<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended October 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
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Commission file number 1-6711
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OEA, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2362379
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
P. O. Box 100488, Denver, Colorado 80250
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 693-1248
---------------
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
20,599,101 Shares of Common Stock at December 11, 1998.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets
October 30, 1998 (unaudited)
and July 31, 1998. . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations (unaudited)
Three Months Ended October 30, 1998
and October 31, 1997 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows (unaudited)
Three Months Ended October 30, 1998
and October 31, 1997 . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements (unaudited). . 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 8
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2. Changes in Securities and Use of Proceeds . . . . . . . . . 13
ITEM 3. Defaults on Senior Securities . . . . . . . . . . . . . . . 13
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . 13
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 13
</TABLE>
2
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OEA, INC
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS
October 30, July 31,
1998 1998
------------- -----------
Current Assets: (Unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 15,489 $ 1,920
Accounts Receivable, Net 45,817 43,998
Unbilled Costs and Accrued Earnings 3,834 3,190
Income Taxes Receivable 8,152 12,040
Inventories:
Raw Material and Component Parts 23,045 25,954
Work-in-Process 17,238 17,222
Finished Goods 8,470 11,391
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48,753 54,567
Prepaid Expenses and Other 1,348 1,863
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Total Current Assets 123,393 117,578
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Property, Plant and Equipment 281,244 272,411
Less: Accumulated Depreciation 73,835 67,761
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Property, Plant and Equipment, Net 207,409 204,650
Long-Term Receivable 3,000 3,000
Investment in Foreign Joint Venture 2,323 2,323
Other Assets 1,207 1,208
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Total Assets $ 337,332 $ 328,759
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------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 23,161 $ 22,457
Interest Payable 2,212 2,368
Accrued Expenses 5,729 6,636
Federal and State Income Taxes -- --
------------- ------------
Total Current Liabilities 31,102 31,461
Long-term Bank Borrowings 135,000 124,000
Deferred Income Taxes 10,821 10,821
Other 962 971
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Total Liabilities 177,885 167,253
------------- ------------
Stockholders' Equity:
Common Stock - $.10 par value, Authorized 50,000,000 shares
Issued - 22,019,700 shares 2,202 2,202
Additional Paid-In Capital 13,214 13,201
Retained Earnings 147,724 150,440
Less: Cost of Treasury Shares, 1,420,599 and 1,424,943 (2,135) (2,142)
Equity Adjustment from Translation (1,558) (2,195)
------------- ------------
Total Stockholders' Equity 159,447 161,506
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Total Liabilities and Stockholder's Equity $ 337,332 $ 328,759
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------------- ------------
</TABLE>
3
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OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended
October 30, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
Net Sales $ 56,793 $ 57,335
Cost of Sales 55,284 47,171
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Gross Profit 1,509 10,164
General and Administrative Expenses 2,725 1,885
Research and Development Expenses 1,005 301
------------- ------------
Operating Profit (Loss) (2,221) 7,978
Other Income (Expense):
Interest Income 34 131
Interest Expense (1,916) (975)
Other, Net 113 154
------------- ------------
(1,769) (690)
------------- ------------
Earnings (Loss) Before Income Taxes (3,990) 7,288
Federal and State Income Tax Expense (1,274) 2,656
------------- ------------
Net Earnings (Loss) Before Cumulative
Effect of a Change in Accounting Principle $ (2,716) $ 4,632
Cumulative Effect of a Change in Accounting Principle -- (10,040)
------------- ------------
Net Loss $ (2,716) $ (5,408)
------------- ------------
Earnings (Loss) per Share Before Cumulative
Effect of a Change in Accounting Principle - Basic
and Diluted $ (0.13) $ 0.23
Cumulative Effect of a Change in Accounting
Principle - Basic and Diluted -- (0.49)
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Loss per Share - Basic and Diluted $ (0.13) $ (0.26)
------------- ------------
------------- ------------
Weighted Average Number of Shares Outstanding:
Basic 20,595,964 20,557,178
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Diluted 20,603,170 20,600,812
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</TABLE>
4
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OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
October 30, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
Operating Activities:
Net Loss $ (2,716) $ (5,408)
Adjustments to reconcile net earnings to net
cash provided by operating activities
Cumulative effect of a change in accounting principle -- 10,040
Depreciation and amortization 5,788 5,066
Decrease in deferred compensation payable (9) --
Gain (Loss) on disposal of property, plant and equipment (1) 2
Changes in operating assets and liabilies
Accounts receivable (1,505) (1,099)
Unbilled costs and accrued earnings (644) (47)
Inventories 5,960 (3,862)
Prepaid expenses and other 518 (1,018)
Accounts payable and accrued expenses (1,015) (11,266)
Income taxes payable 3,888 1,902
------------- ------------
Net cash provided by/(used in) operating activities 10,264 (5,690)
Investing activities:
Capital expenditures (6,613) (20,587)
Proceeds from sale of property, plant, and equipment 3 --
Increase in other assets, net (38) (35)
------------- ------------
Net cash used in investing activities (6,648) (20,622)
Financing activities:
Purchases of common stock for treasury -- (43)
Proceeds from issuance of treasury stock 20 105
Increase in borrowings, net 11,000 26,800
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Net cash provided by financing activities 11,020 26,862
Effect of exchange rate changes on cash (1,067) (134)
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Net increase in cash and cash equivalents 13,569 416
Cash and cash equivalents at beginning of period 1,920 4,138
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Cash and cash equivalents at end of period $ 15,489 $ 4,554
------------- ------------
------------- ------------
</TABLE>
5
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements furnished above reflect all adjustments
(consisting of normal recurring accruals) which are, in the opinion of OEA's
management, necessary for a fair statement of the results of operations for
the three-month periods ended October 30, 1998 and October 31, 1997. Certain
amounts in the fiscal 1998 financial statements have been reclassified to
conform with the fiscal 1999 presentation. These reclassifications had no
impact on the reported results of operations.
Refer to the Company's annual financial statements for the year ended July
31, 1998, for a description of the accounting policies, which have been
continued without change. Also, refer to the footnotes with those financial
statements for additional details of the Company's financial condition,
results of operations, and changes in financial position. The details in
those notes have not changed, except as a result of normal transactions in
the interim.
NOTE 2 - START-UP COSTS
In April 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities." This Statement requires entities to expense costs of start-up
activities as they are incurred and to report the initial adoption as a
cumulative effect of a change in accounting principle as described in
Accounting Principles Board Opinion No. 20, "Accounting Changes." Statement
of Position No. 98-5 is effective for fiscal years beginning after December
15, 1998. However, the Company elected to adopt Statement of Position 98-5 in
the first quarter of fiscal 1998.
NOTE 3 - COMPREHENSIVE INCOME
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standard No. 130, REPORTING COMPREHENSIVE INCOME, ("SFAS
130"). Comprehensive income generally represents all changes in
stockholders' equity, except those resulting from investments or
contributions by stockholders. Total comprehensive income for the first
quarters of fiscal 1999 and fiscal 1998 were:
<TABLE>
<CAPTION>
FY 1999 FY 1998
-------- --------
<S> <C> <C>
Net Loss ($ 2,716) ($ 5,408)
Equity Adjustment from Translation 637 907
-------- --------
Total Comprehensive Income ($ 2,079) ($ 4,501)
-------- --------
-------- --------
</TABLE>
NOTE 4 - SEGMENT INFORMATION
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
The Statement requires public companies to report certain information about
operating segments in complete sets of financial statements and in condensed
financial statements of interim periods issued to shareholders. Under
Statement No. 131, operating segments are to be determined based on how
management measures performance and makes decisions about allocating
resources. It also requires that public companies report certain information
about their products and services, the geographic areas in which they
operate, and their major customers. Statement No. 131 is effective for
fiscal years beginning after December 15, 1997. The Company will adopt
Statement No. 131 in the fourth quarter of the current fiscal year.
6
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NOTE 5 - BANK BORROWINGS
On April 10, 1998, the Company entered into a $180 million Amended and
Restated Revolving Credit Agreement with a group of seven banks. This
agreement was amended on June 11, 1998. At the Company's request, this
agreement was again amended on December 10, 1998 to reduce the amount of the
facility to $150 million and to modify the financial debt covenants. The
Company's principal bank is acting as agent for the banks under this
agreement. At October 30, 1998, the Company had $135 million of long term
debt drawn down on this credit facility. All outstanding debt at October 30,
1998 is classified as long-term since no portion is either due or expected to
be permanently repaid within the next twelve-month period. Please refer to
Management's Discussion and Analysis -Liquidity and Capital Resources for
further information regarding this credit facility.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains certain forward-looking statements within the meaning of
Section 27E of the Securities Exchange Act of 1934, as amended, including
statements regarding Company strategy, its soundness, the inflator and
initiator market, inflator prices, inflator and initiator demand, sales
volume increases, the utilization rate of the Company's inflator
manufacturing facility, the benefits of cost reduction programs and improved
manufacturing processes, implementation of ERP systems, year 2000 compliance,
as well as other statements or implications regarding future events. Actual
results or events may differ materially from these forward-looking statements
depending on a variety of factors. Reference is made to the cautionary
statements under the caption "Forward-Looking Statements" in OEA's Annual
Report on Form 10-K for the year ended July 31, 1998 and the Company's report
on Form 8-K filed on June 4, 1998 for a description of various factors that
might cause OEA's actual results to differ materially from those contemplated
by such forward-looking statements.
A summary of the principal items included in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
Comparison of
Three Months Ended
---------------------------------------------------
October 30, 1998 October 31, 1997
Dollars Dollars
(in thousands) % of Sales (in thousands) % of Sales
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net Sales 56,793 100.0% 57,335 100.0%
Cost Of Sales 55,284 97.3% 47,171 82.3%
-------- ------ -------- ------
Gross Margin 1,509 2.7% 10,164 17.7%
General and
Administrative Expenses 2,725 4.8% 1,885 3.3%
Research and
Development Expenses 1,005 1.8% 301 0.5%
-------- ------ -------- ------
Operating Profit (Loss) (2,221) (3.9%) 7,978 13.9%
Other Income (Expense) (1,769) (3.1%) (690) (1.2%)
-------- ------ -------- ------
Earnings (Loss) Before Tax (3,990) (7.0%) 7,288 12.7%
Income Tax Expense (Benefit) (1,274) (2.2%) 2,656 4.6%
-------- ------ -------- ------
Net Earnings (Loss)
Before Cumulative Effect of a
Change in Accounting
Principle (2,716) (4.8%) 4,632 8.1%
Cumulative Effect of a
Change in Accounting
Principle -- -- (10,040) (17.5%)
-------- ------ -------- ------
Net Earnings (Loss) (2,716) (4.8%) (5,408) (9.4%)
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
8
<PAGE>
NET SALES
Net sales decreased 1% to $56.8 million for the quarter ended October 30,
1998, as compared to the prior-year period, due to a shortfall in aerospace
segment sales, partially offset by an increase in automotive segment sales.
Automotive segment sales increased 3.2% ($1.4 million) to $46.4 million in
the quarter, as compared to the prior-year period, driven by increased
initiator sales. Inflator unit shipments increased 31% in the quarter to
more than 1.6 million inflators, as compared to the prior-year first
quarter, and unit shipments increased 15%, as compared to the fiscal 1998
fourth quarter. However, an industry-wide inflator price adjustment became
effective August 1, 1998. The impact on the Company was a weighted average
inflator price reduction of 23.5%, or $10 million for the quarter. The
Company believes that this large reduction in inflator sales price was a
market adjustment and is not representative of future price reductions.
The effects of the price reduction, combined with a shift in inflator
product mix, caused inflator sales to decrease by $.3 million, as compared
to the prior-year period. Initiator unit shipments to outside customers
increased 43% to 6.0 million initiators, as compared to the prior-year
first quarter, and unit shipments increased 12%, as compared to the fiscal
1998 fourth quarter. This unit increase, partially offset by initiator
price reductions and a shift in initiator product mix, resulted in an
initiator sales increase of $1.7 million. The significant increases in both
inflator and initiator unit sales reflects continued strong customer
acceptance of the Company's automotive safety products and increased demand
for air bags from both domestic and foreign automobile manufacturers.
Inflator unit shipments are expected to continue to increase quarter over
quarter throughout the year, with the majority of the increases taking
place in the second half of the fiscal year.
Aerospace segment sales decreased 16% ($2.0 million) to $10.4 million in
the quarter, as compared to the prior-year period. This decrease is
primarily due to the timing of shipments on the Delta program and is
expected to be made up during the year.
COST OF SALES
Cost of sales for the quarter ended October 30, 1998 was $55.3 million, as
compared to $47.2 million for the prior-year period, primarily due to the
increased volume in the automotive segment.
Automotive segment cost of sales increased 24% ($9.0 million) to $46.2
million in the quarter, as compared to the prior-year period. This reflects
the increased inflator and initiator volumes, partially offset by the early
effects of the Company's cost reduction programs. As a percentage of
sales, cost of sales increased from 83% in the fiscal 1998 first quarter to
99% in the current period. This increase reflects the inflator sales price
reduction discussed in "Net Sales" above; and increased overhead and other
costs associated with the Company's new inflator production facility, which
was not fully operational in the prior-year period and is currently
operating significantly below target utilization; partially offset by cost
reductions achieved in the first quarter.
Aerospace segment cost of sales decreased 8% ($.8 million) to $9.1 million
in the quarter, as compared to the prior-year period. This reflects the
decrease in aerospace sales, partially offset by increased engineering
development costs.
GROSS MARGIN
Gross margin for the quarter was $1.5 million (2.7% of net sales), as
compared to $10.2 million (17.7% of net sales) for the prior-year period.
Automotive segment gross margin for the quarter was $.3 million (.6% of net
automotive sales), as compared to $7.8 million (17.3% of net automotive
sales) for the prior-year period. This decrease in gross margin was
primarily due to the inflator sales price reduction as discussed above.
Eliminating the effects of the inflator price reduction, automotive gross
margin would have been $10.3 million (18.3% of net
9
<PAGE>
automotive sales) for the first quarter of fiscal 1999. Automotive
gross margins are expected to improve in future quarters as the effects
of the Company's cost reduction efforts continue to phase in and as
sales volumes continue to increase throughout the year. The Company's
new inflator production facility represents 10 million of its 15 million
total annual inflator production capacity. This facility was running at
a 23% utilization rate in the first quarter of fiscal 1999 and, as
inflator volumes increase throughout the year, is expected to be running
at a utilization rate of up to 60% by year end.
Aerospace segment gross margin was $1.2 million (11.9% of net aerospace
sales), as compared to $2.4 million (19.3% of net aerospace sales) for the
prior-year period. This decrease in gross margin was primarily due to the
decrease in aerospace sales and the increase in engineering development
costs as discussed above.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ended October 30, 1998
were $2.7 million (4.8% of net sales), as compared to $1.9 million (3.3% of
net sales) for the prior-year period. This increase was primarily due to
the reclassification of certain expenses from manufacturing overhead, such
as premium freight, and timing differences in recording expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the quarter ended October 30, 1998
were $1.0 million, as compared to $.3 million for the prior-year period.
This increased R&D effort reflects continued work on the Company's "smart"
(dual-stage) inflators, micro gas generators for seat belt pretensioner
systems, and other new products in early stages of development.
OPERATING PROFIT
Operating profit (loss) for the quarter ended October 30, 1998 was ($2.2)
million (-3.9% of net sales), as compared to $8.0 million (13.9% of net
sales) for the prior-year period. This reduction was primarily due to the
inflator price reduction, the timing of G&A expenses and increased R&D
costs as discussed above.
OTHER INCOME (EXPENSE)
Other expenses for the quarter ended October 30, 1998 were ($1.8) million,
as compared to ($.7) million for the prior-year period. This is due to
increased interest expense of $1.9 million in the current quarter, as
compared to $1.0 million in the prior-year period. Interest costs have
increased due to the Company's higher debt level of $135.0 million on
October 30, 1998, as compared to $120.0 million on October 31, 1997.
Additionally, the prior-year period included capitalized interest on major
capital assets (i.e. production and test equipment) that were subsequently
placed in service; therefore, the interest costs associated with these
assets are no longer being capitalized.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities" (SOP 98-5). This Statement requires entities to
expense costs of start-up activities as they are incurred and to report the
initial adoption as a cumulative effect of a change in accounting principle
as described in Accounting Principles Board Opinion No. 20, "Accounting
Changes." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a
new class of customer or beneficiary, initiating a new process in an
existing facility, or commencing some new operation.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998.
However, the Company elected to adopt SOP 98-5 in its fiscal year 1998.
Accordingly, the Company wrote off the net book
10
<PAGE>
value ($10.0 million) of its start-up and related costs included in the
scope of SOP 98-5 as a one-time adjustment referred to as a Cumulative
Effect of a Change in Accounting Principle in the first quarter of
fiscal 1998.
NET EARNINGS
Net earnings (loss) for the quarter ended October 30, 1998 was ($2.7)
million, as compared to ($5.4) million for the prior-year period. Basic
earnings (loss) per share for the quarter ended October 30, 1998 was
($.13), as compared to ($.26) for the prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased during the quarter to $92.3 million
from $86.1 at July 31, 1998, primarily due to an increase in cash,
partially offset by a reduction in inventory. During the first quarter
ended October 30, 1998, the Company made capital expenditures totaling
approximately $6.6 million, which were funded from operations and bank
borrowings. On April 10, 1998, the Company entered into a four-year, $180
million Amended and Restated Revolving Credit Agreement with a group of
seven banks. This agreement was amended on June 11, 1998. At the Company's
request, this agreement was again amended on December 10, 1998 to reduce
the amount of the facility to $150 million and to modify the financial debt
covenants. The Company's principal bank is acting as agent for the banks
under this agreement. The interest rate (applicable margin plus federal
funds or LIBOR) is progressive and based upon the Company's ratio of
indebtedness to EBITDA. The margin will fluctuate up or down as determined
by the above ratio. At October 30, 1998, the interest rate was 6.35%. At
the Company's discretion, it may convert all or part of the total debt to
Eurodollar or Alternate Base Rate loan(s). This credit facility expires on
December 18, 2000, and provides for a twelve-month extension to the
termination date at the Company's option. At October 30, 1998, the Company
had $135.0 million of long-term debt drawn down on this credit facility.
Anticipated working capital requirements, capital expenditures, and
facility expansions are expected to be met through bank borrowings and from
internally generated funds.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to
maintain traceability, process transactions, send invoices, or engage in
similar normal business activities.
Based on current assessments, the Company is progressing with its
modification and replacement of significant portions of its software so
that its computer systems will properly utilize dates beyond December 31,
1999. Additionally, the Company has received written assurances from its
major production suppliers, and will be requesting assurances from its
major customers in the fiscal second quarter, regarding their Year 2000
compliance. The Company presently believes that with its modifications to
existing software, conversions of new software, and supplier/customer
assurances, the Year 2000 Issue will be mitigated. Although the Company has
taken significant steps to address the Year 2000 issue, there can be no
assurance that the failure of the Company and/or its major suppliers or
customers to timely attain Year 2000 compliance will not materially reduce
the Company's revenues or income, or that these failures and/or the impacts
of broader compliance failures by telephone, mail, data transfer or other
utility or general service providers or government or private entities will
not have a material adverse effect on the Company.
11
<PAGE>
The Company is utilizing both internal and external resources to modify,
replace, and test its software for Year 2000 compliance. The Company plans
to complete the Year 2000 project by July 1999. To date, the Company has
incurred approximately $1.1 million related to the assessment of, and
efforts in connection with, its Year 2000 project. Approximately 75% of
which are capitalized costs related to the purchase and implementation of
new computer software and hardware. The total remaining costs for this
project are currently being assessed and are unknown at this time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
12
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company sold 4,344 shares of unregistered common stock pursuant to the
exercise of options by a key employee in the first quarter of fiscal 1999
as follows:
<TABLE>
<CAPTION>
Date Number Aggregate
of Sale Of Shares Offering Price
------- --------- --------------
<S> <C> <C>
10/06/98 4,344 $ 20,272
</TABLE>
Such sale was made pursuant to the exemption from registration available
under Section 4(2) of the Securities Act of 1993.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Second Amendment to Amended and Restated Revolving Credit
Facility dated December 10, 1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
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SIGNATURES
Pursuant to the requirements 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.
OEA, INC.
----------------------------------
(Registrant)
December 11, 1998 ----------------------------------
Date J. Thompson McConathy
Vice President Finance
(Principal Financial and Accounting Officer)
December 11, 1998 ----------------------------------
Date Charles B. Kafadar
Chief Executive Officer
(Principal Executive Officer)
14
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SECOND AMENDMENT TO AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated
as of December 10, 1998 (the "AMENDMENT") among OEA, INC., a Delaware
corporation (the "COMPANY"), each of the banks named under the caption "Banks"
on the signature pages hereof (individually, a "BANK" and, collectively, the
"BANKS"), BANQUE NATIONALE DE PARIS, U.S. BANK NATIONAL ASSOCIATION and UNION
BANK OF CALIFORNIA, N.A., as Co-Agents and THE NORTHERN TRUST COMPANY, as agent
for the Banks (in such capacity, together with its successors in such capacity,
the "AGENT").
WHEREAS, the Company, the Agent, the Co-Agents and the Banks have entered
into an Amended and Restated Revolving Credit Agreement dated as of April 10,
1998, as amended by a First Amendment thereto dated as of June 11, 1998, (as
amended the "EXISTING AGREEMENT") pursuant to which the Banks agreed to make
Loans (as defined in the Existing Agreement) to the Company in an aggregate
principal amount not to exceed $180,000,000 at any time outstanding, on and
subject to the terms and conditions thereof;
WHEREAS, the Company has given the Agent notice of its desire to reduce the
amount of the Commitments to $150,000,000; and
WHEREAS, the parties wish to amend the Existing Agreement to (a) reduce the
amount of the Commitments, (b) modify certain covenants, and (c) increase
pricing;
NOW, THEREFORE, the parties agree as follows:
Section1. DEFINITIONS. Terms defined in the introductory paragraphs
hereof shall have their respective defined meanings when used in this Amendment
and, except as otherwise expressly provided herein, terms defined in the
Existing Agreement shall have their respective defined meanings when used in
this Amendment. In addition, the following terms shall have the following
meanings (terms defined in the introductory paragraphs or this SECTION 1 in the
singular to have correlative meanings when used in the plural and VICE VERSA):
"EFFECTIVE DATE" shall mean as of October 31, 1998, which will be
deemed to occur upon the first date, if any, which occurs before the
termination of this Amendment pursuant to SECTION 5 hereof and on which the
conditions precedent in SECTION 3 shall have been satisfied.
Section2. AMENDMENTS TO EXISTING AGREEMENT. The following amendments
are hereby made to the Existing Agreement with effect from and after the
Effective Date:
(a) DEFINITIONS. SECTION 1.1 of the Existing Agreement is
amended by (i) amending and restating in their entirety the definitions of
"APPLICABLE MARGIN" and "AUTHORIZED OFFICER" as follows and (ii) adding the
following new definitions in alphabetical order:
<PAGE>
" "AEROTEST" shall mean Aerotest Operations, Inc., a California
corporation, together with its successors and assigns.
"AEROSPACE SECURITY AGREEMENT" shall mean the Security Agreement
between Aerospace and the Agent, as collateral agent, in substantially the
form of EXHIBIT K hereto, as the same may be amended from time to time.
"AEROTEST SECURITY AGREEMENT" shall mean the Security Agreement
between Aerotest and the Agent, as collateral agent, in substantially the
form of EXHIBIT K hereto, and the same may be amended from time to time.
"APPLICABLE MARGIN" shall mean, for any period and for the type of
Loan or fee indicated below, the number of basis points per annum set forth
below corresponding with the applicable ratio of consolidated Indebtedness
of the Company and its Subsidiaries to EBITDA plus interest income, as
determined in accordance with SECTION 8.11 hereof:
INDEBTEDNESS TO EBITDA RATIO
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIO GREATER THAN LESS THAN 3.75:1.0 LESS THAN 3.0:1.0 LESS THAN 2.5:1.0 LESS THAN 2.0:1.0
OR EQUAL TO but GREATER but GREATER but GREATER
3.75:1.0 THAN OR THAN OR THAN OR
EQUAL TO EQUAL TO EQUAL TO
3.0:1.0 2.5:1.0 2.0:1.0
- -------------------------------------------------------------------------------------------------------------
FACILITY 25.0 25.0 12.5 12.5 12.5
FEE
- -------------------------------------------------------------------------------------------------------------
FED FUNDS 225 200 162.5 112.5 87.5
RATE
- -------------------------------------------------------------------------------------------------------------
LIBOR RATE 225 200 162.5 112.5 87.5
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of determining the Applicable Margin, consolidated
Indebtedness to EBITDA shall be calculated by the Company as provided in
SECTION 8.11 hereof as of the end of each of its fiscal quarters and shall
be reported to the Agent pursuant to a certificate executed by a senior
financial officer of the Company and delivered concurrently with the
certificate required by SECTION 8.1 hereof. The Applicable Margin shall be
adjusted, if necessary, effective on and after the first Business Day after
the date of receipt by the Agent of the certificate required to be
delivered pursuant to SECTION 8.1 hereof; provided, however, that if such
certificate, together with the financial statements to which such
certificate relates, are not delivered by the required delivery date, then
Level I pricing shall apply until the date such certificate is actually
delivered and unless it indicates that a lower Level is applicable.
Notwithstanding the foregoing, Level I pricing shall apply until the fiscal
quarter ended on April 30, 1999.
"AUTHORIZED OFFICER" shall mean (a) (i) in the case of the Company,
its chief executive officer, its chief operating officer, its president,
automotive safety products, its
-2-
<PAGE>
chief financial officer, any Person designated as an "Authorized Officer"
of the Company in SCHEDULE 2 attached hereto or any other Person designated
as an "Authorized Officer" of the Company for the purpose of this
Agreement, the Security Documents to which it is a party and the documents
delivered by the Company in connection herewith or therewith in an
officer's certificate executed by the Company's secretary, assistant
secretary or chief financial officer and delivered to the Agent; (ii) in
the case of Aerospace, its President, Vice-President/Treasurer or
Secretary, any other Person designated as an "Authorized Officer" of
Aerospace in SCHEDULE 2 attached hereto or any other Person designated as
an "Authorized Officer" of Aerospace for purpose of the Security Documents
to which it is a party in an officer's certificate executed by Aerospace's
President, Vice-President/Treasurer or Secretary and delivered to the
Agent; and (iii) in the case of Aerotest, its President, Vice
President/Treasurer or Secretary, any other Person designated as an
"Authorized Officer" of Aerotest in SCHEDULE 2 attached hereto or any other
Person designated as an "Authorized Officer" of Aerotest for purposes of
the Security Documents to which it is a party in an officer's certificate
executed by Aerotest's President, Vice-President/Treasurer or Secretary and
delivered to the Agent; and (b) in the case of each Bank, any officer of
such Bank designated as its "Authorized Officer" in SCHEDULE 1 attached
hereto or any officer of such Bank designated as its "Authorized Officer"
for the purpose of this Agreement or any documents delivered in connection
herewith, in a certificate executed by one of its Authorized Officers. Any
action taken under this Agreement, the Security Documents to which it is a
party or other documents to which it is party in connection herewith or
therewith, on behalf of the Company, or the Security Documents to which it
is a party, on behalf of Aerospace or Aerotest, as applicable, by any
individual who on or after the date of this Agreement shall have been an
Authorized Officer thereof, and whom the Agent or any Bank in good faith
believes to be a Authorized Officer of the Company, Aerospace or Aerotest,
as applicable, at the time of such action shall be binding on the Company,
Aerospace, or Aerotest, as applicable, even though such individual shall
have ceased to be an Authorized Officer of the Company, Aerospace or
Aerotest, as applicable, and any action taken under this Agreement or the
Security Documents on behalf of any Bank by any individual who on or after
the date of this Agreement shall have been an Authorized Officer of such
Bank and whom the Company in good faith believes to be an Authorized
Officer of such Bank at the time of such action shall be binding on such
Bank even though such individual shall have ceased to be an Authorized
Officer of such Bank.
"COMPANY SECURITY AGREEMENT" shall mean the Security Agreement between
the Company and the Agent, as collateral agent, in substantially the form
of EXHIBIT L hereto, as the same may be amended from time to time.
"PYROINDUSTRIE LEASE TRANSACTIONS" shall have the meaning specified in
SECTION 2.5(b).
"SECURITY DOCUMENTS" means collectively, the Pledge Agreements, the
Company Security Agreement, Aerospace Security Agreement, Aerotest Security
Agreement and the French Filing Documents."
-3-
<PAGE>
(b) SECTION 2.5 OF THE EXISTING AGREEMENT SECTION 2.5 of the
Existing Agreement is hereby amended as of the date hereof by relettering clause
(b) as clause (c) and inserting a new clause (b) as follows:
"(b) The Company agrees to notify the Agent immediately upon
Pyroindustrie S.A. entering (i) any transaction involving the sale or
other transfer of any of its real property to any Person (other than
the Company or any Subsidiary) with the intent to lease such property
as lessee or (ii) any transaction involving the lease of any personal
property from any Person (other than the Company or any Subsidiary)
(collectively, the "PYROINDUSTRIE LEASE TRANSACTIONS"). Each such
notice shall describe such transactions, including the anticipated net
proceeds to Pyroindustrie, in the case of a sale/leaseback, or the
fair market value of the leased equipment, as applicable, under such
Pyroindustrie Lease Transactions, and the Agent shall promptly notify
the Banks of the content of such notice. Effective upon, in the case
of a sale/leaseback transaction, the date of receipt of the gross
proceeds less reasonable and customary expenses thereof by
Pyroindustrie, or the commencement date of the equipment lease, the
Commitments shall be automatically reduced in the amount of such net
proceeds, in the case of the sale/leaseback, or the fair market value
of the equipment under lease (as certified by the Authorized Officer
of the Company) in the case of an equipment lease, and the Company
agrees to prepay immediately the principal amount of the Loans
outstanding in excess of the reduced amount of the Commitments,
without any further notice or action by the Agent or the Banks."
(c) SECTION 2.11(c) OF THE EXISTING AGREEMENT. SECTION 2.11(c) of
the Existing Agreement is hereby amended by deleting the dollar amount
"$180,000,000" appearing therein and substituting the dollar amount
"$150,000,000" therefor.
(d) SECTIONS 7.3, 7.4, 7.5 AND 7.6 OF THE EXISTING AGREEMENT.
SECTIONS 7.3, 7.4, 7.5 and 7.6 of the Existing Agreement are hereby amended and
restated in their entirety as follows:
"7.3. 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 of its Subsidiaries which would have a material adverse effect on (i) the
financial condition, operations or business taken as a whole of the Company and
its Subsidiaries or (ii) the ability of the Company, Aerospace or Aerotest to
perform their respective obligations under this Agreement, the Notes, the
Security Documents or L/C Related Documents to which it is a party.
7.4. NO BREACH. The execution, delivery and performance by the
Company of this Agreement, the Notes, the L/C Related Documents and Security
Documents to which it is a party will not conflict with or result in a breach
of, or cause the creation of a Lien (other than as contemplated by the L/C
Related Documents or Security Documents to which it is a party) or require any
consent under, the certificate of incorporation or by-laws of the Company or any
applicable law or regulation, or any order, injunction or decree of any court or
governmental
-4-
<PAGE>
authority or agency, or any agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which any of them is bound, except for any
breach of, or failure to obtain any consent required under any such agreement or
instrument that would not have a material adverse effect on (i) the financial
condition, operations or business taken as a whole of the Company and its
Subsidiaries or (ii) the ability of the Company, Aerospace or Aerotest to
perform their respective obligations under this Agreement, the Notes, the
Security Documents or L/C Related Documents to which it is a party.
7.5. CORPORATE POWER AND ACTION; BINDING EFFECT. The Company has
all necessary corporate power and authority to execute, deliver and perform its
respective obligations under this Agreement, the Notes, the L/C Related
Documents and Security Documents to which it is a party; the execution, delivery
and performance by the Company of this Agreement, the Notes, the L/C Related
Documents and Security Documents to which it is a party have been duly
authorized by all necessary corporate action on its part; and this Agreement,
the L/C Related Documents and Security Documents to which it is a party have
been duly and validly executed and delivered by the Company, and constitute, and
each of the Notes when executed and delivered for value will constitute, legal,
valid and binding obligations, enforceable in accordance with its terms.
7.6. APPROVALS. Except for notice filings with the appropriate
governmental authorities, no authorizations, approvals or consents 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, the Notes, the L/C Related Documents or Security Documents to
which it is a party or for the validity or enforceability thereof."
(e) SECTION 7.12(b)(ii), (c)(ii) AND (e)(ii) OF THE EXISTING
AGREEMENT. SECTIONS 7.12(b)(ii), (c)(ii) and (e)(ii) of the Existing Agreement
are hereby amended and restated as follows: "or (ii) the ability of the
Company, Aerospace or Aerotest to perform their respective obligations under
this Agreement, the Notes, the Security Documents or the L/C Related Documents
to which it is a party."
(f) SECTION 8.5 OF THE EXISTING AGREEMENT. SECTION 8.5 of the
Existing Agreement is hereby amended by adding the phrase "Except for the
Pyroindustrie Lease Transactions," at the beginning thereof.
(g) SECTION 8.6(h) OF THE EXISTING AGREEMENT. SECTION 8.6(h) of
the Existing Agreement is hereby amended by deleting the phrase "Pledge
Agreements and French Filing Documents" appearing therein and substituting the
phrase "Security Documents" therefor.
(h) AMENDMENT TO SECTION 8.10. SECTION 8.10 of the Existing
Agreement is hereby amended and restated in its entirety as follows:
"8.10. TANGIBLE NET WORTH. The Company shall maintain, as at the
last day of each fiscal quarter, a Consolidated Tangible Net Worth of not less
than that specified below for the period indicated:
-5-
<PAGE>
<TABLE>
<CAPTION>
For Fiscal Quarter(s) Ending On Consolidated Tangible Net Worth
-------------------------------- --------------------------------
<S> <C>
October 31, 1998 $155,000,000
January 31, 1999 $148,000,000
April 30, 1999 $150,000,000
July 31,1999 $150,000,000
October 31, 1999 and Thereafter $150,000,000 plus 50% of Net Income
(if positive), for each fiscal
quarter ended after October 31,
1999 determined on a cumulative
basis, plus the net proceeds of the
issuance of any capital stock of
the Company and its Subsidiaries
issued at any time."
</TABLE>
(i) AMENDMENT TO SECTION 8.11. SECTION 8.11 of the Existing
Agreement is hereby amended and restated in its entirety as follows:
"8.11 INDEBTEDNESS TO EBITDA. The Company will not permit the ratio
of the consolidated Indebtedness of the Company and its Subsidiaries for
the 12-month period ending on the last day of each fiscal quarter listed
below to the sum of EBITDA plus interest income for the 12-month period
ending on the last day of such fiscal quarter to be greater than the ratio
specified for such quarter below, all calculated in accordance with GAAP:
<TABLE>
<CAPTION>
12-Month Period Ending On Ratio
------------------------- -----
<S> <C>
October 31, 1998 5.5:1.0
January 31, 1999 7.0:1.0
April 30, 1999 5.0:1.0
July 31, 1999 3.5:1.0
October 31, 1999 3.0:1.0
January 31, 2000 3.0:1.0
Thereafter 2.75:1.0"
</TABLE>
(j) SECTION 8.13 OF THE EXISTING AGREEMENT. SECTION 8.13 of the
Existing Agreement is hereby amended and restated in its entirety as follows:
"8.13. MINIMUM INTEREST COVERAGE. The Company will not permit the
ratio of EBITDA for the 12-month period ending on the last day of each
fiscal quarter listed below to Interest Expense for the 12-month period
ending on the last day of such fiscal quarter to be less than the ratio
specified below for the time period indicated, all calculated in accordance
with GAAP:
-6-
<PAGE>
<TABLE>
<CAPTION>
12-Month Period Ending On Ratio
------------------------- -----
<S> <C>
October 31, 1998 2.5:1.0
January 31, 1999 1.5:1.0
April 30, 1999 2.0:1.0
July 31, 1999 and Thereafter 3.0:1.0"
</TABLE>
(k) SECTION 9(c) OF THE EXISTING AGREEMENT. SECTION 9(c) of the
Existing Agreement is hereby amended by deleting the phrase "Pledge Agreement
and L/C Related Documents" appearing therein and substituting the phrase
"Security Document or any L/C Related Document" therefor.
(l) SECTION 9(d) OF THE EXISTING AGREEMENT. SECTION 9(d) of the
Existing Agreement is hereby amended by adding the section reference "2.5(b)"
immediately after the word "SECTION" appearing therein.
(m) SECTION 9(k) OF THE EXISTING AGREEMENT. SECTION 9(k) of the
Existing Agreement is hereby amended and restated as follows:
"(k) a default shall occur under any Security Document or L/C
Related Document; any Security Document or L/C Related Document shall at
any time and for any reason (other than its express terms) be discontinued
or cease to be in full force and effect; the Lien purported to be created
by any Security Document shall at any time and for any reason cease to be a
duly perfected first priority Lien on the "Collateral," as defined therein,
or".
(n) SECTION 10 OF THE EXISTING AGREEMENT. SECTION 10 of the
Existing Agreement is hereby amended by (i) deleting the phrase "Pledge
Agreements" each time it appears therein and substituting the phrase "Security
Documents" therefor and (ii) deleting the word "Aerospace" each time it appears
therein and substituting the phrase "Aerospace or Aerotest" therefor.
(o) SECTION 11.1 OF THE EXISTING AGREEMENT. SECTION 11.1 of the
Existing Agreement is hereby amended by deleting the phrase "Pledge Agreements"
each time it appears therein and substituting the phrase "Security Documents"
therefor.
(p) SECTION 11.3 OF THE EXISTING AGREEMENT. SECTION 11.3 of the
Existing Agreement is hereby amended by deleting the phrase "Pledge Agreements"
each time it appears therein and substituting the phrase "Security Documents"
therefor.
(q) SECTION 11.6 OF THE EXISTING AGREEMENT. SECTION 11.6 of the
Existing Agreement is hereby amended by deleting the phrase "Pledge Agreement"
each time it appears therein and substituting the phrase "Security Documents to
which it is a party" therefor.
(r) SECTIONS 11.11, 11.12 AND 11.13 OF THE EXISTING AGREEMENT.
SECTIONS 11.11, 11.12 and 11.13 of the Existing Agreement are hereby amended by
deleting the
-7-
<PAGE>
phrase "OEA Pledge Agreement" each time it appears therein and substituting the
phrase "Security Documents to which it is a party" therefor.
(s) SCHEDULES 1 AND 2 OF THE EXISTING AGREEMENT. SCHEDULES 1
and 2 to the Existing Agreement are hereby amended to be in the form of
SCHEDULES 1 and 2 hereto.
(t) EXHIBITS L AND K. The Existing Agreement is hereby amended as
of the date hereof to add EXHIBITS L and K thereto in the form of EXHIBITS L and
K hereto.
SECTION3. CONDITIONS TO EFFECTIVE DATE. The occurrence of the Effective
Date shall be subject to the satisfaction, on and as of the Effective Date, of
the following conditions precedent:
(a) AMENDMENT. The Company, the Agent and the Majority Banks
shall have executed and delivered this Amendment.
(b) SECURITY DOCUMENTS. The Company, Aerospace and Aerotest shall
have executed and delivered to the Agent the Company Security Agreement,
Aerospace Security Agreement and Aerotest Security Agreement, as applicable.
(c) NO DEFAULT. No Default shall have occurred and be continuing
under the Existing Agreement and the representations and warranties of the
Company in SECTION 7 of the Existing Agreement, as amended hereby, and in
SECTION 7 hereof shall be true and correct on and as of the Effective Date
(except to the extent such representations and warranties state that they relate
solely to a specified date) and the Company shall have provided to the Agent a
certificate of a senior officer of the Company to that effect.
(d) CERTIFICATE OF INCORPORATION. The Company shall have
delivered to the Agent, in form and substance satisfactory to the Agent, a
certificate of the secretary or assistant secretary of the Company
(i) confirming that the certificate of incorporation and by-laws of the Company
have not been amended since June 11, 1998 or (ii) setting forth a true and
correct copy of any amendment to the certificate of incorporation or by-laws of
the Company adopted on or after June 11, 1998.
(e) COMPANY RESOLUTIONS. The Company shall have delivered to the
Agent a copy, duly certified by the secretary or an assistant secretary of the
Company, of (i) resolutions of the Company's Board of Directors authorizing or
ratifying the execution and delivery of this Amendment, the Security Documents
to which it is a party and the Replacement Notes and authorizing the borrowings
under the Existing Agreement, as amended hereby, (ii) all documents evidencing
other necessary corporate action, and (iii) all approvals or consents, if any,
with respect to this Amendment, the Security Documents and Replacement Notes.
(f) COMPANY INCUMBENCY CERTIFICATE. The Company shall have
delivered to the Agent a certificate of the secretary or an assistant secretary
of the Company certifying the names of the Company's officers authorized to sign
this Amendment, any Security Documents to which it is a party, the Replacement
Notes and all other documents or certificates to be delivered hereunder,
together with the true signatures of such officers.
-8-
<PAGE>
(g) AEROSPACE AND AEROTEST ARTICLES OF INCORPORATION. Each of
Aerospace and Aerotest shall have provided to the Agent a certificate of the
secretary or assistant secretary of each of Aerotest and Aerospace as to their
respective articles of incorporation and by-laws.
(h) AEROSPACE AND AEROTEST RESOLUTIONS. Each of Aerospace and
Aerotest shall have provided to the Agent a copy, duly certified by the
secretary or an assistant secretary of each of Aerospace and Aerotest, of
(i) resolutions of their respective Board of Directors authorizing or ratifying
the execution and delivery of the Security Documents to which it is a party,
(ii) all documents evidencing other necessary corporate action, and (iii) all
approvals or consents, if any, with respect to the Security Documents to which
it is a party.
(i) AEROSPACE AND AEROTEST INCUMBENCY CERTIFICATE. The Agent
shall have received a certificate of the secretary or an assistant secretary of
each of Aerospace and Aerotest certifying the names of their respective officers
authorized to sign the Security Documents to which it is a party and all other
documents or certificates to be delivered hereunder, together with the true
signatures of such officers.
(j) REPLACEMENT NOTES. The Company shall have delivered to each
Bank a promissory note of the Company (each a "REPLACEMENT NOTE" and
collectively, the "REPLACEMENT NOTES"), substantially in the form of EXHIBIT A
hereto, payable to the order of such Bank in the amount of such Bank's
Commitment Amount. Upon receipt of its Replacement Note, each Bank will:
(i) record the aggregate unpaid principal amount of its Note dated April 10,
1998 (with respect to such Bank, its "ORIGINAL NOTE") issued under the Existing
Agreement in its records, or, at its option, on the schedule attached to its
Replacement Note as the aggregate unpaid principal amount of the Replacement
Note; (ii) mark its Original Note as replaced by its Replacement Note; and
(iii) return the Original Note to the Company. Thereafter, all references in
the Existing Agreement and in any and all instruments or documents provided for
therein or delivered or to be delivered thereunder or in connection therewith to
the Note or Notes shall be deemed references to each Replacement Note or the
Replacement Notes. The replacement of an Original Note with a Replacement Note
shall not be construed to deem paid or forgiven the unpaid principal amount of,
or unpaid accrued interest on, such Original Note outstanding at the time of
replacement.
(k) LIEN SEARCHES. Satisfactory lien search results concluded
against the Company, Aerospace and Aerotest.
(l) UCC FINANCING STATEMENTS. Such duly executed financing
statements and other documents together with such other acts and things as the
Agent may have required to establish and maintain a valid lien and security
interest in the collateral described in the Security Documents.
(m) LEGAL OPINION. The Company shall have delivered to the Agent
an opinion of the Company's, Aerospace's and Aerotest's counsel, in the form and
substance satisfactory to the Agent.
(n) AMENDMENT FEE. The Company shall have paid to the Agent, for
the account of the Banks who have approved in writing the transactions
contemplated by this
-9-
<PAGE>
Amendment on or before December 2, 1998, a non-refundable fee equal to the
product of 10 basis points times the Commitment Amount of such approving Bank to
be in effect on the Effective Date.
(o) OTHER. The Company shall have delivered such other documents
as the Agent may reasonably request.
SECTION4. EFFECTIVE DATE NOTICE. Promptly following the occurrence of
the Effective Date, the Agent shall give notice to the parties hereto of the
occurrence of the Effective Date, which notice shall be conclusive, and all
parties may rely thereon; provided, that such notice shall not waive or
otherwise limit any right or remedy of the Agent or any Bank arising out of any
failure of any condition precedent set forth in SECTION 3 to be satisfied.
SECTION5. TERMINATION. If the Effective Date shall not have occurred on
or before December 30, 1998, the Agent on instructions of the Majority Banks may
terminate this Amendment by notice in writing to the Company at any time before
the occurrence of the Effective Date; provided, that the obligations of the
Company under SECTION 12 shall survive such termination.
SECTION6. RATIFICATION. The parties agree that the Existing Agreement,
the Pledge Agreements and the Notes have not lapsed or terminated, are in full
force and effect, and are and from and after the Effective Date shall remain
binding in accordance with their terms, as amended hereby.
SECTION7. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Banks that:
(a) NO BREACH. The execution, delivery and performance by the
Company of this Amendment, the Existing Agreement, as amended hereby, and the
Security Documents to which it is a party and Replacement Notes will not
conflict with or result in a breach of, or cause the creation of a Lien (other
than as contemplated by the Company Security Agreement) or require any consent
under, the certificate of incorporation or by-laws of the Company, or any
applicable law or regulation, or any order, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any of them is bound.
(b) INCORPORATION, CORPORATE POWER AND ACTION, BINDING EFFECT.
The Company has been duly incorporated and is validly existing in good standing
under the laws of the State of Delaware and has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Amendment, the Existing Agreement, as amended hereby, the Security Documents to
which it is a party and the Replacement Notes; the execution, delivery and
performance by the Company of this Amendment, the Existing Agreement, as amended
hereby, the Security Documents to which it is a party and the Replacement Notes
have been duly authorized by all necessary corporate action on its part; and
this Amendment, the Security Documents which it is a party and the Replacement
Notes have been duly and validly executed
-10-
<PAGE>
and delivered by the Company and constitute legal, valid and binding
obligations, enforceable in accordance with its terms.
(c) APPROVALS. No authorizations, approvals or consents 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 Amendment, the Existing Agreement as amended hereby, the Security
Documents to which it is a party or the Replacement Notes or for the validity or
enforceability thereof.
SECTION8. CERTAIN USAGES. From and after the Effective Date, each
reference to the Existing Agreement in the Existing Agreement or in other
agreements, documents or instruments referred to or provided for in or delivered
under the Existing Agreement shall be deemed to refer to the Existing Agreement,
as amended hereby.
SECTION9. SUCCESSORS AND ASSIGNS. This Amendment, the Security
Documents to which it is a party and the Replacement Notes shall be binding upon
and inure to the benefit of the Company, the Agent, the Banks and their
respective successors and assigns, except that the Company may not transfer or
assign any of its rights or interest hereunder.
SECTION10. GOVERNING LAW. This Amendment shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Illinois.
SECTION11. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and any party hereto may execute any one or more of such
counterparts, all of which shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Amendment.
SECTION12. EXPENSES. Whether or not the Effective Date shall occur,
without limiting the obligations of the Company under the Existing Agreement,
the Company agrees to pay, or to reimburse on demand, all reasonable costs and
expenses incurred by (i) the Agent in connection with the negotiation,
preparation, execution, delivery, modification, amendment or enforcement of this
Amendment, any Security Document, the Replacement Notes and the other
agreements, documents and instruments referred to herein or therein, including
the reasonable fees and expenses of Gardner, Carton & Douglas, special counsel
to the Agent, and (ii) any Bank in connection with enforcement of this
Amendment, the Existing Agreement as amended hereby, any Security Document, its
Replacement Note and the agreements, documents and instruments referred to
herein or therein, including the reasonable fees and expenses of counsel to such
Bank.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
OEA, INC.
By: /s/ J. Thompson McConathy
-------------------------------------
Name: J. Thompson McConathy
Title: Vice President Finance
THE NORTHERN TRUST COMPANY,
as Agent
By: /s/ James F.T. Monhart
-------------------------------------
Name: James F.T. Monhart
Title: Senior Vice President
THE NORTHERN TRUST COMPANY,
as Issuing Lender
By: /s/ James F.T. Monhart
-------------------------------------
Name: James F.T. Monhart
Title: Senior Vice President
BANKS:
THE NORTHERN TRUST COMPANY, individually
By: /s/ James F.T. Monhart
-------------------------------------
Name: James F.T. Monhart
Title: Senior Vice President
BANQUE NATIONALE DE PARIS, individually
and as Co-Agent
By: /s/ Clive Bettles
-------------------------------------
Name: Clive Bettles
Title: Senior Vice President &
Manager
By: /s/ Mitchell M. Ozawa
-------------------------------------
Name: Mitchell M. Ozawa
Title: Vice President
<PAGE>
U.S. BANK NATIONAL ASSOCIATION,
individually and as Co-Agent
By: /s/ William J. Sullivan
-------------------------------------
Name: William J. Sullivan
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.,
individually and as Co-Agent
By: /s/ Wanda Headrick
-------------------------------------
Name: Wanda Headrick
Title: Vice President
CREDIT AGRICOLE INDOSUEZ, individually
By: /s/ David Bouhl
-------------------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
Chicago
By: /s/ Dean Balice
-------------------------------------
Name: Dean Balice
Title: Senior Vice President &
Branch Manager
LASALLE NATIONAL BANK, individually
By: /s/ Michael Bryan
-------------------------------------
Name: Michael Bryan
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., individually
By: /s/ Mark A. Thompson
-------------------------------------
Name: Mark A. Thompson
Title: Senior Vice President &
Team Leader
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<NAME> OEA, INC./DE/
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<PERIOD-START> AUG-01-1998
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0
0
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