SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Commission file number
to 1-3229
NORTHROP CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-1055798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East
Los Angeles, California 90067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 553-6262
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of February 22, 1994, 49,132,906 shares of Common Stock were
outstanding, and the aggregate market value of the Common Stock (based upon
the closing price of the stock on the New York Stock Exchange) of the
Registrant held by nonaffiliates was approximately $1,932 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1994 Annual Meeting of
Stockholders. Part III
PART I
Item 1. Business
Northrop Corporation was incorporated in Delaware in 1985. Northrop
is an advanced technology company operating in the aerospace industry. The
company designs, develops and manufactures aircraft, aircraft subassemblies
and electronic systems for military and commercial use.
Additional information required by this Item is contained in Part II
Item 7 of this Annual Report on Form 10-K.
Item 2. Properties
The major locations, general status of the company's interest in the
property and identity of the industry segments which use the property
described, are indicated in the following table.
Location Property Interest
Anaheim, California(1)(5)(a)(b)(c)(e). . . . . . Owned and leased
*Arlington, Virginia(5)(a) . . . . . . . . . . . . leased
Auborn, Washington (1)(c) . . . . . . . . . . . . leased
Carson, California(1)(c). . . . . . . . . . . . . leased
Compton, California(1)(b)(c). . . . . . . . . . . leased
Commerce, California(1)(c). . . . . . . . . . . . leased
*Edwards Air Force Base, California(1) . . . . . . leased
Elk Grove, Illinois(4)(a)(b)(c)(d). . . . . . . . leased
El Segundo, California(1)(3)(a)(b)(c)(d). . . . . Owned and leased
Fullerton, California(4)(a)(b)(c) . . . . . . . . leased
Gardena, California(1)(4)(a)(b)(c). . . . . . . . Owned and leased
*Hawthorne, California(1)(3)(4)(5)(a)(b)(c)(d) . . Owned and leased
Hondo, Texas(2)(b)(c) . . . . . . . . . . . . . . leased
Kent, Washington(1)(c). . . . . . . . . . . . . . leased
Lawton, Oklahoma (2)(a) . . . . . . . . . . . . . Owned and leased
Los Angeles,California(1)(5)(a)(b)(c)(d). . . . . leased
Montebello, California(1)(c). . . . . . . . . . . leased
Newbury Park, California(1)(a)(b)(c)(d) . . . . . Owned
New Town, North Dakota(4)(a)(b)(c). . . . . . . . Owned and leased
Norwood, Massachusetts(4)(a)(b)(c)(d) . . . . . . Owned and leased
Palmdale, California(1)(a)(b)(c)(d)(e). . . . . . Owned and leased
Perry, Georgia(1)(3)(a)(b)(c) . . . . . . . . . . Owned
Pico Rivera, California(1)(5)(a)(b)(c)(d) . . . . Owned and leased
Rolling Hills Estates, California(2)(a)(d). . . . Owned
Rolling Meadows, Illinois(4)(a)(b)(c)(d). . . . . Owned and leased
Torrance, California(1)(a)(b)(c). . . . . . . . . Owned and leased
Warner Robins, Georgia(4)(a)(b) . . . . . . . . . Owned
Warren, Michigan(1)(a)(b)(c)(d) . . . . . . . . . Leased
__________
* Certain portions of the properties at each of these locations are leased
or subleased to others. The company believes that in the aggregate the
property covered by such leases or subleased to others is not material
compared to the property actually utilized by the company in its
business.
Following each described property are numbers indicating the industry
segments utilizing the property:
(1) Aircraft (3) Missiles and Unmanned Vehicle Systems
(2) Services (4) Electronics
(5) General Corporate Asset
Following each described property are letters indicating the types of
facilities located at each location:
(a) office (c) warehouse
(b) manufacturing (d) research and testing
(e) other
Government-owned facilities used or administered by the company
consist of 1,638,481 square feet at Air Force Plant 42, Palmdale,
California and 430,511 square feet at Edwards Air Force Base, California.
The company believes its properties are well-maintained and in good
operating condition. Under present business conditions and the company's
volume of business, productive capacity is currently in excess of
requirements.<PAGE>
Item 3. Legal Proceedings
Environmental Proceedings
Stringfellow Site
On June 4, 1987, the United States District Court for the Central
District of California entered an order against the company and other
defendants declaring them jointly and severally liable under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") for clean-up and other costs at the Stringfellow site located
near Riverside, California. The government contends it has spent in excess
of $70 million to date in clean-up costs. The potentially responsible
parties have expended approximately $6.9 million in clean-up costs of which
the company has spent approximately $335,000. Present estimates of future
clean-up costs are between $139 million and $200 million. A fourth interim
action Record Of Decision ("ROD") was issued by the Environmental
Protection Agency ("EPA") on September 30, 1990, mandating certain remedial
actions. The company and 14 other potentially responsible parties signed a
Consent Decree with the EPA to perform certain work under that ROD. A
trial to determine the State of California's responsibility for clean-up
costs was concluded on June 17, 1992. In December 1993, the Special Master
issued a recommended order on apportionment finding that the State and
certain other defendants are responsible for up to 65% of the clean-up
costs associated with the site under CERCLA standards and up to 95% of such
costs under State law claims. The Court found that the manufacturers as a
group (including Northrop) are responsible for 25% of the clean-up costs
under CERCLA and none of the costs under State law claims. The State has
indicated that it will oppose the Special Master's recommended order. The
United States Air Force and the United States Navy have stipulated to
liability for certain of the clean-up costs arising out of their activities
at the site.
Northrop contributed less than 2% of the total volume of materials at
the Stringfellow site. It is not known at this time whether a volumetric
allocation for damages will be used in this matter. However, the clean-up
costs attributable to Northrop are not expected to have a material adverse
effect on the company's financial condition.
Litigation
False Claims Act Litigation
On June 9, 1987, a complaint, entitled U.S. ex rel, David Peterson
and Jeff Kroll v. Northrop Corporation, was filed in the U.S. District
Court for the Central District of California alleging violations by the
company of the False Claims Act in connection with the operation of petty
cash funds, inspection, testing, and pricing for the MX Peacekeeper Missile
program. On September 1, 1989, the government intervened and reduced the
scope of the lawsuit by filing an amended complaint. The amended complaint
does not completely specify the total amount being sought but, rather,
seeks damages in excess of $1.2 million. On May 7, 1990, the Court ruled
that the original plaintiffs may proceed with portions of the lawsuit that
the government declined to include in the amended complaint. The trial in
this matter is scheduled for August 1994.
On August 31, 1992, the company was served with a complaint in an
action entitled U.S. ex rel Rex Robinson v Northrop. The lawsuit is filed
in the United States District Court for the Northern District of Illinois.
The complaint alleges that the company violated the False Claims Act with
respect to certain accounting practices at its Rolling Meadows facility.
The U.S. Department of Justice has declined to intervene in the lawsuit
which seeks unspecified damages.
The company has been named a defendant in a lawsuit filed in the U.S.
District Court for the Central District of California, entitled Janssen v
Northrop, pursuant to the False Claims Act relating to the company's
pricing of subassemblies for the F/A-18 Hornet Jet. On April 9, 1990, the
U.S. Department of Justice intervened in the lawsuit and filed an amended
complaint. The amended complaint, which seeks unspecified damages and
penalties, alleges common law fraud, unjust enrichment, and mistake of fact
in connection with purported false statements regarding labor hours, cost
of materials and total dollar costs that were required for Northrop to
manufacture F/A-18 Hornet Jet subassemblies. In May 1992, the U.S.
Government filed an additional complaint containing allegations
substantially identical to those contained in the April 9, 1990 amended
complaint. This complaint seeks damages relating to foreign military sales
of the F/A-18 Hornet Jet.
In addition, the company is a party to a number of civil actions
brought by private parties alleging violation of the False Claims Act in
which the government has declined to intervene. These actions, which have
been previously reported, relate to the MX Peacekeeper Missile, the Air
Launched Cruise Missile and the Advanced Technology Bomber (B-2) programs.
In a number of these actions, plaintiffs also allege employment related
claims including claims of wrongful termination. Damages sought include
claims for compensatory and punitive damages. A number of these civil
actions were initially reported when it was unclear what position, if any,
the government would take in the litigation. In light of the government's
decision not to intervene or otherwise pursue the litigation, as well as
the amounts involved, the cases will not be individually reported.
Further, the company learns from time to time that it has been named as a
defendant in lawsuits which are filed under seal pursuant to the False
Claims Act. Since these matters remain under seal, the company does not
possess sufficient information to accurately report on the particular
allegations.
General
The company, as a government contractor, is from time to time subject
to U.S. Government investigations relating to its operations. Government
contractors that are found to have violated the False Claims Act, or are
indicted or convicted for violations of other Federal laws, or are
considered not to be responsible contractors may be suspended or debarred
from government contracting for some period of time. Such convictions
could also result in fines. Given the company's dependence on government
contracting, suspension or debarment could have a material adverse effect
on the company.
With respect to the lawsuits and proceedings discussed above, based
upon available information, the company does not expect that any fines,
damages or penalties that may result will have a material adverse effect on
its financial position.
Executive Officers of the Registrant
<TABLE>
The following individuals were the elected officers of the company as of February 16, 1994:
<CAPTION>
Business Experience
Name Age Office Held Since Last Five Years
<S> <C> <C> <C> <C>
Kent Kresa 55 Chairman, President & CEO 1990 President and Chief Executive
Officer; Prior to September 1990,
President and COO.
Oliver C. Boileau, Jr. 66 Corporate Vice President, 1992 Vice President,
President and General Manager- President and General
B-2 Division Manager, B-2 Division; Prior to
November 1989, Consultant to
General Dynamics
Arthur F. Dauer 57 Corporate Vice President and 1991 Senior Vice
Chief Human Resources Officer President, Human Resources; Prior
to 1991, Director of Human
Resources, Hewlett-Packard Co.
Marvin Elkin 57 Corporate Vice President Admin- 1991 Vice President,
istration and Services Materiel and Services; Prior to
1989, Vice President and Deputy
General Manager, B-2 Division
Sheila M. Gibbons 62 Corporate Vice President and 1992 Vice President and
Secretary Secretary
Nelson F. Gibbs 56 Corporate Vice President and 1992 Vice President and
Controller Controller; Prior to 1991, Partner,
Deloitte & Touche
Robert F. Helm 42 Corporate Vice President, 1994 Vice President, Legislative
Government Relations Affairs; Prior to 1989, Vice
President, Business Development,
Space and Aviation Systems
Business, Honeywell, Inc.
Charles L. Jones 52 Corporate Vice President, 1991 Vice President and Manager
Quality Operations Product Assurance and Productivity
Department
Richard R. Molleur 61 Corporate Vice President and 1991 Senior Vice President and General
General Counsel Counsel; Prior to 1991, Partner,
Winston & Strawn.
John R. Rettberg 56 Corporate Vice President and 1992 Vice President and
Treasurer Treasurer
James G. Roche 54 Corporate Vice President and 1993 Corporate Vice President and
Chief Advanced Development, Chief Advanced Development
Planning, and Public Affairs and Planning Officer; Prior to
Officer 1991, Vice President and Special
Assistant to the Chairman,
President and CEO.
Wallace G. Solberg 62 Corporate Vice President and 1991 Vice President and
General Manager-Aircraft General Manager, Electronics
Division Systems Division; Prior to 1991,
Vice President and General Manager,
Defense Systems Division.
Richard B. Waugh, Jr. 50 Corporate Vice President and 1993 Vice President, Taxes, Risk
Chief Financial Officer Management and Business Analysis
Max T. Weiss 71 Corporate Vice President and 1991 Vice President-General Technology
Manager, Electronics and Systems Division Advanced
Development; Prior to 1991, Vice
President-Technology; Prior to
1990, Vice President-Technical,
Electronics Systems Group.
</TABLE>
Item 4. Submission of Matters to a Vote of Security Holders
No information is required in response to this Item.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The information required by this Item is contained in Part II, Item 8
of this Annual Report on Form 10-K.
Item 6. Selected Financial Data
The information required by this Item is contained in Part II, Item 7
of this Annual Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
Selected Financial Data
<CAPTION>
Year ended December 31,
$ in millions, except per share 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales to:
United States Government $ 4,481 $ 4,958 $ 5,102 $ 4,929 $ 4,677
The Boeing Company 533 550 542 489 469
Other customers 49 42 50 72 102
Total net sales 5,063 5,550 5,694 5,490 5,248
Net income(loss) 96 121 201 210 (81)
Earnings(loss) per share 1.99 2.56 4.26 4.48 (1.71)
Cash dividends per share 1.60 1.20 1.20 1.20 1.20
Net working capital 481 354 611 570 91
Current ratio 1.45 to 1 1.25 to 1 1.51 to 1 1.47 to 1 1.05 to 1
Total assets $ 2,939 $ 3,162 $ 3,128 $ 3,094 $ 3,196
Long-term debt 160 160 470 690 550
Total long-term obligations 468 426 688 727 583
Long-term debt as a percentage of
shareholders equity 12.1% 12.8% 39.8% 66.8% 62.9%
Operating margin as a percentage of:
Net sales 4.3 4.1 6.2 5.3 .4
Average operating assets 9.1 8.9 12.8 10.0 .8
Net income(loss) as a percentage of:
Net sales 1.9 2.2 3.5 3.8 (1.5)
Average assets 3.1 3.8 6.5 6.7 (2.5)
Average shareholders' equity 7.5 9.9 18.1 22.1 (8.6)
Research and development expenses:
Contract $ 1,603 $ 1,693 $ 1,601 $ 2,164 $ 2,412
Noncontract 97 93 102 156 180
Payroll and employee benefits 1,906 2,001 2,109 2,099 2,140
Number of employees at year-end 29,800 33,600 36,200 38,200 41,000
Number of shareholders at year-end 11,618 12,599 13,607 14,483 14,263
Depreciation and amortization $ 214 $ 160 $ 171 $ 187 $ 220
Maintenance and repairs 87 106 97 83 79
Rent expense 47 52 51 47 44
Floor area (millions of square feet):
Owned 12.9 12.6 12.2 11.6 12.9
Commercially leased 3.2 4.2 4.5 5.4 5.6
Leased from United States Government 2.1 1.9 1.7 1.6 1.6
</TABLE>
Business Conditions
Northrop's industry segments - aircraft, electronics, missiles and unmanned
vehicle systems (MUVS) and services - are each a factor in the broadly
defined aerospace industry. Much of the work in the missiles and unmanned
vehicle systems segment is still classified, and contracts and program
details cannot be disclosed. While Northrop is subject to the usual
vagaries of the marketplace, it is also affected by the unique
characteristics of the aerospace industry and by certain elements peculiar
to its own business mix.
Northrop is one of about a dozen major companies in the industry that
compete for the relatively small number of large, long-term programs that
characterize both the defense and commercial segments of the aerospace
business. It is common in the aerospace industry for work on major programs
to be shared between a number of companies. A company competing to be a
prime contractor can turn out to be a subcontractor. It is not uncommon to
compete with customers, and to simultaneously be both a supplier to and
customer of a given competitor. Boeing, Lockheed and McDonnell Douglas are
the largest companies in the aerospace industry at this time. Northrop
also competes against many other companies for a relatively large number of
smaller programs, notably in the electronics areas. Competition is intense,
yet the nature of major aerospace programs, conducted under binding
contracts, allows companies that perform well to benefit from a level of
program continuity unknown in many industries. Thus, intense competition
and long operating cycles are both characteristic of the industry's - and
Northrop's - business.
The B-2 bomber, for which the company is the prime contractor, is
Northrop's largest program. Northrop's B-2 Division is responsible for
assembly (in Palmdale, California) of the B-2's airframe, systems
integration and parts of the B-2's navigation and electronic
warfare/situational awareness system. Major subcontractors include Boeing,
which makes the aft and outboard wing sections, landing gear and fuel
system and Vought Aircraft, which makes fuselage sections. The Air Force
plans to operate two B-2 bomber squadrons of eight aircraft each with the
remaining four operational aircraft available to fill in for those in depot
being serviced or upgraded.
The company's Aircraft Division is the principal subcontractor on the
McDonnell Douglas F/A-18 program. The F/A-18 is a fighter/ground-attack
aircraft that can carry either one or two crew members. It is principally
deployed by the U.S. Navy on aircraft carriers, but several nations have
purchased the aircraft and use it as a land-based combat aircraft. The
company builds approximately 40% of the aircraft including the center and
aft fuselage sections and vertical tails. Of the several versions of the
F/A-18 in service, the A is a single seat combat aircraft that was first
delivered to the Navy in 1980 and the B is a two seat version principally
used for training. A/B production ended in 1987 when a transition was made
to the C and D versions of the aircraft that are now in production. The
single seat C version differs from the A through better avionics,
electronic warfare capability, the ability to carry more advanced missiles
and a longer range. The F/A-18E/F program is an improved version of the
F/A-18C/D under development for the U.S. Navy as its next generation multi-
mission aircraft.
Northrop's principal commercial program is the production of shipsets for
the Boeing 747, which it has done since the program's inception in 1966.
The company builds the 153 foot center fuselage section and related cargo
and passenger doors, floor beams and other structural components.
Northrop's Aircraft Division is responsible for developing the AGM-137
Tri-Service Stand-Off Attack Missile (TSSAM) which is a stealthy
conventional cruise missile. The program is being managed by the Air
Force, and was originally intended for all three U.S. military services,
before the Army's recent withdrawal. The company currently intends to
produce this missile at its Perry, Georgia, facility. Many aspects of the
program remain classified.
The company's Aircraft Division also produces aerial targets, principally
the BQM-74/Chukar. The BQM-74 series has been in production since the 1960s.
It is used by the Navy for air defense training, gunnery practice and weapon
system evaluation. The company builds the airframe and the electronics that
are used to guide the drone with the drone's engine being produced by
Williams International.
ECM denotes electronic countermeasures equipment manufactured by the
company's Electronics Systems Division (ESD) - Rolling Meadows Site. The
largest program in this business area is the AN/ALQ-135, which is an
internally mounted radar jammer deployed on F-15 aircraft as part of that
aircraft's Tactical Electronic Warfare System. The AN/ALQ-162 "Shadowbox"
is a jammer built specifically to counter continuous wave (CW) radars. The
AN/ALQ-162 has been installed on F/A-18C/D and AV-8B aircraft. It is also
being deployed on U.S.Army helicopters and special mission aircraft and it
has been sold to the Danish Air Force for installation on Draken and F-16
fighters.
Northrop's ESD-Hawthorne Site, as the prime contractor to the U.S. Army,
is developing a "brilliant" anti-armor submunition designated as BAT with
production scheduled to commence in 1997. BAT is a three foot long, 44
pound, wide-area-attack submunition that would be used to disable and
destroy armored vehicles and trucks. BATs are meant to be carried and
dispensed by a larger missile. BATS will be ejected over an armored
vehicle column or attacking formation. Each BAT has an infrared sensor
that can home in on the heat generated by a vehicle's engine, and an
acoustic sensor that can home in on the noise created by the tank or
truck's engine.
Tables of contract acquisitions, sales, and funded order backlog by major
program follow and complement industry segment data. B-2, F/A-18 and 747
are currently the major programs of the aircraft industry segment. ECM,
BAT and MX Peacekeeper are included in the electronics industry segment.
The company's MUVS industry segment includes TSSAM. The "all other"
category includes aerial targets and other work done by the MUVS industry
segment, as well as the balance of the company's numerous other contracts,
classified and unclassified.
RESULTS OF OPERATIONS BY INDUSTRY SEGMENT
AND MAJOR CUSTOMER
<TABLE>
<CAPTION>
Year ended December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Revenue:
Aircraft
United States Government $3,570 $3,864 $3,728 $3,629 $3,498
Other customers 543 560 553 498 508
Intersegment sales 1 1 1 2
Other income(deductions) (4) (6) (4) 3
4,110 4,419 4,278 4,130 4,008
Electronics
United States Government 582 677 738 760 748
Other customers 15 9 18 31 32
Intersegment sales 114 120 118 134 121
Other deductions (8) (1) (13) (2) (4)
703 805 861 923 897
Missiles and Unmanned Vehicle Systems
United States Government 250 329 541 423 274
Other customers 24 23 21 32 31
Other income 1 1 1 1
275 353 563 456 305
Services
United States Government 79 88 95 117 157
Intersegment sales 1 1
Other deductions (1)
79 87 95 118 158
Intersegment eliminations (115) (121) (119) (135) (124)
Total revenue $5,052 $5,543 $5,678 $5,492 $5,244
Operating Profit(Loss)
Aircraft $ 387 $ 357 $ 384 $ 262 $ 284
Electronics 56 63 54 56 (11)
Missiles and Unmanned Vehicle Systems (185) (135) 33 24 (142)
Services 4 3 4 5 5
Total operating profit 262 288 475 347 136
Adjustments to reconcile
operating profit to operating margin:
Other (income)deductions included above 11 7 16 (2) 4
State and local income taxes (18) (12) (30) (14) (6)
General corporate expenses (84) (103) (107) (97) (107)
Corporate retiree benefit income(cost) 48 49 (2) 57 (4)
Operating margin $ 219 $ 229 $ 352 $ 291 $ 23
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Contract Acquisitions
Aircraft $3,764 $3,072 $6,297 $5,492 $4,739
Electronics 616 568 722 612 506
Missiles and Unmanned Vehicle Systems 352 435 450 386 608
Services 75 89 83 110 130
Total acquisitions $4,807 $4,164 $7,552 $6,600 $5,983
Funded Order Backlog
Aircraft $5,650 $5,999 $7,351 $5,335 $3,970
Electronics 699 680 798 832 1,011
Missiles and Unmanned Vehicle Systems 527 449 366 478 547
Services 43 47 46 58 65
Total backlog $6,919 $7,175 $8,561 $6,703 $5,593
Identifiable Assets
Aircraft $1,793 $1,849 $1,913 $2,034 $2,088
Electronics 325 360 445 479 547
Missiles and Unmanned Vehicle Systems 175 272 280 278 320
Services 25 27 25 28 38
Operating assets 2,318 2,508 2,663 2,819 2,993
General corporate 621 654 465 275 203
Total assets $2,939 $3,162 $3,128 $3,094 $3,196
Capital Expenditures
Aircraft $ 71 $ 46 $ 57 $ 62 $ 91
Electronics 30 34 22 34 43
Missiles and Unmanned Vehicle Systems 8 7 7 20 43
Services 1 1 2 2 3
General corporate 25 35 30 3 7
Total expenditures $ 135 $ 123 $ 118 $ 121 $ 187
Depreciation and Amortization
Aircraft $ 142 $ 85 $ 96 $ 125 $ 143
Electronics 40 39 42 47 53
Missiles and Unmanned Vehicle Systems 7 10 10 9 10
Services 1 1 3 3 3
General Corporate 24 25 20 3 11
Total depreciation and amortization $ 214 $ 160 $ 171 $ 187 $ 220
</TABLE>
Individual companies prosper in the competitive aerospace/defense
environment according to their ability to develop and market innovative
products. They must also have the ability to provide the people,
facilities, equipment and financial capacity needed to deliver those
products with maximum efficiency. It is necessary to maintain, as the
company has, sources for raw materials, fabricated parts, electronic
components and major subassemblies. In this manufacturing and systems
integration environment, effective oversight of subcontractors and
suppliers is as vital to success as managing internal operations.
Northrop's operating policies are designed to enhance these capabilities.
The company also believes that it maintains good relations with its
employees, a small number of whom are covered by collective bargaining
agreements.
U.S. Government programs in which Northrop either participates, or strives
to participate, must compete with other programs for consideration during
our nation's budget formulation and appropriation processes. As a
consequence of the end of the Cold War and pressure to reduce the federal
budget deficit, the U.S. defense budget is expected to continue to decline
for a number of years. Budget decisions made in this environment will have
long-term consequences for the size and structure of Northrop and the
entire defense industry. An important factor in determining Northrop's
ability to successfully compete for future contracts will be its cost
structure vis-a-vis other bidders.
Given these conditions, it is difficult to predict the amount and rate of
decline in defense outlays. Although the ultimate size of future defense
budgets remains uncertain, the defense needs of the nation are expected to
provide a substantial research and development (R&D) and procurement
business base for the company to pursue in the future.
Northrop has historically concentrated much of its efforts in such high
technology areas as stealth and precision weapons. Even though a high
priority has been assigned by the Department of Defense to our major
programs, there remains the possibility that one or more of them may be
reduced, stretched or terminated.
In the commercial aircraft market, many airlines have deferred deliveries
and purchases of new aircraft because of financial difficulties. This has
caused The Boeing Company to announce substantial reductions in its
scheduled production of various jetliners, including the 747. As a result,
Northrop's subcontract workload for the 747 has been stretched out
beginning in late 1993, with deliveries declining 40 percent through
mid-1994 and another 33 percent through mid-1995. Although business
conditions in the commercial aircraft industry currently remain tenuous,
the company is optimistic about the longer-term prospects for its
commercial aircraft structures business.
In September 1992, Northrop purchased a minority interest in the parent
company of Vought Aircraft Company (VAC), a manufacturer of major
subsections for both commercial and military aircraft. Northrop has an
option to purchase the remaining interest during a three-year period
beginning in late 1995. The investment was made in line with our previously
stated strategy to increase Northrop's participation in these markets over
the longer term. The decision to exercise the option will be based in part
on the business climate of the industry in the three-year period. VAC's
cash flow has been large enough to enable it to repay all the debt
undertaken to finance the acquisition, permit the early cancellation of
Northrop's loan guaranties, and pay its first cash dividend to Northrop,
nearly $2 million in 1993.
Northrop's emphasis on debt reduction, primarily through better cash
management, has resulted in lowering debt by over 86 percent during the
last four years, from $1.12 billion to $160 million. This gives Northrop
the ability to pursue new business opportunities when justified by
acceptable financial returns and technological risks. Northrop examines
opportunities to acquire or invest in new businesses and technologies to
strengthen its traditional business areas. The company also is exploring
new directions for marketing and capitalizing on its technologies and
skills by entering into joint ventures, partnerships or associations with
companies that are world class in nontraditional fields.
Northrop, as well as many other companies in the defense industry,
continues to suffer the effects of the Department of Defense's practice in
the 1980s of structuring new, high-risk development contracts as
fixed-price or capped cost-reimbursement type contracts. Although Northrop
stopped accepting these types of contracts in 1988, it has experienced
financial losses on several programs acquired under them in the past,
including TSSAM. This is Northrop's last remaining development program
being carried out under a fixed-price contract.
While Northrop conducts most of its business with the U.S. Government,
principally the Department of Defense, commercial sales still represent a
significant portion of total revenue.Prime contracts with various agencies of
the U.S. Government and subcontracts with other prime contractors are subject
to a profusion of procurement regulations, with noncompliance found by any
one agency possibly resulting in fines, penalties, debarment or suspension
from receiving additional contracts with all agencies. Given the company's
dependence on government business, suspension or debarment could have a
material adverse affect on the company's future. Moreover, these contracts
may be terminated at the Government's convenience. In the event of
termination for convenience, however, contractors are normally protected
by provisions covering reimbursement for costs incurred as well as the
payment of any applicable fees or profits.
Federal, state and local laws relating to the protection of the
environment affect the company's manufacturing operations. The company
has provided for the estimated cost to complete remediation where it is
probable that the company will incur such costs in the future, including
those for which it has been named a Potentially Responsible Party (PRP) by
the Environmental Protection Agency or similarly designated by other
environmental agencies. The company has been designated a PRP under
federal Superfund laws at three hazardous waste sites (Chemtronics,
Stringfellow and Operating Industries, Inc.) and under state law at four
sites (Southland Oil; ESD - Precision Products Plants 2 and 7; and
Lubrication Company of America). It is difficult to estimate the timing
and ultimate amount of environmental cleanup costs to be incurred in the
future due to the uncertainties regarding the extent of the required
cleanup and the status of the law, regulations and their interpretations.
Nonetheless, to assess the potential impact on the company's financial
statements, management estimates the total reasonably possible remediation
costs that could be incurred by the company. Such estimates take into
consideration the professional judgment of the company's environmental
engineers and, when necessary, consultation with outside environmental
specialists. In most instances, only a range of reasonably possible costs
can be estimated. The top end of the range is reflected as the total
estimate of reasonably possible costs; however, in the determination of
accruals the most probable amount is used when determinable and the low end
of the range is used when no single amount is more probable. The company
records accruals for environmental cleanup costs in the accounting period
in which the company's responsibility is established and the costs can be
reasonably estimated. Management estimates that at December 31, 1993, the
reasonably possible range of future costs for environmental remediation,
including Superfund sites, is $14 million to $26 million, of which $14
million has been accrued. The amount accrued has not been offset by
potential recoveries from insurance carriers or other potentially
responsible parties (PRPs). Should other PRPs not pay their allocable
share of remediation costs the company may have to incur costs in addition
to those already estimated and accrued. In 1993 the company was awarded a
judgement of $6.7 million against its insurance carrier with respect to
costs associated with the ESD-Precision Products Plant 2 remediation. This
award is currently on appeal and is not reflected in the company's 1993
financial statements. The company is making the necessary investments to
comply with environmental laws; however, the amounts, while not
insignificant, are not considered material to the company's financial
position or results of its operations.
Measures of Volume
Contract acquisitions tend to fluctuate widely and are determined by the
size and timing of new and add-on orders. The effects of multiyear orders
and/or funding can be seen in the highs and lows shown in the following
table.
B-2 acquisitions in 1993 include incremental funding for ongoing
development work, long-lead funding for the last five remaining production
aircraft, spares and other customer support for this 20 operational
aircraft program. In January of 1994, $2.4 billion of funding was awarded
to complete these five aircraft by modifying, effective October 29, 1993,
the previous Low Rate Initial Production (LRIP) contract. The company
still stands to gain future new post-production business, such as airframe
depot maintenance, repair of components, operational software changes and
product improvement modifications. The debate over the future of the B-2,
which is built on the nation's only extant bomber producing facility, has
yet to take place. Without future production orders the nations's multi-
billion dollar investment in this capability will be disassembled and
largely irretrievable.
..........................................................................
Contract Acquisitions
$ in millions 1993 1992 1991 1990 1989
B-2 $2,632 $2,235 $4,794 $3,749 $3,065
F/A-18C/D 89 576 564 529 632
F/A-18E/F 743 131 10
747 242 76 870 950 719
ECM 445 361 431 395 303
TSSAM 248 349 369 277 428
BAT 90 147 82 51 30
MX Peacekeeper 26 4 28 84 79
ATF 191 242
All other 292 285 404 374 485
$4,807 $4,164 $7,552 $6,600 $5,983
..........................................................................
In 1993, $743 million of funding was received toward the development of
the next generation F/A-18, the E/F version. This development program has
an estimated value of $1.4 billion to Northrop. No orders for new F/A-
18C/D shipsets were received in 1993 from the McDonnell Douglas
Corporation. In 1992, orders for 88 F/A-18C/D shipsets were received. In
1991, 70 F/A-18C/D shipsets were ordered, compared with 84 in each of the
years 1990 and 1989.
The Boeing Company ordered one hundred 747 shipsets in each of the years
1989 through 1991. In 1993, additional contract value was received for,
among other things, extending the delivery schedule of those shipsets into
1996.
Year-to-year sales vary less than contract acquisitions and reflect
performance under new and ongoing contracts. Sales for 1994 currently are
expected to be about $4.4 billion.
..........................................................................
Net Sales
$ in millions 1993 1992 1991 1990 1989
B-2 $2,881 $3,212 $3,100 $2,744 $2,554
F/A-18C/D 362 492 562 597 629
F/A-18E/F 279 118 10
747 531 549 540 483 461
ECM 372 378 415 425 341
TSSAM 179 265 390 343 219
BAT 100 135 71 55 22
MX Peacekeeper 31 46 90 153 239
ATF 191 242
All other 328 355 516 499 541
$5,063 $5,550 $5,694 $5,490 $5,248
..........................................................................
The increasing trend of B-2 sales, begun in 1990 was reversed in 1993, one
year earlier than forecasted a year ago. A decrease in revenues from
engineering and manufacturing development (EMD) work exceeded the decrease
in revenues for production work. The level of EMD effort, included in
amounts reported as customer-sponsored R&D, constituted 28 percent of the
total B-2 revenue, down from 34 percent in 1992. Current planning data
indicate that the level of overall B-2 revenue will decline roughly 20
percent per year for the remainder of the decade.
Sales under the F/A-18C/D program declined in 1993 with the delivery of 52
shipsets. In 1992, the company delivered 75 shipsets, compared with 80 in
1991, 94 in 1990, and 101 in 1989. In 1994 and 1995, the company plans to
deliver 42 and 60 F/A-18C/D shipsets respectively. F/A-18E/F revenue is
expected to exceed $400 million in 1994.
Deliveries of 747 center fuselages were 54 in 1993, 60 in 1992, 62 in
1991, 56 in 1990, and 54 in 1989. Thirty-one fuselages are expected to be
delivered in 1994 and 26 in 1995.
Sales reversals were recorded on the TSSAM contract amounting to $128
million in 1993, $80 million in 1992 and $120 million in 1989. These
reversals followed reductions in the estimate of the percentage of work
completed to date on the contract. In addition, 1991 MUVS segment sales
included the final revenue earned from the conclusion that year of the
Tacit Rainbow missile program.
Electronics segment revenues declined 13 percent in 1993 with half the
decline coming from two programs -- lower BAT development revenue and lower
MX Peacekeeper sales. The final seven Peacekeeper IMUs were delivered in
1991 versus 16 in 1990, and 28 in 1989. Ongoing system support work will
generate a modest amount of future revenue. The second largest cause of
reduced electronics segment revenues in 1993 stemmed from lower sales in
the sensor product area while in both 1993 and 1992 fewer deliveries of
missile components by the ESD-Precision Products operation were made versus
the respective previous year. Overall Electronics sales are expected to
decline only slightly for 1994.
The year-end funded order backlog is the sum of the previous year-end
backlog plus the year's contract acquisitions minus the year's sales.
Backlog is converted into the following years' sales as deliveries are made
under contract terms. It is expected that approximately 60 percent of the
1993 year-end backlog will be converted into sales in 1994.
..........................................................................
Funded Order Backlog
$ in millions 1993 1992 1991 1990 1989
B-2 $3,921 $4,170 $5,147 $3,453 $2,448
F/A-18C/D 443 716 632 630 698
F/A-18E/F 477 13
747 723 1,012 1,485 1,155 688
ECM 540 467 484 468 498
TSSAM 367 298 214 235 301
BAT 20 30 18 7 11
MX Peacekeeper 17 22 64 126 195
All other 411 447 517 629 754
$6,919 $7,175 $8,561 $6,703 $5,593
..........................................................................
Total U.S. Government orders, including those made on behalf of foreign
governments (FMS), comprised 89 percent of the backlog at the end of 1993
compared with 85 percent at the end of 1992, 82 percent at the end of both
1991 and 1990, and 87 percent at the end of 1989. Total foreign customer
orders, including FMS, accounted for 3 percent of the backlog at the end of
1993 compared with 2 percent in 1992, 3 percent in 1991, 4 percent in 1990,
and 3 percent in 1989. Domestic commercial business remaining in backlog
at the end of 1993 was 11 percent, 14 percent at the end of 1992, 17
percent for both 1991 and 1990, and 12 percent at the end of 1989.
Measures of Performance
Loss provisions made during 1993 on the TSSAM development contract
aggregated $201 million, and followed similar provisions of $152 million
made in the third quarter of 1992 and $150 million in the second quarter of
1989. The expected loss from the performance of this classified long-term
fixed-price R&D contract caused major losses in the MUVS segment during
four of the last six years. Most of these provisions resulted from
additional costs necessary to comply with contractual requirements. Other
recent factors included the U. S. Army's January 1994 stop work order
preparatory to the deletion of its variant of TSSAM along with the
Government's indication that it has further delayed a production decision
on other variants until June 1994. Production delays cause increased
amounts of sustaining labor to be absorbed by the development phase of the
program.
Anticipated total production quantities are approaching one-half of those
originally contemplated. This could result in an increased
production cost per unit. The company faces the challenge of successfully
completing, by the end of 1997, the development phase of the program in
which it has invested over $600 million. Given the pressure to shrink the
defense budget, the Government may have to consider whether it should
complete the current TSSAM program as planned, modify it, or terminate it
for its convenience and reallocate available funds to other activities.
The company plans to recover the $144 million investment in plant and
equipment that it made for the production phase of the program through its
successful execution. Should the Government decide not to produce the
missile, the company will seek to recoup its investment from the
government. Because of the nature of the TSSAM long-term fixed-price
development contract, additional losses are possible. The ultimate loss on
this contract will depend not only upon the accuracy of the company's cost
projections, but also the eventual outcome of an equitable settlement of
outstanding contractual issues with the U.S. Government, including a $154
million claim filed in November 1993.
The company's traditional line of aerial targets was profitable in each
of the last five years. The overall increase in MUVS operating profit in
1991 versus 1990 resulted from the completion of the Tacit Rainbow missile
program at less cost than had previously been estimated.
The company has improved the margin rate of each of its two largest and
most mature industry segments -- Aircraft and Electronics. These
improvements have been partially offset by the poor performance of the MUVS
segment. Company-wide efforts to improve and streamline the management of
the business continue. Tighter business controls, cost reduction, cash
management and effective asset utilization are all aimed at contributing to
two important long standing financial goals; achieving a 20 percent return
on equity and repaying debt, if we so choose, by the mid-1990s. This
financial report demonstrates the degree to which the accomplishment of
these goals is being achieved.
Operating profit in the aircraft industry segment increased to its
highest level ever in 1993 as margin rates improved on all major aircraft
programs - B-2, F/A-18 and 747. The F/A-18 and 747 improvements came
despite reduced shipset deliveries in 1993. The primary cause of aircraft
segment operating profit being higher in 1991 than 1992 was the one
percentage point increase in the B-2 LRIP contract margin rate made during
the fourth quarter of 1991 on sales recorded prior to that date ($40
million of margin). This 1991 margin rate adjustment followed
definitization of the LRIP contract late in the year and took into account
the company's production and assembly experience as of that date. Setting
aside the $40 million adjustment, the B-2 program provided an increasing
amount of operating margin in each of the last three years as the mix of
sales continue its shift from relatively low-margin R&D work to production
work. Following the recent award of the last increment of production
funding for the B-2 the company will record future operating margin
increases on all production aircraft as these units are delivered and
accepted by the customer. At the time each unit is delivered an assessment
will be made of the status of the production contract so as to estimate the
amount of any probable additional margin available beyond that previously
recognized. That unit's proportionate share of any such unrecognized
remaining balance will then be recorded. In this fashion it is believed
that margin improvements will be recognized on a more demonstrable basis,
much like in the case of incentive or award fees. The current 15
production units are scheduled for their initial delivery over a five year
period, which began in December 1993. All but two units (four equivalent
units for this purpose) will be returned for scheduled retrofitting with
final deliveries beginning in 1997 and ending in 2000. It is anticipated
that the total of 30 equivalent units will be delivered at a rate of from
three to five per year over the next seven years.
Affecting the comparison of 1992 aircraft operating profit with that of
1991 were the slightly lower rates of margin earned on fewer F/A-18C/D and
747 shipset deliveries. In addition, a low rate of margin was recorded in
1992 on the F/A-18E/F as this program is in its early phase of development.
Partially offsetting the B-2 margin improvement for 1991 was the lower
rate of margin earned on the reduced number of F/A-18 shipsets delivered
during 1991. A slightly lower rate of margin was earned on higher 747
shipset deliveries generating an overall increase in the amount of 747
margin. Affecting comparisons of 1991 aircraft segment operating profit
with those of the previous two years are the amounts invested and written
off on the ATF program - $66 million during 1990, compared with $73 million
in 1989. With the completion of the DEM/VAL phase of ATF in 1990 the
company discontinued making any material amount of expenditures for
company-sponsored R&D.
The 13 percent sales decline in the electronics segment for 1993 was
accompanied by an 11 percent decline in operating profit. An increase in
ECM operating margin and the benefit of a $5 million reduced loss at ESD's
Precision Products operation offset lower margins in the sensor product
area and on the BAT program.
The amount and rate of operating profit earned by the electronics segment
increased during 1992 despite the loss incurred by ESD Precision Products.
ESD Precision Product's operating loss declined $7 million from that of
1991. In 1992 Precision Products suffered from the effects of a 24 percent
sales decline coupled with a $6 million write-off of unrecoverable
inventoried costs. Also influencing the trend in the electronics segment
operating profit has been the replacement of high-margin Peacekeeper
production revenue by low-margin BAT development revenue.
While the rate of operating profit for 1991 improved slightly for the
electronics segment, the amount of profit declined $2 million. The rate
increase was largely achieved by the ECM area where improved margins
accompanied higher sales of the successful AN/ALQ-135 system developed for
the F-15 fighter aircraft. Offsetting this increase was the cost of
settling various legal and product disputes, principally for ESD Precision
Products. Of the aggregate of $31 million in provisions made during 1991
for these issues, $12 million is reported in Other Deductions in the
Consolidated Statements of Operations.
Operating margin in 1993 included $71 million of pension income compared
with $83 million in 1992, and $23 million in 1991. Nearly offsetting the
1993 reduction in pension income was 1993's decline in the cost of
providing retiree health care and life insurance benefits - $32 million in
1993 versus $41 million in 1992, and $47 million in 1991. For calculating
the liability balances for these plans at December 31, 1993 the company
reduced the discount rate used from 8 to 7 percent and changed its employee
turnover assumptions. The net affect of this served to increase year-end
liability balances for all plans by $402 million. Also, for 1994, these
changes will cause a $27 million reduction in pension income and an $8
million increase in retiree health care and life insurance benefit costs
from what they otherwise would be.
The Financial Accounting Standards Board's (FASB) accounting standard No.
106 - Employers' Accounting for Postretirement Benefits Other than
Pensions - was adopted by the company in 1991. The liability representing
previously unrecognized costs of $145 million for all years prior to 1991
was recorded as of January 1, 1991, with an after-tax effect on earnings of
$88 million or $1.86 per share. The company's adoption in 1992 of the new
FASB accounting standard No. 112 - Employers' Accounting for Postemployment
Benefits - had no material effect on the company's financial position or
operating results.
Interest expense declined in each of the last four years - $9 million in
1993, $33 million in 1992, $15 million in 1991, and $29 million in 1990,
with nearly all of these reductions stemming from four years of debt
reduction which totaled $960 million, or 86 percent.
In 1991 the company adopted the FASB standard No. 109 - Accounting for
Income Taxes - and recorded, as of January 1, 1991, a benefit of $21
million, or 43 cents per share. As described in the accounting policy
footnote to the financial statements, any future change in the tax rate
would result in the immediate recognition in current earnings of the
cumulative effect from deferred tax assets and liabilities.
The company's effective federal income tax rate was 43.5 percent in 1993,
32.8 percent in 1992, and 3.2 percent in 1991. The rate for 1993 would
have been 31.8 percent but for the effects of the retroactive application
of The Revenue Reconciliation Act of 1993. The one percentage point
increase in the federal statutory income tax rate, now 35 percent, required
the redetermination of December 31, 1992 deferred tax asset and liability
balances. This redetermination added $18 million to 1993's tax provision
thereby reducing earnings per share by 38 cents. During 1989 final
regulations were issued concerning the research tax credit. The company
took a conservative approach in calculating its tax provisions since 1981
pursuant to uncertain proposed regulations. An exhaustive study was
undertaken throughout the company to redetermine qualifying expenditures in
compliance with final regulations so as to recalculate prior years' tax
credits and amend its tax returns as appropriate. The benefit resulting
from the conclusion of that study was the $90 million in additional
research credits recognized in the determination of the 1991 effective tax
rate of 3.2 percent.
Measures of Liquidity and Capital Resources
The evolution of the company's financial condition and liquidity, which
began in 1990, continued to improve in 1993. Over these last four years
operating cash flows have averaged $385 million annually. While cash flow
from operations increased $96 million in 1993 over that of 1992, it
declined $325 million in 1992 from that of 1991. Much of the increase in
1991's cash flow from operations resulted from the company finalizing the
B-2 LRIP contract, after it was about 50 percent complete, as well as
follow-on contracts for 747 and F/A-18 work. To a great extent the pace of
delivery of B-2 production aircraft and the satisfactory completion of
program milestones will dictate the future level of any required capital
resources. Provisions for contract losses are one of the important
elements shown in illustrating the difference between Net Income(Loss) and
cash flows from operating activities shown in the Reconciliation section of
the Consolidated Statements of Cash Flows. Cash outflow resulting from
accrued forward loss provisions on fixed-price R&D contracts follows in
succeeding periods, when the costs that they represent are incurred. Most
of the $664 million in loss provisions made in the MUVS segment over the
last six years was necessitated by the TSSAM program. As of December 31,
1993 all but $140 million of those loss provisions represent costs already
incurred.
The trend and relationship of sales volume with accounts receivable and
inventoried cost balances, before and after the benefit of progress
payments, is a useful measure in assessing liquidity. In 1987 the
company's net investment in these balances represented 25 percent of sales.
It had subsequently grown to 32 percent at year-end 1989, when Northrop's
debt peaked, before dropping to 27 percent at the end of 1993. The largest
recent reduction in gross accounts receivable and inventoried cost balances
occurred in 1991 as the result of the final billing and collection of ATF
contract balances, along with the completion of a number of B-2 contract
milestones during the year. A reduction in the rate used by the
Government to make progress payments to its customers applies to new
contracts entered into after legislation was enacted in 1993. Therefore,
it is not expected to have a demonstrable effect on the company's level of
working capital in the near term.
The following table is a condensed summary of the detailed cash flow
information contained in the Consolidated Statements of Cash Flows.
..........................................................................
Year ended December 31 1993 1992 1991 1990 1989
Cash came from
Customers 99% 98% 100% 85% 86%
Lenders 1% 2% 11% 13%
Buyers of assets 4% 1%
100% 100% 100% 100% 100%
Cash went to
Employees and suppliers of
services and materials 89% 93% 88% 81% 83%
Lenders 8% 3% 9% 16% 13%
Suppliers of facilities 2% 2% 2% 2% 3%
Sellers of assets 1%
Shareholders 1% 1% 1% 1% 1%
100% 100% 100% 100% 100%
..........................................................................
The above percentages of gross cash receipts and disbursements portray the
extent to which lenders supplemented customer financing until 1990 when it
became possible to repay that support through improved collections from
customers. Some other important indicators of short-term liquidity are the
trend in working capital, the current ratio and the ratio of long-term debt
to shareholders' equity. This information is reported in the table
captioned Selected Financial Data.
Total debt peaked at $1.3 billion in mid-1989. In February of 1990 the
company sold its headquarters complex in Los Angeles and applied the net
proceeds of $218 million toward reducing its short-term debt. In October
1990 the company reduced its former $750 million credit agreement to $400
million and converted that amount of short-term debt into long-term debt
that was repayable in 20 quarterly installments of $20 million. The
company at its option elected to prepay larger amounts. Cash flow from
operations during 1992 was sufficient to enable the company to pay the four
required installments totaling $80 million in converted credit agreement
debt as well as to prepay another $60 million of this debt. In February of
1993 the last two installments totaling $40 million were prepaid and in
November $210 million of private placement debt was paid. During three
months of 1993 it was necessary to supplement cash provided by operations
with short-term borrowings. These borrowings peaked at $232 million and
none was outstanding at 1993's year end. They were necessitated by
intermittent spikes in working capital needs on the B-2 and TSSAM programs.
Future near-term borrowing needs will be met through the use of short-term
credit lines and the company's $400 million revolving credit agreement,
which was renewed with comparable terms for four more years in January
1994.
To provide for long-term liquidity the company believes it could obtain
additional capital from such sources as: the public or private capital
markets, the further sale of assets, sale and leaseback of operating assets
and leasing rather than purchasing new assets. The company's final amount
of indebtedness, $160 million of private placement debt, is due to be paid
in November 1995.
The cash improvement program underway throughout the company since early
1989 has produced favorable results, with the expectation that further
efforts will result in minimizing, if not eliminating, the need to make
short-term borrowings during 1994. Cash generated from operations is
expected to be more than sufficient in 1994 to finance capital expansion
projects and continue paying dividends to the shareholders. Noncontract
R&D expenditures are expected to approximate $100 million in 1994 compared
with $97 million in 1993.
Capital expenditure commitments at December 31, 1993, were approximately
$115 million including $9 million for environmental control and compliance
purposes. The 1994 forecast of capital expenditures is $100 million.
The company will continue to provide the productive capacity to perform
its existing contracts, dispose of assets no longer needed to fulfill
operational requirements, prepare for future contracts and conduct R&D in
the pursuit of developing opportunities. While these expenditures tend to
limit short-term liquidity and profitability, they are made with the
intention of improving the long-term growth and profitability of the
company.
Based on recent cash flow improvements, anticipated future positive cash
flows, and unused and available capital resources, management believes that
it is in a strong position to pursue its strategic options - acquiring one
or more other businesses, raising cash dividends, repurchasing outstanding
common shares, or making other investments, to maximize the long-term
return to our shareholders.
Item 8. Financial Statements and Supplementary Data
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<CAPTION>
December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 100 $ 230 $ 203 $ 173 $ 5
Accounts receivable 820 791 860 844 1,019
Inventoried costs 569 670 693 721 683
Deferred state income taxes 46 38 28
Prepaid expenses 25 31 23 47 40
Total current assets 1,560 1,760 1,807 1,785 1,747
Property, plant and equipment at cost
Land and land improvements 118 117 117 106 114
Buildings 744 719 703 715 820
Machinery and other equipment 1,898 1,982 1,990 1,926 1,928
Leasehold improvements 29 59 65 63 62
2,789 2,877 2,875 2,810 2,924
Accumulated depreciation and amortization (1,773) (1,753) (1,698) (1,571) (1,484)
1,016 1,124 1,177 1,239 1,440
Other assets
Prepaid pension cost and intangible
pension asset 278 190 98 65 4
Investments in and advances to
affiliates and sundry assets 78 81 34 5 5
Deferred state income taxes 7 7 12
363 278 144 70 9
$ 2,939 $ 3,162 $ 3,128 $ 3,094 $ 3,196
</TABLE>
<TABLE>
<CAPTION>
December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Liabilities and Shareholders' Equity:
Current liabilities
Notes payable to banks $ $ 100 $ $ $ 570
Current portion of long-term debt 250 80 260
Trade accounts payable 324 363 407 330 511
Accrued employees' compensation 146 144 157 143 141
Income taxes payable 12 25 12 6
Deferred income taxes 426 389 353 336 248
Other current liabilities 171 160 174 134 180
Total current liabilities 1,079 1,406 1,196 1,215 1,656
Long-term debt 160 160 470 690 550
Accrued retiree benefits 308 266 218 37 33
Deferred gain on sale/leaseback 23 26 29 32
Deferred income taxes 47 50 33 87 82
Shareholders' equity
Paid-in capital
Preferred stock, 10,000,000 shares authorized
and none issued
Common stock, 200,000,000 shares authorized;
issued and outstanding
1993 -- 48,913,403; 1992 -- 47,398,303;
1991 -- 47,090,248; 1990 -- 46,937,671;
1989 -- 46,930,941 256 207 199 196 196
Retained earnings 1,070 1,051 987 843 689
Unvested employee restricted award shares (2) (2) (4) (6) (10)
Unfunded pension losses, net of taxes (2) (2)
1,322 1,254 1,182 1,033 875
$ 2,939 $ 3,162 $ 3,128 $ 3,094 $ 3,196
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
December 31, $ in millions, except per share 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales $5,063 $5,550 $5,694 $5,490 $5,248
Cost of sales
Operating costs 4,359 4,866 4,811 4,748 4,692
Administrative and general expenses 485 455 531 451 533
Operating margin 219 229 352 291 23
Other income(deductions)
Gain(loss) on disposals of property, plant
and equipment (26) (11) (6) 103 (9)
Interest income 2 4 11 3 2
Other, net 13 5 10 (4)
Interest expense (38) (47) (80) (95) (124)
Income(loss) before income taxes and
cumulative effect of accounting
principle changes 170 180 277 312 (112)
Federal and foreign income taxes(benefit) 74 59 9 102 (31)
Income(loss) before cumulative effect of
accounting principle changes 96 121 268 210 (81)
Cumulative effect on prior years of changes in
accounting principles for
Income taxes 21
Retiree health care and life
insurance benefits (88)
Net income(loss) $ 96 $ 121 $ 201 $ 210 $ (81)
Weighted average common shares
outstanding, in millions 48.1 47.2 47.1 47.0 47.0
Earnings(loss) per share before cumulative
effect of accounting principle changes $ 1.99 $ 2.56 $ 5.69 $ 4.48 $(1.71)
Cumulative effect on prior years of changes in
accounting principles, per share, for
Income taxes .43
Retiree health care and life
insurance benefits (1.86)
Earnings(loss) per share $ 1.99 $ 2.56 $ 4.26 $ 4.48 $(1.71)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
<CAPTION>
Year ended December 31, $ in millions,
except per share 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Paid-in Capital
At beginning of year $ 207 $ 199 $ 196 $ 196 $ 195
Employee stock awards and options
exercised, net of forfeitures 49 8 3 1
At end of year 256 207 199 196 196
Retained Earnings
At beginning of year 1,051 987 843 689 826
Net income(loss) 96 121 201 210 (81)
Cash dividends (77) (57) (57) (56) (56)
At end of year 1,070 1,051 987 843 689
Unvested Employee Restricted Award Shares
At beginning of year (2) (4) (6) (10) (17)
Forfeitures, net of grants 1 3 2
Amortization 1 2 1 5
At end of year (2) (2) (4) (6) (10)
Unfunded Pension Losses, Net of Taxes
At beginning of year (2)
Excess of additional minimum liability
over unrecognized prior service costs (2)
At end of year (2) (2)
Total shareholders' equity $1,322 $1,254 $1,182 $1,033 $ 875
Book value per share $27.04 $26.46 $25.11 $22.00 $18.65
Cash dividends per share 1.60 1.20 1.20 1.20 1.20
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Operating Activities
Sources of Cash
Cash received from customers
Progress payments $ 2,028 $ 2,647 $ 2,647 $ 2,618 $ 2,324
Other collections 2,924 2,914 3,050 2,977 2,830
Interest received 2 4 11 2 3
Income tax refunds received 3 3 1
Shareholder litigation settlement 9
Other cash receipts 6 5 4 17 19
Cash provided by operating activities 4,963 5,570 5,724 5,615 5,176
Uses of Cash
Cash paid to suppliers and employees 4,484 5,186 4,986 5,220 4,967
Interest paid 42 47 85 97 122
Fines from settled litigation 10 17
Income taxes paid 52 48 32 14 8
Other cash payments 5 5 2 1 1
Cash used in operating activities 4,583 5,286 5,115 5,349 5,098
Net cash provided by operating activities 380 284 609 266 78
Investing Activities
Additions to property, plant and equipment (134) (123) (118) (121) (187)
Proceeds from sale of property,
plant and equipment 2 5 3 252 14
Proceeds from sale of affiliates 8 1
Proceeds from sale of direct financing leases 22
Investments in affiliates, net of dividends 2 (47)
Other investing activities (1) (8) (3) 5
Net cash provided by (used in)
investing activities (123) (165) (123) 128 (145)
Financing Activities
Borrowings under lines of credit 55 100 750 783
Repayment of borrowings under lines of credit (155) (920) (659)
Principal payments of long-term
debt/capital leases (251) (140) (400)
Proceeds from issuance of stock 41 5 1
Dividends paid (77) (57) (57) (56) (56)
Net cash provided by (used in)
financing activities (387) (92) (456) (226) 68
Increase(decrease) in cash and cash equivalents (130) 27 30 168 1
Cash and cash equivalents balance at
beginning of year 230 203 173 5 4
Cash and cash equivalents balance
at end of year $ 100 $ 230 $ 203 $ 173 $ 5
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, $ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Reconciliation of Net Income(Loss) to Net Cash
Provided by Operating Activities:
Net income(loss) $ 96 $ 121 $ 201 $ 210 $ (81)
Adjustments to reconcile net income(loss) to
net cash provided
Depreciation and amortization 214 160 171 187 220
Common stock issued to employees 3 3 4 4 5
Amortization of restricted award shares 1 2 1 5
Loss(gain) on disposals of property,
plant and equipment 26 11 6 (103) 9
Cumulative effect on prior years of
changes in accounting principles for
Income taxes (21)
Retiree health care and life insurance benefits 88
Non-cash retiree pension cost(income) (40) (43) 14 (53) 7
Amortization of deferred gain on sale/leaseback (3) (3) (3) (2)
Loss(gain) on sale of affiliates (4) 7
Gain on sale of direct financing leases (13)
Decrease(increase) in
Accounts receivable (4) 339 1,058 (1,085) (1,209)
Inventoried costs 142 63 123 50 (86)
Prepaid expenses (10) (17) (8) (4)
Refundable income taxes 8 1
Increase(decrease) in
Progress payments (90) (340) (1,054) 1,204 1,138
Accounts payable and accruals (28) (43) 116 (211) 54
Provisions for contract losses 36 9 (100) (41) 60
Deferred income taxes 26 48 93 (34)
Income taxes payable 12 (25) 13 6 1
Other non-cash transactions 4 (1) (2) (2)
Net cash provided by operating activities $ 380 $ 284 $ 609 $ 266 $ 78
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
corporation and its subsidiaries. All material intercompany accounts,
transactions and profits are eliminated in consolidation. The investment in
the parent company of Vought Aircraft Company (VAC) is accounted for by the
cost method because it is a nonvoting minority interest. As there is no
trading in the shares of VAC, it is not practical to estimate its fair
value. Management does believe that its fair value approximates its
carrying amount of $45 million.
Industry Segment and Major Customer Data
Descriptions of the company's principal products and services can be found
in the Management's Discussion and Analysis section of this report.
Intersegment sales are transacted at actual cost incurred with no profit
added. Operating profit is defined to include the Other Income earned
by each industry segment, but exclude costs allocated to them for general
corporate expenses and state and local income taxes. The amount of the
difference between (1) the costs of retiree benefit plans (pension and
nonpension) allocable to contracts as determined by government cost
accounting standards, and (2) cost(income) as calculated in conformity
with financial accounting standards is captioned Corporate Retiree Benefit
Income(Cost) and is shown separately from general corporate expenses so as
not to distort operating profit as reported by industry segment. General
corporate assets include cash and cash equivalents, the company's
centralized data processing assets, corporate office furnishings and
equipment, other unallocable property, investments in affiliates,
prepaid pension cost and intangible pension asset.
Sales to the company's major customer, the U.S. Government (including
foreign military sales), are reported within each industry segment and in
total in Selected Financial Data. The company does not conduct a
significant volume of activity through foreign operations or in foreign
currencies.
Sales
Sales under cost-reimbursement, service, research and development, and
construction-type contracts are recorded as costs are incurred and include
estimated earned fees or profits calculated on the basis of the
relationship between costs incurred and total estimated costs (cost-to-cost
type of percentage-of-completion method of accounting). Construction-type
contracts embrace those fixed-price contracts that provide for the delivery
of a small number of units after a lengthy period of time over which a
significant amount of costs have been incurred. Sales under other types of
contracts are recorded as deliveries are made and are computed on the basis
of the estimated final average unit cost plus profit (units-of-delivery
type of percentage-of-completion method of accounting).
Certain contracts contain provisions for price redetermination or for cost
or performance incentives. Such redetermined amounts or incentives are
included in sales when the amounts can reasonably be determined. In the
case of the B-2 bomber production contract any future increases in
operating margin will be recognized on a units-of-delivery basis and
recorded as each equivalent production unit is delivered. Amounts
representing contract change orders, claims or limitations in funding are
included in sales only when they can be reliably estimated and realization
is probable. In the period in which it is determined that a loss will
result from the performance of a contract, the entire amount of the
estimated ultimate loss is charged against income. Loss provisions are
first offset against costs that are included in assets, with any remaining
amount reflected in Other Current Liabilities. Other changes in estimates
of sales, costs, and profits are recognized using the cumulative catch-up
method of accounting. This method recognizes in the current period the
cumulative effect of the changes on current and prior periods. Hence, the
effect of the changes on future periods of contract performance is
recognized as if the revised estimates had been the original estimates.
Contract Research and Development
Customer-sponsored research and development costs (direct and indirect
costs incurred pursuant to contractual arrangements) are accounted for like
other contract costs.
Noncontract Research and Development
This category includes independent research and development costs (indirect
costs allocable to U.S. Government contracts) and company-sponsored
research and development costs (direct and indirect costs not recoverable
under contractual arrangements). Independent research and development
(IR&D) costs are included in administrative and general expenses while
company-sponsored research and development costs are charged against income
as incurred.
Environmental Costs
Environmental liabilities are accrued when the company determines its
responsibility for cleanup costs and such amounts are reasonably estimable.
When only a range of amounts is established and no amount within the range
is better than another the minimum amount in the range is recorded. The
company does not anticipate and record insurance recoveries before
collection is probable.
Income Taxes
Provisions(Benefits) for federal, state and local income taxes are
calculated on reported financial statement pretax income(loss) based on
current tax law and also include, in the current period, the cumulative
effect of any changes in tax rates from those used previously in
determining deferred tax assets and liabilities. Such provisions(benefits)
differ from the amounts currently payable because certain items of income
and expense are recognized in different time periods for financial
reporting purposes than for income tax purposes.
The company reports certain contracts using different methods of tax
accounting for contracts in process and thus provides deferred taxes on the
difference between the financial and taxable income reported during the
performance of such contracts.
State and local income and franchise tax provisions are included in
administrative and general expenses.
Earnings(Loss) per Share
Earnings(Loss) per Share are based on the weighted average number of shares
of common stock outstanding during each period, after giving recognition to
stock splits and stock dividends. The dilutive effect of common stock
equivalents, shares under stock options, was insignificant.
Cash and Cash Equivalents
Included are interest-earning liquid debt instruments that mature in three
months or less from the date purchased. Amounts reported in the
Consolidated Statements of Financial Position approximate their fair value.
Accounts Receivable
Included are amounts billed and currently due from customers under all
types of contracts, amounts currently due but unbilled (primarily related
to contracts accounted for under the cost-to-cost type of
percentage-of-completion method of accounting), certain estimated contract
changes, claims in negotiation and amounts retained pending contract
completion.
Inventoried Costs
Inventoried costs primarily relate to work in process under fixed-price
type contracts (excluding those included in unbilled accounts receivable as
previously described). They represent accumulated contract costs less the
portion of such costs allocated to delivered items. Accumulated contract
costs include direct production costs, factory and engineering overhead,
production tooling costs, and allowable administrative and general expenses
(except for general corporate expenses and IR&D allocable to commercial
contracts, which are charged against income as incurred).
In accordance with industry practice, inventoried costs are classified as
a current asset and include amounts related to contracts having production
cycles longer than one year.
Depreciable Properties
Property, plant and equipment owned by the company are depreciated over the
estimated useful lives of individual assets. Capital leases providing for
the transfer of ownership upon their expiration or containing bargain
purchase options are amortized over the estimated useful lives of
individual assets. Most of these assets are depreciated using
declining-balance methods, with the remainder using the straight-line
method.
Accounts Receivable
Unbilled amounts represent sales for which billings have not been presented
to customers at year-end, including differences between actual and
estimated overhead and margin rates. These amounts are usually billed and
collected within one year, progress payments are however received on a
number of fixed-price contracts accounted for using the cost-to-cost type
of percentage-of-completion method.
Amounts due upon contract completion are retained by customers until work
is completed and customer acceptance is obtained.
Accounts receivable at December 31, 1993, are expected to be collected in
1994 except for approximately $3 million due in 1995 and $4 million due in
1996 and later. These amounts principally relate to long-term contracts
with the U.S. Government.
Allowances for doubtful amounts represent mainly estimates of overhead
type costs which may not be successfully negotiated and collected.
Contract loss provisions are reflected as an offset to accounts receivable
to the extent related costs are contained therein.
<TABLE>
Accounts receivable were composed of the following:
<CAPTION>
......................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Due from U.S. Government, long-term contracts:
Current accounts
Billed $ 65 $ 82 $ 70 $ 65 $ 88
Unbilled 3,050 3,100 3,518 4,467 3,311
Progress payments received (2,410) (2,467) (2,777) (3,757) (2,503)
Net current accounts 705 715 811 775 896
Due upon availability of funds 69
Due upon contract completion 14 19 4 10 13
719 734 815 785 978
Due from other customers, long-term contracts:
Current accounts
Billed 66 31 37 39 33
Unbilled 43 48 15 58 28
Due upon contract completion 1
109 79 52 97 62
Total due, long-term contracts 828 813 867 882 1,040
Trade and other accounts receivable:
Due from U.S. Government 36 28 38 33 46
Due from other customers 13 7 7 11 6
Total due, trade and other 49 35 45 44 52
877 848 912 926 1,092
Allowances for doubtful amounts (57) (57) (52) (82) (73)
$ 820 $ 791 $ 860 $ 844 $ 1,019
......................................................................................................
</TABLE>
<TABLE>
Inventoried Costs
<CAPTION>
Inventoried costs were composed of the following:
......................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Production costs of contracts in process $ 800 $ 920 $ 976 $1,050 $1,055
Administrative and general expenses 95 109 106 134 141
895 1,029 1,082 1,184 1,196
Progress payments received (326) (359) (389) (463) (513)
$ 569 $ 670 $ 693 $ 721 $ 683
......................................................................................................
</TABLE>
Inventoried costs relate to long-term contracts in process and include
expenditures for raw materials and work in process beyond what is required
for recorded orders. These expenditures are incurred to help maintain
stable and efficient production schedules. However, no material amount
representing claims, learning curve, unamortized tooling or other deferred
costs is included in inventoried costs.
The ratio of inventoried administrative and general expenses to total
inventoried costs is assumed to be the same as the ratio of total
administrative and general expenses to total contract costs.
According to the provisions of U.S. Government contracts, the customer has
title to, or a security interest in, substantially all inventories related
to such contracts.
Notes Payable to Banks
The company has available short-term credit lines in the form of money
market facilities with several banks. The amount of and conditions for
borrowing under these credit lines depend on the availability and terms
prevailing in the marketplace. No fees or compensating balances are
required for these credit facilities. The average outstanding balance for
days on which borrowings were made during 1993 was $80 million, at a
weighted average interest rate of 3.4 percent. The maximum amount
outstanding during the year occurred on December 24, 1993 - $232 million at
a weighted average interest rate of 3.4 percent. At December 31, 1993,
there were no outstanding money market loans.
In addition, the company maintained a credit agreement with a group of
domestic and foreign banks which made available $400 million on a revolving
credit basis. This agreement was renewed on January 7, 1994, at the same
dollar amount, for a period of four years. For 1993, the maximum amount
outstanding was also the average outstanding balance for days on which
borrowings were made -- $100 million at a weighted average interest rate of
3.7 percent. At December 31, 1993 there were no loans outstanding under
the credit agreement. In 1993, the company paid quarterly a commitment fee
of one-tenth percent per annum on the unused amounts and a facility fee of
one-fifteenth percent per annum on the total amount of the revolving credit
facility. Under both agreements, in the event of a "change in control,"
the banks are relieved of their commitments. Compensating balances are not
required under these agreements.
The company's credit agreements contain restrictions relating to the
payment of dividends, acquisition of the company's stock, aggregate
indebtedness for borrowed money and the maintenance of shareholders'
equity. At December 31, 1993, $295 million of retained earnings were
unrestricted as to the payment of dividends. Total indebtedness for all
types of borrowed money is limited to 150 percent of shareholders' equity,
as defined. At December 31, 1993, indebtedness was limited to $1,969
million.
<TABLE>
Income Taxes
Income tax expense(benefit), both federal and foreign (which arises primarily
from work performed abroad by domestic operations), was composed of the
following:
<CAPTION>
......................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Currently payable:
Federal income taxes $ 41 $ 7 $ 11 $ 9 $ 3
Foreign income taxes 1 1 1
42 8 11 9 4
Change in deferred federal income taxes 32 51 (2) 93 (35)
$ 74 $ 59 $ 9 $ 102 $ (31)
......................................................................................................
</TABLE>
Income tax expense(benefit) differs from the amount computed by multiplying the
statutory federal income tax rate times the income(loss) before income
taxes(benefit) due to the following:
<TABLE>
<CAPTION>
.....................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income tax expense(benefit) at statutory rate $ 59 $ 61 $ 94 $ 106 $ (38)
Retroactive effect of statutory rate increase 18
Provision for nondeductible expenses 1 1 8 1 7
Benefit from ESOP dividends (4) (3) (3) (6)
Research and experimentation tax credit (90)
Investment tax credit, net 1
$ 74 $ 59 $ 9 $ 102 $ (31)
......................................................................................................
</TABLE>
The research and experimentation tax credit shown for 1991 was the
outgrowth of an internal company study that determined the amount earned
over the years 1981 through 1990 in excess of the amount previously
recognized for those years pending final government regulations which were
not issued until 1989.
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes.
The principal type of temporary difference stems from the recognition of
income on contracts being reported under different methods for tax purposes
than for financial reporting. Effective January 1, 1991, the company
adopted FASB Statement No. 109.
The tax effects of significant temporary differences and carryforwards
that gave rise to year-end deferred tax balances since the adoption of FASB
statement No. 109, as broadly categorized in the Consolidated Statements of
Financial Position, were as follows:
........................................................................
$ in millions 1993 1992 1991
Net deferred tax assets
Deductible temporary differences
Income on contracts $ 21 $ 13 $ 8
Retiree benefit plan expense 21 21 16
Provision for estimated expenses 28 27 26
Other 2 2 3
72 63 53
Taxable temporary differences
Retiree benefit plan income (19) (15) (7)
Administrative and general expenses
period-costed for tax purposes (3) (6)
(19) (18) (13)
$ 53 $ 45 $ 40
Net deferred tax liabilities
Taxable temporary differences
Income on contracts $ 811 $ 789 $ 772
Excess tax over book depreciation 70 89 93
Retiree benefit plan income 94 64 33
Administrative and general expenses
period-costed for tax purposes 18 18 19
993 960 917
Deductible temporary differences
Provision for estimated expenses (135) (120) (116)
Retiree benefit plan expense (106) (93) (76)
Other (9) (11) (17)
(250) (224) (209)
Tax carryforwards
Operating losses (54) (117) (151)
Tax credits (129) (140) (150)
Alternative minimum tax credit (87) (40) (21)
(270) (297) (322)
$ 473 $ 439 $ 386
Overall net deferred tax liability
Total deferred tax liabilities (taxable
temporary differences above) $1,012 $ 978 $ 930
Less total deferred tax assets
(deductible temporary differences
and tax carryforwards above) 592 584 584
$ 420 $ 394 $ 346
.........................................................................
The tax carryforward benefits will be used in the periods that net deferred
tax liabilities mature. The expiration dates for these tax carryforward
benefits are: tax operating loss carryforwards - $54 million in 2004, and
tax credit carryforwards in various amounts over the years 1994 through
2005. The alternative minimum tax credit can be carried forward
indefinitely.
<TABLE>
Long-Term Debt
Long-term debt consisted of the following:
<CAPTION>
......................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Notes payable to institutional investors
with interest payable semi-annually
Notes due November 1991, 9.81% $ $ $ $180 $180
Notes due November 1993, 10.04% 210 210 210 210
Notes due November 1995, 10.24% 160 160 160 160 160
Term loans payable to banks at floating rates 40 180 400
160 410 550 950 550
Less current portion 250 80 260
$160 $160 $470 $690 $550
......................................................................................................
</TABLE>
The note purchase agreement with institutional investors contains
restrictions as to mergers and limitations on liens and aggregate
indebtedness - 150 percent of shareholders' equity. In the event of a
"change in control" the noteholders could require the company to repurchase
the outstanding notes at a premium.
During 1993 the company prepaid the $40 million term loan outstanding at
the end of 1992. The average outstanding balance during 1993, for the days
on which notes remained outstanding, was $40 million at a weighted average
interest rate of 3.7 percent. The company paid a facility fee of one-tenth
percent per annum on the total amount outstanding.
The principal amount of long-term debt outstanding at December 31, 1993,
is due in 1995. Based on interest rates currently available for debt with
terms and a due date similar to the company's $160 million in carrying
value of long-term debt, an estimate of its fair value would be $175
million.
Retirement Benefits
The company sponsors several defined-benefit pension plans covering
substantially all employees. Pension benefits for most employees are based
on the employee's years of service and compensation during the last five
years before retirement. It is the policy of the company to fund at least
the minimum amount required for all qualified plans, using actuarial cost
methods and assumptions acceptable under U.S. Government regulations, by
making payments into a trust separate from the company. Two of the four
qualified plans, including the main plan which covers over 80 percent of
all employees, were in a legally defined full-funding limitation
status. No contributions have been made to the main plan since 1986. To
protect the surplus of assets in the master trust from a "change in
control" the trust agreement and the main pension plan were appropriately
amended during 1991.
The company and a subsidiary also sponsor defined-contribution plans in
which all employees are eligible to participate. Company contributions, up
to 4 percent of compensation, are based on a formula resulting in the
matching of employee contributions.
In addition, the company and its subsidiaries provide certain health care
and life insurance benefits for retired employees. Employees achieve
eligibility to participate in these contributory plans upon retirement from
active service and if they are age 55 with 10 or more years of service, or
65 with 5 years service. Election to participate must be made at the date
of retirement. Qualifying dependents are also eligible for medical
coverage. Approximately 75 percent of the company's current retirees
participate in the medical plan. The cost and funded status for the medical
and life benefits are combined in the tables that follow because (1) life
benefits constitute an insignificant amount of the combined cost, and (2)
the assets in trust for each plan can be used to pay benefits under either
plan. Plan documents reserve the company's right to amend or terminate the
plans at any time. Premiums charged retirees for medical coverage are based
on years of service and are annually adjusted for the cost of the plan as
determined by an independent actuary. In addition to this medical inflation
cost-sharing feature, the plan also has provisions for deductibles,
copayments, coinsurance percentages, out-of-pocket limits, schedule of
reasonable fees, managed care providers, maintenance of benefits with other
plans, Medicare carve-out and a maximum lifetime benefit of $250,000 per
covered individual. It is the policy of the company to fund the maximum
amount deductible for income taxes into the VEBA trust established for
these benefits. Until 1991, the costs accrued for these plans were
determined by the aggregate actuarial cost method with such amounts paid by
the company, along with retiree contributions, into a separate trust. The
company elected to implement the new accounting standard, FASB Statement
No. 106, for 1991 by immediately recognizing the January 1, 1991,
accumulated postretirement benefit obligation of $437 million. This amount
was offset by $292 million, the fair value of plan assets held in trust
outside the company, in recording a net obligation and pretax charge to
operations of $145 million.
<TABLE>
The cost to the company of these plans in each of the last five years is
shown in the following table.
<CAPTION>
.....................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Defined-benefit pension plans
Actual return on assets $(449) $(298) $(825) $ 26 $(626)
Deferral of actual return on assets 153 38 604 (255) 442
Expected return on assets (296) (260) (221) (229) (184)
Service cost 104 99 88 92 89
Interest cost 190 175 158 147 137
Amortization of unrecognized items
Transition asset, net (42) (42) (42) (42) (42)
Prior service costs 15 13 14 14 14
Net gain from previous years (42) (68) (20) (35) (4)
Net periodic pension cost(income) $ (71) $ (83) $ (23) $ (53) $ 10
Defined-contribution plans $ 47 $ 48 $ 45 $ 44 $ 40
Retiree health care and life insurance benefit plans
Actual return on assets $ (19) $ (10) $ (85)
Deferral of actual return on assets (7) (13) 69
Expected return on assets (26) (23) (16)
Service cost 21 25 24
Interest cost 37 39 39
Net periodic postretirement benefit cost $ 32 $ 41 $ 47 $ 29 $ 31
......................................................................................................
</TABLE>
Major assumptions as of each year-end used in the accounting for the
defined-benefit plans are shown in the following table. Pension cost is
determined using all three factors as of the beginning of each year,
whereas the funded status of the plans, shown later, uses only the first
two factors, as of the end of each year.
<TABLE>
......................................................................................................
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Discount rate for obligations 7.00% 8.00% 8.00% 8.50% 8.25%
Rate of increase for compensation 5.50 5.50 5.50 5.50 5.50
Expected long-term rate of return on plan assets 8.25 8.25 8.25 8.25 8.25
......................................................................................................
</TABLE>
These assumptions were also used in retiree health care and life insurance
benefit calculations with one modification. Since, unlike the pension
trust, the earnings of the VEBA trust are taxable, the above pretax 8.25
percent return on plan assets was reduced accordingly to 5.5 percent after
taxes. A significant factor used in estimating future per capita cost, for
the company and its retirees, of covered health care benefits is known as
the health care cost trend rate assumption. The rate used was 10 percent
for 1993 and is assumed to decrease gradually to 6 percent for 2006 and
remain at that level thereafter. An additional one-percentage-point of
increase each year in that rate would result in a $9 million annual
increase in the aggregate of the service and interest cost components of
net periodic postretirement benefit cost, and a $68 million increase in the
accumulated postretirement benefit obligation at December 31, 1993.
The following tables set forth the funded status and amounts recognized in
the Consolidated Statements of Financial Position at each year-end for the
company's defined-benefit pension and retiree health care and life
insurance benefit plans. The summary showing pension plans whose
accumulated benefits are in excess of assets at December 31, 1993, is
comprised of one qualified plan along with four unfunded nonqualified plans
for benefits provided to directors, officers and employees either beyond
those provided by, or payable under, the company's main plan.
<TABLE>
<CAPTION>
......................................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Pension Plans Whose Assets Exceed Accumulated Benefits
Actuarial present value of benefit obligations
Vested benefits $ 2,059 $ 1,690 $ 1,538 $ 1,335 $ 1,178
Nonvested benefits 175 153 147 125 204
Accumulated benefit obligations 2,234 1,843 1,685 1,460 1,382
Effect of assumed salary rate increases 453 421 387 325 346
Projected benefit obligations 2,687 2,264 2,072 1,785 1,728
Less market value of plan assets 3,970 3,642 3,458 2,708 2,824
Excess of assets over projected
benefit obligations (1,283) (1,378) (1,386) (923) (1,096)
Unrecognized items
Net transition asset 374 415 458 501 541
Prior service costs (114) (133) (135) (146) (157)
Net gain 764 916 972 513 715
Accrued retiree benefits liability (pension asset)
included in Consolidated Statements of
Financial Position $ (259) $ (180) $ (91) $ (55) $ 3
......................................................................................................
Pension plan assets at December 31, 1993, were comprised of 60 percent equity type
investments in listed companies (including 7 percent in Northrop common stock)
and 40 percent in fixed income type investments, principally in U.S. Government
securities. The investment in Northrop represents 7,574,800 shares, or 16
percent of the company's total shares outstanding.
</TABLE>
<TABLE>
<CAPTION>
..............................................................................................
$ in millions 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Pension Plans Whose Accumulated Benefits Exceed Assets
Actuarial present value of benefit obligations
Vested benefits $ 57 $ 33 $ 32 $ 38 $ 31
Nonvested benefits 3 2
Accumulated benefit obligations 60 33 32 40 31
Effect of assumed salary rate increases 19 3 3 3 6
Projected benefit obligations 79 36 35 43 37
Less market value of plan assets 16 10
Excess of projected benefit obligations
over assets 63 36 35 33 37
Unrecognized items
Net transition obligation (5) (4) (5) (7) (6)
Prior service costs (14) 5 (7) (10) (10)
Net gain(loss) (7) (3) 9 13 7
Additional minimum liability 12 7 3 3 4
Accrued retiree benefits liability included
in Consolidated Statements of
Financial Position $ 49 $ 41 $ 35 $ 32 $ 32
......................................................................................................
</TABLE>
Retiree health care and life insurance plan assets at December 31, 1993, were
almost entirely comprised of equity type investments in listed companies.
<TABLE>
<CAPTION>
......................................................................................................
$ in millions 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Retiree health care and life insurance plans
Accumulated postretirement benefit obligation (APBO)
Retirees $ 274 $ 243 $ 240 $ 206
Fully eligible active employees 86 82 97 83
Active employees not yet eligible 192 194 172 148
552 519 509 437
Less market value of plan assets 373 369 372 292
Excess of APBO over assets 179 150 137 145
Unrecognized items
Net transition obligation (145)
Net gain 74 72 45
Accrued retiree benefits liability included
in Consolidated Statements of Financial Position $ 253 $ 222 $ 182 $
......................................................................................................
</TABLE>
Contingencies
The corporation and its subsidiaries have been named as defendants in
various legal actions. Based upon available information, it is the
company's expectation that those actions are either without merit or will
have no material adverse effect on the company's results of operations or
financial position.
Stock Rights
On September 21, 1988, the company adopted a Common Stock Purchase Rights
plan. One right for each outstanding share of common stock was issued to
shareholders of record on October 5, 1988. The rights will become
exercisable on the tenth business day after a person or group has acquired
15 percent or more of the general voting power of the company, or announces
an intention to make a tender offer for 30 percent or more of such voting
power, without the prior consent of the Board of Directors. If the rights
become exercisable, a holder will be entitled to purchase one share of
common stock from the company at an initial exercise price of $105.
If a person acquires more than 15 percent of the then outstanding voting
power of the company or if the company is combined with an acquiror, each
right will entitle its holder to receive, upon exercise, shares of the
company's or the acquiror's (depending upon which is the surviving company)
common stock having a value equal to two times the exercise price of the
right.
The company will be entitled to redeem the rights at $.02 per right at any
time prior to the earlier of the expiration of the rights in October 1998
or within 10 days following the date that a person has acquired or obtained
the right to acquire 15 percent of the general voting power of the company.
The rights are not exercisable until after the date on which the company's
prerogative to redeem the rights has expired. The rights do not have voting
or dividend privilege and cannot be traded independently from the company's
common stock until such time as they become exercisable.
Long-Term Incentive Stock Plan
The company's 1993 Long-Term Incentive Stock Plan provides for stock
options, stock appreciation rights (SARs) and stock awards to key
employees. This plan added 2,300,000 shares, of which up to one-half may be
in the form of stock awards, to the pool available for future grants. The
number of shares reserved for future grants shown in the following table
reflects both stock options and stock awards.
Stock awards, in the form of restricted performance stock rights, are
granted to key employees without payment to the company. Recipients of the
rights shall earn shares of stock based on a total shareholder return
measure of performance over a five year period with interim distributions
beginning three years after grant. If after the five year period no shares
have been earned, based on performance, 70 percent of the original grant
will be forfeited. Compensation expense will be estimated and accrued over
the vesting period.
Each grant of a stock option is made at the closing market price on the
date of the grant. When stock options are exercised, the amount of the
proceeds is added to paid-in capital. Under current accounting standards
there are no additions to or deductions from income in connection with
these options.
Termination of employment can result in forfeiture of some or all of the
benefits extended under the plans.
<TABLE>
Stock option activity for the last five years is summarized below:
<CAPTION>
........................................................................................................
Shares
Shares Shares Reserved for
Under Option Exercisable Future Grants
<S> <C> <C> <C>
Outstanding at January 1, 1989, nonstatutory options
with 1,200,000 SARs, at $27 to $47 per share 1,576,300 623,720 2,637,449
Granted 605,000
Cancelled (37,780)
Outstanding at December 31, 1989, nonstatutory options
with 1,800,000 SARs, at $17 to $47 per share 2,143,520 1,419,120 2,056,467
Granted 739,600
Cancelled (36,800)
Outstanding at December 31, 1990, nonstatutory options
with 1,800,000 SARs, at $15 to $47 per share 2,846,320 1,491,420 1,161,149
Granted 67,000
Cancelled (54,420)
Exercised or surrendered, at $17 to $19 per share (35,030)
Outstanding at December 31, 1991, nonstatutory options
with 1,800,000 SARs, at $15 to $47 per share 2,823,870 1,841,070 1,152,902
Granted 635,700
Cancelled (43,380)
Exercised or surrendered, at $16 to $29 per share (281,660)
Outstanding at December 31, 1992, nonstatutory options
at $15 to $47 per share 3,134,530 1,798,550 413,780
Granted 515,300
Cancelled (96,640)
Exercised or surrendered, at $15 to $30 per share (1,405,330)
Outstanding at December 31, 1993, nonstatutory options
at $15 to $36 per share 2,147,860 738,300 1,618,640
.......................................................................................................
</TABLE>
Unaudited Selected Quarterly Data
Quarterly financial results, as previously reported in unaudited quarterly
reports to shareholders, are set forth in the following tables together
with dividend and common stock price data:
<TABLE>
<CAPTION>
......................................................................................................
1993 Quarters, $ in millions, except per share 4 3 2 1
<S> <C> <C> <C> <C>
Net sales $1,256 $1,220 $1,312 $1,275
Operating margin(loss) (40) 83 93 83
Net income(loss) (35) 26 53 52
Earnings(loss) per share (.73) .54 1.12 1.09
Dividend per share .40 .40 .40 .40
Stock price:
High 39 1/4 42 3/8 42 5/8 37 3/8
Low 34 33 7/8 35 3/8 30 1/2
......................................................................................................
</TABLE>
The sum of quarterly earnings per share for 1993 does not equal earnings
per share for the year because the average number of common shares
outstanding for the second half of 1993 was disproportionately higher than
the full year average due to the high level of stock options exercised
during the second half.
Net income and earnings per share in the third quarter of 1993 were
reduced for the cumulative effect of the retroactive application of The
Revenue Reconciliation Act of 1993 signed into law August 10, 1993. The
one percentage point increase in the federal statutory income tax rate
required the redetermination of prior deferred tax asset and liability
balances as well as an increase in the taxes provided on pretax earnings
for the first three quarters of 1993. Third quarter 1993 net income and
earnings per share were accordingly reduced by $18 million, 38 cents per
share, and $2 million, 5 cents per share, respectively.
The operating loss in the fourth quarter of 1993 resulted from a $164
million provision for an increase in the estimated cost to complete the
TSSAM development contract. This provision followed similar ones amounting
to $14 million, $5 million and $18 million in each of the three preceding
quarters, respectively.
<TABLE>
<CAPTION>
......................................................................................................
1992 Quarters, $ in millions, except per share 4 3 2 1
<S> <C> <C> <C> <C>
Net sales $1,514 $1,294 $1,442 $1,300
Operating margin(loss) 99 (39) 89 80
Net income(loss) 55 (32) 51 47
Earnings(loss) per share 1.17 (.69) 1.08 1.00
Dividend per share .30 .30 .30 .30
Stock price:
High 34 7/8 28 3/8 27 3/8 26 7/8
Low 22 1/2 22 1/2 23 7/8 23 7/8
......................................................................................................
</TABLE>
The operating loss in the third quarter of 1992 resulted from a $152
million provision for the estimated financial impact of the company's
proposal to the U.S. Air Force to extend the schedule to complete the TSSAM
flight test program.
The corporation's common stock is traded on the New York and Pacific Stock
Exchanges (trading symbol NOC). The approximate number of holders of record
of the corporation's common stock at January 31, 1994, was 11,550.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Northrop Corporation
Los Angeles, California
We have audited the accompanying consolidated statements of financial
position of Northrop Corporation and Subsidiaries as of December 31 for
each of the years 1989 through 1993, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows
for the years then ended. Our audits also included the financial statement
schedules listed in the Index at Item 14. These financial statements and
financial statement schedules are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Northrop Corporation
and Subsidiaries at December 31 for each of the years 1989 through 1993,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. Also,
in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in the footnotes to the consolidated financial
statements, in 1991 the company changed its method of computing income
taxes by adopting Financial Accounting Standards Board Statement No. 109 -
Accounting for Income Taxes and its accounting for nonpension benefit plans
by adopting Financial Accounting Standards Board Statement No. 106 -
Employers' Accounting for Postretirement Benefits Other Than Pensions.
Deloitte & Touche
Los Angeles, California
February 1, 1994
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
No information is required in response to this Item.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information as to Directors will be incorporated herein by
reference to the Proxy Statement for the 1994 Annual Meeting of
Stockholders to be filed within 120 days after the end of the company's
fiscal year.
The information as to Executive Officers is contained in Part I of
this report as permitted by General Instruction G(3).
Item 11. Executive Compensation
The information required by this Item will be incorporated herein by
reference to the Proxy Statement for the 1994 Annual Meeting of
Stockholders to be filed within 120 days after the end of the company's
fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item will be incorporated herein by
reference to the Proxy Statement for the 1994 Annual Meeting of
Stockholders to be filed within 120 days after the end of the company's
fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required by this Item will be incorporated herein by
reference to the Proxy Statement for the 1994 Annual Meeting of
Stockholders to be filed within 120 days after the end of the company's
fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
Consolidated Statements of Financial Position
Consolidated Statements of Operations
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees other than
Related Parties
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Schedule VII - Guarantees of Securities of Other Issuers
Schedule VIII - Valuation and Qualifying Accounts
All other schedules are omitted either because they are not
applicable or not required or because the required information is included
in the financial statements or notes thereto.
Separate financial statements of the parent company are omitted since
it is primarily an operating company and minority equity interests in
and/or nonguaranteed long-term debt of subsidiaries held by others than the
company are in amounts which together do not exceed 5 percent of the total
consolidated assets at December 31, 1993.
Exhibits:
3(a) Certificate of Incorporation, as amended (incorporated by
reference to Form SE filed March 30, 1989).
3(b) Northrop Corporation Bylaws, as amended (incorporated by reference
to Form SE filed March 30, 1993).
4(a) Common Stock Purchase Rights Plan (incorporated by reference to
Form 8-A filed September 22, 1988 and amended on August 2, 1991).
4(b) Note Purchase Agreement dated October 15, 1988 among Northrop
Corporation and various Institutional Investors (incorporated by
reference to Form SE filed March 30, 1989).
10(a) Northrop Corporation Credit Agreement dated as of January 7, 1994.
10(b) Uncommitted Credit Facility dated June 14, 1990, between Northrop
Corporation and Bank of New York (incorporated by reference to
Form SE filed March 30, 1992), which is substantially identical to
facilities between Northrop and certain banks some of which are
parties to the Credit Agreement filed as Exhibit (10)(a) hereto.
*10(c) 1973 Incentive Compensation Plan (incorporated by reference to
Form 8-B filed June 21, 1985).
*10(d) 1973 Performance Achievement Plan (incorporated by reference to
Form 8-B filed June 21, 1985).
*10(e) Northrop Supplemental Plan 2.
*10(f) Northrop Corporation ERISA Supplemental Plan 1.
*10(g) Retirement Plan for Independent Outside Directors (incorporated by
reference to Form SE filed March 29, 1991).
*10(h) 1987 Long-Term Incentive Plan, as amended (incorporated by
reference to Form SE filed March 30, 1989).
10(i) Deferred Compensation Arrangement under Performance Achievement
Plan (incorporated by reference to Form 8-B filed June 21, 1985).
*10(j) Supplemental Life Insurance Policy (incorporated by reference to
Form 8-B filed June 21, 1985).
*10(k) Supplemental Accidental Death and Dismemberment Insurance Policy
(incorporated by reference to Form 8-B filed June 21, 1985).
*10(l) Supplemental Long-Term Disability Insurance Policy (incorporated
by reference to Form 8-B filed June 21, 1985).
*10(m) Supplemental Health Insurance Policy (incorporated by reference to
Form 8-B filed June 21, 1985).
*10(n) Supplemental Dental Insurance Policy (incorporated by reference to
Form 8-B filed June 21, 1985).
*10(o) Employment Agreement dated October 18, 1989 between Northrop
Corporation and Oliver C. Boileau, Jr. (incorporated by reference
to Form SE filed March 30, 1993).
*10(p) Northrop Corporation 1993 Long-Term Incentive Stock Plan
(incorporated by reference to Northrop Corporation 1993 Proxy
Statement filed March 30, 1993).
*10(q) Northrop Corporation 1993 Non-employee Directors Plan
(incorporated by reference to Northrop Corporation 1993 Proxy
Statement filed March 30, 1993).
10(r) Northrop Corporation Special Severance Pay Agreement
11 Statement Re Computation of Per Share Earnings
23 Independent Auditors' Consent
24 Power of Attorney
___________
* Listed as Exhibits pursuant to Item 601(b)(10) of Regulation S-K
(b) No reports on Form 8-K were filed during the three months ended
December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 28th day of February 1994.
Northrop Corporation
By: &&PINAZ2928
Nelson F. Gibbs
Corporate Vice President and
Controller
(Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on behalf of the registrant this 28th day of
February 1994, by the following persons and in the capacities indicated.
Signature Title
Kent Kresa* Chairman of the Board, President and Chief
Executive Officer and Director
(Principal Executive Officer)
Oliver C. Boileau, Jr. * Director
Jack R. Borsting* Director
John T. Chain, Jr.* Director
Jack Edwards* Director
Barbara C. Jordan* Director
Aulana L. Peters* Director
Richard R. Rosenberg* Director
William F. Schmied* Director
John Brooks Slaughter* Director
Wallace C. Solberg* Director
Richard J. Stegemeier* Director
Richard B. Waugh, Jr.* Corporate Vice President and Chief
Financial Officer
*By: &&PINAD1368
Sheila M. Gibbons, Attorney-in-Fact
pursuant to a power of attorney
<TABLE>
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
(Dollars in Thousands)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Balance at
Balance Deductions End of Period
at
Beginning Amounts
of Amounts Written Not
Classification Period Additions Collected Off Current Current
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1990 $ 347 $ 9 $ 356 $ -0- $ -0- $ -0-
</TABLE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Dollars in Thousands)
<CAPTION>
COL A. COL B. COL. C COL. D COL. E COL. F
Other
Balance at Changes Balance
Beginning Additions Add at End
Classification of Period At Cost Retirements (Deduct)(1) of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1989:
Land........................... $ 74,032 $ $ 184 $ $ 73,848
Land improvements.............. 42,888 (2,574) 40,314
Buildings...................... 783,871 33,458 237 2,574 819,666
Machinery and other equipment.. 1,857,470 149,746 79,974 1,927,242
Leasehold improvements......... 60,759 3,626 2,172 62,213
$2,819,020 $186,830 $ 82,567 $ -0- $2,923,283
Year ended December 31, 1990:
Land........................... $ 73,848 $ $ 6,152 $ (1,574) $ 66,122
Land improvements.............. 40,314 4,201 4,755 39,760
Buildings...................... 819,666 20,099 106,687 (18,236) 714,842
Machinery and other equipment.. 1,927,242 92,358 78,454 (15,280) 1,925,866
Leasehold improvements......... 62,213 4,526 2,996 63,743
$2,923,283 $121,184 $199,044 $(35,090) $2,810,333
Year ended December 31, 1991:
Land........................... $ 66,122 $ $ $ $ 66,122
Land improvements.............. 39,760 10,537 3 32 50,326
Buildings...................... 714,842 22 1,597 (10,468) 702,799
Machinery and other equipment.. 1,925,866 103,152 48,992 10,114 1,990,140
Leasehold improvements......... 63,743 3,688 2,119 (17) 65,295
$2,810,333 $117,399 $ 52,711 $ (339) $2,874,682
Year ended December 31, 1992:
Land........................... $ 66,122 $ 850 $ 322 $ $ 66,650
Land improvements.............. 50,326 619 33 (2) 50,910
Buildings...................... 702,799 15,722 536 1,142 719,127
Machinery and other equipment.. 1,990,140 102,522 111,190 122 1,981,594
Leasehold improvements......... 65,295 2,810 8,156 (1,262) 58,687
$2,874,682 $122,523 $120,237 $ -0- $2,876,968
Year ended December 31, 1993:
Land........................... $ 66,650 $ 8 $ $ $ 66,658
Land improvements.............. 50,910 1,637 912 28 51,663
Buildings...................... 719,127 15,645 476 9,449 743,745
Machinery and other equipment.. 1,981,594 114,507 198,815 528 1,897,814
Leasehold improvements......... 58,687 3,110 22,855 (10,005) 28,937
$2,876,968 $134,907 $223,058 $ -0- $2,788,817
</TABLE>
___________________
(1) Transfers between classifications and between operating elements and, in
1990, assets taken out of operation and held for sale transferred to
prepaid expenses. Depreciation and amortization, including capital
leases, is computed using the following lives:
Years
Land improvements . . . . . . . . . . . . . . . . . 4 to 25
Buildings . . . . . . . . . . . . . . . . . . . . . 4 to 45
Machinery and other equipment . . . .. . . . . . . 2 to 20
Leasehold improvements. . . . . . . .. . . . . . . Length of Lease
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Dollars in Thousands)
<CAPTION>
COL A. COL B. COL. C COL. D COL. E COL. F
Other
Balance at Changes-- Balance
Beginning Additions Add at End
Classification of Period At Cost Retirements (Deduct)(1) of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1989:
Land improvements.............. $ 17,038 $ 2,239 $ $ $ 19,277
Buildings...................... 204,254 29,879 100 234,033
Machinery and other equipment.. 1,072,205 180,925 57,959 8 1,195,179
Leasehold improvements......... 29,383 7,524 1,633 (8) 35,266
$1,322,880 $220,567 $ 59,692 $ -0- $1,483,755
Year ended December 31, 1990:
Land improvements.............. $ 19,277 $ 1,901 $ 1,175 $ (642) $ 19,361
Buildings...................... 234,033 25,820 24,768 (5,354) 229,731
Machinery and other equipment.. 1,195,179 150,921 55,779 (8,955) 1,281,366
Leasehold improvements......... 35,266 8,042 2,707 (2) 40,599
$1,483,755 $186,684 $ 84,429 $(14,953) $1,571,057
Year ended December 31, 1991:
Land improvements.............. $ 19,361 $ 2,250 $ $ 27 $ 21,638
Buildings...................... 229,731 25,478 412 (499) 254,298
Machinery and other equipment.. 1,281,366 135,849 41,864 481 1,375,832
Leasehold improvements......... 40,599 7,723 2,107 (9) 46,206
$1,571,057 $171,300 $ 44,383 $ -0- $1,697,974
Year ended December 31, 1992:
Land improvements.............. $ 21,638 $ 2,400 $ 32 $ (1) $ 24,005
Buildings...................... 254,298 24,879 508 834 279,503
Machinery and other equipment.. 1,375,832 127,209 98,061 107 1,405,087
Leasehold improvements......... 46,206 5,411 6,186 (940) 44,491
$1,697,974 $159,899 $104,787 $ -0- $1,753,086
Year ended December 31, 1993:
Land improvements.............. $ 24,005 $ 3,278 $ 910 $ 14 $ 26,387
Buildings...................... 279,503 56,385 351 4,619 340,156
Machinery and other equipment.. 1,405,087 150,761 173,299 490 1,383,039
Leasehold improvements......... 44,491 3,929 20,386 (5,123) 22,911
$1,753,086 $214,353 $194,946 $ -0- $1,772,493
__________________
(1) Transfers between classifications and between operating elements and, in assets taken out of
1990, operation and held for sale transferred to prepaid expenses.
</TABLE>
<TABLE>
SCHEDULE VII - GUARANTEES OF SECURITIES OF OTHER ISSUERS
(Dollars in Thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Nature of
any default
by issuer of
securities
guaranteed
in principal,
interest,
Amount sinking fund
owned by redemption
person or Amount in or
Name of issuer of Title of issue Total amount persons treasury of provisions
securities guaranteed of each class guaranteed for which issuer of or payment
by person for of securities and statement securities Nature of of
which statement is filed guaranteed outstanding is filed guaranteed guarantee dividends
<S> <C> <C> <C> <C> <C> <C>
Cruceros de Valencia Mortgage $ 3,000 -0- -0- Guaranteed by Northrop None
</TABLE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Other
Balance at Changes-- Balance
Beginning Additions Add at End
Classification of Period At Cost (Deduct)(1) of Period
<S> <C> <C> <C> <C>
Description:
Year ended December 31, 1989
Reserves and allowances deducted
from asset accounts:
Allowances for doubtful
amounts . . . . . . . . . . . . . . . . . . . . . $75,393 $ 6,699 $ (9,248) $72,844
Year ended December 31, 1990
Reserves and allowances deducted
from asset accounts:
Allowances for doubtful
amounts . . . . . . . . . . . . . . . . . . . . . $72,844 $27,862 $(18,625) $82,081
Year ended December 31, 1991
Reserves and allowances deducted
from asset accounts:
Allowances for doubtful
amounts . . . . . . . . . . . . . . . . . . . . . $82,081 $ 8,900 $(38,980) $52,001
Year ended December 31, 1992
Reserves and allowances deducted
from asset accounts:
Allowances for doubtful
amounts . . . . . . . . . . . . . . . . . . . . . $52,001 $ 7,571 $ (2,412) $57,160
Year ended December 31, 1993
Reserves and allowances deducted
from asset accounts:
Allowances for doubtful
amounts . . . . . . . . . . . . . . . . . . . . . $57,160 $ 9,304 $ (9,759) $56,705
</TABLE>
__________
(1) Uncollectible amounts written off, net of recoveries.
<TABLE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Primary:
Average shares outstanding 48,085 47,179 47,075 46,963 46,986
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 792 251 187 1
Totals 48,877 47,430 47,262 46,964 46,986
Income(loss) before cumulative effect
of accounting principle changes $ 95,755 $120,922 $268,256 $210,424 $(80,469)
Cumulative effect on prior years of
changes in accounting principles:
Income Taxes 20,282
Retiree healthcare and life
insurance benefits (87,717)
Net Income(loss) $ 95,755 $120,922 $200,821 $210,424 $(80,469)
Earnings(loss) per share before
cumulative effect of accounting
principle changes $ 1.96 $ 2.55 $ 5.68 $ 4.48 $ (1.71)
Cumulative effect on prior years
of change in accounting principles,
per share:
Income Taxes .43
Retiree healthcare and life
insurance benefits (1.86)
Earnings(loss) per share(1) $ 1.96 $ 2.55 $ 4.25 $ 4.48 $ (1.71)
Fully diluted:
Average shares outstanding 48,085 47,179 47,075 46,963 46,986
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 872 805 225 4
Totals 48,957 47,984 47,300 46,967 46,986
Income(loss) before cumulative effect
of accounting principle changes $ 95,755 $120,922 $268,256 $210,424 $(80,469)
Cumulative effect on prior years of
changes in accounting principles:
Income Taxes 20,282
Retiree healthcare and life
insurance benefits (87,717)
Net Income(loss) $ 95,755 $120,922 $200,821 $210,424 $(80,469)
Earnings(loss) per share before
cumulative effect of accounting
principle changes $ 1.96 $ 2.52 $ 5.67 $ 4.48 $ (1.71)
Cumulative effect on prior years
of change in accounting principles,
per share:
Income Taxes .43
Retiree healthcare and life
insurance benefits (1.85)
Earnings(loss) per share(1) $ 1.96 $ 2.52 $ 4.25 $ 4.48 $ (1.71)
_______________
(1) This calculation was made in compliance with Item 601 of Regulation S-K. Earnings per
share presented elsewhere in this report exclude from their calculation shares issuable under
employee stock options, since their dilutive effect is less than 3%.
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
Nos. 2-73293, 2-98614 and 33-15764 of Northrop Corporation on Form S-8 of
our report dated February 1, 1994, appearing in this Annual Report on Form
10-K of Northrop Corporation for the year ended December 31, 1993.
DELOITTE & TOUCHE
Los Angeles, California
February 28, 1994
EXHIBIT 10(e)
NORTHROP SUPPLEMENTAL PLAN 2
EFFECTIVE DECEMBER 1, 1993
TABLE OF CONTENTS
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
General Provisions . . . . . . . . . . . . . . . . . . . . . . 2
Lump Sum Election. . . . . . . . . . . . . . . . . . . . . . . 6
Northrop Supplemental Retirement Income Program For
Senior Executives. . . . . . . . . . . . . . . . . . . . . . .10
ERISA Supplemental Program 2 . . . . . . . . . . . . . . . . .15
ARTICLE I
Definitions
For purposes of the Plan, the following terms,
when capitalized, will have the following
meanings:
1.01 "Board of Directors" means the Board of Directors
of the Company.
1.02 "Code" means the Internal Revenue Code of 1986, as
amended.
1.03 "Company" means Northrop Corporation.
1.04 "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
1.05 "Participant" means any employee of the Company
who is eligible for benefits under a particular
Program and has not received full payment under
the Program.
1.06 "Plan" means this plan, the Northrop Supplemental
Plan 2.
1.07 "Program" means one of the eligibility and benefit
structures described in the Appendices.
ARTICLE II
General Provisions
2.01 In General. The Plan contains a number of
different benefit Programs which are set forth in
the Appendices. The Appendices describe the
eligibility conditions and the amount of benefits
payable under the Programs.
2.02 Forms and Times of Benefit Payments. Unless
particular rules regarding the form and timing of
benefit payments are set forth in a Program, the
Company will determine the form and timing of
benefit payments in its sole discretion, except
where a lump sum election under Article III is
applicable.
For payments made to supplement those of a
particular tax-qualified retirement or savings
plan, the Company will only select among the
options available under that plan, using the same
actuarial adjustments used in that plan.
In the case of a married Participant, payments
will be made in the form of a 50% joint and
survivor annuity with the Participant's spouse as
survivor beneficiary, unless the Participant's
spouse consents to some other form of payment.
Whenever the present value of the amount payable
under the Plan does not exceed $10,000, it will be
paid in the form of a single lump sum as of the
first of the month following termination of
employment. The lump sum will be calculated using
the factors and methodology described in Section
3.06 below.
2.03 Beneficiaries and Spouses. If the Company selects
a form of payment which includes a survivor
benefit, the Participant may make a beneficiary
designation, which may be changed at any time
prior to commencement of benefits. A beneficiary
designation must be in writing and will be
effective only when received by the Company.
If a Participant is married on the date his or her
benefits are scheduled to commence, his or her
beneficiary will be his or her spouse unless some
other beneficiary is named with spousal consent.
Spousal consent, to be effective, must be
submitted in writing before benefits commence and
must be witnessed by a Plan representative or
notary public. No spousal consent is necessary if
the Company determines that there is no spouse or
that the spouse cannot be found.
With respect to Programs designed to supplement
tax-qualified retirement or savings plans, the
Participant's spouse will be the spouse as
determined under the underlying tax-qualified
plan. Otherwise, the Participant's spouse will be
determined by the Company in its sole discretion.
2.04 Amendment and Plan Termination. The Company may,
in its sole discretion, through action of the
Board of Directors or its delegate, terminate,
suspend or amend this Plan at any time or from
time to time, in whole or in part.
(a) Except as provided in (f), no amendment,
suspension or termination of the Plan may,
without the consent of a Participant, affect
the Participant's right or the right of the
surviving spouse to receive benefits in
accordance with this Plan as in effect on the
date the employee becomes a Participant.
(b) The Participant's rights to benefits
following any amendment which are preserved
by (a) will be determined as if he or she
terminated employment immediately prior to
the adoption of the amendment (or its
effective date, if later). The determination
in the preceding sentence will be based on
the relevant factors at that time, such as
the Participant's compensation history,
service credits and Code limitations on
benefits.
(c) However, the determination in (b) will be
adjusted to take into account any post-
amendment increases in benefits provided by
the Company's tax-qualified retirement and
savings plans, to the extent such benefits
are also a factor in the benefits due under
this Plan.
Example: Assume an amendment eliminates all
future benefits under a particular Program.
Assume that the Program provides a level of
benefits reduced by benefits paid under a
tax-qualified plan. Assume further that as of
the date of the amendment, a Participant's
level of benefits under the Program is
$150/month less a tax-qualified plan benefit
of $100/month, leaving the Participant a net
benefit of $50. Under paragraph (b), the
Participant's right to that $50 would be
preserved.
However, assume that later the Participant's
tax-qualified plan benefit increases to
$130/month. Under the provisions of this
paragraph (c), for future months, the
Participant would only be entitled to $20
under this Plan.
(d) In addition, the determination in (b) will
also be adjusted to take into account post-
amendment decreases in a Participant's
compensation, to the extent relevant to the
pre-amendment Plan benefits.
(e) The rights of surviving spouses claiming
benefits under the Plan with respect to a
Participant will be preserved and limited in
the same fashion as a Participant's benefits.
(f) The Company may, in its sole discretion,
through action of the Board of Directors or
its delegate, amend or eliminate any of the
provisions of the Plan with respect to lump
sum distributions at any time, including the
calculation factors of Section 3.06. This
applies whether or not a Participant has
already made a lump sum election.
2.05 Not an Employment Agreement. Nothing contained in
this Plan gives any Participant the right to be
retained in the service of the Company, nor does
it interfere with the right of the Company to
discharge or otherwise deal with Participants
without regard to the existence of this Plan.
2.06 Assignment of Benefits. A Participant, surviving
spouse or beneficiary may not, either voluntarily
or involuntarily, assign, anticipate, alienate,
commute, sell, transfer, pledge or encumber any
benefits to which he or she is or may become
entitled under the Plan, nor may Plan benefits be
subject to attachment or garnishment by any of
their creditors or to legal process.
2.07 Nonduplication of Benefits. This Section applies
if, despite Section 2.06, with respect to any
Participant (or his or her beneficiaries), the
Company is required to make payments under this
Plan to a person or entity other than the payees
described in the Plan. In such a case, any amounts
due the Participant (or his or her beneficiaries)
under this Plan will be reduced by the actuarial
value of the payments required to be made to such
other person or entity. Actuarial value will be
determined using the factors and methodology
described in Section 3.06 below.
2.08 Funding. Participants have the status of general
unsecured creditors of the Company and the Plan
constitutes a mere promise by the Company to make
benefit payments in the future. The Company may,
but need not, fund benefits under the Plan through
a trust. If it does so, any trust created by the
Company and any assets held by the trust to assist
it in meeting its obligations under the plan will
conform to the terms of the model trust, as
described in Internal Revenue Service Revenue
Procedure 92-64, but only to the extent required
by Internal Revenue Service Revenue Procedure 92-
65. It is the intention of the Company and
Participants that the Plan be unfunded for tax
purposes and for purposes of Title I of ERISA.
2.09 Construction. The Company shall have full
discretionary authority to determine eligibility
and to construe and interpret the terms of the
Plan, including the power to remedy possible
ambiguities, inconsistencies or omissions.
2.10 Governing Law. This Plan shall be governed by the
law of the State of California, except to the
extent superseded by federal law.
2.11 Plan Representatives. Those authorized to act as
Plan representatives will be designated in writing
by the Board of Directors or its delegate.
2.12 Number. The singular, where appearing in this
Plan, will be deemed to include the plural, unless
the context clearly indicates the contrary.
ARTICLE III
Lump Sum Election
3.01 In General. This Article sets forth the rules
under which Participants may elect to receive
their benefits in a lump sum. This Article does
not apply to active employees (Section 3.04) in
cases where benefits do not exceed $10,000 and so
are automatically payable in lump sum form under
Section 2.02.
This Article will not be applicable if a
particular Program so provides.
3.02 Retirees Election. Participants and Participants'
beneficiaries already receiving monthly benefits
under the Plan at its inception will be given a
one-time opportunity to elect a lump sum payout of
future benefit payments. The election must be made
within a 45-day period determined by the Company.
Within its discretion, the Company may delay the
commencement of the 45-day period in instances
where the Company is unable to timely communicate
with a particular payee.
The determination as to whether a payee is already
receiving monthly benefits will be made at the
beginning of the 45-day period.
Elections to receive a lump sum must be made in
writing and must include spousal consent if the
payee (whether the Participant or beneficiary) is
married. Elections and spousal consent must be
witnessed by a Plan representative or a notary
public.
An election (with spousal consent, where required)
to receive the lump sum made at any time during
the 45-day period will be irrevocable. If no
proper election has been made by the end of the
45-day period, payments will continue unchanged in
the monthly form that had previously been
applicable.
3.03 Retirees Lump Sum. If a retired Participant makes
a proper election under Section 3.02 within the
45-day period, monthly payments will continue in
the previously applicable form for 12 months. As
of the first of the 13th month, the present value
of the remaining benefit payments will be paid to
the Participant (or survivor, as appropriate) in a
single lump sum.
3.04 Actives Election. Participants who are still
employed by the Company may elect to have their
benefits paid in the form of a single lump sum
under this Section. Such an election may be made
at any time during the 60-day period prior to
termination of employment and covers both--
(a) Benefits payable to the Participant during
his or her lifetime, and
(b) Survivor benefits (if any) payable to the
Participant's beneficiary, including
preretirement death benefits (if any) payable
to the Participant's spouse.
An election, once made, cannot be revoked.
Elections to receive a lump sum must be made in
writing and must include spousal consent if the
payee is married. Elections and spousal consent
must be witnessed by a Plan representative or a
notary public.
3.05 Actives Lump Sum. If a Participant terminates
employment with a proper lump sum election in
effect under Section 3.04, the lump sum will be
payable as of the first of the month following the
later of termination of employment or 12 months
after the lump sum election.
However, if the Participant dies prior to
commencement of benefits, and the Participant is
survived by a spouse who is entitled to a
preretirement surviving spouse benefit, the lump
sum will be payable as of the first of the month
following the date of the Participant's death.
If the lump sum is not immediately payable after
retirement in accordance with the first paragraph
of this Section, monthly benefit payments will
commence the first of the month following
termination of employment. Payments will be made:
(a) in the case of a Participant who is not
married on the date benefits are scheduled to
commence, based on a straight life annuity
for the Participant's life, or
(b) in the case of a Participant who is
married on the date benefits are scheduled to
commence, based on a joint and survivor
annuity form with the Participant's spouse as
the survivor annuitant and with the survivor
benefit equal to 50% of the Participant's
benefit, determined by using the contingent
annuitant option factors used to convert
straight life annuities to 50% joint and
survivor annuities under the Northrop
Retirement Plan.
3.06 Calculation of Lump Sum. The factors to be used in
calculating the lump sum are as follows:
Interest: Whichever of the following two
rates that produces the smaller lump sum:
(1) the discount rate used by the
Company for the interest assumption
used by the Company for purposes of
Statement of Financial Accounting
Standards No. 87 of the Financial
Accounting Standards Board as
disclosed in the Company's annual
report to shareholders for the year
end immediately preceding the date
of distribution, or
(2) the PBGC interest rate (or rates)
that would be used to calculate a
lump sum value for the benefit
under the Northrop Retirement Plan
(taking into account the
differential for lump sums over
$25,000).
Mortality: 1983 Group Annuity Mortality
table.
Increase in Section 415 Limit: 4% per year.
Age: Age rounded to the nearest month at the
time the lump sum payment is due.
Variable Unit Values: Variable Unit Values
are presumed not to increase for future
periods after the date the lump sum is
payable.
The annuity to be converted to a lump sum will be
the remaining annuity currently payable to the
Participant or his or her beneficiary at the time
the lump sum is due.
For example, assume a Participant is
receiving benefit payments in the form of a
50% joint and survivor annuity.
If the Participant and the survivor annuitant
are both still alive at the time the lump sum
payment is due, the present value calculation
will be based on the remaining benefits to be
paid to both the Participant and the
survivor.
If only the survivor is alive, the
calculation will be based solely on the
remaining 50% survivor benefits to be paid to
the survivor.
If only the Participant is alive, the
calculation will be based solely on the
remaining benefits to be paid to the
Participant.
In the case of a Participant who dies prior to
commencement of benefits so that only a
preretirement surviving spouse benefit (if any) is
payable, the lump sum will be based solely on the
value of the preretirement surviving spouse
benefit.
No lump sum payment will be made if:
The Participant is receiving monthly benefit
payments in a form that does not provide for
survivor benefits and the Participant dies
before the time the lump sum payment is due.
The Participant is receiving monthly benefit
payments in a form that does provide for
survivor benefits but the Participant and the
beneficiary both die before the time the lump
sum payment is due.
3.07 Spousal consent. Spousal consent, as required for
elections as described above, need not be obtained
if the Company determines that there is no spouse
or the spouse cannot be located.
A Participant will be considered married for
purposes of the spousal consent requirement if he
or she is married on the date of his or her
election.
APPENDIX A
Northrop Supplemental Retirement Income Program For Senior
Executives
A.01 Purpose. The purpose of this Program is to provide
minimum pension and death benefits to senior
executives participating in the Northrop
Retirement Plan ("Retirement Plan") who have only
had a short period of service with the Company
prior to retirement.
A.02 Eligibility. Officers of the Company may become
Participants under this Program only if they are
designated as such by the Board of Directors.
A.03 Retirement Benefit. Upon voluntary or involuntary
termination of employment with the Company (other
than by death), at or after age 55 and with 10 or
more years of Vesting Service, a Participant will
be entitled to the benefit described in Section
A.04.
A.04 Amount of Retirement Benefit. A Participant
entitled to a benefit under Section A.03 will
receive a benefit equal in value to the excess of
(a) over (b) as follows:
(a) is the greater of
(1) the value of the Participant's
retirement income under the Retirement
Plan, computed without regard to the
limitations on benefits and the cap on
counted compensation imposed by Code
sections 415 and 401(a)(17), or
(2) the value of a life annuity with annual
payments equal to the Participant's
Final Average Salary (as defined by the
Retirement Plan) in effect on the date
of his or her termination multiplied by
the appropriate percentage shown in the
following schedule:
Percentage of Final Average
Age at Termination Date* Salary at Termination Date**
55 30%
56 34%
57 38%
58 42%
59 46%
60 50%
61 52%
62 54%
63 56%
64 58%
65 and over 60%
(b) is the value of the Participant's retirement
income under the Retirement Plan, computed as
of his or her termination of employment.
________________________
*Calculated to years and completed months on the
Termination Date.
**The applicable percentage shall be straight line
interpolation depending on the Participant's age
on his termination date. The percentage thus
determined shall be rounded to the nearest
hundredth. For example, if a Participant
terminates when he is 55 years and 8 months old,
the applicable percentage is 30.00% + 2.67% =
32.67%.
A.05 Post-55 Preretirement Surviving Spouse Benefit. If
a Participant dies--
(a) after age 55;
(b) while credited with 10 or more years of
Vesting Service;
(c) while still in the employ of the Company; and
(d) his or her spouse is entitled to a survivor
annuity under the Retirement Plan,
then the Participant's spouse will be entitled to
the benefit under Section A.06.
A.06 Amount of Post-55 Spouse's Benefit. The
Participant's surviving spouse shall be entitled
to receive a benefit equal to the sum of (a) and
(b), with such sum then reduced by (c) where:
(a) is the amount of retirement income that the
Participant would have received under the
100% Contingent Annuitant Option under the
Retirement Plan had the Participant retired
on the date of death,
(b) is the amount of the benefit under the Plan
after the offset of the Retirement Plan
benefit the Participant would have received
if he or she had retired on the date of his
death with said 100% Contingent Annuitant
Option in effect, and
(c) is the value of the annuity benefit payable
to the surviving spouse under the Retirement
Plan (even if the annuity is commuted to a
lump sum).
A.07 Payment of Post-55 Spouse's Benefit. The spouse's
benefit described in Section A.06 will be payable
commencing the first day of the month next
following the Participant's date of death and
shall terminate on the date of death of the
surviving spouse.
A.08 Pre-55 Preretirement Surviving Spouse Benefit. If
a Participant dies--
(a) before age 55;
(b) while credited with 10 or more years of
Vesting Service; and
(c) while still in the employ of the Company,
then the Participant's spouse will be entitled to
the benefit under Section A.09.
A.09 Amount of Pre-55 Spouse's Benefit. The
Participant's surviving spouse shall be entitled
to receive a benefit equal to the benefit standing
to the credit of the Participant under the
Retirement Plan as of the date of his or her
death, actuarially reduced in accordance with the
factors in the following table:
Age of Participant Factor to be Applied
at Date of Death* to the Earned Benefit**
55 .431
54 .399
53 .370
52 .343
51 .319
50 .297
49 .276
48 .257
47 .240
46 .223
45 .208
Any extension of the above table below age 45
shall be based on the following assumptions (i)
Mortality - 1971 Towers, Perrin, Forster & Crosby
Forecast Mortality Table, and (ii) Interest - 6%
compounded annually.
_________________
*Calculated to years and completed months on date of
death.
**The applicable factor shall be determined by straight
line interpolation depending on Participant's age at date
of death.
A.10 Payment of Pre-55 Spouse's Benefit. The spouse's
benefit described in Section A.09 will be payable
commencing the first day of the month next
following the Participant's date of death and will
terminate on the date of death of the surviving
spouse.
A.11 Waiver of Requirements. The President of the
Company or its Chief Executive Officer may, in his
or her discretion,
(a) waive the requirement of 10 years of Vesting
Service in any one or all of Sections A.03,
A.05, and A.08, and
(b) with respect to Section A.05, waive the
requirement that the Participant's spouse be
entitled to a survivor annuity under the
Retirement Plan only by virtue of the fact
that such Participant has not yet accumulated
sufficient years of Vesting Service as of the
date of death.
This waiver authority includes the authority to
have benefits under the Program pro rated based on
Vesting Service for Participants receiving a
waiver (e.g., benefits under the Program will be
multiplied by an amount equal to the Participant's
years of Vesting Service divided by 10). Any
waiver will specify whether or not the pro rating
of benefits will be applicable.
A.12 Effective Date. This Program first became
effective on July 18, 1973 and will be effective
as to each Participant on the date the Board of
Directors takes the action designating him or her
as a Participant under this Program.
A.13 Vesting Service. For purposes of this Program,
Vesting Service will be determined under the
Retirement Plan.
APPENDIX B
ERISA Supplemental Program 2
B.01 Purpose. The purpose of this Program is simply to
restore to employees of the Company the benefits
they lose under the Northrop Retirement Plan and
the Retirement Plan of Northrop Corporation,
Electronic Systems Division - Rolling Meadows Site
("the Pension Plans") as a result of the
compensation limit in Code section 401(a)(17)
("section 401(a)(17)"), or any successor
provision.
B.02 Eligibility. An employee of the Company is
eligible to receive a benefit under this Program
if he or she:
(a) retires on or after January 1, 1989;
(b) has vested in benefits under one or both
Pension Plans which are reduced because of
the application of section 401(a)(17); and
(c) is not eligible to receive a benefit under
the Northrop Corporation Supplemental
Retirement Income Program for Senior
Executives.
B.03 Amount of Benefit. The benefit payable under this
Program with respect to a Participant who
commences benefits during his or her lifetime will
equal the retirement benefit, if any, which would
have been payable to the Participant under the
terms of a Pension Plan, but for the restrictions
of Code sections 401(a)(17) and 415 ("section
415"), or any successor section.
The benefit payable under this Program will be
reduced by the combined amounts of Pension Plan
Benefits and the Northrop Corporation ERISA
Supplemental Plan 1 benefits attributable to the
applicable Pension Plan.
Benefits under this Program will only be paid to
supplement benefit payments actually made from a
Pension Plan. If benefits are not payable under a
Pension Plan because the Participant has failed to
vest or for any other reason, no payments will be
made under this Program with respect to such
Pension Plan.
B.04 Preretirement Surviving Spouse Benefit.
Preretirement surviving spouse benefits will be
payable under this Program on behalf of a
Participant if such Participant's surviving spouse
is eligible for benefits payable from a Pension
Plan. The benefit payable will be the amount which
would have been payable under the Pension Plan but
for the restrictions of section 401(a)(17) and
section 415.
The benefit payable under this Program will be
reduced by the combined amounts of the Pension
Plan Benefits and the Northrop Corporation ERISA
Supplemental Plan 1 benefits attributable to the
applicable Pension Plan.
No benefit will be payable under this Program with
respect to a spouse after the death of that
spouse.
B.05 Plan Termination. No further benefits may be
earned under this Program with respect to a
particular Pension Plan after the termination of
such Pension Plan.
B.06 Pension Plan Benefits. For purposes of this
Appendix, the term Pension Plan Benefits generally
means the benefits actually payable to a
Participant, spouse, beneficiary or contingent
annuitant under a Pension Plan. However, this
Program is only intended to remedy pension
reductions caused by the operation of section
401(a)(17) and not reductions caused for any other
reason. In those instances where pension benefits
are reduced for some other reason, the term
Pension Plan Benefits shall be deemed to mean the
benefits that actually would have been payable but
for such other reason.
Examples of such other reasons include, but are
not limited to, the following:
(a) A reduction in pension benefits as a result
of a distress termination (as described in
ERISA Section 4041(c) or any comparable
successor provision of law) of a Pension
Plan. In such a case, the Pension Plan
Benefits will be deemed to refer to the
payments that would have been made from the
Pension Plan had it terminated on a fully
funded basis as a standard termination (as
described in ERISA Section 4041(b) or any
comparable successor provision of law).
(b) A reduction of accrued benefits as permitted
under section 412(c)(8) of the Internal
Revenue Code of 1986, as amended, or any
comparable successor provision of law.
(c) A reduction of pension benefits as a result
of payment of all or a portion of a
Participant's benefits to a third party on
behalf of or with respect to a Participant.
EXHIBIT 10(f)
NORTHROP CORPORATION
ERISA SUPPLEMENTAL PLAN 1
EFFECTIVE DECEMBER 1, 1993
ARTICLE I
Definitions
1.01 Company means the Company as designated in the
Pension Plans.
1.02 Participant means any employee who (a) is eligible
for benefits under one or both Pension Plans, (b)
meets the eligibility requirements of Section 2.02
of this Plan and (c) and has not received full
payment under the Plan.
1.03 Plan means the Northrop Corporation ERISA
Supplemental Plan 1.
1.04 Pension Plan Benefits is defined in Section 2.08
of this Plan.
1.05 Pension Plan and Pension Plans mean the Northrop
Retirement Plan and/or the Retirement Plan of
Northrop Corporation, Electronic Systems
DivisionRolling Meadows Site.
ARTICLE II
Eligibility for and Amount of Benefits
2.01 Purpose. The purpose of this Plan is simply to
restore to employees of the Company the benefits
they lose under the Pension Plans as a result of
the benefit limits in section 415 of the Internal
Revenue Code of 1986, as amended, or any successor
section (section 415).
2.02 Eligibility. Each Participant is eligible to
receive a benefit under this Plan if:
(a) he or she has vested in benefits under
one or both Pension Plans;
(b) he or she has vested benefits reduced
because of the application of section 415;
and
(c) he or she is not eligible to receive a
benefit under the Northrop Corporation
Supplemental Retirement Income Plan for
Senior Executives.
2.03 Amount of Benefit. The benefit payable from the
Company under this Plan to a Participant will
equal the retirement benefit, if any, which would
have been payable to the Participant under the
terms of a Pension Plan but for the restrictions
of section 415.
The benefit payable under this Plan will be
reduced by the amount of Pension Plan Benefits
attributable to the applicable Pension Plan.
Benefits under this Plan will only be paid to
supplement benefit payments actually made from a
Pension Plan. If benefits are not payable under a
Pension Plan because the Participant has failed to
vest or for any other reason, no payments will be
made under this Plan with respect to such Pension
Plan.
2.04 Preretirement Surviving Spouse Benefit.
Preretirement surviving spouse benefits will be
payable under this Plan on behalf of a Participant
if such Participants surviving spouse is eligible
for preretirement surviving spouse benefits
payable from a Pension Plan. The benefit payable
will be the amount which would have been payable
under the Pension Plan but for the restrictions of
section 415.
The benefit payable under this Plan will be
reduced by the amount of Pension Plan Benefits
attributable to the applicable Pension Plan.
No benefit will be payable under this Plan with
respect to a spouse after the death of that
spouse.
2.05 Forms and Times of Benefit Payments. The Company
will determine the form and timing of benefit
payments in its sole discretion. However, for
payments made to supplement those of a particular
Pension Plan, the Company will only select among
the options available under that Pension Plan,
using the same actuarial adjustments used in that
Pension Plan.
Whenever the present value of the amount payable
under the Plan does not exceed $10,000, it will be
paid in the form of a single lump sum as of the
first of the month following termination of
employment. The lump sum will be calculated using
the factors and methodology described in Section
3.06 below.
2.06 Beneficiaries and Spouses. If the Company selects
a form of payment which includes a survivor
benefit, the Participant may make a beneficiary
designation, which may be changed at any time
prior to commencement of benefits. A beneficiary
designation must be in writing and will be
effective only when received by the Company.
If a Participant is married on the date his or
her benefits are scheduled to commence, his or her
beneficiary will be his or her spouse unless some
other beneficiary is named with spousal consent.
Spousal consent, to be effective, must be
submitted in writing before benefits commence and
must be witnessed by a Plan representative or
notary public. No spousal consent is necessary if
the Company determines that there is no spouse or
that the spouse cannot be found.
The Participants spouse will be the spouse as
determined under the underlying Pension Plan.
2.07 Plan Termination. No further benefits may be
earned under this Plan with respect to a
particular Pension Plan after the termination of
such Pension Plan.
2.08 Pension Plan Benefits. The term Pension Plan
Benefits generally means the benefits actually
payable to a Participant, spouse, beneficiary or
contingent annuitant under a Pension Plan.
However, this Plan is only intended to remedy
pension reductions caused by the operation of
section 415 and not reductions caused for any
other reason. In those instances where pension
benefits are reduced for some other reason, the
term Pension Plan Benefits shall be deemed to mean
the benefits that would have been actually payable
but for such other reason.
Examples of such other reasons include, but are
not limited to, the following:
(a) A reduction in pension benefits as a
result of a distress termination (as
described in ERISA Section 4041(c) or any
comparable successor provision of law) of a
Pension Plan. In such a case, the Pension
Plan Benefits will be deemed to refer to the
payments that would have been made from the
Pension Plan had it terminated on a fully
funded basis as a standard termination (as
described in ERISA Section 4041(b) or any
comparable successor provision of law).
(b) A reduction of accrued benefits as
permitted under section 412(c)(8) of the
Internal Revenue Code of 1986, as amended, or
any comparable successor provision of law.
(c) A reduction of pension benefits as a
result of payment of all or a portion of a
Participants benefits to a third party on
behalf of or with respect to a Participant.
ARTICLE III
Lump Sum Election
3.01 In General. This Article sets forth the rules
under which Participants may elect to receive
their benefits in a lump sum. This Article does
not apply to active employees (Section 3.04) in
cases where benefits do not exceed $10,000 and so
are automatically payable in lump sum form under
Section 2.06.
3.02 Retirees Election. Participants and Participants
beneficiaries already receiving monthly benefits
under the Plan at its inception will be given a
one-time opportunity to elect a lump sum payout of
future benefit payments. The election must be made
within a 45-day period determined by the Company.
Within its discretion, the Company may delay the
commencement of the 45-day period in instances
where the Company is unable to timely communicate
with a particular payee.
The determination as to whether a payee is already
receiving monthly benefits will be made at the
beginning of the 45-day period.
Elections to receive a lump sum must be made in
writing and must include spousal consent if the
payee (whether the Participant or beneficiary) is
married. Elections and spousal consent must be
witnessed by a Plan representative or a notary
public.
An election (with spousal consent, where required)
to receive the lump sum made at any time during
the 45-day period will be irrevocable. If no
proper election has been made by the end of the
45-day period, payments will continue unchanged in
the monthly form that had previously been
applicable.
3.03 Retirees Lump Sum. If a retired Participant makes
a proper election under Section 3.02 within the
45-day period, monthly payments will continue in
the previously applicable form for 12 months. As
of the first of the 13th month, the present value
of the remaining benefit payments will be paid to
the Participant (or survivor, as appropriate) in a
single lump sum.
3.04 Actives Election. Participants who are still
employed by the Company may elect to have their
benefits paid in the form of a single lump sum
under this Section. Such an election may be made
at any time during the 60-day period prior to
termination of employment and covers both--
(a) Benefits payable to the Participant during
his or her lifetime, and
(b) Survivor benefits (if any) payable to the
Participants beneficiary, including
preretirement death benefits (if any) payable
to the Participants spouse.
An election, once made, cannot be revoked.
Elections to receive a lump sum must be made in
writing and must include spousal consent if the
payee is married. Elections and spousal consent
must be witnessed by a Plan representative or a
notary public.
3.05 Actives Lump Sum. If a Participant terminates
employment with a proper lump sum election in
effect under Section 3.04, the lump sum will be
payable as of the first of the month following the
later of termination of employment or 12 months
after the lump sum election.
However, if the Participant dies prior to
commencement of benefits, and the Participant is
survived by a spouse who is entitled to a
preretirement surviving spouse benefit, the lump
sum will be payable as of the first of the month
following the date of the Participants death.
If the lump sum is not immediately payable after
retirement in accordance with the first paragraph
of this Section, monthly benefit payments will
commence the first of the month following
termination of employment. Payments will be made:
(a) in the case of a Participant who is not
married on the date benefits are scheduled to
commence, based on a straight life annuity
for the Participants life, or
(b) in the case of a Participant who is
married on the date benefits are scheduled to
commence, based on a joint and survivor
annuity form with the Participants spouse as
the survivor annuitant and with the survivor
benefit equal to 50% of the Participants
benefit, determined by using the contingent
annuitant option factors used to convert
straight life annuities to 50% joint and
survivor annuities under the Northrop
Retirement Plan.
3.06 Calculation of Lump Sum. The factors to be used in
calculating the lump sum are as follows:
Interest: Whichever of the following two
rates that produces the smaller lump sum:
(1) the discount rate used by the
Company for the interest assumption
used by the Company for purposes of
Statement of Financial Accounting
Standards No. 87 of the Financial
Accounting Standards Board as
disclosed in the Companys annual
report to shareholders for the year
end immediately preceding the date
of distribution, or
(2) the PBGC interest rate (or rates)
that would be used to calculate a
lump sum value for the benefit
under the Northrop Retirement Plan
(taking into account the
differential for lump sums over
$25,000).
Mortality: 1983 Group Annuity Mortality
table.
Increase in Section 415 Limit: 4% per year.
Age: Age rounded to the nearest month on the
date the lump sum is payable.
Variable Unit Values: Variable Unit Values
are presumed not to increase for future
periods after the date the lump sum is
payable.
The annuity to be converted to a lump sum will be
the remaining annuity currently payable to the
Participant or his or her beneficiary at the time
the lump sum is due.
For example, assume a Participant is
receiving benefit payments in the form of a
50% joint and survivor annuity.
If the Participant and the survivor annuitant
are both still alive at the time the lump sum
payment is due, the present value calculation
will be based on the remaining benefits to be
paid to both the Participant and the
survivor.
If only the survivor is alive, the
calculation will be based solely on the
remaining 50% survivor benefits to be paid to
the survivor.
If only the Participant is alive, the
calculation will be based solely on the
remaining benefits to be paid to the
Participant.
In the case of a Participant who dies prior to
commencement of benefits so that only a
preretirement surviving spouse benefit (if any) is
payable, the lump sum will be based solely on the
value of the preretirement surviving spouse
benefit.
No lump sum payment will be made if:
The Participant is receiving monthly benefit
payments in a form that does not provide for
survivor benefits and the Participant dies
before the time the lump sum payment is due.
The Participant is receiving monthly benefit
payments in a form that does provide for
survivor benefits but the Participant and the
beneficiary both die before the time the lump
sum payment is due.
3.07 Spousal consent. Spousal consent, as required for
elections as described above, need not be obtained
if the Company determines that there is no spouse
or the spouse cannot be located.
A Participant will be considered married for
purposes of the spousal consent requirement if he
or she is married on the date of his or her
election.
ARTICLE IV
Miscellaneous
4.01 Amendment and Plan Termination. The Company may,
in its sole discretion, through action of the
Board of Directors or its delegate, terminate,
suspend or amend this Plan at any time or from
time to time, in whole or in part.
(a) Except as provided in (f), no amendment,
suspension or termination of the Plan may,
without the consent of a Participant, affect
the Participants right or the right of the
surviving spouse to receive benefits in
accordance with this Plan as in effect on the
date the employee becomes a Participant.
(b) The Participants rights to benefits following
any amendment which are preserved by (a) will
be determined as if he or she terminated
employment immediately prior to the adoption
of the amendment (or its effective date, if
later). The determination in the preceding
sentence will be based on the relevant
factors at that time, such as the
Participants compensation history, service
credits and Code limitations on benefits.
(c) However, the determination in (b) will be
adjusted to take into account any post-
amendment increases in benefits provided by
the Pension Plans.
Example: Assume an amendment eliminates all
future benefits under the Plan. Assume that
as of the date of the amendment, a
Participants level of benefits under the Plan
is $150/month less a Pension Plan benefit of
$100/month, leaving the Participant a net
benefit of $50. Under paragraph (b), the
Participants right to that $50 would be
preserved.
However, assume that later the Participants
Pension Plan benefit increases to $130/month.
Under the provisions of this paragraph (c),
for future months, the Participant would only
be entitled to $20 under this Plan.
(d) In addition, the determination in (b) will
also be adjusted to take into account post-
amendment decreases in a participants
compensation.
(e) The rights of surviving spouses claiming
benefits under the Plan with respect to a
Participant will be preserved and limited in
the same fashion as a Participants benefits.
(f) The Company may, in its sole discretion,
through action of the Board of Directors or
its delegate, amend or eliminate any of the
provisions of the Plan with respect to lump
sum distributions at any time, including the
calculation factors of Section 3.06. This
applies whether or not a Participant has
already made a lump sum election.
4.02 Not an Employment Agreement. Nothing contained in
this Plan gives any Participant the right to be
retained in the service of the Company, nor does
it interfere with the right of the Company to
discharge or otherwise deal with Participants
without regard to the existence of this Plan.
4.03 Assignment of Benefits. A Participant, surviving
spouse or beneficiary may not, either voluntarily
or involuntarily, assign, anticipate, alienate,
commute, sell, transfer, pledge or encumber any
benefits to which he or she is or may become
entitled under the Plan, nor may Plan benefits be
subject to attachment or garnishment by any of
their creditors or to legal process.
4.04 Nonduplication of Benefits. This Section applies
if, despite Section 4.03, with respect to any
Participant (or his or her beneficiaries), the
Company is required to make payments under this
Plan to a person or entity other than the payees
described in the Plan. In such a case, any amounts
due the Participant (or his or her beneficiaries)
under this Plan will be reduced by the actuarial
value of the payments required to be made to such
other person or entity. Actuarial value will be
determined using the factors and methodology
described in Section 3.06 above.
4.05 Funding. Participants have the status of general
unsecured creditors of the Company and the Plan
constitutes a mere promise by the Company to make
benefit payments in the future. The Company may,
but need not, fund benefits under the Plan through
a trust. If it does so, any trust created by the
Company and any assets held by the trust to assist
it in meeting its obligations under the plan will
conform to the terms of the model trust, as
described in Internal Revenue Service Revenue
Procedure 92-64, but only to the extent required
by Internal Revenue Service Revenue Procedure 92-
65. It is the intention of the Company and
Participants that the Plan be unfunded for tax
purposes and for purposes of Title I of ERISA.
4.06 Construction. The Company shall have full
discretionary authority to determine eligibility
and to construe and interpret the terms of the
Plan, including the power to remedy possible
ambiguities, inconsistencies or omissions.
4.07 Governing Law. This Plan shall be governed by the
law of the State of California, except to the
extent superseded by federal law.
4.08 Plan Representatives. Those authorized to act as
Plan representatives will be designated in writing
by the Board of Directors or its delegate.
4.09 Number. The singular, where appearing in this
Plan, will be deemed to include the plural, unless
the context clearly indicates the contrary.
Exhibit 10(a)
[COMPOSITE CONFORMED COPY]
NORTHROP CORPORATION
_________________________
CREDIT AGREEMENT
Dated as of January 7, 1994
__________________________
$400,000,000
__________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
CHEMICAL BANK
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Co-Agents
___________________________
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
<PAGE>
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Definitions and Accounting Matters. . . . . . . 1
1.01 Certain Defined Terms. . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations. . . . . . . 12
Section 2. Commitments . . . . . . . . . . . . . . . . . . 13
2.01 Syndicated Loans . . . . . . . . . . . . . . . . 13
2.02 Borrowings of Syndicated Loans . . . . . . . . . 14
2.03 Competitive Bid Loans. . . . . . . . . . . . . . 14
2.04 Changes of Commitments . . . . . . . . . . . . . 19
2.05 Fees . . . . . . . . . . . . . . . . . . . . . . 21
2.06 Lending Offices. . . . . . . . . . . . . . . . . 21
2.07 Several Obligations; Remedies Independent. . . . 21
2.08 Notes. . . . . . . . . . . . . . . . . . . . . . 22
2.09 Prepayments. . . . . . . . . . . . . . . . . . . 22
Section 3. Payments of Principal and Interest. . . . . . . 23
3.01 Repayment of Loans . . . . . . . . . . . . . . . 23
3.02 Interest . . . . . . . . . . . . . . . . . . . . 23
Section 4. Payments; Pro Rata Treatment; Computations;
Etc. . . . . . . . . . . . . . . . . . . . . . 24
4.01 Payments . . . . . . . . . . . . . . . . . . . . 24
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . 25
4.03 Computations . . . . . . . . . . . . . . . . . . 25
4.04 Non-Receipt of Funds by the Agent. . . . . . . . 25
4.05 Sharing of Payments, Etc.. . . . . . . . . . . . 25
Section 5. Yield Protection and Illegality . . . . . . . . 27
5.01 Additional Costs . . . . . . . . . . . . . . . . 27
5.02 Limitation on Types of Loans . . . . . . . . . . 29
5.03 Illegality . . . . . . . . . . . . . . . . . . . 30
5.04 Base Rate Loans Pursuant to Sections 5.01
and 5.03 . . . . . . . . . . . . . . . . . . . 30
5.05 Compensation . . . . . . . . . . . . . . . . . . 30
Section 6. Conditions Precedent. . . . . . . . . . . . . . 31
6.01 Initial Loan . . . . . . . . . . . . . . . . . . 31
6.02 Initial and Subsequent Loans . . . . . . . . . . 32
Section 7. Representations and Warranties. . . . . . . . . 33
7.01 Corporate Existence. . . . . . . . . . . . . . . 33
7.02 Financial Condition. . . . . . . . . . . . . . . 33
7.03 Litigation . . . . . . . . . . . . . . . . . . . 34
7.04 No Breach. . . . . . . . . . . . . . . . . . . . 34
7.05 Corporate Action . . . . . . . . . . . . . . . . 34
7.06 Approvals. . . . . . . . . . . . . . . . . . . . 35
7.07 Use of Loans . . . . . . . . . . . . . . . . . . 35
7.08 ERISA. . . . . . . . . . . . . . . . . . . . . . 35
7.09 Taxes. . . . . . . . . . . . . . . . . . . . . . 35
7.10 Funded Debt. . . . . . . . . . . . . . . . . . . 36
7.11 Properties . . . . . . . . . . . . . . . . . . . 36
7.12 Environmental Matters. . . . . . . . . . . . . . 36
Section 8. Covenants of the Company. . . . . . . . . . . . 37
8.01 Financial Statements . . . . . . . . . . . . . . 37
8.02 Existence, Payment of Taxes, ERISA, Etc. . . . . 39
8.03 Notice of Litigation . . . . . . . . . . . . . . 39
8.04 Insurance. . . . . . . . . . . . . . . . . . . . 40
8.05 Access to Books and Properties . . . . . . . . . 40
8.06 Restricted Payments. . . . . . . . . . . . . . . 40
8.07 Sale, Lease, Etc.. . . . . . . . . . . . . . . . 40
8.08 Maintenance of Shareholders' Equity. . . . . . . 40
8.09 Contingent Liabilities . . . . . . . . . . . . . 41
8.10 Acquisition of Assets. . . . . . . . . . . . . . 42
8.11 Limitation on Liens. . . . . . . . . . . . . . . 42
8.12 Loans and Investments. . . . . . . . . . . . . . 43
8.13 Limitation on Funded Debt. . . . . . . . . . . . 44
8.14 Limitation on Subordinated Debt. . . . . . . . . 44
8.15 Use of Proceeds. . . . . . . . . . . . . . . . . 44
8.16 Margin Stock . . . . . . . . . . . . . . . . . . 44
Section 9. Events of Default . . . . . . . . . . . . . . . 44
Section 10. The Agent . . . . . . . . . . . . . . . . . . . 48
10.01 Appointment, Powers and Immunities . . . . . . . 48
10.02 Reliance by Agent. . . . . . . . . . . . . . . . 49
10.03 Defaults . . . . . . . . . . . . . . . . . . . . 49
10.04 Rights as a Bank . . . . . . . . . . . . . . . . 49
10.05 Indemnification. . . . . . . . . . . . . . . . . 49
10.06 Non-Reliance on Agent and other Banks. . . . . . 50
10.07 Failure to Act . . . . . . . . . . . . . . . . . 50
10.08 Resignation or Removal of Agent. . . . . . . . . 51
10.09 Co-Agents. . . . . . . . . . . . . . . . . . . . 51
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . 51
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . 51
11.02 Notices. . . . . . . . . . . . . . . . . . . . . 51
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . 52
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . 52
11.05 Successors and Assigns . . . . . . . . . . . . . 53
11.06 Assignments and Participations . . . . . . . . . 53
11.07 Survival . . . . . . . . . . . . . . . . . . . . 55
11.08 Captions . . . . . . . . . . . . . . . . . . . . 55
11.09 Counterparts . . . . . . . . . . . . . . . . . . 55
11.10 Governing Law. . . . . . . . . . . . . . . . . . 55
11.11 Confidentiality. . . . . . . . . . . . . . . . . 55
11.12 Cancellation of Existing Credit Agreement. . . . 56
<PAGE>
EXHIBIT A-1 - Form of Syndicated Note
EXHIBIT A-2 - Form of Competitive Bid Note
EXHIBIT B - Form of Opinion of Counsel of the Company
EXHIBIT C - Form of Opinion of Special New York
Counsel to the Banks
EXHIBIT D - Form of Confidentiality Agreement
<PAGE>
CREDIT AGREEMENT dated as of January 7, 1994 among:
NORTHROP CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Delaware (together with
its successors and permitted assigns, the "Company"); each of the
banks that is a signatory hereto (together with its successors
and permitted assigns, individually, a "Bank" and, collectively,
the "Banks"); and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as agent for the Banks (in such capacity, together
with its successors in such capacity, the "Agent").
The Company has requested that the Banks make loans to
the Company, and the Banks are prepared to make such loans upon
the terms and conditions hereof. Accordingly, the parties hereto
agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the
following terms shall have the following meanings (all terms
defined in this Section 1 or in other provisions of this
Agreement in the singular to have the same meanings when used in
the plural and vice versa):
"Applicable Lending Office" shall mean, for each Bank
and for each type of Loan, the Lending Office of such Bank
(or of an affiliate of such Bank) designated for such type
of Loan on the signature pages hereof or such other office
of such Bank (or of an affiliate of such Bank) as such Bank
may from time to time specify to the Agent and the Company
as the office by which its Loans of such type are to be made
and maintained.
"Applicable Facility Fee Rate" and "Applicable Margin"
for each type of Syndicated Loan shall mean: (a) during the
period from the date of this Agreement to but excluding the
first Quarterly Date, the respective rates set forth below
opposite the range of the Leverage Ratio set forth below
which encompasses the Leverage Ratio set forth in the
certificate delivered by the Company under Section 6.01(i)
hereof and (b) during each Quarterly Period, the respective
rates set forth below opposite the range of the Leverage
Ratio set forth below which encompasses the Leverage Ratio
set forth in the certificate required to be delivered under
Section 8.01(h) hereof not less than five Business Days
prior to the first day of such Quarterly Period (provided
that if the Company shall fail to deliver such certificate
as required under Section 8.01(h) hereof, the "Applicable
Facility Fee Rate" and the "Applicable Margin" for each type
of Syndicated Loan during such Quarterly Period shall be
determined as if the relevant Leverage Ratio were greater
than 1.25 to 1):
Applicable Applicable Margin
Range of Facility Base Rate Eurodollar
Leverage Ratio Fee Rate Loan Loan
Greater than 0.3500% 0% 0.4000%
or equal to
1.25 to 1
Less than 0.2500% 0% 0.3500%
1.25 to 1
but greater
than or equal
to 0.60 to 1
Less than 0.1875% 0% 0.2500%
0.60 to 1
but greater
than or equal
to 0.35 to 1
Less than 0.1500% 0% 0.2250%
0.35 to 1
"Bankruptcy Code" shall mean the Federal Bankruptcy
Code of 1978, as amended from time to time.
"Base Rate" shall mean, with respect to any Base Rate
Loan, for any day, the higher of (a) the Federal Funds Rate
for such day plus 1/2 of 1% and (b) the Prime Rate for such
day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base
Rate shall take effect at the time of such change in the
Base Rate.
"Base Rate Loans" shall mean Syndicated Loans which
bear interest at rates based upon the Base Rate.
"Basle Accord" shall mean the proposals for risk-based
capital framework described by the Basle Committee on
Banking Regulations and Supervisory Practices in its paper
entitled "International Convergence of Capital Measurement
and Capital Standards" dated July 1988, as amended,
supplemented and otherwise modified and in effect from time
to time, or any replacement thereof.
"Business Day" shall mean any day on which commercial
banks are not authorized or required to close in New York
City and, where such term is used in the definition of
"Quarterly Date" in this Section 1.01 or if such day relates
to the giving of notices or quotes in connection with a
LIBOR Auction or to a borrowing of, a payment or prepayment
of principal of or interest on, or the Interest Period for,
a Eurodollar Loan or a LIBOR Bid Loan or a notice by the
Company with respect to any such borrowing, payment,
prepayment or Interest Period for a Eurodollar Loan or a
LIBOR Bid Loan, which is also a day on which dealings in
Dollar deposits are carried out in the London interbank
market.
"Chase" shall mean The Chase Manhattan Bank (National
Association).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Combined Statement of Position and Income" shall mean,
for any fiscal period, an unaudited combined statement of
position as at the last day of such fiscal period and an
unaudited combined statement of income for the portion of
the fiscal year of the Company ending on the last day of
such fiscal period, in substantially the form, respectively,
of the Combined Statement of Position and the Combined
Statement of Income of the Company dated September 30, 1993
heretofore delivered to the Banks.
"Commitment" shall mean, as to each Bank, the
obligation of such Bank to make Syndicated Loans pursuant to
Section 2.01 hereof in an aggregate amount at any one time
outstanding equal to the amount set opposite such Bank's
name on the signature pages hereof under the caption
"Commitment" (as the same may be reduced pursuant to
Section 2.04 hereof or reduced or increased pursuant to
Section 11.06(b) hereof).
"Commitment Termination Date" shall mean January 6,
1998.
"Competitive Bid Borrowing" shall have the meaning set
forth in Section 2.03(b) hereof.
"Competitive Bid Loan Limit" shall have the meaning set
forth in Section 2.03(c) hereof.
"Competitive Bid Loans" shall mean the loans provided
for by Section 2.03 hereof.
"Competitive Bid Margin" shall have the meaning set
forth in Section 2.03(c)(ii)(C) hereof.
"Competitive Bid Notes" shall mean the promissory notes
provided by Section 2.08(b) hereof.
"Competitive Bid Quote" shall mean an offer by a Bank
to make a Competitive Bid Loan in accordance with
Section 2.03(c) hereof.
"Competitive Bid Quote Request" shall have the meaning
set forth in Section 2.03(b) hereof.
"Competitive Bid Rate" shall have the meaning set forth
in Section 2.03(c)(ii)(D) hereof.
"Consolidated Net Earnings Available for Restricted
Payments" shall mean an amount equal to (i) the sum of
$350,000,000 plus 80% (or minus 100% in case of consolidated
net loss) of consolidated net earnings of the Company and
the Subsidiaries for the period (taken as one accounting
period) commencing October 1, 1993 and terminating on the
Quarterly Date immediately preceding the date of any
proposed Restricted Payment, less (ii) the sum of (A) the
aggregate amount of all dividends (except stock dividends)
and other distributions paid or declared by the Company on
any class of its stock on and after October 1, 1993 and
(B) the excess (if any) of the aggregate amount expended,
directly or indirectly, on and after October 1, 1993 for the
redemption, purchase or other acquisition of any shares of
its stock, over the aggregate amount received on and after
said date as the net cash proceeds of the sale of any shares
of its stock.
"Consolidated Tangible Shareholders' Equity" shall mean
the sum (determined without duplication on a consolidated
basis) of the following amounts: paid in capital and
retained earnings of the Company and the Subsidiaries, minus
the sum of the amount on the books of the Company and the
Subsidiaries of (x) all intangible assets, including but not
limited to good will, patents, franchises, trade-marks,
trade names and copyrights, at the time of any computation
of Consolidated Tangible Shareholders' Equity, (y) the
write-up in book value of any assets resulting from any
revaluation thereof after acquisition and (z) unamortized
debt discount and expense (collectively, "Intangibles");
provided that, solely for the purposes of calculating
Consolidated Tangible Shareholders' Equity when such term is
used in Section 8.08 hereof and in the definition of the
term Leverage Ratio when used in Section 8.13 hereof,
Intangibles arising out of transactions consummated after
September 30, 1993 shall be deducted only to the extent that
the amount of such Intangibles exceeds $350,000,000 in the
aggregate.
"Default" shall mean an Event of Default or an event
which with notice or lapse of time or both would become an
Event of Default.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"Equity Issuance" shall mean (a) any issuance or sale
(including, without limitation, issuance or sale as a result
of a conversion or exchange of debt securities) by the
Company or any of the Subsidiaries of (i) any capital stock
or any warrants, options or rights exercisable in respect of
capital stock, including any capital stock issued upon the
exercise of any such warrants, options or rights (other than
any capital stock, warrants, options or rights issued to
directors, officers or employees of the Company or any of
the Subsidiaries pursuant to employee benefit plans, stock
option plans or long-term incentive plans established in the
ordinary course of business and any capital stock of the
Company issued upon the exercise of such warrants, options
or rights) or (ii) any other security or instrument
representing an equity interest in the Company or any of the
Subsidiaries or (b) the receipt by the Company or any of the
Subsidiaries of any capital contribution (whether or not
evidenced by any equity security issued by the recipient of
such contribution); provided that Equity Issuance shall not
include (x) any such issuance or sale by any Subsidiary to
the Company or any Wholly-Owned Subsidiary or (y) any
capital contribution by the Company or any Wholly-Owned
Subsidiary to any Subsidiary.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade
or business which is a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the
Code) as the Company or is under common control (within the
meaning of Section 414(c) of the Code) with the Company.
"Eurodollar Loans" shall mean Syndicated Loans the
interest rates on which are determined on the basis of rates
referred to in the definition of "Fixed Base Rate" in this
Section 1.01.
"Event of Default" shall have the meaning assigned to
that term in Section 9 hereof.
"Existing Credit Agreement" shall mean the Credit
Agreement dated as of October 3, 1990 among the Company, the
banks party thereto and The Chase Manhattan Bank (National
Association), as agent, as amended, supplemented and
otherwise modified and in effect from time to time.
"Federal Funds Rate" shall mean, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined
is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next
preceding Business Day as so published on the next
succeeding Business Day and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day
shall be the average rate charged to Chase on such day on
such transactions as determined by the Agent.
"Final Risk-Based Capital Guidelines" shall mean
(a) the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 208,
Appendix A and 12 C.F.R. Part 225, Appendix A) and (b) and
the Final Risk-Based Capital Guidelines of the Office of the
Comptroller of the Currency, and any successor or
supplemental regulations (12 C.F.R. Part 3, Appendix A), and
any successor regulations, in each case, as amended,
supplemented and otherwise modified and in effect from time
to time.
"Fixed Base Rate" shall mean, with respect to any Fixed
Rate Loan, the arithmetic mean (rounded, if necessary, to
the nearest 1/16 of 1%), as determined by the Agent, of the
rate per annum quoted by each Reference Bank at
approximately 11:00 a.m. London time (or as soon thereafter
as practicable) two Business Days prior to the first day of
the Interest Period for such Loan for the offering by such
Reference Bank to leading banks in the London interbank
market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal
amount of the Eurodollar Loan or LIBOR Bid Loan to be made
by such Reference Bank for such Interest Period. If any
Reference Bank is not participating in any Eurodollar Loan,
the Fixed Base Rate for such Loan shall be determined by
reference to the amount of the Loan which such Reference
Bank would have made had it been participating in such Loan.
In determining the Fixed Base Rate with respect to any LIBOR
Bid Loan, each Reference Bank shall be deemed to have made a
LIBOR Bid Loan in an amount equal to $10,000,000. If any
Reference Bank does not timely furnish such information for
determination of any Fixed Base Rate, the Agent shall
determine such Fixed Base Rate on the basis of information
timely furnished by the remaining Reference Banks.
"Fixed Rate" shall mean a rate per annum (rounded, if
necessary, to the nearest 1/100 of 1%) determined by the
Agent to be equal to the Fixed Base Rate for such Loan for
the Interest Period for such Loan.
"Fixed Rate Loans" shall mean Eurodollar Loans and, for
the purposes of the definition of "Fixed Base Rate" herein
and Section 5 hereof, LIBOR Bid Loans.
"Funded Debt" shall mean any obligation of the Company
or any Subsidiary for borrowed money or the purchase price
of property which is shown on the financial statements as a
liability, including (a) obligations under capitalized
leases and (b) obligations which are deemed Funded Debt
under Section 8.09 hereof but excluding (i) Subordinated
Debt (unless such Subordinated Debt is required by
Section 8.14 hereof to be included as Funded Debt
hereunder), (ii) items customarily reflected as current
liabilities and classified as other than debt (it being
understood that progress payments, trade accounts payable,
obligations under leases which are not capitalized leases
and income taxes payable are excluded from "Funded Debt"
under this definition) and (iii) deferred income taxes.
"Government" shall mean the United States of America or
any department or agency thereof.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is
made and ending on the numerically corresponding day in
the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in
Section 2.02 hereof, except that each Interest Period
which commences on the last Business Day of a calendar
month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of
the appropriate subsequent calendar month.
(b) With respect to any Base Rate Loan, the
period commencing on the date such Base Rate Loan is
made and ending on the earlier of (i) the Quarterly
Date next succeeding such date and (ii) the Commitment
Termination Date.
(c) With respect to any Set Rate Loan, the period
commencing on the date such Set Rate Loan is made and
ending on any Business Day up to and including 180 days
thereafter, as the Company may select as provided in
Section 2.03(b) hereof.
(d) With respect to any LIBOR Bid Loan, the
period commencing on the date such LIBOR Bid Loan is
made and ending on the numerically corresponding day in
the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in
Section 2.03(b) hereof, except that each Interest
Period which commences on the last Business Day of a
calendar month (or any day for which there is no
numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar
month.
Notwithstanding the foregoing: (i) no Interest Period may
commence before and end after the Commitment Termination
Date; (ii) each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest
Period for Eurodollar Loans or LIBOR Bid Loans, if such next
succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and
(iii) notwithstanding clause (i) above, no Interest Period
for any Fixed Rate Loans or LIBOR Bid Loans shall have a
duration of less than one month and, if the Interest Period
for any Fixed Rate Loans would otherwise be a shorter
period, such Loans shall not be available hereunder.
"Leverage Ratio" shall mean, at any time, the ratio of
(a) the aggregate amount (determined without duplication on
a consolidated basis) of all Funded Debt outstanding at such
time to (b) Consolidated Tangible Shareholders' Equity at
such time.
"LIBO Rate" shall mean, for any LIBOR Bid Loan, a rate
per annum determined by the Agent to be equal to the rate of
interest specified in the definition of "Fixed Base Rate" in
this Section 1.01 for the Interest Period for such Loan.
"LIBOR Auction" shall mean a solicitation of
Competitive Bid Quotes setting forth Competitive Bid Margins
based on the LIBO Rate pursuant to Section 2.03 hereof.
"LIBOR Bid Loans" shall mean Competitive Bid Loans the
interest rates on which are determined on the basis of
LIBO Rates pursuant to a LIBOR Auction.
"Lien" shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
"Loans" shall mean Competitive Bid Loans and Syndicated
Loans.
"Majority Banks" shall mean, at any time, one or more
Banks having at such time more than 50% of the aggregate
amount of the Commitments or, if the Commitments shall have
terminated, one or more Banks holding at such time more than
50% of the aggregate outstanding principal amount of the
Loans.
"Material Subsidiary" shall mean, at any time, any
Subsidiary if, at such time, such Subsidiary would qualify
as a "significant subsidiary" under Regulation S-X of the
Securities and Exchange Commission as in effect on the date
hereof.
"Multiemployer Plan" shall mean a multiemployer plan
defined as such in Section 3(37) of ERISA to which
contributions have been made by the Company or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" shall mean, as to the Company and the
Subsidiaries for any fiscal period, an amount equal to the
consolidated net income of the Company and the Subsidiaries
for such fiscal period computed on the basis of the
financial statements required to be delivered to the Banks
under Section 8.01(a) hereof.
"Notes" shall mean the promissory notes provided for by
Section 2.08 hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Person" shall mean an individual, a corporation, a
company, a voluntary association, a partnership, a trust, an
unincorporated organization or a government or any agency,
instrumentality or political subdivision thereof.
"Plan" shall mean an employee benefit or other plan
established or maintained by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any
principal of any Loan or any other amount payable by the
Company under this Agreement or any Note which is not paid
when due (whether at stated maturity, by acceleration or
otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to 1%
plus the Base Rate as in effect from time to time plus the
Applicable Margin (if any) (provided that, if such amount in
default is principal of a Fixed Rate Loan or a Competitive
Bid Loan and the due date is a day other than the last day
of the Interest Period therefor, the "Post-Default Rate" for
such principal shall be, for the period commencing on the
due date and ending on the last day of the Interest Period
therefor, 1% plus the interest rate for such Loan as
provided in Section 3.02 hereof and, thereafter, the rate
otherwise provided in this definition). For the purposes of
computing the Post-Default Rate, the Applicable Margin shall
be determined as if the Leverage Ratio were greater than
1.25 to 1.
"Prime Rate" shall mean the arithmetic mean (rounded,
if necessary, to the nearest 1/16 of 1%), as determined by
the Agent, of the rate of interest from time to time
announced by each Reference Bank at its principal office as
its prime commercial lending rate.
"Principal Office" shall mean the principal office of
Chase, located on the date of this Agreement at 1 Chase
Manhattan Plaza, New York, New York 10081.
"Quarterly Dates" shall mean the last Business Day of
each March, June, September and December in each year, the
first of which shall be the first such day after the date of
this Agreement.
"Quarterly Period" shall mean the period from and
including one Quarterly Date to but excluding the next
succeeding Quarterly Date.
"Quotation Date" shall have the meaning set forth in
Section 2.03(b) hereof.
"Reference Banks" shall mean Chase, Chemical Bank, The
First National Bank of Chicago and Morgan Guaranty Trust
Company of New York (or their Applicable Lending Offices, as
the case may be).
"Regulation A", "Regulation D", "Regulation U" and
"Regulation X" shall mean, respectively, Regulation A,
Regulation D, Regulation U and Regulation X of the Board of
Governors of the Federal Reserve System (or any successor),
as the same may be modified and supplemented and in effect
from time to time.
"Regulatory Change" shall mean, with respect to any
Bank, any change after the date of this Agreement in United
States Federal, state or foreign law or regulations
(including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests
applying to a class of banks including such Bank of or under
any United States Federal, state or foreign law or
regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reserve Requirement" shall mean, for any Interest
Period for any Fixed Rate Loan or LIBOR Bid Loan, the
average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required
to be maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks by
reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which
the Fixed Base Rate for Eurodollar Loans or LIBOR Bid Loans
(as the case may be) is to be determined as provided in the
definition of "Fixed Base Rate" or "LIBO Rate" in this
Section 1.01 or (ii) any category of extensions of credit or
other assets which include Fixed Rate Loans or LIBOR Bid
Loans.
"Restricted Payment" shall mean any dividend (other
than dividends payable solely in stock of the Company) or
any other distribution with respect to any stock of the
Company, whether now or hereafter outstanding, or any
payment on account of the purchase, acquisition, redemption
or other retirement, directly or indirectly, of any shares
of such stock.
"Set Rate Auction" shall mean a solicitation of
Competitive Bid Quotes setting forth Competitive Bid Rates
pursuant to Section 2.03 hereof.
"Set Rate Loans" shall mean Competitive Bid Loans the
interest rates on which are determined on the basis of
Competitive Bid Rates pursuant to a Set Rate Auction.
"Subordinated Debt" shall mean any indebtedness of the
Company which is subordinated to the indebtedness evidenced
by the Notes by subordination provisions satisfactory in
form and substance to the Banks.
"Subsidiary" shall mean any corporation of which
outstanding shares of stock of such corporation having by
the terms thereof ordinary voting power to elect (whether
immediately or ultimately) a majority of the board of
directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason
of the happening of any contingency) are at the time
directly or indirectly owned or controlled by the Company or
one or more of the Subsidiaries or by the Company and one or
more of the Subsidiaries. "Wholly-Owned Subsidiary" shall
mean any such corporation of which all of such shares, other
than directors' qualifying shares, are so owned or
controlled.
"Syndicated Loans" shall mean the loans provided for by
Section 2.01 hereof.
"Syndicated Notes" shall mean the promissory notes
provided for by Section 2.08(a) hereof.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial
matters required to be delivered to the Banks hereunder shall
(unless otherwise disclosed to the Banks in writing at the time
of delivery thereof in the manner described in subsection
(b) below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those
used in the preparation of the latest corresponding financial
statements furnished to the Banks hereunder after the date hereof
(or, until such financial statements are furnished, consistent
with those used in the preparation of the financial statements
referred to in Section 7.02 hereof). All calculations made for
the purposes of determining compliance with the provisions of
this Agreement shall (except as otherwise expressly provided
herein) be made by application of generally accepted accounting
principles applied on a basis consistent with those used in the
preparation of the latest corresponding annual or quarterly
financial statements furnished to the Banks pursuant to
Section 8.01 hereof (or, until such financial statements are
furnished, consistent with those used in the preparation of the
financial statements referred to in Section 7.02 hereof) unless
(i) the Company shall have objected to determining such
compliance on such basis at the time of delivery of such
financial statements or (ii) the Majority Banks shall so object
in writing within 30 days after delivery of such financial
statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of
the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the
first financial statements delivered under Section 8.01 hereof,
shall mean the financial statements referred to in Section 7.02
hereof).
(b) The Company shall deliver to the Banks at the same
time as the delivery of any annual or quarterly financial
statement under Section 8.01 hereof (i) a description in
reasonable detail of any material variation between the
application of accounting principles employed in the preparation
of such statement and the application of accounting principles
employed in the preparation of the next preceding annual or
quarterly financial statements as to which no objection has been
made in accordance with the last sentence of paragraph (a) above
(which, in the case of the first financial statements delivered
under Section 8.01 hereof, shall mean the financial statements
referred to in Section 7.02 hereof) and (ii) reasonable estimates
of the difference between such statements arising as a
consequence thereof.
(c) If, under the last sentence of paragraph (a)
above, the Company or the Majority Banks shall object to
determining compliance with the covenants contained herein based
upon the latest financial statements delivered under Section 8.01
hereof, and if the Company and the Banks (or the Majority Banks,
as the case may be) shall enter into an amendment or other
modification of the covenants and other terms and conditions of
this Agreement which, in their sole respective discretion, makes
adequate adjustments for any material variation of the type
described in clause (i) of Section 1.02(b) hereof, then neither
the Company nor the Banks shall thereafter have any right to
object to determining compliance with the covenants contained
herein based upon said financial statements.
Section 2. Commitments.
2.01 Syndicated Loans. Each Bank severally agrees, on
the terms of this Agreement, to make loans to the Company during
the period from and including the date hereof to but excluding
the Commitment Termination Date in an aggregate principal amount
at any one time outstanding up to but not exceeding the amount of
such Bank's Commitment as then in effect. Subject to the terms
of this Agreement, during such period the Company may borrow,
repay and reborrow the amount of the Commitments; provided that
no Syndicated Loan shall be made if the sum of (i) such
Syndicated Loan (together with all other Syndicated Loans and
Competitive Bid Loans to be made on the same day as such
Syndicated Loan), plus (ii) the aggregate principal amount of all
outstanding Competitive Bid Loans, plus (iii) the aggregate
principal amount of all outstanding Syndicated Loans exceeds the
aggregate amount of the Commitments at such time; and provided
further that there may be no more than fifteen different Interest
Periods for both Syndicated Loans and Competitive Bid Loans
outstanding at the same time (for which purpose Interest Periods
described in different lettered clauses of the definition of the
term "Interest Period" shall be deemed to be different Interest
Periods even if they are coterminous). Syndicated Loans may be
Base Rate Loans or Eurodollar Loans (each a "type" of Syndicated
Loan).
2.02 Borrowings of Syndicated Loans. The Company
shall give the Agent (which shall promptly notify the Banks)
notice of each borrowing hereunder of Syndicated Loans, which
notice shall be irrevocable and effective only upon receipt by
the Agent, shall specify with respect to the Syndicated Loans to
be borrowed (i) the aggregate amount (which shall be $10,000,000
or an integral multiple of $1,000,000 in excess thereof),
(ii) the type and date (which shall be a Business Day) and
(iii) in the case of Fixed Rate Loans, the duration of the
Interest Period therefor and shall be given not later than
11:00 a.m. New York time on the day which is not less than the
number of Business Days prior to the date of such borrowing
specified below opposite the type of such Loans:
Type Number of Business Days
Base Rate Loans 0
Eurodollar Loans 3
Not later than 1:00 p.m. New York time on the date specified for
each Syndicated Loan borrowing hereunder, each Bank shall make
available the amount of the Syndicated Loan to be made by it on
such date to the Agent, at account number NYAO-DI-900-9-000002
maintained by the Agent with Chase at the Principal Office, in
immediately available funds, for account of the Company. The
amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Company by
depositing the same, in immediately available funds, in an
account of the Company maintained with Chase at the Principal
Office designated by the Company.
2.03 Competitive Bid Loans.
(a) In addition to borrowings of Syndicated Loans, at
any time prior to the Commitment Termination Date the Company
may, as set forth in this Section 2.03, request the Banks to make
offers to make Competitive Bid Loans to the Company. The Banks
may, but shall have no obligation to, make such offers and the
Company may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section 2.03. Competitive
Bid Loans may be LIBOR Bid Loans or Set Rate Loans (each a "type"
of Competitive Bid Loan), provided that:
(i) there may be no more than fifteen different
Interest Periods for both Syndicated Loans and Competitive
Bid Loans outstanding at the same time (for which purpose
Interest Periods described in different lettered clauses of
the definition of the term "Interest Period" shall be deemed
to be different Interest Periods even if they are
coterminous); and
(ii) the aggregate principal amount of all Competitive
Bid Loans, together with the aggregate principal amount of
all Syndicated Loans, at any one time outstanding shall not
exceed the aggregate amount of the Commitments at such time.
(b) When the Company wishes to request offers to make
Competitive Bid Loans, it shall give the Agent (which shall
promptly notify the Banks) notice (a "Competitive Bid Quote
Request") so as to be received no later than 11:00 a.m. New York
time on (x) the fourth Business Day prior to the date of
borrowing proposed therein, in the case of a LIBOR Auction or
(y) the Business Day next preceding the date of borrowing
proposed therein, in the case of a Set Rate Auction (or, in any
such case, such other time and date as the Company and the Agent,
with the consent of the Majority Banks, may agree with notice by
the Agent to the Banks of such agreement), specifying:
(i) the proposed date of such borrowing (a
"Competitive Bid Borrowing"), which shall be a Business Day;
(ii) the aggregate amount of such Competitive Bid
Borrowing, which shall be $10,000,000 or an integral
multiple of $5,000,000 in excess thereof, but shall not
cause the limits specified in Section 2.03(a) hereof to be
violated;
(iii) the duration of the Interest Period applicable
thereto;
(iv) whether the Competitive Bid Quotes requested are
to set forth a Competitive Bid Margin or a Competitive Bid
Rate;
(v) if the Competitive Bid Quotes requested are to set
forth a Competitive Bid Rate, the date on which the
Competitive Bid Quotes are to be submitted (which may not be
earlier than the Business Day next succeeding the date of
the Competitive Bid Quote Request) if it is before the
proposed date of borrowing (the date on which such
Competitive Bid Quotes are to be submitted is called the
"Quotation Date" and if no such date is specified, the
Quotation Date is the proposed date of borrowing); and
(vi) the aggregate principal amount of all Competitive
Bid Loans and Syndicated Loans outstanding at the date of
such Competitive Bid Quote Request.
The Company may request offers to make Competitive Bid
Loans with both Competitive Bid Margins and Competitive Bid
Rates, and with different Interest Periods, in a single request;
provided that (aa) the request for each separate type and
maturity shall be deemed to be a separate Competitive Bid Quote
Request for a separate Competitive Bid Borrowing and (bb) the
Company may not make more than 5 Competitive Bid Quote Requests
at the same time. Except as otherwise provided in the preceding
sentence, no Competitive Bid Quote Request shall be given within
five Business Days (or such other number of days as the Company
and the Agent, with the consent of the Majority Banks, may agree
with notice by the Agent to the Banks of such agreement) of any
other Competitive Bid Quote Request.
(c) (i) Each Bank may submit a Competitive Bid Quote
containing an offer to make a Competitive Bid Loan in response to
any Competitive Bid Quote Request; provided that, if the
Company's request under Section 2.03(b) hereof specified more
than one Interest Period and/or type of Competitive Bid Loan,
such Bank may make a single submission containing a separate
offer for each such Interest Period and for each such type and
each such separate offer shall be deemed to be a separate
Competitive Bid Quote. Each Competitive Bid Quote must be
submitted to the Agent not later than (x) 2:00 p.m. New York time
on the fourth Business Day prior to the proposed date of
borrowing, in the case of a LIBOR Auction or (y) 10:00 a.m. New
York time on the Quotation Date, in the case of a Set Rate
Auction (or, in any such case, such other time and date as the
Company and the Agent, with the consent of the Majority Banks,
may agree with notice by the Agent to the Banks of such
agreement); provided that any Competitive Bid Quote submitted by
Chase (or its Applicable Lending Office) may be submitted, and
may only be submitted, if Chase (or such Applicable Lending
Office) notifies the Company of the terms of the offer contained
therein not later than (x) 1:00 p.m. New York time on the fourth
Business Day prior to the proposed date of borrowing, in the case
of a LIBOR Auction or (y) 9:45 a.m. New York time on the
Quotation Date, in the case of a Set Rate Auction. Subject to
Sections 5.02(b), 5.03, 6.02 and 9 hereof, any Competitive Bid
Quote so made shall be irrevocable except with the written
consent of the Agent given on the instructions of the Company.
(ii) Each Competitive Bid Quote shall specify:
(A) the proposed date of borrowing and the
Interest Period therefor;
(B) the principal amount of the Competitive Bid
Loan for which each such offer is being made, which
principal amount (x) may be greater than or less than
the unused Commitment of the quoting Bank, (y) shall be
$10,000,000 or an integral multiple of $5,000,000 in
excess thereof and (z) may not exceed the principal
amount of the Competitive Bid Borrowing for which
offers were requested;
(C) in the case of a LIBOR Auction, the margin
above or below the applicable LIBO Rate (the
"Competitive Bid Margin") offered for each such
Competitive Bid Loan, expressed as a percentage
(rounded upwards, if necessary, to the nearest
1/10,000th of 1%) to be added to or subtracted from the
applicable LIBO Rate;
(D) in the case of a Set Rate Auction, the rate
of interest per annum (rounded upwards, if necessary,
to the nearest 1/10,000th of 1%) (the "Competitive Bid
Rate") offered for each such Competitive Bid Loan; and
(E) the identity of the quoting Bank.
No Competitive Bid Quote shall contain qualifying, conditional or
similar language or propose terms other than or in addition to
those set forth in the applicable Competitive Bid Quote Request
and, in particular, no Competitive Bid Quote may be conditioned
upon acceptance by the Company of all (or some specified minimum)
of the principal amount of the Competitive Bid Loan for which
such Competitive Bid Quote is being made; provided that the
submission by any Bank containing more than one Competitive Bid
Quote may be conditioned on offers contained in such submission
not being accepted to the extent that it would result in such
Bank making Competitive Bid Loans pursuant thereto in excess of a
specified aggregate amount (the "Competitive Bid Loan Limit").
(d) The Agent shall (x) in the case of a Set Rate
Auction, as promptly as practicable after the Competitive Bid
Quote is submitted (but in any event not later than 10:15 a.m.
New York time) or (y) in the case of a LIBOR Auction, by
4:00 p.m. New York time on the day a Competitive Bid Quote is
submitted, notify the Company of the terms (i) of any Competitive
Bid Quote submitted by a Bank that is in accordance with
Section 2.03(c) hereof and (ii) of any Competitive Bid Quote that
amends, modifies or is otherwise inconsistent with a previous
Competitive Bid Quote submitted by such Bank with respect to the
same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Agent unless
such subsequent Competitive Bid Quote is submitted solely to
correct a manifest error in such former Competitive Bid Quote.
The Agent's notice to the Company shall specify (A) the aggregate
principal amount of the Competitive Bid Borrowing for which
offers have been received and (B) the respective principal
amounts and Competitive Bid Margins or Competitive Bid Rates, as
the case may be, so offered by each Bank (identifying the Bank
that made each Competitive Bid Quote).
(e) Not later than (x) 11:00 a.m. New York time on the
third Business Day prior to the proposed date of borrowing, in
the case of a LIBOR Auction or (y) 11:00 a.m. New York time on
the Quotation Date, in the case of a Set Rate Auction (or, in any
such case, such other time and date as the Company and the Agent,
with the consent of the Majority Banks, may agree with notice by
the Agent to the Banks of such agreement), the Company shall
notify the Agent of its acceptance or nonacceptance of the offers
so notified to it pursuant to Section 2.03(d) hereof (and the
failure by the Company to notify the Agent of its acceptance of
an offer as provided above shall be deemed to be nonacceptance by
the Company of such offer), and the Agent shall promptly notify
each affected Bank. In the case of acceptance, such notice by
the Agent shall specify the aggregate principal amount of offers
for each Interest Period that are accepted and the lowest and
highest Competitive Bid Margins and Competitive Bid Rates that
were accepted for each Interest Period. The Company may accept
any Competitive Bid Quote in whole or in part (provided that any
Competitive Bid Quote accepted in part from any Bank shall be
$10,000,000 or an integral multiple of $5,000,000 in excess
thereof); provided that:
(i) the aggregate principal amount of each Competitive
Bid Borrowing may not exceed the applicable amount set forth
in the related Competitive Bid Quote Request;
(ii) the aggregate principal amount of each Competitive
Bid Borrowing shall be $10,000,000 or an integral multiple
of $5,000,000 in excess thereof, but shall not cause the
limits specified in Section 2.03(a) hereof to be violated;
(iii) acceptance of offers may only be made in ascending
order of Competitive Bid Margins or Competitive Bid Rates,
as the case may be, in each case beginning with the lowest
rates so offered;
(iv) the Company may not accept any offer if the Agent
has advised the Company that such offer fails to comply with
Section 2.03(c)(ii) hereof or otherwise fails to comply with
the requirements of this Agreement (including, without
limitation, Section 2.03(a) hereof); and
(v) the aggregate principal amount of each Competitive
Bid Borrowing from any Bank may not exceed any applicable
Competitive Bid Loan Limit of such Bank.
If offers are made by two or more Banks with the same Competitive
Bid Margins or Competitive Bid Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of
which offers are permitted to be accepted for the related
Interest Period, the principal amount of Competitive Bid Loans in
respect of which such offers are accepted shall be allocated by
the Company among such Banks as nearly as possible (in integral
multiples of $5,000,000) in proportion to the aggregate principal
amount of such offers. Determinations by the Company of the
amounts of Competitive Bid Loans shall be conclusive in the
absence of manifest error.
(f) Any Bank whose offer to make any Competitive Bid
Loan has been accepted shall, not later than 1:00 p.m. New York
time on the date specified for the making of such Loan, make the
amount of such Loan available to the Agent at the Principal
Office in immediately available funds. The amount so received by
the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company on such date by
depositing the same, in immediately available funds, in an
account of the Company maintained with Chase at the Principal
Office designated by the Company.
(g) Except for the purpose and to the extent expressly
stated in Section 2.04(a) hereof, the amount of any Competitive
Bid Loan made by any Bank shall not constitute a utilization of
such Bank's Commitment.
2.04 Changes of Commitments.
(a) The Company shall have the right to terminate or
reduce the unused amount of the Commitments (solely for which
purpose the amount of any Competitive Bid Borrowing shall be
deemed to be a pro rata (based upon Commitments) utilization of
each Bank's Commitment) at any time or from time to time upon not
less than three Business Days' prior notice to the Agent (which
shall promptly notify the Banks) of each such termination or
reduction, which notice shall specify the effective date thereof
and the amount of any such reduction (which shall be $10,000,000
or an integral multiple of $1,000,000 in excess thereof) and
shall be irrevocable and effective only upon receipt by the
Agent.
(b) The Commitments once terminated or reduced may not
be reinstated.
(c) If any Bank requests compensation pursuant to
Section 5.01 hereof (other than compensation requested under
Section 5.01(e) hereof), the Company may, so long as no Default
shall have occurred and be continuing, require that such Bank
transfer all or a portion of its rights and obligations
(including, without limitation, its Loans and Commitment) as a
"Bank" under this Agreement and such Bank's Notes to one or more
banks (such bank or banks being herein referred to as the
"Replacement Bank(s)") identified by the Company in a notice (the
"Replacement Notice") to the Agent (which shall promptly notify
the affected Bank) specifying the date on which such transfer is
to occur and whether all or a portion of said rights and
obligations are proposed to be transferred, which notice shall be
given not less than 10 Business Days prior to the date on which
such transfer is to occur; provided that no such transfer shall
be made unless (i) the Agent shall have consented to the identity
of the Replacement Bank(s), which consent shall not be
unreasonably withheld or delayed, (ii) the aggregate amount of
compensation that would be requested by the Replacement Bank(s)
under Section 5.01 hereof would be less than the aggregate amount
of compensation requested by the affected Bank in respect of the
rights and obligations proposed to be transferred, (iii) the
Commitment proposed to be transferred to the Replacement Bank(s),
together with the aggregate amount of the Commitments transferred
pursuant to this Section 2.04(c) during the preceding period of
12 months shall not exceed 17.5% of the aggregate amount of the
Commitments as in effect on the date of the proposed transfer and
(iv) the amount of the Commitment proposed to be transferred to
any Replacement Bank shall be at least $10,000,000 (or, if less
than $10,000,000, the entire Commitment of the affected Bank).
On the date of any transfer permitted under this Section 2.04(c),
(x) the affected Bank shall sell, assign and transfer to the
Replacement Bank(s), and the Replacement Bank(s) shall acquire
and assume from the affected Bank, all (or the lesser portion
specified in the Replacement Notice) of the rights and
obligations of the affected Bank as a "Bank" under this Agreement
and under the affected Bank's Notes (collectively, the
"Transferred Interest") and (y) the Company and/or the
Replacement Bank(s) shall pay to the affected Bank an amount
equal to all principal, interest, fees and other amounts then
owing under this Agreement and the affected Bank's Notes in
respect of the Transferred Interest (including, without
limitation, any amounts which would be payable in respect of the
Transferred Interest under Sections 5.01 and 5.05 hereof as if
the affected Bank's Loans were being prepaid in full on such
date), whereupon the Replacement Bank(s) shall become "Bank(s)"
for all purposes of this Agreement having all the rights and
obligations, including, without limitation, Commitment(s), under
this Agreement of "Bank(s)" holding the Transferred Interest, and
the obligations of the affected Bank in respect of the
Transferred Interest shall terminate (provided that the
obligations of the Company under Sections 5.01, 5.05 and 11.03
hereof to the affected Bank in respect of the Transferred
Interest shall survive such transfer as provided in Section 11.07
hereof). If the Commitment of any Bank that is a Reference Bank
(or whose Applicable Lending Office is a Reference Bank, as the
case may be) shall terminate (other than pursuant to Section 9
hereof), such Reference Bank shall thereupon cease to be a
Reference Bank and, if as a result of the foregoing, there shall
be only two Reference Banks remaining, then the Agent (after
consultation with the Company) shall, by notice to the Company
and the Banks, designate another Bank as a Reference Bank.
2.05 Fees.
(a) The Company shall pay to the Agent for account of
each Bank a facility fee on the daily average amount of such
Bank's Commitment (whether or not utilized) for the period from
and including the date of this Agreement to but excluding the
earlier of the date such Commitment is terminated or the
Commitment Termination Date at a rate per annum equal to the
Applicable Facility Fee Rate. Accrued facility fee shall be
payable on each Quarterly Date and on the earlier of the date the
Commitments are terminated or the Commitment Termination Date.
(b) The Company shall pay to the Agent for its own
account agency fees in the amounts specified in the letter
agreement dated October 25, 1993 from Chase to the Company,
payable on the Quarterly Date occurring in September in each
calendar year commencing with 1994 so long as the Commitments or
any Loans are outstanding on such date. The Company shall also
pay to the Agent for the Agent's account a fee of $500 for each
Competitive Bid Quote Request (for which purpose multiple
Competitive Bid Quote Requests contained in a single request
shall be deemed to be a single Competitive Bid Quote Request
notwithstanding the provisions of the second sentence of
Section 2.03(b) hereof), such fees to be payable in arrears on
the last Business Day of each month.
2.06 Lending Offices. The Loans of each type made by
each Bank shall be made and maintained at such Bank's Applicable
Lending Office for Loans of such type.
2.07 Several Obligations; Remedies Independent. The
failure of any Bank to make any Loan to be made by it on the date
specified therefor shall not relieve any other Bank of its
obligation to make any Loan to be made by such other Bank on such
date, but no Bank shall be responsible for the failure of any
other Bank to make a Loan to be made by such other Bank. The
amounts payable by the Company at any time hereunder and under
the Notes to each Bank shall be a separate and independent debt
and each Bank shall be entitled to protect and enforce its rights
arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank or the Agent to consent to, or be
joined as an additional party in, any proceedings for such
purposes.
2.08 Notes.
(a) The Syndicated Loans made by each Bank shall be
evidenced by a single promissory note of the Company in
substantially the form of Exhibit A-1 hereto, dated the date of
this Agreement, payable to such Bank in a principal amount equal
to the amount of its Commitment as originally in effect and
otherwise duly completed. The date, amount, type, interest rate
and maturity date of each Syndicated Loan made by each Bank, and
all payments made on account of the principal thereof, shall be
recorded by such Bank on its books and, prior to any transfer of
such Note held by it, endorsed by such Bank on the schedule
attached to such Note or any continuation thereof; provided that
the failure by such Bank to make such recordation or endorsement
shall not relieve the Company of any of its obligations hereunder
or under such Note.
(b) The Competitive Bid Loans made by each Bank shall
be evidenced by a single promissory note of the Company in
substantially the form of Exhibit A-2 hereto, dated the date of
this Agreement, payable to such Bank and otherwise duly
completed. The date, amount, type, interest rate and maturity
date of each Competitive Bid Loan made by any Bank, and all
payments made on account of the principal thereof, shall be
recorded by such Bank on its books and, prior to any transfer of
such Note held by it, endorsed by such Bank on the schedule
attached to such Note or any continuation thereof; provided that
the failure by such Bank to make such recordation or endorsement
shall not relieve the Company of any of its obligations hereunder
or under such Note.
(c) No Note may be subdivided, by exchange for
promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of
such Bank's Commitment, Loans and Note pursuant to
Sections 11.06(b) and 11.06(e) hereof.
2.09 Prepayments. Subject to Section 5.05 hereof, the
Company may prepay Syndicated Loans upon not less than three
Business Days' prior notice to the Agent (which shall promptly
notify the Banks), which notice shall specify the prepayment date
(which shall be a Business Day) and the amount of the prepayment
(which shall be $10,000,000 or an integral multiple of $1,000,000
in excess thereof) and shall be irrevocable and effective only
upon receipt by the Agent (and, upon the date specified in any
such notice of prepayment, the amount to be prepaid shall become
due and payable hereunder), provided that interest on the
principal prepaid, accrued to the prepayment date, shall be paid
on the prepayment date. The Company may not prepay any
Competitive Bid Loans (provided that this sentence shall not
affect the Company's obligation to pay Loans pursuant to
Section 9 hereof).
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Company will pay to the
Agent for account of each Bank the principal of each Loan made by
such Bank, and each Loan shall mature, on the last day of the
Interest Period therefor.
3.02 Interest. The Company will pay to the Agent for
account of each Bank interest on the unpaid principal amount of
each Loan made by such Bank for the period commencing on the date
of such Loan to but excluding the date such Loan shall be paid in
full, at the following rates per annum:
(a) if such Loan is a Base Rate Loan, the Base Rate
(as in effect from time to time) plus the Applicable Margin
(if any);
(b) if such Loan is a Fixed Rate Loan, the Fixed Rate
for such Loan for the Interest Period therefor plus the
Applicable Margin;
(c) if such Loan is a LIBOR Bid Loan, the LIBO Rate
for such Loan for the Interest Period therefor plus (or
minus) the Competitive Bid Margin quoted by the Bank making
such Loan in accordance with Section 2.03 hereof; and
(d) if such Loan is a Set Rate Loan, the Competitive
Bid Rate for such Loan for the Interest Period therefor
quoted by the Bank making such Loan in accordance with
Section 2.03 hereof.
Notwithstanding the foregoing, the Company will pay to the Agent
for account of each Bank interest at the applicable Post-Default
Rate on any principal of any Loan made by such Bank, and (to the
fullest extent permitted by the law of the State of New York) on
any other amount payable by the Company hereunder or under the
Note held by such Bank to or for account of such Bank, which
shall not be paid in full when due (whether at stated maturity,
by acceleration or otherwise), for the period commencing on the
due date thereof until the same is paid in full. Accrued
interest on each Loan shall be payable on the last day of the
Interest Period therefor and, if such Interest Period is longer
than 90 days (in the case of a Set Rate Loan) or three months (in
the case of a Eurodollar Loan or a LIBOR Bid Loan), at 90-day or
three-month intervals, respectively, following the first day of
such Interest Period, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand
and interest on any Fixed Rate Loan that is converted into a Base
Rate Loan (pursuant to Section 5.04 hereof) shall be payable on
the date of conversion (but only to the extent so converted).
Promptly after the determination of any interest rate provided
for herein or any change therein, the Agent shall notify the
Banks to which such interest is payable and the Company thereof.
Section 4. Payments; Pro Rata Treatment; Computations;
Etc.
4.01 Payments. Except to the extent otherwise
provided herein, all payments of principal, interest and other
amounts to be made by the Company under this Agreement and the
Notes shall be made in Dollars, in immediately available funds,
to the Agent at account number NYAO-DI-900-9-000002 maintained by
the Agent with Chase at the Principal Office, not later than
1:00 p.m. New York time on the date on which such payment shall
become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding
Business Day). Any Bank for whose account any such payment is to
be made, may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary
deposit account of the Company with such Bank (with notice to the
Company and the Agent). The Company shall, at the time of making
each payment under this Agreement or any Note for account of any
Bank, specify to the Agent the Loans or other amounts payable by
the Company hereunder to which such payment is to be applied (and
in the event that it fails to so specify, or if an Event of
Default has occurred and is continuing, the Agent shall
distribute such payment to the Banks pro rata (based on the
amounts then due and payable hereunder to the Banks) and each
Bank may apply the portion of such payment received by it to such
amounts then due and payable hereunder to such Bank as such Bank
may determine). Each payment received by the Agent under this
Agreement or any Note for account of a Bank shall be paid
promptly to such Bank, in immediately available funds, and, in
the case of principal or interest on any Loan, for account of
such Bank's Applicable Lending Office for such Loan. If the due
date of any payment under this Agreement or any Note would
otherwise fall on a day which is not a Business Day such date
shall be extended to the next succeeding Business Day, and
interest shall be payable for any principal so extended for the
period of such extension.
4.02 Pro Rata Treatment. Except to the extent
otherwise provided herein: (a) each borrowing from the Banks
under Section 2.01 hereof shall be made from the Banks, each
payment of facility fee under Section 2.05(a) hereof shall be
made for account of the Banks, and each termination or reduction
of the amount of the Commitments under Section 2.04 hereof shall
be applied to the Commitments of the Banks, pro rata according to
the amounts of their respective Commitments; (b) each payment of
principal of Syndicated Loans by the Company shall be made for
account of the Banks pro rata in accordance with the respective
unpaid principal amounts of the Syndicated Loans held by the
Banks; and (c) each payment of interest on Syndicated Loans by
the Company shall be made for account of the Banks pro rata in
accordance with the amounts of interest on Syndicated Loans due
and payable to the respective Banks.
4.03 Computations. Interest on Competitive Bid Loans
and Fixed Rate Loans, and facility fees payable pursuant to
Section 2.05(a) hereof, respectively, shall be computed on the
basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period
for which payable, and interest on Base Rate Loans shall be
computed on the basis of a year of 365 or 366 days, as the case
may be (or, for each day the interest on Base Rate Loans is
calculated by reference to the Federal Funds Rate, on a year of
360 days), and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which
payable.
4.04 Non-Receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Bank or the Company (each, a
"Payor") prior to the date on which the Payor is to make payment
to the Agent of (in the case of a Bank) the proceeds of a Loan to
be made by it hereunder or (in the case of the Company) a payment
to the Agent for account of one or more of the Banks hereunder
(such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that it does not intend
to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon
such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date; and,
if the Payor has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay
to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on
the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to
the Federal Funds Rate for such day.
4.05 Sharing of Payments, Etc. The Company agrees
that, in addition to (and without limitation of) any right of
set-off, bankers' lien or counterclaim a Bank may otherwise have,
each Bank shall be entitled, at its option, to offset balances
held by such Bank or any of its affiliates at any of their
respective offices for account of the Company, in Dollars or in
any other currency, against any principal of or interest on any
of such Bank's Loans, or any other amount payable to such Bank
hereunder, which is not paid when due (regardless of whether such
balances are then due to the Company), in which case it shall
promptly notify the Company and the Agent thereof, provided that
such Bank's failure to give such notice shall not affect the
validity thereof. If any Bank shall obtain payment of any
principal of or interest on any Syndicated Loan made by it to the
Company under this Agreement through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Bank shall have
received a greater percentage of the principal or interest then
due hereunder by the Company to such Bank in respect of
Syndicated Loans than the percentage received by any other Banks,
it shall promptly purchase from such other Banks participations
in (or, if and to the extent specified by such Bank, direct
interests in) the Syndicated Loans made by such other Banks (or
in interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be
equitable, to the end that all the Banks shall share the benefit
of such excess payment (net of any expenses which may be incurred
by such Bank in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal and/or interest on
the Syndicated Loans held by each of the Banks. To such end all
the Banks shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored. The Company agrees
that any Bank so purchasing a participation (or direct interest)
in the Syndicated Loans made by other Banks (or in interest due
thereon, as the case may be) may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to
such participation (or direct interest) as fully as if such Bank
were a direct holder of Loans in the amount of such
participation. Nothing contained herein shall require any Bank
to exercise any such right or shall affect the right of any Bank
to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness (including, without
limitation, Competitive Bid Loans) or obligation of the Company.
If under any applicable bankruptcy, insolvency or other similar
law, any Bank receives a secured claim in lieu of a set-off to
which this Section 4.05 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Banks entitled
under this Section 4.05 to share in the benefits of any recovery
on such secured claim.
Section 5. Yield Protection and Illegality.
5.01 Additional Costs.
(a) The Company shall pay directly to each Bank from
time to time such amounts as such Bank may determine to be
necessary to compensate it for any costs which such Bank
determines are attributable to its making or maintaining of any
Fixed Rate Loans or its obligation to make any Fixed Rate Loans
hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation
(such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Bank under this Agreement or its
Notes in respect of any of such Loans (other than taxes imposed
on the overall net income of such Bank or of its Applicable
Lending Office for any of such Loans by the jurisdiction in which
such Bank has its principal office or such Applicable Lending
Office); or (ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Bank (including any
of such Loans or any deposits referred to in the definition of
"Fixed Base Rate" in Section 1.01 hereof), or any Commitment of
such Bank; or (iii) imposes any other condition affecting this
Agreement or its Notes (or any of such extensions of credit or
liabilities) or Commitment. Each Bank will designate a different
Applicable Lending Office for the Loans of such Bank affected by
such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole
opinion of such Bank, be disadvantageous to such Bank, provided
that such Bank shall have no obligation to so designate an
Applicable Lending Office located in the United States. If any
Bank requests compensation from the Company under this
Section 5.01(a), the Company may, by notice to such Bank (with a
copy to the Agent), suspend the obligation of such Bank to make
additional Loans of the type with respect to which such
compensation is requested until the Regulatory Change giving rise
to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable).
(b) Without limiting the effect of the provisions of
Section 5.01(a) hereof, in the event that, by reason of any
Regulatory Change, any Bank either (i) incurs Additional Costs
based on or measured by the excess above a specified level of the
amount of a category of deposits or other liabilities of such
Bank which includes deposits by reference to which the interest
rate on Eurodollar Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets
of such Bank which includes Eurodollar Loans or (ii) becomes
subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so
elects by notice to the Company (with a copy to the Agent), the
obligation of such Bank to make additional Loans of such type
hereunder shall be suspended until such Regulatory Change ceases
to be in effect (in which case the provisions of Section 5.04
hereof shall be applicable).
(c) Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the
Company shall pay directly to each Bank from time to time on
request such amounts as such Bank may determine to be necessary
to compensate such Bank or any corporation controlling such Bank
for any costs which such Bank determines are attributable to the
maintenance by such Bank (or any Applicable Lending Office),
pursuant to any law or regulation or any interpretation,
directive or request (whether or not having the force of law) of
any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital
guideline or other requirement heretofore or hereafter issued by
any government or governmental authority implementing at the
national level the Basle Accord (including, without limitation,
the Final Risk-Based Capital Guidelines), of capital in respect
of its Commitment (such compensation to include, without
limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Bank (or any Applicable
Lending Office) or any corporation controlling such Bank to a
level below that which such Bank (or any Applicable Lending
Office) or such corporation could have achieved but for such law,
regulation, interpretation, directive or request). Each Bank
will notify the Company that it is entitled to compensation
pursuant to this Section 5.01(c) as promptly as practicable after
it determines to request such compensation.
(d) Each Bank will furnish the Company with a
certificate setting forth the basis, calculation and amount of
each request by such Bank for compensation under paragraph (a),
(c) or (e) of this Section 5.01. Notwithstanding anything in
this Section 5.01 to the contrary, compensation with respect to
any event entitling any Bank to compensation under paragraph (a)
or (c) of this Section 5.01 shall be payable to such Bank only
for costs incurred by such Bank from and after the date 45 days
after such Bank furnishes to the Company notice of its intention
to request the payment of compensation with respect to such
event. Determinations and allocations by any Bank for purposes
of this Section 5.01 of the effect of any Regulatory Change
pursuant to Section 5.01(a) or (b) hereof, or of the effect of
capital maintained pursuant to Section 5.01(c) hereof, on its
costs or rate of return of maintaining Loans or its obligation to
make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Bank under this
Section 5.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(e) Without limiting the effect of the foregoing, the
Company shall pay to each Bank on the last day of each Interest
Period (or, if later, on the date of the notice provided for
below) so long as such Bank is maintaining reserves against
"Eurocurrency liabilities" under Regulation D (or, unless the
provisions of paragraph (b) above are applicable, so long as such
Bank is, by reason of any Regulatory Change, maintaining reserves
against any other category of liabilities which includes deposits
by reference to which the interest rate on Eurodollar Loans is
determined as provided in this Agreement or against any category
of extensions of credit or other assets of such Bank which
includes any Eurodollar Loans) an additional amount (determined
by such Bank and notified to the Company through the Agent within
45 days after the last day of such Interest Period) equal to the
product of the following for each Eurodollar Loan for each day
during such Interest Period:
(i) the principal amount of such Eurodollar Loan
outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of
which is the rate (expressed as a decimal) at which interest
accrues on such Eurodollar Loan for such Interest Period as
provided in this Agreement (less the Applicable Margin) and
the denominator of which is one minus the effective rate
(expressed as a decimal) at which such reserve requirements
are imposed on such Bank on such day minus (y) such
numerator; and
(iii) 1/360.
5.02 Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, if, on or prior to the
determination of any Fixed Base Rate for any Interest Period:
(a) the Agent determines (which determination shall be
conclusive) that quotations of interest rates for the
relevant deposits referred to in the definition of "Fixed
Base Rate" in Section 1.01 hereof are not being provided in
the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for any type of
Fixed Rate Loans as provided herein; or
(b) the Majority Banks determine (or any Bank that has
outstanding a Competitive Bid Quote with respect to a
LIBOR Bid Loan determines), which determination shall be
conclusive, and notify (or notifies, as the case may be) the
Agent that the relevant rates of interest referred to in the
definition of "Fixed Base Rate" in Section 1.01 hereof upon
the basis of which the rate of interest for Eurodollar Loans
(or LIBOR Bid Loans, as the case may be) for such Interest
Period is to be determined are not likely adequately to
cover the cost to such Banks (or to such quoting Bank) of
making or maintaining such type of Loans;
then the Agent shall give the Company and each Bank prompt notice
thereof, and so long as such condition remains in effect, the
Banks (or such quoting Bank) shall be under no obligation to make
additional Loans of such type.
5.03 Illegality. Notwithstanding any other provision
of this Agreement, in the event that it becomes unlawful for any
Bank or its Applicable Lending Office to honor its obligation to
make or maintain Eurodollar Loans and LIBOR Bid Loans hereunder,
then such Bank shall promptly notify the Company thereof (with a
copy to the Agent) and such Bank's obligation to make Eurodollar
Loans shall be suspended until such time as such Bank may again
make and maintain Eurodollar Loans (in which case the provisions
of Section 5.04 hereof shall be applicable), and such Bank shall
no longer be obligated to make any LIBOR Bid Loan that it has
offered to make.
5.04 Base Rate Loans Pursuant to Sections 5.01 and
5.03. If the obligation of any Bank to make Fixed Rate Loans
shall be suspended pursuant to Section 5.01 or 5.03 hereof (Loans
of such type being herein called "Affected Loans" and such type
being herein called the "Affected Type"), all Loans (other than
Competitive Bid Loans) which would otherwise be made by such Bank
as Loans of the Affected Type shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01(b) or 5.03
hereof has occurred and such Bank so requests by notice to the
Company with a copy to the Agent, all Affected Loans of such Bank
then outstanding shall be automatically converted into Base Rate
Loans on the date specified by such Bank in such notice) and, to
the extent that Affected Loans are so made as (or converted into)
Base Rate Loans, all payments of principal which would otherwise
be applied to such Bank's Affected Loans shall be applied instead
to its Base Rate Loans.
5.05 Compensation. The Company shall pay to the Agent
for account of each Bank, upon the request of such Bank through
the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss,
cost or expense which such Bank determines is attributable to:
(a) any payment or conversion of a Fixed Rate Loan or
a Set Rate Loan for any reason (including, without
limitation, under Section 5.04 hereof or by reason of the
acceleration of the Loans pursuant to Section 9 hereof) on a
date other than the last day of the Interest Period for such
Loan; or
(b) any failure by the Company for any reason
(including, without limitation, the failure of any of the
conditions precedent specified in Section 6 hereof to be
satisfied) to borrow a Fixed Rate Loan or a Set Rate Loan
(with respect to which, in the case of a Competitive Bid
Loan, the Company has accepted a Competitive Bid Quote) from
such Bank on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02
or 2.03(b) hereof.
Without limiting the effect of the preceding sentence, such
compensation shall include an amount equal to the excess, if any,
of (i) the amount of interest which otherwise would have accrued
on the principal amount so paid or converted or not borrowed for
the period from the date of such payment, conversion or failure
to borrow to the last day of the Interest Period for such Loan
(or, in the case of a failure to borrow, the Interest Period for
such Loan which would have commenced on the date specified for
such borrowing) at the applicable rate of interest for such Loan
provided for herein over (ii) the interest component of the
amount such Bank would have bid in the London interbank market
(if such Loan is a Eurodollar Loan or a LIBOR Bid Loan) or the
United States certificate of deposit market for issuance at face
value of certificates of deposit (if such Loan is a Set Rate
Loan) for Dollar deposits in amounts comparable to such principal
amount and with maturities comparable to such period (as
reasonably determined by such Bank).
Section 6. Conditions Precedent.
6.01 Initial Loan. The obligation of the Banks to
make the initial Loans hereunder is subject to the receipt by the
Agent of the following documents and the occurrence of the
following events, as the case may be, each of which shall be
satisfactory to the Agent in form and substance:
(a) Certified copies of the charter and by-laws of the
Company and all corporate action taken by the Company
approving this Agreement and the Notes and borrowings by the
Company hereunder (including, without limitation, a
certificate setting forth the resolutions of the Board of
Directors of the Company adopted in respect of the
transactions contemplated hereby).
(b) A certificate of the Company in respect of each of
the officers (i) who is authorized to sign this Agreement or
the Notes on its behalf and (ii) who will, until replaced by
another officer or officers duly authorized for that
purpose, act as its representative for the purposes of
signing documents and giving notices and other
communications in connection with this Agreement and the
transactions contemplated hereby. The Agent and each of the
Banks may conclusively rely on such certificate until it
receives notice in writing from the Company to the contrary.
(c) A certificate of a senior officer of the Company
to the effect set forth in the first sentence of
Section 6.02 hereof.
(d) An opinion of the attorney then acting as general
counsel of the Company, substantially in the form of
Exhibit B hereto (and the Company hereby instructs such
counsel to deliver such opinion to the Banks and the Agent).
(e) An opinion of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Banks, substantially in the
form of Exhibit C hereto.
(f) The Syndicated Notes, duly completed and executed.
(g) The Competitive Bid Notes, duly completed and
executed.
(h) Evidence that any commitments to extend credit
under the Existing Credit Agreement shall have been
terminated.
(i) A certificate of an authorized financial or
accounting officer of the Company setting forth the Leverage
Ratio as at September 30, 1993.
(j) Such other documents as the Agent or any Bank or
special New York counsel to the Banks may reasonably
request.
6.02 Initial and Subsequent Loans. The obligation of
any Bank to make any Loan (including any Competitive Bid Loan and
such Bank's initial Syndicated Loan) to the Company upon the
occasion of each borrowing hereunder is subject to the further
conditions precedent that, as of the date of such Loan and after
giving effect thereto:
(a) no Event of Default and, if such borrowing is a
Competitive Bid Loan or will increase the outstanding
aggregate principal amount of the Syndicated Loans, no
Default shall have occurred and be continuing; and
(b) the representations and warranties made by the
Company in Section 7 hereof (other than, if such borrowing
is not a Competitive Bid Loan and will not increase the
outstanding aggregate principal amount of the Syndicated
Loans, the last sentence of Section 7.02 hereof and
Section 7.03 hereof) shall be true in all material respects
on and as of the date of the making of such Loan with the
same force and effect as if made on and as of such date.
Each notice of borrowing by the Company hereunder shall
constitute a certification by the Company to the effect set forth
in the preceding sentence (both as of the date of such notice
and, unless the Company otherwise notifies the Agent prior to the
date of such borrowing, as of the date of such borrowing).
Section 7. Representations and Warranties. The
Company represents and warrants to the Banks that:
7.01 Corporate Existence. Each of the Company and the
Material Subsidiaries: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation; (b) has all requisite
corporate power, and has all material governmental licenses,
authorizations, consents and approvals, necessary to own its
assets and carry on its business as now being conducted; and
(c) is qualified to do business and is in good standing in all
jurisdictions in which the failure to so qualify would have a
material adverse effect on the business, financial condition or
operations of the Company and the Subsidiaries taken as a whole.
7.02 Financial Condition. The consolidated statement
of financial position of the Company and the Subsidiaries as at
December 31, 1992 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows of the
Company and the Subsidiaries for the fiscal year ended on said
date, with the opinion thereon of Deloitte and Touche, and the
unaudited consolidated statement of financial position of the
Company and the Subsidiaries as at September 30, 1993 and the
related consolidated statements of operations, changes in
shareholders' equity and cash flows of the Company and the
Subsidiaries for the nine-month period ended on such date,
heretofore furnished to each of the Banks, are complete and
fairly present the consolidated financial condition of the
Company and the Subsidiaries as at said date and the consolidated
results of their operations for the fiscal year and nine-month
period ended on said dates (subject, in the case of such
financial statements as at September 30, 1993, to normal year-end
adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent
basis. Neither the Company nor any of the Subsidiaries had on
said dates any material contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in said statements of
financial position as at said dates. Except as expressly
disclosed in writing to the Banks prior to the date of this
Agreement, since December 31, 1992, there has been no material
adverse change in the consolidated financial condition or
operations, or the prospects or business taken as a whole, of the
Company and the Subsidiaries from that set forth in said
financial statements as at said date.
7.03 Litigation. There are no legal or arbitral
proceedings or any proceedings by or before any governmental or
regulatory authority or agency, now pending or (to the knowledge
of the Company) threatened against the Company or any Material
Subsidiary which, if adversely determined, would result, in the
opinion of the Company, in any material adverse change in the
business or the financial condition of the Company or such
Material Subsidiary except as heretofore disclosed to the Banks
in the Company's Annual Report on Form 10-K for the calendar year
ended December 31, 1992 and the Company's Quarterly Reports on
Form 10-Q for the calendar quarters ended March 31, 1993,
June 30, 1993 and September 30, 1993, copies of which have been
furnished to the Banks.
7.04 No Breach. None of the execution and delivery of
this Agreement and the Notes, the consummation of the
transactions herein contemplated and compliance with the terms
and provisions hereof will conflict with or result in a breach
of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which the Company or
any Material Subsidiary is a party or by which it is bound or to
which it is subject, or constitute a default under any such
agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Company or
any Material Subsidiary pursuant to the terms of any such
agreement or instrument.
7.05 Corporate Action. The Company has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Notes; and the
execution, delivery and performance by the Company of this
Agreement and the Notes have been duly authorized by all
necessary corporate action on its part; and this Agreement has
been duly and validly executed and delivered by the Company and
constitutes, and each of the Notes when executed and delivered
for value will constitute, its legal, valid and binding
obligation, enforceable in accordance with its terms, except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights and
(b) the application of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
7.06 Approvals. No authorizations, approvals,
consents or licenses of, and no filings or registrations with,
any governmental or regulatory authority or agency are necessary
for the execution, delivery or performance by the Company of this
Agreement or the Notes or for the validity or enforceability
hereof or thereof or to borrow hereunder.
7.07 Use of Loans. Neither the Company nor any
Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation U or X), and no
part of the proceeds of any Loan hereunder will be used, directly
or indirectly, to buy or carry any margin stock in violation of
Regulation X. At the request of any Bank, the Company will
furnish to such Bank in connection with any Loan a statement in
conformity with the requirements of Form U-1 referred to in
Regulation U.
7.08 ERISA. Each of the Company and the ERISA
Affiliates has fulfilled its obligations under the minimum
funding standards of ERISA and the Code with respect to each
Plan, is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code and has not
incurred any liability to the PBGC or any Plan or Multiemployer
Plan (other than a liability to make payments or contributions in
the ordinary course of business). No Termination Event has
occurred and is continuing. As used in this Agreement, the term
"Termination Event" shall mean any event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to
administer, any Plan and which involves a liability of the
Company to PBGC in excess of $25,000,000.
7.09 Taxes. United States Federal income tax returns
of the Company and its Material Subsidiaries have been examined
and reported on by the Internal Revenue Service or closed by
applicable statutes and satisfied through the fiscal year of the
Company ended December 31, 1985. Each of the Company and the
Subsidiaries has filed all United States Federal and State income
tax returns which, to the knowledge of the officers of the
Company, are required to be filed by it and has paid all taxes
due pursuant to such returns or pursuant to any assessment
received by the Company or any Subsidiary to the extent that such
taxes have become due (except as to such taxes which are being
contested in good faith by appropriate proceedings). The
charges, accruals and reserves on the books of the Company and
the Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of the Company, adequate. The
California Franchise tax returns of the Company have been
examined and reported on by the California Franchise Tax Board or
closed by applicable statutes and satisfied for all fiscal years
prior to, and including, the fiscal year ended December 31, 1985.
7.10 Funded Debt. As of the date of this Agreement,
no default exists under the provisions of any instrument
evidencing Funded Debt or of any agreement relating thereto.
7.11 Properties. The Company has, and each of the
Material Subsidiaries has, good and marketable title to its
respective properties and assets, including the properties and
assets reflected in the balance sheet as at December 31, 1992
hereinabove described (other than properties and assets disposed
of in the ordinary course of business), subject to no Lien of any
kind except Liens permitted by Section 8.11 hereof.
7.12 Environmental Matters.
(a) Except as disclosed in the Company's Annual Report
on Form 10-K for the calendar year ended December 31, 1992 and
the Company's Quarterly Reports on Form 10-Q for the calendar
quarters ended March 31, 1993, June 30, 1993 and September 30,
1993, neither the Company nor any Subsidiary (i) has received
notice or otherwise obtained knowledge of any claim, demand,
action, event, condition, report or investigation indicating or
concerning any potential or actual liability which would
individually or in the aggregate have a material adverse effect
on the consolidated financial condition or operations, or the
prospects or business taken as a whole, of the Company and the
Subsidiaries arising in connection with: (1) any non-compliance
with or violation of the requirements of any applicable Federal,
state and local environmental health and safety statutes and
regulations or (2) the release or threatened release of toxic or
hazardous waste, substance or constituent, or other substance
into the environment, (ii) has any threatened or actual liability
in connection with the release or threatened release of any toxic
or hazardous waste, substance or constituent, or other substance
into the environment which would individually or in the aggregate
have a material adverse effect on the consolidated financial
condition or operations, or the prospects or business taken as a
whole, of the Company and the Subsidiaries, (iii) has received
notice or otherwise obtained knowledge of any Federal or state
investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or
hazardous waste, substance or constituent or other substance into
the environment for which the Company or any Subsidiary is or may
be liable, which remedial action would have a material adverse
effect on the consolidated financial condition or operations, or
the prospects or business taken as a whole, of the Company and
the Subsidiaries or (iv) has received notice that the Company or
any Subsidiary is or may be liable to any Person under the
Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, 42 U.S.C. Sect. 9601 et seq. ("CERCLA"), or any
analogous state law which liability would have a material adverse
effect on the consolidated financial condition or operations, or
the prospects or business taken as a whole, of the Company and
the Subsidiaries.
(b) Each of the Company and each Subsidiary is in
compliance with the financial responsibility requirements of all
Federal and state environmental laws, including, without
limitation, those contained in 40 C.F.R., Parts 264 and 265,
Subpart H, and any similar state law requirements.
Section 8. Covenants of the Company. The Company
agrees that, so long as any of the Commitments are in effect and
until payment in full of all Loans hereunder, all interest
thereon and all other amounts payable by the Company hereunder:
8.01 Financial Statements. The Company shall deliver
to each of the Banks:
(a) within 120 days after the end of each fiscal year
of the Company, (i) a consolidated statement of financial
position of the Company and the Subsidiaries as at the close
of such fiscal year and consolidated statements of
operations, changes in shareholders' equity and cash flows
of the Company and the Subsidiaries for such year, certified
by Deloitte and Touche or by other independent public
accountants selected by the Company and reasonably
satisfactory to the Agent and (ii) a Combined Statement of
Position and Income for such year;
(b) within 60 days after the end of each of the
first three fiscal quarters of each fiscal year of the
Company, (i) a consolidated statement of financial position
of the Company and the Subsidiaries as at the end of such
quarter and consolidated statements of operations, changes
in shareholders' equity and cash flows of the Company and
the Subsidiaries for such quarter and for the period from
the beginning of the fiscal year to the end of such quarter,
certified by an authorized financial or accounting officer
of the Company and (ii) a Combined Statement of Position and
Income for such fiscal quarter;
(c) within 120 days after the end of each fiscal year
of the Company, a list (in reasonable detail) of the
guarantees referred to in Section 8.09(d) hereof, as of the
end of such year, certified by an authorized officer of the
Company or authorized employee of the Company who is
satisfactory to the Agent, except that any individual
guarantee in an amount of less than $10,000,000 need not be
reported separately;
(d) promptly upon becoming available, copies of all
financial statements, reports, notices, proxy statements and
final prospectuses sent by the Company to shareholders or
the Securities and Exchange Commission or any governmental
agency successor to any or all of the functions of said
Commission;
(e) subject to Government restrictions, such other
statement or statements of the position and affairs of the
Company and of the Subsidiaries and the status of their
contracts, open accounts and budgets or forecasts, and other
financial information, as may be reasonably requested by the
Agent;
(f) with each of the audited financial statements
required to be delivered under Section 8.01(a) hereof, a
certificate by the independent public accountants certifying
such statements to the effect that they are familiar with
the provisions of this Agreement and that, in auditing the
financial statements which they certified, they acquired no
knowledge of any Default or, if the contrary is the case,
specifying the nature of such Default;
(g) with each of the financial statements required to
be delivered under Section 8.01(a) or Section 8.01(b)
hereof, a statement by an authorized financial or accounting
officer of the Company to the effect that no Default has
occurred and is continuing, or if any Default has occurred
and is continuing, describing such Default and the action
taken or proposed to be taken by the Company with respect
thereto, and a detailed computation of the financial
calculations required in Sections 8.06, 8.08, 8.09, 8.13 and
8.14 hereof;
(h) not less than five Business Days prior to the
first day of each Quarterly Period, a certificate of an
authorized financial or accounting officer of the Company
setting forth the Leverage Ratio as at the last day of the
fiscal quarter of the Company ending approximately three
months prior to the first day of such Quarterly Period; and
(i) promptly after the Company knows or has reason to
know that any Default has occurred, a notice of such Default
describing the same in reasonable detail and, together with
such notice or as soon thereafter as is reasonably
practicable, a description of the action that the Company
has taken or proposes to take with respect thereto in such
detail as the Company reasonably believes to be appropriate.
8.02 Existence, Payment of Taxes, ERISA, Etc. The
Company shall, and shall cause each of the Material Subsidiaries
to:
(a) preserve and maintain its legal existence and all
of its material rights, privileges, licenses and franchises
(provided that nothing in this Section 8.02 shall prohibit
any transaction expressly permitted under Section 8.07 or
8.10 hereof);
(b) comply in all material respects with the
requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure
to comply with such requirements is reasonably likely
(either individually or in the aggregate) to have a material
adverse effect on the financial condition of the Company and
the Subsidiaries taken as a whole; and
(c) promptly pay and discharge, and cause each
Subsidiary to promptly pay and discharge, all taxes,
assessments and governmental charges prior to the date on
which material penalties attach thereto, but only to the
extent that such taxes, assessments and charges shall not be
contested in good faith and by appropriate proceedings by
the Company or such Subsidiary.
The Company shall furnish to the Agent the following:
(i) As soon as possible and in any event within
30 days after the Company knows or has reason to know that
any Termination Event (as defined in Section 7.08 hereof)
has occurred, a statement of a senior financial or
accounting officer of the Company describing such
Termination Event and the action, if any, which the Company
proposes to take with respect thereto;
(ii) Promptly after receipt thereof by the Company,
copies of each notice received from the PBGC of its
intention to terminate any Plan or to have a trustee
appointed to administer any Plan; and
(iii) Promptly after request therefor, such other
documents and information relating to any Plan as the Agent
may reasonably request from time to time.
8.03 Notice of Litigation. The Company shall promptly
give notice in writing to the Agent (which shall promptly notify
the Banks) of any litigation or proceeding against the Company or
any Subsidiary if in the opinion of the Senior Vice President and
General Counsel of the Company or any person acting in such
capacity such action or proceeding is reasonably likely to have a
material adverse effect on the financial condition of the Company
and the Subsidiaries taken as a whole.
8.04 Insurance. The Company shall maintain, and cause
each Subsidiary to maintain, insurance with responsible companies
in such amounts and against such risks as is usually carried by
owners of similar businesses and property in the same general
area in which the Company or such Subsidiary operates, including
reasonable war, comprehensive and commercial risk insurance when
and if available.
8.05 Access to Books and Properties. The Company
shall, as may be reasonably requested, give any representatives
of the Banks access, subject to Government restrictions, during
normal business hours to, and permit them to examine, copy or
make extracts from, any and all books, records and documents in
the possession of the Company or any Subsidiary relating to its
affairs and to inspect any properties of the Company or any
Subsidiary.
8.06 Restricted Payments. The Company shall not
declare, pay or authorize any Restricted Payment if (a) any such
Restricted Payment is not paid out of Consolidated Net Earnings
Available For Restricted Payments, (b) at the time of, and
immediately after, the making of any such Restricted Payment (or
the declaration of any dividend except a stock dividend) a
Default has occurred or (c) the making of any such Restricted
Payment would reduce Consolidated Tangible Shareholders' Equity
below the amount thereof which the Company is required to
maintain pursuant to Section 8.08 hereof.
8.07 Sale, Lease, Etc. The Company shall not, and
shall not permit any Subsidiary to, sell, lease, assign, transfer
or otherwise dispose of (each, a "disposition") assets having a
book value which, together with the book value of all assets
theretofore disposed of since the date hereof, equal or exceed
30% of the book value of the total assets of the Company and its
Subsidiaries as at the last day of the fiscal quarter ending on
or most recently ended prior to such disposition, excluding from
the operation of this clause (a) dispositions in the ordinary and
normal operation of business for full and adequate consideration,
(b) dispositions between the Company and any Subsidiary or
between Subsidiaries, (c) investments permitted by Section 8.12
hereof and (d) assets determined by the Company to be no longer
useful in its business.
8.08 Maintenance of Shareholders' Equity. The Company
shall not permit the amount of Consolidated Tangible
Shareholders' Equity at any time to be less than the sum of
(a) $1,000,000,000 plus (b) 50% of Net Income (but without
reduction for net losses) for the fourth fiscal quarter of the
fiscal year of the Company ending on December 31, 1993 plus
(c) the cumulative sum of 50% of Net Income (but without
reduction for net losses) for each fiscal year of the Company
commencing with the fiscal year ending on December 31, 1994 plus
(d) 75% of the cumulative additions to shareholders' equity
resulting from Equity Issuances effected after the date hereof.
8.09 Contingent Liabilities. The Company shall not,
and shall not permit any Subsidiary to, assume, guarantee (which
for purposes of this Section 8.09 shall include agreements to
purchase or to provide funds for the payment of obligations of,
to maintain the net worth or working capital or other financial
test of, or otherwise become liable upon the obligations of, any
Person) or endorse any obligation of any Person (including,
without limitation, by causing a bank or similar institution to
issue a letter of credit or similar instrument to support any
obligation of any Person), or suffer to exist any of the
foregoing, except that:
(a) the Company may assume, guarantee or endorse any
obligation of the Company or any Subsidiary;
(b) any Subsidiary may assume, guarantee or endorse
any obligation of the Company or any other Subsidiary;
(c) the Company or any Subsidiary may, in the ordinary
and normal operation of its business as presently conducted
(it being understood that performance guaranty bonds, bank
guarantees for foreign work (including offset and
countertrade activities), advance payment bonds, direct
guarantees for performance and other surety bonds will be so
considered), assume, guarantee or endorse any obligation of
any Person other than the Company and the Subsidiaries;
(d) the Company or any Subsidiary may guarantee any
direct obligation for the payment of money of any of its
customers (other than the Company and the Subsidiaries) in
connection with any customer financing; and
(e) the Company or any Subsidiary may issue a
guarantee of any obligation of a Person other than the
Company or any Subsidiary, or assume an obligation of any
such Person;
provided that (i) the excess (if any) of (x) the sum of the
aggregate amount of all obligations referred to in clauses (a)
and (b) above (to the extent said obligations do not otherwise
constitute Funded Debt) for which the Company or any Subsidiary
shall have caused a bank or similar institution to issue a letter
of credit or similar instrument in support thereof plus the
aggregate amount of all obligations referred to in clauses (c)
and (d) above over (y) 25% of Consolidated Tangible Shareholders'
Equity shall be deemed Funded Debt for the purposes of this
Agreement and (ii) the aggregate amount of all obligations
referred to in clause (e) above guaranteed or assumed by the
Company or any Subsidiary (excluding (aa) obligations of any
Person other than for the payment of borrowed money if the
long-term corporate debt of such Person is at such time rated
"BBB" or higher by Standard & Poor's Corporation or "Baa2" or
higher by Moody's Investors Service, Inc. unless the Company or
any Subsidiary shall have caused a bank or similar institution to
issue a letter of credit or similar instrument to support such
obligations and (bb) obligations referred to in clause (c) above)
shall be deemed Funded Debt for the purposes of this Agreement.
8.10 Acquisition of Assets. The Company shall not,
and shall not permit any Subsidiary to, acquire any assets of any
other Person through merger, consolidation or otherwise
(including acquisition of capital stock of any other Person if
such acquisition is analogous in either purpose or effect to a
consolidation or merger) except in the ordinary course of
business, unless immediately after giving effect to such
acquisition (a) in the case of a merger or consolidation
involving the Company, the Company shall be the surviving
corporation and (b) no Default shall have occurred.
8.11 Limitation on Liens. The Company shall not, and
shall not permit any Subsidiary to, create, assume or suffer to
exist any Lien on any of its assets or properties, whether now
owned or hereafter acquired, except:
(a) deposits or pledges to secure payments of workers'
compensation, unemployment insurance, old age pensions or
other social security, or in connection with or to secure
the performance of bids, tenders, contracts (other than
contracts for the repayment of borrowed money) or leases, or
to secure statutory obligations or surety or appeal bonds,
or other pledges or deposits for purposes of like nature in
the ordinary and normal operation of its business;
(b) Liens created in favor of the Government or any
other contracting party or customer in connection with
advance or progress payments;
(c) mechanics', carriers', workers', repairmen's or
other like Liens arising in the ordinary course of business
in respect of obligations which are not overdue;
(d) Liens for taxes which at the particular time are
not due, or remain payable without penalty, or which are
being contested in good faith and by proper proceedings;
(e) Liens securing obligations assumed in connection
with a transaction permitted by Section 8.10 hereof; and
(f) purchase money liens on fixed assets (including
trust deeds or first mortgages) given substantially
concurrently with the acquisition of the fixed assets and
liens existing on such fixed assets at the time of
acquisition thereof, conditional sales agreements or other
title retention agreements with respect to fixed assets
hereafter acquired, and extensions and renewals of any of
the same; provided that (i) the indebtedness secured by any
such Lien shall be reasonably related to the fair market
value of the related asset acquired by the Company or a
Subsidiary, as the case may be, and (ii) no such Lien shall
extend to any property other than that then being acquired;
provided that the aggregate amount of indebtedness or obligations
(whether or not assumed by the Company or a Subsidiary) secured
by all Liens and agreements permitted by clauses (e) and (f) of
this Section 8.11 shall not at any time exceed $350,000,000.
8.12 Loans and Investments. The Company shall not,
and shall not permit any Subsidiary to, make any loan to or
investment in others except:
(a) loans and investments made in the ordinary and
normal operation of its business as presently conducted;
(b) reasonable advances to its subcontractors and
suppliers in anticipation of deliveries;
(c) loans to or investments in others, whether
domestic or foreign persons, in amounts which, together with
loans to or investments in others presently outstanding, do
not exceed $350,000,000 in the aggregate, at any time
outstanding;
(d) loans to or investments in others, whether
domestic or foreign persons, to the extent covered by
guarantees or insurance covering all political and credit
risks issued by the Overseas Private Investment Corporation
or another agency of the United States acceptable to the
Agent; and
(e) investments in prime quality short-term money
market instruments and direct obligations of the United
States and agencies thereof, having a remaining term to
maturity of not more than five years.
8.13 Limitation on Funded Debt. The Company shall not
permit the Leverage Ratio at any time to exceed 1.5 to 1.
8.14 Limitation on Subordinated Debt. The Company
shall not at any time create, assume, incur, or in any manner
become or be liable in respect of, any Subordinated Debt unless,
immediately after the creation, assumption or incurrence of such
Subordinated Debt, and after giving effect to the existence
thereof, the aggregate principal amount of all such Subordinated
Debt shall not exceed 20% of Consolidated Tangible Shareholders'
Equity unless such excess amount shall be included as Funded Debt
and such Funded Debt in such amount shall be permitted by the
provisions of this Agreement.
8.15 Use of Proceeds. The Company shall use the
proceeds of the Loans hereunder in compliance with all applicable
legal and regulatory requirements, including, without limitation,
Regulations U and X and the Securities Act of 1933 and the
Securities Act of 1934 and the regulations thereunder.
8.16 Margin Stock. The Company shall not permit more
than 25% of the value (as determined by any reasonable method) of
the assets of the Company and the Subsidiaries subject to the
provisions of Section 8.07 or 8.11 hereof or any similar
restriction to be represented by margin stock (within the meaning
of Regulation U or X).
Section 9. Events of Default. If one or more of the
following events (herein called "Events of Default") shall occur
and be continuing:
(a) The Company shall default in the payment of any
principal of any Loan; or the Company shall default in the
payment of any interest on any Loan or any other amount
payable by it hereunder to any Bank or the Agent when due
which nonpayment shall have continued for a period of
two Business Days or more; or
(b) Default by the Company or any Subsidiary in the
payment of any indebtedness of the Company or any
Subsidiary, or in the payment of any other obligation,
whether direct or contingent, for borrowed money or the
acquisition of capital equipment on a title retention or net
lease basis, or in the performance or observance of the
terms of any instrument, as at any time amended, pursuant to
which any such obligation was created or securing any such
obligation or providing for any such acquisition or lease,
or any event specified in any note, agreement, indenture or
other document evidencing or relating to any such obligation
shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both)
to permit the holder or holders of such indebtedness (or a
trustee or agent on behalf of such holder or holders) to
cause, such indebtedness to become due prior to its stated
maturity; except, in each case that may otherwise be covered
by this paragraph (b), for a default on indebtedness or
obligations not exceeding $10,000,000 in an aggregate amount
if such default is being contested in good faith by the
Company; or
(c) Any representation, warranty or certification made
or deemed made herein by the Company, or any certificate
furnished to any Bank or the Agent pursuant to the
provisions hereof, shall prove to have been false or
misleading as of the time made or deemed made or furnished
in any material respect; or
(d) The Company shall default in the performance of
any of its obligations under Section 8.01(i) or
Sections 8.06 through 8.15 (inclusive) hereof; or the
Company shall default in the performance of any of its other
obligations in this Agreement and such default shall
continue unremedied for a period of 30 days after notice
thereof to the Company by the Agent or any Bank (through the
Agent); or
(e) The Company or any Subsidiary having total assets
of $50,000,000 or more shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts
become due; or
(f) The Company or any Subsidiary having total assets
of $50,000,000 or more shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without
the application or consent of the Company or any Subsidiary
having total assets of $50,000,000 or more, in any court of
competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or
the like of the Company or such Subsidiary or of all or any
substantial part of its assets, or (iii) similar relief in
respect of the Company or such Subsidiary under any law
relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in
effect, for a period of 60 days; or an order for relief
against the Company or such Subsidiary shall be entered in
an involuntary case under the Bankruptcy Code; or
(h) If (i) a final judgment which, with other
outstanding final judgments against the Company and all
Subsidiaries, exceeds an aggregate of $100,000,000 shall be
rendered against the Company or any Subsidiary and
(ii) within 60 days after entry thereof, such judgment shall
not have been discharged, vacated or reversed or execution
thereof stayed pending appeal or within 60 days after the
expiration of any such stay, such judgment shall not have
been discharged, vacated or reversed; or
(i) An event or condition (i) which might constitute
grounds under Section 4042 of ERISA for the termination of,
or for the appointment of a trustee to administer, any Plan
or Multiemployer Plan and which involves a liability of the
Company to PBGC in excess of $25,000,000 or (ii) leading to
the receipt by the Company from the PBGC of a notice of its
intention to terminate any Plan or Multiemployer Plan or to
have a trustee appointed to administer any such Plan or
Multiemployer Plan shall occur or exist and, as a result of
such event or condition, together with all other such events
or conditions, the Company or any ERISA Affiliate shall
incur or in the opinion of the Majority Banks shall be
reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the
foregoing) which is, in the determination of the Majority
Banks, material in relation to the consolidated financial
position of the Company and the Subsidiaries; or
(j) Any person or group of persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended, it being agreed that an employee of the Company
or any Subsidiary for whom shares are held under an employee
stock ownership, employee retirement, employee savings or
similar plan and whose shares are voted in accordance with
the instructions of such employee shall not be a member of a
group of persons within the meaning of said Section 13 or 14
solely because such employee's shares are held by a trustee
under said plan) shall acquire, directly or indirectly,
beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under
said Act, as amended) of more than 50% of the outstanding
shares of stock of the Company having by the terms thereof
ordinary voting power to elect (whether immediately or
ultimately) a majority of the board of directors of the
Company (irrespective of whether or not at the time stock of
any other class or classes of stock of the Company shall
have or might have voting power by reason of the happening
of any contingency); or
(k) During any period of 25 consecutive calendar
months, a majority of the Board of Directors of the Company
shall no longer be composed of individuals (i) who were
members of said Board on the first day of such period,
(ii) whose election or nomination to said Board was approved
by individuals referred to in clause (i) above constituting
at the time of such election or nomination at least a
majority of said Board or (iii) whose election or nomination
to said Board was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of said Board;
THEREUPON: (i) in the case of an Event of Default other than one
referred to in clause (f) or (g) of this Section 9, (x) the Agent
may and, upon request of the Majority Banks, shall, by notice to
the Company, cancel the Commitments and (y) the Agent may and,
upon request of one or more Banks holding more than 50% of the
aggregate outstanding principal amount of Loans, shall, by notice
to the Company, declare the principal amount then outstanding of
and the accrued interest on the Loans and all other amounts
payable by the Company hereunder and under the Notes to be
forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest
or other formalities of any kind, all of which are hereby
expressly waived by the Company; and (ii) in the case of the
occurrence of an Event of Default referred to in clause (f) or
(g) of this Section 9, the Commitments shall be automatically
canceled and the principal amount then outstanding of, and the
accrued interest on, the Loans and all other amounts payable by
the Company hereunder and under the Notes shall become
automatically immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which
are hereby expressly waived by the Company.
Without limiting Section 11.04 hereof, the Majority
Banks may, on behalf of all the Banks, waive, for the period and
on the conditions (if any) specified in such waiver, any Event of
Default arising from the failure by the Company to perform any of
its obligations under Section 8 hereof and any consequences
thereof (including any termination of the Commitments and/or any
declaration that the principal of and interest on the Loans and
all other amounts payable by the Company hereunder and under the
Notes shall be forthwith due and payable). In the case of any
such waiver, the Company, the Banks and the Agent, for said
period and on said conditions, shall be restored to their
respective former positions and rights hereunder and under the
Notes, and any Event of Default so waived shall, for said period
and on said conditions, be deemed not to be continuing for the
purposes of this Agreement; provided that no such waiver shall
extend to any subsequent or other Event of Default or impair any
other right of any Bank or the Agent hereunder or under the
Notes.
Section 10. The Agent.
10.01 Appointment, Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as
its agent hereunder with such powers as are specifically
delegated to the Agent by the terms of this Agreement, together
with such other powers as are reasonably incidental thereto. The
Agent (which term as used in this sentence and in Section 10.05
and the first sentence of Section 10.06 hereof shall include
reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no
duties or responsibilities except those expressly set forth in
this Agreement, and shall not by reason of this Agreement be a
trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties
contained in this Agreement, or in any certificate or other
document referred to or provided for in, or received by any of
them under, this Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided
for herein or for any failure by the Company or any other Person
to perform any of its obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation
or collection proceedings hereunder; and (d) shall not be
responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith, except for its
own gross negligence or willful misconduct. The Agent may employ
agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. The Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof
unless and until (except in the case of an assignment pursuant to
Section 11.06(e) hereof) a written notice of the assignment or
transfer thereof shall have been filed with the Agent, together
with the written consent of the Company to such assignment or
transfer.
10.02 Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants
and other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions signed by the Majority
Banks, and such instructions of the Majority Banks and any action
taken or failure to act pursuant thereto shall be binding on all
of the Banks.
10.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default unless the Agent has
received notice from a Bank or the Company specifying such
Default and stating that such notice is a "Notice of Default".
In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice
thereof to the Banks. The Agent shall (subject to
Sections 10.01, 10.07 and 11.04 hereof) take such action with
respect to such Default as shall be directed by the Majority
Banks, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable
in the best interest of the Banks.
10.04 Rights as a Bank. With respect to its
Commitment and the Loans made by it, Chase (and any successor
acting as Agent) in its capacity as a Bank hereunder shall have
the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not acting as the Agent, and
the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. Chase
(and any successor acting as Agent) and its affiliates may
(without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking,
trust or other business with the Company (and any of its
affiliates) as if it were not acting as the Agent, and Chase and
its affiliates may accept fees and other consideration from the
Company for services in connection with this Agreement or
otherwise without having to account for the same to the Banks.
10.05 Indemnification. The Banks agree to indemnify
the Agent (to the extent not reimbursed under Section 11.03
hereof, but without limiting the obligations of the Company under
said Section 11.03), ratably in accordance with their respective
Commitments (or, if the Commitments shall have terminated,
ratably in accordance with the outstanding principal amounts of
the Loans held by the respective Banks), for any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out
of this Agreement or any other documents contemplated by or
referred to herein or the transactions contemplated hereby
(including, without limitation, the costs and expenses which the
Company is obligated to pay under Section 11.03 hereof but
excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the
performance of its agency duties hereunder and excluding amounts
referred to in clauses (a) and (b) of Section 11.03 hereof in an
aggregate amount in excess of the monetary limitation therefor
specified in the letter agreement dated October 25, 1993 from
Chase to the Company under the heading "Expenses") or the
enforcement of any of the terms hereof or of any such other
documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Agent and other Banks. Each
Bank agrees that it has, independently and without reliance on
the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Company and the Subsidiaries and decision to
enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Agent
shall not be required to keep itself informed as to the
performance or observance by the Company of this Agreement or any
other document referred to or provided for herein or to inspect
the properties or books of the Company or any Subsidiary. Except
for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning
the affairs, financial condition or business of the Company or
any Subsidiary (or any of their affiliates) which may come into
the possession of the Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly
required of the Agent hereunder the Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it
shall receive further assurances to its satisfaction from the
Banks of their indemnification obligations under Section 10.05
hereof against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action.
10.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice thereof
to the Banks and the Company and the Agent may be removed at any
time with or without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall, after
consultation with the Company, have the right to appoint a
successor Agent. If no successor Agent shall have been so
appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the
Banks, after consultation with the Company, appoint a successor
Agent, which shall be a bank with a combined capital and surplus
of at least $1,000,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Section 10 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was
acting as the Agent.
10.09 Co-Agents. The Co-Agents identified on the
front page of this Agreement shall have no duties or
responsibilities hereunder other than as Banks hereunder.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Agent or
any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this
Agreement or any Note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or
privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
11.02 Notices. All notices and other communications
provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement)
shall be given or made by telex, telecopy, telegraph, cable or in
writing (or, with respect to notices given pursuant to
Sections 2.02 and 2.03 hereof, by telephone, confirmed in writing
by telex by the close of business on the day the notice is
given); and telexed, telecopied, telegraphed, cabled, mailed or
delivered (or telephoned, as the case may be) to the intended
recipient at the "Address for Notices" specified below its name
on the signature pages hereof or, as to any party, at such other
address as shall be designated by such party in a notice to each
other party. Officers of the Company authorized to give such
telephone notices shall be designated by the Company in writing
to the Agent and notices given by anyone purporting to be any one
of the designated officers may be honored by the Agent. Except
as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telex
or telecopier, delivered to the telegraph or cable office or
personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or
reimburse each of the Banks and the Agent for paying: (a) the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Banks, in connection with (i) the
preparation, execution and delivery of this Agreement and the
Notes and the making of the Loans hereunder and (ii) any
amendment, modification or waiver of any of the terms of this
Agreement or any of the Notes; (b) all reasonable costs and
expenses of the Agent (including, without limitation, telephone,
telex and courier expenses and printing and publishing costs) in
connection with the negotiation, syndication and execution of
this Agreement (provided that the Company shall not have any
liability under clauses (a) and (b) of this Section 11.03 for
fees, costs or expenses in an aggregate amount in excess of the
monetary limitation therefor specified in the letter agreement
dated October 25, 1993 from Chase to the Company under the
heading "Expenses"); (c) all reasonable costs and expenses of the
Banks and the Agent (including reasonable counsels' fees and
allocated expenses of in-house lawyers) in connection with the
enforcement of this Agreement or any of the Notes; and (d) all
transfer, stamp, documentary or other similar taxes, assessments
or charges levied by any governmental or revenue authority in
respect of this Agreement, any of the Notes or any other document
referred to herein.
11.04 Amendments, Etc. Any provision of this
Agreement may be amended, waived or otherwise modified only by an
instrument signed by the Company and the Majority Banks, or by
the Company and the Agent acting with the consent of the Majority
Banks, and any provision of this Agreement may be waived by the
Majority Banks or by the Agent acting with the consent of the
Majority Banks; provided that (a) no amendment, waiver or other
modification shall, unless by an instrument signed by all of the
Banks or by the Agent acting with the consent of all of the
Banks: (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of any of
the Commitments, (ii) extend the date fixed for the payment of
principal of or interest on any Loan, (iii) reduce the amount of
any payment of principal thereof or the rate at which interest is
payable thereon or any commitment or facility fee is payable
hereunder, (iv) alter the terms of clause (f) or (g) of Section 9
hereof, the paragraph of Section 9 hereof beginning with the word
"THEREUPON" or this Section 11.04, (v) amend the definition of
the term "Majority Banks", (vi) waive any of the conditions
precedent set forth in Section 6 hereof, (vii) alter any
provision of this Agreement insofar as such provision requires
the consent or approval of all of the Banks or (viii) alter any
provision of this Agreement that would have the effect set forth
in any of the foregoing clauses (i) through (vii) and (b) any
amendment of Section 10 hereof, or which increases the
obligations of the Agent hereunder, shall require the consent of
the Agent.
11.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or
obligations hereunder or under the Notes without the prior
consent of all of the Banks and the Agent.
(b) A Bank may assign any of its Loans, its Notes or
its Commitment to any other Person only with the prior consent of
the Company and the Agent (which consent, in each case, may not
be unreasonably withheld or delayed; it being agreed that the
Company, in determining whether to give such consent, may
reasonably consider, without limitation of other factors that the
Company may reasonably consider, the financial capability,
financial rating and location of a proposed assignee and any
prior business relationships between the Company and a proposed
assignee, provided that any such determination shall be made by
the Company in good faith and after consideration of all relevant
factors); provided that any Bank may assign to another Bank all
or (subject to the further provisos below) any portion of its
Commitment; provided that any such partial assignment shall be in
an aggregate principal amount equal to $10,000,000 or any
integral multiple of $1,000,000 in excess thereof; and provided
further that such assigning Bank shall also simultaneously assign
to such assignee Bank the same proportion of each of its
Syndicated Loans then outstanding (together with the same
proportion of the relevant Note then outstanding). Upon written
notice to the Company and the Agent of an assignment permitted by
the provisos of the preceding sentence (which notice shall
identify the assignee Bank, the amount of the assignor Bank's
Commitment and Loans assigned in detail reasonably satisfactory
to the Agent) and upon the effectiveness of any assignment
consented to by the Company and the Agent, the assignee shall
have, to the extent of such assignment (unless otherwise provided
in such assignment with the consent of the Company and the
Agent), the obligations, rights and benefits of a Bank hereunder
holding the Commitment and Loans (or portions thereof) assigned
to it (in addition to the Commitment and Loans, if any,
theretofore held by such assignee). Upon the effectiveness of
any assignment of any of its Commitment or Loans, the assignor
Bank or the assignee (as agreed between them) shall pay to the
Agent a transfer fee in an amount equal to $2,000; provided that
the assignee Bank shall pay any transfer fee payable in
connection with any assignment effected pursuant to
Section 2.04(c) hereof.
(c) A Bank may sell to one or more other Persons a
participation in all or any part of any Loan held or to be made
by it or in its Commitment, in which event each such participant
shall not have any rights or benefits under this Agreement or any
Note (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement (the
"Participation Agreement") executed by such Bank in favor of the
participant). All amounts payable by the Company to any Bank
under Section 5 hereof shall be determined as if such Bank had
not sold any participations in such Loan and in such Commitment
and as if such Bank were funding all of such Loan in the same way
that it is funding the portion of such Loan and such Commitment
in which no participations have been sold. In no event shall a
Bank that sells a participation be obligated to the participant
under the Participation Agreement to take or refrain from taking
any action hereunder or under such Bank's Note(s) except that
such Bank may agree in the Participation Agreement that it will
not, without the consent of the participant, agree to (i) the
increase or the extension of the term, or the extension of the
time or waive any requirement for the reduction or termination,
of such Bank's Commitment, (ii) the extension of any date fixed
for the payment of principal of or interest on the related Loan
or Loans, (iii) the reduction of any payment of principal thereof
or (iv) the reduction of the rate at which either interest is
payable thereon or (if the participant is entitled to any part
thereof) facility fee is payable hereunder to a level below the
rate at which the participant is entitled to receive interest or
facility fee (as the case may be) in respect of such
participation.
(d) A Bank may furnish any publicly available
information concerning the Company or any Subsidiary in the
possession of such Bank from time to time to any of its
affiliates or its assignees and participants (including
prospective assignees and participants).
(e) Any Bank may at any time assign and pledge to any
Federal Reserve Bank (or to an affiliate of such Bank for the
purpose of permitting such affiliate to assign and pledge to any
Federal Reserve Bank), as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal
Reserve Bank all or any portion of its Loans and its Notes. No
such assignment shall release the assigning Bank from its
obligations hereunder.
11.07 Survival. The obligations of the Company under
Sections 5.01, 5.05 and 11.03 hereof shall survive the repayment
of the Loans and the termination of the Commitments.
11.08 Captions. Captions and section headings
appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any
provision of this Agreement.
11.09 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such
counterpart.
11.10 Governing Law. THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.11 Confidentiality. Each Bank and the Agent agrees
(on behalf of itself and each of its affiliates, directors,
officers, employees and representatives) to keep confidential, in
accordance with their customary procedures for handling
confidential information of this nature and in accordance with
safe and sound banking practices, any non-public information
supplied to it by the Company pursuant to this Agreement which is
identified by the Company as being proprietary, private and/or
confidential at the time the same is delivered to the Banks or
the Agent, provided that nothing herein shall limit the
disclosure of any such information (a) to the extent required by
statute, rule, regulation or judicial process, (b) to counsel for
any of the Banks or the Agent, (c) to bank examiners, auditors or
accountants, (d) to the Agent or any other Bank, (e) in
connection with any litigation to which any one or more of the
Banks or the Agent is a party or (f) to any assignee or
participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or
participant) first executes and delivers to the respective Bank a
Confidentiality Agreement in substantially the form of Exhibit D
hereto (whereupon such Bank shall promptly deliver a copy of such
Confidentiality Agreement to the Company); provided, further,
that (i) unless specifically prohibited by applicable law or
court order, each Bank and the Agent shall, prior to disclosure
thereof, notify the Company of any request for disclosure of any
such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection
with an examination of the financial condition of such Bank by
such governmental agency) or (y) pursuant to legal process and
(ii) in no event shall any Bank or the Agent be obligated or
required to return any materials furnished by the Company; and,
provided, finally, that no Bank shall, without the Company's
prior consent, provide any information relating to projections of
the Company's financial performance to any participant or any
prospective assignee or participant (other than any bank or other
financial institution identified to the Company as a participant
under the Existing Credit Agreement in a notice given to the
Company prior to the date of this Agreement), and, in lieu
thereof, the Company shall, promptly following the request of any
Bank and at the Company's expense, provide to a participant (or
prospective assignee or participant) of such Bank any information
relating to projections of the Company's financial performance
that has been made available to such Bank. Each Bank agrees that
money damages would not be a sufficient remedy for any breach of
such Bank's obligations under this Section 11.11 and that, in
addition to all other remedies available to the Company at law or
in equity, the Company shall be entitled to injunctive relief
against such Bank as a remedy for such breach.
11.12 Cancellation of Existing Credit Agreement. On
the date of the execution and delivery of this Agreement, the
commitments of the Banks party to the Existing Credit Agreement
shall automatically terminate and all fees payable to such Banks
accrued to such date under the Existing Credit Agreement shall be
immediately due and payable.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
NORTHROP CORPORATION
By /s/ John R. Rettberg
Title: Vice President and
Treasurer
1840 Century Park East
Los Angeles, California 90067
Attention: John R. Rettberg
Vice President and
Treasurer
Telecopier No.: 310-553-2076
Telephone No.: 310-201-3070
THE BANKS
Commitment THE CHASE MANHATTAN BANK
$55,000,000 (NATIONAL ASSOCIATION)
By /s/ Lawrence K. Williamson
Title: Managing Director
Lending Office for all Loans:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Richard C. Smith
Telex No.: 429963 CCGDUI
Telecopier No.: 212-552-5879
Telephone No.: 212-552-0667
Commitment BANK OF AMERICA NATIONAL TRUST
$40,000,000 AND SAVINGS ASSOCIATION
By /s/ Lori Y. Kannegieter
Title: Vice President
Lending Office for all Loans:
Bank of America National Trust
and Savings Association
Global Payment Operations #5693
1850 Gateway Blvd.
Concord, California 94520
Address for Notices:
Bank of America National Trust
and Savings Association
Credit Products #5618
555 South Flower Street
Los Angeles, California 90071
Attention: Lori Y. Kannegieter
Telecopier No.: 213-228-2756
Telephone No.: 213-228-6379
Commitment
$40,000,000 CHEMICAL BANK
By /s/ Kevin P. Higgins
Title: Vice President
Lending Office for all Loans:
Chemical Bank
270 Park Avenue
10th Floor
New York, New York 10017
Address for Notices:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Kevin Higgins
Telecopier No.: 212-270-9647
Telephone No.: 212-270-3618
Commitment
$30,000,000 THE BANK OF NEW YORK
By /s/ Craig Rethmeyer
Title: Vice President
Lending Office for Base
Rate Loans:
The Bank of New York
1 Wall Street
New York, New York 10286
Lending Office for all
other Loans:
The Bank of New York,
Grand Cayman Branch
c/o The Bank of New York
1 Wall Street
New York, New York 10286
Address for Notices:
The Bank of New York
1 Wall Street
New York, New York 10286
Telecopier No.: 212-635-6397
Telephone No.: 212-635-6730
with a copy to:
The Bank of New York
10990 Wilshire Boulevard
Suite 1700
Los Angeles, California 90024
Attention: Craig Rethmeyer
Telecopier No.: 310-996-8667
Telephone No.: 310-996-8657
Commitment
$30,000,000 THE BANK OF NOVA SCOTIA
By /s/ M. Van Otterloo
Title: Vice President
By /s/ J. York
Title: Vice President
Lending Office for Syndicated
Loans:
The Bank of Nova Scotia
101 California Street
48th Floor
San Francisco, California 94119
Lending Office for Competitive Bid
Loans:
The Bank of Nova Scotia
1 Liberty Plaza
New York, New York 10006
Address for Notices:
The Bank of Nova Scotia
101 California Street
48th Floor
San Francisco, California 94111
Attention: M. Van Otterloo
Telecopier No.: 415-397-0791
Telephone No.: 415-986-1100
Commitment
$30,000,000 THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ L. Gene Beube
Title: Senior Vice President
Lending Office for all Loans:
The First National Bank of
Chicago
One First National Plaza
Chicago, Illinois 60670
Address for Notices:
The First National Bank of
Chicago
777 South Figueroa Street
4th Floor
Los Angeles, California 90017-5800
Attention: Dirk Vos
Telecopier No.: 213-683-4949
Telephone No.: 213-683-4950
Commitment
$25,000,000 BANKERS TRUST COMPANY
By /s/ Edward G. Benedict
Title: Vice President
Lending Office for all Loans:
Bankers Trust Company
280 Park Avenue
New York, New York 10017
Address for Notices:
Bankers Trust Company
280 Park Avenue
New York, New York 10017
Attention: Edward G. Benedict
Telecopier No.: 212-454-2942
Telephone No.: 212-454-3591
Commitment
$25,000,000 CREDIT LYONNAIS LOS ANGELES BRANCH
By /s/ Martin S. Avidan
Title: Authorized Signatory
Lending Office for Base Rate Loans
and Set Rate Loans:
Credit Lyonnais Los Angeles Branch
515 South Flower Street
Los Angeles, California 90071
Lending Office for Eurodollar Loans
and LIBOR Bid Loans:
Credit Lyonnais Cayman Island
Branch
c/o Credit Lyonnais Los Angeles
Branch
515 South Flower Street
Los Angeles, California 90071
Address for Notices:
Credit Lyonnais
515 South Flower Street
Los Angeles, California 90071
Attention: Robin S. Yim
Telecopier No.: 213-627-3437
Telephone No.: 213-627-3200
Commitment
$25,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Robert M. Osieski
Title: Vice President
Lending Office for Base Rate Loans
and Set Rate Loans:
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
Lending Office for Eurodollar Loans
and LIBOR Bid Loans:
Morgan Guaranty Trust Company of
New York
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
Loan Operations -- 3rd Floor
500 Stanton -- Christiana Road
Newark, Delaware 19713
Address for Notices:
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
Attention: Diana H. Imhof
Telecopier No.: 212-648-5014
Telephone No.: 212-648-6987
Commitment
$25,000,000 NATIONAL WESTMINSTER BANK PLC
By /s/ Thomas F. Dillon
Title: Vice President
Lending Office for Base Rate Loans
and Set Rate Loans:
National Westminster Bank Plc
175 Water Street
New York, New York 10038
Lending Office for Eurodollar Loans
and LIBOR Bid Loans:
National Westminster Bank Plc,
Nassau Branch
175 Water Street
New York, New York 10038
Address for Notices:
National Westminster Bank Plc
400 South Hope Street
Los Angeles, California 90071
Attention: Thomas F. Dillon
Telecopier No.: 213-623-6540
Telephone No.: 213-624-8555
Commitment NBD BANK, N.A.
$20,000,000
By /s/ Curtis A. Price
Title: Vice President
Lending Office for all Loans:
NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Address for Notices:
NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Curtis A. Price
Telecopier No.: 313-225-2649
Telephone No.: 313-225-4387
Commitment CITICORP USA, INC.
$20,000,000
By /s/ Barbara A. Cohen
Title: Vice President
Lending Office for all Loans:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Address for Notices:
Citicorp USA, Inc.
c/o Citicorp North America, Inc.
725 S. Figueroa Street
5th Floor
Los Angeles, California 90017
Attention: Walt Larsen
Telecopier No.: 213-623-3592
Telephone No.: 213-239-1501
<PAGE>
Commitment NATIONSBANK OF TEXAS, N.A.
$20,000,000
By /s/ Tom F. Scharfenberg
Title: Vice President
Lending Office for all Loans:
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75202
Address for Notices:
NationsBank of Texas, N.A.
444 South Flower Street
Suite 1500
Los Angeles, California 90071
Attention: Tom Scharfenberg
Telecopier No.: 213-624-5815
Telephone No.: 213-624-5723
<PAGE>
Commitment J.P. MORGAN DELAWARE
$15,000,000
By /s/ Philip S. Detjens
Title: Vice President
Lending Office for all Loans:
J.P. Morgan Delaware
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Address for Notices:
J.P. Morgan Delaware
902 Market Street
Wilmington, Delaware 19801
Attention: Phillip S. Detjens
Telecopier No.: 302-654-5336
Telephone No.: 302-651-3726
<PAGE>
THE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Lawrence K. Williamson
Title: Managing Director
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
(National Association)
4 Metrotech Center
13th Floor
Brooklyn, New York 11255
Telex No.: 672 0516 CMB NYA UW
Telecopier No.: 718-242-6910
Telephone No.: 718-242-7979
EXHIBIT A-1
[Form of Note for Syndicated Loans]
PROMISSORY NOTE
$__________ ________________, 1994
New York, New York
FOR VALUE RECEIVED, NORTHROP CORPORATION, a Delaware
corporation (the "Company"), hereby promises to pay to
_______________________________ (the "Bank"), for account of its
respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza,
New York, New York 10081 the principal sum of _______________
Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Syndicated Loans made by the Bank
to the Company under the Credit Agreement), in lawful money of
the United States of America and in immediately available funds,
on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Syndicated Loan, at such office, in like money and
funds, for the period commencing on the date of such Syndicated
Loan until such Syndicated Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, type, interest rate and maturity date
of each Syndicated Loan made by the Bank to the Company, and each
payment made on account of the principal thereof, shall be
recorded by the Bank on its books and, prior to any transfer of
this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof; provided that the failure by the
Bank to make such recordation or endorsement shall not relieve
the Company of any of its obligations hereunder or under the
Credit Agreement.
This Note is one of the Syndicated Notes referred to in
the Credit Agreement dated as of January 7, 1994 (as amended,
supplemented and otherwise modified and in effect from time to
time, the "Credit Agreement") among the Company, the Banks named
therein (including the Bank) and The Chase Manhattan Bank
(National Association), as Agent, and evidences Syndicated Loans
made by the Bank thereunder. Capitalized terms used in this Note
have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of
the maturity of this Note upon the occurrence of certain events
and for prepayments of Loans upon the terms and conditions
specified therein.
Except as permitted by Section 11.06 of the Credit
Agreement, this Note may not be assigned by the Bank to any other
Person.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
NORTHROP CORPORATION
By____________________________
Title:
SYNDICATED LOANS
Principal
Date Amount Type Maturity Amount Unpaid
of of of Int. Date of Paid or Principal
Notation
Loan Loan Loan Rate Loan Prepaid Amount
Made By
<PAGE>
EXHIBIT A-2
[Form of Note for Competitive Bid Loans]
PROMISSORY NOTE
________________, 1994
New York, New York
FOR VALUE RECEIVED, NORTHROP CORPORATION, a Delaware
corporation (the "Company"), hereby promises to pay to
_______________________________ (the "Bank"), for account of its
respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza,
New York, New York 10081 the aggregate unpaid principal amount of
the Competitive Bid Loans made by the Bank to the Company under
the Credit Agreement, in lawful money of the United States of
America and in immediately available funds, on the dates and in
the amounts provided in the Credit Agreement, and to pay interest
on the unpaid principal amount of each such Competitive Bid Loan,
at such office, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid
in full, at the rates and on the dates provided in the Credit
Agreement.
The date, amount, type, interest rate and maturity date
of each Competitive Bid Loan made by the Bank to the Company, and
each payment made on account of the principal thereof, shall be
recorded by the Bank on its books and, prior to the transfer of
this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof; provided that the failure by the
Bank to make such recordation or endorsement shall not relieve
the Company of any of its obligations hereunder or under the
Credit Agreement.
This Note is one of the Competitive Bid Notes referred
to in the Credit Agreement dated as of January 7, 1994 (as
amended, supplemented and otherwise modified and in effect from
time to time, the "Credit Agreement") among the Company, the
Banks named therein (including the Bank) and The Chase Manhattan
Bank (National Association), as Agent, and evidences Competitive
Bid Loans made by the Bank thereunder. Capitalized terms used in
this Note have the respective meanings assigned to them in the
Credit Agreement.
The Credit Agreement provides for the acceleration of
the maturity of this Note upon the occurrence of certain events
and for prepayments of Loans upon the terms and conditions
specified therein.
Except as permitted by Section 11.06 of the Credit
Agreement, this Note may not be assigned by the Bank to any other
Person.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
NORTHROP CORPORATION
By__________________________
Title:
<PAGE>
COMPETITIVE BID LOANS
Principal
Date Amount Type Maturity Amount Unpaid
of of of Int. Date of Paid or Principal
Notation
Loan Loan Loan Rate Loan Prepaid Amount
Made By
<PAGE>
EXHIBIT B
[Form of Opinion of Counsel to the Company]
____________, 199_
To the Banks party to the Credit
Agreement referred to below and
The Chase Manhattan Bank
(National Association), as Agent
Gentlemen:
I am the Corporate Vice President and General Counsel
of Northrop Corporation (the "Company") and I am furnishing this
opinion in connection with the Credit Agreement dated as of
January 7, 1994 (the "Credit Agreement") among the Company, the
Banks named therein and The Chase Manhattan Bank (National
Association), as Agent, providing for loans to be made to the
Company in the aggregate principal amount up to $400,000,000.
Terms defined in the Credit Agreement are used herein as defined
therein.
In rendering the opinion expressed below, I have
examined, or caused to be examined, the originals or conformed
copies of such corporate records, agreements and instruments of
the Company, certificates of public officials and of officers of
the Company, and such other documents and records, and such
matters of law, as I have deemed appropriate as a basis for the
opinions hereinafter expressed.
Based upon the foregoing, I am of the opinion that:
1. Each of the Company and the Material Subsidiaries:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power, and
has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry
on its business as now being conducted; and (c) is qualified
to do business in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the
business, financial condition or operations of the Company
and the Subsidiaries taken as a whole.
2. The making and performance by the Company of the
Credit Agreement and the Notes and the borrowings thereunder
have been duly authorized by all necessary corporate action,
and do not and will not violate any provision of law or
regulation or any provision of its charter or by-laws or
result in the breach of, or constitute a default or require
any consent under, or result in the creation of any Lien
upon any of its properties, revenues or assets pursuant to,
any indenture or other agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company
or any Subsidiary or its properties may be bound.
3. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations
under the Credit Agreement and the Notes and to borrow under
the Credit Agreement. The Credit Agreement has been duly
and validly executed and delivered by the Company. The
Credit Agreement constitutes, and the Notes, when executed
and delivered by the Company, will constitute, legal, valid
and binding obligations of the Company enforceable in
accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights
and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except that no
opinion is expressed as to the fourth sentence of
Section 4.05 of the Credit Agreement.
4. There are no legal or arbitral proceedings, and no
proceedings by or before any governmental or regulatory
authority or agency, pending or (to my knowledge) threatened
against or affecting the Company or any of the Subsidiaries,
or any properties or rights of the Company or any of the
Subsidiaries, which, if adversely determined, is reasonably
likely to have a material adverse effect on the consolidated
financial condition or operations, or the business taken as
a whole, of the Company and the Subsidiaries except as
heretofore disclosed to the Banks in the Company's Annual
Report on Form 10-K for the calendar year ended December 31,
1992 and the Company's Quarterly Reports on Form 10-Q for
the calendar quarters ended March 31, 1993 and June 30,
1993.
5. No authorizations, consents, approvals or licenses
of, or filings or registrations with, any governmental or
regulatory authority or agency are required in connection
with the execution, delivery or performance by the Company
of the Credit Agreement or the Notes or to borrow under the
Credit Agreement.
<PAGE>
6. The Company is not an "investment company", or a
company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
Very truly yours,
Richard Molleur
Corporate Vice President and
General Counsel
<PAGE>
EXHIBIT C
[Form of Opinion of Special New York Counsel to Chase]
__________, 199_
To the Banks party to the
Credit Agreement referred to
below and The Chase
Manhattan Bank (National Association), as Agent
Ladies and Gentlemen:
We have acted as special New York counsel to Chase in
connection with (i) the Credit Agreement dated as of January 7,
1994 (the "Credit Agreement") among Northrop Corporation (the
"Company"), the lenders named therein and The Chase Manhattan
Bank (National Association), as Agent, providing for loans to be
made by said lenders to the Company in an aggregate principal
amount not exceeding $400,000,000 and (ii) the various other
agreements and instruments referred to in the next following
paragraph. Terms defined in the Credit Agreement are used herein
as defined therein. This opinion is being delivered pursuant to
Section 6.01(e) of the Credit Agreement.
In rendering the opinion expressed below, we have
examined the following agreements, instruments and other
documents:
(a) the Credit Agreement;
(b) the Notes; and
(c) such corporate records of the Company and such
other documents as we have deemed necessary as a
basis for the opinions expressed below.
The agreements, instruments and other documents referred to in
the foregoing lettered clauses (other than clause (c) above) are
collectively referred to as the "Credit Documents".
In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us
as originals and the conformity with authentic original documents
of all documents submitted to us as copies. When relevant facts
were not independently established, we have relied upon
statements of governmental officials and upon representations
made in or pursuant to the Credit Documents and certificates of
appropriate representatives of the Company.
In rendering the opinions expressed below, we have
assumed, with respect to all of the documents referred to in this
opinion letter, that:
(i) such documents have been duly authorized by, have
been duly executed and delivered by, and (except
to the extent set forth in the opinions below as
to the Company) constitute legal, valid, binding
and enforceable obligations of, all of the parties
to such documents;
(ii) all signatories to such documents have been duly
authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the power
and authority (corporate or other) to execute,
deliver and perform such documents.
Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and
having considered such questions of law as we have deemed
necessary as a basis for the opinions expressed below, we are of
the opinion that each of the Credit Documents constitutes the
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the
Credit Documents is subject to the application of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation,
(a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts
of materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following
comments and qualifications:
(A) The enforceability of provisions in the Credit
Documents to the effect that terms may not be waived or
modified except in writing may be limited under certain
circumstances.
(B) We express no opinion as to (i) the effect of the
laws of any jurisdiction in which any Bank is located (other
than the State of New York) that limit the interest, fees or
other charges such Bank may impose and (ii) the fourth
sentence of Section 4.05 of the Credit Agreement.
The foregoing opinions are limited to matters involving
the Federal laws of the United States and the law of the State of
New York, and we do not express any opinion as to the laws of any
other jurisdiction.
This opinion letter is, pursuant to Section 6.01(e) of
the Credit Agreement, provided to you by us in our capacity as
special New York counsel to Chase and may not be relied upon by
any Person for any purpose other than in connection with the
transactions contemplated by the Credit Agreement without, in
each instance, our prior written consent.
Very truly yours,
CDP/RJW
<PAGE>
EXHIBIT D
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Insert Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of
January 7, 1994 (the "Credit Agreement") among Northrop
Corporation (the "Company"), the Banks named therein and The
Chase Manhattan Bank (National Association), as Agent, providing
for loans in the aggregate principal amount of $400,000,000 at
any one time outstanding. Terms defined in the Credit Agreement
are used herein as defined therein.
As a Bank party to the Credit Agreement, we have agreed
with the Company in Section 11.11 of the Credit Agreement to keep
confidential, except as otherwise provided therein, all
non-public information identified by the Company as being
proprietary, private and/or confidential at the time the same is
delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.11, we are permitted to
provide you, as a prospective [holder of a participation in the
Loans] [assignee Bank], with certain of such non-public
information subject to the execution and delivery by you, prior
to receiving such non-public information, of a Confidentiality
Agreement in this form. Such information will not be made
available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you
hereby agree (on behalf of yourself and each of your affiliates,
directors, officers, employees and representatives) that (A) such
information will not be used by you except in connection with the
proposed [participation] [assignment] mentioned above and (B) you
shall use reasonable precautions, in accordance with your
customary procedures for handling confidential information and in
accordance with safe and sound banking practices, to keep such
information confidential, provided that nothing herein shall
limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process,
(ii) to your counsel or to counsel for any of the Banks or the
Agent, (iii) to bank examiners, auditors or accountants, (iv) to
the Agent or any other Bank, (v) in connection with any
litigation to which you or any one or more of the Banks is a
party; provided, further, that, unless specifically prohibited by
applicable law or court order, you agree, prior to disclosure
thereof, to notify the Company of any request for disclosure of
any such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection
with an examination of your financial condition by such
governmental agency) or (y) pursuant to legal process; and
provided finally that in no event shall you be obligated to
return any materials furnished to you pursuant to this
Confidentiality Agreement. In addition, you hereby agree that
money damages would not be a sufficient remedy for any breach of
your obligations under this Confidentiality Agreement and that,
in addition to all other remedies available to the Company at law
or in equity, the Company shall be entitled to injunctive relief
against you as a remedy for such breach and that the Company is
an express beneficiary hereof entitled to enforce your
obligations hereunder as if the Company were a party hereto.
Please indicate your agreement to the foregoing by
signing at the place provided below the enclosed copy of this
Confidentiality Agreement.
Very truly yours,
[INSERT NAME OF BANK]
By____________________________
Title:
AGREED AS AFORESAID:
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By____________________________
Title:
Exhibit 24
POWER OF ATTORNEY IN CONNECTION WITH THE
1993 ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
directors and officers of NORTHROP CORPORATION, a Delaware
corporation, does hereby appoint RICHARD R. MOLLEUR and
SHEILA M. GIBBONS, and each of them as his agents and
attorneys-in-fact (the "Agents"), in his respective name and
in the capacity or capacities indicated below to execute
and/or file the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (the "Report") under the
Securities Exchange Act of 1934, as amended (the "Act"), and
any one or more amendments to any part of the Report that
may be required to be filed under the Act (including the
financial statements, schedules and all exhibits and other
documents filed therewith or constituting a part thereof)
and to any part or all of any amendment(s) to the Report,
whether executed and filed by the undersigned or by any of
the Agents. Further, each of the undersigned does hereby
authorize and direct the Agents to take any and all actions
and execute and file any and all documents with the
Securities and Exchange Commission (the "Commission"), which
they deem necessary or advisable to comply with the act and
the rules and regulations or orders of the Commission
adopted or issued pursuant thereto, to the end that the
Report shall be properly filed under the Act. Finally, each
of the undersigned does hereby ratify each and every act and
documents which the Agents may take, execute or file
pursuant thereto with the same force and effect as though
such action had been taken or such document had been
executed or filed by the undersigned, respectively.
This Power of Attorney shall remain in full force and effect
until revoked or superseded by written notice filed with the
Commission.
IN WITNESS THEREOF, each of the undersigned has subscribed
these presents this 16th day of February, 1994.
/s/ Kent Kresa Chairman of the Board,
President and Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Oliver C. Boileau, Jr. Director
/s/ Jack R. Borsting Director
/s/ John T. Chain, Jr. Director
/s/ Jack Edwards Director
/s/ Barbara C. Jordan Director
/s/ Aulana L. Peters Director
/s/ Richard M. Rosenberg Director
/s/ William F. Schmied Director
/s/ John Brooks Slaughter Director
/s/ Wallace C. Solberg Director
/s/ Richard J. Stegemeier Director
/s/ Richard B. Waugh, Jr. Corporate Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ Nelson F. Gibbs Corporate Vice President
and Controller (Principal
Accounting Officer)
Exhibit 10(r)
SPECIAL SEVERANCE PAY AGREEMENT
This Special Severance Pay Agreement (the
"Agreement") is entered into as of the _____ day of
____________ by and between Northrop Corporation, a
Delaware corporation (the "Company") and
_________________________________ (the "Employee").
RECITALS
Employee is a key member of the Company's management
team and has been designated by the Compensation and
Management Development Committee (the "Committee") of the
Board of Directors (the "Board") of the Company as a key
employee to whom the protection of the Company's Special
Severance Pay Plan (the "Plan") are extended. The
purpose of the Plan is to reinforce and encourage the
continued attention and dedication of employees like
Employee to their assigned duties without distraction in
the face of the potentially disturbing circumstances that
arise from the possibility of a change in control of the
Company.
NOW, THEREFORE, in consideration of the mutual
benefits to be derived from this Agreement, including the
continued employment and rendition of services by
Employee, it is agreed as follows:
1. Company's Right to Terminate. No provision
contained herein shall affect the Company's
ability to terminate Employee's employment at
any time, with or without cause. Nothing in
this Agreement shall in any way require the
Company to provide any Benefits prior to a
Change in Control nor shall this Agreement
ever be construed in any way as establishing
any policies or requirements for severance
benefits for Employee if he terminates
employment with the Company prior to a Change
in Control
2. Change in Control. Benefits provided herein
shall be payable only in the event there shall
have occurred a "Change in Control" as defined
below, and Employee's employment by the
Company shall thereafter have been terminated
in accordance with Section 3 below. Each
event constituting a "Change in Control" as
defined below shall be considered a separate
"Change in Control" entitling Employee to the
Benefits provided herein if his employment by
the Company shall have been terminated in
accordance with Section 3 below following such
"Change in Control." For purposes of this
Agreement a "Change in Control" shall be
deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of
the Company in which (A) the Company is not
the continuing or surviving corporation, other
than a merger in which the holders of the
Common Stock of the Company immediately prior
to the merger have the same proportionate
ownership of common stock of the surviving
corporation immediately after the merger, or
(B) the Common Stock of the Company
outstanding immediately prior to the merger
would amount to less than 50% of the common
stock of the surviving corporation outstanding
immediately after the merger or (y) any sale,
lease, exchange or other transfer (in one
transaction or a series of related
transactions) of all, or substantially all, of
the assets of the Company, or (ii) the
stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as defined
in Sections 13(d) and 14(d) of the Securities
Exchange act of 1934, as amended (the
"Exchange Act"), but not including any trust
established pursuant to an employee benefit
plan of the Company, shall become the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of fifteen percent or more of the
Company's outstanding Common Stock, or (iv)
during any period of two consecutive years, a
majority of the directors of the Company shall
cease to be "Continuing Directors," as defined
below. As used herein, "Continuing Director"
shall mean a person who was a director of the
Company at the beginning of any specified two-
year period and any person whose election or
nomination as a director during such period
was approved by two-thirds of the then
Continuing Directors.
3. Termination Following Change in Control. In
the event a Change in Control shall have
occurred, Employee shall be entitled to the
Benefits provided in Section 4 hereof upon any
termination of his employment with the Company
within the 30-month period following such
Change in Control except a termination of
employment (a) because of his death, (b) by
the Company for "Cause" or "Disability" or (c)
by him other than for "Good Reason."
(i) Disability. For the purposes of this
Agreement only, and for no other benefit
program or policy of the Company, termination
for "Disability" shall mean termination of
Employee's employment because of his absence
from duties with the Company on a full-time
basis for 130 consecutive business days, as a
result of incapacity due to physical or mental
illness, unless he shall have returned to the
full-time performance of his duties within 30
days after "Notice of Termination" (as
described in (iv) below) is given in
connection with such absence.
(ii) Cause. Termination by the Company of
Employee's employment for "Cause" shall mean
termination within the 30-month period
following a Change in Control by reason of:
(A) the willful and continued failure by
Employee to substantially perform his
duties with the Company (other than any
such failure resulting from his
incapacity due to physical or mental
illness), for a period of 30 or more days
after a written demand for substantial
performance is delivered to him by the
Chief Executive Officer (the "Officer")
of the Company or the Committee, which
demand specifically identifies the manner
in which such Officer or the Committee
believes that Employee has not
substantially performed his duties.
(B) the willful engaging by Employee in
misconduct which is materially injurious
to the Company, monetarily or otherwise.
For purposes of this paragraph, no act,
or failure to act, on Employee's part
shall be considered "willful" unless
done, or omitted to be done, by Employee
not in good faith and without reasonable
belief that his action or omission was
not opposed to the best interest of the
Company.
Notwithstanding the foregoing, Employee shall
not be deemed to have been terminated for
Cause unless and until there shall have been
delivered to Employee a copy of a Notice of
Termination from the Officer or the Committee
after reasonable notice to Employee and an
opportunity for him, together with his
counsel, to be heard before the Committee (or,
if there be no such Committee or such
Committee delivers the Notice of Termination,
the Board), finding that, in the good faith
opinion of such Committee (or the Board), he
was guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of
this paragraph (ii) and specifying the
particulars thereof in detail.
(iii) Good Reason. Termination by Employee of his
employment for "Good Reason" shall mean the
termination by Employee of his employment within
the 30-month period following a Change in Control:
(A) if within the 30-month period following a
Change in Control, the Company reduces
Employee's base salary in effect immediately
prior to the Change in Control or as increased
from time to time thereafter.
(B) if within the 30-month period following a
Change in Control, the Company, without the
express written consent of the Employee,
requires Employee to report to a location or
be relocated anywhere in excess of one hundred
(100) miles of his present office location,
except for required travel on the Company's
business to an extent substantially consistent
with his present business travel obligations.
(C) if within the 30-month period following a
Change in Control, the Company has failed to
maintain in force plans providing benefits at
least as beneficial as, or substantially
equivalent to, those provided by any benefit
or compensation plan, retirement or pension
plan, stock option plan, life insurance plan,
health and accident plan or disability plan in
which Employee is participating at the time of
a Change in Control or if the Company has
taken any action which would adversely affect
Employee's participation in or materially
reduce Employee's benefits under any of such
plans or deprive him of any material fringe
benefit (without substituting a fringe benefit
substantially equivalent to such benefit)
enjoyed by him at the time of the Change in
Control, or if the Company fails to provide
him with the number of paid vacation days to
which he would be entitled in accordance with
the Company's normal vacation policy in effect
at the time of the Change in Control.
(D) if within the 30-month period following a
Change in Control, the Company materially
reduces Employee's title, job authorities or
responsibilities in effect immediately prior
to the Change in Control.
(E) if within the 30-month period following a
Change in Control, the Company fails to obtain
the assumption of the obligations contained in
this Agreement by any successor as
contemplated in Section 5 hereof.
(F) if within the 30-month period following a
Change in Control, the Company purports to
terminate Employee's employment in a manner
which is not effected pursuant to a Notice of
Termination satisfying the requirements of
paragraph (iv) below (and, if applicable,
paragraph (ii) above); and for purposes of
this Agreement, no such purported termination
shall be effective.
A termination of employment by Employee within the
30-month period following a Change in Control shall
be for Good Reason if one of the occurrences
specified in this paragraph (iii) shall have
occurred, notwithstanding that Employee may have
other reasons for terminating employment, including
employment by another employer which Employee
desiress to accept.
(v) Date of Termination. "Date of Termination"
shall mean:
(A) If Employee's employment is terminated
for Disability, thirty (30) days after Notice
of Termination is given (provided that
Employee shall not have returned to the
performance of his duties on a full-time basis
during such thirty (30) day period),
(B) if Employee's employment is terminated
pursuant to paragraph (ii) above, the date on
which the Notice of Termination is given,
(C) if Employee's employment is terminated by
the Company for any other reason, the date on
which a Notice of Termination is given;
provided that if within thirty (30) days after
any Notice of Termination is given Employee
notifies the Company that a dispute exists
concerning the termination, the Date of
Termination shall be the date on which such
Notice of Termination is given or the date on
which the dispute is finally determined,
either by mutual written agreement of the
parties, or by a final judgment, order or
decree of a court of competent jurisdiction,
whichever shall provide Employee with the
greater dollar value of Benefits hereunder,
and
(D) if Employee terminates his employment for
Good Reason, the date on which the Company
receives notice from Employee of such
termination.
4. Certain Befits Upon Termination. If, within
the 30-month period following a Change in
Control, Employee's employment by the Company
shall be terminated (a) by the Company other
than for Cause or Disability or (b) by
Employee for Good Reason, Employee shall be
entitled to each of the "Benefits" provided
below:
(i) the Company shall pay Employee his full
base salary through the Date of Termination,
at the rate in effect at the time Notice of
Termination is given.
(ii) the Company shall pay as severance pay
to Employee after the Date of Termination, an
amount equal to 2.99 times Employee's full
Base Amount (as defined in Section 280G of the
Internal Revenue Code of 1986, as amended, and
the regulations adopted thereunder in effect
from time to time) of total compensation as in
effect at the time notice of termination is
given. Such severance pay shall be paid to
Employee in a cash lump sum within 30 days
following the Date of Termination.
(iii) for a period not to exceed thirty-six
(36) months the Company shall, at its expense,
arrange to provide Employee with medical,
dental and life insurance benefits
substantially similar to those which Employee
was receiving immediately prior to the Change
in Control or, if greater, those which
Employee was receiving on his Date of
Termination. Notwithstanding the foregoing,
the Company shall not provide any benefit
otherwise receivable by Employee pursuant to
this Section 4(iii) to the extent that a
substantially similar benefit is actually
received by Employee from a subsequent
employer during such period, (iv) and any such
benefit actually received by Employee shall be
reported to the Company.
(iv) the Company shall pay to Employee all
deferred accrued and bonus vacation pay to
which he is entitled under the terms of the
Company's pay policies as in effect
immediately prior to the Change in Control or,
if it results in greater vacation pay, as in
effect on Employee's Date of Termination.
Employee shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking
other employment or otherwise, nor shall the amount of
any payment provided for in this Section 4 be reduced by
any compensation earned by Employee as the result of
employment by another employer after the Date of
Termination, or otherwise.
Anything in this Agreement to the contrary
notwithstanding, in no event may the amount of any
benefits payable to Employee under this Agreement, when
added to any other benefits which Employee is entitled to
receive from the Company, exceed the total amount of
payments or benefits which could be received by Employee
from the Company without any portion thereof constituting
a nondeductible "excess parachute payment" pursuant to
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), or being subject to the excise tax
imposed by Section 4999 of the Code; and such payments or
benefits shall be reduced to the extent necessary to
comply with this limitation. If any such payments or
benefits must be reduced by reason of the preceding
sentence, such reduction shall be made in the order and
manner determined by Employee as soon as administratively
practicable following the Change in Control.
5. Successors, Binding Agreement. The Company may
amend or terminate this Agreement by action of a
majority of its Continuing Directors (as defined in
Section 2 hereof) at any time prior to a Change in
Control. In any event, this Agreement shall
terminate on the fifth (5th) anniversary hereof
unless a Change in Control has occurred. The
Company expressly waives any right to amend or
terminate this Agreement following a Change in
Control and the Company acknowledges that Employee
shall have a binding and irrevocable right to the
Benefits set forth hereunder in the event of a
Change in Control. Any purported termination of
this Agreement following a Change in Control shall
be ineffective, and Employee shall not lose any
right hereunder for failing to contest such a
purported termination.
(i) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise)to all or substantially
all of the business and/or assets of the Company,
to expressly assume and agree to honor this
Agreement in the same manner and to the same extent
that the Company would be required to so honor if
no such succession had taken place. Failure of the
Company to obtain such agreement prior to the
effectiveness of any such succession shall be a
violation of this Agreement and shall entitle
Employee to Benefits from the Company or such
successor in the same amount and on the same terms
as Employee would be entitle hereunder if he
terminated his employment for Good Reason, except
that for purposes of implementing the foregoing,
the date on which any such succession becomes
effective shall be deemed the Date of Termination.
As used in this Agreement, "Company" shall mean the
Company hereinbefore defined and any successor to
its business and/or assets as aforesaid which
executes and delivers the agreement provided for in
this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement
by operation of law. The Company shall promptly
notify Employee of any succession by purchase,
merger, consolidation or otherwise to all or
substantially all the business and/or assets of the
Company and shall state whether or not the
successor has executed the agreement required by
this paragraph (i) and, if so, shall make a copy of
such agreement available to Employee.
(ii) This Agreement shall inure to the benefit of
and be enforceable by Employee and his personal or
legal representives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If Employee should die while any amount
would still be payable to him hereunder if he had
continued to live, all such amounts, unless
otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his
devisee, legatee or other designee or, if there be
no such designee, to his estate.
(iii) The Company expressly acknowledges and
agrees that Employee shall have a contractual right
to the Benefits provided hereunder, and the Company
expressly waives any ability, if possible, to deny
liability for any breach of its contractual
commitment hereunder upon the grounds of lack of
consideration, accord and satisfaction or any other
defense. In any dispute arising after a Change in
Control as to whether Employee is entitled to
Benefits under this Agreement, there shall be a
presumption that Employee is entitled to such
Benefits and the burden of proving otherwise shall
be on the Company.
(iv) All Benefits to be provided hereunder shall
be in addition to any pension, disability, worker's
compensation, other Company benefit plan
distribution, unpaid vacation or other unpaid
benefits that Employee has at his Date of
Termination.
6. Notice. For purposes of this Agreement, notices
and all other communications provided for in this
Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by
certified or registered mail, return receipt
requested, postage prepaid, addressed: (i) if to
Employee, to his latest address as reflected on the
records of the Company, and if to Company:
Northrop Corporation, 1840 Century Park East, Los
Angeles, California 90067, Attn: President, or to
such other address as Company may furnish to
Employee in writing with specific reference to this
Agreement and the importance of the notice, except
that notice of change of address shall be effective
only upon receipt.
7. Miscellaneous. After a Change in Control, no
rights of Employee under this Agreement may be
released, modified, waived or discharged by
Employee unless such release, waiver, modification,
or discharge is agreed to in writing signed by
Employee and a licensed attorney-at-law
representing Employee. No failure to enforce or
waiver by Employee at any time of any breach by the
Company of, or noncompliance with, any condition or
provision of this Agreement to be performed by the
Company shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or
at any prior or subsequent time. This Agreement
shall not supersede or in any way limit the rights,
duties or obligations Employee may have under any
other written agreement with the Company. The
Company expressly waives any right to deny
liability hereunder on the basis that Employee
failed to submit a claim on a timely basis. The
validity, interpretation, construction and
performance of this Agreement shall be governed by
the laws of the State of California.
8. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect
the validity or enforceability of any other
provision of this Agreement, which shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this
agreement as of the above-stated date.
ATTEST:
______________________ BY_____________________
EMPLOYEE
_____________________
