<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
GULFSTREAM AEROSPACE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3554834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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 (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 the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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 (the "Securities Act"); other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. /X/
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>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01........................ 20,700,000 shares $43.47 $899,829,000.00 $265,450.00
</TABLE>
(1) A portion of the shares to be registered 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
purposes of sales outside the United States. Includes up to 2,700,000 shares
subject to the Underwriters' over-allotment options.
(2) Calculated pursuant to Rule 457(c) under the Securities Act based upon the
average of the high and low prices of the Common Stock as reported on the
New York Stock Exchange Composite Tape for April 14, 1998, solely for
purposes of determining the registration fee.
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>
SUBJECT TO COMPLETION, DATED APRIL 21, 1998
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>
18,000,000 SHARES
[LOGO]
GULFSTREAM AEROSPACE CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
Of the 18,000,000 shares of Common Stock offered, 14,400,000 shares are
being offered hereby in the United States and 3,600,000 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".
All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. See "Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares.
The last reported sale price of the Common Stock, which is listed under the
symbol "GAC," on the New York Stock Exchange on April 20, 1998 was $46.81 per
share. See "Price Range of Common Stock and Dividend Policy".
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
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
OFFERING PRICE DISCOUNT(1) SELLING STOCKHOLDERS(2)
--------------------- --------------------- ---------------------------
<S> <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) Estimated expenses of approximately $1,500,000 are 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 2,160,000 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 to purchase up to an additional
540,000 shares, as part of the concurrent international offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount, 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 the shares
will be ready for delivery in New York, New York, on or about , 1998
against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
The date of this Prospectus is , 1998.
<PAGE>
[DESCRIPTION OF INSIDE FRONT COVER]
Photographs of Gulfstream V Aircraft, Cockpit, Hanger and Interior of
Gulfstream V Aircraft.
<PAGE>
AVAILABLE INFORMATION
Gulfstream Aerospace Corporation (the "Company") is subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by the Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, 7th Floor, New York, New York 10048. Copies of such
materials may also be obtained upon written request from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C., 20549, at
prescribed rates. The Commission also maintains a Web Site at http://
www.sec.gov, which contains reports and other information regarding registrants
that file electronically with the Commission. In addition, such material may
also be inspected and copied at the offices of the New York Stock Exchange, Inc.
(the "NYSE"), 20 Broad Street, New York, New York 10005, on which the Company's
common stock, par value $.01 per share (the "Common Stock"), is listed.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of its Common Stock being offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements made in this Prospectus
as to the contents of any contract, agreement or other document are not
necessarily complete; with 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. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997;
2. The Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders, dated March 25, 1998;
3. The description of the Common Stock of the Company, which is contained
in the Company's Registration Statement on Form 8-A filed with the
Commission on August 29, 1996;
4. The Company's Current Report on Form 8-K, dated February 10, 1998;
5. The Company's Current Report on Form 8-K, dated April 16, 1998; and
6. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offerings of the shares.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests
2
<PAGE>
should be directed to the Company, P.O. Box 2206, 500 Gulfstream Road, Savannah,
Georgia 31402-2206, Attention: Investor Relations, telephone: (912) 965-3000.
------------------------
Any statement contained in a document or a portion thereof which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document or
portion thereof which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified shall
not be deemed to constitute a part of this Prospectus except as so modified, and
any statement so superseded shall not be deemed to constitute part of this
Prospectus.
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
3
<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 OR INCORPORATED BY REFERENCE HEREIN.
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 COMMON STOCK, WHICH OCCURRED IN
OCTOBER 1996 (COLLECTIVELY, THE "1996 RECAPITALIZATION"), (II) ASSUMES THAT THE
OVER-ALLOTMENT OPTIONS GRANTED TO THE UNDERWRITERS ARE NOT EXERCISED, (III)
ASSUMES THE SALE OF COMMON STOCK IN THE OFFERINGS AT $46.81 PER SHARE, AND (IV)
ASSUMES THE ISSUANCE OF 2,911,077 SHARES OF COMMON STOCK BY THE COMPANY TO
CERTAIN SELLING STOCKHOLDERS PURSUANT TO THE EXERCISE OF OUTSTANDING OPTIONS AND
THE SALE OF SUCH SHARES IN THE OFFERINGS. 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. 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 1997 REFERS TO THE YEAR ENDED DECEMBER 31, 1997).
THE COMPANY
OVERVIEW
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 approximately 60%. The Company has manufactured and
sold over 1,000 large cabin business aircraft since the introduction of the
Gulfstream product line in 1958.
The Company has developed a broad range of aircraft products to meet the
aviation needs of its targeted customers (which include national and
multinational corporations, governments, governmental agencies, heads of state
and wealthy individuals). See "Business--Customers and Marketing". The Company's
current principal aircraft products are the Gulfstream
IV-SP-Registered Trademark-, the Gulfstream V-Registered Trademark- and
Gulfstream Shares-Registered Trademark- (fractional ownership interests in
Gulfstream IV-SPs). As an integral part of its aircraft product offerings, the
Company offers aircraft completions (exterior painting of the aircraft and the
installation of customer selected interiors), financial services and worldwide
aircraft maintenance services and technical support.
Since 1994, Gulfstream has significantly increased its profitability and
market share by broadening its product offerings, increasing its production
capacity and reducing its cost structure. In 1997, the Company's revenues grew
by 79%, to $1,903 million, from $1,064 million in 1996, and operating profit
increased nearly fivefold to $229 million in 1997 from $50 million in 1996. At
March 31, 1998, Gulfstream had a firm contract backlog for 88 aircraft, valued
at approximately $2.8 billion. During the quarter ended March 31, 1998, the
Company also signed a contract valued at approximately $335 million (which is
not included in backlog) for 12 Gulfstream IV-SPs to expand its highly
successful fractional ownership program into the Middle East. Including this
contract, the Company had a total of 100 aircraft, valued at approximately $3.1
billion of potential future revenues, under contract.
BUSINESS STRATEGY
Gulfstream's strategy is to continue to dominate the large cabin, long range
business jet market and expand the Company's customer base by offering the most
technologically advanced business aircraft and a broad range of complementary
transportation services. With the completion of the $285 million Gulfstream V
development program, the Company has introduced the world's first ultra-long
range
4
<PAGE>
business aircraft and received the 1997 Robert J. Collier Trophy for outstanding
aeronautical achievement. The performance and first-to-market advantages of the
Gulfstream V, as well as the continuing popularity of the Gulfstream IV-SP, have
created exceptional demand for the Company's products, with 100 aircraft
currently under contract.
In order to capitalize on the Company's strong product demand and meet its
customers' growing transportation needs, Gulfstream has been and will continue
to (i) expand its production capacity, (ii) increase the breadth of its products
and services and (iii) invest in product innovation. The Company's co-production
strategy is successfully underway, with production nearly doubling from 27
aircraft in 1996 to 51 in 1997. Through ongoing productivity improvements,
Gulfstream plans to deliver 58 aircraft in 1998 and in excess of 60 aircraft in
1999, without adding to its existing physical plant. Since 1995, the Company has
also successfully expanded its product offerings to include Gulfstream Shares,
with total aircraft ordered to date of 29 in North America and 12 overseas, and
Gulfstream Financial Services, which facilitated financing for over $550 million
of new and pre-owned aircraft sales in 1996 and 1997. The Company plans to
continue to introduce new products and services in order to grow its revenue and
customer base, as well as invest in research and development to maintain its
leadership position in the marketplace.
With the Gulfstream V development program now complete and the Company's
co-production program successfully underway, Gulfstream is poised for
significant earnings growth. As the Company continues to increase its
deliveries, enhance its manufacturing productivity and leverage its fixed costs,
Gulfstream is targeting 70% growth in fully taxed earnings per share in 1998, to
$2.85 per share, and 15% growth in 1999 and 2000. This targeted growth is
supported by the Company's 100 aircraft contracts, representing $3.1 billion of
future potential revenues. The Company is currently selling positions for
outfitted deliveries of Gulfstream IV-SPs in the fourth quarter of 1999 and
Gulfstream Vs in the first half of 2000.
MARKET LEADERSHIP
GULFSTREAM IV-SP. The Gulfstream IV-SP continues to dominate the long
range, large cabin busi-
ness aircraft market, with 67 world records and a 62% market share over the last
three years for aircraft with comparable performance and price. Worldwide demand
for the aircraft remains strong, with 39 new orders in 1997, 41 aircraft in
backlog at March 31, 1998 and an additional 12 aircraft under contract for the
Middle East Shares program. The Gulfstream IV-SP has recorded more than 850,000
flight hours and a 99.2% dispatch reliability rate. Since the Company delivered
the first Gulfstream IV in 1985, it has delivered a total of 333 Gulfstream
IV/IV-SPs, establishing this product as the most successful long range, large
cabin business aircraft in the history of business aviation.
GULFSTREAM V. On April 11, 1997, Gulfstream received final FAA
certification of the Gulfstream V, the world's first ultra-long range business
jet. The Gulfstream V entered operational service in June 1997 and is still the
only certified and operating ultra-long range product in the marketplace. The
Gulfstream V has set 47 world and national records and met or exceeded all of
its performance specifications. As confirmation of the product's innovative
design and outstanding performance, the Gulfstream V received the 1997 Robert J.
Collier Trophy for aeronautical achievement and was selected by the United
States Air Force to provide intercontinental transportation for senior
government officials and dignitaries. As of March 31, 1998, the Company had
received a total of 90 orders for the Gulfstream V and, net of deliveries, had a
contract backlog of 47 aircraft. To date, the Gulfstream V has achieved a 99.5%
dispatch reliability rate, an impressive level for a new aircraft.
PRODUCTION EXPANSION AND PRODUCTIVITY
PRODUCTION EXPANSION. To meet the strong demand for its products,
Gulfstream has increased its production rate from 27 aircraft in 1996 to 51 in
1997 and is targeting 58 deliveries in 1998 and more than
5
<PAGE>
60 in 1999. The Company plans to invest approximately $20 million of capital in
1998 to support its production expansion, with new tooling and business systems.
To date, the Company's production rate is seven months ahead of schedule.
QUALITY AND PRODUCTIVITY INITIATIVES. In 1997, Gulfstream initiated
cross-functional teams to focus on quality and efficiency in product design,
manufacturing and interior completions. Capitalizing on the collective expertise
of Gulfstream's highly skilled workforce, the Company reduced the Gulfstream V's
final assembly production time from 75 days to 30 days in just over six months
and the total manufacturing hours per aircraft by nearly 50%. At the same time,
the manufacturing process has been redesigned to give Gulfstream the flexibility
to change its annual production mix between Gulfstream IV-SPs and Vs to respond
to customer demand. Similar initiatives are underway in the completions area,
with a goal to reduce the Company's completion cycle time by nearly 50% over the
next twelve to eighteen months. Largely as a result of these efforts, Gulfstream
expects gross margins (excluding pre-owned aircraft) to improve from 20% in 1997
to the mid-20s by the end of 1998.
INTEGRATION OF PRODUCTION, COMPLETIONS AND SERVICE. In order to minimize
duplicate costs and continue to improve manufacturing productivity, Gulfstream
has combined the management of its green aircraft production, its interior
completions and its service business. The Company currently outfits nearly 100%
of its new aircraft interiors, up from 70% in 1990, and is targeting to almost
double its completion deliveries in 1998. By integrating green aircraft
production with completions, Gulfstream has the opportunity to build common
customer configurations into the initial aircraft production line and
significantly reduce rework and duplicate costs. In addition, this organization
change enables the Company to maximize its engineering and material resources
and negotiate better terms for its material and parts contracts through
long-term supplier agreements.
EXPANDING PRODUCTS AND SERVICES
As part of the Company's strategy to offer its customers a broad range of
transportation services, Gulfstream has introduced a number of new products
since 1995. These products have expanded the potential market for Gulfstream, as
well as increased sales to existing customers.
GULFSTREAM SHARES. In 1995, the Company introduced a Gulfstream IV-SP
fractional share ownership program, Gulfstream Shares, in conjunction with
Executive Jet International ("EJI"). Gulfstream Shares provides customers with
the benefits of Gulfstream aircraft ownership at a substantially lower cost and
has significantly increased Gulfstream's potential customer base. Over 60% of
the current Shares customers are either first time buyers of an aircraft or are
trading up to the Gulfstream IV-SP from a smaller aircraft program. To date, the
Company has contracted to deliver 27 Gulfstream IV-SPs and two Gulfstream Vs in
connection with the program. Twelve of these aircraft are already in service and
17 are scheduled for delivery through 2000. EJI also has an option to purchase
two more Gulfstream IV-SPs. In addition, Gulfstream signed a firm contract in
March 1998 with a group of Middle East investors for 12 Gulfstream IV-SPs, which
will be delivered over the next five years for a Middle East fractional
ownership program.
GULFSTREAM FINANCIAL SERVICES. Gulfstream Financial Services Corporation
("GFSC") offers customers a variety of financing alternatives to facilitate the
purchase of a new aircraft. By providing its customers access to capital, GFSC
serves to expedite and increase the sale of new and pre-owned aircraft. This
program is offered through private label relationships with major financial
institutions, which manage and bear the credit risk of these financing packages.
GFSC facilitated financing for over $550 million of new and pre-owned aircraft
sales in 1996 and 1997.
GULFSTREAM CHARTER AND AIRCRAFT MANAGEMENT SERVICES. The Company has
developed Gulfstream Charter Services to provide its customers with easy access
to the Gulfstream charter market. The program helps customers meet their interim
and supplemental lift requirements by connecting potential
6
<PAGE>
Gulfstream charter customers with operators through a private label relationship
with a charter services manager. In addition, Gulfstream expects to finalize an
agreement with a third party provider to offer Gulfstream Management Services,
an outsourcing program for the management of a Gulfstream aircraft. Through this
service, individual and corporate owners of Gulfstream aircraft can receive
aircrew, dispatch and maintenance management services directly through
Gulfstream.
GULFSTREAM OPERATING LEASE. The Company is in the process of developing a
Gulfstream operating lease program. This program, which is expected to include
third party participation, would provide an important vehicle for new Gulfstream
aircraft sales, offer customers an additional solution for their interim
aircraft operating needs and introduce customers with less initial capital to
Gulfstream's product offerings. Gulfstream will market the leases, provide
maintenance services and share in the operating lease profits. The Company
expects this product to have significant international as well as domestic
potential.
GULFSTREAM SERVICECARE-SM-. To provide predictability and security to the
cost of maintaining new Gulfstream IV-SPs, the Company introduced the
ServiceCare program in 1997. This product offers customers a guaranteed hourly
service program which covers all scheduled and unscheduled maintenance events.
Gulfstream provides the maintenance services for the customer aircraft and a
third party is responsible for the risk management and administration of the
program through a private label agreement.
ONGOING PRODUCT INNOVATION AND INVESTMENT
Gulfstream is just beginning to reap the benefits of its $285 million
investment in the Gulfstream V development program, with 1997 being the first
full year of Gulfstream V deliveries. The Company plans to continue to focus its
research and development on maintaining Gulfstream's position as a market leader
at the forefront of technology. Currently, research and development funds are
being invested to reduce the manufacturing and operating costs of the Gulfstream
IV-SP and the Gulfstream V. Over the longer term, the Company plans to apply
cost effective Gulfstream V enhancements to the Gulfstream IV-SP, increase the
cockpit commonality of the two products and further upgrade their respective
avionics and electronics packages as technology progresses. In total, the
Company plans to invest approximately $60 million in research and development
over the next three years in support of these efforts.
In addition, Gulfstream is investing in new products and services. The
Company has invested approximately $60 million in the core fleet aircraft of its
North American Gulfstream Shares program and has committed to invest an
estimated $40 million for core fleet to support the Middle East Shares
expansion. Over the long term, Gulfstream plans to explore additional Shares
programs, including Gulfstream V and Far East products, and invest in additional
services and strategic partnerships which support the Company's earnings growth.
PRINCIPAL STOCKHOLDERS
In March 1990, the Gulfstream business was acquired from Chrysler
Corporation by certain partnerships (the "Forstmann Little Partnerships") formed
by Forstmann Little & Co. ("Forstmann Little"). On October 16, 1996, the Company
sold 4,559,100 shares of Common Stock, and the Forstmann Little Partnerships and
certain other holders of Common Stock sold 37,940,900 shares of Common Stock in
an initial public offering (the "Initial Public Offering"). The Forstmann Little
Partnerships own approximately 43.2% of the currently outstanding shares of
Common Stock (40.0% on a fully diluted basis). Shares of Common Stock to be sold
pursuant to the Offerings will be sold by the Forstmann Little Partnerships, as
well as by certain other holders of Common Stock and certain option holders
(collectively, the Forstmann Little Partnerships and such holders of Common
Stock and options are referred to as the "Selling Stockholders"). After the
consummation of the Offerings, the Forstmann Little Partnerships will
beneficially own approximately 22.0% of the Common Stock (21.2% on a fully
diluted basis) or 18.9% (18.3% on a fully diluted basis), assuming that the
Underwriters' over-allotment options are exercised in full. See "Selling
Stockholders".
7
<PAGE>
THE OFFERINGS (1)
<TABLE>
<S> <C>
Common Stock offered by the
Selling Stockholders: (2)
United States Offering........ 14,400,000 shares
International Offering........ 3,600,000 shares
--------------------
Total....................... 18,000,000 shares
Common Stock to be outstanding
after the Offerings............. 75,581,184 shares (2)(3)
Use of proceeds................... The Company will not receive any of the proceeds from
the sale of shares. 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 2,911,077 shares of Common Stock from the
Company for an aggregate exercise price of approximately
$28.7 million; all of such shares are expected to be
sold by such Selling Stockholders in the Offerings. See
"Use of Proceeds".
NYSE symbol....................... GAC
</TABLE>
- ------------------------
(1) The offering of 14,400,000 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the offering of 3,600,000 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) Based on the number of shares outstanding on March 31, 1998, plus 2,911,077
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
2,938,194 shares issuable upon the exercise of additional outstanding 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 or incorporated by reference in this Prospectus.
8
<PAGE>
SUMMARY FINANCIAL DATA
The consolidated financial data of the Company as of and for each of the
five years in the period ended December 31, 1997, has been derived from the
Company's audited consolidated financial statements. The consolidated financial
data as of and for the three months ended March 31, 1997 and 1998, has been
derived from the unaudited consolidated financial statements of the Company
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of its financial
condition and results of operations as of such dates and for such periods. The
results for the three months ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the full year. The selected
consolidated financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto,
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
---------- --------- ---------- ---------- ---------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................... $ 887,113 $ 901,638 $1,041,514 $1,063,713 $1,903,494 $ 375,626 $ 503,407
---------- --------- ---------- ---------- ---------- ----------- -----------
Costs and expenses:
Cost of sales........................ 737,361 710,554 835,547 839,254 1,557,250 305,152 404,069
Selling and administrative
expenses........................... 97,011 82,180 93,239 99,452 97,499 22,615 25,942
Stock option compensation expense.... 7,186 1,640 522 329
Research and development expense..... 47,990 57,438 63,098 58,118 10,792 (1,520) 1,945
Amortization of intangibles and
deferred charges................... 27,613 7,583 7,540 9,434 7,347 1,820 1,876
Restructuring charge(1).............. 203,911
---------- --------- ---------- ---------- ---------- ----------- -----------
Total costs and expenses............... 1,113,886 857,755 999,424 1,013,444 1,674,798 328,589 434,161
Income (loss) from operations.......... (226,773) 43,883 42,090 50,269 228,696 47,037 69,246
Interest income...................... 486 367 5,508 14,605 11,532 3,123 2,522
Interest expense..................... (48,940) (20,686) (18,704) (17,909) (31,159) (8,130) (6,999)
---------- --------- ---------- ---------- ---------- ----------- -----------
Income(loss) before income taxes....... (275,227) 23,564 28,894 46,965 209,069 42,030 64,769
Income tax expense (benefit)(2)........ -- -- -- -- (33,942) 2,000 24,288
---------- --------- ---------- ---------- ---------- ----------- -----------
Net income (loss).................... $ (275,227) $ 23,564 $ 28,894 $ 46,965 $ 243,011 $ 40,030 $ 40,481
---------- --------- ---------- ---------- ---------- ----------- -----------
---------- --------- ---------- ---------- ---------- ----------- -----------
Earnings per share:
Net income per share--basic(3)....... $ .39 $ .64 $ 3.28 $ .54 $ .56
--diluted(3)...... $ .37 $ .60 $ 3.12 $ .51 $ .54
Pro forma fully taxed earnings per
share--diluted(4).................... $ .23 $ .37 $ 1.68 $ .33 $ .54
</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.
(2) The Company recorded a net income tax benefit of $33.9 million for 1997 and
a provision for income taxes of $24.3 million for the three months ended
March 31, 1998. Prior to September 30, 1997, the Company recorded no
provision for income taxes, other than alternative minimum taxes,
principally as a result of utilization of net operating loss carryforwards.
In the third quarter of 1997, the Company released its deferred tax
valuation allowance, totaling $94.2 million. Of this amount, $29.4 million
related to the exercise of stock options and was credited to additional
paid-in capital and $64.8 million was recorded as a one-time, non-cash
income tax benefit. The Company had available at March 31, 1998 a net
operating loss carryforward for regular federal income tax purposes of
approximately $11.7 million, which will begin expiring in 2006.
(3) Net income per share ("EPS") information for 1995 and 1996 is based on
historical unadjusted net income divided by pro forma weighted average
number of shares. Shares included for basic EPS give retroactive effect to
the 1996 Recapitalization, the shares issued to option holders upon the
exercise of options at the date of the Initial Public Offering, and the
shares issued pursuant to the Initial Public Offering (all of which are
described in Note 10 to the consolidated financial statements incorporated
herein by reference) as if such transactions had occurred at the beginning
of the period. Diluted EPS further includes the effects of options granted
in 1995 and 1996 as if such options had been outstanding for all periods
presented. See also Note 14 to the consolidated financial statements,
incorporated herein by reference, for a reconciliation of per share data.
(4) Pro forma fully taxed earnings per share--diluted is presented for the
applicable periods assuming an estimated effective tax rate of 37.5%.
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- ---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.............. $ 9,331 $ 23,605 $ 223,312 $ 233,172 $ 306,451 $ 200,510 $ 183,214
Working capital........................ 302,369 301,913 356,976 138,091 295,811 166,963 230,006
Total assets........................... 799,470 745,761 981,253 1,313,215 1,473,667 1,238,451 1,369,645
Total debt(1).......................... 206,145 178,145 146,331 400,000 380,000 400,000 361,250
Total stockholders' equity
(deficit)(1)(2)...................... 164,395 188,950 217,540 (188,811) 92,757 (147,752) 68,973
OPERATING DATA:
Depreciation and amortization.......... $ 47,866 $ 24,151 $ 23,094 $ 26,910 $ 33,022 $ 7,832 $ 8,292
OPERATING DATA:
Units delivered during period:
Gulfstream IV/IV-SP.................. 26 22 26 24 22 5 6
Gulfstream V......................... 0 0 0 3 29 6 7
--------- --------- --------- ---------- ---------- ---------- ----------
Total deliveries..................... 26 22 26 27 51 11 13
Units ordered during period:
Gulfstream IV/IV-SP(3)............... 26 25 30 44 39 21 4
Gulfstream V......................... 17 16 12 21 7 -- 9
--------- --------- --------- ---------- ---------- ---------- ----------
Total orders......................... 43 41 42 65 46 21 13
Units in backlog at end of period:
Gulfstream IV/IV-SP(3)(4)............ 3 3 7 27 43 43 41
Gulfstream V(5)...................... 24 40 50 67 45 61 47
--------- --------- --------- ---------- ---------- ---------- ----------
Total backlog(6)..................... 27 43 57 94 88 104 88
ESTIMATED BACKLOG (in
billions)(3)(4)(5)(6):................. $ 0.9 $ 1.5 $ 1.9 $ 3.1 $ 2.8 $ 3.3 $ 2.8
</TABLE>
- ------------------------------
(1) Total stockholders' equity and total debt at December 31, 1996 give effect
to the 1996 Recapitalization and Initial Public Offering which occurred
during the fourth quarter 1996.
(2) Total stockholders' equity at March 31, 1998 gives effect to the repurchase
of approximately 2.5 million shares of Common Stock, at an average price of
$30.01 per share, for an aggregate amount of $74.6 million, during the first
quarter 1998. See also Note 15 to the consolidated financial statements,
incorporated herein by reference.
(3) During the quarter ended March 31, 1998, the Company also signed a contract
for 12 Gulfstream IV-SPs to expand its highly successful Gulfstream Shares
fractional ownership program into the Middle East region. This contract,
valued at approximately $335 million, is not included in units ordered or
backlog.
(4) Net of cancellations of 3 in 1994 and 1 in 1997, which generally relate to
orders placed in prior years.
(5) Net of cancellations of 1, 2 and 1 in 1993, 1995 and 1996, respectively,
which generally relate to orders placed in prior years.
(6) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Contractual Backlog".
10
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE
IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK
OFFERED HEREBY.
AIRCRAFT PRODUCTION AND COMPLETION
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 the green aircraft is delivered to the customer. The
Company records revenue from completion services when the outfitted aircraft is
delivered to the customer. The Company is currently targeting 58 green aircraft
deliveries in 1998 and in excess of 60 green aircraft deliveries in 1999.
Completions are projected to nearly double in 1998. However, there can be no
assurance as to the extent to which the Company can successfully increase its
rates of aircraft production and completion.
Approximately 70% of the production costs of both the Gulfstream IV-SP and
the Gulfstream V consist of materials and equipment purchased from other
manufacturers. While the Company's production activities have never been
materially affected by its inability to obtain components, and while the Company
maintains business interruption insurance in the event that a disruption should
occur, the failure of the Company's suppliers to meet the Company's performance
specifications, quality standards or delivery schedules could have a material
adverse impact on the Company's delivery schedule. In addition, although the
Company has in place revenue share and long-term supply arrangements that help
protect it against unexpected materials price increases, if the Company
experiences price pressure on materials, margins could be adversely affected.
The Company's ability to meet its production and completion schedules
depends on the Company's meeting its needs for skilled labor. Although the
Company's employee relations are generally good and its ability to hire required
skilled labor has not to date adversely affected its ability to meet its
production and completion schedules, there can be no assurance that these
favorable conditions will continue.
The Company expects to become more efficient at producing and completing
Gulfstream V aircraft, and expects production and completion costs to fall as it
gains more experience in this aircraft program. As a result, the Company expects
gross margins (excluding pre-owned aircraft, which are typically sold at
break-even levels) to improve from 20% in 1997 to the mid-20s by the end of
1998. If the Company is unable to achieve anticipated efficiencies in a timely
manner, its delivery schedule and its projected margin improvements could be
adversely impacted. Additional costs associated with the learning curve on
Gulfstream V completions are expected to delay margin improvements somewhat in
the first half of 1998. If subsequent improvement is not achieved in the second
half, as anticipated, the Company may be unable to achieve its margin targets.
While the Company generally receives non-refundable deposits in connection
with each order, an order may be canceled (and the deposit returned) under
certain conditions if the delivery of a Gulfstream V aircraft is delayed more
than six months after a customer's scheduled delivery date. An extended delay in
the production or completion process could cause order cancellations, which
could have an adverse effect on the Company's results of operations. To date,
there have been no such cancellations.
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
11
<PAGE>
Company for its new and pre-owned aircraft. Although 80% of the Company's
backlog consists of North American customers and 65% of its North American
customers are Fortune 500 companies, adverse business and economic conditions
could cause customers to be unable or unwilling to consummate the purchase of an
aircraft and could, therefore, result in order cancellations. To the extent
customers cancel, they forfeit their non-refundable deposits.
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. However, if one or a number of catastrophic events were to occur with
the Gulfstream fleet, and it was determined to be related to the aircraft
manufacturer, Gulfstream's reputation and sales of Gulfstream aircraft could be
adversely affected. There have been no incidents of this nature in the Company's
history.
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 IV-SP or Gulfstream V. Based on the current market for pre-owned
aircraft, the Company expects to continue to be able to resell pre-owned
aircraft taken in trade, and does not expect to suffer a loss with respect to
these trade-ins and resales. 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's 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. and to a lesser extent
Bombardier Inc. ("Bombardier"). 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,
according to published reports, is scheduled for certification in the second
quarter of 1998, 18 months after the initial delivery of the Gulfstream V. The
Boeing Company, in partnership with General Electric Co., is marketing a version
of the Boeing 737 into the ultra-long range business jet aircraft market
segment. Boeing has indicated that it expects this aircraft to be available for
delivery in the fourth quarter of 1998. In June 1997, Airbus Industries
announced it would market a version of the Airbus A319 into this market segment
as well. Airbus has indicated that it expects the aircraft to be available in
early 1999. The Company's competitors may have access to greater resources
(including, in certain cases, governmental subsidies) than are available to the
Company.
PERIOD-TO-PERIOD FLUCTUATIONS
Since the Company relies on the sales of a relatively small number of high
unit selling price new aircraft to provide the substantial portion of its
revenues, even a small decrease in the number of deliveries in any period could
have a material adverse effect on the results of operations for that period. 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.
YEAR 2000 COMPLIANCE
As a part of the Company's initiatives, begun in 1996, to increase
production rates and co-produce the Gulfstream IV-SP and Gulfstream V, the
Company has, and continues to, upgrade and replace business systems and facility
infrastructure. These initiatives help to reduce the potential impact of the
Year 2000 issue on the Company's operations. In addition, the Company has
implemented a Year 2000 Compliance Plan designed to ensure that all other
hardware, software, systems and products with microprocessors relevant to the
Company's business are not adversely affected by the Year 2000 issue. The
Company is also reviewing compliance by suppliers and vendors and the impact of
the Year 2000 issue on in-service customer aircraft. The Company does not
believe that the implementation of this Year 2000 Compliance Plan will have a
material effect on the Company's business operations, financial
12
<PAGE>
condition, liquidity or capital resources. However, there can be no assurance,
with regard to compliance by customers and suppliers, that all aspects of their
Year 2000 compliance plans will be successfully completed in a timely manner.
PENDING TAX AUDIT
The Company is involved in tax audits by the Internal Revenue Service
covering the years 1990 through 1994. The revenue agent's reports include
several proposed adjustments involving the deductibility of certain compensation
expense and items relating to the capitalization of the Company, the allocation
of the purchase price for the acquisition by the Company of the Gulfstream
business, including the treatment of advance payments with respect to and 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 reports are 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.
LEVERAGE AND DEBT SERVICE; RESTRICTIONS ON PAYMENT OF DIVIDENDS
Although the Company is not significantly leveraged, it does have a bank
credit facility. Borrowings under this facility could have 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 (the
"Credit Agreement"), of Gulfstream Delaware Corporation, the Company's principal
operating subsidiary ("Gulfstream Delaware"), contains certain restrictive
financial and operating covenants, including, among others, requirements that
Gulfstream satisfy certain financial ratios; (iv) Gulfstream's borrowings are 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 restricts the
ability of the Company's subsidiaries to pay cash dividends or to make other
distributions and, accordingly, limits the ability of the Company to pay cash
dividends to its stockholders. The borrowings under the Credit Agreement are
guaranteed by the Company and certain of its subsidiaries and are secured by a
pledge of the stock of certain of the Company's subsidiaries. See "Price Range
of Common Stock and Dividend Policy" and "Management's Discussions and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
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 22.0% of the Common Stock (21.2% on a fully
diluted basis) or 18.9% (18.3% on a fully diluted basis), assuming that the
Underwriters' over-allotment options are exercised in full. After the
13
<PAGE>
Offerings, it is expected that the Forstmann Little Partnerships will continue
to be the largest stockholders of the Company and, collectively, are likely to
be able to influence the election of the Board of Directors of the Company and,
in general, to affect 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. See
"Management" and "Selling Stockholders".
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".
In connection with the Offerings, 2,911,077 shares of Common Stock will be
issued upon the exercise of outstanding stock options by 254 current and former
employees, directors, advisors and consultants of the Company for an aggregate
exercise price of approximately $28.7 million, which shares will be sold in the
Offerings for aggregate proceeds (based on an assumed public offering price of
$46.81) of approximately $130.8 million (net of underwriting discounts);
approximately 1,639,141 of such shares will be issued to and sold by current
directors and executive officers of the Company. See "Selling Stockholders".
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of 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 75,581,184 shares of Common Stock. Of these shares, the
18,000,000 shares sold in the Offerings (20,700,000 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, 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 18,885,557 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 Stock for a period of 90 days
after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters except, in the case of such Selling
Stockholders, for certain transfers to immediate family members, trusts for the
benefit of such 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. Following expiration or waiver of the foregoing
restrictions on dispositions, 16,618,861 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
14
<PAGE>
equity securities. In addition, pursuant to a 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 five
additional registrations under the Securities Act, covering all or any portion
of 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 "Selling Stockholders" and "Description of
Capital Stock".
THE COMPANY
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
approximately 60%. The Company has manufactured and sold over 1,000 large cabin
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 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 from Chrysler by certain partnerships formed by Forstmann
Little. The Company completed its initial public offering in October 1996.
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 1985, the Gulfstream IV-SP in
1993 and the Gulfstream V in 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 mailing address of the principal executive offices of the Company is
P.O. Box 2206, 500 Gulfstream Road, Savannah, Georgia 31402-2206, and the
telephone number of the Company is (912) 965-3000. The Company maintains a Web
Site at www.gulfstreamaircraft.com. The Company has operating subsidiaries with
facilities in Savannah, Georgia; Brunswick, Georgia; Bethany, Oklahoma; Long
Beach, California; and Mexicali, Mexico.
USE OF PROCEEDS
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 2,911,077 shares of Common Stock from the Company for an aggregate
exercise price of approximately $28.7 million; all of such shares are expected
to be sold by such Selling Stockholders in the Offerings. The Company intends to
use the proceeds of such option exercises for general corporate purposes.
15
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been listed on the NYSE since October 10, 1996 under
the symbol "GAC". The following sets forth the high and low sale prices for the
Common Stock as reported on the NYSE Composite Tape for the periods indicated.
<TABLE>
<CAPTION>
COMMON STOCK PRICE
RANGE
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
1996 (BEGINNING OCTOBER 10)
First Quarter.............................................................. -- --
Second Quarter............................................................. -- --
Third Quarter.............................................................. -- --
Fourth Quarter............................................................. $ 26.00 $ 20.75
1997
First Quarter.............................................................. 24.13 21.25
Second Quarter............................................................. 32.75 21.75
Third Quarter.............................................................. 31.13 26.00
Fourth Quarter............................................................. 32.06 26.50
1998
First Quarter.............................................................. 44.44 28.75
Second Quarter (through April 20).......................................... 46.94 42.00
</TABLE>
For a recent sale price for the Common Stock, see the cover page of this
Prospectus.
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 restricts the ability of the Company's
subsidiaries to pay cash dividends or to make other distributions to the Company
and, accordingly, limits the ability of the Company to pay cash dividends to its
stockholders. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources". 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.
16
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of March 31, 1998 on an actual basis and as
adjusted to reflect the sale of 2,911,077 shares of Common Stock by the Company
to certain of the Selling Stockholders in connection with the Offerings pursuant
to existing option agreements for an aggregate option exercise price of $28.7
million. This table should be read in conjunction with the Company's
consolidated financial statements, incorporated herein by reference, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(In thousands)
<S> <C> <C>
Cash.............................................................. $ 183,214 $ 211,915
--------- ------------
--------- ------------
Short-term debt:
Current portion of long-term debt............................... $ 75,000 $ 75,000
--------- ------------
Total short-term debt......................................... 75,000 75,000
Long-term debt (excluding current portion) (1):
Credit Agreement................................................ 286,250 286,250
--------- ------------
Total debt.................................................... 361,250 361,250
Stockholders' equity:
Preferred stock; 20,000,000 shares authorized and none
outstanding...................................................
Common stock; $.01 par value; 300,000,000 shares authorized and
87,133,546 actual shares and 90,044,623 as adjusted shares
issued........................................................ 871 900
Additional paid-in capital(2)..................................... 380,237 447,205
Accumulated deficit............................................... (185,479) (185,479)
Minimum pension liability......................................... (762) (762)
Unamortized stock plan expense.................................... (826) (826)
Less: Treasury stock: 14,463,439 shares........................... (125,068) (125,068)
--------- ------------
Total stockholders' equity.................................... 68,973 135,970
--------- ------------
Total capitalization.......................................... $ 430,223 $ 497,220
--------- ------------
--------- ------------
</TABLE>
- ------------------------
(1) See Note 7 to the consolidated financial statements, which are incorporated
herein by reference.
(2) Upon the exercise of the stock options contemplated in the Offerings, the
Company will record a federal income tax benefit of approximately $38.3
million (based on an assumed offering price of $46.81), which will be
credited directly to additional paid-in capital.
17
<PAGE>
SELECTED FINANCIAL DATA
The consolidated financial data of the Company as of and for each of the
five years in the period ended December 31, 1997, has been derived from the
Company's audited consolidated financial statements. The consolidated financial
data as of and for the three months ended March 31, 1997 and 1998, has been
derived from the unaudited consolidated financial statements of the Company
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of its financial
condition and results of operations as of such dates and for such periods. The
results for the three months ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the full year. The selected
consolidated financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto,
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- ---------- ---------- ---------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 887,113 $ 901,638 $1,041,514 $1,063,713 $1,903,494 $ 375,626 $ 503,407
--------- --------- ---------- ---------- ---------- ----------- -----------
Costs and expenses:
Cost of sales....................... 737,361 710,554 835,547 839,254 1,557,250 305,152 404,069
Selling and administrative
expenses.......................... 97,011 82,180 93,239 99,452 97,499 22,615 25,942
Stock option compensation expense... 7,186 1,640 522 329
Research and development expense.... 47,990 57,438 63,098 58,118 10,792 (1,520) 1,945
Amortization of intangibles and
deferred charges.................. 27,613 7,583 7,540 9,434 7,347 1,820 1,876
Restructuring charge (1)............ 203,911
--------- --------- ---------- ---------- ---------- ----------- -----------
Total costs and expenses.............. 1,113,886 857,755 999,424 1,013,444 1,674,798 328,589 434,161
Income (loss) from operations......... (226,773) 43,883 42,090 50,269 228,696 47,037 69,246
Interest income..................... 486 367 5,508 14,605 11,532 3,123 2,522
Interest expense.................... (48,940) (20,686) (18,704) (17,909) (31,159) (8,130) (6,999)
--------- --------- ---------- ---------- ---------- ----------- -----------
Income (loss) before income taxes..... (275,227) 23,564 28,894 46,965 209,069 42,030 64,769
Income tax expense (benefit) (2)...... -- -- -- -- (33,942) 2,000 24,288
--------- --------- ---------- ---------- ---------- ----------- -----------
Net income (loss)................... $(275,227) $ 23,564 $ 28,894 $ 46,965 $ 243,011 $ 40,030 $ 40,481
--------- --------- ---------- ---------- ---------- ----------- -----------
--------- --------- ---------- ---------- ---------- ----------- -----------
Earnings per share:
Net income per share--basic (3)..... $ .39 $ .64 $ 3.28 $ .54 $ .56
--diluted (3).... $ .37 $ .60 $ 3.12 $ .51 $ .54
Pro forma fully taxed earnings per
share--diluted (4).................. $ .23 $ .37 $ 1.68 $ .33 $ .54
</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.
(2) The Company recorded a net income tax benefit of $33.9 million for 1997 and
a provision for income taxes of $24.3 million for the three months ended
March 31, 1998. Prior to September 30, 1997, the Company recorded no
provision for income taxes, other than alternative minimum taxes,
principally as a result of utilization of net operating loss carryforwards.
In the third quarter of 1997, the Company released its deferred tax
valuation allowance, totaling $94.2 million. Of this amount, $29.4 million
related to the exercise of stock options and was credited to additional
paid-in capital and $64.8 million was recorded as a one-time, non-cash
income tax benefit. The Company had available at March 31, 1998 a net
operating loss carryforward for regular federal income tax purposes of
approximately $11.7 million, which will begin expiring in 2006.
(3) Net income per share ("EPS") information for 1995 and 1996 is based on
historical unadjusted net income divided by pro forma weighted average
number of shares. Shares included for basic EPS give retroactive effect to
the 1996 Recapitalization, the shares issued to option holders upon the
exercise of options at the date of the Initial Public Offering, and the
shares issued pursuant to the Initial Public Offering (all of which are
described in Note 10 to the consolidated financial statements incorporated
herein by reference) as if such transactions had occurred at the beginning
of the period. Diluted EPS further includes the effects of options granted
in 1995 and 1996 as if such options had been outstanding for all periods
presented. See also Note 14 to the consolidated financial statements,
incorporated herein by reference, for a reconciliation of per share data.
(4) Pro forma fully taxed earnings per share--diluted is presented for the
applicable periods assuming an estimated effective tax rate of 37.5%.
18
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents........... $ 9,331 $ 23,605 $ 223,312 $ 233,172 $ 306,451 $ 200,510 $ 183,214
Working capital..................... 302,369 301,913 356,976 138,091 295,811 166,963 230,006
Total assets........................ 799,470 745,761 981,253 1,313,215 1,473,667 1,238,451 1,369,645
Total debt (1)...................... 206,145 178,145 146,331 400,000 380,000 400,000 361,250
Total stockholders' equity (deficit)
(1)(2)............................ 164,395 188,950 217,540 (188,811) 92,757 (147,752) 68,973
OPERATING DATA:
Depreciation and amortization....... $ 47,866 $ 24,151 $ 23,094 $ 26,910 $ 33,022 7,832 8,292
OPERATING DATA:
Units delivered during period:
Gulfstream IV/IV-SP............... 26 22 26 24 22 5 6
Gulfstream V...................... 0 0 0 3 29 6 7
--------- --------- ---------- ---------- ---------- ---------- ----------
Total deliveries.................. 26 22 26 27 51 11 13
Units ordered during period:
Gulfstream IV/IV-SP (3)........... 26 25 30 44 39 21 4
Gulfstream V...................... 17 16 12 21 7 -- 9
--------- --------- ---------- ---------- ---------- ---------- ----------
Total orders...................... 43 41 42 65 46 21 13
Units in backlog at end of period:
Gulfstream IV/IV-SP (3)(4)........ 3 3 7 27 43 43 41
Gulfstream V (5).................. 24 40 50 67 45 61 47
--------- --------- ---------- ---------- ---------- ---------- ----------
Total backlog (6)................. 27 43 57 94 88 104 88
ESTIMATED BACKLOG (in billions)
(3)(4)(5)(6):....................... $ 0.9 $ 1.5 $ 1.9 $ 3.1 $ 2.8 $ 3.3 $ 2.8
</TABLE>
- ------------------------
(1) Total stockholders' equity and total debt at December 31, 1996 give effect
to the 1996 Recapitalization and Initial Public Offering which occurred
during the fourth quarter 1996.
(2) Total stockholders' equity at March 31, 1998 gives effect to the repurchase
of approximately 2.5 million shares of Common Stock, at an average price of
$30.01 per share, for an aggregate amount of $74.6 million, during the first
quarter 1998. See also Note 15 to the consolidated financial statements,
incorporated herein by reference.
(3) During the quarter ended March 31, 1998, the Company also signed a contract
for 12 Gulfstream IV-SPs to expand its highly successful Gulfstream Shares
fractional ownership program into the Middle East region. This contract,
valued at approximately $335 million, is not included in units ordered or
backlog.
(4) Net of cancellations of 3 in 1994 and 1 in 1997, which generally relate to
orders placed in prior years.
(5) Net of cancellations of 1, 2 and 1 in 1993, 1995 and 1996, respectively,
which generally relate to orders placed in prior years.
(6) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Contractual Backlog".
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements incorporated herein by reference.
BUSINESS
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 and Gulfstream Shares (fractional ownership
interests in Gulfstream IV-SPs). As an integral part of its aircraft product
offerings, the Company offers aircraft completion, financial services and
worldwide aircraft maintenance services and technical support.
OPERATING DATA
With a $2.8 billion contractual backlog at March 31, 1998, and a $335
million Middle East Shares contract, a significant portion of the Company's
future revenues are under contract. Generally, at the signing of a Gulfstream
IV-SP or Gulfstream V contract, a customer makes a non-refundable deposit with
the Company, at which time the order is placed in the contractual backlog. 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 the green 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 new aircraft remains relatively smooth
throughout the year. However, deliveries of aircraft can vary significantly
depending upon a variety of factors, including the timing of final customer
acceptance. Accordingly, the Company's revenues can vary significantly from
quarter to quarter.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
NET REVENUES. Total net revenues increased by $127.8 million, or 34.0%, to
$503.4 million in the first quarter of 1998 from $375.6 million in the first
quarter of 1997. The significant increase resulted primarily from an increase in
revenues from green aircraft of $62.8 million as the Company delivered 13
aircraft, seven Gulfstream Vs and six Gulfstream IV-SPs, as compared with 11
aircraft, six Gulfstream Vs and five Gulfstream IV-SPs, in the first quarter of
1997. In addition, revenues associated with the sale of pre-owned aircraft
increased by $47.6 million as two additional units were delivered in 1998. Also
contributing to the increase in revenues was an increase in completion revenues
of $13.9 million, resulting from Gulfstream V completion deliveries.
COST OF SALES. Total cost of sales increased to $404.1 million in the first
quarter of 1998 from $305.2 million in the first quarter of 1997. The increase
was a result of the higher number of green, pre-owned and completion aircraft
deliveries discussed above. Excluding pre-owned aircraft, which generally are
sold at break-even levels, the gross profit percentage for the first quarter of
1998 was 22.1% compared to 20.0% for the first quarter of 1997. This increase is
primarily attributable to reductions in Gulfstream V aircraft production costs.
See "--Comparison of the Years Ended December 31, 1997 and 1996."
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
increased by $3.3 million, or 14.7% to $25.9 million in the first quarter of
1998 from $22.6 million in the first quarter of 1997, and as a percentage of net
revenues, decreased to 5.2% in the first quarter of 1998 from 6.0% in the first
quarter of 1997 due to the higher level of revenues.
20
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $1.9
million in the first quarter of 1998, as compared to $(1.5) million in the first
quarter of 1997. Research and development expense for 1997 is net of a $10.0
million credit for launch assistance funds received from vendors participating
in the development of the Gulfstream V. Research and development expenditures in
1998 and the near-term future are expected to stem principally from product
improvements and enhancements, rather than new aircraft development.
INTEREST INCOME AND EXPENSE. Interest income decreased by $0.6 million to
$2.5 million in the first quarter of 1998 from $3.1 million in the first quarter
of 1997 as a result of lower average cash balances the Company had invested
during 1998 compared to the same period of 1997. Interest expense decreased by
$1.1 million to $7.0 million for the first quarter of 1998. This decrease is
attributable to both a decrease in average borrowings and lower weighted average
interest rates.
INCOME TAXES. The Company recorded an income tax provision of $24.3 million
in the first quarter of 1998 based on an estimated effective tax rate of 37.5%
compared with a provision for income taxes of $2.0 million, representing
alternative minimum taxes, in the first quarter of 1997. Prior to September 30,
1997, the Company recorded no provision for income taxes, other than alternative
minimum taxes, principally as a result of utilization of net operating loss
carryforwards. The Company had available at March 31, 1998 a net operating loss
carryforward for regular federal income tax purposes of approximately $11.7
million which will begin expiring in 2006. See "--Comparison of the Years Ended
December 31, 1997 and 1996".
EARNINGS PER SHARE. The Company reported diluted earnings per share of
$0.54 for the first quarter of 1998, up from $0.51 for the first quarter of
1997. On a pro forma fully-taxed basis, assuming an effective tax rate of 37.5%,
comparable diluted earnings per share would have been $0.33 for the first
quarter of 1997.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NET REVENUES. Total net revenues increased by $839.8 million, or 79.0%, to
$1,903.5 million in 1997 from $1,063.7 million in 1996. Revenues from green
aircraft increased $739.3 million due primarily to the delivery of 29 Gulfstream
V aircraft in 1997, as full scale production commenced, compared to three
Gulfstream V aircraft in 1996. During 1997, a total of 51 green aircraft were
delivered as compared to 27 in 1996. Also contributing to the revenue gain was a
$57.1 million increase in the sale of pre-owned aircraft related to trade-ins on
the higher level of Gulfstream V deliveries. In addition, completion revenues
increased by $11.5 million in 1997 principally due to initial Gulfstream V
completion deliveries. Aircraft Services revenue increased by $22.7 million in
1997, as the Company continues to aggressively market and expand its aftermarket
products and maintenance services.
COST OF SALES. Total cost of sales increased to $1,557.5 million in 1997
compared to $839.3 million in 1996. Excluding pre-owned aircraft, which are
generally sold at break-even levels, the gross profit percentage for 1997 was
20.0% compared to 24.8% for 1996. The decline in gross profit percentage is
primarily attributable to the introduction of the Gulfstream V aircraft into
production and the higher costs associated with the early stages of the
Gulfstream V production and completions. Timing of the learning curve on the
Gulfstream V completions is expected to delay margin improvements somewhat in
the first half of 1998. Overall, the Company expects the margin percentage of
revenue on the Gulfstream V to continue to improve as it realizes increased
manufacturing efficiencies.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense
decreased by $2.0 million, or 2.0%, to $97.5 million in 1997 from $99.5 million
in 1996 and, as a percentage of net revenues, decreased to 5.1% in 1997 from
9.4% in 1996. Expenses were higher in 1996 due principally to the level of
advertising and marketing expense associated with the certification and initial
customer deliveries of the Gulfstream V.
21
<PAGE>
STOCK OPTION COMPENSATION EXPENSE. The issuance of options to purchase
common stock of the Company resulted in a non-cash compensation charge of $1.6
million in 1997 and $7.2 million in 1996.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was
$10.8 million in 1997, a decrease of $47.3 million from 1996, and as a
percentage of net revenues was 0.6% versus 5.5%. Research and development
expense decreased during 1997 principally as a result of the substantial
completion of the Gulfstream V development program. Research and development
expense for 1997 and 1996 are net of credits of $10.0 million and $8.0 million,
respectively, for launch assistance funds received from vendors participating in
the development of the Gulfstream V. Research and development expenditures in
1998 and the near-term future are expected to stem principally from product
improvements and enhancements, rather than new aircraft development.
AMORTIZATION OF INTANGIBLES AND DEFERRED CHARGES. This non-cash expense
includes amortization of goodwill and other intangible assets consisting of
aftermarket service and aftermarket product support, as well as deferred
financing charges related to the Company's pre-existing and new bank credit
facilities. Amortization of intangibles and deferred charges of $7.3 million for
1997 were $2.1 million lower than 1996. This decrease was a result of the
accelerated amortization in 1996 of financing charges associated with the
Company's prior bank credit facilities, which were repaid in October 1996. See
"Liquidity and Capital Resources".
INTEREST INCOME AND EXPENSE. Interest income decreased by $3.1 million to
$11.5 million in 1997 from $14.6 million in 1996 as a result of lower average
cash balances the Company had invested in 1997 compared to 1996. Interest
expense consists almost entirely of interest paid on long-term borrowings under
the Company's bank credit facilities. Interest expense increased to $31.2
million for 1997 from $17.9 million in 1996. This increase was due to an
increase in average borrowings partially offset by the Company's lower average
borrowing costs of 7.7% in 1997 versus 9.0% in 1996. See "Liquidity and Capital
Resources".
INCOME TAXES. The Company recorded an income tax benefit of $33.9 million
for 1997. No provision for income taxes was recorded in 1996, principally due to
the utilization of net operating loss carryforwards. The Company, in estimating
its ability to realize the benefit of its net deferred tax assets, considers
both positive and negative evidence and gives greater weight to evidence that is
objectively verifiable. As a result of numerous factors including, but not
limited to, recent earnings trends and the size of its contractual backlog, the
Company currently believes that its net deferred tax asset is more likely than
not to be realized. In the third quarter of 1997, the Company released its
deferred tax valuation allowance, totaling $94.2 million. Of this amount, $29.4
million related to the exercise of stock options and was credited to additional
paid-in capital and $64.8 million was recorded as a one-time, non-cash income
tax benefit. During the fourth quarter of 1997, the Company recorded a provision
for income taxes based on its overall estimated effective tax rate of 37.5%. The
Company had available at December 31, 1997 and 1996, net operating loss
carryforwards for regular federal income tax purposes of approximately $65.0
million and $228.0 million, respectively, which will begin expiring in 2006.
EARNINGS PER SHARE. The Company reported diluted earnings per share of
$3.12 during 1997, up from 1996 diluted earnings per share of $0.60. On a pro
forma fully-taxed basis, assuming an effective tax rate of 37.5%, the Company's
earnings per share would have been $1.68 and $0.37 for 1997 and 1996,
respectively.
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
Company's share repurchase program
22
<PAGE>
described below. During the first quarter of 1998 and the years 1997, 1996 and
1995 the Company relied on its available cash balances to fund these needs.
Net cash generated by operating activities was $120.4 million, $243.4
million and $282.4 million in 1997, 1996 and 1995, respectively. The reduction
in 1997 was primarily due to the decrease in customer progress payments
associated with new aircraft in backlog. The reduction in 1996 was primarily due
to the temporary build-up in inventory associated with Gulfstream V production
and the timing of cash receipts to satisfy customer receivables, partially
offset by the increase in customer progress payments associated with aircraft in
backlog and new sales activities.
During the year ended December 31, 1997, additions to property and equipment
amounted to $26.7 million. At December 31, 1997, the Company was not committed
to the purchase of any significant amount of property and equipment. Additions
to property and equipment were $16.2 million in 1996 and $25.2 million in 1995.
The increased level of spending of $10.5 million in 1997 over 1996, primarily
related to the Company's strategic initiative to increase its annual production
rate to approximately 60 aircraft by 1999, a twofold increase over its 1996
annual production rate. As a result, in 1997, the Company's capital expenditures
increased $15 million and in 1998 are expected to increase by approximately $20
million above previously planned annual levels of approximately $15 million.
During the first quarter of 1998, the Company completed a new $8.5 million paint
facility located at its Long Beach, California plant. This facility is part of
the Company's 60 aircraft plan and will allow the Company to double its present
volume of painting new, pre-owned and customer aircraft. The Company continually
monitors its capital spending in relation to current and anticipated business
needs. As circumstances dictate, facilities are added, consolidated or
modernized.
During 1997, 1996 and 1995, the Company invested $3.0 million, $2.1 million
and $25.7 million, respectively, for tooling associated with the Gulfstream V
program. As of December 31, 1997, the Company had recorded, net of amortization,
an aggregate of $42.7 million in tooling associated with the Gulfstream V
program. Gulfstream V tooling is being 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.
In January 1998, the Company established a program to repurchase up to $200
million of its Common Stock. The purchases will be made from time to time in the
open market or through negotiated transactions as market conditions warrant. The
Company expects to fund the stock purchases from cash on hand. As of March 31,
1998, approximately 2.5 million shares, at an average price of $30.01 per share,
had been repurchased under this plan for an aggregate amount of $74.6 million.
On October 16, 1996, Gulfstream Delaware, a wholly owned subsidiary of the
Company, entered into a $650 million credit facility (the "Credit Agreement").
The Credit Agreement consists of a $400 million term loan facility and 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 available to the Company for borrowings. In
addition, up to $20 million of the revolving credit facility may be used for
swing line loans. The revolving credit facility expires September 30, 2002 with
any amounts outstanding due on that date. There were no amounts outstanding
under the revolving credit facility on December 31, 1997 or March 31, 1998. The
Credit Agreement contains 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.
As of March 31, 1998, the Company was in compliance with the covenants contained
in the Credit Agreement. Payments under the term loan facility were $20.0
million in 1997, and scheduled repayments are $75.0 million in each of the years
1998 through 2001 and $80.0 million in 2002.
On October 16, 1996, the Company completed the Initial Public Offering from
which the Company received net proceeds of approximately $100 million after
deducting underwriting discounts and other
23
<PAGE>
expenses. In connection with the Initial Public Offering, certain members of
senior management and other employees of the Company exercised options to
purchase approximately 4 million shares of Common Stock of the Company and sold
those shares in the Initial Public Offering, resulting in additional net
proceeds to the Company of $14.2 million. The Company used the net proceeds of
the Initial Public Offering, together with the $400 million term loan under the
Credit Agreement and available cash from operations, to (i) repurchase the
remaining $450 million of 7% Cumulative Preferred Stock and pay accrued
dividends, (ii) repay all the outstanding indebtedness under the Company's
pre-existing credit facilities, which totaled $107.7 million, and (iii) pay fees
and expenses incurred in connection with the Initial Public Offering and the
refinancing of the Company's indebtedness. During 1996, the Company had
previously repurchased approximately four shares of 7% Cumulative Preferred
Stock at their stated value of $18.9 million and paid accumulated dividends of
$105.3 million out of available cash from operations.
The Company's principal source of liquidity both on a short-term and
long-term basis is cash flow provided from operations, including customer
progress payments and deposits on new aircraft orders. Occasionally, however,
the Company may borrow against the Credit Agreement to supplement cash flow from
operations. The Company believes, based upon its analysis of its consolidated
financial position, its cash flow during the past 12 months and its expected
results of operations in the future, that operating cash flow and available
borrowings under the Credit Agreement will be adequate to fund operations,
capital expenditures, debt service and the Company's share repurchase program
for at least the next 12 months. The Company intends to repay its remaining
indebtedness primarily with cash flow from operations. There can be no
assurance, however, that future industry specific developments or general
economic trends will not adversely affect the Company's operations or its
ability to meet its cash requirements.
As of March 31, 1998, in connection with orders for 24 Gulfstream V aircraft
in the backlog, the Company has offered customers trade-in options (which may or
may not be exercised by the customer) under which the Company will accept
trade-in aircraft (primarily Gulfstream IVs and IV-SPs) at a guaranteed minimum
trade-in price. Additionally, in connection with recorded sales of new aircraft,
the Company has agreed to accept pre-owned aircraft with trade-in values
totaling $203.7 million as of March 31, 1998. Of this amount, $47.1 million is
under contract for resale to pre-owned aircraft customers. Management believes
that the fair market value of all such aircraft exceeds the specified trade-in
value.
The Company is currently engaged in the monitoring and cleanup of certain
groundwater at its Savannah facility under the oversight of the Georgia
Department of Natural Resources. Expenses incurred for cleanup have not been
significant. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. 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. The
Company believes the liabilities, if any, that will result from the above
environmental matters will not have a material adverse effect on its financial
statements.
On December 24, 1997, the Company executed final documents with the Pension
Benefit Guaranty Corporation (the "PBGC") concerning funding of the Company's
defined benefit pension plans. The terms were essentially the same as those set
out in the agreement in principle reached between the PBGC and the Company
during October 1996. Pursuant to this agreement, the Company contributed $25.0
million in 1997 and has agreed to contribute a total of $25.0 million annually
from 1998 through 2000 to its pension plans which payments are expected to
result in such plans being fully funded. The payments to be made under this
agreement were already part of the Company's overall financial planning and
therefore, are not expected to have a material adverse effect on the Company's
financial statements. The funding required under this agreement will not result
in any increase in the Company's annual pension expense.
24
<PAGE>
The Company is involved in tax audits by the Internal Revenue Service
covering the years 1990 through 1994. The revenue agent's reports include
several proposed adjustments involving the deductibility of certain compensation
expense, items relating to the initial capitalization of the Company, the
allocation of the original purchase price for the acquisition by the Company of
the Gulfstream business, including the treatment of advance payments with
respect to and 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.
CONTRACTUAL BACKLOG
At March 31, 1998, the Company had a firm contract backlog of approximately
$2.8 billion, representing a total of 41 contracts for Gulfstream IV-SPs and 47
contracts for Gulfstream Vs. This compares to $2.8 billion and $3.1 billion of
firm contract backlog at the end of 1997 and 1996, respectively, representing a
total of 43 and 27 contracts for Gulfstream IV-SPs and 45 and 67 contracts for
Gulfstream Vs, respectively. The decline in backlog from 1996 is directly
related to the increased level of Gulfstream V deliveries during 1997.
During the quarter ended March 31, 1998, the Company also signed a contract
for 12 Gulfstream IV-SPs to expand its highly successful Gulfstream Shares
fractional ownership program to the Middle East region. This contract is valued
at approximately $335 million and is not included in the Company's backlog. In
1993, the Company established very stringent deposit requirements for recording
aircraft into its backlog. The contract for the Middle East Shares expansion
includes modestly different deposit requirements early in the program. The
Company has decided for the initial phase of the program to record these orders
when the aircraft are delivered. Including the Middle East contract, the Company
had a total of 100 aircraft, valued at approximately $3.1 billion of potential
future revenues, under contract.
The Company includes an order in backlog only if the Company has entered
into a purchase contract (with no contingencies) with the customer and has
received a significant (generally non-refundable) deposit from the customer. In
total, approximately 51% of the Company's contractual backlog (which excludes
the Middle East Shares contract) is scheduled for delivery beyond 1998.
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. However, to the extent that
there is a lengthy period of time between a customer's aircraft order and its
expected delivery date, there may be increased uncertainty as to changes in
business and economic conditions which may affect customer 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.
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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.
OUTLOOK
The Company plans to deliver 58 green aircraft in 1998 and to nearly double
its completion rate. The gross margins are expected to improve from 20% in 1997
to the mid-20s by the end of 1998. Based on projections of increasing aircraft
production and improving margins, Gulfstream expects 1998 diluted earnings per
share of approximately $2.85. The Company also expects diluted earnings per
share to increase 15% per year in 1999 and 2000.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations", including the statements
under the heading "Outlook", as well as other statements elsewhere in this
Prospectus, contain forward-looking information. These forward-looking
statements are subject to risks and uncertainties. Actual results might differ
materially from those projected in the forward-looking statements. Additional
information concerning factors that could cause actual results to materially
differ from those in the forward-looking statements is contained in "Risk
Factors" and in Exhibit 99.1 to the Company's Form 10-K for the year ended
December 31, 1997.
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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 approximately 60%. The Company has manufactured and
sold over 1,000 large cabin business aircraft since the introduction of the
Gulfstream product line in 1958.
The Company has developed a broad range of aircraft products to meet the
aviation needs of its targeted customers (which include national and
multinational corporations, governments, governmental agencies, heads of state
and wealthy individuals). The Company's current principal aircraft products are
the Gulfstream IV-SP, the Gulfstream V, and Gulfstream Shares (fractional
ownership interests in Gulfstream IV-SPs). As an integral part of its aircraft
product offerings, the Company offers aircraft completions (exterior painting of
the aircraft and the installation of customer selected interiors), financial
services and worldwide aircraft maintenance services and technical support.
Since 1994, Gulfstream has significantly increased its profitability and
market share by broadening its product offerings, increasing its production
capacity and reducing its cost structure. In 1997, the Company's revenues grew
by 79%, to $1,903 million, from $1,064 million in 1996, and operating profit
increased nearly fivefold to $229 million in 1997 from $50 million in 1996. At
March 31, 1998, Gulfstream had a firm contract backlog for 88 aircraft, valued
at approximately $2.8 billion. During the quarter ended March 31, 1998, the
Company also signed a contract valued at approximately $335 million (which is
not included in backlog) for 12 Gulfstream IV-SPs to expand its highly
successful fractional ownership program into the Middle East. Including this
contract, the Company had a total of 100 aircraft, valued at approximately $3.1
billion of potential future revenues, under contract.
BUSINESS STRATEGY
Gulfstream's strategy is to continue to dominate the large cabin, long range
business jet market and expand the Company's customer base by offering the most
technologically advanced business aircraft and a broad range of complementary
transportation services. With the completion of the $285 million Gulfstream V
development program, the Company has introduced the world's first ultra-long
range business aircraft and received the 1997 Robert J. Collier Trophy for
outstanding aeronautical achievement. The performance and first-to-market
advantages of the Gulfstream V, as well as the continuing popularity of the
Gulfstream IV-SP, have created exceptional demand for the Company's products,
with 100 aircraft currently under contract.
In order to capitalize on the Company's strong product demand and meet its
customers' growing transportation needs, Gulfstream has been and will continue
to (i) expand its production capacity, (ii) increase the breadth of its products
and services and (iii) invest in product innovation. The Company's co-production
strategy is successfully underway, with production nearly doubling from 27
aircraft in 1996 to 51 in 1997. Through ongoing productivity improvements,
Gulfstream plans to deliver 58 aircraft in 1998 and in excess of 60 aircraft in
1999, without adding to its existing physical plant. Since 1995, the Company has
also successfully expanded its product offerings to include Gulfstream Shares,
with total aircraft ordered to date of 29 in North America and 12 overseas, and
Gulfstream Financial Services, which facilitated financing for over $550 million
of new and pre-owned aircraft sales in 1996 and 1997. The Company plans to
continue to introduce new products and services in order to grow its revenue and
customer base, as well as invest in research and development to maintain its
leadership position in the marketplace.
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With the Gulfstream V development program now complete and the Company's
co-production program successfully underway, Gulfstream is poised for
significant earnings growth. As the Company continues to increase its
deliveries, enhance its manufacturing productivity and leverage its fixed costs,
Gulfstream is targeting 70% growth in fully taxed earnings per share in 1998, to
$2.85 per share, and 15% growth in 1999 and 2000. This targeted growth is
supported by the Company's 100 aircraft contracts, representing $3.1 billion of
future potential revenues. The Company is currently selling positions for
outfitted deliveries of Gulfstream IV-SPs in the fourth quarter of 1999 and
Gulfstream Vs in the first half of 2000.
PRINCIPAL PRODUCTS
The business jet aircraft market is generally divided into four
markets--light, medium, large and ultra-long range. These markets are defined on
the basis of range, cabin volume and gross operating weight.
GULFSTREAM V
The Company's newest aircraft product is the Gulfstream V, which serves the
ultra-long range market. 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 currently in operation. The
Gulfstream V received final type certification from the Federal Aviation
Administration ("FAA") on April 11, 1997. Deliveries of the first outfitted
aircraft to customers began in 1997. As of March 31, 1998, the Company had
manufactured and delivered 39 Gulfstream Vs. In its first nine months in
service, the Gulfstream V set 47 world and national records. As confirmation of
the product's innovative design and outstanding performance, the Gulfstream V
received the 1997 Robert J. Collier Trophy for aeronautical achievement and was
selected by the United States Air Force to provide intercontinental
transportation for senior government officials and dignitaries.
The Gulfstream V has a maximum operating speed of Mach .885. It can
accommodate up to 19 passengers and has a range of up to 6,500 nautical miles.
These capabilities 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 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 are designed to operate 7,000 flight hours between
major overhauls and, due to fuel efficiency, operate at a lower cost than the
engines of the Gulfstream IV-SP.
The aircraft utilizes dual cabin pressurization systems to minimize cabin
altitude. At its cruising altitude of 51,000 feet, the Gulfstream V cabin
altitude is only 6,000 feet, the lowest cabin altitude of any business jet
aircraft. This low cabin altitude, together with a 100% fresh air ventilation
system (instead of a recirculating air system), significantly reduces 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
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visibility 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 Northrop Grumman Corporation for the wing and Fokker Aviation
B.V. (a subsidiary of Stork 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.
The Company had received a total of 90 orders through March 31, 1998 for the
Gulfstream V. In 1997, the Gulfstream V was selected by the U.S. Air Force for
its VCX program for use in the Special Mission Air Wing.
The list price for a completed Gulfstream V is currently approximately
$38,000,000 (depending on escalation and selected options). The Company provides
a purchaser of a Gulfstream V with a 20 year or 20,000 flight hour warranty
(whichever comes first) 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 warranty (whichever comes first) on the engines
to purchasers of a Gulfstream V.
GULFSTREAM IV-SP
The Company's other principal aircraft product is the Gulfstream IV-SP,
serving the large cabin business jet market. 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 in its market segment. The Gulfstream IV-SP is an enhanced version
of the Gulfstream IV, which the Company began delivering to customers in 1985.
In total, the Company has manufactured and sold 333 Gulfstream IVs/IV-SPs,
making it the best selling large cabin business jet in the history of business
aviation.
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 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 67 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 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 8,000 flight hours between major overhauls, producing
aircraft operating costs for the Gulfstream IV-SP that the Company believes are
comparable to those of its competitors. Additionally, the Gulfstream IV-SP,
together with the Gulfstream IV and the Gulfstream V, were the first business
jet aircraft to combine 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
$28,600,000 (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 five-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
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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 U. S. 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. Depending upon the specific
configuration, the Gulfstream IV-MPA's list price ranges from $28,600,000 to
$32,600,000. There are currently 8 Gulfstream IV-MPAs in service. 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
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
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 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. As of
March 31, 1998, the Company had contracted to deliver to EJI 27 Gulfstream
IV-SPs and two Gulfstream Vs in connection with the Gulfstream Shares program,
12 of which are in service and 17 of which will be delivered through 2000. EJI
also has an option to purchase two additional Gulfstream IV-SPs. 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 five 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 three 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. The Company's marketing services agreement for Gulfstream Shares has a
term of three years from 1996 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 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. Over 60% of the current Shares
customers are either first time buyers of an aircraft or are trading up to the
Gulfstream IV-SP from a smaller aircraft program. Fractional ownership also
allows the Company to offer an interim solution for customers who
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have an immediate need for aircraft transportation and desire to purchase a
whole aircraft, but must wait for delivery due to the order backlog.
The Company is currently pursuing opportunities for international Gulfstream
Shares programs. In March 1998, the Company signed a contract for 12 Gulfstream
IV-SPs, valued at approximately $335 million, to expand the fractional shares
program to the Middle East.
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 has proprietary control over the specifications
required to complete a 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 nearly 100% in 1997. 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. In order to support the additional production and
completion growth, the Company built a new paint hanger at its Long Beach
facility.
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 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 refurbishes pre-owned Gulfstream aircraft and markets these
aircraft as a branded product of the Company. Pursuant to this program, the
Company backs pre-owned Gulfstream aircraft with a five-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.
Trade-in values for pre-owned aircraft generally 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 been
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successful in entering into 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.
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 less 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.
The Company has 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.
AIRCRAFT SERVICES, PARTS AND TECHNICAL SUPPORT
The Company is committed to supporting, servicing and expanding the
Gulfstream aircraft fleet as part of its 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
IV-SPs. In 1997, the Company expanded the Service Center operations in Savannah
to 24 hours a day, seven days a week.
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.
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) were
undertaken 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 maintenance program (CMP) is offered as
a subscription service to customers for the management and tracking of the
maintenance status of their aircraft. Approximately 95% of the Company's
customers utilize this service. The Company has instituted a policy requiring
third-party maintenance facilities to purchase factory technical support for
scheduled maintenance performed on customer aircraft.
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SERVICECARE. In 1997, the Company introduced its ServiceCare program, the
first comprehensive airframe, engine and avionics maintenance program to be
offered in the business aircraft market. The program provides customers of new
Gulfstream IV-SPs with scheduled and unscheduled maintenance at guaranteed
costs. Coverage is provided on a world-wide basis, with all work to be
accomplished at Gulfstream or Gulfstream authorized service centers.
AIRCRAFT MAINTENANCE SERVICES. The Company has developed a proactive
marketing and sales effort in its maintenance services operations, which has
resulted in an increase in market share to approximately 60% of the maintenance
services market for the Gulfstream fleet in 1997. The Company's estimated market
share was approximately 55% in 1996.
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. In 1997, FSI completed a new 65,000 square
foot training facility adjacent to the Gulfstream Service Center in Savannah.
This facility, which became operational in January 1998, contains 21 classrooms,
16 briefing rooms and four CPM (cockpit procedures modules) rooms. In addition,
it houses simulators 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 SimuFlite Training International ("SimuFlite") located
at Dallas-Fort Worth International Airport, Texas. SimuFlite provides training
services for Gulfstream II, Gulfstream III and Gulfstream IV aircraft.
Gulfstream, in conjunction with SimuFlite, facilitates the operation of an
additional Customer Training Advisory Board which provides direct customer and
original equipment manufacturer input to SimuFlite training curriculums and
course content.
GULFSTREAM CHARTER AND AIRCRAFT MANAGEMENT SERVICES
The Company has developed Gulfstream Charter Services to provide its
customers with easy access to the Gulfstream charter market. The program helps
customers meet their interim and supplemental lift requirements by connecting
potential Gulfstream charter customers with operators through a private label
relationship with a charter services manager. In addition, Gulfstream expects to
finalize an agreement with a third party provider to offer Gulfstream Management
Services, an outsourcing program for the management of a Gulfstream aircraft.
Through this service, individual and corporate owners of Gulfstream aircraft can
receive aircrew, dispatch and maintenance management services directly through
Gulfstream.
GULFSTREAM OPERATING LEASE
The Company is in the process of developing a Gulfstream operating lease
program. This program, which is expected to include third party participation,
would provide an important vehicle for new Gulfstream aircraft sales, offer
customers an additional solution for their interim aircraft operating needs and
introduce customers with less initial capital to Gulfstream's product offerings.
Gulfstream will market the leases, provide maintenance services and share in the
operating lease profits. The Company expects this product to have significant
international as well as domestic potential.
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AIRCRAFT FINANCING ARRANGEMENTS
The Company, through its subsidiary Gulfstream Financial Services
Corporation, 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 proprietary, private label
relationships with prominent providers of aircraft financing, that have full
credit review and approval rights and assume all credit risk with no recourse to
the Company. Additionally, the Company and its North American 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 from 1996 with a minimum
lending commitment of $250 million annually, and can be extended by mutual
agreement of the parties. GFSC has facilitated financing for over $550 million
of new and pre-owned aircraft sales in 1996 and 1997.
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
At March 31, 1998, the Company had a firm contract backlog of approximately
$2.8 billion, representing a total of 47 contracts for Gulfstream Vs and 41
contracts for Gulfstream IV-SPs. In addition, during the quarter ended March 31,
1998, the Company signed a contract for 12 Gulfstream IV-SPs to expand its
highly successful Gulfstream Shares fractional ownership program into the Middle
East region. This contract is valued at approximately $335 million and is not
included in the Company's backlog. In 1993, the Company established very
stringent deposit requirements for recording aircraft into its backlog. The
contract for the Middle East Shares expansion includes modestly different
deposit requirements early in the program. The Company has decided for the
initial phase of the program to record these orders when the aircraft are
delivered. Including the Middle East contract, the Company had a total of 100
aircraft, valued at approximately $3.1 billion of potential future revenues,
under contract.
The Company includes an order in backlog only if the Company has entered
into a purchase contract (with no contingencies) with a customer and has
received a significant (generally non-refundable) deposit from the customer.
Approximately 51% of the Company's contractual backlog (which excludes the
contract for 12 Gulfstream IV-SPs for the Middle East Shares program) is
scheduled for delivery beyond 1998. Approximately 80% of the Company's backlog
is North American and approximately 20% is international.
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 approximately 90%
of the purchase price paid prior to delivery of the green aircraft. The Company
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. However, to the extent that there is a lengthy period
of time between a customer's aircraft order and its expected delivery date,
there may be increased uncertainty as to changes in business and economic
conditions which may affect customer cancellations.
New orders for the Gulfstream V and the Gulfstream IV-SP totaled seven and
39 in 1997, 21 and 44 in 1996, and 12 and 30 in 1995, respectively. In the first
quarter of 1998, the Company received 13 new
34
<PAGE>
orders, nine Gulfstream Vs and four Gulfstream IV-SPs, which are included in
backlog and signed a contract for 12 Gulfstream IV-SPs for the Middle East
Shares program (which are not included in backlog). 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, retail trade, the United States government,
other sovereign entities and individuals. Seventy percent of the Gulfstream
fleet is based in North America and 30% of the fleet is based in 45 countries
worldwide. Current owners of Gulfstream aircraft include 31 of the Fortune 50
companies and 117 of the Fortune 500 companies. In addition, the United States
government, including all branches of the United States military, and 38 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 40 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.
Gulfstream operates an International Advisory Board of 17 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.
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 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 both in North America and around
the world. Internationally, the Company also utilizes independent agents who
facilitate transactions in selected local markets.
The Company pursues government and special mission business opportunities
worldwide with a four 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.
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. and, to a lesser extent,
Bombardier. 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 in the second
35
<PAGE>
quarter 1998. 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
the fourth quarter of 1998. In addition, Airbus Industries announced in June
1997 that it intends to manufacture a version of the A319CJ for the ultra-long
range business jet market and expects certification and delivery of this
aircraft in early 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 technology and 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
Gulfstream aircraft.
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 major 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), The Aerostructures Corporation (Gulfstream IV-SP wing),
Northrop Grumman Corporation (Gulfstream V wing revenue share partner and
Gulfstream IV-SP nacelle supplier), Fokker Aviation B.V., a subsidiary of Stork
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
36
<PAGE>
AlliedSignal, Inc. (Gulfstream IV-SP and Gulfstream V auxiliary power unit and
environmental control systems and Gulfstream IV-SP electrical systems).
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 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 and Gulfstream V suppliers. All of the agreements with the exception of
the revenue share agreements, allow schedule flexibility and have no cost
termination clauses at the Company's option, subject to certain conditions and
prior notification periods. 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 and
prices are determined as a function of the sale price of the Gulfstream
aircraft.
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. Gulfstream has never had a Type Certificate
or a Production Certificate suspended, nor had any jet aircraft grounded as the
result of regulatory action.
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.
EMPLOYEES
At March 31, 1998, the Company employed approximately 5,900 persons, of whom
approximately 4,100 were employed at the Company's Savannah, Georgia facility,
100 were employed at the Brunswick, Georgia facility, 650 were employed at the
Bethany, Oklahoma facility, 630 were employed at the
37
<PAGE>
Long Beach, California facility and 400 were employed at the Mexicali, Mexico
facility. None of the workers at the Savannah, Brunswick, Long Beach, or
Mexicali facilities are unionized. In 1996, the Company entered into a five-year
contract with the International Union of United Automobile, Aerospace &
Agricultural Implement Workers of America, which represents certain of the
Company's employees at its Bethany, Oklahoma plant. 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 1,500,000 square feet and is
the location of the Company's corporate 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 140,000
square feet, is adjacent to the aircraft production line and simultaneously
accommodates completion of up to 10 Gulfstream IV-SP or six 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 53,000 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 the
Gulfstream IV-SP and over 13,000 for the Gulfstream V.
The 250,000 square foot Long Beach facility consists of completion
facilities, which have capacity for eight aircraft, service center facilities,
which have capacity for seven aircraft, and design and administrative functions.
The Company owns the buildings and leases the land; the lease expires in 2014.
During 1997, the Company entered into a lease for an additional 62,000
square foot hangar building located on the same airport and in close proximity
to the Long Beach facility. The hangar is used for both service and completion
operations and has a capacity for six aircraft; the lease expires in 1999. The
Company continues to lease an adjacent facility of approximately 22,000 square
feet used as a completion facility with a capacity for two aircraft; the lease
expires in 2000. Also during 1997, the Long Beach facility expanded further by
completing a 59,000 square foot aircraft paint facility. The Company owns this
building, and leases the land at this facility; the lease expires in 2007. The
expansions described above are part of the Company's overall plan to more than
double the 1996 annual production levels to approximately 60 Gulfstream V and
Gulfstream IV-SP aircraft by 1999.
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.
38
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the directors and executive officers of each of the
Company, Gulfstream Aircraft Incorporated, the Company's sales and marketing
subsidiary, and Gulfstream Financial Services Corporation, the Company's
financing subsidiary, 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 responsibility 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, manufacturing and
service, finance and information technology, and sales and marketing. Officers
serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Theodore J. Forstmann (c), 58 Chairman of the Board and Director of the Company;
(d)............................ Chairman of the Management Committee
Bryan T. Moss (a).............. 58 Vice Chairman of the Board and Director of the
Company;
Vice Chairman and Chief Executive Officer of
Gulfstream Aircraft Incorporated;
Management Committee member
James T. Johnson (c)........... 55 President, Chief Operating Officer and Director of
the Company;
Management Committee member
Chris A. Davis (a)............. 47 Executive Vice President, Chief Financial Officer
and Secretary and Director of the Company;
Executive Vice President and Chief Financial Officer
of Gulfstream Aircraft Incorporated;
President and Chief Operating Officer of Gulfstream
Financial Services Corporation;
Management Committee member
W.W. Boisture, Jr. (b)......... 53 Executive Vice President and Director of the
Company; President and Chief Operating Officer of
Gulfstream Aircraft Incorporated;
Management Committee member
Robert Anderson (c)............ 77 Director
Charlotte L. Beers (a)......... 62 Director
Thomas D. Bell, Jr. (a)........ 48 Director
Lynn Forester (c).............. 43 Director
Nicholas C. Forstmann (a), 51 Director
(d)............................
Sandra J. Horbach (b).......... 37 Director
Henry A. Kissinger (b)......... 74 Director
Drew Lewis (c)................. 66 Director
Mark H. McCormack (c).......... 67 Director
Michael S. Ovitz (b)........... 51 Director
Allen E. Paulson (b)........... 76 Director
Roger S. Penske (a)............ 61 Director
Colin L. Powell (b)............ 61 Director
Gerard R. Roche (c)............ 66 Director
Donald H. Rumsfeld (a)......... 65 Director
George P. Shultz (b)........... 77 Director
Robert S. Strauss (c).......... 79 Director
</TABLE>
- ------------------------
(a) Class I director.
(b) Class II director.
(c) Class III director.
(d) Theodore J. Forstmann and Nicholas C. Forstmann are brothers.
39
<PAGE>
Theodore J. Forstmann has served as Chairman of the Board of the Company
since November 1993 and is Chairman of the Company's Management Committee. 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 General Instrument
Corporation.
Bryan T. Moss has served as Vice Chairman and a director of the Company and
Vice Chairman and Chief Executive Officer of Gulfstream Aircraft Incorporated
since March 1995 and is a member of the Company's Management Committee. 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.
James T. Johnson has served as President, Chief Operating Officer and a
director of the Company since August 1997 and is a member of the Company's
Management Committee. Mr. Johnson was President of GE Capital Aviation Services
from 1994 to July 1997. He was Executive Vice President of United Technologies
and President of the Large Commercial Engines Business of its Pratt & Whitney
subsidiary in 1993. Prior to 1993, Mr. Johnson served in increasingly senior
positions during a 28-year career at The Boeing Company, most recently as Vice
President and General Manager of its Everett Division.
Chris A. Davis has served as Executive Vice President and Chief Financial
Officer of the Company since July 1993, Secretary since August 1996 and a
director since March 1997 and is a member of the Company's Management Committee.
She is also President and Chief Operating Officer of Gulfstream Financial
Services Corporation and Executive Vice President and Chief Financial Officer of
Gulfstream Aircraft Incorporated. Ms. Davis served in increasingly senior
financial management positions at General Electric Company from 1978 to 1993,
most recently as chief financial officer of its Electronic Systems Division. Ms.
Davis is also a director of Wolverine Tube, Inc.
W.W. Boisture, Jr. has served as Executive Vice President of the Company
since February 1994 and as a director since February 1995 and is a member of the
Company's Management Committee. Mr. Boisture has principal responsibility for
the Company's sales and marketing activities and is President and Chief
Operating Officer of Gulfstream Aircraft Incorporated. 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.
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 Networks, Inc., the Timken Company,
Aftermarket Technology Corp. and Motor Cargo Industries.
Charlotte L. Beers has been a director of the Company since July 1993. She
has been Chairman Emeritus of Ogilvy & Mather Worldwide, Inc. ("Ogilvy &
Mather") since April 1997. She was Chairman of Ogilvy & Mather from April 1992
to April 1997 and Chief Executive Officer from April 1992 to September 1996.
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. 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.
Lynn Forester has been a director of the Company since March 1997. She has
been President and Chief Executive Officer of FirstMark Holdings, Inc., since
1984. From 1989 to December 1994, she was Chairman and Chief Executive Officer
of TPI Communications International, Inc. She is also a director of
40
<PAGE>
General Instrument Corporation and Vice Chairman of the Corporate Commission on
Educational Technology.
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 CommScope, Inc.
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,
Inc.
Henry A. Kissinger has been a director of the Company since December 1997.
Dr. Kissinger is Chairman of Kissinger Associates, Inc., an international
consulting firm. He was United States Secretary of State from 1973 to 1977 and
Assistant to the President for National Security Affairs from 1969 to 1975. Dr.
Kissinger has been awarded the Nobel Peace Prize, the Presidential Medal of
Freedom and the Medal of Liberty. Dr. Kissinger is also a director of
Continental Grain Company, Revlon, Inc., Freeport & McMoran Copper and Gold,
Inc. and Hollinger International Inc.
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 from
October 1987 to December 1996. He is also a director of Union Pacific Resources
Group, Inc., American Express Company, Lucent Technologies, FPL Group, Inc.,
Gannett Co., Inc. and AmTec Communications.
Mark H. McCormack has been a director of the Company since May 1997. Mr.
McCormack has served as President, Chief Executive Officer and a director of
International Management Group since 1965. He also serves as a director of Fruit
of the Loom, Inc. and Planet Hollywood International, Inc.
Michael S. Ovitz has been a director of the Company since March 1997. He is
an independent businessman and investor. From October 1995 to December 1996, Mr.
Ovitz was President of The Walt Disney Company. From 1975 to 1995, Mr. Ovitz
served as chairman of Creative Artists Agency, which he co-founded.
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 CardioDynamics 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 and a director of Penske Corporation since 1969 and
Chairman, Chief Executive Officer and a director of Detroit Diesel Corporation
since 1987. Mr. Penske is also a director of Penske Motorsports, Inc., Philip
Morris Companies Inc. and General Electric Co.
Colin L. Powell has been a director of the Company since May 1996. General
Powell is Chairman of America's Promise--The Alliance for Youth. 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.
Gerard R. Roche has been a director of the Company since January 1993. Mr.
Roche has been Chairman of Heidrick & Struggles, Inc. since 1981.
Donald H. Rumsfeld has been a director of the Company since April 1993. Mr.
Rumsfeld has been in private business since August 1993. From October 1990 to
August 1993, Mr. Rumsfeld served as Chairman and Chief Executive Officer of
General Instrument Corporation. Mr. Rumsfeld is also a director
41
<PAGE>
of ABB AB, Kellogg Company, Sears Roebuck and Co. and Tribune Company. From 1962
to 1977, Mr. Rumsfeld served in a variety of U.S. Government posts, including
U.S. Congressman, Ambassador to NATO, White House Chief of Staff and Secretary
of Defense.
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 1982 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, L.L.P. ("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 Hollinger International
Inc.
42
<PAGE>
INTERNATIONAL ADVISORY BOARD
In 1994, the Company established an International Advisory Board of 17
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 once 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>
Theodore J. Forstmann............ Chairman of the Company and Co- United States
founder of Forstmann Little
George P. Shultz................. Former U.S. Secretary of State; United States
(Co-Chairman) Distinguished Fellow, Hoover
Institute
Robert S. Strauss................ Former Ambassador to the Soviet United States
(Co-Chairman) Union and Russian Federation;
Partner, Akin, Gump, Strauss,
Hauer & Feld, L.L.P.
Henry A. Kissinger............... Former U.S. Secretary of State; United States
(Co-Chairman) Chairman of Kissinger
Associates, Inc.
Fouad M.T. Alghanim.............. Chairman of Alghanim Group Saudi Arabia
Conrad M. Black.................. Chairman and Chief Executive Canada
Officer of Hollinger, Inc.
Gustavo A. Cisneros.............. President and Chief Executive South America
Officer of Cisneros Group of
Companies
Bernard Duc...................... Senior Partner, H.M.I., Ltd. Southeast Asia
Claudio X. Gonzalez.............. Chairman and Chief Executive Mexico
Officer of Kimberly Clark de
Mexico, S.A. de C.V.
Hong-choo Hyun................... Attorney at Law, Kim & Chang Korea
Henry H. Keswick................. Chairman of Matheson & Co., United Kingdom/Europe
Limited
David K.P. Li.................... Chairman and Chief Executive Hong Kong/China
Officer of The Bank of East
Asia, Limited
Karl Otto Pohl................... Partner, Sal. Oppenheim Jr. & Germany
Cie.
Lord Jacob Rothschild............ Chairman of J. Rothschild Group United Kingdom/Europe
Julio Mario Santo Domingo, Sr.... Chairman of the Board of Bavaria, South America
S.A.
Hiroshi Toyokawa................. President of Okura & Co., Ltd. Japan
Alec Wildenstein................. Chief Executive Officer of Europe
Wildenstein & Co.
</TABLE>
43
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock (i) immediately prior to the consummation of the
Offerings, and (ii) as adjusted to reflect the sale of the shares of Common
Stock pursuant to the Offerings by each Selling Stockholder participating in the
Offerings. 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) OFFERINGS (1)
---------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
NUMBER
OF
SHARES
NAME NUMBER PERCENT(2) OFFERED(1) NUMBER PERCENT(2)
- ------------------------------------ ------------- ------------- ------------- ------------------- -------------
MBO-IV (3).......................... 19,467,013 26.8% 9,161,108 10,305,905 13.6%
Gulfstream Partners (3)............. 5,071,259 7.0 2,386,517 2,684,742 3.6%
Gulfstream Partners II, L.P. (3).... 6,853,399 9.4 3,225,185 3,628,214 4.8%
Robert Anderson..................... 61,335 * 28,864 32,471 *
Charlotte L. Beers.................. 30,889 * 14,536 16,353 *
Thomas D. Bell, Jr.................. 123,555 * 58,145 65,410 *
W.W. Boisture, Jr................... 354,481 * 208,249 152,626 *
Chris A. Davis...................... 184,610 * 116,290 76,312 *
Lynn Forester....................... 13,333 * 18,824 0 *
Nicholas C. Forstmann (3)........... 31,391,671 43.2 14,772,810 16,618,861 22.0%
Theodore J. Forstmann (3)........... 31,766,671 43.7 15,038,793 16,727,878 22.1%
Sandra J. Horbach (3)............... 6,928,399 9.5 3,278,382 3,650,017 4.8%
James T. Johnson.................... 0 * 470,597 0 *
Henry A. Kissinger.................. 0 * 65,884 0 *
Drew Lewis (3)...................... 30,447 * 14,328 16,119 *
Mark H. McCormack................... 13,333 * 18,824 0 *
Bryan T. Moss....................... 370,666 * 174,434 196,232 *
Michael S. Ovitz.................... 13,333 * 18,824 0 *
Roger S. Penske..................... 61,778 * 29,073 32,705 *
Colin L. Powell..................... 37,500 * 39,897 0 *
Gerard Roche........................ 30,889 * 14,536 16,353 *
Donald H. Rumsfeld (4).............. 61,778 * 29,073 32,705 *
George P. Shultz.................... 61,335 * 28,864 32,471 *
Robert S. Strauss................... 61,335 * 28,864 32,471 *
ADDITIONAL SELLING STOCKHOLDERS:
260 additional Selling Stockholders,
each of whom is selling less than
133,000 shares in the Offerings
and will beneficially own less
than 1% of the outstanding Common
Stock after the Offerings......... 2,816,825 3.4 1,529,904 1,433,648 1.9
</TABLE>
- ------------------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
44
<PAGE>
(1) For purposes of this table, a person or 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 following March 31, 1998. 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 or have the right to acquire within 60 days following March 31,
1998 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 72,670,107 shares outstanding on March 31, 1998 and 75,581,184
shares outstanding after the Offerings.
(3) MBO-IV is Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-IV. The address of MBO-IV, Gulfstream Partners and
Gulfstream Partners II, L.P., each a New York limited partnership, is c/o
Forstmann Little & Co., 767 Fifth Avenue, New York, New York 10153. 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, Winston W. Hutchins and Thomas H. Lister 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, 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 and Mr. Lister do 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 and Mr. Lister are not
deemed to be the beneficial owner thereof. Drew Lewis and Roger S. Penske
are limited partners in Gulfstream Partners, and Roger S. Penske is a
limited partner 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.
(4) Shares are beneficially owned by an irrevocable trust for the benefit of
certain members of Mr. Rumsfeld's family. Mr. Rumsfeld disclaims beneficial
ownership of such shares.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Pursuant to the Company's Restated Certificate of Incorporation, the
Company's authorized capital stock consists of (i) 300,000,000 shares of Common
Stock of which 75,581,184 shares will be issued and outstanding upon the
consummation 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 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 22.0% of the Common Stock (21.2% on a fully
diluted basis) or 18.9% (18.3% on a fully diluted basis), assuming that the
Underwriters' over-allotment options are exercised in full. After the Offerings,
it is expected that the Forstmann Little Partnerships will continue to be the
largest stockholders of the Company and, collectively, are likely to be able to
influence the election of the Board of Directors of the Company and, in general,
to affect 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. See "Risk Factors--Control by
Principal Stockholders; Limitations on Change of Control; Benefits to Principal
Stockholders" and "Selling 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, 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.
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
46
<PAGE>
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 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
The Company is 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 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. 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
47
<PAGE>
provisions in the Restated Certificate of Incorporation and the Company's
By-laws authorizing the Board of Directors to fill newly created directorship
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.
In addition, the Company's By-Laws establish advance notice procedures for
stockholders to make nominations of candidates for election as directors, or
bring other business before an annual meeting of stockholders of the Company
(the "Stockholder Notice Procedures").
The Stockholder Notice Procedures provide that only persons who are
nominated by or at the direction of the Company's Board of Directors, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedures also
provide that at an annual meeting only such business may be conducted as has
been specified in the notice of the meeting given by, or at the direction of,
the Company's Board of Directors (or any duly authorized committee thereof) or
by a stockholder who has given timely written notice to the Secretary of the
Company of such stockholder's intention to bring such business before such
meeting.
Under the Stockholder Notice Procedures, notice of stockholder nominations
to be made or business to be conducted at an annual meeting must be received by
the Company not less than 60 days nor more than 90 days prior to the date of the
annual meeting or, 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,
then notice must be received by the close of business on the tenth day following
the day on which such notice was mailed or such public disclosure was made,
whichever first occurs. Under the Stockholder Notice Procedures, notice of a
stockholder nomination to be made at a special meeting at which directors are to
be elected must be received by the Company not later than the close of business
on the tenth day following the day on which such 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.
TRANSFER AGENT
The transfer agent for the Common Stock is ChaseMellon Shareholder Services,
L.L.C.
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.
48
<PAGE>
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, 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 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...................................................................................... 14,400,000
-------------
-------------
</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 3,600,000 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.
In connection with the Offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include overallotment
and stabilizing transactions, and purchases to cover syndicate short positions
created in connection with the Offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Selling Stockholders in the Offerings.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the shares of
Common Stock sold in the Offerings for their account may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the NYSE, in the over-the-counter market or otherwise.
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 2,160,000 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 14,400,000 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option to
purchase up to an aggregate of 540,000 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 90 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 such securities, without the prior written
consent of the representatives of the Underwriters.
The Selling Stockholders have agreed not to offer, sell or otherwise dispose
of any Common Stock for a period of 90 days after the date of the Offerings
without the prior written consent of the representatives of the Underwriters,
except for certain transfers to immediate family members, trusts for the benefit
of a 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 Common Stock is listed on the NYSE under the symbol "GAC".
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>
[DESCRIPTION OF INSIDE BACK COVER]
Photo of The Gulfstream V
THE GULFSTREAM V.
AN ACHIEVEMENT SO REMARKABLE,
IT HAS RECEIVED THE SAME HONOR AS THE
GREATEST NAMES IN AMERICAN AVIATION HISTORY.
<TABLE>
<CAPTION>
THE ROBERT J. COLLIER TROPHY CHARTER PREVIOUS TROPHY WINNERS INCLUDE:
<S> <C> <C>
TO RECOGNIZE "THE GREATEST ORVILLE WRIGHT UNITED STATES AIR FORCE
ACHIEVEMENT IN AERONAUTICS OR NASA GENERAL DYNAMICS
ASTRONAUTICS IN AMERICA, WITH CHARLES YEAGER ROCKWELL INTERNATIONAL
RESPECT TO IMPROVING THE BOEING VOYAGER MISSION TEAM
PERFORMANCE, EFFICIENCY AND SAFETY JOHN GLENN U.S. NAVAL RESEARCH LABORATORY
OF AIR OR SPACE VEHICLES, THE NEIL ARMSTRONG MARTIN MARIETTA
VALUE OF WHICH HAS BEEN THOROUGHLY LOCKHEED UNITED STATES ARMY
DEMONSTRATED BY ACTUAL USE DURING THE NORTHROP CORPORATION
PRECEDING YEAR."
</TABLE>
On behalf of our Gulfstream V(R) owners,
employees, shareholders, revenue share
partners and suppliers, we would like to THE WORLD STANDARD.-TM-
thank the National Aeronautic Association GULFSTREAM
for this high honor.
GAC
listed
NYSE
<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>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 4
Risk Factors.......................... 11
The Company........................... 15
Use of Proceeds....................... 15
Price Range of Common Stock and
Dividend Policy..................... 16
Capitalization........................ 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 27
Management............................ 39
Selling Stockholders.................. 44
Description of Capital Stock.......... 46
Validity of Common Stock.............. 48
Experts............................... 49
Underwriting.......................... U-1
</TABLE>
18,000,000 SHARES
GULFSTREAM AEROSPACE
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------
[LOGO]
--------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. 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).................................. $ 265,450
NASD fees (actual)............................................. 30,500
Transfer agent and registrar fee and expenses.................. 10,000
Accounting fees and expenses................................... 150,000
Legal fees and expenses........................................ 500,000
Blue Sky expenses and counsel fees............................. 10,000
Printing and engraving expenses................................ 250,000
Miscellaneous.................................................. 284,050
----------
Total.......................................................... $1,500,000
----------
----------
</TABLE>
ITEM 15. 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 Restated 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 and Gulfstream Delaware have entered into agreements to
indemnify the Company's directors and officers in addition to the
indemnification provided for in the Restated Certificate of Incorporation 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 Company, its controlling persons, its directors and
certain of its officers by the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- --------- ---------------------------------------------------------------------------------
<C> <S>
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. (Incorporated herein by reference to
Exhibit 2.1 of Registrant's Registration Statement on Form S-1, No. 333-09897).
4.1 -- The Restated Certificate of Incorporation of the Company. (Incorporated by
reference to Exhibit 3.1 of Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996).
4.2 -- The Restated By-Laws of the Company. (Incorporated herein by reference to Exhibit
3.2 of Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996).
4.3 -- Specimen Form of Company's Common Stock Certificate. (Incorporated herein by
reference to Exhibit 4.1 of Registrant's Registration Statement on Form S-1, No.
333-09897).
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
23.1 -- Consent of Deloitte & Touche LLP.*
23.2 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
24.1 -- Powers of Attorney (contained on signature page).
27.1 -- Financial Data Schedule--Fiscal 1997. (Incorporated by reference to Exhibit 27.1
of Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).
27.2 -- Restated Financial Data Schedule--Fiscal 1996 and Third Quarter 1996.
(Incorporated by reference to Exhibit 27.2 of Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
27.3 -- Restated Financial Data Schedule--First, Second and Third Quarter 1997.
(Incorporated by reference to Exhibit 27.3 of Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
</TABLE>
- ------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration
II-2
<PAGE>
statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933, if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933 each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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 of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective;
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective 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.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Gulfstream
Aerospace Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Savannah, the State of Georgia on the 20th day
of April, 1998.
GULFSTREAM AEROSPACE CORPORATION
BY: /s/ Chris A. Davis
-----------------------------------------
Chris A. Davis
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
AND SECRETARY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Chris A. Davis, Ira Berman, 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.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ Theodore J. Forstmann Chairman of the Board;
- ------------------------------ Director April 20, 1998
Theodore J. Forstmann
/s/ W.W. Boisture, Jr. Executive Vice President;
- ------------------------------ Director April 20, 1998
W.W. Boisture, Jr.
Executive Vice President,
Chief Financial Officer
/s/ Chris A. Davis and Secretary; Director
- ------------------------------ (Principal Financial April 20, 1998
Chris A. Davis Officer and Principal
Accounting Officer)
/s/ James T. Johnson President and Chief
- ------------------------------ Operating Officer; April 20, 1998
James T. Johnson Director
/s/ Bryan T. Moss Vice Chairman of the Board;
- ------------------------------ Director April 20, 1998
Bryan T. Moss
II-4
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ Robert A. Anderson Director
- ------------------------------ April 20, 1998
Robert A. Anderson
Director
- ------------------------------
Charlotte L. Beers
/s/ Thomas D. Bell, Jr. Director
- ------------------------------ April 20, 1998
Thomas D. Bell, Jr.
/s/ Lynn Forester Director
- ------------------------------ April 20, 1998
Lynn Forester
/s/ Nicholas C. Forstmann Director
- ------------------------------ April 20, 1998
Nicholas C. Forstmann
/s/ Sandra J. Horbach Director
- ------------------------------ April 20, 1998
Sandra J. Horbach
/s/ Henry A. Kissinger Director
- ------------------------------ April 20, 1998
Henry A. Kissinger
/s/ Drew Lewis Director
- ------------------------------ April 20, 1998
Drew Lewis
/s/ Mark H. McCormack Director
- ------------------------------ April 20, 1998
Mark H. McCormack
/s/ Michael S. Ovitz Director
- ------------------------------ April 20, 1998
Michael S. Ovitz
/s/ Allen E. Paulson Director
- ------------------------------ April 20, 1998
Allen E. Paulson
/s/ Roger S. Penske Director
- ------------------------------ April 20, 1998
Roger S. Penske
/s/ Colin L. Powell Director
- ------------------------------ April 20, 1998
Colin L. Powell
/s/ Gerard R. Roche Director
- ------------------------------ April 20, 1998
Gerard R. Roche
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ Donald H. Rumsfeld Director
- ------------------------------ April 20, 1998
Donald H. Rumsfeld
/s/ George P. Shultz Director
- ------------------------------ April 20, 1998
George P. Shultz
/s/ Robert S. Strauss Director
- ------------------------------ April 20, 1998
Robert S. Strauss
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- -----
<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. (Incorporated herein
by reference to Exhibit 2.1 of Registrant's Registration Statement on Form
S-1, No. 333-09897).
4.1 -- The Restated Certificate of Incorporation of the Company. (Incorporated by
reference to Exhibit 3.1 of Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996).
4.2 -- The Restated By-Laws of the Company. (Incorporated herein by reference to
Exhibit 3.2 of Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996).
4.3 -- Specimen Form of Company's Common Stock Certificate. (Incorporated herein
by reference to Exhibit 4.1 of Registrant's Registration Statement on Form
S-1, No. 333-09897).
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
23.1 -- Consent of Deloitte & Touche LLP.*
23.2 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit
5.1).
24.1 -- Powers of Attorney (contained on signature page).
27.1 -- Financial Data Schedule--Fiscal 1997. (Incorporated by reference to
Exhibit 27.1 of Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
27.2 -- Restated Financial Data Schedule--Fiscal 1996 and Third Quarter 1996.
(Incorporated by reference to Exhibit 27.2 of Registrant's Annual Report
on Form 10-K for the year ended December 31, 1997).
27.3 -- Restated Financial Data Schedule--First, Second and Third Quarter 1997.
(Incorporated by reference to Exhibit 27.3 of Registrant's Annual Report
on Form 10-K for the year ended December 31, 1997).
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
EXHIBIT 1.1
GULFSTREAM AEROSPACE CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
(U.S. VERSION)
-, 1998
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:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of Gulfstream Aerospace Corporation, a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of [-] shares (the "Firm Shares") of Common Stock, par value $.01 per share
("Stock"), of the Company, and, at the election of the Underwriters, up to [-]
additional shares (the "Optional Shares") of Stock. 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 Selling Stockholders
are concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Selling Stockholders of up to a total
of [-] shares of Stock (the "International Shares"), including the overallotment
option thereunder, 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 Limited, 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
<PAGE>
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-3 (File No. 333-[-]) (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 but including
all documents incorporated by reference in the prospectus contained therein, 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 or will become effective upon filing, no other document
with respect to the Initial Registration Statement or any document incorporated
by reference therein 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 (i) 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 and (ii) the documents incorporated by reference in the
prospectus contained in the Initial Registration Statement at the time such part
of the Initial Registration Statement became effective, each as amended at the
time such part of the Initial 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"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; and any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment or supplement to
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any amendment
to the Registration Statement shall be deemed to refer to and include any annual
report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange
Act after the effective date of the Registration Statement that is incorporated
by reference in the Registration Statement);
-2-
<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 Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents 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; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents 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 or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will 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 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;
(iv) 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 Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference 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
-3-
<PAGE>
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;
(vi) 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, dated as of October 16, 1996 (the "Credit Agreement"), among
Gulfstream Delaware Corporation, The Chase Manhattan Bank, and the banks and
other financial institutions party thereto, 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 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;
(vii) 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 or organized and is validly existing as a corporation or limited
liability company in good standing under the laws of its jurisdiction of
incorporation or organization; 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;
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and non-
assessable; at each Time of Delivery (as defined in Section 4 below) 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 in
all material respects to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock or other ownership
interests of each subsidiary of the Company have been duly and
-4-
<PAGE>
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, except as are
provided for pursuant to the terms of the Credit Agreement;
(ix) 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;
(x) 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 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 in all material respects to the
description thereof in the Prospectus;
(xi) The Shares have been duly qualified for listing on the New York
Stock Exchange, subject to official notice of issuance.
(xii) 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 in all material respects to the descriptions thereof
in the Prospectus;
(xiii) 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
consummation by the Company of the transactions contemplated by this Agreement
and the International Underwriting Agreement, except for the registration under
the Act of the Shares 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;
-5-
<PAGE>
(xiv) 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 the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xv) 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;
(xvi) 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; and
(xvii) 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 "Risk Factors--Shares Eligible
For Future Sale; Registration Rights" and "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, in each case present a fair summary of such terms, laws or documents in
all material respects.
(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
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<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 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, (a) if certificates representing the Shares are to be delivered
to the Underwriters and International Underwriters, upon delivery of the
certificates representing all Shares to be sold by such Selling Stockholder and
payment therefor pursuant hereto and thereto, and assuming the Underwriters and
International Underwriters purchase such Shares without notice of any adverse
claim (as such term is used in Section 8-105 of the Uniform Commercial Code as
in effect in the State of New York (the "Code")), the Underwriters and
International Underwriters will acquire good and valid title to such Shares,
free and clear of all security interests, liens, encumbrances, equities or other
adverse claims, or (b) if the Shares are to be delivered to the Underwriters and
International Underwriters through the facilities of The Depository Trust
Company ("DTC"), upon delivery of such Shares registered in the name of Cede &
Co. or such other nominee designated by DTC, payment therefor pursuant hereto
and the International Underwriting Agreement and the crediting of the
Underwriters' and International Underwriters' accounts with such Shares in the
records of DTC, Cede & Co. or such other nominee designated by DTC shall acquire
all of the rights such Selling Stockholders had in the Shares and shall be a
"protected purchaser" of such Shares (within the meaning of Section 8-303 of the
Code), and the Underwriters and the International Underwriters will acquire a
valid "security entitlement" (within the meaning of Section 8-501 of the Code)
with respect to such Shares, and no action based on an "adverse claim" (as
defined in Section 8-102 of the Code) may be asserted against the Underwriters
or the International Underwriters with respect to such security entitlement
(assuming that the Underwriters and the International Underwriters are without
notice of any such adverse claim);
(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 90 days
after the date of the Prospectus, directly or indirectly, by such Selling
Stockholder without the prior written consent of the representatives 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
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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
(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
ChaseMellon Shareholder 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
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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
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) 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 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 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 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
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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 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 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) 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 Selling Stockholders shall be delivered by or on behalf of 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 or by wire
transfer, payable to the order of the Custodian in Federal Funds (same day).
The delivery of the Shares to Goldman, Sachs & Co. pursuant to the prior
sentence may be made, at the option of Goldman, Sachs & Co., through the
facilities of DTC. 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,
or at the office of DTC or its designated custodian, as the case may be (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 [-], 1998 or
such other time and date as Goldman, Sachs & Co. and the Attorneys-in-Fact 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
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, 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,
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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 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 any
amendment to the Registration Statement 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 file promptly all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the delivery of a
prospectus is required in connection with the offering or sale of the Shares; to
advise you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of 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
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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;
(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 90 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 such other securities, 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 of the Underwriters;
(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 90 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 90-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 90-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 90-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);
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(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 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); and
(i) 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 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 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,
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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) Ira P. Berman, Vice President and General Counsel of the Company,
or other counsel (who may be employees of the Company) reasonably
satisfactory to the Underwriters, 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;
(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 it owns or leases properties, or conducts any business, so
as to require such qualification, except where failure to so qualify,
individually or in the aggregate, 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 (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
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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, except
such as are provided for pursuant to the terms of the Credit Agreement;
(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 in each jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, except where failure
to so qualify, individually or in the aggregate, 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 (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 known
to such counsel 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, except
for such conflicts, breaches, violations or defaults as will not have,
individually or in the aggregate, a material adverse effect on the financial
position, results of operations or cash flows of the Company and its
subsidiaries taken as a whole, 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 (v) above is required for the consummation by the Company of the
transactions contemplated by this Agreement and the International Underwriting
Agreement, except for the registration under the Act of the Shares, which has
been made, 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;
(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 with respect to liens and encumbrances, such as are provided for
pursuant to the terms of the Credit Agreement or such as
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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 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 (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); and
(viii) The documents incorporated by reference in 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 and
schedules and other financial data included therein, as to which such counsel
need express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material respects
with the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder; and such counsel has no
reason to believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act, 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, in the
case of other documents which were filed under the Exchange Act with the
Commission, an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such documents were so filed,
not misleading;
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 or incorporated by
reference 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 or incorporated by reference 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 or incorporated by reference
therein, as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a
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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 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 he expresses no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, the State of Georgia (with respect to paragraphs (iii), (v) and (vi)
of this section), the General Corporation Law of the State of Delaware and the
Federal laws of sthe United States.
(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 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, after due inquiry, or any order identified to such
counsel in a certificate provided by the Vice President and General Counsel of
the Company, 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
registration under the Act of the Shares, which has been made, 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 authorized and validly issued and are fully paid
and non-assessable (assuming, with respect to the Shares being issued upon the
exercise of the Options, that payment of the exercise price therefore is made to
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the Company as provided in the Custody Agreements); 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
"Risk Factors-- Shares Eligible For Future Sale; Registration Rights"; 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 or incorporated by
reference 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 or incorporated by reference 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 or incorporated by
reference 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:
(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
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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 to such counsel in a certificate provided by a general
partner of such FL Selling Stockholder, 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 to such counsel in a certificate provided by a general partner of
such FL Selling Stockholder, 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 registration under the Act of the Shares, which has been made,
and such consents, approvals, or authorizations 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
(iv) Assuming that the Underwriters and the International
Underwriters purchase the Shares to be sold to the Underwriters and the
International Underwriters by the FL Selling Stockholders at such Time of
Delivery for value and without notice of any adverse claim as such term is
defined in Section 8-102 of the Code, if certificates representing the Shares
are to be delivered to the Underwriters and International Underwriters, the
Underwriters and International Underwriters will acquire good and valid title to
such Shares free and clear of all security interests, liens, encumbrances or
other adverse claims, or, if such Shares are to be delivered to the Underwriters
and the International Underwriters through the facilities of DTC, upon the
crediting of the Underwriters' and the International Underwriters' accounts with
such Shares in the records of DTC, Cede & Co. or such other nominee designated
by DTC will acquire all rights that such Selling Stockholders had in the Shares
and will be a "protected purchaser" of such Shares (within the meaning of
Section 8-303 of the Code) and the Underwriters and the International
Underwriters will acquire a valid "security entitlement" (within the meaning of
Section 8-501 of the Code) with respect to such Shares, and no action based on
an "adverse claim" (as defined in Section 8-102 of the Code) may be asserted
against the Underwriters or the International Underwriters with respect to such
security entitlement;
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(f) Fried, Frank, Harris, Shriver & Jacobson, special counsel for
each of the Selling Stockholders, shall have furnished to you their written
opinion (a copy of such opinion is attached as Annex II(c) hereto), dated such
Time of Delivery, with respect to each of the Selling Stockholders other than
the FL Selling Stockholders (the "Other Selling Stockholders"), in form and
substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by each Other Selling Stockholder and constitute valid
and binding agreements of such Other 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 each Other Selling
Stockholder; and
(iii) Assuming that the Underwriters and the International
Underwriters purchase the Shares to be sold to the Underwriters and the
International Underwriters by the Selling Stockholders at such Time of Delivery
for value and without notice of any adverse claim as such term is defined in
Section 8-102 of the Code, if certificates representing the Shares are to be
delivered to the Underwriters and International Underwriters, the Underwriters
and International Underwriters will acquire good and valid title to such Shares
free and clear of all security interests, liens, encumbrances or other adverse
claims, or, if such Shares are to be delivered to the Underwriters and the
International Underwriters through the facilities of DTC, upon the crediting of
the Underwriters' and the International Underwriters' accounts with such Shares
in the records of DTC, Cede & Co. or such other nominee designated by DTC shall
acquire all rights that such Selling Stockholders had in the Shares and shall be
a "protected purchaser" of such Shares (within the meaning of Section 8-303 of
the Code) and the Underwriters and the International Underwriters will acquire a
valid "security entitlement" (within the meaning of Section 8-501 of the Code)
with respect to such Shares, and no action based on an "adverse claim" (as
defined in Section 8-102 of the Code) may be asserted against the Underwriters
or the International Underwriters with respect to such security entitlement;
In rendering the opinion in subparagraphs (i) and (ii) such counsel may
assume the authenticity of all signatures and the capacity of the Other Selling
Stockholders to enter into and perform the agreements referred to therein;
(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 (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 or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity,
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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 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; and
(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.
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
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investigating or defending any such action, claim, suit or proceeding as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in case of this subsection(a) 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.
(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
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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 and the Company for
any legal or other expenses reasonably incurred by such Underwriter or the
Company 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
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<PAGE>
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; PROVIDED, HOWEVER,
that the omission so to notify the indemnifying party in the case of subsections
(a), (b), (c) and (d) 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 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 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 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
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<PAGE>
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 Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and 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 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 Selling Stockholders
that you have so arranged for the purchase of such Shares, or the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or 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 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
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<PAGE>
of Delivery, then 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 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 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
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,
the Selling Stockholders 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 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
Selling Stockholders as provided herein, the Company 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.
-26-
<PAGE>
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 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.
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<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
-28-
<PAGE>
SCHEDULE I
NUMBER OF
OPTIONAL
TOTAL NUMBER SHARES TO BE
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 .
Total . . . . . . . . . . ----------- -------------
___________ _____________
___________ _____________
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<PAGE>
SCHEDULE II
NUMBER OF OPTIONAL
TOTAL NUMBER SHARES TO BE
OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
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 Fried, Frank, Harris, Shriver &
Jacobson, One New York Plaza, New York, NY 10004, and have appointed Ira P.
Berman, Chris A. Davis and Sandra J. Horbach and each of them, as the
Attorneys-in-Fact for each of them.
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<PAGE>
ANNEX I(a)
Pursuant to Section 7(g) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included or incorporated by reference in the Registration Statement or the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act or the Exchange Act, as applicable, and
the related published rules and regulations thereunder; and, if applicable
they have made a review in accordance with standards established by the
American Institute of Certified Public Accountants of the consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report on Form 10-Q
incorporated by reference into the Prospectus; and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to their
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus and
included or incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the audited
consolidated financial statements for such five fiscal years which were
included or incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
<PAGE>
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301 and 302, respectively, of
Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated by reference
in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or incorporated
by reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements
of the Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
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<PAGE>
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compliance of those
statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights and upon conversions of
convertible securities, in each case which were outstanding on the
date of the latest balance sheet included or incorporated by reference
in the Prospectus) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in consolidated
net current assets or stockholders' equity or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the
latest balance sheet included or incorporated by reference in the
Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or income from operations or the total or
per share amounts of consolidated net income or other items specified
by the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference) or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representative,
or in documents incorporated by reference in the Prospectus specified by
the Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement;
(viii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other
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<PAGE>
procedures referred to in paragraphs (iii), (vi) and (vii) above, they
have, with respect to each customer who has orders for a Gulfstream IV-SP
and/or Gulfstream V, agreed the total amount of deposits and progress
payments of each such customer to the accounting records of the Company.
-4-
<PAGE>
EXHIBIT 5.1
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
212-859-8000
FAX 212-859-4000
WRITER'S DIRECT LINE
212-859-8076
April 21, 1998 (FAX: 212-859-8587)
Gulfstream Aerospace Corporation
P.O. Box 2206
500 Gulfstream Road
Savannah, Georgia 31402-2206
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as special counsel for Gulfstream Aerospace
Corporation, a Delaware corporation (the "Company"), in connection with the
underwritten public offering (the "Offering") by certain of the Company's
stockholders of shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock") of the Company, including Shares which may be
offered and sold upon the exercise of overallotment options granted to the
underwriters. The Shares are to be offered to the public pursuant to a U.S.
underwriting agreement among the Company, the selling stockholders named
therein, and Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated, as representatives of
the U.S. underwriters, and an international underwriting agreement among the
Company, the selling stockholders named therein, and Goldman Sachs
International, Merrill Lynch International and Morgan Stanley & Co.
International Limited, as representatives of the international underwriters
(together, the "Underwriting Agreements").
The Shares to be sold in the Offering include Shares to be issued
upon the exercise of stock options (the "Option Shares") granted pursuant to
(a) the Company's stock option plan (the "Plan"), and related stock option
agreements, and (b) certain other stock option agreements ("Non-Plan Option
Agreements") between the Company and certain of its current and former
directors, officers, advisors and consultants.
With your permission, all assumptions and statements of reliance
herein have been made without any independent investigation or verification
on our part except to the extent otherwise expressly stated, and we express
no opinion with respect to the subject matter or accuracy of such assumptions
or items relied upon.
<PAGE>
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
Gulfstream Aerospace Corporation -2- April 21, 1998
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such agreements, instruments, documents and records of
the Company, such certificates of public officials and such other documents,
and (iii) received such information from officers and representatives of the
Company as we have deemed necessary or appropriate for the purposes of this
opinion. In all examinations, we have assumed the legal capacity of all
natural persons executing documents, the genuineness of all signatures, the
authenticity of original and certified documents and the conformity to
original or certified copies of all copies submitted to us as conformed or
reproduction copies. As to various questions of fact relevant to the opinions
expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the documents and certificates
and oral or written statements and other information of or from
representatives of the Company and others and assume compliance on the part
of all parties to the documents with their convenants and agreements
contained therein.
Based upon the foregoing and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that
(i) the Shares (other than the Option Shares) are duly authorized, validly
issued, fully paid and non-assessable and (ii) the Option Shares, when
issued, delivered and paid for in accordance with the provisions of the Plan
and the applicable option agreements or with the provisions of the applicable
Non-Plan Option Agreements, as the case may be, will be duly authorized,
validly issued, fully paid and non-assessable.
The opinion expressed herein is limited to the General Corporation
Law of the State of Delaware, as currently in effect.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Validity of Common Stock" in the Prospectus forming part of the Registration
Statement. In giving such consent, we do not hereby admit that we are in the
category of such persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Lois Herzeca
------------------------------------
Lois Herzeca
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Gulfstream Aerospace Corporation on Form S-3 of our reports dated January 30,
1998, appearing in and incorporated by reference in the Annual Report on Form
10-K of Gulfstream Aerospace Corporation for the year ended December 31, 1997
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
April 20, 1998
