<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GULFSTREAM AEROSPACE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3721 13-3554834
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
P.O. BOX 2206
500 GULFSTREAM ROAD
SAVANNAH, GEORGIA 31402-2206
(912) 965-3000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CHRIS A. DAVIS
GULFSTREAM AEROSPACE CORPORATION
P.O. BOX 2206
500 GULFSTREAM ROAD
SAVANNAH, GEORGIA 31402-2206
(912) 965-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
Lois Herzeca, Esq. Robert W. Reeder, III, Esq.
FRIED, FRANK, HARRIS, SHRIVER & SULLIVAN & CROMWELL
JACOBSON 125 Broad Street
One New York Plaza New York, New York 10004-2498
New York, New York 10004-1980 (212) 558-4000
(212) 859-8000
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1) REGISTRATION FEE (2)
<S> <C> <C>
Common Stock, par value $.01 per share.... $740,600,000 $255,379
</TABLE>
(1) A portion of the proposed maximum aggregate offering price represents shares
that are to be offered outside of the United States but that may be resold
from time to time in the United States. Such shares are not being registered
for the purpose of sales outside the United States.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 9, 1996
28,000,000 SHARES
[LOGO]
GULFSTREAM AEROSPACE CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 28,000,000 shares of Common Stock offered, 22,400,000 shares are
being offered hereby in the United States and 5,600,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
Of the 28,000,000 shares of Common Stock offered, 4,782,600 shares are being
sold by the Company and 23,217,400 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently anticipated that the initial public offering
price per share will be between $21.00 and $25.00. For factors to be considered
in determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "GAC".
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
------------------ --------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $
</TABLE>
- --------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 3,360,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Selling Stockholders have granted the
International Underwriters a similar option with respect to an additional
840,000 shares as part of a concurrent International Offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount, proceeds to the Company and proceeds to the Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting".
-------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
--------------------------------------
The date of this Prospectus is , 1996.
<PAGE>
[PHOTO OF GULFSTREAM PRODUCT]
The Company intends to furnish to its stockholders annual reports containing
audited financial statements for each fiscal year of the Company.
-------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO THE REPURCHASE OF ALL OF THE
OUTSTANDING PREFERRED STOCK AND THE EXCHANGE, REDESIGNATION AND 1.5-FOR-1 STOCK
SPLIT OF THE COMPANY'S COMMON STOCK, WHICH WILL OCCUR IMMEDIATELY PRIOR TO, OR
SIMULTANEOUSLY WITH, THE CLOSING OF THE OFFERINGS (COLLECTIVELY, THE "1996
RECAPITALIZATION") DESCRIBED UNDER "DESCRIPTION OF CAPITAL STOCK", (II) ASSUMES
THAT THE OVER-ALLOTMENT OPTIONS GRANTED TO THE UNDERWRITERS ARE NOT EXERCISED
AND (III) ASSUMES THE ISSUANCE AND SALE OF COMMON STOCK IN THE OFFERINGS AT
$23.00 PER SHARE (THE MID-POINT OF THE RANGE OF THE INITIAL PUBLIC OFFERING
PRICES SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS). UNLESS THE CONTEXT
REQUIRES OTHERWISE, REFERENCES TO THE COMPANY OR GULFSTREAM REFER TO GULFSTREAM
AEROSPACE CORPORATION, ITS PREDECESSORS AND ITS SUBSIDIARIES AND REFERENCES TO
"COMMON STOCK" REFER TO THE COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF
GULFSTREAM AEROSPACE CORPORATION AFTER GIVING EFFECT TO THE 1996
RECAPITALIZATION. REFERENCES IN THIS PROSPECTUS TO (I) MILES ARE TO NAUTICAL
MILES; ONE NAUTICAL MILE IS EQUAL TO 1.15 STATUTE MILES; AND (II) FISCAL YEARS
ARE TO THE FISCAL YEAR OF THE COMPANY ENDED DECEMBER 31 OF THE YEAR SPECIFIED
(e.g., "FISCAL 1995" REFERS TO THE YEAR ENDED DECEMBER 31, 1995).
THE COMPANY
Gulfstream Aerospace Corporation is recognized worldwide as a leading
designer, developer, manufacturer and marketer of the most technologically
advanced intercontinental business jet aircraft. Since 1966, when the Company
created the large cabin business jet category with the introduction of the
Gulfstream II, the Company has dominated this market segment, capturing a
cumulative market share of 60%. The Company has manufactured and sold over 950
large business aircraft since the introduction of the Gulfstream product line in
1958. Since 1990, the Company has been owned by certain partnerships formed by
Forstmann Little & Co., a private investment firm ("Forstmann Little").
The Company has developed a broad range of aircraft products to meet the
aviation needs of its targeted customers. The Company's current principal
aircraft products are the Gulfstream IV-SP, the Gulfstream V, Gulfstream
Shares-TM- (fractional ownership interests in Gulfstream IV-SPs) and pre-owned
Gulfstream aircraft. As an integral part of its aircraft product offerings, the
Company offers aircraft completion (exterior painting of the aircraft and
installation of customer selected interiors and optional avionics) and worldwide
aircraft maintenance services and technical support for all Gulfstream aircraft.
In addition, the Company's financial services subsidiary, Gulfstream Financial
Services Corporation, through its private label relationship with a third-party
aircraft financing provider, offers customized products to finance the worldwide
sale of Gulfstream aircraft.
BUSINESS STRATEGY
Beginning in 1993, the Company implemented a major restructuring and
refocusing of its business in order to improve profitability, increase market
share and build backlog. Theodore J. Forstmann, who assumed the position of
Chairman of the Company in November 1993, recruited a new senior management team
(including over 20 senior executives with aviation and aerospace industry
experience) and established a five member Management Committee, chaired by Mr.
Forstmann and comprised of four other key executives who share responsibility
for strategic decisions, management and oversight of the Company's operations.
In addition, Mr. Forstmann assembled both a Board of Directors and an
International Advisory Board comprised of prominent business executives and
senior statesmen to counsel the Company and assist in its refocused sales and
operating initiatives.
Under the leadership of Mr. Forstmann and the new management team, the
Company (i) recapitalized its balance sheet, thereby reducing the Company's
annual interest expense by approximately $38 million, (ii) reduced the Company's
cost structure, yielding over $50 million in annual savings, while increasing
the Company's aircraft production rate, (iii) strengthened the Company's market
position and aircraft order growth, resulting in a contract backlog of
approximately $2.7 billion of revenues, plus letters of intent and executed
contracts (with financing contingencies or awaiting initial deposits)
representing approximately $540 million of additional potential revenues, at
July 31, 1996, (iv) expanded and improved the Company's product offerings and
(v) increased the Company's completion order rate and expanded its worldwide
service and support business.
3
<PAGE>
The most significant aspects of the restructuring were:
RECAPITALIZATION AND SIGNIFICANT REDUCTION OF INTEREST EXPENSE
In late 1993, a partnership formed by Forstmann Little exchanged
approximately $469 million of the Company's subordinated debentures (including
accrued interest) for preferred stock, thereby reducing the Company's annual
interest expense by approximately $38 million. See "Certain Transactions -- The
Acquisition; Subsequent Events". This recapitalization and the resulting
increase in cash flow (together with the cost reductions and manufacturing
efficiencies discussed below) enabled the Company to dedicate additional
resources to significantly enhance the design of the Gulfstream V, the Company's
new ultra-long range business jet.
COST REDUCTIONS AND INCREASED PRODUCTION RATE
The Company initiated a restructuring that significantly reduced its cost
structure and product manufacturing cycle times. The restructuring program
included a voluntary reduction in the Company's work force of approximately 15%,
the outsourcing of certain manufacturing activities, the renegotiation of major
supplier contracts and the termination of certain leases, which, in the
aggregate, have yielded over $50 million in annual savings. Additionally, the
Company has reduced final assembly time of an aircraft by more than 50% from
over 67 days to approximately 30 days and has reduced aircraft completion time
from approximately 35 weeks to approximately 21 weeks. As a result of these
cycle time reductions, the use of common tooling and selected outsourcing, the
Company expects to increase its production rate from an average of 2.4 aircraft
per month in 1996 to an average of 3.5 to 4.0 aircraft per month in 1997.
NEW MARKETING INITIATIVES AND SIGNIFICANTLY INCREASED BACKLOG
The Company developed and implemented a new, proactive marketing strategy to
substantially broaden the markets for its products. In addition to the Company's
historical practice of targeting its existing customer base, the Company (a)
initiated an aggressive marketing campaign focused on companies and individuals
that have not previously owned Gulfstream aircraft, (b) significantly expanded
international sales activities, (c) introduced its Gulfstream Shares-TM- program
and (d) offered its customers access to customized financing to support the sale
of new and pre-owned Gulfstream aircraft. The Company has also redirected its
sales and marketing effort to focus on high level decision makers through
increased involvement of the Company's Board of Directors, International
Advisory Board and senior management in the selling process and restructured its
sales commission program to more effectively support the Company's strategic
goals.
As a result of these new marketing initiatives, the Company has experienced
strong growth in aircraft orders and backlog and believes that it has
substantially strengthened its market position. At July 31, 1996, the Company
had a contract backlog of approximately $2.7 billion of revenues, representing
16 contracts for Gulfstream IV-SPs and 63 contracts for Gulfstream Vs.
Approximately 48% of the Gulfstream V backlog units are scheduled for delivery
beyond 1997. In addition, at July 31, 1996, the Company had letters of intent
and executed contracts (with financing contingencies or awaiting initial
deposits) for a total of 20 Gulfstream IV-SPs and 1 Gulfstream V, representing
approximately $540 million of additional potential revenues, 95% of which would
be reflected in 1997 and beyond.
EXPANDED PRODUCT OFFERINGS
The Company expanded its product offerings to provide multiple aircraft
products in contrast to its historical strategy of offering only one new
aircraft model at a time. In addition, the Company began marketing its products
as an integrated whole, offering completion and worldwide maintenance services
and technical support for all Gulfstream aircraft. The Company's current product
offerings include the following:
GULFSTREAM V. The Company significantly enhanced the design and performance
characteristics of the Gulfstream V, which was in the early stage of development
in 1993, and accelerated the pace of its development. The Gulfstream V is
targeted at the market for ultra-long range business jet aircraft (6,500
nautical miles) which is a new market segment for the business jet industry. The
Gulfstream V is in the advanced stages of flight testing and is on schedule to
obtain certification by the Federal Aviation Administration ("FAA") in the last
quarter of 1996, at least 12 months prior to the targeted certification date of
any other ultra-long range business jet aircraft. The Company believes the
Gulfstream V provides the longest range, fastest cruising speed and most
technologically advanced avionics of any ultra-long range business jet aircraft
in operation.
4
<PAGE>
GULFSTREAM IV-SP. In 1993, the Company introduced the Gulfstream IV-SP,
which offers significantly improved performance and upgraded avionics as
compared to its predecessor, the Gulfstream IV. The Company believes that the
Gulfstream IV-SP offers the best combination of large cabin size, long range
(4,220 nautical miles), fast cruising speed and technologically advanced
avionics of any large business jet aircraft currently available.
GULFSTREAM SHARES-TM-. In 1995, the Company introduced a Gulfstream IV-SP
fractional share ownership program (Gulfstream Shares-TM-) in conjunction with
Executive Jet International, Inc.'s ("EJI") NetJets-Registered Trademark-
Program. Gulfstream Shares-TM- provides customers with the benefits of
Gulfstream aircraft ownership at a substantially lower cost than full aircraft
ownership and significantly increases the Company's potential customer base. To
date, the Company has contracted to deliver 16 Gulfstream IV-SPs to EJI in
connection with this program, 7 of which have been delivered and 9 of which will
be delivered through 1998. EJI also has an option to purchase 5 additional
Gulfstream IV-SPs in 1998 and 2 Gulfstream Vs for delivery in 1999.
PRE-OWNED GULFSTREAM AIRCRAFT. The Company assembled a new, experienced
management team for its pre-owned aircraft sales operations and introduced a
number of initiatives that have enhanced the marketability of pre-owned
Gulfstream aircraft. In addition, the Company has been successful in using
pre-owned Gulfstream aircraft as a significant tool to expand the Company's
potential market and to compete against other manufacturers of lower priced, new
aircraft products. As a result of the Company's competitive success in marketing
pre-owned aircraft, the Company has reduced its inventory of pre-owned aircraft
available for sale to approximately $35.0 million as of June 30, 1996, as
compared with approximately $125.8 million at October 31, 1993.
IMPROVED COMPLETION, SERVICE AND SUPPORT
The Company's new marketing strategy has resulted in substantial
improvements in the Company's completion business. Gulfstream currently
completes approximately 95% of all new Gulfstream aircraft sold to customers as
compared to 70% in 1990. Further, the Company has significantly expanded its
worldwide maintenance services and technical support for Gulfstream aircraft,
including opening a new 200,000 square foot service center in 1996 to increase
its ability to provide high quality service to Gulfstream customers. These
service and support activities provide the Company with ongoing customer
contact, which the Company believes enhances its opportunity to sell new
aircraft to existing service and support customers.
SUCCESSFUL CO-PRODUCTION OF GULFSTREAM V AND GULFSTREAM IV-SP AIRCRAFT
The Company is currently manufacturing both the Gulfstream V and Gulfstream
IV-SP. Upon FAA certification of the Gulfstream V, which is expected to occur in
the last quarter of 1996, the Company will begin delivering Gulfstream V
aircraft to customers. Given the Company's increased manufacturing volume and
large backlog of orders, the Company expects to deliver aircraft in 1997 at
rates substantially in excess of those experienced in the recent past. Assuming
FAA certification in the last quarter of 1996, the Company expects to deliver
approximately 46 new aircraft in 1997, including 19 Gulfstream IV-SP and 27
Gulfstream V aircraft, representing a 59% increase over the Company's expected
deliveries in 1996.
Certain partnerships formed by Forstmann Little & Co. (the "Forstmann Little
Partnerships") own substantially all of the shares of the Company's currently
outstanding common stock (87.1% of the common stock on a fully diluted basis).
Shares of Common Stock to be sold pursuant to the Offerings will be sold by the
Company and by the Forstmann Little Partnerships, as well as by certain other
holders of the Company's common stock and certain option holders (collectively,
the Forstmann Little Partnerships and such holders of common stock and options
are the "Selling Stockholders"). After the consummation of the Offerings, the
Forstmann Little Partnerships will beneficially own approximately 61.2% of the
Common Stock (55.4% on a fully diluted basis) or 55.8% (50.9% on a fully diluted
basis), assuming that the Underwriters' over-allotment options are exercised in
full. See "Certain Transactions -- The Acquisition; Subsequent Events" and
"Principal and Selling Stockholders".
5
<PAGE>
THE OFFERINGS (1)
<TABLE>
<S> <C>
Common Stock offered by the
Company: (2)
United States Offering........ 3,826,100 shares
International Offering........ 956,500 shares
Total....................... 4,782,600 shares
Common Stock offered by the
Selling Stockholders: (2)
United States Offering........ 18,573,900 shares
International Offering........ 4,643,500 shares
Total....................... 23,217,400 shares
Common Stock to be outstanding
after the Offerings............ 72,220,541 shares (2)(3)
Use of proceeds by the Company.. Together with proceeds of $400 million from new bank borrowings and
funds generated from operations, to repurchase the outstanding
Series A 7% cumulative preferred stock of the Company (the "7%
Cumulative Preferred Stock") at its stated value for an aggregate
purchase price of $450 million, plus approximately $7.9 million of
unpaid dividends, to repay outstanding indebtedness under existing
credit facilities (which was $119.8 million at June 30, 1996) and to
pay the fees and expenses incurred in connection with the Offerings
and the refinancing of the Company's indebtedness. The Company will
not receive any of the proceeds from the sale of shares by the
Selling Stockholders. See "Use of Proceeds".
Proposed NYSE symbol............ GAC
</TABLE>
- --------------
(1) The offering of 22,400,000 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the offering of 5,600,000 shares
of Common Stock initially being offered outside the United States (the
"International Offering") are collectively referred to as the "Offerings".
The underwriters for the U.S. Offering (the "U.S. Underwriters") and the
underwriters for the International Offering (the "International
Underwriters") are collectively referred to as the "Underwriters".
(2) Assumes that the Underwriters' over-allotment options are not exercised. See
"Underwriting".
(3) Includes 2,122,928 shares of Common Stock to be issued simultaneously with
or immediately prior to the consummation of the Offerings upon exercise of
outstanding stock options, which shares will be sold in the Offerings. Does
not include 7,527,210 shares issuable upon the exercise of additional
outstanding stock options. See "Management -- Stock Options".
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
factors set forth under "Risk Factors" as well as the other information set
forth in this Prospectus.
6
<PAGE>
SUMMARY FINANCIAL DATA
The summary historical financial information presented below, except the pro
forma financial information, is derived from the Company's Financial Statements
as of the date and for the periods indicated. The summary historical financial
statements for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996 and pro forma financial information should
be read in conjunction with the Company's Consolidated Financial Statements and
the related notes thereto included elsewhere in this Prospectus,
"Capitalization", "Selected Financial Data", "Pro Forma Condensed Financial
Information", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business -- Business Strategy -- Recapitalization and
Significant Reduction of Interest Expense" and "Description of Capital Stock".
In the six months ended June 30, 1996, 3 fewer green aircraft were delivered
than were in the same period in 1995 as a result of the delivery in early 1995
of 3 units which were produced in late 1994. In addition, beginning in the
fourth quarter of 1995, the Company dedicated a portion of its production
capacity to the manufacture of Gulfstream Vs which the Company will not begin
delivering to customers until after FAA certification, which is expected in the
fourth quarter of 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
STATEMENT OF OPERATIONS DATA:
Net revenues.................................... $ 887,234 $ 900,419 $ 887,113 $ 901,638 $1,041,514 $ 474,884 $ 458,672
Gross profit.................................... 138,681 175,865 149,752 191,084 205,967 96,862 103,831
Restructuring charge............................ 203,911(1)
Interest expense................................ 72,679 61,235 48,940 20,686 18,704 9,945 7,166
Income (loss) from operations................... 21,254 9,528 (226,773) 43,883 42,090 16,358 14,932
Net income (loss)............................... (49,728) (49,572) (275,227) 23,564 28,894 7,839 15,359
Pro forma net income (loss) per share (2)....... $ .18 $ (.02) $ .08
Pro forma common shares outstanding (2)......... 78,314 78,314 78,314
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................. $ 248,974 $ 268,881 $ 302,369 $ 301,913 $ 356,976 $ 322,261 $ 232,508
Total assets.................................... 991,841 945,433 799,470 745,761 981,253 823,861 1,159,371
Total debt (3).................................. 719,500 670,258 206,145(4) 178,145 146,331 172,863 119,798
Total stockholders' equity (deficit) (3)........ (27,191) (26,700) 164,395 188,950 217,540 196,789 123,103
OTHER DATA:
Depreciation and amortization................... $ 49,687 $ 52,374 $ 47,866 $ 24,151 $ 23,094 $ 11,530 $ 12,242
Research and development expense................ 9,555 36,295 47,990 57,438 63,098 34,076 34,746
Stock option compensation expense............... 5,200
OPERATING DATA:
Units delivered during period:
Gulfstream IV/IV-SP........................... 28 25 26 22 26 14 11
Units ordered during period:
Gulfstream IV/IV-SP........................... 31 26 26 25 30 17 15
Gulfstream V.................................. 0 8 17 16 12 5 12
--------- --------- --------- ---------- ---------- ---------- ----------
Total orders.................................. 31 34 43 41 42 22 27
Units in backlog at end of period:
Gulfstream IV/IV-SP(5)........................ 5 3 3 3 7 6 11
Gulfstream V(6)............................... 0 8 24 40 50 45 62
--------- --------- --------- ---------- ---------- ---------- ----------
Total backlog (in units)...................... 5 11 27 43 57 51 73
Estimated backlog (in thousands) (7)............ $ 124,225 $ 362,466 $ 897,747 $1,473,772 $1,938,315 $1,731,532 $2,496,061
</TABLE>
- ------------------
(1) The Company recorded a charge for a restructuring plan based upon the
Company's reassessment of its business plan and its products from which it
has realized improved operating efficiencies, reduced costs, and increased
overall profitability. See Note 2 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus.
(2) Pro forma net income (loss) per share amounts are calculated based on the
pro forma net income, after giving effect to the 1996 Recapitalization,
divided by the pro forma weighted average number of common and common
equivalent shares outstanding assuming the 1996 Recapitalization shares and
the shares sold in the Offerings were outstanding for all periods reported.
For information regarding the pro forma data, see "Pro Forma Condensed
Financial Information" and "Capitalization". Due to the change in the
Company's capital structure to be effected with the 1996 Recapitalization,
historical share and per share data for all periods is not relevant and
therefore is not presented.
(3) Total debt and stockholders' equity (deficit) does not include the impact of
the 1996 Recapitalization of the Company to be effected immediately prior to
or simultaneously with the consummation of the Offerings. See
"Capitalization".
7
<PAGE>
(4) During November 1993, the Company converted $469 million of subordinated
debentures (including accrued interest) to 7% Cumulative Preferred Stock in
connection with the 1993 recapitalization. See "Business -- Business
Strategy -- Recapitalization and Significant Reduction of Interest Expense"
and "Certain Transactions -- The Acquisition; Subsequent Events".
(5) Net of 3 cancellations in each of 1992 and 1994, which generally relate to
orders placed in prior years.
(6) Net of cancellations of 1 and 2 in 1993 and 1995, respectively, which
generally relate to orders placed in prior years. As of June 30, 1996, only
3 Gulfstream V contracts had been cancelled, 2 of which were the result of
declines in the business performance of the customer and one of which was
the result of adverse economic conditions in a foreign country.
(7) Backlog includes only those orders for which the Company has entered into a
purchase contract with a customer and has received a significant (generally
non-refundable) deposit from the customer. Not included in backlog are
letters of intent, options for which definitive contracts have not been
executed or executed contracts subject to financing contingencies, which, at
June 30, 1996, represented approximately $350 million of additional
potential revenues.
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
GULFSTREAM V CERTIFICATION AND PRODUCTION
The Gulfstream V is a new aircraft product that is still in the FAA
certification process, as are its BMW Rolls-Royce BR710 engines. Neither the
Gulfstream V nor the BR710 engines have yet been delivered to customers. The
Gulfstream V and the BR710 engines have successfully passed the FAA tests
administered to date as part of their respective certification processes. While
the Company believes that the Gulfstream V and the BR710 engines are currently
on schedule to obtain FAA certification in the last quarter of 1996, no
assurance can be given that certification will occur as scheduled or that
changes in FAA policies or procedures will not delay certification.
An extended delay in the FAA certification process may have a near-term
adverse effect on the Company's results of operations. In addition, while the
Company generally receives non-refundable deposits in connection with each
order, an order may be cancelled (and the deposit returned) under certain
conditions if the delivery of the Gulfstream V is delayed more than six months
after a customer's scheduled delivery date. An extended delay in the FAA
certification process could cause an increase in the number of cancellations of
orders for Gulfstream Vs, which could have an adverse effect on the Company's
results of operation.
In contrast to its historical practice of discontinuing existing models, the
Company will continue to manufacture and sell Gulfstream IV-SPs at the same time
that it manufactures and sells Gulfstream Vs. As of July 31, 1996, the Company
had produced 5 Gulfstream Vs concurrently with its production of Gulfstream
IV-SPs. The Company expects to increase its production rate from an average of
2.4 aircraft per month in 1996 to an average of 3.5 to 4.0 aircraft per month in
1997. No assurance can be given as to the extent to which the Company can
successfully increase its rate of production.
THE BUSINESS JET AIRCRAFT MARKET
The Company's principal business is the design, development, manufacture and
marketing of large and ultra-long range business jet aircraft. Because of the
high unit selling price of its aircraft products and the availability of
commercial airlines and charters as alternative means of business travel, a
downturn in general economic conditions could result in a reduction in the
orders received by the Company for its new and pre-owned aircraft. The Company
would not be able to rely on sales of other products to offset a reduction in
sales of its aircraft. If a potential purchaser is experiencing a business
downturn or is otherwise seeking to limit its capital expenditures, the high
unit selling price of a new Gulfstream aircraft could result in such potential
purchaser deferring its purchase or changing its operating requirements and
electing to purchase a competitor's lower priced aircraft. Since the Company
relies on the sales of a relatively small number of high unit selling price new
aircraft (42 new contracts signed, and 26 aircraft delivered, in 1995) to
provide approximately 55% to 65% of its revenues, small decreases in the number
of aircraft delivered in any year could have a material adverse effect on the
results of operations for that year.
The Company believes that its reputation and the exemplary safety record of
its aircraft are important selling points for new and pre-owned Gulfstream
aircraft. The Company designs its aircraft with back-up systems for major
functions and appropriate safety margins for structural components. However, if
one or a number of catastrophic events were to occur with the Gulfstream fleet,
Gulfstream's reputation and sales of Gulfstream aircraft could be adversely
affected.
In many cases, the Company has agreed to accept, at the customer's option,
the customer's pre-owned aircraft as a trade-in in connection with the purchase
of a Gulfstream V. In connection with orders for 33 Gulfstream V aircraft, the
Company has offered customers trade-in options (which may or may not be
exercised) pursuant to which the Company will accept trade-in aircraft
(primarily Gulfstream IVs and Gulfstream IV-SPs) at a guaranteed minimum
trade-in price or its fair market value. See Note 14 to the
9
<PAGE>
Company's Consolidated Financial Statements included elsewhere in this
Prospectus. Based on the current market for pre-owned aircraft, the Company
expects to continue to be able to resell such pre-owned aircraft, and does not
expect to suffer a loss with respect to the possible trade-in of such aircraft.
However, an increased level of pre-owned aircraft or changes in the market for
pre-owned aircraft may increase the Company's inventory costs and may result in
the Company receiving lower prices for its pre-owned aircraft.
The market for large cabin business jet aircraft is highly competitive. The
Gulfstream IV-SP competes in the large cabin business jet aircraft market
segment, principally with Dassault Aviation S.A. (which recently announced that
it will merge with Aerospatiale SA) and Bombardier Inc. The Gulfstream V
competes in the ultra-long range business jet aircraft market segment, primarily
with the Global Express, which is being marketed by Canadair, a subsidiary of
Bombardier, and which is scheduled for certification at least 12 months after
the anticipated initial delivery of the Gulfstream V. In addition, in July 1996,
The Boeing Company ("Boeing"), in partnership with General Electric Co.,
publicly announced that it intends to begin to market a version of the Boeing
737 into the ultra-long range business jet aircraft market segment. Boeing has
indicated that it expects that this aircraft could be available for delivery in
late 1998 or 1999. The Company's competitors may have access to greater
resources (including, in certain cases, governmental subsidies) than are
available to the Company. The Company believes, however, that it competes
favorably with its competitors on the basis of the performance characteristics
of its aircraft, the quality, range and timeliness of the service it provides
and its innovative marketing techniques, and that it has the leading market
share in both the large cabin and ultra-long range business jet aircraft market
segments.
The Company's ability to remain pre-eminent in the large business jet and
ultra-long range business jet aircraft markets over the long term requires
continued technological and performance enhancements to Gulfstream aircraft.
Although the Company believes that the Gulfstream IV-SP and the Gulfstream V are
currently the most advanced aircraft in the marketplace, no assurance can be
given that the Company's competitors will not be able to produce aircraft
capable of performance comparable or superior to Gulfstream aircraft in the
future.
RELIANCE ON SINGLE SOURCE SUPPLIERS
As is typical among general aviation aircraft manufacturers, the Company
relies on single source suppliers for complex aircraft components and systems.
These single sources are selected based on overall aircraft systems
requirements, quality and certification requirements and competitiveness in the
market. The Company's suppliers and revenue share partners (i.e., parties which
supply components or systems for the Gulfstream V in exchange for a fixed
percentage of the revenues of each Gulfstream V sold) include Rolls-Royce
Commercial Aero Engines Limited (Gulfstream IV-SP engines), BMW Rolls-Royce GmbH
(Gulfstream V engines), Honeywell Incorporated (Gulfstream IV-SP and Gulfstream
V flight management systems/avionics), Textron Aerostructures (Gulfstream IV-SP
wing), Northrop Grumman Corporation (Gulfstream V wing revenue share partner
through its Vought Aircraft Company subsidiary and Gulfstream IV-SP nacelle
supplier), Fokker Aviation B.V. (Gulfstream V empennage revenue share partner),
The B.F. Goodrich Co. (Gulfstream IV-SP and Gulfstream V landing gears and air
speed sensors), Sundstrand Corp. (Gulfstream V electrical system and actuators)
and AlliedSignal, Inc. (Gulfstream IV-SP and Gulfstream V auxiliary power unit
and environmental control systems and Gulfstream IV-SP electrical systems).
While the Company's production activities have never been materially
affected by its inability to obtain essential components, and while the Company
maintains business interruption insurance in the event that such a disruption
should occur, the failure of certain suppliers or revenue share partners to meet
the Company's performance specifications, quality standards or delivery
schedules could have a material adverse effect on the Company's results of
operations. In addition, because of the difficulty in obtaining alternate
sources for these products, the inability of any one of the Company's single
source suppliers to deliver their products at agreed upon prices may have an
adverse effect on the Company's
10
<PAGE>
profitability or on its ability to price its aircraft competitively. The Company
works closely with its major suppliers to procure materials on a timely basis
that meet Gulfstream's high quality standards. See "Business -- Materials and
Components".
POSSIBLE FLUCTUATIONS IN QUARTERLY AND ANNUAL RESULTS
The Company records revenue from the sale of a new "green" aircraft (i.e.,
before exterior painting and installation of customer selected interiors and
optional avionics) when that aircraft is delivered to the customer. As a result,
a delay or an acceleration in the delivery of new aircraft may affect the
Company's revenues for a particular quarter or year and may make
quarter-to-quarter or year-to-year comparisons difficult. In addition, the
Company's production schedule may be affected by many factors, including timing
of deliveries by suppliers. Accordingly, the prevailing market price of the
Common Stock could be subject to fluctuations in response to variations in the
Company's production and delivery schedules. See " -- Gulfstream V Certification
and Production", " -- Reliance on Single Source Suppliers" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Quarterly Results".
LEVERAGE AND DEBT SERVICE; RESTRICTIONS ON PAYMENT OF DIVIDENDS
Pursuant to a commitment letter, dated August 9, 1996 (the "Committment
Letter"), The Chase Manhattan Bank ("Chase") and Chase Securities, Inc., as the
arranger ("CSI"), have committed to provide a $650 million credit facility (the
"Bank Facility") to Gulfstream Delaware Corporation, the principal operating
subsidiary of the Company ("Gulfstream Delaware"), under a new credit agreement
to be entered into (the "Credit Agreement"). The facility under the Credit
Agreement will consist of a $400 million term loan (the "Term Loan Facility")
and a $250 million revolving credit facility (the "Revolving Credit Facility").
Gulfstream Delaware expects to borrow and use approximately $400 million under
the Credit Agreement to fund, along with the proceeds of the sale of shares of
Common Stock by the Company in the Offerings and funds generated by operations,
(i) the repayment of outstanding indebtedness under the Company's existing
credit facilities (which was $119.8 million at June 30, 1996), (ii) the payment
of fees and expenses incurred in connection with the Offerings and the
refinancing of the Company's indebtedness and (iii) the repurchase of all of the
outstanding shares of the Company's 7% Cumulative Preferred Stock for an
aggregate purchase price of $450 million (plus approximately $7.9 million of
unpaid dividends). As a result, the Company will be more leveraged after the
Offerings. On a pro forma basis, after giving effect to the Offerings, the
borrowings under the Credit Agreement and the application of the net proceeds
thereof as described under "Use of Proceeds", at June 30, 1996, the Company's
long-term indebtedness (including current maturities of $13.3 million) would
have been $400 million. See "Capitalization" and "Description of Credit
Agreement".
The degree to which the Company is leveraged could have important
consequences to holders of Common Stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, product development, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a portion of the
Company's and its subsidiaries' cash flow from operations must be dedicated to
the payment of the principal of and interest on its indebtedness; (iii) the
Credit Agreement will contain certain restrictive financial and operating
covenants, including, among others, requirements that Gulfstream satisfy certain
financial ratios; (iv) a significant portion of Gulfstream's borrowings will be
at floating rates of interest, causing Gulfstream to be vulnerable to increases
in interest rates; (v) the Company's degree of leverage may make it more
vulnerable in a downturn in general economic conditions; and (vi) the Company's
financial position may limit its flexibility in responding to changing business
and economic conditions.
The Company is a holding company with no operations or assets other than the
stock of its subsidiaries. As a result, the Company's ability to pay dividends
on its Common Stock is dependent upon the ability of its subsidiaries to pay
cash dividends or make other distributions. The Credit Agreement will restrict
the ability of the Company's subsidiaries to pay cash dividends or to make other
11
<PAGE>
distributions and, accordingly, will limit the ability of the Company to pay
cash dividends to its stockholders. The borrowings under the Credit Agreement
will be guaranteed by the Company and will be secured by a pledge of the stock
of the Company's subsidiaries. See "Dividend Policy" and "Description of Credit
Agreement".
CONTROL BY PRINCIPAL STOCKHOLDERS; LIMITATIONS ON CHANGE OF CONTROL; BENEFITS TO
PRINCIPAL STOCKHOLDERS
After the consummation of the Offerings, the Forstmann Little Partnerships
will beneficially own approximately 61.2% of the Common Stock (55.4% on a fully
diluted basis) or 55.8% (50.9% on a fully diluted basis), assuming that the
Underwriters' over-allotment options are exercised in full. As long as the
Forstmann Little Partnerships continue to own in the aggregate more than 50% of
the Company's outstanding shares of Common Stock, they will collectively have
the power to elect the entire Board of Directors of the Company and, in general,
determine (without the consent of the Company's other stockholders) the outcome
of any corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations and the sale of all or substantially
all of the Company's assets, and to prevent or cause a change in control of the
Company. See "Management", "Principal and Selling Stockholders" and "Description
of Credit Agreement".
The Company's Restated Certificate of Incorporation and By-laws contain
provisions that may have the effect of discouraging a third party from making an
acquisition proposal for the Company. The Restated Certificate of Incorporation
and By-laws of the Company, among other things, (i) classify the Board of
Directors into three classes, with directors of each class serving for a
staggered three-year period, (ii) provide that directors may be removed only for
cause and only upon the affirmative vote of the holders of at least a majority
of the outstanding shares of Common Stock entitled to vote for such directors
and (iii) permit the Board of Directors (but not the Company's stockholders) to
fill vacancies and newly created directorships on the Board. Such provisions
would make the removal of incumbent directors more difficult and time-consuming
and may have the effect of discouraging a tender offer or other takeover attempt
not previously approved by the Board of Directors. Under the Company's Restated
Certificate of Incorporation, the Board of Directors of the Company also has the
authority to issue up to 20,000,000 shares of preferred stock in one or more
series and to fix the powers, preferences and rights of any such series without
stockholder approval. The Board of Directors could, therefore, issue, without
stockholder approval, preferred stock with voting and other rights that could
adversely affect the voting power of the holders of Common Stock and could make
it more difficult for a third party to gain control of the Company. See
"Description of Capital Stock".
The Company intends to use a portion of the proceeds it receives from the
sale of shares in the Offerings, together with borrowings under the Credit
Agreement and funds generated from operations, to repurchase all of the
outstanding 7% Cumulative Preferred Stock from one of the Forstmann Little
Partnerships for an aggregate purchase price of $450 million, plus approximately
$7.9 million of unpaid dividends. See "Certain Transactions -- The Acquisition;
Subsequent Events".
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of the Company's Common Stock after
the consummation of the Offerings could adversely affect the prevailing market
price of the Common Stock. Upon the consummation of the Offerings, the Company
will have outstanding 72,220,541 shares of Common Stock, including 44,220,541
outstanding shares of Common Stock beneficially owned by existing stockholders.
Of these shares, the 28,000,000 shares sold in the Offerings (32,200,000 if the
Underwriters' over-allotment options are exercised in full) will be freely
transferable in the public market or otherwise without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless purchased by an "affiliate" of the Company as that term is defined
in Rule 144 under the Securities Act (an "Affiliate"). Shares purchased by
Affiliates will be subject to the resale limitations of Rule 144 under the
Securities Act. The Company and the Selling Stockholders (who will beneficially
own 44,220,541 outstanding shares immediately following the consummation of the
Offerings) have agreed with the Underwriters not to offer, sell or otherwise
dispose of any shares of Common
12
<PAGE>
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of the Representatives of the Underwriters except, in the
case of such existing stockholders and Selling Stockholders, for certain
transfers to immediate family members, trusts for the benefit of such existing
stockholder or Selling Stockholder and his or her immediate family, charitable
foundations and controlled entities so long as the transferee agrees to be bound
by the foregoing restrictions. Based on shares outstanding as of August 9, 1996,
following expiration or waiver of the foregoing restrictions on dispositions,
44,206,787 shares of Common Stock owned by the Forstmann Little Partnerships
will be available for sale into the public market pursuant to Rule 144
(including the volume and other limitations set forth therein) and could impair
the Company's future ability to raise capital through an offering of equity
securities. In addition, pursuant to a registration rights agreement (the
"Registration Rights Agreement"), the Forstmann Little Partnerships have the
right, under certain circumstances and subject to certain conditions, to require
the Company to effect up to six registrations under the Securities Act, covering
all or any portion of the shares of Common Stock held by them. In addition,
whenever the Company proposes to register any of its securities under the
Securities Act, the Forstmann Little Partnerships and the holders of the
Company's outstanding stock options (pursuant to the stock option agreements
under which such options were granted) have the right, under certain
circumstances and subject to certain conditions, to include their shares (or any
security convertible into or exercisable or exchangeable for Common Stock) in
such registration. The Company is generally required to pay all the expenses
(other than the expenses of optionholders) associated with these offerings
(other than underwriting discounts and commissions). See "Principal and Selling
Stockholders", "Description of Capital Stock" and "Shares Eligible for Future
Sale".
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the consummation of the Offerings, there has been no public market
for the Common Stock. There can be no assurance that market prices after the
consummation of the Offerings will equal or exceed the initial public offering
price set forth on the cover page of this Prospectus. The initial public
offering price will be determined by negotiation among the Company, the Selling
Stockholders and the Underwriters based upon several factors and may not be
indicative of the market price for the Common Stock following the consummation
of the Offerings. See "Underwriting".
DILUTION
Persons purchasing shares of Common Stock in the Offerings will incur
immediate and substantial dilution in net tangible book value per share. See
"Dilution".
13
<PAGE>
THE COMPANY
GENERAL
Gulfstream is recognized worldwide as a leading designer, developer,
manufacturer and marketer of the most technologically advanced intercontinental
business jet aircraft. Since 1966, when the Company created the large cabin
business jet category with the introduction of the Gulfstream II, the Company
has dominated this market segment, capturing a cumulative market share of 60%.
The Company has manufactured and sold over 950 large business aircraft since the
introduction of the Gulfstream product line in 1958.
Gulfstream is the ultimate successor to a business (the "Predecessor
Business") established by Grumman Aerospace ("Grumman") in 1956. In 1978, the
Predecessor Business was acquired by a group of investors headed by Allen E.
Paulson, the then Chairman of the Predecessor Business. Chrysler Corporation
("Chrysler") acquired the Predecessor Business in 1985. In March 1990, the
Gulfstream business was acquired (the "Acquisition") from Chrysler by certain
partnerships formed by Forstmann Little.
The Company's product line originated in 1958, with the introduction of the
Gulfstream I, and continued with the introduction of the Gulfstream II in 1966,
the Gulfstream III in 1979, the Gulfstream IV in 1983, the Gulfstream IV-SP in
1993 and the Gulfstream V, deliveries of which are expected to begin in the last
quarter of 1996. Only the Gulfstream IV-SP and the Gulfstream V are currently in
production.
The Company was incorporated under the laws of the State of Delaware in
1990. The principal executive offices of the Company are located at 500
Gulfstream Road, Savannah, Georgia 31402-2206, and the telephone number of the
Company is (912) 965-3000. The Company has operating subsidiaries with
facilities in Savannah, Georgia; Brunswick, Georgia; Bethany, Oklahoma; Long
Beach, California; and Mexicali, Mexico.
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offerings are
estimated to be approximately $100 million, based on an assumed initial public
offering price of $23.00 per share (the mid-point of the range of the initial
public offering prices set forth on the cover page of this Prospectus) and after
deducting estimated underwriting discounts and other expenses. The Company
intends to use the net proceeds of the Offerings, together with $400 million of
borrowings under the Company's new Credit Agreement and funds generated from
operations, to repurchase all of the outstanding shares of the 7% Cumulative
Preferred Stock for an aggregate purchase price of $450 million, plus
approximately $7.9 million of unpaid dividends, to repay outstanding
indebtedness under the Company's existing credit facilities (which was $119.8
million at June 30, 1996) and to pay fees and expenses incurred in connection
with the Offerings and the refinancing of the Company's indebtedness. The
indebtedness to be repaid under the Company's existing facilities: (i) in the
case of the 1990 term loan portion of such facilities, is payable in quarterly
installments through March 1997 and at June 30, 1996 bore interest at 7.57% per
annum and (ii) in the case of the 1993 term loan, is payable in two equal
installments in September 1997 and March 1998 and at June 30, 1996 bore interest
at 8.69% per annum. No amounts were outstanding under the revolving credit
facility at June 30, 1996.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders. In connection with the Offerings,
certain current and former directors and employees of, and advisors to, the
Company are expected to exercise stock options to purchase, in the aggregate,
approximately 2,122,928 shares of Common Stock from the Company for an aggregate
exercise price of approximately $8.1 million; all of such shares are expected to
be sold by such Selling Stockholders in the Offerings.
DIVIDEND POLICY
The Company has never paid cash dividends on its common stock and does not
anticipate paying such dividends in the foreseeable future. As a holding
company, the ability of the Company to pay dividends is dependent upon the
ability of its subsidiaries to pay cash dividends or to make other
distributions. The Credit Agreement will restrict the ability of the Company's
subsidiaries to pay cash dividends or to make other distributions to the Company
and, accordingly, will limit the ability of the Company to pay cash dividends to
its stockholders. See "Description of Credit Agreement". Any determination to
pay cash dividends in the future will be at the discretion of the Company's
Board of Directors and will depend upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
at that time by the Company's Board of Directors.
14
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of June 30, 1996, (i) on an actual basis, (ii)
on a pro forma basis, for the 1996 Recapitalization, after giving effect to (a)
the borrowing of $400 million under the Term Loan Facility of the Credit
Agreement, (b) the repurchase of 7% Cumulative Preferred Stock for an aggregate
purchase price of $450 million, plus approximately $7.9 million of unpaid
dividends, (c) the repayment of the outstanding indebtedness under the existing
credit facilities of $119.8 million, (d) the write-off of approximately $2.4
million of deferred financing costs associated with the repayment of the
indebtedness under the existing credit facilities, (e) the reduction of
unamortized stock plan expense of $0.4 million as a result of the accelerated
vesting of certain stock options (see "Management -- Stock Options") and (f) the
sale of 2,122,928 shares of Common Stock by the Company to certain of the
Selling Stockholders pursuant to existing option agreements for an aggregate
option exercise price of $8.1 million, and (iii) on a pro forma basis, for the
1996 Recapitalization and the Offerings, to reflect the sale of 4,782,600 shares
of Common Stock by the Company (assuming an initial public offering price of
$23.00 per share (the mid-point of the range of the initial public offering
prices set forth on the cover page of this Prospectus)). The information
presented below should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto, "Pro Forma Condensed
Financial Information", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Description of Capital Stock" and
"Certain Transactions" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------------
PRO FORMA FOR
PRO FORMA FOR 1996
1996 RECAPITALIZATION
ACTUAL RECAPITALIZATION AND OFFERINGS
------- ----------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash............................................................ $ 213,268 $ 34,663 $ 135,563
------------ ---------------- ----------------
------------ ---------------- ----------------
Short-term debt:
Current portion of long-term debt............................. $ 39,798 $ 13,333 $ 13,333
------------ ---------------- ----------------
Total short-term debt....................................... 39,798 13,333 13,333
------------ ---------------- ----------------
Long-term debt (excluding current portion) (1):
Credit Facilities
Existing credit facilities.................................. 80,000 0 0
New Credit Agreement........................................ 386,667 386,667
------------ ---------------- ----------------
Total debt................................................ 119,798 400,000 400,000
------------ ---------------- ----------------
Stockholders' equity (deficit):
Preferred stock; Series A, 7%-cumulative $.01 par value;
10,000,000 shares authorized; 96 shares issued in 1996 and
20,000,000 shares authorized and none outstanding after the
1996 Recapitalization and Offerings.......................... 450,000 0 0
Common stock; $.01 par value; 109,273,000 shares authorized
and 52,406,166 shares issued and 300,000,000 shares
authorized and 84,191,501 shares issued after the 1996
Recapitalization and Offerings............................... 524 794 842
Additional paid-in capital...................................... 219,751 227,549 328,401
Accumulated deficit............................................. (491,390) (502,085) (502,085)
Minimum pension liability....................................... (1,450) (1,450) (1,450)
Unamortized stock plan expense.................................. (3,843) (3,433) (3,433)
Less: Treasury stock: 8,220,833 shares and 11,970,960 shares
after the 1996 Recapitalization and Offerings.................. (50,489) (50,489) (50,489)
------------ ---------------- ----------------
Total stockholders' equity (deficit)........................ 123,103 (329,114) (228,214)
------------ ---------------- ----------------
Total capitalization........................................ $ 242,901 $ 70,886 $ 171,786
------------ ---------------- ----------------
------------ ---------------- ----------------
</TABLE>
- ------------------
(1) See "Description of Credit Agreement" and Note 7 to the Company's
Consolidated Financial Statements included elsewhere in this Prospectus for
descriptions of the long-term debt instruments of the Company and its
subsidiaries.
15
<PAGE>
DILUTION
The tangible book value is the book value determined in accordance with
generally accepted accounting principles, less goodwill and other intangible
assets. At June 30, 1996, the pro forma, for 1996 Recapitalization, net tangible
book value of the Company was $(432.5) million or $(6.41) per share of Common
Stock, without giving effect to the Offerings. At June 30, 1996, after giving
effect to the Offerings, including the use of the estimated net proceeds
therefrom (assuming the Underwriters' over-allotment options are not exercised
and an initial public offering price of $23.00 per share (the mid-point of the
range of the initial public offering prices set forth on the cover page of this
Prospectus) and after deducting estimated underwriting discounts and expenses),
as described in "Use of Proceeds" but without taking into account any other
changes in such net tangible book value subsequent to June 30, 1996, the pro
forma, for 1996 Recapitalization and Offerings, net tangible book value of the
Company would have been $(331.6) million or $(4.59) per share. This represents
an immediate increase in the net tangible book value of $1.82 per share to
existing stockholders and an immediate dilution of $27.59 per share to investors
purchasing shares of Common Stock in the Offerings. The following table
illustrates this dilution:
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
<S> <C> <C>
Assumed initial public offering price per share (1)...................................... $ 23.00
Pro forma, for 1996 Recapitalization, net tangible book value per share before the
Offerings (2)......................................................................... $ (6.41)
Increase in per share attributable to the Offerings.................................... 1.82
----------
Pro forma, for 1996 Recapitalization and Offerings, net tangible book value per share.... (4.59)
----------
Dilution per share to new investors (3).................................................. $ 27.59
----------
----------
</TABLE>
- --------------
(1) Before deduction of estimated underwriting discounts and expenses to be paid
by the Company.
(2) Pro forma, for 1996 Recapitalization, net tangible book value per share is
determined by dividing the net tangible book value of the Company after the
1996 Recapitalization (assets less liabilities, goodwill and other
intangible assets) by the number of shares of Common Stock outstanding after
the 1996 Recapitalization.
(3) Dilution is determined by subtracting the pro forma, for 1996
Recapitalization, net tangible book value per share at June 30, 1996, as
adjusted for the Offerings, from the assumed initial public offering price
paid by a new investor for a share of Common Stock.
The following table compares, on a pro forma basis as of June 30, 1996, the
number of shares of Common Stock purchased and the total consideration paid by
the existing stockholders when they purchased shares of the Company with the
number of shares of Common Stock purchased and the total consideration paid by
the new investors in the Offerings (assuming the Underwriters' over-allotment
options are not exercised and an initial public offering price of $23.00 per
share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ----------- --------- ----------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing Stockholders..................................... 67.4 93.4% 228.3 67.5% 3.39
New investors............................................. 4.8 6.6 110.0 32.5 23.00
----------- ----- --------- -----
Total................................................. 72.2 100.0% $ 338.3 100.0%
----------- ----- --------- -----
----------- ----- --------- -----
</TABLE>
The foregoing tables assume the sale of 2,122,928 shares of Common Stock by
the Company to certain of the Selling Stockholders pursuant to existing option
agreements for an aggregate option exercise price of $8.1 million. The foregoing
tables do not assume the exercise of any other outstanding options to purchase
Common Stock after June 30, 1996. After exercise of such options, there were
outstanding options to purchase 7,527,210 shares of Common Stock at a weighted
average exercise price of approximately $3.93 per share. After giving effect to
the exercise of any remaining options to purchase Common Stock, there will be
further dilution in the aggregate to new investors. See "Management -- Stock
Options -- Stock Option Plan" and Note 11 to the Company's Consolidated
Financial Statements included elsewhere in this Prospectus.
16
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information was
derived from the historical financial data of the Company included elsewhere in
this Prospectus. The unaudited pro forma statements of operations for the year
ended December 31, 1995 and the six months ended June 30, 1996 give effect to
(i) the 1996 Recapitalization as described under "Description of Capital Stock",
(ii) the new borrowings under the Credit Agreement, (iii) the sale of 2,122,928
shares of Common Stock by the Company to certain of the Selling Shareholders
pursuant to existing option agreements, and (iv) the issuance of the shares of
Common Stock offered by the Company pursuant to the Offerings and the
application of the estimated net proceeds as provided under "Use of Proceeds" as
if such transactions occurred at the beginning of the respective periods.
The pro forma financial data presented herein does not purport to represent
the results of operations of the Company that would have resulted had such
transactions in fact occurred at the beginning of such periods or to project the
Company's results of operations of any future period. The pro forma financial
information is based upon, and should be read in conjunction with, the Company's
Consolidated Financial Statements, including the notes thereto, included
elsewhere in this Prospectus.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------
PRO FORMA
FOR 1996
RECAPITALIZATION
ACTUAL ADJUSTMENTS (1)
------------- ------------ -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues................................................... $ 1,041,514 $ 1,041,514
------------- -------------------
Costs and expenses:
Cost of sales................................................ 835,547 835,547
Selling and administrative expenses.......................... 93,239 93,239
Amortization of intangibles and deferred charges............. 7,540 7,540
Research and development..................................... 63,098 63,098
------------- -------------------
Total costs and expenses....................................... 999,424 999,424
-------------
Income from operations......................................... 42,090 42,090
Interest income................................................ 5,508 5,508
Interest expense............................................... (18,704) $ (14,693)(2) (33,397)
------------- ------------ -------------------
Net income..................................................... $ 28,894 $ (14,693) $ 14,201
------------- ------------ -------------------
------------- ------------ -------------------
Pro forma net income per share (3)............................. $ .18
-------------------
-------------------
Pro forma common shares outstanding (3)........................ 78,314
-------------------
-------------------
</TABLE>
- ------------------
(1) The unaudited pro forma condensed consolidated statement of operations does
not include a one-time charge of approximately $3.1 million for write-off
of deferred financing charges associated with the repayment of amounts
outstanding under the existing credit facilities.
(2) Reflects the increase in interest expense due to the borrowings under the
new Credit Agreement and the repayment of amounts outstanding under the
existing credit facilities as described under "Use of Proceeds". The
assumed interest rate on the new $400.0 million Credit Agreement is 8.0%
per annum.
(3) Pro forma net income per share amount is calculated based on the pro forma
net income, after giving effect to the 1996 Recapitalization, divided by
the pro forma weighted average number of common and common equivalent
shares outstanding assuming the 1996 Recapitalization shares and the shares
sold in the Offerings were outstanding for all of the period reported.
17
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------
PRO FORMA FOR 1996
RECAPITALIZATION
ACTUAL ADJUSTMENTS (1)(2)
------------- ------------ ----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues................................................ $ 458,672 $ 458,672
------------- -----------
Costs and expenses:
Cost of sales............................................. 354,841 354,841
Selling and administrative expenses....................... 45,190 45,190
Stock option compensation expense......................... 5,200 5,200
Amortization of intangibles and deferred charges.......... 3,763 3,763
Research and development.................................. 34,746 34,746
------------- -----------
Total costs and expenses.................................... 443,740 443,740
------------- -----------
Income from operations...................................... 14,932 0 14,932
Interest income............................................. 7,593 7,593
Interest expense............................................ (7,166) $ (9,112)(3) (16,278)
------------- ------------ -----------
Net income.................................................. $ 15,359 $ (9,112) $ 6,247
------------- ------------ -----------
------------- ------------ -----------
Pro forma net income per share (4).......................... $ .08
-----------
-----------
Pro forma common shares outstanding (4)..................... 78,314
-----------
-----------
</TABLE>
- ------------------
(1) The unaudited pro forma condensed consolidated statement of operations does
not include a one-time charge of approximately $2.4 million for the
write-off of deferred financing charges associated with the repayment of
amounts outstanding under the existing credit facilities.
(2) The unaudited pro forma condensed consolidated statements of operations do
not include a one-time charge of approximately $0.4 million for non-cash
compensation expense associated with accelerated vesting of certain options
to purchase common stock upon consummation of the Offerings.
(3) Reflects the increase in interest expense due to the borrowings under the
new Credit Agreement and the repayment of amounts outstanding under the
existing credit facilities as described under "Use of Proceeds". The
assumed interest rate on the new $400.0 million Credit Agreement is 8.0%
per annum.
(4) Pro forma net income per share amount is calculated based on the pro forma
net income, after giving effect to the 1996 Recapitalization, divided by
the pro forma weighted average number of common and common equivalent
shares outstanding assuming the 1996 Recapitalization shares and the shares
sold in the Offerings were outstanding for all of the period reported.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected historical financial information should be read in
conjunction with the Company's Consolidated Financial Statements and the related
notes thereto included elsewhere in this Prospectus and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
"Business -- Business Strategy -- Recapitalization and Significant Reduction of
Interest Expense", and "Description of Capital Stock". The statement of
operations data set forth below with respect to the years ended December 31,
1993, 1994 and 1995 are derived from the audited financial statements included
elsewhere in this Prospectus. The statement of operations data set forth below
with respect to the years ended December 31, 1991 and 1992 are derived from
audited financial statements not included herein. The selected historical
financial information for the six months ended June 30, 1995 and 1996 are
derived from unaudited financial statements and reflect all adjustments
(consisting only of adjustments of a normal recurring nature) that in the
opinion of management of the Company are necessary for a fair presentation of
the results of such periods. The unaudited results of operations for the six
months ended June 30, 1996 are not necessarily indicative of results expected
for the year ending December 31, 1996. In the six months ended June 30, 1996, 3
fewer green aircraft were delivered than were in the same period in 1995 as a
result of the delivery in early 1995 of 3 units which were produced in late
1994. In addition, beginning in the fourth quarter of 1995, the Company
dedicated a portion of its production capacity to the manufacture of Gulfstream
Vs which the Company will not begin delivering to customers until after FAA
certification, which is expected in the fourth quarter of 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenues $ 887,234 $ 900,419 $ 887,113 $ 901,638 $1,041,514 $ 474,884 $ 458,672
--------- --------- ---------- --------- ---------- --------- ---------
Costs and expenses:
Cost of sales.............................. 748,553 724,554 737,361 710,554 835,547 378,022 354,841
Selling and administrative expenses........ 77,800 98,187 97,011 82,180 93,239 42,651 45,190
Stock option compensation expense.......... 5,200
Research and development expense........... 9,555 36,295 47,990 57,438 63,098 34,076 34,746
Amortization of intangibles and deferred
charges................................... 30,072 31,855 27,613 7,583 7,540 3,777 3,763
Restructuring charge....................... 203,911(1)
--------- --------- ---------- --------- ---------- --------- ---------
Total costs and expenses..................... 865,980 890,891 1,113,886 857,755 999,424 458,526 443,740
--------- --------- ---------- --------- ---------- --------- ---------
Income (loss) from operations................ 21,254 9,528 (226,773) 43,883 42,090 16,358 14,932
Interest income............................ 1,697 2,135 486 367 5,508 1,426 7,593
Interest expense........................... (72,679) (61,235) (48,940) (20,686) (18,704) (9,945) (7,166)
--------- --------- ---------- --------- ---------- --------- ---------
Net income (loss)............................ $ (49,728) $ (49,572) $ (275,227) $ 23,564 $ 28,894 7,839 15,359
--------- --------- ---------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------- --------- ---------
Pro forma net income (loss) per share (2).... $ .18 $ (.02) $ .08
---------- --------- ---------
---------- --------- ---------
Pro forma common shares outstanding (2)...... 78,314 78,314 78,314
---------- --------- ---------
---------- --------- ---------
</TABLE>
- ------------------
(1) The Company recorded a charge for a restructuring plan based upon the
Company's reassessment of its business plan and its products from which it
has realized improved operating efficiencies, reduced costs, and increased
overall profitability. See Note 2 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus.
(2) Pro forma net income (loss) per share amounts are calculated based on the
pro forma net income, after giving effect to the 1996 Recapitalization,
divided by the pro forma weighted average number of common and common
equivalent shares outstanding assuming the 1996 Recapitalization shares and
the shares sold in the Offerings were outstanding for all periods reported.
For information regarding the pro forma data, see "Pro Forma Condensed
Financial Information" and "Capitalization". Due to the change in the
Company's capital structure to be effected with the 1996 Recapitalization,
historical share and per share data for all periods is not relevant and
therefore is not presented.
19
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
DECEMBER 31, 30,
------------------------------------------------------ ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital...................... $248,974 $268,881 $302,369 $ 301,913 $ 356,976 $ 322,261 $ 232,508
Total assets......................... 991,841 945,433 799,470 745,761 981,253 823,861 1,159,371
Total debt (1)....................... 719,500 670,258 206,145(2) 178,145 146,331 172,863 119,798
Total stockholders' equity (deficit)
(1)................................. (27,191) (26,700) 164,395 188,950 217,540 196,789 123,103
OTHER DATA:
Depreciation and amortization........ $ 49,687 $ 52,374 $ 47,866 $ 24,151 $ 23,094 $ 11,530 $ 12,242
OPERATING DATA:
Units delivered during period:
Gulfstream IV/IV-SP................ 28 25 26 22 26 14 11
Units ordered during period:
Gulfstream IV/IV-SP................ 31 26 26 25 30 17 15
Gulfstream V....................... 0 8 17 16 12 5 12
-------- -------- -------- ---------- ---------- ---------- ----------
Total orders....................... 31 34 43 41 42 22 27
Units in backlog at end of period:
Gulfstream IV/IV-SP (3)............ 5 3 3 3 7 6 11
Gulfstream V (4)................... 0 8 24 40 50 45 62
-------- -------- -------- ---------- ---------- ---------- ----------
Total backlog (in units)........... 5 11 27 43 57 51 73
Estimated backlog (in thousands)
(5)............................... $124,225 $362,466 $897,747 $1,473,772 $1,938,315 $1,731,532 $2,496,061
</TABLE>
- ------------------
(1) Total debt and stockholders' equity (deficit) does not include the impact
of the 1996 Recapitalization of the Company to be effected immediately
prior to or simultaneously with the consummation of the Offerings. See
"Capitalization".
(2) During November 1993, the Company converted $469 million of subordinated
debentures (including accrued interest) to 7% Cumulative Preferred Stock in
connection with the 1993 recapitilization. See "Business -- Business
Strategy -- Recapitalization and Significant Reduction of Interest Expense"
and "Certain Transactions -- The Acquisition; Subsequent Events".
(3) Net of 3 cancellations in each of 1992 and 1994, which generally relate to
orders placed in prior years.
(4) Net of cancellations of 1 and 2 in 1993 and 1995, respectively, which
generally relate to orders placed in prior years. As of June 30, 1996, only
3 Gulfstream V contracts had been cancelled, 2 of which were the result of
declines in the business performance of the customer and one of which was
the result of adverse economic conditions in a foreign country.
(5) Backlog includes only those orders for which the Company has entered into a
purchase contract with a customer and has received a significant (generally
non-refundable) deposit from the customer. Not included in backlog are
letters of intent, options for which definitive contracts have not been
executed or executed contracts subject to financing contingencies, which,
at June 30, 1996, represented approximately $350 million of additional
potential revenues.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto contained elsewhere in this Prospectus.
GENERAL
Gulfstream is recognized worldwide as a leading designer, developer,
manufacturer and marketer of the most technologically advanced intercontinental
business jet aircraft. The Company's current principal aircraft products are the
Gulfstream IV-SP, the Gulfstream V, Gulfstream Shares-TM- (fractional ownership
interests in Gulfstream IV-SPs) and pre-owned Gulfstream aircraft. As an
integral part of its aircraft product offerings, the Company offers aircraft
completion and worldwide aircraft maintenance services and technical support for
all Gulfstream aircraft. In addition, the Company's financial services
subsidiary, Gulfstream Financial Services Corporation, through its private label
relationship with a third-party aircraft financing provider, offers customized
products to finance the worldwide sale of Gulfstream aircraft.
The Company recognizes revenue for the sale of a new "green" aircraft (i.e.,
before exterior painting and installation of customer selected interiors and
optional avionics) when that aircraft is delivered to the customer. Revenues
from completion services are recorded when the outfitted aircraft is delivered
to the customer. Revenues on all other products and services, including
pre-owned aircraft, are recognized when such products are delivered or such
services are performed. Generally, production of aircraft for delivery remains
relatively smooth throughout a year. However, deliveries of such aircraft can
vary significantly depending upon the timing of contract execution and final
customer acceptance. Accordingly, the Company's revenues can vary significantly
from quarter to quarter. In addition, beginning in the fourth quarter of 1995,
the Company dedicated a portion of its production capacity to the manufacture of
Gulfstream Vs which the Company will not begin delivering to customers until
after FAA certification, which is expected in the fourth quarter of 1996.
OPERATING DATA
The following sets forth certain statistical data concerning the Company's
deliveries, orders and backlog for new aircraft.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Units delivered during period:
Gulfstream IV/IV-SP.................... 28 25 26 22 26 14 11
Units ordered during period:
Gulfstream IV/IV-SP.................... 31 26 26 25 30 17 15
Gulfstream V........................... 0 8 17 16 12 5 12
--------- --------- --------- ---------- ---------- ---------- ----------
Total orders........................... 31 34 43 41 42 22 27
Units in backlog at end of period:
Gulfstream IV/IV-SP (1)................ 5 3 3 3 7 6 11
Gulfstream V (2)....................... 0 8 24 40 50 45 62
--------- --------- --------- ---------- ---------- ---------- ----------
Total backlog (in units)............... 5 11 27 43 57 51 73
Estimated backlog (in thousands) (3)... $ 124,225 $ 362,466 $ 897,747 $1,473,772 $1,938,315 $1,731,532 $2,496,061
</TABLE>
- ------------------
(1) Net of 3 cancellations in each of 1992 and 1994, which generally relate to
orders placed in prior years.
(2) Net of cancellations of 1 and 2 in 1993 and 1995, respectively, which
generally relate to orders placed in prior years. As of June 30, 1996, only
3 Gulfstream V contracts had been cancelled, 2 of which were the result of
declines in the business performance of the customer and one of which was
the result of adverse economic conditions in a foreign country.
(3) Backlog includes only those orders for which the Company has entered into a
purchase contract with a customer and has received a significant (generally
non-refundable) deposit from the customer. Not included in backlog are
letters of intent, options for which definitive contracts have not been
executed or executed contracts subject to financing contingencies, which,
at June 30, 1996, represented approximately $350 million of additional
potential revenues.
21
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
NET REVENUES. During the six months ended June 30, 1996, the Company
received orders for 15 Gulfstream IV-SPs and 12 Gulfstream Vs as compared to
orders for 17 Gulfstream IV-SPs and 5 Gulfstream Vs during the six months ended
June 30, 1995. Total net revenues decreased by $16.2 million, or 3.4%, to $458.7
million for the six months ended June 30, 1996 from $474.9 million for the six
months ended June 30, 1995. In the six month period ended June 30, 1996, 3 fewer
green aircraft were delivered than in the same period in 1995, with associated
revenues decreasing $47.5 million, as a result of the delivery in early 1995 of
3 units which were produced in late 1994. In addition, beginning in the fourth
quarter of 1995, the Company dedicated a portion of its production capacity to
the manufacture of Gulfstream Vs which the Company will not begin delivering to
customers until after FAA certification, which is expected in the fourth quarter
of 1996. Other factors contributing to the overall revenue decline in 1996 were
a decrease in the sale of pre-owned aircraft ($9.7 million) resulting from a
reduced number of trade-ins requiring re-sales and the conclusion of a U.S.
Department of Defense logistical supply contract ($8.4 million). Offsetting
these declines were an increase in Gulfstream IV-SP average selling prices ($8.8
million), an increase in revenues from 5 additional completions ($32.9 million)
and increased international spares sales and service center volume primarily
attributable to the addition of the new service center ($12.4 million). See "--
Liquidity and Capital Resources".
COST OF SALES. Total cost of sales decreased by 6.1%, or $23.2 million, to
$354.8 million for the six months ended June 30, 1996 from $378.0 million for
the six months ended June 30, 1995. The decline in total cost was due to 3 fewer
green Gulfstream IV-SPs deliveries, partially offset by 5 additional completion
deliveries. Excluding pre-owned aircraft, which are generally sold at breakeven
levels and other nonrecurring items, the gross profit percentage increased to
26.9% for the six months ended June 30, 1996 from 25.7% for the comparable
period in 1995, primarily as a result of the Company's cost and cycle time
reduction initiatives and the price appreciation on Gulfstream IV-SP aircraft
sales.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
increased by $2.5 million, or 5.9%, to $45.2 million for the six months ended
June 30, 1996, from $42.7 million for the six months ended June 30, 1995 and as
percentage of net revenues increased from 9.0% in 1995 to 9.9% in 1996. The
dollar increase principally resulted from increased advertising and marketing
expenses associated with the Gulfstream V program. The increase as a percentage
of sales was also attributable to lower net revenues stemming from the timing of
deliveries, as discussed above.
STOCK OPTION COMPENSATION EXPENSE. The issuance of options to purchase
Common Stock of the Company during the six months ended June 30, 1996 resulted
in a non-cash compensation charge of $5.2 million.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense of $34.7
million for the six months ended June 30, 1996 was comparable to such expense
for the six months ended June 30, 1995. Substantially all research and
development expense was associated with the Gulfstream V development program,
which the Company expects to be materially completed by the end of 1996.
AMORTIZATION OF INTANGIBLES AND DEFERRED CHARGES. This non-cash expense
includes amortization of goodwill and other intangible assets consisting of
after-market service and after-market product support, as well as deferred
financing charges related to the Company's existing bank credit facilities.
Amortization of intangibles and deferred charges of $3.8 million for the six
months ended June 30, 1996 remained essentially unchanged from the six months
ended June 30, 1995.
INTEREST INCOME AND EXPENSE. Interest income increased by $6.2 million to
$7.6 million for the six months ended June 30, 1996 from $1.4 million for the
six months ended June 30, 1995, as a result of the increase in cash generated
from operations. Interest expense decreased by $2.7 million to $7.2 million for
the six months ended June 30, 1996 from $9.9 million for the six months ended
June 30, 1995. This decrease was due to limited use of the revolving credit
facility and a reduction in borrowings under the existing term loans.
22
<PAGE>
INCOME TAXES. The Company had available at June 30, 1996 net operating loss
carryforwards for regular federal income tax purposes of approximately $150
million, which will begin expiring in 2006. Although the Company recorded net
income during the six months ended June 30, 1996 and the six months ended June
30, 1995, no provision for income taxes was recorded in either period
principally as a result of the utilization of net operating loss carryforwards.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND 1994
NET REVENUES. During 1995, the Company received orders for 30 Gulfstream
IV-SPs and 12 Gulfstream Vs as compared to orders for 25 Gulfstream IV-SPs and
16 Gulfstream Vs during 1994. Gulfstream V orders for 1995 were lower as a
result of the delay into 1996 of a multiple aircraft order which was under a
letter of intent at year-end 1995 and which was executed in the first quarter of
1996. Total net revenues increased by $139.9 million, or 15.5%, to $1,041.5
million in 1995 from $901.6 million in 1994. Revenues from green Gulfstream
IV-SP aircraft increased $116.7 million in 1995 due to the delivery of 4 more
units and higher average selling prices. Three of the 4 additional units were
deliveries of aircraft in 1995 which were produced in 1994. In addition,
revenues from the sale of pre-owned aircraft increased $54.2 million in 1995 as
a result of the Company's initiatives to provide premium pre-owned products to
the large business jet market. Completion revenues increased by $8.1 million in
1995 as a result of the Company completing a higher percentage of new aircraft
in 1995 than in 1994. These increases were partially offset by declines in
revenues of (i) $30.9 million primarily due to the delivery of special aircraft
modifications on two contracts with governmental agencies in 1994 and (ii) a
decline of $11.0 million due to the early termination in 1994 of a wing
manufacturing contract with another aerospace manufacturer.
COST OF SALES. Total costs of sales increased $124.9 million, or 17.6%, to
$835.5 million in 1995 from $710.6 million in 1994 as a result of increased unit
deliveries in 1995 of both green Gulfstream IV-SP aircraft and completions.
Gross profit as a percentage of sales (excluding pre-owned aircraft and other
nonrecurring items) increased from 25.2% in 1994 to 25.8% in 1995 as a result of
the restructuring of the Company's manufacturing process to obtain cycle time
reductions and additional cost savings.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expenses
increased by $11.0 million, or 13.4%, to $93.2 million for 1995 from $82.2
million for 1994, but decreased as a percentage of net revenues to 8.9% in 1995
from 9.1% in 1994. The dollar increase was principally attributable to increases
in marketing programs centered around the Company's new marketing strategies,
including the roll out and first flight of the Gulfstream V, expansion of the
Company's international sales activities, and, as a result of successful Company
performance, higher payouts to employees under the Company's management and
employee incentive plans.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased by $5.7 million, or 9.9%, to $63.1 million in 1995 from $57.4 million
in 1994, which was 6.1% and 6.4%, respectively, of net revenues. This increase
was related to the Gulfstream V development program.
AMORTIZATION OF INTANGIBLES AND DEFERRED CHARGES. Amortization of
intangibles and deferred charges were $7.5 million in 1995 and $7.6 million in
1994.
INTEREST INCOME AND EXPENSE. Interest income increased by $5.1 million to
$5.5 million for 1995 from $0.4 million in 1994 as a result of the increased
cash generated from operations between the periods. Interest expense decreased
by $2.0 million, or 9.7%, to $18.7 million for 1995 from $20.7 million for 1994.
Interest expense consists almost entirely of interest paid on borrowings under
the Company's bank credit facilities. The decrease resulted principally from a
reduced level of average borrowings in 1995 compared to 1994. See "-- Liquidity
and Capital Resources". The weighted average interest rates on the Company's
bank credit facilities at December 31, 1995 and 1994 were 8.42% and 8.64%,
respectively, per annum.
INCOME TAXES. The Company had available at December 31, 1995 and 1994 net
operating loss carryforwards for regular federal income tax purposes of
approximately $150 million and $167 million,
23
<PAGE>
respectively, which will expire beginning in 2006. Although the Company recorded
net income during 1995 and 1994, no provision for income taxes was recorded in
either period principally as a result of the utilization of net operating loss
carryforwards.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994 AND 1993
NET REVENUES. During 1994, the Company received orders for 25 Gulfstream
IV-SPs and 16 Gulfstream Vs as compared to orders for 26 Gulfstream IV-SPs and
17 Gulfstream Vs during 1993. Total net revenues increased by $14.5 million, or
1.6%, to $901.6 million in 1994 from $887.1 million in 1993. This increase in
revenues was primarily driven by (i) increased sales of pre-owned aircraft
($74.2 million due to 6 additional unit deliveries in 1994) as a result of the
new pre-owned sales and marketing strategy, (ii) delivery of special aircraft
modifications on two government aircraft and increased volume on logistics
support contracts with governmental agencies ($35.2 million) and (iii) 6
additional completion deliveries ($15.7 million). These increases in 1994
revenues were largely offset by four fewer Gulfstream IV/IV-SP deliveries
($114.1 million), 3 of which were produced in 1994 but not delivered until 1995.
COST OF SALES. Total cost of sales decreased $26.8 million, or 3.6%, to
$710.6 million in 1994 from $737.4 million in 1993. The decline was primarily
due to fewer deliveries of green Gulfstream IV/IV-SPs aircraft, as well as
reduced material costs of new Gulfstream IV-SP aircraft which resulted from
contract re-negotiations with certain suppliers of systems and components.
Additionally, during 1993 the Company incurred approximately $6.7 million in
non-recurring reversionary price penalties associated with supplier contracts
which are no longer in force. The gross profit percentage (excluding pre-owned
aircraft and other nonrecurring items) increased to 25.2% in 1994 from 21.6% in
1993 as a result of the Company's cost and cycle time reduction initiatives.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
decreased by $14.8 million, or 15.3%, to $82.2 million in 1994 from $97.0
million in 1993, and as a percentage of net revenues from 10.9% to 9.1%. This
decrease was the direct result of the restructuring plan implemented by the
Company in 1993. These changes are discussed below under "-- Restructuring
Charge".
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased by $9.4 million, or 19.6%, to $57.4 million in 1994 from $48.0 million
in 1993, or 6.4% and 5.4% of net revenues, respectively. Increased spending was
related to the development of the Gulfstream V.
AMORTIZATION OF INTANGIBLES AND DEFERRED CHARGES. Amortization of
intangibles and deferred charges decreased by $20.0 million, to $7.6 million for
1994. This decrease was due to the Company accelerating the amortization of
aircraft design intangibles during 1993, as part of the restructuring plan
discussed below.
RESTRUCTURING CHARGE. Based upon the Company's reassessment of its business
plan and its products, the Company recorded a $203.9 million charge in 1993 for
a restructuring plan from which it realized improved operating efficiencies,
reduced costs, and overall increased profitability of the Company. This charge
included, among other items, payments for severance or early retirement of
employees, acceleration of certain employee benefit programs, costs associated
with re-aligning manufacturing capacity through selected outsourcing, lease
terminations of administrative facilities, and the accelerated amortization of
aircraft design intangibles and related Gulfstream IV aircraft tooling. The
charge, determined in part based on expected future cash flows and net
realizable values, is comprised of $146.2 million of accelerated amortization
for aircraft design and related tooling, $24.8 million of special termination
benefits and $32.9 million of other items.
INTEREST EXPENSE. Interest expense decreased by $28.2 million, or 57.7% to
$20.7 million in 1994 from $48.9 million in 1993. This decrease was due to a
conversion in October 1993 of $450 million of subordinated debt, plus $18.9
million of accrued interest, into 7% Cumulative Preferred Stock. This conversion
reduced the Company's annual interest expense by approximately $38.0 million.
This reduction was partially offset by increases in interest rates on the
Company's floating rate debt during 1994. The weighted average interest rates on
the Company's bank credit facilities at December 31, 1994 and 1993 were 8.64%
and 6.17%, respectively, per annum.
24
<PAGE>
INCOME TAXES. The Company had available at December 31, 1994 net operating
loss carryforwards for regular federal income tax purposes of approximately $167
million. Although the Company recorded net income during 1994, no provision for
income taxes was recorded principally as a result of the utilization of net
operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from working capital requirements,
capital expenditures, principal and interest payments on long-term debt, and the
payment of dividends on the 7% Cumulative Preferred Stock (which will be
repurchased simultaneously with the consummation of the Offerings). During 1995
and the six months ended June 30, 1996, the Company relied on cash flows from
operations to finance these needs.
During the six months ended June 30, 1996, net cash generated by operating
activities was $139.9 million, a 48% increase over the same period in 1995. This
increase was primarily due to the increase in customer progress payments
associated with aircraft orders in backlog and deposits on new Gulfstream V
aircraft orders, a portion of which funds the temporary inventory build-up
associated with Gulfstream V production occurring prior to initial customer
aircraft deliveries. The Company expects to begin deliveries of Gulfstream V
aircraft in the fourth quarter of 1996 with 6 deliveries planned for 1996 and 27
deliveries planned for 1997.
Net cash provided by operating activities during 1995 and 1994 was $282.4
million and $69.0 million, respectively. This substantial increase is also
principally attributable to progress payments associated with aircraft orders in
backlog and deposits on new orders of Gulfstream IV-SP and Gulfstream V
aircraft. While the Company experienced higher net inventories during 1995
resulting from the commencement of Gulfstream V production, the Company
benefited from receipt of progress payments associated with Gulfstream V orders
in backlog.
During the six months ended June 30, 1996, additions to property and
equipment were $7.5 million, or approximately 44% of the total year forecasted
expenditures of $17.0 million for fiscal 1996. At June 30, 1996, the Company was
not committed to the purchase of a significant amount of property and equipment.
Additions to property and equipment were $25.2 million in 1995 and $9.9 million
in 1994. Spending in 1995 increased by $15.3 million primarily related to the
construction of a new $16.0 million, 200,000 square foot service center to
support the Company's strategic initiative of expanding the Company's market
share for servicing Gulfstream aircraft. The Company expects to make capital
expenditures of approximately $15.0 million in 1997. Subsequent to 1997, the
Company's capital expenditures may increase to the extent the Company determines
to expand its production capacity. The Company continually monitors its capital
spending in relation to current and anticipated business needs. As circumstances
dictate, facilities are added, consolidated, or modernized.
For the six months ended June 30, 1996, capitalized tooling increased $0.9
million. As of June 30, 1996, the Company had expended an aggregate of $46.2
million in tooling associated with the Gulfstream V program and anticipates
incurring approximately $2.0 million of additional tooling during the remainder
of 1996. During 1995 and 1994, the Company invested $25.7 million and $17.3
million, respectively, for tooling associated with the Gulfstream V program.
Gulfstream V tooling will be amortized to cost of sales on a unit basis over the
first 200 units of the Gulfstream V program. Tooling associated with the
Gulfstream IV and IV-SP has been fully amortized to cost of sales.
At June 30, 1996 and December 31, 1995, borrowings under the Company's
existing bank credit facilities were $119.8 million and $146.3 million,
respectively. The Company made scheduled principal payments of $31.8 million
during 1995 and $26.5 million during the six months ended June 30, 1996. Of the
scheduled maturities totalling $119.8 million at June 30, 1996, $39.8 million is
payable over the next 12 months.
On June 30, 1996, the Company repurchased approximately four shares of 7%
Cumulative Preferred Stock at their stated value of $18.9 million, and paid
accumulated dividends of $96.1 million out of excess cash flow.
25
<PAGE>
Pursuant to the Commitment Letter, The Chase Manhattan Bank and Chase
Securities, Inc. have severally agreed to provide a $650 million credit facility
to Gulfstream Delaware, a wholly owned subsidiary of the Company. The Bank
Facility will consist of a $400 million Term Loan Facility and a $250 million
Revolving Credit Facility. The Credit Agreement will contain customary
affirmative and negative covenants including restrictions on the ability of the
Company and its subsidiaries to pay cash dividends, as well as financial
covenants, under which the Company must operate. See "Description of Credit
Agreement".
In connection with orders for 33 Gulfstream V aircraft in the backlog, the
Company has offered customers trade-in options (which may or may not be
exercised) under which the Company will accept trade-in aircraft, primarily
Gulfstream IVs and Gulfstream IV-SPs, at a guaranteed minimum trade-in price or
fair market value. See Note 14 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus. In light of the current market
for used Gulfstream aircraft, management believes that the fair market value of
such aircraft will exceed the specified trade-in values. As such, Gulfstream
does not believe the existence of such commitments will have a material adverse
effect on its results of operations, cash flow or financial position.
The Company believes that the net proceeds of the Offerings, together with
cash generated from operating activities, including customer progress payments
and deposits on new aircraft orders, and borrowings available under the Bank
Facility, are sufficient for the Company to meet its working capital needs and
planned capital expenditures.
The Company is involved in a tax audit by the Internal Revenue Service
covering the years ended December 31, 1990 and 1991. See "Business -- Legal
Proceedings".
QUARTERLY RESULTS
The following table sets forth the unaudited consolidated statement of
operating data for each quarter of 1994 and 1995 and the first two quarters of
1996. This quarterly information has been prepared on the same basis as annual
consolidated financial statements and, in the opinion of management, reflects
all adjustments (consisting only of adjustments of a normal recurring nature)
necessary to state fairly the information set forth therein.
Since revenues from sales of new aircraft are recorded as deliveries of
green aircraft are made and revenues from completion services are recorded as
completed aircraft are delivered to the customer, the Company's revenues can
vary significantly from quarter to quarter depending upon the timing of the
deliveries. The operating results for any quarter are not indicative of results
for any future period.
<TABLE>
<CAPTION>
1994
--------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT DELIVERIES DATA)
<S> <C> <C> <C> <C>
Net revenues................................................. $ 128,283 $ 235,502 $ 141,795 $ 396,058
Gross profit................................................. 26,840 34,132 35,831 94,281
Income (loss) from operations................................ (4,491) 169 (3,567) 51,722
Net income (loss)............................................ (8,922) (4,528) (8,944) 45,958
Aircraft deliveries (in units):
Green...................................................... 2 5 2 13
Completion................................................. 6 4 7 9
Pre-owned aircraft......................................... 2 8 2 5
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
1995
--------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT DELIVERIES DATA)
Net revenues................................................. $ 172,564 $ 302,320 $ 239,420 $ 327,210
<S> <C> <C> <C> <C>
Gross profit................................................. 39,072 57,790 44,207 64,898
Income (loss) from operations................................ (1,301) 17,659 5,172 20,560
Net income (loss)............................................ (5,569) 13,408 2,118 18,937
Aircraft deliveries (in units):
Green...................................................... 5 9 5 7
Completion................................................. 3 4 8 14
Pre-owned aircraft......................................... 3 6 5 7
<CAPTION>
1996
------------------------
FIRST SECOND
----------- -----------
(IN THOUSANDS, EXCEPT
DELIVERIES DATA)
<S> <C> <C> <C> <C>
Net revenues................................................. $ 215,063 $ 243,609
Gross profit................................................. 46,791 57,040
Income from operations....................................... 6,317 8,613
Net income................................................... 6,077 9,282
Aircraft deliveries (in units):
Green...................................................... 5 6
Completion................................................. 6 6
Pre-owned aircraft......................................... 3 4
</TABLE>
CONTRACTUAL BACKLOG
Typically, the Company begins taking orders and building backlog two to
three years prior to beginning production of a new aircraft model and receives a
significant number of orders prior to delivering its initial aircraft in a
program. The Company includes an order in backlog only if the Company has
entered into a purchase contract with the customer and has received a
significant (generally non-refundable) deposit from the customer. At July 31,
1996, the Company had a contract backlog of approximately $2.7 billion of
revenues, representing 16 contracts for Gulfstream IV-SPs and 63 contracts for
Gulfstream Vs. All of the Gulfstream IV-SP backlog units are scheduled for
delivery prior to the end of 1997. Approximately 48% of the Gulfstream V backlog
units are scheduled for delivery beyond 1997. Not included in contractual
backlog are letters of intent, executed contracts with financing contingencies
and options for which definitive contracts have not been executed. At July 31,
1996, the Company had letters of intent and executed contracts (with financing
contingencies or awaiting initial deposits) for a total of 20 Gulfstream IV-SPs
and 1 Gulfstream V, representing approximately $540 million of additional
potential revenues, 95% of which would be reflected in 1997 and beyond. At
December 31, 1994 and 1995 the Company had a contract backlog of approximately
$1.5 billion and $1.9 billion, respectively, representing 3 and 7 Gulfstream
IV-SP units and 40 and 50 Gulfstream V units, respectively.
The Company continually monitors the condition of its backlog and believes,
based on the nature of its customers and its historical experience, that there
will not be a significant number of cancellations.
FOREIGN EXCHANGE
The Company does not have any significant assets located outside the United
States. All the Company's sales and contracts have historically been and
currently are denominated in U.S. dollars and, as a result, are not subject to
changes in exchange rates. In addition, substantially all of the Company's
material purchases are currently denominated in U.S. dollars.
INFLATION
The Company continually attempts to minimize any effect of inflation on
earnings by controlling its operating costs and selling prices. During the past
few years, the rate of inflation has been low and has not had a significant
impact on the results of the Company's operations.
27
<PAGE>
A significant portion of the Company's Gulfstream V contracts contain an
adjustment in the purchase price to account for inflation. Such adjustments are
generally capped at an aggregate of 3% per year. These adjustments are intended
to minimize the Company's cost risk associated with the small portion of
material contracts which are not under long-term agreements.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. SFAS No. 121 addresses issues surrounding the measurement and
recognition of losses when the value of certain assets has been deemed to be
permanently impaired. The Company adopted this Statement in 1996 and there was
no material effect on its financial position or results of operations from
adoption.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123 establishes a method
of accounting for stock compensation plans based on the fair value of employee
stock options and similar equity instruments. Adoption of the fair value method
of accounting is not required and the Company is continuing to account for
stock-based compensation using the method set forth in Accounting Principles
Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, which is based
on the intrinsic value of equity instruments. However, beginning in 1996, SFAS
No. 123 requires disclosure in annual financial statements of pro forma net
income and earnings per share as if a fair value method included in SFAS No. 123
had been used to measure compensation cost.
28
<PAGE>
BUSINESS
GENERAL
Gulfstream Aerospace Corporation is recognized worldwide as a leading
designer, developer, manufacturer and marketer of the most technologically
advanced intercontinental business jet aircraft. Since 1966, when the Company
created the large cabin business jet category with the introduction of the
Gulfstream II, the Company has dominated this market segment, capturing a
cumulative market share of 60%. The Company has manufactured and sold over 950
large business aircraft since the introduction of the Gulfstream product line in
1958. Since 1990, the Company has been owned by certain partnerships formed by
Forstmann Little & Co.
The Company has developed a broad range of aircraft products to meet the
aviation needs of its targeted customers. The Company's current principal
aircraft products are the Gulfstream IV-SP, the Gulfstream V, Gulfstream
Shares-TM- (fractional ownership interests in Gulfstream IV-SPs) and pre-owned
Gulfstream aircraft. As an integral part of its aircraft product offerings, the
Company offers aircraft completion (exterior painting of the aircraft and
installation of customer selected interiors and optional avionics) and worldwide
aircraft maintenance services and technical support for all Gulfstream aircraft.
In addition, the Company's financial services subsidiary, Gulfstream Financial
Services Corporation, through its private label relationship with a third-party
aircraft financing provider, offers customized products to finance the worldwide
sale of Gulfstream aircraft.
BUSINESS STRATEGY
Beginning in 1993, the Company implemented a major restructuring and
refocusing of its business in order to improve profitability, increase market
share and build backlog. Theodore J. Forstmann, who assumed the position of
Chairman of the Company in November 1993, recruited a new, senior management
team (including over 20 senior executives with aviation and aerospace industry
experience) and established a five member Management Committee, chaired by Mr.
Forstmann and comprised of four other key executives who share responsibility
for strategic decisions, management and oversight of the Company's operations.
In addition, Mr. Forstmann assembled both a Board of Directors and an
International Advisory Board comprised of prominent business executives and
senior statesmen to counsel the Company and to assist in its refocused sales and
operating initiatives.
Under the leadership of Mr. Forstmann and the new management team, the
Company (i) recapitalized its balance sheet, thereby reducing the Company's
annual interest expense by approximately $38 million, (ii) reduced the Company's
cost structure, yielding over $50 million in annual savings, while increasing
the Company's aircraft production rate, (iii) strengthened the Company's market
position and aircraft order growth, resulting in a contract backlog of
approximately $2.7 billion of revenues, plus letters of intent and executed
contracts (with financing contingencies or awaiting initial deposits)
representing approximately $540 million of additional potential revenues, at
July 31, 1996, (iv) expanded and improved the Company's product offerings and
(v) increased the Company's completion order rate and expanded its worldwide
service and support business.
The most significant aspects of the restructuring were:
RECAPITALIZATION AND SIGNIFICANT REDUCTION OF INTEREST EXPENSE
In late 1993, a partnership formed by Forstmann Little exchanged
approximately $469 million of the Company's subordinated debentures (including
accrued interest) for preferred stock, thereby reducing the Company's annual
interest expense by approximately $38 million. See "Certain Transactions -- The
Acquisition; Subsequent Events". This recapitalization and the resulting
increase in cash flow (together with the cost reductions and manufacturing
efficiencies discussed below) enabled the Company to dedicate additional
resources to significantly enhance the design of the Gulfstream V, the Company's
new ultra-long range business jet.
COST REDUCTIONS AND INCREASED PRODUCTION RATE
The Company initiated a restructuring that significantly reduced its cost
structure and product manufacturing cycle times. The restructuring program
included a voluntary reduction in the Company's
29
<PAGE>
work force by approximately 15%, the outsourcing of certain manufacturing
activities, the renegotiation of major supplier contracts and the termination of
certain leases, which, in the aggregate, have yielded over $50 million in annual
savings. Additionally, the Company has reduced final assembly time of an
aircraft by more than 50% from over 67 days to approximately 30 days and has
reduced aircraft completion time from approximately 35 weeks to approximately 21
weeks. As a result of these cycle time reductions, the use of common tooling and
selected outsourcing, the Company expects to increase its production rate from
an average of 2.4 aircraft per month in 1996 to an average of 3.5 to 4.0
aircraft per month in 1997.
NEW MARKETING INITIATIVES AND SIGNIFICANTLY INCREASED BACKLOG
The Company developed and implemented a new, proactive marketing strategy to
substantially broaden the markets for its products. In addition to the Company's
historical practice of targeting its existing customer base, the Company (a)
initiated an aggressive marketing campaign focused on companies and individuals
that have not previously owned Gulfstream aircraft, (b) significantly expanded
international sales activities, (c) introduced its Gulfstream Shares-TM- program
and (d) offered its customers access to customized financing to support the sale
of new and pre-owned Gulfstream aircraft. The Company has also redirected its
sales and marketing effort to focus on high level decision makers through
increased involvement of the Company's Board of Directors, International
Advisory Board and senior management in the selling process and restructured its
sales commission program to more effectively support the Company's strategic
goals.
As a result of these new marketing initiatives, the Company has experienced
strong growth in aircraft orders and backlog and believes that it has
substantially strengthened its market position. At July 31, 1996, the Company
had a contract backlog of approximately $2.7 billion of revenues, representing
16 contracts for Gulfstream IV-SPs and 63 contracts for Gulfstream Vs.
Approximately 48% of the Gulfstream V backlog units are scheduled for delivery
beyond 1997. In addition, at July 31, 1996, the Company had letters of intent
and executed contracts (with financing contingencies or awaiting initial
deposits) for a total of 20 Gulfstream IV-SPs and 1 Gulfstream V, representing
approximately $540 million of additional potential revenues, 95% of which would
be reflected in 1997 and beyond.
EXPANDED PRODUCT OFFERINGS
The Company expanded its product offerings to provide multiple aircraft
products in contrast to its historical strategy of offering only one new
aircraft model at a time. In addition, the Company began marketing its products
as an integrated whole, offering completion and worldwide maintenance services
and technical support for all Gulfstream aircraft. The Company's current product
offerings include the following:
GULFSTREAM V. The Company significantly enhanced the design and performance
characteristics of the Gulfstream V, which was in the early stage of development
in 1993, and accelerated the pace of its development. The Gulfstream V is
targeted at the market for ultra-long range business jet aircraft (6,500
nautical miles) which is a new market segment for the business jet industry. The
Gulfstream V is in the advanced stages of flight testing and is on schedule to
obtain certification by the Federal Aviation Administration ("FAA") in the last
quarter of 1996, at least 12 months prior to the targeted certification date of
any other ultra-long range business jet aircraft. The Company believes the
Gulfstream V provides the longest range, fastest cruising speed and most
technologically advanced avionics of any ultra-long range business jet aircraft
in operation.
GULFSTREAM IV-SP. In 1993, the Company introduced the Gulfstream IV-SP,
which offers significantly improved performance and upgraded avionics as
compared to its predecessor, the Gulfstream IV. The Company believes that the
Gulfstream IV-SP offers the best combination of large cabin size, long range
(4,220 nautical miles), fast cruising speed and technologically advanced
avionics of any large business jet aircraft currently available.
GULFSTREAM SHARES-TM-. In 1995, the Company introduced a Gulfstream IV-SP
fractional share ownership program (Gulfstream Shares-TM-) in conjunction with
Executive Jet International, Inc.'s ("EJI")
30
<PAGE>
NetJets-Registered Trademark- Program. Gulfstream Shares-TM- provides customers
with the benefits of Gulfstream aircraft ownership at a substantially lower cost
than full aircraft ownership and significantly increases the Company's potential
customer base. To date, the Company has contracted to deliver 16 Gulfstream IV-
SPs to EJI in connection with this program, 7 of which have been delivered and 9
of which will be delivered through 1998. EJI also has an option to purchase 5
additional Gulfstream IV-SPs in 1998 and 2 Gulfstream Vs for delivery in 1999.
PRE-OWNED GULFSTREAM AIRCRAFT. The Company assembled a new, experienced
management team for its pre-owned aircraft sales operations and introduced a
number of initiatives that have enhanced the marketability of pre-owned
Gulfstream aircraft. In addition, the Company has been successful in using
pre-owned Gulfstream aircraft as a significant tool to expand the Company's
potential market and to compete against other manufacturers of lower priced, new
aircraft products. As a result of the Company's competitive success in marketing
pre-owned aircraft, the Company has reduced its inventory of pre-owned aircraft
available for sale to approximately $35.0 million as of June 30, 1996, as
compared with approximately $125.8 million at October 31, 1993.
IMPROVED COMPLETION, SERVICE AND SUPPORT
The Company's new marketing strategy has resulted in substantial
improvements in the Company's completion business. Gulfstream currently
completes approximately 95% of all new Gulfstream aircraft sold to customers as
compared to 70% in 1990. Further, the Company has significantly expanded its
worldwide maintenance services and technical support for Gulfstream aircraft,
including opening a new 200,000 square foot service center in 1996 to increase
its ability to provide high quality service to Gulfstream customers. These
service and support activities provide the Company with ongoing customer
contact, which the Company believes enhances its opportunity to sell new
aircraft to existing service and support customers.
SUCCESSFUL CO-PRODUCTION OF GULFSTREAM V AND GULFSTREAM IV-SP AIRCRAFT
The Company is currently manufacturing both the Gulfstream V and Gulfstream
IV-SP. Upon FAA certification of the Gulfstream V, which is expected to occur in
the last quarter of 1996, the Company will begin delivering Gulfstream V
aircraft to customers. Given the Company's increased manufacturing volume and
large backlog of orders, the Company expects to deliver aircraft in 1997 at
rates substantially in excess of those experienced in the recent past. Assuming
FAA certification in the last quarter of 1996, the Company expects to deliver
approximately 46 new aircraft in 1997, including 19 Gulfstream IV-SP and 27
Gulfstream V aircraft, representing a 59% increase over the Company's expected
deliveries in 1996.
INDUSTRY
The business jet aircraft market is generally divided into four segments --
light, medium, large and ultra-long range. These segments are defined on the
basis of range, cabin volume and gross operating weight. The Company considers
the large segment to currently consist of the Gulfstream IV-SP, Canadair
Challenger 604, and Dassault Falcon 900B and 900EX. The medium segment includes
a variety of business jet aircraft such as the Cessna Citation VII and X,
Dassault Falcon 50EX and 2000, Learjet 60 and Raytheon Hawker 800XP and 1000.
The light segment consists of a variety of aircraft such as the Learjet 31A and
45, Beechjet 400A and Cessna Citation V-Ultra and Bravo.
The ultra-long range market has evolved with the development by the Company
of the Gulfstream V. The first Gulfstream V deliveries are expected in the
fourth quarter of 1996. Bombardier, which is marketing the Global Express in the
ultra-long range market, has announced that it does not expect to receive
certification for delivery of the first Global Express until the second quarter
of 1998. In July 1996, Boeing publicly announced that it would market, in
partnership with General Electric Co., a version of the Boeing 737 for the
ultra-long range business aircraft market. Boeing has indicated that it expects
this entry could be available for delivery in late 1998 or early 1999.
According to BUSINESS AVIATION WEEKLY, since 1982, the annual unit growth
rate for the total business jet fleet worldwide averaged 4.2%. During the same
period, the annual unit growth rate for the large
31
<PAGE>
business aircraft segment averaged 4.5%. Since 1966, when the Company created
the large cabin business jet category with the introduction of the Gulfstream
II, the Company has dominated this market segment, capturing a cumulative market
share of 60%.
The Company believes that the large and ultra-long range business jet
aircraft market will expand significantly in the future due to: (i) the
increasing business relationships in and between existing and emerging commerce
centers, including the Pacific Rim, Europe, the former Soviet states, and the
United States, (ii) the broader and increased utilization of business aircraft
as a result of the increased difficulty of, and safety and security concerns
with, commercial travel, (iii) the improved performance and extended range of
business aircraft, and (iv) the expansion of the fractional ownership concept in
the large business jet aircraft market which allows customers, whose aircraft
usage patterns or financial resources do not justify or permit the direct
purchase of a large aircraft, to purchase a fractional interest in a business
jet aircraft.
PRINCIPAL PRODUCTS
GULFSTREAM V
The Company's newest aircraft product is the Gulfstream V, which the Company
believes provides the longest range, fastest cruising speed and most
technologically advanced avionics of any ultra-long range business jet aircraft
currently in operation. The Gulfstream V is in the advanced stages of flight
testing and the Company expects it to be certified by the FAA in the last
quarter of 1996. Five Gulfstream Vs have been manufactured to date, and four are
currently engaged in the flight testing process. The Company expects to begin
customer deliveries of the Gulfstream V in the last quarter of 1996, at least 12
months prior to the announced delivery dates of any other ultra-long range
business jet aircraft. Assuming FAA certification by year end, the Company
expects to deliver approximately 27 Gulfstream V aircraft in 1997. See "Risk
Factors -- Gulfstream V Certification and Production".
The Gulfstream V has a maximum speed of Mach .885. It can accommodate up to
19 passengers and is expected to have a range of up to 6,500 nautical miles and
a cruising speed of up to Mach .87. These capabilities will permit routine
intercontinental travel at cruising speeds comparable to commercial airline
cruising speeds, while operating efficiently at altitudes as high as 51,000
feet, flying above most commercial airline traffic and adverse weather. The
Gulfstream V is versatile enough to fly long-range missions, such as New York to
Tokyo in approximately 14 hours, as well as high-speed missions, such as New
York to London, in approximately six hours.
The Gulfstream V design process combined modern technology with the
conservative design philosophy of all Gulfstream aircraft. The Gulfstream V
aircraft development was launched in September 1992 and significantly enhanced
in 1993 in response to extensive market research. Aerodynamic profiles were
developed and verified using computational fluid dynamics (CFD) and scale model
wind tunnel testing. Following systems definition, detailed designs were
prepared on both two dimensional (CADAM) and three dimensional (CATIA) digital
computer models, thereby eliminating the need to construct a physical prototype
of the new aircraft. The Company estimates that Gulfstream, its revenue share
partners and key suppliers will have invested over $800 million, in the
aggregate, in developing the Gulfstream V. The Company expects that the
Gulfstream V development program will be materially completed by the end of
1996.
The Gulfstream V is equipped with two 14,750-pound-thrust BR710 engines
built by BMW Rolls-Royce GmbH, which were specifically designed for use on the
Gulfstream V and for which Gulfstream was the launch customer. The sound levels
of the Gulfstream V's engines are well below FAA Stage 3 and ICAO/Chapter 3
regulatory requirements (the FAA's and ICAO's most stringent noise abatement
regulations). These engines, like the Rolls-Royce Tay engines on the Gulfstream
IV-SP (which are considered an industry benchmark), are designed to operate
7,000 flight hours between major overhauls and, due to fuel efficiency, are
expected to operate at a lower cost than the engines of the Gulfstream IV-SP.
32
<PAGE>
The aircraft utilizes dual cabin pressurization systems to minimize cabin
altitude. At a maximum altitude of 51,000 feet, the Gulfstream V cabin altitude
is designed to be pressurized to 6,000 feet, the lowest cabin altitude
pressurization of any business jet aircraft. This low cabin altitude, together
with a 100% fresh air ventilation system (instead of a recirculating air system)
is expected to significantly reduce passenger fatigue.
The advanced flight systems on the Gulfstream V include automatic throttle
systems, an integrated performance computer system, an engine information crew
advisory system, a dual global positioning system and independent inertial
reference systems. These systems provide accurate flight planning, as well as
automatic control, throughout the planned flight profile. For maximum safety, a
Traffic Collision Avoidance System, turbulence and wind shear-detecting radar
and an enhanced Ground Proximity Warning System are also standard. An additional
safety feature of the Gulfstream V is an optional head-up display ("HUD"). The
HUD optimizes pilot performance and improves flight safety, especially in low
visability conditions, by reducing the pilot's dependence on the instrument
panel, thus allowing the pilot to direct his vision outside the cockpit.
In order to reduce the business risk associated with the design and
manufacture of the Gulfstream V, the Company entered into revenue sharing
agreements with Vought Aircraft Company (a subsidiary of Northrop Grumman
Corporation) for the wing and Fokker Aviation B.V. for the empennage. Under
these agreements, the revenue share partner is responsible for the detailed
design, tooling and manufacture of the systems in exchange for a fixed
percentage of revenues of each Gulfstream V sold (which the Company records as a
cost of goods sold upon an aircraft delivery). Thus, in addition to financing
the development, manufacture and delivery of its components, each manufacturer
shares in the risk of fluctuations in demand and market price of the Gulfstream
V. See "-- Materials and Components" and "Risk Factors -- Reliance on Single
Source Suppliers".
The list price for a completed Gulfstream V is currently approximately
$37,750,000 (depending on escalation and selected options). The Company provides
a purchaser of a Gulfstream V with a 20 year or 20,000 flight hour (whichever
comes first) warranty on the airframe structure and a six-year warranty on
components (other than the engines). BMW Rolls-Royce GmbH provides a direct
five-year or 2,500 flight hour (whichever comes first) warranty on the engines
to purchasers of a Gulfstream V.
GULFSTREAM IV-SP
The Company's other principal aircraft product is the Gulfstream IV-SP, a
twin-engine fanjet aircraft which is an enhanced version of the Gulfstream IV
(which the Company no longer manufactures). See "-- Past Aircraft Product
Offerings." The Company believes that the Gulfstream IV-SP offers the best
combination of large cabin size, long range, fast cruising speed and
technologically advanced avionics of any large business jet aircraft currently
available. The Company has manufactured and sold 81 Gulfstream IV-SPs from its
introduction in 1993 through June 30, 1996. The Company intends to continue to
manufacture the Gulfstream IV-SP after the introduction of the Gulfstream V.
The Gulfstream IV-SP can accommodate up to 19 passengers, has a range of up
to 4,220 nautical miles and a cruising speed of up to approximately Mach .85.
These capabilities permit routine intercontinental travel at cruising speeds
comparable to commercial airline cruising speeds, while operating efficiently at
altitudes as high as 45,000 feet, flying above most commercial airline traffic
and adverse weather. The Gulfstream IV/IV-SP is the holder of 195 distance,
altitude and speed records for aircraft of its class including east-bound and
west-bound around-the-world speed records (36 hours and 8 minutes (east-bound)
and 45 hours and 25 minutes (west-bound)).
The Company developed the SP (Special Performance) version of the Gulfstream
IV with enhanced avionics, increased interior cabin width and height, and
increased allowable landing weight, providing improved mission flexibility and
allowing the Gulfstream IV-SP to fly multiple-leg trips without refueling.
The Gulfstream IV-SP is equipped with two Rolls-Royce Tay fan jet engines
which have commercial airline-proven reliability and performance. The Tay
engines can operate 7,000 flight hours between major overhauls, producing
aircraft operating costs for the Gulfstream IV-SP that the Company believes are
33
<PAGE>
comparable to those of its competitors. Additionally, the Gulfstream IV-SP,
together with the Gulfstream IV and the Gulfstream V, are the only business jet
aircraft combining an electronic "all glass cockpit" and an advanced avionics
suite consisting of a fully integrated computerized flight management system,
including a performance computer and automatic throttle systems.
The list price for a completed Gulfstream IV-SP is currently approximately
$28,200,000 (depending upon selected options). The Company provides a purchaser
of a Gulfstream IV-SP with a 15 year or 15,000 flight hour warranty (whichever
comes first) on the airframe structure and a 30 month warranty on most other
parts (other than the engines). Rolls-Royce provides a direct 5 year or 2,500
flight hour warranty (whichever comes first) on the engines to purchasers of a
new Gulfstream IV-SP. Since the first delivery of a Gulfstream IV in 1985,
warranty claims on the Gulfstream IV and Gulfstream IV-SP have aggregated less
than 1% of aggregate net revenues from the sales of Gulfstream IVs and
Gulfstream IV-SPs.
GULFSTREAM IV-MPA
The Company has designed and manufactured the Gulfstream IV-MPA, a multi
purpose derivative of the Gulfstream IV (designated C20-G) procured by and in
service for the United States Navy. The Gulfstream IV-MPA may be equipped with a
six-foot wide cargo door and/or high density seating (up to 26 passengers).
These aircraft have the capability to convert from a cargo configuration to a 26
passenger configuration in less than four hours. There are currently 5
Gulfstream IV-MPAs in service with the United States Navy with 3 additional
units under contract for delivery to other government agencies. The Company
believes that the Gulfstream IV-MPA and other special mission modifications of
the Gulfstream IV-SP aircraft will be important products for meeting the needs
of government operators, military organizations, civil authorities and
intelligence gathering agencies.
GULFSTREAM SHARES-TM-
The Company offers customers fractional ownership in Gulfstream IV-SP
aircraft through a program established by the Company in 1995 in conjunction
with EJI's NetJets-Registered Trademark- program. This program is designed to
provide customers with the benefits of Gulfstream IV-SP aircraft ownership at a
substantially lower cost than the purchase of an entire aircraft. The program
significantly expands the market for Gulfstream IV-SP aircraft to include those
customers whose aircraft usage patterns or financial resources do not justify or
permit the direct purchase of a Gulfstream aircraft. The Gulfstream Shares-TM-
program, by teaming Gulfstream and EJI, has brought the Gulfstream name,
quality, reputation and marketing infrastructure together with the operational
experience and reputation of the founder and leader in the business jet aircraft
fractional ownership market.
The Gulfstream Shares-TM- program is marketed by the Company. EJI purchases
Gulfstream IV-SPs from the Company and then sells fractional ownership interests
in such aircraft generally in one-eighth or one-quarter increments for which the
customer receives 100 or 200 hours of flying time per year, respectively, with a
guaranteed response time for pick-up of 10 hours or 6 hours, respectively. The
customers enter into management and operating contracts with EJI which provide
guaranteed services and operating costs. EJI's agreement with its customers
provides for a term of 5 years with certain termination and renewal rights.
There is no recourse to the Company under the provisions of these agreements or
under the Company's contractual agreement with EJI.
The Gulfstream IV-SP aircraft are maintained by the Company under a
maintenance agreement with EJI. Further, under a lease arrangement, the Company
provides EJI up to 4 pre-owned Gulfstream IV aircraft (which are included in the
Company's pre-owned aircraft inventory) which make up EJI's core fleet and are
used to facilitate EJI's meeting its response time and service guarantees. The
Company has a proprietary agreement with EJI relating to the marketing
activities and provision of the core fleet, pursuant to which the Company is
reimbursed for certain marketing expenses and earns royalty fees on certain EJI
revenues.
Under the terms of the agreements between the Company and EJI, the program
consists of EJI's purchase or option to purchase over 20 Gulfstream IV-SPs and 2
Gulfstream Vs. To date, the Company
34
<PAGE>
has contracted to deliver to EJI 16 Gulfstream IV-SPs in connection with the
Gulfstream Shares-TM- program, 7 of which have been delivered and 9 of which
will be delivered through 1998. In addition, EJI has remaining an option to
purchase 5 additional Gulfstream IV-SPs in 1998 as well as 2 Gulfstream Vs for
delivery in 1999. The Company's marketing services agreement for Gulfstream
Shares-TM- has a term of three years which can be extended by mutual agreement
of the parties.
In addition to providing the Company with an incremental source of revenues,
the Company believes the Gulfstream Shares-TM- program represents an important
marketing tool. Fractional ownership provides the Company with a lower priced
product that allows it to broaden its potential market and to create an entry
level product for new Gulfstream customers. Fractional ownership also allows the
Company to offer an interim solution for customers who have an immediate need
for aircraft transportation and desire to purchase a whole aircraft, but must
wait for delivery due to the orders backlog.
The Company is currently conducting a feasibility study, which is expected
to be completed by early 1997, to determine whether to establish a pre-owned
Gulfstream Shares-TM- program internationally. Such a program could expand the
Company's presence in international markets and assist the Company in selling
pre-owned Gulfstream IV and Gulfstream IV-SP aircraft acquired by the Company
from trade-ins on Gulfstream V deliveries.
AIRCRAFT COMPLETION
When the Company sells a new Gulfstream V or Gulfstream IV-SP, it generally
contracts with its customer to deliver a green aircraft and a completed
interior. The Company's completion services include painting and installing
customer selected interiors and optional avionics. The Company believes that its
completion services improve customer satisfaction while enhancing the Company's
profitability. The Company is the only company possessing the technology and
specifications to complete the Gulfstream V. Although other companies offer
completion services for the Gulfstream IV-SP, the Company believes it has an
advantage over other suppliers due to Gulfstream's understanding of its own
aircraft and the interface requirements necessary for installation of
custom-designed interiors and optional avionics systems. The Company believes
that it also provides superior craftsmanship in designing and building
customized interiors.
Gulfstream has increased its completion order rate on new aircraft as a
percentage of green aircraft orders from 70% in 1990 to approximately 95% in
1995. In an effort to simplify the selling process and to capture completion
business, the Company currently markets its aircraft to customers on a completed
basis. As part of this effort, the Company has developed an aircraft completion
program that offers customers a customized interior using core standardized
design elements. The use of these standardized elements allows the Company to
more accurately predict and reduce costs, cut cycle times and increase
consistency of production. This, together with its integrated marketing
strategy, has allowed the Company to perform substantially all of the completion
services for its green aircraft since 1993.
The Company's completion centers, located in Savannah, Georgia; Brunswick,
Georgia; and Long Beach, California, offer full completion and refurbishing
services. The Company's completion centers located in Savannah, Long Beach and
Brunswick can accommodate an aggregate of up to 20 aircraft at one time.
PREMIUM PRE-OWNED GULFSTREAM AIRCRAFT AND OTHER PRE-OWNED AIRCRAFT
Pre-owned aircraft are routinely accepted in trade to facilitate the sale of
new Gulfstream IV-SPs and Gulfstream Vs. The Company uses pre-owned Gulfstream
aircraft as a significant tool in expanding the Company's potential market and
competing with lower priced, new aircraft products.
The Company has assembled a new, experienced management team and has
introduced a number of initiatives which have enhanced the marketability of its
pre-owned aircraft. The Company refurbishes pre-owned Gulfstream aircraft and
markets these aircraft as a branded product of the Company.
35
<PAGE>
Pursuant to this program, the Company backs pre-owned Gulfstream aircraft with a
5 year warranty on the airframe structure and a 12 month warranty on virtually
all other parts, including the engines under a separate warranty from
Rolls-Royce Commercial Aero Engines Limited.
Recently, the Company obtained certification of Gulfstream IIIs, Gulfstream
IVs and Gulfstream IV-SPs for use in the Commonwealth of Independent States (the
former Soviet Union) as a part of the Company's efforts to develop select
international markets through the introduction of lower priced, pre-owned
Gulfstreams.
Trade-in values for pre-owned aircraft are based on estimated fair market
value ("FMV") at the time the trade-in will actually occur. If the trade-in time
is greater than twelve months into the future, the Company's current practice is
to reserve the right to determine FMV not more than six months prior to delivery
of the green aircraft. Trade-in aircraft are always entered into inventory at
the lower of cost or estimated realizable value. Any excess value offered to a
customer above estimated realizable value is recognized as a reduction in the
revenue received in the new aircraft sale transaction.
Through its trade-in agreements, the Company reserves the right to
pre-market the trade-in aircraft prior to acceptance of title from the customer.
Over the past several years, the Company has generally been successful in
entering sales agreements on trade-in aircraft prior to acceptance of title. If
market conditions change, however, no assurances can be made that the Company
can continue this practice even though the Company's strategy may remain the
same.
The Company has provided a portion of its Gulfstream V customers whose
contracts are currently in backlog with an option to trade in a Gulfstream
aircraft at the time of their Gulfstream V aircraft delivery. These options may
be at a specified dollar amount or at FMV "to be determined six months prior to
green delivery" of the Gulfstream V. The Company continues to assess those
options which are at a fixed dollar amount in light of market conditions and has
determined such fixed dollar options are no higher than the FMV estimated for
the time of Gulfstream V aircraft delivery. Although no assurance can be given
that the fixed dollar trade-in aircraft values will remain at or below FMV at
the time of trade, any adjustments required for values in excess of FMV will be
appropriately reflected in the new aircraft sales transaction and the pre-owned
inventory will be stated on the Company's books at the lower of cost or
estimated realizable value.
AIRCRAFT SERVICES, PARTS AND TECHNICAL SUPPORT
The Company is committed to supporting, servicing and expanding the
Gulfstream aircraft fleet as part of its refocused customer-oriented strategy.
The Company provides worldwide service and support by integrating a network of
Company-owned service centers, three levels of authorized third party service
providers, worldwide parts depots, worldwide service representatives and 24
hour-a-day technical/AOG (aircraft on the ground) support. The Company believes
that the service business offers potential for future expansion and growth as
the Gulfstream fleet grows and that the high level of service the Company
provides results in significant repeat business.
SERVICE CENTERS. The Company operates service centers in Savannah and
Brunswick, Georgia and Long Beach, California for aircraft maintenance
functions, including modifications and major repairs. In 1996, the Company
opened a new 200,000 square foot, state-of-the-art, service facility in
Savannah, Georgia, with capacity for 12 to 20 Gulfstream Vs and Gulfstream IVs.
See "-- Properties". Training, level of service and business practices have been
significantly improved and standardized across the Company's service centers
since 1994.
Additionally, the Company has license agreements with Marshalls of Cambridge
(Cambridge, England), Chrysler's Pentastar Aviation subsidiary (Ypsilanti,
Michigan) and Jet Aviation (Singapore) to provide service, maintenance and
repairs for Gulfstream aircraft. The licensees provide additional geographic
service locations for the expanding Gulfstream fleet. Royalty fees are paid to
the Company by the licensees based on labor hours expended. In addition,
Associated Airlines (Melbourne, Australia) and Jet Aviation Business Jets
(Geneva and Basel, Switzerland) serve as authorized warranty centers.
36
<PAGE>
PARTS. Parts are provided to aircraft owners through a network of five
Company parts depots. Proprietary initiatives (including cancellation of
discounts to third party outlets, a gradual adjustment of parts pricing for high
use items, and a gradual elimination of international price premiums) have been
undertaken in the last 18 months to develop, improve and sustain the Company's
competitive advantage in the fragmented parts market and to improve customer
service levels.
TECHNICAL INFORMATION. The Company markets aircraft support publications
and technical documents to its customers and to third party service facilities.
Additionally, a proprietary computerized manufacturer program (CMP) is offered
as a subscription service to customers for the management and tracking of the
maintenance status of their aircraft. Approximately 90% of the Company's
customers utilize this service. Recently, the Company instituted a policy
requiring third party maintenance facilities to purchase factory technical
support for scheduled maintenance performed on customer aircraft. This is
expected to offset the cost of providing this technical support and further
strengthen the competitive position of the Company's own service centers.
The Company is in the process of establishing its ServiceCare program, the
first comprehensive airframe, engine and avionics maintenance program to be
offered in the business aircraft market, which will provide customers of new
Gulfstream IV-SPs with scheduled and unscheduled maintenance at guaranteed
costs. Coverage will be provided on a world-wide basis, with all work to be
accomplished at Gulfstream or Gulfstream authorized service centers. The program
is expected to be implemented by year-end 1996.
AIRCRAFT MAINTENANCE SERVICES MARKET. In 1995 the Company's estimated
market share (based on service center visits) of the maintenance services market
for the Gulfstream fleet was approximately 40%. The Company has assembled a new,
experienced management team for its maintenance services operations. Under this
new team, the Company has developed a proactive marketing and sales effort and
made investments in training and facilitates, which are expected to increase its
market share significantly by the end of 1998. During the first half of 1996,
the Company increased its revenues from maintenance, parts, services and
facilities by 21% over the comparable period in 1995.
TRAINING AND FACILITIES. The Company provides pilot and maintenance
training services to its customers as an integral component of the sale of new
Gulfstream IV-SP, Gulfstream V and pre-owned Gulfstream aircraft. The Company
has long-term agreements with FlightSafety International ("FSI") for the
provision of this high quality training service.
FSI maintains and operates training facilities co-located with the Company's
Savannah and Long Beach operations and has recently announced its intention to
build a new 86,000 square foot training facility adjacent to the recently
constructed Gulfstream Service Center in Savannah. This training center will be
fully funded by FSI and will house classrooms and simulators (including the new
Gulfstream V simulator) supporting the entire Gulfstream product line
(Gulfstream I through Gulfstream V). Gulfstream, in conjunction with FSI,
facilitates the operation of a Customer Training Advisory Board which provides
direct customer and original equipment manufacturer input to FSI's training
curriculums and course content.
Additionally, pilot and maintenance training services are provided to
Gulfstream customers by SimuFlight Training International ("SimuFlight") located
at Dallas-Fort Worth International Airport, Texas. SimuFlight provides training
services for Gulfstream II, Gulfstream III and Gulfstream IV aircraft.
Gulfstream, in conjunction with SimuFlight, facilitates the operation of an
additional Customer Training Advisory Board which provides direct customer and
original equipment manufacturer input to SimuFlight training curriculums and
course content.
37
<PAGE>
AIRCRAFT FINANCING ARRANGEMENTS
The Company, through its subsidiary Gulfstream Financial Services
Corporation ("GFSC"), provides customers with access to customized financial
products to support the worldwide sale of Gulfstream new and pre-owned aircraft.
GFSC representatives typically consult with potential customers to develop the
most effective means of financing the purchase of a Gulfstream jet for each such
customer's specialized needs.
The financial products (including capital and operating leases, loans, tax
advantaged leases, like-kind exchange options, and Export-Import Bank support)
are provided on a competitive basis through a proprietary, private label
relationship with a prominent provider of aircraft financing (the "Financing
Provider"), that has full credit review and approval rights and assumes all
credit risk with no recourse to the Company. Additionally, the Company and the
Financing Provider have entered into a re-marketing arrangement which enables
the Company to manage the resale of any Gulfstream aircraft whose lease
financing period has ended. This private label agreement has a term of five
years with a lending commitment of $250 million annually, and can be extended by
mutual agreement of the parties.
The Company believes that the access provided by GFSC to financing sources
for customers throughout the world serves to expedite and increase sales of new
and pre-owned aircraft and also enables the Company to effectively manage the
residual values of the Gulfstream fleet.
BACKLOG AND NEW ORDERS
Typically, the Company begins taking orders and building backlog two to
three years prior to beginning production of a new aircraft model and receives a
significant number of orders prior to delivering its initial aircraft in a
program. The Company includes an order in backlog only if the Company has
entered into a purchase contract with the customer and has received a
significant (generally non-refundable) deposit from the customer. At July 31,
1996, the Company had a contract backlog of approximately $2.7 billion of
revenues, representing 16 contracts for Gulfstream IV-SPs and 63 contracts for
Gulfstream Vs. All of the Gulfstream IV-SP backlog units are scheduled for
delivery prior to the end of 1997. Approximately 48% of the Gulfstream V backlog
units are scheduled for delivery beyond 1997. Not included in contractual
backlog are letters of intent, executed contracts with financing contingencies
and options for which definitive contracts have not been executed. At July 31,
1996, the Company had letters of intent and executed contracts (with financing
contingencies or awaiting initial deposits) for a total of 20 Gulfstream IV-SPs
and 1 Gulfstream V, representing approximately $540 million of additional
potential revenues, 95% of which would be reflected in 1997 and beyond. At
December 31, 1993, 1994 and 1995, the Company had a contract backlog of
approximately $0.9 billion, $1.5 billion and $1.9 billion, respectively,
representing 3, 3 and 7 Gulfstream IV-SP units and 24, 40 and 50 Gulfstream V
units, respectively.
Generally, at the signing of a Gulfstream IV-SP or Gulfstream V contract, a
customer makes a non-refundable deposit with the Company. Subsequently, the
customer makes a series of significant progress payments, with the balance of
the purchase price due at delivery of the green aircraft. Since the Company
began taking orders for Gulfstream Vs in 1992, only 4 contracts have been
cancelled, 3 of which were the result of declines in the business performance of
the customer and one of which was a result of adverse economic conditions in a
foreign country.
New orders for the Gulfstream V and the Gulfstream IV-SP totaled 12 and 30,
respectively, in 1995, 16 and 25 in 1994 and 17 and 26 in 1993. Orders tend to
vary from year to year reflecting a number of factors, including competitive
circumstances, worldwide economic and geopolitical conditions and the timing of
customer decisions in placing new orders due to budget planning and specific
transportation needs.
CUSTOMERS AND MARKETING
The majority of the Company's aircraft are sold to national and
multinational corporations and governments. Gulfstream's aircraft are operated
by customers in a wide spectrum of industries and customer groups, including:
pharmaceuticals, consumer goods, high technology, energy, industrial
manufacturing, finance, insurance, real estate, mining, transportation,
communications, public utilities,
38
<PAGE>
retail trade, the United States government, other sovereign entities, and
individuals. Seventy-eight percent of the Gulfstream fleet is based in North
America and 22% of the fleet is based in 46 countries worldwide. Current owners
of Gulfstream aircraft include 25 of the Fortune 50 companies and 115 of the
Fortune 500 companies. In addition, the United States government, including all
branches of the United States military, and 39 foreign governments operate
Gulfstream aircraft. Gulfstream aircraft provide air transportation for the
President, Vice President and other senior members of the United States
government. Over 48 Gulfstream aircraft are currently in operation with various
United States government agencies, including the FAA.
The diverse Gulfstream customer base combined with wide geographic
distribution requires an integrated marketing, communications and sales
approach. The Company's marketing and communications program is designed to
create general awareness of the Company, its products and services, while the
sales approach is highly personalized and focused on the key decision makers, as
well as flight departments and other managers within the customer's
organization.
In 1994, the Company fundamentally changed its sales and marketing processes
to include market segmentation, analysis of customer potential, prospect
tracking and weekly reviews of specific sales and pricing strategies with senior
management. Additionally, with the introduction of GFSC, the Company began
including strategic planning for sales transactions in order to better integrate
customer financing and budgeting requirements. The Company believes these
enhanced processes have been a major contributor to its success in obtaining
orders and growing backlog. Also in 1994, Gulfstream established an
International Advisory Board of 16 prominent international business executives
and senior statesmen to advise the Company on international activities in
support of the Company's strategic initiatives to further penetrate the
international markets. See "Management -- International Advisory Board".
In early 1995, to strengthen its overall position in the market and
effectively focus the resources of the Company on its customers, the Company
created Gulfstream Aircraft Incorporated ("GAI") as a wholly owned subsidiary of
the Company. GAI is responsible for all functions directly related to customers
including: marketing, sales, completions, service and product support. By
closely integrating these activities, customers are provided a high level of
personalized service on the schedule they require. This organization allows the
Company to respond appropriately to scheduled and unscheduled customer needs
while maintaining the engineering expertise and focused business environment
required for the development and manufacture of its high quality products in the
balance of the organization. In addition, it facilitates the direct involvement
of senior leadership in the sales and marketing process.
The Company's marketing and communications program is a carefully integrated
combination of business and trade advertising, direct mail, press coverage,
trade shows and special events. These activities are specifically developed and
executed through GAI to create personal selling opportunities for the sales team
and senior management with assistance from the Board of Directors and
International Advisory Board.
The Company has 22 sales executives located in: New York; New Jersey;
Washington, D.C.; Atlanta, Georgia; Dallas, Texas; Los Angeles, California;
Chicago, Illinois; Columbus, Ohio; Miami, Florida; Savannah, Georgia; London;
Cairo; Singapore; Monaco; and Hong Kong. In the case of international
operations, these executives are responsible for the Company's relationships
with 33 international agents who facilitate business transactions in selected
local markets.
The Company pursues government and special mission business opportunities
worldwide with a two person sales team located in Washington, D.C. These sales
executives are specifically suited by their background and experience to deal
with military and government customers. The Company's government relations
function also involves two people with experience in regulatory, legislative and
appropriations processes essential to the conduct of the Company's business with
the United States Government.
39
<PAGE>
No single customer accounted for more than 10% of sales revenues during the
year ended December 31, 1995.
The following table sets forth for the periods indicated information
concerning the Company's net revenues:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
----------------------------------------------- ----------------------
1994 1995 1996
---------------------- ----------------------- ----------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States........................................ $ 778.8 86% $ 824.5 79% $ 365.1 80%
International........................................ 122.8 14 217.0 21 93.6 20
--------- --- ---------- --- --------- ---
Total net revenues............................... $ 901.6 100% $ 1,041.5 100% $ 458.7 100%
--------- --- ---------- --- --------- ---
--------- --- ---------- --- --------- ---
</TABLE>
For a description of the Company's export sales by geographical area, see
Note 15 to the Company's Consolidated Financial Statements included elsewhere in
this Prospectus.
COMPETITION
The business aircraft market generally is divided into four segments (light,
medium, large and ultra-long range) of aircraft either designed or converted for
business use.
The Gulfstream IV-SP competes in the large cabin business jet aircraft
market segment, principally with Dassault Aviation S.A. (which recently
announced that it will merge with Aerospatiale SA) and Bombardier Inc. The
Gulfstream V competes in the ultra-long range business jet aircraft market
segment, primarily with the Global Express, which is being marketed by Canadair,
a subsidiary of Bombardier, and which is scheduled for certification at least 12
months after the anticipated initial delivery of the Gulfstream V. In addition,
in July 1996, Boeing, in partnership with General Electric Co., publicly
announced that it intends to begin to market a version of the Boeing 737 into
the ultra-long range business jet aircraft market segment. Boeing has indicated
that it expects that this aircraft could be available for delivery in late 1998
or 1999. The Company's competitors may have access to greater resources
(including, in certain cases, governmental subsidies) than are available to the
Company. The Company believes, however, that it competes favorably with its
competitors on the basis of the performance characteristics of its aircraft, the
quality, range and timeliness of the service it provides and its innovative
marketing techniques, and that it has the leading market share in both the large
cabin and ultra-long range business jet aircraft market segments. The Company
believes its aircraft's operating costs are comparable to or lower than those of
its competitors and that its products are competitively priced.
RESEARCH AND DEVELOPMENT
The Company conducts an internally funded research and development program
primarily for the enhancement of the existing Gulfstream aircraft fleet and for
the development of new aircraft. The Company's research and development
expenditures are cyclical and tend to be relatively high several years prior to
the introduction of a new aircraft model and to decrease significantly as that
product cycle matures. All amounts expended on research and development are
expensed as incurred.
The Company's research and development program is based on product and
process improvement to satisfy changing customer needs and changing regulatory
requirements. The Company's research and development efforts have focused on
improving operating efficiencies, performance, safety and reliability, reducing
pilot workloads, realizing environmental benefits, reducing weight and improving
ease of manufacture.
The Company believes that its emphasis on product improvements for aircraft
in the Gulfstream fleet has provided and will continue to provide added value
for the Gulfstream customer. For aircraft already produced and in service,
aircraft changes, which incorporate product improvements, are generally made
available for purchase by existing owners of Gulfstreams.
40
<PAGE>
In 1994 and 1995, the Company spent $57.4 million and $63.1 million,
respectively, on research and development primarily relating to the Gulfstream
V. As a result of the completion of the Gulfstream V development project, the
Company's total research and development expenditures are expected to decline to
$9.2 million in 1997 from an anticipated $59.8 million in 1996. Research and
development expenditures in 1997 and the near-term future will stem principally
from product and process improvements rather than new aircraft development.
MATERIALS AND COMPONENTS
Approximately 70% of the production costs of both the Gulfstream IV-SP and
the Gulfstream V consist of purchased materials and equipment. Many materials
and items of equipment used in the production of the Company's aircraft, such as
the engines, wings, landing gear and avionics systems, are purchased from other
manufacturers, generally pursuant to long-term purchase orders. For the
Gulfstream V, the Company has entered into revenue sharing agreements for the
wing and empennage. Under these agreements, the revenue share partner is
responsible for the detailed design, tooling and manufacture of the systems in
exchange for a fixed percentage of revenues of each Gulfstream V sold. As is
typical among general aviation aircraft manufacturers, the Company relies on
single source suppliers for complex aircraft components and systems. These
single sources are selected based on overall aircraft systems requirements,
quality and certification requirements and competitiveness in the market. The
Company's suppliers include Rolls-Royce Commercial Aero Engines Limited
(Gulfstream IV-SP engines), BMW Rolls-Royce GmbH (Gulfstream V engines),
Honeywell Incorporated (Gulfstream IV-SP and Gulfstream V flight management
systems/avionics), Textron Aerostructures (Gulfstream IV-SP wing), Northrop
Grumman Corporation (Gulfstream V wing revenue share partner through its Vought
Aircraft Company subsidiary and Gulfstream IV-SP nacelle supplier), Fokker
Aviation B.V. (Gulfstream V empennage revenue share partner), The B.F. Goodrich
Co. (Gulfstream IV-SP and Gulfstream V landing gears and air speed sensors),
Sundstrand Corp. (Gulfstream V electrical system and actuators) and
AlliedSignal, Inc. (Gulfstream IV-SP and Gulfstream V auxiliary power unit and
environmental control systems and Gulfstream IV-SP electrical systems). Fokker
Aviation B.V., the provider of the Gulfstream V empennage, was formed upon the
bankruptcy of Fokker Aerospace. To date, the Company has not suffered any
adverse impact from the Fokker reorganization and does not anticipate any future
adverse impact due to the announced Stork NV acquisition of Fokker Aviation B.V.
See "Risk Factors -- Reliance on Single Source Suppliers".
Suppliers are selected on the basis of their ability to produce high quality
systems and components at competitive prices on a timely basis. The Company has
had continuing relationships with most of its major suppliers since the
inception of the Gulfstream II program in 1966. Ongoing supplier relationships
are dependent on cooperation, performance and the maintenance of competitive
pricing. From time to time suppliers have been replaced as the quality of such
suppliers' products declined or the costs associated therewith failed to remain
competitive. While the Company's production activities have not been materially
affected by the inability to obtain essential components, and while it maintains
business interruption insurance in the event that such a disruption should
occur, the failure of certain suppliers or subcontractors to meet the Company's
performance specifications, quality standards or delivery schedules could
adversely impact the Company's operations. In addition, the Company's ability to
significantly increase its production rate could be limited by the ability or
willingness of its key suppliers to increase their delivery rates; however, in
the past, the Company's ability to maintain or increase production has not been
significantly limited by suppliers' performance. In addition, under many of its
supply contracts, the Company is permitted to increase or decrease the quantity
of components or systems being ordered at no cost on six months' notice.
The Company has negotiated multi-year agreements with its major Gulfstream
IV-SP suppliers, who account for approximately 70% of the purchased material
cost used in a Gulfstream IV-SP. All of the agreements allow schedule
flexibility and have no cost termination clauses at the Company's option,
subject to certain conditions and prior notification periods. In aggregate, the
terms of these agreements provide for what is anticipated to be slightly
deflationary pricing through 1999. Contracts are in place for over 95% of the
purchased material required for the Gulfstream V program. Supply arrangements
for all
41
<PAGE>
major components and systems are under long-term agreements, have annual
delivery commitments based on production requirements and allow schedule
flexibility. The terms of the revenue share agreements with Northrop Grumman
Corporation for the wing and Fokker Aviation B.V. for the empennage continue so
long as the Company is manufacturing the Gulfstream V. All other major supply
contracts have no cost termination clauses at the Company's option, subject to
certain conditions and notification periods.
PAST AIRCRAFT PRODUCT OFFERINGS
GULFSTREAM IV
The Gulfstream IV, launched in 1983, has a range of 4,220 nautical miles and
was the first truly intercontinental business jet aircraft. The Gulfstream IV
was designed and built to incorporate the most current technologies in
aerodynamics, propulsion, digital electronics and automated flight management
systems and represented a significant technological advancement over the
Gulfstream III and every other business jet aircraft available at the time. Like
the Gulfstream IV-SP, the Gulfstream IV is equipped with twin Rolls-Royce Tay
engines and an advanced avionics suite. The Gulfstream IV meets current FAA
Stage 3 and ICAO Chapter 3 noise limits. The Company produced 213 Gulfstream IVs
from 1985 through 1992, all of which are still in service.
GULFSTREAM III
In December 1979, the Company introduced the Gulfstream III, a twin-engine
fanjet aircraft powered by two Rolls-Royce Spey engines with a cabin
accommodating up to 19 passengers, a range of 3,600 nautical miles and a
cruising speed of Mach .80. The Gulfstream III incorporated an advanced design
utilizing NASA developed winglet technology to provide greater range and fuel
efficiency than the Gulfstream II. When production ended in January 1987, 202
Gulfstream IIIs had been built. Virtually all of the Gulfstream IIIs remain in
service today.
GULFSTREAM II AND IIB
In 1966, the Company introduced the Gulfstream II, which was the first
business jet aircraft capable of carrying business passengers non-stop,
coast-to-coast. The Gulfstream II is a twin-engine fanjet aircraft powered by
two Rolls-Royce Spey engines with a range of 2,400 nautical miles and a cruising
speed of Mach .80. Beginning in 1981, the Company modified 43 Gulfstream IIs to
Gulfstream IIBs by retrofitting customers' Gulfstream II aircraft with the
Gulfstream III's advanced design wing which enhanced the range capability of the
aircraft to 3,400 nautical miles at Mach .80. When production of the Gulfstream
II ended in December 1979, 256 units had been produced, 95% of which remain in
service. Several specially modified Gulfstream IIs are still used regularly to
train NASA's space shuttle astronauts.
GULFSTREAM I
The Company's product line originated in 1958 with the introduction of the
Gulfstream I, a large twin-engine turboprop powered aircraft built by Grumman
which was the first aircraft of its size and type designed specifically for
business use. The Gulfstream I is powered by Rolls-Royce Dart engines and has a
range of more than 1,700 miles. When production of the Gulfstream I ended in
1966, 200 Gulfstream Is had been built.
REGULATION
In order for an aircraft model to be manufactured for sale, the FAA must
issue a Type Certificate and a Production Certificate for the aircraft model
and, in order for an individual aircraft to be operated, an Airworthiness
Certificate. Type Certificates are issued by the FAA when an aircraft model is
determined to meet certain performance, environmental, safety and other
technical criteria. The Production Certificate ensures that the aircraft is
built to specifications approved under the Type Certificate. An Airworthiness
Certificate is issued for a particular aircraft when it is certified to have
been built in accordance with specifications approved under the Type Certificate
for that particular model aircraft. If the FAA were to suspend or rescind the
Type Certificate or the Production Certificate for an aircraft model, sales of
that aircraft model would be adversely affected or terminated. Gulfstream has
never had a Type Certificate or a Production Certificate suspended, nor had any
jet aircraft grounded as the result of regulatory action.
42
<PAGE>
All of the Company's aircraft models comply with all currently applicable
federal laws and regulations pertaining to aircraft noise and engine emissions.
Due to their weight (under 75,000 pounds), all Gulfstream II, III, IV and IV-SP
aircraft are currently exempt from the FAA Stage 3 noise requirements.
Notwithstanding federal requirements, foreign and local jurisdictions and
airport authorities may establish more stringent restrictions pertaining to
aircraft noise. Such local and foreign regulations in several locations
currently restrict the operation of certain jet aircraft, including the
Gulfstream II, IIB and III and certain of their competitors from landing or
taking off during late evening and early morning hours. Each of the Gulfstream
IV, IV-SP and V aircraft produce noise levels below the FAA's Stage 3 and ICAO's
Chapter 3 noise ceilings. The extent to which regulations pertaining to aircraft
noise and engine emissions may continue to be adopted or modified and the effect
they may have on the operation of business jet aircraft cannot be predicted.
EMPLOYEES
The Company has a 29 year history of operation in Savannah, Georgia, and has
access to the skilled labor force from nearby military bases. The Company's
Bethany, Oklahoma and Long Beach, California facilities also attract a similar
quality work force. At June 30, 1996, the Company employed approximately 4,600
persons, of whom approximately 3,390 were employed at the Company's Savannah,
Georgia facility, 60 were employed at the Brunswick, Georgia facility, 580 were
employed at the Bethany, Oklahoma facility, 360 were employed at the Long Beach,
California facility and 210 were employed at the Mexicali, Mexico facility. None
of the workers at the Savannah, Brunswick, Long Beach, or Mexicali facilities
are unionized. In August 1996, the employees at the Company's Bethany, Oklahoma
plant who are represented by the International Union of United Automobile
Aerospace & Agricultural Implement Workers of America ratified the terms of a
new 5-year contract. The Company considers its overall employee relations to be
good.
PROPERTIES
The Company's production and service facilities are located in Savannah and
Brunswick, Georgia; Bethany, Oklahoma; Long Beach, California; and Mexicali,
Mexico.
The Savannah facility occupies approximately 1,450,000 square feet,
including a new 200,000 square foot service center, and is the location of the
Company's executive offices. Functions performed at the Savannah complex include
Gulfstream IV-SP and Gulfstream V manufacturing, assembly and completion,
product support, service, repair and overhaul of customer-owned Gulfstream
aircraft and new product design, engineering and development. The Savannah
completion center, occupying approximately 120,000 square feet, is adjacent to
the aircraft production line and simultaneously accommodates completion of up to
10 Gulfstream IV-SP or 6 Gulfstream V aircraft. All of the land and buildings
constituting the Savannah facility are owned by the Company.
Any prolonged disruption in the use of the Savannah facility due to the
destruction of or material damage to such facility, or other reasons, could have
an adverse effect on the Company's operations. The Company maintains property
and business interruption insurance to protect against any such disruption, but
there can be no assurance that the proceeds of such insurance would be adequate
to repair or rebuild its facilities in such event or to compensate the Company
for losses incurred during the period of any such disruption.
The Company leases approximately 51,500 square feet of hangar and adjacent
office space in Brunswick, Georgia. The Brunswick facility is both a service
center facility and completion facility and has the capacity for four aircraft.
The lease term, which is renewable annually at Gulfstream's option, extends to
May 1998.
The Bethany facility occupies approximately 500,000 square feet, all of
which are in buildings leased under leases expiring in 2007. At the Bethany
facility, the Company manufactures over 17,000 different detail parts for each
of the Gulfstream IV-SP and the Gulfstream V.
The 250,000 square foot Long Beach facility consists of a completion
facility, which has capacity for 8 aircraft and a service center facility which
has capacity for 10 aircraft. The Long Beach facility also has
43
<PAGE>
facilities for design and administrative functions. The Company owns the
buildings and leases the land at the Long Beach facility; the lease expires in
2014. The Company expects to expand its completion capacity at the Long Beach
facility through the lease of an additional 22,000 square feet at an adjacent
facility.
The Company's Mexicali, Mexico plant occupies approximately 50,000 square
feet of leased space under leases expiring in December 1998 and assembles
electrical products, including wire harnesses, used in Gulfstream production,
and performs repair and service operations, as well as other electrical
subcontracting.
During the last five and one half years (January 1, 1991 to June 30, 1996),
the Company has invested approximately $70 million in capital improvements at
its facilities. Such capital improvements are expected to enhance the Company's
ability to build and service its aircraft. The Company believes that its
facilities are adequate for its present requirements.
PATENTS AND TRADEMARKS
While the Company pursues an active policy of seeking patents for new
products and designs, it believes that its success is primarily dependent upon
the recognition of the quality of its aircraft and upon the Company's
management, technical knowledge, engineering skill, production techniques and
service capabilities. The Company does not believe that the expiration of any
patent would have a material adverse effect on its business.
The Company owns and uses a number of registered trademarks around the world
relating to the name GULFSTREAM (including Gulfstream Shares-TM-) which are used
in connection with its business. The Company believes such trademarks are widely
recognized as representing its advanced design and related technologies. The
Company is not aware of any actions against its trademarks and has not received
any notice or claims of infringement in respect of its trademarks.
ENVIRONMENT
The Company uses hazardous substances and generates solid and hazardous
waste in the ordinary course of its business. Consequently, the Company's
operations, in common with those of the industry generally, are subject to
various laws and regulations governing, among other things, the handling and
disposal of solid and hazardous materials, wastewater discharges and the
remediation of contamination associated with the use and disposal of hazardous
substances. Because of the nature of its business, the Company has incurred, and
will continue to incur, costs relating to compliance with such environmental
laws. Although the Company believes that it is in substantial compliance with
such environmental requirements, and has not in the past been required to incur
material costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. Although the Company is unable to predict what legislation or
regulations may be adopted in the future with respect to environmental
protection and waste disposal, compliance with existing legislation and
regulations has not had, and is not expected to have, a material adverse effect
on its capital expenditures, results of operations, or competitive position.
The Company received in 1992, at its Long Beach facility, two inquiries from
the U. S. Environmental Protection Agency (the "EPA") regarding (i)
documentation errors subject to the Resource Conservation and Recovery Act
("RCRA"), and (ii) possible shipments of hazardous wastes to two storage
facilities whose operators are under EPA investigation pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").
The Company estimates that potential fines regarding these inquires, and a 1991
soil contamination inquiry at the Oklahoma facility, will not have a material
adverse effect on the Company's results of operations.
The Company is currently and continuously engaged in the monitoring and
cleanup of certain groundwater at its Savannah facility under the oversight of
the Georgia Department of Natural Resources. The principal expenses for the
cleanup have been incurred. The Company believes other aspects of the Savannah
facility, as well as other Gulfstream properties, are being carefully monitored
and are in substantial compliance with current federal, state and local
environmental regulations.
44
<PAGE>
Like the Savannah facility, certain of the Company's other facilities have
been in operation for a number of years and, over such time, these facilities
have used substances or generated and disposed of wastes which are or may be
considered hazardous. As a result, it is possible that the Company could become
subject to additional environmental liabilities in the future in connection with
these sites.
LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit instituted on December 12, 1992 and
pending in Oklahoma styled KMC LEASING, INC. ET AL. V. GULFSTREAM AEROSPACE
CORPORATION ET AL. (District Court, State of Oklahoma, Oklahoma County, Case No.
CJ 92 10313). This action, which may be certified as a class action on behalf of
twin-engine Commander aircraft owners, arises from claims relating to potential
damage from corrosion and fatigue fractures on wing spars and requirements to
inspect and possibly replace wing spars in those aircraft. While there are
currently more than 2,500 twin engine Commander aircraft owners, the Company
does not believe all of these owners would qualify as members of any such class.
This product line was discontinued in 1985 and sold during 1989. This lawsuit is
not an insured claim. Other than an allegation that the plaintiffs' damages
exceed jurisdictional requirements, the plaintiffs have not specified a dollar
value of the extent of their damages. The Company believes it has meritorious
defenses to all these claims based upon the facts and merits that underlie them.
The Company does not expect the results in this action to have a material
adverse effect on its financial condition or results of operations. Although
there are other lawsuits pending involving the Company's discontinued light
aircraft product lines, those claims are (i) covered by the General Aviation
Revitalization Act of 1994, which is a federal statute of repose, (ii) the
responsibility of the purchasers of those light aircraft product lines, or (iii)
covered by the Company's product liability insurance. There are no accident or
incident claims pending with respect to any Gulfstream jet aircraft.
The Company maintains product liability insurance coverage of $250 million
per occurrence and in the aggregate per year, subject to $10 million of
self-insurance retention. Management believes this coverage is adequate. The
Company has paid less than $100,000, other than claim expenses and insurance
premiums, with respect to product liability occurrences taking place since
January 1, 1991.
The Company is involved in a tax audit by the Internal Revenue Service
covering the years ended December 31, 1990 and 1991. The revenue agent's report
includes several proposed adjustments involving the deductibility of certain
compensation expense and items relating to the capitalization of the Company and
the allocation of the purchase price in connection with the Acquisition,
including the cost of aircraft that were in backlog at the time of the
Acquisition and the amortization of amounts allocated to intangible assets. The
Company believes that the ultimate resolution of these issues will not have a
material adverse effect on its financial statements because the financial
statements already reflect what the Company currently believes is the expected
loss of benefit arising from the resolution of these issues. However, because
the revenue agent's report is proposing adjustments in amounts materially in
excess of what the Company has reflected in its financial statements and because
it may take several years to resolve the disputed matters, the ultimate extent
of the Company's expected loss of benefit and liability with respect to these
matters cannot be predicted with certainty and no assurance can be given that
the Company's financial position or results of operations will not be adversely
affected.
The Company is also involved in other litigation, including product and
general liability matters, and governmental proceedings arising in the ordinary
course of its business, the ultimate disposition of which in the opinion of the
Company's management, will not have a material adverse effect on the financial
position or results of operations of the Company.
45
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the directors and executive officers of each of the
Company, GAI and GFSC as of the date hereof. The Company does not have a Chief
Executive Officer, but operates principally through a five-member management
committee (the "Management Committee") chaired by Theodore J. Forstmann and
comprised of four other key executives who share reponsibility for strategic
decisions, management and oversight of the Company's operations. Each Management
Committee member is also individually responsible for leadership of specific
organizations within the Company, such as engineering and manufacturing, finance
and information technology, sales and marketing and service. Officers serve at
the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Theodore J. Forstmann (a),(g),(h)............... 56 Chairman of the Board and Director of the Company;
Chairman of the Management Committee
Fred A. Breidenbach (a),(g)..................... 49 President, Chief Operating Officer and Director of the
Company;
Management Committee member
Bryan T. Moss (e)............................... 56 Vice Chairman of the Board and Director of the Company;
Vice Chairman and Chief Executive Officer of GAI;
Management Committee member
W.W. Boisture, Jr. (a),(f)...................... 51 Executive Vice President and Director of the Company;
President and Chief Operating Officer of GAI;
Management Committee member
Chris A. Davis.................................. 45 Executive Vice President, Chief Financial Officer and
Secretary of the Company;
Executive Vice President and Chief Financial Officer of
GAI;
President and Chief Operating Officer of GFSC;
Management Committee member
William R. Acquavella (f)....................... 58 Director
Robert Anderson (b),(g)......................... 75 Director
Charlotte L. Beers (e).......................... 61 Director
Thomas D. Bell, Jr. (e)......................... 46 Director
Nicholas C. Forstmann (d),(e),(h)............... 49 Director
Sandra J. Horbach (a),(c),(f)................... 35 Director
Drew Lewis (g).................................. 64 Director
Allen E. Paulson (f)............................ 74 Director
Roger S. Penske (b),(e)......................... 59 Director
Colin L. Powell (f)............................. 59 Director
Gerard Roche (c),(d),(g)........................ 65 Director
Donald H. Rumsfeld (b),(e)...................... 64 Director
George P. Shultz (f)............................ 75 Director
Robert S. Strauss (c),(d),(g)................... 77 Director
</TABLE>
46
<PAGE>
- --------------
(a) Member of Executive Committee.
(b) Member of Audit Committee.
(c) Member of Compensation Committee.
(d) Member of Employee Benefit Plan Committee.
(e) Class I director.
(f) Class II director.
(g) Class III director.
(h) Nicholas C. Forstmann and Theodore J. Forstmann are brothers.
Theodore J. Forstmann has served as Chairman of the Board of the Company
since November 1993. Mr. Forstmann has been a general partner of FLC
Partnership, L.P. since he co-founded Forstmann Little in 1978. He is also a
director of CIDCO Incorporated, General Instrument Corporation ("General
Instrument") and Department 56, Inc. ("Department 56").
Fred A. Breidenbach has served as President, Chief Operating Officer and a
director of the Company since April 1993. Prior to joining the Company, he was
Vice President and General Manager of General Electric Co.'s Electronics Systems
Division from 1991 to 1993. He is also a director of the Aerospace Industries
Association of America, Inc. and the Vice Chairman of the General Aviation
Manufacturing Association.
Bryan T. Moss has served as Vice Chairman of the Company and Chief Executive
Officer of GAI since March 1995. Prior to joining the Company, he was President
of Bombardier Business Aircraft Division where he was responsible for the
Challenger and Global Express business jet programs from 1989 to March 1995.
W.W. Boisture, Jr. has served as Executive Vice President since February
1994 and as a director of the Company since February 1995. He is also President
and Chief Operating Officer of GAI. Prior to joining the Company, he was
President and Chief Executive Officer of British Aerospace Corporate Jets from
October 1992 through 1993 where he was responsible for the "Hawker" business jet
product line and its worldwide marketing, sales and support organization. From
early 1990 to 1992, Mr. Boisture was Chairman, President and Chief Executive
Officer of Butler Aviation, a nationwide aviation services company.
Chris A. Davis has served as Executive Vice President and Chief Financial
Officer of the Company since July 1993 and Secretary of the Company since August
8, 1996. She is also President and Chief Operating Officer of GFSC. Prior to
joining the Company, she was Chief Financial Officer for General Electric Co.'s
Electronic Systems Division from 1990 to 1993.
William R. Acquavella has been a director of the Company since March 1990.
He has been the owner and operator of Acquavella Galleries, Inc. and Acquavella
Contemporary Art, Inc. since 1963 and the general partner of Acquavella Modern
Art since May 1990.
Robert Anderson has been a director of the Company since March 1990. He has
served as Chairman Emeritus of Rockwell Corporation since February 1990. Mr.
Anderson is also a director of Optical Data Systems, Inc. and the Timken
Company.
Charlotte L. Beers has been a director of the Company since July 1993. She
has been Chairman and Chief Executive Officer of Ogilvy & Mather Worldwide, Inc.
since April 1992. Ms. Beers was Chairman/Chief Executive Officer of Thatham RSCG
from 1982 to 1992.
Thomas D. Bell, Jr. has been a director of the Company since April 1994. Mr.
Bell has been President and Chief Executive Officer of Burson-Marsteller, a
division of Young & Rubicam Inc., since May 1995.
47
<PAGE>
Mr. Bell was Vice Chairman of the Company from April 1994 to April 1995. From
1991 to 1994 Mr. Bell served as Vice Chairman and Chief Operating Officer of
Burson-Marsteller. Mr. Bell is also a director of Lincoln National Corporation.
Nicholas C. Forstmann has been a director of the Company since March 1990.
He has been a general partner of FLC Partnership, L.P. since he co-founded
Forstmann Little in 1978. He is also a director of General Instrument and
Department 56.
Sandra J. Horbach has been a director of the Company since September 1994.
She has been a general partner of FLC Partnership, L.P. since January 1993. She
joined Forstmann Little in August 1987. She is also a director of Department 56.
Drew Lewis has been a director of the Company since March 1990. He has
served as Chairman and Chief Executive Officer of Union Pacific Corporation
since October 1, 1987. He is also a director of American Express Company, Ford
Motor Company, Lucent Technologies, FPL Group, Inc., Gannett Co., Inc., and
Union Pacific Resources Group, Inc.
Allen E. Paulson has been a director of the Company since March 1990. He
served as Chairman, Chief Executive Officer and a director of Gulfstream
Aerospace Corporation (a Georgia corporation and wholly owned indirect
subsidiary of the Company) and its predecessors from 1978, when he purchased the
corporate jet division of Grumman Aerospace and began Gulfstream American (a
predecessor of the Company), to 1992. He has also served as Chairman of the
Company from March 1990 and Chief Executive Officer of the Company from January
1992 to August 1992. He is also a director of Cardio-Dynamics International
Corp. and Full House Resorts, Inc.
Roger S. Penske has been a director of the Company since December 1993. Mr.
Penske has been Chairman, Chief Executive Officer, President and a director of
Penske Transportation, Inc. since 1969 and Chairman, Chief Executive Officer and
a director of Detroit Diesel Corporation since 1987. Mr. Penske is also a
director of Penske Mortorsports, Inc., Philip Morris Companies Inc. and General
Electric Company.
Colin L. Powell has been a director of the Company since May 1996. Mr.
Powell served as the Chairman of the Joint Chiefs of Staff from October 1989 to
September 1993. Prior to that, Mr. Powell served as the National Security
Adviser from December 1987 to January 1989. Since his retirement from military
service on September 30, 1993, Mr. Powell has written his autobiography, "My
American Journey".
Gerard Roche has been a director of the Company since January 1993. Mr.
Roche has been Chairman of Heidrick & Struggles, Inc. since 1981. Mr. Roche is
also a director of Morrison Knudsen Corporation.
Donald H. Rumsfeld has been a director of the Company since January 1993.
Mr. Rumsfeld has been in private business since August 1993. From October 1990
to August 1993, Mr. Rumsfeld served as Chairman, Chief Executive Officer and
President of General Instrument. Mr. Rumsfeld is also a director of ABB AB,
Amylin Pharmaceuticals, Inc., Gilead Sciences, Inc., Kellogg Company, Metricom,
Inc., Sears Roebuck & Co., and Tribune Company.
George P. Shultz has been a director of the Company since November 1991. Mr.
Shultz served as the United States Secretary of State from July 1983 until
January 1989 and is a Distinguished Fellow of the Hoover Institute. Mr. Shultz
is also a director of AirTouch Communications, Inc. and Gilead Sciences, Inc.
Robert S. Strauss has been a director of the Company since April 1993. Mr.
Strauss is a founder of and partner in the law firm of Akin, Gump, Strauss,
Hauer & Feld ("Akin Gump") and served as U.S. Ambassador to the Soviet Union,
and upon its dissolution, to the Russian Federation from August 1991 to November
1992. In November 1992, Mr. Strauss returned to Akin Gump. Mr. Strauss is also a
director of Archer-Daniels-Midland Co. and General Instrument.
48
<PAGE>
INTERNATIONAL ADVISORY BOARD
In 1994, the Company established an International Advisory Board of 16
prominent international business executives and senior statesmen to counsel the
Company and assist in its strategic initiatives to further penetrate
international markets. The International Advisory Board, which meets twice a
year, is comprised of the following individuals, representing the principal
geographic areas of the world:
<TABLE>
<CAPTION>
NAME PRINCIPAL AFFILIATION GEOGRAPHIC AREA
- ------------------------------------ --------------------------------------------- ----------------------------
<S> <C> <C>
George P. Shultz (Co-Chairman)...... Former U.S. Secretary of State; Distinguished USA
Fellow, Hoover Institute
Robert S. Strauss (Co-Chairman)..... Former Ambassador to the Soviet Union and USA
Russian Federation; Partner, Akin, Gump,
Strauss, Hauer & Feld
Theodore J. Forstmann............... Chairman of the Company and Co-founder of USA
Forstmann Little
Conrad M. Black..................... Chairman and Chief Executive Officer of Canada
Hollinger Inc.
Claudio X. Gonzalez................. Chairman and Chief Executive Officer of Mexico
Kimberly Clark de Mexico, S.A. de C.V.
Gustavio A. Cisneros................ President and Chief Executive Officer of South America
Cisneros Group of Companies
Julio Mario Santo Domingo........... Chairman of the Board of Bavaria, S.A. South America
Alex Wildenstein.................... Chief Executive Officer of Wildenstein & Co. Europe
Karl Otto Pohl...................... Former Head of The Bundesbank; Partner, Sal. Germany
Oppenheim Jr. & Cie
Henry H. Keswick.................... Chairman of Matheson & Co. Limited; Chairman United Kingdom/Europe
of The Hong Kong Association
Lord Jacob Rothschild............... Chairman of J. Rothschild Group United Kingdom/Europe
Fouad Said.......................... Chairman of Unifund Switzerland
Hiroshi Toyokawa.................... President of Okura & Co., Ltd. Japan
David K. P. Li...................... Director and Chief Executive of The Bank of Hong Kong/China
East Asia, Limited
Bernard Duc......................... Senior Partner, H.M.I. Ltd. Southeast Asia
Fouad M.T. Alghanim................. Chariman of Alghanim Group Saudi Arabia
</TABLE>
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Restated Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes. Each class will consist, as nearly as
possible, of one-third of the total number of directors constituting the entire
Board. The term of the initial Class I directors will terminate on the date of
the 1997 annual meeting of stockholders; the term of the initial Class II
directors will terminate on the date of the 1998 annual meeting of stockholders;
and the term of the initial Class III directors will terminate on the date of
the 1999 annual meeting of stockholders. Beginning in 1997, at each annual
meeting of stockholders, successors to the class of directors whose term expires
at that annual meeting will be elected for a three-year term and until their
respective successors are elected and qualified. A director may only be removed
with cause by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock entitled to vote in the election of
directors.
Directors who are neither executive officers of the Company nor general
partners in FLC Partnership, L.P. have been granted options to purchase Common
Stock in connection with their election to the Board. In addition, in 1996 each
of Theodore J. Forstmann and Sandra J. Horbach were granted options
49
<PAGE>
to purchase Common Stock in consideration of extraordinary service to the
Company. See "-- Compensation Committee Interlocks and Insider Participation".
Directors do not receive any fees for serving on the Company's Board, but are
reimbursed for their out-of-pocket expenses arising from attendance at meetings
of the Board and committees thereof.
EXECUTIVE COMPENSATION
The following table sets forth the compensation of each of the members of
the Company's Management Committee, which includes the Chairman of the Board and
the four most highly paid executive officers of the Company who were serving as
executive officers at December 31, 1995 (the "named executive officers") for
fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION BASE SALARY BONUS* COMPENSATION OPTIONS (#) COMPENSATION
- ---------------------------------------------- ------------ --------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Theodore J. Forstmann ........................ -- -- -- -- --
Chairman of the Board
Bryan T. Moss ................................ $ 619,432(1) $ 312,500 -- 675,000 $ 765,975(2)
Vice Chairman of the Board
Fred A. Breidenbach .......................... 500,011 312,500 $ 236,521(3) 19,304(4)
President and COO
W.W. Boisture, Jr. ........................... 274,056 171,875 225,000 2,433(5)
Executive Vice President
Chris A. Davis ............................... 274,056 171,875 187,500 3,000(5)
Executive Vice President and CFO
</TABLE>
- ------------------
* Bonuses were paid in January 1996 in respect of fiscal 1995 under a
management incentive plan.
(1) Represents base salary, plus commissions paid for 1995 sales of aircraft.
(2) Represents a signing bonus ($325,600), a nonrecurring payment in respect of
the value of vested stock options with previous employer ($437,375) and the
Company's contribution to the 401(k) plan ($3,000).
(3) Represents tax gross-up relating to vesting of annuity contract purchased
by the Company for Mr. Breidenbach in 1993.
(4) Represents the Company's contribution to an executive life insurance plan
($16,304) and the 401(k) plan ($3,000).
(5) Represents the Company's contribution to the 401(k) plan.
50
<PAGE>
The following table sets forth the stock option grants to each of the named
executive officers for fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE/ OPTION TERM(2)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
- --------------------------------- ------------ ---------------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Theodore J. Forstmann............ -- -- -- -- -- --
Bryan T. Moss.................... 675,000(3) 38.79% $ 4.10 03/14/2005 $1,740,466 $4,410,682
Fred A. Breidenbach.............. -- -- -- -- -- --
W.W. Boisture, Jr................ 150,000(4) 8.62% $ 4.10 02/06/2005 386,770 980,145
75,000(5) 4.31% $ 4.10 06/30/2005 193,385 490,073
Chris A. Davis................... 187,500(5) 10.78% $ 4.10 06/30/2005 483,463 1,225,181
</TABLE>
- ------------------
(1) All awards listed on table were in the form of option grants made pursuant
to the Company's Stock Option Plan.
(2) Sets forth potential option gains based on assumed annualized rates of
stock price appreciation from the exercise price at the date of grant of 5%
and 10% (compounded annually) over the full term of the grant with
appreciation determined as of the expiration date. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission, and do not represent the Company's estimate or
projection of future Common Stock prices.
(3) This grant was made on March 14, 1995. One fourth of the total number of
options granted became exercisable immediately, another fourth became
exercisable on the first anniversary of the grant date, and an additional
fourth is exercisable on each of the second and third anniversaries of the
grant date.
(4) This grant was made on February 6, 1995. One third of the total number of
options granted became exercisable on the first anniversary of the grant
date; an additional one third is exercisable on each of the second and
third anniversary dates.
(5) This grant was made on June 30, 1995. One third of the total number of
options granted was exercisable on the first anniversary of the grant date;
an additional one third is exercisable on each of the second and third
anniversary dates.
51
<PAGE>
The following table sets forth the stock option exercises for the fiscal
year ended December 31, 1995 and the stock option values as of December 31,
1995, in each case, for each of the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)*
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------- ----------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Theodore J. Forstmann....... -- -- -- -- -- --
Bryan T. Moss............... -- -- 168,750 506,250 3,189,375 9,568,125
Fred A. Breidenbach......... -- -- 703,125 234,375 13,985,156 4,661,719
W.W. Boisture, Jr........... -- -- 187,500 412,500 3,543,750 7,796,250
Chris A. Davis.............. -- -- 196,875 253,125 3,915,844 4,849,031
</TABLE>
- --------------
* Sets forth values for "in the money" options that represent the positive
spread between the respective exercise/base prices of outstanding stock
options and the value of the Company's Common Stock as of December 31, 1995
based on an assumed initial public offering price of $23.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Theodore J. Forstmann, Sandra J. Horbach and Daniel F. Akerson administered
the Company's compensation program during 1995. Mr. Forstmann is the Chairman of
the Company and Ms. Horbach served as Vice President, Assistant Treasurer and
Assistant Secretary of the Company until August 8, 1996. Mr. Akerson resigned as
a director of the Company in March 1996. On August 8, 1996, the Company
appointed a new Compensation Committee to administer the cash portion of the
Company's compensation program, comprised of Sandra J. Horbach, Gerard Roche and
Robert S. Strauss, and a new Employee Benefit Plan Committee, to administer the
Company's employee benefit plans, comprised of Nicholas C. Forstmann, Gerard
Roche and Robert S. Strauss. Theodore J. Forstmann, Sandra J. Horbach and
Nicholas C. Forstmann are general partners of FLC Partnership, L.P. Daniel F.
Akerson was a general partner of FLC Partnership, L.P. until his withdrawal in
March 1996.
Under a usage agreement Gulfstream pays an affiliate of FLC Partnership,
L.P. for use of a Gulfstream IV in connection with sales demonstrations,
customer support and other Gulfstream business. Total payments for 1993, 1994
and 1995 and the first six months of 1996 were $4.6 million, $2.3 million, $2.3
million and $1.2 million, respectively. In August 1996, Gulfstream entered into
agreements with Mr. Theodore J. Forstmann pursuant to which Gulfstream will
provide Mr. Forstmann with the use of a Gulfstream V for a period of ten years.
Until the Gulfstream V becomes available, Gulfstream will make available to Mr.
Forstmann a Gulfstream IV (by purchasing at fair market value, or assuming a
lease at fair market value for, a Gulfstream IV from an affiliate of FLC
Partnership, L.P.). Mr. Forstmann has agreed to pay Gulfstream up to $1.0
million annually for non-Company use of the aircraft. If Mr. Forstmann is no
longer serving as a director or official of Gulfstream, he has agreed to
reimburse Gulfstream $1,800 per hour for all use of the aircraft, or other such
rate required so as not to exceed FAA regulatory requirements.
Gulfstream purchased approximately $1.7 million, $1.5 million and $1.8
million in inventory items relating to lighting from Grimes Aerospace Corp., an
affiliate of FLC Partnership, L.P., during 1993, 1994 and 1995 and has purchased
approximately $0.9 million in inventory in 1996 pursuant to existing purchase
orders. During 1994, Gulfstream sold three aircraft on normal commercial terms
for an aggregate purchase price totaling $58.6 million to two corporations whose
presidents are directors of the Company and also sold a Gulfstream II to an
affiliate of FLC Partnership, L.P., for $6.7 million. From time to time the
Company provides maintenance and support services, all on standard commercial
terms, to FL Aviation Corp., an affiliate of FLC Partnership, L.P. that operates
Gulfstream aircraft. For providing such services Gulfstream was paid
approximately $0.2 million, $0.5 million, $0.5 million and
52
<PAGE>
$0.1 million in 1993, 1994, 1995 and the first six months of 1996, respectively.
Moran Printing, a company owned by relatives of Theodore J. Forstmann and
Nicholas C. Forstmann, has a 3 year contract (which commenced in November 1995)
to provide printing services on standard commercial terms to the Company. For
the first six months of 1996, the Company received services and paid $633,458
therefor, under such contract.
The Forstmann Little Partnerships are entitled to the benefits of the
Registration Rights Agreement described under "Shares Eligible For Future Sale
- -- Registration Rights". Each director and officer who currently holds options
exercisable for Common Stock is entitled to the benefits of a stockholder's
agreement described under "-- Stock Options". In May 1996, in consideration of
extraordinary service to the Company, Theodore J. Forstmann and Sandra J.
Horbach received options to purchase 375,000 and 75,000 shares of Common Stock,
respectively, in each case at an exercise price of $4.10 per share.
STOCK OPTIONS
STOCK OPTION PLAN
GENERAL. The following summary description of the Stock Option Plan does
not purport to be complete and is qualified in its entirety by the full text of
the Stock Option Plan.
On September 12, 1990, the Board of Directors of the Company, and the
Company's stockholders, adopted the Gulfstream Aerospace Corporation Stock
Option Plan (the "Stock Option Plan"). The Stock Option Plan provides for the
granting of options to purchase shares of Common Stock to any employee or
director of, or consultant or advisor to, the Company or its subsidiaries, which
options are not intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). While all
employees (approximately 4,600 persons) are eligible to participate under the
Stock Option Plan, the Company has historically granted options to only a
portion of its employees. Generally, the Company's current practice is to limit
option grants to members of management, directors and advisors of the Company.
No options may be granted under the Stock Option Plan after September 12, 2010.
The maximum number of shares of Common Stock which can be granted under the
Stock Option Plan is 8,218,993; at June 30, 1996, options for approximately
7,481,480 shares of Common Stock were outstanding under the Stock Option Plan.
In the event that any option granted under the Stock Option Plan is terminated
and unexercised as to any shares of Common Stock covered by the option (other
than due to adjustments made by the Committee (as defined below) because of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split-up or other substitution of securities), such shares will thereafter be
available for the granting of future options under the Stock Option Plan.
The purpose of the Stock Option Plan is to provide financial incentives to
key employees of the Company and its subsidiaries and such consultants, advisors
and members of the Board of Directors whose entrepreneurial and management
talents and commitments are essential for the continued growth and expansion of
the Company's business. The Stock Option Plan provides that options will be
granted by a committee appointed by the Company's Board of Directors (the
"Committee"). The Committee will determine the terms and conditions of options
granted pursuant to the Stock Option Plan, including the per share exercise
price and the time or times at which the options become exercisable. While the
terms of each option under the Stock Option Plan may differ from others granted
under the Stock Option Plan, in no event will the term of any option granted
under the Stock Option Plan exceed ten years and one day. Under the Stock Option
Plan, the options are exercisable during an optionee's lifetime only by the
optionee and are not transferable except, in certain cases, by will to certain
permitted transferees who agree to be bound by the Stock Option Agreements or
under the laws of descent and distribution of the state of domicile of the
optionee if the optionee dies intestate. Except as otherwise provided in the
Stock Option Agreement (as defined below), the options are not exercisable after
the termination of the optionee's employment or directorship. To exercise an
option, the optionee must deliver payment in full for the shares with respect to
which the option is being exercised and a fully executed Stockholder's Agreement
(as described below). The Stock Option Plan is currently administered by the
Employee Benefit Plan Committee of the Board of Directors of the Company.
53
<PAGE>
The Board of Directors of the Company may amend, suspend or terminate the
Stock Option Plan at any time provided that (except for adjustments due to
merger consolidation, reorganization, recapitalization, stock dividend, stock
split-up or other substitution of securities) no amendment may: (a) increase the
total number of shares which may be issued and sold pursuant to the exercise of
options granted under the Stock Option Plan, (b) extend the period for granting
or exercising any option, or (c) change the classes of persons eligible to
receive options, unless such amendment is made by or with the approval of a
majority of the outstanding shares of Common Stock. The rights of an optionee
under any option granted prior to an amendment, suspension or termination of the
Stock Option Plan may not be adversely affected by Board action without the
optionee's consent.
STOCK OPTION AGREEMENTS. The options which have been granted under the
Stock Option Plan have been granted pursuant to stock option agreements ("Stock
Option Agreements"), and each option is exercisable into one share of Common
Stock at a price set forth in each Stock Option Agreement. The options generally
vest and become exercisable in three equal amounts on each of the first, second
and third anniversaries of the grant date, or in four equal amounts on the grant
date and each of the first, second and third anniversaries of the grant date.
Certain of the options were fully vested and exercisable on the grant date.
Generally, the unvested portion of an option expires on the date of the
optionee's termination of employment, and vested options expire after the
termination of employment as described below.
Except as set forth in the individual Stock Option Agreements, an option may
not be exercised after termination of the optionee's employment. The Stock
Option Agreements generally provide for the redemption by the Company, at the
Company's option, of the vested portion of an option in the event of a
termination or permit the optionee to exercise such portion following the
termination within a period of time specified in such Stock Option Agreement.
The option expires at the end of such period of time.
The Stock Option Agreements provide that the Company will notify the
optionee within a specified number of days prior to a "Terminating Event" or a
"Partial Sale." A Terminating Event includes (a) the merger or consolidation of
the Company into another corporation (other than a merger or consolidation in
which the Company is the surviving corporation and which does not result in a
capital reorganization, reclassification or other change of the then outstanding
shares of Common Stock), (b) liquidation of the Company, (c) sale to a third
party of all or substantially all of the Company's assets or (d) sale to a third
party of Common Stock (including through one or more public offerings); but only
if, in the case of the events described in (a), (b) and (d), the Forstmann
Little Partnerships cease to own a specified percentage (ranging from zero to
51%, depending on the particular Stock Option Agreement) of the outstanding
shares of the voting stock of the Company. A Partial Sale means a sale by the
Forstmann Little Partnerships of all or a portion of their shares of Common
Stock (including through a public offering) to a third party (other than a
Terminating Event). The Offerings will not constitute a Terminating Event. Upon
receipt of a notice of a Partial Sale, the optionee may, within a specified
period of time after receiving such notice, exercise his or her options only for
purposes of participating in the Partial Sale, whether or not such options were
otherwise exercisable, with respect to the excess, if any, of (a) the number of
shares with respect to which the optionee would be entitled to participate in
the Partial Sale under the Stockholder's Agreement, which permits proportional
participation with the Forstmann Little Partnerships in a public offering or
sale to a third party (as described below), over (b) the number of shares
previously issued upon exercise of such options and not previously disposed of
in a Partial Sale. The Offerings constitute a Partial Sale. Upon receipt of a
notice of a Terminating Event, the optionee may, within ten days of receiving
such notice (or such shorter time as determined by the Committee), exercise all
or part of his or her options, whether or not such options were otherwise
exercisable. In connection with a Terminating Event involving the merger,
consolidation or liquidation of the Company or the sale of Common Stock by the
Forstmann Little Partnerships, the Company, in the Committee's discretion, may
redeem the unexercised portion of the options, in lieu of permitting the
optionee to exercise the options, for a price equal to the price received per
share of Common Stock in the Terminating Event, less the exercise price of the
options. Any unexercised portion of an option will terminate upon the
consummation of a Terminating Event, unless the Company provides for the
continuation thereof. In the event a Terminating Event or Partial Sale
54
<PAGE>
is not consummated, any option which the optionee had exercised in connection
with such Terminating Event or Partial Sale will be deemed not to have been
exercised and will be exercisable thereafter only to the extent it would have
been exercisable if notice of such Terminating Event or Partial Sale had not
been given to the optionee. The optionee has no independent right to require the
Company to register under the Securities Act the shares of Common Stock subject
to such options.
STOCKHOLDER'S AGREEMENT. Upon exercise of an option (or portion thereof)
under the Stock Option Plan, an optionee is required to enter into a
Stockholder's Agreement with the Company. The form of Stockholder's Agreement
currently contemplated to be used in connection with the Stock Option Plan
governs the optionee's rights and obligations as a stockholder (the
"Stockholder"). The Stockholder's Agreement provides that, generally, the shares
issued upon exercise of the options may not be sold, transferred, assigned,
exchanged, pledged, encumbered or otherwise disposed of, except as specifically
provided in the Stockholder's Agreement.
The Stockholder's Agreement provides that the Stockholder shall participate
proportionately in any sale by the Forstmann Little Partnerships of all or a
portion of their shares of Common Stock to any person who is not a partner or
affiliate thereof, and the Stockholder shall participate proportionately in a
public offering of shares of Common Stock by the Forstmann Little Partnerships,
by selling the same percentage of the Stockholder's shares that the Forstmann
Little Partnerships are selling of their shares. The sale of shares of Common
Stock in such a transaction must be for the same price and otherwise on the same
terms and conditions as the sale by the Forstmann Little Partnerships. If the
Forstmann Little Partnerships sell or exchange all of their Common Stock in a
bona fide arm's-length transaction, the Stockholder is required to sell all of
his, her or its shares for the same price and on the same terms and conditions
as the sale of Common Stock by the Forstmann Little Partnerships and, if
stockholder approval of the transaction is required, to vote his, her or its
shares in favor thereof. If, however, one or more public offerings result in the
Forstmann Little Partnerships owning, in the aggregate, less than 25% of the
then outstanding voting stock of the Company, the Stockholder is generally
entitled to sell, transfer or hold his shares of Common Stock free of the
restrictions and rights contained in the Stockholders Agreement. It is
anticipated that immediately after the Offerings, the Forstmann Little
Partnerships, in the aggregate, will not own less than such percentage.
The following table sets forth the amount of shares of Common Stock subject
to outstanding options under the Stock Option Plan as of July 31, 1996 held by:
(a) each of the Named Executive Officers; (b) current executive officers; (c)
current directors who are not executive officers; and (d) all current employees,
including all current officers who are not either current executive officers or
named executive officers. The Committee has not determined to grant any other
options under the Stock Option Plan.
55
<PAGE>
GULFSTREAM STOCK OPTION PLAN TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
Theodore J. Forstmann ....................................................................... 375,000
Chairman of the Board
Bryan T. Moss ............................................................................... 675,000
Vice Chairman of the Board
Fred A. Breidenbach ......................................................................... 937,500
President and COO
W. W. Boisture, Jr .......................................................................... 675,000
Executive Vice President
Chris A. Davis .............................................................................. 450,000
Executive Vice President and CFO
All executive officers as a group (5 persons) ............................................... 3,112,500
All current directors who are not executive officers as a group (13 persons) ................ 1,627,140
All employees, including all current officers who are not executive officers as a group (240
persons).................................................................................... 3,262,528
</TABLE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to options awarded under the Stock Option Plan. This summary is not intended to
be exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.
An optionee will not recognize any taxable income upon the grant of a
nonqualified option and the Company will not be entitled to a tax deduction with
respect to such grant. Upon exercise of an option, the excess of the fair market
value of the Common Stock on the exercise date over the exercise price will be
taxable as compensation income to the optionee. Subject to the optionee
including such excess amount in income or the Company satisfying applicable
reporting requirements, the Company should be entitled to a tax deduction in the
amount of such compensation income. The optionee's tax basis for the Common
Stock received pursuant to the exercise of an option will equal the sum of the
compensation income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
nonqualified option, any appreciation or depreciation after the exercise date
generally will be taxed as capital gain or loss and will be long-term gain or
loss if the holding period for such Common Stock was more than one year.
Special rules may apply to optionees who are subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Under certain circumstances the accelerated vesting or exercise of options
in connection with a change of control of the Company might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Code. To the extent it is so considered, the optionee may be
subject to a 20% excise tax and the Company may be denied a tax deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
other most highly compensated executive officers who are employed by the Company
on the last day of the taxable year. Compensation attributable to options
granted under the Company's Stock Option Plan prior to the Company's first
stockholder meeting in which directors are elected in the year 2000 should not
be subject to the deduction limitation. The Employee Benefit Plan Committee will
determine whether or not to administer the Stock Option Plan so that
compensation attributable to options granted thereafter would not be subject to
such deduction limitation.
56
<PAGE>
OTHER OPTIONS
GENERAL. The Company has entered into individual stock option agreements
(the "Non-Plan Option Agreements") with certain of its current and former
directors, advisors and consultants (the "Non-Plan Optionees"). Currently,
Non-Plan Option Agreements exercisable for 2,168,658 shares of Common Stock are
in effect. The options granted pursuant to the Non-Plan Option Agreements are
not intended to qualify as incentive stock options under Section 422 of the Code
and were not issued pursuant to the Stock Option Plan.
Certain of the options were fully vested and exercisable on the date of
grant. The other options generally become exercisable in three equal amounts on
each of the first, second and third anniversaries of the date of grant. No
option may be exercised following the tenth anniversary or, under certain of the
Director Option Agreements, the day after the tenth anniversary of the date of
grant. Certain of the options are transferable during the Non-Plan Optionee's
lifetime to certain permitted transferees, who generally must agree in writing
to be bound by the Non-Plan Option Agreement.
The rights and obligations of the Company and the Non-Plan Optionees are
otherwise similar to those under the Stock Option Agreements, including with
respect to Terminating Events and Partial Sales. Upon exercise of the option,
the optionee is required to enter into a stockholder's agreement with the
Company upon terms substantially similar to the terms contained in the
Stockholder's Agreements.
STOCK APPRECIATION RIGHTS
The Company has granted an aggregate of 21,304 stock appreciation rights
("SARs") to certain employees of the Company ("Grantees") pursuant to SAR
agreements (the "SAR Agreements"). The SARs permit a Grantee whose employment
with the Company has terminated after a specified date (generally one year after
the grant of the SAR) as a result of death or disability, termination without
cause or retirement on or after reaching age 65 to receive with respect to each
vested reference share to which the SAR relates (the "Reference Shares") an
amount in cash (an "Appreciation Amount") equal to the difference between the
base price ($3.52 or $4.10) of the Reference Shares and the market price per
share of the Common Stock.
In the event that the Forstmann Little Partnerships sell all or a portion of
the shares of Common Stock owned by them to a Third Party (including in a public
offering), the Grantees may elect to receive payment in respect of that
percentage of the Grantees' Reference Shares outstanding immediately prior to
the closing of such transaction equal to the same percentage of Reference Shares
of the Grantee then outstanding as the shares of Common Stock the Forstmann
Little Partnerships propose to sell bears to the aggregate number of shares of
Common Stock owned by the Forstmann Little Partnerships. The amount of such
payment is based on the per share Common Stock price received in such
transaction over the SAR base price.
RETIREMENT PLAN
GULFSTREAM PENSION PLAN. The Gulfstream Aerospace Corporation Pension Plan
(the "Pension Plan") was amended and restated effective January 1, 1989. The
Pension Plan is a defined benefit plan maintained by Gulfstream Aerospace
Corporation (a Georgia corporation and wholly owned indirect subsidiary of the
Company) ("Gulfstream Georgia"), for the benefit of the employees of Gulfstream
Georgia and certain of its affiliates that have adopted the Pension Plan (each,
a "Participating Employer"). The Pension Plan covers full time employees who
have attained age 21 and have completed at least one year of service. Pension
costs are borne by the Participating Employer and determined from time to time
on an actuarial basis, with contributions made accordingly.
Participants' benefit accruals under the Pension Plan are based on their
gross amount of earnings, but exclude items such as overtime pay, bonuses and
commissions. Generally, a participant's accrued annual retirement benefit,
assuming retirement at or after age 65 and a minimum of five years of service,
is equal to the total of the benefit accrued for each year of benefit service,
which for each of the named executive officers will be determined for each such
year under the following benefit formula: the sum of (x) 2.65% of the first
$17,000 of the participant's wage base earnings as adjusted by the rate used to
57
<PAGE>
increase the taxable wage base for old age, survivors and disability insurance
(currently at $20,100) for such year and (y) 3% of the participant's earnings in
excess of such adjusted wage base earnings. Payments made under the Pension Plan
are not subject to any deduction for Social Security or other offset amounts.
Participants who have attained age 60 with at least 5 years of service or age 50
with at least 20 years of service may retire early with an actuarially reduced
retirement benefit. No benefits are payable under the Pension Plan with respect
to a participant who dies prior to commencement of his or her benefits
thereunder subject to certain specified exceptions. Benefits are paid, absent a
contrary election, in the form of a single life annuity or qualified joint and
survivor annuity depending on the marital status of the participant.
Participants vest 100% in their accrued benefits, which are non-forfeitable
except upon death or re-employment of the participant, after five years of
service. Each participant in the Pension Plan is subject to the maximum benefit
limitations provided for under the Code and pursuant to the Pension Plan.
As of December 31, 1995, the estimated annual benefits payable upon
retirement for W.W. Boisture, Jr., Fred A. Breidenbach, Chris A. Davis and Bryan
T. Moss, Jr. are $66,447, $79,738, $97,457 and $17,719, respectively, assuming
retirement at age 65 and the retiree's lifetime annuity payout option without
available modifications.
58
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (i) immediately prior to the
consummation of the Offerings, giving effect to the Recapitalization and (ii) as
adjusted to reflect the sale of the shares of Common Stock pursuant to the
Offerings by (a) each person who is known to the Company to be the beneficial
owner of more than five percent of the Company's Common Stock after the
Offerings, (b) each director of the Company, (c) each other named executive
officer, (d) all directors and executive officers of the Company as a group and
(e) each other Selling Stockholder participating in the Offering. Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them, except to the extent such power may be shared with a spouse.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERINGS (1) NUMBER OF OFFERINGS (1)
------------------------ SHARES ----------------------
NAME NUMBER PERCENT (2) OFFERED (1) NUMBER PERCENT (2)
- --------------------------------------------------- --------- ------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
MBO-IV (3).........................................
Gulfstream Partners (3)............................
Gulfstream Partners II, L.P. (3)...................
DIRECTORS:
William R. Acquavella (4)..........................
Robert Anderson (5)................................
Charlotte L. Beers (6).............................
Thomas D. Bell, Jr. (7)............................
W.W. Boisture, Jr. (8).............................
Fred A. Breidenbach (9)............................
Nicholas C. Forstmann (3)..........................
Theodore J. Forstmann (3)(10)......................
Sandra J. Horbach (3)(11)..........................
Drew Lewis (3)(12).................................
Bryan T. Moss (13).................................
Allen E. Paulson (14)..............................
Roger S. Penske (15)...............................
Colin L. Powell (16)...............................
Gerard Roche (17)..................................
Donald H. Rumsfeld (18)............................
George P. Shultz (19)..............................
Robert S. Strauss (20).............................
OTHER NAMED EXECUTIVE OFFICERS:
Chris A. Davis (21)................................
All Directors and Executive Officers as a Group (19
persons) (3)(22)..................................
ADDITIONAL SELLING STOCKHOLDERS:
[ ] additional Selling Stockholders, each of
whom is selling less than 280,000 shares in the
Offerings and will beneficially own less than 1%
of the outstanding Common Stock after the
Offerings.........................................
</TABLE>
- --------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
(1) For purposes of this table, information as to the shares of Common Stock
assumes that the Underwriters' over-allotment options are not exercised. For
purposes of this table, a person or
59
<PAGE>
group of persons is deemed to have "beneficial ownership" of any shares of
Common Stock which such person has the right to acquire within 60 days after
the date of this Prospectus. For purposes of computing the percentage of
outstanding shares of Common Stock held by each person or group of persons
named above, any shares which such person or persons has the right to
acquire within 60 days after the date of this Prospectus is deemed to be
outstanding but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Each Selling Stockholder other
than the Forstmann Little Partnerships (an "Other Selling Stockholder") has
the right to participate with the Forstmann Little Partnerships in the
Offerings. Other Selling Stockholders may participate in the Offerings with
respect to their options regardless of whether they beneficially own the
shares subject to such options for purposes of this table. Information about
the shares being offered, beneficial ownership after the Offerings and the
Selling Stockholders is subject to change pending final confirmation of
Selling Stockholder participation in the Offerings, prior to pricing of the
Offerings.
(2) Based on [ ] shares of Common Stock outstanding prior to the
consummation of the Offerings and [ ] shares of Common Stock
outstanding after the consummation of the Offerings.
(3) Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV ("MBO-IV"), Gulfstream Partners and Gulfstream Partners II,
L.P., c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New York, are
the Forstmann Little Partnerships and are New York limited partnerships. The
general partner of MBO-IV is FLC Partnership, L.P., a limited partnership of
which Theodore J. Forstmann, Nicholas C. Forstmann, Steven B. Klinsky,
Sandra J. Horbach and Winston W. Hutchins are general partners. The general
partner of Gulfstream Partners is FLC XXI Partnership, a general partnership
of which Wm. Brian Little, Nicholas C. Forstmann, Steven B. Klinsky, Winston
W. Hutchins, John A. Sprague, Wm. Brian Little IRA, Winston W. Hutchins IRA,
John A. Sprague IRA and TJ/JA L.P., a Delaware limited partnership ("TJ/JA
L.P."), are general partners. The general partner of TJ/JA L.P. is Theodore
J. Forstmann. The general partner of Gulfstream Partners II, L.P. is FLC
XXIV Partnership, a general partnership of which Theodore J. Forstmann,
Nicholas C. Forstmann, Wm. Brian Little, John A. Sprague, Steven B. Klinsky,
Sandra J. Horbach and Winston W. Hutchins are general partners. Accordingly,
each of such individuals and partnerships may be deemed the beneficial
owners of shares owned by MBO-IV, Gulfstream Partners and/or Gulfstream
Partners II, L.P., in which such individual or partnership is a partner. For
the purposes of this table, such beneficial ownership is included. Ms.
Horbach does not have any voting or investment power with respect to, or any
economic interest in, the shares of Common Stock held by MBO-IV, and
accordingly, Ms. Horbach is not deemed to be the beneficial owner thereof.
William R. Acquavella, Drew Lewis and Roger S. Penske are limited partners
in Gulfstream Partners and William R. Acquavella and Roger S. Penske are
limited partners in Gulfstream Partners II, L.P. There are other limited
partners in each of MBO-IV, Gulfstream Partners and Gulfstream Partners II,
L.P., none of which is otherwise affiliated with the Company or FLC
Partnership, L.P. See "Certain Transactions".
(4) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(5) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(6) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(7) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
60
<PAGE>
(8) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(9) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(10) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(11) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(12) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(13) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(14) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(15) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(16) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(17) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(18) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(19) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(20) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(21) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
(22) Includes [ ] shares subject to options exercisable currently or within
60 days of the date of this Prospectus, none of which have been exercised,
but [ ] of which are expected to be exercised in connection with the
Offerings.
61
<PAGE>
CERTAIN TRANSACTIONS
THE ACQUISITION; SUBSEQUENT EVENTS
On February 12, 1990, the Company, through its wholly owned subsidiary GA
Acquisition Corp. ("GA"), a corporation formed by an investor group led by
Forstmann Little, entered into a stock purchase agreement to acquire from
Chrysler the Predecessor Business, in the form of Gulfstream Delaware (then
Gulfstream Aerospace Corporation), for a cash purchase price of $850 million
(including acquisition costs of $25 million, $8.25 million of which represented
a fee payable to Forstmann Little). The Acquisition was consummated on March 19,
1990. The purchase price was funded by the issuance of 25,000,000 shares of
common stock (without giving effect to the 1996 Recapitalization), for an
aggregate purchase price of $100 million, and $300 million aggregate principal
amount of debentures (the "Original Debentures") in three series with maturity
dates, respectively, of March 31, 2001, March 31, 2002 and March 31, 2003, with
the balance of the purchase price supplied by bank borrowings. Gulfstream
Delaware was capitalized with $100 million of its common stock subscribed for by
the Company, a $300 million long-term note payable to the Company and bank
borrowings. Upon consummation of the Acquisition, GA was merged into Gulfstream
Delaware and Gulfstream Delaware became a wholly owned subsidiary of the
Company. The Company's only asset is its investment in Gulfstream Delaware.
On August 31, 1992, MBO-IV and Gulfstream Partners II, L.P. purchased
16,250,000 additional shares of common stock (without giving effect to the 1996
Recapitalization), for an aggregate purchase price of $100 million, and MBO-IV
purchased an additional $150 million aggregate principal amount of the Company's
debentures (the "Additional Debentures") at par. The Additional Debentures were
issued in three series with maturity dates, respectively, of September 30, 2003,
September 30, 2004 and September 30, 2005. Of the proceeds of these issuances,
$50 million was contributed to the capital of Gulfstream Delaware, $50 million
of the proceeds was used to repurchase the shares of common stock of the Company
held by Allen E. Paulson, and $150 million of the proceeds was loaned by the
Company to Gulfstream Delaware. This loan was evidenced by a long-term note
payable by Gulfstream Delaware to the Company.
On November 30, 1993, MBO-IV exchanged the Original Debentures and the
Additional Debentures, and all indebtedness represented thereby, including
accrued interest, for (i) 7% Cumulative Preferred Stock issued by the Company
with a stated value of $468,937,500 and 11,045,833 shares of Class B Common
Stock (without giving effect to the 1996 Recapitalization). The 7% Cumulative
Preferred has a liquidation preference equal to its stated value, plus all
accrued and unpaid dividends. The Company's Certificate of Incorporation was
amended to reclassify the Company's common stock outstanding prior to November
30, 1993 as Class A Common Stock. Each share of Class A Common Stock issued on
or after August 31, 1992 was designated as a share of Series A-1 Common Stock,
and each share of Class A Common Stock which was issued prior to August 31, 1992
was designated as a share of Series A-2 Common Stock. Also on November 30, 1993,
the long-term notes payable by Gulfstream Delaware to the Company in principal
amounts of $300 million and $150 million, respectively, were contributed to the
capital of Gulfstream Delaware. After providing for the 7% Cumulative Preferred
Stock, the Class A Common Stock has a preference with respect to dividends,
other distributions and in liquidation over all other classes of common stock of
the Company currently outstanding in the amount of approximately $186 million.
After providing for the 7% Cumulative Preferred Stock and the Class A Common
Stock preferences, the Class A Common Stock is entitled to 75% and the Class B
Common Stock is entitled to 25% of any dividends and other distributions or in
liquidation. On June 30, 1996, the Company repurchased approximately 4 shares of
7% Cumulative Preferred Stock at their stated value of $18,937,500, and paid
accumulated dividends of $96,135,587. Funds for the redemption and dividends
were provided by the Company's operations.
Immediately prior to, or simultaneously with, the closing of the Offerings,
(i) the Company will repurchase all of the remaining outstanding 7% Cumulative
Preferred Stock, (ii) all of the Class A Series A-2 Common Stock and Class B
Common Stock will be exchanged for shares of Class A
62
<PAGE>
Series A-1 Common Stock on a 1.0301-for-1 and a 1.0137-for-1 basis,
respectively, (iii) the Class A Series A-1 Common Stock will be redesignated as
Common Stock and (iv) there will be a 1.5-for-1 split of the Common Stock. The
exchange ratios set forth in clause (ii) above for the exchange of shares of
Class A Series A-2 and Class B Common Stock for shares of Class A Series A-1
Common Stock have been calculated based on an assumed initial public offering
price of $23.00 per share (the mid-point of the range of the initial public
offering prices set forth on the cover of this Prospectus). The actual exchange
ratios will be determined at the time of pricing of the Offerings, based on the
actual initial public offering price. See "Description of Capital Stock".
RELATED PARTY TRANSACTIONS
Drew Lewis, Colin L. Powell, Donald H. Rumsfeld, George P. Shultz and Robert
S. Strauss, directors of the Company, are members of an advisory committee to
FLC Partnership, L.P.
Gulfstream leased from Allen E. Paulson, one of its directors, through
August 1993, an aircraft used for sales demonstrations and customer support
purposes. Total lease expense for 1993 was $834,000.
See also "Management -- Compensation Committee Interlocks and Insider
Participation".
63
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Pursuant to the Company's Amended and Restated Certificate of Incorporation,
the Company's authorized capital stock currently consists of (i) 10,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock"),
approximately 96 shares of which are outstanding as of the date of this
Prospectus, (ii) 109,273,000 shares of common stock, par value $.01 per share,
of which 93,493,000 shares are designated Class A Common Stock, Series A-1 and
Series A-2, and 15,780,000 shares are designated Class B Common Stock. As of
June 30, 1996 (which is prior to the exchange and reclassification described
below), 33,139,500 and 11,045,833 shares of Class A Common Stock (Series A-1 and
Series A-2) and Class B Common Stock, respectively, were issued and outstanding
and held of record by an aggregate of 5 stockholders. Immediately prior to, or
simultaneous with, the closing of the Offerings (i) all of the outstanding
Preferred Stock will be repurchased, (ii) each outstanding share of Class A
Series A-2 Common Stock will be exchanged for 0.9708 shares of Class A Series
A-1 Common Stock and each outstanding share of Class B Common Stock will be
exchanged for 0.9865 shares of Class A Series A-1 Common Stock, (iii) the Class
A Series A-1 Common Stock will be redesignated as Common Stock and adjusted for
a stock split of the Common Stock on a 1.5-for-1 basis and the Certificate of
Incorporation will be amended and restated (the "Restated Certificate of
Incorporation") to reflect a single class of common stock par value $.01 per
share (the "Common Stock"), and (iv) the number of authorized shares of Common
Stock and Preferred Stock will be increased (collectively, the "1996
Recapitalization").
Pursuant to the Restated Certificate of Incorporation, the Company's
authorized capital stock will consist of (i) 300,000,000 shares of Common Stock
of which 72,220,541 shares will be issued and outstanding upon completion of the
Offerings (assuming the Underwriters' over-allotment options are not exercised)
and (ii) 20,000,000 shares of Preferred Stock, none of which will be issued and
outstanding upon completion of the Offerings. All outstanding shares of the
Common Stock are, and the shares offered hereby will be, when issued and sold,
validly issued, fully paid and nonassessable.
After the consummation of the Offerings, the Forstmann Little Partnerships
will beneficially own approximately 61.2% of the Common Stock (55.4% on a fully
diluted basis) or 55.8% (50.9% on a fully diluted basis), assuming that the
Underwriters' over-allotment options are exercised in full. As long as the
Forstmann Little Partnerships continue to own in the aggregate more than 50% of
the Company's outstanding shares of Common Stock, they will collectively have
the power to elect the entire Board of Directors of the Company and, in general,
to determine (without the consent of the Company's other stockholders) the
outcome of any corporate transaction or other matter submitted to the
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of the Company's assets, to prevent or cause a change in
control of the Company, and to approve substantially all amendments to the
Restated Certificate of Incorporation. See "Risk Factors -- Control by Principal
Stockholders; Limitations on Change of Control; Benefits to Principal
Stockholders".
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. Accordingly, the holders of a majority of the shares
voting for the election of directors can elect all the directors if they choose
to do so, subject to any voting rights of holders of Preferred Stock to elect
directors. Subject to the preferential rights of any outstanding series of
Preferred Stock, and to the restrictions on payment of dividends imposed by the
Credit Agreement (as described in "Dividend Policy" and "Description of Credit
Agreement"), the holders of Common Stock will be entitled to such dividends as
may be declared from time to time by the Board of Directors from funds legally
available therefor, and will be entitled, after payment of all prior claims, to
receive pro rata all assets of the Company upon the liquidation, dissolution or
winding up of the Company. Holders of Common Stock have no redemption or
conversion rights or preemptive rights to purchase or subscribe for securities
of the Company.
64
<PAGE>
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "GAC".
PREFERRED STOCK
The authorized capital stock of the Company includes 20,000,000 shares of
Preferred Stock, none of which are currently issued or outstanding. The
Company's Board of Directors is authorized to divide the Preferred Stock into
series and, with respect to each series, to determine the preferences and rights
and the qualifications, limitations or restrictions thereof, including the
dividend rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting the series and the designation of such series. The Board of
Directors could, without stockholder approval, issue Preferred Stock with voting
and other rights that could adversely affect the voting power of the holders of
Common Stock and which could have certain anti-takeover effects. The Company has
no present plans to issue any shares of Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Restated Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty as a director, except in
certain cases where liability is mandated by the Delaware General Corporation
Law (the "DGCL"). The Restated Certificate of Incorporation and the By-Laws of
the Company provide for indemnification, to the fullest extent permitted by the
DGCL, of any person who is or was involved in any manner in any pending,
threatened or completed investigation, claim or other proceeding by reason of
the fact that such person is or was a director or officer of the Company or, at
the request of the Company, is or was serving as a director or officer of
another entity, against all expenses, liabilities, losses and claims actually
incurred or suffered by such person in connection with the investigation, claim
or other proceeding. The Company and Gulfstream Delaware have entered into, or
intend to enter into, agreements to provide indemnification for the Company's
directors and certain officers in addition to the indemnification provided for
in the Restated Certificate of Incorporation and the By-Laws. These agreements,
among other things, will indemnify the Company's directors and certain officers
to the fullest extent permitted by Delaware law for certain expenses (including
attorneys' fees) and all losses, claims, liabilities, judgments, fines and
settlement amounts incurred by such person arising out of or in connection with
such person's service as a director or officer of the Company or another entity
for which such person was serving as an officer or director at the request of
the Company. There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company or any other entity as to which
indemnification is being sought from the Company, and the Company is not aware
of any pending or threatened litigation that may result in claims for
indemnification by a director, officer, employee or other agent.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Upon completion of the Offerings, the Company will be subject to the
provisions of section 203 ("Section 203") of the DGCL. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or,
in certain cases, within three years prior, did own) 15% or more of the
corporation's voting stock. Under Section 203, a business combination between
the Company and an interested stockholder is prohibited unless it satisfies one
of the following conditions: (i) the Company's Board of Directors must have
previously approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder, or (ii) on
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the Company outstanding at the time the transaction commenced
(excluding, for purposes of determining the number of shares outstanding, shares
owned by (a) persons who are directors and also officers and (b) employee stock
plans, in certain instances) or (iii) the business combination is approved
65
<PAGE>
by the Board of Directors and authorized at an annual or special meeting of the
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder.
The Restated Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes. Each class will consist, as nearly as may
be possible, of one-third of the total number of directors constituting the
entire Board of Directors. The term of the initial Class I directors will
terminate on the date of the 1997 annual meeting of stockholders; the term of
the initial Class II directors will terminate on the date of the 1998 annual
meeting of stockholders; and the term of the initial Class III directors will
terminate on the date of the 1999 annual meeting of stockholders. Beginning in
1997, at each annual meeting of stockholders, successors to the class of
directors whose term expires at that annual meeting will be elected for a
three-year term and until their respective successors are elected and qualified.
A director may only be removed with cause by the affirmative vote of the holders
of a majority of the outstanding shares of capital stock entitled to vote in the
election of directors.
LIMITATIONS ON CHANGES IN CONTROL
The Restated Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes serving staggered three-year terms. The
Restated Certificate of Incorporation also provides that a director may only be
removed for cause by the affirmative vote of the holders of a majority of the
shares entitled to vote for the election of directors. These provisions, when
coupled with the provisions in the Restated Certificate of Incorporation and the
Company's By-laws authorizing the Board of Directors to fill newly created
directorships and vacancies on the Board of Directors, will preclude
stockholders from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
such removal with their nominees. The foregoing provisions, the provisions
authorizing the Board of Directors to issue Preferred Stock without stockholder
approval, and the provisions of Section 203 of the DGCL, could have the effect
of delaying, deferring or preventing a change in control of the Company or the
removal of existing management.
TRANSFER AGENT
The transfer agent for the Common Stock will be ChaseMellon Shareholder
Services, L.L.C.
66
<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
In connection with the Offerings, Gulfstream Delaware has received a
Commitment Letter pursuant to which Chase and CSI have agreed, subject to the
terms and conditions thereof, to provide the Bank Facility, consisting of the
$400 million Term Loan Facility and the $250 million Revolving Credit Facility.
The Commitment Letter provides that the closing of the funding under the Credit
Agreement is to be consummated concurrently with the consummation of the
Offerings. The commitments of Chase to provide the financing pursuant to the
Bank Facility expires unless the closing thereunder occurs on or prior to
December 31, 1996.
The following summary of the Credit Agreement, which is expected to be
entered into simultaneously with the Offerings, does not purport to be complete
and is qualified in its entirety by reference to the Credit Agreement a copy of
which will be filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Each capitalized term used in this Section but not defined
herein has the meaning ascribed to the term in the Credit Agreement.
TERM LOAN
The Bank Facility will include a $400 million term loan. The term loan will
be repayable in consecutive quarterly installments commencing on June 30, 1997
with a final maturity of September 30, 2002, in aggregate amounts for each of
the following periods as follows (with the installments within each year being
equal):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------------------------------------------------------------------------ --------------
<S> <C>
1997.......................................................................... $ 20,000,000
1998.......................................................................... $ 75,000,000
1999.......................................................................... $ 75,000,000
2000.......................................................................... $ 75,000,000
2001.......................................................................... $ 75,000,000
2002.......................................................................... $ 80,000,000
</TABLE>
The Term Loans may be prepaid at any time, in whole or in part, without
premium or penalty. In addition, the Bank Facility provides for mandatory
prepayments, subject to certain exceptions, of the Term Loan out of the net
proceeds of the sale or disposition of certain assets.
REVOLVING CREDIT FACILITY
The Revolving Credit Facility is a $250 million revolving credit facility. A
portion of the Revolving Credit Facility, in an amount not to exceed $150
million, may be used (to the extent available) for standby and commercial
letters of credit, and up to $200 million of the Revolving Credit Facility will
be made available to the Company by Chase to provide cash borrowings. In
addition, up to $20 million of the Revolving Credit Facility may be used
pursuant to a swing line facility. Revolving Credit Loans may be prepaid and
commitments may be reduced by Gulfstream Delaware in minimum amounts of
$2,500,000 or whole multiples of $1,000,000 in excess thereof.
USE OF PROCEEDS
The proceeds from the Term Loan Facility, together with the proceeds of the
Offerings, will be used to fund (i) the repurchase of all the Company's 7%
Cumulative Preferred Stock plus approximately $7.9 million of unpaid dividends,
(ii) the repayment of outstanding indebtedness under the Company's existing
credit facilities (which was $119.8 million at June 30, 1996) and (iii) the
payment of fees and expenses incurred in connection with the Offerings and
refinancing of the Company's indebtedness. Borrowings under the Revolving Credit
Facility will be used for the same purposes for which Term Loans may be used and
to finance the customary working capital needs of Gulfstream Delaware and for
other general corporate purposes.
INTEREST RATE
The Loans will bear interest at a rate equal to, at the Company's option,
(i) a base rate (the "ABR") equal to the greater of (A) the Chase prime or
reference rate and (B) the overnight federal funds rate plus
67
<PAGE>
.5% in effect from time to time plus the Applicable Margin for ABR Loans (the
"ABR Loans"); or (ii) the Eurodollar rate (the "Eurodollar Rate") for the
respective interest period plus the Applicable Margin for Eurodollar Loans (the
"Eurodollar Loans"). All swing line loans will bear interest based upon the ABR
or money market rates quoted by Chase as the swing line lender (in each case
plus the Applicable Margin for ABR Loans). The Applicable Margin initially will
be set at 0.75% for ABR Loans and 1.75% for Eurodollar Loans, and will vary
depending upon the Company's ratio of Total Consolidated Debt to Consolidated
EBITDA (which, as defined in the Credit Agreement, adds back Gulfstream V
research and development expenses to Consolidated EBITDA) and whether such loan
is an ABR Loan or a Eurodollar Loan, as set forth below:
<TABLE>
<CAPTION>
RATIO OF TOTAL CONSOLIDATED EURODOLLAR
DEBT TO CONSOLIDATED EBITDA ABR LOANS LOANS
- --------------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Equal to or greater than 3.50 to 1........................................................... 1.00% 2.00%
Equal to or greater than 3.00 to 1 but less than 3.50 to 1................................... 0.75% 1.75%
Equal to or greater than 2.50 to 1 but less than 3.00 to 1................................... 0.50% 1.50%
Equal to or greater than 2.00 to 1 but less than 2.50 to 1................................... 0.25% 1.25%
Equal to or greater than 1.50 to 1 but less than 2.00 to 1................................... 0% 1.00%
Less than 1.50 to 1.......................................................................... 0% 0.75%
</TABLE>
Interest on ABR Loans will be payable quarterly in arrears. Interest on
Eurodollar Loans will be payable on the last day of each relevant interest
period and, in the case of any interest period of six months, on the date three
months after the first day of such interest period.
Overdue principal, interest, fees and other amounts shall bear interest at
2% above the rate otherwise applicable thereto (or the ABR Rate, in the case of
amounts other than principal).
FEES
Gulfstream Delaware will be required to pay commitment fees on the average
daily unutilized portion of the Term Loan Facility and the Revolving Credit
Facility, which will initially be set at .375% and which may range from .250% to
.500% per annum based on the Company's ratio of Total Consolidated Debt to
Consolidated EBITDA.
The Commitment Letter provides for additional customary fees and charges,
including (i) an arrangement fee on the aggregate amount of the Term Loan
Facility and Revolving Credit Facilities payable on the Closing Date, (ii) a
commitment fee on the aggregate amount of the Term Loan Facility and Revolving
Credit Facility from the date of the initial syndication to the earlier of the
Closing Date or the termination of the commitments under the Commitment Letter
and (iii) an annual administrative agent's fee.
GUARANTEES
The Credit Agreement will be guaranteed by the Company and each of the
Company's direct and indirect subsidiaries which have a total asset value which
exceeds $20 million, and such other subsidiaries as the Company may elect to
include as a guarantor, other than foreign subsidiaries or other subsidiaries if
more than 75% of the assets of such subsidiaries are securities of foreign
subsidiaries.
CONDITIONS
The initial funding by the Lenders under the Credit Agreement will be
subject to a number of conditions, including among other things, (a) the
repayment of outstanding indebtedness under the Company's existing credit
facilities, (b) the absence of any material adverse change in the business,
assets, operations, condition (financial or otherwise) or prospects of
Gulfstream Delaware and its subsidiaries taken as a whole, (c) the successful
consummation of the Offerings, including net proceeds to the Company of at least
$75 million and (d) other conditions customary for transactions similar to those
contemplated by the Credit Agreement.
COVENANTS
The Credit Agreement will contain customary affirmative and negative
covenants, including restrictions on the ability of the Company and its
subsidiaries to pay cash dividends, as well as financial
68
<PAGE>
covenants, under which the Company must operate. Failure to comply with any of
such covenants will permit the Administrative Agent to accelerate, subject to
the terms of the Credit Agreement, the maturity of all amounts outstanding under
the Credit Agreement, and to terminate Gulfstream Delaware's ability to borrow
under the Revolving Credit Facility.
EVENTS OF DEFAULT
The Credit Agreement will contain customary events of default appropriate in
the context of the proposed transaction, including nonpayment of principal,
interest, fees or other amounts, violation of covenants, material inaccuracy of
representations and warranties, cross-default of indebtedness in excess of $10
million, bankruptcy, final judgment unpaid or not pending appeal in excess of
$10 million and not covered by insurance, certain ERISA liabilities, invalidity
of loan documents or security interests, incurrence of liabilities or conduct of
business by the Company and change of control.
69
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offerings, the Company will have approximately
72,220,541 shares of Common Stock outstanding, assuming no exercise of the
Underwriters' over-allotment options. Of these shares, only the 28,000,000
shares of Common Stock sold in the Offerings will be freely tradeable without
registration under the Securities Act and without restriction by persons other
than "affiliates" of the Company (as defined below). The 44,206,787 shares of
Common Stock held by the Forstmann Little Partnerships after the Offerings will
be "restricted" securities under the meaning of Rule 144 under the Securities
Act ("Rule 144") and may not be sold in the absence of registration under the
Securities Act, unless an exemption from registration is available, including
exemptions pursuant to Rule 144 or Rule 144A under the Securities Act.
In general, under Rule 144 as currently in effect, if two years have elapsed
since the later of the date of acquisition of restricted shares from the Company
or any affiliate of the Company, the acquiror or subsequent holder is entitled
to sell, within any three-month period, that number of shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock or the
average weekly trading volume of the shares of Common Stock on all exchanges
and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission
(the "Commission"). Sales under Rule 144 are also subject to certain
restrictions relating to manner of sale, notice requirements and the
availability of current public information about the Company. If three years
have elapsed since the later of the date of acquisition of restricted shares
from the Company or from any affiliate of the Company, and the acquiror or
subsequent holder thereof is deemed not to have been an affiliate of the Company
at any time during the 90 days preceding a sale, such person would be entitled
to sell such shares in the public market under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information requirements
or notice requirements. The Commission has proposed amendments to Rule 144,
including amendments to reduce the Rule 144 holding period from two years to one
year and the Rule 144(k) holding period from three years to two years. The
Company cannot predict whether or when any of the proposed amendments will be
adopted. As defined in Rule 144, an "affiliate" of an issuer is a person that
directly or indirectly controls, or is controlled by, or is under the common
control with, such issuer.
The Company has agreed, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, not to offer, sell, contract to sell or otherwise dispose of,
or file a registration statement (other than a registration statement on Form
S-8 with respect to an employee benefit plan) with respect to, any Common Stock,
or any securities of the Company (other than pursuant to employee stock option
and incentive plans and agreements, upon conversion of outstanding convertible
securities or grants of options to directors), which are substantially similar
to the Common Stock or any other securities which are exercisable or
exchangeable for, convertible into or whose exercise or settlement price is
derivable from the price of, Common Stock or any such securities substantially
similar to the Common Stock.
The Selling Stockholders and all directors and executive officers of the
Company have agreed not to offer, sell or otherwise dispose of any Common Stock
for a period of 180 days after the date of this Prospectus without the prior
written consent of Goldman, Sachs & Co., except for certain transfers to
immediate family members, trusts for the benefit of the Selling Stockholder and
his or her immediate family, charitable foundations and controlled entities so
long as the transferee agrees to be bound by the foregoing restrictions.
Pursuant to Rule 144 and after giving effect to the agreements described in
the immediately preceding paragraph, the 44,206,787 shares held by the Forstmann
Little Partnerships will be eligible for sale in the public market beginning 180
days after the date of this Prospectus, subject to the volume limitations under
Rule 144 described above.
70
<PAGE>
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Forstmann Little
Partnerships have the right, under certain circumstances and subject to certain
conditions, to require the Company to effect up to six registrations under the
Securities Act covering all or a portion of the shares of Common Stock held by
them. Under the Registration Rights Agreement, the Company will pay all expenses
(other than underwriting discounts and commissions) in connection with such
registrations made at the request of the Forstmann Little Partnerships. In
addition, whenever the Company proposes to register any of its securities under
the Securities Act, the Forstmann Little Partnerships have the right to include
all or a portion of their shares in such registration. The Company will pay all
expenses in connection with such registrations. The Registration Rights
Agreement also provides that the Company will indemnify the Forstmann Little
Partnerships against certain liabilities, including liabilities under the
Securities Act, incurred in connection with such registrations. The Forstmann
Little Partnerships have informed the Company that they have no present
intention of exercising their registration rights after this Offering, and they
have agreed not to exercise such rights for a period of 180 days after the date
of this Prospectus.
None of the Company's other stockholders or optionees has an independent
right to require the Company to register shares of Common Stock under the
Securities Act. Pursuant to agreements between the holders of stock or options
and the Company, such holders have, subject to certain conditions, the right to
participate in sales, including through registered public offerings, of shares
of Common Stock by the Forstmann Little Partnerships (and to have their expenses
paid on the same basis as the expenses of the Forstmann Little Partnerships).
See "Management -- Stock Options -- Stock Option Plan -- Stockholder's
Agreement".
Prior to the Offerings, there has been no public market for the Common
Stock. Trading of the Common Stock is expected to commence following the
consummation of the Offerings. No prediction can be made as to the effect, if
any, that future sales of shares, or the availability of shares for future sale,
will have on the market price prevailing from time to time. However, sales by
the Forstmann Little Partnerships of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock and could impair the Company's future ability to
raise capital through an offering of its equity securities.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), One New York Plaza, New York, New York
10004-1980, and for the Underwriters by Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004-2498. Fried, Frank, Harris, Shriver & Jacobson renders
legal services to Forstmann Little on a regular basis.
EXPERTS
The financial statements as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus and the related financial statement schedules included elsewhere in
the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) under the Securities Act with
respect to the securities offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete; with
71
<PAGE>
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
Upon completion of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. The Registration
Statement, the exhibits and schedules forming a part thereof and the reports and
other information filed by the Company with the Commission in accordance with
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Copies of such material will also be available for inspection at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
72
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and (Unaudited) June 30, 1996................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995 and (Unaudited)
for the six-month periods ended June 30, 1995 and 1996.................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1993, 1994 and 1995 and
(Unaudited) for the six-month period ended June 30, 1996.................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and (Unaudited)
for the six-months periods ended June 30, 1995 and 1996................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Gulfstream Aerospace Corporation:
We have audited the accompanying consolidated balance sheets of Gulfstream
Aerospace Corporation and its subsidiaries as of December 31, 1994 and 1995 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1994 and 1995 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
Atlanta, Georgia
February 2, 1996
F-2
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- 1996
1994 1995 -------------
------------ -------------- (UNAUDITED)
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 23,605 $ 223,312 $ 213,268
Accounts receivable (less allowance for doubtful accounts:-- $1,312,
$3,437 and $3,521)................................................ 176,936 82,613 99,247
Inventories......................................................... 289,331 393,125 567,706
Prepaids and other assets........................................... 3,130 2,362 2,496
------------ -------------- -------------
Total current assets............................................ 493,002 701,412 882,717
Property and equipment, net......................................... 117,621 127,151 126,118
Tooling............................................................. 20,719 46,412 47,311
Goodwill, net of accumulated amortization:--$5,166, $6,244 and
$6,783............................................................ 37,956 36,877 36,339
Other intangible assets, net........................................ 65,699 60,628 58,092
Other assets and deferred charges................................... 10,764 8,773 8,794
------------ -------------- -------------
Total Assets........................................................ $ 745,761 $ 981,253 $ 1,159,371
------------ -------------- -------------
------------ -------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt................................... $ 31,814 $ 53,065 $ 39,798
Accounts payable.................................................... 56,153 58,191 62,528
Accrued liabilities................................................. 69,974 79,911 87,420
Customer deposits--current portion.................................. 33,148 153,269 460,463
------------ -------------- -------------
Total current liabilities....................................... 191,089 344,436 650,209
Long-term debt...................................................... 146,331 93,266 80,000
Accrued postretirement benefit cost................................. 95,626 102,021 105,341
Customer deposits--long-term........................................ 60,512 158,325 136,400
Other long-term liabilities......................................... 63,253 65,665 64,318
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred stock, Series A, 7%--cumulative; par value $.01; shares
authorized: 10,000,000; shares issued: 100 in 1994 and 1995 and 96
in 1996; Liquidation preference, $546,282,058 in 1995 and
$450,000,000 in 1996.............................................. 468,938 468,938 450,000
Common stock, Class A, Series A-1 and A-2, par value $.01; shares
authorized: 93,493,000; shares issued: 41,345,833 in 1994,
41,347,833 in 1995 and 41,360,333 in 1996......................... 413 413 414
Common stock, Class B, par value $.01; shares authorized:
15,780,000; shares issued: 11,045,833............................. 110 110 110
Additional paid-in capital.......................................... 210,621 210,631 219,751
Accumulated deficit................................................. (439,507) (410,613) (491,390)
Minimum pension liability........................................... (1,136) (1,450) (1,450)
Unamortized stock plan expense...................................... (3,843)
Treasury stock, Common stock, Class A, Series A-2, 8,220,833
shares............................................................ (50,489) (50,489) (50,489)
------------ -------------- -------------
Total stockholders' equity...................................... 188,950 217,540 123,103
------------ -------------- -------------
Total Liabilities and Stockholders' Equity.................. $ 745,761 $ 981,253 $ 1,159,371
------------ -------------- -------------
------------ -------------- -------------
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
----------- ----------- ------------- ----------- -----------
(UNAUDITED)
Net Revenues................................. $ 887,113 $ 901,638 $ 1,041,514 $ 474,884 $ 458,672
Costs and Expenses
Cost of sales.............................. 737,361 710,554 835,547 378,022 354,841
Selling and administrative................. 97,011 82,180 93,239 42,651 45,190
Stock option compensation expense.......... 5,200
Research and development................... 47,990 57,438 63,098 34,076 34,746
Amortization of intangibles and deferred
charges.................................. 27,613 7,583 7,540 3,777 3,763
Restructuring charge....................... 203,911
----------- ----------- ------------- ----------- -----------
Total Costs and Expenses................. 1,113,886 857,755 999,424 458,526 443,740
----------- ----------- ------------- ----------- -----------
Income (Loss) From Operations........ (226,773) 43,883 42,090 16,358 14,932
Interest income.............................. 486 367 5,508 1,426 7,593
Interest expense............................. (48,940) (20,686) (18,704) (9,945) (7,166)
----------- ----------- ------------- ----------- -----------
Net Income (Loss).................... $ (275,227) $ 23,564 $ 28,894 $ 7,839 $ 15,359
----------- ----------- ------------- ----------- -----------
----------- ----------- ------------- ----------- -----------
Pro forma net income (loss) per share
(Unaudited) (Note 1):
For 1996 Recapitalization.................. $ .19 $ (.02) $ .08
------------- ----------- -----------
------------- ----------- -----------
For 1996 Recapitalization and Offerings.... $ .18 $ (.02) $ .08
------------- ----------- -----------
------------- ----------- -----------
Pro forma common shares outstanding
(Unaudited) (Note 1):
For 1996 Recapitalization.................. 73,531 73,531 73,531
------------- ----------- -----------
------------- ----------- -----------
For 1996 Recapitalization and Offerings.... 78,314 78,314 78,314
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------- ADDITIONAL MINIMUM
PREFERRED STOCK CLASS A PAID-IN ACCUMULATED PENSION
SERIES A SERIES A-1 & A-2 CLASS B CAPITAL DEFICIT LIABILITY
---------------- ------------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1993.......... $ 413 $ 210,621 $ (187,734)
Net Loss............................... (275,227)
Issuance of common stock............... $ 110 (110)
Purchase of treasury stock.............
Issuance of preferred stock............ $ 468,938
Minimum pension liability adjustment... $ (2,127)
---------------- ----- ----- ----------- ------------- -----------
BALANCE AS OF DECEMBER 31, 1993........ 468,938 413 110 210,621 (463,071) (2,127)
Net Income............................. 23,564
Minimum pension liability adjustment... 991
---------------- ----- ----- ----------- ------------- -----------
BALANCE AS OF DECEMBER 31, 1994........ 468,938 413 110 210,621 (439,507) (1,136)
Net Income............................. 28,894
Minimum pension liability adjustment... (314)
Issuance of stock pursuant to stock
options.............................. 10
---------------- ----- ----- ----------- ------------- -----------
BALANCE AS OF DECEMBER 31, 1995........ 468,938 413 110 210,631 (410,613) (1,450)
Net Income (Unaudited)................. 15,359
Issuance of stock pursuant to stock
options (Unaudited).................. 1 77
Repurchase of preferred stock
(Unaudited).......................... (18,938)
Preferred stock dividend (Unaudited)... (96,136)
Issuance of compensatory common stock
options (Unaudited).................. 9,043
.......................................
---------------- ----- ----- ----------- ------------- -----------
BALANCE AS OF JUNE 30, 1996
(UNAUDITED).......................... $ 450,000 $ 414 $ 110 $ 219,751 $ (491,390) $ (1,450)
---------------- ----- ----- ----------- ------------- -----------
---------------- ----- ----- ----------- ------------- -----------
<CAPTION>
UNAMORTIZED TOTAL
STOCK PLAN TREASURY STOCKHOLDERS'
EXPENSE STOCK EQUITY
------------- ----------- --------------
<S> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1993.......... $ (50,000) $ (26,700)
Net Loss............................... (275,227)
Issuance of common stock............... 0
Purchase of treasury stock............. (489) (489)
Issuance of preferred stock............ 468,938
Minimum pension liability adjustment... (2,127)
------------- ----------- --------------
BALANCE AS OF DECEMBER 31, 1993........ 0 (50,489) 164,395
Net Income............................. 23,564
Minimum pension liability adjustment... 991
------------- ----------- --------------
BALANCE AS OF DECEMBER 31, 1994........ 0 (50,489) 188,950
Net Income............................. 28,894
Minimum pension liability adjustment... (314)
Issuance of stock pursuant to stock
options.............................. 10
------------- ----------- --------------
BALANCE AS OF DECEMBER 31, 1995........ 0 (50,489) 217,540
Net Income (Unaudited)................. 15,359
Issuance of stock pursuant to stock
options (Unaudited).................. 78
Repurchase of preferred stock
(Unaudited).......................... (18,938)
Preferred stock dividend (Unaudited)... (96,136)
Issuance of compensatory common stock
options (Unaudited).................. $ (3,843) 5,200
....................................... 0
------------- ----------- --------------
BALANCE AS OF JUNE 30, 1996
(UNAUDITED).......................... $ (3,843) $ (50,489) $ 123,103
------------- ----------- --------------
------------- ----------- --------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)....................................... $(275,227) $ 23,564 $ 28,894 $ 7,839 $ 15,359
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 47,866 24,151 23,094 11,530 12,242
Postretirement benefit cost........................... 17,086 6,624 6,395 3,220 3,320
Provision for loss on pre-owned aircraft.............. 6,100 208 2,050 1,450 800
Restructuring charge.................................. 203,911
Non-cash stock option compensation expense............ 5,200
All other operating activities........................ (1,652) 453 2,277 133 201
Change in assets and liabilities:
Accounts receivable................................. (9,443) (84,613) 91,817 5,945 (16,784)
Inventories......................................... (24,131) 155,009 (105,844) (6,868) (175,381)
Prepaids and other assets........................... 689 (48) 768 (1,288) (134)
Other assets and deferred charges................... (3,670) 1,179 600 360 (710)
Notes payable....................................... (10,490) (29,682)
Accounts payable.................................... 38,784 (32,303) 2,038 (2,704) 4,337
Accrued liabilities................................. (10,382) 2,099 9,937 5,586 7,508
Customer deposits................................... 48,688 (3,109) 217,934 76,232 285,269
Other long-term liabilities......................... 9,557 5,506 2,412 (6,791) (1,347)
--------- --------- --------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES............... 37,686 69,038 282,372 94,644 139,880
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment..................... (10,685) (9,946) (25,186) (5,884) (7,518)
Dispositions of property and equipment.................. 79 447 18 19 22
Additions to tooling.................................... (4,560) (17,265) (25,693) (19,875) (899)
--------- --------- --------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES................... (15,166) (26,764) (50,861) (25,740) (8,395)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................. 10 78
Repurchase of preferred stock........................... (18,938)
Purchase of common stock................................ (489)
Proceeds from term loans................................ 80,000
Repayment of term loans................................. (114,113) (31,814) (5,282) (26,533)
Payment of dividends on preferred stock................. (96,136)
Proceeds from revolving credit loans.................... 612,000 432,000
Payments on revolving credit loans...................... (592,000) (460,000)
--------- --------- --------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES................... (14,602) (28,000) (31,804) (5,282) (141,529)
--------- --------- --------- --------- ---------
Increase in cash and cash equivalents................... 7,918 14,274 199,707 63,622 (10,044)
Cash and cash equivalents, beginning of year............ 1,413 9,331 23,605 23,605 223,312
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of year.................. $ 9,331 $ 23,605 $ 223,312 $ 87,227 $ 213,268
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Gulfstream Aerospace Corporation (the "Company") is primarily engaged in the
design, development, production, and sale of large business jet aircraft. The
Company is also engaged in a number of related businesses, including: product
support and services for customer-owned aircraft, which include maintenance
services and replacement parts for the Company's world-wide fleet; aircraft
completion services, which involve the installation of customized interiors and
optional avionics as well as exterior painting; and the sale of pre-owned
aircraft. The majority of the Company's aircraft are sold to domestic and
multinational corporations and domestic and foreign governments.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions and
estimates that directly affect the amounts reported in the consolidated
financial statements. Significant estimates for which changes in the near term
are considered reasonably possible and that may have a material effect on the
financial statements are addressed in these notes to the consolidated financial
statements.
REVENUE RECOGNITION POLICY
Contracts for new aircraft are segmented between the manufacture of the
"green" aircraft (i.e., before exterior painting and installation of customer
selected interiors and optional avionics) and its completion. Sales of new
Gulfstream green aircraft are recorded as deliveries are made to the customer
prior to the aircraft entering the completion process. In connection with
recorded sales of new aircraft, at December 31, 1995, and June 30, 1996 the
Company has agreed to accept pre-owned aircraft totaling $19.4 million and $47.3
million, respectively. With respect to completed aircraft, any costs related to
parts to be installed and services to be performed under the contract, after the
delivery of the aircraft, which are not significant, are included as cost of
sales at the time of the sale of the new aircraft. Sales of all other products
and services, including pre-owned aircraft, are recognized when delivered or the
service is performed.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid financial instruments
which have maturities of less than three months.
INVENTORIES
Inventories of work in process and finished goods for aircraft are stated at
the lower of cost (based on estimated average unit costs of the number of units
in a production lot) or market. Raw materials, material components of other work
in process and substantially all purchased parts inventories are stated at the
lower of cost (first-in, first-out method) or market.
Pre-owned aircraft acquired in connection with the sale of new aircraft are
recorded at the lower of the trade-in value or estimated net realizable value.
F-7
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated by the
straight-line method over their estimated useful lives ranging from 15 to 25
years for buildings and improvements and 4 to 12 years for all other property
and equipment. The cost of maintenance and repairs is charged to operations as
incurred; significant renewals and betterments are capitalized.
TOOLING
Tooling is stated at cost and represents primarily production tooling
relating to the Gulfstream V aircraft program. Tooling associated with the
Gulfstream V will be amortized to cost of sales on a unit basis over the first
200 units of the Gulfstream V program.
INTANGIBLES AND OTHER ASSETS
Goodwill is being amortized on a straight-line basis over 40 years. Other
intangible assets consisting of after market service and product support are
being amortized on a straight-line basis over the expected useful lives which
range from 10 to 21 years. The Company periodically assesses the recoverability
of intangibles based on its expectations of future profitability and
undiscounted cash flow of the related operations. These factors, along with
management's plans with respect to the operations are considered in assessing
the recoverability of goodwill and other purchased intangibles.
The costs of obtaining bank financing have been included in other assets and
deferred charges and are being amortized over the lives of the related bank
borrowings.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged directly to operations as
incurred.
PRODUCT WARRANTIES
Product warranty expense is recorded as aircraft are delivered based upon
the estimated aggregate future warranty costs relating to the aircraft.
CUSTOMER DEPOSITS
Substantially all customer deposits represent advance payments for new
aircraft purchases. The deposits on aircraft that are expected to be delivered
in the following year are classified as current in the accompanying consolidated
balance sheets.
CONCENTRATIONS OF CREDIT
Financial instruments which may potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade and contract receivables. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to trade and contract receivables are limited due to
the Company's large number of customers and their dispersion across many
industries and geographic regions.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes, effective January 1, 1993. SFAS No. 109 was
adopted on a prospective basis and prior periods were not restated. The
cumulative effect at the date of adoption was not material to the results of
operations or the financial position of the Company.
F-8
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company provides for deferred income taxes based on the difference
between the financial statement and the tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. A valuation allowance is provided against deferred tax
assets in accordance with the provisions of SFAS No. 109.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. SFAS No. 121 addresses issues surrounding the measurement and
recognition of losses when the value of certain assets has been deemed to be
permanently impaired. The Company adopted the Statement as of January 1, 1996
and there was no material effect on its financial position or results of
operations from adoption.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123 establishes a method
of accounting for stock compensation plans based on fair value of employee stock
options and similar equity instruments. Adoption of a fair value method of
accounting is not required and the Company plans to continue accounting for
stock-based compensation using the method set forth in Accounting Principles
Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, which is based
on the intrinsic value of equity instruments. However, beginning in 1996, the
new Statement requires disclosure in annual financial statements of pro forma
net income and earnings per share as if a fair value method included in SFAS No.
123 had been used to measure compensation cost.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of June 30, 1996 and for the six months ended
June 30, 1995 and 1996 were prepared on the same basis as the audited
consolidated financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for these
periods. Operating results for the interim periods included herein are not
necessarily indicative of the results that may be expected for the entire year.
PRO FORMA PER SHARE INFORMATION (UNAUDITED)
Pro forma net income (loss) per share amounts are calculated for 1996
recapitalization (as discussed in Note 16) based upon pro forma net income,
after giving effect to the 1996 recapitalization, divided by the pro forma
weighted average number of common and common equivalent shares outstanding
assuming that all options to purchase common stock were exercised (applying the
treasury stock method assuming an initial public offering price of $23.00 per
share) and assuming the proposed 1996 recapitalization was completed at the
beginning of all periods. Options to purchase common stock issued or granted in
the twelve months ended June 30, 1996 were treated as outstanding for all
periods reported. Historical net income (loss) per common and common equivalent
share is not presented as it is not relevant.
Pro forma net income (loss) per share amounts, for 1996 recapitalization and
offerings, are calculated based on the pro forma net income (loss) per common
and common equivalent share amounts for 1996 recapitalization, as adjusted,
assuming the shares sold in the offerings were outstanding for all periods
reported.
F-9
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 2. RESTRUCTURING
During 1993, the Company recorded a $203.9 million charge for a
restructuring plan based upon the Company's reassessment of its business plan
and its products from which it expected improved operating efficiencies, reduced
costs, and overall increased profitability of the Company. This charge included,
among other items, payments for severance or early retirement of employees,
acceleration of certain employee benefit programs, costs associated with
re-aligning manufacturing capacity through selected outsourcing, lease
terminations of administrative facilities, and the accelerated amortization of
aircraft design intangibles and related Gulfstream IV aircraft tooling. The
charge, determined in part based on expected future cash flows and net
realizable values, is comprised of $146.2 million of accelerated amortization
for aircraft design and related tooling, $24.8 million of special termination
benefits and $32.9 million of other items.
NOTE 3. INVENTORIES
Inventories consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ 1996
1994 1995 (UNAUDITED)
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Finished goods....................................................... $ 60,800 $ 17,996 $ 33,146
Pre-owned aircraft................................................... 11,750 57,750 91,700
Work in process...................................................... 77,473 173,756 253,790
Raw materials........................................................ 72,975 75,768 77,679
Vendor progress payments............................................. 66,333 67,855 111,391
----------- ----------- ------------
$ 289,331 $ 393,125 $ 567,706
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
During December 1994, the Company amended the payment provisions pertaining
to one of its major supplier contracts. The amendment canceled $36.8 million of
notes payable associated with vendor progress payments. The Company leases
pre-owned aircraft under agreements which are short-term in nature to customers
who are purchasers of Gulfstream IV aircraft.
F-10
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 4. PROPERTY AND EQUIPMENT
The major categories of property and equipment consisted of the following
at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ 1996
1994 1995 (UNAUDITED)
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land................................................................. $ 4,109 $ 4,109 $ 4,109
Buildings and improvements........................................... 76,926 78,445 94,369
Machinery and equipment.............................................. 86,337 97,405 101,685
Furniture and fixtures............................................... 9,653 9,729 10,296
Construction in progress............................................. 2,915 14,862 1,314
----------- ----------- ------------
Total................................................................ 179,940 204,550 211,773
Less accumulated depreciation........................................ (62,319) (77,399) (85,655)
----------- ----------- ------------
$ 117,621 $ 127,151 $ 126,118
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
NOTE 5. OTHER INTANGIBLE ASSETS
Other intangible assets are comprised of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------- 1996
1994 1995 (UNAUDITED)
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
After market--Service Center.......................................... $ 15,000 $ 15,000 $ 15,000
After market--Product Support......................................... 75,000 75,000 75,000
---------- ---------- ------------
Total................................................................. 90,000 90,000 90,000
Less accumulated amortization......................................... (24,301) (29,372) (31,908)
---------- ---------- ------------
$ 65,699 $ 60,628 $ 58,092
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- 1996
1994 1995 (UNAUDITED)
--------- -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Employee compensation and benefits................................ $ 18,373 $ 18,732 $ 22,777
Uncompleted work on delivered aircraft............................ 8,645 12,655 19,685
Accrued warranty.................................................. 9,086 9,637 10,225
Deferred income................................................... 7,504 19,945 13,801
Other............................................................. 26,366 18,942 20,932
--------- -------------- ------------
$ 69,974 $ 79,911 $ 87,420
--------- -------------- ------------
--------- -------------- ------------
</TABLE>
F-11
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 7. LONG-TERM DEBT
Long-term debt consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ 1996
1994 1995 (UNAUDITED)
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Term loans........................................................... $ 178,145 $ 146,331 $ 119,798
Less current portion................................................. (31,814) (53,065) (39,798)
----------- ----------- ------------
$ 146,331 $ 93,266 $ 80,000
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
As of December 31, 1995 and June 30, 1996, the Company operated under two
credit agreements with a consortium of lenders. The initial credit agreement
provided the Company with term loans of $385.0 million and a revolving credit
commitment of up to $265.0 million including letters of credit. The term loans
are payable in quarterly installments in increasing amounts through March 1997.
The revolving credit loans are payable the earlier of March 31, 1998, or one
year following the date the term loans are paid in full. The credit agreement
provides for a commitment fee of 1/2 of 1% per year on the average daily amount
of unused revolving credit commitment. The revolving credit commitment available
at December 31, 1995 and June 30, 1996 was $240.6 million and $251.3 million,
respectively.
The initial credit agreement, as amended, generally provides that the
revolving credit loans and the term loans can be comprised of a combination of
domestic-sourced borrowings and Eurodollar borrowings. The interest rate for
domestic-sourced borrowings is 1% plus the greater of (i) the lead bank's
reference rate and (ii) the Federal funds rate plus 1/2%, and the interest rate
for Eurodollar borrowings is the Eurodollar Rate plus 2%. The Company is
required to enter into interest rate protection arrangements during periods when
certain interest rate environments exist. At December 31, 1995 and June 30,
1996, the rate environments were such that no interest rate protection
agreements were required.
In November 1993, the Company entered into an additional $80 million credit
agreement, with maturities of $40 million on September 30, 1997 and $40 million
on March 31, 1998. The proceeds of this credit agreement were used to prepay the
term loans under the initial credit agreement in the stated order of their
scheduled maturities.
The new credit agreement generally follows the same covenants, restrictions
and composition as the initial credit agreement. The interest rate for
domestic-sourced borrowings is 2% plus the greater of (i) the lead bank's
reference rate and (ii) the Federal funds rate plus 1/2%, and the interest rate
for Eurodollar borrowings is the Eurodollar Rate plus 3%.
Both credit agreements include restrictions as to, among other things, the
amount of additional indebtedness, capitalized lease obligations, contingent
obligations, capital expenditures, foreign exchange contracts and dividends
which can be incurred or paid by the Company. At December 31, 1995 and June 30,
1996, the Company and its subsidiaries were not permitted to pay any dividends
without the permission of the banks. The credit agreements also require
maintenance of minimum levels of net worth, interest coverage, and liquidity;
some of which are increasing minimum levels. Also, the net proceeds in excess of
$10 million received from sales of assets and businesses approved by the lending
banks (other than certain permitted sales) must be used to prepay the term
loans.
F-12
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 7. LONG-TERM DEBT (CONTINUED)
The common stock of the Company and its subsidiaries, as well as an
intercompany note between the Company and one of its subsidiaries, are pledged
as collateral for the borrowings under the credit agreements. The Company has
also guaranteed the obligations of its subsidiaries under the credit agreements.
At December 31, 1995, aggregate annual maturities for all long-term debt
maturing by calendar year were as follows (in thousands): 1996, $53.1 million;
1997, $53.3 million; 1998, $40 million.
The weighted average interest rates on both the revolving credit loans and
term loans at December 31, 1994 and 1995 were 8.64% and 8.42%, respectively, and
at June 30, 1995 and 1996 were 8.94% and 8.32%, respectively. Interest payments
were $41.8 million, $19.0 million, $19.4 million for 1993, 1994 and 1995, and
$7.7 million and $7.5 million for the six months ended June 30, 1995 and 1996,
respectively.
During November 1993, pursuant to a recapitalization of the Company, newly
issued shares of its 7% Cumulative Preferred Stock and Class B Common Stock were
exchanged for all of the $450 million of subordinated debentures, including
accrued interest of $18.9 million.
NOTE 8. INCOME TAXES
The tax effects of significant items comprising the Company's deferred
income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards.......................................... $ 64,673 $ 61,066 $ 54,985
Postretirement benefits................................................... 28,928 35,037 37,381
Intangible assets......................................................... 30,780 24,789 18,764
Pension and other benefits................................................ 6,894 13,763 8,670
Inventory................................................................. 3,825 3,010 2,525
Restructuring charges..................................................... 11,175 2,238 811
Other..................................................................... 6,663 7,778 11,031
------------ ------------ ------------
Total..................................................................... 152,938 147,681 134,167
Less valuation allowance.................................................. (147,660) (138,492) (124,843)
------------ ------------ ------------
5,278 9,189 9,324
DEFERRED TAX LIABILITY
Property and equipment, principally due to basis difference............... (5,278) (9,189) (9,324)
------------ ------------ ------------
Net deferred tax asset.................................................... $ -0- $ -0- $ -0-
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
At December 31, 1995, the Company had available a net operating loss
carryforward for regular federal income tax purposes of approximately $150
million which will expire beginning in 2006. Although the Company recorded net
income during 1994 and 1995, no provision for income taxes was recorded,
principally as a result of utilization of net operting loss carryforwards. The
Company has recorded a full valuation allowance for its net deferred tax assets.
In estimating the realizability of its net deferred tax
F-13
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 8. INCOME TAXES (CONTINUED)
assets, the Company considers both positive and negative evidence and gives
greater weight to evidence that is objectively verifiable. Due to the Company's
cumulative losses for federal income tax purposes, the Company currently
believes that the realization of its net deferred tax assets is uncertain. The
Company will continue to monitor the realizability of such deferred tax assets
on a quarterly basis.
The Company is involved in a tax audit by the Internal Revenue Service
covering the years ended December 31, 1990 and 1991. The revenue agent's report
includes several proposed adjustments involving the deductibility of certain
compensation expense and items relating to the capitalization of the Company and
the allocation of the purchase price in connection with the Acquisition,
including the cost of aircraft that were in backlog at the time of the
Acquisition and the amortization of amounts allocated to intangible assets. The
Company believes that the ultimate resolution of these issues will not have a
material adverse effect on its financial statements because the financial
statements already reflect what the Company currently believes is the expected
loss of benefit arising from the resolution of these issues.
NOTE 9. LEASES
The Company has various operating leases for both real and personal property
including the Company's demonstrator aircraft. Rental expense for 1993, 1994 and
1995 was $22.4 million, $16.6 million and $14.9 million, respectively. The
Company also receives sub-lease rental income under an operating lease, which
the approximate annual future minimum sub-rentals are $2.5 million through
November 1999. Future minimum lease payments for all noncancelable operating
leases having a remaining term in excess of one year at December 31, 1995
aggregated $51.5 million, and payments during the next five years are: 1996,
$8.2 million; 1997, $8.0 million; 1998, $7.5 million; 1999, $6.9 million; 2000,
$3.9 million.
NOTE 10. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company maintains three noncontributory plans covering substantially all
employees. Benefits paid to retirees are based primarily on age at retirement,
years of credited service, and compensation earned during employment. The
Company's funding policy complies with the requirements of Federal law and
regulations. The Company's total pension fund contributions were $800,000, $9.8
million and $14.3 million in 1993, 1994 and 1995, respectively. The Company's
contributions are made to a master trust and invested in a diversified portfolio
consisting primarily of equity and debt securities.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS, the Company has recorded
an additional minimum liability at December 31, 1994 and 1995 representing the
excess of the accumulated benefit obligation over the fair value of plan assets
and accrued pension liability. The additional liability has been offset by
intangible assets to the extent of previously unrecognized prior service cost.
Amounts in excess of previously unrecognized prior service cost are recorded as
a reduction of stockholders' equity of $2.1 million, $1.1 million and $1.5
million in 1993, 1994 and 1995, respectively.
F-14
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension cost was as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period....................... $ 8,290 $ 10,210 $ 9,232
Interest cost on projected benefit obligation......................... 10,997 12,533 13,158
Actual return on plan assets.......................................... (7,505) (5,384) (15,937)
Net amortization and deferral......................................... (1,237) (2,857) 5,570
----------- ----------- -----------
$ 10,545 $ 14,502 $ 12,023
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Actuarial assumptions used were:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Discount rate......................................................... 7.50% 8.50% 8.00%
Rate of increase in future compensation levels........................ 4.25% 5.00% 4.75%
Long-term rate of return on plan assets............................... 8.50% 9.00% 9.50%
</TABLE>
The following table sets forth the funded status at December 31:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefits:
Vested.............................................................. $ 128,317 $ 115,424 $ 136,922
Nonvested........................................................... 12,362 12,498 16,597
----------- ----------- -----------
Accumulated benefit obligaton......................................... $ 140,679 $ 127,922 $ 153,519
----------- ----------- -----------
Projected benefit obligation.......................................... $ 172,371 $ 158,411 $ 190,858
Plan assets at fair value............................................. 106,965 112,527 136,582
----------- ----------- -----------
Projected benefit obligation in excess of plan assets................. 65,406 45,884 54,276
Unrecognized prior service cost....................................... (1,767) (1,627) (4,479)
Contributions......................................................... (1,420) (97)
Unamortized loss resulting from changes in plan experience and
actuarial assumptions............................................... (26,389) (121) (9,269)
Adjustment required to recognize additional minimum
liability........................................................... 2,119 1,305 1,511
----------- ----------- -----------
Accrued pension cost.................................................. $ 39,369 $ 44,021 $ 41,942
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, the Company provides certain health care
insurance benefits to retired Company employees and their dependents. The
Company currently funds these plans on a pay-
F-15
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
as-you-go basis. Substantially all of the Company's salaried employees and
certain hourly employees become eligible for such benefits when they attain
certain age and service requirements while employed by the Company.
The following tables set forth the components of the accumulated
postretirement benefit obligation and the net periodic postretirement benefit
cost (in thousands):
Net periodic postretirement benefit cost included the following at December
31:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................................. $ 41,444 $ 34,181 $ 46,090
Full eligible active plan participants................................ 1,516 1,353 1,644
Other active plan participants........................................ 44,243 40,070 32,073
--------- --------- -----------
Accumulated postretirement benefit obligation in excess of plan
assets................................................................ 87,203 75,604 79,807
Unrecognized prior service cost......................................... 10,927 12,080 8,496
Accrued postretirement benefit cost..................................... (9,128) 7,942 13,718
--------- --------- -----------
$ 89,002 $ 95,626 $ 102,021
--------- --------- -----------
--------- --------- -----------
</TABLE>
Net postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits attributed to service during the period.......... $ 3,771 $ 4,413 $ 3,795
Interest cost of postretirement benefit obligation...................... 5,676 5,949 6,268
Other net amortization and deferral..................................... (823) (952) (1,139)
--------- --------- -----------
$ 8,624 $ 9,410 $ 8,924
--------- --------- -----------
--------- --------- -----------
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.50% in 1993, 8.50% in 1994 and 8.00% in
1995. The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation pre-age 65 is 13.0% in 1993, 10.75% in 1994
and 10.0% in 1995, declining annually .75% to a rate of 5.5%; and for post-age
65 is 11.0% in 1993, 8.75% in 1994 and 8.00% in 1995, declining annually .75% to
a rate of 5.0%. If the health care cost trend rate assumptions were increased by
1%, the accumulated postretirement benefit obligation as of December 31, 1995
would be increased by 14.5%. The effect of this change on the sum of the service
cost and interest cost components would be an increase of 16.6%.
INVESTMENT PLAN
The Company sponsors a voluntary 401(k) investment plan designed to enhance
existing retirement plans. The Company contributes amounts equal to 50% of the
employee's contributions, up to a maximum of 4% of the employee's base salary.
Total expense for the plan was $2.0 million, $1.9 million and $2.1 million for
1993, 1994 and 1995, respectively.
F-16
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER EMPLOYEE BENEFITS
The Company has supplemental benefit plans covering certain key executives.
These plans provide for benefits which supplement those provided by the
Company's other retirement plans. The Supplemental Executive Retirement Plans
are unfunded plans of deferred compensation for certain key executives. These
supplemental plans are non-qualified and are being provided for by charges to
operations sufficient to meet the projected benefit obligation. The Executive
Insurance Plan provides additional death benefits to certain key executives. The
Company acquired life insurance policies or annuity contracts to provide funding
of the benefits. The costs for these plans are based on substantially the same
actuarial methods and economic assumptions as those used for the defined benefit
pension plans. The Company's expense for these plans was $1.4 million in both
1993 and 1994 and $1.3 million in 1995. The accumulated benefit obligation
related to these plans totaled approximately $3.9 million, $4.1 million and $4.4
million at December 31, 1993, 1994 and 1995, respectively, and is recorded in
other long-term liabilities.
The Company has an Incentive Compensation Plan administered by the
Compensation Committee of the Board of Directors which provides for payment of
cash awards to officers and key employees based upon achievement of specific
goals by the Company and the participating employees. For the years ended 1993,
1994 and 1995, provisions of approximately $1.5 million, $4.0 million and $4.5
million, respectively, were charged against income related to the plan. Payouts
are based entirely on achievement of financial and business objectives.
NOTE 11. STOCKHOLDERS' EQUITY
In November 1993, the Company amended and restated its certificate of
incorporation to authorize the issuance of 93,493,000 shares of Class A Common
Stock, par value $.01 per share, consisting of 67,682,000 shares of Series A-1
and 25,811,000 shares of Series A-2, and 15,780,000 shares of Class B Common
Stock, par value $.01 per share, and 10,000,000 shares of Preferred Stock, par
value $.01 per share. The Class A and Class B Common Stock have equal voting
rights. Each common share issued immediately prior to the recapitalization was
designated as either Series A-1 shares (16,250,000) or Series A-2 shares
(25,095,833).
In November 1993, the Company issued 100 shares of 7% Series A Cumulative
Preferred Stock with a par value of $.01 per share (Series A Preferred Stock)
and 11,045,833 shares of Class B Common Stock with a par value of $.01 per share
(see Note 7). Accumulated deficit was charged with the par value of the Class B
Common Stock issued of $110,458. The Series A Preferred Stock has a stated value
of $4,689,375 per share, and a liquidation preference equal to the stated value
per share plus all accumulated dividends ($77.3 million at December 31, 1995)
subsequent to October 1, 1993. The dividends are payable quarterly, when, as and
if, declared by the Company's Board of Directors. No payments in liquidation may
be made with respect to Common Stock unless all accumulated dividends on the
Series A Preferred Stock and the liquidation preference on the Series A
Preferred Stock have been paid in full. After provision for the Series A
Preferred Stock, the Class A Common Stock has preference with respect to
dividends, other distributions and in liquidation over all other classes of
common stock currently outstanding in the amount of approximately $186 million.
After the provision for the Preferred Stock and the Class A Common Stock
preferences as described above, the Class A Common Stock is entitled to 75% and
the Class B Common Stock is entitled to 25% of any dividends and other
distributions or in liquidation. Under certain circumstances, holders of the
Series A Preferred Stock are entitled to limited
F-17
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 11. STOCKHOLDERS' EQUITY (CONTINUED)
voting rights. In addition, under certain circumstances, including an initial
public offering of the Company's common stock, the Series A-2 Common Stock and
the Class B Common Stock shall be exchanged for Series A-1 Common Stock.
Under a Stock Option Plan adopted by its stockholders effective March 20,
1990, the Company has granted options to purchase its common stock to certain
Company employees with an option price which, prior to 1996, was not less than
the fair value of the stock at the date of grant. Generally, the options vest
25% on date of issuance, 25% on or before the first anniversary of the date of
issuance, and 25% annually thereafter. Effective July 1, 1994, generally the
vesting schedule was changed to 33% on and after the first anniversary of the
date of issuance, an additional 33% on and after the second anniversary of the
date of issuance and the last 33% after the third anniversary of the date of
issuance. In addition, the Company has granted options to purchase its common
stock to its directors and advisors with vesting periods up to three years.
Generally, such options expire ten years from date of grant. The option price
per share ranges from approximately $5 to $6. At December 31, 1995 and June 30,
1996, options for 3,807,950 shares and 4,838,178 shares, respectively, are
exercisable and 5,802,075 shares and 6,459,575 shares, respectively, of Class A
Common Stock are reserved for issuance upon the exercise of the options under
the Stock Option Plan and to the Company's directors and advisors. The Company
recorded compensation expense related to stock option grants of $5.2 million
during the six months ended June 30, 1996.
The Company's stock option transactions were as follows:
<TABLE>
<CAPTION>
GRANTS TO DIRECTORS
STOCK OPTION PLAN AND ADVISORS
----------------- ---------------------------
NUMBER OF NUMBER OF
SHARES SHARES
----------------- ---------------------------
<S> <C> <C>
Balance at January 1, 1993.............. 2,565,550 587,500
Granted................................. 11,750 318,750
Canceled or expired..................... (779,100)
----------------- ----------
Balance at December 31, 1993............ 1,798,200 906,250
Granted................................. 2,180,875 450,000
Canceled or expired..................... (37,500)
----------------- ----------
Balance at December 31, 1994............ 3,941,575 1,356,250
Granted................................. 1,160,000
Exercised............................... (2,000)
Canceled or expired..................... (616,250) (37,500)
----------------- ----------
Balance at December 31, 1995............ 4,483,325 1,318,750
Granted (Unaudited)..................... 535,000 145,000
Exercised (Unaudited)................... (12,500)
Canceled or expired (Unaudited)......... (10,000)
----------------- ----------
Balance at June 30, 1996 (Unaudited) 5,008,325 1,451,250
----------------- ----------
----------------- ----------
</TABLE>
F-18
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 11. STOCKHOLDERS' EQUITY (CONTINUED)
The Company has granted stock appreciation rights (SARs) to certain officers
and key employees. There were 22,312 and 14,312 SARs outstanding as of December
31, 1995 and June 30, 1996, respectively, with a base price ranging from
approximately $5 to $6. The Company recorded compensation expense related to
SARs of $165,000 during the six months ended June 30, 1996. These SARs vest 50%
on the first anniversary date of issuance, and 25% annually thereafter.
NOTE 12. RELATED PARTY TRANSACTIONS
Entities related to Forstmann Little & Co. ("Forstmann Little") currently
beneficially own substantially all of the Company's common stock. Under a usage
agreement, the Company pays an affiliate of Forstmann Little for the use of a
Gulfstream IV. Total expenses associated with this agreement totalled $4.6
million for 1993 and $2.3 million for 1994 and 1995. This aircraft is utilized
as a demonstrator aircraft. The Company also procures certain inventory items
from another Forstmann Little affiliate engaged in the aircraft industry. During
1994, the Company sold three aircraft totaling $58.6 million to two corporations
whose presidents are directors of the Company and also sold a Gulfstream II to
an affiliate of Forstmann Little for $6.7 million. Additionally, the Company
leased from one of its directors, through August 1993, an aircraft used for
sales demonstration, and customer support purposes. Total expense for the year
ended December 31, 1993 was $834,000. Management believes all these transactions
with related parties are on terms similar to those of other customers and
vendors.
In August 1996, Gulfstream entered into agreements with Mr. Theodore J.
Forstmann pursuant to which Gulfstream will provide Mr. Forstmann with the use
of a Gulfstream V for a period of ten years. Until the Gulfstream V becomes
available, Gulfstream will make available to Mr. Forstmann a Gulfstream IV (by
purchasing at fair market value, or assuming a lease at fair market value for, a
Gulfstream IV from an affiliate of FLC Partnership, L.P.). Mr. Forstmann has
agreed to pay Gulfstream up to $1.0 million annually for non-Company use of the
aircraft. If Mr. Forstmann is no longer serving as a director or official of
Gulfstream, he has agreed to reimburse Gulfstream $1,800 per hour for all use of
the aircraft, or other such rate required so as not to exceed FAA regulatory
requirements.
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of the fair value of certain
financial instruments. Cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities are reflected in the financial statements at
fair value because of the short-term maturity of these instruments. The Company
estimates that the carrying value of its long-term debt, based on current
interest rates and terms, approximates fair value.
NOTE 14. COMMITMENTS AND CONTINGENCIES
In the normal course of business, lawsuits, claims and proceedings have been
or may be instituted or asserted against the Company relating to various
matters, including product liability. Although the outcome of litigation cannot
be predicted with certainty and some lawsuits, claims or proceedings may be
disposed of unfavorably to the Company, management has made provision for all
known probable losses related to lawsuits and claims and believes that the
disposition of all matters which are pending or asserted will not have a
material adverse effect on the financial position or results of operations of
the Company.
The Company has agreements with certain of its suppliers to procure major
aircraft components such as engines, wings, and avionics. The agreements vary in
length from three to five years and
F-19
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
generally provide for price and quantity of components to be supplied. In
connection with the Gulfstream V program, the Company has entered into revenue
sharing agreements with two suppliers. One of these suppliers has reorganized,
and the Gulfstream revenue sharing agreement was assigned to the successor
corporation which was formed from the remaining business divisions. The terms of
such agreements require the supplier to design, manufacture and supply certain
aircraft components in exchange for a fixed percentage of the revenues of each
Gulfstream V sold. Progress payments under the revenue sharing agreements are
generally required to be made on a pro rata basis concurrent with the associated
deposits received on Gulfstream V contracts.
In connection with the sale of 28 aircraft as of December 31, 1995, and 33
aircraft as of June 30, 1996, the Company has offered customers trade-in options
(which may or may not be exercised) pursuant to which the Company will accept
trade-in aircraft (primarily Gulfstream IVs and IV-SPs) at a guaranteed minimum
trade-in price or its fair market value. Management believes that the fair
market value of such aircraft will exceed the specified trade-in value.
At December 31, 1995 and June 30, 1996, the Company had outstanding letters
of credit (which support performance guarantees) totaling $24.4 million and
$13.7 million, respectively.
The Company purchases its major aircraft components from a limited number of
suppliers. Although the Company purchases from a limited number of suppliers,
management believes that there are other suppliers who could provide similar
components on comparable terms without significant disruption of its production.
Management of the Company expects that its new Gulfstream V aircraft will be
certified by the Federal Aviation Administration by the end of 1996. While a
significant delay in such certification could have near term adverse
consequences, management believes that certification will occur on schedule.
NOTE 15. EXPORT SALES
Foreign sales by geographical area consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------- 1996
1993 1994 1995 (UNAUDITED)
----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Africa................................................. $ 7,512 $ 5,977 $ 6,773 $ 49,886
Latin America and Caribbean............................ 83,398 28,337 36,479 17,325
Asia................................................... 86,831 64,630 102,990 12,973
Europe................................................. 71,229 22,201 51,330 12,269
Canada................................................. 611 821 19,102 929
Other.................................................. 6,013 834 358 206
----------- ----------- ----------- ------------
$ 255,594 $ 122,800 $ 217,032 $ 93,588
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
NOTE 16. SUBSEQUENT EVENTS
The Company is currently pursuing an initial public offering which is
expected to be effected during the fourth quarter of 1996.
On August 9, 1996, the Company received a commitment from a bank for a new
long-term credit agreement under which the lenders who are parties to the credit
agreement would, effective upon the
F-20
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 16. SUBSEQUENT EVENTS (CONTINUED)
consummation of the initial public offering, make available to the Company a
$400 million term loan and $250 million revolving credit facility with
substantially different terms but with similar restrictive covenants as the
present credit agreements. Concurrently with entering into the credit agreement,
the Company would repay all amounts outstanding under its present credit
agreements and terminate such agreements.
In connection with the initial public offering, the Company expects to
effect a 1996 recapitalization immediately prior to, or simultaneous with, the
closing of the offerings to:
- repurchase all of its outstanding 7% Series A Cumulative Preferred Stock
for a purchase price of $450 million plus approximately $7.9 million of
unpaid dividends,
- exchange all outstanding shares of Class A-2 and Class B Common Stock for
Class A-1 Common Stock,
- redesignate Class A-1 Common Stock into Common Stock,
- effect a 1.5-for-1 stock split of the Common Stock,
- sell 2,122,928 shares of Common Stock by the Company to certain option
holders pursuant to existing option agreements, and
- restate the Company's Certificate of Incorporation to authorize
300,000,000 shares of Common Stock, par value $.01 per share, and
20,000,000 shares of Preferred Stock.
F-21
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. Incorporated are acting as representatives, has severally agreed
to purchase from the Company and the Selling Stockholders the respective number
of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------------------------- -------------
<S> <C>
Goldman Sachs & Co.......................................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................................
Morgan Stanley & Co. Incorporated........................................................
-------------
Total................................................................................ 22,400,000
-------------
-------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $[ ] per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $[ ] per share
to certain brokers and dealers. After the shares of Common Stock are released
for sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 5,600,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the International Offering, and vice versa. The representatives of
the International Underwriters are Goldman Sachs International, Merrill Lynch
International and Morgan Stanley & Co. International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
U-1
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 3,360,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 22,400,000 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option
exercisable up to an aggregate of 840,000 additional shares of Common Stock.
The Company has agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the date
of this Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of or file a registration statement (other than a registration statement
on Form S-8 with respect to an employee benefit plan) with respect to any Common
Stock, or any securities of the Company (other than pursuant to employee stock
option and incentive plans and agreements, upon conversion of outstanding
convertible securities or grants of options to directors) which are
substantially similar to the Common Stock or any other securities which are
exercisable or exchangeable for, convertible into or whose exercise or
settlement price is derivable from the price of Common Stock or any such
securities substantially similar to the Common Stock.
The Selling Stockholders and all directors and executive officers of the
Company have agreed not to offer, sell or otherwise dispose of any Common Stock
for a period of 180 days after the date of the Offerings without the prior
written consent of Goldman, Sachs & Co., except for certain transfers to
immediate family members, trusts for the benefit of the Selling Stockholder and
his or her immediate family, charitable foundations and controlled entities so
long as the transferee agrees to be bound by the foregoing restrictions.
The representatives of the Underwriters have informed the Company that they
do not expect sales to discretionary accounts by the U.S. Underwriters to exceed
five percent of the total number of shares of Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company, the Selling Stockholders and the representatives of the U.S.
Underwriters and the International Underwriters. Among the factors to be
considered in determining the initial public offering price of the Common Stock,
in addition to prevailing market conditions, will be the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
Application will be made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................. 3
Risk Factors....................................... 9
The Company........................................ 14
Use of Proceeds.................................... 14
Dividend Policy.................................... 14
Capitalization..................................... 15
Dilution........................................... 16
Pro Forma Condensed Financial Information.......... 17
Selected Financial Data............................ 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 21
Business........................................... 29
Management......................................... 46
Principal and Selling Stockholders................. 59
Certain Transactions............................... 62
Description of Capital Stock....................... 64
Description of Credit Agreement.................... 67
Shares Eligible For Future Sale.................... 70
Validity of Common Stock........................... 71
Experts............................................ 71
Additional Information............................. 71
Index to Financial Statements...................... F-1
Underwriting....................................... U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
28,000,000 SHARES
GULFSTREAM AEROSPACE
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
[LOGO]
-----------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by the
Company, in connection with the issuance and distribution of the securities
being registered hereby, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC registration fee (actual)................................... $ 255,379
NYSE filing fee*................................................
NASD fees (actual).............................................. 30,500
Transfer agent and registrar fee and expenses*..................
Accounting fees and expenses*...................................
Legal fees and expenses*........................................
Blue Sky expenses and counsel fees.............................. 26,000
Printing and engraving expenses*................................
Miscellaneous*..................................................
----------
Total........................................................... $
----------
----------
</TABLE>
- --------------
* To be filed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation and By-Laws of the Company provide
for indemnification, to the fullest extent permitted by the DGCL, of any person
who is or was involved in any manner in any threatened, pending or completed
investigation, claim or other proceeding, by reason of the fact that such person
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 another entity, against all
expenses, liabilities, losses and claims actually incurred or suffered by such
person in connection with the investigation, claim or other proceeding. The
By-Laws also provide that the Company shall advance expenses to a director or
officer upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that the director or
officer is not entitled to be indemnified by the Company.
Article SIXTH of the Restated Certificate of Incorporation provides that
directors of the Company shall not, to the fullest extent permitted by the DGCL,
be liable to the Company or any of its stockholders for monetary damages for any
breach of fiduciary duty as a director. The Certificate of Incorporation also
provides that if the DGCL is amended to permit further elimination or limitation
of the personal liability of directors, then the liability of the directors of
the Company shall be eliminated or limited to the fullest extent permitted by
the DGCL as so amended.
The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in the Certificate and
By-Laws. These agreements, among other things, indemnify the Company's directors
and officers to the fullest extent permitted by Delaware law for certain
expenses (including attorney's fees), liabilities, judgments, fines and
settlement amounts incurred by such person arising out of or in connection with
such person's service as a director or officer of the Company or an affiliate of
the Company.
Policies of insurance are maintained by the Company under which its
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
II-1
<PAGE>
The form of Underwriting Agreements filed as Exhibit 1.1 hereto provides for
the indemnification of the Registrant, its controlling persons, its directors
and certain of its officers by the Underwriters against certain liabilities,
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (WITHOUT GIVING EFFECT TO THE
1996 RECAPITALIZATION)
On November 30, 1993, the Company sold 100 shares of its 7% Cumulative
Preferred Stock and 11,045,833 shares of its Class B Common Stock to MBO-IV in
return for the Original Debentures and the Additional Debentures. See "Certain
Transactions -- The Acquisition; Subsequent Events." Such
issuances were exempt from registration under the Securities Act pursuant to
Section 4(2) thereof because they did not involve a public offering as the
shares were issued only to a limited number of persons and were not offered to
any other persons. Registration under the Securities Act also was not required
because MBO-IV was an existing holder of the Company's securities and the sale
did not involve any solicitation. Therefore, these exchanges are exempt from
registration under the Securities Act under Section 3(a)(9) of the Securities
Act.
On June 30, 1995, the Company sold to a former officer of the Company 2,000
shares of Class A Common Stock, Series A-2, pursuant to a stock option granted
to the former officer in May 1994. The purchase price for these shares was
$10,240. This issuance was exempt from registration under the Securities Act
pursuant to section 4(2) thereof because it did not involve a public offering as
the shares were issued to one person and were not offered to another person.
On May 13, 1996, the Company sold to an advisor of the Company 12,500 shares
of Class A Common Stock, Series A-1, pursuant to a stock option granted to the
advisor in May 1994. The purchase price for these shares was $76,875. This
issuance was exempt from registration under the Securities Act pursuant to
section 4(2) thereof because it did not involve a public offering as the shares
were issued to one person and were not offered to another person.
As part of the 1996 Recapitalization, (i) each outstanding share of Class A
Series A-2 Common Stock and each outstanding share of Class B Common Stock will
be exchanged for shares of Class A Series A-1 Common Stock, (ii) all Class A
Series A-1 Common Stock will be redesignated Common Stock and (iii) the Common
Stock will be adjusted for a 1.5-for-1 split of the Common Stock. See
"Description of Capital Stock -- General". Registration under the Securities Act
will not be required in respect of issuances pursuant to the 1996
Recapitalization because they will be made exclusively to existing holders of
the Company's securities and will not involve any solicitation. Therefore, these
issuances will be exempt from registration under the Securities Act pursuant to
section 3(a)(9) of the Securities Act.
No other sales of the Company's securities have taken place within the last
three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
<TABLE>
<C> <S> <C>
1.1 -- Proposed Form of Underwriting Agreements.*
2.1 -- Stock Purchase Agreement, dated as of February 12, 1990 between Electrospace
Holding, Inc. and GA Acquisition Corp.**
3.1 -- Form of Restated Certificate of Incorporation of the Company.*
3.2 -- Form of Restated By-Laws of the Company.*
4.1 -- Specimen Form of Company's Common Stock Certificate.**
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of
the securities being registered.**
10.1 -- Gulfstream Aerospace Corporation Pension Plan, amended and restated January
1, 1989, as amended.* +
10.2 -- Gulfstream Aerospace Corporation Supplemental Executive Retirement Plan,
effective as of April 1, 1991.* +
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
10.3 -- Gulfstream Aerospace Corporation November 1, 1991 Supplemental Executive
Retirement Plan.* +
10.4 -- Form of Indemnification Agreement between the Company and its directors and
executive officers.*
10.5 -- Form of Outside Director Stock Option Agreement.* +
10.6 -- Form of Outside Director Stockholder's Agreement.* +
10.7 -- Gulfstream Aerospace Corporation Stock Option Plan.* +
10.8 -- Form of Employee Stock Option Agreement.* +
10.9 -- Form of Employee Stockholder's Agreement.* +
10.10 -- Form of Employee Stock Appreciation Right Agreement.* +
10.11 -- Lease Agreement, dated as of January 1, 1988, between Oklahoma City Airport
Trust and Gulfstream Aerospace Corporation.**
10.12 -- Lease Agreement, dated as of March 14, 1989, between City of Long Beach and
7701 Woodley Avenue Corporation dba Gulfstream Aerospace.**
10.13 -- Form of Lease Agreements, dated January 1, 1994 between Immuebles El Vigia,
S.A., and Interiores Aeros, S.A. De C.V.**
10.14 -- Lease Agreement, dated May 1, 1996 between Immuebles El Vigia, S.A., and
Interiores Aeros, S.A. De C.V.**
10.15 -- Sub-Lease Agreement, dated May 25, 1995 between Brunswick and Glynn County
Development Authority and Gulfstream Aerospace Corporation, a Georgia
Corporation.**
10.16 -- Credit Agreement, dated as of 1996, among Gulfstream Delaware
Corporation, Gulfstream Aerospace Corporation, The Chase Manhattan Bank
and the banks and other financial institutions parties thereto.**
10.17 -- Registration Rights Agreement among Gulfstream Aerospace Corporation,
Gulfstream Delaware Corporation, Gulfstream Partners, Gulfstream Partners
II, L.P., and MBO-IV.*
10.18 -- Repurchase Agreement, dated as of May 15,1996, between Gulfstream Aerospace
Corporation and MBO-IV.*
10.19 -- Repurchase Agreement, dated as of August 8, 1996, between Gulfstream
Aerospace Corporation and MBO-IV.*
11.1 -- Computation of Earnings per Common Share.*
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit
5.1).**
23.2 -- Consent and Report of Deloitte & Touche LLP (included in Schedules on page
S-1).*
24.1 -- Powers of Attorney (included on signature page).*
</TABLE>
- --------------
* Filed herewith.
** To be filed by amendment.
+ Compensation Arrangement
B. SCHEDULES
<TABLE>
<CAPTION>
Independent Auditors Consent and Report on Schedules.................. S-1
<S> <C>
Schedule I Condensed Financial Information of Registrant........... S-2
Schedule II Valuation and Qualifying Accounts (Company)............ S-4
</TABLE>
All financial statement schedules other than the above have been omitted
because they are not required or the information required to be set forth
therein is included in the financial statements or in the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
II-3
<PAGE>
(1) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
(2) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant, pursuant to the provisions described in Item 14 or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by any such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(3) That for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(4) That for the purpose of determining any liability under the Securities
Act, each posteffective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Gulfstream
Aerospace Corporation has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Savannah and the State of Georgia on the 9th day of August, 1996.
GULFSTREAM AEROSPACE CORPORATION
By: /s/ CHRIS A. DAVIS
-----------------------------------
Chris A. Davis
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Fred A. Breidenbach, Chris A. Davis and Sandra J.
Horbach his or her true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this Registration Statement, including post-effective amendments and a
registration statement registering additional securities pursuant to Rule 462(b)
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
his said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ------------------------
<C> <S> <C>
/s/ THEODORE J. FORSTMANN
------------------------------- Chairman of the Board; Director August 9, 1996
Theodore J. Forstmann
/s/ FRED A. BREIDENBACH
------------------------------- President and Chief Operating Officer; Director August 9, 1996
Fred A. Breidenbach
/s/ CHRIS A. DAVIS Executive Vice President, Chief Financial
------------------------------- Officer (Principal Financial Officer and August 9, 1996
Chris A. Davis Principal and Accounting Officer)
/s/ WILLIAM R. ACQUAVELLA
------------------------------- Director August 9, 1996
William R. Acquavella
/s/ ROBERT ANDERSON
------------------------------- Director August 9, 1996
Robert Anderson
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ------------------------
<C> <S> <C>
/s/ CHARLOTTE L. BEERS
------------------------------- Director August 9, 1996
Charlotte L. Beers
/s/ THOMAS D. BELL, JR.
------------------------------- Director August 9, 1996
Thomas D. Bell, Jr.
/s/ W.W. BOISTURE, JR.
------------------------------- Executive Vice President; Director August 9, 1996
W.W. Boisture, Jr.
/s/ NICHOLAS C. FORSTMANN
------------------------------- Director August 9, 1996
Nicholas C. Forstmann
/s/ SANDRA J. HORBACH
------------------------------- Director August 9, 1996
Sandra J. Horbach
/s/ DREW LEWIS
------------------------------- Director August 9, 1996
Drew Lewis
/s/ BRYAN T. MOSS
------------------------------- Vice Chairman of the Board; Director August 9, 1996
Bryan T. Moss
/s/ ALLEN E. PAULSON
------------------------------- Director August 9, 1996
Allen E. Paulson
/s/ ROGER S. PENSKE
------------------------------- Director August 9, 1996
Roger S. Penske
/s/ COLIN L. POWELL
------------------------------- Director August 9, 1996
Colin L. Powell
/s/ GERARD ROCHE
------------------------------- Director August 9, 1996
Gerard Roche
/s/ DONALD H. RUMSFELD
------------------------------- Director August 9, 1996
Donald H. Rumsfeld
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ------------------------
<C> <S> <C>
/s/ GEORGE P. SHULTZ
------------------------------- Director August 9, 1996
George P. Shultz
/s/ ROBERT S. STRAUSS
------------------------------- Director August 9, 1996
Robert S. Strauss
</TABLE>
II-7
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders of
Gulfstream Aerospace Corporation:
We consent to the use in this Registration Statement of Gulfstream Aerospace
Corporation on Form S-1 of our report dated February 2, 1996, appearing in the
Prospectus, which is part of this Registration Statement and to the reference to
us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the consolidated financial statement schedules of
Gulfstream Aerospace Corporation and its subsidiaries, listed in Item 16(B).
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respect the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 6,1996
S-1
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Investment in subsidiary.......................................................... $ 190,644 $ 219,234
-------------- --------------
Total Assets.................................................................. $ 190,644 $ 219,234
-------------- --------------
-------------- --------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Payable to subsidiary............................................. $ 1,694 $ 1,694
----------- -----------
Total Liabilities............................................... 1,694 1,694
----------- -----------
Stockholders' Equity:
Preferred stock, Series A, 7%-cumulative; par value $.01; shares
authorized; 10,000,000; shares issued; 100 in 1994 and 1995,
Liquidation preference, $546,282,056 in 1995..................... 468,938 468,938
Common stock, Class A, Series A-1 and A-2, par value $.01; shares
authorized: 93,493,000; shares issued: 41,345,833 in 1994 and
41,347,833 in 1995;.............................................. 413 413
Common stock, Class B, par value $.01; shares authorized;
15,780,000; shares issued: 11,045,833 in 1994 and 1995........... 110 110
Additional paid-in capital........................................ 210,621 210,631
Accumulated deficit............................................... (439,507) (410,613)
Minimum pension liability......................................... (1,136) (1,450)
Treasury stock, Common stock, Class A, Series A-2, 8,220,833
shares in 1994 and 1995.......................................... (50,489) (50,489)
----------- -----------
Total Stockholders' Equity...................................... 188,950 217,540
----------- -----------
Total Liabilities and Stockholders' Equity........................ $ 190,644 $ 219,234
----------- -----------
</TABLE>
Note to Schedule I:
The Company accounts for its investment in its subsidiary using the equity
method of accounting. No dividends were paid to the Company by its subsidiary
during the two years ended December 31, 1995.
S-2
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
------------ --------- ---------
<S> <C> <C> <C>
Interest income.............................................................. $ (28,406)
Interest expense............................................................. 28,406
------------ --------- ---------
Interest--net................................................................ 0 0 0
Net income (loss) of subsidiary.............................................. (275,227) $ 23,564 $ 28,894
------------ --------- ---------
Net income (loss)............................................................ $ (275,227) $ 23,564 $ 28,894
------------ --------- ---------
------------ --------- ---------
</TABLE>
Note: Statement of cash flows are not presented since the Company had no cash
flows from operations.
S-3
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
SCHEDULE II -- CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING
ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (1) PERIOD
- ----------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended December 31, 1993............................. $ 1,255 $ 50 $ 153 $ 1,152
----------- ----------- ----- -----------
Year ended December 31, 1994............................. 1,152 286 126 1,312
----------- ----------- ----- -----------
Year ended December 31, 1995............................. 1,312 2,506 381 3,437
----------- ----------- ----- -----------
</TABLE>
(1) Deductions from the allowance for doubtful accounts represent the write-off
of uncollectible accounts.
S-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C> <C>
1.1 -- Proposed Form of Underwriting Agreements.*
2.1 -- Stock Purchase Agreement, dated as of February 12, 1990 between Electrospace Holding,
Inc. and GA Acquisition Corp.**
3.1 -- Form of Restated Certificate of Incorporation of the Company.*
3.2 -- Form of Restated By-Laws of the Company.*
4.1 -- Specimen Form of Company's Common Stock Certificate.**
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the
securities being registered.**
10.1 -- Gulfstream Aerospace Corporation Pension Plan, amended and restated January 1, 1989,
as amended.* +
10.2 -- Gulfstream Aerospace Corporation Supplemental Executive Retirement Plan, effective as
of April 1, 1991.* +
10.3 -- Gulfstream Aerospace Corporation November 1, 1991 Supplemental Executive Retirement
Plan.* +
10.4 -- Form of Indemnification Agreement between the Company and its directors and executive
officers.*
10.5 -- Form of Outside Director Stock Option Agreement.* +
10.6 -- Form of Outside Director Stockholder's Agreement.* +
10.7 -- Gulfstream Aerospace Corporation Stock Option Plan.* +
10.8 -- Form of Employee Stock Option Agreement.* +
10.9 -- Form of Employee Stockholder's Agreement.* +
10.10 -- Form of Employee Stock Appreciation Right Agreement.* +
10.11 -- Lease Agreement, dated as of January 1, 1988, between Oklahoma City Airport Trust and
Gulfstream Aerospace Corporation.**
10.12 -- Lease Agreement, dated as of March 14, 1989, between City of Long Beach and 7701
Woodley Avenue Corporation dba Gulfstream Aerospace.**
10.13 -- Form of Lease Agreements, dated January 1, 1994 between Immuebles El Vigia, S.A., and
Interiores Aeros, S.A. De C.V.**
10.14 -- Lease Agreement, dated May 1, 1996 between Immuebles El Vigia, S.A., and Interiores
Aeros, S.A. De C.V.**
10.15 -- Sub-Lease Agreement, dated May 25, 1995 between Brunswick and Glynn County
Development Authority and Gulfstream Aerospace Corporation, a Georgia
Corporation.**
10.16 -- Credit Agreement, dated as of 1996, among Gulfstream Delaware
Corporation, Gulfstream Aerospace Corporation, The Chase Manhattan Bank and the
banks and other financial institutions parties thereto.**
10.17 -- Registration Rights Agreement among Gulfstream Aerospace Corporation, Gulfstream
Delaware Corporation, Gulfstream Partners, Gulfstream Partners II, L.P., and
MBO-IV.*
10.18 -- Repurchase Agreement, dated as of May 15,1996, between Gulfstream Aerospace
Corporation and MBO-IV.*
10.19 -- Repurchase Agreement, dated as of August 8, 1996, between Gulfstream Aerospace
Corporation and MBO-IV.*
11.1 -- Computation of Earnings per Common Share.*
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).**
23.2 -- Consent and Report of Deloitte & Touche LLP (included in Schedules on page S-1).*
24.1 -- Powers of Attorney (included on signature page).*
</TABLE>
- --------------
* Filed herewith.
** To be filed by amendment.
+ Compensation Arrangement
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
----------------------
, 1996
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Gulfstream Aerospace Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ........ shares of Common Stock, par value $.01 per share ("Stock"), of the
Company, and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of ........ shares and, at the
election of the Underwriters, up to ........ additional shares of Stock. The
aggregate of ........ shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of ........
additional shares to be sold by the Selling Stockholders is herein called the
"Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of ....... shares of Stock (the
"International Shares"), including the overallotment option thereunder,
<PAGE>
through arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Merrill
Lynch International and Morgan, Stanley & Co. International are acting
as lead managers. Anything herein or therein to the contrary notwithstanding,
the respective closings under this Agreement and the International
Underwriting Agreement are hereby expressly made conditional on one another.
The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the International
Shares. The latter form of prospectus will be identical to the former except
for certain substitute pages. Except as used in Sections 2, 3, 4, 9 and 11
herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the
U.S. and the international versions thereof.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters and the Selling Stockholders that:
(i) A registration statement on Form S-1 (File No. 33-....) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act,
is hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective, each
as amended at the time such part of the registration statement became
effective or such part of the Rule 462(b) Registration Statement, if any,
became or hereafter becomes effective, are hereinafter collectively called
the "Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
<PAGE>
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by any Underwriter through
Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Items 7 and
11(l) of Form S-1;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Items 7 and 11(l) of Form S-1;
(iv) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, which would
individually or in the aggregate have, or may reasonably be expected to
have, a material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock (other than pursuant to
the exercise of Options (as defined below)) or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development that may reasonably be expected to involve a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus;
(v) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or,
with respect to liens and encumbrances, such as are provided for pursuant
to the terms of the Credit Agreement (as defined in the Prospectus), or
such as do not materially affect the value of such property and do not
interfere in any material respect with the use made and proposed to be made
of
<PAGE>
such property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere in any material respect with the
use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vi) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, except where failure to so qualify would not have, and would
not reasonably be expected to have, a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole; each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and each of Gulfstream Delaware Corporation
and Gulfstream Aerospace Corporation, a Georgia corporation ("GACGA"), has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which each owns or leases properties, or conducts any business, so as to
require such qualification, except where the failure to so qualify would
not have, and would not reasonably be expected to have, a material adverse
effect on the consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole;
(vii) At each Time of Delivery (as defined in Section 4 below), the
Company will have an authorized capitalization as set forth in the
Prospectus under the caption "Capitalization", and at each Time of Delivery
all of the then issued shares of Stock of the Company will have been duly
and validly authorized and issued, will be fully paid and non-assessable
and will conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company will be duly and validly authorized and issued,
will be fully paid and non-assessable and (except for directors' qualifying
shares) will be owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims, except as are provided for
pursuant to the terms of the Credit Agreement;
(viii) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly
issued and fully paid and non-assessable, will be free of preemptive and
other similar rights and will conform to the description of the Stock
contained in the Prospectus; and no holder of securities of the Company has
rights, pursuant to any agreement with the Company or otherwise, to
register such securities under any registration statement filed with the
Commission except as otherwise disclosed in the Prospectus;
(ix) The unissued shares of Stock issuable upon the exercise of
options to be exercised by certain of the Selling Stockholders (the
"Options") have been duly and validly authorized and reserved for issuance,
and at the Time of Delivery with respect to such shares, such shares will
be delivered in accordance with the provisions of the
<PAGE>
Stock Option Agreements between the Company and such Selling Stockholders
pursuant to which such options were granted (the "Option Agreements") and
will be duly and validly issued, fully paid and non-assessable and will
conform to the description thereof in the Prospectus;
(x) The Options were duly authorized and issued pursuant to the
Option Agreements and constitute valid and binding obligations of the
Company, and the counterparties thereto are entitled to the benefits
provided by the Option Agreements; the Option Agreements were duly
authorized, executed and delivered and constitute valid and binding
instruments enforceable in accordance with their terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Options and the Option Agreements
conform to the descriptions thereof in the Prospectus;
(xi) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, which conflict, breach,
violation or default would have, or may reasonably be expected to have, a
material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, nor will such action result in any
violation of the provisions of the Restated Certificate of Incorporation or
By-laws of the Company or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except for the filing by the Company with the
Secretary of State of Delaware of the Company's Restated Certificate of
Incorporation (as described in the Prospectus), the registration under the
Act of the Shares, the registration of the Stock under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which would individually or in the
aggregate have, or may reasonably be expected to have, a material adverse
effect on the consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken
<PAGE>
as a whole; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(xiii) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(xiv) The Company's existing backlog orders for production of the
Gulfstream IV-SP and Gulfstream V are as described in the Prospectus in all
material respects; all such orders are valid and binding and in full force
and effect with respect to the Company, and such orders are subject to no
limitations, restrictions or conditions otherwise than as expressly set
forth therein, except for such limitations, restrictions or conditions as,
individually or in the aggregate, would not have a material adverse effect
on the Company's backlog as described in the Prospectus; and all such
backlog orders and any amendments thereto are in substantially the forms
supplied to you or your representatives for inspection;
(xv) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock and under the captions "Description of
Certain Indebtedness"; "Shares Eligible For Future Sale"; and
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are in each case accurate and fair
in all material respects; and
(xvi) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Stockholder of this Agreement,
the International Underwriting Agreement, the Power of Attorney (the "Power
of Attorney") and the Custody Agreement (the "Custody Agreement")
hereinafter referred to, and for the sale and delivery of the Shares to be
sold by such Selling Stockholder hereunder and under the International
Underwriting Agreement, have been obtained; and such Selling Stockholder
has full right, power and authority to enter into this Agreement, the
International Underwriting Agreement, the Power of Attorney and the Custody
Agreement and to sell, assign, transfer and deliver the Shares to be sold
by such Selling Stockholder hereunder and under the International
Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement, the Power of Attorney
and the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder is bound or to which any of the
property or assets of such Selling
<PAGE>
Stockholder is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of such Selling
Stockholder if such Selling Stockholder is a corporation, the Partnership
Agreement or Articles of Partnership of such Selling Stockholder if such
Selling Stockholder is a partnership, or other constituent documents if
such Selling Stockholder is neither a corporation nor a partnership, or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over such Selling Stockholder or the
property of such Selling Stockholder;
(iii) Immediately prior to each Time of Delivery (as defined below in
Section 4 hereof) such Selling Stockholder will have good and valid title
to the Shares (other than the Shares, if any, to be issued upon exercise of
Options) to be sold at such Time of Delivery by such Selling Stockholder
hereunder and under the International Underwriting Agreement, free and clear
of all liens, encumbrances, equities or claims, except for those arising
under this Agreement, the International Underwriting Agreement, the Custody
Agreement and the Power of Attorney; such Selling Stockholder will have,
immediately prior to such Time of Delivery, (a) good and valid title to the
Options, if any, to be exercised in respect of the Shares to be sold
hereunder and under the International Underwriting Agreement and (b)
assuming due issuance by the Company of any Shares to be issued upon
exercise of Options, good and valid title to the Shares issued upon exercise
of such Options, in each case, free and clear of all liens, encumbrances,
equities or adverse claims, except for those arising under this Agreement,
the International Underwriting Agreement, the Custody Agreement and the
Power of Attorney; and, upon delivery of the certificates representing all
Shares to be sold by such Selling Stockholder and payment therefor pursuant
hereto and thereto, good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or adverse claims, will pass to the
several Underwriters or the International Underwriters, as the case may be;
(iv) No offering, sale or other disposition of any Stock (excluding
any sales or dispositions to the Company, but including the entering into
of any physically or cash-settled derivatives instrument) will be made
within 180 days after the date of the Prospectus, directly or indirectly,
by such Selling Stockholder otherwise than hereunder or under the
International Underwriting Agreement, other than through transfers to
(i) any spouse, parent, child, brother or sister of such Selling
Stockholder, or any issue of the foregoing (including for this purpose
persons legally adopted into the line of descent), (ii) a trust established
solely for the benefit of such Selling Stockholder or any spouse, parent,
child, brother or sister of such Selling Stockholder, or for the benefit of
any issue of the foregoing, (iii) a charitable foundation or similar
charitable organization, or (iv) any corporation or partnership which is
controlled by such Selling Stockholder, or by any spouse, parent, child,
brother or sister of such Selling Stockholder, or by any issue of the
foregoing, PROVIDED, HOWEVER, that prior to each such transfer such
transferee shall have entered into a letter agreement with you as
representatives of the Underwriters agreeing to abide by the restrictions
contained in this clause;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares; and
<PAGE>
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions contemplated herein and in the International
Underwriting Agreement, each of the Selling Stockholders agrees to deliver to
you prior to or at the First Time of Delivery (as hereinafter defined) a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Stockholder hereunder other than any such Shares to be issued
upon the exercise of Options, have been, and each of the Selling Stockholders
who is selling Shares on the exercise of Options represents and warrants that
duly completed and executed irrevocable Option exercise notices, in the forms
specified by the relevant Option Agreement, with respect to all of the Shares
to be sold by such Selling Stockholder hereunder which are not represented by
certificates have been, placed in custody under a Custody Agreement, in the
form heretofore furnished to you, duly executed and delivered by such Selling
Stockholder to Chase Mellon Shareholders Services, L.L.C., as custodian (the
"Custodian"), and that such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you,
appointing the persons indicated in Schedule II hereto, and each of them, as
such Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement and the International
Underwriting Agreement on behalf of such Selling Stockholder, to determine
the purchase price to be paid by the Underwriters to the Selling Stockholders
as provided in Section 2 hereof, to authorize the delivery of the Shares to
be sold by such Selling Stockholder hereunder and otherwise to act on behalf
of such Selling Stockholder in connection with the transactions contemplated
by this Agreement, the International Underwriting Agreement and the Custody
Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates or the irrevocable Option exercise notice, in
either case held in custody for such Selling Stockholder under the Custody
Agreement, are subject to the interests of the Underwriters hereunder, and that
the arrangements made by such Selling Stockholder for such custody, and the
appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of
Attorney, are to that extent irrevocable. Each of the Selling Stockholders
specifically agrees that the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or incapacity
of any individual Selling Stockholder, or, in the case of an estate or trust, by
the death or incapacity of any executor or trustee or the termination of such
estate or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of any
<PAGE>
other event. If any individual Selling Stockholder or any such executor or
trustee should die or become incapacitated, or if any such estate or trust
should be terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery of the
Shares hereunder, certificates representing the Shares shall be delivered by or
on behalf of such Selling Stockholder in accordance with the terms and
conditions of this Agreement, the International Underwriting Agreement and of
the Custody Agreement, and actions taken by the Attorneys-in-Fact pursuant to
the Power of Attorney shall be as valid as if such death, incapacity,
termination, dissolution or other event had not occurred, regardless of whether
or not the Custodian, the Attorneys-in-Fact, or any of them, shall have received
notice of such death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $......................, the number of Firm
Shares (to be adjusted by you so as to eliminate fractional shares) determined
by multiplying the aggregate number of Firm Shares to be sold by the Company and
each of the Selling Stockholders as set forth opposite their respective names in
Schedule II hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by such Underwriter as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the aggregate number of Firm Shares to be purchased by all of the Underwriters
from the Company and all of the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, each of the Selling Stockholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Stockholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
Each of the Selling Stockholders, as and to the extent indicated in
Schedule II hereto, hereby grants, severally and not jointly, to the
Underwriters the right to purchase at their election up to .......... Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares shall be made in proportion to the
maximum number of Optional Shares to be sold by each Selling Stockholder as set
forth in Schedule II hereto. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Attorneys-in-Fact, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Attorneys-in-Fact otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
<PAGE>
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) Certificates in definitive form for the Shares to be purchased by
each Underwriter hereunder, in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company and the Selling Stockholders shall be
delivered by or on behalf of the Company and the Selling Stockholders to
Goldman, Sachs & Co., for the account of such Underwriter, against payment
by or on behalf of such Underwriter of the purchase price therefor by
certified or official bank check or checks, payable to the order of the
Company and the Custodian in New York Clearing House same day funds. The
Company will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office
of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the
"Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1996 or such other time and date as Goldman, Sachs & Co.,
the Company and the Selling Stockholders may agree upon in writing, and,
with respect to the Optional Shares, 9:30 a.m., New York City time, on the
date specified by Goldman, Sachs & Co. in the written notice given by
Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Shares, or such other time and date as Goldman, Sachs & Co. and
the Attorneys-in-Fact may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery",
such time and date for delivery of the Optional Shares, if not the First
Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof will be delivered at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004
(the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at each Time of Delivery. A meeting will be held at
the Closing Location at 2:00 p.m., New York City time, on the New York
Business Day next preceding each Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act and, if the
Company elects to rely upon Rule 462(b) under the Act, to file a Rule
462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 p.m., Washington D.C. time on the date of this
<PAGE>
Agreement and to pay to the Commission at such time of filing the filing
fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the
Act; to make no further amendment or any supplement to the Registration
Statement or Prospectus prior to the last Time of Delivery which shall be
reasonably disapproved by you promptly after reasonable notice thereof; to
advise you, promptly after it receives notice thereof, of the time when the
Registration Statement or any amendment to the Registration Statement
thereto has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you
copies thereof; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or any order preventing
or suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
<PAGE>
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, or file a
registration statement (other than a registration statement on Form S-8
with respect to an employee benefit plan) with respect to, except as
provided hereunder and under the International Underwriting Agreement, any
Stock, securities of the Company (other than pursuant to stock option and
incentive plans and agreements existing, or on the conversion of
convertible securities outstanding on the date of this agreement or grants
to new or existing members of the Company's Board of Directors pursuant to
the Company's existing policy of granting options thereto) which are
substantially similar to the Stock or any other securities which are
exercisable or exchangeable for, convertible into or whose exercise or
settlement price is derivable from the price of, Stock or any such
securities substantially similar to the Stock, without your prior written
consent; and to use reasonable efforts to cause each person who has entered
into an agreement substantially to the effect set forth in Section 1(b)(iv)
to comply therewith and not to grant any waivers or consents to non-
compliance therewith and to enforce its rights under each such agreement, in
each case unless and to the extent that it shall have obtained the prior
written consent of the representatives;
(f) Except as described in the Prospectus and with respect to the
acceleration of Options to be exercised in connection with this Agreement
and the International Underwriting Agreement, during the period beginning
from the date hereof and continuing to and including the date 180 days after
the date of the Prospectus, not to accelerate or agree to accelerate the
vesting of any options to acquire Stock to any date within such 180-day
period, unless, in connection with any such acceleration or agreement to
accelerate it is duly established that the date upon which such vested
options may first be exercised for shares of Stock shall not be any date
within such 180-day period, and not to waive, rescind, terminate, amend or
modify any provision or term of any agreement or stock option plan having
the effect of accelerating the vesting of any such options to any date
within such 180-day period;
(g) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants);
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver
to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
<PAGE>
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(i) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";
(j) To use its best efforts to list, subject to notice of issuance,
the Shares on the New York Stock Exchange (the "Exchange");
(k) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(l) Upon delivery to the Company of the irrevocable Option exercise
notices referred to in the Section 1(b) hereof and the receipt of the
appropriate instructions from the Attorneys-in-Fact, to issue the Shares
relating thereto in accordance with the provisions of the applicable Option
Agreement, and, notwithstanding any other provision of such Option
Agreement, to deliver the Shares to you as contemplated in the Custody
Agreement.
6. The Company and each Selling Stockholder covenant and agree with one
another and with the several Underwriters that (a) the Company will pay or cause
to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
International Underwriting Agreement, the Agreement between Syndicates, the
Selling Agreements, the Blue Sky Memorandum and any other documents in
connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (v) the cost of preparing stock certificates; (vi) the cost and charges
of any transfer agent or registrar; (vii) the fees and expenses of the
Attorneys-in-Fact and the Custodian; (viii) all expenses and taxes incident to
the sale and delivery of the Shares to be sold by the Selling Stockholders to
the Underwriters hereunder, except as provided below; (ix) all fees and expenses
in connection with listing the Shares on the Exchange; (x) all fees,
disbursements and expenses of one counsel for the Selling Stockholders selected
by the FL Selling Stockholders (as defined in Section 7(e)) (which counsel may
be counsel to the Company); and (xi) all other costs and expenses incident to
the performance of its obligations or the Selling Stockholders' obligations
hereunder which are not otherwise specifically provided for in this Section and
(b) each Selling Stockholder shall pay or cause to be paid any fees,
disbursements and expenses of counsel for such Selling Stockholder other than
those
<PAGE>
specified in clause (x) above. In connection with clause (viii) of the preceding
sentence, Goldman, Sachs & Co. agree to pay New York State stock transfer tax,
and the Company agrees to reimburse Goldman, Sachs & Co. for associated carrying
costs if such tax payment is not rebated on the day of payment and for any
portion of such tax payment not rebated. It is understood, however, that, except
as provided in this Section, Section 8 and Section 11 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the
Shares being delivered at such Time of Delivery, the Registration
Statement, the Prospectus and such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Donald L. Mayer, Vice President and General Counsel of the
Company, shall have furnished to you his written opinion (a draft of such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which would
individually or in the aggregate have, or may reasonably be
expected to have, a material adverse effect on the consolidated
financial position, stockholders' equity or results of operations
of the Company and its subsidiaries, taken as a whole; and, to
the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
<PAGE>
(ii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each jurisdiction in which such
corporation owns or leases properties (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company and its subsidiaries,
provided that such counsel shall state that he believes that both
you and he are justified in relying upon such opinions and
certificates);
(iii) Each of Gulfstream Delaware Corporation and GACGA
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its respective
state of incorporation; and all of the issued and outstanding
shares of capital stock of each such company have been duly and
validly authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned directly
or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) Each of Gulfstream Delaware Corporation and GACGA
has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of
each jurisdiction in which such corporation owns or leases
properties (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the
Company and its subsidiaries, provided that such counsel shall
state that he believes that both you and he are justified in
relying upon such opinions and certificates);
(v) The compliance by the Company with all of the
provisions of this Agreement, the International Underwriting
Agreement and the consummation by the Company and the Selling
Stockholders of the transactions herein and therein contemplated
will not conflict with, or result in a breach or violation of,
any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of any
statute or rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(vi) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body referred to in clause (iv) above is
required for the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except for the filing by the Company with the
Secretary of State of Delaware of the Company's Restated
Certificate of Incorporation, the registration under the Act of
the Shares and the registration of the Stock under the Exchange
Act, each
<PAGE>
of which has been made or obtained, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters; and
(vii) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by
them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as
do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries
(in giving the opinion in this clause, such counsel may state
that no examination of record titles for the purpose of such
opinion has been made, and that he is relying upon a general
review of the titles of the Company and its subsidiaries, upon
opinions of local counsel and abstracts, reports and policies of
title companies rendered or issued at or subsequent to the time
of acquisition of such property by the Company or its
subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates of
officers of the Company or its subsidiaries, provided that such
counsel shall state that he believes that both you and he are
justified in relying upon such opinions, abstracts, reports,
policies and certificates).
In addition, such counsel shall state that the Registration Statement and
the Prospectus and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial statements and
related notes and schedules and other financial data included therein, as to
which such counsel need express no opinion) as of their respective effective or
issue dates, appear on their face to be responsive as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; no facts have come to his attention to cause him to believe that, as
of its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related notes and schedules and other financial data
included therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data included
therein, as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading or that, as of such Time of Delivery, the Prospectus or any
further amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules and other
financial data included therein, as to which such counsel need express no
opinion) contains
<PAGE>
an untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(d) Fried, Frank, Harris, Shriver & Jacobson, special counsel for the
Company, shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(b) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Delaware, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectus;
(ii) The issue and sale of the Shares being delivered
at such Time of Delivery to be sold by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject and which
has been identified to such counsel in a certificate provided by
the Vice President and General Counsel of the Company, as
material to the Company and its subsidiaries, taken as a whole,
nor will such action result in any violation of the provisions of
the Restated Certificate of Incorporation or By-laws of the
Company or any statute or any rule or regulation known to such
counsel, or any order identified to such counsel after due
inquiry, of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(iii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the consummation by
the Company of the transactions contemplated by this Agreement or
the International Underwriting Agreement, except for the filing
by the Company with the Secretary of State of Delaware of the
Company's Restated Certificate of Incorporation, the registration
under the Act of the Shares and the registration of the Stock
under the Exchange Act, each of which has been made or obtained,
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters;
(iv) The Company has an authorized capitalization as
set forth in the Prospectus under the caption "Capitalization",
and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and are fully paid and non-
assessable (assuming, with respect to the
<PAGE>
Shares being issued upon the exercise of the Options, that
payment of the exercise price therefore is made to the Company as
provided in the Custody Agreement); and the Shares conform as to
legal matters to the description of the Stock contained in the
Prospectus;
(v) The statements set forth in the Prospectus under
the captions "Description of Credit Agreement"; "Shares Eligible
For Future Sale"; and "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to
therein, in each case fairly summarize such provisions in all
material respects; and
(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by
the Company.
In addition, such counsel shall state that the Registration Statement and
the Prospectus and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial statements and
related notes and schedules and other financial data included therein, as to
which such counsel need express no opinion) as of their respective effective or
issue dates, appear on their face to be responsive as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; no facts have come to their attention to cause them to believe that,
as of its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related notes or schedules and other financial data
included therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related notes or schedules and other financial data
included therein, as to which counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading or that, as of such Time of Delivery, the
Prospectus or any further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial statements and related
notes or schedules and other financial data included therein, as to which such
counsel need express no opinion) contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, the Federal law of the United States and the General Corporation Law
of the State of Delaware;
(e) Fried, Frank, Harris, Shriver & Jacobson, special counsel for each of
the FL Selling Stockholders (as defined below), shall have furnished to you
their written opinion (a draft of such opinion is attached as Annex II(c)
hereto), with respect to each of Gulfstream Partners, Gulfstream Partners II,
L.P. and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV, each of which is a Selling Stockholder (the "FL Selling
Stockholders"), dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
<PAGE>
(i) A Power of Attorney and a Custody Agreement have
been duly executed and delivered by such FL Selling Stockholder
and constitute valid and binding agreements of such FL Selling
Stockholder in accordance with their terms, subject as to
enforcement to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar
laws affecting creditors' rights generally and (ii) general
principles of equity (whether considered in a proceeding at law
or in equity);
(ii) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by or on behalf
of such FL Selling Stockholder; and the sale of the Shares to be
sold by such FL Selling Stockholder hereunder and thereunder and
the compliance by such FL Selling Stockholder with all of the
provisions of this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and
the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any terms or provisions of, or constitute a default
under, any statute of the State of New York or the United States
of America, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument identified after due
inquiry to such counsel to which such FL Selling Stockholder is a
party or by which such FL Selling Stockholder is bound or to
which any of the property or assets of such FL Selling
Stockholder is subject, or the Partnership Agreement of such FL
Selling Stockholder, or any order, rule or regulation identified
after due inquiry to such counsel of any court or governmental
agency or body of the State of New York or the United States of
America having jurisdiction over such FL Selling Stockholder or
the property of such FL Selling Stockholder;
(iii) No consent, approval, authorization or order of
any court or governmental agency or body of the State of New York
or the United States of America is required for the consummation
of the transactions contemplated by this Agreement and the
International Underwriting Agreement in connection with the
Shares to be sold by such FL Selling Stockholder hereunder and
thereunder, except for the filing by the Company with the
Secretary of State of Delaware of the Company's Restated
Certificate of Incorporation, the registration under the Act of
the Shares and the registration of the Stock under the Exchange
Act, each of which has been made or obtained, and such
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters and the
International Underwriters; and
(iv) Assuming that the Underwriters and the
International Underwriters have taken physical delivery and
possession of the Shares to be sold to the Underwriters and the
International Underwriters by the FL Selling Stockholders at such
Time of Delivery in good faith and without notice of any adverse
claim as such term is used in Section 8-302 of the Uniform
Commercial Code in effect in the
<PAGE>
State of New York, upon delivery of such Shares in registered
form issued to the Underwriters and the International
Underwriters and payment for such Shares as contemplated in this
Agreement and the International Underwriting Agreement, the
Underwriters and the International Underwriters will acquire such
Shares free and clear of all security interests, liens,
encumbrances, equities or other adverse claims;
[TBD].
(g) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Deloitte & Touche LLP shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance satisfactory
to you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration Statement
and as of each Time of Delivery is attached as Annex I(b) hereto);
(h)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development that may reasonably be expected
to involve a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in your judgment so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated by the Prospectus;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the Exchange; (ii) a suspension or material limitation in trading
in the Company's securities on the Exchange; (iii) a general moratorium on
commercial banking activities declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iv) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated by the Prospectus;
(j) The Shares to be sold by the Company and the Selling Stockholders
at such Time of Delivery shall have been duly listed, subject to notice of
issuance, on the Exchange;
(k) The Company shall have complied with the provisions of subsection
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
<PAGE>
(l) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and of the Selling Stockholders, respectively, satisfactory to
you as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (h) of this
Section, and as to such other matters as you may reasonably request;
(m) The Company has obtained and delivered to you executed copies of
an agreement from each of the members of the Company's Board of Directors (other
than such members who are Selling Stockholders) substantially to the effect set
forth in Subsection 1(b)(iv) hereof in form and substance reasonably
satisfactory to you; and
(n) The Recapitalization as described in the Prospectus shall have
been consummated in accordance with applicable law; and the Company shall have
entered into the Credit Agreement described in the Prospectus on terms
substantially as described in the Prospectus.
8.(a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through you expressly for use therein; and provided,
further, that the Company shall not be liable to any Underwriter under the
indemnity agreement in this subsection (a) with respect to any Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact that such Underwriter sold Shares to a person
as to whom it shall be established that there was not sent or given, at or prior
to the written confirmation of such sale, a copy of the Prospectus or of the
Prospectus as then amended or supplemented in any case where such delivery is
required by the Act if the Company has previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was identified in writing at
such time to such Underwriter and corrected in the Prospectus or in the
Prospectus as then amended or supplemented.
<PAGE>
(b) Each of the FL Selling Stockholders, severally in proportion to the
number of Shares to be sold by such FL Selling Stockholder hereunder, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the FL
Selling Stockholders shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through you expressly
for use therein; and provided, further, that the FL Selling Stockholders shall
not be liable to any Underwriter under the indemnity agreement in this
subsection (b) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company or the Selling Stockholders have previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was identified in writing at
such time to such Underwriter and corrected in the Prospectus or in the
Prospectus as then amended or supplemented. Notwithstanding the provisions of
this subsection (b), no FL Selling Stockholder shall be required to pay an
amount in excess of the gross proceeds received by such FL Selling Stockholder
from the Shares sold by it hereunder.
(c) Each of the Selling Stockholders, severally in proportion to the
number of Shares to be sold by such Selling Stockholder hereunder, will
indemnify and hold harmless the Company and each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Selling Stockholder expressly for
use therein, and provided, further, that the Selling Stockholders shall not be
<PAGE>
liable to any Underwriter under the indemnity agreement in this subsection (c)
with respect to any Preliminary Prospectus to the extent that any such loss,
claim, damage or liability of such Underwriter results from the fact that such
Underwriter sold Shares to a person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company or the Selling Stockholders have previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was identified in writing at
such time to such Underwriter and corrected in the Prospectus or in the
Prospectus as then amended or supplemented. Notwithstanding the provisions of
this subsection (c), no Selling Stockholder shall be required to pay an amount
in excess of the gross proceeds received by such Selling Stockholder from the
Shares sold by it hereunder.
(d) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will reimburse the
Company and each Selling Stockholder for any legal or other expenses reasonably
incurred by the Company and such Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(e) Promptly after receipt by an indemnified party under subsection (a),
(b), (c) or (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under each subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under such subsection. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
(f) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b), (c) or (d) above in respect of
<PAGE>
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (e) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Shares purchased under this Agreement (before deducting expenses)
received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholders and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (f) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (f). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (f) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (f), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling
Stockholder shall be required to contribute, in the aggregate, any amount in
excess of the gross proceeds received by such Selling Stockholder from the
Shares sold by it hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective
<PAGE>
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to become
a director of the Company) to each partner of any Selling Stockholder that is a
partnership and to each person, if any, who controls the Company or any Selling
Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholders to sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements
<PAGE>
in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter
from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, or any partners of any Selling Stockholder that is a
partnership, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; PROVIDED,
HOWEVER, that any notice to an Underwriter pursuant to Section 8(e) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company, each partner of any Selling Stockholder that is a partnership and each
person who controls the Company, any
<PAGE>
Selling Stockholder or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us 7 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Stockholders. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Gulfstream Aerospace Corporation
By:
---------------------------
Name:
Title:
Selling Stockholders
By:
---------------------------
Name:
Title:
As Attorney-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule II
to this Agreement.
Accepted as of the date hereof
New York, New York
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
By:
--------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
Goldman, Sachs & Co. . . . . . . . . .
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. . . . .
Morgan Stanley & Co. Incorporated . .
[NAMES OF OTHER UNDERWRITERS]. . . . .
Total. . . . . . . . .
<PAGE>
SCHEDULE II NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
The Company. . . . . . . . . . . . . .
The Selling Stockholders(a): . . . . .
[NAME OF SELLING STOCKHOLDER] . .
[NAME OF SELLING STOCKHOLDER] . .
[NAME OF SELLING STOCKHOLDER] . .
[NAME OF SELLING STOCKHOLDER] . .
[NAME OF SELLING STOCKHOLDER] . .
Total . . . . . . . . . . . . . .
(a) The Selling Stockholders are represented by [NAME AND ADDRESS OF
COUNSEL] and have appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for each of them.
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
-------------------------
....................., 1996
Goldman Sachs International,
Merrill Lynch International,
Morgan, Stanley & Co. International
As representative of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Gulfstream Aerospace Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ............. shares of Common Stock, par value $.01 per share ("Stock"), of
the Company, and the stockholders of the Company named in Schedule II hereto
(the "Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of ............ shares and, at
the election of the Underwriters, up to ................. additional shares of
Stock. The aggregate of ................ shares to be sold by the Company
and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of ................ additional shares to be sold by the Selling
Stockholders is herein called the "Optional Shares". The Firm Shares and the
Optional Shares which the Underwriters elect to purchase pursuant to Section 2
hereof are herein collectively called, the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
sale by the Company and the Selling Stockholders of up to a total of ....shares
of Stock (the "U.S. Shares"), including the overallotment option thereunder,
through arrangements with certain underwriters in the United States (the "U.S.
Underwriters"), for whom Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Morgan Stanley & Co. Incorporated are acting as
representatives. Anything herein or therein to the contrary notwithstanding,
the respective closings under this Agreement and the U.S. Underwriting Agreement
are hereby expressly made conditional on one another. The Underwriters
hereunder and the U.S. Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting
<PAGE>
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates and for
consultation by Goldman Sachs International, Merrill Lynch International
and Morgan, Stanley & Co. International, the Lead Managers hereunder, with
Goldman, Sachs & Co. prior to exercising the rights of the Underwriters under
Section 7 hereof. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the U.S. Shares. The latter
form of prospectus will be identical to the former except for certain substitute
pages. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as
context may otherwise require, references hereinafter to the Shares shall
include all of the shares of Stock which may be sold pursuant to either this
Agreement or the U.S. Underwriting Agreement, and references herein to any
prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied MUTATIS MUTANDIS as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Stockholders hereby make
to the Underwriters the same respective representations, warranties and
agreements as are set forth in Section 1 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not
jointly, to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and each of
the Selling Stockholders, at a purchase price per share of $............, the
number of Firm Shares (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying the aggregate number of Firm Shares to be
sold by the Company and each of the Selling Stockholders as set forth
opposite their respective names in Schedule II hereto by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased by
such Underwriter as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the aggregate number of
Firm Shares to be purchased by all the Underwriters from the Company and all
the Selling Stockholders hereunder and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional Shares
as provided below, each of the Selling Stockholders agree, severally and not
jointly, to sell to each of the Underwriters, and each of the Underwriters
agree, severally and not jointly, to purchase from each of the Selling
Stockholders, at the purchase price per share set forth in clause (a) of this
Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such
<PAGE>
number of Optional Shares by a fraction the numerator of which is the maximum
number of Optional Shares which such Underwriter is entitled to purchase as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the
right to purchase at their election up to ..................... Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares.
Any such election to purchase Optional Shares shall be made in proportion to
the maximum number of Optional Shares to be sold by each Selling Stockholder
as set forth in Schedule II hereto. Any such election to purchase Optional
Shares may be exercised only by written notice from you to the
Attorneys-in-Fact, given within a period of 30 calendar days after the date
of this Agreement and setting forth the aggregate number of Optional Shares
to be purchased and the date on which such Optional Shares are to be
delivered, as determined by you but in no event earlier than the First Time
of Delivery (as defined in Section 4 hereof) or, unless you and the
Attorneys-in-Fact otherwise agree in writing, earlier than two or later than
ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to
and with the Company and the Selling Stockholders the representations and
agreements of such Underwriter as a member of the selling group contained in
Sections 3(d) and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company and the Selling Stockholders shall be
delivered by or on behalf of the Company and the Selling Stockholders to
Goldman, Sachs & Co., for the account of such Underwriter, against payment
by or on behalf of such Underwriter of the purchase price therefor by
certified or official bank check or checks, payable to the order of the
Company and the Custodian in New York Clearing House (next day) Co. funds.
The Company will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office
of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the
"Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1996 on such other time and date as Goldman, Sachs & Co.,
the Company and the Selling Stockholders may agree upon in writing, and,
with respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman,
Sachs & Co. of the Underwriters' election to purchase such Optional Shares,
or such other time and date as Goldman, Sachs & Co. and the
Attorneys-in-Fact may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery",
such time and date for delivery of the Optional Shares, if not the First
Time of Delivery, is herein
<PAGE>
called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross-receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(l) of the
U.S. Underwriting Agreement, will be delivered at the offices of Sullivan
& Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing
Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., New York City time, on the New York Business Day
next preceding each Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. "New York Business Day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company hereby makes with the Underwriters the same agreements as
are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company, and the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of their
respective obligations hereunder theretofore to be performed, and additional
conditions identical to those set forth in Section 7 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through you expressly for use therein; and provided,
further, that the Company shall not be liable to any Underwriter under the
indemnity agreement in this
<PAGE>
subsection (a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company has previously furnished copies thereof in sufficient quantity to such
Underwriter and the loss, claim, damage or liability of such Underwriter results
from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was identified in writing at such time to such
Underwriter and corrected in the Prospectus or in the Prospectus as then amended
or supplemented.
(b) Each of the FL Selling Stockholders, severally in proportion to
the number of Shares to be sold by such FL Selling Stockholder hereunder, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the FL
Selling Stockholders shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through you expressly
for use therein; and provided, further, that the FL Selling Stockholders shall
not be liable to any Underwriter under the indemnity agreement in this
subsection (b) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company or the Selling Stockholders have previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was identified in writing at
such time to such Underwriter and corrected in the Prospectus or in the
Prospectus as then amended or supplemented. Notwithstanding the provisions of
this subsection (b), no FL Selling Stockholder shall be required to pay an
amount in excess of the gross proceeds received by such FL Selling Stockholder
from the Shares sold by it hereunder.
(c) Each of the Selling Stockholders, severally in proportion to the
number of Shares to be sold by such Selling Stockholder hereunder, will
indemnify and hold harmless the Company and each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material
<PAGE>
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon an omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Selling Stockholder expressly for use therein, and provided,
further, that the Selling Stockholders shall not be liable to any Underwriter
under the indemnity agreement in this subsection (c) with respect to any
Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such Underwriter results from the fact that such Underwriter sold
Shares to a person as to whom it shall be established that there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus or of the Prospectus as then amended or supplemented in any case
where such delivery is required by the Act if the Company or the Selling
Stockholders have previously furnished copies thereof in sufficient quantity to
such Underwriter and the loss, claim, damage or liability of such Underwriter
results from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was identified in writing at such time to such
Underwriter and corrected in the Prospectus or in the Prospectus as then amended
or supplemented. Notwithstanding the provisions of this subsection (c), no
Selling Stockholder shall be required to pay an amount in excess of the gross
proceeds received by such Selling Stockholder from the Shares sold by it
hereunder.
(d) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through you expressly for use
therein; and will reimburse the Company and each Selling Stockholder for any
legal or other expenses reasonably incurred by the Company and such Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(e) Promptly after receipt by an indemnified party under
subsection (a), (b), (c) or (d) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under each subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party other than under such subsection. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to
<PAGE>
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation.
(f) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b), (c) or (d) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (e) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (f) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (f). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (f) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no Selling Stockholder shall be required to
contribute, in the aggregate, any
<PAGE>
amount in excess of the gross proceeds received by such Selling Stockholder from
the Shares sold by it hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in the Registration Statement as about to become a director of the
Company) to each partner of any Selling Stockholder that is a partnership and to
each person, if any, who controls the Company or any Selling Stockholder within
the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains
<PAGE>
unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be
purchased at such Time of Delivery, or if the Company and the Selling
Stockholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Company and the Selling Stockholders to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholders, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any of the Selling Stockholders, or any officer
or director or controlling person of the Company or any controlling person of
any Selling Stockholders, and any partner of any Selling Stockholder that is a
partnership shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number of
Shares to be sold by the Company and such Selling Stockholder hereunder) will
reimburse the Underwriters through GSI for all out-of-pocket expenses approved
in writing by GSI, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to
<PAGE>
Section 8(e) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by GSI upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company, each partner of any Selling Stockholder that is a partnership and each
person who controls the Company, any Selling Stockholder or any Underwriter, and
their respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us 7 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Stockholders. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (International Version), the
form of which shall be furnished to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Gulfstream Aerospace Corporation
By:
-----------------------------
Name:
Title:
Selling Stockholders
By:
-----------------------------
Name:
<PAGE>
Title:
As Attorney-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule II
to this Agreement.
Accepted as of the date hereof [AT.....,
- ---------------------------------------]
Goldman Sachs International
Merrill Lynch International
Morgan, Stanley & Co. International
By: Goldman Sachs International
By: -----------------------------------
(Attorney-in-fact)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- -----------
Goldman, Sachs & Co.
Merrill Lynch International
Morgan, Stanley & Co. International
[Names of other Managers]
Total
<PAGE>
SCHEDULE II
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
The Company.
The Selling Stockholder(s)(a):
Total
(a) The Selling Stockholders are represented by [NAME AND ADDRESS OF
COUNSEL] and have appointed [NAMES OF ATTORNEYS-IN-FACT], and
each of them, as the Attorneys-in-Fact for such Selling Stockholders.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
GULFSTREAM AEROSPACE CORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
The undersigned, Chris A. Davis, certifies that she is the
Executive Vice President, Chief Financial Officer and Secretary of Gulfstream
Aerospace Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), and does hereby further certify as
follows:
(1) The name of the Corporation is Gulfstream Aerospace
Corporation. The name under which the Corporation was originally
incorporated was Gulfstream Holdings Corp.
(2) The Corporation's original certificate of incorporation was
filed with the Secretary of State of the State of Delaware on February 14,
1990.
(3) Certificates of Amendment of the Certificate of Incorporation
were filed with the Secretary of State of the State of Delaware on March 14,
1990 and September 18, 1990. An Amended and Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware
on January 28, 1992, and a Certificate of Amendment of the Amended and
Restated Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on November 30, 1993.
(4) This Restated Certificate of Incorporation, which restates,
integrates and further amends the certificate of incorporation of the
Corporation, was duly adopted by unanimous stockholder written consent in
accordance with Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware (the "GCL").
(5) Pursuant to Section 103(d) of the GCL, this Restated
Certificate of Incorporation shall become effective at 8:00 a.m. on
[_________________], 1996 (the "Effective Time").
(6) The text of the Amended and Restated Certificate of
Incorporation of the Corporation as further amended hereby is restated to
read in its entirety as follows:
FIRST: The name of the Corporation is Gulfstream Aerospace
Corporation (the "Corporation").
<PAGE>
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the GCL.
FOURTH: The total number of all shares of all classes of capital
stock which the Corporation shall have the authority to issue is 320,000,000
divided into two classes of which 300,000,000 shares of par value $.01 per
share shall be designated Common Stock, and 20,000,000 shares of par value
$.01 per share shall be designated Preferred Stock. At the Effective Time,
the terms of the Series A-1 Common Stock shall be amended pursuant to this
Restated Certificate of Incorporation and the Series A-1 Common Stock shall
be redesignated as Common Stock, and each issued share of such Common Stock
shall be subdivided into 1.5 shares of Common Stock, with a par value of $.01
per share.
A. Common Stock
1. DIVIDENDS. Subject to the preferential rights, if any,
of the Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors, out of
the assets of the Corporation which are by law available therefor, dividends
payable either in cash, in property, or in shares of Common Stock.
2. VOTING RIGHTS. Except as otherwise required by law, at
every annual or special meeting of stockholders of the Corporation, every
holder of Common Stock shall be entitled to one vote, in person or by proxy,
for each share of Common Stock standing in such holder's name on the books of
the Corporation.
3. LIQUIDATION, DISSOLUTION, OR WINDING UP. In the event of
any voluntary or involuntary liquidation, dissolution, or winding up of the
affairs of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation and of the preferential
amounts, if any, to which the holders of Preferred Stock shall be entitled,
the holders of all outstanding shares of Common Stock shall be entitled to
share ratably in the remaining net assets of the Corporation.
B. Preferred Stock
1. ISSUANCE. The Board of Directors of the Corporation is
authorized, subject to limitations prescribed by law, to provide for the
issuance of shares of the Preferred Stock of the Corporation from time to
time in one or more series, each of
-2-
<PAGE>
which series shall have such distinctive designation or title as shall be
fixed by the Board of Directors prior to the issuance of any shares thereof.
Each such series of Preferred Stock shall have such voting powers, full or
limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such series of Preferred Stock as may
be adopted from time to time by the Board of Directors prior to the issuance
of any shares thereof pursuant to the authority hereby expressly vested in
it, all in accordance with the laws of the State of Delaware.
2. AMENDMENT. Except as may otherwise be required by law or
this Restated Certificate of Incorporation, the terms of any series of
Preferred Stock may be amended without consent of the holders of any other
series of Preferred Stock or of any class of Common Stock of the Corporation.
FIFTH: The business and affairs of the Corporation shall be
managed by and under the direction of the Board of Directors. The Board of
Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or this Restated
Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
A. NUMBER OF DIRECTORS. Except as otherwise fixed by or pursuant
to the provisions of this Restated Certificate of Incorporation relating to
the rights of the holders of Preferred Stock to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted
by a majority of the then authorized number of directors of the Corporation,
but in no event shall the number of directors be fewer than three. No
director need be a stockholder.
B. CLASSES AND TERMS OF DIRECTORS. The directors shall be
divided into three classes (I, II and III), as nearly equal in number as
possible, and no class shall include less than one director. The term of
office for members of Class I shall expire at the annual meeting of
stockholders in 1997; the initial term of office for members of Class II
shall expire at the annual meeting of stockholders in 1998; and the initial
term of office for members of Class III shall expire at the annual meeting of
stockholders in 1999. At each annual meeting of stockholders beginning in
1997, directors elected to succeed those directors whose terms expire shall
be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election, and shall continue to hold
office until their respective successors are elected and qualified. In the
event of any increase in the number of directors fixed by the Board of
Directors, the additional directors shall be so classified that all classes
of directors have as nearly equal numbers of directors as may be possible.
In the event of any decrease in the number of directors, all
-3-
<PAGE>
classes of directors shall be decreased equally as nearly as may be possible,
but in no case will a decrease in the number of directors shorten the term of
any incumbent director.
C. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES. Subject to the
rights of the holders of any series of Preferred Stock then outstanding,
newly created directorships resulting from any increase in the number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or any other
cause shall be filled only by a majority of the directors then in office,
even if less than a quorum is then in office, or by the sole remaining
director, and shall not be filled by stockholders. Directors elected to fill
a newly created directorship or other vacancies shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor has been elected and has qualified.
D. REMOVAL OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock then outstanding, the directors or any director
may be removed from office at any time, but only for cause, at a meeting
called for that purpose, and only by the affirmative vote of the holders of
at least a majority of the voting power of all issued and outstanding shares
of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
E. RIGHTS OF HOLDERS OF PREFERRED STOCK. Notwithstanding the
foregoing provisions of this Article FIFTH, whenever the holders of any one
or more series of Preferred Stock issued by the Corporation shall have the
right, voting separately by series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
rights and preferences of such Preferred Stock as set forth in this Restated
Certificate of Incorporation or in the resolution or resolutions of the Board
of Directors relating to the issuance of such Preferred Stock, and such
directors so elected shall not be divided into classes pursuant to this
Article FIFTH unless expressly provided by such rights and preferences.
F. WRITTEN BALLOT NOT REQUIRED. Elections of directors need not
be by written ballot unless the Bylaws of the Corporation shall otherwise
provide.
SIXTH: To the fullest extent permitted under the law of the State
of Delaware, including the GCL, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for damages for any
breach of fiduciary duty as a director. No amendment to or repeal of this
Article SIXTH shall apply to or have any effect on the liability or alleged
liability of any director or the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment or repeal.
In the event that the GCL is hereafter amended to permit further elimination or
-4-
<PAGE>
limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be so eliminated or limited to the fullest
extent permitted by the GCL as so amended without further action by either
the Board or Directors or the stockholders of the Corporation.
SEVENTH: Each person who was or is made a party or is threatened
to be made a party to or is involved (including, without limitation, as a
witness) in any threatened, pending or completed action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative
hearing or any other proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), by reason of the fact that such person (the
"Indemnitee") is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, whether the basis
of such Proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving as such a director or officer,
shall be indemnified and held harmless by the Corporation to the full extent
permitted by law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), or by other
applicable law as then in effect, against all expense, liability, losses and
claims (including attorneys' fees, judgments, fines, excise taxes under the
Employee Retirement Income Security Act of 1974, as amended from time to
time, penalties and amounts to be paid in settlement) actually incurred or
suffered by such Indemnitee in connection with such Proceeding.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to
adopt, repeal, alter, amend or rescind the Bylaws of the Corporation. In
addition, the Bylaws of the Corporation may be adopted, repealed, altered,
amended or rescinded by the affirmative vote of the holders of at least a
majority of the voting power of all of the issued and outstanding shares of
capital stock of the Corporation entitled to vote thereon.
NINTH: The Corporation reserves the right to repeal, alter, amend
or rescind any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this
reservation.
-5-
<PAGE>
IN WITNESS WHEREOF, Gulfstream Aerospace Corporation has caused
this Restated Certificate of Incorporation to be signed by Chris A. Davis,
its Executive Vice President, Chief Financial Officer and Secretary, on this
__ day of _____, 1996.
GULFSTREAM AEROSPACE CORPORATION
By:
-------------------------------
Chris A. Davis
Executive Vice President, Chief
Financial Officer and Secretary
-6-
<PAGE>
RESTATED BY-LAWS
OF
GULFSTREAM AEROSPACE CORPORATION
(hereinafter called the "Corporation")
(As of __________, 1996)
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
Section 2. OTHER OFFICES. The Corporation may also have an office
or offices other than said registered office at such place or places, either
within or without the State of Delaware, as the Board of Directors shall from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at any such
time and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver thereof. At such annual meetings, the stockholders shall elect
by a plurality vote a Board of Directors, and transact such other business as
may properly be brought before the meeting in accordance with these Restated By-
Laws.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
for any purpose or purposes, unless otherwise prescribed by statute may be
called by the Board of Directors, the Chairman of the Board of Directors, if one
shall have been elected, or the President and shall be called by the Secretary
upon the request in writing of a stockholder
<PAGE>
or stockholders holding of record at least a majority of the voting power of the
issued and outstanding shares of capital stock of the Corporation entitled to
vote at such meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly
required by statute, written notice of each annual and special meeting of
stockholders stating the date, place and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given to each stockholder of record entitled to vote thereat not less
than ten nor more than sixty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice. Notice shall be given personally or by mail and,
if by mail, shall be sent in a postage prepaid envelope, addressed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid. Notice of any
meeting shall not be required to be given to any person who attends such
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
SECTION 5. ORGANIZATION. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, or, in such person's
absence or if one shall not have been elected, the President, shall act as
chairman of the meeting. The Secretary or, in such person's absence or
inability to act, the person whom the chairman of the meeting shall appoint
secretary of the meeting, shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 6. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seems to him or her in order. The date and time of the opening
and closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting.
SECTION 7. QUORUM, ADJOURNMENTS. The holders of a majority of the
voting power of the issued and outstanding shares of capital stock of the
Corporation entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at all meetings of
stockholders, except as otherwise provided by statute or by the Restated
Certificate of Incorporation. If, however, such quorum shall not be present or
represented by proxy at any meeting of stockholders, the stockholders entitled
to vote thereat, present in person or represented by
-2-
<PAGE>
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented by proxy. At such adjourned meeting at which a quorum shall be
present or represented by proxy, any business may be transacted which might have
been transacted at the meeting as originally called. If the adjournment is for
more than thirty days, or, if after adjournment a new record date is set, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 8. VOTING. Except as otherwise provided by statute or the
Restated Certificate of Incorporation and these Restated By-Laws, each
stockholder of the Corporation shall be entitled at each meeting of stockholders
to one vote for each share of capital stock of the Corporation standing in such
stockholder's name on the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these Restated By-Laws as the record date for the
determination of the stockholders who shall be entitled to notice of
and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the
close of business on the day next preceding the day on which notice
thereof shall be given, or, if notice is waived, at the close of
business on the date next preceding the day on which the meeting is
held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for such stockholder by a proxy signed by such
stockholder or such stockholder's attorney-in-fact, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
Any such proxy shall be delivered to the secretary of the meeting at or prior to
the time designated in the order of business for so delivering such proxies.
When a quorum is present at any meeting, the affirmative vote of the holders of
a majority of the voting power of the issued and outstanding stock of the
Corporation entitled to vote thereon, present in person or represented by proxy,
shall decide any question brought before such meeting, unless the question is
one upon which by express provision of statute or of the Restated Certificate of
Incorporation or of these Restated By-Laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question. Unless required by statute, or determined by the chairman of the
meeting to be advisable, the vote on any question need not be by ballot. On a
vote by ballot, each ballot shall be signed by the stockholder voting, or by
such stockholder's proxy, if there be such proxy.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. At least ten
days before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the
-3-
<PAGE>
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder
shall be prepared. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city, town, or village where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
SECTION 10. INSPECTORS. The Board of Directors shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting shall, or if inspectors shall
not have been appointed, the chairman of the meeting may appoint one or more
inspectors. Each inspector, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. The inspectors shall determine the number of
shares of capital stock of the Corporation outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting, the inspectors shall make a report in writing of any challenge, request
or matter determined by them and shall execute a certificate of any fact found
by them. No director or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be stockholders.
SECTION 11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided by statute or in the Restated Certificate of Incorporation,
any action required to be taken or which may be taken at any annual or special
meeting of the stockholders of the Corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of any such corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
SECTION 12. ADVANCE NOTICE PROVISIONS FOR ELECTION OF DIRECTORS.
Only persons who are nominated in accordance with the following procedures shall
be eligible
-4-
<PAGE>
for election as directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 12 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 12.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than 60 days nor more
than 90 days prior to the date of the annual meeting; PROVIDED, HOWEVER, that in
the event that less than 70 days' notice or prior public disclosure of the date
of the annual meeting is given or made to stockholders, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the 10th day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the 10th day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the
-5-
<PAGE>
persons named in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to be named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 12. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
SECTION 13. ADVANCE NOTICE PROVISIONS FOR BUSINESS TO BE TRANSACTED
AT ANNUAL MEETING. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section 13 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 13.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the date of the
annual meeting; PROVIDED, HOWEVER, that in the event that less than 70 days'
notice or prior public disclosure of the date of the annual meeting is given or
made to stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record
-6-
<PAGE>
address of such stockholder, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
such stockholder, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 13, PROVIDED, HOWEVER, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 13 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. PLACE OF MEETINGS. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 2. ANNUAL MEETING. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such other time or place (within or without the State of Delaware) as
shall be specified in a notice thereof given as hereinafter provided in Section
5 of this Article III.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise be
held on that day shall be held at the same hour on the next succeeding business
day.
-7-
<PAGE>
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one shall have been
elected, or by two or more directors of the Corporation or by the President.
SECTION 5. NOTICE OF MEETINGS. Notice of regular meetings of the
Board of Directors need not be given except as otherwise required by law or
these Restated By-Laws. Notice of each special meeting of the Board of
Directors for which notice shall be required, shall be given by the Secretary as
hereinafter provided in this Section 5, in which notice shall be stated the time
and place of the meeting. Except as otherwise required by these By-Laws, such
notice need not state the purposes of such meeting. Notice of any special
meeting, and of any regular or annual meeting for which notice is required,
shall be given to each director at least (a) four hours before the meeting if by
telephone or by being personally delivered or sent by telex, telecopy, or
similar means or (b) two days before the meeting if delivered by mail to the
director's residence or usual place of business. Such notice shall be deemed to
be delivered when deposited in the United States mail so addressed, with postage
prepaid, or when transmitted if sent by telex, telecopy, or similar means.
Neither the business to be transacted at, nor the purpose of, any special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting. Any director may waive notice of any meeting by a
writing signed by the director entitled to the notice and filed with the minutes
or corporate records. The attendance at or participation of the director at a
meeting shall constitute waiver of notice of such meeting, unless the director
at the beginning of the meeting or promptly upon such director's arrival objects
to holding the meeting or transacting business at the meeting.
SECTION 6. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, if one shall have been elected, or, in the
absence of the Chairman of the Board or if one shall not have been elected, the
President (or, in the President's absence, another director chosen by a majority
of the directors present) shall act as chairman of the meeting and preside
thereat. The Secretary or, in such person's absence, any person appointed by
the chairman shall act as secretary of the meeting and keep the minutes thereof.
SECTION 7. QUORUM AND MANNER OF ACTING. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, and, except as otherwise expressly
required by statute or the Restated Certificate of Incorporation or these
Restated By-Laws, the affirmative vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum at any meeting of the Board of Directors,
a majority of the directors present thereat may adjourn such meeting to another
time and place. Notice of the time and place of any such adjourned meeting
shall be given to all of the directors unless such time and place were announced
-8-
<PAGE>
at the meeting at which the adjournment was taken, in which case such notice
need only be given to the directors who were not present thereat. 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. The
directors shall act only as a Board and the individual directors shall have no
power as such.
SECTION 8. ACTION BY CONSENT. Unless restricted by the Restated
Certificate of Incorporation, 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 such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
SECTION 9. TELEPHONIC MEETING. Unless restricted by the Restated
Certificate of Incorporation, 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 by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
SECTION 10. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence of disqualification of any member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
such members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Each such committee, to the extent provided in the resolution creating
it, shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which
require it; PROVIDED, HOWEVER, that no such committee shall have the power or
authority in reference to the following matters: (a) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (b) adopting, amending or repealing any by-law of the Corporation. Each such
committee shall serve at the pleasure of the Board of Directors and have such
name as may be determined from time to time by resolution adopted by
-9-
<PAGE>
the Board of Directors. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors.
SECTION 11. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 12. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice of such director's resignation to
the Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 13. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's or
persons' votes are counted for such purposes if (a) the material facts as to
such person's or persons' relationship or interest and as to the contract or
transaction are disclosed or are known to the directors or committee who then in
good faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum, or (b) the material facts as to such person's or persons'
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
-10-
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be
chosen by the Board of Directors and shall include a President, one or more Vice
Presidents (including Senior, Executive or other classifications of Vice
Presidents) and a Secretary. The Board of Directors, in its discretion, may
also choose as an officer of the Corporation a Chairman of the Board and a Vice
Chairman of the Board and may choose other officers (including a Treasurer, one
or more Assistant Secretaries and one or more Assistant Treasurers) as may be
necessary or desirable. Such officers as the Board of Directors may choose
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors. The Board of Directors may delegate
to any officer of the Corporation the power to choose such other officers and to
proscribe their respective duties and powers. Any number of offices may be held
by the same person, unless otherwise prohibited by law, the Restated Certificate
of Incorporation or these Restated By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman of the Board and Vice Chairman of the Board of Directors, need such
officers be directors of the Corporation.
SECTION 2. TERM. All officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
SECTION 3. RESIGNATIONS. Any officer of the Corporation may
resign at any time by giving written notice of such officer's resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon receipt. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to make it effective.
SECTION 4. REMOVAL. Any officer may be removed at any time by the
Board of Directors with or without cause.
SECTION 5. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that such officer is also a
director of the Corporation.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
one shall have been elected, shall be a member of the Board, an officer of the
Corporation
-11-
<PAGE>
and, if present, shall preside at each meeting of the Board of Directors or the
stockholders. The Chairman of the Board shall advise and counsel with the
President, and in the President's absence with other executives of the
Corporation, and shall perform such other duties as may from time to time be
assigned to the Chairman of the Board by the Board of Directors.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or a Vice Chairman of the Board
or the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restriction of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on
a certificate may be a facsimile engraved or printed. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person was such officer, transfer
agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or the owner's legal
-12-
<PAGE>
representative, to give the Corporation a bond in such sum as it may direct
sufficient to indemnify it against any claim that may be made against the
Corporation on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its records; PROVIDED, HOWEVER, that the Corporation
shall be entitled to recognize and enforce any lawful restriction on transfer.
Whenever any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the Corporation for transfer, both the transferor
and the transferee request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
SECTION 6. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these Restated By-Laws,
as it may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares of stock on
-13-
<PAGE>
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. GENERAL. Each person who was or is made a party or is
threatened to be made a party to or is involved (including, without limitation,
as a witness) in any threatened, pending or completed action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal, administrative or
investigative ("Proceeding") brought by reason of the fact that such person (the
"Indemnitee") is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, whether the basis of
such Proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving as such a director or officer,
shall be indemnified and held harmless by the Corporation to the full extent
authorized by the General Corporation Law of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expenses,
liabilities, losses and claims (including attorneys' fees, judgments, fines,
excise taxes under the Employee Retirement Income Security Act of 1974, as
amended from time to time, penalties and amounts to be paid in settlement)
actually incurred or suffered by such Indemnitee in connection with such
Proceeding (collectively, "Losses").
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to or is
involved (including, without limitation, as a witness) in any Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person (also an "Indemnitee") is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, against Losses actually incurred or suffered by the
Indemnitee in connection with the defense or settlement of such action or suit
if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
provided that no indemnification shall be made in respect of any claim, issue or
matter as to which Delaware law expressly prohibits such indemnification by
reason of an adjudication
-14-
<PAGE>
of liability of the Indemnitee unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 3. INDEMNIFICATION IN CERTAIN CASES. Notwithstanding any
other provision of this Article VI, to the extent that an Indemnitee has been
wholly successful on the merits or otherwise in any Proceeding referred to in
Sections 1 or 2 of this Article VI on any claim, issue or matter therein, the
Indemnitee shall be indemnified against Losses actually incurred or suffered by
the Indemnitee in connection therewith. If the Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Corporation shall indemnify the Indemnitee, against Losses actually incurred
or suffered by the Indemnitee in connection with each successfully resolved
claim, issue or matter. In any review or Proceeding to determine such extent of
indemnification, the Corporation shall bear the burden of proving any lack of
success and which amounts sought in indemnity are allocable to claims, issues or
matters which were not successfully resolved. For purposes of this Section 3
and without limitation, the termination of any such claim, issue or matter by
dismissal with or without prejudice shall be deemed to be a successful
resolution as to such claim, issue or matter.
SECTION 4. PROCEDURE. (a) Any indemnification under Sections 1
and 2 of this Article VI (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the Indemnitee is proper (except that the right of the
Indemnitee to receive payments pursuant to Section 5 of this Article VI shall
not be subject to this Section 4) in the circumstances because the Indemnitee
has met the applicable standard of conduct. Such determination shall be made
promptly, but in no event later than 60 days after receipt by the Corporation of
the Indemnitee's written request for indemnification. The Secretary of the
Corporation shall, promptly upon receipt of the Indemnitee's request for
indemnification, advise the Board of Directors that the Indemnitee has made such
request for indemnification.
(b) The entitlement of the Indemnitee to indemnification shall be
determined in the specific case (1) by the Board of Directors by a majority vote
of the directors who are not parties to such Proceeding, even though less than a
quorum (the "Disinterested Directors"), or (2) if there are no Disinterested
Directors, or if such Disinterested Directors so direct, by independent legal
counsel, or (3) by the stockholders.
(c) In the event the determination of entitlement is to be made by
independent legal counsel, such independent legal counsel shall be selected by
the Board of Directors and approved by the Indemnitee. Upon failure of the
Board of Directors to
-15-
<PAGE>
so select such independent legal counsel or upon failure of the Indemnitee to so
approve, such independent legal counsel shall be selected by the American
Arbitration Association in New York, New York or such other person as such
Association shall designate to make such selection.
(d) If the Board of Directors or independent legal counsel shall have
determined that the Indemnitee is not entitled to indemnification to the full
extent of the Indemnitee's request, the Indemnitee shall have the right to seek
entitlement to indemnification in accordance with the procedures set forth in
Section 6 of this Article VI.
(e) If the person or persons empowered pursuant to Section 4(b) of
this Article VI to make a determination with respect to entitlement to
indemnification shall have failed to make the requested determination within 60
days after receipt by the Corporation of such request, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and the Indemnitee shall be absolutely entitled to such indemnification,
absent (i) misrepresentation by the Indemnitee of a material fact in the request
for indemnification or (ii) a final judicial determination that all or any part
of such indemnification is expressly prohibited by law.
(f) The termination of any proceeding by judgment, order, settlement
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not,
of itself, adversely affect the rights of the Indemnitee to indemnification
hereunder except as may be specifically provided herein, or create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or create a presumption that (with respect to any criminal
action or proceeding) the Indemnitee had reasonable cause to believe that the
Indemnitee's conduct was unlawful.
(g) For purposes of any determination of good faith hereunder, the
Indemnitee shall be deemed to have acted in good faith if the Indemnitee's
action is based on the records or books of account of the Corporation or an
affiliate, including financial statements, or on information supplied to the
Indemnitee by the officers of the Corporation or an affiliate in the course of
their duties, or on the advice of legal counsel for the Corporation or an
affiliate or on information or records given or reports made to the Corporation
or an affiliate by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care to the Corporation or an
affiliate. The Corporation shall have the burden of establishing the absence of
good faith. The provisions of this Section 4(g) of this Article VI shall not be
deemed to be exclusive or to limit in any way the other circumstances in which
the Indemnitee may be deemed to have met the applicable standard of conduct set
forth in these Restated By-Laws.
-16-
<PAGE>
(h) The knowledge and/or actions, or failure to act, of any other
director, officer, agent or employee of the Corporation or an affiliate shall
not be imputed to the Indemnitee for purposes of determining the right to
indemnification under these Restated By-Laws.
SECTION 5. ADVANCES FOR EXPENSES AND COSTS. All expenses
(including attorneys fees) incurred by or on behalf of the Indemnitee (or
reasonably expected by the Indemnitee to be incurred by the Indemnitee within
three months) in connection with any Proceeding shall be paid by the Corporation
in advance of the final disposition of such Proceeding within twenty days after
the receipt by the Corporation of a statement or statements from the Indemnitee
requesting from time to time such advance or advances whether or not a
determination to indemnify has been made under Section 4 of this Article VI.
The Indemnitee's entitlement to such advancement of expenses shall include those
incurred in connection with any Proceeding by the Indemnitee seeking an
adjudication or award in arbitration pursuant to these Restated By-Laws. The
financial ability of an Indemnitee to repay an advance shall not be a
prerequisite to the making of such advance. Such statement or statements shall
reasonably evidence such expenses incurred (or reasonably expected to be
incurred) by the Indemnitee in connection therewith and shall include or be
accompanied by a written undertaking by or on behalf of the Indemnitee to repay
such amount if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified therefor pursuant to the terms of this Article VI.
SECTION 6. REMEDIES IN CASES OF DETERMINATION NOT TO INDEMNIFY OR
TO ADVANCE EXPENSES. (a) In the event that (i) a determination is made that
the Indemnitee is not entitled to indemnification hereunder, (ii) advances are
not made pursuant to Section 5 of this Article VI or (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to Section 4 of this Article VI, the Indemnitee shall be entitled to seek a
final adjudication either through an arbitration proceeding or in an appropriate
court of the State of Delaware or any other court of competent jurisdiction of
the Indemnitee's entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance with the
procedures set forth in Section 4 of this Article VI, in whole or in part, that
the Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in paragraph (a) of this Section 6 shall be DE NOVO and
the Indemnitee shall not be prejudiced by reason of any such prior determination
that the Indemnitee is not entitled to indemnification, and the Corporation
shall bear the burdens of proof specified in Sections 3 and 4 of this Article VI
in such proceeding.
-17-
<PAGE>
(c) If a determination is made or deemed to have been made pursuant
to the terms of Sections 4 or 6 of this Article VI that the Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration in the absence of (i) a
misrepresentation of a material fact by the Indemnitee or (ii) a final judicial
determination that all or any part of such indemnification is expressly
prohibited by law.
(d) To the extent deemed appropriate by the court, interest shall be
paid by the Corporation to the Indemnitee at a reasonable interest rate for
amounts which the Corporation indemnifies or is obliged to indemnify the
Indemnitee for the period commencing with the date on which the Indemnitee
requested indemnification (or reimbursement or advancement of expenses) and
ending with the date on which such payment is made to the Indemnitee by the
Corporation.
SECTION 7. RIGHTS NON-EXCLUSIVE. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other Sections
of this Article VI shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
SECTION 8. INSURANCE. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article VI.
SECTION 9. DEFINITION OF CORPORATION. For purposes of this
Article VI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, shall stand in the same position under this Article VI with respect to the
resulting or surviving
-18-
<PAGE>
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
SECTION 10. OTHER DEFINITIONS. For purposes of this Article VI,
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VI.
SECTION 11. SURVIVAL OF RIGHTS. The indemnification and
advancement of expenses provided by, or granted pursuant to this Article VI
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person. No amendment, alteration, rescission or replacement of these Restated
By-Laws or any provision hereof shall be effective as to an Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
position with the Corporation or any other entity which the Indemnitee is or was
serving at the request of the Corporation prior to such amendment, alteration,
rescission or replacement.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The Corporation may, by action of the Board of Directors from time
to time, grant rights to indemnification and advancement of expenses to
employees and agents of the Corporation with the same scope and effect as the
provisions of this Article VI with respect to the indemnification of directors
and officers of the Corporation.
SECTION 13. SAVINGS CLAUSE. If this Article VI or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each person
entitled to indemnification under the first paragraph of this Article VI as to
all losses actually and reasonably incurred or suffered by such person and for
which indemnification is available to such person pursuant to this Article VI to
the full extent permitted by any applicable portion of this Article VI that
shall not have been invalidated and to the full extent permitted by applicable
law.
-19-
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the provisions of statute and
the Restated Certificate of Incorporation, dividends upon the shares of capital
stock of the Corporation may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash, in property or in
shares of stock of the Corporation, unless otherwise provided by statute or the
Restated Certificate of Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in such form
as shall be approved by the Board of Directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall
be fixed, and once fixed, may thereafter be changed, by resolution of the Board
of Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts
or other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless
otherwise provided by resolution of the Board of Directors, the Chairman of the
Board or the President, from time to time, may (or may appoint one or more
attorneys or agents to) cast the votes which the Corporation may be entitled to
cast as a shareholder or otherwise in any other corporation, any of whose shares
or securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of
-20-
<PAGE>
the Board or the President may instruct the person or persons so appointed as to
the manner of casting such votes or giving such consent. The Chairman of the
Board or the President may, or may instruct the attorneys or agents appointed
to, execute or cause to be executed in the name and on behalf of the Corporation
and under its seal or otherwise, such written proxies, consents, waivers or
other instruments as may be necessary or proper in the circumstances.
ARTICLE VIII
AMENDMENTS
These Restated By-Laws may be repealed, altered, altered, amended or
rescinded in whole or in part, or new By-Laws may be adopted by either the
affirmative vote of the holders of at least a majority of the voting power of
all of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereon or by the Board of Directors.
-21-
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
TABLE OF CONTENTS
ARTICLE I. THE PLAN
1.1 Background of Plan 1
1.2 Applicability of Plan 1
1.3 Purpose of Plan 2
ARTICLE II. DEFINITIONS
2.1 Accrued Benefit 3
2.2 Actuarial Equivalent 3
2.3 Affiliate 4
2.4 Annuity Starting Date 4
2.5 Beneficiary 4
2.6 Board 5
2.7 Code 5
2.8 Committee 5
2.9 Company 5
2.10 Disability 5
2.11 Earliest Retirement Age 5
2.12 Earnings 5
2.13 Eligible Employee 7
2.14 Employee 7
2.15 Employer 7
2.16 ERISA 7
2.17 Freeze Date 8
2.18 Highly Compensated Employee 8
2.19 Participant 10
2.20 Plan 10
2.21 Plan Administrator 10
2.22 Plan Year 10
2.23 Qualified Joint and Survivor Annuity 11
2.24 Retirement Age 11
i
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
TABLE OF CONTENTS
(Continued)
2.25 Retirement Date 11
2.26 Retirement Fund 13
2.27 Single Life Annuity 13
2.28 Super Highly Compensated Employee 13
2.29 Termination of Service 13
2.30 Trust Agreement 13
2.31 Trustee 13
2.32 Trust Fund 13
ARTICLE III. DETERMINATION OF ELIGIBILITY SERVICE
AND VESTING SERVICE
3.1 Hour of Service 14
3.2 Eligibility Service 17
3.3 Vesting Service 18
3.4 Severance from Service 21
3.5 One-Year Period of Severance 21
ARTICLE IV. ELIGIBILITY AND PARTICIPATION
4.1 Date of Participation 23
4.2 Reentry into the Plan Following a Break Year 23
ARTICLE V. AMOUNT OF RETIREMENT BENEFITS
5.1 Normal Retirement Benefits 24
5.2 Delayed Retirement Benefits 27
5.3 Early Retirement Benefits 28
5.4 Vested Retirement Benefits 30
5.5 Cost-of-Living Adjustments 31
5.6 Non-Duplication of Benefits 32
5.7 Maximum Annual Benefits 33
ii
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
TABLE OF CONTENTS
(Continued)
ARTICLE VI. DISTRIBUTION OF RETIREMENT BENEFITS
6.1 Normal Form of Pension for Unmarried Participants 35
6.2 Normal Form of Pension for Married Participants 35
6.3 Optional Methods of Payment 37
6.4 Restrictions on Distributions 40
6.5 Payment of Small Amounts 43
6.6 Withholding Taxes 44
ARTICLE VII. SUSPENSION OF BENEFITS UPON CERTAIN
EMPLOYMENT OR REEMPLOYMENT
7.1 Suspension of Benefits 45
7.2 Suspension of Benefits Notice Procedures 46
ARTICLE VIII. PRERETIREMENT DEATH BENEFITS
8.1 Preretirement Death Benefits 47
8.2 Amount and Commencement of Preretirement Death Benefit 47
8.3 Lump Sum Payments 49
ARTICLE IX. FINANCING
9.1 Financing 50
9.2 Contributions 50
9.3 Nonreversion 51
ARTICLE X. ADMINISTRATION
10.1 Committee 53
10.2 Compensation and Expenses 53
10.3 Manner of Action 53
10.4 Chairman, Secretary, and Specialists 53
iii
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
TABLE OF CONTENTS
(Continued)
10.5 Delegation of Duties 54
10.6 Records 54
10.7 Rules 54
10.8 Administration 54
10.9 Appeals from Denial of Claims 55
10.10 Notice of Address and Missing Persons 56
10.11 Data and Information for Benefits 57
10.12 Indemnity for Liability 57
10.13 Effect of a Mistake 57
10.14 Self Interest 58
ARTICLE XI. AMENDMENT AND TERMINATION
11.1 Amendment and Termination 59
11.2 Vesting and Distribution on Termination 60
11.3 Merger, Consolidation, or Transfer 60
ARTICLE XII. RESTRICTIONS ON BENEFITS
12.1 Restrictions Prior to May 14, 1990 61
12.2 Restrictions on Benefits 62
ARTICLE XIII. TOP-HEAVY PROVISIONS
13.1 Application of Top-Heavy Provisions 64
13.2 Definitions 64
13.3 Vesting Requirements 66
13.4 Minimum Benefit 67
13.5 Limit on Annual Additions; Combined Plan Limit 68
13.6 Collective Bargaining Agreements 69
iv
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
TABLE OF CONTENTS
(Continued)
ARTICLE XIV. PARTICIPATION IN AND WITHDRAWAL FROM THE
PLAN BY AN AFFILIATE
14.1 Participation in the Plan 70
14.2 Withdrawal from the Plan 71
ARTICLE XV. GENERAL PROVISIONS
15.1 Incompetency 72
15.2 Nonalienation of Benefits 72
15.3 No Guarantee of Employment 73
15.4 Applicable Law 73
15.5 Severability 73
APPENDIX A-1
v
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
PENSION PLAN
(Amended and Restated
as of January 1, 1989)
ARTICLE I. THE PLAN
1.1 BACKGROUND OF PLAN. Gulfstream Aerospace Corporation (Georgia)
presently maintains a defined benefit pension plan for its eligible Employees
known as the Gulfstream Aerospace Corporation Pension Plan (the "Plan"). The
Plan was established effective September 1, 1978, and was subsequently amended
several times, including its last restatement effective as of January 1, 1984.
Effective January 19, 1989, certain highly compensated employees ceased to
accrue additional benefits under the Plan until the Plan could be amended to
comply with certain requirements of the Tax Reform Act of 1986. This cessation
of benefit accruals was accomplished by following Alternative IID, as described
in Internal Revenue Service Notice 88-131.
The Plan is hereby amended and restated, effective as of January 1, 1989,
to comply with the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act
of 1986, the Technical and Miscellaneous Revenue Act of 1988, and other recent
regulatory and legislative changes. Benefit accruals under the Plan shall
resume for the highly compensated employees described in Alternative IID, to the
extent provided in section 5.1.
1.2 APPLICABILITY OF PLAN. The provisions of this restated Plan are
generally applicable only to Employees who are employed by an Employer on or
after January 1, 1989. Except as otherwise provided in a retroactively
effective provision of this
1
<PAGE>
restatement, any person who was covered by the Plan as in effect before January
1, 1989, and who had a Termination of Service before January 1, 1989, shall
continue to be entitled to the retirement benefits (if any) provided under the
Plan as in effect on his or her Termination of Service.
1.3 PURPOSE OF PLAN. The purpose of the Plan is to provide for a
portion of the livelihood of Eligible Employees in their retirement. The Plan
is intended to meet the requirements of section 401(a) of the Internal Revenue
Code of 1986.
2
<PAGE>
ARTICLE II. DEFINITIONS
Whenever used in the plan, the following terms shall have the meanings set
forth below unless otherwise expressly provided. When the defined meaning is
intended, the term is capitalized. The definition of any term in the singular
shall also include the plural, whichever is appropriate in the context.
2.1 "ACCRUED BENEFIT" means, as of any given date, the monthly
retirement benefit a Participant would receive at his or her Normal Retirement
Date or Delayed Retirement Date (as applicable) based on Earnings received prior
to the given date.
2.2 "ACTUARIAL EQUIVALENT" means a benefit having the same value as the
benefit it replaces, as determined on the basis of the actuarial assumptions in
use under the Plan on the date when the determination is made.
(a) IN GENERAL. Such benefit shall be determined in accordance
with the actuarial factors described in either Appendix A to
the Plan or some other specific reference in the Plan. To
the extent that no such specific factors are described in
the Plan, the benefit shall be computed based on--
(1) the 1984 Unisex Pension Mortality Table set forward one
year; and
(2) the interest rate used by the Pension Benefit Guaranty
Corporation (as of the first day of the Plan Year) for
determining the present value of a lump sum
distribution on plan termination.
(b) COST-OF-LIVING ADJUSTMENTS. Effective January 1, 1994, the
Actuarial Equivalent of a benefit subject to the cost-of-
living adjustments described in section 5.5 shall be
calculated based on the
3
<PAGE>
assumption that the rate of increase pursuant to that
section shall be 3 percent for each year.
2.3 "AFFILIATE" means--
(a) any corporation while it is a member of the same "controlled
group" of corporations (within the meaning of Code section
414(b)) as the Company;
(b) any other trade or business (whether or not incorporated)
while it is under "common control" (within the meaning of
Code section 414(c)) with the Company;
(c) any organization during any period in which it (along with
the Company) is a member of an "affiliated service group"
(within the meaning of Code section 414(m)); or
(d) any other entity during any period in which it is required
to be aggregated with the Company under Code section 414(o).
2.4 "ANNUITY STARTING DATE" shall be defined as follows.
(a) BENEFITS PAYABLE IN THE FORM OF AN ANNUITY. In the case of
benefits payable in the form of an annuity, Annuity Starting
Date means the first day of the first period for which an
amount is payable under the Plan.
(b) BENEFITS PAYABLE IN THE FORM OF A SINGLE SUM PAYMENT. In
the case of a benefit payable in the form of a single sum
payment, Annuity Starting Date means the date on which all
events have occurred that entitle the Participant to the
benefit.
2.5 "BENEFICIARY" means each person designated by the Participant to
receive any benefits payable on behalf of the Participant after his or her
death, subject to the spousal consent requirements of section 6.2(b).
4
<PAGE>
2.6 "BOARD" means the Company's Board of Directors.
2.7 "CODE" means the Internal Revenue Code of 1986, as amended, or as
it may be amended from time to time. A reference to a particular section of the
Code shall also refer to regulations and other regulatory guidance issued under
that Code section.
2.8 "COMMITTEE" means the Employee Benefits Committee appointed by the
Board to administer the Plan under section 10.1.
2.9 "COMPANY" means Gulfstream Aerospace Corporation (Georgia) or any
successor thereto.
2.10 "DISABILITY" means any physical or mental condition of an Employee
that constitutes a disability under the long-term disability plan maintained by
the Employer.
2.11 "EARLIEST RETIREMENT AGE" means the earliest date on which, under
the Plan, a Participant could elect to receive a retirement benefit.
2.12 "EARNINGS" means the compensation (as defined below) that is paid
to an Employee for the portion of a Plan Year during which the Employee is a
Participant.
(a) GENERAL RULE. Earnings means the base cash compensation
paid to a Participant by an Employer, including any pay
reduction contributions made for the Participant pursuant to
a plan maintained by an Employer under Code section 401(k),
but excluding the following items:
(1) PREMIUM OR INCENTIVE PAY: Any overtime pay, bonuses,
commissions, incentive compensation, cost-of-living
adjustments, or other special or premium pay;
(2) DEFERRED COMPENSATION: Any amount contributed by an
Employer for the Participant's benefit to this Plan or
any other profit sharing, pension, stock bonus, or
other retirement or
5
<PAGE>
benefit plan maintained by an Employer other than the
pay reduction contributions described above;
(3) REIMBURSEMENTS: Any reimbursements for travel
expenses, relocation allowances, educational or tuition
assistance allowances, and other allowances or
expenses;
(4) SEVERANCE PAY: Any severance pay paid as a result of
the Participant's Termination of Service;
(5) UNEMPLOYMENT COMPENSATION: Any compensation paid or
payable to the Participant, or to any governmental body
or agency on account of the Participant, under the
terms of any state, federal, or foreign law requiring
the payment of such compensation because of the
Participant's voluntary or involuntary Termination of
Service; and
(6) AWARDS: Any payments received under the Company's
Performance Award Plan and any patent awards or any
other awards.
(b) LIMITATION ON AMOUNT FOR PLAN YEARS BEGINNING PRIOR TO
JANUARY 1, 1994. The amount of Earnings taken into account
for any Plan Year beginning on or after January 1, 1989 and
prior to January 1, 1994 shall not exceed $200,000 (or other
amount determined by the Secretary of the Treasury under
Code section 401(a)(17)).
(c) LIMITATION ON AMOUNT FOR PLAN YEARS BEGINNING ON OR AFTER
JANUARY 1, 1994. The amount of Earnings taken into account
for any Plan Year beginning on or after January 1, 1994
shall not exceed $150,000 (or other amount determined by the
Secretary of the Treasury under Code section 401(a)(17)).
6
<PAGE>
2.13 "ELIGIBLE EMPLOYEE" means an Employee of an Employer, except for
any Employee covered by a collective bargaining agreement if retirement benefits
were the subject of good faith bargaining (unless the collective bargaining
agreement provides for the Employee's participation in the Plan). Effective
January 1, 1994, the group of Eligible Employees under this Plan shall include
any Employee of Gulfstream Aerospace Corporation (Oklahoma) who is a Highly
Compensated Employee with respect to any Plan Year beginning on or after January
1, 1994.
2.14 "EMPLOYEE" means any person who is employed by the Company or an
Affiliate.
A person who is considered a "leased employee" of the Company or an Affiliate,
within the meaning of Code section 414(n), shall not be considered an Employee
for purposes of participating in this Plan or receiving any benefits under this
Plan. However, if a leased employee becomes eligible to participate in the Plan
as a result of later employment with an Employer, the leased employee shall
receive credit for Eligibility Service and Vesting Service as a leased employee.
Notwithstanding the preceding provisions, a leased employee shall be included as
an Employee for purposes of applying the requirements described in Code section
414(n)(3) and determining the number and identity of Highly Compensated
Employees.
2.15 "EMPLOYER" means the Company or any Affiliate that elects to become
a party to the Plan with the approval of the Company. An Affiliate shall become
an Employer by adopting the Plan for the benefit of its eligible Employees in
the manner described in Article XIV. Effective January 1, 1994, Gulfstream
Aerospace Corporation (Oklahoma) shall become an Employer under this Plan, but
only with respect to its Employees who are or thereafter become Highly
Compensated Employees.
2.16 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or as it may be amended from time to time. A reference to a
particular section
7
<PAGE>
of ERISA shall also refer to regulations and other regulatory guidance issued
under that ERISA section.
2.17 "FREEZE DATE" means--
(a) December 31, 1988, in the case of a Participant who is a
Super Highly Compensated Employee with respect to the 1989
Plan Year;
(b) December 31, 1989, in the case of a Participant who is a
Super Highly Compensated Employee with respect to the 1990
Plan Year, but not the 1989 Plan Year; or
(c) December 31, 1990, in the case of any other Participant.
2.18 "HIGHLY COMPENSATED EMPLOYEE" means, with respect to any Plan Year,
any individual who is described in subsection (a), (b), or (c).
(a) An Employee shall be treated as a Highly Compensated
Employee if, during the 12-month period immediately
preceding the Plan Year, he--
(1) was at any time a 5-percent owner (as defined in Code
section 416(i)(1));
(2) received compensation from the Company and Affiliates
in excess of $75,000;
(3) received compensation from the Company and Affiliates
in excess of $50,000 and was a member of the "top-paid
group" (as defined in Treasury Regulation section
1.414(q)-1T, Q&A-9); or
(4) was at any time an officer of the Company or an
Affiliate and received compensation greater than 50
percent of the dollar limitation in effect under Code
section 415(b)(1)(A) for the period.
8
<PAGE>
(b) An Employee shall be treated as a Highly Compensated
Employee if, during the Plan Year, he--
(1) is at any time a 5-percent owner (as defined in Code
section 416(i)(1));
(2) receives compensation from the Company and Affiliates
in excess of $75,000;
(3) receives compensation from the Company and Affiliates
in excess of $50,000 and is a member of the "top-paid
group" (as defined in Treasury Regulation section
1.414(q)-1T, Q&A-9); or
(4) is at any time an officer of the Company or an
Affiliate and receives compensation greater than 50
percent of the dollar limitation in effect under Code
section 415(b)(1)(A) for the Plan Year.
An Employee not described in paragraph (1) shall be treated as a
Highly Compensated Employee under this subsection only if he is one
of the 100 Employees paid the greatest compensation during the Plan
Year.
(c) A former Employee shall be treated as a Highly Compensated
Employee if--
(1) the former Employee was a Highly Compensated Employee
when he separated from service; or
(2) the former employee was a Highly Compensated Employee
at any time after attaining age 55.
(d) If an Employee is a family member (as defined in Code
section 414(q)(6)(B)) of a Highly Compensated Employee who
is described in subsection (a)(1) or (b)(1) or who is one of
the ten Employees paid the greatest compensation during the
year, the family member
9
<PAGE>
and the other Employee shall be treated as a single Employee
with compensation and Plan contributions equal to the sum of
compensation and Plan contributions for the family member
and other Employee.
(e) The Committee, in its sole and absolute discretion, may
identify Highly Compensated Employees for any given Plan
Year under any method permissible under Code section 414(q),
including the method described in section 4 of Revenue
Procedure 93-42.
(f) For purposes of this section 2.18--
(1) the $75,000 and $50,000 amounts specified in
subsections (a) and (b) shall be adjusted as provided
under Code sections 414(q)(1) and 415; and
(2) "compensation" means compensation as defined in Code
section 414(q)(7).
2.19 "PARTICIPANT" means an Employee who has become a Participant under
Article IV. A Participant shall continue to be a Participant as long as he or
she has an undistributed beneficial interest in the Plan. If upon Termination
of Service a Participant's vested Accrued Benefit is zero, the Participant shall
be deemed to have received an immediate lump sum payment of his or her benefit
and shall thereupon cease to be a Participant.
2.20 "PLAN" means this Gulfstream Aerospace Corporation Pension Plan, as
amended from time to time.
2.21 "PLAN ADMINISTRATOR" means the Committee.
2.22 "PLAN YEAR" means the calendar year.
10
<PAGE>
2.23 "QUALIFIED JOINT AND SURVIVOR ANNUITY" means an annuity that is the
Actuarial Equivalent of the Single Life Annuity. The Qualified Joint and
Survivor Annuity provides a monthly benefit to the Participant for his or her
life and, upon the Participant's death, provides an annuity for the life of his
or her surviving spouse (to whom the Participant was married on his or her
Annuity Starting Date) in a monthly amount equal to 50 percent of the amount
payable to the Participant during his or her life.
2.24 "RETIREMENT AGE" means the following.
(a) "NORMAL RETIREMENT AGE" means the later of--
(1) the Participant's sixty-fifth birthday; or
(2) the earlier of--
(A) the fifth anniversary of the date on which the
Participant commenced participation in the Plan;
or
(B) the date on which the Participant completes five
years of Vesting Service.
(b) "EARLY RETIREMENT AGE" means a Participant's age prior to
Normal Retirement Age when he or she either--
(1) has attained at least age 60 and completed at least
five years of Vesting Service; or
(2) has attained at least age 50 and completed at least 20
years of Vesting Service.
(c) "VESTED RETIREMENT AGE" means a Participant's age prior to
Early Retirement Age after he or she has completed at least
five years of Vesting Service.
2.25 "RETIREMENT DATE" means the date as of which retirement benefit
payments under the Plan begin. The Retirement Dates under the Plan shall be
defined as follows.
11
<PAGE>
(a) "NORMAL RETIREMENT DATE" means the first day of the month
coinciding with or next following the Participant's Normal
Retirement Age.
(b) "DELAYED RETIREMENT DATE" means, for a Participant who
remains or becomes employed as an Employee after his or her
Normal Retirement Date, the first day of the month
coinciding with or next following his or her Termination of
Service.
(c) "EARLY RETIREMENT DATE" means the first day of the month
coinciding with or next following the Participant's
Termination of Service on or after his or her Early
Retirement Age, but before his or her Normal Retirement Age.
Notwithstanding the preceding sentence, this Participant may
elect as an Early Retirement Date the first day of any month
following a Termination of Service after his or her Early
Retirement Age, but not later than his or her Normal
Retirement Date.
(d) "VESTED RETIREMENT DATE" means, for a Participant who has a
Termination of Service on or after his or her Vested
Retirement Age for reasons other than normal or early
retirement or death, the first day of any month coinciding
with or next following the Participants sixtieth birthday,
but not later than his or her Normal Retirement Date.
Notwithstanding the preceding sentence, if this Participant
has at least 20 years of Vesting Service, the Participant
may elect as his or her Vested Retirement Date the first day
of any month coinciding with or next following his or her
fiftieth birthday, but not later than his or her Normal
Retirement Date.
12
<PAGE>
2.26 "RETIREMENT FUND" means the Trust Fund or any insurance fund
established and maintained under any Trust Agreement or any group annuity
contract designated as a part of this Plan to finance the benefits under this
Plan.
2.27 "SINGLE LIFE ANNUITY" means an annuity providing monthly payments
for the lifetime of the Participant with no survivor benefits.
2.28 "SUPER HIGHLY COMPENSATED EMPLOYEE" means, with respect to any Plan
Year, any individual who is described in subsection (a)(1), (a)(2), (b)(1), or
(b)(2) of section 2.18 with respect to the 1989 or 1990 Plan Year.
2.29 "TERMINATION OF SERVICE" means the last date on which an individual
performs duties as an Employee of the Company or an Affiliate.
2.30 "TRUST AGREEMENT" means any agreement in the nature of a trust
established to form a part of this Plan to receive, hold, invest, and dispose of
the Trust Fund.
2.31 "TRUSTEE" means any corporation or individual acting as trustee
under the Trust Agreement at any time of reference.
2.32 "TRUST FUND" means the assets of every kind and description held
under any Trust Agreement forming a part of this Plan.
13
<PAGE>
ARTICLE III. DETERMINATION OF ELIGIBILITY SERVICE AND VESTING SERVICE
3.1 "HOUR OF SERVICE" means each hour used to determine eligibility to
receive benefits and the amount of benefits.
(a) FOR THE PERFORMANCE OF DUTIES. An Employee shall receive an
Hour of Service for each hour for which the Employee is paid
or entitled to payment by the Company or an Affiliate for
the performance of duties. Hours of Service under this
subsection shall be credited to the Employee in the calendar
year in which the duties are performed.
(b) PERIODS DURING WHICH NO DUTIES ARE PERFORMED. An Employee
shall receive an Hour of Service for each hour for which the
Employee is directly or indirectly paid or entitled to
payment by the Company or an Affiliate on account of a
period of time during which no duties are performed
(irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or
leave of absence. Hours of Service under this subsection
shall be credited to the Employee in the calendar year for
which the Employee is paid or entitled to payment. Except
as provided in subsection (g) (regarding military leave), no
more than 501 Hours of Service shall be credited under this
subsection on account of any single period during which the
Employee performs no duties (whether or not this period
occurs in a single computation period).
(c) BACK PAY. An Employee shall receive an Hour of Service for
each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Company or an
Affiliate. Hours
14
<PAGE>
of Service under this subsection shall be credited to the
Employee in the calendar year to which the award or
agreement relates.
(d) HOURS NOT COUNTED. This subsection limits the Hours of
Service credited for periods during which no duties are
performed. This subsection applies whether or not Hours of
Service otherwise would have been counted for these periods
under subsection (b) or (c).
(1) NONDUPLICATION. No hour shall be credited as an
Hour of Service more than once under this section
3.1.
(2) UNPAID TIME. An hour for which an Employee is not
paid, either directly or indirectly, shall not be
credited, except as provided in subsection (e)
(regarding maternity or paternity leave),
subsection (f) (regarding leaves of absence
pursuant to the Family and Medical Leave Act of
1993), and subsection (g) (regarding military
leave).
(3) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR
UNEMPLOYMENT COMPENSATION. An hour for which an
Employee is directly or indirectly paid or
entitled to payment on account of a period during
which the Employee performs no duties shall not be
credited as an Hour of Service if the payment is
made or due under a plan maintained solely for the
purpose of complying with applicable disability
insurance or unemployment compensation laws.
(4) MEDICAL REIMBURSEMENT. Hours of Service shall not
be credited for a payment that solely reimburses
the Employee for medical or medically-related
expenses.
15
<PAGE>
(e) MATERNITY/PATERNITY LEAVE. Solely for purposes of
determining whether a Break Year has occurred, an Employee
shall receive eight Hours of Service for each day of an
Employee's absence from employment for maternity or
paternity reasons. An absence for maternity or paternity
reasons shall mean an absence by reason of--
(1) the Employee's pregnancy;
(2) the birth of the Employee's child;
(3) the placement of a child with the Employee in
connection with the adoption of the child; or
(4) the caring for a child for a period immediately
following the child's birth or placement.
No more than 501 Hours of Service shall be credited under
this subsection for any such absence. Hours of Service
under this subsection shall be credited in the Plan Year in
which the absence from employment commences if the crediting
is necessary to prevent a Break Year, or in all other cases,
such Hours of Service shall be credited in the following
Plan Year.
(f) FMLA LEAVE. Solely for purposes of determining whether a
Break Year has occurred, an Employee shall receive an Hour
of Service for each hour of the normally-scheduled workweek
for each week during any period the Employee is on an
approved leave of absence taken pursuant to the Family and
Medical Leave Act of 1993.
(g) MILITARY LEAVE. An Employee shall receive an Hour of
Service for each hour of the normally-scheduled workweek for
each week during any period the Employee is on any absence
from work with the Company or an Affiliate for voluntary or
involuntary military service with the armed forces of the
United States, but not to exceed
16
<PAGE>
the period required under the law pertaining to veterans'
reemployment rights. However, if the Employee fails to
report for work at the end of this absence before his or her
reemployment rights expire, the Employee shall not receive
credit for hours on the leave.
(h) ACQUIRED BUSINESSES. If an individual becomes an Employee
upon the acquisition of all or a portion of the business of
his or her former employer by the Company or an Affiliate,
whether by merger, acquisition of assets or stock, or
otherwise, his or her service with the predecessor employer
shall be included in determining his or her Hours of Service
if, and to the extent that, this service is required to be
credited by--
(1) Code section 414(a),
(2) the terms of the agreement under which the Company or
Affiliate acquired the business of the former employer,
or
(3) a vote of the Board.
(i) CONSTRUCTION. For purposes of crediting Hours of Service,
the Plan Administrator shall follow Department of Labor
regulation section 2530.200b-2(b) and (c).
3.2 "ELIGIBILITY SERVICE" means the period of employment with the
Company or an Affiliate used to determine an Employee's eligibility to
participate in the Plan.
(a) IN GENERAL. An Employee is credited with a year of
Eligibility Service for any 12-month period during which he
or she completes 1,000 Hours of Service, beginning on the
Employee's first day of compensated work for the Company or
an Affiliate or any following January 1.
17
<PAGE>
(b) REEMPLOYMENT AFTER A BREAK YEAR. If an Employee is
reemployed by the Company or an Affiliate after incurring
one or more Break Years, his or her Eligibility Service
credited prior to the Break Year shall be reinstated if--
(1) the Employee was vested in any part of his or her
benefits under the Plan prior to the Break Year; or
(2) the number of consecutive Break Years does not equal or
exceed the greater of five years or the number of years
of service completed prior to the Break Years. For
purposes of this paragraph, the number of years of
service completed prior to a Break Year shall not
include years of service disregarded by reason of any
prior Break Year.
For purposes of this subsection, a "Break Year" means a Plan
Year in which an Employee is credited with not more than 500
Hours of Service.
3.3 "VESTING SERVICE" means the period of employment with the Company
or an Affiliate used to determine a Participant's eligibility to receive
benefits.
(a) IN GENERAL. An Employee shall receive credit for Vesting
Service for the period beginning on the first day on which
the Employee performs an Hour of Service and ending on the
Employee's Severance from Service. Vesting Service shall be
determined in completed years and days, with each 365 days
constituting one year.
(b) REHIRED EMPLOYEES. An Employee who is rehired after having
a Severance from Service shall have his or her Vesting
Service reinstated upon reemployment as follows.
18
<PAGE>
(1) If the Employee is reemployed before a One-Year Period
of Severance occurs, the Employee's complete and
partial years of Vesting Service shall be reinstated
upon reemployment. In addition, if the Employee is
reemployed within one year after a Severance from
Service that results from quit, discharge, or
retirement, the Employee shall receive credit for
Vesting Service for the period between the Employee's
Severance from Service and reemployment.
(2) If the Employee is reemployed after a One-Year Period
of Severance occurs, the Employee shall not receive
credit for Vesting Service for the period between the
Employee's Severance from Service and the Employee's
reemployment. The Employee's complete and partial
years of Vesting Service shall be reinstated only if--
(A) the Employee was vested in any part of his or her
benefits under the Plan prior to the Severance
from Service; or
(B) the number of consecutive One-Year Periods of
Severance does not equal or exceed the greater of
five years or the number of years of Vesting
Service completed prior to the One-Year Periods of
Severance. For purposes of this subparagraph, the
number of years of Vesting Service completed prior
to a One-Year Period of Severance shall not
include years of Vesting Service disregarded by
reason of any prior One-Year Period of Severance.
19
<PAGE>
(c) PRIOR SERVICE. In the case of a Participant who was an
Employee on September 1, 1978, and was a participant in a
predecessor plan on August 31, 1978, the Participant's
Vesting Service shall include the period of his or her
service as of August 31, 1978.
(d) DISABILITY. An Employee shall continue to earn Vesting
Service while suffering from a Disability, without regard to
whether a Severance from Service has occurred.
(e) MILITARY LEAVE. If an Employee is absent from employment
for voluntary or involuntary military service with the armed
forces of the United States and returns to employment within
the period required under the law pertaining to veteran
reemployment rights, the Employee shall receive vesting
service for the period of his or her absence from
employment.
(f) ACQUIRED BUSINESSES. If an individual becomes an Employee
upon the acquisition of all or a portion of the business of
his or her former employer by the Company or an Affiliate,
whether by merger, acquisition of assets or stock, or
otherwise, his or her service with the predecessor employer
shall be included in determining his or her years of Vesting
Service if, and to the extent that, this service is required
to be credited by--
(1) Code section 414(a);
(2) the terms of the agreement under which the Company or
Affiliate acquired the business of the former employer;
or
(3) a vote of the Board.
20
<PAGE>
3.4 "SEVERANCE FROM SERVICE" means the earlier of subsection (a) or (b)
below:
(a) the date the Employee quits, retires, is discharged, or
dies; or
(b) the first anniversary of the first day of an Employee's
absence from employment with the Company or an Affiliate
(with or without pay) for any reason other than in (a)
above, such as vacation, sickness, leave of absence, layoff,
or military service (except as otherwise provided in section
3.3(d) and (e)). Notwithstanding the foregoing, in no event
shall an Employee have a Severance from Service solely as a
result of taking an authorized leave of absence pursuant to
the Family and Medical Leave Act of 1993.
An Employee who fails to return to employment at the
expiration of an absence shall be deemed to have had a
Severance from Service on the earlier of the expiration of
the Employee's absence or the first anniversary of the first
day of the Employee's absence.
3.5 "ONE-YEAR PERIOD OF SEVERANCE" means each 12-consecutive-month
period beginning on the date an Employee incurs a Severance from Service and
ending on the anniversary of that date, provided that the Employee does not
perform an Hour of Service during that period.
Solely for purposes of determining whether a One-Year Period of Severance
has occurred, if an Employee is absent from work beyond the first anniversary of
the first date of an absence and the absence is for maternity or paternity
reasons, the date the Employee incurs a Severance from Service shall be the
second anniversary of the Employee's absence from employment. The period
between the first and second anniversary of the first date of absence shall not
constitute service. For purposes of this section, an absence from work for
maternity or paternity reasons means an absence by reason of (a) the Employee's
pregnancy, (b) the birth of the Employee's child, (c) the placement of a child
21
<PAGE>
with the Employee in connection with the adoption of the child, or (d) the
caring for a child for a period immediately following the child's birth or
placement.
22
<PAGE>
ARTICLE IV. ELIGIBILITY AND PARTICIPATION
4.1 DATE OF PARTICIPATION.
(a) GENERAL RULE. Each Employee who was a Participant in the Plan as
in effect on December 31, 1988 shall automatically continue to be a
Participant on January 1, 1989, if he or she is still an Eligible
Employee. Each other Employee shall become a Participant in this
Plan on the first day of the month coinciding with or next
following the later of--
(1) the date on which the Employee becomes an Eligible Employee;
or
(2) the completion of one year of Eligibility Service and
attainment of age 21.
(b) RETROACTIVE PARTICIPATION FOR CERTAIN OLDER EMPLOYEES.
Notwithstanding subsection (a), an Eligible Employee shall be
deemed to become a Participant on January 1, 1988 if he or she was
excluded from participation in the Plan solely because his or her
employment with the Employer commenced after his or her sixtieth
birthday. This subsection shall apply only to an Employee who has
at least one Hour of Service on or after January 1, 1988.
4.2 REENTRY INTO THE PLAN FOLLOWING A BREAK YEAR. A Participant who
again becomes an Employee after a Break Year shall resume participation in the
Plan as of the date he or she again becomes an Eligible Employee. Any other
Employee rehired after a Break Year will be treated as a new Employee for all
purposes under the Plan, provided that his or her Eligibility Service will be
reinstated under section 3.2(b) if the Employee satisfies the requirements of
that provision.
23
<PAGE>
ARTICLE V. AMOUNT OF RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFITS.
(a) ELIGIBILITY. Subject to the provisions of Article VI, a
Participant who attains Normal Retirement Age while employed by the
Company or an Affiliate shall be eligible for a normal retirement
benefit under this Plan. This normal retirement benefit shall be
calculated as a Single Life Annuity commencing on the Participant's
Normal Retirement Date. If a Participant remains employed after
his or her Normal Retirement Date, benefit payments under this
section may be suspended under Article VII. At Normal Retirement
Age, the Participant's right to his or her normal retirement
benefit shall be 100 percent vested and nonforfeitable except upon
death or reemployment.
(b) AMOUNT. Except as otherwise provided in this section and in
section 5.7, a Participant who becomes entitled to receive a normal
retirement benefit under this section shall be entitled to a
monthly benefit equal to the sum of the benefits payable under
paragraphs (1) and (2).
(1) For each Plan Year beginning prior to January 1, 1991, the
Participant shall receive a benefit equal to one-twelfth of-
(A) 2.25 percent of the Participant's Earnings for the Plan
Year that do not exceed $22,900; plus
(B) 3.0 percent of the Participant's Earnings for the Plan
Year in excess of $22,900.
(2) For each Plan Year beginning on or after January 1, 1991, a
Participant shall receive a benefit equal to one-twelfth of-
24
<PAGE>
(A) 2.65 percent of the Participant's Earnings for the Plan
Year that do not exceed the integration level (as
defined in paragraph (3)) for the Plan Year; plus
(B) 3.0 percent of the Participant's Earnings for the Plan
Year in excess of the integration level for the Plan
Year.
Notwithstanding the foregoing, in the case of a Participant
who, as of the end of a Plan Year, has participated in this
Plan or a defined benefit plan maintained by Grumman
Aerospace Corporation or one of its affiliates for a total
of 35 or more years, the benefit determined under this
paragraph for that and each following Plan Year shall be
equal to one-twelfth of 3.0 percent of the Participant's
Earnings for the applicable Plan Year.
(3) For purposes of paragraph (2), the integration level for a
Plan Year shall be:
(A) 1991: $17,000;
(B) 1992: $17,669;
(C) 1993: $18,400; and
(D) 1994: $19,400.
For each subsequent Plan Year, the integration level shall
be increased at the rate used to increase the taxable wage
base for old-age, survivors, and disability insurance
determined under section 230 of the Social Security Act for
such Plan Year, rounded up to the next highest multiple of
$100.
(c) SUPER HIGHLY COMPENSATED EMPLOYEES. Notwithstanding subsection
(b), in the case of a Super Highly Compensated Employee who becomes
entitled to receive a normal retirement benefit under this section,
his or her monthly
25
<PAGE>
benefit shall be equal to the sum of the benefits payable under
paragraphs (1), (2), and (3).
(1) For each Plan Year ending prior to or on the Super Highly
Compensated Employee's Freeze Date, he or she shall receive
a benefit equal to one-twelfth of--
(A) 2.25 percent of his or her Earnings for the Plan Year
that do not exceed $22,900; plus
(B) 3.0 percent of his or her Earnings for the Plan Year in
excess of $22,900.
(2) For each Plan Year ending after the Super Highly Compensated
Employee's Freeze Date and prior to January 1, 1991, he or
she shall receive a benefit equal to one-twelfth of 2.25
percent of his or her Earnings for the Plan Year.
(3) For each Plan Year beginning on or after January 1, 1991,
the Super Highly Compensated Employee shall receive the
benefit determined under subsection (b)(2).
(d) PROTECTION OF ACCRUED BENEFIT. Notwithstanding any provision to
the contrary, in no event shall the monthly normal retirement
benefit determined under this section 5.1 be less than--
(1) the Accrued Benefit determined as of the Participant's
Freeze Date based on the provisions of the Plan as in effect
on December 31, 1988; or
(2) the largest early retirement benefit the Participant would
have been entitled to receive under section 5.3 by retiring
at any time after his or her Early Retirement Age, but
before Normal Retirement Age.
(e) OVERALL PERMITTED DISPARITY LIMITS. In no event shall the benefits
payable to a Participant under this Plan and under any other plan
maintained by the
26
<PAGE>
Employer exceed the overall permitted disparity limits under Code
section 401(l) and accompanying regulations. If these limits would
otherwise be exceeded, the Participant's retirement benefit under
this Plan shall be reduced to comply with the requirements.
5.2 DELAYED RETIREMENT BENEFITS.
(a) ELIGIBILITY. Subject to the provisions of Article VI, a
Participant who remains an Employee beyond his or her Normal
Retirement Date shall be eligible for a delayed retirement benefit
under this Plan. This delayed retirement benefit shall be
calculated as a Single Life Annuity commencing on the Participant's
Delayed Retirement Date.
(b) AMOUNT. Except as otherwise provided in this section and in
section 5.7, a Participant who becomes eligible to receive a
delayed retirement benefit under this section shall be entitled to
a monthly benefit computed in the same manner as a normal
retirement benefit under section 5.1, based on the provisions of
the Plan in effect at the Participant's Delayed Retirement Date.
In no event shall a delayed retirement benefit under this section
5.2 be less than the greatest monthly retirement benefit the
Participant would have been entitled to receive under section 5.1
if he or she had elected to retire under section 5.1.
In the case of a Participant whose retirement benefits commence
prior to his or her Termination of Service pursuant to section
6.4(b), the Participant's benefit will be adjusted, if appropriate,
as of January 1 of each year beginning after the Participant's
benefit commencement date to reflect additional accruals under the
Plan for the immediately preceding calendar year.
27
<PAGE>
5.3 EARLY RETIREMENT BENEFITS.
(a) ELIGIBILITY. Subject to the provisions of Article VI, a
Participant who attains his or her Early Retirement Age while
employed by the Company or an Affiliate, but who has not yet
reached Normal Retirement Age, shall be eligible for an early
retirement benefit commencing on his or her Early Retirement Date.
If a Participant is reemployed after his or her Early Retirement
Date, benefit payments under this section may be suspended under
Article VII.
(b) AMOUNT. Subject to section 5.7, a Participant who becomes entitled
to receive an early retirement benefit under this section shall be
entitled to a monthly benefit equal to the Participant's Accrued
Benefit reduced for commencement before Normal Retirement Date by
the following factors:
Age at
Commencement Factor
------------ ------
60 or over 1.00
59 .93
58 .86
57 .80
56 .75
55 .70
54 .65
53 .61
52 .58
51 .54
50 .51
In the case of a fractional part of a year, these factors shall be
adjusted by straight-line interpolation.
28
<PAGE>
(c) EARLY RETIREMENT WINDOW.
(1) ELIGIBILITY. Notwithstanding the preceding provisions,
special early retirement benefits shall be calculated for a
Participant who--
(A) attains his or her Early Retirement Age by August 31,
1993 (taking into account any years of age and Vesting
Service added pursuant to paragraph (2));
(B) makes an election to retire on or after May 5, 1993,
but not later than June 30, 1993, under the "Voluntary
Resignation Opportunity" offered by the Employer; and
(C) retires on or after May 5, 1993 and not later than
August 31, 1993.
(2) AMOUNT. The early retirement benefit for a Participant
satisfying the requirements of paragraph (1) shall be
calculated by adding five years both to the Participant's
age and years of Vesting Service.
(3) REHIRED PARTICIPANTS. Notwithstanding anything to the
contrary in the Plan, in the case of a Participant who
becomes entitled to a special early retirement benefit under
this subsection and is then rehired by the Company or an
Affiliate, the Participant may elect to recommence benefits
as of any month coinciding with or next following his or her
Termination of Service after rehire. The benefit payable
upon this subsequent retirement shall be equal to the
greater of--
(A) the benefit determined pursuant to this Article V,
based on the Participant's employment and Earnings
before and after his or her absence, but excluding any
additional benefit payable under this subsection (c)
for Participants retiring under the Voluntary
Resignation Opportunity, and actuarially reduced
29
<PAGE>
for the period (if any) by which the first such payment
precedes the date on which the Participant would attain
Early Retirement Age without regard to this subsection;
or
(B) the benefit determined at the time of his or her
retirement pursuant to the Voluntary Resignation
opportunity,
reduced in either case by the Actuarial Equivalent value of
all payments previously received, as provided in Article
VII.
5.4 VESTED RETIREMENT BENEFITS.
(a) ELIGIBILITY. Subject to the provisions of Article VI, a
Participant who attains his or her Vested Retirement Age, but who
is not eligible to receive a normal or early retirement benefit,
shall be eligible for a vested retirement benefit commencing on his
or her Vested Retirement Date. If a Participant is reemployed
after his or her Vested Retirement Date, benefit payments under
this section may be suspended under Article VII.
(b) AMOUNT. Subject to section 5.7, a terminated Participant who
becomes entitled to receive a vested retirement benefit under this
section shall be entitled to a monthly benefit equal to the
Participant's Accrued Benefit reduced for commencement before
Normal Retirement Date as follows.
(1) in the case of a Participant who has completed at least 20
years of Vesting Service, the Participant's Accrued Benefit
shall be reduced by the factors identified in section
5.3(b).
(2) In the case of any other Participant, the Participant's
Accrued Benefit shall be reduced by the following factors:
30
<PAGE>
Age at
Commencement Factor
64 .93
63 .86
62 .80
61 .75
60 .70
In the case of a fractional part of a year, these factors shall be
adjusted by straight line interpolation.
5.5 COST-OF-LIVING ADJUSTMENTS.
(a) ELIGIBILITY. The benefit payable to a Participant or Beneficiary
shall be adjusted as of April 1 each year to reflect increases or
decreases in the cost of living, provided that the Participant or
Beneficiary was receiving this benefit on or before the December 1
preceding the April 1 adjustment date.
(b) AMOUNT. Except as otherwise provided in this section, the amount
of the cost-of-living adjustment shall be determined by multiplying
the eligible benefit by a fraction, the numerator of which is the
Consumer Price Index for the calendar year immediately preceding
the April 1 adjustment date and the denominator of which is the
Consumer Price Index for next preceding calendar year. This
fraction shall be expressed to the nearest whole tenth of 1
percent. For purposes of this subsection, "Consumer Price Index"
means the Consumer Price Index for Urban Consumers (CDI-U) (All
Items, National) as promulgated by the Bureau of Labor Statistics
of the United States Department of Labor.
(c) LIMITATIONS ON ADJUSTMENT. In no event shall the adjustment to a
benefit as of any April 1, whether an increase or decrease in the
benefit amount, exceed 3 percent. Further, in no event shall any
downward adjustment to a benefit result in decreasing such benefit
below the amount payable to the
31
<PAGE>
Participant or Beneficiary as if this section had not been in
effect (the "base amount"). If such downward adjustments would
otherwise have the effect of reducing the benefit payable below the
base amount, any later upward adjustments shall increase the amount
payable only after offsetting such prior downward adjustments.
(d) BENEFITS FOR SURVIVING SPOUSE. In the case of a spouse receiving
benefits under the Qualified Joint and Survivor Annuity or the
joint and survivor annuity option described in section 6.3(b), all
cost-of-living adjustments that applied to the Participant's
benefit at the time of his or her death shall continue with respect
to the survivor benefit payable to the spouse.
(e) ADJUSTMENT FOR EXCESS BENEFIT. Effective January 1, 1994, the
portion of a benefit attributable to the Participant's Excess
Benefit shall be adjusted for cost-of-living increases only for
benefits payable on or after the Participant's sixty-second
birthday. Any such increase shall not exceed the rate for
adjustments to Social Security benefits under section 215(i)(2)(A)
of the Social Security Act that have occurred since the later of
the Participant's sixty-second birthday or his or her commencement
of benefits.
For purposes of this subsection, "Excess Benefit" means the portion
of a benefit attributable to .35 percent of the Participant's
Earnings above the integration level applicable under section
5.1(b)(3).
5.6 NON-DUPLICATION OF BENEFITS. Notwithstanding any other provision
of this Plan to the contrary, any benefit payable to a Participant under this
Article V shall be reduced by the benefits, if any, that are payable to the
Participant under any other qualified defined benefit plan contributed to by the
Company or an Affiliate and that are attributable to the Participant's period of
participation in this Plan.
32
<PAGE>
5.7 MAXIMUM ANNUAL BENEFITS.
(a) IN GENERAL. Effective January 1, 1987, and notwithstanding any
other provision of this Plan to the contrary, in no event may the
annual benefit provided under this Plan (together with that
provided by all other defined benefit plans of the Company and
Affiliates) for any Participant for a calendar year exceed the
lesser of--
(1) $90,000, or
(2) 100 percent of the Participant's average annual compensation
(as defined in Treasury regulation section 1.415-2(d)) over
the three consecutive years during which the Participant had
the greatest aggregate compensation from the Company and
Affiliates.
(b) PARTICIPANT WITH FEWER THAN TEN YEARS OF PARTICIPATION OR SERVICE.
If a Participant has fewer than ten years of participation in the
Plan, the dollar limit described in subsection (a)(1) shall be
multiplied by a fraction (not to be less than 1/10), the numerator
of which is the Participant's years of participation in the Plan
and the denominator of which is ten. In the case of a Participant
who has not participated in a defined contribution plan maintained
by the Employer, the dollar limit as adjusted pursuant to this
subsection shall not be less than $10,000.
If a Participant has fewer than ten years of Vesting Service, the
compensation limit described in subsection (a)(2) shall be
multiplied by a fraction (not to be less than 1/10), the numerator
of which is the Participant's years of Vesting Service and the
denominator of which is ten.
(c) FORM OF BENEFITS. The limits of subsection (a) shall be adjusted
if a Participant's benefit is paid in any form other than a Single
Life Annuity or a Qualified Joint and Survivor Annuity. The limits
shall also be adjusted if
33
<PAGE>
a Participant's Annuity Starting Date does not coincide with the
Participant's attaining social security retirement age (as defined
in Code section 415(b)(8)). These adjustments shall be made as
specified in Code section 415(b)(2).
(d) COST-OF-LIVING INCREASES. The limit in subsection (a)(1), and the
limit in subsection (a)(2) for a Participant who has incurred a
Termination of Service, shall be adjusted for increases in the cost
of living in the manner specified in applicable regulations.
(e) DEFINITION OF AFFILIATE. In applying the limitations under this
section, the qualified plans of any employer that is not an
Affiliate shall be aggregated with the Plan or any other plan of
the Company or an Affiliate if the employer would be an Affiliate
if the phrase "at least 80 percent" in Code section 1563(a)(1), in
applying that section to Code section 414(b) or (c), was replaced
with "more than 50 percent."
(f) COMBINED PLAN LIMIT. If any Participant is a participant in a
defined contribution plan of the Company or any Affiliate, the sum
of the "defined benefit plan fraction" and the "defined
contribution plan fractions" (as these terms are defined in Code
section 415(e)) for any Plan Year with respect to the Participant
shall not exceed one. If this sum would otherwise exceed one, the
Participant's retirement benefit under this Plan shall be reduced
to comply with the requirements of this subsection.
(g) PROTECTION OF ACCRUED BENEFIT. Nothing in this section 5.7 shall
limit or prohibit the payment of any benefit attributable to a
Participant's years of participation prior to January 1, 1987, to
the extent that the benefit would have been permitted under the
terms of Code section 415 and this Plan as in effect prior to
January 1, 1987.
34
<PAGE>
ARTICLE VI. DISTRIBUTION OF RETIREMENT BENEFITS
6.1 NORMAL FORM OF PENSION FOR UNMARRIED PARTICIPANTS. Subject to
sections 6.3 through 6.5, the form of pension payable to a Participant who is
entitled to a benefit under Article V and who is not married on his or her
Annuity Starting Date shall be a Single Life Annuity (Option A).
6.2 NORMAL FORM OF PENSION FOR MARRIED PARTICIPANTS.
(a) NORMAL FORM. Subject to sections 6.3 through 6.5, the form of
pension payable to a Participant who is entitled to a benefit under
Article V and who is married on his or her Annuity Starting Date
shall be a Qualified Joint and Survivor Annuity (Option 2).
(b) WAIVER PROCEDURES.
(1) GENERAL RULE. A married Participant may elect in writing,
on a form supplied by the Plan Administrator, to waive the
Qualified Joint and Survivor Annuity, and to receive his or
her benefits in accordance with an optional form of payment
described in section 6.3. Any election by a Participant
pursuant to this paragraph (1) must be filed with the Plan
Administrator within the 90-day period ending on the
Participant's Annuity Starting Date. For this election to
be effective--
(A) the Participant's spouse must consent in writing to the
election;
(B) the election and the consent must specify the optional
form of benefit elected;
(C) the election and the consent must designate a
Beneficiary (if applicable);
35
<PAGE>
(D) the Participant's spouse must acknowledge the financial
consequences of the consent; and
(E) the spouse's consent must be witnessed by a person
designated by the Plan Administrator or a notary
public.
(2) EXCEPTION TO CONSENT REQUIREMENT. The consent of a
Participant's spouse shall not be required where--
(A) the Participant elects the joint and survivor annuity
option under section 6.3(b);
(B) the Plan Administrator determines that the required
consent cannot be obtained because there is no spouse
or the Participant's spouse cannot be located;
(C) the Plan Administrator determines that the Participant
is legally separated;
(D) the Plan Administrator determines that the Participant
has been abandoned within the meaning of local law and
there is a court order to that effect; or
(E) there exists any other circumstance (as determined by
the Plan Administrator) prescribed by law as an
exception to the consent requirement.
(3) REVOCATION AND MODIFICATION. An election by a Participant
under paragraph (1) to waive the Qualified Joint and
Survivor Annuity may be revoked by the Participant in
writing without the consent of his or her spouse at any time
during the election period. Any subsequent election by a
Participant to waive the Qualified Joint and Survivor
Annuity or any subsequent modification of a prior election
(other than a revocation of a waiver of the Qualified Joint
and Survivor Annuity or a change in the form of payment or
designation of
36
<PAGE>
Beneficiary where there is in effect a valid "general
consent") must comply with the requirements in paragraph (1)
above. A spouse's consent shall be considered a "general
consent" if the following requirements are satisfied:
(A) the consent permits the Participant to waive the
Qualified Joint and Survivor Annuity;
(B) the consent permits the Participant to change the
optional form of benefit payment and the Beneficiary
(as applicable) without any requirement of further
consent by the spouse; and
(C) the spouse acknowledges in the consent that he or she--
(i) has the right to limit consent to a specific
optional form of benefit and Beneficiary (as
applicable), and
(ii) voluntarily relinquishes either or both of these
rights.
(c) NOTICE AND EXPLANATION TO PARTICIPANTS. The Plan Administrator
shall provide to each Participant (by mail or personal delivery),
between 30 and 90 days before the Participant's Annuity Starting
Date, a written explanation of the Qualified Joint and Survivor
Annuity. This explanation shall describe the terms and conditions
of the benefit, the material features and relative values of other
optional forms of benefit available under the Plan, the
Participant's right to make (and the effect of) an election to
waive the benefit, the right of the Participant's spouse to consent
in writing to the waiver, and the right to make (and the effect of)
a revocation of an election to waive the benefit.
6.3 OPTIONAL METHODS OF PAYMENT. In lieu of the normal form of benefit
otherwise payable under section 6.1 or 6.2, a Participant may elect to receive
his or her benefit in the form of an optional method of payment that shall be
the Actuarial
37
<PAGE>
Equivalent of the normal form of benefit (as determined by applying the
actuarial factors in Appendix A). Any such election made by a married
Participant must comply with the requirements of section 6.2(b). Any such
election by an unmarried Participant shall be valid only if the Participant is
furnished with an explanation of the material features of the optional forms of
payment within the notice period described in section 6.2(c). Optional forms of
payment include a certain and life annuity option, a joint and survivor annuity
option, a pop-up option, a Single Life Annuity option, and a level income
option.
(a) CERTAIN AND LIFE ANNUITY OPTION (OPTION 3). The certain and life
annuity option is a reduced monthly retirement benefit payable for
the life of the retired Participant, and if he or she dies before
receiving 60, 120, or 180 monthly payments (as elected by the
Participant), payments shall continue to the Participant's
Beneficiary until a total of 60, 120, or 180 monthly payments (as
elected by the Participant) have been made.
(1) DEATH OF BENEFICIARY. If a Beneficiary dies after payments
begin to the Beneficiary, but before payments have been made
to the Participant and the Beneficiary for the total elected
period, the Actuarial Equivalent value of any remaining
payments shall be paid in a single sum to the Beneficiary's
estate.
(2) DEATH OF PARTICIPANT. If the Participant dies before
receiving payments for the elected period and there is no
surviving designated Beneficiary, the Actuarial Equivalent
value of any remaining payments shall be paid in a single
sum to the Participant's estate.
(b) JOINT AND SURVIVOR ANNUITY OPTION (OPTION 1). A married
Participant may elect to receive a reduced monthly retirement
benefit payable to the Participant for life and to his or her
surviving spouse for the lifetime of the spouse in a monthly amount
equal to 100 percent of the amount payable during the Participant's
lifetime.
38
<PAGE>
(c) POP-UP OPTION. A married Participant electing to receive benefits
in the form of either the Qualified Joint and Survivor Annuity or
the joint and survivor annuity option described in subsection (b)
may further elect a reduced monthly benefit payable to the
Participant in such form with the provision that, if the spouse
dies before the Participant, the amount of the Participant's
monthly retirement benefit shall be increased to the amount payable
as if the Participant had elected a Single Life Annuity. This
increased benefit shall be payable beginning as of the first day of
the month following the spouse's death.
(d) SINGLE LIFE ANNUITY OPTION. A married Participant may elect to
receive his or her benefit in the form of a Single Life Annuity.
(e) LEVEL INCOME OPTION. A Participant who elects to commence his or
her benefits in any form other than the certain and life annuity
option described in subsection (a) may further elect his or her
benefit payments to be made in an increased monthly benefit amount
for the period prior to age 62, and a reduced monthly amount
thereafter, so that the aggregate retirement income payable from
both sources during the Participant's lifetime can be approximately
level from the time benefits commence under the Plan. The election
of the level income option shall affect only the amount of benefits
paid to the Participant during his or her lifetime and shall not
affect the amount of benefits (if any) payable to a Beneficiary
upon the Participant's death.
If a Participant elects an optional form of payment under this section 6.3 and
dies before his or her Annuity Starting Date, his or her election shall be null
and void, and any benefits with respect to the Participant shall be payable in
accordance with Article VIII (regarding preretirement death benefits).
39
<PAGE>
6.4 RESTRICTIONS ON DISTRIBUTIONS.
(a) GENERAL RULE. Notwithstanding anything in this Article VI to the
contrary, unless the Participant otherwise elects in writing,
distribution to the Participant shall not commence later than the
sixtieth day after the close of the Plan Year in which occurs the
latest of the following events:
(1) the Participant attains age 65;
(2) the Participant attains the tenth anniversary of the date on
which he or she became a Participant under the Plan; or
(3) the Participant incurs a Termination of Service.
(b) LATEST ALLOWABLE COMMENCEMENT DATES.
(1) BASIC RULE. Notwithstanding anything contained in this
Article VI to the contrary, and except as provided under
paragraphs (2) and (3), a Participant's benefits under the
Plan shall commence to be distributed no later than the
April 1 following the calendar year in which the Participant
attains age 70-1/2, regardless of whether his or her
employment with the Company and its Affiliates has
terminated.
(2) PARTICIPANTS WHO ATTAIN AGE 70-1/2 BEFORE JANUARY 1, 1988.
In the case of a Participant who attains age 70-1/2 before
January 1, 1988, the Participant's benefits under the Plan
shall commence to be distributed no later than the April 1
following the calendar year in which occurs the later of his
or her (A) Termination of Service or (B) attainment of age
70-1/2. Notwithstanding the preceding sentence, a
Participant who is a 5 percent owner (as described in Code
section 416(i)) at any time during the Plan Year ending in
or with the calendar year in which the Participant attains
age 66-1/2, or during any subsequent Plan Year, shall in any
event commence to have his or her benefits distributed no
later than the April 1 following the
40
<PAGE>
calendar year in which the Participant attains age 70-1/2,
regardless of whether he or she has incurred a Termination
of Service.
(3) SPECIAL ELECTIONS. Notwithstanding paragraphs (1) and (2),
a Participant's benefits under the Plan shall be paid at the
time and in the form of any designation made by the
Participant that satisfies the requirements of section
242(b)(2) of the Tax Equity and Fiscal Responsibility Act of
1982.
(4) ANNUITY STARTING DATE. For purposes of this Plan, a
Participant's latest allowable commencement date under this
subsection (b) shall also be his or her Annuity Starting
Date. A Participant whose benefits commence under this
subsection (b) shall not be permitted to change his or her
form of distribution after the Annuity Starting Date.
(c) PERIODIC BENEFIT PARENTS. No election under this Article VI will
be effective unless the Participant's total benefit will be
distributed over a period that will not exceed--
(1) the life of the Participant;
(2) the lives of the Participant and the Participant's
designated Beneficiary;
(3) a period certain not extending beyond the life expectancy of
the Participant; or
(4) a period certain not extending beyond the joint life and
last survivor expectancy of the Participant and the
Participant's designated Beneficiary.
In no event will the life expectancy of a Participant (or the joint
life expectancies of a Participant and spouse) be recalculated
under the Plan.
41
<PAGE>
(d) REQUIRED DISTRIBUTIONS WHERE PARTICIPANT DIES BEFORE ENTIRE
INTEREST IS DISTRIBUTED.
(1) If benefits have commenced and the Participant dies prior to
receiving his or her entire interest under the Plan, the
remaining portion of this interest shall be distributed to
his or her Beneficiary at least as rapidly as under the
method of distribution selected by the Participant.
(2) If the Participant dies prior to the commencement of
benefits under the Plan and the Participant has not
designated a Beneficiary, any remaining interest payable
shall be fully paid within the five-year period following
the Participant's death.
(3) If--
(A) any portion of the Participant's benefits is payable to
a designated Beneficiary,
(B) this portion will be distributed over the life of the
Beneficiary or over a period not extending beyond the
life expectancy of the Beneficiary, and
(C) the distributions begin not later than December 31 of
the calendar year following the calendar year in which
the Participant's death occurred, or any later date
that the Secretary of the Treasury may prescribe by
regulations,
the portion referred to in paragraph (3)(A) shall be treated
as distributed within the time required under paragraph (2).
(4) If the designated Beneficiary referred to in paragraph
(3)(A) is the surviving spouse of the Participant, the date
on which distributions are required to begin under paragraph
(3)(C) shall not be earlier than the date on which the
Participant would have attained age 70-1/2.
42
<PAGE>
(e) INCIDENTAL BENEFIT REQUIREMENT. The minimum amount that must be
distributed each calendar year shall be determined in accordance
with the provisions of Q&A 6 and 7 of Treasury Regulation section
1.401(a)(9)-2.
(f) DISTRIBUTIONS TO BE MADE IN ACCORDANCE WITH TREASURY REGULATIONS.
Distributions under the Plan shall be made in accordance with
Treasury Regulations under Code section 401(a)(9), including
section 1.401(a)(9)-2.
6.5 PAYMENT OF SMALL AMOUNTS.
(a) GENERAL RULE. If the single sum Actuarial Equivalent of the
benefit payable to a Participant under Article V does not exceed
$3,500, the benefit shall be paid in a single sum as soon as
practicable following the Participant's Annuity Starting Date.
(b) DATE OF VALUATION. For purposes of this section 6.5, the present
value of any benefit to be paid as a single sum shall be determined
as of the date the payment is to be made. No interest shall be
added to the payment for the period (if any) beginning on that date
and ending on the date the payment is actually made.
(c) DIRECT ROLLOVER. In the case of a single sum distribution
available to a Participant after December 31, 1992, the Participant
may elect to have the distribution made in the form of a direct
rollover to an "eligible retirement plan" (within the meaning of
Code section 401(a)(31)). The Participant shall designate, in a
manner and at a time specified by the Committee, the eligible
retirement plan to which the distribution is to be paid and shall
provide all other information reasonably requested by the Committee
to complete the transfer. The Committee shall establish rules
regarding the eligibility of a Participant to elect a direct
rollover in accordance with the requirements of Code section
401(a)(31).
43
<PAGE>
6.6 WITHHOLDING TAXES. The Trustee may withhold from any payment under
this Plan any taxes required to be withheld with respect to benefits under this
Plan and any sum that the Trustee may reasonably estimate as necessary to cover
any taxes for which it may be liable and that may be assessed with respect to
benefits under this Plan.
44
<PAGE>
ARTICLE VII. SUSPENSION OF BENEFITS UPON CERTAIN EMPLOYMENT OR
REEMPLOYMENT
7.1 SUSPENSION OF BENEFITS. If a Participant continues to be employed
by the Company or an Affiliate after his or her Normal Retirement Age, or is
reemployed after he or she has received or begun to receive a benefit under the
Plan--
(a) no benefits shall be paid for any month in which the Participant is
credited with 40 or more Hours of Service;
(b) Department of Labor regulation section 2530.203-3, including the
notice procedures described in section 7.2, shall be followed for
the periods of employment or reemployment described in subsection
(a);
(c) in the case of a Participant who continues to be employed after his
or her Normal Retirement Age, benefits shall be determined pursuant
to section 5.2; and
(d) in the case of a Participant who is reemployed after receiving a
benefit under the Plan--
(1) benefits under the Plan shall be redetermined upon the
Participant's subsequent Termination of Service as if he or
she then first retires, based on the Participant's
employment and Earnings before and after his or her absence;
(2) this redetermined benefit shall be reduced by the Actuarial
Equivalent value of all payments previously received (but
not below the Actuarial Equivalent value of his or her
benefits at his or her prior retirement); and
(3) the Participant shall be entitled during this period of
reemployment (subject to the election procedures of Article
VI) to revise any prior election affecting the form in which
benefits are paid.
45
<PAGE>
7.2 SUSPENSION OF BENEFITS NOTICE PROCEDURES. In the case of a
Participant whose benefits are to be suspended after his or her Normal
Retirement Age, the Committee shall notify him of the suspension. This notice
shall be by personal delivery or first class mail during the first calendar
month for which payments are withheld. This notice shall contain:
(a) a general description of the reasons why payments are suspended;
(b) a general description of the Plan provisions relating to the
suspension of benefits;
(c) a copy of these Plan provisions;
(d) a statement that applicable Department of Labor regulations may be
found in section 2530.203-3 of Title 29 of the Code of Federal
Regulations; and
(e) a statement that a review of the suspension may be requested under
the appeals procedure in section 10.9.
If the summary plan description for the Plan contains information that is
substantially the same as the information required by this subsection, the
notice may refer the Participant to the relevant pages of the summary, provided
that the Participant is informed how to obtain a copy of the summary or the
relevant pages and that requests for information are honored within 30 days.
46
<PAGE>
ARTICLE VIII. PRERETIREMENT DEATH BENEFITS
8.1 PRERETIREMENT DEATH BENEFITS. A preretirement death benefit shall
be payable under this Article VIII to the surviving spouse of a married
Participant who dies before his or her Annuity Starting Date, but after
attaining a nonforfeitable right to his or her Accrued Benefit. No death
benefit shall be payable in the case of a Participant who dies before his or her
Annuity Starting Date and is not married at the time of his or her death.
8.2 AMOUNT AND COMMENCEMENT OF PRERETIREMENT DEATH BENEFIT.
(a) AMOUNT. Except as provided in section 8.3, the preretirement death
benefit payable to a surviving spouse pursuant to section 8.1 shall
be a monthly benefit determined as follows:
(1) In the case of a Participant who dies while an Employee or
on or after attaining Earliest Retirement Age, the amount of
the benefit shall be the amount payable as a survivor
annuity as if the Participant had retired with an immediate
100 percent joint and survivor annuity (as described in
section 6.3(b)) on the day before his or her death,
actuarially reduced for commencement before the
Participant's Earliest Retirement Age.
(2) In the case of any Participant not described in paragraph
(1), the amount of the benefit shall be the amount payable
as a survivor annuity as if the Participant had--
(A) terminated employment on the date of his or her death
(if employment had not yet terminated);
(B) survived to his or her Earliest Retirement Age;
(C) retired with an immediate Qualified Joint and Survivor
Annuity at his or her Earliest Retirement Age; and
47
<PAGE>
(D) died on the day after he or she would have attained his
or her Earliest Retirement Age.
(b) COMMENCEMENT. Payment of the preretirement death benefit described
in subsection (a) shall commence as of the first day of the month
following--
(1) the date on which the Participant would have attained
Earliest Retirement Age (in the case of a Participant not
described in subsection (a)(1)); or
(2) the date of the Participant's death (in the case of a
Participant described in subsection (a)(1)).
Notwithstanding the foregoing, the surviving spouse may elect, in
writing, to defer commencement of the preretirement death benefit
until the first day of any calendar month preceding or coinciding
with the date on which the Participant would have attained Normal
Retirement Age, but no later than that date. The monthly amount of
any preretirement death benefit that commences after the later of
the dates referenced in paragraphs (1) and (2) above shall be
increased (as if the Participant had deferred commencement of the
benefit) to reflect this deferral.
(c) DEATHS PRIOR TO JULY 1, 1992. Notwithstanding subsections (a) and
(b), a surviving spouse eligible for a preretirement death benefit
under this Article shall receive the benefit calculated pursuant to
subsection (a)(2) if the Participant dies--
(1) prior to July 1, 1992;
(2) while an Employee; and
(3) before attaining his or her Earliest Retirement Age.
Payment of this benefit shall commence as of the first day of the
month following the date on which the Participant would have
attained Earliest
48
<PAGE>
Retirement Age, subject to the spouse's right to defer commencement
of the benefit as provided in subsection (b).
8.3 LUMP SUM PAYMENTS.
(a) AUTOMATIC CASH-OUT. If the single sum Actuarial Equivalent of the
benefit payable to a surviving spouse under this Article does not
exceed $3,500, the benefit shall be paid in a single sum as soon as
practicable following the Participant's death.
(b) DATE OF VALUATION. For purposes of this section 8.3, the present
value of any benefit to be paid as a single sum shall be determined
as of the date the payment is to be made. No interest shall be
added to the payment for the period (if any) beginning on that date
and ending on the date the payment is actually made.
(c) DIRECT ROLLOVER. In the case of a single sum distribution
available to a surviving spouse after December 31, 1992, the spouse
may elect to have the distribution made in the form of a direct
rollover to an "eligible retirement plan" (within the meaning of
Code section 401(a)(31)) other than a qualified trust or an annuity
plan described in Code section 403(a). The spouse shall designate,
in a manner and at a time specified by the Committee, the eligible
retirement plan to which the distribution is to be paid and shall
provide all other information reasonably requested by the Committee
to complete the transfer. The Committee shall establish rules
regarding the eligibility of a spouse to elect a direct rollover in
accordance with the requirements of Code section 401(a)(31).
In no event shall a Beneficiary other than a surviving spouse be
entitled to elect a direct rollover of any distribution.
49
<PAGE>
ARTICLE IX. FINANCING
9.1 FINANCING. The Committee shall maintain a Retirement Fund as a
part of the Plan to implement the provisions of the Plan and to finance the
benefits under the Plan. The Committee shall enter into one or more Trust
Agreements or insurance contracts, or shall cause insurance contracts to be held
under a Trust Agreement. Any Trust Agreement so designated shall constitute a
part of this Plan. All rights that may accrue to any person under this Plan
shall be subject to all the terms and provisions of the Trust Agreement.
The Committee may modify any Trust Agreement or insurance contract from time to
time to accomplish the purposes of the Plan. The Committee may replace any
insurance company or appoint a successor Trustee or Trustees. By entering into
Trust Agreements or insurance contracts, the Committee shall establish a funding
policy for the Plan. The Committee shall vest in the Trustee and/or in one or
more investment managers appointed under the Trust Agreement responsibility for
the management and control of the Retirement Fund pursuant to this funding
policy. If the Committee appoints any investment manager, the Trustee shall not
be liable for the acts or omissions of this investment manager or have any
responsibility to invest or otherwise manage any portion of the Retirement Fund
subject to the management and control of the investment manager.
9.2 CONTRIBUTIONS. The Employers shall make contributions to the
Retirement Fund that, under accepted actuarial principles, are at least
sufficient to maintain the Plan as a qualified defined benefit plan meeting the
minimum funding standard requirements of the Code. All contributions made by
the Employers are strictly conditioned on their deductibility under Code section
404.
50
<PAGE>
Except as provided in Title I and Title IV of ERISA, all benefits payable under
the Plan shall be payable only from the Retirement Fund. No liability for the
payment of benefits under the Plan shall be imposed on the Company, Affiliates,
Trustees, their officers, directors, or employees, or the members of the
Committee.
Forfeitures arising under the Plan for any reason shall be used as soon as
possible to reduce the contributions of the Employers.
9.3 NONREVERSION. The Employers shall not have any right, title, or
interest in the contributions made to the Retirement Fund under the Plan. No
part of the Retirement Fund shall revert to the Employers except as follows.
(a) Upon complete termination of the Plan and the allocation and
distribution of the Retirement Fund under section 11.2, any funds
remaining in the Retirement Fund because of an erroneous actuarial
computation after the satisfaction of all fixed and contingent
liabilities under the Plan (which shall not include any subsidized
early retirement benefit for a Participant who has not reached
Early Retirement Age) shall revert to the Employers at that time.
(b) If a contribution is made to the Retirement Fund by an Employer by
a mistake of fact, the contribution may be returned within one year
after the payment of the contribution. To the extent part or all
of a contribution is disallowed as a deduction under Code section
404, it shall be returned within one year after the disallowance.
(c) If the Internal Revenue Service initially determines that the Plan
does not meet the requirements of Code section 401, the Plan shall
be null and void from its effective date, and any contributions
shall be returned to all contributors within one year following the
determination that the Plan does not meet these requirements,
unless the Company elects to make the
51
<PAGE>
changes to the Plan necessary to receive a determination from the
Internal Revenue Service that the requirements of Code section 401
are met.
52
<PAGE>
ARTICLE X. ADMINISTRATION
10.1 COMMITTEE. The Plan shall be administered by the Employee Benefits
Committee, appointed by the Board, which shall act as the "plan administrator"
and the "named fiduciary" within the meaning of Title I of ERISA. The Committee
shall be composed of as many members as the Board may appoint from time to time
and shall hold office at the pleasure of the Board. Any member of the Committee
may resign by delivering his or her written resignation to the Board. Vacancies
in the Committee arising by resignation, death, removal, or otherwise shall be
filled by the Board.
10.2 COMPENSATION AND EXPENSES. A member of the Committee shall serve
without compensation for these services if he or she is receiving full-time pay
from the Company or an Affiliate as an Employee. Any other member of the
Committee may receive compensation for services as a member, to be paid from the
Retirement Fund to the extent not paid by an Employer in its sole and absolute
discretion. Any member of the Committee may receive reimbursement by the
Retirement Fund for expenses properly and actually incurred to the extent these
expenses are not paid by an Employer in its sole and absolute discretion.
10.3 MANNER OF ACTION. A majority of the members of the Committee in
office shall constitute a quorum for the transaction of business. All
resolutions adopted and other actions taken by the Committee at any meeting
shall be by a majority vote of those present at the meeting. Upon the unanimous
concurrence in writing of the members in office, action of the Committee may be
taken other than at a meeting.
10.4 CHAIRMAN, SECRETARY, AND SPECIALISTS. The members of the Committee
may elect one of their number as chairman and may elect a secretary who may, but
need not, be a member of the Committee. They may authorize one or more of their
number or any agent to execute or deliver any instrument or instruments on their
behalf. The Committee may employ any counsel, auditors, and other specialists,
and any clerical, actuarial, and
53
<PAGE>
other services as it may require in carrying out the provisions of the Plan.
These expenses shall be paid by the Retirement Fund to the extent not paid by
the Employers in their sole and absolute discretion.
10.5 DELEGATION OF DUTIES. The Committee may appoint one or more
individuals and delegate any of its powers and duties as it deems desirable to
any such individual. In this case every reference in the Plan to the Committee
shall be deemed to mean or include these individuals as to matters within their
jurisdiction.
10.6 RECORDS. All resolutions, proceedings, acts, and determinations of
the Committee shall be recorded by the secretary or under his or her
supervision. All records, together with any documents and instruments as may be
necessary for the administration of the Plan, shall be preserved in the custody
of the secretary.
10.7 RULES. Subject to the terms of the Plan, the Committee may from
time to time in its discretion establish rules for the conduct of its affairs
and the exercise of the duties imposed upon it under the Plan.
10.8 ADMINISTRATION. Except with respect to duties delegated under the
terms of the Plan, the Committee shall be responsible for the administration of
the Plan. The Committee shall have all powers necessary or appropriate to carry
out the provisions of the Plan. It may, from time to time, establish rules for
the administration of the Plan and the transaction of the Plan's business.
In making any determination or rule, the Committee shall pursue uniform policies
established by the Committee. It shall not discriminate in favor of or against
any Participant. The Committee shall have the exclusive right to make any
finding of fact necessary or appropriate for any purpose under the Plan
including, but not limited to, the determination of the eligibility for and the
amount of any benefit payable under the Plan, all in its sole and absolute
discretion.
54
<PAGE>
The Committee shall have the exclusive right to interpret the terms and
provisions of the Plan and to determine any and all questions arising under the
Plan or in connection with its administration, including, without limitation,
the right to remedy or resolve possible ambiguities, inconsistencies, or
omissions, by general rule or particular decision, all in its sole and absolute
discretion. The Committee shall make, or cause to be made, all reports or other
filings necessary to meet the reporting, disclosure, and other filing
requirements of ERISA that are the responsibility of "plan administrators" under
ERISA.
Any exercise of these powers by the Committee shall be conclusive and binding
upon all persons having or claiming to have any interest or right under the Plan
and shall be given the maximum possible deference allowed by law.
10.9 APPEALS FROM DENIAL OF CLAIMS. If any claim for benefits under the
Plan is wholly or partially denied, the claimant shall be given notice in
writing of the denial. This notice shall be given in writing within a
reasonable period of time after receipt of the claim by the Committee. This
period will not exceed 90 days after receipt of the claim, except that if
special circumstances require an extension of time, written notice of the
extension shall be furnished to the claimant, and an additional 90 days will be
considered reasonable.
This notice shall be written in a manner calculated to be understood by the
claimant and shall set forth the following information:
(a) the specific reasons for the denial;
(b) a specific reference to the Plan provisions on which the
denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why this material or information is
necessary;
55
<PAGE>
(d) an explanation that a full and fair review by the Committee
of the decision denying the claim may be requested by the
claimant or an authorized representative by filing with the
Committee, within 60 days after the notice has been
received, a written request for review; and
(e) a statement that, if a request is so filed, the claimant or
an authorized representative may review pertinent documents
and submit issues and comments in writing within the same
60-day period specified in subsection (d).
The decision of the Committee upon review shall be made promptly, and not later
than 60 days after the Committee's receipt of the request for review, unless
special circumstances require an extension of time for processing. In this case
the claimant shall be so notified, and a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If the claim is denied, wholly or in part, the claimant shall be given a copy of
the decision promptly. The decision shall be in writing, shall include specific
reasons for the denial, shall include specific references to the pertinent Plan
provisions on which the denial is based, and shall be written in a manner
calculated to be understood by the claimant.
10.10 NOTICE OF ADDRESS AND MISSING PERSONS. Each person entitled to
benefits under the Plan must file with the Plan Administrator, in writing, his
or her post office address and each change of post office address. Any
communication, Statement, or notice addressed to a person at his or her last
reported post office address will be binding for all Purposes of the Plan. The
Plan Administrator, Company, Affiliates, Trustees, and insurance company shall
not be obliged to search for or ascertain his or her whereabouts. If a person
cannot be located, the Plan Administrator may direct that his or her benefit and
all further benefits with respect to him or her shall be discontinued, and all
liability
56
<PAGE>
for any payment shall terminate. However, in the event of the subsequent
reappearance of the Participant or Beneficiary prior to termination of the Plan,
the benefits due shall be recomputed and paid in accordance with the terms of
the Plan.
10.11 DATA AND INFORMATION FOR BENEFITS. All persons claiming benefits
under the Plan must furnish to the Plan Administrator or its designated agent
all documents, evidence, or information as the Plan Administrator or its
designated agent considers necessary or desirable to administer the Plan. Any
person must furnish this information promptly and sign any documents the Plan
Administrator or its designated agent may require before any benefits become
payable under the Plan.
10.12 INDEMNITY FOR LIABILITY. The Company shall indemnify each member
of the Committee against any and all claims, losses, damages, and expenses
(including counsel fees) incurred by the Committee. The Company shall indemnify
the Committee members against any liability (including any amounts paid in
settlement with the Committee's approval) arising from the member's or
Committee's action or failure to act. The Company is not liable to indemnify
these persons against claims, losses, damages, expenses, or liabilities that are
judicially determined to be attributable to gross negligence or willful
misconduct. The Company shall pay the premiums on any bond secured under this
section and shall be entitled to reimbursement by the other Employers for their
proportionate share.
10.13 EFFECT OF A MISTAKE. In the event of a mistake or misstatement as
to the eligibility, participation, or service of any Participant, or the amount
of payments made or to be made to a Participant or Beneficiary, the Plan
Administrator shall, if possible, cause these payment amounts to be withheld,
accelerated, or otherwise adjusted as will in its sole judgment result in the
Participant or Beneficiary receiving the proper amount of payments under this
Plan.
57
<PAGE>
10.14 SELF INTEREST. A member of the Committee who is also a Participant
shall not vote on any question relating specifically to himself or herself.
58
<PAGE>
ARTICLE XI. AMENDMENT AND TERMINATION
11.1 AMENDMENT AND TERMINATION.
(a) IN GENERAL. While the Company intends the Plan to be permanent,
the Company reserves the right to amend or modify in any respect,
or to terminate, the Plan at any time, for any reason whatsoever,
by a resolution of the Board, without prior notice other than as
specifically required by law. The Company may make any
modifications or amendments to the Plan, retroactively if necessary
or appropriate, to qualify or maintain the Plan as a plan meeting
the requirements of Code section 401(a) and ERISA.
The Committee shall also have the right to amend or modify the Plan
by action of its members pursuant to section 10.3, provided,
however, that the Company shall have the sole right to terminate
the Plan.
(b) PROHIBITED AMENDMENTS. Notwithstanding anything to the contrary in
subsection (a), no amendment of the Plan shall cause any part of
the Retirement Fund to be used for or diverted to purposes other
than the exclusive benefit of the Participants or Beneficiaries.
No plan amendment may decrease the Accrued Benefit of any
Participant. No plan amendment may (1) eliminate or reduce an
early retirement benefit or a retirement-type subsidy (as defined
in Treasury regulations) or (2) eliminate an optional form of
benefit with respect to benefits attributable to service before the
amendment, except as permitted under Code section 411(d)(6).
Retroactive plan amendments may not decrease the Accrued Benefit of
any Participant determined as of the time the amendment was
adopted, except as permitted by law or regulation.
59
<PAGE>
11.2 VESTING AND DISTRIBUTION ON TERMINATION.
(a) VESTING. Upon termination or partial termination of the Plan, the
rights of the Participants who are employed by the Company or an
Affiliate on the date of termination (and who in the case of a
partial termination are affected thereby) to their benefits accrued
under the Plan as of the date of the termination shall be
nonforfeitable to the extent then funded. However, in no event
shall any Participant or Beneficiary have recourse to other than
the Retirement Fund or, if applicable, the Pension Benefit Guaranty
Corporation.
(b) DISTRIBUTION. In the case of a complete termination of the Plan,
the assets then held in the Retirement Fund shall be allocated,
after payment of all expenses of administration or liquidation, in
the manner prescribed by ERISA section 4044. If any assets remain,
they shall revert to the Employers as provided in section 9.3.
Distribution may be implemented through the continuance of the
Retirement Fund, the creation of a new retirement fund, the
purchase of nontransferable annuity contracts, a cash distribution,
or a combination thereof, subject to the requirements of the
Pension Benefit Guaranty Corporation.
11.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or
consolidation of the Plan with (or in the case of any transfer of assets or
liabilities of the Plan to or from) any other plan, each Participant in the Plan
shall (if the Plan then terminated) receive a benefit immediately after the
merger, consolidation, or transfer that is equal to or greater than the benefit
he or she would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated).
60
<PAGE>
ARTICLE XII. RESTRICTIONS ON BENEFITS
12.1 RESTRICTIONS PRIOR TO MAY 14, 1990. Notwithstanding any other
provisions in the Plan to the contrary, for periods prior to May 14, 1990, the
benefits provided under this Plan for Employees (including retired Employees)
who are among the 25 most highly compensated Employees as of the date the
initial adoption of this Plan became effective or as of any later date as of
which any amendment of the Plan increases the retirement benefits hereunder for
such Employees (each of which dates shall hereinafter be referred to as a
"Restricted Date"), and whose anticipated annual benefits from Employer
contributions exceed $1,500, shall be subject to the following restrictions:
(a) If on any date prior to ten years after a Restricted Date the Plan
is terminated, the benefits from Employer contributions payable to
any Employee in this group shall not exceed the benefit that can be
provided from the greater of the following:
(1) the Employer contributions (or funds attributable thereto)
that would have been applied to provide benefits for the
Employee under the Plan as in effect on the day before such
applicable Restricted Date had it continued in effect
unchanged to such date of termination of the Plan;
(2) $20,000;
(3) the sum of--
(A) the Employer contributions (or funds attributable
thereto) that would have been applied to provide
benefits for the Employee under the Plan as in effect
on the day before such applicable Restricted Date, if
it had been terminated on the day before such
applicable Restricted Date; and
(B) an amount computed by multiplying
61
<PAGE>
(i) 20 percent of the Employee's average annual
compensation for the last five years of his or her
Vesting Service or
(ii) $10,000, whichever is the lesser, by the number of
years elapsing between the applicable Restricted
Date and such date of termination of the Plan; or
(4) the present value of the benefit guaranteed for such
Participant under ERISA section 4022.
(b) If any Participant in this group leaves the employ of the Employer
when the full current costs have not been met, the funds or
benefits from Employer contributions that any Participant in such
group may receive (including any funds or benefits from Employer
contributions he or she has already received) shall not, at any
time prior to ten years after an applicable Restricted Date, exceed
the funds or benefits from Employer contributions that he could
receive in accordance with subsection (a) above if the Plan were
terminated at the time he or she receives such funds or benefits;
provided, however, that neither subsection (b) nor subsection (a)
of this section 12.1 shall restrict the current payment of the full
monthly retirement benefits called for by the Plan for any
Participant in such group while the Plan is in full effect and its
full current costs have been met.
12.2 RESTRICTIONS ON BENEFITS. Notwithstanding any other provisions in
this Plan to the contrary, for the period beginning on May 14, 1990, the Plan
must observe the restrictions described in subsections (a) and (b).
(a) RESTRICTIONS ON BENEFITS. In the event of a plan termination, the
benefit payable to any Participant who is a Highly Compensated
Employee
62
<PAGE>
(including a former Employee) as defined in section 2.18 must be
nondiscriminatory under Code section 401(a)(4).
(b) RESTRICTIONS ON DISTRIBUTIONS. Annual benefits payable to
Participants described in subsection (a) who are also among the 25
most highly compensated Employees or former Employees are limited
to the amount that could be paid out as a Single Life Annuity that
is the Actuarial Equivalent of the Employee's Accrued Benefit and
other benefits to which the Employee is entitled under the Plan
unless--
(1) after the payment of such benefit, the value of Plan assets
equals or exceeds 110 percent of the value of the Plan's
"current liabilities" (as defined in Code section
412(l)(7));
(2) the value of such benefit is less than 1 percent of the
value of the Plan's "current liabilities" (as defined in
Code section 412(l)(7)); or
(3) the value of such benefit does not exceed $3,500.
63
<PAGE>
ARTICLE XIII. TOP-HEAVY PROVISIONS
13.1 APPLICATION OF TOP-HEAVY PROVISIONS.
(a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2)
below, if as of a Determination Date the sum of the Section 416
Benefits of Key Employees and the Beneficiaries of deceased Key
Employees exceeds 60 percent of the Section 416 Benefits of all
Participants (other than former Key Employees) and their
Beneficiaries, the Plan is top-heavy. In this event, the
provisions of this Article shall become applicable.
(b) AGGREGATION GROUP DETERMINATION.
(1) If as of a Determination Date the Plan is part of a top-
heavy Aggregation Group, the provisions of this Article shall become applicable.
Top-heaviness for the purpose of this subsection shall be determined with
respect to the Aggregation Group in the same manner as described in subsection
(a).
(2) If the Plan is top-heavy under subsection (a), but the
Aggregation Group is not top-heavy, this Plan shall not be
top-heavy, and this Article shall not be applicable.
(c) PLAN ADMINISTRATOR. The Plan Administrator shall have
responsibility to make all calculations to determine whether the
Plan is top-heavy.
13.2 DEFINITIONS.
(a) "AGGREGATION GROUP" means the Plan and all other plans maintained
by the Company and all Affiliates that cover a Key Employee and any
other plan that enables a plan covering a Key Employee to satisfy
Code section 401(a)(4) or 410. In addition, at the election of the
Plan Administrator, the Aggregation Group may include any other
qualified plan maintained by the
64
<PAGE>
Company or an Affiliate if this expanded Aggregation Group
satisfies Code sections 401(a)(4) and 410.
(b) "DETERMINATION DATE" means the last day of the Plan Year
immediately preceding the Plan Year for which top-heaviness is to
be determined.
(c) "KEY EMPLOYEE" means a Participant who is a "key employee" under
Code section 416(i).
(d) "SECTION 416 BENEFIT" means the sum of--
(1) the present value of the Accrued Benefit credited as of a
Determination Date to a Participant or Beneficiary under the
Plan and any other qualified defined benefit plan that is
part of an Aggregation Group;
(2) the amount credited to a Participant's or Beneficiary's
account under a qualified defined contribution plan that is
part of an Aggregation Group; and
(3) the amount of distributions to the Participant or
Beneficiary during the five-year period ending on the
Determination Date. Such distributions shall not include
any tax-free rollover contribution (or similar transfer)
that is not initiated by the Participant or is contributed
to a plan maintained by the Company or an Affiliate;
reduced by--
(4) the amount of rollover contributions (or similar transfer)
and earnings thereon credited as of a Determination Date
under the Plan or a plan forming part of an Aggregation
Group that is attributable to a rollover contribution (or
similar transfer) initiated by the Participant and derived
from a plan not maintained by the Company or an Affiliate.
65
<PAGE>
The present value of the Accrued Benefits shall be determined as of
the most recent valuation date used for Code section 412 that is
within the 12-month period ending on the Determination Date. The
Accrued Benefit of a current Participant shall be determined as if
the Participant terminated service as of the valuation date. In
valuing Accrued Benefits under this Article XIII, the Plan
Administrator shall be able to use any reasonable actuarial
assumptions permitted under Code section 416.
The account or Accrued Benefit of a Participant who was a Key
Employee and who subsequently meets none of the conditions of
subsection (c) above for the Plan Year containing the Determination
Date is not a Section 416 Benefit. This accrual or account balance
shall be excluded from all computations under this Article.
Furthermore, if a Participant has not received any compensation
from the Company or an Affiliate (other than benefits under the
Plan) during the five-year period ending on the Determination Date,
any Accrued Benefit for the Participant (and any account of the
Participant) shall not be taken into account.
13.3 VESTING REQUIREMENTS.
(a) If the Plan is determined to be top-heavy with respect to a Plan
Year under the provisions of section 13.1, a Participant's interest
in his or her Accrued Benefit shall vest in accordance with the
following schedule:
Years of
Continuous Service Vesting Percentage
------------------ ------------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%
66
<PAGE>
The vesting provisions described in this subsection shall not apply
to a Participant who does not have an Hour of Service after the
Plan becomes top-heavy.
(b) If in a subsequent Plan Year the Plan is no longer top-heavy, the
vesting provisions that were in effect prior to the time the Plan
became top-heavy shall be reinstated. Any portion of a
Participant's Accrued Benefit that was vested prior to the time the
Plan was no longer top-heavy shall remain vested, and a Participant
who has at least three years of Vesting Service at the start of
such Plan Year shall have the option, to the extent required by
law, of remaining under the vesting schedule in effect while the
Plan was top-heavy.
13.4 MINIMUM BENEFIT.
(a) MINIMUM ACCRUAL FORMULA. If the Plan is determined to be top-heavy
under the provisions of section 13.1 with respect to a Plan Year,
the Accrued Benefit, when expressed as an Annual Retirement Benefit
(as defined below), of a Participant who is not a Key Employee
shall not be less than the difference between paragraphs (1) and
(2) where--
(1) is the product of--
(A) the number of Years of Top-Heavy Service (as defined
below); and
(B) 2 percent of the Participant's average compensation (as
defined in Code section 415, but limited pursuant to
Code section 401(a)(17)) during the period of the five
consecutive Years of Top-Heavy Service during which the
Participant had the greatest aggregate compensation;
67
<PAGE>
provided, however, that this product shall not exceed
20 percent of the average compensation; and
(2) is the amount of the Annual Retirement Benefit that would be
provided by the Participant's account balance attributable
to Employer contributions under a defined contribution plan
which is included in an Aggregation Group.
(b) DEFINITIONS.
(1) ANNUAL RETIREMENT BENEFIT means a benefit payable annually
in the form of a Single Life Annuity commencing at age 65.
If the benefit is payable in another form or commences at
another time, the amount described in subsection (a) above
shall be adjusted on an Actuarial Equivalent basis.
Preretirement death benefits shall not cause a reduction in
the amount of the benefit.
(2) A YEAR OF TOP-HEAVY SERVICE shall be credited for each year
of Vesting Service that is credited with respect to a Plan
Year in which the Plan is top-heavy.
13.5 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT.
(a) GENERAL. If the Plan is determined to be top-heavy under section
13.1, Code section 415(e) shall be applied to the Plan by
substituting "1.0" for "1.25" each place "1.25" appears in Code
section 415(e)(2)(B) and 415(e)(3)(B) .
(b) EXCEPTION. Subsection (a) above shall not be applicable if--
(1) section 13.4(a)(1)(B) is applied by substituting "3 percent"
for "2 percent";
(2) section 13.4(a)(1) is applied by increasing (but not by more
than 10 percentage points) "20 percent" by 1 percentage
point for each year
68
<PAGE>
for which such plan was taken into account under this
subsection; and
(3) the Plan would not be top-heavy if "90 percent" is
substituted for "60 percent" in section 13.1(a).
(c) TRANSITION RULE. If, but for this subsection, subsection (a) above
would begin to apply with respect to the Plan, the application of
subsection (a) above shall be suspended with respect to a
Participant so long as there are--
(1) no Employer contributions, forfeitures, or voluntary
nondeductible contributions allocated to the Participant;
and
(2) no accruals under a qualified defined benefit plan for the
Participant.
13.6 COLLECTIVE BARGAINING AGREEMENTS. The requirements of sections
13.3 and 13.4 shall not apply with respect to any Employee included in a unit of
Employees covered by a collective bargaining agreement between Employee
representatives and an Employer if retirement benefits were the subject of good
faith bargaining between the Employee representatives and the Employer.
69
<PAGE>
ARTICLE XIV. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE
14.1 PARTICIPATION IN THE PLAN. Any Affiliate that desires to become an
Employer hereunder may elect, with the consent of the Board, to become a party
to the Plan and Trust Agreement. The Affiliate shall adopt the Plan for the
benefit of its eligible Employees, effective as of the date specified in the
adoption resolution--
(a) by filing with the Company a certified copy of a resolution of its
board of directors to that effect, and any other instruments as the
Company may require; and
(b) by the Company's filing with the Trustee or insurance company a
copy of the resolution.
The adoption resolution may contain any specific changes in Plan or Trust
Agreement terms applicable to any adopting Affiliate and its Employees that are
acceptable to the Company and the Trustee or insurance company. The Company may
not amend any such specific changes and variations in these terms without the
consent of the Affiliate. However, the sole, exclusive right of any other
amendment of whatever kind or extent to the Plan or Trust Agreement is reserved
by the Company. The adoption resolution or decision shall become, as to the
Affiliate and its Employees, a part of this Plan as then amended or thereafter
amended and the related Trust Agreement. It shall not be necessary for the
adopting Affiliate to sign or execute the original or then amended Plan and
Trust Agreement documents. The coverage date of the Plan for any adopting
Affiliate shall be that stated in the resolution of adoption. From and after
the effective date, the adopting Affiliate shall assume all the rights,
obligations, and liabilities of an individual Employer entity hereunder and
under the Trust Agreement. The administrative powers and control of the
Company, as provided in the Plan and Trust Agreement, including the sole right
to amendment, and of appointment and removal of the
70
<PAGE>
Committee, the Trustee, and their successors, shall not be diminished by reason
of the participation of any adopting Affiliate in the Plan and Trust Agreement.
14.2 WITHDRAWAL FROM THE PLAN. Any Employer, by action of its board of
directors or other governing authority, may withdraw from the Plan and Trust
Agreement after giving 90 days' notice to the Board, if the Board consents to
the withdrawal. In the event this withdrawal constitutes a partial termination
of the Plan, the affected Participants in the part of the Plan that is
terminated shall have fully vested and nonforfeitable rights to their Accrued
Benefits.
Distribution upon a withdrawal may be implemented through continuation of the
Retirement Fund, or transfer to another trust fund exempt from tax under Code
section 501, or to a group annuity contract qualified under Code section 401.
However, no action shall divert any part of the fund to any purpose other than
the exclusive benefit of the Employees of the Employer prior to the satisfaction
of all liabilities under the Plan as provided under section 9.3.
71
<PAGE>
ARTICLE XV. GENERAL PROVISIONS
15.1 INCOMPETENCY. Every person receiving or claiming benefits under
the Plan shall be conclusively presumed to be mentally competent and of age
until the Plan Administrator receives written notice, in a form and manner
acceptable to it, that the person is incompetent or a minor, and that a
guardian, conservator, or other person legally vested with the care of his or
her estate has been appointed. If the Plan Administrator finds that any person
to whom a benefit is payable under the Plan is unable to care properly for his
or her affairs, or is a minor, any payment due (unless a prior claim therefor
shall have been made by a duly appointed legal representative) may be paid to
the spouse, child, parent, brother, or sister of that person, or to any person
deemed by the Plan Administrator to have incurred expense for the person
otherwise entitled to payment.
If a guardian or conservator of the estate of any person receiving or claiming
benefits under the Plan is appointed by a court of competent jurisdiction,
payments shall be made to the guardian or conservator if proper proof of the
appointment is furnished in a form and manner suitable to the Plan
Administrator.
To the extent permitted by law, any payment made under the provisions of this
section shall be a complete discharge of liability under the Plan.
15.2 NONALIENATION OF BENEFITS. Except as provided in Code section
401(a)(13), no benefit payable at any time under the Plan shall be subject in
any manner to alienation, sale, transfer, assignment, pledge, attachment,
garnishment, or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge, or otherwise encumber any benefit, whether presently
or thereafter payable, shall be void. The Retirement Fund under the Plan shall
not in any manner be liable for or subject to the debts or liabilities of any
Participant or Beneficiary entitled to any benefit.
72
<PAGE>
The preceding paragraph shall also apply to the creation, assignment, or
recognition of a right to any interest or benefit payable with respect to a
Participant pursuant to a domestic relations order, unless the order is
determined to be a qualified domestic relations order (as defined in Code
section 414(p)). The Plan Administrator shall establish reasonable procedures
to determine the qualified status of domestic relations orders and to administer
distributions under these orders.
15.3 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the service of the
Company or an Affiliate or to interfere with the right of the Company or an
Affiliate to discharge or retire any Employee at any time.
15.4 APPLICABLE LAW. To the extent not preempted by ERISA, the Plan
shall be governed by and construed according to the laws of the state of
Georgia.
15.5 SEVERABILITY. If a provision of this Plan shall be held illegal or
invalid, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included in this Plan.
73
<PAGE>
* * * * * * * *
IN WITNESS WHEREOF, GULFSTREAM AEROSPACE CORPORATION (GEORGIA) has
caused this Plan to be signed and its corporate seal to be hereunto affixed by
its duly authorized officers, this 28th day of June, 1994.
GULFSTREAM AEROSPACE
CORPORATION (GEORGIA)
By: /s/ Robert L. Williams
-----------------------
Title: Treasurer
ATTEST:
By: /s/ Donald L. Mayer
-------------------
Title: Senior Vice President
and Secretary
74
<PAGE>
APPENDIX
75
<PAGE>
APPENDIX A
OPTIONAL BENEFIT FORM FACTORS
FOR ALL PARTICIPANTS
Except as otherwise provided for Employees prior to January 1, 1984, the amount
payable to a Participant or his or her Beneficiary will be adjusted to reflect
the payment of benefits in one of the forms listed below by applying the
following reduction factors.
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY (SECTION 6.2). The Participant's
monthly benefit equals 90 percent of the monthly benefit payable as a
Single Life Annuity. The surviving spouse's monthly benefit equals 45
percent of the Participant's Single Life Annuity benefit.
(b) QUALIFIED JOINT AND SURVIVOR ANNUITY WITH POP-UP FEATURE (SECTION 6.3(C)).
The Participant's monthly benefit equals 88.5 percent of the monthly
benefit payable as a Single Life Annuity. The surviving spouse's monthly
benefit equals 44.25 percent of the Participant's Single Life Annuity
benefit.
(c) JOINT AND SURVIVOR ANNUITY OPTION (SECTION 6.3(B)). The Participant's
monthly benefit equals 75 percent of the monthly benefit payable as a
Single Life Annuity. The surviving spouse's monthly benefit equals 75
percent of the Participant's Single Life Annuity benefit.
(d) JOINT AND SURVIVOR ANNUITY OPTION WITH POP-UP FEATURE (SECTION 6.3(C)). The
Participant's monthly benefit equals 73 percent of the benefit payable as a
Single Life Annuity. The surviving spouse's monthly benefit equals 73
percent of the Participant's Single Life Annuity benefit.
(e) FIVE-YEAR CERTAIN AND LIFE ANNUITY OPTION (SECTION 6.3(A)). The
Participant's monthly benefit equals 95 percent of the monthly benefit
payable as a Single Life Annuity.
A-1
<PAGE>
(f) TEN-YEAR CERTAIN AND LIFE ANNUITY OPTION (SECTION 6.3(A)). The
Participant's monthly benefit equals 90 percent of the monthly benefit
payable as a Single Life Annuity.
(g) 15-Year Certain and Life Annuity Option (section 6.3(a)). The Participant's
monthly benefit equals 80 percent of the monthly benefit payable as a
Single Life Annuity.
A-2
<PAGE>
OPTIONAL BENEFIT FORM FACTORS
FOR PARTICIPANTS PRIOR TO 1984
In the case of any Participant who is credited with an Hour of Service prior to
January 1, 1984 and who receives benefits in one of the forms listed below, the
amount payable to the Participant or his or her Beneficiary will be adjusted by
applying the following reduction factors, if this calculation would produce a
larger benefit amount than would otherwise be determined under the Plan.
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY (SECTION 6.2). The Participant's
monthly benefit equals 90 percent of the monthly benefit payable as a
Single Life Annuity, increased by .50 percent for each year that the
spouse's age exceeds the Participant's age (up to a maximum factor of 95
percent) and reduced by .50 percent for each year that the Participant's
age exceeds the spouse's age.
(b) Qualified Joint and Survivor Annuity with Pop-Up Feature (section 6.3(c)).
The Participant's monthly benefit equals the amount calculated under (a)
above by substituting 88.5 percent for 90 percent.
(c) Joint and Survivor Annuity Option (section 6.3(b)). The Participant's
monthly benefit equals 80 percent of the monthly benefit payable as a
Single Life Annuity, increased by .75 percent for each year that the
spouse's age exceeds the Participant's age (up to a maximum factor of 87.5
percent) and reduced by .75 percent for each year that the Participant's
age exceeds the spouse's age.
(d) Joint and Survivor Annuity Option with Pop-Up Feature (section 6.3(c)). The
Participant's monthly benefit equals the amount calculated under (a) above
by substituting 78 percent for 80 percent.
A-3
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of April 1, 1991)
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of April 1, 1991)
TABLE OF CONTENTS
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 Establishment of Plan 1
1.2 Purpose of Plan 1
ARTICLE II. DEFINITIONS
2.1 Aerospace Plan 2
2.2 Affiliate 2
2.3 Beneficiary 2
2.4 Boards of Directors 2
2.5 Committee 2
2.6 Companies 2
2.7 Earliest Retirement Age 2
2.8 Employee 2
2.9 Employer 3
2.10 Participant 3
2.11 Qualified Joint and Survivor Annuity 3
2.12 Supplemental Plan 3
2.13 Technologies Plan 3
2.14 Vesting Service 3
ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility 4
3.2 Participation 4
ARTICLE IV. BENEFITS
4.1 Supplemental Retirement Benefits 5
4.2 Deferred Supplemental Retirement Benefits 8
4.3 Form of Payment 9
4.4 Preretirement Death Benefits 9
4.5 Payment of Small Amounts 11
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of April 1, 1991)
TABLE OF CONTENTS
(Continued)
ARTICLE V. FINANCING
5.1 Financing 12
5.2 Unsecured Interest 12
ARTICLE VI. BENEFICIARY
6.1 Payments to Beneficiary 13
ARTICLE VII. ADMINISTRATION
7.1 Administration 14
7.2 Appeals from Denial of Claims 14
7.3 Tax Withholding 16
7.4 Expenses 16
ARTICLE VIII. ADOPTION OF THE PLAN BY AFFILIATE;
AMENDMENT AND TERMINATION OF THE PLAN
8.1 Adoption of the Plan by Affiliate 17
8.2 Amendment and Termination 17
ARTICLE IX. MISCELLANEOUS PROVISIONS
9.1 No Contract of Employment 18
9.2 Severability 18
9.3 Applicable Law 18
ii
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of April 1, 1991)
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT OF PLAN. Gulfstream Aerospace Corporation
(Georgia) and Gulfstream Aerospace Corporation (Oklahoma) hereby establish a
supplemental retirement plan for selected Employees. The plan is effective
April 1, 1991 and shall be known as the Gulfstream Aerospace Corporation
Supplemental Executive Retirement Plan (the "Supplemental Plan").
The Supplemental Plan is an unfunded plan of deferred compensation for a select
group of management or highly compensated employees. The Supplemental Plan,
therefore, is intended to be exempt from the participation, vesting, funding,
and fiduciary requirements of Title I of the Employee Retirement Income Security
Act of 1974.
1.2 PURPOSE OF PLAN. The purpose of this Supplemental Plan is to ensure
that selected Employees receive a total retirement benefit equal to the amounts
that would have been payable under the Gulfstream Aerospace Corporation Pension
Plan and the Gulfstream Aerospace Technologies Salaried Employees' Pension Plan
if those plans had not been amended in certain respects to comply with the Tax
Reform Act of 1986.
1
<PAGE>
ARTICLE II. DEFINITIONS
Whenever used in this Supplemental Plan, the following terms shall have the
meanings set forth below unless otherwise expressly provided. When the defined
meaning is intended, the term is capitalized. The definition of any term in the
singular shall also include the plural, whichever is appropriate in the context.
2.1 "AEROSPACE PLAN" means the Gulfstream Aerospace Corporation Pension
Plan, as it may be amended from time to time.
2.2 "AFFILIATE" means any corporation, association, joint venture,
proprietorship, or partnership while it is connected with a Company through
stock ownership, common control, membership in an affiliated service group, or
otherwise within the meaning of section 414(b), (c), (m), and (o) of the
Internal Revenue Code of 1986.
2.3 "BENEFICIARY" means the Participant's "Beneficiary" as determined
under the Aerospace Plan or the Technologies Plan (as applicable).
2.4 "BOARDS OF DIRECTORS" means the Boards of Directors of the Companies.
2.5 "COMMITTEE" means the committee appointed by the Boards of Directors
to administer the Plan.
2.6 "COMPANIES" means Gulfstream Aerospace Corporation (Georgia) and
Gulfstream Aerospace Corporation (Oklahoma).
2.7 "EARLIEST RETIREMENT AGE" means the earliest date on which a
Participant could begin to receive benefits under section 4.1.
2.8 "EMPLOYEE" means any person who is employed by an Employer. Where
the context requires, the term "Employee" shall also refer to a former Employee.
2
<PAGE>
2.9 "EMPLOYER" means the Companies and any Affiliate that elects to
become a party to the Supplemental Plan with the approval of the Companies.
2.10 "PARTICIPANT" means an individual who has met and continues to meet
the eligibility requirements described in section 3.1.
2.11 "QUALIFIED JOINT AND SURVIVOR ANNUITY" means the "Qualified Joint and
Survivor Annuity" as defined in the Aerospace Plan or the Technologies Plan (as
applicable).
2.12 "SUPPLEMENTAL PLAN" means this Gulfstream Aerospace Corporation
Supplemental Executive Retirement Plan, as it may be amended from time to time.
2.13 "TECHNOLOGIES PLAN" means the Gulfstream Aerospace Technologies
Salaried Employees' Pension Plan, as it may be amended from time to time.
2.14 "VESTING SERVICE" means "Vesting Service" as determined under the
Aerospace Plan.
3
<PAGE>
ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY . An Employee shall be eligible to participate in
this Supplemental Plan if--
(a) he or she is (or, at his or her termination of employment, was) a
member of a select group of management or highly compensated
employees; and
(b) he or she is designated as eligible to participate by the
Committee.
3.2 PARTICIPATION. Unless otherwise specified by the Committee, an
Employee who has satisfied the eligibility requirements of section 3.1 shall
become a Participant on the first day of the month following the date on which
the Committee designates the Employee as a Participant.
4
<PAGE>
ARTICLE IV. BENEFITS
4.1 SUPPLEMENTAL RETIREMENT BENEFITS.
(a) ELIGIBILITY. A Participant who terminates employment after
becoming eligible for a benefit under the Aerospace Plan or the
Technologies Plan shall be eligible for a benefit under this
Supplemental Plan.
(b) AMOUNT.
(1) AEROSPACE PLAN PARTICIPANTS. A Participant eligible for a
benefit under the Aerospace Plan shall be entitled to a monthly
benefit under this Supplemental Plan equal to--
(A) the monthly benefit that would have been payable
to the Participant under the Aerospace Plan in the form of a
single life annuity if the benefit accrued by the
Participant (if any) for the period from January 1, 1989
through December 31, 1990 had been calculated under section
5.1 of the Aerospace Plan as in effect on December 31, 1988,
but limited in accordance with section 401(a)(17) of the
Internal Revenue Code;
reduced by--
(B) the monthly benefit that is payable to the
Participant under the Aerospace Plan in the form of a single
life annuity.
(2) TECHNOLOGIES PLAN PARTICIPANTS. A Participant
eligible for a benefit under the Technologies Plan shall be
entitled to a monthly benefit under this Supplemental Plan equal
to--
5
<PAGE>
(A) the monthly benefit that would have been payable
to the Participant under the Technologies Plan in the form
of a single life annuity if this benefit had been calculated
under section 5.1 of the Technologies Plan as in effect on
December 31, 1988, but limited in accordance with section
401(a)(17) of the Internal Revenue Code;
reduced by--
(B) the monthly benefit that is payable to the
Participant under the Technologies Plan in the form of a
single life annuity.
(3) In the case of a Participant whose benefits commence
prior to attaining age 65, the monthly benefit amounts described
in paragraphs (1) and (2) shall be reduced in accordance with the
reduction factors for early retirement provided in the Aerospace
Plan or the Technologies Plan (as applicable).
(c) COMMENCEMENT.
(1) AEROSPACE PLAN PARTICIPANTS. Subject to paragraph (3)
(commencing benefits at age 70 1/2) and section 4.2 (providing for
deferred benefits), monthly supplemental retirement benefits
shall begin as follows for Participants who are eligible for a
benefit under the Aerospace Plan.
(A) In the case of any such Participant who has completed
at least 20 years of Vesting Service, benefits shall begin
as of the first day of the month that coincides with or next
follows the later of--
(i) the Participant's termination of employment; or
6
<PAGE>
(ii) the date on which the Participant attains age 50.
(B) In the case of any such Participant who is hired before
October 1, 1988 and who has not completed at least 20 years
of Vesting Service, benefits shall begin as of the first day
of the month that coincides with or next follows the later
of--
(i) the Participant's termination of employment; or
(ii) the date on which the Participant attains age 60.
(C) In the case of any such Participant who is hired on or
after October 1, 1988 and who has completed at least ten
years (but fewer than 20 years) of Vesting Service, benefits
shall begin as of the first day of the month that coincides
with or next follows the later of--
(i) the Participant's termination of employment; or
(ii) the date on which the Participant attains age 60.
(D) In the case of any such Participant who is hired
on or after October 1, 1988 and who has not completed at
least ten years of Vesting Service, benefits shall begin as
of the first day of the month that coincides with or next
follows the later of--
(i) the Participant's termination of employment; or
(ii) the date on which the Participant attains age 65.
(2) TECHNOLOGIES PLAN PARTICIPANTS. Subject to paragraph (3)
(commencing benefits at age 70 1/2) and section 4.2 (providing for
deferred benefits), monthly supplemental retirement benefits for
Participants who are eligible
7
<PAGE>
for a benefit under the Technologies Plan shall begin as of the
first day of the month that coincides with or next follows the
later of--
(A) the Participant's termination of employment; or
(B) the date on which the Participant attains age 55.
(3) REQUIRED COMMENCEMENT DATE. In any event monthly supplemental
retirement benefits shall begin no later than the April 1
following the calendar year in which the Participant attains age
70 1/2, in accordance with section 401(a)(9) of the Internal
Revenue Code.
4.2 DEFERRED SUPPLEMENTAL RETIREMENT BENEFITS.
(a) DELAYED COMMENCEMENT. The Committee, in its sole and absolute
discretion, may delay the commencement of a retirement benefit payable
under section 4.1 beyond the applicable date specified in section
4.1(c). Monthly retirement benefits may begin as of the first day of
any month following the date so specified, as provided by the
Committee, but in no event may the Committee delay the commencement
date of benefits past the first day of the month that coincides with
or next follows the date on which the Participant attains age 65.
(b) AMOUNT. If the Committee elects to delay the commencement of a
Participant's retirement benefit under subsection (a), the amount
payable as of the delayed commencement date shall be adjusted in
accordance with the Aerospace Plan or the Technologies Plan (as
applicable) to reflect this delay.
8
<PAGE>
4.3 FORM OF PAYMENT.
(a) NORMAL FORM. Except as otherwise provided in subsection (b) and
section 4.5 (regarding payment of small amounts), benefits under
sections 4.1 and 4.2 shall be paid in the form of--
(1) a single life annuity for a Participant who is not married when
benefit payments under this Supplemental Plan begin; or
(2) a Qualified Joint and Survivor Annuity for a Participant who is
married when benefit payments under this Supplemental Plan begin.
(b) OPTIONAL FORMS. In lieu of the normal form of payment described in
subsection (a), the Committee may direct, in its sole and absolute
discretion, that benefits under this Supplemental Plan be paid in one of
the optional forms of payment available under the Aerospace Plan or the
Technologies Plan (as applicable). Monthly payments under any optional
form of payment shall be adjusted in the manner described in the Aerospace
Plan or the Technologies Plan (as applicable) so that payments under the
optional form are the actuarial equivalent of payments under the normal
form described in subsection (a).
4.4 PRERETIREMENT DEATH BENEFITS.
(a) ELIGIBILITY. The surviving spouse of a married Participant shall be
eligible to receive a monthly preretirement death benefit if the
Participant dies after becoming eligible for a benefit under the
Aerospace Plan or the Technologies Plan, but before benefits under
this Supplemental Plan begin.
(b) AMOUNT. The monthly payments to an eligible surviving spouse under
subsection (a) shall equal the amounts that would have been payable as
a survivor annuity under the Qualified Joint and Survivor Annuity if--
9
<PAGE>
(1) in the case of a Participant who dies after attaining Earliest
Retirement Age, the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his or her
death; or
(2) in the case of a Participant who dies on or before Earliest
Retirement Age, the Participant had terminated employment on the
date of death (if employment had not yet terminated), survived to
Earliest Retirement Age, retired with an immediate Qualified
Joint and Survivor Annuity on Earliest Retirement Age, and died
on the day after the day on which he or she would have attained
Earliest Retirement Age.
(c) COMMENCEMENT. Preretirement death benefits shall begin as of the
first day of the month that coincides with or next follows--
(1) the date on which the Participant would have attained Earliest
Retirement Age (in the case of a Participant who dies prior to
attaining Earliest Retirement Age); or
(2) the date of the Participant's death (in the case of a Participant
who dies on or after attaining Earliest Retirement Age).
Notwithstanding the foregoing, the Committee may elect, in its
sole and absolute discretion, to delay commencement of the
preretirement death benefit until the first day of any month that
coincides with or next follows the date on which the Participant
would have attained age 65. The monthly amount of any
preretirement death benefit so delayed by the Committee shall be
adjusted in accordance with the Aerospace Plan or the
Technologies Plan (as applicable) to reflect this delay.
10
<PAGE>
4.5 PAYMENT OF SMALL AMOUNTS. If the single sum actuarial equivalent
of the monthly benefit payable to any person under the Supplemental Plan is less
than $3,500, the Committee may direct, in its sole and absolute discretion, that
the benefit shall be paid in a single sum as soon as practicable following the
Participant's termination of employment or death (whichever is applicable). For
this purpose, actuarial equivalence shall be determined in accordance with the
actuarial assumptions described in the Aerospace Plan or the Technologies Plan
(as applicable).
11
<PAGE>
ARTICLE V. FINANCING
5.1 FINANCING. The benefits under this Supplemental Plan shall be paid
out of the general assets of the Employers, except to the extent they are paid
from the assets of a grantor trust established by an Employer to pay these
benefits.
5.2 UNSECURED INTEREST. No Participant shall have any interest
whatsoever in any specific asset of the Employers. To the extent that any
person acquires a right to receive payments under this Supplemental Plan, this
right shall be no greater than the right of any unsecured general creditor of
the Employers.
12
<PAGE>
ARTICLE VI. BENEFICIARY
6.1 PAYMENTS TO BENEFICIARY. Upon the Participant's death, his or her
Beneficiary shall receive any amount due under an optional form of payment
described in section 4.3(b).
If the Participant and the Beneficiary die before all benefits under the
Supplemental Plan have been paid, these remaining benefits shall be paid as
follows.
(a) If the Beneficiary dies before the Participant, the present value
of the benefits payable after the Participant's death shall be paid
to the Participant's estate in a single sum.
(b) If the Beneficiary dies after the Participant, the present value of
the remaining payments shall be paid to the Beneficiary's estate in
a single sum.
For these purposes, the determination of present value shall be made in
accordance with the actuarial assumptions described in the Aerospace Plan or the
Technologies Plan (as applicable).
13
<PAGE>
ARTICLE VII. ADMINISTRATION
7.1 ADMINISTRATION. The Supplemental Plan shall be administered by the
Committee. A majority of the members of the Committee at the time in office
shall constitute a quorum for the transaction of business. All resolutions and
other actions taken by the Committee at any meeting shall be by a majority vote
of those present at the meeting. Upon the unanimous concurrence in writing of
all Committee members, action of the Committee may be taken other than at a
meeting.
The Committee shall have all powers necessary or appropriate to carry out the
provisions of the Supplemental Plan. It may, from time to time, establish rules
for the administration of the Supplemental Plan and the transaction of the
Supplemental Plan's business.
The Committee shall have the exclusive right to make any finding of fact
necessary or appropriate for any purpose under the Supplemental Plan, including,
but not limited to, the determination of eligibility for and amount of any
benefit.
The Committee shall have the exclusive right to interpret the terms and
provisions of the Supplemental Plan and to determine any and all questions
arising under the Supplemental Plan or in connection with its administration,
including, without limitation, the right to remedy or resolve possible
ambiguities, inconsistencies, or omissions by general rule or particular
decision.
To the extent permitted by law, all findings of fact, determinations,
interpretations, and decisions of the Committee shall be conclusive and binding
upon all persons having or claiming to have any interest or right under the
Supplemental Plan.
7.2 APPEALS FROM DENIAL OF CLAIMS. If any claim for benefits under the
Supplemental Plan is wholly or partially denied, the claimant shall be given
notice in writing of the denial. This notice shall be in writing, within a
reasonable period of time after receipt of
14
<PAGE>
the claim by the Committee. This period shall not exceed 90 days after receipt
of the claim, except that if special circumstances require an extension of time,
written notice of the extension shall be furnished to the claimant, and an
additional 90 days will be considered reasonable.
This notice shall be written in a manner calculated to be understood by the
claimant and shall set forth the following information:
(a) the specific reasons for the denial;
(b) specific reference to the Supplemental Plan provisions on which the
denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
this material or information is necessary;
(d) an explanation that a full and fair review by the Committee of the
decision denying the claim may be requested by the claimant or an
authorized representative by filing with the Committee, within 60
days after the notice has been received, a written request for the
review; and
(e) if this request is so filed, an explanation that the claimant or an
authorized representative may review pertinent documents and submit
issues and comments in writing within the same 60-day period
specified in subsection (d).
The decision of the Committee upon review shall be made promptly, and not later
than 60 days after the Committee's receipt of the request for review, unless
special circumstances require an extension of time for processing. In this case
the claimant shall be so notified, and a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If the claim is denied, wholly or in part, the claimant shall be given a copy of
the decision promptly. The decision shall be in writing, shall include specific
reasons for the
15
<PAGE>
denial, shall include specific references to the pertinent Supplemental Plan
provisions on which the denial is based, and shall be written in a manner
calculated to be understood by the claimant.
7.3 TAX WITHHOLDING. An Employer may withhold from any payment under
this Supplemental Plan any federal, state, or local taxes required by law to be
withheld with respect to the payment and any sum the Employer may reasonably
estimate as necessary to cover any taxes for which the Employer may be liable
and that may be assessed with regard to the payment.
7.4 EXPENSES. All expenses incurred in the administration of the
Supplemental Plan shall be paid by the Companies.
16
<PAGE>
ARTICLE VIII. ADOPTION OF THE PLAN BY AFFILIATE;
AMENDMENT AND TERMINATION OF THE PLAN
8.1 ADOPTION OF THE PLAN BY AFFILIATE. An Affiliate may adopt the Plan
by appropriate action of its board of directors or authorized officers or
representatives, subject to the approval of the Boards of Directors.
8.2 AMENDMENT AND TERMINATION. The Companies hereby reserve the right
to amend, modify, or terminate the Supplemental Plan at any time, and for any
reason, by action of the Boards of Directors. However, no amendment or
termination shall adversely affect benefits accrued prior to the date of the
amendment or termination.
17
<PAGE>
ARTICLE IX. MISCELLANEOUS PROVISIONS
9.1 NO CONTRACT OF EMPLOYMENT. Nothing contained in the Supplemental
Plan shall be construed to give any Participant the right to be retained in the
service of an Employer or to interfere with the right of an Employer to
discharge a Participant at any time.
9.2 SEVERABILITY. If any provision of this Supplemental Plan shall be
held illegal or invalid, the illegality or invalidity shall not affect its
remaining parts. The Supplemental Plan shall be construed and enforced as if it
did not contain the illegal or invalid provision.
9.3 APPLICABLE LAW. Except to the extent preempted by applicable
federal law, this Supplemental Plan shall be governed by and construed in
accordance with the laws of the State of Georgia.
18
<PAGE>
* * * * * * * * * *
IN WITNESS WHEREOF, GULFSTREAM AEROSPACE CORPORATION (GEORGIA) and
GULFSTREAM AEROSPACE CORPORATION (OKLAHOMA) have caused this instrument to be
executed by their duly authorized officers, effective as of the date specified
above.
GULFSTREAM AEROSPACE
CORPORATION (GEORGIA)
By: /s/ Richard A. Krajec
-------------------------
Title: Treasurer
ATTEST:
By: /s/ Donald L. Mayer
---------------------------
Title: Vice President,
General Counsel and
Secretary
GULFSTREAM AEROSPACE
CORPORATION (OKLAHOMA)
By: /s/ Richard A. Krajec
-------------------------
Title: Treasurer
ATTEST:
By: /s/ Donald L. Mayer
--------------------------
Title: Secretary
19
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
Supplemental Executive Retirement Plan
SUBMITTED BY:
Harris, Crouch, Long, Scott & Miller, Inc.
Post Office Box 2000
Whitsett, North Carolina 27377
Telephone: (919) 449-7771
WATS (800) 827-7288
Effective Date November 1, 1991
<PAGE>
Gulfstream Aerospace Corporation
NOVEMBER 1, 1991 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The purpose of the November 1, 1991 Supplemental Executive Retirement Plan of
Gulfstream Aerospace Corporation is to provide supplemental retirement benefits
to a select number of senior level executives.
SECTION 1. DEFINITIONS:
For the purposes hereof, unless otherwise clearly apparent from the context, the
following phrases or terms have the following indicated meanings:
1.0 "Base Salary" means annualized compensation actually paid or accrued by the
Corporation to an Employee as of December 31, 1991, excluding bonuses,
commissions, deferrals under any deferred compensation arrangement between
the Corporation and the Employee, amounts paid to the Employee as an
allowance or reimbursement for travel or relocation expenses, maturing
payments of deferred compensation, income from the exercise of stock
options, amounts paid in a lump sum for accrued unused vacation, payment of
accrued amounts previously taken into account for purposes of the plan, the
cost or value of benefit programs (including but not limited to group
insurance, disability, hospitalization, sick or similar benefits), and the
value of job perquisites treated as income or any other payment or benefit
not customarily regarded by the Corporation as being current remuneration
for services.
1.1 "Beneficiary" shall mean the person(s), trust(s), or the estate of a
Participant, entitled to receive any Retirement Benefit pursuant to this
Plan upon the death of a Participant.
1.2 "Board" means the Board of Directors of Gulfstream Holdings Corp. ("GHC"),
the top parent company of the Corporation.
1.3 "Corporation" means Gulfstream Aerospace Corporation, a Georgia
corporation, or its subsidiaries or affiliates.
1.4 "Effective Date" of the Plan means November 1, 1991.
1.5 "Employee" means any person who is in the regular full time employment of
the Corporation as determined by the personnel policies of the Corporation.
1
<PAGE>
1.6 "Participant" means an Employee who has enrolled in the Plan and any former
Employee who has a Retirement Benefit payable hereunder which has not been
wholly paid. The designation of the Employee as a Participant and his
enrollment in the Plan shall be evidenced by the execution of a Plan
Agreement.
1.7 "Plan" means the November 1, 1991 Supplemental Executive Retirement Plan of
Gulfstream Aerospace Corporation as herein set out or as duly amended.
1.8 "Plan Administrator" means the President of the Georgia Corporation unless
otherwise designated by the Board.
1.9 "Plan Agreement" means the form of written agreement, which is entered into
by and between the Corporation and a Participant.
1.10 "Retirement" means the Participant's termination of Service with the
Corporation, within the meaning of Section 2.0, 2.1, 2.2, or 2.3 below.
1.11 "Retirement Benefit" means an annual payment in each of ten (10)
consecutive years, equal to twenty (20) percent of the Base Salary of
the Participant.
1.12 "SERP Retirement Age" of a Participant means age 62.
1.13 "Service" means employment by the Corporation as an Employee.
SECTION 2. RETIREMENT OR TERMINATION OF SERVICE:
2.0 SERP Retirement: As of his SERP Retirement Age, a Participant in Service
shall be eligible to retire and receive his Retirement Benefit.
2.1 Delayed Retirement: If a Participant remains in Service following his SERP
Retirement Age, his Delayed Retirement Date shall be the date he actually
terminates Service for reasons other than death. At his Delayed Retirement
Date, a Participant shall commence receiving payment of his Retirement
Benefit.
2.2 Early Retirement: In the event a Participant's employment with the
Corporation terminates prior to his SERP Retirement Age and he is eligible
to retire under the early retirement provisions of the Corporation's then
existing qualified pension plan, he shall commence receiving payment of his
Retirement Benefit at his SERP Retirement Age.
2.3 Disability Retirement: In the event a Participant becomes disabled, as
defined by the Corporation's long-term disability program, prior to his
SERP Retirement Age,
2
<PAGE>
he shall commence receiving payment of his Retirement Benefit at his SERP
Retirement Age.
2.4 Method of Payment: The Retirement Benefit of a Participant shall be payable
in ten annual installments commencing no later than sixty (60) days
following his Retirement and continuing on each anniversary thereof for a
total of ten annual payments.
2.5 Acceleration of Retirement Benefit Payments: Notwithstanding the foregoing
provisions of this Section 2, the Corporation, in the discretion of the
Plan Administrator, may prepay all or any part of the benefits provided
under this Section 2. The present value of the future payments shall be
determined by discounting the future payments using an interest rate of
eight (8) percent per annum. Any prepayment shall be in full satisfaction
of the obligation hereunder to the recipient to the extent thereof.
SECTION 3. VESTING:
3.0 A Participant shall be 100% vested in his Retirement Benefit as of the
effective date of enrollment in the Plan.
SECTION 4. DEATH:
4.0 Death While In Service: If a Participant dies while in Service, no benefits
are payable under this Plan.
4.1 Death Following Commencement of Benefit Payments: If a Participant dies
following commencement of Retirement Benefit payments under the Plan,
payments shall continue in the same annual amount to his Beneficiary for
the remainder of the ten years for which such Retirement Benefit payments
were payable to the Participant.
4.2 Acceleration of Retirement Benefit Payments: Notwithstanding the foregoing
provision of Section 4.1, the Corporation, in the discretion of the Plan
Administrator, may prepay all or any part of the benefits provided under
Section 4.1. The present value of the future payments shall be determined
by discounting the future payments using an interest rate of eight (8)
percent per annum. Any prepayment shall be in full satisfaction of the
obligation hereunder to the recipient to the extent thereof.
3
<PAGE>
SECTION 5. TERMINATION FOLLOWING CHANGE IN CONTROL:
5.0 Special Termination Benefit: If a Change in Control of the Corporation, as
defined in Section 5.1 below, occurs while an Employee is a Participant in
the Plan, then the present value of the entire remaining Retirement Benefit
of the Participant shall be payable in a lump sum to the Participant if he
is living, or if not then to his Beneficiary. The present value of the
future payments shall be determined by discounting the future payments
using an interest rate of eight (8) percent per annum. Any prepayment
shall be in full satisfaction of the obligation hereunder to the recipient
to the extent thereof.
5.1 Change in Control: For purposes of this Section 5, a "Change in Control of
the Corporation" shall be deemed to have occurred if: (i) any person (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934), other than an officer who is an employee of the Corporation
for at least one year preceding the Change in Control, in a single
transaction or in a related series of transactions acquires or becomes the
beneficial owner, directly or indirectly, of securities of the Corporation
representing 25 percent or more of the combined voting power of the
Corporation's then outstanding securities, and contemporaneously the
membership of the Board becomes such that a majority are persons who were
not members of the Board at the time of the acquisition of securities; or
(ii) the Corporation, or its assets, are acquired by or combined with
another previously unaffiliated corporation, and less than a majority of
the outstanding voting shares of the parent or surviving corporation after
such acquisition or combination are owned, immediately after such
acquisition or combination, by the owners (or affiliates thereof), of
voting shares of the Corporation outstanding immediately prior to such
acquisition.
SECTION 6. FUNDING:
6.0 This Plan is intended to be an unfunded plan of deferred compensation
maintained for a select group of highly compensated or management
employees. The obligation of the Corporation to make payments hereunder
shall constitute a general unsecured obligation of the Corporation to the
Participant. Such payments shall be from the general assets of the
Corporation, and the Corporation shall not be required to establish or
maintain any special or separate fund or otherwise segregate assets to
assure that such payments shall be made. Neither the Participant nor his
estate shall have any interest in any particular asset of the Corporation
by reason of the Corporation's obligation hereunder. Nothing contained
herein shall create or be construed as creating a trust of any kind or any
other fiduciary relationship between the Corporation and the Participant or
any
4
<PAGE>
other person. To the extent that any person acquires a right to receive
payments from the Corporation hereunder, such right shall be no greater
than the right of an unsecured creditor of the Corporation.
SECTION 7. PLAN ADMINISTRATOR:
7.0 This Plan shall be administered for the Corporation by a Plan
Administrator, as specified in Section 1.8. The Plan Administrator shall
have the authority to control and manage the operation and administration
of the Plan except to the extent all or any of such obligations are
specifically imposed on the Board. The Plan Administrator may correct
errors and, so far as practicable, may adjust any Retirement Benefit
payment accordingly. In the event that any Retirement Benefit payment is
less than the amount to which the recipient is entitled, the Plan
Administrator shall adjust the underpayment as soon as practicable. In the
event that an overpayment is made, or in the event the Retirement Benefit
is paid to an individual who is not entitled to the Retirement Benefit
under the Plan, the Plan Administrator shall take all reasonable steps as
soon as practicable to recover the overpayment, including the institution
of judicial proceedings. The Plan Administrator may appoint other persons
or entities to assist him in performing his duties and responsibilities.
SECTION 8. ALLOCATION OF RESPONSIBILITIES:
The duties and responsibilities with respect to the Plan shall be allocated as
follows:
8.0 Board:
(i) To amend the Plan;
(ii) To appoint and remove the Plan Administrator;
(iii)To administer the claims procedure to the extent provided in Section
10; and
(iv) To terminate the Plan.
8.1 Plan Administrator:
(i) To interpret the provisions of the Plan and determine the rights of
Participants under the Plan, except to the extent otherwise provided
in Section 10 relating to the claims procedure;
(ii) To administer the Plan in accordance with its terms, except to the
extent powers to administer the Plan are specifically delegated to
another named fiduciary or other person or persons as provided in the
Plan;
(iii)To account for the Retirement Benefits of Participants;
5
<PAGE>
(iv) To file such reports as may be required with the United States
Department of Labor, the Internal Revenue Service and any other
government agency to which reports may be required to be submitted
from time to time; and
(v) To comply with requirements of the law for disclosure of Plan
provisions and other information relating to the Plan to Participants
and other interested parties.
SECTION 9. BENEFITS NOT ASSIGNABLE; FACILITY OF PAYMENTS:
9.0 No portion of the Retirement Benefit of any Participant shall be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge. Any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. No
portion of such accrued benefit in any manner shall be payable to any
assignee, receiver or trustee; be liable for the Participant's debts,
contracts, liabilities, engagements or torts; or be subject to any legal
process to levy upon or attach.
9.1 If any individual entitled to receive any payment under the Plan shall be
physically, mentally or legally incapable of receiving or acknowledging
receipt of such payment, the Plan Administrator, upon the receipt of
satisfactory evidence (i) of his incapacity, (ii) that another person or
institution is maintaining him, and (iii) that no guardian or committee has
been appointed for him, may cause any payment otherwise payable to him to
be made to such person or institution. Payment to such person or
institution shall be in full satisfaction of all claims by or through the
Participant to the extent of the amount thereof.
SECTION 10. CLAIMS PROCEDURE:
The following claims procedure shall apply with respect to the Plan:
10.0 Filing of a Claim for Benefits: If a Participant or Beneficiary
believes that he is entitled to benefits under the Plan which are not
being paid to him or accrued for his benefit, he may file a written
claim therefor with the Plan Administrator. In the event the Plan
Administrator shall be the claimant, all actions which are required to
be taken by the Plan Administrator pursuant to this Section 10 shall be
taken instead by the Board.
10.1 Notification to Claimant of Decision: Within 90 days after receipt of
a claim by the Plan Administrator (or within 180 days if special
circumstances require an extension of time), the Plan Administrator
shall notify the claimant of his decision with regard to the claim. In
the event of special circumstances requiring an
6
<PAGE>
extension of time, written notice of the extension shall be furnished
to the claimant prior to expiration of the initial 90-day period,
setting forth the special circumstances and the date by which the
decision shall be furnished. If such claim shall wholly or partially
be denied, notice thereof shall be in writing worded in a manner
calculated to be understood by the claimant and shall set forth:
(i) the specific reason or reasons for the denial; (ii) specific
reference to pertinent provisions of the Plan on which the denial is
based; (iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and (iv) an explanation
of the procedure for review of the denial. If the Plan Administrator
fails to notify the claimant of the decision in a timely manner, the
claim shall be deemed denied as of the close of the initial 90-day
period (or the close of the extension period, if applicable).
10.2 Procedure for Review: Within 60 days following receipt by the claimant
of notice denying his claim, in whole or in part, or, if such notice
shall not be given, within 60 days following the latest date on which
such notice timely could have been given, the claimant may appeal
denial of the claim by filing a written application for review with the
Board. Following such request for review, the Board shall fully and
fairly review the decision denying the claim. Prior to the decision of
the Board, the claimant shall be given an opportunity to review
pertinent documents and submit issues and comments in writing.
10.3 Decision on Review: The decision on review of a claim denied in whole
or in part by the Plan Administrator shall be made in the following
manner:
10.3.1 Within 60 days following receipt by the Board of the request for
review (or within 120 days if special circumstances require an
extension of time), the Board shall notify the claimant in
writing of its decision with regard to the claim. In the event
of special circumstances requiring an extension of time, written
notice of the extension shall be furnished to the claimant prior
to commencement of the extension. If the decision on review is
not furnished in a timely manner, the claim shall be deemed
denied as of the close of the initial 60-day period (or the
extension period, if applicable).
10.3.2 With respect to a claim that is denied in whole or in part, the
decision on review shall set forth specific reasons for the
decision, be written in a manner calculated to be understood by
the claimant, and cite specific references to the pertinent Plan
provisions on which the decision is based.
10.3.3 The decision of the Board shall be final and conclusive.
7
<PAGE>
10.4 Action by Authorized Representative of Claimant: All actions set
forth in this Section 10 to be taken by the claimant likewise may be
taken by a representative of the claimant duly authorized by him to act
on his behalf on such matters. The Plan Administrator and Board may
require such evidence as either may reasonably deem necessary or
advisable of the authority to act of any such representative.
SECTION 11. MISCELLANEOUS PROVISIONS:
11.0 Notices: Each Participant who is not in Service and any party
claiming under or through him shall be responsible for furnishing
the Plan Administrator with his current address for the mailing
of notices, reports and benefit payments. Any notice required or
permitted to be given to such person shall be deemed given if
directed to such address and mailed by first class United States
mail, postage prepaid. If any check mailed to such address is
returned as undeliverable to the addressee, mailing of checks
will be suspended until the Participant or beneficiary furnishes
the proper address. This provision shall not be construed as
requiring the mailing of any notice otherwise permitted to be
given by posting or other publication.
11.1 Lost Distributees: A benefit shall be deemed forfeited if the
Plan Administrator is unable after a reasonable period of time to
locate the Participant or any party claiming under or through him
to whom payment is due; provided, however, that such benefit
shall be reinstated if a valid claim is made by or on behalf of
such person for the forfeited benefit.
11.2 Reliance on Data: The Corporation and Plan Administrator shall
have the right but not the duty to rely on any data provided by
the Participant, including representations as to age, health and
marital status. Such representations shall be binding upon any
party seeking to claim a benefit through a Participant. The
Corporation and Plan Administrator shall have no obligation to
inquire into the accuracy of any representation made at any time
by any person.
11.3 Receipt and Release for Payments: Any payment made from the Plan
to or with respect to any Participant shall be in full
satisfaction of all claims hereunder against the Plan and the
Corporation with respect to the Plan to the extent of such
payment. The recipient of any payment from the Plan may be
required by the Plan Administrator to execute a receipt and
release thereto in such form as shall be acceptable to the Plan
Administrator as a condition precedent to such payment.
11.4 Headings: The headings and subheadings of the Plan have been
inserted for convenience of reference and are to be ignored in
any construction of the provisions hereof.
8
<PAGE>
11.5 Continuation of Employment: The establishment of the Plan shall
not be construed as conferring any legal or other rights upon any
Employee or any person for continuation of employment, nor shall
it interfere with the right of the Corporation to discharge an
Employee or deal with him without regard to the effect thereof
under the Plan.
11.6 Amendment and Termination: The Board, acting in behalf of the
Corporation, shall have the right at any time and from time to
time to amend or terminate the Plan; provided, that in no event
shall such amendment or termination of the Plan in any way affect
a Participant's Retirement Benefit or right to payment thereof
under the provisions of the Plan as in effect immediately prior
to such amendment or termination.
11.7 Severability: All provisions contained in this Plan shall be
severable. In the event any one or more of them shall be held
invalid by any competent court, this Plan shall be interpreted
as if such invalid provision were not contained herein.
11.8 Construction: The provisions of the Plan shall be construed
and enforced according to the laws of and in courts sitting in
the State of Georgia, to the extent not preempted by Federal law.
11.9 This Plan shall be construed, where required, so that the
masculine gender includes the feminine as well.
IN WITNESS WHEREOF, the November 1, 1991 Supplemental Executive Retirement Plan
of Gulfstream Aerospace Corporation is, by the authority of the Board of
Directors of GHC, executed on behalf of the Corporation on the 31st day of
October, 1991 to be effective November 1, 1991.
Gulfstream Aerospace Corporation ("Corporation")
By: /s/ Donald L. Mayer
-------------------
Title: Vice President and Legal Counsel
Attest:
By: /s/ James L. Bradbury
---------------------
Title: Senior Vice President
(Corporate Seal)
9
<PAGE>
9
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of ___________, 1996, by and among
Gulfstream Aerospace Corporation, a Delaware corporation (the "Company"),
Gulfstream Delaware Corporation, a Delaware corporation and an indirect
wholly-owned subsidiary of the Company ("Gulfstream Delaware"), and the
director and/or officer of the Company whose name appears on the signature
page of this Agreement ("Indemnitee").
RECITALS
A. Highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or officers or in other capacities
unless they are provided with reasonable protection through insurance or
indemnification against risks of claims and actions against them arising out
of their service to and activities on behalf of the corporations.
B. The Board of Directors of the Company (the "Board") has determined
that the Company should act to assure its directors and officers that there
will be increased certainty of such protection in the future.
C. It is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified.
D. Indemnitee is willing to serve, to continue to serve and to take on
additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified.
E. In consideration of the benefits received and to be received by
Gulfstream Delaware in connection with actions taken and to be taken by the
Board and by the officers of the Company, Gulfstream Delaware has determined
that it is in the best interest of Gulfstream Delaware for the reasons set
forth above to be a party to this Agreement and to provide indemnification to
the directors and officers of the Company in connection with their service to
and activities on behalf of the Company, Gulfstream Delaware and their
respective subsidiaries.
F. Gulfstream Delaware acknowledges that for purposes of this
Agreement the directors and officers of the Company who enter into this
Agreement are serving in such capacities at the request of Gulfstream
Delaware.
G. Gulfstream Delaware further acknowledges that such directors and
officers are willing to serve, to continue to serve and to take on additional
service for or on behalf of the Company, thereby benefiting Gulfstream
Delaware and its subsidiaries, on the condition that Gulfstream Delaware
enter into, and provide indemnification pursuant to, this Agreement.
<PAGE>
AGREEMENT
In consideration of the premises and the covenants contained herein, the
Company, Gulfstream Delaware and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
(a) For purposes of this Agreement:
(i) "Affiliate" shall mean any corporation, partnership, joint
venture, trust or other enterprise in respect of which Indemnitee is or was
or will be serving as a director or officer directly or indirectly at the
request of the Company or Gulfstream Delaware, and including, but not limited
to, service with respect to an employee benefit plan.
(ii) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.
(iii) "Expenses" shall include all attorneys' fees and costs,
retainers, court costs, transcripts, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses
incurred in connection with asserting or defending claims.
(iv) "fines" shall include any excise taxes assessed on Indemnitee
with respect to any employee benefit plan.
(v) "Independent Counsel" shall mean a law firm or lawyer that
neither is presently nor in the past year has been retained to represent: (i)
the Company, Gulfstream Delaware or Indemnitee in any matter material to any
such party or (ii) any other party to the Proceeding giving rise to a claim
for indemnification hereunder in any matter material to such other party.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any firm or person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing any of the Company, Gulfstream Delaware or Indemnitee in an
action to determine Indemnitee's right to indemnification under this
Agreement. All Expenses of the Independent Counsel incurred in connection
with acting pursuant to this Agreement shall be borne by the Company.
(vi) "Losses" shall mean all expenses, liabilities, losses and
claims (including attorneys' fees, judgments, fines, excise taxes under the
Employee Retirement Income Security Act of 1974, as amended from time to
time, penalties and amounts to be paid in settlement) incurred in connection
with any Proceeding.
(vii) "Proceeding" shall include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative.
-2-
<PAGE>
(b) For purposes of this Agreement, a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement; the term "serving at the request
of the Company or Gulfstream Delaware" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and
references to the "Company" or "Gulfstream Delaware" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify Indemnitee in its capacity as a director, officer, or
employee or agent, so that Indemnitee shall stand in the same position under
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
2. SERVICE BY INDEMNITEE. Indemnitee agrees to begin or continue
to serve the Company or any Affiliate as a director and/or officer.
Notwithstanding anything contained herein, this Agreement shall not create a
contract of employment between the Company or Gulfstream Delaware and
Indemnitee, and the termination of Indemnitee's relationship with the Company
or Gulfstream Delaware or an Affiliate by either party hereto shall not be
restricted by this Agreement.
3. INDEMNIFICATION. The Company and Gulfstream Delaware jointly
and severally agree to indemnify Indemnitee for, and hold Indemnitee harmless
from and against, any Losses or Expenses at any time incurred by or assessed
against Indemnitee arising out of or in connection with the service of
Indemnitee as a director or officer of the Company or of an Affiliate
(collectively referred to as an "Officer or Director of the Company") to
the fullest extent permitted by the laws of the State of Delaware in effect
on the date hereof or as such laws may from time to time hereafter be amended
to increase the scope of such permitted indemnification. Without diminishing
the scope of the indemnification provided by this Section, the rights of
indemnification of Indemnitee provided hereunder shall include but shall not
be limited to those rights set forth hereinafter.
4. ACTION OR PROCEEDING OTHER THAN AN ACTION BY OR IN THE RIGHT
OF THE COMPANY OR GULFSTREAM DELAWARE. Indemnitee shall be entitled to the
indemnification rights provided herein if Indemnitee is a person who was or
is made a party or is threatened to be made a party to or is involved
(including, without limitation, as a witness) in any Proceeding, other than
an action by or in the right of the Company or Gulfstream Delaware, as the
case may be, by reason of (a) the fact that Indemnitee is or was an Officer
or Director of the Company or any other entity which Indemnitee is or was or
will be serving at the request of the Company or Gulfstream Delaware, as the
case may be, or (b) anything done or not done by Indemnitee in any such
capacity.
5. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall
be entitled to the indemnification rights provided herein if Indemnitee is a
person who was or is a party or is
-3-
<PAGE>
threatened to be made a party to or is involved (including, without
limitation, as a witness) in any Proceeding brought by or in the right of the
Company to procure a judgment in its favor by reason of (a) the fact that
Indemnitee is or was an Officer or Director of the Company or any Affiliate,
or (b) anything done or not done by Indemnitee in any such capacity.
Pursuant to this Section, Indemnitee shall be indemnified against Losses or
Expenses incurred or suffered by Indemnitee or on Indemnitee's behalf in
connection with the defense or settlement of any Proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company or Gulfstream Delaware.
Notwithstanding the foregoing provisions of this Section, no such
indemnification shall be made in respect of any claim, issue or matter as to
which Delaware law expressly prohibits such indemnification by reason of an
adjudication of liability of Indemnitee to the Company or Gulfstream Delaware
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such Losses and Expenses which the Court
of Chancery or such other court shall deem proper.
6. INDEMNIFICATION FOR LOSSES AND EXPENSES OF PARTY WHO IS WHOLLY
OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been wholly successful on the merits or
otherwise in any Proceeding referred to in Sections 3, 4 or 5 hereof on any
claim, issue or matter therein, Indemnitee shall be indemnified against all
Losses and Expenses incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
and Gulfstream Delaware jointly and severally agree to indemnify Indemnitee
to the maximum extent permitted by law against all Losses and Expenses
incurred by Indemnitee in connection with each successfully resolved claim,
issue or matter. In any review or Proceeding to determine the extent of
indemnification, the Company shall bear the burden of proving any lack of
success and which amounts sought in indemnity are allocable to claims, issues
or matters which were not successfully resolved. For purposes of this
Section and without limitation, the termination of any such claim, issue or
matter by dismissal with or without prejudice shall be deemed to be a
successful resolution as to such claim, issue or matter.
7. PAYMENT FOR EXPENSES OF A WITNESS. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of
the fact that Indemnitee is or was an Officer or Director of the Company or
any Affiliate, as the case may be, a witness in any Proceeding, the Company
and Gulfstream Delaware jointly and severally agree to pay to Indemnitee all
Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection therewith.
8. ADVANCEMENT OF EXPENSES AND COSTS. All Expenses incurred by
or on behalf of Indemnitee (or reasonably expected by Indemnitee to be
incurred by Indemnitee within three months) in connection with any Proceeding
shall be paid by the Company or Gulfstream Delaware in advance of the final
disposition of such Proceeding within twenty days after the receipt by the
Company or Gulfstream Delaware of a statement or statements from Indemnitee
-4-
<PAGE>
requesting from time to time such advance or advances, whether or not a
determination to indemnify has been made under Section 9. Indemnitee's
entitlement to such advancement of Expenses shall include those incurred in
connection with any Proceeding by Indemnitee seeking an adjudication or award
in arbitration pursuant to this Agreement. The financial ability of
Indemnitee to repay an advance shall not be a prerequisite to the making of
such advance. Such statement or statements shall reasonably evidence such
Expenses incurred (or reasonably expected to be incurred) by Indemnitee in
connection therewith and shall include or be accompanied by a written
undertaking by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified
therefor pursuant to the terms of this Agreement.
9. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) When seeking indemnification under this Agreement (which
shall not include in any case the right of Indemnitee to receive payments
pursuant to Section 7 and Section 8 hereof, which shall not be subject to
this Section 9), Indemnitee shall submit a written request for
indemnification to the Company and Gulfstream Delaware. Determination of
Indemnitee's entitlement to indemnification shall be made promptly, but in no
event later than 60 days after receipt by the Company and Gulfstream Delaware
of Indemnitee's written request for indemnification. The Secretary of the
Company shall, promptly upon receipt of Indemnitee's request for
indemnification, advise the Board that Indemnitee has made such request for
indemnification.
(b) The entitlement of Indemnitee to indemnification under
this Agreement shall be determined in the specific case (1) by the Board of
Directors by a majority vote of the Disinterested Directors, even though less
than a quorum, or (2) if there are no Disinterested Directors, or if such
Disinterested Directors so direct, by Independent Counsel, or (3) by the
stockholders.
(c) In the event the determination of entitlement is to be
made by Independent Counsel, such Independent Counsel shall be selected by
the Board and the Board of Directors of Gulfstream Delaware and approved by
Indemnitee. Upon failure of the Board and the Board of Directors of
Gulfstream Delaware to so select such Independent Counsel or upon failure of
Indemnitee to so approve, such Independent Counsel shall be selected by the
American Arbitration Association of New York, New York or such other person
as such Association shall designate to make such selection.
(d) If the determination made pursuant to Section 9(b) is
that Indemnitee is not entitled to indemnification to the full extent of
Indemnitee's request, Indemnitee shall have the right to seek entitlement to
indemnification in accordance with the procedures set forth in Section 10
hereof.
(e) If the person or persons empowered pursuant to Section
9(b) to make a determination with respect to entitlement to indemnification
shall have failed to make the requested determination within 60 days after
receipt by the Company and Gulfstream Delaware of such request, the requisite
determination of entitlement to indemnification shall be deemed to
-5-
<PAGE>
have been made and Indemnitee shall be absolutely entitled to such
indemnification, absent (i) misrepresentation by Indemnitee of a material
fact in the request for indemnification or (ii) a final judicial
determination that all or any part of such indemnification is expressly
prohibited by law.
(f) The termination of any Proceeding by judgment, order,
settlement or conviction, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, adversely affect the rights of Indemnitee
to indemnification hereunder except as may be specifically provided herein,
or create a presumption that Indemnitee did not act in good faith and in a
manner which Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company or Gulfstream Delaware, as the case may be, or
create a presumption that (with respect to any criminal action or proceeding)
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(g) For purposes of any determination of good faith
hereunder, Indemnitee shall be deemed to have acted in good faith if in
taking such action Indemnitee relied on the records or books of account of
the Company or an Affiliate, including financial statements, or on
information supplied to Indemnitee by the officers of the Company or an
Affiliate in the course of their duties, or on the advice of legal counsel
for the Company or an Affiliate or on information or records given or reports
made to the Company or an Affiliate by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care
to the Company or an Affiliate. The Company shall have the burden of
establishing the absence of good faith. The provisions of this Section 9(g)
shall not be deemed to be exclusive or to limit in any way the other
circumstances in which Indemnitee may be deemed to have met the applicable
standard of conduct set forth in this Agreement.
(h) The knowledge and/or actions, or failure to act, of any
other director, officer, agent or employee of the Company or an Affiliate
shall not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
10. REMEDIES IN CASES OF DETERMINATION NOT TO INDEMNIFY OR TO
ADVANCE EXPENSES.
(a) In the event that (i) a determination is made that
Indemnitee is not entitled to indemnification hereunder, (ii) advances are
not made pursuant to Section 8 hereof or (iii) payment has not been timely
made following a determination of entitlement to indemnification pursuant to
Section 9 hereof, Indemnitee shall be entitled to seek a final adjudication
either through an arbitration proceeding or in an appropriate court of the
State of Delaware or any other court of competent jurisdiction of
Indemnitee's entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance
with the procedures set forth in Section 9 hereof, in whole or in part, that
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in Section 10(a) shall be DE NOVO and Indemnitee
shall not be prejudiced by reason of any such prior determination that
-6-
<PAGE>
Indemnitee is not entitled to indemnification, and the Company shall bear the
burdens of proof specified in Sections 6 and 9 hereof in such proceeding.
(c) If a determination is made or deemed to have been made
pursuant to the terms of Section 9 or 10 hereof that Indemnitee is entitled
to indemnification, the Company and Gulfstream Delaware shall be bound by
such determination in any judicial proceeding or arbitration in the absence
of (i) a misrepresentation of a material fact by Indemnitee or (ii) a final
judicial determination that all or any part of such indemnification is
expressly prohibited by law.
(d) To the extent deemed appropriate by the court, interest
shall be paid by the Company or Gulfstream Delaware, or both, to Indemnitee
at a reasonable interest rate for amounts which the Company or Gulfstream
Delaware, or both, indemnifies or is obliged to indemnify Indemnitee for the
period commencing with the date on which Indemnitee requested indemnification
(or reimbursement or advancement of any Expenses) and ending with the date on
which such payment is made to Indemnitee by the Company or Gulfstream
Delaware, or both.
11. EXPENSES INCURRED BY INDEMNITEE TO ENFORCE THIS AGREEMENT.
All Expenses incurred by Indemnitee in connection with the preparation and
submission of Indemnitee's request for indemnification hereunder shall be
jointly and severally borne by the Company and Gulfstream Delaware. In the
event that Indemnitee is a party to or intervenes in any proceeding in which
the validity or enforceability of this Agreement is at issue or seeks an
adjudication to enforce Indemnitee's rights under, or to recover damages for
breach of, this Agreement, Indemnitee, if Indemnitee prevails in whole in
such action, shall be entitled to recover from the Company and Gulfstream
Delaware, and shall be jointly and severally indemnified by the Company and
Gulfstream Delaware against, any Expenses incurred by Indemnitee. If it is
determined that Indemnitee is entitled to indemnification for part (but not
all) of the indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably prorated
among the claims, issues or matters for which Indemnitee is entitled to
indemnification and for claims, issues or matters for which Indemnitee is
not so entitled.
12. NON-EXCLUSIVITY. The rights of indemnification and to receive
advances as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under any law,
certificate of incorporation, by-law, other agreement, vote of stockholders
or resolution of directors or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. To the extent Indemnitee would be prejudiced thereby, no amendment,
alteration, rescission or replacement of this Agreement or any provision
hereof shall be effective as to Indemnitee with respect to any action taken
or omitted by such Indemnitee in Indemnitee's position with the Company or an
Affiliate or any other entity which Indemnitee is or was serving at the
request of the Company or Gulfstream Delaware prior to such amendment,
alteration, rescission or replacement.
-7-
<PAGE>
13. DURATION OF AGREEMENT. This Agreement shall apply to any
claim asserted and any Losses and Expenses incurred in connection with any
claim asserted on or after the effective date of this Agreement and shall
continue until and terminate upon the later of: (a) ten years after
Indemnitee has ceased to occupy any of the positions or have any of the
relationships described in Section 3, 4 or 5 hereof; or (b) one year after
the final termination of all pending or threatened Proceedings of the kind
described herein with respect to Indemnitee. This Agreement shall be binding
upon the Company and Gulfstream Delaware and their respective successors and
assigns and shall inure to the benefit of Indemnitee and Indemnitee's spouse,
assigns, heirs, devisee, executors, administrators or other legal
representatives.
14. MAINTENANCE OF D&O INSURANCE.
(a) The Company and Gulfstream Delaware each hereby covenants
and agrees with Indemnitee that, so long as Indemnitee shall continue to
serve as an Officer or Director of the Company and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed Proceeding, whether civil, criminal or investigative, by reason of
the fact that Indemnitee was an Officer or Director of the Company or any
other entity which Indemnitee was serving at the request of the Company or
Gulfstream Delaware, the Company and Gulfstream Delaware shall maintain in
full force and effect (i) the directors' and officers' liability insurance
issued by the insurer and having the policy amount and deductible as
currently in effect with respect to directors and officers of the Company or
any of its subsidiaries and (ii) any replacement or substitute policies
issued by one or more reputable insurers providing in all respects coverage
at least comparable to and in the same amount as that currently provided
under such existing policy (collectively, "D&O Insurance").
(b) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits, subject to the same limitations, as are accorded to the
Company's directors or officers most favorably insured by such policy.
(c) Notwithstanding anything to the contrary set forth in (a)
above, the Company and Gulfstream Delaware shall have no obligation to
maintain D&O Insurance if the Company and Gulfstream Delaware determine in
good faith that such insurance is not reasonably available, the premium cost
for such insurance is disproportionate to the amount of coverage provided or
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit.
15. SEVERABILITY. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions hereof shall not be affected
thereby, and the illegal or unenforceable portions hereof shall be and hereby
are redrafted to conform with applicable law, while leaving the remaining
portions hereof intact.
16. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
-8-
<PAGE>
17. HEADINGS. Section headings are for convenience only and do
not control or affect meaning or interpretation of any terms or provisions
hereof.
18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
each of the parties hereto.
19. NO DUPLICATIVE PAYMENT. The Company and Gulfstream Delaware
shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder if and to the extent that Indemnitee has
otherwise actually received such payment (net of Expenses incurred in
collecting such payment) under any insurance policy, contract, agreement or
otherwise.
20. NOTICES. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing (including
telecopier or similar writing) and shall be deemed to have been given at the
time when mailed, enclosed in a registered or certified postpaid envelope, in
any general or branch office of the United States Postal Service, or sent by
Federal Express or other similar overnight courier service, addressed to the
address of the parties stated below or to such changed address as such party
may have fixed by notice or, if given by telecopier, when such telecopy is
transmitted and the appropriate answerback is received.
(a) If to Indemnitee, to the address appearing on the signature
page hereof.
(b) If to the Company or Gulfstream Delaware to:
Gulfstream Aerospace Corporation
500 Gulfstream Rd.
Savannah, GA 31402
Attention: Chief Financial Officer
21. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws
of the State of Delaware without regard to its conflicts of law rules.
22. ENTIRE AGREEMENT. Subject to the provisions of Section 12
hereof, this Agreement constitutes the entire understanding between the
parties and supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter hereof. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
GULFSTREAM DELAWARE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
INDEMNITEE
Name:__________________________________
Address:_______________________________
City and State:________________________
Telecopier Number:_____________________
-10-
<PAGE>
STOCK OPTION AGREEMENT (the "Agreement"), made as of the ___ day of
__________, 199_, between Gulfstream Aerospace Corporation, a Delaware
corporation (the "Corporation"), and _________________ (the "Optionee").
1. GRANT OF OPTION.
1.1 The Corporation hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of
_______ whole shares of Series A-1 Common Stock, par value $.01 per share, of
the Corporation (the "Common Stock") (such number being subject to
adjustment as provided in Section 8 hereof) on the terms and conditions set
forth in this Agreement.
1.2 This Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
2. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase shares of Common Stock upon the exercise of this Option shall be
$6.15 per share (the "Exercise Price").
3. DURATION OF OPTION. The Option shall be exercisable at any time to
the extent and in the manner provided herein for a period of 10 years from
the date hereof; provided, however, that the Option may be earlier terminated
as provided in Section 6 or Section 7 hereof.
4. EXERCISABILITY OF OPTION.
4.1 Subject to the provisions of this Agreement, the Option shall
be exercisable in accordance with the following schedule:
(a) on or after [one year from date of grant] but before
[two years from date of grant], the Option may be exercised to acquire
up to one-third of the total number of shares of Series A-1 Common Stock
which may be purchased pursuant to the Option, less any shares previously
acquired pursuant to the Option;
(b) on or after [two years from date of grant] but before
[three years from date of grant], the Option may be exercised to acquire
up to two-thirds of the total number of shares of Series A-1 Common Stock
which may be purchased pursuant to the Option, less any shares previously
acquired pursuant to the Option; and
(c) on or after [three years from date of grant] but before
<PAGE>
the expiration of the term of the Option, the Option may be exercised to
acquire up to 100% of the total number of shares of Series A-1 Common
Stock which may be purchased pursuant to the Option, less any shares
previously acquired pursuant to the Option.
4.2 The Corporation shall give the Optionee 20 days' notice (or,
if not practicable, such shorter notice as may be practicable) prior to the
anticipated date of the consummation of a Terminating Event (as hereinafter
defined) or the anticipated date of the consummation of a Partial Sale (as
hereinafter defined). Upon receipt of such notice, and for a period of 14
days thereafter (or such shorter period as the Board of Directors shall
determine and so notify the Optionee), the Optionee shall be permitted to
exercise the Option to the extent provided in this Section 4.2, whether or
not the Option was otherwise so exercisable on the date such notice was
given. In the case of a Terminating Event, the Option may be exercised in
whole or in part for the full amount of the shares of Common Stock covered
thereby (less the number of shares previously acquired by the Optionee upon
exercise of the Option, if any). In the case of a Partial Sale, the Option
may be exercised in whole or in part, but not for more than the excess, if
any, of (a) the number of shares with respect to which the Optionee would be
entitled to participate in the Partial Sale pursuant to Section 2.3 or 2.4,
as applicable, of the Stockholder's Agreement attached hereto as Exhibit A
(the "Stockholder's Agreement") (if the number of shares issuable pursuant
to the unexercised portion of the Option were deemed shares held by the
Optionee), and will so participate, over (b) the number of shares previously
issued to the Optionee upon exercise of the Option and not disposed of in a
prior Partial Sale. In the event the Terminating Event or Partial Sale is
not consummated, the Option will be deemed not to have been exercised and
shall be exercisable thereafter only to the extent it would have been
exercisable if no such notice had been given. In lieu of permitting the
Optionee to exercise the Option in the event of a Terminating Event involving
a merger, consolidation or liquidation of the Corporation, the Board of
Directors, in its sole discretion, may instead invoke the provisions of
Section 7 as though such Terminating Event were a Sale (as defined in
Section 7).
For purposes hereof, (a) the term "Terminating Event" shall mean the
consummation of any of the following events: (i) any merger or consolidation
of the Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the surviving corporation and which
does not result in any capital reorganization or reclassification or other
change of the then outstanding shares of Common Stock), or (ii) the
liquidation of the Corporation, or (iii) the sale to any person who is not a
partner or an affiliate of the FL & Co. Companies (as defined below) or an
affiliate of such partner (a "Third Party") of all or substantially all of
the assets of the Corporation pursuant to a plan of liquidation or otherwise,
or (iv) the sale to a Third Party of Common Stock, including through one or
more public offerings; provided, that in the
-2-
<PAGE>
case of each of clauses (i), (ii) and (iv) above, as a result thereof the FL
& Co. Companies, the direct or indirect partners of the FL & Co. Companies or
any affiliates of any of the foregoing cease to own, directly or indirectly,
any shares of the voting stock of the Corporation, and (b) the term "Partial
Sale" shall mean any sale by the FL & Co. Companies of all or a portion of
their shares of Common Stock to a Third Party, including through any public
offering, which sale is not a Terminating Event.
4.3 TERMINATION OF OPTION. The Option shall terminate
simultaneously with the consummation of a Terminating Event to the extent
that the Option has not theretofore been exercised.
5. MANNER OF EXERCISE AND PAYMENT.
5.1 Subject to the terms and conditions of this Agreement, the
Option may be exercised by delivery of written notice to the Corporation.
Such notice shall state that the Optionee is electing to exercise the Option,
shall set forth the number of shares of Common Stock in respect of which the
Option is being exercised and shall be signed by the person or persons
exercising the Option.
5.2 The notice of exercise described in Section 5.1 shall be
accompanied by (a) the full purchase price for the shares of Common Stock in
respect of which the Option is being exercised, such purchase price to be
paid by delivery to the Corporation of a certified or bank check payable to
the order of the Corporation or cash by wire transfer or other immediately
available funds to an account designated by the Corporation, and (b) the
Stockholder's Agreement, executed by the Optionee.
5.3 Upon receipt of notice of exercise and the executed
Stockholder's Agreement and upon full payment for the shares of Common Stock
in respect of which the Option is being exercised, the Corporation shall take
such action as may be necessary under applicable law to effect the issuance
to the Optionee of the number of shares of Common Stock as to which such
exercise was effected.
5.4 The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common
Stock subject to the Option until: (a) the Option shall have been exercised
in accordance with the terms of this Agreement and the Optionee shall have
paid the full purchase price for the number of shares in respect of which the
Option was exercised; (b) the Optionee shall have delivered the executed
Stockholder's Agreement to the Corporation; (c) the Corporation shall have
issued and delivered the shares to the Optionee; and (d) the Optionee's name
shall have been entered as a stockholder of record on the books of the
Corporation.
5.5 If the Option is being exercised by a person other than the
Optionee, the documents required by this Section 5 shall be executed by such
person
-3-
<PAGE>
rather than the Optionee and the Corporation may require proof satisfactory
to it as to the right of such person or persons to exercise the Option,
including whether such person is a Permitted Transferee (as defined in
Section 6.2 hereof).
5.6 In the event the initial exercise of the Option is an
exercise in part only, then, in the event of any further exercise of the
Option, the Optionee, in lieu of executing a new Stockholder's Agreement,
shall re-execute the original Stockholder's Agreement, thereby re-affirming
the representations and warranties contained therein as of the date of
re-execution, but with an amended Schedule I completed to set forth the
number of shares of Common Stock in respect of which the Option is then being
exercised and the cumulative number of shares of Common Stock which would
then be subject to the Stockholder's Agreement. If a further exercise of the
Option is by a person who has not previously exercised the Option (as for
example if the initial exercise was by the Optionee and the subsequent
exercise was by a Permitted Transferee), then such person shall execute a
Stockholder's Agreement but the shares received by all persons upon their
respective exercises of the Option shall be cumulated for purposes of any
person's Stockholder's Agreement.
6. RESTRICTIONS ON DISPOSITION OF THE OPTION.
6.1 NO SALE OR TRANSFER. The Optionee shall not sell, transfer,
assign, exchange, pledge, encumber or otherwise dispose of the Option or any
portion thereof, except in accordance with the provisions of this Agreement.
6.2 PERMITTED TRANSFERS. The Optionee may transfer all or any
portion of the Option to:
(a) any spouse, parent, child, brother or sister of the
Optionee, or any issue of the foregoing (as used in this Section 6.2,
issue shall include persons legally adopted into the line of descent), or
(b) a trust solely for the benefit of the Optionee or any
spouse, parent, child, brother or sister of the Optionee, or for the
benefit of any issue of the foregoing, or
(c) any corporation or partnership which is controlled by the
Optionee, or by any spouse, parent, child, brother or sister of the
Optionee, or by any issue of the foregoing
(each such person being referred to herein as a "permitted transferee"),
and a permitted transferee may transfer the Option or any portion thereof to
another permitted transferee or back to the Optionee; provided, that prior to
the transfer to a permitted transferee hereunder, the permitted transferee
(which, in the case of a trust, shall include each
-4-
<PAGE>
person having authority to sell or dispose of the Option or portion thereof
proposed to be transferred to the trust) shall agree in writing to be bound
by all the terms of this Agreement applicable to the Optionee or a permitted
transferee as if the permitted transferee originally had been a party to this
Agreement; and provided, further, that all of the stockholders of any
permitted transferee that is a corporation and all of the general partners of
any permitted transferee that is a partnership shall agree in writing not to
transfer any shares they then own or may thereafter acquire in the corporate
permitted transferee or any partnership interest they then own or may
thereafter acquire in the partnership permitted transferee, except to a
person described in paragraph (a), (b) or (c) above, so long as the corporate
or partnership permitted transferee shall own any portion of the Option. For
purposes hereof, a "Permitted Transferee" means a permitted transferee who
holds the Option or any portion thereof.
In the event all or any portion of the Option is transferred to a
Permitted Transferee, any reference to the Optionee hereunder shall be deemed
to include a reference to the Permitted Transferee to the extent of the
Option or portion thereof so transferred, unless the context otherwise
requires.
6.3 TERMINATION. (a) If the Optionee shall cease to serve as a
director of the Corporation for any reason whatsoever (a "Termination"),
the Option, to the extent it is not exercisable pursuant to Section 4.1
hereof on the date of such Termination, shall terminate and be of no further
force and effect from and after the date of such Termination.
(b) If any portion of the Option is exercisable pursuant to
Section 4.1 hereof on the date of the Optionee's Termination, (i) then the
Optionee may exercise the Option, to the extent the Option was exercisable on
the date of the Optionee's Termination, at any time within 30 days after the
date of the Termination, and (ii) the Corporation agrees to make available
the most recent audited financial statements of the Corporation for review by
the Terminated Optionee at the principal offices of the Corporation during
such 30-day period. The Option shall terminate and be of no further force
and effect to the extent not exercised during such 30-day period.
7. SALE OF ALL COMMON STOCK BY THE FL & CO. COMPANIES.
7.1 If Gulfstream Partners, Gulfstream Partners II, L.P. and
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV (collectively, the "FL & Co. Companies") shall propose to
sell all of their Common Stock to a purchaser (a "Purchaser") in a bona
fide arm's-length transaction (a "Sale"), then, at the election of
Gulfstream Partners, the Optionee shall be deemed to have exercised his
Option in full (to the extent not previously exercised) immediately prior to
the closing of the Sale and to have agreed to sell all of his Common Stock
purchased
-5-
<PAGE>
pursuant to such exercise to the Purchaser for the same consideration per
share and otherwise on the same terms as the FL & Co. Companies propose to
sell their shares of Common Stock in the Sale. Subject to the next two
sentences, the price to be received by the Optionee in respect of each share
of Common Stock subject to the Option shall be equal to the per Common Stock
share price received by the FL & Co. Companies in the Sale less the Exercise
Price. It is the parties' intention that, in the event of a Sale, the
Optionee be treated in all respects as though (1) he had exercised his Option
in full (to the extent not previously exercised) immediately prior to the
closing of the Sale and (2) he had executed a counterpart of any and all
agreements and other documents executed by the FL & Co. Companies in
connection therewith ("Sale Documents"). Accordingly, and without limiting
the generality of the foregoing, the Optionee shall (a) bear his
proportionate share of all expenses of the Sale being borne by the FL & Co.
Companies, (b) be liable for his proportionate share of any joint and several
liability under the Sale Documents, including liability for indemnification,
and (c) be entitled to his proportionate share of any reserve or other
amounts withheld (whether by the Purchaser or by the FL & Co. Companies) from
the proceeds of the Sale if and to the extent that any amounts from such
reserve become available for distribution to the FL & Co. Companies. The
Corporation shall notify the Optionee of the Sale no later than 10 days prior
to the closing thereof (or, if not practicable, such shorter time as may
reasonably be practicable) and the Optionee, if he does not wish for his
Option to be deemed to be exercised pursuant to this Section 7, shall be
entitled to terminate his rights under this Option and declare this Option
null and void by written notice to the Corporation not more than three days
after receipt by him of the notice of the Sale.
7.2 (a) The Optionee hereby irrevocably appoints Gulfstream
Partners (the "Representative") his true and lawful agent and
attorney-in-fact, with full powers of substitution, to act in his name, place
and stead, to do or refrain from doing all such acts or things, and to
execute and deliver all such documents in connection with the Option as the
Representative shall deem necessary or appropriate in connection with the
Sale or the deemed exercise of the Option as provided in Section 7.1,
including, without in any way limiting the generality of the foregoing, to
receive on behalf of the Optionee any payments made in respect of the
unexercised portion of the Option in connection with the Sale or the deemed
exercise of the Option, to hold back from any such payments any amount which
the Representative deems necessary to reserve against the Optionee's share of
any expenses or other liabilities or obligations incurred or which may be
incurred by the stockholders of the Corporation in connection with the Sale,
and to engage in any acts in which the Representative or any affiliate
thereof is authorized by and on behalf of the holders of the Common Stock to
engage in connection with the Sale. The Optionee hereby ratifies and
confirms all that the Representative shall do or cause to be done by virtue
of its appointment as the Optionee's Representative.
(b) In acting for the Optionee pursuant to the appointment
-6-
<PAGE>
set forth in paragraph (a) hereof, the Representative shall not be
responsible to the Optionee for any loss or damage the Optionee may suffer by
reason of the performance of the Representative of its duties under this
Agreement, except for loss or damage arising from willful violation of law or
gross negligence in the performance of its duties hereunder. The appointment
of the Representative shall be deemed coupled with an interest and shall be
irrevocable, and any person dealing with the Representative may conclusively
and absolutely rely, without inquiry, upon any act of the Representative as
the act of the Optionee in all matters referred to in this Section 7.2.
(c) Notwithstanding the foregoing, this power of attorney does
not empower the Representative to terminate the Optionee's rights under the
Option and declare this Option null and void pursuant to the last sentence of
Section 7.1 hereof.
8. ADJUSTMENTS. In the event that the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares
of stock or other securities of the Corporation, whether through merger,
consolidation, reorganization, recapitalization, stock dividend, stock
split-up or other substitution of securities of the Corporation, the Board of
Directors of the Corporation shall make appropriate adjustments to the number
and class of shares of stock subject to this Option and to the Exercise
Price, and any reference to the Exercise Price herein shall be to the
Exercise Price as so adjusted. The Board of Directors' adjustment shall be
effective and binding for all purposes of this Agreement. No adjustment
provided for in this Section 8 shall require the Corporation to issue a
fractional share, and the total adjustment with respect to this Agreement
shall be limited accordingly.
9. CERTAIN DEFINITIONS.
9.1 The term "affiliate" of any person shall mean any person that,
directly or indirectly, controls, is controlled by, or is under common
control with, the person of which it is an affiliate.
9.2 The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
10. NOTICES. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
-7-
<PAGE>
(a) If to the Corporation or the Representative, to it:
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Optionee, to him at the address listed below his
signature.
11. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
12. INVALIDITY OF PROVISION. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised or
applied in a manner that renders it lawful and enforceable to the fullest
extent possible.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.
14. HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be
an original and which together shall constitute one and the same instrument.
15. ENTIRE AGREEMENT. This Agreement and the Stockholder's Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to
the subject matter hereof and thereof.
-8-
<PAGE>
16. RESOLUTION OF DISPUTES. Any dispute or disagreement which may
arise under, or as a result of, or which may in any way relate to, the
interpretation, construction or application of this Agreement shall be
determined by the Board of Directors of the Corporation, in good faith, whose
determination shall be final and binding for all purposes.
17. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to
the principles of conflicts of law thereof.
GULFSTREAM AEROSPACE
CORPORATION
By:_________________________________
____________________________________
Name:
-9-
<PAGE>
The undersigned acknowledges that the undersigned has read the foregoing
Agreement between Gulfstream Aerospace Corporation and the undersigned's
spouse, understands that the undersigned's spouse has been granted an option
to acquire shares of Gulfstream Aerospace Corporation Series A-1 Common
Stock, which option is subject to certain restrictions reflected in such
Agreement and agrees to be bound by the foregoing Agreement.
____________________________________
Optionee's Spouse
-10-
<PAGE>
STOCKHOLDER'S AGREEMENT
Stockholder's Agreement (the "Agreement"), dated as of the ____ day of
_______________, 19__, between Gulfstream Aerospace Corporation (formerly known
as Gulfstream Holdings Corp.), a Delaware corporation (the "Company"), and
_______________ (the "Stockholder"), who was granted the right and option (the
"Option") to purchase shares of Series A-1 Common Stock, par value $.01 per
share, of the Company (the "Common Stock") pursuant to the terms and conditions
of a Stock Option Agreement, dated as of ___________, 199_ (the "Option
Agreement").
WHEREAS, the Stockholder was at the time of the grant of the Option a
member of the Board of Directors of the Company;
WHEREAS, Gulfstream Partners, a New York limited partnership
("Gulfstream Partners"), Gulfstream Partners II, L.P., a New York limited
partnership ("Gulfstream Partners II"), and Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-IV, a New York limited partnership
("MBO-IV") (Gulfstream Partners, Gulfstream Partners II and MBO-IV, together
with any other partnership which is an affiliate of Forstmann Little & Co. which
is or shall become a stockholder of the Company, are hereafter individually and
collectively referred to as the "FL & Co. Companies") have purchased shares of
capital stock of the Company;
WHEREAS, the Option Agreement requires the Stockholder to enter into
this Stockholder's Agreement upon the exercise of the Option;
WHEREAS, the Stockholder wishes to exercise the Option to purchase
shares of Common Stock; and
WHEREAS, the Stockholder and the Company wish to provide for certain
arrangements with respect to the Stockholder's rights to hold and dispose of the
shares of Common Stock acquired by the Stockholder upon the exercise of the
Option.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
1. PURCHASE AND SALE OF COMMON STOCK.
The Stockholder hereby elects to exercise the Option in respect
of the shares of Common Stock set forth in Annex I. Accompanying this Agreement
is a certified or bank check or a wire transfer of immediately available funds
in the amount of $________ representing the full purchase price for the shares
of Common Stock in respect of which the Option is being exercised. The Company
shall promptly issue and deliver to the Stockholder stock certificates
representing the shares of Common Stock in respect of which the Option is being
exercised and shall enter the name of the Stockholder as a stockholder of record
of such shares on the books of the Company.
2. RESTRICTIONS ON DISPOSITION OF COMMON STOCK.
2.1. NO SALE OR TRANSFER. The Stockholder shall not sell,
transfer, assign, exchange, pledge, encumber or otherwise dispose of any shares
of Common Stock acquired hereunder or hereafter, or grant any option or right to
purchase such shares or any legal or beneficial interest therein, except in
accordance with the provisions of this Agreement.
2.2. PERMITTED TRANSFERS. The Stockholder may dispose of shares
of Common Stock acquired hereunder or hereafter, or grant any option or right to
purchase such shares or any legal or beneficial interest therein, to:
(a) any spouse, parent, child, brother or sister of the
Stockholder, or any issue of the foregoing (as used in this Section
2.2, issue shall include persons legally adopted into the line of
descent), or
(b) a trust solely for the benefit of the Stockholder or
any spouse, parent, child, brother or sister of the Stockholder, or
for the benefit of any issue of the foregoing, or
(c) any corporation or partnership which is controlled by
the Stockholder, or by any spouse, parent, child, brother or sister of
the Stockholder, or by any issue of the foregoing
-2-
<PAGE>
(each such person being referred to herein as a "permitted transferee"), and a
permitted transferee may transfer any shares of Common Stock which such
permitted transferee acquires, or grant an option or right to purchase the
shares or a legal or beneficial interest therein, to another permitted
transferee or back to the Stockholder; provided, that prior to the transfer to a
permitted transferee hereunder, the permitted transferee (which, in the case of
a trust, shall include each person having authority to sell or dispose of the
shares of Common Stock proposed to be transferred to the trust) shall agree in
writing to be bound by all the terms of this Agreement applicable to the
Stockholder or a permitted transferee as if the permitted transferee originally
had been a party to this Agreement; and provided, further, that all of the
stockholders of any permitted transferee that is a corporation and all of the
general partners of any permitted transferee that is a partnership shall agree
in writing not to transfer any shares they then own or may thereafter acquire in
the corporate permitted transferee or any partnership interest they then own or
may thereafter acquire in the partnership permitted transferee, except to a
person described in paragraph (a), (b) or (c) above, so long as the corporate or
partnership permitted transferee shall own any shares of Common Stock. For
purposes hereof, a "Permitted Transferee" means a permitted transferee who holds
shares of Common Stock.
2.3. PARTICIPATION IN SALE OF COMMON STOCK. The Stockholder and
any Permitted Transferee, at such person's option, may participate
proportionately (and the FL & Co. Companies shall allow such persons to
participate proportionately) in any sale of all or a portion of the shares of
Common Stock owned by any of the FL & Co. Companies to any person who is not a
partner or affiliate of any of the FL & Co. Companies (a "Third Party"), by
selling to the Third Party the same percentage of such person's shares of Common
Stock as the FL & Co. Companies propose to sell to the Third Party of the
aggregate shares of Common Stock owned by all of the FL & Co. Companies. The FL
& Co. Companies proposing to sell their Common Stock shall notify the
Stockholder in writing of their intention to effect a sale to a Third Party, the
identity
-3-
<PAGE>
of the Third Party and the nature and per share amount of consideration to be
paid by such Third Party, at least ten days before the closing of any such
proposed sale of Common Stock. Any sale of shares of Common Stock by the
Stockholder or Permitted Transferee pursuant to this Section 2.3 shall be for
the same consideration per share, on the same terms and subject to the same
conditions as the sale of shares of Common Stock owned by the FL & Co.
Companies. If the Stockholder or any Permitted Transferee elects to sell any
shares of Common Stock pursuant to this Section 2.3, such person shall pay a
proportionate share of any of the expenses and shall be responsible for a
proportionate share of any liabilities and obligations (including liabilities
and obligations for indemnification and for post-closing purchase price
adjustments) (collectively, "Expenses of Sale") incurred by the selling
stockholders in connection with such sale that are not paid by the Company.
2.4. PUBLIC OFFERING OF COMMON STOCK. The Stockholder and any
Permitted Transferee, at such person's option, may participate proportionately
(and the FL & Co. Companies shall allow such persons to participate
proportionately) in any public offering of all or a portion of the shares of
Common Stock owned by the FL & Co. Companies, by selling in the public offering
the same percentage of such person's shares of Common Stock as the FL & Co.
Companies propose to sell in the public offering of the aggregate shares of
Common Stock owned by all of the FL & Co. Companies. The Company, at the
request of the Stockholder or a Permitted Transferee, shall cause such person's
portion of the shares to be included in the offering. If the Stockholder or any
Permitted Transferee elects to sell any shares of Common Stock pursuant to this
Section 2.4, such person shall pay a proportionate share of all Expenses of Sale
incurred by the selling stockholders in connection with such public offering
that are not paid by the Company, including indemnifying the underwriters, on a
proportionate basis, to the same extent as the FL & Co. Companies are required
to indemnify such underwriters.
-4-
<PAGE>
2.5. SALE OF ALL COMMON STOCK BY THE FL & CO. COMPANIES.
Notwithstanding any other provision of this Agreement, if the FL & Co. Companies
shall propose to sell or exchange (in a business combination or otherwise) all
of their shares of Common Stock and other shares of capital stock of the Company
in a bona fide arm's-length transaction, the FL & Co. Companies, at their
option, may require that the Stockholder and any Permitted Transferee sell all
of their shares of Common Stock in the same transaction and, if stockholder
approval of the transaction is required, that each such person vote such
person's shares in favor thereof. In calculating the aggregate consideration
paid with respect to the Common Stock, the Board of Directors of the Company, in
good faith, shall determine the fair market value of all property (other than
cash) received in the sale or exchange and its determination shall be final and
binding on the holders of Common Stock. The Stockholder and any Permitted
Transferee shall pay their proportionate share of all Expenses of Sale incurred
by the selling stockholders in connection with such sale that are not paid by
the Company.
2.6. TERMINATION OF RESTRICTIONS AND RIGHTS. Notwithstanding any
other provision of this Agreement, but subject to the restrictions of the
federal and any applicable state securities laws, including the restrictions in
this Agreement relating thereto, after one or more public offerings which result
in the shares of Common Stock owned by the FL & Co. Companies immediately
thereafter constituting, in the aggregate, less than 25% of the then outstanding
voting power of the Company, any and all shares of Common Stock owned by the
Stockholder or any Permitted Transferee may be sold, transferred, assigned,
exchanged, pledged, encumbered or otherwise disposed of, and the Stockholder or
any Permitted Transferee may grant any option or right to purchase, or may
continue to hold, such shares or any legal or beneficial interest therein, free
of the restrictions and rights contained in this Agreement.
-5-
<PAGE>
3. STOCK CERTIFICATE LEGEND AND INVESTMENT REPRESENTATIONS.
3.1. All certificates representing shares of Common Stock
acquired hereunder or hereafter by the Stockholder or any Permitted Transferee
(unless registered under the Securities Act of 1933, as amended (the "Act"))
shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
securities regulatory authority of any state, and may not be sold,
transferred, assigned, exchanged, pledged, encumbered or otherwise
disposed of except in accordance with the provisions of a
Stockholder's Agreement with the Company, a copy of which agreement is
available for inspection at the offices of the Company."
3.2. The Stockholder represents and warrants that: (a) the
Stockholder understands that (i) the offer and sale of shares of Common Stock in
accordance with this Agreement have not been and will not be registered under
the Act, and it is the intention of the parties hereto that the offer and sale
of the securities be exempt from registration under the Act and the rules
promulgated thereunder by the Securities and Exchange Commission; and (ii) the
shares cannot be sold, transferred, assigned, exchanged, pledged, encumbered or
otherwise disposed of unless they are registered under the Act or an exemption
from registration is available; (b) the Stockholder is acquiring the shares of
Common Stock to be acquired hereunder for investment for the Stockholder's own
account and not with a view to the distribution thereof; (c) the Stockholder
will not, directly or indirectly, sell, transfer, assign, exchange, pledge,
encumber or otherwise dispose of any shares of Common Stock acquired hereunder
or hereafter except in accordance with this Agreement; (d) the Stockholder has,
or the Stockholder together with the Stockholder's advisors, if any, have, such
knowledge and experience in financial and business matters that the Stockholder
is, or the Stockholder together with the Stockholder's advisors, if any, are,
and will be capable of
-6-
<PAGE>
evaluating the merits and risks relating to the Stockholder's purchase of shares
of Common Stock under this Agreement; (e) the Stockholder has been given the
opportunity to obtain information and documents relating to the Company and to
ask questions of and receive answers from representatives of the Company
concerning the Company and the Stockholder's investment in the Common Stock; (f)
the Stockholder is able to bear the economic risk of a total loss of the
Stockholder's investment in the Company; and (g) the Stockholder has adequate
means of providing for the Stockholder's current needs and foreseeable personal
contingencies and has no need for the Stockholder's investment in the Common
Stock to be liquid.
4. MISCELLANEOUS.
4.1. CERTAIN DEFINITIONS.
(a) In this Agreement, unless the context otherwise
requires, words in the singular number or in the plural number shall
each include the singular number and the plural number, words of the
masculine gender shall include the feminine and the neuter, and, where
the sense so indicates, words of the neuter gender may refer to any
gender.
(b) The term "affiliate" of any person shall mean any
person that, directly or indirectly, controls, is controlled by, or is
under common control with, the person of which it is an affiliate.
(c) The term "person" shall mean an individual, a
corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
(d) There shall be included within the term "Company" any
successor to Gulfstream Aerospace Corporation by merger,
-7-
<PAGE>
consolidation, acquisition of substantially all the assets thereof,
or otherwise.
(e) There shall be included within the term "Common Stock"
any Common Stock now or hereafter authorized to be issued, and any and
all securities of any kind whatsoever of the Company which may be
issued after the date hereof in respect of, or in exchange for, shares
of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of the Company or otherwise.
(f) All references herein to "Stockholder" or "Permitted
Transferee" shall be deemed to include references to the guardian,
executor, administrator or other legal representative of the
Stockholder or Permitted Transferee, if any, unless the context
otherwise requires.
4.2. DISTRIBUTIONS. In the event of any dividend, distribution
or exchange paid or made in respect of the Common Stock consisting of securities
(the "Affiliate Securities") of any affiliate of the Company (the "Affiliate"),
the restrictions and rights with respect to transferability of the Common Stock
that are contained in Article 2 hereof shall be applicable to the Affiliate
Securities without further action of the parties (with the references to Common
Stock being deemed references to the Affiliate Securities and the references to
the Company being deemed references to the Affiliate).
4.3. FURTHER ASSURANCES. Each party hereto shall do and perform
or cause to be done and performed all further acts and things and shall execute
and deliver all such other agreements, certificates, instruments and documents
as any other party hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
4.4. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
enforced in
-8-
<PAGE>
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
4.5. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
there will be no adequate remedy at law for a violation of any of the provisions
of this Agreement and that, in addition to any other remedies which may be
available, all of the provisions of this Agreement shall be specifically
enforceable in accordance with their terms.
4.6. INVALIDITY OF PROVISION. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement is
held unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the fullest
extent possible.
4.7. NOTICES. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Company, to it:
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
-9-
<PAGE>
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Stockholder or a Permitted Transferee, to
such person at the address as reflected in the stock
records of the Company.
4.8. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective heirs,
legal representatives, successors and assigns.
4.9. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
4.10.HEADINGS; EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and which together shall constitute one and the same instrument.
4.11. ENTIRE AGREEMENT. This Agreement and the Option
Agreement constitute the entire agreement and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof and thereof.
-10-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto, all as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By:___________________________________
_____________________________________
Stockholder
-11-
<PAGE>
The undersigned hereby agree to be bound by the provisions of Sections 2.3 and
2.4 of the foregoing Stockholder's Agreement.
GULFSTREAM PARTNERS
By FLC XXI Partnership, as General Partner
By _____________________________________________
, General Partner
GULFSTREAM PARTNERS II, L.P.
By FLC XXIV Partnership, as General Partner
By _____________________________________________
, General Partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND
EQUITY MANAGEMENT BUYOUT PARTNERSHIP - IV
By FLC Partnership, as General Partner
By _____________________________________________
, General Partner
-12-
<PAGE>
(IF THE STOCKHOLDER RESIDES IN A COMMUNITY PROPERTY STATE)
The undersigned acknowledges that the undersigned has read the foregoing
Agreement, including the schedule thereto, between Gulfstream Aerospace
Corporation and the undersigned's spouse, and the Stock Option Agreement,
understands that such agreement and option agreement provide for the
undersigned's spouse to purchase shares of Series A-1 Common Stock, which shares
are subject to certain restrictions reflected in such agreement and option
agreement, and agrees to be bound by the foregoing agreement and option
agreement.
----------------------------------
Stockholder's Spouse
-13-
<PAGE>
ANNEX I
Number of Shares In Cumulative Number Of
Respect Of Which Option Shares Subject To The
Is Being Exercised On Stockholder's Agreement
The Date Hereof On The Date Hereof
---------------------- ------------------------
Date:
-14-
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
STOCK OPTION PLAN
(as amended and restated on August 8, 1996)
1. PURPOSE. The purpose of the Gulfstream Aerospace Corporation Stock
Option Plan is to provide financial incentives to key employees of the
Corporation and its Subsidiaries and such consultants, advisors and members of
the Board of Directors of the Corporation and its Subsidiaries whose
entrepreneurial and management talents and commitments are essential for the
continued growth and expansion of the Corporation's business.
The options granted under the Plan are not intended to qualify as
Incentive Stock Options within the meaning of Section 422A(b) of the Code.
2. DEFINITIONS. For purposes of this Plan:
(a) "Affiliate" means any person directly or indirectly controlling,
controlled by, or under common control with the person of which it is an
Affiliate.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Common Stock" means the Common Stock, par value $.0l per share,
of the Corporation and any other stock or securities into which such shares are
changed or for which such shares are exchanged as described in Section 7
hereof.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee consisting of three or more persons
appointed by the Board to administer the Plan and perform the functions set
forth herein.
(f) "Corporation" means Gulfstream Aerospace Corporation, a Delaware
corporation, and any successor to Gulfstream Aerospace Corporation by merger,
consolidation, acquisition of substantially all the assets thereof or otherwise.
(g) "Eligible Person" means any individual employee or director of,
or consultant or advisor to, the Corporation or its Subsidiaries whom the
Committee designates as eligible to receive Options under the Plan.
<PAGE>
(h) "FL & Co. Companies" means individually and collectively
Gulfstream Partners, Gulfstream Partners II, L.P. and Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership - IV, each a New
York limited partnership.
(i) "Initial Public Offering" means the first Public Offering.
(j) "Option" means an option granted under the Plan.
(k) "Optionee" means a person to whom an Option has been granted
under the Plan.
(1) "Option Price" means the price at which a share of Common Stock
can be purchased pursuant to an Option.
(m) "Original Shareholders" means individually and collectively the
FL & Co. Companies and Allen E. Paulson.
(n) "Parent" means a parent corporation within the meaning of Section
425(e) of the Code.
(o) "Plan" means the Gulfstream Aerospace Corporation Stock Option
Plan as set forth in this instrument and as it may be amended from time to time.
(p) "Public Offering" means a public offering of Common Stock
registered under the Securities Act of 1933, as amended.
(q) "Stock Option Agreement" means the written agreement between an
Optionee and the Corporation evidencing the grant of an Option under the Plan
and setting forth the terms and conditions of that Option.
(r) "Stockholder's Agreement" means the Stockholder's Agreement
governing the rights, duties and obligations of present or former employees of
the Corporation or its Subsidiaries with respect to shares of Common Stock
granted or sold to such persons, or issued pursuant to options granted or sold
to such persons, substantially
-2-
<PAGE>
in the form attached hereto, or such other form as is in use by the
Corporation at the time of exercise of the Option or any part thereof and
which the Corporation elects to require the Optionee to execute in connection
with his exercise of the Option. All references herein or in any Stock
Option Agreement to sections of the Stockholder's Agreement refer to sections
of the Stockholder's Agreement attached hereto or to the corresponding
sections of any Stockholder's Agreement in use by the Corporation at the time
of exercise of any Option and which the Corporation elects to require the
Optionee to execute in connection with his exercise of the Option.
(s) "Subsidiary" means a subsidiary corporation of the Corporation
within the meaning of Section 425(f) of the Code, substituting "issuing" for
"employer" references therein.
(t) "Successor Corporation" means a corporation, or a Parent or
Subsidiary of such corporation, which issues or assumes a stock option in a
transaction to which Section 425(a) of the Code applies.
(u) "Third Party" means any person who is not an Affiliate or a
partner of the Original Shareholders or an Affiliate of such partner.
3. ADMINISTRATION. The Plan shall be administered by the Committee,
which shall hold meetings at least annually, and shall keep minutes of its
meetings. The Committee shall have all of the powers necessary to enable it to
carry out its duties under the Plan properly, including the power and duty to
construe and interpret the Plan and to determine all questions arising under it.
The Committee's interpretations and determinations shall be conclusive and
binding upon all persons. The Committee may also establish, from time to time,
such regulations, provisions, procedures and conditions regarding the Options
and granting of Options which in its opinion may be advisable in administering
the Plan. The acts of a majority of the total membership of the Committee
-3-
<PAGE>
at any meeting, or acts approved in writing by all of its members, shall be
acts of the Committee.
4. SHARES AVAILABLE FOR OPTION.
(a) The Corporation shall reserve for the purposes of the Plan, out
of its authorized but unissued Common Stock or out of shares of Common Stock
held in the Corporation's treasury, or partly out of each, as shall be
determined by the Board, a total of 5,500,000 shares of Common Stock (or the
number and kind of shares of stock or other securities into which those
5,500,000 shares are changed or for which those 5,500,000 shares are exchanged
in accordance with Section 7 hereof).
(b) In the event that an Option granted under the Plan to any
Eligible Person expires, or is for any other reason terminated and unexercised
as to any shares of Common Stock covered by the Option, those shares of Common
Stock shall thereafter be available for the granting of future Options under the
Plan.
5. GRANTING OPTIONS.
(a) Subject to the provisions of the Plan, the Committee shall have
full and final authority to select those Eligible Persons who will receive
Options. The Committee may also grant more than one Option to a given Eligible
Person during the term of the Plan, either in addition to, or in substitution
for, one or more Options previously granted that Eligible Person. Options
shall be issued pursuant to a Stock Option Agreement executed by the
Corporation and the Optionee.
(b) The Committee, in its sole discretion, shall establish the per
share Option Price at the time an Option is granted.
(c) The terms of each Option granted under the Plan may differ from
those of other Options granted under the Plan at the same time, or at some other
time;
-4-
<PAGE>
provided that in no event shall the term of any Option granted under the Plan
exceed ten years and one day.
(d) Subject to the provisions of the Plan and the Stock Option
Agreement, an Option granted under this Plan shall be exercisable immediately or
in accordance with a schedule determined by the Committee in its sole
discretion.
(e) Options granted under the Plan shall not be transferable by the
Optionee except by will to transferees approved by the Committee as reflected in
the particular Stock Option Agreement, or if the Optionee dies intestate, by the
laws of descent and distribution of the state of the Optionee's domicile at the
time of his death.
(f) Subject to the terms and conditions and within the limitations of
the Plan, the Committee may modify, extend, replace or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options (to the
extent they have not yet been exercised) and grant new Options in substitution
for them. Notwithstanding the foregoing, however, no modification of an Option
shall adversely alter or impair any rights or obligations under any Option
granted under the Plan without the affected Optionee's consent.
6. EXERCISE OF OPTIONS.
(a) To exercise an Option, in whole or in part, the Optionee shall
deliver to the Committee a written notice of exercise specifying the number of
shares of Common Stock in respect of which the Option is being exercised. The
Option Price shall be paid in full for those shares of Common Stock with respect
to which the Option is being exercised. The Stock Option Agreement shall set
forth the minimum number of shares of Common Stock, if any, which may be
purchased at any one time upon the exercise of an Option. Each share of Common
Stock purchased upon exercise of an Option shall be issued and delivered at the
principal office of the Corporation to the person entitled to
-5-
<PAGE>
receive it. An Optionee shall not be deemed the holder of any shares of Common
Stock subject to the Option or have any rights of a stockholder with respect
thereto until such shares of Common Stock have been issued and delivered to
such Optionee. The Stock Option Agreement may contain such other conditions to
the exercise of an Option as the Committee from time to time shall determine and
may also contain provisions relating to the ownership of the shares of Common
Stock issued upon the exercise of the Option or may require the Optionee, as a
condition of exercise of the Option, to execute a Stockholder's Agreement.
(b) Except as provided in the Stock Option Agreement, any Options
held by an Optionee shall not be exercisable after the termination of the
Optionee's employment with the Corporation or its Subsidiaries or his membership
on the Board, as the case may be. During an Optionee's lifetime, Options
granted under the Plan shall be exercisable only by the Optionee. In the
event of an Optionee's death, any Options held by the Optionee shall be
exercisable, to the extent provided in the Plan or under the Stock Option
Agreement, by the legatee or legatees under his will or by his personal
representatives or distributees.
(c) All certificates representing shares of Common Stock issued
pursuant to the exercise of an Option shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any securities
regulatory authority of any state, and may not be sold, transferred,
assigned, exchanged, pledged, encumbered or otherwise disposed of
except in accordance with the provisions of a Stockholder's Agreement
with the
-6-
<PAGE>
Corporation, a copy of which is available for inspection at the
offices of the Corporation."
or such other legend to the same effect as approved by the Committee.
(d) To the extent that an Option is not exercised prior to the
expiration of its term or such shorter period of time prescribed by the Plan and
the Stock Option Agreement, the Option shall lapse and all rights of the
Optionee with respect thereto shall terminate.
7. CHANGES IN COMMON STOCK. In the event that the outstanding shares of
Common Stock are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Corporation, whether through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split-
up or other substitution of securities of the Corporation, the Committee shall
make appropriate adjustments to the maximum number and class of shares of stock
as to which Options may be granted under the Plan and the number and class of
shares of stock with respect to which Options have been granted under the Plan,
the Option Price for such shares and any other economic terms of the Option. In
the event that any shares of Common Stock are issued after the date of the Plan
to any of the FL & Co. Companies for less than fair consideration, as determined
conclusively by the Committee, the Committee shall make appropriate adjustments
to the maximum number of shares of stock as to which Options may be granted
under the Plan and the number of shares of stock with respect to which Options
have been granted under the Plan and the Option Price for such shares. The
Committee's adjustment shall be final and binding for all purposes of the Plan
and each Stock Option Agreement entered into under the Plan. No adjustment
provided for in this Section 7 shall require the Corporation to issue a
fractional share, and with respect to each Stock
-7-
<PAGE>
Option Agreement the total adjustment as to the number of shares for which
Options have been granted shall be effected by rounding down to the nearest
whole number of shares.
8. AMENDMENT OR TERMINATION OF PLAN. The Board shall have the right to
amend, suspend or terminate the Plan at any time, provided that, except as and
to the extent authorized and permitted by Section 7 above, no amendment shall be
made which shall (a) increase the total number of shares which may be issued and
sold pursuant to the exercise of Options granted under the Plan, (b) extend the
period for granting or exercising any Option, or (c) change the classes of
persons eligible to receive Options, unless such amendment is made by or with
the approval of the holders of a majority of the outstanding shares of Common
Stock. The rights of an Optionee under any Option granted prior to an
amendment, suspension or termination of the Plan shall not be adversely affected
by any such action of the Board except upon the consent of the Optionee.
9. INDEMNIFICATION OF STOCK OPTION COMMITTEE. The members of the
Committee shall be indemnified by the corporation against all losses, claims,
damages and liabilities, joint or several (including all legal and other
expenses reasonably incurred in connection with the preparation for, or defense
of, any claim, action or proceeding, whether or not resulting in any
liability), for any acts or omissions which are within the scope of such
member's duties as a member of the Committee to the full extent permitted under
the General Corporation Law of the State of Delaware, as amended from time to
time.
10. COMPLIANCE WITH LAW AND OTHER CONDITIONS. All Options and Stock
Option Agreements shall be governed by the laws of the State of New York to the
extent not superseded by the laws of the United States. Notwithstanding
anything herein or in any agreements pursuant to which Options are granted to
the contrary, the Corporation shall
-8-
<PAGE>
not be required to issue shares pursuant to the exercise of any Option granted
under the Plan unless the Corporation's counsel has advised the Corporation
that such exercise and issuance comply with all applicable laws including,
without limitation, all applicable federal and state securities laws.
11. MISCELLANEOUS. Nothing in the Plan or in any Stock Option Agreement
shall (a) confer on any employee any right to continue in the employ of the
Corporation, any of its Subsidiaries or any Successor corporation; or (b) affect
the right of the Corporation, any of its Subsidiaries or any Successor
Corporation to terminate his employment at any time.
12. EFFECTIVE DATE AND DURATION OF PLAN. The effective date of the Plan
shall be the date of its adoption by the Board, subject only to the approval of
the stockholders of the Corporation. No options may be granted under the Plan
after the date twenty years from the date the Plan is adopted by the Board.
-9-
<PAGE>
STOCK OPTION AGREEMENT (the "Agreement"), dated as of ________, 199_,
between Gulfstream Aerospace Corporation, a Delaware corporation (together with
its successors the "Corporation"), and ____________ (the "Optionee").
1. GRANT OF OPTION.
1.1 The Corporation hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of _______
whole shares of Series A-1 Common Stock, par value $.01 per share, of the
Corporation (the "Series A-1 Common Stock") (such number being subject to
adjustment as provided in Section 8 hereof) on the terms and conditions set
forth in this Agreement and in the Corporation's Stock Option Plan (the "Plan"),
a copy of which has previously been provided to the Optionee.
1.2 This Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
1.3 Except as otherwise defined herein, capitalized terms used
in this Agreement shall have the same definitions as set forth in the Plan.
2. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase shares of Series A-1 Common Stock upon the exercise of this
Option shall be $6.15 per share (such price being subject to adjustment as
provided in Section 8 hereof) (the "Option Price").
3. DURATION OF OPTION. The Option shall be exercisable to the
extent and in the manner provided herein for a period of 10 years from the date
hereof; provided, however, that the Option may be earlier terminated as provided
in Section 6, Section 7 or Section 9 hereof.
4. EXERCISABILITY OF OPTIONS. Subject to the provisions of this
Agreement and the Plan, the Option shall be exercisable in accordance with the
following schedule:
(a) on or after [one year from date of grant] but before [two
years from date of grant], the Option may be exercised to acquire up
to one-third of the total number of shares of Series A-1 Common Stock
which may be purchased pursuant to the Option, less any shares
previously acquired pursuant to the Option;
<PAGE>
(b) on or after [two years from date of grant] but before [three
years from date of grant], the Option may be exercised to acquire up
to two-thirds of the total number of shares of Series A-1 Common Stock
which may be purchased pursuant to the Option, less any shares
previously acquired pursuant to the Option; and
(c) on or after [three years from date of grant] but before the
expiration of the term of the Option, the Option may be exercised to
acquire up to 100% of the total number of shares of Series A-1 Common
Stock which may be purchased pursuant to the Option, less any shares
previously acquired pursuant to the Option.
Notwithstanding the foregoing, prior to the completion of an Initial
Public Offering, unless the Committee otherwise determines, the Optionee may
exercise the Option (to the extent the Option is exercisable at such time in
accordance with 4(a), 4(b) and 4(c) above) on one occasion during the 90-day
period following the date upon which the Corporation delivers to the Optionee
notice to the effect that copies of the Corporation's audited financial
statements for the fiscal year immediately preceding the fiscal year in which
such notice is given are available to the Optionee for his review at the
principal office of the Corporation. The Corporation shall use its best efforts
to deliver such notice within 30 days after the audited financial statements
referred to therein are completed. Upon the completion of an Initial Public
Offering, the Corporation shall no longer be required to deliver such notice and
the Option may be exercised (to the extent the Option is exercisable at such
time in accordance with 4(a), 4(b) and 4(c) above) at any time.
In addition, the Corporation shall give the Optionee 30 days written
notice (or, if not practicable, such shorter notice as may be practicable) prior
to the anticipated date of the consummation of a Terminating Event (as
hereinafter defined) or the anticipated date of the consummation of a Partial
Sale (as hereinafter defined), and the Optionee shall be permitted to exercise
the Option for a period of 21 days (or such shorter period as the Committee
shall determine and so notify the Optionee) after the date of such notice of the
Terminating Event or the Partial Sale. In the case of a Terminating Event, the
Option may be exercised, in whole or in part, for the full amount of the shares
of Series A-1 Common Stock covered thereby (less the number of shares previously
issued to the Optionee upon exercise of the Option), whether or not the Option
was otherwise so exercisable pursuant to the vesting schedule described in 4(a),
4(b) and 4(c) hereof on the date such notice was given. In
-2-
<PAGE>
the case of a Partial Sale, the Option may be exercised in whole or in part,
whether or not the Option was otherwise so exercisable pursuant to the vesting
schedule described in 4(a), 4(b) and 4(c) hereof on the date such notice was
given, but not for more than the excess, if any, of (a) the number of shares
with respect to which the Optionee will be entitled to, and will participate in
the Partial Sale pursuant to Section 2.3 or 2.4 of the Stockholder's Agreement,
as the case may be, over (b) the number of shares previously issued to the
Optionee upon exercise of the Option. In the event the Terminating Event or
Partial Sale is not consummated, the Option will be deemed not to have been
exercised and shall be exercisable thereafter only to the extent it would have
been exercisable pursuant to the vesting schedule described in 4(a), 4(b) and
4(c) hereof if no such notice had been given. In lieu of permitting the
Optionee to exercise the Option in the event of a Terminating Event involving
the merger, consolidation or liquidation of the Corporation or the sale of
capital stock covered by Section 2.5 of the Stockholder's Agreement, the
Committee, in its sole discretion, may instead cause the Corporation to redeem
the unexercised portion of the Option pursuant to Section 9 hereof.
For purposes hereof, (a) the term "Terminating Event" shall mean the
consummation of any of the following transactions: (i) any merger or
consolidation of the Corporation with or into another corporation (other than a
merger or consolidation in which the Corporation is the surviving corporation
and which does not result in any capital reorganization or reclassification or
other change of the then outstanding shares of Series A-1 Common Stock), or (ii)
the liquidation of the Corporation, or (iii) the sale to a Third Party of all or
substantially all of the assets of the Corporation pursuant to a plan of
liquidation or otherwise, or (iv) the sale to a Third Party of Class A Common
Stock (including through one or more Public Offerings); provided, that in the
case of each of clauses (i), (ii) and (iv) above, as a result thereof the FL &
Co. Companies (as defined below), the direct or indirect partners of any of the
FL & Co. Companies, and any Affiliates of any of the foregoing cease to own,
directly or indirectly, any shares of the voting stock of the Corporation, and
(b) the term "Partial Sale" shall mean any sale by the FL & Co. Companies of all
or a portion of their shares of Series A-1 Common Stock to a Third Party,
including through any Public Offering, which sale is not a Terminating Event.
The term "FL & Co. Companies" shall mean Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-IV, Gulfstream Partners and
Gulfstream Partners II, L.P., each a New York limited partnership.
Subject to the provisions of Section 9 hereof, the Option shall be
canceled simultaneously with the consummation of
-3-
<PAGE>
a Terminating Event to the extent that the Option has not theretofore been
exercised.
5. MANNER OF EXERCISE AND PAYMENT.
5.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Committee, at the Corporation's principal office (or such other address as the
Corporation may from time to time notify the Optionee in writing). Such notice
shall state that the Optionee is electing to exercise the Option and the number
of shares of Series A-1 Common Stock in respect of which the Option is being
exercised and shall be signed by the Optionee or by any guardian, executor,
administrator or other legal representative (each, a "Legal Representative").
The Corporation may require proof satisfactory to it as to the right of such
person to exercise the Option.
5.2 The notice of exercise described in Section 5.1 hereof shall
be accompanied by (a) the full purchase price for the shares in respect of which
the Option is being exercised, such purchase price to be paid by check, and (b)
a fully executed Stockholder's Agreement (a copy of which will be supplied to
the Optionee upon request). Not less than 250 shares of Series A-1 Common Stock
may be purchased at any one time upon the exercise of an Option, unless the
number of shares of Series A-1 Common Stock so purchased constitutes the total
number of shares of Series A-1 Common Stock then purchasable under the Option.
5.3 Upon receipt of notice of exercise, full payment for the
shares of Series A-1 Common Stock in respect of which the Option is being
exercised and a fully executed Stockholder's Agreement, and subject to Section
10 of the Plan, the Corporation shall take such action as may be necessary under
applicable law to effect the issuance and delivery to the Optionee of the number
of shares of Series A-1 Common Stock as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Series A-1
Common Stock subject to the Option until: (a) the Option shall have been
exercised pursuant to the terms of this Agreement and the Optionee shall have
paid the full purchase price for the number of shares in respect of which the
Option was exercised, (b) the Optionee shall have delivered the fully executed
Stockholder's Agreement to the Corporation, (c) the Corporation shall have
issued and delivered the shares to the Optionee, and (d) the Optionee's name
shall have been entered as a stockholder of record on the books of the
Corporation. Upon
-4-
<PAGE>
the occurrence of all of the foregoing events, the Optionee shall have full
voting and other ownership rights with respect to such shares, subject to the
provisions of the Stockholder's Agreement.
5.5 In the event the initial exercise of the Option is an
exercise in part only, then, in the event of any further exercise of the Option,
the Optionee, in lieu of executing a new Stockholder's Agreement, shall
re-execute the original Stockholder's Agreement, thereby re-affirming the
representations and warranties contained in the Stockholder's Agreement as of
the date of re-execution, but with an amended Schedule I completed to set forth
the number of shares of Series A-1 Common Stock in respect of which the Option
is then being exercised and the cumulative number of shares of Series A-1 Common
Stock which would then be subject to the Stockholder's Agreement. If a further
exercise of the Option is by a person who has not previously exercised the
Option (as for example if the initial exercise was by the Optionee and the
subsequent exercise was by a Legal Representative), then such person shall
execute a counterpart of the original Stockholder's Agreement thereby agreeing
to be bound by such agreement as though such person were an original signatory
thereto and affirming the truth of the representations and warranties contained
therein with respect to such person as of the date of his execution of such
counterpart.
6. CERTAIN RESTRICTIONS.
6.1 NO SALE OR TRANSFER. The Optionee shall not sell, transfer,
assign, exchange, pledge, encumber or otherwise dispose of the Option, in whole
or in part, except in accordance with the provisions of this Agreement.
6.2 EMPLOYMENT TERMINATION. Except (i) as provided in this
Section 6.2 or (ii) as may be agreed between the Committee and the Optionee, if
the Optionee shall no longer be employed on a full-time basis by either the
Corporation or any of its subsidiaries, or ceases to serve as a director of the
Corporation or any of its subsidiaries, for any reason whatsoever (including by
reason of death, permanent disability or adjudicated incompetency) ("Terminated"
or a "Termination"), irrespective of whether the Optionee receives, in
connection with the Termination, any severance or other payment from the
Corporation or any of its subsidiaries under any employment agreement or
otherwise (such Optionee being referred to herein as a "Terminated Optionee"),
the portion of the Option that was not exercisable immediately prior to the
Optionee's Termination shall terminate and shall be of no further force and
effect from and after the date of such Termination. Following a Termination,
the Optionee may exercise the portion of the Option which was
-5-
<PAGE>
exercisable immediately prior to the date of the Optionee's Termination (the
"Exercisable Portion of the Option") or any portion thereof on one occasion
during the 90-day period following the date of the delivery of the Statement
Notice (as defined below) (or, if an Initial Public Offering has not been
completed prior to the date of the delivery of the Statement Notice and the date
of the delivery of the Statement Notice does not fall within the 90-day exercise
period set forth in Section 4 hereof, then within the next succeeding period
during which the Option is exercisable pursuant to Section 4 hereof), but in no
event after the expiration of the term of the Option. To the extent the
Terminated Optionee does not so exercise the Exercisable Portion of the Option,
the Exercisable Portion of the Option shall terminate and shall be of no force
and effect.
As promptly as practicable, but in any event within 95 days (or such
later date as the audited financial statements referred to below are7 available)
following the date of Termination, the Corporation shall deliver to the
Terminated Optionee a notice (the "Statement Notice") to the effect that the
financial statements referred to in this paragraph are available to the
Terminated Optionee for review at the principal office of the Corporation and
shall make available to the Terminated Optionee, for review at the principal
office of the Corporation, a copy of the Corporation's consolidated financial
statements as of the last day of the fiscal year immediately preceding the
fiscal year in which the Termination occurred (the "Statement Date"), which
financial statements shall be accompanied by an opinion letter of the
Corporation's then independent certified public accountants to the effect that
the consolidated balance sheet contained therein presents fairly in all material
respects the consolidated financial position of the Corporation and its
subsidiaries as of the Statement Date and has been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years, except for changes in accounting methods in which such accountants
have concurred; provided, however, that if the Corporation does not have its
financial statements audited or for any other reason shall be unable to make a
copy of its audited consolidated balance sheet available to the Terminated
Optionee for review within 95 days following the date of Termination, the
Corporation instead shall make available a copy of the Corporation's unaudited
consolidated financial statements as of the Statement Date, including an
unaudited consolidated balance sheet, which statements shall be accompanied by
(i) a certificate of the chief financial officer of the Corporation stating
that, to the best of his knowledge, the consolidated balance sheet contained in
the unaudited consolidated financial statements presents fairly the consolidated
financial position of the Corporation as of the Statement Date in accordance
with generally accepted accounting
-6-
<PAGE>
principles applied on a basis consistent with prior years, except for changes in
accounting methods in which the Corporation's then independent certified public
accountants have concurred, and (ii) a letter from the Corporation's then
independent certified public accountants stating that, based upon their review
of the unaudited consolidated financial statements (which review does not
constitute an examination in accordance with generally accepted auditing
standards), they are not aware of any material modifications that should be made
to such financial statements for them to be in conformity with generally
accepted accounting principles.
The Terminated Optionee shall keep the financial statements and any
other documentation provided in connection therewith confidential, shall not use
any such material or any information contained therein for any purpose other
than to determine whether to exercise all or any part of the Exercisable Portion
of the Option, and shall not disclose any such material or any information
contained therein to anyone other than his legal or financial advisors who have
agreed in writing to the equivalent confidentiality, non-use and non-disclosure
provisions contained in this sentence.
7. PROHIBITED ACTIVITIES.
7.1 PROHIBITION AGAINST CERTAIN ACTIVITIES. The Optionee agrees
that (a) he will not at any time during his employment (other than in the course
of his employment) with the Corporation or any Affiliate thereof, or after any
Termination, directly or indirectly disclose or furnish to any other person or
use for his own or any other person's account any confidential or proprietary
knowledge or any other information which is not a matter of public knowledge
obtained during the course of his employment with, or other performance of
services for, the Corporation or any Affiliate thereof or any predecessor of any
of the foregoing, no matter from where or in what manner the Optionee may have
acquired such knowledge or information, and he shall retain all such knowledge
and information in trust for the benefit of the Corporation, its Affiliates and
the successors and assigns of any of them, (b) if he is Terminated, he will not
for three years following the Termination directly or indirectly solicit for
employment, including, without limitation, recommending to any subsequent
employer the solicitation for employment of, any person who at the time of the
solicitation is employed by the Corporation or any Affiliate thereof and (c) he
will not at any time during his employment or after any Termination publish any
statement or make any statement (under circumstances reasonably likely to become
public or that he might reasonably expect to become public) critical of the
Corporation or any Affiliate of the Corporation, including Forstmann Little &
-7-
<PAGE>
Co., or in any way adversely affecting or otherwise maligning the business or
reputation of any of the foregoing entities (any activity described in clause
(a), (b) or (c) of this Section 7.1 being herein referred to as a "Prohibited
Activity").
7.2 RIGHT TO TERMINATE OPTION. The Optionee understands that
the Corporation is granting to the Optionee an option to purchase shares of
Series A-1 Common Stock hereunder to reward the Optionee for the Optionee's
future efforts and loyalty to the Corporation and its Affiliates by giving the
Optionee the opportunity to participate in the potential future appreciation of
the Corporation. Accordingly, (a) if the Optionee engages in any Prohibited
Activity, or (b) if, at any time during the Optionee's employment with the
Corporation or any Affiliate or during the three years following the Optionee's
Termination, the Optionee engages in any Competitive Activity (as hereinafter
defined), or (c) if, at any time (whether during the Optionee's employment or
after any Termination), the Optionee is convicted of a crime against the
Corporation or any Affiliate, then, in addition to any other rights and remedies
available to the Corporation, the Corporation shall be entitled, at its option,
to terminate the Option, which shall then be of no further force and effect.
The term "Competitive Activity" shall mean engaging in any of the following
activities: (i) serving as a director of any person (other than the Corporation
or any of its subsidiaries) that competes either directly or indirectly through
one or more Affiliates with any of the businesses conducted by the Corporation
or any of its Affiliates (a "Competitor"), (ii) directly or indirectly through
one or more intermediaries (X) controlling any Competitor or (Y) owning any
equity or debt interests in any Competitor (other than equity or debt interests
which are publicly traded and do not exceed 2% of the particular class of
interests outstanding) (it being understood that, if interests in any Competitor
are owned by an investment vehicle or other entity in which the Optionee owns an
equity interest, a portion of the interests in such Competitor owned by such
entity shall be attributed to the Optionee, such portion determined by applying
the percentage of the equity interest in such entity owned by the Optionee to
the interests in such Competitor owned by such entity), (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Corporation or any
Affiliate of the Corporation of which the Optionee owns shares of capital stock
or any other equity interest or (iv) employment by (including serving as an
officer or director of) or providing consulting services to any Competitor. For
purposes of this Section 7.2, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of any Competitor, whether through the ownership of equity
interests, by contract or otherwise.
-8-
<PAGE>
8. ADJUSTMENTS. In the event that the outstanding shares of the
Series A-1 Common Stock are changed into or exchanged for a different number or
kind of shares of stock or other securities of the Corporation, whether through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split-up or other substitution of securities of the Corporation, the Committee
shall make appropriate adjustments to the number and class of shares of stock
subject to this Option and the Option Price for such shares. In the event that
any shares of Series A-1 Common Stock are issued after the date of the Plan to
any of the FL & Co. Companies for less than fair consideration, as determined
finally by the Committee, the Committee shall make appropriate adjustments to
the number of shares of stock subject to this Option and the Option Price for
such shares. The Committee's adjustment shall be final and binding for all
purposes of the Plan and this Agreement. No adjustment provided for in this
Section 8 shall require the Corporation to issue a fractional share, and the
total adjustment with respect to this Agreement shall be limited accordingly.
9. TERMINATING EVENTS.
(a) Upon the effective date of any Terminating Event, any
unexercised portion of this Option shall terminate unless provision shall be
made in writing in connection with such Terminating Event for the continuance of
the Plan and for the assumption of such unexercised portion of this Option by a
Successor Corporation or for the substitution for such unexercised portion of
this Option of new options covering shares of such Successor Corporation with
appropriate adjustments as to number and kind of shares and prices of shares
subject to such new options; provided, however, that in connection with a
Terminating Event involving the merger, consolidation or liquidation of the
Corporation or the sale of capital stock of the Corporation covered by Section
2.5 of the Stockholder's Agreement, the Committee may, in its sole discretion,
authorize the redemption of the unexercised portion of the Option for a
consideration per share of Series A-1 Common Stock issuable upon exercise of the
unexercised portion of the Option equal to the excess of (i) the consideration
payable per share of Series A-1 Common Stock in connection with such Terminating
Event, adjusted as if all outstanding options and warrants had been exercised
prior to the consummation of such Terminating Event, over (ii) the Option Price.
In the event that provision for continuance of the Plan is made in writing in
connection with a Terminating Event, the unexercised portion of this Option or
the new options substituted therefor shall continue in the manner and under the
terms provided in the Plan and this Agreement and in such writing.
-9-
<PAGE>
(b) In the event of a redemption pursuant to this Section 9, the
Optionee shall be responsible for and shall be obligated to pay a proportionate
amount (determined as if the Optionee were a holder of the number of shares of
Series A-1 Common Stock which would have been issuable upon exercise of the
portion of the Option redeemed pursuant to this Section 9) of the expenses,
liabilities or obligations incurred or to be incurred by the stockholders of the
Corporation in connection with such Terminating Event (including, without
limitation, the fees and expenses of investment bankers, legal counsel and other
outside advisors and experts retained by or on behalf of the stockholders of the
Corporation in connection with the Terminating Event, amounts payable in respect
of indemnification claims, amounts paid into escrow and amounts payable in
respect of post-closing adjustments to the purchase price).
10. NO RIGHT TO CONTINUED EMPLOYMENT. This Option shall not confer
upon the Optionee any right with respect to continuance of employment by the
Corporation or any Affiliate, nor shall it interfere in any way with the right
of the Corporation or any Affiliate to terminate the Optionee's employment at
any time.
11. OPTIONEE BOUND BY PLAN; ENTIRE AGREEMENT. The Optionee hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. This Agreement and the Plan and, upon execution
thereof, the Stockholder's Agreement, constitute the entire agreement, and
supersede all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof; provided, however,
that in the event there is any conflict between the provisions of this Agreement
or, upon execution thereof, the Stockholder's Agreement, on the one hand, and
the Plan, on the other hand, the provisions of this Agreement or the
Stockholder's Agreement shall be binding.
12. MODIFICATION OF AGREEMENT. This Agreement may be modified,
amended, suspended or terminated by the parties hereto; provided, that the
Corporation may modify, amend, suspend or terminate this Agreement without any
further action by the Optionee if such modification, amendment, suspension or
termination does not adversely affect the Optionee's rights hereunder. Any
terms, covenants, representations or conditions may be waived by the parties
hereto, but only in a writing signed by the party which is entitled to the
benefits of such waived term, covenant, representation or condition.
13. SEVERABILITY. Should any provision of this Agreement be held by
a court to be unenforceable or invalid for
-10-
<PAGE>
any reason, the remaining provisions of this Agreement shall not be affected by
such holding and shall continue in full force in accordance with their terms.
14. ACKNOWLEDGMENT. By signing this Agreement, the Optionee
acknowledges that he has reviewed the Plan and this Agreement and understands
his rights and obligations thereunder and hereunder. The Optionee also
acknowledges that he has been provided with such information concerning the
Corporation, the Plan and this Agreement as he and his advisors have requested.
15. SUCCESSORS IN INTEREST. This Agreement shall inure to the
benefit of and be binding upon each successor of the Corporation. All
obligations imposed upon the Optionee and all rights granted to the Corporation
under this Agreement shall be binding upon the Optionee's heirs, executors,
administrators and successors.
16. HEADINGS. The headings and captions contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
17. RESOLUTION OF DISPUTES. Any dispute or disagreement which may
arise under, or as a result of, or which may in any way relate to, the
interpretation, construction or application of this Agreement shall be
determined by the Committee. Any determination made hereunder shall be final
and binding for all purposes.
18. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed in accordance with, the
laws of the State of New York without giving effect to the principles of
conflicts of laws thereof.
GULFSTREAM AEROSPACE CORPORATION
By:__________________________
Title:
_____________________________
Optionee
-11-
<PAGE>
The undersigned acknowledges that the undersigned has read the
foregoing Agreement between Gulfstream Aerospace Corporation and the
undersigned's spouse and the Stock Option Plan, understands that the
undersigned's spouse has been granted an option to acquire shares of Gulfstream
Aerospace Corporation Series A-1 Common Stock, which option is subject to
certain restrictions reflected in such Agreement and such Plan and agrees to be
bound by the foregoing Agreement and such Plan.
________________________________
Optionee's Spouse
-12
<PAGE>
STOCKHOLDER'S AGREEMENT
STOCKHOLDER'S AGREEMENT, dated as of [ ], between Gulfstream
Aerospace Corporation, a Delaware corporation (the "Corporation"), and the
undersigned person (the "Stockholder"), who was granted the right and option
(the "Option") to purchase shares of Series A-1 Common Stock, par value $.01
per share, of the Corporation (the "Series A-1 Common Stock") pursuant to the
terms and conditions of the Corporation's Stock Option Plan (the "Plan") and
a Stock Option Agreement, dated as of ____________, 199_, between the
Corporation and the Stockholder (the "Option Agreement").
WHEREAS, the Option Agreement requires the Stockholder to enter into
this Stockholder's Agreement upon and as a condition to the exercise of the
Option;
WHEREAS, the Stockholder wishes to exercise the Option to purchase
shares of Series A-1 Common Stock; and
WHEREAS, the Stockholder and the Corporation wish to provide for
certain arrangements with respect to the Stockholder's rights to hold and
dispose of the shares of Series A-1 Common Stock acquired by the Stockholder
upon the exercise of the Option.
NOW, THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SERIES A-1 COMMON STOCK. The Stockholder hereby
elects to exercise the Option in respect of the shares of Series A-1 Common
Stock set forth in Schedule I hereto. Promptly upon payment in full of the
purchase price for the shares of Series A-1 Common Stock in respect of which
the Option is being exercised and compliance by the Stockholder with the
other provisions of Section 5.3 of the Option Agreement, the Corporation
shall issue and deliver to the Stockholder a stock certificate representing
the shares of Series A-1 Common Stock in respect of which the Option is being
exercised and shall enter the name of the Stockholder as a stockholder of
record of such shares on the books of the Corporation (the "Closing").
2. RESTRICTIONS ON DISPOSITION OF SERIES A-1 COMMON STOCK.
2.1. No Sale or Transfer. The Stockholder shall not sell, transfer,
assign, exchange, pledge, encumber or otherwise dispose of any shares of
Series A-1 Common Stock acquired hereunder or hereafter, or grant any option
or right to purchase
<PAGE>
such shares or any legal or beneficial interest therein, except in accordance
with the provisions of this Agreement.
2.2. EMPLOYMENT TERMINATION.
(a) Except (i) as provided in this Section 2.2(a) or (ii) as may
be agreed between the Corporation and the Stockholder, and subject to Section
2.6(a) hereof, if the Stockholder shall no longer be employed on a full-time
basis by the Corporation or any of its subsidiaries, or ceases to serve as a
director of the Corporation or any of its subsidiaries, for any reason
whatsoever (including by reason of death, permanent disability or adjudicated
incompetency) ("Terminated" or a "Termination"), irrespective of whether the
Stockholder receives, in connection with the Termination, any severance or
other payment from the Corporation or any of its subsidiaries under any
employment agreement or otherwise (such Stockholder being referred to herein
as a "Terminated Employee"), the Corporation shall be entitled to, at its
option exercisable upon written notice to the Terminated Employee, purchase
all of the shares of Series A-1 Common Stock then held by (x) the Terminated
Employee or (y) the guardian, executor, administrator or other legal
representative (each, a "Legal Representative") of the Terminated Employee.
All references herein to "Stockholder" shall be deemed to include references
to the Legal Representative thereof, if any, unless the context otherwise
requires. Notwithstanding the foregoing, if the Terminated Employee's
employment with the Corporation or any of its affiliates is terminated as a
result of the death or disability of the Stockholder or the Normal Retirement
(as hereinafter defined) of the Stockholder, the Terminated Employee, at his
option, exercisable by written notice delivered to the Corporation not later
than 30 days after the Date of Determination of the Book Value of the
Corporation (as hereinafter defined) or (if applicable) 60 days after the
appointment of the Legal Representative, whichever period ends later (the
date such notice is given, or if no such notice is given, the last date on
which such notice could have been given, being referred to herein as the
"Election Date"), may elect not to sell to the Corporation, pursuant to this
Section 2.2, all or any portion of the aggregate number of shares of Series
A-1 Common Stock then held by him. Any shares of Series A-1 Common Stock
retained by the Terminated Employee pursuant to the provisions of this
paragraph (a) shall continue to be subject to the terms of this Agreement,
other than the first sentence of this Section 2.2(a) but including the
provisions of Article 3 hereof. "Normal Retirement" means the voluntary
retirement of the Stockholder on or after his 65th birthday.
-2-
<PAGE>
(b) Subject to Section 2.6(b) hereof, the purchase price per
share of the shares of Series A-1 Common Stock purchased pursuant to Section
2.2(a) hereof (the "Purchase Price") shall be equal to the greater of (i)
$6.15 per share, adjusted to reflect any Capital Transaction (as defined
below) effected after the date hereof and prior to the Date of Determination
of the Book Value of the Corporation (as defined below) and (ii) the amount
which would be payable in respect of one share of Series A-1 Common Stock
(the "Book Value Per Share") in the event of a dissolution, liquidation or
winding-up of the affairs of the Corporation if the amount of assets
available for distribution in the event of such dissolution, liquidation or
winding-up with respect to all shares of capital stock of the Corporation
ranking junior to or pari passu with the Series A-1 Common Stock outstanding
as of the last day of the fiscal year of the Corporation immediately
preceding the fiscal year in which the Termination occurred (the "Valuation
Date") were equal to the Book Value of the Corporation. The term "Book Value
of the Corporation" shall mean the difference between (x) the total assets of
the Corporation and (y) the sum of (A) the total liabilities and
stockholders' equity of the Corporation less total stockholders' equity of
the Corporation and (B) the aggregate amount payable upon the dissolution,
liquidation or winding-up to all classes of the Corporation's capital stock
ranking senior in preference to the Series A-1 Common Stock, as of the
Valuation Date, adjusted to reflect any stock split, stock dividend or
reclassification of the Series A-1 Common Stock, recapitalization, spin-off,
partial liquidation or similar capital adjustments ("Capital Transaction")
between the Valuation Date and the Date of Determination of the Book Value of
the Corporation, as if such event had occurred as of the Valuation Date.
For purposes of calculating Book Value Per Share and Book Value of
the Company, all options on shares of capital stock of the Company
outstanding on the Date of Determination of the Book Value of the Company or
exercised between the Valuation Date and the Date of Determination of the
Book Value of the Company shall be deemed to have been exercised on the
Valuation Date and the number of outstanding shares on the Valuation Date
shall be increased by the number of shares subject to those options, and the
assets of the Company shall be increased by the aggregate exercise price of
those options, unless the effect thereof would be antidilutive, in which case
this sentence shall not be applicable.
As promptly as practicable, but in any event within 95 days (or such
later date as the audited financial statements referred to below are
available), following the date of Termination, the Corporation shall deliver
to the Terminated
-3-
<PAGE>
Employee a certificate of the chief financial officer of the Corporation
setting forth the Purchase Price and the calculation thereof and the Book
Value of the Corporation and stating that the financial statements referred
to in this paragraph are available to the Terminated Employee for review at
the principal office of the Corporation (the "Purchase Price Certificate"),
and shall make available to the Terminated Employee, for review at the
principal office of the Corporation, a copy of the Corporation's consolidated
financial statements as of the Valuation Date, which statements shall be
accompanied by an opinion letter of the Corporation's then independent public
accountants to the effect that the consolidated balance sheet contained
therein presents fairly, in all material respects, the consolidated financial
position of the Corporation and its subsidiaries as of the Valuation Date in
accordance with generally accepted accounting principles.
If the second paragraph of this Section 2.2(b) is applicable, the
Corporation shall make available to the Terminated Employee, for review at
the principal office of the Corporation, a schedule setting forth the
adjustment to the Book Value of the Corporation and the Book Value Per Share
by reason thereof (the "Option Schedule"), accompanied by a letter from the
Corporation's then independent public accountants stating that, based upon
their review of the Option Schedule, nothing came to their attention that
caused them to believe that the Option Schedule does not fairly reflect the
calculations required by such sentence. The calculations as set forth on the
Option Schedule shall be final and binding on the Corporation and the
Terminated Employee for purposes of this Agreement.
In the event there has been a stock split, a stock dividend or a
reverse stock split (each, a "Stock Dividend") after the Valuation Date and
prior to the Date of Determination of the Book Value of the Corporation, the
number of shares outstanding for purposes of determining the Book Value Per
Share shall be the number of shares that would have been outstanding
immediately after the Stock Dividend on the Valuation Date had the Stock
Dividend occurred on the Valuation Date. In the event there has been a
Capital Transaction other than a Stock Dividend after the Valuation Date and
prior to the Date of Determination of the Book Value of the Corporation, the
Corporation shall deliver to the Terminated Employee a schedule setting forth
the adjustment to the Purchase Price (the "Schedule"), accompanied, in the
case of an adjustment being made to the Book Value of the Corporation by
reason of such Capital Transaction's having occurred between the Valuation
Date and the Date of Determination of the Book Value of the
-4-
<PAGE>
Corporation, by a letter report of the Corporation's then independent
certified public accountants stating that based upon their review of the
Schedule nothing came to their attention that caused them to believe that the
Schedule does not fairly reflect the adjustment required by reason of such
Capital Transaction. The adjustment as set forth on the Schedule shall be
final and binding on the Corporation and the Terminated Employee for purposes
of this Agreement. If the Capital Transaction (other than a Stock Dividend)
resulted in a distribution to stockholders of cash or property, then the
Board of Directors of the Corporation, in good faith, shall determine the
fair market value of any property distributed and its determination shall be
final and binding on the Corporation and the Terminated Employee for purposes
of this Agreement.
The Book Value of the Corporation as reflected in the consolidated
balance sheet prepared and reported on as set forth above and, if applicable,
as adjusted as set forth on the Option Schedule and/or the Schedule, and the
Purchase Price as set forth on the Purchase Price Certificate shall be final
and binding on the Corporation and the Terminated Employee for purposes of
this Agreement.
If, prior to the date of Termination, there shall have been any
public offering of shares of Series A-1 Common Stock and the restrictions and
rights contained in this Agreement shall not have terminated pursuant to
Section 2.6(a) hereof, then as promptly as practicable, but in any event
within 30 days following the date of Termination, the Corporation shall
deliver to the Terminated Employee, in lieu of delivering the Purchase Price
Certificate and making the financial statements available, a certificate of
the chief financial officer of the Corporation setting forth the Market Price
per Share (as defined in Section 2.6(b) hereof) and stating that the Market
Price per Share has been computed in accordance with Section 2.6(b) hereof
(the "Market Price Certificate"), and the Market Price per Share set forth on
the Market Price Certificate shall be final and binding on the Corporation
and the Terminated Employee for purposes of this Agreement.
For purposes hereof, the Date of Determination of the Book Value of
the Corporation shall be the date on which the Purchase Price Certificate or,
if applicable, the Market Price Certificate is delivered to the Terminated
Employee. The Terminated Employee shall keep the Purchase Price Certificate,
the financial statements and any other documentation provided in connection
therewith confidential, shall not use any such material or any information
contained therein for any purpose other than to verify the amounts due him in
respect of any shares being sold by him to the Corporation and, if applicable,
-5-
<PAGE>
to assist him in making a determination as to whether to retain any shares,
and shall not disclose any such material or any information contained therein
to anyone other than his legal or financial advisors who have agreed in
writing to the equivalent confidentiality, non-use and non-disclosure
provisions contained in this sentence.
(c) Subject to Section 2.2(d) hereof, the closing of any purchase
of shares of Series A-1 Common Stock provided for in Section 2.2(a) hereof
shall take place at the principal office of the Corporation on the later of
(i) 40 days after the Date of Determination of the Book Value of the
Corporation or (ii) (if applicable) 70 days after the appointment of a Legal
Representative. At the Closing, the Terminated Employee shall sell, convey,
transfer, assign and deliver to the Corporation all right, title and interest
in and to their shares of Series A-1 Common Stock, which shall constitute
(and, at the Closing, the Terminated Employee shall certify the same to the
Corporation in writing) good and unencumbered title to such shares, free and
clear of all liens, security interests, encumbrances and adverse claims of
any kind and nature, and shall deliver to the Corporation a certificate
representing the shares duly endorsed for transfer, or accompanied by
appropriate stock transfer powers duly endorsed, with signatures guaranteed
by a commercial bank, trust company or registered broker dealer, and with all
necessary transfer tax stamps affixed thereto at the expense of the
Terminated Employee. The Corporation shall deliver to the Terminated
Employee, in full payment of the purchase price for the shares of Series A-1
Common Stock purchased, a check payable to the order of the Terminated
Employee in the amount of the aggregate purchase price for the shares
purchased from the Terminated Employee.
(d) The Stockholder understands and agrees that any purchase of
shares of Series A-1 Common Stock by the Corporation pursuant to this Section
2.2 may require the consent of some or all of the lenders pursuant to credit
agreements to which the Corporation and/or any of its affiliates are now or
hereafter may become parties. If the closing of any purchase provided for in
this Section 2.2 cannot be consummated by the date which would otherwise be
the closing date pursuant to Section 2.2(c) hereof (the "Original Closing
Date") because of the failure of the Corporation or any of its affiliates,
for whatever reason, to receive any necessary consent from the lenders (and
the Corporation covenants to request, or cause its affiliates to request, the
lenders to give any such consent) or for any other reason not within the
control of the Corporation or any of its affiliates, then the closing shall
take place on the third business day after which
-6-
<PAGE>
the purchase may be consummated (the "Deferred Closing Date"). In the case
of any delay in the closing of any purchase provided for in this Section 2.2,
there shall be paid on the Deferred Closing Date, together with any purchase
price payable for the shares of Series A-1 Common Stock owned by the
Terminated Employee, interest on the amount of such purchase price from (and
including) the Original Closing Date to (but not including) the Deferred
Closing Date, at an annual rate equal to the rate of interest publicly
announced by Chemical Bank from time to time as its reference rate.
2.3. PARTICIPATION IN SALE OF SERIES A-1 COMMON STOCK. The
Stockholder shall participate proportionately (and the FL & Co. Companies (as
defined in Section 5.1 hereof) shall allow the Stockholder to participate
proportionately) in any sale of all or a portion of the shares of Series A-1
Common Stock owned by any of the FL & Co. Companies to any person who is not
an affiliate or a partner of any of the FL & Co. Companies or an affiliate of
such partner (a "Third Party"), by selling to the Third Party the same
percentage of the Stockholder's shares of Series A-1 Common Stock as the FL &
Co. Companies propose to sell to the Third Party of the aggregate shares of
Series A-1 Common Stock owned by all of the FL & Co. Companies. For purposes
of determining the number of shares of Series A-1 Common Stock in respect of
which the Stockholder may participate pursuant to this Section 2.3, the
Stockholder shall be deemed to own (a) the shares of Series A-1 Common Stock
subject to this Agreement, (b) if the Stockholder has not been Terminated,
the shares of Series A-1 Common Stock issuable upon exercise of the
unexercised portion of the Option and (c) if the Stockholder has been
Terminated, the shares of Series A-1 Common Stock issuable upon the exercise
of the Exercisable Portion of the Option (as defined in the Option
Agreement), if any. The FL & Co. Companies proposing to sell shares of
Series A-1 Common Stock shall notify the Stockholder in writing of their
intention to effect a sale to a Third Party, the identity of the Third Party
and the nature and per share amount of consideration to be paid to each
seller by such Third Party, at least 10 days before the closing of any such
proposed sale of Series A-1 Common Stock. Any sale of shares of Series A-1
Common Stock by the Stockholder pursuant to this Section 2.3 shall be for the
same consideration per share, on the same terms and subject to the same
conditions as the sale of shares of Series A-1 Common Stock owned by the FL &
Co. Companies. The Stockholder shall pay a proportionate share of any of the
expenses and shall be responsible for a proportionate share of any
liabilities and obligations (including liabilities and obligations for
indemnification, amounts paid into escrow and for post-closing purchase price
adjustments) (collectively, "Expenses of Sale") incurred by the selling
stockholders in
-7-
<PAGE>
connection with any sale pursuant to this Section 2.3 that are not paid by
the Corporation.
2.4. PUBLIC OFFERING OF SERIES A-1 COMMON STOCK.
(a) The Stockholder shall participate proportionately (and the FL
& Co. Companies shall allow the Stockholder to participate proportionately)
in any public offering of all or a portion of the shares of Series A-1 Common
Stock owned by any of the FL & Co. Companies, by selling in the public
offering the same percentage of the Stockholder's shares of Series A-1 Common
Stock as the FL & Co. Companies propose to sell in the public offering of the
aggregate shares of Series A-1 Common Stock owned by all of the FL & Co.
Companies. For purposes of determining the number of shares of Series A-1
Common Stock in respect of which the Stockholder may participate pursuant to
this Section 2.4, the Stockholder shall be deemed to own (a) the shares of
Series A-1 Common Stock subject to this Agreement, (b) if the Stockholder has
not been Terminated, the shares of Series A-1 Common Stock issuable upon
exercise of the unexercised portion of the Option and (c) if the Stockholder
has been Terminated, the shares of Series A-1 Common Stock issuable upon the
exercise of the Exercisable Portion of the Option, if any. The Corporation
shall cause the Stockholder's portion of the shares to be included in the
offering. The Stockholder shall pay a proportionate share of all Expenses of
Sale incurred by the selling stockholders in connection with such public
offering that are not paid by the Corporation, including indemnifying the
underwriters, on a proportionate basis, to the same extent as the FL & Co.
Companies are required to indemnify such underwriters.
(b) In connection with any proposed public offering of securities
of the Corporation by any of the FL & Co. Companies or the Corporation, the
Stockholder agrees (i) to supply any information reasonably requested by the
Corporation in connection with the preparation of a registration statement
and/or any other documents relating to such public offering, and (ii) to
execute and deliver any agreements and instruments reasonably requested by
the Corporation to effectuate such public offering, including, without
limitation, an underwriting agreement, a custody agreement and a "holdback"
agreement pursuant to which the Stockholder will agree not to sell or
purchase any securities of the Corporation (whether or not such securities
are otherwise governed by this Agreement) for the same period of time
following the public offering as is agreed to by the FL & Co. Companies with
respect to themselves. If the Corporation requests that the Stockholder take
any of the actions referred to in clause (i) or (ii) of the previous
sentence, the Stockholder shall take such action promptly but
-8-
<PAGE>
in any event within three days following the date of such request.
2.5. SALE OF ALL OF THEIR CAPITAL STOCK BY THE FL & CO. COMPANIES.
Notwithstanding any other provision of this Agreement, if the FL & Co.
Companies shall propose to sell or exchange (in a business combination or
otherwise) all of their shares of capital stock of the Corporation in a bona
fide arm's-length transaction, the FL & Co. Companies, at their option, may
require that the Stockholder sell all of its shares of Series A-1 Common
Stock in the same transaction and, if stockholder approval of the transaction
is required, that the Stockholder vote his shares in favor thereof. In
calculating the aggregate consideration paid with respect to the Series A-1
Common Stock, the Board of Directors of the Corporation, in good faith, shall
determine the fair market value of all property (other than cash) received in
the sale or exchange and its determination shall be final and binding on the
holders of capital stock of the Corporation. The Stockholder shall pay his
proportionate share of all Expenses of Sale incurred by the selling
stockholders in connection with such sale that are not paid by the
Corporation.
2.6. TERMINATION OF RESTRICTIONS AND RIGHTS.
(a) Notwithstanding any other provision of this Agreement, but
subject to the restrictions of all applicable federal and state securities
laws, including the restrictions in this Agreement relating thereto, after
one or more public offerings which result in the shares of capital stock of
the Corporation owned by the FL & Co. Companies immediately thereafter
constituting, in the aggregate, less than 25% of the then outstanding voting
power of the Corporation, any and all shares of Series A-1 Common Stock owned
by the Stockholder may be sold, transferred, assigned, exchanged, pledged,
encumbered or otherwise disposed of, and the Stockholder may grant any option
or right to purchase, or may continue to hold, such shares or any legal or
beneficial interest therein, free of the restrictions and rights contained in
this Agreement, including the restriction requiring resale by the Stockholder
to the Corporation of all or a portion of the shares of Series A-1 Common
Stock owned by him.
(b) If there shall have been a public offering of shares of
Series A-1 Common Stock and immediately after such public offering the shares
owned by the FL & Co. Companies continue to constitute, in the aggregate, 25%
or more of the then outstanding voting power of the Corporation, then the
provisions of this Agreement shall continue to apply, except that the
Purchase Price pursuant to Section 2.2(b) or Section
-9-
<PAGE>
3.3 hereof shall not be as set forth therein but shall instead be equal to
(x) if the Series A-1 Common Stock is listed on one or more stock exchanges,
the average of the closing sales prices of a share of Series A-1 Common Stock
on the primary national or regional stock exchange on which such shares are
listed or (y) if the Series A-1 Common Stock is not listed but traded in the
over-the-counter market, the average of the closing bid and asked prices of a
share of Series A-1 Common Stock, in each case, for the 30 trading days (or
such lesser number of trading days as any of the Series A-1 Common Stock
shall have been traded) next preceding the date of Termination (the "Market
Price per Share").
3. PROHIBITED ACTIVITIES.
3.1. PROHIBITION AGAINST CERTAIN ACTIVITIES. The Stockholder agrees
that (a) he will not at any time during his employment (other than in the
course of his employment) with the Corporation or any affiliate thereof, or
after any Termination, directly or indirectly disclose or furnish to any
other person or use for his own or any other person's account any
confidential or proprietary knowledge or any other information which is not a
matter of public knowledge obtained during the course of his employment with,
or other performance of services for, the Corporation or any affiliate
thereof or any predecessor of any of the foregoing, no matter from where or
in what manner the Stockholder may have acquired such knowledge or
information, and he shall retain all such knowledge and information in trust
for the benefit of the Corporation, its affiliates and the successors and
assigns of any of them, (b) if he is Terminated, he will not for three years
following the Termination directly or indirectly solicit for employment,
including, without limitation, recommending to any subsequent employer the
solicitation for employment of, any person who at the time of the
solicitation is employed by the Corporation or any affiliate thereof and (c)
he will not at any time during his employment or after any Termination
publish any statement or make any statement (under circumstances reasonably
likely to become public or that he might reasonably expect to become public)
critical of the Corporation or any affiliate of the Corporation, including
Forstmann Little & Co., or in any way adversely affecting or otherwise
maligning the business or reputation of any of the foregoing entities (any
activity described in clause (a), (b) or (c) of this Section 3.1 being herein
referred to as a "Prohibited Activity").
3.2. RIGHT TO PURCHASE SHARES. The Stockholder understands that the
Corporation has granted the Option to the Stockholder to reward the
Stockholder for the Stockholder's future efforts and loyalty to the
Corporation and its
-10-
<PAGE>
affiliates by giving the Stockholder the opportunity to participate in the
potential future appreciation of the Corporation. Accordingly, (a) if the
Stockholder engages in any Prohibited Activity, or (b) if, at any time during
the Stockholder's employment with the Corporation or any affiliate or during
the three years following the Stockholder's Termination, the Stockholder
engages in any Competitive Activity (as defined below), or (c) if, at any
time (whether during the Stockholder's employment or after any Termination),
the Stockholder is convicted of a crime against the Corporation or any
affiliate, then, in addition to any other rights and remedies available to
the Corporation, the Corporation shall be entitled, at its option,
exercisable by written notice (the "Repurchase Notice") to the holder, to
purchase all of the shares of Series A-1 Common Stock then held by the
Stockholder. The term "Competitive Activity" shall mean engaging in any of
the following activities: (i) serving as a director of any person (other
than the Corporation or any of its affiliates) that competes either directly
or indirectly through one or more affiliates with any of the businesses
conducted by the Corporation or any of its affiliates (a "Competitor"), (ii)
directly or indirectly through one or more intermediaries (X) controlling any
Competitor or (Y) owning any equity or debt interests in any Competitor
(other than equity or debt interests which are publicly traded and do not
exceed 2% of the particular class of interests outstanding) (it being
understood that, if interests in any Competitor are owned by an investment
vehicle or other entity in which the Stockholder owns an equity interest, a
portion of the interests in such Competitor owned by such entity shall be
attributed to the Stockholder, such portion determined by applying the
percentage of the equity interest in such entity owned by the Stockholder to
the interests in such Competitor owned by such entity), (iii) directly or
indirectly soliciting, diverting, taking away, appropriating or otherwise
interfering with any of the customers or suppliers of the Corporation or any
subsidiary or any affiliate of the Corporation of which the Stockholder owns
shares of capital stock or any other equity interest, or (iv) employment by
(including serving as an officer or director of) or providing consulting
services to any Competitor. For purposes of this Section 3.2, the term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of any
Competitor, whether through the ownership of equity interests, by contract or
otherwise.
3.3. PURCHASE PRICE. The purchase price per share of any shares of
Series A-1 Common Stock purchased pursuant to this Article 3 shall be equal
to the lesser of (x) $6.15 (adjusted to reflect any Capital Transaction
effected after the
-11-
<PAGE>
date hereof and prior to the date of the Repurchase Notice) and (y) the Book
Value Per Share, except that with respect to adjustments for Capital
Transactions, the reference to the Date of Determination of the Book Value of
the Corporation shall instead be a reference to the date of the Repurchase
Notice (such purchase price per share, whether calculated pursuant to this
Section 3.3 or Section 2.6(b) hereof, being referred to herein as the
"Termination Price"). The closing of such purchase shall take place at the
principal office of the Corporation 30 days following the date of the
Repurchase Notice, and the provisions of Section 2.2(c) (except for the first
sentence thereof) and Section 2.2(d) shall apply to such closing.
Notwithstanding anything herein to the contrary, from and after the date of
the Repurchase Notice, the Stockholder shall have no rights with respect to
any shares of Series A-1 Common Stock which he is required to sell to the
Corporation pursuant to this Section 3.3, except to receive the Termination
Price therefor.
3.4. LIMITATION OF PURCHASE PRICE. Notwithstanding anything to the
contrary set forth in Section 2.3, 2.4 or 2.5 hereof, the Stockholder shall
not be entitled to receive as consideration for the Stockholder's shares of
Series A-1 Common Stock in connection with any sale by the Stockholder of
such shares pursuant to the provisions of Section 2.3, 2.4 or 2.5, as the
case may be, an amount per share greater than the Termination Price (the
"Greater Consideration") if, at or prior to the time such consideration is
otherwise payable (the "Greater Consideration Closing"), the Corporation
would be or would have been entitled to exercise its right to purchase such
shares of Common Stock pursuant to Section 3.2 hereof. The Corporation may
request the Stockholder, if, at such time, the Stockholder has been
Terminated, to provide the Corporation with evidence, reasonably satisfactory
to the Corporation, of the identity of the employers of the Stockholder at
any time during the period set forth in clause (b) of Section 3.2 hereof (or
since the date hereof until the date of the request, if a shorter period), in
which event, notwithstanding the provisions of Section 2.3, 2.4 or 2.5, as
the case may be, the Stockholder shall not be entitled to receive the Greater
Consideration unless and until the Stockholder first provides such evidence
to the reasonable satisfaction of the Corporation. If the Stockholder fails
to provide such evidence to the reasonable satisfaction of the Corporation
prior to the date of the Greater Consideration Closing, or if the Corporation
could have exercised its right to purchase by reason of Section 3.2 hereof,
the Corporation on behalf of the Stockholder shall be entitled to receive the
entire purchase price payable in respect of the Stockholder's shares of
Series A-1 Common Stock and (i) shall remit to the Stockholder only an amount
equal to
-12-
<PAGE>
(x) the Termination Price multiplied by (y) the number of shares of Series
A-1 Common Stock sold by the Stockholder, and (ii) shall remit the balance of
such purchase price to the other stockholders of the Corporation
participating in the transaction referred to in Section 2.3, 2.4 or 2.5
hereof, as the case may be, pro rata in accordance with their respective
participation in such transaction.
4. STOCK CERTIFICATE LEGEND AND INVESTMENT
REPRESENTATIONS; OTHER REPRESENTATIONS.
4.1. All certificates representing shares of Series A-1 Common Stock
acquired hereunder or hereafter by the Stockholder (unless registered under
the Securities Act of 1933, as amended (the "Act")) shall bear the following
legend:
"The shares represented by this certificate
have not been registered under the Securities Act
of 1933, as amended, or any securities regulatory
authority of any state, and may not be sold,
transferred, assigned, exchanged, pledged,
encumbered or otherwise disposed of except in
accordance with the provisions of a Stockholder's
Agreement with the Corporation, a copy of which is
available for inspection at the offices of the
Corporation."
4.2. The Stockholder represents and warrants that: (a) the
Stockholder understands that (i) the offer and sale of shares of Series A-1
Common Stock in accordance with this Agreement have not been and will not be
registered under the Act, and it is the intention of the parties hereto that
the offer and sale of the securities be exempt from registration under the
Act and the rules promulgated thereunder by the Securities and Exchange
Commission; and (ii) such shares cannot be sold, transferred, assigned,
exchanged, pledged, encumbered or otherwise disposed of unless they are
registered under the Act or an exemption from registration is available; (b)
the Stockholder is acquiring the shares of Series A-1 Common Stock to be
acquired hereunder for investment for the Stockholder's own account and not
with a view to the distribution thereof; (c) the Stockholder will not,
directly or indirectly, sell, transfer, assign, exchange, pledge, encumber or
otherwise dispose of any shares of Series A-1 Common Stock acquired hereunder
or hereafter except in accordance with this Agreement; (d) the Stockholder
has, or the Stockholder together with the Stockholder's advisors, if any,
have, such knowledge and experience in financial and business matters
that the Stockholder is, or the Stockholder together with the
-13-
<PAGE>
Stockholder's advisors, if any, are, and will be capable of
evaluating the merits and risks relating to the Stockholder's purchase of
shares of Series A-1 Common Stock under this Agreement; (e) the Stockholder
has been given the opportunity to obtain information and documents relating
to the Corporation and to ask questions of and receive answers from
representatives of the Corporation concerning the Corporation and the
Stockholder's investment in the Series A-1 Common Stock; (f) the Stockholder
is able to bear the economic risk of a total loss of the Stockholder's
investment in the Corporation; and (g) the Stockholder has adequate means of
providing for the Stockholder's current needs and foreseeable personal
contingencies and has no need for the Stockholder's investment in the Series
A-1 Common Stock to be liquid.
5. MISCELLANEOUS.
5.1. RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates, words
of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(d) There shall be included within the term "Corporation" any
successor to Gulfstream Aerospace Corporation by merger, consolidation,
acquisition of substantially all the assets thereof, or otherwise.
(e) There shall be included within the term "Series A-1 Common
Stock" any Series A-1 Common Stock now or hereafter authorized to be issued,
and any and all securities of any kind whatsoever of the Corporation which
may be issued after the date hereof in respect of, or in exchange for, shares
of Series A-1 Common Stock pursuant to
-14-
<PAGE>
a merger, consolidation, stock split, stock dividend, recapitalization of the
Corporation or otherwise.
(f) The term "FL & Co. Companies" shall mean individually and
collectively Gulfstream Partners, Gulfstream Partners II, L.P. and Forstmann
Little & Co. Subordinated Debt and Equity Management Buyout Partnership-IV,
each a New York limited partnership.
5.2. DISTRIBUTIONS. In the event of any dividend, distribution or
exchange paid or made in respect of the Series A-1 Common Stock consisting of
securities (the "Affiliate Securities") of any affiliate of the Corporation
(the "Affiliate"), (i) the restrictions and rights with respect to
transferability of the Series A-1 Common Stock that are contained in Article
2 shall be applicable to the Affiliate Securities without further action of
the parties (with the references to Series A-1 Common Stock being deemed
references to the Affiliate Securities and the references to the Corporation
being deemed references to the Affiliate), and (ii) as a condition precedent
to the receipt of the Affiliate Securities by the Stockholder, the
Stockholder shall enter into a stockholder's agreement containing
substantially equivalent terms with respect to the Affiliate Securities (but
reflecting the economics of the dividend, distribution or exchange and the
capitalization of the Affiliate) as are contained in Section 2.2 and Article
3 hereof. The Board of Directors of the Corporation, in good faith, shall
determine such economics and its determination shall be final and binding on
the holders of the Series A-1 Common Stock.
5.3. FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute
and deliver all other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
5.4. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to
the principles of conflicts of law thereof.
5.5. SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
will be no adequate remedy at law for a violation of any of the provisions of
this Agreement and
-15-
<PAGE>
that, in addition to any other remedies which may be available, all of the
provisions of this Agreement shall be specifically enforceable in accordance
with their respective terms.
5.6. INVALIDITY OF PROVISION. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction. If any provision of this
Agreement is held unlawful or unenforceable in any respect, such provision
shall be revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible.
5.7. NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Corporation, to:
Gulfstream Aerospace Corporation
500 Gulfstream Road, Travis Field
Savannah, Georgia 31408
Attention: Donald L. Mayer, Esq.
With copies to:
Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra Horbach
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Stockholder or Legal Representative,
to such person at the address as reflected in
the stock records of the Corporation.
5.8. BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and
-16-
<PAGE>
assigns. In addition, each of the FL & Co. Companies shall be third party
beneficiaries of this Agreement and shall be entitled to enforce this
Agreement.
5.9. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5.10. HEADING; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be
an original and which together shall constitute one and the same instrument.
5.11. ENTIRE AGREEMENT. This Agreement, the Plan and, if any part of
the Option continues to be outstanding, the Option Agreement constitute the
entire agreement, and supersede all prior agreements and understandings, oral
and written, between the parties hereto with respect to the subject matter
hereof and thereof.
5.12. WITHHOLDING. The Stockholder agrees to indemnify the
Corporation against any federal, state and local withholding taxes for which
the Corporation may be liable in connection with the Stockholder's
acquisition, ownership or disposition of Series A-1 Common Stock.
5.13. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement shall not
confer upon the Stockholder any right with respect to continuance of
employment by the Corporation or any affiliate thereof, nor shall it
interfere in any way with the right of the Corporation or any affiliate
thereof to terminate the Stockholder's employment at any time.
5.14. POSSESSION OF CERTIFICATES; POWER OF ATTORNEY.
(a) In order to provide for the safekeeping of the certificates
representing the shares of Series A-1 Common Stock being purchased by the
Stockholder and to facilitate the enforcement of the terms and conditions of
this Agreement, the Stockholder shall redeliver to the Corporation at the
Closing and the Corporation shall retain physical possession of all
certificates representing shares of Series A-1 Common Stock subject hereto.
(b) The Stockholder hereby irrevocably appoints the FL & Co.
Companies, and each of them (individually and
-17-
<PAGE>
collectively, the "Representative"), the Stockholder's true and lawful agent
and attorney-in-fact, with full powers of substitution, to act in the
Stockholder's name, place and stead, to do or refrain from doing all such
acts and things, and to execute and deliver all such documents, in connection
with this Agreement or the shares of Series A-1 Common Stock as the
Representative shall deem necessary or appropriate in connection with a sale
to the Corporation following a Termination or pursuant to Section 2.5 or 3.2
hereof, including, without in any way limiting the generality of the
foregoing, in the case of a sale pursuant to Section 2.5 to receive on behalf
of the Stockholder any payments made in respect of the sale of his shares of
Series A-1 Common Stock, to hold back from any such payments any amount that
the Representative deems necessary to reserve against the Stockholder's share
of any Expenses of Sale, and to engage in any acts that the Representative is
authorized by and on behalf of the holders of any capital stock of the
Corporation to engage in in connection with any such sale; provided, that the
Representative shall not have any right to make any election permitted the
Stockholder under Section 2.2(a) hereof on behalf of the Stockholder. The
Stockholder hereby ratifies and confirms all that the Representative shall do
or cause to be done by virtue of its appointment as the Stockholder's agent
and attorney-in-fact. In acting for the Stockholder pursuant to the
appointment set forth in this Section 5.14(b), the Representative shall not
be responsible to the Stockholder for any loss or damage the Stockholder may
suffer by reason of the performance by the Representative of its duties under
this Agreement, except for loss or damage arising from willful violation of
law or gross negligence in the performance of its duties hereunder. The
appointment of the Representative shall be deemed coupled with an interest
and shall be irrevocable, and any person dealing with the Representative may
conclusively and absolutely rely, without inquiry, upon any act of the
Representative as the act of the Stockholder in all matters referred to in
this Section 5.14(b).
(c) The Stockholder hereby represents, warrants and covenants
to the Corporation and each of the FL & Co. Companies that no person other
than the Stockholder shall at any time have any right to title to any of the
shares of Series A-1 Common Stock held by the Stockholder. Breaches of this
Section 5.14(c) shall be deemed to be a Prohibited Activity for the purposes
of this Agreement.
5.15. CONSENT TO JURISDICTION. The Stockholder hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York or the United States of America located in
the State of New
-18-
<PAGE>
York for any actions, suits or proceedings arising out of or relating to this
Agreement and the transactions contemplated hereby (and the Stockholder
agrees not to commence any action, suit or proceeding relating thereto except
in such courts), and further agrees that service of any process, summons,
notice of document by United States registered mail to the Stockholder in
accordance with Section 5.7 hereof shall be effective service of process for
any action, suit or proceeding brought against the Stockholder in any such
court. The Stockholder hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby, in the courts
of the State of New York or the United States of America located in the State
of New York, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto, all as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By: _________________________________________
Title:
______________________________________________
Stockholder
The undersigned hereby agree to be bound by the provisions of Sections 2.3
and 2.4 of the foregoing Stockholder's Agreement.
GULFSTREAM PARTNERS
By FLC XXI Partnership, as General Partner
By: _________________________________________
, General Partner
GULFSTREAM PARTNERS II, L.P.
-19-
<PAGE>
By FLC XXIV Partnership, as General Partner
By: __________________________________________
, General Partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP - IV
By FLC Partnership, as General Partner
By: __________________________________________
, General Partner
(IF THE STOCKHOLDER RESIDES IN A COMMUNITY PROPERTY STATE)
The undersigned acknowledges that the undersigned has read the
foregoing Agreement, including the schedule thereto, between Gulfstream
Aerospace Corporation and the undersigned's spouse, the Stock Option Plan and
the Stock Option Agreement, understands that such agreement, plan and option
agreement provide for the undersigned's spouse to purchase shares of Series
A-1 Common Stock, which shares are subject to certain restrictions reflected
in such agreement, plan and option agreement, and agrees to be bound by the
foregoing agreement, plan and option agreement.
________________________________________
Stockholder's Spouse
-20-
<PAGE>
SCHEDULE I
Number Of Shares In Cumulative Number Of
Respect Of Which Option Shares Subject To The
Is Being Exercised On Stockholder's Agreement
Date The Date Hereof On The Date Hereof
- ---- ----------------------- -----------------------
-21-
<PAGE>
STOCK APPRECIATION RIGHT AGREEMENT
STOCK APRECIATION RIGHT AGREEMENT, dated as of ___________ 199_, by
and between GULFSTREAM AEROSPACE CORPORATION, a Delaware corporation (the
"Company"), and ________ (the "Grantee").
1. GRANT OF STOCK APPRECIATION RIGHT. The Company hereby grants to
the Grantee a Stock appreciation right (the "Right") covering _____ reference
shares (each a "Reference Share"). The base price for each Reference Share
covered by this Right shall be $[6.15], as adjusted pursuant to this Agreement
(as adjusted, the "Base Price").
2. NO SALE OR TRANSFER. The Grantee shall not sell, transfer,
assign, exchange, pledge, encumber or otherwise dispose of the Right or any
portion thereof, or grant any option or right to purchase the Right. Any sale,
transfer, assignment, pledge, encumbrance or other disposition of the Right or
any portion thereof or any grant of any option or right to purchase the Right
shall be null and void.
3. EMPLOYMENT TERMINATION; OTHER PAYMENTS IN RESPECT OF RIGHTS.
3.1 AMOUNT PAYABLE UPON TERMINATION. (a) Except (i) as
provided in this Section 3.1(a) or (ii) as may be agreed between the Company and
the Grantee, if the Grantee shall no longer be employed on a full-time basis by
either the Company or any of its affiliates for any reason whatsoever (whether
voluntarily or involuntarily, including by reason of death, permanent disability
or adjudicated incompetency), and irrespective of whether the Grantee receives,
in connection therewith, any severance or other payment from the Company or any
of its affiliates under any employment agreement or otherwise ("Terminated" or a
"Termination"), the Right shall terminate and shall be of no further force and
effect from and after the date of such Termination; provided, however, that if
such Termination occurs after [one year from date of grant] as a result of the
death or disability of the Grantee, the Company's or an affiliate's Termination
of the Grantee without Cause or the Normal Retirement (as such terms are defined
in Section 3.2(a)(1) hereof) of the Grantee (each of the foregoing, a "Vesting
Termination"), the Company shall pay and the Grantee (or the guardian, executor,
administrator or other legal representative of the Grantee (each a "Legal
Representative")) shall be entitled to receive, subject to Article 4 hereof, in
respect of each Vested Reference Share (as defined in Section 3.2(a)(1) hereof)
an amount (the "Appreciation Amount") equal to the excess, if any, of (i) the
Book Value Per Share, adjusted to reflect any Capital Transaction effected after
the Valuation Date and prior to the Date of Determination of the Book Value of
the Company (as such terms are defined
<PAGE>
in Section 3.2(a)(1) hereof), as if such event had occurred as of the Valuation
Date or, if prior to the date of Termination there shall have been any public
offering (a "Public Offering") of shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock"), the Market Price Per Share (as
defined in Section 3.2(a)(1) hereof), over (ii) the Base Price.
All references herein to "Grantee" shall be deemed to include
references to the Grantee's Legal Representative, if any, unless the context
otherwise requires.
(b) Notwithstanding the provisions of Section 3.1(a)
hereof, if the Termination occurs after [one year from date of grant] as a
result of the death or disability of the Grantee or the Normal Retirement of the
Grantee, the Grantee, at the Grantee's option, exercisable by written notice
delivered to the Company not later than 30 days after the Date of Determination
of the Book Value of the Company or (if applicable) 60 days after the
appointment of the Legal Representative, whichever period ends later (such date
being referred to herein as the "Election Date"), may elect to retain, and not
have Section 3.1(a) hereof apply to, all or any portion of his Vested Reference
Shares, in which event the Company shall not make and the Grantee shall not be
entitled to receive any payment pursuant to Section 3.1(a) hereof in respect of
the number of Vested Reference Shares which the Grantee has elected to retain
pursuant to this Section 3.1(b). Any Vested Reference Shares retained by the
Grantee pursuant to the provisions of this Section 3.1(b) shall continue to be
subject to the terms and conditions of this Agreement other than Section 3.1(a)
hereof.
3.2 DEFINITIONS; CERTIFICATES; MANNER OF PAYMENT. (a)(1)(i)
The term "Book Value Per Share" shall mean the amount which would be payable in
respect of one share of Common Stock in the event of a dissolution, liquidation
or winding-up of the affairs of the Company if the amount of assets available
for distribution in the event of such dissolution, liquidation or winding-up
with respect to all shares of Common Stock outstanding as of the Valuation Date
were equal to the Book Value of the Company. The term "Book Value of the
Company" shall mean (1) the difference between (x) the total assets of the
Company over (y) the sum of (A) the total liabilities and stockholders' equity
of the Company less total stockholders' equity of the Company and (B) the
aggregate amount payable upon the dissolution, liquidation or winding-up of the
Company to all classes of the Company's capital stock ranking senior in
preference to the Common Stock, on a consolidated basis, as of the Valuation
Date, plus (2) $46,433,000 (which is the amount recorded on the audited
consolidated statement of operations of the Company for the fiscal year ended
December 31, 1990 for the Accumulated Postretirement Benefit Obligation as of
March 20, 1990 under Statement of Financial Accounting; Standards No. 106, net
of any related tax benefit accrued through the Valuation Date (the "Net APBO
Amount"). For purposes of calculating the Appreciation Amount, the Book Value
Per Share and the Book Value of the Company, all options on shares of Common
Stock, (1)
2
<PAGE>
outstanding on the Date of Determination of the Book Value of the Company, or
(2) exercised between the Valuation Date and the Date of Determination of the
Book Value of the Company shall be deemed to have been exercised on the
Valuation Date and the number of outstanding shares on the Valuation Date shall
be increased by the number of shares subject to those options, and the assets of
the Company shall be increased by the aggregate exercise price of those options,
unless the effect thereof would be antidilutive, in which case this sentence
shall not be applicable.
(ii) The term "Stock Dividend" shall mean any stock
split, stock dividend or reverse stock split. The term "Capital Transaction"
shall mean any Stock Dividend, reclassification of the Common Stock,
recapitalization (including, without limitation, any special dividend or
distribution), spin-off, partial liquidation or similar capital adjustments.
(iii) The term "Cashed-Out Vested Reference Shares"
shall mean the number of Vested Reference Shares less the number of Vested
Reference Shares, if any, which the Grantee elects to retain pursuant to Section
3.1(b) hereof.
(iv) The term "Cause" shall mean the willful failure by
the Grantee to perform his duties with the Company or an affiliate or the
willful engaging in conduct which is materially injurious to the Company or an
affiliate, monetarily or otherwise.
(v) The term "Date of Determination of the Book Value
of the Company" shall mean the date on which the Appreciation Amount Certificate
(as defined in Section 3.2(a)(2) hereof) or, if applicable, the Market Price
Certificate (as defined in Section 3.2(a)(5) hereof) is delivered to the
Grantee.
(vi) The term "Market Price Per Share" shall mean (x)
if the Common Stock is listed on one or more stock exchanges or is quoted on the
National Market System of the National Association of Securities Dealers'
Automated Quotation System (the "National Market System"), the average of the
closing sales prices of a share of Common Stock on the primary national or
regional stock exchange on which such shares are listed or on the National
Market System if quoted thereon or (y) if the Common Stock is not so listed or
quoted but is traded in the over-the-counter market (other than the National
Market System), the average of the closing bid and asked prices of a share of
Common Stock, in each case, for the 30 trading days (or such lesser number of
trading days as any of the Common Stock shall have been so listed, quoted or
traded) next preceding the date of Termination.
3
<PAGE>
(vii) The term "Normal Retirement" shall mean the
retirement of the Grantee on or after his 65th birthday.
(viii) The term "Valuation Date" shall mean the last
day of the fiscal year of the Company immediately preceding the fiscal year in
which the Termination occurred.
(ix) The term "Vested Reference Shares" shall equal
(1) if a Vesting Termination occurs after [one year from date of grant] but
before [two years from date of grant], (x) 50% of the Aggregate Number of
Reference Shares Granted (as defined below) minus (y) the Aggregate Number of
Paid-out Reference Shares (as defined below), (2) if a Vesting Termination
occurs on or after [two years from date of grant] but before [three years from
date of grant], (x) 75% of the Aggregate Number of Reference Shares Granted
minus (y) the Aggregate Number of Paid-out Reference Shares, and (3) if a
Vesting Termination occurs on or after [three years from date of grant], 100% of
the Reference Shares then held by the Grantee. The term "Aggregate Number of
Reference Shares Granted" shall mean the aggregate number of Reference Shares
granted to the Grantee on the date hereof (adjusted to reflect any Stock
Dividend with respect to the shares of Common Stock effected after the date
hereof and prior to the Date of Determination of the Book Value of the Company),
and the term "Aggregate Number of Paid-out Reference Shares" shall mean the
aggregate number of Paid-out Reference Shares (as defined in Section 3.3
hereof), if any (as so adjusted), with respect to all Section 3.3 Transactions
(as defined in Section 3.3 hereof).
(2) In the case of a Vesting Termination, as promptly as practicable,
but in any event within 95 days, following the date of the Vesting Termination,
(a) the Company shall deliver to the Grantee a certificate of the chief
financial officer of the Company setting forth the Appreciation Amount and
stating that the financial statements referred to in this paragraph are
available for review at the principal office of the Company (the "Appreciation
Amount Certificate"), and (b) the Company shall make available to the Grantee,
for review at the principal office of the Company, a copy of the Company's
consolidated financial statements (including an audited consolidated balance
sheet, but which need not include any other audited financial statements) as of
the Valuation Date (if the Company, in the ordinary course of its business at
the time, has its financial statements audited by independent public
accountants), which statements shall be accompanied by an opinion letter from
the firm of independent public accountants then regularly employed by the
Company (the "Accountants") to the effect that the consolidated balance sheet
contained therein presents fairly, in all material respects, the consolidated
financial position of the Company and its subsidiaries as of the Valuation Date
in conformity with generally accepted accounting principles; provided, however,
that if the Company does not have its financial statements audited or for any
other reason shall be unable to make a copy of its audited consolidated balance
sheet available to the
4
<PAGE>
Grantee for review within 95 days following the date of Termination, the Company
instead shall make available a copy of the Company's unaudited consolidated
financial statements as of the Valuation Date, including an unaudited
consolidated balance sheet, which statements shall be accompanied by (x) a
certificate of the chief financial officer of the Company stating that, to the
best of his knowledge, the consolidated balance sheet contained in the unaudited
consolidated financial statements presents fairly, in all material respects, the
consolidated financial position of the Company and its subsidiaries as of the
Valuation Date in conformity with generally accepted accounting principles, and
(y) a review report from the Accountants to the effect that, based upon their
review of the unaudited consolidated financial statements (which review does not
constitute an examination in accordance with generally accepted auditing
standards), they are not aware of any material modifications that should be made
to such financial statements for them to be in conformity with generally
accepted accounting principles. In addition to the financial statements
referred to in the preceding paragraph, the Company shall make available to the
Grantee, for review at the principal office of the Company, a schedule setting
forth the Net APBO Amount (the "APBO Schedule"), accompanied by a letter from
the Accountants stating that, based upon their review of the APBO Schedule,
nothing came to their attention that caused them to believe that the APBO
Schedule does not fairly reflect the calculation required by clause (2) of the
second sentence of Section 3.2(a)(1)(i). The Net APBO Amount set forth on the
APBO Schedule shall be final and binding on the Company and the Grantee for
purposes of this Agreement. If the third sentence of Section 3.2(a)(1)(i) is
applicable, the Company shall also make available to the Grantee, for review at
the principal office of the Company, a schedule setting forth the adjustment to
the Appreciation Amount by reason thereof (the "Option Schedule"), accompanied
by a letter from the Accountants stating that, based upon their review of the
Option Schedule, nothing came to their attention that caused them to believe
that the Option Schedule does not fairly reflect the calculations required by
such sentence. The calculations as set forth on the Option Schedule shall be
final and binding on the Company and the Grantee for purposes of this Agreement.
(3) In the event there has been a Stock Dividend after the date
hereof and prior to the Date of Determination of the Book Value of the Company,
the Base Price and the number of Reference Shares shall be adjusted
proportionately and the number of shares outstanding for purposes of determining
Book Value Per Share shall be the number of shares that would have been
outstanding immediately after the Stock Dividend on the Valuation Date had the
Stock Dividend occurred on the Valuation Date. In the event there has been a
Capital Transaction other than a Stock Dividend after the date hereof and prior
to the Date of Determination of the Book Value of the Company, the Company shall
deliver to the Grantee, as an annex to the Appreciation Amount Certificate, a
schedule setting forth the adjustment to the Book Value Per Share (the
"Schedule"), accompanied, in the case of an adjustment being made to the Book
Value of the Company by reason of
5
<PAGE>
such Capital Transaction's having occurred between the Valuation Date and the
Date of Determination of the Book Value of the Company, by a letter report of
the Accountants to the effect that, based upon their review of the Schedule,
nothing came to their attention that caused them to believe that the Schedule
does not fairly reflect the adjustment required by reason of such Capital
Transaction. The adjustment as set forth on the Schedule shall be final and
binding on the Company and the Grantee for purposes of this Agreement. The
Board of Directors of the Company, in good faith, shall determine the fair
market value of any property distributed and its determination shall be final
and binding on the Company and the Grantee for purposes of this Agreement.
(4) The Book Value of the Company, as reflected in the consolidated
balance sheet prepared and reported on as set forth above, as adjusted as set
forth on the APBO Schedule and, if applicable, as adjusted as set forth on the
Option Schedule and the Schedule, and the Appreciation Amount, as set forth on
the Appreciation Amount Certificate, shall be final and binding on the Company
and the Grantee for purposes of this Agreement.
(5) If, prior to the date of the Vesting Termination, there shall
have been any Public Offering, then, as promptly as practicable, but in any
event within 30 days following the date of the Vesting Termination, the Company
shall deliver to the Grantee, in lieu of delivering the Appreciation Amount
Certificate and other documentation referred to in this Section 3.2 and making
the financial statements available, a certificate of the chief financial officer
of the Company setting forth the Market Price Per Share and stating that the
Market Price Per Share has been computed in accordance with Section 3.2(a)(1)
(the "Market Price Certificate"). The Market Price Per Share set forth on the
market Price Certificate shall be final and binding on the Company and the
Grantee for purposes of this Agreement.
(6) The Grantee shall keep the Appreciation Amount Certificate, the
Market Price Certificate, the financial statements and any other documentation
provided in connection with any of the foregoing confidential, shall not use any
such material or any information contained therein for any purpose other than to
verify the amounts due him in respect of the Vested Reference Shares and to
assist him in making a determination as to whether to retain any Vested
Reference Shares, and shall not disclose any such material or any information
contained therein to anyone other than his legal or financial advisors who have
agreed in writing to the equivalent confidentiality, non-use and non-disclosure
provisions contained in this paragraph.
(b) Any payment provided for in Section 3.1(a) hereof in
respect of the Cashed-out Vested Reference Shares shall take place at the
principal office of the Company on the later of (A) 40 days after the Date of
Determination of the Book Value of the Company and (B) (if applicable) 70 days
after the appointment of a Legal
6
<PAGE>
Representative (such later date, the "Original Closing Date"). Subject to
Section 3.2(c) hereof, on the Original Closing Date, the Company shall deliver
to the Grantee, in full payment for the Cashed-out Vested Reference Shares, a
check payable to the order of the Grantee, in the amount equal to the product of
the Appreciation Amount and the number of Cashed-out Vested Reference Shares
(the "Aggregate Appreciation Amount").
(c) The Grantee understands and agrees that payment of the
Aggregate Appreciation Amount by the Company may require the consent of some or
all of the lenders pursuant to credit agreements to which the Company and/or any
of its affiliates are now or hereafter may become parties. If the Company
cannot pay the Aggregate Appreciation Amount by the Original Closing Date
because of the failure of the Company or its affiliates, for whatever reason, to
receive any necessary consent from the lenders for any other reason not within
the control of the Company or its affiliates, then the closing shall take place
on the third business day after which the payment may be made (the "Deferred
Closing Date"). In the case of any delay in the payment of the Aggregate
Appreciation Amount, there shall be paid on the Deferred Closing Date, together
with the Aggregate Appreciation Amount, interest on the Aggregate Appreciation
Amount from (and including) the Original Closing Date to (but not including) the
Deferred Closing Date, at an annual rate equal to the rate of interest publicly
announced by Chemical Bank from time to time as its reference rate.
3.3 OTHER PAYMENTS IN RESPECT OF REFERENCE SHARES. If (i)
Gulfstream Partners, a New York limited partnership ("Gulfstream Partners"),
Gulfstream Partners II, a New York limited partnership "Gulfstream Partners
II"), and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV, a New York limited partnership ("MBO-IV"; Gulfstream Partners,
Gulfstream Partners II and MBO-IV are collectively referred to as the "FL & Co.
Companies"), sell all or a portion of the shares of Common Stock owned by either
of the FL & Co. Companies to any person who is not an affiliate or a partner of
either of the FL & Co. Companies or an affiliate of such partner (a "Third
Party") or (ii) there occurs a Public Offering of all or a portion of the shares
of Common Stock owned by any of the FL & Co. Companies (each, a "Section 3.3
Transaction"), the Grantee may elect to receive a payment in respect of the same
percentage of the Grantee's Reference Shares outstanding on the date of the
closing of the Section 3.3 Transaction as the FL & Co. Companies propose to sell
in the Section 3.3 Transaction of the aggregate number of shares of Common Stock
owned by the FL & Co. Companies (such Reference Shares are referred to as the
"Paid-out Reference Shares"). The FL & Co. Companies proposing to sell shares
of Common Stock in a Section 3.3 Transaction shall notify the Grantee in writing
of their intention to effect such a sale, the nature and per share amount of
consideration to be paid in the Section 3.3 Transaction and the other material
terms and conditions of such proposed sale at least 10 days prior to the closing
of any such proposed Section 3.3 Transaction. The amount of such payment in
respect of each Paid-out Reference Share (the "Section 3.3 Amount")
7
<PAGE>
shall be equal to the excess, if any, of (A) the per share Common Stock price
received by the FL & Co. Companies in the Section 3.3 Transaction over (B) the
Base Price. If the Grantee elects to receive payment pursuant to this Section
3.3, the Grantee shall pay and be responsible for his proportionate share of any
expenses and shall be responsible for his proportionate share of any liabilities
and obligations (including liabilities and obligations for indemnification,
amounts paid into escrow, post-closing purchase price adjustments and, in the
case of a Public Offering, indemnification of the underwriters, on a
proportionate basis, to the same extent as the FL & Co. Companies are required
to indemnify such underwriters) (collectively, "Sale Obligations") incurred in
connection with such sale or Public Offering that are not paid by the Company.
3.4 SECTION 3.1 ADJUSTMENTS. (a) If (1) the Grantee is
Terminated, and (2) either of the FL & Co. Companies, within 90 days following
the date of Termination, shall sell part or all of their shares of Common Stock
in a Section 3.3 Transaction (or shall agree in writing to sell part or all of
their Common Stock, provided such sale is consummated (which, in the case of a
Public Offering, shall mean having a registration statement declared effective)
within the later of (i) such 90 days and (ii) two months of the date of such
agreement), and (3) prior to the closing of such Section 3.3 Transaction, any of
the Grantee's Reference Shares shall have terminated and ceased to be
outstanding by reason of the Grantee's Termination (the "Terminated Reference
Shares") (regardless of whether any payment has been made in respect of such
Terminated Reference Shares) so that the Grantee was unable to participate in
the Section 3.3 Transaction with respect to the Terminated Reference Shares,
then the Grantee shall be entitled to receive from the Company an additional
amount (the "Adjustment Amount") equal to the excess, if any, of (a) the amount
(net of the Grantee's proportionate share of Sale Obligations) which the Grantee
would have been entitled to receive pursuant to Section 3.3 hereof had the
Grantee been the holder of the Terminated Reference Shares at the time of such
sale or Public Offering, as the case may be, and had the Grantee participated in
such sale or Public Offering pursuant to Section 3.3 hereof with respect to the
Permitted Percentage (as defined below) of the Terminated Reference Shares, over
(b) the Aggregate Appreciation Amount, if any, paid or payable to the Grantee in
respect of the Permitted Percentage of Terminated Reference Shares. The term
"Permitted Percentage" shall mean the percentage participation permitted to the
Grantee pursuant to Section 3.3 hereof. Subject to Section 3.4(b) hereof, the
Adjustment Amount, if any, shall be paid to the Grantee, by check on the 20th
day (the "Original Adjustment Payment Date") from the date of the closing of the
sale or the closing of the Public Offering, as the case may be.
(b) The Grantee understands and agrees that any payment of
an Adjustment Amount by the Company pursuant to this Section 3.4 may require the
consent of some or all of the lenders pursuant to credit agreements to which the
Company and/or any of its affiliates are now or hereafter may become parties.
If, on the Original
8
<PAGE>
Adjustment Payment Date, payment of the Adjustment Amount cannot be made because
the Company or any of its affiliates has failed, for whatever reason, to receive
any necessary consent from the lenders or for any other reason not within the
control of the Company or its affiliates, then the payment shall be made within
three business days after the date on which the Company becomes able to pay the
Adjustment Amount (the "Deferred Payment Date"). In the case of such a delay,
there shall be paid on the Deferred Payment Date, together with the Adjustment
Amount, interest on the Adjustment Amount from (and including) the Original
Adjustment Payment Date to (but not including) the Deferred Payment Date, at an
annual rate equal to the rate of interest publicly announced by Chemical Bank
from time to time as its reference rate.
3.5 SALE BY FL & CO. COMPANIES OF ALL THEIR COMMON STOCK.
Notwithstanding any other provision of this Agreement, if the FL & Co. Companies
shall propose to sell or exchange (in a business combination or otherwise) all
their shares of Common Stock and other shares of capital stock of the Company in
a bona fide arm's length transaction (a "Section 3.5 Transaction"), the FL & Co.
Companies, at their option, may provide in the agreement evidencing the Section
3.5 Transaction or any agreement ancillary thereto that the Grantee shall be
paid in respect of each Reference Share held by the Grantee on the date such
Section 3.5 Transaction is consummated, in full satisfaction of any and all
obligations which the Company may have to the Grantee hereunder, an amount (the
"Section 3.5 Amount") equal to the excess, if any, of (A) the per share Common
Stock price received by the FL & Co. Companies in the Section 3.5 Transaction,
over (B) the Base Price. In calculating the aggregate consideration paid with
respect to the Common Stock in the Section 3.5 Transaction, the Board of
Directors of the Company, in good faith, shall determine the fair market value
of all property (other than cash) received in the Section 3.5 Transaction and
its determination shall be final and binding upon the Grantee and the Company
for the purposes of this Agreement. The Grantee shall pay and be responsible
for his proportionate share of all Sale Obligations incurred in connection with
such sale that are not paid by the Company.
4. PROHIBITED ACTIVITIES.
4.1 PROHIBITION AGAINST CERTAIN ACTIVITIES. The Grantee agrees
that (a) he will not at any time during his employment (other than in the course
of his employment) with the Company or any affiliate thereof, or after any
Termination, directly or indirectly disclose or furnish to any other person or
use for his own account any confidential or proprietary knowledge or any other
information which is not a matter of public knowledge obtained during the course
of his employment with the Company or any affiliate thereof, no matter from
where or in what manner the Grantee may have acquired such knowledge or
information, and he shall retain all such knowledge and information in trust for
the benefit of the Company, its affiliates and the successors and assigns of any
of them, (b) if he is Terminated, he will not for three years following the
9
<PAGE>
Termination directly or indirectly solicit for employment, including, without
limitation, recommending to any subsequent employer the solicitation for
employment of, any person who is employed by the Company or any affiliate
thereof, and (c) he will not at any time during his employment or after any
Termination publish any statement or make any statement (under circumstances
reasonably likely to become public or that he might reasonably expect to become
public) critical of the Company or any affiliate of the Company, including
Forstmann Little & Co., or in any way adversely affecting or otherwise maligning
the business or reputation of any of the foregoing entities (any activity
described in clause (a), (b) or (c) of this Section 4.1 being herein referred to
as a "Prohibited Activity").
4.2 RIGHT TO TERMINATE THE RIGHT. The Grantee understands that
the Company is granting to the Grantee the Right hereunder to reward the Grantee
for the Grantee's future efforts and loyalty to the Company and its affiliates
by giving the Grantee the opportunity to participate in the potential future
appreciation of the Company. Accordingly, (a) if the Grantee engages in any
Prohibited Activity, or (b) if, at any time during the Grantee's employment with
the Company or any affiliate or during the three years following the Grantee's
Termination, the Grantee engages in any Competitive Activity (as defined below),
or (c) if, at any time (whether during the Grantee's employment or after any
Termination), the Grantee is convicted of a crime against the Company or any
affiliate, then, in addition to any other rights and remedies available to the
Company, the Company shall be entitled, at its option, exercisable by written
notice to the Grantee (the "Forfeiture Notice"), to terminate the Right without
any payment with respect thereto or any further action by the parties, and all
Reference Shares then held by the Grantee shall terminate and cease to be
outstanding and shall then be of no further effect.
The term "Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor (as defined
below), (ii) directly or indirectly through one or more intermediaries (X)
controlling any Competitor or (Y) owning any equity or debt interests in any
Competitor (other than equity or debt interests which are publicly traded and do
not exceed 2% of the particular class of interests outstanding), or (iii)
employment by (including serving as an officer of) or providing consulting
services to any Competitor; provided, however, that, if the Competitor has more
than one discrete and readily distinguishable part of its business, employment
by or providing consulting services to the Competitor shall be Competitive
Activity only if (1) the employment is by, at, or involving the part of the
Competitor's business that competes with any of the businesses conducted by the
Company or any of its subsidiaries or any affiliate of the Company of which the
Grantee owns shares of capital stock or any other equity interest on the date of
Termination (the "Competing Operations"), including serving in a capacity where
any person at the Competing Operations reports to him, or (2) the consulting
services provided are to or involving the
10
<PAGE>
Competing Operations. The term "Competitor" shall mean any person (other than
the Company or any of its affiliates) that competes either directly or
indirectly with any of the businesses conducted, on the date the Grantee is
Terminated, by the Company or any of its subsidiaries or any affiliate of the
Company of which the Grantee owns shares of capital stock or any other equity
interest on the date of Termination.
4.3 LIMITATION ON PAYMENTS. Notwithstanding anything to the
contrary set forth in Section 3 hereof, the Grantee shall not be entitled to
receive any payment in respect of the Grantee's Reference Shares pursuant to any
of the provisions of Section 3 hereof, if at or prior to the time such amount is
otherwise payable (the "Transaction Closing"), the Company would be or would
have been entitled to exercise its right to terminate the Right pursuant to
Section 4.2 hereof. The Company may request the Grantee to prove to the
reasonable satisfaction of the Company that the Grantee has not at any time
during the period set forth in clause (b) of Section 4.2 hereof (or since the
date hereof until the date of the request, if a shorter period) engaged in any
Competitive Activity; in which event, notwithstanding the provisions of Section
3 hereof, the Grantee shall not be entitled to receive any payment in respect of
the Reference Shares unless and until the Grantee first provides such proof to
the reasonable satisfaction of the Company. If the Grantee fails to provide
such proof to the reasonable satisfaction of the Company prior to the date of
the Transaction Closing, or if the Company could have exercised its right to
terminate the Right by reason of Section 4.2 hereof prior to the date of the
Transaction Closing, the Company may terminate the Right and, if the Company
terminates the Right, all Reference Shares then held by the Grantee shall cease
to be outstanding and shall then be of no further effect.
5. TERMINATION OF RIGHT. (a) (i) All Reference Shares, other than
any Vested Reference Shares, shall terminate and cease to be outstanding on the
date of the Grantee's Termination; (ii) all Cashed-out Vested Reference Shares
shall terminate and cease to be outstanding on the Election Date; (iii) the
Paid-out Reference Shares in respect of any Section 3.3 Transaction shall
terminate and cease to be outstanding upon payment of the Section 3.3 Amount
(net of the Grantee's proportionate share of the Sale Obligations with respect
to such transaction); (iv) all Reference Shares held by the Grantee at the date
of consummation of a Section 3.5 Transaction shall terminate and cease to be
outstanding upon payment of the Section 3.5 Amount for such Reference Shares
(net of the Grantee's proportionate share of Sale Obligations with respect to
such transaction); (v) all Reference Shares then outstanding shall terminate and
cease to be outstanding upon the giving of a Forfeiture Notice; and (vi) all
Reference Shares then outstanding shall terminate and cease to be outstanding on
the date that is ten years and one day from the date hereof; in each case,
without any action of the parties.
(b) This Right shall terminate when all the Grantee's Reference
Shares shall have terminated and ceased to be outstanding.
11
<PAGE>
(c) Notwithstanding paragraphs (a) and (b) of this Section 5,
(i) with respect to any Section 3.3 Transaction or Section 3.5 Transaction, the
Grantee shall be entitled to his proportionate share of any reserve or other
amounts withheld (whether by the purchaser or by the FL & Co. Companies) from
the proceeds of such transaction if and to the extent that any amounts from such
reserve become available for distribution, and (ii) if payment of any portion of
the Aggregate Appreciation Amount or Adjustment Amount shall have been deferred
pursuant to Section 3.2(c) or 3.4(b), as the case may be, the Grantee's right to
receive such deferred payment shall continue pursuant to and in accordance with
the provisions of Section 3.2(c) or Section 3.4(b) hereof, as the case may be.
Except as provided in this paragraph (c), the Grantee shall have no further
rights with respect to any Reference Shares that have terminated and ceased to
be outstanding, effective upon such termination.
6. ADJUSTMENTS. The Board of Directors of the Company shall make
appropriate adjustments to the number of Reference Shares covered by the Right
and to the Base Price to reflect any Capital Transaction effected after the date
hereof and prior to the date of termination of the Right. The Board of
Directors' adjustment shall be final and binding on the Company and the Grantee
for purposes of this Agreement. No adjustment provided for in this Section 6
shall require a fractional Reference Share to be granted to cover the Right and
the total adjustment with respect to this Agreement shall be limited
accordingly.
7. POWER OF ATTORNEY. (a) The Grantee hereby irrevocably appoints
Gulfstream Partners (the "Representative") the Grantee's true and lawful agent
and attorney-in-fact, with full powers of substitution, to act in the Grantee's
name, place and stead, to do or refrain from doing all such acts and things, and
to execute and deliver all such documents in connection with this Agreement as
the Representative shall deem necessary or appropriate in connection with any
Section 3.3 Transaction or Section 3.5 Transaction, as the case may be,
including, without in any way limiting the generality of the foregoing, to
receive on behalf of the Grantee any payments made in respect of the Grantee's
Reference Shares in connection with the Section 3.3 Transaction or Section 3.5
Transaction, as the case may be, to hold back from any such payments the
Grantee's proportionate share of the Sale Obligations, and to take any actions
in connection with the Section 3.3 Transaction or Section 3.5 Transaction, as
the case may be. The Grantee hereby ratifies and confirms all that the
Representative shall do or cause to be done by virtue of its appointment as the
Grantee's Representative.
(b) In acting for the Grantee pursuant to the appointment set
forth in paragraph (a) hereof, the Representative shall not be responsible to
the Grantee for any loss or damage the Grantee may suffer by reason of the
performance of the Representative of its duties under this Agreement, except for
loss or damage arising from willful violation of law or gross negligence in the
performance of its duties hereunder.
12
<PAGE>
The appointment of the Representative shall be deemed coupled with an interest
and shall be irrevocable, and any person dealing with the Representative may
conclusively and absolutely rely, without inquiry, upon any act of the
Representative as the act of the Grantee in all matters referred to in this
Section 7.
(c) Notwithstanding the foregoing, this power of attorney does
not empower the Representative to make any election on behalf of the Grantee to
receive any payment under Section 3.3 hereof in respect of his Reference Shares.
8. MISCELLANEOUS.
8.1 RULES OF CONSTRUCTION. (a) In this Agreement, unless the
context otherwise requires, words in the singular number or in the plural number
shall each include the singular number and the plural number, words of the
masculine gender shall include the feminine and the neuter, and, when the sense
so indicates, words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the person
of which it is an affiliate.
(c) The term "control" shall mean, with respect to any
person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person, whether through the
ownership of equity interests, by contract or otherwise.
(d) The term "person" shall mean an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
(e) There shall be included within the term "Company" any
successor to Gulfstream Aerospace Corporation by merger, consolidation,
acquisition of substantially all the assets thereof, or otherwise.
(f) There shall be included within the term "Common Stock"
any Common Stock now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be issued after the
date hereof in respect of, or in exchange for, shares of Common Stock pursuant
to a merger, consolidation, stock split, stock dividend, recapitalization of the
Company or otherwise.
8.2 RESOLUTION OF DISPUTES. Any dispute or disagreement which
may arise under, or as a result of, or which may in any way relate to, the
interpretation, construction or application of this Agreement shall be
determined by the Board of
13
<PAGE>
Directors of the Company. Any determination made hereunder shall be final and
binding for all purposes.
8.3 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
8.4 SEVERABILITY. Should any provision of this Agreement be
held by a court to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
8.5 NOTICE. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Company, to:
Gulfstream Aerospace Corporation
P.O. Box 2206
Savannah, Georgia 31402
Attention: Donald L. Mayer, Esq.
with copies to:
Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Mr. Nicholas C. Forstmann
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Grantee, at the address as reflected in the
records of the Company.
8.6 SUCCESSORS IN INTEREST. This Agreement shall inure to the
benefit of and be binding upon each successor of the Company. All obligations
imposed
14
<PAGE>
upon the Grantee and all rights granted to the Company under this Agreement
shall be binding upon the Grantee's heirs, executors, administrators and
successors.
8.7 MODIFICATION OF AGREEMENT. This Agreement may be modified,
amended, suspended or terminated by the parties hereto; provided that the
Company may modify, amend, suspend or terminate this Agreement without any
further action by the Grantee if such modification, amendment, suspension or
termination does not adversely affect the Grantee's rights hereunder. Any
terms, covenants, representations or conditions may be waived by the parties
hereto, but only in a writing signed by the party which is entitled to the
benefits of such waived term, covenant, representation or condition.
8.8 HEADINGS: EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and which together shall constitute one and the same instrument.
8.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
8.10 WITHHOLDING. The Company shall have the right to deduct
from any amount payable under this Agreement or otherwise any taxes or other
amounts to the extent required by law to be withheld.
15
<PAGE>
8.11 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement shall not
confer upon the Grantee any right with respect to continuance of employment by
the Company or any affiliate thereof, nor shall it interfere in any way with the
right of the Company or any affiliate thereof to terminate the Grantee's
employment at any time.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties hereto, all as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By:_________________________________
Title:
____________________________________
Grantee:
(FOR GRANTEES RESIDING IN COMMUNITY PROPERTY STATES ONLY)
The undersigned acknowledges that the undersigned has read the foregoing
agreement between Gulfstream Aerospace Corporation and the undersigned's spouse,
understands that the agreement provides for the grant of a stock appreciation
right to the undersigned's spouse, which right is subject to certain
restrictions reflected in such agreement, and agrees to be bound by the
foregoing agreement.
____________________________________
Grantee's Spouse
16
<PAGE>
REGISTRATION RIGHTS AGREEMENT
among
GULFSTREAM AEROSPACE CORPORATION,
GULFSTREAM DELAWARE CORPORATION,
GULFSTREAM PARTNERS,
GULFSTREAM PARTNERS II, L.P.
and
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-IV
<PAGE>
REGISTRATION RIGHTS AGREEMENT, among GULFSTREAM AEROSPACE CORPORATION,
a Delaware corporation ("Parent"), GULFSTREAM DELAWARE CORPORATION, a
Delaware corporation (the "Company") and wholly owned subsidiary of Parent,
GULFSTREAM PARTNERS, a New York limited partnership ("Gulfstream Partners"),
GULFSTREAM PARTNERS II, L.P., a New York limited partnership ("Gulfstream
Partners II"), and FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-IV, a New York limited partnership ("MBO-IV")
(Gulfstream Partners, Gulfstream Partners II and MBO-IV are individually
referred to as a "Forstmann Little Partnership" and collectively referred to
as the "Forstmann Little Partnerships".)
On March 19, 1990, Parent acquired the Company through the purchase of
all of the outstanding shares of common stock of the Company (the
"Acquisition"). In connection with the Acquisition and on each of August 31,
1992 and November 30, 1993, certain of the Forstmann Little Partnerships
acquired shares of Common Stock (as defined below) issued by Parent.
If any of the Forstmann Little Partnerships desires to sell shares of
Common Stock (whether prior to, concurrently with or following any
registration and offering by Parent of shares of its capital stock to the
public (an "Offering")), it may be necessary to register such shares under
the Securities Act (as defined below).
In addition, Parent has entered into certain stockholder's agreements
and stock option agreements (and upon exercise of the options thereunder,
will enter into stockholder's agreements) with each of the Other Investors
(as hereinafter defined). Pursuant to the terms of such stockholder's
agreements and stock option agreements, the Other Investors generally have
the right to participate (and the Forstmann Little Partnerships must allow
such persons to participate) in any public offering of all or a portion of
the shares of Common Stock owned by the Forstmann Little Partnerships. The
number of shares of Common Stock held by any Other Investor to be so included
in any such public offering is to be determined in accordance with the
stockholder's agreement or stock option agreement, as the case may be,
between such Other Investor and Parent. Pursuant to the terms of such
stockholder's agreement or option agreement, Parent must cause such shares to
be included in any such public offering.
As part of, and as consideration for, the acquisition, from time to
time, of shares of Common Stock by the Forstmann Little Partnerships from
Parent, it was the intention of the parties that the Forstmann Little
Partnerships enter into a registration rights agreement relating to the
shares of Common Stock held by the Forstmann Little Partnerships.
Accordingly, in view of the foregoing, Parent hereby grants to the Forstmann
Little Partnerships certain registration and other rights with respect to
their shares of Common Stock.
<PAGE>
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Certificate of Incorporation" means the Amended Certificate of
Incorporation of Parent, as it may be amended or restated hereafter from time
to time.
"Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of Series A-1 Common Stock, par value
$.01 per share, of Parent, Series A-2 Common Stock, par value $.01 per share,
of Parent, or Class B Common Stock, par value $.01 per share, of Parent, now
or hereafter authorized to be issued, and any and all securities of any kind
whatsoever of Parent which may be issued on or after the date hereof in
respect of, in exchange for, or upon conversion of shares of Common Stock
pursuant to a merger, consolidation, stock split, stock dividend,
recapitalization of Parent or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"Other Investor" means each Person who, at the time of any registration
of Common Stock hereunder, has the right under a stockholder's agreement or
stock option agreement with Parent to participate in any public offering of
all or a portion of the shares of Common Stock owned by the Forstmann Little
Partnerships.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock owned by
the Forstmann Little Partnerships and acquired, whether prior or subsequent
to the effectiveness of this Agreement, directly from Parent, (ii) any shares
of Common Stock held pursuant to the terms of a stockholder's agreement or
issuable upon exercise of an option pursuant to the terms of a stock option
agreement, as the case may be, between any Other Investor and Parent, which
agreement gives such Other Investor the right to participate proportionately
with the Forstmann Little Partnerships in a public offering with respect to
such shares, and (iii) any Common Stock issued with respect to the Common
Stock referred to in clauses (i) or (ii) by way of a stock dividend, stock
split or
2
<PAGE>
reverse stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities (a) when a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (b) when such securities shall have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by Parent and subsequent public distribution of
them shall not require registration of them under the Securities Act, or (c)
when such securities shall have been sold as permitted by, and in compliance
with, the Securities Act. Any certificate evidencing the Registrable
Securities shall bear a legend stating that the securities have not been
registered under the Securities Act and setting forth or referring to the
restrictions on transferability and sale of the securities.
"Registration Expenses" means all expenses incident to the registration
and disposition of the Registrable Securities pursuant to Section 2 hereof,
including, without limitation, all registration, filing and applicable
national securities exchange fees, all fees and expenses of complying with
state securities or blue sky laws (including fees and disbursements of
counsel to the underwriters or the Forstmann Little Partnerships in
connection with "blue sky" qualification of the Registrable Securities and
determination of their eligibility for investment under the laws of the
various jurisdictions), all word processing, duplicating and printing
expenses, all messenger and delivery expenses, the fees and disbursements of
counsel for Parent and of its independent public accountants, including the
expenses of "cold comfort" letters or any special audits required by, or
incident to, such registration, all fees and disbursements of underwriters
(other than underwriting discounts and commissions), all transfer taxes, and
the fees and expenses of counsel to the Forstmann Little Partnerships;
PROVIDED, HOWEVER, that Registration Expenses shall exclude, and the
Forstmann Little Partnerships and the Other Investors shall pay, underwriting
discounts and commissions in respect of the Registrable Securities being
registered.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
3
<PAGE>
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 REGISTRATION ON REQUEST.
(a) REQUEST. At any time or from time to time, the Forstmann
Little Partnerships, individually or jointly, shall have the right to require
Parent to effect the registration under the Securities Act of all or part of
the Registrable Securities, by delivering a written request therefor to
Parent specifying the number of shares of Registrable Securities and the
intended method of distribution. Parent shall, (i) as expeditiously as
possible (but in any event within 120 days of receipt of a written request),
use its best efforts to effect the registration under the Securities Act
(including by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested in such request and if Parent is then eligible
to use such a registration) of the Registrable Securities which Parent has
been so requested to register by the Forstmann Little Partnerships, for
distribution in accordance with the intended method of distribution set forth
in the written request delivered by the Forstmann Little Partnerships, and
(ii) if requested by the Forstmann Little Partnerships, obtain acceleration
of the effective date of then registration statement relating to such
registration.
(b) REGISTRATION OF OTHER SECURITIES. Whenever Parent shall
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by any Forstmann Little Partnership and any Other
Investors of Registrable Securities, no securities other than Registrable
Securities shall be included among the securities covered by such
registration unless the Forstmann Little Partnership or Partnerships so
registering Registrable Securities (the "Registering Forstmann Little
Partnerships") shall have consented in writing to the inclusion therein of
such other securities, which consent may be subject to terms and conditions
determined by the Registering Forstmann Little Partnerships in their sole
discretion.
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission
as shall be selected by Parent and as shall be reasonably acceptable to the
Registering Forstmann Little Partnerships. Parent agrees to include in any
such registration statement all information which, in the opinion of counsel
to the Registering Forstmann Little Partnerships and counsel to Parent, is
necessary or desirable to be included therein.
(d) EXPENSES. Parent and the Company shall pay, and shall be
jointly and severally responsible for, all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected
4
<PAGE>
(including for purposes of paragraph (h) of this Section 2.1) (i) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least 120 days (or such
shorter period which shall terminate when all the Registrable Securities
covered by such registration statement have been sold pursuant thereto), (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason not attributable to the
Registering Forstmann Little Partnerships and has not thereafter become
effective, or (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived.
(f) SELECTION OF UNDERWRITERS. The underwriters of each
underwritten offering of the Registrable Securities so to be registered shall
be selected by the Registering Forstmann Little Partnerships.
(g) RIGHT TO WITHDRAW. If the managing underwriter of any
underwritten offering shall advise the Registering Forstmann Little
Partnerships that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to
the Registering Forstmann Little Partnerships, then the Registering Forstmann
Little Partnerships shall have the right to notify Parent in writing that
they have determined that the registration statement be abandoned or
withdrawn, in which event Parent shall abandon or withdraw such registration
statement. In the event of such abandonment or withdrawal, such request
shall not be counted for purposes of the requests for registration to which
the Forstmann Little Partnerships are entitled pursuant to this Section 2.1.
(h) LIMITATIONS ON REGISTRATION ON REQUEST. The Forstmann
Little Partnerships shall be entitled to require Parent to effect, and Parent
shall be required to effect, six registrations in the aggregate pursuant to
this Section 2.1, provided, however, that the aggregate offering value of the
shares to be registered pursuant to any such registration shall be at least
$15,000,000 unless the Forstmann Little Partnerships then own shares with an
aggregate value less than $15,000,000 (in which case such lesser number of
shares may be registered).
(i) POSTPONEMENT. Parent shall be entitled once in any
six-month period to postpone for a reasonable period of time (but not
exceeding 90 days) (the "Postponement Period") the filing of any registration
statement required to be prepared and filed by it pursuant to this Section
2.1 if Parent determines, in its reasonable judgment, that such registration
and offering would materially interfere with any material financing,
corporate reorganization or other material transaction involving Parent or
any subsidiary, or would require premature disclosure thereof, and promptly
gives the Registering Forstmann Little Partnerships written notice of such
determination,
5
<PAGE>
containing a general statement of the reasons for such postponement and an
approximation of the anticipated delay. If Parent shall so postpone the
filing of a registration statement, the Forstmann Little Partnerships shall
have the right to withdraw the request for registration by giving written
notice to Parent at any time and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which the Forstmann Little Partnerships are entitled pursuant to this Section
2.1.
2.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If Parent at
any time proposes to register any of its securities under the Securities Act
by registration on Form S-1, S-2 or S-3 or any successor or similar form(s)
(except registrations on any such Form or similar form(s) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation), whether or not for
sale for its own account, it will each such time give prompt written notice
to each of the Forstmann Little Partnerships of its intention to do so and of
the Forstmann Little Partnerships' rights under this Section 2.2. Upon the
written request of any of the Forstmann Little Partnerships (which request
shall specify the maximum number of Registrable Securities intended to be
disposed of by the Forstmann Little Partnerships), made as promptly as
practicable and in any event within 30 days after the receipt of any such
notice (15 days if Parent states in such written notice or gives telephonic
notice to the Forstmann Little Partnerships, with written confirmation to
follow promptly thereafter, stating that (i) such registration will be on
Form S-3 and (ii) such shorter period of time is required because of a
planned filing date), Parent shall use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which
Parent has been so requested to register by the Forstmann Little
Partnerships; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, Parent shall determine for any reason not to register or to
delay registration of such securities, Parent shall give written notice of
such determination and its reasons therefor to the Forstmann Little
Partnerships and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from any obligation of Parent to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of the Forstmann Little Partnerships to request that
such registration be effected as a registration under Section 2.1 and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this
Section 2.2 shall relieve Parent of its obligation to effect any registration
upon request under Section 2.1. Parent will pay all Registration
6
<PAGE>
Expenses in connection with any registration of Registrable Securities
requested pursuant to this Section 2.2.
(b) RIGHT TO WITHDRAW. The Forstmann Little Partnerships
shall have the right to withdraw their request for inclusion of its
Registrable Securities in any registration statement pursuant to this Section
2.2 at any time prior to the execution of an underwriting agreement with
respect thereto by giving written notice to Parent of its request to withdraw.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of any underwritten offering shall inform Parent by letter of its
belief that the number of Registrable Securities requested to be included in
such registration, when added to the number of other securities to be offered
in such registration, would materially adversely affect such offering, then
Parent shall include in such registration, to the extent of the number and
type which Parent is so advised can be sold in (or during the time of) such
offering without so materially adversely affecting such offering (the
"Section 2.2 Sale Amount"), (i) all of the securities proposed by Parent to
be sold for its own account; (ii) thereafter, to the extent the Section 2.2
Sale Amount is not exceeded, the Registrable Securities requested by the
Forstmann Little Partnerships to be included in such registration pursuant to
Section 2.2(a) (including Registrable Securities held by Other Investors);
and (iii) thereafter, to the extent the Section 2.2 Sale Amount is not
exceeded, any other securities of Parent requested to be included in such
registration by any holder thereof, including, in the case where such
registration is to be effected as a result of the exercise by a holder of
Parent's securities of such holder's right to cause such securities to be so
registered, the securities of such holder.
(d) PLAN OF DISTRIBUTION. Any participation by holders of
Registrable Securities in a registration by Parent shall be in accordance
with Parent's plan of distribution, provided that the Registering Forstmann
Little Partnerships shall have the right to select the co-managing
underwriter.
2.3 REGISTRATION PROCEDURES. If and whenever Parent is required
to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2
hereof, Parent shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as practicable
the requisite registration statement to effect such registration (and
shall include all financial statements required by the Commission to be
filed therewith) and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that
before filing such registration statement (including all exhibits) or
any amendment or supplement thereto
7
<PAGE>
or comparable statements under securities or blue sky laws of any
jurisdiction, Parent shall furnish such documents to the Registering
Forstmann Little Partnerships and each underwriter, if any,
participating in the offering of the Registrable Securities and their
respective counsel, which documents will be subject to the review and
comments of the Registering Forstmann Little Partnerships, each
underwriter and their respective counsel; and provided, further,
however, that Parent may discontinue any registration of its securities
which are not Registrable Securities at any time prior to the effective
date of the registration statement relating thereto;
(b) notify the Registering Forstmann Little Partnerships of the
Commission's requests for amending or supplementing the registration
statement and the prospectus, and prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement for such
period as shall be required for the disposition of all of such
Registrable Securities in accordance with the intended method of
distribution thereof; provided, that except with respect to any such
registration statement filed pursuant to Rule 415 under the Securities
Act, such period need not exceed 120 days;
(c) furnish, without charge, to the Registering Forstmann Little
Partnerships and each underwriter such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as the Registering Forstmann Little Partnerships and such underwriters
may reasonably request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such securities or blue sky laws of such
States of the United States of America where an exemption is not
available and as the Registering Forstmann Little Partnerships or any
managing underwriter shall reasonably request, (ii) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and (iii) to take any other
8
<PAGE>
action which may be reasonably necessary or advisable to enable the
Registering Forstmann Little Partnerships to consummate the disposition
in such jurisdictions of the securities to be sold by the Registering
Forstmann Little Partnerships, except that Parent shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for
the requirements of this subsection (d) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to Parent and
counsel to the Registering Forstmann Little Partnerships to consummate
the disposition of such Registrable Securities;
(f) furnish to the Registering Forstmann Little Partnerships and
each underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed counterpart
of
(i) an opinion of counsel for Parent, and
(ii) a "comfort" letter signed by the independent public
accountants who have certified Parent's financial statements included
or incorporated by reference in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' comfort letters
delivered to the underwriters in underwritten public offerings of
securities (and dated the dates such opinions and comfort letters are
customarily dated) and, in the case of the legal opinion, such other
legal matters, and, in the case of the accountants' comfort letter,
such other financial matters, as the Registering Forstmann Little
Partnerships, or the underwriters, may reasonably request;
(g) promptly notify the Registering Forstmann Little Partnerships
and each managing underwriter, if any, participating in the offering of
the securities covered by such registration statement (i) when such
registration statement, any pre-effective amendment, the prospectus or
any prospectus supplement related thereto or post-effective amendment
to such registration statement has been filed, and, with respect to
such registration statement or
9
<PAGE>
any post-effective amendment, when the same has become effective; (ii)
of any request by the Commission for amendments or supplements to such
registration statement or the prospectus related thereto or for
additional information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or the initiation of any proceedings for that purpose; (iv) of the
receipt by Parent of any notification with respect to the suspension
of the qualification of any of the Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were
made, and in the case of this clause (v), at the request of the
Registering Forstmann Little Partnerships promptly prepare and
furnish to the Registering Forstmann Little Partnerships and each
managing underwriter, if any, participating in the offering of the
Registrable Securities, a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they were made; and (vi) at any time when
the representations and warranties of Parent contemplated by Section
2.4(a) or (b) hereof cease to be true and correct;
(h) otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to the Registering Forstmann Little Partnerships a copy of any
amendment or supplement to such registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be Parent) for all Registrable
Securities covered by such registration statement from and after a date
not later than the effective date of such registration;
10
<PAGE>
(j) (i) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed on the principal
securities exchange on which similar securities issued by Parent are
then listed (if any), if the listing of such Registrable Securities is
then permitted under the rules of such exchange, or (ii) if no similar
securities are then so listed, use its best efforts to (x) cause all
such Registrable Securities to be listed on a national securities
exchange or (y) failing that, secure designation of all such
Registrable Securities as a National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ") "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission or (z)
failing that, to secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, to arrange for
at least two market makers to register as such with respect to such
shares with the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Registering Forstmann
Little Partnerships and each underwriter, if any, participating in the
offering of the Registrable Securities, copies of all correspondence
between the Commission and Parent, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff
with respect to such registration statement;
(l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, no
later than the effective date of the registration statement; and
(n) make available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into
account the needs of Parent's and the Company's businesses) in their
marketing of Registrable Securities.
Parent may require the Registering Forstmann Little Partnerships to furnish
Parent such information regarding the Registering Forstmann Little
Partnerships and the distribution of the Registrable Securities as Parent may
from time to time reasonably request in writing.
The Forstmann Little Partnerships agree that upon receipt of any notice
from Parent of the happening of any event of the kind described in paragraph
(g)(iii) or (v) of this Section 2.3, each of the Registering Forstmann Little
Partnerships will, to the extent appropriate, discontinue its disposition of
Registrable Securities pursuant to the
11
<PAGE>
registration statement relating to such Registrable Securities until, in the
case of paragraph (g)(v) of this Section 2.3, its receipt of the copies of
the supplemented or amended prospectus contemplated by paragraph (g)(v) of
this Section 2.3 and, if so directed by Parent, will deliver to Parent (at
Parent's expense) all copies, other than permanent file copies, then in its
possession, of the prospectus relating to such Registrable Securities current
at the time of receipt of such notice. If the disposition by the Registering
Forstmann Little Partnerships of their securities is discontinued pursuant to
the foregoing sentence, Parent shall extend the period of effectiveness of
the registration statement by the number of days during the period from and
including the date of the giving of notice to and including the date when the
Registering Forstmann Little Partnerships shall have received copies of the
supplemented or amended prospectus contemplated by paragraph (g)(v) of this
Section 2.3; and, if Parent shall not so extend such period, the Registering
Forstmann Little Partnerships' request pursuant to which such registration
statement was filed shall not be counted for purposes of the requests for
registration to which the Forstmann Little Partnerships are entitled pursuant
to Section 2.1 hereof.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by the Registering Forstmann
Little Partnerships (and any Other Investors) pursuant to a registration
requested under Section 2.1, Parent shall enter into a customary underwriting
agreement with a managing underwriter or underwriters selected by the
Registering Forstmann Little Partnerships. Such underwriting agreement shall
be satisfactory in form and substance to the Registering Forstmann Little
Partnerships and shall contain such representations and warranties by, and
such other agreements on the part of, Parent and such other terms as are
generally prevailing in agreements of that type, including, without
limitation, such customary provisions relating to indemnification and
contribution as shall be agreed to by Parent. The Registering Forstmann
Little Partnerships shall be parties to such underwriting agreement and may,
at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, Parent to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Registering Forstmann Little Partnerships and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of the
Registering Forstmann Little Partnerships. None of the Registering Forstmann
Little Partnerships shall be required to make any representations or
warranties to or agreements with Parent or the underwriters other than
representations, warranties or agreements regarding such Registering
Forstmann Little Partnership, its ownership of and title to the Registrable
Securities, and its intended method of distribution; and any liability of any
Registering Forstmann Little Partnership to any underwriter or other person
under such underwriting agreement shall be limited to
12
<PAGE>
liability arising from breach of its representations and warranties and shall
be limited to an amount equal to the proceeds (net of expenses and
underwriting discounts and commissions) that it derives from such
registration.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. In the case of a
registration pursuant to Section 2.2 hereof, if Parent shall have determined
to enter into any underwriting agreements in connection therewith, all of the
Registrable Securities to be included in such registration shall be subject
to such underwriting agreements. The Registering Forstmann Little
Partnerships may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
Parent to and for the benefit of such underwriters shall also be made to and
for the benefit of the Registering Forstmann Little Partnerships and that any
or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations
of the Registering Forstmann Little Partnerships. None of the Registering
Forstmann Little Partnerships shall be required to make any representations
or warranties to or agreements with Parent or the underwriters other than
representations, warranties or agreements regarding such Registering
Forstmann Little Partnership, its ownership of and title to the Registrable
Securities, and its intended method of distribution; and any liability of any
Registering Forstmann Little Partnership to any underwriter or other Person
under such underwriting agreement shall be limited to liability arising from
breach of its representations and warranties and shall be limited to an
amount equal to the proceeds (net of expenses and underwriting discounts and
commissions) that it derives from such registration.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, Parent will give the Registering Forstmann
Little Partnerships, their underwriters, if any, and their respective
counsel, accountants and other representatives and agents the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and give each of them such access to its books
and records and such opportunities to discuss the business of Parent with its
officers and employees and the independent public accountants who have
certified its financial statements, and supply all other information
reasonably requested by each of them, as shall be necessary or appropriate,
in the opinion of the Registering Forstmann Little Partnerships and such
underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 INDEMNIFICATION.
(a) INDEMNIFICATION BY PARENT AND THE COMPANY. Parent and
the Company agree, jointly and severally, that in the event of any
registration of any
13
<PAGE>
securities of Parent under the Securities Act, each of Parent and the Company
shall, and hereby does, indemnify and hold harmless each Forstmann Little
Partnership, its respective directors, officers, partners, agents and
affiliates and each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such Forstmann Little Partnership or any such underwriter within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities, joint or several, to which such Forstmann Little Partnership or
any such director, officer, partner, agent or affiliate or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, joint or several (or
actions or proceedings, whether commenced or threatened, in respect thereof),
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in
which they were made not misleading, or (iii) any violation by Parent of any
federal, state or common law rule or regulation applicable to Parent and
relating to action required of or inaction by Parent in connection with any
such registration, and each of Parent and the Company shall reimburse such
Forstmann Little Partnership and each such director, officer, partner, agent
or affiliate, underwriter and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; PROVIDED
that Parent and the Company shall not be liable in any such case to the
Forstmann Little Partnerships or any such director, officer, partner, agent,
affiliate, or controlling person to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to Parent through an instrument duly executed
by or on behalf of the Forstmann Little Partnerships, specifically stating
that it is for use in the preparation thereof; and PROVIDED, FURTHER, that
Parent and the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense (i)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to Parent through an instrument duly executed
by or on behalf of
14
<PAGE>
such Person or (ii) arises out of such Person's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force regardless of any investigation made by or on
behalf of any Forstmann Little Partnership or any such director, officer,
partner, agent, affiliate, underwriter or controlling Person and shall
survive the transfer of such securities by such Forstmann Little Partnership.
(b) INDEMNIFICATION BY THE FORSTMANN LITTLE PARTNERSHIPS. As
a condition to including any Registrable Securities in any registration
statement, Parent shall have received an undertaking reasonably satisfactory
to it from each Registering Forstmann Little Partnership so including any
Registrable Securities to indemnify and hold harmless (in the same manner and
to the same extent as set forth in paragraph (a) of this Section 2.6) Parent,
and each director of Parent, each officer of Parent and each other Person, if
any, who controls Parent within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, but only to the extent such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Parent through an instrument
duly executed by such Registering Forstmann Little Partnership specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; PROVIDED, HOWEVER, that the liability of such indemnifying party
under this Section 2.6(b) shall be limited to the amount of proceeds (net of
expenses and underwriting discounts and commissions) received by such
indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of Parent or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
Forstmann Little Partnership.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section
2.6, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 2.6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice, and shall not
relieve the indemnifying party from any liability
15
<PAGE>
which it may have to the indemnified party otherwise than under this Section
2.6. In case any such action or proceeding is brought against an indemnified
party, the indemnifying party shall be entitled to participate therein and,
unless in the opinion of outside counsel to the indemnified party a conflict
of interest between such indemnified and indemnifying parties may exist in
respect of such claim, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER,
that if the defendants in any such action or proceeding include both the
indemnified party and the indemnifying party and if in the opinion of outside
counsel to the indemnified party there may be legal defenses available to
such indemnified party and/or other indemnified parties which are different
from or in addition to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel
to defend such action or proceeding on behalf of such indemnified party or
parties, PROVIDED, HOWEVER, that the indemnifying party shall be obligated to
pay for only one counsel for all indemnified parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any
legal expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation (unless the
first proviso in the preceding sentence shall be applicable). No
indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 2.6 shall for any reason be held by a court to be unavailable to
an indemnified party under subsection (a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subsection (a) or (b) hereof, the
indemnified party and the indemnifying party under subsection (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand, and the indemnified party on the other, which resulted in such
loss, claim, damage or liability, or action in respect thereof, with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or if the allocation provided in
this clause (ii) provides a greater amount to the indemnified party than
clause (i) above, in such proportion as shall be appropriate to reflect not
only the
16
<PAGE>
relative fault but also the relative benefits received by the indemnifying
party and the indemnified party from the offering of the securities covered
by such registration statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.6(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in the
preceding sentence of this Section 2.6(d). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Registering Forstmann Little Partnerships'
obligations to contribute as provided in this subsection (d) are several and
not joint and shall be in proportion to the relative value of their
respective Registrable Securities covered by such registration statement. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim effected without such
Person's consent, which consent shall not be unreasonably withheld.
Notwithstanding anything in this subsection (d) to the contrary, no
indemnifying party (other than Parent and the Company) shall be required to
contribute any amount in excess of the proceeds (net of expenses and
underwriting discounts and commissions) received by such party from the sale
of the Registrable Securities in the offering to which the losses, claims,
damages or liabilities of the indemnified parties relate.
(e) OTHER INDEMNIFICATION. Indemnification and contribution
similar to that specified in the preceding subsections of this Section 2.6
(with appropriate modifications) shall be given by Parent, the Company and
the Registering Forstmann Little Partnerships with respect to any required
registration or other qualification of securities under any federal, state or
blue sky law or regulation of any governmental authority other than the
Securities Act. The indemnification agreements contained in this Section 2.6
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the transfer
of any of the Registrable Securities by any of the Forstmann Little
Partnerships.
(f) INDEMNIFICATION PAYMENTS. The indemnification and
contribution required by this Section 2.6 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as
and when bills are received or expense, loss, damage or liability is incurred.
2.7 UNLEGENDED CERTIFICATES. In connection with the offering of
any Registrable Securities registered pursuant to this Section 2, Parent
shall (i) facilitate the timely preparation and delivery to the Forstmann
Little Partnerships, the Other Investors and the underwriters, if any,
participating in such offering, of unlegended certificates
17
<PAGE>
representing ownership of such Registrable Securities being sold in such
denominations and registered in such names as requested by the Forstmann
Little Partnerships, the Other Investors or such underwriters and (ii)
instruct any transfer agent and registrar of such Registrable Securities to
release any stop transfer orders with respect to any such Registrable
Securities.
2.8 LIMITATION ON SALE OF SECURITIES. Parent hereby agrees that if
it shall previously have received a request for registration pursuant to
Section 2.1 or 2.2 hereof, and if such previous registration shall not have
been withdrawn or abandoned, (i) Parent shall not effect any public or
private offer, sale or distribution of its securities or effect any
registration of any of its equity securities under the Securities Act (other
than a registration on Form S-8 or any successor or similar form which is
then in effect), whether or not for sale for its own account, until a period
of 90 days (or such shorter period as the Registering Forstmann Little
Partnerships shall be advised by their managing underwriter) shall have
elapsed from the effective date of such previous registration, and Parent
shall so provide in any registration rights agreements hereafter entered into
with respect to any of its securities; and (ii) Parent shall use its best
efforts to cause each holder of its equity securities purchased from Parent
at any time after the date of this Agreement to agree not to effect any
public sale or distribution of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act.
2.9 NO REQUIRED SALE. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any of the Forstmann Little
Partnerships to sell any Registrable Securities pursuant to any effective
registration statement.
3. RULE 144. Parent shall take all actions reasonably necessary to
enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of a Forstmann Little Partnership, Parent
will deliver to such holder a written statement as to whether it has complied
with such requirements.
4. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified
or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5. OTHER INVESTORS. The parties hereto acknowledge and agree that
no Other Investor has any right to request registration of the Common Stock
held by such Other Investor or to participate in any registration of
securities by Parent, other than in
18
<PAGE>
accordance with the terms of the stockholder's agreement or option agreement,
as the case may be, between such Other Investor and Parent, pursuant to which
such Other Investor generally has the right to participate in any public
offering of all or a portion of the shares of Common Stock owned by the
Forstmann Little Partnerships.
6. ADJUSTMENTS. In the event of any change in the capitalization
of Parent as a result of any stock split, stock dividend, reverse split,
combination, recapitalization, merger, consolidation, or otherwise, the
provisions of this Agreement shall be appropriately adjusted. Parent agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Forstmann Little
Partnerships or the Other Investors to include any Registrable Securities in
any registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. Parent agrees that it will
take all reasonable steps necessary to effect a combination or subdivision of
shares if in the reasonable judgment of the Forstmann Little Partnerships
such combination or subdivision would enhance the marketability of the
Registrable Securities.
7. NOTICE. All notices and other communications hereunder shall be
in writing and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to any of the Forstmann Little Partnerships, to it:
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Ms. Sandra J. Horbach
With a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Lois Herzeca, Esq.
(b) If to Parent or the Company, to it at:
P.O. Box 2206, B-02
Savannah, Georgia 31402-2206
Attention: Ms. Chris A. Davis
19
<PAGE>
8. ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns; provided,
however, that the Other Investors shall have no rights under this Agreement.
This Agreement may not be assigned by Parent. Any Forstmann Little
Partnership may, at its election, at any time or from time to time, assign
its rights under this Agreement, in whole or in part, to any purchaser of
shares of Common Stock held by it.
9. REMEDIES. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in
addition to all other remedies available to them, each of them shall be
entitled to an injunction restraining such breach, violation or default or
threatened breach, violation or default and to any other equitable relief,
including without limitation specific performance, without bond or other
security being required. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification provisions
thereof), the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other available
remedy.
10. NO INCONSISTENT AGREEMENTS. Parent will not, on or after the
date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Forstmann
Little Partnerships in this Agreement or otherwise conflicts with the
provisions hereof, other than any customary lock-up agreement with the
underwriters in connection with any Offering effected hereunder, pursuant to
which Parent shall agree not to register for sale, and Parent shall agree not
to sell or otherwise dispose of, Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, for a specified period
(not to exceed 180 days) following such Offering. Parent has not previously
entered into any agreement with respect to its securities granting any
registration rights to any Person other than the registration rights granted
pursuant to this Agreement and pursuant to the subscription agreements, stock
option agreements and stockholder's agreement between Parent and the Other
Investors. The rights granted to the Forstmann Little Partnerships hereunder
do not in any way conflict with and are not inconsistent with any other
agreements to which Parent is a party or by which it is bound. Parent
further agrees that if any other registration rights agreement entered into
after the date of this Agreement with respect to any of its securities
contains terms which are more favorable to, or less restrictive on, the other
party thereto than the terms and conditions contained in this Agreement are
(insofar as they are applicable) to the Forstmann Little Partnerships, then
the terms and conditions of this Agreement shall immediately be deemed to
have been amended without further action by Parent or the Forstmann Little
Partnerships so that the Forstmann Little Partnerships shall be entitled to
the benefit of any such more favorable or less restrictive terms or
conditions.
20
<PAGE>
11. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not control or otherwise affect the meaning hereof.
12. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights and obligations of the parties hereto
shall be governed by, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and the United
States of America located in the County of New York for any action or
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any action or proceeding
relating thereto except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in Section 7 hereof shall be effective service
of process for any action or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action or proceeding arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America located in the County of
New York, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient
forum.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
14. INVALIDITY OF PROVISION. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction. If any restriction or provision
of this Agreement is held unreasonable, unlawful or unenforceable in any
respect, such restriction or provision shall be interpreted, revised or
applied in a manner that renders it lawful and enforceable to the fullest
extent possible under law.
15. FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute
and deliver all other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
21
<PAGE>
16. ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement constitutes
the entire agreement, and supersedes all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject
matter hereof. It is the parties desire that this Agreement be effective as
of March 19, 1990.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
GULFSTREAM AEROSPACE
CORPORATION
By: /s/ Chris A. Davis
------------------
Title: Executive Vice President
and Chief Financial Officer
GULFSTREAM DELAWARE
CORPORATION.
By: /s/ Chris A. Davis
------------------
Title: Executive Vice President
and Chief Financial Officer
GULFSTREAM PARTNERS
By: FLC XXI Partnership,
its General Partner
By: /s/ Winston W. Hutchins
-----------------------
A General Partner
GULFSTREAM PARTNERS II, L.P.
By: FLC XXIV Partnership,
its General Partner
By: /s/ Sandra J. Horbach
----------------------
A General Partner
22
<PAGE>
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-IV
By: FLC Partnership, L.P.
its General Partner
By: /s/ Sandra J. Horbach
---------------------
A General Partner
23
<PAGE>
REPURCHASE AGREEMENT, dated as of May 15, 1996, between Gulfstream
Aerospace Corporation, a Delaware Corporation (the "Company"), and Forstmann
Little & Co. Subordinated Debt and Equity Management Buyout Partnership-IV, a
New York limited partnership ("MBO-IV").
W I T N E S S E T H:
WHEREAS, MBO-IV owns 100 shares of 7% Class A Cumulative Preferred
Stock, par value $.01 per share ("Preferred Stock") of the Company;
WHEREAS, MBO-IV desires to sell to the Company, and the Company desires
to purchase, 4.038385 shares of Preferred Stock upon the terms set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE. On or before June 30, 1996, MBO-IV agrees to sell to
the Company, and the Company agrees to purchase, 4.038385 shares of Preferred
Stock for an aggregate purchase price of $18,937,500 in cash (the "Purchase
Price"). At the closing of such purchase and sale, MBO-IV shall surrender
its stock certificate representing 100 shares of Preferred Stock against
which the Company shall (i) pay, by wire transfer of immediately available
funds, the Purchase Price, and (ii) deliver a new stock certificate, issued
in the name of MBO-IV, representing 95.961615 shares of Preferred Stock.
2. REPRESENTATIONS AND WARRANTIES OF MBO-IV. MBO-IV represents and
warrants to the Company as follows:
2.1. THE SHARES OF PREFERRED STOCK. All shares of Preferred Stock
being sold pursuant hereto (the "Shares") are owned by MBO-IV free and
clear of all liens, encumbrances, security interests or claims whatsoever.
By delivering the Shares concurrently herewith, good and valid title to
the Shares is passing to the Company.
2.2. AUTHORITY OF MBO-IV. MBO-IV is a limited partnership duly
organized, validly existing and in good standing under the laws of
New York, with full power and authority to execute and deliver this
Agreement and to consummate the transaction contemplated hereby.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to MBO-IV as follows:
3.2. AUTHORITY OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware, with full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
4. MISCELLANEOUS.
4.1. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
4.2. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By: /s/ Chris A. Davis
-----------------------------------------
Name: Chris A. Davis
Title: Executive Vice President &
Chief Financial Officer
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-IV
By: FLC Partnership, L.P.,
its general partner
By: /s/ Winston W. Hutchins
--------------------------------------
Winston W. Hutchins,
a general partner
2
<PAGE>
REPURCHASE AGREEMENT, dated as of August 8, 1996, between Gulfstream
Aerospace Corporation, a Delaware corporation (the "Company"), and Forstmann
Little & Co. Subordinated Debt and Equity Management Buyout Partnership-IV, a
New York limited partnership ("MBO-IV").
W I T N E S S E T H:
WHEREAS, the Company is contemplating the issuance of shares of common
stock of the Company to the public pursuant to an underwritten public offering
(the "Proposed Offering");
WHEREAS, MBO-IV owns 95.961615 shares of 7% Class A Cumulative Preferred
Stock, par value $.01 per share, of the Company (the "Shares"); and
WHEREAS, in connection with the Proposed Offering, MBO-IV desires to sell
to the Company, and the Company desires to purchase from MBO-IV, the Shares upon
the terms set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE. MBO-IV agrees to sell to the Company, and the Company
agrees to purchase from MBO-IV, the Shares for an aggregate purchase price of
$450,000,000 plus unpaid dividends thereon in cash (the "Purchase Price")
subject to, and contingent upon, the closing of the Proposed Offering. At the
closing of such purchase and sale (the "Closing"), MBO-IV shall surrender its
stock certificate representing the Shares to the Company, duly endorsed for
transfer, or with appropriate stock powers attached, and the Company shall pay
to MBO-IV, by wire transfer of immediately available funds to an account
designated by MBO-IV, the Purchase Price. The Closing shall take place
simultaneously with the closing of the Proposed Offering.
2. REPRESENTATIONS AND WARRANTIES OF MBO-IV. MBO-IV represents and warrants
to the Company as follows:
2.1. THE SHARES. The Shares are owned by MBO-IV free and clear of all
liens, encumbrances, security interests or claims whatsoever. The delivery
of the Shares to the Company will vest in the Company good and valid title
to the Shares.
2.2. AUTHORITY OF MBO-IV. MBO-IV is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of New
York, with full power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to MBO-IV that the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
4. MISCELLANEOUS.
4.1. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
the conflict of laws provisions thereof.
4.2. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
GULFSTREAM AEROSPACE CORPORATION
By: /s/ Chris A. Davis
---------------------------------
Title: Executive Vice President
and Chief Financial Officer
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-IV
By: FLC Partnership, L.P.,
its general partner
By: /s/ Sandra J. Horbach
--------------------------------------
a general partner
2
<PAGE>
GULFSTREAM AEROSPACE CORPORATION
Schedule Regarding Computation of Per Share Income (Loss)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Pro Forma for 1996 Recapitalization:
Net Income - historical................................................. $ 28,894 $ 7,839 $ 15,359
Pro forma, for 1996 Recapitalization, adjustments:
Interest expense...................................................... (14,693) (9,315) (9,112)
-------------- --------- ---------
Pro forma, for 1996 Recapitalization, net income (loss)................. $ 14,201 $ (1,476) $ 6,247
-------------- --------- ---------
-------------- --------- ---------
Average shares issued and outstanding..................................... 65,315 65,315 65,315
Exercise of certain stock options with the Offerings...................... 2,123 2,123 2,123
Incremental shares applicable to stock options outstanding after the
exercise of certain stock options with the Offerings..................... 6,093 6,093 6,093
-------------- --------- ---------
Pro forma, for 1996 Recapitalization, weighted average number of common
and common equivalent shares............................................. 73,531 73,531 73,531
Pro forma, shares issued pursuant to the Offerings........................ 4,783 4,783 4,783
-------------- --------- ---------
Pro forma, for 1996 Recapitalization and Offerings, weighted average
number of common and common equivalent share............................. 78,314 78,314 78,314
-------------- --------- ---------
-------------- --------- ---------
Pro forma, for 1996 Recapitalization, net income (loss) per common and
common equivalent share.................................................. $ 0.19 $ (0.02) $ 0.08
-------------- --------- ---------
-------------- --------- ---------
Pro forma, for 1996 Recapitalization and Offerings, net income (loss) per
common and common equivalent share....................................... $ 0.18 $ (0.02) $ 0.08
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
Note: Shares and stock options issued subsequent to June 30, 1995 are treated as
outstanding for all reported periods.
<PAGE>
SUBSIDIARIES OF GULFSTREAM AEROSPACE CORPORATION
<TABLE>
<CAPTION>
SUBSIDIARY NAME DOING BUSINESS AS JURISDICTION OF INCORPORATION
- --------------------------------------- -------------------------------- -----------------------------
<S> <C> <C>
Gulfstream Aerospace Corporation California
Gulfstream Delaware Corporation Delaware
Gulfstream International Corporation Delaware
Gulfstream Aircraft Incorporated Georgia
Gulfstream Financial Services Corporation Georgia
Gulfstream Aerospace Corporation Georgia
Gulfstream Aerospace Corporation Gulfstream Aerospace Technologies Oklahoma
Gulfstream Aerospace Corporation of Texas Texas
Gulfstream Aerospace (Middle East) Ltd. Cyprus
Interiores Aereos S.A. De C.V. Mexico
</TABLE>
