ltd. Israel
EDO Energy Corporation Delaware
EDO Automotive Natural Gas, Inc. Delaware
<PAGE> 112
EDO SCHEDULE 4.5
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF LITIGATION AND JUDGMENTS
Litigation
The proceeding of the United States Environmental Protection Agency
relating to a site in Norwalk, Connecticut, formerly occupied by the Company's
former Elinco Division, in which the Company has been named as a potentially
responsible party, as more fully described in the Company's 10-K for the fiscal
year ended December 31, 1992, copies of which have heretofore been delivered to
the Agent and the Banks.
Judgments
The Supreme Court of Peru has granted a judgment to the Ministry of
Defense of the Government of Peru against the Company on August 12, 1993, in
the amount of $735,138 in a proceeding involving a terminated contract for
sonar equipment. The judgment is presently being challenged.
EDO SCHEDULE 4.12
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF PLANS
1. The EDO Corporation Employees Pension Plan.
2. The EDO Corporation Employee Stock Ownership Plan.
3. The EDO Corporation Payroll Based Employee Stock Ownership Plan.
4. The EDO Corporation Employees 401(K) Savings Plan.
5. The Barnes Engineering Employees 401(K) Savings Plan.
6. The EDO Automotive Natural Gas Employees 401(K) Savings Plan.
<PAGE> 113
EDO SCHEDULE 4.14
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
EXCEPTIONS TO PARAGRAPH 4.14
(ENVIRONMENTAL MATTERS)
The proceeding of the United States Environmental Protection Agency
relating to a site in Norwalk, Connecticut, formerly occupied by the Company's
former Elinco Division, in which the Company has been named as a potentially
responsible party, as more fully described in the Company's 10-K for the fiscal
year ended December 31, 1992, copies of which have heretofore been delivered to
the Agent and the Banks.
<PAGE> 114
EDO SCHEDULE 8.1
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF EXISTING INDEBTEDNESS
1. The Indebtedness of EDO (Canada) Limited under the EDO
Canada Line.
2. The Indebtedness of the Company evidenced by the Deben-
tures of which $29,317,000 face amount were outstanding as
of December 31, 1993.
3. The Indebtedness of the Company under the ESOP Guaranty.
<PAGE> 115
EDO SCHEDULE 8.2
TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994
LIST OF EXISTING LIENS
None.
<PAGE>
EXHIBIT 4(h)
<PAGE>
AMENDMENT NO. 7
TO GUARANTEE AGREEMENT
AMENDMENT NO. 7 (the "Amendment") dated March 3, 1994, effective as of the 31st
day of December, 1993, to that certain Guarantee Agreement dated as of July 12,
1988 as amended by Amendment and Waiver dated as of April 12, 1990, Amendment
No. 2 dated as of October 9, 1990, Amendment No. 3 dated as of April 8, 1991,
Amendment No. 4 dated March 26, 1992, Amendment No. 5 dated June 9, 1992 and
Amendment No. 6 dated July 30, 1993 (as so amended, the "EXISTING GUARANTEE")
made by EDO Corporation, a New York corporation (the "Guarantor") in favor of
NATIONAL WESTMINSTER BANK USA (the "BANK") (as successor in interest to
Manufacturers Hanover Trust Company ("Manufacturers")).
W I T N E S S E T H :
WHEREAS, the Guarantor and Manufacturers were parties to the Existing
Guarantee;
WHEREAS, the Bank succeeded to all of Manufacturers' right, title and interest
under the Existing Guarantee pursuant to that certain Assignment and Assumption
Agreement dated as of June 8, 1990 between Manufacturers and the Bank;
WHEREAS, the Guarantor has requested the Bank to amend certain provisions of
the Existing Guarantee;
WHEREAS, the Bank has agreed to such request subject to the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Existing Guarantee is hereby amended as follows:
(a) Subsection 10(b)(iv) is deleted in its entirety and there is substituted
therefor the following:
"(iv) Quick Assets Ratio. Permit the ratio of the sum of (a) cash and Cash
Equivalents of the Guarantor and its Subsidiaries plus (b) the amount shown on
a consolidated balance sheet of the Guarantor and its Subsidiaries as accounts
receivable (less provision for doubtful accounts) to Consolidated Current
Liabilities at any time to be less than 1.50 to 1.00."
- 1 -
<PAGE>
(b) Subsection 10(b)(vii) is deleted in its entirety and there is substituted
therefor the following:
"(vii) Interest Coverage.
(A) Permit (i) as of the end of the fiscal year of the Guarantor ending
December 31, 1994, the Interest Coverage Ratio to be less than 1.375:1.000, and
(ii) as of the end of the fiscal quarters set forth below, the Interest
Coverage Ratio to be less than the ratios set forth below:
Fiscal Quarter Ending Ratio
March 31, 1994 0.25 to 1.00
June 30, 1994 1.25 to 1.00
September 30, 1994 1.75 to 1.00
December 31, 1994 and the 2.25 to 1.00
last day of each fiscal
quarter thereafter"
(c) Subsection 10(b)(viii) is deleted in its entirety and there is substituted
therefor the following:
"(viii) Maintenance of Capital Funds. Permit at any time (i) prior to December
31, 1994, Consolidated Capital Funds to be less than $62,300,000, and (ii) on
and after December 31, 1994, Consolidated Capital Funds to be less than
$63,300,000."
(d) Subsection 10(b)(ix) is deleted in its entirety and there is substituted
therefor the following:
"(ix) Limitation on Dividends. From and after January 1, 1994, declare any
dividends (other than dividends payable solely in common stock of the
Guarantor) on, or make any payments on account of, or set apart assets for a
sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of stock of the
Guarantor, whether nor or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Guarantor or any Subsidiary, except that, so long as
no Default or Event of Default has occurred and is continuing or would occur
after giving effect to such declaration or payment, (a) the Guarantor may
declare and pay cash dividends on its ESOP Convertible Cumulative Preferred
Shares, Series A, and (b) the Guarantor may declare and pay cash dividends on
the common
- 2 -
<PAGE>
stock of the Guarantor or repurchase shares of the common stock of the
Guarantor (x) during its 1994 fiscal year in an amount not in excess of $0.28
per share, and (y) during each of its fiscal years thereafter, in an amount not
in excess of $0.28 per share provided such dividends are paid solely out of the
Guarantor's Consolidated Net Income for such fiscal year."
(e) Subsection 10(b)(x) is deleted in its entirety and there is substituted
therefor the following:
"(x) Limitation on Capital Expenditures. Make any capital expenditures or fixed
asset acquisitions, or, without duplication, incur any obligation so to do or
permit any Subsidiary so to do, with respect to the Guarantor and its
Subsidiaries on a consolidated basis in an amount exceeding (i) $4,600,000 for
the fiscal year ending December 31, 1993, and (ii) $4,000,000 in any fiscal
year thereafter. Capital expenditures and fixed asset acquisitions shall be
calculated on a non- cumulative basis so that amounts not expended in any
fiscal year may not be carried over and expended in subsequent fiscal years."
(f) Subsection 10(b)(xiv) is deleted in its entirety and there is substituted
therefor the following:
"(xiv) Limitation on Acquisitions. Acquire all or any substantial portion of
the business, stock or assets of any company or permit any Subsidiary to do any
of the foregoing, without the prior written consent of the Bank."
(g) A new subsection 10(b)(xv) is added reading as follows:
"(xv) Minimum Consolidated Net Worth. Permit at any time (i) prior to December
31, 1994, Consolidated Net Worth to be less than $33,000,000, and (ii) on and
after December 31, 1994, Consolidated Net Worth to be less than $34,000,000."
(h) The definitions of "Consolidated Interest Income" and "Interest Coverage
Ratio" are inserted in the appropriate alphabetical order in Schedule 1 to the
Existing Guarantee, reading as follows:
"'Consolidated Interest Income': for any period, the sum of the amounts
included as consolidated interest income in determining Consolidated Net Income
for such period."
- 3 -
<PAGE>
"'Interest Coverage Ratio': at any time of determination, the ratio of (a) the
sum of (i) the product of Consolidated Net Income for the immediately preceding
fiscal quarter of the Guarantor multiplied by 4, (ii) the product of income
taxes to the extent deducted in determining such Consolidated Net Income for
such immediately preceding fiscal quarter of the Guarantor multiplied by 4 and
(iii) the product of Consolidated Interest Expense for such fiscal quarter
multiplied by 4 minus the product of Consolidated Interest Income for such
fiscal quarter multiplied by 4 to (b) the product of Consolidated Interest
Expense for such fiscal quarter multiplied by 4 minus the product of
Consolidated Interest Income for such fiscal quarter multiplied by 4."
2. In order to induce the Bank to execute and deliver this Amendment, the
Guarantor hereby represents and warrants to the Bank that the representations
and warranties set forth in Section 9 of the Existing Guarantee are true and
correct as if made on the date hereof except for changes in the ordinary course
of business, none of which, singly or in the aggregate, have had a material
adverse effect on the business, operations or financial condition of the
Guarantor or on the ability of the Guarantor to perform its obligations under
the Existing Guarantee and other than as has been publicly reported by the
Guarantor in its announcements, releases or filings with the Securities and
Exchange Commission; provided, however, that all references to the term
"Guarantee" shall be deemed to be references to the Existing Guarantee as
amended by this Amendment.
3. Defined terms used in this Amendment not otherwise defined herein shall have
the meanings set forth in the Existing Guarantee unless the context otherwise
requires. Except as expressly amended hereby, all of the terms and conditions
of the Existing Guarantee shall remain in full force and effect.
- 4 -
<PAGE>
4. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York and may be exe- cuted in any number of
counterparts, all of which taken together, shall constitute one and the same
document.
IN WITNESS WHEREOF, the parties hereto have set their signatures as of the date
first above written.
EDO CORPORATION
By M. J. Hegarty
Vice President - Finance
Title
NATIONAL WESTMINSTER BANK USA
By__________________________
Title
- 5 -
<PAGE>
EXHIBIT 10(c)
<PAGE>
EDO CORPORATION
1988 STOCK OPTION PLAN
1. Purpose
The EDO Corporation 1988 Stock Option Plan (the "Plan") is intended to attract
and retain qualified directors, executives and other key employees of EDO
Corporation (the "Corporation") and its Subsidiaries by providing them with
opportunities for stock ownership under the Plan.
2. Administration
The Plan shall be administered by a committee (the "Committee") of not less
than three directors of the Corporation selected by, and serving at the
pleasure of, its Board of Directors (the "Board"). Directors who are also
employees of the Corporation or any Subsidiary, or who have been such employees
within one year, may not serve on the Committee.
The Committee shall have the authority, subject to the terms of the Plan
(including, without limitation, the grant of options to Outside Directors as
specified in Section 3 below), to determine the persons eligible for options
and those to whom options shall be granted, the number of shares to be covered
by each option, the time or times at which options shall be granted, and the
terms and provisions of the instruments by which options shall be evidenced;
and to interpret the Plan and make all determination s necessary or advisable
for its administration. The Committee may consult with legal counsel, who may
be counsel to the Corporation, and shall not incur any liability for any action
taken in good faith in reliance upon the advice of counsel.
The Committee's decisions under the Plan to grant options shall be subject to
the approval of the Board.
3. Eligibility
Only employees who serve as an executive or other key employee of the
Corporation or a Subsidiary shall be granted options. "Subsidiary" means any
company of which the Corporation owns, directly or indirectly, the majority of
the combined voting power of all classes of stock. In addition, directors of
the Corporation who are not employees of the Corporation ("Outside Directors")
shall receive a one-time grant of 2,000 non-qualified options. Except for the
initial grant of options to Outside Directors, a mem ber of the Committee shall
not be eligible, while a member, to receive an option under the Plan, but may
exercise any previously granted options.
<PAGE>
4. Stock
The stock for which options may be granted shall be the Corporation's Common
Shares ("Common Shares"). When options are exercised, the Corporation may
either issue authorized but unissued Common Shares or transfer issued Common
Shares held in its treasury. The total number of Common Shares which may be
sold to optionees under the Plan pursuant to options shall not exceed 200,000
shares. If an option expires, or is otherwise terminated prior to its exercise,
the Common Shares covered by such an option immedi ately prior to such
expiration or other termination shall continue to be available under the Plan.
5. Granting of Options
The date of grant of an option to employees under the Plan will be the date on
which the option is awarded by the Committee. The granting of any option to any
optionee shall neither entitle such optionee to, nor disqualify such optionee
from, participation in any other grant of options. Current Outside Directors
shall be granted their options effective as of January 26, 1988, and new
Outside Directors (including directors who become Outside Directors upon
termination of their employment with the Company) shall be granted their
options on the date on which they first become Outside Directors.
6. Terms and Conditions of Options
Options shall be designated non-qualified options or incentive stock options
qualified under Section 422A of the Internal Revenue Code of 1986, as amended
(the "Code"), and shall be evidenced by instruments in form approved by the
Committee. Such instruments shall conform to the following terms and
conditions.
6.1 Option price
The option price per share for non-qualified options granted to Outside
Directors and incentive stock options shall be the fair market value of the
optioned shares on the day the option is granted, which shall be the mean of
the high and low prices of the Common Shares on the Consolidated Trading Tape
on that day or, if no sale of Common Shares is recorded on such Tape on that
day, then on the next preceding day on which there was such a sale. The price
for other non-qualified options shall be determined solely at the discretion of
the Committee and the Board and shall be between 75% and 100% of fair market
value as determined above. The option price shall be paid (i) in cash or (ii)
in Common Shares of the Corporation having a fair market value equal to such
option price or (iii) in a combination
<PAGE>
of cash and Common Shares. The fair market value of Common Shares delivered to
the Corporation pursuant to the immediately preceding sentence shall be
determined on the basis of the mean of the high and low price for a Common
Share on the Consolidated Trading Tape on the day of exercise or, if there was
no such sale on the day of exercise, on the day next preceding the day of
exercise on which there was such a sale. Notwithstanding the above, no
incentive stock option shall be granted to any person who, at the time the
option is granted, owns (within the meaning of Section 425(d) of the Code)
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or of any Subsidiary, unless at the time
the incentive stock option is granted to such person the option price is at
least 110% of the fair market value (as described above) of the shares subject
to the option.
6.2 Term and exercise of options
Except in special circumstances, each option shall expire on the tenth
anniversary of the date of its grant and shall be exercisable in four
substantially equal annual installments commencing on the first anniversary of
the date of grant; provided, however, that the Committee may include in any
option instrument (other than in respect of any option granted to an Outside
Director), initially or by amendment at any time, a provision making any
installment or installments exercisable at such earlier date, or upon the
occurrence of such earlier event, as may be specified by such provision, if the
Committee deems such provision to be in the interests of the Corporation or
necessary to realize the reasonable expectation of the optionee. After becoming
exercisable, each installment shall remain exercisable until expiration or
termination of the option. An option may be exercised from time to time, in
whole or part, up to the total number of shares with respect to which it is
then exercisable. The Committee may provide that payment of the option
exercise price may be made following delivery of the certificate for the
exercised shares.
6.3 Termination of employment or membership on the Board
If an optionee ceases, other than by reason of death or retirement as
determined under the Corporation's Pension Plan, to be employed by the
Corporation or a Subsidiary, or if an Outside Director optionee ceases to be a
member of the Board, all options granted to such optionee and exercisable on
the date of such
<PAGE>
optionee's termination of employment or membership on the Board shall terminate
on the earlier of such options' expiration or one month after the day such
optionee's employment or membership ends. If an optionee retires, all options
granted to such optionee and exercisable on the date of such optionee's
retirement shall terminate on the earlier of such options' expiration or the
third anniversary of the day of such optionee's retirement. Any installment not
exercisable on the date of such termination or retirement shall lapse and be
thenceforth unexercisable. Whether authorized leave of absence or absence in
military or governmental service may constitute employment for the purposes of
the Plan shall be conclusively determined by the Committee. Except with respect
to the options granted to Outside Directors, the Committee could extend the
period of exercisability in the event of optionee termination for other than
death or retirement.
6.4 Exercise upon death of optionee
If an optionee dies, such optionee's option may be exercised, to the extent of
the number of shares with respect to which such optionee could have exercised
it on the date of such optionee's death, by such optionee's estate, personal
representative or beneficiary who acquires the option by will or by the laws of
descent and distribution, at any time prior to the earlier of such option's
expiration or the third anniversary of such optionee's death. On the earlier of
such dates, the option shall terminate. The Committee may approve all cash
payments to the estate of an optionee if circumstances warrant such a decision.
6.5 Assignability
No option shall be assignable or transferable by the optionee except by will or
by the laws of descent and distribution and during the lifetime of the optionee
the option shall be exercisable only by such optionee. At the request of an
optionee, Common Shares purchased on exercise of an option may be issued or
transferred in the name of the optionee and another person jointly with the
right of survivorship.
6.6 Repurchase of option shares
(a) Any optionee (other than an Outside Director) may at the time of exercise
or, provided such optionee has duly made an election under Section 83(b) of the
Code, within thirty days thereafter request that the Corporation repurchase
from such optionee a portion of the Common Shares to be purchased by the
optionee upon such exercise with an aggregate fair market value not exceeding
one-half of the amount by which (i) the fair market value of a Common Share on
the day of
<PAGE>
exercise, multiplied by the number of Common Shares as to which the optionee is
exercising an option, exceeds (ii) the total purchase price for that number of
Common Shares under the terms of such option.
(b) Subject to section 6.6(c), an optionee who is at the time of exercise a
director or officer of the Corporation or the beneficial owner, directly or
indirectly, of 10% or more of the Corporation's Common Shares may at a day
following such exercise which complies with the requirement of section 6.6(c),
request that the Corporation repurchase from such optionee a portion of the
Common Shares which such optionee purchased upon exercise of such optionee's
option, and which, after reduction (if any) for repurchase following a request
pursuant to section 6.6(a), has an aggregate fair market value not exceeding
one-half of the amount by which (i) the fair market value of a Common Share on
the day of exercise (or day of request for repurchase if such optionee has not
made an election under Section 83(b) of the Code) multiplied by the number of
Common Shares as to which the optionee exercised such option exceeded (ii) the
total purchase price for that number of Common Shares under the terms of such
option.
(c) Any request for repurchase made pursuant to section 6.6(b) shall be made
not earlier than six months after date of exercise nor later than the end of
the ninth business day of the initial period thereafter in which such optionee
is permitted to trade in the Common Shares of the Corporation in compliance
with Federal securities laws and rules, and policies of the New York Stock
Exchange.
(d) Upon receipt of a request for repurchase made pursuant to sections 6.6(a)
or 6.6(b), the Committee shall then, in its sole discretion, determine whether
the Corporation will purchase any or all of such Common Shares. If the
Corporation purchases any such Common Shares, the purchase price thereof shall
be determined on the basis of the fair market value of a Common Share on the
day of receipt of the request for repurchase. The fair market value of a Common
Share shall be the mean of the high and low price for a Common Share on the
Consolidated Trading Tape on the day of such receipt of request, or, if there
was no such sale on the day of such receipt of request, on the day next
preceding the day of such receipt of request on which there was such a sale.
(e) Any action taken by an optionee pursuant to this section 6.6 must be in the
form of written notice to the Committee and shall be effective upon receipt
thereof.
<PAGE>
6.7 Limitation on incentive stock options
Incentive stock options can only be granted to the extent that the aggregate
fair market value (determined at the time the options are granted) of the stock
subject to such options, exercisable for the first time during any calendar
year, shall not exceed $100,000.
6.8 Other provisions
Instruments evidencing options may contain such other provisions, not
inconsistent with the Plan, as the Committee deems advisable, including a
requirement that an optionee represent to the Corporation in writing, when an
option is granted, or when such optionee receives shares on its exercise, that
such optionee is accepting such option, or receiving such shares (unless they
are then covered by a Securities Act of 1933 registration statement), for such
optionee's own account for investment only.
7. Capital Adjustments
The number and price of Common Shares covered by each option and the total
number of shares that may be sold under the Plan shall be proportionally
adjusted to reflect, as deemed equitable and appropriate by the Committee and
subject to any required action by shareholders, any stock dividend or split,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares or other similar corporate change.
8. Effective Date of Plan
The effective date of the Plan is January 26, 1988. The Plan will become
effective as of that date provided that the Plan receives the approval of the
holders of a majority of the outstanding Common Shares at the Corporation's
1988 Annual Meeting of Shareholders. If such approval is not forthcoming, the
Plan shall be null and void.
9. Term; Amendment of Plan
This Plan shall expire on January 25,1998 (except as to options outstanding on
that date). The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the holders of a majority of the
outstanding Common Shares, the total number of shares that may be sold, issued
or transferred under the Plan may not be increased (except by adjustment
pursuant to section 7), the provisions of
<PAGE>
section 3, regarding eligibility, may not be modified, the purchase price at
which shares may be offered pursuant to options may not be reduced (except by
adjustment pursuant to section 7), the expiration date of the Plan may not be
extended and no change may be made which would cause the Plan not to comply
with Rule 16(b)3, promulgated under the Securities Exchange Act of 1934, as
amended from time to time. No action of the Board or shareholders, however,
may, without the consent of an optionee, alter or impair such optionee's rights
under any option previously granted to such optionee.
10. No Right of Employment
Neither the action of the Corporation in establishing the Plan, nor the action
taken by it or by the Board or the Committee under the Plan, nor any provision
of the Plan, shall be construed as giving to any person the right to be
retained in the employ of the Corporation or any Subsidiary.
11. Withholding Taxes
The Corporation shall have the right to deduct withholding taxes from any
payments made pursuant to the Plan or to make such other provisions as it deems
necessary or appropriate to satisfy its obligations to withhold Federal, state
or local income or other taxes incurred by reason of payments or the issuance
of Common Shares under the Plan. Whenever under the Plan Common Shares are to
be delivered upon exercise of an option, the Committee shall be entitled to
require as a condition of delivery that the gra ntee remit an amount sufficient
to satisfy all Federal, state and other governmental withholding tax
requirements related thereto.
12. Plan not a Trust
Nothing contained in the Plan and no action taken pursuant to the Plan shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Corporation and any participant, the executor,
administrator or other personal representative, or designated beneficiary of
such participant, or any other persons. Any reserves that may be established by
the Corporation in connection with the Plan shall continue to be part of the
general funds of the Corporation and no individual or entity other than the
Corporation shall have any interest in such funds until paid to a participant.
If and to the extent that any participant or such participant's executor,
administrator or other personal representative, as the case may be, acquires a
right to receive any payment from the Corporation pursuant to the Plan, such
right shall be no greater than the right of an unsecured general creditor of
the Corporation.
<PAGE>
13. Notices
Each participant shall be responsible for furnishing the Committee with the
current and proper address for the mailing of notices and delivery of
agreements, Common Shares and cash pursuant to the Plan. Any notices required
or permitted to be given shall be deemed given if directed to the person to
whom addressed at such address and mailed by regular United States mail,
first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the participant
furnishes the proper address. This provision shall not be construed as
requiring the mailing of any notice or notification if such notice is not
required under the terms of the Plan or any applicable law.
14. 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.
15. 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
Committee, the Corporation and other parties with respect thereto.
16. 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.
17. Controlling Law
This Plan shall be construed and enforced according to the laws of the State of
New York to the extent not preempted by Federal law, which shall otherwise
control.
<PAGE>
EXHIBIT 10(d)
<PAGE>
EDO CORPORATION
1983 LONG-TERM INCENTIVE PLAN
1. Purpose.
The purpose of the 1983 Long-Term Incentive Plan (the "Plan") of EDO
Corporation (the "Corporation") is to advance the interests of the Corporation
and its shareholders by providing key employees of the Corporation and its
Subsidiaries, upon whose judgment, initiative and efforts the successful
conduct of the Corporation's business largely depends, with an additional
incentive to continue their efforts on behalf of the Corporation, as well as to
attract to the Corporation people of experience and ability.
2. Definitions.
(a) "Applicable Percentage" means a percentage, ranging from 0'% to 200%, of
the value (whether expressed in terms of Fair Market Value of the Common Shares
or otherwise) of a Performance Unit.
(b) "Award" means an award of Restricted Shares and/or Performance Units
granted under the provisions of the Plan.
(c) "Board of Directors" means the Board of Directors of the Corporation.
(d) "Change in Control" means an occurrence in which (i) a "person," including
a "group," other than the Corporation's Employee Stock Ownership Trust, becomes
a "beneficial owner," directly or indirectly, of securities of the Corporation
having 25% or more of the total number of votes which may be cast for directors
of the Corporation (as the terms "person," "group" and "beneficial owner" are
used in Sections 13(d) (3) and 14(d) (2) of the Securities Exchange Act of
1934) (ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof unless the election, or the
nomination for election by the Corporation's shareholders, of each new director
was approved at the time by a vote of at least two-thirds of the directors
still in office who were directors at the beginning of the period; (iii) the
shareholders of the Corporation shall approve any merger or other business
combination, sale of assets or combination of the foregoing transactions; or
(iv) a tender offer is commenced for at least 25% of the outstanding shares of
the Corporation's common stock.
(e) "Committee" means the Audit and Compensation Committee of the Corporation.
(f) "Common Shares" means the common shares of the Corporation, par value $1.00
per share.
(g) "Date of Grant" means the date on which an Award is granted by the
Committee.
(h) "Discharge for Cause" means the termination of employment of an employee
for (i) providing the Corporation with materially false reports concerning his
business interests or employment related activities, (ii) making materially
false representations relied upon by the Corporation in furnishing information
to shareholders, a stock exchange or the Securities and Exchange Commission,
(iii) maintaining an undisclosed, unauthorized and material conflict of
interest in the discharge of duties owed to the Corporation, (iv) misconduct
causing a serious violation by the Corporation of state or federal laws, (v)
theft of Corporation funds or corporate assets, or (vi) conviction of a crime
(excluding traffic violations or similar misdemeanors).
(i) "Fair Market Value" on any date is the mean of the high and low sale prices
of the Common Shares on the American Stock Exchange composite tape on such date
or if there is no sale on such date. then the mean of such high and low sale
prices on the last previous date on which a sale is reported.
(j) "Participant" means an employee of the Corporation or any of its Subsidiary
chosen by the Committee to participate in the Plan.
(k) "Performance Period" shall have the meaning specified in Section 8.2.
(I) "Performance Target" means a financial target upon whose attainment the
valuation of the Performance Units is dependent, which may include measures
such as growth in corporate or divisional earnings or any other financial
measure(s) selected by the Committee.
(m) "Performance Threshold" means a minimum Performance Target which must be
met before any value is accrued to a Performance Unit.
(n) "Performance Unit" means the right to receive an amount of cash based upon
the terms and subject to the restrictions set forth in Section 8. Performance
Units are not Common Shares.
(o) "Restricted Shares" means the Common Shares awarded upon the terms and
subject to the restrictions set forth in Section 7.
(p) "Restriction Period" shall have the meaning specified in Section 7.2.
(q) "Share Restrictions" shall have the meaning specified in Section 7.2.
(r) "Subsidiary" means any corporation of which the majority of the outstanding
voting stock is owned, directly or indirectly, by the Corporation.
3. Effective Date of the Plan.
The effective date of the Plan is January 1, 1983. The Plan will become
effective as of that date upon the approval of the Corporation's Board of
Directors, provided that the Plan receives the approval, within twelve months
of its approval by the Board of Directors, of the holders of a majority of the
Common Shares of the Corporation. If such approval is not forthcoming, the Plan
and all Awards granted under it shall become null and void.
4. Administration.
The Plan shall be administered by the Committee, which shall consist of three
or more directors, none of whom shall be eligible to receive any Awards under
the Plan. The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all Participants in the Plan and on their legal
representatives and beneficiaries.
5. Common Shares and Performance Units Subject to the Plan.
Subject to adjustment as provided in Section 11, the maximum number of Common
Shares which may be issued under the Plan is 75,000 Common Shares and the
maximum number of Performance Units which may be awarded under the Plan is
75,000 units. In no event will any Participant be awarded during the term of
the Plan more than 20% of the maximum number of Common Shares or Performance
Units available under the Plan. The Common Shares issued under the Plan may be
either authorized and unissued Common Shares or Common Shares previously
issued and reacquired by the Corporation. Any Restricted Shares awarded and
later forfeited and any Performance Units awarded and to which no value has
accrued at the end of the Performance Period relating to such Award are again
subject to award under the Plan.
6. Eligibility.
The Committee will from time to time in its absolute discretion, subject to the
approval of the Board of Directors, grant Restricted Share and Performance Unit
Awards to those key employees of the Corporation and its subsidiaries whom it
identifies as having significant responsibility for the long-term growth of the
Corporation. Members of the Board of Directors who are not employees or
officers of the Corporation shall not be eligible to receive Awards under the
Plan.
7. Restricted Share Awards.
7.1 Grant of Restricted Share Awards.
The Committee will determine for each Participant the number of Common Shares
to be covered by each Restricted Share Award.
7.2. Restrictions.
Common Shares issued to a Participant as a Restricted Share Award will be
subject to the following restrictions ("Share Restrictions"):
(a) Except as set forth in Sections 7.4 and 7.5, all of the Restricted Shares
subject to an Award will be forfeited and returned to the Corporation and all
rights of the Participant to such Restricted Shares will terminate without any
payment of consideration by the Corporation, unless the Participant remains in
the continuous employment of the Corporation or a Subsidiary for a period of
time determined by the Committee but in no event less than one year from the
Date of Grant ("Restriction Period").
(b) During the Restriction Period relating to an Award, none of the Restricted
Shares subject to such Award may be sold, assigned, bequeathed, transferred,
pledged, hypothecated or otherwise disposed of in any way by the Participant.
7.3 Rights As a Shareholder.
Except as set forth in Section 7.2(b), the recipient of a Restricted Share
Award will have all of the rights of a shareholder with respect to the
Restricted Shares, including the right to vote the Restricted Shares and to
receive all dividends or other distributions made with respect to the
Restricted Shares.
7.4 Lapse of Restrictions at Termination of Employment.
In the event of the termination of employment of a Participant during the
Restriction Period by reason of death, total and permanent disability,
retirement, or discharge from employment other than a Discharge for Cause, the
Committee may, at its discretion, remove Share Restrictions on a pro rata
portion of the Restricted Shares subject to an Award. In any such case Share
Restrictions will lapse on the date of such termination on the fraction of the
total number of shares of Restricted Shares subject to such Award equal to:
(i) the number of full calendar months between the Date of Grant of such Award
and the date of termination of employment, divided by
(ii) the total number of months in the Restriction Period.
Restricted Shares to which the Share Restrictions have not so lapsed will be
forfeited and returned to the Corporation as provided in Section 7.2(a).
7.5 Lapse of Restrictions at Discretion of the Committee.
The Committee may shorten the Restriction Period or remove any or all Share
Restrictions if, in the exercise of its absolute discretion, it determines that
such action is in the best interests of the Corporation and equitable to the
Participant.
7.6 Listing and Registration of Shares.
The Corporation may, in its discretion, postpone the issuance and/or delivery
of Restricted Shares until completion of stock exchange listing, or
registration, or other qualification of such Restricted Shares under any law,
rule or regulation.
8. Performance Unit Awards.
8.1 Grant of Performance Units.
The Committee may grant Performance Units in connection with grants of
Restricted Shares or separately. No fund will be set aside by the Corporation
for the payment of Performance Units; rather, the Corporation will maintain a
separate written account for each Participant and will record in each account
the number of Performance Units awarded to the Participant.
8.2 Performance Period.
The Committee will determine, with respect to each Performance Unit awarded,
the period of time during which the attainment of the Performance Target
pertaining to such Performance Unit will be measured (the "Performance
Period"). Such Performance Period shall be at least one year in duration and
shall correspond with the periods used by the Corporation for financial
reporting purposes.
8.3 Valuation of Performance Units.
At the Date of Grant, the Committee shall establish for each Performance Unit
Award (i) the Performance Threshold, (ii) the Performance Target and (iii) the
Applicable Percentage. As soon as practicable after the expiration of the
Performance Period as the financial statements of the Corporation for such
period are available in final form, the Committee will determine the value of
each Award. The value of a Performance Unit will equal (i) the Applicable
Percentage times (ii) the Fair Market Value of the Shares on the last day of
the Performance Period or such other measure of value selected by the
Committee. In the event that Fair Market Value is the measure used to value
Performance Units, the value of any Performance Unit at the end of a
Performance Period may not exceed three times the Fair Market Value of the
Stock on the Date of Grant. In the event that the Performance Threshold in
respect to an Award is not met, no payment will be made to Participant with
respect to such Award.
8.4 Payment on Termination of Employment.
Performance Units will have no value if the Participant is not an employee of
the Corporation at the end of the Performance Period for which the Performance
Unit was granted, provided however, that in the event of termination of
employment by reason of death, total and permanent disability, retirement, or
discharge from employment other than a Discharge for Cause, the Committee may,
in its discretion, accrue value to a pro rata portion of the Performance Units
subject to an Award. The fraction of such Performance Units with respect to
which value has accrued will equal:
(i) the number of full calendar months between the I )ate of Grant of the award
and the date of termination of employment, divided by
(ii) the total number of months in the Performance Period.
8.5 Payment at Discretion of the Committee.
The Committee may shorten the Performance Period or declare any Performance
Unit immediately payable if, in the exercise of its absolute discretion, it
determines that such action is in the best interests of the Corporation and
equitable to the Participant holding such Performance Unit.
8.6 Payment of Performance Units.
Payment of the value of Performance Units will be made as soon as practical
after valuation. Payments will be made in cash.
8.7 Assignment.
No Performance Unit may be sold, assigned, bequeathed, transferred, pledged,
hypothecated or otherwise disposed of in any way by any Participant.
9. Award Agreements.
Each Restricted Share and/or Performance Unit Award will be evidenced by a
written agreement, in form satisfactory to the Committee, executed by the
Participant and the Corporation, which describes the conditions for receiving
the Award including, if appropriate, Share Restrictions, applicable Restriction
or Performance Periods, the Performance Threshold, the Performance Target, the
Applicable Percentage, and any other terms and conditions as may be required by
the Committee or applicable securities law.
10. Designation of Beneficiary.
A participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Restricted Shares or payment of
Performance Units to which he or she would then be entitled. Such designation
will be made upon forms supplied by and delivered to the Corporation and may be
revoked in writing by the Participant. If a Participant fails effectively to
designate a beneficiary, then his or her estate will be deemed to be the
beneficiary.
11. Dilution and Other Adjustments.
In the event of any change in the outstanding Common Shares by reason of any
stock dividend or split, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, the Committee shall make such adjustments as it, in its absolute
discretion, deems equitable in the number or kind of Common Shares or units
authorized by the Plan and, with respect to outstanding Awards, in the number
or kind of shares of stock or units covered by grants made under the Plan. The
Committee may also make adjustments, to the extent it deems appropriate, in the
Performance Threshold and/or Performance Target for any Performance Units
awarded, to reflect any significant changes which may have occurred during such
period in accounting practices, tax laws, or any unusual circumstances outside
of management's control which significantly affected the Corporation's
performance.
12. Change in Control.
Notwithstanding any other provision of this plan, in the event of a Change in
Control, all Share Restrictions on all Restricted Shares previously awarded
will lapse immediately, in each case from such date as will enable the
Participants to obtain the same consideration available to any other
shareholder. The Performance Periods applicable to all Performance Units
previously awarded under the Plan will end immediately, and the Performance
Units of any and all Participants shall immediately become payable in an amount
determined by multiplying the amount which would have been payable, assuming
the Performance Target with respect to such Performance Units had been
achieved, by a fraction, the numerator of which is the number of calendar
months or parts thereof between the Date of Grant and the date on which the
Change of Control occurs, and the denominator of which is the total number of
months in the Performance Period.
13. Withholding.
There will be deducted from each distribution of cash and/or Common Shares
under the Plan the amount of any tax required by any governmental authority to
be withheld.
14. Amendment of the Plan.
The Board of Directors may at any time, and from time to time, modify or amend
the Plan in any respect; provided, however, that unless also approved or
ratified by a vote of the holders of a majority of the Corporation's
outstanding shares entitled to vote thereon, any such modification or amendment
shall not increase the maximum number of Common Shares or units which may be
granted under the Plan (subject, however, to the provisions of Section 11
hereof). No modification or amendment may adversely affect the rights of a
Participant under a previously granted Award.
15. Termination of the Plan.
The right to grant Awards under the Plan will terminate on December 31, 1992.
The Board of Directors may, however, suspend or terminate the Plan at any time,
provided that no such action will, without the consent of any Participant
affected thereby, adversely affect his or her rights under a previously granted
Award.
16. Employment.
Nothing in the Plan or in any Award confers upon any Participant the right to
continue in the employ of the Corporation or interferes with or restricts in
any way the rights of the Corporation to discharge any Participant at any time
for any reason whatsoever, with or without cause.
17. Applicable Law.
The Plan will be interpreted in accordance with the laws of the State of New
York.
<PAGE>
EXHIBIT 10(e)
<PAGE>
EDO CORPORATION
1988 LONG-TERM INCENTIVE PLAN
1. Purpose
The purpose of the 1988 Long-Term Incentive Plan (the "Plan") of EDO
Corporation (the "Corporation") is to advance the interests of the Corporation
and its shareholders by providing certain key employees of the Corporation and
its Subsidiaries, upon whose judgment, initiative and efforts the successful
conduct of the Corporation's business largely depends, with an additional
incentive to continue their efforts on behalf of the Corporation, as well as to
attract to the Corporation people of experience and ability.
2. Definitions
(a) "Applicable Percentage" means a percentage, ranging from 0% to 200%, of the
value (whether expressed in terms of Fair Market Value of the Common Shares or
otherwise) of a Performance Unit.
(b) "Award" means an award of Restricted Shares and/or Performance Units
granted under the provisions of the Plan.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" means an occurrence in which (i) a "person," including
a "group," other than the Corporation's Employee Stock Ownership Trust, becomes
a "beneficial owner," directly or indirectly, of securities of the Corporation
having 25% or more of the total number of votes which may be cast for directors
of the Corporation (as the terms "person," "group" and "beneficial owner" are
used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934),
(ii) during any period of two cons ecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Corporation's shareholders, of each new director was
approved at the time by a vote of at least two-thirds of the directors still in
office who were directors at the
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<PAGE>
beginning of the period, (iii) the shareholders of the Corporation shall
approve any merger or other business combination, sale of assets or combination
of the foregoing transactions, or (iv) a tender offer is commenced for at least
25% of the outstanding shares of the Corporation's common stock.
(e) "Committee" means the Audit and Compensation Committee of the Corporation.
(f) "Common Shares" means the common shares of the Corporation, par value $1.00
per share.
(g) "Date of Grant" means the date on which an Award is granted by the
Committee.
(h) "Discharge for Cause" means the termination of employment of an employee
for (i) providing the Corporation with materially false reports concerning such
employee's business interests or employment related activities, (ii) making
materially false representations relied upon by the Corporation in furnishing
information to shareholders, a stock exchange or the Securities and Exchange
Commission, (iii) maintaining an undisclosed, unauthorized and material
conflict of interest in the discharge of duties owed to the Corporation, (iv)
misconduct causing a serious violation by the Corporation of state or Federal
laws, (v) theft of Corporation funds or corporate assets, or (vi) conviction of
a crime (excluding traffic violations or similar misdemeanors).
(i) "Fair Market Value" on any date is the mean of the high and low sale prices
of the Common Shares on the Consolidated Trading Tape on such date or, if no
sale of Common Shares is recorded on such Tape on such day, then on the next
preceding day on which there was such a sale.
(j) "Participant" means an employee of the Corporation or any of its
Subsidiaries chosen by the Committee to participate in the Plan.
(k) "Performance Period" shall have the meaning specified in Section 8.2.
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<PAGE>
(l) "Performance Target" means a financial target upon whose attainment the
valuation of the Performance Units is dependent, which may include measures
such as growth in corporate or divisional earnings or any other financial
measure(s) selected by the Committee.
(m) "Performance Threshold" means a minimum Performance Target which must be
met before any value is, accrued to a Performance Unit.
(n) "Performance Unit" means the right to receive an amount of cash based upon
the terms and subject to the restrictions set forth in Section 8. Performance
Units are not Common Shares.
(o) "Restricted Shares" means the Common Shares awarded upon the terms and
subject to the restrictions set forth in Section 7.
(p) "Restriction Period" shall have the meaning specified in Section 7.2.
(q) "Share Restrictions" shall have the meaning specified in Section 7.2.
(r) "Subsidiary" means any corporation of which the majority of the combined
voting power of all classes of stock is owned, directly or indirectly, by the
Corporation.
3. Effective Date of the Plan
The effective date of the Plan is January 1, 1988. The Plan will become
effective as of that date provided that the Plan receives the approval, within
twelve months of its approval by the Board, of the holders of a majority of the
outstanding Common Shares. If such approval is not forthcoming, the Plan and
all Awards shall be null and void.
4. Administration
The Plan shall be administered by the Committee, which shall consist of three
or more directors, none of whom shall be eligible to receive any Awards. The
Committee is authorized, subject to the provisions of the
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<PAGE>
Plan, to establish such rules and regulations as it deems necessary for the
proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all Participants and on their legal representatives and
beneficiaries.
5. Restricted Shares and Performance Units Subject to the Plan
Subject to adjustment as provided in Section 11, the maximum number of
Restricted Shares which may be issued under the Plan is 150,000 and the maximum
number of Performance Units which may be awarded is 150,000. The Restricted
Shares issued under the Plan may be either authorized and unissued Common
Shares or Common Shares previously issued and reacquired by the Corporation.
Any Restricted Shares awarded and later forfeited and any Performance Units
awarded and to which no value has accrued at the end of the Performance Period
relating to such Award are again subject to award under the Plan.
6. Eligibility
The Committee will from time to time in its absolute discretion, subject to the
approval of the Board, grant Restricted Share and/or Performance Unit Awards to
those key employees of the Corporation and its Subsidiaries whom it identifies
as having significant responsibility for the long-term growth of the
Corporation. Members of the Board who are not employees of the Corporation
shall not be eligible to receive Awards.
7. Restricted Share Awards
7.1 Grant of Restricted Share Awards
The Committee will determine for each Participant the number of Common Shares
to be covered by each Restricted Share Award.
7.2 Restrictions
Common Shares issued to a Participant as a Restricted Share Award will be
subject to the following restrictions ("Share Restrictions").
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<PAGE>
(a) Except as set forth in Sections 7.4 and 7.5, all of the Restricted Shares
subject to an Award will be forfeited and returned to the Corporation and all
rights of the Participant to such Restricted Shares will terminate without any
payment of consideration by the Corporation, unless the participant remains in
the continuous employment of the Corporation or a Subsidiary for a period of
time determined by the Committee but in no event less than one year from the
Date of Grant ("Restriction Period").
(b) During the Restriction Period relating to an Award, none of the Restricted
Shares subject to such Award may be sold, assigned, bequeathed, transferred,
pledged, hypothecated or otherwise disposed of in any way by the Participant.
7.3 Rights as a Shareholder
Except as set forth in Section 7.2(b), the recipient of a Restricted Share
Award will have all of the rights of a shareholder with respect to the
Restricted Shares, including the right to vote the Restricted Shares and to
receive all dividends or other distributions made with respect to the
Restricted Shares.
7.4 Lapse of Restrictions at Termination of Employment
In the event of the termination of employment of a Participant during the
Restriction Period by reason of death, total and permanent disability,
retirement as determined under the Corporation's Pension Plan, or discharge
from employment other than a Discharge for Cause, the Committee may, at its
discretion, remove Share Restrictions on a pro rata portion of the Restricted
Shares subject to an Award. In any such case Share Restrictions will lapse on
the date of such termination on the fraction of the total number of Restricted
Shares subject to such Award equal to (i) the number of full calendar months
between the Date of Grant of such Award and the
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<PAGE>
date of termination of employment, divided by (ii) the total number of months
in the Restriction Period.
Restricted Shares to which the Share Restrictions have not so lapsed will be
forfeited and returned to the Corporation as provided in Section 7.2(a).
7.5 Lapse of Restrictions at Discretion of the Committee
The Committee may shorten the Restriction Period or remove any or all Share
Restrictions if, in the exercise of its absolute discretion, it determines that
such action is in the best interests of the Corporation and equitable to the
Participant.
7.6 Listing and Registration of Shares
The Corporation may, in its discretion, postpone the issuance and/or delivery
of Restricted Shares until completion of stock exchange listing, or
registration, or other qualification of such Restricted Shares under any law,
rule or regulation.
8. Performance Unit Awards
8.1 Grant of Performance Units
The Committee may grant Performance Units in connection with grants of
Restricted Shares or separately. No fund will be set aside by the Corporation
for the payment of Performance Units; rather, the Corporation will maintain a
separate written account for each Participant and will record in each account
the number of Performance Units awarded to the Participant.
8.2 Performance Period
The Committee will determine, with respect to each Performance Unit awarded,
the period of time during which the attainment of the Performance Target
pertaining to such Performance Unit will be measured (the "Performance Per-
- 6 -
<PAGE>
iod"). Such Performance Period shall be at least one year in duration and shall
correspond with the periods used by the Corporation for financial reporting
purposes.
8.3 Valuation of Performance Units
At the Date of Grant, the Committee shall establish for each Performance Unit
Award (i) the Performance Threshold, (ii) the Performance Target and (iii) the
Applicable Percentage. As soon as practicable after the expiration of the
Performance Period as the financial statements of the Corporation for such
period are available in final form, the Committee will determine the value of
each Award. The value of a Performance Unit will equal (i) the Applicable
Percentage times (ii) the Fair Market Value on the last day of the Performance
Period or such other measure of value selected by the Committee. In the event
that Fair Market Value is the measure used to value Performance Units, the
value of any Performance Unit at the end of a Performance Period may not exceed
three times the Fair Market Value on the Date of Grant. In the event that the
Performance Threshold in respect to an Award is not met, no payment will be
made with respect to such Award.
8.4 Payment on Termination of Employment
Performance Units will have no value if the Participant is not an employee of
the Corporation at the end of the Performance Period for which the Performance
Unit was granted; provided, however, that in the event of termination of
employment by reason of death, total and permanent disability, retirement as
determined under the Corporation's Pension Plan, or discharge from employment
other than a Discharge for Cause, the Committee may, in its discretion, accrue
value to a pro rata portion of the Performance Units subject to an Award. The
fraction of such Performance Units with respect to which value has accrued will
equal (i) the number of full calendar months between the Date of Grant of the
award and the date of termina-
= 7 -
<PAGE>
tion of employment, divided by (ii) the total number of months in the
Performance Period.
8.5 Payment at Discretion of the Committee
The Committee may shorten the Performance Period or declare any Performance
Unit immediately payable if, in the exercise of its absolute discretion, it
determines that such action is in the best interests of the Corporation and
equitable to the participant holding such Performance Unit.
8.6 Payment of Performance Units
Payment of the value of Performance Units will be made as soon as practical
after valuation. Payments will be made in cash.
8.7 Assignment
No Performance Unit may be sold, assigned, bequeathed, transferred, pledged,
hypothecated or otherwise disposed of in any way by any Participant.
9. Award Agreements
Each Restricted Share and/or Performance Unit Award will be evidenced by a
written agreement, in form satisfactory to the Committee, executed by the
Participant and the Corporation, which describes the conditions for receiving
the Award including, if appropriate, Share Restrictions, applicable Restriction
or Performance Periods, the Performance Threshold, the Performance Target, the
Applicable Percentage, and any other terms and conditions as may be required by
the Committee or applicable securities law.
10. Designation of Beneficiary
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Restricted Shares or payment of
Performance Units to which such Participant would then be entitled. Such
designation will be made upon forms supplied by and delivered to the
Corporation and may be revoked in writing by the Participant.
- 8 -
<PAGE>
If a Participant fails effectively to designate a beneficiary, then such
Participant's estate will be deemed to be the beneficiary.
11. Dilution and Other Adjustments
In the event of any change in the outstanding Common Shares by reason of any
stock dividend or split, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, the Committee shall make such adjustments as it, in its absolute
discretion, deems equitable in the number or kind of Common Shares or
Performance Units authorized by the Plan and, with respect to outstanding
Awards, in the number or kind of Common Shares or Performance Units granted.
The Committee may also make adjustments, to the extent it deems appropriate, in
the Performance Threshold and/or Performance Target for any Performance Units
awarded, to reflect any significant changes which may have occurred during such
period in accounting practices, tax laws, or any unusual circumstances outside
of management's control which significantly affected the Corporation's
performance.
12. Change in Control
Notwithstanding any other provision of this plan, in the event of a Change in
Control, all Share Restrictions on all Restricted Shares previously awarded
will lapse immediately, in each case from such date as will enable the
Participants to obtain the same consideration available to any other
shareholder. The Performance Periods applicable to all Performance Units
previously awarded under the Plan will end immediately, and the Performance
Units of any and all Participants shall immediately become payable in an amount
determined by multiplying the amount which would have been payable, assuming
the Performance Target with respect to such Performance Units had been
achieved, by a fraction, the numerator of which is the number of calendar
months or parts thereof between the Date of Grant and the date on which the
Change of Control occurs, and the denominator of which is the total number of
months in the Performance Period.
13. Withholding
There will be deducted from each distribution of
- 9 -
<PAGE>
cash and/or Common Shares under the Plan the amount of any tax required by any
governmental authority to be withheld.
14. Amendment of the Plan
The Board may at any time, and from time to time, modify or amend the Plan in
any respect; provided, however, that unless also approved or ratified by a vote
of the holders of a majority of the Corporation's outstanding shares entitled
to vote thereon, any such modification or amendment shall not increase the
maximum number of Common Shares or Performance Units which may be granted under
the Plan (subject, however, to the provisions of Section 11 hereof). No
modification or amendment may adversely affect the rights of a Participant
under a previously granted Award.
15. Termination of the Plan
The right to grant Awards will terminate on December 31, 1997. The Board may,
however, suspend or terminate the Plan at any time; provided, that no such
action will, without the consent of any Participant affected thereby, adversely
affect such Participant's rights under a previously granted Award.
16. Employment
Nothing in the Plan or in any Award confers upon any Participant the right to
continue in the employ of the Corporation or any Subsidiary or interferes with
or restricts in any way the rights of the Corporation or any Subsidiary to
discharge any Participant at any time for any reason whatsoever, with or
without cause.
17. Plan not a Trust
Nothing contained in the Plan and no action taken pursuant to the Plan shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Corporation and any Participant, the executor,
administrator or other personal representative, or designated beneficiary of
such Participant, or any other persons. Any reserves that may be established by
the Corporation in connection with the Plan shall continue to be part of the
general funds of the Corporation and no individual or entity other than the
Corporation shall have any interest in such funds until paid to a Participant.
- 10 -
<PAGE>
If and to the extent that any Participant or such Participant's executor,
administrator or other personal representative, as the case may be, acquires a
right to receive any payment from the Corporation pursuant to the Plan, such
right shall be no greater than the right of an unsecured general creditor of
the Corporation.
18. Notices
Each Participant shall be responsible for furnishing the Committee with the
current and proper address for the mailing of notices and delivery of
agreements, Common Shares and cash pursuant to the Plan. Any notices required
or permitted to be given shall be deemed given if directed to the person to
whom addressed at such address and mailed by regular United States mail,
first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the Participant
furnishes the proper address. This provision shall not be construed as
requiring the mailing of any notice or notification if such notice is not
required under the terms of the Plan or any applicable law.
19. 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.
20. Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent person or
other person incapable of receipting therefore 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
Committee, the Corporation and other parties with respect thereto.
21. Headings and Captions
The headings and captions herein are provided for reference and convenience
only, shall not be
- 11 -
<PAGE>
considered part of the Plan, and shall not be employed in the construction of
the Plan.
22. Controlling Law
This Plan shall be construed and enforced according to the laws of the State of
New York to the extent not preempted by Federal law, which shall otherwise
control.
- 12 -
<PAGE> 1
EXHIBIT 13(a)
PAGES 13 THROUGH 29
TO THE REGISTRANT'S
ANNUAL REPORT TO SHAREHOLDERS
<PAGE> 2
SELECTED FINANCIAL DATA
EDO CORPORATION AND SUBSIDIARIES
(Not covered by Independent Auditors' Report)
- - -------------------------------------------------------------------------------
1993 1992 1991 1990 1989
(in thousands, except per share amounts)
- - -------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net sales:
Military Systems $ 66,915 89,681 108,109 104,730 118,225
Commercial and Other 37,223 36,090 37,584 34,018 31,569
Products
- - -------------------------------------------------------------------------------
$ 104,138 125,771 145,693 138,748 149,794
- - -------------------------------------------------------------------------------
Operating earnings
(loss):
Military Systems $ (5,082)a 10,096 10,637 8,160 9,853
Commercial and Other
Products (200) 4,543 4,256 3,170 3,569
- - -------------------------------------------------------------------------------
(5,282) 14,639 14,893 11,330 13,422
Net interest income
(expense) (2,201) (2,504) (2,404) (2,087) (2,349)
General corporate
expense (4,146) (4,281) (3,785) (4,240) (3,445)
Litigation settlement (1,166) - (5,589) - -
Other income (expense),
net (1,390) (443) (585) (58) (205)
- - -------------------------------------------------------------------------------
Earnings (loss) before
Federal and foreign
income taxes,
cumulative effect of
accounting change,
minority interest and
extraordinary gain $(14,185) 7,411 2,530 4,945 7,423
Provision (benefit)
for Federal and
foreign income taxes (4,901) 1,684 458 947 1,480
- - -------------------------------------------------------------------------------
Net Earnings (loss)
before cumulative
effect of accounting
change, minority
interest and
extraordinary gain (9,284) 5,727 2,072 3,998 5,943
- - -------------------------------------------------------------------------------
Net Earnings (loss) (16,348)a,b 5,677 1,809 5,400 5,943
Dividends on Preferred
Shares 1,406 1,455 1,495 1,528 1,535
- - -------------------------------------------------------------------------------
Net Earnings (loss)
available for common
shares $(17,754)a,b 4,222 314 3,872 4,408
- - -------------------------------------------------------------------------------
PER COMMON SHARE DATA
- - -------------------------------------------------------------------------------
Primary net earnings
(loss) $ (3.28)a,b 0.78 0.05 0.44 0.81
Fully diluted net
earnings $ - 0.69 - 0.42 0.71
Average number of shares 5,415 5,389 5,298 5,355 5,451
outstanding-primary
Cash dividends per
common share $ 0.28 0.28 0.28 0.28 0.28
Shareholders' equity $ 5.51 9.18 9.00 9.20 8.62
OTHER INFORMATION
Working capital $ 41,065 52,022 47,468 47,897 52,882
Depreciation $ 6,451 6,460 6,196 5,869 5,462
Plant and equipment
expenditures $ 4,517 4,566 5,609 9,489 8,216
Total assets $ 123,405 133,348 137,098 140,126 137,942
Long-term debt $ 29,317 30,544 30,577 30,808 36,670
ESOT loan obligation $ 15,045 16,005 16,895 17,718 18,480
Shareholders' equity $ 34,286 52,369 50,032 50,015 47,657
Backlog of unfilled
orders $ 89,203 94,200 116,279 162,926 174,649
a Includes a restructuring charge of $9,800 relating to the discontinuance,
relocation and downsizing of certain operations.
b Includes the cumulative effect of change in accounting for postretirement
health benefits of $9,400 or $1.74 per share on primary net earnings.
- 13 -
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT
The Company's core business is in the defense market, which has been declining
over the past several years and is not expected to recover in the near future.
The Company continues to believe that, although uncertainty will continue as to
the direction of defense spending, the Company will benefit from its
diversified position in the market and its commitment to adjust its operations
to meet this decline. Accordingly, the Company adopted a plan in 1993 to
restructure its operations to more efficiently operate in this changing market.
This restructuring has resulted in a charge to earnings of $9.8 million that is
more fully explained in Note 2.
In addition to restructuring its core business, the Company has been
aggressively seeking to expand its commercial segment through use of its
technological expertise when a market warrants it and through acquisition. This
strategy is exemplified by the continuing increase in the level of research and
development expenditures, despite the reduced level of sales, primarily on
commercial market initiatives and the acquisition in 1993 of Automotive Natural
Gas, Inc. (ANGI), a provider of natural gas filling stations. See Note 3 for
more details.
While the Company has been pursuing this strategy with more emphasis on its
Commercial and Other Products segment, it has not yet achieved desired results.
Operating earnings in this segment decreased by $4.7 million, principally due
to the aforementioned increased R&D effort and startup costs in the Company's
Sports and Energy businesses, partially offset by a $2.2 million contract
recovery at the Fiber Science Division. Further, fiscal 1993 results in this
segment were adversely affected by unanticipated contract costs in the
Company's Barnes Engineering subsidiary, which are not expected to reoccur, and
a reduction in satellite-system product sales.
RESULTS OF OPERATIONS - 1993 COMPARED TO 1992
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions," in
the first quarter of 1993. This resulted in a onetime noncash charge of $13.4
million before income tax credits ($9.4 million after income tax credits, or
$1.74 per common share). This charge includes the expensing of the transition
obligation and is classified separately as a cumulative effect of accounting
change. See Note 15 to the Consolidated Financial Statements for more
information. The discussion that follows excludes the effect of this adoption
when comparing results of 1993 to 1992.
On December 2, 1993, the Company acquired substantially all the assets and
certain liabilities of ANGI through its newly formed wholly-owned subsidiary,
EDO Automotive Natural Gas, Inc. (EDO ANGI). The results of operations of EDO
ANGI, which had a minimal impact on the Company's Consolidated operating
results, are included from the date of acquisition (mentioned above and in Note
3 to the Consolidated Financial Statements).
Sales for 1993 were $104.1 million, which represents a decline of 17% when
compared with sales of $125.8 million in 1992. Sales in the Military Systems
segment decreased 25%, to $66.9 million, due primarily to continuing reductions
in military spending in general, the slippage in U.S. Government contract
awards due to changing Administration priorities particularly in sonar, ceramic
and fiber-reinforced composite sales, and the impact of the completion of a
Canadian military fuel tank contract in early 1993 . Sales in the Commercial
and Other Products segment increased by 3%, to $37.2 million, where decreases
in satellite-systems product sales were offset by an increase in acoustic
instruments and the results of EDO ANGI from the date of purchase.
A loss from operations (before general corporate expense allocations) of $5.3
million was recorded in 1993 as compared to earnings of $14.6 million in 1992.
Included in 1993 operating results is a restructuring charge of $9.8 million
that is mentioned above and more fully explained in Note 2. Excluding this
charge, operating earnings in the Military Systems segment decreased to $4.7
million in 1993 from $10.1 million in 1992 due primarily to lower sales volume
and reduced margins partially offset by aggressive cost management. The
Commercial and Other Products segment recorded an operating loss of $0.2
million, which is discussed above in Business Environment.
Selling, general and administrative expenses decreased to $17.2 million from
$18.5 million in 1992 due to cost reductions made as sales continued to decline
in 1993. This reduction was partially offset by an increase in the Commercial
and Other Products segment as a result of higher expenditures on new business
initiatives. Company-sponsored research-and-development expenditures increased
14%, to $6.0 million. The increase results from higher expenditures for new
commercial products in the Commercial and Other Products segment, where the
increase was partially offset by a reduction in the Military Systems segment.
Customer-sponsored research and development expenditures, which occur primarily
in the Military Systems segment, declined $2.0 million, to $14.1 million
consistent with the general decline in military spending.
Interest expense, net of interest income, decreased to $2.2 million from $2.5
million in 1992. Interest expense primarily represents the interest paid on the
7% Convertible Subordinated Debentures Due 2011.
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes," in the first quarter of 1993, which did not
result in a cumulative effect adjustment. The effect of adoption on earnings is
that the tax benefit associated with the dividends paid on unallocated
preferred shares is now credited directly to shareholders' equity and not as a
reduction of the Federal income tax provision. In 1993 this represented
approximately $0.3 million. See Note 11 for a discussion of the current year's
tax benefit.
The net loss, before the cumulative effect of accounting change
- 14 -
<PAGE> 4
and minority interest, in 1993 of $9.3 million compares to net earnings in 1992
of $5.7 million. The loss reflects, in addition to the items discussed above, a
restructuring charge of $9.8 million, which is more fully explained in Note 2;
a litigation settlement charge of $1.2 million, which is more fully explained
in Note 17; and a $1.0 million charge to add to a general reserve for the
Company's long-term investments, as explained in Note 1(f).
The primary net loss per share before the cumulative effect of the accounting
change and extraordinary gain from early retirement of debt, was $1.54 as
compared to net earnings of $0.78 in 1992. The pro forma combined effect of the
three 1993 charges mentioned above amounts to $2.22 per share. Primary earnings
per share calculations were based on a weighted average of 5.4 million shares
outstanding in both 1993 and 1992.
The Company's 1993 year-end backlog was $89.2 million compared to $94.2 million
in 1992. The reduction reflects the overall decline in military spending. In
order to offset these continuing declines the Company is continuing to
emphasize its strategy of diversifying into commercial markets and at the same
time restructuring its military business to provide the cash and earnings to
continue to pursue new opportunities in its commercial segment.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the declining sales volume and emphasis on working capital
management, cash and short-term investments increased $4.7 million; to $9.3
million at December 31, 1993. This increase is primarily attributable to
reductions in accounts receivable and inventory, which were partially offset by
the cash portion of the 1993 loss and cash outlays associated with the
acquisition of ANGI.
The restructuring charge of $9.8 million taken in 1993 results primarily from
the write-down of existing assets, and as a result there is no immediate impact
on cash flow. Cash proceeds from future disposal of these assets will
positively affect cash flow. Additionally, the Company is in contract to sell a
facility in Salt Lake City, Utah, which will generate approximately $3.0
million in cash in 1994.
The Company has an ESOT obligation of $15.0 million which is funded principally
through dividends on its ESOP Preferred Shares. The Company also has
outstanding $29.3 million of 7% Convertible Subordinated Debentures Due 2011.
During 1990, the Board of Directors authorized a plan to purchase up to $10
million of such debentures. As of December 31, 1993, the Company had acquired
$5.7 million of such debentures in open market or privately negotiated
transactions at prevailing market prices, which averaged about 50% of par
value. These debentures will be used to satisfy sinking fund requirements
commencing in 1996.
The Company's results for 1993 resulted in its not meeting certain financial
covenants in its ESOT obligation as well as its revolving credit agreement
(Credit Agreement), which is explained in Note 9 and Note 10. Noncompliance
provisions and the terms of the covenants on both obligations have been
amended. The terms of the Credit Agreement have been amended to (a) reduce the
line to $15 million, (b) extend its maturity to 1995 and (c) modify the
interest rate. Additionally, the modified covenants may restrict dividend
pay-ments on common stock commencing in 1995. Management believes it has
sufficient capital resources to fund its future capital requirements.
Capital expenditures in 1993 amounted to $4.5 million, as compared with $4.6
million in 1992. Depreciation expense of $6.5 million was charged to earnings
in 1993 and 1992.
As explained in Note 17, the Company is involved in an environmental matter
which management believes is covered by liability insurance. Management does
not believe the outcome of this matter will have a material effect on the
Company's consolidated financial position.
RESULTS OF OPERATIONS - 1992 COMPARED TO 1991
The Company is continuing efforts to reduce costs and to focus attention and
resources on targeted new commercial products. Management believes that its
current initiatives will strategically position the Company for the future. The
Company has modified its segment reporting by reclassifying essentially all
military products into the Military Systems segment and changing the Marine
Systems and Specialized Products segment to the Commercial and Other Products
segment. Current and historical segment data have been modified throughout this
report to reflect this change.
Sales for 1992 were $125.8 million, a 14% decrease when compared with sales of
$145.7 million in 1991. Sales in the Military Systems segment decreased 17%, to
$89.7 million, due primarily to reduced sales on sonar programs, continued
delays in the award of anticipated programs; and, when awards are made, they
are generally in smaller increments. Sales in the Commercial and Other Products
segment decreased by 4%, to $36.1 million, primarily as a result of decreased
fiber-reinforced product sales due to a customer-directed slowdown on an
international program.
Despite the reduction in sales, earnings from operations (before general
corporate expense allocations) in 1992 decreased by less than 2%, to $14.6
million. The improvement in operating earnings as a percent of sales results
primarily from a more favorable mix of high and low margin product deliveries
averaged over the course of the year and from continuing cost reduction
programs. Operating earnings in the Military Systems segment decreased to $10.1
million from $10.6 million in 1991, while the Commercial and Other Products
segment recorded an increase in operating earnings of 7% to $4.5 million.
Selling, general and administrative expenses increased to $17.1 million from
$16.1 million in 1991. The increase occurred primarily in the Commercial and
Other Products segment as new business
- 15 -
<PAGE> 5
initiatives incur a proportionately higher rate in the startup phase.
Additionally, this increase in selling, general and administrative expenses
does not reflect reductions within the Military Systems segment where these
expenses are generally reported in cost of sales.
Company-sponsored research and development expenditures increased 40%, to $5.3
million. The increase results from higher expenditures in both segments, with
the largest increase occurring for new commercial products in the Commercial
and Other Products segment. Customer-sponsored research and development
expenditures declined $4.6 million, to $16.1 million, consistent with the
general decline in military spending.
Interest expense net of interest income increased slightly to $2.5 million,
from $2.4 million in 1991.
The provision for Federal and foreign income taxes as a percentage of pretax
earnings was approximately 23% and 18% in 1992 and 1991, respectively. The low
effective tax rate results principally from the deductibility of preferred
share dividends.
Net earnings, before minority interest and the extraordinary gain from early
retirement of debt, increased from $2.1 million in 1991 to $5.7 million in
1992. This increase primarily reflects the inclusion in 1991 results of two
nonoperating expenses, one of which was approximately $5.6 million relating to
a litigation settlement explained in Note 17 and the other one of which was
approximately $1.0 million for the addition to a general reserve for the
Company's long-term investments.
Primary net earnings per share, before the extraordinary gain from early
retirement of debt were $0.78 in 1992 as compared to $0.05 in 1991. The pro
forma combined after-tax effect of the two 1991 nonoperating charges mentioned
above amounts to $0.76 per share. Primary earnings per share calculations were
based on a weighted average of 5.4 million and 5.3 million shares outstanding
in 1992 and 1991, respectively.
The Company's 1992 year-end backlog was $94 million, compared to $116 million
in 1991. The reduction reflects the overall decline in military spending. The
Company is emphasizing its new and existing technical capabilities for
commercial applications as well as the Company's core businesses to secure new
opportunities to mitigate defense cutbacks.
COMMON SHARE PRICES
EDO common shares are traded on the New York Stock Exchange. As of February 18,
1994, there were 3,076 shareholders of record (brokers and nominees counted as
one each).
The price range in 1993 and 1992 was as follows:
1993 1992
HIGH LOW HIGH LOW
1st Quarter 7-5/8 6 8-3/4 6-1/4
2nd Quarter 6-7/8 5 6-1/2 4-1/4
3rd Quarter 6 4-1/2 5-7/8 4-5/8
4th Quarter 7-1/2 5-1/8 6-1/4 4-3/4
DIVIDENDS
The Company has paid quarterly cash dividends without interruption since the
fourth quarter of 1976. Fifty percent stock dividends were paid in February
1984, April 1983 and September 1982. While it is the present intention of the
Company's Board of Directors to continue payment of regular quarterly
dividends, decisions as to the payment of future dividends rest within the
discretion of the Board of Directors and will be made in light of the Company's
earnings, financial condition, and such other factors as the Board of Directors
may deem relevant at such time. Two financing arrangements restrict the amount
of funds that the Company may use for the payment of cash dividends, which will
be based on earnings available for dividends, as defined, beginning in 1995.
See Notes 9 and 10 to the Consolidated Financial Statements.
- 16 -
<PAGE> 6
CONSOLIDATED STATEMENTS OF OPERATIONS
EDO CORPORATION AND SUBSIDIARIES
- - -------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31
1993 1992 1991
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
- - -------------------------------------------------------------------------------
INCOME
Net sales $104,138 $125,771 $145,693
Other 556 395 333
- - -------------------------------------------------------------------------------
104,694 126,166 146,026
- - -------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 81,097 92,045 112,919
Selling, general and administrative 17,181 18,477 18,232
Research and development 6,044 5,286 3,767
Restructuring charge 9,800 - -
- - -------------------------------------------------------------------------------
114,122 115,808 134,918
- - -------------------------------------------------------------------------------
OPERATING EARNINGS (LOSS) (9,428) 10,358 11,108
NON-OPERATING INCOME (EXPENSE)
- - -------------------------------------------------------------------------------
Interest income 291 176 131
Interest expense (2,492) (2,680) (2,535)
Litigation settlement (1,166) - (5,589)
Other, net (1,390) (443) (585)
- - -------------------------------------------------------------------------------
(4,757) (2,947) (8,578)
- - -------------------------------------------------------------------------------
Earnings (loss) before Federal and foreign
income taxes, cumulative effect of
accounting change, minority
interest and extraordinary gain (14,185) 7,411 2,530
Provision (benefit) for Federal and foreign
income taxes (4,901) 1,684 458
- - -------------------------------------------------------------------------------
NET EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE, MINORITY INTEREST AND
EXTRAORDINARY GAIN (9,284) 5,727 2,072
Minority interest 2,336 (50) (322)
Cumulative effect of change in accounting
for postretirement health benefits
(net of taxes of $3,958) (9,400) - -
Extraordinary gain on
purchase of debt
(net of taxes of $40 in 1991) - - 59
- - -------------------------------------------------------------------------------
NET EARNINGS (LOSS) (16,348) 5,677 1,809
Dividends on preferred shares 1,406 1,455 1,495
- - -------------------------------------------------------------------------------
NET EARNINGS (LOSS) AVAILABLE FOR
COMMON SHARES $(17,754) $4,222 $314
EARNINGS (LOSS) PER COMMON SHARE:
Primary:
Net earnings (loss) before cumulative
effect of change in accounting
and extraordinary gain $(1.54) $0.78 $0.05
Cumulative effect of change in accounting (1.74) - -
Extraordinary gain on purchase of debt - - 0.01
- - -------------------------------------------------------------------------------
$(3.28) $0.78 $0.06
- - -------------------------------------------------------------------------------
Fully diluted:
Net earnings (loss) before cumulative effect
of change in accounting and extraordinary
gain * $0.69 $ *
Cumulative effect of change in accounting * - -
Extraordinary gain on purchase of debt - - *
- - -------------------------------------------------------------------------------
$ * $0.69 $ *
- - -------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
* Antidilutive in 1991 and 1993.
- 17 -
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
EDO CORPORATION AND SUBSIDIARIES
- - -------------------------------------------------------------------------------
DECEMBER 31
1993 1992
(in thousands,
except share amounts)
- - -------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,284 $ 4,597
Recoverable Federal income taxes 2,322 -
Accounts receivable 38,283 48,283
Inventories 18,155 20,702
Prepayments 1,319 1,126
- - -------------------------------------------------------------------------------
Total current assets 69,363 74,708
- - -------------------------------------------------------------------------------
Property, plant and equipment, at cost 92,389 88,237
Less accumulated depreciation and amortization 58,512 45,859
- - -------------------------------------------------------------------------------
Net property, plant and equipment 33,877 42,378
Cost in excess of fair value of net assets acquired 11,415 8,627
Deferred Federal and foreign income taxes 1,011 -
Other assets 7,739 7,635
- - -------------------------------------------------------------------------------
$123,405 $133,348
- - -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ - $ 34
Accounts payable and accrued liabilities 21,019 16,829
Contract advances and deposits 7,279 5,823
- - -------------------------------------------------------------------------------
Total current liabilities 28,298 22,686
- - -------------------------------------------------------------------------------
Deferred Federal and foreign income taxes - 6,273
Long-term debt, less current installments 29,317 30,544
ESOT loan obligation 15,045 16,005
Postretirement obligation 13,492 -
Minority interest 2,967 5,471
SHAREHOLDERS' EQUITY
Preferred shares, par value $1 per share,
authorized 500,000 shares
(80,056 issued in 1993 and 84,027 in 1992) 80 84
Common shares, par value $1 per share, authorized
25,000,000 shares (8,453,902 issued in both years) 8,454 8,454
Additional paid-in capital 41,784 43,366
Retained earnings 42,350 61,274
- - -------------------------------------------------------------------------------
92,668 113,178
Less: Treasury shares at cost (2,982,853 shares
in 1993 and 3,094,101 shares in 1992) (42,393) (43,973)
Translation adjustment (749) (428)
ESOT loan obligation (15,045) (16,005)
Deferral under Long-Term Incentive Plans (195) (403)
- - -------------------------------------------------------------------------------
Total shareholders' equity 34,286 52,369
- - -------------------------------------------------------------------------------
$123,405 $133,348
- - -------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
- 18 -
<PAGE> 8
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
EDO CORPORATION AND SUBSIDIARIES
- - -------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31
1993 1992 1991
(in thousands)
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- - -------------------------------------------------------------------------------
Preferred Shares
Balance at beginning
of year $ 84 84 $ 87 87 $ 89 89
Par value of shares
converted (4) (4) (3) (3) (2) (2)
- - -------------------------------------------------------------------------------
Balance at end of
year 80 80 84 84 87 87
- - -------------------------------------------------------------------------------
Common Shares
- - -------------------------------------------------------------------------------
Par value of
shares issued 8,454 8,454 8,454 8,454 8,454 8,454
- - -------------------------------------------------------------------------------
Additional paid-in
capital
Balance at
beginning of year 43,366 45,056 45,535
Shares used for
exercise of stock
options (9) - (9)
Shares (used)
cancelled for Long-
Term Incentive
Plans 11 (735) 6
Conversion of
preferred shares
to common shares (1,584) (955) (476)
- - -------------------------------------------------------------------------------
Balance at end
of year 41,784 43,366 45,056
- - -------------------------------------------------------------------------------
Retained earnings
Balance at
beginning of year 61,274 58,560 59,730
Net earnings (loss) (16,348) 5,677 1,809
Common dividends -
$0.28 per share (1,514) (1,508) (1,484)
Preferred dividends (1,406) (1,455) (1,495)
Tax benefit
associated with
dividends paid on
unallocated
preferred shares 344 - -
- - -------------------------------------------------------------------------------
Balance at end
of year 42,350 61,274 58,560
- - -------------------------------------------------------------------------------
Treasury shares
at cost
Balance at
beginning of year (43,973) (3,094) (45,715) (3,146) (46,156) (3,175)
Shares used for
exercise of stock
options 14 1 - - 14 1
Purchase of
treasury shares - - (555) (106) (19) (3)
Shares used
(cancelled) for
Long-Term
Incentive Plans (22) (2) 1,339 92 (32) (2)
Shares used for
conversion of
preferred shares 1,588 112 958 66 478 33
- - -------------------------------------------------------------------------------
Balance at
end of year (42,393) (2,983) (43,973) (3,094) (45,715) (3,146)
- - -------------------------------------------------------------------------------
Translation adjustment
Balance at
beginning of year (428) 485 449
Adjustment
during the year (321) (913) 36
- - -------------------------------------------------------------------------------
Balance at
end of year (749) (428) 485
- - -------------------------------------------------------------------------------
ESOT Loan Obligation
Balance at
beginning of year (16,005) (16,895) (17,718)
Repayments made
during year 960 890 823
- - -------------------------------------------------------------------------------
Balance at
end of year (15,045) (16,005) (16,895)
- - -------------------------------------------------------------------------------
Deferral under Long-
Term Incentive Plans
Balance at
beginning of year (403) - (368)
Shares used for
Long-Term Incentive
Plans 12 (604) 26
Amortization of
Long-Term Incentive
Plan deferrals 196 201 342
- - -------------------------------------------------------------------------------
Balance at
end of year (195) (403) -
- - -------------------------------------------------------------------------------
TOTAL SHAREHOLDERS'
EQUITY $34,286 $52,369 $50,032
- - -------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
- 19 -
<PAGE> 9
CONSOLIDATED STATEMENTS OF
CASH FLOWS
EDO CORPORATION AND SUBSIDIARIES
- - -------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31
1993 1992 1991
(in thousands)
- - -------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net earnings (loss) $(16,348) $5,677 $1,809
Adjustments to net earnings (loss) to arrive
at cash from operations:
Extraordinary gain (net of taxes of $40
in 1991) - - (59)
Restructuring charge 9,800 - -
Cumulative effect of change in accounting
for postretirement health benefits 9,400 - -
Depreciation and amortization 6,836 6,827 6,603
(Decrease) in current and
deferred income taxes (9,578) (13) (2,156)
Investments in technology companies 1,000 225 1,058
Common shares issued for employee benefits 201 201 347
Minority interest (2,336) 50 322
Changes in:
Accounts receivable 11,072 3,614 (2,216)
Inventories 3,840 (1,156) 2,546
Prepayments, other assets and other 493 (387) (286)
Accounts payable and accrued liabilities 79 276 1,433
Contract advances and deposits 159 2,353 (9,243)
- - -------------------------------------------------------------------------------
Cash provided by operations 14,618 17,667 158
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (4,517) (4,566) (5,609)
Acquisition of ANGI, net of cash acquired (44) - -
- - -------------------------------------------------------------------------------
Cash (used) by investing
activities (4,561) (4,566) (5,609)
FINANCING ACTIVITIES:
Proceeds from (payments of) notes payable (1,189) (8,000) 8,000
Reduction of long-term debt (1,261) (30) (378)
Purchase of treasury shares - (555) (19)
Payment of common share cash dividends (1,514) (1,508) (1,484)
Payment of preferred share cash dividends (1,406) (1,455) (1,495)
Purchase of 7% Convertible Subordinated
Debentures due 2011 - - (141)
- - -------------------------------------------------------------------------------
Cash (used) provided by financing activities (5,370) (11,548) 4,483
- - -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4,687 1,553 (968)
Cash and cash equivalents at beginning of year 4,597 3,044 4,012
- - -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,284 $ 4,597 $ 3,044
- - -------------------------------------------------------------------------------
Supplemental disclosures:
Cash paid for:
Interest $ 2,243 $ 2,508 $ 2,327
Income taxes $ 608 $ 1,718 $ 2,901
See accompanying Notes to Consolidated Financial Statements.
- 20 -
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EDO Corporation
and all majority-owned subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
(b) CASH EQUIVALENTS
For purposes of presenting a consolidated statement of cash flows, the Company
considers all securities with an original maturity of three months or less at
the date of acquisition to be cash equivalents.
(c) INVENTORY
Inventory under long-term contracts and programs reflects all accumulated
production costs, including factory overhead, initial tooling and other related
costs, including general and administrative expenses relating to the Company's
Military Systems segment, less the portion of such costs charged to cost of
sales. Inventory costs in excess of amounts recoverable under contracts are
charged to cost of sales when they become known. All other inventory is stated
at the lower of cost (principally first-in, first-out method) or market.
Sales on long-term, fixed price contracts, including pro-rata profits, are
generally recorded based on the relationship of total costs incurred to date to
total projected final costs or, alternatively, as progress billings or
deliveries are made. Sales under cost reimbursement contracts are recorded as
costs are incurred. Sales on other than long-term contract orders (principally
commercial products) are recorded as shipments are made.
(d) DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment have been
provided using the declining balance and straight-line methods over the
estimated useful lives of the assets. Leasehold improvements are being
amortized over the lesser of their estimated useful lives or their respective
lease periods.
Deferred financing costs are amortized on a straight-line basis over the life
of the related financing. The unamortized balance of $1,555,000 and $1,739,000
is included in other assets at December 31, 1993 and 1992.
(e) COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
The excess of the total acquisition cost of Barnes Engineering Company over the
fair value of net assets acquired of approximately $11 million is being
amortized on a straight-line basis over thirty years. The excess of the total
acquisition costs of ANGI over the fair value of net assets acquired of
approximately $3 million is being amortized on a straight-line basis over
fifteen years.
(f) LONG-TERM INVESTMENTS
The Company has minority positions in several small technology companies that
it has been holding as long-term investments. These investments are carried in
other assets at the lower of cost or net realizable value. During 1993, the
Company charged other non-operating expense approximately $1,000,000 to reduce
the carrying value of the Company's long-term investments based on the
operating results and economic conditions affecting the business of these
investments. At December 31, 1993 and 1992, the net carrying value of the
long-term investments was $436,000 and $1,436,000, respectively.
(g) INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in the first quarter of 1993. Statement 109 was
adopted on a prospective basis and did not have any impact on the Company's
financial statements at adoption.
(h) EARNINGS PER SHARE
Primary earnings per share amounts are determined by using the weighted average
number of common shares and common share equivalents (stock options)
outstanding during the year. Primary earnings per share amounts were based on
5,415,046, 5,388,818 and 5,298,263 shares outstanding for 1993, 1992 and 1991,
respectively.
Fully diluted earnings per share are based on the assumption that the
convertible debentures and preferred shares, in the periods in which such
securities are dilutive, are converted into common shares and their related
interest and dividends are added back to net earnings, net of applicable income
taxes. In 1992 the convertible debentures were antidilutive. In 1993 and 1991
both the convertible debentures and preferred shares were antidilutive. Fully
diluted earnings per share were based on 6,542,451 shares outstanding for
1992.
(2) RESTRUCTURING OF OPERATIONS
During the fourth quarter of 1993, the Company adopted a restructuring plan to
address the continuing worldwide decline in the defense and aerospace
business, reduce costs and improve its competitiveness. This restructuring plan
includes the discontinuance of the defense portion of business in Canada, the
relocation of some United States production from New York to other less costly
locations, the related disposition of nonproductive assets (principally land
and buildings) and workforce reductions. The accompanying consolidated
statements of operations reflect a pretax charge of $9,800,000 relating to this
plan, including approximately $5,200,000 relating to a write-down of a major
portion of its College Point production facility, which is the portion that
will be placed for sale, and $3,620,000 related to the discontinuance of the
defense related business in the Canadian operations.
(3) AUTOMOTIVE NATURAL GAS, INC. (ANGI) ACQUISITION
During December 1993, the Company acquired substantially all the
- 21 -
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
assets and certain liabilities of ANGI. ANGI manufactures and installs pumping
stations for natural gas refueling and vehicle conversion kits to allow the use
of natural gas as an alternative fuel source.
The purchase price was $68,000 plus the assumption of certain liabilities that
were in excess of the value of assets acquired by approximately $2,600,000.
Additional costs incurred as a result of the acquisition were approximately
$422,000. The excess of the total acquisition costs over the fair value of net
assets acquired (goodwill) of approximately $3,100,000 is being amortized on a
straight-line basis over 15 years. The operating results for ANGI are included
in the consolidated statements of operations from the purchase date. ANGI's
results had a minimal impact on consolidated operating results for the year
ended December 31, 1993.
The following unaudited pro-forma consolidated results of operations assume
that the purchase occurred on January 1, 1992 and reflect the historical
operations of the Company and ANGI adjusted for reduced interest income as a
result of the use of cash to acquire ANGI and the amortization of goodwill.
- - -------------------------------------------------------------------------------
December 31
1993 1992
- - -------------------------------------------------------------------------------
Net Sales $ 116,662 $ 140,625
Net Earnings (loss) available
for common shareholders (19,076) 3,698
- - -------------------------------------------------------------------------------
Earnings (loss) per share available
for common shareholders ($3.52) $0.69
- - -------------------------------------------------------------------------------
(4) CANADIAN SUBSIDIARY
EDO (Canada) Ltd. is approximately 40 percent owned by an agency of the
Government of the Province of Alberta. The Company has an agreement with the
Province of Alberta which provided for the purchase of nonconvertible,
redeemable preferred shares. In 1990 and 1989, the Province of Alberta
purchased $1,416,000 and $1,943,000 of such shares and the Company purchased
$656,000 and $867,000, respectively. The preferred shares are to be redeemed on
a pro-rata basis out of future earnings based on an agreed-upon formula. The
Company has discontinued its defense business in Canada; however, it expects to
continue its commercial business.
(5) LONG-TERM CONTRACT RECEIVABLES
Accounts receivable included $11,800,000 and $16,700,000 at December 31, 1993
and 1992, respectively, representing unbilled revenues, including accrued
profits on long-term contracts. Substantially all of the unbilled balances at
December 31, 1993 will be billed and collected during 1994. Total receivables
due from the United States government, either directly or as a subcontractor to
a prime contractor with the government, were $18,001,000 at December 31, 1993,
and $22,417,000 at December 31, 1992.
(6) INVENTORIES
Inventories are summarized by major classification as follows at December 31,
1993 and 1992:
- - -------------------------------------------------
1993 1992
(in thousands)
- - -------------------------------------------------
Raw material and supplies $ 8,343 $ 6,415
Work-in-process 8,713 13,151
Finished goods 1,099 1,136
- - -------------------------------------------------
$18,155 $20,702
- - -------------------------------------------------
Work-in-process inventory includes $2,500,000 and $5,500,000 at December 31,
1993 and 1992, respectively, applicable to long-term contracts.
(7) PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment at December 31, 1993 and 1992, and
their related useful lives are summarized as follows:
- - ---------------------------------------------------------------------
1993 1992 Range in
(in thousands) Years
- - ---------------------------------------------------------------------
Land and land improvements $ 2,014 $ 2,014 8 - 30
Buildings and building improvements 28,585 28,167 8 - 45
Machinery and equipment 51,786 49,341 3 - 10
Leasehold improvements 10,004 8,715 lease terms
- - ---------------------------------------------------------------------
$92,389 $88,237
- - ---------------------------------------------------------------------
(8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following at December
31, 1993 and 1992:
- - -----------------------------------------------------------------
1993 1992
(in thousands)
- - -----------------------------------------------------------------
Trade payables $ 8,403 $ 7,732
Employee compensation 2,680 3,230
Employee retirement plans 186 183
Taxes on income other than
Federal and foreign income taxes 3,274 3,285
Other 6,476 2,399
- - -----------------------------------------------------------------
$21,019 $16,829
- - -----------------------------------------------------------------
- 22 -
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
(9) NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt of the Company consisted of the following at December 31, 1993
and 1992:
- - -----------------------------------------------------------------------
1993 1992
(in thousands)
- - -----------------------------------------------------------------------
9.625% first mortgage note due 1994 $ - $ 1,261
7% Convertible Subordinated Debentures Due 2011 29,317 29,317
- - -----------------------------------------------------------------------
Total long-term debt 29,317 30,578
Current installments - (34)
- - -----------------------------------------------------------------------
Long-term debt, less current installments $29,317 $30,544
- - -----------------------------------------------------------------------
The 7% Convertible Subordinated Debentures Due 2011 were issued in November
1986. During 1991 and 1990, respectively, the Company purchased $200,000 and
$5,483,000 of these debentures for combined purchase prices of $96,000 and
$2,790,000. The purchases resulted in extraordinary gains of $59,000 and
$1,508,000 in 1991 and 1990, respectively, net of income taxes and other costs.
The debentures are convertible at the rate of 45.45 common shares for each
$1,000 principal amount, which is equivalent to $22 per share. Debentures are
redeemable at the option of the Company at par plus (until December 15, 1996) a
stated premium. Debentures are redeemable at the option of the holder under
certain circumstances involving a change in control of the Company at par plus
(until December 15, 1996) a stated premium. Annual sinking fund payments of
$1,750,000 until retirement are due commencing in 1996. The purchased
debentures may be used by the Company to satisfy annual sinking fund
requirements.
In June 1992, the Company entered into a $30 million unsecured revolving-credit
agreement (Credit Agreement) with a bank syndicate. The Credit Agreement is for
both short-term borrowings and letters of credit. Compliance with certain
Credit Agreement financial covenants and others were amended by the bank as a
result of the Company not meeting certain financial covenant tests for 1993. In
March 1994, the Credit Agreement was modified to reduce the amount to $15
million and the maturity date was extended to June 1995. Borrowings under the
Credit Agreement will carry interest based on the agent bank's prime rate plus
0.25%. The Company pays a commitment fee of 0.375% per annum on the average
unused portion. The Credit Agreement, as amended, also contains certain
financial covenants and restrictions, including a limitation on the payment of
common dividends. Dividend payments in 1994 are limited to approximately the
amount paid in 1993. Dividend payments beyond 1994 will be conditioned on
future earnings.
At December 31, 1993, there were no borrowings outstanding under the Credit
Agreement. For the year ended December 31, 1993, the weighted average borrowing
approximated $88,000, at a weighted average interest rate of approximately
6.0%, and there were no borrowings outstanding at any month end. For the year
ended December 31, 1992, the weighted average borrowing approximated $4.1
million, at a weighted average interest rate of 5.7%, and the maximum amount
outstanding at any month end was $9,500,000.
(10) EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Company's Employee Stock Ownership Plan (ESOP) provides retirement benefits
to substantially all employees. During 1993 and 1992, respectively, cash
contributions of $314,000 and $328,000 were made to the ESOP. As of December
31, 1993, there were 470,710 common shares in the ESOP.
During 1988, the Employee Stock Ownership Trust (ESOT) purchased 89,772
convertible preferred shares from the Company for approximately $19,185,000.
The shares will be allocated to employees through 2003 on the basis of
compensation. The preferred shares provide for dividends of 8% per annum, which
are deductible by the Company for Federal and state income tax purposes. Each
unallocated preferred share is convertible at its stated conversion rate into
10 common shares. Allocated shares are convertible at the greater of the
stated conversion rate or the fair value of each preferred share ($165 at
December 31, 1993) divided by the current market price of each common share. As
of December 31, 1993, 32,073 shares have been allocated, 57,699 shares remained
unallocated and 9,716 shares have been converted into 227,343 common shares.
Until converted, each preferred share is entitled to 12.3 votes. The preferred
shares are entitled to vote on all matters presented to holders of common
shares voting together as a class, except that certain amendments and mergers
could entitle the holders of preferred shares to vote separately as a class.
The ESOP provides for pass-through of voting rights to the ESOP participants
and beneficiaries.
The ESOT purchased the preferred shares from the Company using the proceeds of
a borrowing guaranteed by the Company. The ESOT services this obligation with
the dividends received on the preferred shares and any additional contributions
from the Company as required. Principal and interest payments on the note of
the ESOT are to be made in quarterly installments through 2003. Interest is
charged at 82% of the prime lending rate. During 1993 and 1992, respectively,
the Company's cash contributions and preferred dividends were used to repay
principal of $960,000 and $890,000 and pay interest of $780,000 and $911,000.
Both the Company and the lender have the option to cancel or refinance the
borrowing after 1995. The guarantee agreement also provides that the Company
may be obligated to prepay the ESOT loan through redemption of the preferred
shares at $213.71 per share upon the occurrence of certain prepayment events.
In addition to these prepayment events, there are certain covenants placed on
the Company that require that several predetermined ratios be maintained.
Compliance with certain of these covenants and others were amended by the
lender as a result of the
- 23 -
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
Company not meeting certain financial covenant tests for 1993. In addition to
these ratios, common dividends in 1994 will be limited to amounts paid in 1993.
Dividends payable beyond 1994 will be conditioned on future earnings.
The ESOT's borrowing guaranteed by the Company is reflected as a liability on
the balance sheet with an equal amount as a reduction of shareholders' equity,
offsetting the increase in the capital stock accounts. As the principal portion
of the note is repaid through 2003, the liability and the ESOT loan obligation
will be reduced concurrently.
(11) FEDERAL AND FOREIGN INCOME TAXES
The 1993, 1992 and 1991 provisions for Federal and foreign income taxes,
excluding the cumulative effect of the change in accounting in 1993 and the
extraordinary gain in 1991, were composed of the following amounts:
- - ---------------------------------------------
1993 1992 1991
(in thousands)
- - ---------------------------------------------
Federal
Current $ (877) $2,096 $ 1,707
Deferred (3,317) (530) (1,762)
- - ---------------------------------------------
(4,194) 1,566 (55)
Foreign
Current $ 28 $ - $ -
Deferred (735) 118 513
- - ---------------------------------------------
(707) 118 513
- - ---------------------------------------------
Total $(4,901)* $1,684 $ 458
- - ---------------------------------------------
* Excludes a tax benefit of $3,958 relating to the cumulative effect of the
change to the accrual method of accounting for post-retirement health benefits.
State income taxes of $178,000, $768,000 and $204,000 in 1993, 1992 and 1991
are included in general and administrative expenses.
The sources of the deferred tax provisions and the related tax effects in each
of the years were as follows:
- - -----------------------------------------------------------------------
1993 1992 1991
(in thousands)
- - -----------------------------------------------------------------------
Long-term contract amounts $ (50) $ 1,642 $ (418)
Postretirement benefit (629) - -
Alternative minimum tax carryforward - (1,700) -
Restructuring accruals (2,100) - -
Depreciation and amortization (1,155) (87) (834)
State and local income taxes 30 (154) 29
Other, net (148) (113) (26)
- - -----------------------------------------------------------------------
Total $(4,052) $ (412) $(1,249)
- - -----------------------------------------------------------------------
The effective Federal income tax rate, excluding the cumulative effect of the
change in accounting in 1993 and the extraordinary gain in 1991, differed from
the statutory Federal income tax rate for the following reasons:
- - --------------------------------------------------------------------------
Percent of Pretax Earnings
1993 1992 1991
- - --------------------------------------------------------------------------
Tax at statutory rate (34.0%) 34.0% 34.0%
Foreign Sales Corporation benefit (0.9) (1.9) (0.7)
Preferred dividends (0.9) (6.7) (20.1)
Earnings taxed at foreign tax rates (2.3) 0.5 2.5
Foreign losses without income tax benefit 13.2 - -
Adjustment of prior year accruals (12.1) - -
Other, net 2.5 (3.2) 2.4
- - --------------------------------------------------------------------------
Effective Federal income tax rate (34.5%) 22.7% 18.1%
- - --------------------------------------------------------------------------
Deferred income taxes for 1993 and 1992 reflect the impact of temporary
differences between the amounts of assets and liabilities recorded for
financial reporting purposes and such amounts as measured in accordance with
tax laws. The items that compose the significant portions of deferred tax
assets and liabilities as of December 31, 1993 and January 1, 1993 are as
follows:
- - ------------------------------------------------------------------------------
December 31 January 1
Deferred Tax Asset 1993 1993
- - ------------------------------------------------------------------------------
Postretirement benefits other than pensions $4,590 $ -
Foreign Net Operating loss carryforwards 2,573 -
Restructuring costs 2,100 -
Alternative minimum tax credits 1,727 1,694
Deferred compensation 1,100 951
Capital loss carryforwards 1,081 1,784
Vacation accruals 311 465
Other items 89 563
- - ------------------------------------------------------------------------------
Total deferred tax assets $13,571 $5,457
Less: Valuation allowance (3,548) -
- - ------------------------------------------------------------------------------
$10,023 $5,457
Deferred Tax Liabilities
Depreciation and amortization 6,049 9,321
Contract tax accounting 1,447 1,577
Other items 1,516 832
- - ------------------------------------------------------------------------------
Total deferred tax liabilities $9,012 $11,730
- - ------------------------------------------------------------------------------
Net deferred tax asset (liability) $1,011 $(6,273)
- - ------------------------------------------------------------------------------
- 24 -
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
Deferred income tax assets as of December 31, 1993 include Canadian net
operating loss carry-forwards and capital loss carry-forwards. Realization of
these assets is dependent on future taxable earnings in Canada and capital
gains. A valuation allowance has been established for these items since
Canadian future earnings and capital gains cannot be reasonably assured. In the
fourth quarter of 1993, $1.8 million of tax reserves no longer required were
released and reduced the income tax provision.
(12) SHAREHOLDERS' EQUITY
At various times beginning in 1983, the Board of Directors has authorized and
subsequently increased by amendments, a plan to purchase an aggregate amount of
4,190,000 of the Company's common shares. As of December 31, 1993, the Company
had acquired approximately 3,957,000 shares in open market transactions at
prevailing market prices. Approximately 974,000 of these shares have been used
for various purposes, including conversion of preferred shares; contributions
of shares to the EDO Corporation Employee Stock Ownership Plan; grants
pursuant to the Company's Long-Term Incentive Plans; partial payment of a 50%
stock dividend; and stock options exercised. As of December 31, 1993 and 1992,
the Company held 2,982,853 and 3,094,101 treasury shares, respectively, for
future use.
At December 31, 1993, the Company had reserved, authorized and unissued common
shares for the following purposes:
- - -------------------------------------------------------------------------------
Shares
- - -------------------------------------------------------------------------------
Conversion of 7% Convertible Subordinated Debentures Due 2011 1,332,590
Stock option plans 862,613
Long-Term Incentive Plans 14,390
Conversion of preferred shares 800,560
- - -------------------------------------------------------------------------------
3,010,153
- - -------------------------------------------------------------------------------
(13) STOCK PLANS
The Company has granted nonqualified stock options to officers, directors and
other key employees, under plans approved by the shareholders in 1988, 1985 and
1980, for the purchase of its common shares at the fair market value of the
shares on the date of grant. Options become exercisable in four substantially
equal annual installments beginning on the first anniversary of the date of the
grant and expiring on the tenth anniversary of the date of the grant.
Changes in options outstanding are shown below.
- - -------------------------------------------------------------------------------
1993 1992 1991
SHARES SHARES SHARES
SUBJECT SUBJECT SUBJECT
PRICE TO PRICE TO PRICE TO
RANGE OPTION RANGE OPTION RANGE OPTION
- - -------------------------------------------------------------------------------
Beginning
of year $4.31-21.79 807,413 $4.31-21.79 831,963 $4.31-21.79 756,538
Options
granted 5.69- 6.94 20,000 5.56- 7.75 32,000 5.44- 7.32 112,850
Options
exercised 4.31 (1,000) - - 5.69 (1,000)
Options
cancelled 7.00-21.79 (34,450) 4.31-21.79 (56,550) 5.69-21.79 (36,425)
- - -------------------------------------------------------------------------------
End of
year 4.31-16.94 791,963 $4.31-21.79 807,413 $4.31-21.79 831,963
- - -------------------------------------------------------------------------------
Exercisable
at year
end 596,407 440,076 271,419
- - -------------------------------------------------------------------------------
In 1983 and 1988, the shareholders of the Company approved the adoption of
Long-Term Incentive Plans (the Plans) for key executives. The Plans provide for
the awarding of up to 318,750 restricted common shares of the Company, and
performance units which are payable in cash.
As of December 31, 1992, Plan participants had been awarded 304,360 restricted
common shares and performance units. The restrictions on 153,060 shares have
lapsed previously. Restrictions on the remaining 151,300 shares will lapse in
1994 and 1995. The value of the performance units is based upon the market
value of the Company's common shares at the end of the defined performance
period and the attainment of predetermined operating goals. The cost of this
award charged to operations in 1993, 1992 and 1991 was $191,000, $232,000 and
$363,000 and, respectively.
Additional Plan awards, if made, will be based upon the future performance of
the Company. The 1983 Plan expired in 1992 and the 1988 Plan will expire in
1997.
(14) OTHER EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of service
and the employees' highest five-year average base salary in the final ten years
of employment. The Company's funding policy is to make annual contributions to
the extent such contributions are actuarially determined and tax deductible.
The net pension expense for 1993, 1992 and 1991 was $732,000, $820,000 and
$1,482,000, respectively, which assumed a
- 25 -
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
discount rate of 8.00%, 8.25% and 9.00%, respectively. The expected long-term
rate of return on plan assets was 9.0% in 1993 and 1992 and 10.0% in 1991. The
actuarial computations assumed a discount rate on benefit obligations at
December 31 of 7.00% for 1993 and 8.00% for 1992. The assumed rate of
compensation increase approximates the Company's previous experience.
A summary of the components of net periodic pension expense for 1993, 1992 and
1991 follows:
- - -------------------------------------------------------------------------------
1993 1992 1991
(in thousands)
- - -------------------------------------------------------------------------------
Service cost $ 1,931 $ 1,900 $ 1,803
Interest cost on projected benefit obligation 5,209 5,054 4,912
Actual return on plan assets (9,078) (6,811) (17,770)
Net amortization and deferral 2,670 677 12,537
- - -------------------------------------------------------------------------------
Net pension expense $ 732 $ 820 $ 1,482
- - -------------------------------------------------------------------------------
The funded status of the plan for 1993 and 1992 was as follows:
- - ---------------------------------------------------------------------
1993 1992
(in thousands)
- - ---------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$67,134 and 58,269 for
1993 and 1992, respectively $(69,348) $(60,966)
- - ---------------------------------------------------------------------
Projected benefit obligation for service
rendered to date $(78,038) $(68,196)
Plan assets at fair value 79,554 74,644
- - ---------------------------------------------------------------------
Funded status of plan 1,516 6,448
Unrecognized net loss (gain) from past
experience different from that
assumed and effects of changes in
assumptions (369) (4,865)
Unrecognized prior service cost at
December 31, being amortized over 8 years
and 6 years, respectively 725 847
Unrecognized net (asset) at December 31,
being amortized over 15 years (67) (75)
- - ---------------------------------------------------------------------
Prepaid pension cost $ 1,805 $ 2,355
- - ---------------------------------------------------------------------
In addition, the Company established in 1988 a supplemental defined benefit
plan for substantially all employees. In 1993, 1992 and 1991, the net pension
expense for this plan was approximately $36,000, $32,000 and $31,000,
respectively, and the projected benefit obligation exceeded plan assets by
approximately $310,000 at December 31, 1993 and $254,000 at December 31, 1992.
The Company also has a supplemental retirement plan for officers and certain
employees under which the Company has agreed to pay, at the option of the
individual, either a predetermined retirement benefit or a fully paid up life
insurance policy. In the event of preretirement death or disability, the plan
provides for similar benefits. At December 31, 1993, the projected benefit
obligation of the plan was $3,775,000. The aggregate cash surrender value of
the life insurance on the plan participants, which is intended to fund the
supplemental retirement plan benefits, was $2,390,000 at the most recent
anniversary date. Total expenses under this plan in 1993, 1992 and 1991 were
$332,000, $321,000 and $283,000, respectively.
(15) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company provides certain health care and life insurance benefits for
qualified retired employees and dependents at certain locations. These benefits
are funded on a pay-as-you-go basis, with the retiree paying a portion of the
cost through contributions, deductibles and coinsurance provisions. The Company
has always retained the right to modify or terminate the plans providing these
benefits.
Effective January 1, 1993, the Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions." SFAS No. 106 requires recognition of these
benefit expenses on an accrual basis as the employees earn them during their
employment rather than when they are actually paid. The adoption has resulted
in a onetime noncash charge of $13.4 million before income tax credits ($9.4
million after income tax credits, or $1.74 per common share) for the
accumulated postretirement obligation recognized as a cumulative effect of
accounting change.
Cash outlays relating to retiree health care and life insurance benefits
amounted to $1,086,000, $840,000 and $824,000 for 1993, 1992 and 1991,
respectively.
Postretirement health care and life insurance expense included the following
components for the year ended December 31, 1993:
- - --------------------------------------------------------------------------
(In thousands)
- - --------------------------------------------------------------------------
Service cost - benefits earned during the period $ 129
Interest cost 1,100
- - --------------------------------------------------------------------------
Total postretirement health care and life insurance expense $1,229
- - --------------------------------------------------------------------------
The postretirement healthcare and life insurance expense assumed a discount
rate of 8.5%.
The funded status and breakdown of the postretirement health care and life
insurance benefits are as follows as of December 31, 1993:
- 26 -
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------
(In thousands)
Acumulated postretirement benefit obligation:
Retirees $11,070
Eligible Actives 1,674
Other ineligible actives 2,027
- - --------------------------------------------------------------------
Unfunded accumulated postretirement benefit obligation $14,771
Unrecognized net loss (1,279)
- - --------------------------------------------------------------------
Accrued postretirement benefit cost $13,492
- - --------------------------------------------------------------------
Actuarial assumptions used in determining the cost and the accumulated
postretirement benefit obligation include a discount rate of 7.5%. Effective
January 1, 1993, the Company has modified these benefit plans to significantly
limit the annual increase of these costs to the Company to a maximum of 5
percent per year through use of copayments from the employees and retirees. As
a result, the Company's exposure to increases in the health care cost trend
rate will be limited to this 5 percent ceiling.
(16) COMMITMENTS AND CONTINGENCIES
The Company is contingently liable under the terms of letters of credit (Note
9) aggregating approximately $5,200,000 at December 31, 1993, should it fail to
perform in accordance with the terms of its contracts with foreign customers.
At December 31, 1993, the Company and its subsidiaries were obligated under
building and equipment leases expiring between 1994 and 1998. Rental expense
under such leases for the years ended December 31, 1993, 1992 and 1991 amounted
to $2,900,000, $2,700,000 and $3,300,000, respectively. Minimum future rentals
under those obligations with noncancellable terms in excess of one year are as
follows: 1994 - $2,700,000; 1995 - $2,300,000; 1996 - $1,800,000; 1997 -
$1,700,000; and 1998 - $1,600,000.
(17) LEGAL MATTERS
The Company and three other companies have entered into a consent decree with
the Federal government for the remediation of a Superfund site. The Company
estimates that its share of the costs will be approximately $8.5 million. This
estimate, subject to reasonable tolerances, represents amounts for capital
requirements, government past and oversight costs, and the present value of
maintenance and operation of the remedy over 30 years. A large portion of these
costs, however, will be expended over the next two to three years. The Company
believes others not party to the consent decree should share in a substantial
portion of the costs and the Company is pursuing them for such costs. The
Company also believes it is covered by liability insurance for all the costs it
incurs. Its insurance carriers have neither agreed nor disagreed with the
Company's position, but the matter is in court to determine the insurers'
defense and indemnification obligations to the Company. The Company does not
believe the ultimate outcome of this matter will have a material adverse
effect on its consolidated financial position. Approximately $2.4 million of
costs incurred through 1993 are included in other assets in the accompanying
December 31, 1993, Consolidated Balance Sheet.
In 1991, the Company reached an out-of-court settlement in connection with a
contract dispute. As a result, the Company recorded a pre-tax charge of
approximately $5.6 million.
In 1993, the Company reached an out-of-court settlement in connection with a
real estate contract dispute. As a result, the Company recorded a pre-tax
charge of approximately $1.2 million.
Additionally, the Company and its subsidiaries are subject to certain legal
actions that arise out of the normal course of business. It is management's
belief that the ultimate outcome of these actions will not have a material
effect on the Company's consolidated financial position.
(18) BUSINESS SEGMENTS
The nature of the Company's products are described elsewhere in this Annual
Report. In 1992, the Company modified its segment reporting by reclassifying
essentially all military products into the Military Systems segment and
changing the Marine Systems and Specialized Products segment to the Commercial
and Other Products segment. Current and historical segment data have been
modified throughout this report to reflect this change. This change has been
made to distinguish between commercial products and military systems as the
Company focuses on commercial product initiatives.
Sales between industry segments approximate market price. Sales are made and
credit is granted generally to the U.S. Government or to customers in the
defense or aerospace industry. The Company considers the risks associated with
such customers to be minimal.
Domestic government sales, which include sales where the Company is a
subcontractor to a prime contractor with the government, amounted to 56%, 60%
and 61% of net sales, which were 69%, 69% and 68% of Military Systems sales and
33%, 39% and 42% of Commercial and Other Products sales for 1993, 1992 and
1991, respectively.
Export sales comprised 22%, 24% and 27% of net sales for 1993, 1992 and 1991,
respectively.
Principal products and systems by industry segment are as follows:
Military Systems:
Ejection Release Units (ERU)
Sonar Systems
Acoustic Systems
Airborne Mine Countermeasure Systems (AMCM)
Electroceramic Components
Command, Control, Communications & Intelligence Systems (C3I)
Fiber-Reinforced Structures
Commercial and Other Products:
Electroceramic Components
Acoustic Instrument Systems
Spaceflight Systems
Infrared Instrumentation
Fiber-Reinforced Structures
Composite Sports Products
Natural Gas Vehicle Products
- 27 -
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
The distribution of sales, operating earnings and identifiable
assets of the Company's business segments follows:
- - -------------------------------------------------------------------------------
1993 1992 1991
(in thousands)
- - -------------------------------------------------------------------------------
Sales:
Military Systems:
Unaffiliated customers $ 66,915 $ 89,681 $108,109
Intersegment sales - - 22
- - -------------------------------------------------------------------------------
66,915 89,681 108,131
Commercial & Other Products:
Unaffiliated customers 37,223 36,090 37,584
Intersegment sales 232 426 763
- - -------------------------------------------------------------------------------
37,455 36,516 38,347
Less intersegment sales 232 426 785
- - -------------------------------------------------------------------------------
Net sales $104,138 $125,771 $145,693
- - -------------------------------------------------------------------------------
Operating (loss) earnings:
Military Systems $ (5,082) $ 10,096 $ 10,637
Commercial & Other Products (200) 4,543 4,256
- - -------------------------------------------------------------------------------
(5,282) 14,639 14,893
Net interest (expense) (2,201) (2,504) (2,404)
General corporate expenses (4,146) (4,281) (3,785)
Litigation settlement (1,166) - (5,589)
Other expense, net (1,390) (443) (585)
- - -------------------------------------------------------------------------------
Earnings (loss) before Federal and foreign
income taxes, cumulative effect of
accounting change, minority interest and
extraordinary gain $(14,185) $ 7,411 $ 2,530
- - -------------------------------------------------------------------------------
Identifiable assets:
Military Systems $ 42,943 $ 75,922 $ 85,623
Commercial & Other Products 62,373 47,734 42,113
Corporate 18,089 9,692 9,362
- - -------------------------------------------------------------------------------
$123,405 $133,348 $137,098
- - -------------------------------------------------------------------------------
Depreciation expense:
Military Systems $ 3,948 $ 4,536 $ 4,549
Commercial & Other Products 2,503 1,924 1,647
- - -------------------------------------------------------------------------------
$ 6,451 $ 6,460 $ 6,196
- - -------------------------------------------------------------------------------
Capital expenditures:
Military Systems $ 960 $ 1,871 $ 3,882
Commercial & Other Products 3,557 2,695 1,727
- - -------------------------------------------------------------------------------
$ 4,517 $ 4,566 $ 5,609
- - -------------------------------------------------------------------------------
KPMG Peat Marwick
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
EDO Corporation
We have audited the accompanying consolidated balance sheets of EDO Corporation
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EDO Corporation and
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statements
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for
Income Taxes" in 1993.
KPMG Peat Marwick
Jericho, New York
March 4, 1994
- 28 -
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
EDO CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth unaudited quarterly financial information for
1993 and 1992 (in thousands, except per share amounts).
- - -------------------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
1993 1992 1993 1992 1993 1992 1993 1992
- - -------------------------------------------------------------------------------
Net sales $27,473 $30,565 $26,764 $30,751 $22,450 $33,434 $27,451 $31,021
Gross profit 4,490 7,005 3,637 7,196 3,776 6,354 5,094 7,885
Net earnings
(loss) before
cumulative
effect of
accounting
change 566 1,421 (936)a 1,395 (387) 1,386 (6,191)b 1,475
Cumulative
effect of
change in
accounting
for post-
retirement
benefits (9,400) - - - -
- - -------------------------------------------------------------------------------
Net earnings
(loss) $(8,834) $1,421 $(936) $1,395 $(387) $1,386 $(6,191) $1,475
Earnings
(loss) per
share:
Primary:
Net
earnings
(loss)
before
accounting
change $0.04 $0.20 $(0.24) $0.19 $(0.14) $0.19 $(1.19) $0.21
Cumulative
effect of
accounting
change (1.75) - - - - - -
- - -------------------------------------------------------------------------------
Net
earnings
(loss) $(1.71) $0.20 $(0.24) $0.19 $(0.14) $0.19 $(1.19) $0.21
Fully
diluted:
Net
earnings
before
accounting
change $ - $0.18 $ - $0.17 $ - $0.17 $ - $0.18
Cumulative
effect of
accounting
change - - - - - - - -
- - -------------------------------------------------------------------------------
Net
earnings $ - $0.18 $ - $0.17 $ - $0.17 $ - $0.18
Cash
dividends
per common
share $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07
Preferred
dividends
paid $359 $371 $359 $362 $346 $363 $342 $359
a The 1993 second quarter results include a nonoperating litigation settlement
charge of approximately $1,200 representing $800 or $0.15 per share after pro
forma tax effect.
b The 1993 fourth quarter results include a restructuring charge of $9,800
which represents $6,200 or $1.15 per share after pro forma tax effect. These
results also include a nonoperating charge of $1,000 or $0.18 per share, which
the Company added to its general reserve for its long-term investments.
- 29 -
<PAGE>
EXHIBIT 21
<PAGE>
LIST OF SUBSIDIARIES
The following are subsidiaries of the Company, the respective jurisdictions of
their incorporation and names (if any) under which they do business. The
Company owns all of the voting securities (including directors' qualifying
shares owned beneficially by the Company) of each such subsidiary except the
Company owns only approximately 60% of EDO (Canada) Limited.
The names of particular subsidiaries of the Company have been omitted. When
considered in the aggregate as a single subsidiary, these omitted subsidiaries
do not constitute a "significant subsidiary" as such term is defined in Rule
1-02(v) of Regulation S-X of the Securities Exchange Act of 1934, as amended.
Jurisdiction Name Under Which
of Subsidiary
Name Incorporation Does Business
EDO Western Corporation Utah EDO Corporation-
Acoustic Division
Barnes Engineering Company Delaware EDO Corporation-
Barnes Engineering
Division
EDO (Canada) Limited Canada
EDO Operations (Israel) Ltd. Israel
EDO Foreign Sales Corporation U.S. Virgin Islands
EDO Sports, Inc. Delaware
EDO Western International Delaware
Corporation
EDO International Delaware
Corporation
VT Technologies, Inc. Delaware
EDO Energy Corporation Delaware
EDO Automotive Natural Gas, Inc. Delaware
<PAGE>
Exhibit 23
<PAGE>
KPMG PEAT MARWICK
Certified Public Accountants
Consent of Independent Auditors
Board of Directors
EDO Corporation:
We consent to incorporation by reference in the Registration Statements No.2-
69243, 33-1526 and 33-28020 on Form S-8 of EDO Corporation of our reports dated
March 4, 1994, relating to the consolidated balance sheets of EDO Corporation
and subsidiaries as of December 31, 1993 and 1992 and the related consolidated
statements of operations, shareholders' equity, and cash flows and related
schedules for each of the years in the three-year period ended December 31,
1993, which reports are incorporated by reference or appear in the December 31,
1993 annual report on Form 10-K of EDO Corporation.
Our reports refer to changes in the methods of accounting for income taxes and
postretirement health care and life insurance benefits.
KPMG PEAT MARWICK
Jericho, New York
March 28, 1994
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Gerald Albert, Michael J.
Hegarty and Marvin D. Genzer, and each of them, with full power of
substitution, the undersigned's true and lawful attorneys and agents to execute
in his name and on his behalf, in any and all capabilities, the Annual Report
on Form 10-K of EDO Corporation (the "Company"), a New York corporation, for
the fiscal year ended December 31, 1993, and any and all other instruments
which such attorneys and agents, or any of them, deem necessary or advisable to
enable the Company to comply with the annual reporting requirements of the
Securities Exchange Act of 1934, as amended, and the rules, regulations and
requirements of the Securities and Exchange Commission; and the undersigned
hereby ratifies and confirms as his own act and deed all that such attorneys
and agents, and each of them, shall do or cause to be done by virtue hereof.
Any one of such attorneys and agents shall have, and may exercise, all of the
powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has subscribed his signature this 18 day of
March, 1994.
Gerald Albert
Frank A. Fariello
Marvin D. Genzer
Kenneth A. Paladino
Alfred Brittain III
Joseph F. Engelberger
Robert M. Hanisee
Robert A. Lapetina
John H. Meyn
Richard Rachals
Ralph O. Romaine
William R. Ryan
<PAGE>
March 30, 1994
Via Federal Express
OFIS Filer Support
S.E.C. Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
EDO Corporation
File No. 1-3985
Dear Sir or Madam:
On behalf of EDO Corporation (the "Company"), I enclose herewith a copy of the
Company's Annual Report on Form 10-K, including all Exhibits as filed under
EDGAR.
I also enclose herewith eight copies of the Company's Definitive Proxy
Statement, dated March 23, 1994, and the Company's 1993 Annual Report to
Shareholders, portions of each of which are incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993. Only those portions of the Company's 1993 Annual Report to Shareholders
which are expressly incorporated by reference in the Company's Annual Report on
Form 10-K are deemed to be filed with the Commission.
One complete copy manually signed and one conformed copy of the Annual Report
on Form 10-K are being filed with the New York Stock Exchange.
Pursuant to General Instruction D.(3) to Form 10-K, the financial statements in
the enclosed report do not reflect a change from the preceding year in any
accounting principle or practice, or in the method of applying any such
principle or practice.
Very truly yours,
Marvin D. Genzer
General Counsel
MDG:alb
Enclosures
