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1994
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JULY 31, 1994 COMMISSION FILE NUMBER 1-6101
ROHR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-1607455
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910
(Address of principal executive offices)
(619) 691-4111
(Telephone No.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange, London
7% Convertible Subordinated Debentures New York Stock Exchange
due 2012 Pacific Stock Exchange
The Stock Exchange, London
7 3/4% Convertible Subordinated Notes due 2004 New York Stock Exchange
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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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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. [X]
AT SEPTEMBER 16, 1994, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, BASED ON MARKET QUOTATIONS AS OF THAT DATE,
WAS APPROXIMATELY $183,623,707.
AS OF SEPTEMBER 16, 1994, THERE WERE 18,053,932 SHARES OF THE REGISTRANT'S
COMMON STOCK OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents are incorporated into this report by
reference:
1. Part II Registrant's Annual Report to Shareholders for fiscal year
ended July 31, 1994.
2. Part III Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the
close of the fiscal year.
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TABLE OF CONTENTS
PART I.
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Item 1. Business..................................................... 1
General..................................................... 1
Products.................................................... 1
Contracts................................................... 3
Subcontractors.............................................. 5
Program Funding............................................. 5
Principal Customers......................................... 6
Backlog..................................................... 6
Competition................................................. 6
Raw Materials and Suppliers................................. 7
Employees................................................... 8
Environmental Matters....................................... 8
Research and Development.................................... 8
Patents and Proprietary Information......................... 9
Manufacturing............................................... 9
Miscellaneous............................................... 9
Item 2. Properties................................................... 10
Item 3. Legal Proceedings............................................ 10
Item 4. Submission of Matters to a Vote of Security Holders.......... 14
Additional
Item Executive Officers of the Registrant......................... 14
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...................................................... 15
Item 6. Selected Financial Data...................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8. Financial Statements and Supplementary Data.................. 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 16
PART III.
Item 10. Directors and Executive Officers of the Registrant........... 16
Item 11. Executive Compensation....................................... 16
Security Ownership of Certain Beneficial Owners and
Item 12. Management................................................... 17
Item 13. Certain Relationships and Related Transactions............... 17
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.......................................................... 17
SIGNATURES
Signature Page............................................... 29
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PART 1
ITEM 1. BUSINESS
GENERAL
Rohr Inc., (the "Company"), incorporated in Delaware in 1969, is the
successor to a business originally established in 1940 under the name of Rohr
Aircraft Corporation. The Company, a leading aerospace supplier, provides
nacelle and pylon systems integration, design, development, manufacturing, and
support services to the aerospace industry worldwide. The Company focuses its
efforts on the market for commercial aircraft which seat 100 or more
passengers. Its principal products include nacelles, which are the aerodynamic
structures or pods that surround an aircraft's jet engines; thrust reversers,
which are part of the nacelle system and assist in the deceleration of jet
aircraft after landing; pylons (sometimes referred to as struts) which are the
structures that attach the jet engines or the propulsion system to the
aircraft; noise suppression systems; engine components; and structures for
high-temperature environments. The Company also manufactures solid rocket motor
casings and nozzles for the Titan space program. In addition, the Company
conducts product research and development in advanced composites and metals,
high-temperature materials, acoustics, and manufacturing processes for existing
and future applications.
The Company sells products and services to the three major commercial
airframe manufacturers (Boeing, Airbus, and McDonnell Douglas) and to the five
major jet engine manufacturers (General Electric, Rolls-Royce, Pratt & Whitney,
CFM International, and International Aero Engines). In addition, the Company
has the right to provide customer and product support directly to approximately
150 airline operators and service centers around the world, including on-site
field services and the sale of spare parts. The Company's commercial and
government (military and space) products represented 86% and 14%, respectively,
of its sales in the fiscal year ended July 31, 1994.
The Company has over 50 years of experience in the aerospace industry.
Originally, the Company operated as a subcontractor to the airframe
manufacturers, building parts to the customer's design. Later, it also began to
build to its own designs based on customer specifications. Eventually, the
Company also began operating as a subcontractor to the engine manufacturers.
Over the last decade, the Company significantly expanded its role in many newer
programs by becoming a systems integrator for nacelle systems with
responsibility for the integration and management of the design, tooling,
manufacture, and delivery of complete nacelle systems, directing the efforts of
international consortia in some cases. As a result of this range of experience,
the Company can provide many different levels of service to its customers
depending upon their needs. The Company can build to the customer's design,
assist in that design, or assume total responsibility for design, manufacture,
integration and product support. In addition, over the last several years, the
Company has expanded its services to the airlines through the direct sale of
spare parts, the provision of technical support and training, and the operation
of repair and overhaul facilities.
PRODUCTS
General. The Company designs and manufactures nacelle systems, nacelle
components, pylons or struts, non-rotating components for jet engines, and
other components for commercial and military aircraft. A nacelle system
generally includes the nose cowl or inlet, fan cowl, nozzle systems and thrust
reverser. The nacelle houses electrical, mechanical, fluid, and pneumatic
systems together with various panels, firewalls, and supporting structures; the
aircraft engine (which is provided by the customer); and purchased or customer-
furnished engine equipment such as electrical generators, starters, fuel pumps
and oil coolers. The Company also performs engine build-ups ("EBU") by
assembling nacelle systems and the related electrical, mechanical, fluid and
pneumatic systems onto core aircraft engines.
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Commercial. The Company manufactures and/or is responsible for the design of
nacelle systems, including thrust reversers, for the McDonnell Douglas MD-80,
the Pratt & Whitney PW4000 series engine option for the McDonnell Douglas MD-11
and the Airbus A310 and A300-600. The Company manufactures the thrust reverser,
nozzle, pylons and fan cowl for Rolls-Royce engine options for the Boeing 757;
the nacelle without thrust reverser for the CF6-80C2, which is the General
Electric engine option for the Airbus A310 and A300-600 and McDonnell Douglas
MD-11, and nacelle components, including the nose cowl, fan cowl, and extension
ring, for the Boeing 737. The Company is completing the design and tooling for
the manufacture of the aft fan case nozzle and plug for the General Electric GE
90 engine option for the Boeing 777. Major components produced by the Company
for the General Electric CF6-80C2 nacelle are also used on the Boeing 747 and
767. The Company is in the development phase of the V2500 nacelle with thrust
reverser for the MD-90.
Programs for which the Company has become a systems integrator, with
responsibility for the integration and management of the design, tooling,
manufacture, and delivery of the complete nacelle or pylon system, include the
CFM International CFM56-5 and the International Aero Engines (an international
consortium) V2500 nacelle program, both of which engines are being
competitively marketed for the Airbus A319, A320 and A321; the pylon program
for the McDonnell Douglas MD-11 aircraft; the nacelle with thrust reverser for
the CFM International-powered Airbus A340; and the nacelle with thrust reverser
for the McDonnell Douglas MD-90 aircraft. The Company's enhanced role on these
programs broadens the Company's business base in the commercial aerospace
industry, but terms and conditions of these contracts require a substantial
investment in working capital and subject the Company to increased market risk
relative to the ultimate success of such programs. The Company, in turn, has
subcontracted the design and production of most components for the CFM56-5,
nacelle components on the V2500, and major components of the MD-11 and A340
contracts to foreign and domestic companies. This enables the Company to
improve its competitive position and to pass on some of the risks associated
with such programs to subcontractors. However, the Company's performance and
ultimate profitability on these programs is dependent on the performance of its
subcontractors, including the timeliness and quality of their work, as well as
the ability of the Company to monitor and manage its subcontractors. See
"Subcontractors".
Government (Military and Space). For military aircraft, the Company
manufactures nacelles for the Lockheed C-130 propjet transport aircraft and
nacelle components for re-engining of existing Boeing KC-135 military aerial
refueling tankers. For the U.S. space program, the Company is delivering solid
fuel rocket motor nozzles and insulated casings for boosters which are used on
the Titan Space Launch Vehicle. The Company is providing technical support in
designing the engine bay doors for the U.S. Air Force F-22 tactical fighter
aircraft. The Company's government business has declined in recent years and
the Company expects the percentage of its revenues attributable to government
sales to decline in future years. The production of the Titan rocket motor
casing program is expected to decline substantially in fiscal 1995 and may end.
The Company's military sales are primarily associated with older programs which
are being phased out of production. The Company expects to complete its
production of the C-130 program in 1996. The extent of future sales under
military and space programs is also dependent, among other things, upon
continued government funding.
Spare Parts. The Company sells spare parts for both military and commercial
aircraft, including those for aircraft in use but no longer in production. Such
sales from continuing operations were approximately $161.5 million in fiscal
1994, $166.9 million in fiscal 1993, and $191.8 million in fiscal 1992. The
Company generally attributes recent reductions in spares sales to the surplus
aircraft in the current marketplace. As a result of such surplus, aircraft
deliveries have declined and the initial spares sold to support newly delivered
aircraft have also declined. In addition, airlines are maintaining lower spares
levels; the existence of surplus aircraft has reduced the level of spare
supplies sufficient to keep an airline's entire fleet in operation. Also,
improved production quality appears to have reduced spares requirements.
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Historically, the Company has sold spare parts for commercial programs to
airframe or engine manufacturers which then resold them to the end user.
However, in recent years, under certain programs, the Company has acquired the
right from its customers to sell spare parts directly to airlines (although on
certain programs royalty payments to its customers are required). The contracts
that grant these rights to the Company generally require that the Company
provide technical and product support directly to the airlines. Thus, the
Company has the right to provide customer and product support directly to
approximately 150 airline operators and service centers worldwide. The
Company's direct sales of spare parts to the airlines are expected to increase
in the future as nacelle programs on which the Company sells spare parts
directly to the airlines mature and as the aircraft using those nacelles age.
Generally, the Company earns a higher margin on the direct sale of spare parts
to airlines than it does on the sale of spare parts to prime contractors (for
resale to the airlines). Prices for direct spare part sales are higher than
prices for spare parts sold to prime contractors, in part, because of
additional costs related to the technical and customer support activities
provided to the airlines. The Company's direct sales of spare parts as a
percentage of total sales of spare parts were 33.2%, 35.2% and 27.5% in fiscal
1994, 1993 and 1992, respectively.
Business Jets. In the fourth quarter of fiscal 1994 the Company sold and
commenced the transfer to the buyer of its business jet line of business which
is accounted for as a discontinued operation. The purchase agreement requires
the Company, over the next several months, to manufacture and deliver certain
components and transfer program engineering and tooling. See "Notes to the
Consolidated Financial Statements, Note 11," contained in the Company's 1994
Annual Report to Shareholders.
Other Activities. The Company also manufactures other components for military
and commercial jet aircraft, including the nozzle and plug used on the Rolls-
Royce-powered versions of the Boeing 747 and 767 and the Airbus A330, the fan
exit duct for the Rolls-Royce engine used on the Boeing 757, the pylon or strut
assemblies for the Boeing 757 and the acoustical ducts and/or acoustic panels
for the Pratt & Whitney engine used on the McDonnell Douglas MD-80 and the
Boeing 757.
The Company has been performing nacelle integration services for Pratt &
Whitney, installing Boeing 757 nacelles under a Pratt & Whitney license, on the
PW2000 series engine for development program use on the former Soviet Union's
IL-96M/T transport aircraft. Pratt & Whitney is currently evaluating
competitive bids for the manufacture and integration of the nacelle system to
support a possible production program.
Recently, the Company signed an agreement to restructure the contract for the
supply of V2500 nacelles for use on the Airbus A319, A320, and A321 commercial
jet aircraft under which the Company will supply the thrust reverser, common
nozzle assembly, exhaust plug and engine mounts.
In June 1994, the Company signed an agreement with Boeing to commence work on
the design and tooling of the inlet and fan cowl for the Boeing 737-700
aircraft, a derivative of the 737-300. The contract price, schedule and terms
remain to be negotiated.
CONTRACTS
Most of the Company's major commercial contracts establish a firm unit price,
subject to cost escalation, over a number of years or, in certain cases, over
the life of the related program. Life-of-program agreements generally entitle
the Company to work as a subcontractor in the program during the entire period
the customer produces its aircraft or engine. While the customer retains the
right to terminate these long-term and life-of-program arrangements, there are
generally significant costs for doing so.
The Company's long-term contracts generally contain escalation clauses for
revising prices based on published indices which reflect increases in material
and labor costs. Furthermore, in almost all
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cases, when a customer orders production schedule revisions (outside of a range
provided in the contract) or design changes, the contract price is subject to
adjustment. These long-term contracts provide the Company with an opportunity
to obtain increased profits if the Company can improve production efficiencies
over time, and the potential for significant losses if it cannot produce the
product for the agreed upon price.
The Company's other commercial contracts generally provide a fixed price for
a specified number of units which, in many cases, are to be delivered over a
specified period of time. Under these contracts, prices are re-negotiated for
each new order. As a result, the Company has the opportunity to negotiate price
increases for subsequent units ordered if production costs are higher than
expected. The Company's customers, however, may seek price reductions from the
Company in connection with any new orders they place.
On its longer-term contracts, the Company bases initial production prices on
estimates of the average cost for a portion of the units which it and its
customer believe will be ordered. Generally, production costs on initial units
are substantially higher during the early years of a new contract or program,
when the efficiencies resulting from learning are not yet fully realized, and
decline as the program matures. Learning typically occurs on a program as tasks
and production techniques become more efficient through repetition of the same
manufacturing operation and as management implements actions to simplify
product design and improve tooling and manufacturing techniques. If the
customer orders fewer than the expected number of units within a specified time
period, certain of the Company's contracts have repricing clauses which
increase the prices for units that have already been delivered. However, other
contracts do not include such repricing provisions and force the Company to
bear certain market risks. The Company analyzed the potential market for the
products under such contracts and agreed to prices based on its estimate of the
average estimated costs for the units it expected to deliver under the program.
Many of the Company's contracts have provided for the recovery of a specified
amount of nonrecurring, pre-production costs, consisting primarily of design
and tooling costs. In some cases, a significant portion of such pre-production
costs have been advanced by the customer. However, in negotiating some
contracts, the Company has agreed to defer recovery of pre-production costs and
instead to recover a certain amount of such costs with the sale of each
production unit over an agreed number of production units plus spares
equivalents. In addition, on some of these contracts, based on its analysis of
the potential market for the products covered by such contracts, the Company
agreed to amortize pre-production costs over a number of units which was larger
than the anticipated initial fabrication orders without the protection of a
repricing clause or guaranteed quantities of orders. On other commercial
contracts, the Company receives advance payments with orders, or other progress
or advance payments, which assist the Company in meeting its working capital
requirements for inventories. In government contracts, the Company receives
progress payments for both pre-production and inventory costs. To reduce such
funding requirements and market risks, the Company has subcontracted
substantial portions of several of its programs. See "Subcontractors".
In accordance with practices in the aircraft industry, most of the Company's
commercial orders and contracts are subject to termination at the convenience
of the customer and on many programs the tooling and design prepared by the
Company are either owned by the customer or may be purchased by it at a nominal
cost. The contracts generally provide, upon termination of firm orders, for
reimbursement of costs incurred by the Company, plus a reasonable profit on the
work performed. The costs of terminating an entire contract or program can be
significantly greater for the customer than the costs of terminating specific
firm orders. All of the Company's government contracts are subject to
termination at the convenience of the government. In such a situation, the
Company is entitled to recover the costs it incurred prior to termination, plus
a reasonable profit on the work performed.
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Under all contracts, the Company may encounter, and on several programs from
time to time has encountered, preproduction and/or production cost overruns
caused by increased material, labor or overhead costs, design or production
difficulties, increased quality, redefined acceptance criteria on government
programs, and various other factors such as technical and manufacturing
complexity. The Company seeks recovery of such cost overruns from the customer
if they are caused by the action or inaction of the customer; otherwise, such
cost overruns will be, and in many cases have been, borne by the Company.
Incident to the manufacture and sale by the Company of its products, the
Company is subject to possible liability by reason of (i) warranties against
defects in design, material and workmanship; (ii) potential product liability
responsibility arising out of the use of its products; and (iii) strict
liability arising from the disposal of certain wastes covered by environmental
protection laws. The Company also has varying contractual obligations to
maintain the ability to produce and service spare parts as long as there are
specified numbers of aircraft still in operation. Provisions of the Company's
contracts provide remedies ranging from actual damages to specified daily
penalties for late deliveries of products.
SUBCONTRACTORS
The competitive market has required the Company to make substantial financial
investments in programs on which it participates. Both to reduce the burden and
risk of such financial investments, and also in some cases to participate in
foreign programs, the Company has further subcontracted the design, development
and production of substantial portions of several of its major contracts to
other foreign and domestic corporations. In return, those companies provided a
portion of the investment and assumed a portion of the risk associated with
various of the Company's contracts. Over the next several years, the Company
expects that the production from its key subcontractors to represent
approximately one-fourth of value of the products and services to be delivered
by the Company during such period. The Company's performance and ultimate
profitability on these programs is dependent on the performance of its
subcontractors, including the timeliness and quality of their work, as well as
the ability of the Company to monitor and manage its subcontractors.
PROGRAM FUNDING
The highly competitive nature of the aerospace market has required the
Company to commit substantial financial resources, largely for working capital,
to participate with its customers on certain long-term programs. Those working
capital requirements consist primarily of nonrecurring pre-production costs
such as design and tooling, recurring costs for inventories and accounts
receivables.
In some cases, a significant portion of the pre-production costs have been
advanced by the customer. However, in negotiating some contracts, the Company
has agreed to defer recovery of pre-production costs and instead to recover a
certain amount of such costs with the sale of each production unit over an
agreed number of production units plus spares equivalents. On some commercial
contracts, the Company receives advance payments with orders, or other progress
or advance payments, which assist the Company in meeting its working capital
requirements for inventories. In government contracts, the Company receives
progress payments for both pre-production and inventory costs. To reduce both
its pre-production funding requirements and the build-up of program
inventories, the Company has entered into agreements with subcontractors to
provide a portion of the program funding needs and has subcontracted to these
entities substantial portions of many of its programs. See "Subcontractors."
Advances and progress payments have varied in the past and are subject to
change in the future based on changes in both commercial and government
procurement practices and governmental regulations. Any future change could
affect the Company's need for program funding.
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Accounts receivable balances vary in accordance with various payment terms
and other factors including the periodic receipt of large payments from
customers for reimbursement of non-recurring costs or for amounts which had
been deferred pending aircraft certification.
Given the large number of major commercial aircraft programs introduced since
1985, and the present industry environment, the Company expects few new
programs to be introduced within the next several years. With respect to those
new programs which are developed, the Company intends to team with partners, or
obtain financial commitments from one or more qualified subcontractors, prior
to entering bids for work.
The Company's primary sources of program funding have been funds generated
from operations and borrowings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources"
in the Company's 1994 Annual Report to Shareholders.
PRINCIPAL CUSTOMERS
For a discussion of the Company's sales to its principal customers, see
"Notes to the Consolidated Financial Statements" in the Company's 1994 Annual
Report to Shareholders, Note 3--"Accounts Receivable--Sales."
BACKLOG
The Company's backlog is significant to its business because the production
of most Company products involves a long lead time from order to shipment date.
Firm backlog represents the sales price of all undelivered units for which the
Company has fabrication authorization. Firm backlog includes units ordered by a
customer although the Company and the customer have not yet agreed upon a sales
price. In such cases, the Company records in backlog an amount it believes
(based upon all available information) is a reasonable price estimate. The
Company also reports anticipated backlog, which represents the sales price of
units which the Company expects (based upon all available information) that its
customers will order under existing contracts and the Company will deliver
within the next seven years.
The Company's firm backlog at July 31, 1994, was approximately $1.2 billion,
compared to $1.4 billion at July 31, 1993. Of such backlog, approximately $0.7
billion is scheduled for delivery on or before July 31, 1995, with the balance
to be delivered in subsequent periods. A portion of the Company's expected
sales for FY95 is not included in firm backlog. Anticipated backlog
approximated $2.5 billion at July 31, 1994, and $2.6 billion at July 31, 1993.
All of the Company's firm and anticipated backlog is subject to termination
or rescheduling at the customer's convenience. The Company's contracts
generally provide for reimbursement of costs incurred, plus a reasonable profit
on such costs, with respect to any firm orders that are terminated.
Historically, it has been rare for a customer to cancel units in firm backlog
because of its obligations to the Company with respect to such units and its
obligations to suppliers of components other than nacelles and pylons, who
frequently are producing concurrently components for use with the units ordered
from the Company.
COMPETITION
The Company's principal competition is Boeing (which in addition to being a
Company customer also manufactures nacelle systems and pylons for its own
aircraft), other significant aerospace corporations who have development and
production experience with respect to portions of the nacelle system, and the
companies to whom the Company has subcontracted various components and who
could (and have) bid on contracts in competition with the Company. Military
aerospace contractors are
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also potential competitors, as excess capacity created by reductions in defense
spending could cause some of these contractors to look to expand in commercial
markets.
Because of recent reductions in demand in the aircraft manufacturing
industry, excess production capacity exists in the market for a number of the
Company's principal products, which may result in increasingly intense price
competition for orders. While the Company believes it competes effectively,
there can be no assurance that the Company can maintain its share of the market
for these products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Company Outlook" in the Company's 1994
Annual Report to Shareholders.
The Company believes that its capabilities and technology, which range from
research and development through component design and testing, flight
certification assistance, component production and integration and airframe
production line assistance, contribute significantly to its market position.
The Company also believes that its contractual rights to participate on
programs for long periods of time or, in some cases, over the life of programs
also contribute to the maintenance of its market position.
Even with respect to its shorter term contracts, the Company is very likely
to continue working as a subcontractor for the prime contractors well beyond
the end of the existing shorter term contracts. The Company has long standing
relationships with all of its significant customers. The Company's continued
participation on existing programs provides cost advantages to the prime
contractors because it avoids the cost of disassembling, moving, reassembling
and recalibrating the customized tooling used to manufacture aerospace products
which would be necessary if a program were transferred to a new subcontractor
at the end of a short-term contract. In addition, the delays inherent in such a
transfer are likely to disrupt the prime contractor's own production schedule
as the flow of deliveries from the subcontractor is interrupted during the
transfer. It is also generally more expensive for a new subcontractor to begin
producing products in the middle of an existing program than it is for the
Company to continue producing the required products. A new subcontractor's
employees must learn program specific tasks with which the Company's employees
will already be familiar. As a result of all of these factors, it is very
unusual for a prime contractor to shift a major aerospace subcontract from one
manufacturer to another at the end of a short-term contract.
Competitive factors include price, quality of product, design and development
capability, ability to consistently achieve scheduled delivery dates,
manufacturing capabilities and capacity, technical expertise of employees, the
desire or lack thereof of airframe and engine manufacturers to produce certain
components in-house, and the willingness, and increasingly the ability, of the
Company and other nacelle manufacturers to accept financial and other risks in
connection with new programs.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company are sheet, plate, rod, bar,
tubing, and extrusions made of aluminum, steel, Inconel and titanium;
electrical wire; rubber; adhesives; and advanced composite products. The
principal purchased components are aircraft engine equipment, custom machined
parts, sheet metal details, and castings and forgings. All of these items are
procured from commercial sources. Supplies of raw materials and purchased parts
historically have been adequate to meet the requirements of the Company.
However, from time to time, shortages have been encountered, particularly
during high industry production and demand. While the Company endeavors to
assure the availability of multiple sources of supply, there are many instances
in which, either because of a customer requirement or the complexity of the
item, the Company may rely on a single source. The failure of any of these
single source suppliers or subcontractors to meet the Company's needs could
seriously delay production on a program. The Company monitors the delivery
performance, product quality and financial health of its critical suppliers,
including all of its single source suppliers. Over the last ten years, which
includes the period from 1987 through 1991 when the Company's sales grew
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rapidly, there have been occasions of periodic, short-term delays from
suppliers, but none of these delays has had a material adverse effect on the
Company or its ability to deliver products to its customers.
EMPLOYEES
At July 31, 1994, the Company had approximately 4,900 full-time employees, of
whom approximately 1,639 were represented by the International Association of
Machinists and Aerospace Workers under agreements which expire on February 11,
1996, and approximately 175 were represented by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America under an
agreement which expires on October 29, 1995. The Company considers its
relationship with its employees generally to be satisfactory.
ENVIRONMENTAL MATTERS
As an international aerospace manufacturing corporation, the Company is
subject to foreign, federal, state and local laws and regulations that limit
the discharge of pollutants into the air, soil and water and establish
standards for the treatment, storage and disposal of hazardous wastes. If the
Company were to violate or otherwise to have liability pursuant to any of these
laws or regulations, it could be subject to judicial or administrative
enforcement proceedings requiring the Company to investigate the nature and
extent of any pollution it caused, to remediate such pollution, to install
control devices in its manufacturing facilities to reduce the amount of
pollutants entering the environment and to otherwise respond to orders and
requests of the courts and the various regulatory agencies. These proceedings
could result in the Company expending additional funds to satisfy judicial or
regulatory decisions. The Company does not believe that its environmental risks
are materially different from those of comparable manufacturing companies.
Nevertheless, the Company cannot provide assurances that environmental laws
will not adversely affect the Company's operations and financial condition in
the future. Environmental risks are generally excluded from coverage under the
Company's current insurance policies. See "Management's Discussion And Analysis
of Financial Condition and Results of Operation--Environmental Matters" and
"Notes to the Consolidated Financial Statements, Note 8, Commitments and
Contingencies," in the Company's 1994 Annual Report to Shareholders. See, also,
Item 3, "Legal Proceedings" in this report.
The Company is involved in several proceedings and investigations related to
waste disposal sites and other environmental matters. See Item 3. "Legal
Proceedings" for a discussion of these matters, and additional suits and
matters that are pending or have been threatened against the Company.
Based upon presently available information, the Company believes that
aggregate costs in relation to all environmental matters of the Company will
not have a material adverse effect on the Company's financial condition,
liquidity, results of operations or capital expenditures.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are designed to improve its
existing products and manufacturing processes, to enhance the competitiveness
of its new products, and to broaden the Company's aerospace product base.
Most of its product development is funded through regular production
contracts. The Company developed the world's first all composite nacelle and
its large cascade thrust reverser under such contracts. The Company also
performs self-funded research and development through which it developed
proprietary products which control noise and prevent ice formation on nacelles.
The Company seeks research and development contracts from the U.S. government
and from commercial customers in targeted areas of interest such as composite
materials and advanced low-cost
8
<PAGE>
processing and joining of new materials. From time to time, the Company also
enters into joint research and development programs with its customers.
PATENTS AND PROPRIETARY INFORMATION
The Company has obtained patents and developed proprietary information which
it believes provide it with a competitive advantage. For example, the Company
holds patents on the DynaRohr family of honeycomb sound attenuation structures,
the state-of-the-art RohrSwirl system which prevents ice formation on the
leading edges of nacelles, and bonding processes for titanium and other metals.
In addition, the Company has developed proprietary information covering such
matters as nacelle design, sound attenuation, bonding of metallic and advanced
composite structures, material specifications and manufacturing processes. The
Company protects this information through inventions and confidentiality
agreements with its employees and other third parties. Although the Company
believes that its patents and proprietary information allow it to produce
superior products, it also believes that the loss of any such patent or
disclosure of any item of proprietary information would not have a material
adverse effect on the Company.
MANUFACTURING
The Company's products are manufactured and assembled at its facilities in
the United States and Europe by an experienced workforce. The Company considers
its facilities and equipment generally to be in good operating condition and
adequate for the purpose for which they are being used. In addition, it has a
substantial number of raw material suppliers and numerous subcontractors to
produce components, and in some cases, major assemblies.
The Company's European final assembly sites, which are located adjacent to
the Company's major European customer, Airbus, allow the Company to respond
quickly to customer needs. The Company believes that these European sites
provide it with advantages in obtaining certain contracts with Airbus because
they allow the Company to perform a portion of the required work in Europe.
MISCELLANEOUS
No material portion of the Company's business is considered to be seasonal.
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ITEM 2. PROPERTIES
All owned and leased properties of the Company are generally well maintained,
in good operating condition, and are generally adequate and sufficient for the
Company's business. The Company's properties are substantially utilized;
however, due to the downturn in the aerospace industry, the Company has excess
manufacturing capacity. All significant leases (except for leases associated
with industrial revenue bond financings) are renewable at the Company's option
on substantially similar terms, except for increases of rent which must be
negotiated in some cases.
The following table sets forth the location, principal use, approximate size
and acreage of the Company's major production facilities. Those which are owned
by the Company and its subsidiaries are owned free of material encumbrances,
except as noted below:
<TABLE>
<CAPTION>
OWNED LEASED
----------------------- -----------------------
APPROXIMATE APPROXIMATE
SQUARE FEET SQUARE FEET
TYPE OF OF FACILITY APPROXIMATE OF FACILITY APPROXIMATE
FACILITY(1) (000) ACREAGE (000) ACREAGE
LOCATION ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ALABAMA
Fairhope(2)........... A,B 123 70.6 -- --
Foley(2).............. A,B 343 163.7 -- --
ARKANSAS
Arkadelphia(3)........ A,B 224 65.2 -- --
Heber Springs(2)...... A,B 153 70.5 -- --
Sheridan(2)........... A,B 149 78.0 -- --
CALIFORNIA
Chula Vista........... A,B,C,D 2,770 97.5 165 65.5
Moreno Valley......... A,B,C 247 37.5 -- --
Riverside............. A,B,C,D 1,162 75.3 140 15.1
FRANCE
Toulouse/St. Martin... A,B,C 132 7.0 18 3.2
Toulouse/Gramont(2)... A,B 170 23.0 -- --
GERMANY
Hamburg............... A,B 28 5.3 -- --
MARYLAND
Hagerstown............ A,B 423 56.8 -- --
TEXAS
San Marcos............ A,B 172 55.0 -- --
----- ----- --- ----
Approximate Totals.... 6,096 805.4 323 83.8
</TABLE>
- - --------
(1) The letters indicated for each location describe the principal activities
conducted at that location:
A-Office
B-Manufacturing
C-Warehouse
D-Research and Testing
(2) Subject to a capital lease.
(3) The completion of construction of this facility has been deferred.
ITEM 3. LEGAL PROCEEDINGS
A. Accounts receivable and inventories include estimated recoveries on
constructive change claims that the Company has asserted with respect to costs
it incurred as a result of government imposed redefined acceptance criteria on
several government subcontracts. In connection with the
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Grumman F-14 subcontract, the Company filed Appeal No. 47139 (filed February 7,
1994) before the Armed Service Board of Contract Appeals ("ASBCA"). In
connection with the Boeing E3/E6 subcontract, the Company filed Appeal No.
47430 (filed April 11, 1994) before the ASBCA. In the above Appeals, the
Company's customers are sponsors of the claims, the U.S. Navy is the defendant,
and the Company is claiming monetary damages. Management believes that the
amounts reflected in the financial statements are a reasonable estimates of the
amounts for which these matters will be resolved. The resolution of these
matters may take several years. See "Notes to the Consolidated Financial
Statements, Note 8", contained in the Company's 1994 Annual Report to
Shareholders.
B. In June 1987, the U.S. District Court of Los Angeles, in U.S. et al. vs.
Stringfellow (United States District Court for the Central District of
California, Civil Action No. 83-2501 (JMI)), granted partial summary judgment
against the Company and 14 other defendants on the issue of liability under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"). This suit, along with related lawsuits, alleges that the defendants
are jointly and severally liable for all damage in connection with the
Stringfellow hazardous waste disposal site in Riverside County, California. In
June 1989, a federal jury and a special master appointed by the federal court
found the State of California also liable for the cleanup costs. On November
30, 1993, the special master released his "Findings of Fact, Conclusion of Law
and Reporting Recommendations of the Special Master Regarding the State Share
Fact Finding Hearing". In it, he allocated liability between the State of
California and other parties. As this hearing did not involve the valuation of
future tasks and responsibilities, the order did not specify dollar amounts of
liability. The order, phrased in percentages of liability, recommended
allocating liability on the CERCLA claims as follows: 65% to the State of
California and 10% to the Stringfellow entities, leaving 25% to the
generator/counterclaimants (including the Company) and other users of the site
(or a maximum of up to 28% depending on the allocation of any Stringfellow
entity orphan share). On the state law claims, the special master recommended a
95% share for the State of California, and 5% for the Stringfellow entities,
leaving 0% for the generator/counter claimants. The special master's
recommendation is subject to a final decision and appeal. The Company is the
second largest generator of wastes disposed at the site by volume, although it
and certain other generators have argued the final allocation among generators
of their shares of cleanup costs should not be determined solely by volume. The
largest generator of wastes disposed at the Stringfellow site, by volume, has
indicated it is significantly dependent on insurance to fund its share of any
cleanup costs, and that it is in litigation with certain of its insurers. The
Company and other generators of wastes disposed at the Stringfellow site, which
include numerous companies with assets and equity significantly greater than
the Company, are jointly and severally liable for the share of cleanup costs
for which the generators, as a group, ultimately are found to be responsible.
The Company intends to continue to defend vigorously these matters and
believes, based on currently available information, that the ultimate
resolutions of these matters will not have a material adverse effect on the
financial position or results of operations of the Company.
The Company has claims against its comprehensive general liability insurers
for reimbursement of its cleanup costs at the Stringfellow site. These claims
are the subject of separate litigation, United Pacific Insurance Co., et al.
vs. Rohr Industries, Inc., et al., No. C634195 in the Los Angeles Superior
Court, although the insurers nevertheless are paying substantially all of the
Company's costs of defense in the EPA and State action against the generators
of wastes disposed at the site. Certain of these insurance policies have
pollution exclusion clauses which are being argued as a defense and the
insurers are alleging various other defenses to coverage. The Company has
entered settlements with some of the insurance carriers and is engaged in
settlement discussions with certain others. The Company intends to continue to
vigorously defend this matter and believes, based upon currently available
information, that the ultimate resolution will not have a material adverse
effect on the financial position, liquidity or results of operations of the
Company.
C. In 1990, the Division of Enforcement of the Securities and Exchange
Commission (the "Enforcement Division") began conducting an informal inquiry
regarding various Company programs,
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<PAGE>
program and contract estimates at completion, and related accounting practices.
On August 17, 1993, the Company received a request for documents from the
Enforcement Division concerning its decision to change its accounting practices
relating to long-term programs and contracts, and its capitalizing of pre-
certification costs and general administrative costs. The staff of the
Commission has indicated in its correspondence with the Company that this
inquiry "should not be construed as an indication by the Commission or its
staff that any violation of the law has occurred; nor should it be considered a
reflection on any person, entity, or security." The Company is cooperating
fully with the Enforcement Division's requests and cannot predict the ultimate
result of the inquiry or its impact, if any, on the Company.
D. In December 1989, the Maryland Department of the Environment ("MDE")
served the Company with a Letter and Consent Order No. CO-90-093. The Consent
Order calls for investigation and remediation of chemicals detected in soil and
ground water at the Company's bonding facility in Hagerstown, Maryland. The
Company and MDE subsequently negotiated a mutually acceptable Consent Order
under which the Company has developed a work plan to determine the nature and
extent of the pollution at the bonding plant. The Company had acquired the
bonding plant from Fairchild Industries, Inc. ("Fairchild"), in September 1987
and Fairchild had agreed to retain responsibility for and to indemnify the
Company against any claims and fees in connection with any hazardous materials
or pollutants released into the environment at or near the bonding plant or any
other property before the closing date of the sale. On March 11, 1993, the
Company and Fairchild executed a settlement agreement pursuant to which
Fairchild substantially reimbursed the Company for past costs relating to
environmental investigations at the bonding plant. The parties also agreed on a
procedure to perform the work required under the MDE Consent Order. Based on
currently available information, the Company believes that the resolution of
this matter will not have a material adverse effect on the financial position
or results of operation of the Company.
E. On March 23, 1992, a Deputy Attorney General for the State of California
advised the Company that it may be subject to suit pursuant to Proposition 65
on the basis of data contained in a health risk assessment ("HRA") of the
Company's Chula Vista facility conducted pursuant to the Air Toxics Hot Spots
Act, also known as California Assembly Bill AB-2588. Proposition 65 requires
manufacturers who expose any person to a chemical resulting in an increased
risk of cancer to issue a clear and reasonable warning to such person and
imposes substantial penalties for non-compliance. AB-2588 requires
manufacturers to inventory their air emissions and to submit an HRA to assess
and quantify health risks associated with those emissions. On April 9, 1993,
representatives of the Company met with the Deputy Attorney General to discuss
this matter and agreed to supply certain requested data to the government. The
Company is presently working on the procedures required to produce this data.
Based on currently available information, the Company believes that the
resolution of this matter will not have a material adverse effect on the
financial position or results of operation of the Company.
F. On July 22, 1994, the Department of Toxic Substances Control of the State
of California Environmental Protection Agency ("DTSC") filed an action against
the Company and other individuals and companies in the U. S. District Court for
the Eastern District of California, Case No. CV-F-94-5683-GEB DLB, seeking,
among other things, recovery of response costs approximating $1.3 million plus
interest and attorney fees. The demand for payment, which is joint and several,
is for expenses allegedly incurred by DTSC personnel in the oversight of the
cleanup of the Rio Bravo deep injection well disposal site in Shafter,
California. The cleanup is currently being conducted by a group of cooperating
potentially responsible parties ("PRPs"), including the Company ("the
Cooperating PRPs"). In February 1993, the Cooperating PRP group wrote to DTSC
and advised them, among other things, of the Cooperating PRPs' continuing
efforts at the site and suggested that DTSC seek recovery of the oversight
funds from the non-cooperating PRPs. Since the demand of the DTSC was joint and
several, and would arguably cover all generators including the non-cooperating
PRPs, none of the $1.3 million demanded by the DTSC has been allocated to the
Cooperating PRPs. Some PRPs estimate the
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<PAGE>
potential cost of cleanup to be approximately $7 million. The Company and other
PRPs could face joint and several liability for the entire amount of cleanup
costs, regardless of Cooperating PRP or non-cooperating PRP status. The Company
intends to vigorously argue that such oversight costs should be recovered from
the non-cooperating PRPs. Based on currently available information, the Company
believes that the resolution of this matter will not have a material adverse
effect on the financial position or results of operation of the Company.
G. The Company previously reported that the DTSC informed the Company and
approximately 100 other individuals and companies that DTSC considered the
recipients to be potentially responsible parties liable for cleanup at the
Chatham Brothers Barrel Yard Site located in Escondido, California (the
"Chatham Site"). By letter dated April 13, 1993, DTSC again notified the
Company that it believed the Company was one of a number of companies who were
liable for the cleanup of the Chatham Site. DTSC further advised the Company
that unless a settlement could be reached with the Company, it intended to name
the Company as a defendant in a cost recovery action it proposed to file in
June 1993. The Company has no knowledge of the filing of any such suit. After a
thorough review of the Company's records and information possessed by DTSC, and
interviews of present and former Company employees, the Company remains
convinced that it has no relationship whatsoever with the Chatham Site and,
therefore, is not liable for the cleanup of that site. In addition, the Company
has discussed this matter with a group of PRPs for the Chatham Site and has
indicated its lack of involvement with the site. If the Company fails to
persuade DTSC that it is not a PRP with regard to the Chatham Site, the Company
could face joint and several liability for the amounts involved. The potential
cost of cleanup for the Chatham Site is estimated by some PRPs to be
approximately $30 million. If suit is filed against the Company, the Company
intends to defend vigorously this matter. Based on currently available
information, the Company believes that the resolution of this matter will not
have a material adverse effect on the financial position or results of
operation of the Company.
H. During the third quarter of fiscal year 1993, Region IX of the United
States Environmental Protection Agency ("EPA") named the Company as a first-
tier generator of hazardous wastes that were transported to the Casmalia
Resources Hazardous Waste Management Facility (the "Casmalia Site") in
Casmalia, California. First-tier generators are the top 82 generators by volume
of waste disposed of at the Casmalia Site. The size of this group was chosen by
the EPA. The EPA has given the first-tier generators a list of work-related
elements needing to be addressed in a good faith offer to investigate and
remediate the site. The first-tier generators believe a collaborative approach
early in the site cleanup and closure process offers all parties an opportunity
to help determine a technical course of action at this site before the EPA has
made final decisions on the matter. The Company has joined approximately 49
other companies in the Casmalia Resources Site Steering Committee which
recently made a good faith offer to the EPA. The Company could be found jointly
and severally liable for the total amount of cleanup cost. The Company does not
yet know the ability of all other PRPs at this site, which include companies of
substantial assets and equity, to fund their allocable share. Some PRPs have
made preliminary estimates of cleanup costs at this site of approximately $60
to $70 million and the Company's share (based on estimated, respective volumes
of discharge into such site by all generators, all of which cannot now be known
with certainty) could approximate $1.8 million. Based on currently available
information, the Company believes that the resolution of this matter will not
have a material adverse effect on the financial position or results of
operation of the Company.
I. By letter dated November 30, 1993, the Environmental Protection Agency of
the State of Ohio advised the Company that it is investigating potential
sources of contamination in the vicinity of property which was previously owned
by a wholly-owned subsidiary of the Company in the Village of Millersburg,
Ohio. This property was sold by the Company in December 1977 under a purchase
and sale agreement that transferred any such liability for contamination to the
purchaser. The Company intends to cooperate fully with the Ohio Environmental
Protection Agency. Based on currently available information, the Company
believes that the resolution of the matter will not have a material adverse
effect on the financial position or results of operation of the Company.
13
<PAGE>
J. By letter dated July 14, 1994, the Company was notified by the State of
Washington's Department of Ecology that the Department believes that the
Company to be a "potentially liable person" ("PLP") under the Model Toxics
Control Act of the Revised Code of Washington. The Company is alleged to have
arranged for the disposal or treatment of a hazardous substance or arranged
with a transporter for disposal or treatment of a hazardous substance at a
facility in Washington known as the Yakima Railroad Area. The Department has
made a written determination that the Company is a PLP. Based on currently
available information, the Company believes that the resolution of this matter
will not have a material adverse effect on the financial position or results of
operation of the Company.
K. The Company previously reported that it had received an Enforcement Order
from the Department of Toxic Substances Control of the State of California
("DTSC"), docket HWCA 91/92-054, seeking a penalty in the amount of $151,791
for the Company's alleged failure to obtain a permit for the treatment of
hazardous waste and storage of hazardous wastes plus related housekeeping
violations. The Company and DTSC have executed a Consent Agreement and Order
effective July 29, 1994, which provides, among other things, for the Company to
pay $12,500.
L. From time to time, various environmental regulatory agencies request that
the Company conduct certain investigations on the nature and extent of
pollution, if any, at its various facilities. For example, such a request may
follow the spill of a reportable quantity of certain chemicals. At other times,
the request follows the removal, replacement or closure of an underground
storage tank pursuant to applicable regulations. At present, the Company's
Chula Vista facility is conducting certain investigations pursuant to
discussions with the San Diego County Department of Health Services, Hazardous
Materials Management Division and the San Diego Regional Water Quality Control
Board. The Company intends to cooperate fully with the various regulatory
agencies.
M. In addition to the litigation discussed above, from time to time the
Company is a defendant in lawsuits involving (i) claims based on the Company's
alleged negligence or strict liability as a manufacturer in the design or
manufacture of various products; (ii) claims based upon environmental
protection laws; and (iii) claims based on the alleged wrongful termination of
its employees due to, among other things, discrimination based on race, age,
sex, national origin, handicap status, sexual preference, etc. The Company
believes that in those types of cases now pending, or in claims known by the
Company to be asserted against it whether or not reduced to a legal proceeding,
it either has no material liability or any such liability is adequately covered
by its reserves or its liability insurance, subject to certain deductible
amounts. The Company is aware that various of its insurers may assert, and in
some such cases have asserted, that their insurance coverage does not provide
protection against punitive damages in any specific lawsuit. While there can be
no assurances that the Company will not ultimately be found liable for material
punitive damages, the Company does not now believe that it has an exposure to
any material liability for punitive damages.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There is no information required to be submitted by the Company under this
Item.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
As of September 16, 1994, the executive officers of the Company, in addition
to R. H. Rau, President and Chief Executive Officer, referred to at Item 10,
Part III, were as follows:
LAURENCE A. CHAPMAN, Senior Vice President and Chief Financial Officer,
age 45, joined the Company in May 1994. Prior to that and since 1981, he
worked for Westinghouse Electric Company ("Westinghouse"). He had been the
Vice President and Treasurer of Westinghouse since January 1992. He was
previously the Chief Financial Officer of Westinghouse Financial Services,
Inc., a wholly-owned subsidiary of Westinghouse. Prior to that, Mr. Chapman
held positions in Corporate Finance and Corporate Planning with
Westinghouse.
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<PAGE>
JOHN R. JOHNSON, Senior Vice President, Programs, Technology, and Quality
Assurance, age 57, has served in his present position since January 1994.
Prior to that and since September 1979, he has served in other senior
management positions, including Senior Vice President, Programs and Support
from March 1993 to January 1994; Vice President, Government Business from
February 1990 to February 1993; Vice President, Planning from May 1989 to
February 1990; and Vice President, Manufacturing, Chula Vista, from April
1986 to May 1989. He joined the Company in September 1979.
RICHARD W. MADSEN, Vice President, General Counsel and Secretary, age 55,
has served in his present position since December 5, 1987. Prior to that
and since August 1979, he served as Secretary and Corporate Counsel and has
been an employee of the Company since 1974.
ALVIN L. MAJORS, Vice President and Controller (Chief Accounting
Officer), age 54, has served in his present position since May 1989. Prior
to that and since December 1987 he served as the Company's Controller.
Prior to that and since 1971, he has served in other senior management
positions. He has been an employee of the Company since 1971.
RONALD M. MILLER, Vice President and Treasurer, age 50, has served in his
present position since May 1989. Prior to that and since December 1987, he
served as the Company's Treasurer and has been an employee of the Company
since February 1969.
DAVID R. WATSON, Senior Vice President--Customer Support and Business
Development, age 43, has served in his present position since March 1994,
assuming the title of Senior Vice President in June 1994. Prior to that and
since May 1991, he served as Vice President, Commercial Programs. In May
1989, he assumed the position of Vice President and General Manager of the
Company's Riverside facility. He has been an employee since February 1988
when he joined the Company as Vice President, Quality Assurance.
GRAYDON A. WETZLER, Senior Vice President, Operations, age 52, has served
in his present position since January 1994. Prior to that and since July
1993, served as Vice President, Technical and Quality Assurance. From
November 1990 to July 1993, he served as Vice President Quality/Product
Assurance. From April 1987 to November 1990, he served as Vice President--
Management Information Systems. He has served in other senior management
positions. He has been an employee of the Company since 1979.
The terms of office of Messrs. Madsen and Miller expire on December 3, 1994.
The initial term of Mr. Rau's Employment Agreement terminates on July 31, 1996.
The other executive officers named above serve at the pleasure of the Chairman
of the Board.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Although a cash dividend has not been paid since 1975, a 2-for 1 stock
dividend was paid in December 1985. Currently, under the terms of certain
covenants in several of the Company's principal financing agreements, the
Company may not pay cash dividends until after April 25, 1997. Thereafter, the
Company's ability to pay cash dividends is restricted substantially.
Other information required by this Item is set forth in the section headed
"Rohr Profile" in the Registrant's Annual Report to Shareholders for the fiscal
year ended July 31, 1994, and such information is incorporated herein by
reference.
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the section headed
"Selected Financial Data" in the Company's Annual Report to Shareholders for
the fiscal year ended July 31, 1994, and such information is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is set forth in the section headed
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report to Shareholders for the fiscal year
ended July 31, 1994, and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in the section headed
"Consolidated Balance Sheets," "Consolidated Statements of Operations,"
"Consolidated Statements of Shareholders' Equity," "Consolidated Statements of
Cash Flows," and "Notes to the Consolidated Financial Statements" in the
Company's Annual Report to Shareholders for the fiscal year ended July 31,
1994, and such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There is no information required to be submitted by the Company under this
Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Officers, directors and greater than
10-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it, or written representations from
certain reporting persons that no such forms were required for those persons,
the Company believes that, during fiscal year 1994, all filing requirements
applicable to its officers, directors, and greater than 10-percent beneficial
owners were complied with.
The other information required under this Item is set forth in the section
headed "Election of Directors" in the Company's Proxy Statement for the 1994
Annual Meeting of Shareholders for fiscal year ended July 31, 1994, and such
information is incorporated herein by reference. See also "Additional Item" at
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the section headed
"Executive Compensation and Other Information" and in the section headed
"Directors' Beneficial Ownership and Compensation" in the Company's Proxy
Statement for the 1994 Annual Meeting of Shareholders for fiscal year ended
July 31, 1994, and such information is incorporated herein by reference.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the table headed
"Beneficial Ownership of Shares" in the Company's Proxy Statement for the 1994
Annual Meeting of Shareholders for fiscal year ended July 31, 1994, and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is no information required to be submitted by the Company under this
Item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following consolidated financial statements of the Company and
consolidated subsidiaries, included in the Company's 1994 Annual Report to
Shareholders, are incorporated by reference in Item 8:
(a) 1. Financial Statements
Consolidated Balance Sheets at July 31, 1994, and 1993
Consolidated Statements of Operations for Years Ended July 31, 1994,
1993, and 1992
Consolidated Statements of Shareholders' Equity for Years Ended July
31, 1994, 1993, and 1992
Consolidated Statements of Cash Flows for Years Ended July 31, 1994,
1993, and 1992
Notes to the Consolidated Financial Statements
(a) 2. Financial Statement Schedules
The following consolidated financial statement schedules of the
Company and subsidiaries are included in Part IV of this report.
Schedule VIII--Valuation and Qualifying Accounts
Schedule IX --Short-Term Borrowings
Schedule X --Supplementary Income Statement Information
All other schedules are omitted because they are not applicable, not
required under the instructions or the information is included in the
financial statements or notes thereto.
(a) 3. Index to exhibits
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of Rohr Industries, Inc.,
dated December 7, 1985, incorporated herein by reference to Exhibit
3.1 filed with Form 10-K for fiscal year ended July 31, 1986.
3.2 Certificate of Designations of Series C Junior Participating
Cumulative Preferred Stock $1.00 Par Value of Rohr Industries, Inc.,
dated August 15, 1986, incorporated herein by reference to Exhibit
3.2 filed with Form 10-K for fiscal year ended July 31, 1986.
</TABLE>
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<TABLE>
<C> <S>
3.3 Certificate of Amendment to Restated Certificate of
Incorporation, dated December 9, 1986, incorporated herein
by reference to Exhibit 3.3 filed with Form 10-K for
fiscal year ended July 31, 1987.
3.4 Certificate of Amendment to Restated Certificate of
Incorporation, dated December 10, 1991, incorporated
herein by reference to Exhibit II filed with Form 8-K
dated as of December 7, 1991.
3.5 Bylaws, as amended January 7, 1993, incorporated herein by
reference to Exhibit 3.8 filed with Form 10-Q for period
ended January 31, 1993.
4.1 Indenture, dated as of March 1, 1987, between Rohr
Industries, Inc., and Bankers Trust Company, trustee,
relating to 9 1/4% subordinated debentures, incorporated
herein by reference to Exhibit 4.1 filed with Form 10-Q
for period ended May 2, 1993.
4.2 Indenture, dated as of October 15, 1987, between Rohr
Industries, Inc., and Bankers Trust Company, trustee,
relating to 7% convertible subordinated debentures,
incorporated herein by reference to Exhibit 4.2 filed with
Form 10-Q for period ended May 2, 1993.
4.3 Indenture, dated as of May 15, 1994, between Rohr, Inc.,
and IBJ Schroder Bank and Trust Company, trustee, relating
to 11 5/8% senior notes, incorporated herein by reference
to Exhibit 4.5 filed with Form 10-Q for period ended May
1, 1994.
4.4 Indenture, dated as of May 15, 1994, between Rohr, Inc.,
and The Bank of New York, trustee, relating to 7 3/4%
convertible subordinated notes, incorporated herein by
reference to Exhibit 4.6 filed with Form 10-Q for period
ended May 1, 1994.
*4.5 Rohr, Inc. Amended and Restated Note Agreement dated as of
May 10, 1994, for 9.35% Senior Notes due January 29, 2000.
*4.6 Rohr, Inc. Amended and Restated Note Agreement dated as of
May 10, 1994, for 9.33% Senior Notes due December 15,
2002.
4.7 Amended and Restated Rights Agreement, dated as of April
6, 1990, incorporated herein by reference to Item 7 of
Form 8-K dated as of April 6, 1990.
10.1 Rohr Industries, Inc., Directors Retirement Plan,
incorporated herein by reference to Exhibit 10.4 filed
with Form 10-K for fiscal year ended July 31, 1985.
10.1.1 First Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.4.1 filed with Form 10-K for fiscal year ended
July 31, 1985.
10.1.2 Second Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.4.2 filed with Form 10K for fiscal year ended
July 31, 1985.
10.1.3 Third Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.3.3 filed with Form 10-K for fiscal year ended
July 31, 1990.
</TABLE>
18
<PAGE>
<TABLE>
<C> <S>
10.1.4 Fourth Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.3.4 filed with Form 10-K for fiscal year ended
July 31, 1990.
10.1.5 Fifth Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.3 filed with Form 10-K for fiscal year ended
July 31, 1992.
10.1.6 Sixth Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.1.6, filed with Form 10-Q for period ended
May 2, 1993.
10.1.7 Seventh Amendment to Rohr Industries, Inc., Directors
Retirement Plan, incorporated herein by reference to
Exhibit 10.1.7, filed with Form 10-Q for period ended
May 2, 1993.
10.2 Rohr Industries, Inc., Supplemental Retirement Plan
(Restated 1983), incorporated herein by reference to
Exhibit 10.4 filed with Form 10-K for fiscal year ended
July 31, 1983.
10.2.1 First Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.4.1 filed with Form 10-K for
fiscal year ended July 31, 1984.
10.2.2 Second Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.4.2 filed with Form 10-K for
fiscal year ended July 31, 1984.
10.2.3 Third Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.3 filed with Form 10-K for
fiscal year ended July 31, 1985.
10.2.4 Fourth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.4 filed with Form 10-K for
fiscal year ended July 31, 1985.
10.2.5 Fifth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.6 filed with Form 10-K for
fiscal year ended July 31, 1986.
10.2.6 Sixth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.7 filed with Form 10-K for
fiscal year ended July 31, 1986.
10.2.7 Seventh Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.8 filed with Form 10-K for
fiscal year ended July 31, 1986.
10.2.8 Eighth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.9 filed with Form 10-K for
fiscal year ended July 31, 1987.
10.2.9 Ninth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.5.10 filed with Form 10-K for
fiscal year ended July 31, 1987.
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
10.2.10 Tenth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.4.11 filed with Form 10-K for
fiscal year ended July 31, 1988.
10.2.11 Eleventh Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.4.12 filed with Form 10-K for
fiscal year ended July 31, 1988.
10.2.12 Twelfth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), incorporated herein by
reference to Exhibit 10.4.13 filed with Form 10-K for
fiscal year ended July 31, 1988.
10.2.13 Thirteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.14 filed
with Form 10-K for fiscal year ended July 31, 1988.
10.2.14 Fourteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.15 filed
with Form 10-K for fiscal year ended July 31, 1989.
10.2.15 Fifteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.16 filed
with Form 10-K for fiscal year ended July 31, 1990.
10.2.16 Sixteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.17 filed
with Form 10-K for fiscal year ended July 31, 1990.
10.2.17 Seventeenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.18 filed
with Form 10-K for fiscal year ended July 31, 1990.
10.2.18 Eighteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.19 filed
with Form 10-K for fiscal year ended July 31, 1991.
10.2.19 Nineteenth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.20 filed
with Form 10-K for fiscal year ended July 31, 1991.
10.2.20 Twentieth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.4.21 filed
with Form 10-K for fiscal year ended July 31, 1992.
10.2.21 Twenty-first Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.2.21,
filed with Form 10-Q for period ended May 2, 1993.
10.2.22 Twenty-second Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983),
incorporated herein by reference to Exhibit 10.2.22,
filed with Form 10-Q for period ended May 2, 1993.
*10.2.23 Twenty-third Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983), dated
September 23, 1993.
*10.2.24 Twenty-fourth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983), dated
December 3, 1993.
*10.2.25 Twenty-fifth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983), dated May
5, 1994.
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
*10.2.26 Twenty-sixth Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983), dated June
3, 1994.
*10.2.27 Twenty-seventh Amendment to Rohr Industries, Inc.,
Supplemental Retirement Plan (Restated 1983), dated
August 19, 1994.
10.3 Rohr, Inc. 1991 Stock Compensation for Non-Employee
Directors, incorporated by reference to Exhibit 10.5
filed with Form 10-K for fiscal year ended July 31, 1992.
10.4 Rohr Industries, Inc., Management Incentive Plan
(Restated 1982), incorporated herein by reference to
Exhibit 10.8 filed with Form 10-K for fiscal year ended
July 31, 1982.
10.4.1 First Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.1 filed with Form 10-K for
fiscal year ended July 31, 1983.
10.4.2 Second Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.2 filed with Form 10-K for
fiscal year ended July 31, 1984.
10.4.3 Third Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.3 filed with Form 10-K for
fiscal year ended July 31, 1984.
10.4.4 Fourth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.4 filed with Form 10-K for
fiscal year ended July 31, 1984.
10.4.5 Fifth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.7.5 filed with Form 10-K for
fiscal year ended July 31, 1986.
10.4.6 Sixth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.6 filed with Form 10-K for
fiscal year ended July 31, 1989.
10.4.7 Seventh Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.7 filed with Form 10-K for
fiscal year ended July 31, 1989.
10.4.8 Eighth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.8 filed with Form 10-K for
fiscal year ended July 31, 1990.
10.4.9 Ninth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.9 filed with Form 10-K for
fiscal year ended July 31, 1990.
10.4.10 Tenth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.10 filed with Form 10-K for
fiscal year ended July 31, 1990.
10.4.11 Eleventh Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.11 filed with Form 10-K for
fiscal year ended July 31, 1990.
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
10.4.12 Twelfth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.12 filed with Form 10-K for
fiscal year ended July 31, 1991.
10.4.13 Thirteenth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.13 filed with Form 10-K for
fiscal year ended July 31, 1991.
10.4.14 Fourteenth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.6.14 filed with Form 10-K for
fiscal year ended July 31, 1992.
10.4.15 Fifteenth Amendment to Rohr Industries, Inc., Management
Incentive Plan (Restated 1982), incorporated herein by
reference to Exhibit 10.4.15, filed with Form 10-Q for
period ended May 2, 1993.
10.5 Rohr Industries, Inc., 1988 Non-Employee Director Stock
Option Plan, incorporated herein by reference to Exhibit
10.17 filed with Form 10-K for fiscal year ended
July 31, 1989.
10.6 Performance Unit Plan as amended through January 7, 1993,
incorporated herein by reference to Exhibit 10.13, filed
with Form 10-Q for period ended May 2, 1993.
10.7 Employment Agreement with Robert H. Rau, incorporated
herein by reference to Exhibit 10.12, filed with Form 10-
Q for period ended May 2, 1993.
10.8 Consulting Agreement with Robert H. Goldsmith,
incorporated herein by reference to Exhibit 10.8 filed
with Form 10-K for fiscal year ended July 31, 1993.
10.9 Severance Agreement and Release with Alek A. Mikolajczak,
incorporated herein by reference to Exhibit 10.9 filed
with Form 10-K for fiscal year ended July 31, 1993.
10.10 Service Agreement with Don Purdy, incorporated herein by
reference to Exhibit 10.10 filed with Form 10-K for
fiscal year ended July 31, 1993.
10.11 None.
*10.12 Employment Agreement with L. A. Chapman.
10.13 Credit Agreement, dated as April 26, 1989, among Rohr
Industries, Inc., as Borrower, and Citibank, N. A.,
Bankers Trust Company, The First National Bank of Chicago
and Wells Fargo Bank, N. A., and Citibank, N.A., as
Agent, incorporated herein by reference to Exhibit
10.6.13 filed with Form 10-Q for quarter ended April 30,
1989.
10.13.1 First Amendment to Credit Agreement, dated as of July 21,
1989, incorporated herein by reference to Exhibit 10.16.1
filed with Form 10-K for fiscal year ended July 31, 1989.
10.13.2 Second Amendment to Credit Agreement, dated January 25,
1990, incorporated herein by reference to Exhibit 10.16.2
filed with Form 10-K for fiscal year ended
July 31, 1990.
10.13.3 Third Amendment to Credit Agreement, dated as of April
30, 1990, incorporated herein by reference to Exhibit
10.16.3 filed with Form 10-K for fiscal year ended
July 31, 1990.
</TABLE>
22
<PAGE>
<TABLE>
<C> <S>
10.13.4 Letter Amendment (fourth amendment) to Credit Agreement,
dated October 31, 1992, incorporated herein by reference
to Exhibit 10.6.4, filed with Form 10-Q for period ended
May 2, 1993.
10.13.5 Fifth Amendment to Bank Credit Agreement dated July 9,
1993, incorporated herein by reference to Exhibit 10.1,
filed with Registration Statement 33-65432.
10.13.6 Sixth Amendment to Bank Credit Agreement, dated as of
September 24, 1993, incorporated herein by reference to
Exhibit 10.11.6 filed with Form 10-Q for period ended May
1, 1994.
10.13.7 Seventh Amendment to Bank Credit Agreement, dated as of
May 10, 1994, incorporated herein by reference to Exhibit
10.11.7 filed with Form 10-Q for period ended May 1,
1994.
10.14 Lease Agreements, dated as of September 14, 1992, by and
between Rohr, Inc., as lessor, and State Street Bank and
Trust Company of California, National Association and W.
Jeffrey Kramer, Trustees, as lessee, incorporated herein
by reference to Exhibit 10.22 filed with Form 10-K for
fiscal year ended July 31, 1992.
10.15 Sublease Agreements, dated as of September 14, 1992, by
and between State Street Bank and Trust Company of
California, National Association and W. Jeffrey Kramer,
Trustees, as sublessor, and Rohr, Inc., as sublessee,
incorporated herein by reference to Exhibit 10.23 filed
with Form 10-K for fiscal year ended July 31, 1992.
10.15.1 Waiver and Modification Agreement dated as of July 9,
1993, incorporated herein by reference to Exhibit 10.2,
filed with Registration Statement 33-65432.
10.15.2 Security Agreement dated as of July 9, 1993, incorporated
herein by reference to Exhibit 10.3, filed with
Registration Statement 33-65432.
10.15.3 Amendment Agreement dated as of September 24, 1993 to
Sublease Agreement, dated as of September 14, 1992,
incorporated herein by reference to Exhibit 10.13.3 filed
with Form 10-Q for period ended May 1, 1994.
10.15.4 Amendment Agreement dated as of May 10, 1994 to Sublease
Agreement, dated September 14, 1992, incorporated herein
by reference to Exhibit 10.13.4 filed with Form 10-Q for
period ended May 1, 1994.
10.16 Promissory Note, dated October 10, 1990, executed by Rohr
Industries, Inc., in favor of Security Pacific National
Bank, incorporated herein by reference to Exhibit 10.9,
filed with Form 10-Q for period ended May 2, 1993.
10.17 Pooling and Servicing Agreement, dated as of December 23,
1992, among Rohr, Inc., RI Receivables, Inc., and Bankers
Trust Company, as Trustee, incorporated herein by
reference to Exhibit 10.10, filed with Form 10-Q for
period ended May 2, 1993.
*10.17.1 First Amendment to Pooling and Servicing Agreement, dated
as of October 7, 1993.
*10.17.2 Second Amendment to Pooling and Servicing Agreement,
dated as of April 25, 1994.
10.18 Receivables Purchase Agreement, dated as of December 23,
1992, among Rohr, Inc., and RI Receivables, Inc.,
incorporated herein by reference to Exhibit 10.11, filed
with Form 10-Q for period ended May 2, 1993.
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
*11.1 Calculation of Primary Earnings per Share.
*11.2 Calculation of Fully Diluted Earnings per Share.
*13 Annual Report to Shareholders for fiscal year ended July 31,
1994. (The Annual Report, except for these portions thereof
which are expressly incorporated by reference in the Form
10-K, is being furnished for the information of the
Commission and is not to be deemed "filed" as part of the
Form 10-K.)
*23. Consent of Deloitte & Touche.
*27. Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K for Fourth Quarter of Fiscal 1994
A report on Form 8-K, dated May 2, 1994, was filed by the Company under
Item 5, "Other Events," discussing the settlement of all its contractual
disputes with the U. S. Air Force and the settlement of the civil claims
aspects of an investigation by the Los Angeles Office of the U. S.
Attorney.
(c) Exhibits required by Item 601 of Regulation S-K
See Subparagraph (a) above.
(d) Financial Statements required by Regulation S-X
See Subparagraph (a) and (b) above.
- - --------
* Exhibits filed with this report.
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Rohr, Inc.:
We have audited the consolidated financial statements of Rohr, Inc. as of July
31, 1994 and 1993, and for each of the three years in the period ended July 31,
1994, and have issued our report thereon dated September 12, 1994; such
consolidated financial statements and report are included in your 1994 Annual
Report to Shareholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of Rohr, Inc., listed in Item
14(a)(2). These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Deloitte & Touche L L P
San Diego, California
September 12, 1994
25
<PAGE>
ROHR, INC., AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1994, 1993, AND 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND ACCOUNTS END OF
PERIOD EXPENSES WRITTEN-OFF PERIOD
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Reserve for bad debts:
1994........................... $11,122 $10,100 $ -- $21,222
1993........................... 11,122 -- -- 11,122
1992........................... 931 11,000 (809) 11,122
</TABLE>
26
<PAGE>
ROHR, INC., AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- ---------- -------------- ----------- ----------- -------------
WEIGHTED MAXIMUM AVERAGE WEIGHTED
AVERAGE AMOUNT AMOUNT AVERAGE
BALANCE AT INTEREST RATE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE END OF OF OUTSTANDING DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS(1) PERIOD BALANCE PERIOD PERIOD(2) PERIOD(3)
- - ------------------------ ---------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Payable to bank for bor-
rowing:
at July 31, 1994...... $ -- -- % $ -- $ -- -- %
at July 31, 1993...... -- -- 65,000 20,074 4.10
at July 31, 1992...... 20,000 3.75 100,000 73,254 5.27
</TABLE>
- - --------
(1) The borrowings are from uncommitted short-term lines of credit. Amounts are
borrowed periodically with interest rates and maturity dates fixed at the
time of borrowing.
(2) Computed as the balance outstanding weighted by the days outstanding
divided by 365.
(3) Computed as total interest charges divided by the weighted average debt
outstanding for the period.
27
<PAGE>
ROHR, INC., AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JULY 31, 1994, 1993, AND 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs............................. $ 8,329 $12,135 $16,503
Rent................................................ 13,077 15,923 15,271
</TABLE>
Depreciation and amortization of intangible assets, taxes other than payroll
and income taxes, royalties, and advertising cost were less than one percent of
sales and are not required to be shown.
28
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Rohr, Inc. (Registrant)
By: /s/ R. H. Rau
----------------------------------
R. H. Rau
President and Chief Executive
Officer
By: /s/ L. A. Chapman
----------------------------------
L. A. Chapman
Senior Vice President and Chief
Financial Officer
By: /s/ A. L. Majors
----------------------------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
Date: September 22, 1994
29
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. Barnes Director September 22, 1994
____________________________________
W. BARNES
/s/ W. W. Booth Director September 22, 1994
____________________________________
W. W. BOOTH
/s/ E. E. Covert Director September 22, 1994
____________________________________
E. E. COVERT
/s/ W. M. Hoffman Director September 22, 1994
____________________________________
W. M. HOFFMAN
/s/ J. J. Kerley Director September 22, 1994
____________________________________
J. J. KERLEY
/s/ D. Larry Moore Director September 22, 1994
____________________________________
D. LARRY MOORE
/s/ R. M. Price Director September 22, 1994
____________________________________
R. M. PRICE
/s/ R. H. Rau Director September 22, 1994
____________________________________
R. H. RAU
/s/ W. P. Sommers Director September 22, 1994
____________________________________
W. P. SOMMERS
/s/ J. D. Steele Director September 22, 1994
____________________________________
J. D. STEELE
</TABLE>
30
<PAGE>
EXHIBIT 4.5
FORM OF AMENDED AND RESTATED NOTE AGREEMENT
ROHR, INC.
--------------
AMENDED AND RESTATED NOTE AGREEMENT
--------------
DATED AS OF MAY 10, 1994
$100,000,000 9.35% SENIOR NOTES DUE JANUARY 29, 2000
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. AUTHORIZATION OF ISSUE OF NOTES..................................... A-5
2. PURCHASE AND SALE OF NOTES.......................................... A-5
3. CONDITIONS OF CLOSING............................................... A-6
3A. Opinion of Purchaser's Special Counsel......................... A-6
3B. Opinions of Company's Counsel.................................. A-6
3C. Representations and Warranties; No Default..................... A-6
3D. Sale of Notes to Other Purchasers.............................. A-6
3E. Purchase Permitted By Applicable laws.......................... A-6
3F. Private Placement Number....................................... A-6
3G. Closing Expenses............................................... A-6
3H. Proceedings.................................................... A-6
4. PREPAYMENTS......................................................... A-7
4A. Required Prepayments........................................... A-7
4B. Optional Prepayment With Yield-Maintenance Premium............. A-7
4C. Notice of Optional Prepayment.................................. A-7
4D. Partial Prepayments Pro Rata................................... A-7
4E. Right to Put................................................... A-7
4F. Retirement of Notes............................................ A-8
4G. Tender of Notes in Payment of Warrant Exercise Price........... A-8
5. AFFIRMATIVE COVENANTS............................................... A-8
5A. Payment of Taxes and Claims.................................... A-8
5B. Maintenance of Properties and Corporate Existence.............. A-9
5C. Payment of Notes and Maintenance of Office..................... A-10
5D. Financial Reporting and Notices................................ A-10
5E. Inspection of Property......................................... A-11
5F. Covenant to Secure Note Equally................................ A-12
5G. ERISA Compliance............................................... A-12
5H. Involuntary Prepayment......................................... A-12
6. NEGATIVE COVENANTS.................................................. A-14
6A. Limitations on Liens........................................... A-14
6B. Limitations on Leases.......................................... A-16
6C. Limitations on Indebtedness.................................... A-16
6D. Limitations on Mergers and Sales of Assets..................... A-18
6E. Adjusted Consolidated Tangible Net Worth Maintenance........... A-19
6F. Limitations on Distributions................................... A-19
6G. Limitations on Capital Expenditures............................ A-20
6H. Private Offering............................................... A-20
6I. Transactions with Affiliates................................... A-20
6J. Line of Business............................................... A-21
6K. Fixed Charge Coverage.......................................... A-21
</TABLE>
A-2
<PAGE>
TABLE OF CONTENTS (Cont.)
<TABLE>
<CAPTION>
PAGE
<S> <C>
6L. Debt Ratio..................................................... A-21
6N. Maintenance of Senior Status................................... A-23
6P. Sales of Assets................................................ A-24
6Q. Sale of Receivables............................................ A-25
6R. Limitation on Certain Obligations.............................. A-25
7. EVENTS OF DEFAULT................................................... A-25
7A. Acceleration................................................... A-25
7B. Acceleration on Payment Default................................ A-28
7C. Other Remedies................................................. A-29
8. REPRESENTATIONS, COVENANTS AND WARRANTIES........................... A-29
8A. Subsidiaries................................................... A-29
8B. Corporate Organization and Authority........................... A-30
8C. Financial Statements........................................... A-30
8D. Actions Pending................................................ A-31
8E. Outstanding Debt............................................... A-31
8F. Title to Properties............................................ A-31
8G. Patents, Trademarks, Licenses, etc............................. A-31
8H. Taxes.......................................................... A-31
8I. Conflicting Agreements and Other Matters....................... A-32
8J. Offering of Notes.............................................. A-32
8K. Regulation G, etc.............................................. A-33
8L. Governmental Consent........................................... A-33
8M. Disclosure..................................................... A-33
8N. Compliance with Law............................................ A-33
8O. Certain Laws................................................... A-34
9. REPRESENTATIONS OF THE PURCHASER.................................... A-34
10. DEFINITIONS......................................................... A-34
10A. Yield-Maintenance Terms........................................ A-35
10B. Other Terms.................................................... A-36
11. MISCELLANEOUS....................................................... A-64
11A. Note Payments.................................................. A-64
11B. Expenses....................................................... A-64
11C. Consent to Amendments.......................................... A-65
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes. A-65
11E. Persons Deemed Owners; Participations.......................... A-66
11F. Accounting Terms............................................... A-66
11G. Directly or Indirectly......................................... A-66
11H. Survival of Representations and Warranties; Entire Agreement... A-67
11I. Successors and Assigns......................................... A-67
</TABLE>
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<PAGE>
TABLE OF CONTENTS (Cont.)
<TABLE>
<CAPTION>
PAGE
<S> <C>
11J. Disclosure to Other Persons.................................... A-67
11K. Notices........................................................ A-68
11L. Descriptive Headings........................................... A-68
11M. Satisfaction Requirement....................................... A-68
11N. Governing Law.................................................. A-69
11O. Payments Due on Non-Business Days.............................. A-69
11P. Counterparts................................................... A-69
Annex 1 -- Purchaser's Schedule
Annex 2 -- Subsidiary Information
Annex 3 -- Restrictions on Debt
Exhibit A -- Form of Note
Exhibit B -- Form of Opinion of Purchaser's Special Counsel
Exhibit C1 -- Form of Opinion of Company's General Counsel
Exhibit C2 -- Form of Opinion of Company's Special Counsel
Exhibit D -- Form of Officer's Certificate
Exhibit E -- Form of Secretary's Certificate
Exhibit F -- Form of Notice of Sale
</TABLE>
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<PAGE>
ROHR, INC.
FOOT OF H STREET
CHULA VISTA, CA 92012
As of May 10, 1994
[Name and Address of Purchaser]
Gentlemen:
The undersigned, Rohr, Inc., (together with its predecessor, Rohr
Industries, Inc. and its successors, the "Company"), a Delaware corporation,
hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. Rohr Industries, Inc., predecessor
to the Company, has authorized the issuance of its senior promissory notes (the
"Notes") in the aggregate principal amount of One Hundred Million Dollars
($100,000,000) dated the date of issue thereof, to mature on January 29, 2000,
bearing interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of nine and
thirty-five one-hundredths percent (9.35%) per annum and on overdue payments at
the rate specified therein, which senior promissory notes have been amended
pursuant to the First Amendment and, as amended, are substantially in the form
of Exhibit A attached hereto. The term "Notes" as used herein shall include
each such senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. The Company sold to you and, subject to
the terms and conditions herein set forth, you purchased from the Company the
aggregate principal amount of Notes set forth opposite your name in the
Purchaser Schedule attached hereto at one hundred percent (100%) of such
aggregate principal amount. The Company delivered to you, at the offices of
Hebb & Gitlin, a Professional Corporation, at One State Street, Hartford,
Connecticut, one or more Notes registered in your name, evidencing the aggregate
principal amount of Notes purchased by you and in the denomination or
denominations specified with respect to you in the Purchaser Schedule, against
payment of the purchase price thereof by transfer of immediately available funds
as directed by the Company in writing on the date of closing, February 2, 1990
(the "Closing" or the "Closing Date"). Concurrently with the execution and
delivery of this Agreement, the Company is entered into other Note Agreements
(the "Other Note Agreements") substantially identical with this Agreement
(except as to the identity of the purchaser and the principal amount of Notes to
be purchased) with the other purchasers (the "Other Purchasers") named in the
Purchaser Schedule. The sale to you and the sales to the Other Purchasers were
separate and several sales.
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<PAGE>
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay for the
Notes to be purchased by you hereunder was subject to the satisfaction, on or
before the Closing Date, of the following conditions:
3A. OPINION OF PURCHASER'S SPECIAL COUNSEL. You shall have received from
Hebb & Gitlin, a Professional Corporation, who are acting as special counsel for
you in connection with this transaction, a favorable opinion satisfactory to you
and substantially in the form of Exhibit B hereto.
3B. OPINIONS OF COMPANY'S COUNSEL. You shall have received from Richard
Madsen, Esq., general counsel for the Company, and Gibson, Dunn & Crutcher,
special counsel for the Company, favorable opinions satisfactory to you and
substantially in the form of Exhibit C1 and Exhibit C2, respectively, hereto.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph ^8 hereof shall be true on and as of the
Closing Date, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Closing Date no Event of Default or
Default; and the Company shall have delivered to you an Officer's Certificate,
dated the Closing Date, in the form of Exhibit D hereto.
3D. SALE OF NOTES TO OTHER PURCHASERS. The Company shall have sold to the
Other Purchasers the Notes to be purchased by them at the Closing and shall have
received payment in full therefor.
3E. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by you on the Closing Date on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject you to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and you shall have
received such certificates or other evidence as you may request to establish
compliance with this condition.
3F. PRIVATE PLACEMENT NUMBER. The Company shall have provided reasonable
evidence that it has complied with the requirements necessary to obtain a
private placement number for the Notes from the CUSIP Division of Standard &
Poor's Corporation.
3G. CLOSING EXPENSES. The Company shall have paid at the Closing the
statement for fees and disbursements of the special counsel of the Purchasers
presented at the Closing.
3H. PROCEEDINGS. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to you, and you
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request. The Company shall have
delivered to you a certificate of the secretary or assistant secretary of the
Company in the form of Exhibit E hereto.
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<PAGE>
4. PREPAYMENTS.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) on January 29 in each
of the years beginning on January 29, 1993, and ending on January 29, 1999,
inclusive, and such principal amounts of the Notes, together with interest
thereon to the prepayment dates, shall become due on such prepayment dates. The
remaining Twelve Million Five Hundred Thousand Dollars ($12,500,000) in
principal amount of the Notes, together with interest accrued thereon, shall
become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE PREMIUM. The Notes shall
be subject to prepayment, in whole at any time or from time to time in part (in
multiples of $5,000,000), at the option of the Company, at one hundred percent
(100%) of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield-Maintenance Premium, if any, with respect to the
principal amount so prepaid. Any prepayment made by the Company pursuant to
this paragraph ^4B shall be applied first to the principal of the Notes due on
the maturity date thereof and second to the prepayments required by this
paragraph ^4 in the inverse order of their scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder of
each Note irrevocable written notice of any prepayment to be made pursuant to
paragraph ^4 hereof not less than ten (10) Business Days prior to the prepayment
date, specifying such prepayment date and the principal amount of the Notes, and
of the Notes held by such holder, to be prepaid on such date and stating that
such prepayment is to be made pursuant to paragraph ^4 hereof. Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the premium, if any, herein provided, shall become due and
payable on such prepayment date.
4D. PARTIAL PREPAYMENTS PRO RATA. Upon any prepayment of the Notes, the
principal amount so prepaid shall be allocated to all Notes at the time
outstanding in proportion to the respective outstanding principal amount thereof
(including, for the purpose of this paragraph only, all Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any
Subsidiary or Affiliate).
4E. RIGHT TO PUT.
(I) GRANTING OF PUT. The Company hereby gives and grants to each holder of
Notes the option, right and privilege (such option, right and privilege herein
collectively referred to as the "Right to Put") to require the Company, upon or
after the occurrence of any Designated Event, to purchase from such holder on
the terms and conditions hereinafter set forth, and the Company agrees so to
purchase from such holder, for an amount equal to the Agreed Put Consideration,
all, but not less than all, of the Notes held by such holder.
(II) EXERCISE OF PUT. Within ten (10) Business Days after the occurrence
of any Designated Event, the Company shall give each holder of Notes written
notice thereof describing such Designated Event, and the facts and circumstances
surrounding the occurrence thereof, in reasonable detail. At any time prior to
ninety (90) days after any holder of Notes shall receive
A-7
<PAGE>
such notice, such holder may exercise its Right to Put by delivering to the
Company a notice of sale (a "Notice of Sale") substantially in the form of
Exhibit F hereto. If a holder of Notes shall deliver a Notice of Sale, the
Company shall purchase the Notes then held by such holder on the date specified
in such notice (which shall be not less than fifteen (15) days after delivery of
such Notice of Sale), and such holder shall sell such Notes to the Company
without recourse, representation or warranty (other than as to such holder's
full right, title and interest to such Notes free of any adverse claim therein),
at a price, payable in immediately available funds by wire transfer to the
account specified pursuant to paragraph ^11 hereof or to such other account as
may be specified in such notice, equal to the Agreed Put Consideration. Each
holder of Notes shall have the rights specified in this paragraph ^4 with
respect to each Designated Event which shall occur, regardless of any act or
omission to act with respect to any previous Designated Event.
4F. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of the Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A or paragraph 4B or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly (other than pursuant to paragraph 4E, paragraph 4G or paragraph 5H
hereof), Notes held by any holder unless the Company or such Subsidiary or
Affiliate shall have offered to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes held by each other holder of Notes at the time
outstanding upon the same terms and conditions. Any Notes so prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
the Subsidiaries or Affiliates shall not be deemed to be outstanding for any
purpose under this Agreement except as provided in paragraph 4D hereof.
4G. TENDER OF NOTES IN PAYMENT OF WARRANT EXERCISE PRICE. The Warrant
Agreement will provide that the purchase price for the Warrants issuable
thereunder may be paid, in whole or in part, by a tender of Notes. The Company
shall be deemed to have reacquired a principal amount of Notes equal to the
aggregate principal amount of Notes tendered in payment of the Warrant exercise
price, and such Notes so deemed to have been reacquired shall not be considered
outstanding for any purposes of this Agreement. In the event that less than the
entire outstanding principal amount of a Note is tendered in payment of the
Warrant exercise price, the Company shall issue and deliver to the holder
thereof a new Note equal in principal amount to the outstanding principal amount
of the Note so tendered less the portion thereof applied to the Warrant exercise
price.
5. AFFIRMATIVE COVENANTS. The Company covenants that on and after the
Closing Date, and so long as any Notes are outstanding, it shall comply with the
following:
5A. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each
Subsidiary to, pay before they become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed
upon it or its Property, and
A-8
<PAGE>
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons that, if unpaid, will more
likely than not result in the creation of a Lien upon its Property,
provided that items of the foregoing description need not be paid while being
contested in good faith and in an appropriate manner.
5B. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Company will,
and will cause each Subsidiary to,
(I) PROPERTY -- maintain its Property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto;
(II) INSURANCE --
(a) maintain, with financially sound and reputable insurers,
insurance (or maintain self-insurance, including without limitation,
insurance with subsidiaries, if that shall be reasonable in the
circumstances) with respect to its Property and business against such
casualties and contingencies, of such types (including, without
limitation, loss or damage, public liability, business interruption,
larceny, embezzlement or other criminal misappropriation) and in such
amounts as is reasonably appropriate for the risks associated with the
business of the Company and the Subsidiaries; and
(b) at your request, deliver to you for examination, as soon as
practicable, policies or certificates of insurance or self-insurance
or certificates of insurance brokers evidencing compliance with the
provisions of this clause (ii);
(III) FINANCIAL RECORDS -- keep true books of records and accounts in
which full and correct entries shall be made of all its business
transactions so that the financial statements required by paragraph 5D
hereof may be prepared in accordance with generally accepted accounting
principles;
(IV) CORPORATE EXISTENCE AND RIGHTS -- maintain, preserve and renew
the Company's existence as a corporation organized under the laws of a
state of the United States of America; and
(V) COMPLIANCE WITH LAW -- not be in violation of any law, ordinance
or governmental rule or regulation to which it is subject (including,
without limitation, laws, ordinances, rules or regulations relating to
environmental matters) and not fail to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of
its Properties or to the conduct of its business, which violation or
failure to obtain will, more likely than not, materially adversely affect
the business or financial condition of the Company and the Subsidiaries,
taken as a whole, or the ability of the Company to perform its obligations
set forth in this Agreement and in the Notes.
A-9
<PAGE>
5C. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE. The Company will
punctually pay, or cause to be paid, the principal and interest (and premium, if
any) to become due in respect of the Notes according to the terms thereof and
shall maintain an office at the address of the Company set forth in paragraph
^11 hereof where notices, presentations and demands in respect of this Agreement
or the Notes may be made upon it. Such office shall be maintained at such
address until such time as the Company shall notify the holders of the Notes of
any change of location of such office.
5D. FINANCIAL REPORTING AND NOTICES.
(I) FINANCIAL REPORTING. The Company will deliver to each holder of Notes
in duplicate:
(a) as soon as practicable and in any event within sixty (60) days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income and cash
flows of the Company and the Subsidiaries for such period and for the
period from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of the Company and the
Subsidiaries as at the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year, accompanied by additional financial statements
containing the same information prepared in accordance with generally
accepted accounting principles as then in effect if the accounting
principles applied by the Company in the preparation of the financial
statements first described in this clause (a) differ in any material
respect from generally accepted accounting principles as then in effect, in
both cases in reasonable detail and certified by an authorized financial
officer of the Company, subject to changes resulting from year-end
adjustments; provided, however, that so long as the accounting principles
applied by the Company in the preparation of the financial statements first
described in this clause (a) do not differ in any material respect from
generally accepted accounting principles as then in effect, delivery
pursuant to clause (c) below of copies of the Quarterly Report on Form 10-Q
of the Company for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (a) (provided that such Form 10-Q is accompanied by any other
financial information incorporated by reference in such Form 10-Q, and
provided further, that the Company provide to each holder who so requests
in writing any document incorporated by reference in such Form 10-Q);
(b) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year, consolidating and consolidated
statements of income and cash flows of the Company and the Subsidiaries for
such year, and consolidating and consolidated balance sheets of the Company
and the Subsidiaries as at the end of such year, setting forth in each case
in comparative form corresponding figures from the preceding annual audit,
accompanied by additional financial statements containing the same
information prepared in accordance with generally accepted accounting
principles as then in effect if the accounting principles applied by the
Company in the preparation of the financial statement first described in
this clause (b) differ in any material respect from generally accepted
accounting principles as then in effect, in both cases all in reasonable
detail and satisfactory in scope to the Required Holders and, as to the
consolidated statements
A-10
<PAGE>
prepared under generally accepted accounting principles as then in effect,
certified to the Company by independent public accountants of recognized
standing selected by the Company whose certificate shall be in scope and
substance satisfactory to the Required Holders in their reasonable
judgment, and, as to the consolidating statements and financial statements
not certified by such independent public accountants, certified by an
authorized financial officer of the Company; provided, however, that so
long as the accounting principles applied by the Company in the preparation
of the financial statements first described in this clause (b) do not
differ in any material respect from generally accepted accounting
principles as then in effect, delivery pursuant to clause (c) below of
copies of the Annual Report on Form 10-K of the Company for such fiscal
year filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (b) (provided that such Form 10-K
is accompanied by any other financial information incorporated by reference
in such Form 10-K, and provided further, that the Company provide to each
holder who so requests in writing any document incorporated by reference in
such Form 10-K);
(c) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports that it sends to its
public stockholders and copies of all registration statements (without
exhibits) and all reports that it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission); and
(d) copies of all agreements governing and instruments evidencing
Debt (other than Debt of a type described in subsection (vi) of the
definition of Debt) of the Company or any Consolidated Subsidiary
containing any Financial Covenant, and all agreements amending, modifying
or supplementing any such agreement or instrument affecting, adding or
deleting any Financial Covenant, in each case, entered into on or after the
First Amendment Date;
(e) all certificates and notices delivered or required to be delivered
to the holders of any other Debt of the Company or any Consolidated
Subsidiary on or after the First Amendment Date, in each case, in
connection with the compliance by the Company or any Consolidated
Subsidiary with any Financial Covenant; and
(f) with reasonable promptness, such other financial data as such
holder of Notes may reasonably request.
(II) DEFAULT NOTICES. The Company also covenants that immediately upon any
Senior Officer of the Company obtaining knowledge of an Event of Default or
Default, it will deliver to each holder of Notes an Officer's Certificate
specifying the nature and period of existence thereof and what action the
Company proposes to take with respect thereto.
5E. INSPECTION OF PROPERTY. The Company will permit any Person designated
in writing by any holder of Notes, at such holder's expense, to visit and
inspect any of the Properties of the Company and the Subsidiaries, to examine
the corporate books and financial records of the Company and the Subsidiaries
and make copies thereof or extracts therefrom, all at such reasonable times and
as often as such holder may reasonably request. In addition, so long as (i) a
Default or an Event of Default shall have occurred and be continuing, (ii) in
the
A-11
<PAGE>
reasonable judgment of any holder of Notes, a material adverse change shall have
occurred with respect to the business or financial condition of the Company and
the Subsidiaries taken as a whole, or (iii) any holder shall have a reasonable
basis for questioning the validity of any line item in any financial statement
of the Company or the validity of such financial statement as a whole, the
Company will permit any Person designated in writing by any holder to discuss
the affairs, finances and accounts of any of such corporations with the
principal officers of the Company and its independent public accountants, all at
such reasonable times and as often as such holder may reasonably request.
5F. COVENANT TO SECURE NOTE EQUALLY. The Company covenants that, if it or
any Subsidiary shall create or assume any Lien upon any of its Property, whether
now owned or hereafter acquired, other than Liens permitted by the provisions of
paragraph 6A hereof or any similar provision incorporated herein by reference
(unless prior written consent to the creation or assumption thereof shall have
been obtained pursuant to paragraph 11C hereof), it will make or cause to be
made effective provision whereby the Notes will be secured by such Lien equally
and ratably with any and all other Debt thereby secured so long as any such
other Debt shall be so secured.
5G. ERISA COMPLIANCE. Neither the Company nor any Subsidiary will cause
any Plan maintained or participated in by it to engage in any "prohibited
transaction," as such term is defined in Section 4975 of the IRC.
5H. INVOLUNTARY PREPAYMENT.
(i) Upon the occurrence of any Prepayment Event, the Company shall
make an offer to the holders of Notes to repurchase the Notes as set forth
in this paragraph 5H. Immediately upon the occurrence of the Prepayment
Event but in any event within five (5) Business Days thereafter, the
Company shall give each holder of the Notes substantially simultaneous
written notice thereof describing such Prepayment Event in reasonable
detail including, without limitation, a description of the issue of Debt
giving rise to such Prepayment Event, the facts and circumstances
surrounding the occurrence thereof, the manner of the prepayment,
redemption or defeasance of such other Debt in connection therewith and
the manner specified in this paragraph 5H of accepting or rejecting such
offer by the holder. Such notice shall also contain the Company's offer
(the "Prepayment Offer") to purchase from each such holder of Notes a
principal amount of the Notes held by such holder equal to its Noteholder
Share of the Ratable Prepayment Amount at a purchase price equal to the
Agreed Put Consideration.
(ii) A holder of Notes may accept the Prepayment Offer, in whole or in
part, through a written acceptance (the "Noteholder Acceptance") delivered
to the Company within forty-five (45) days of such holder's receipt of the
Prepayment Offer (the "Offer Period"). Promptly after (and, in any event,
within two (2) Business Days of) its receipt of any Noteholder Acceptance,
the Company shall give substantially simultaneous written notice thereof to
all other holders of Notes.
(iii) If such holder shall accept the offer, the Company shall
purchase that portion (the "Prepayment Portion"), expressed as a
percentage, of the principal amount of Notes held by such holder specified
in its Noteholder Acceptance, provided that the
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<PAGE>
principal amount of Notes the Company is required to purchase shall not
exceed such holder's Noteholder Share of the Ratable Prepayment Amount.
Such purchase shall be made on the fifteenth (15th) day after the
expiration of the Offer Period or, if later, the first day on which any
holder of any other issue of Debt would receive a prepayment in respect of
such Prepayment Event but in no event later than sixty (60) days after the
expiration of the Offer Period. On the date of purchase, such holder shall
sell the Prepayment Portion of such Notes to the Company without recourse,
representation or warranty (other than as to such holder's full right,
title and interest to the Prepayment Portion of such Notes free of any
adverse claim created by such holder therein), at a price, payable in
immediately available funds by wire transfer to the account specified
pursuant to paragraph ^11 hereof or to such other account as may be
specified in such notice, equal to the Agreed Put Consideration.
(iv) Upon any partial prepayment of a Note pursuant to this paragraph
5H, such Note may, at the option of the holder thereof, be:
(a) surrendered to the Company, in which case the Company shall
promptly execute and issue to the holder thereof a new Note in a
principal amount equal to the principal amount remaining unpaid on the
surrendered Note after giving effect to such prepayment; or
(b) made available to the Company for notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Note is prepaid, such Note shall
be surrendered to the Company for cancellation and shall not be reissued,
and no Note shall be issued in lieu of the prepaid principal amount of any
Note.
(v) If the occurrence of any Prepayment Event causes the Company or
any Subsidiary to defease, repay, repurchase or have a reduction in the
available commitment under any issue of Debt prior to the time that any
Notes would be repurchased hereunder, then simultaneously with such
defeasance, repayment, repurchase or reduction in respect of such other
Debt, the Company shall pay to each holder an amount equal to its
Noteholder Share of the Ratable Prepayment Amount at a purchase price equal
to the Agreed Put Consideration, which payment shall satisfy all
obligations of the Company to the holders in respect of clauses (i) through
(iii), inclusive, of this paragraph 5H. At the time of the making of such
payment, the Company shall notify the holder of such payment in writing,
which notice shall state that such payment is being made pursuant to this
paragraph 5H(v), shall contain a description of the issue of Debt giving
rise to such Prepayment Event, the facts and circumstances surrounding the
occurrence thereof and the manner of the prepayment, redemption or
defeasance of such other Debt in connection therewith (unless such
information shall have been contained in a previously delivered notice
pursuant to paragraph 5H(i) with respect to such Prepayment Event) and
describe the procedure detailed in this paragraph 5H(v) pursuant to which a
holder may elect to rescind such payment.
In the event that a holder of Notes receiving a payment pursuant to
this paragraph 5H(v) elects to rescind the prepayment arising from such
Prepayment Event
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<PAGE>
with respect to all Notes or any portion of the Notes held by such holder,
such holder shall deliver to the Company, within forty-five (45) days of
such holder's receipt of the notice specified in this paragraph 5H(v),
written notice of such recision, and shall contemporaneously pay to the
Company in immediately available funds an amount equal to the amount so
paid such holder pursuant to this paragraph 5H(v) or, in the case of a
recision with respect to only a portion of the prepayment made to such
holder, an amount equal to that portion of such prepayment which such
holder wishes to rescind.
(vi) Each holder of Notes shall have the rights specified in this
paragraph 5H with respect to each Prepayment Event which shall occur,
regardless of any act or omission to act with respect to any previous
Prepayment Event. In the event that the Prepayment Event is also a
Designated Event subject to paragraph 4 of this Agreement, the Company
shall comply with the provisions of clause (v) of this paragraph 5H with
respect to the matters contained therein; in all other respect such
Designated Event will be treated as a Designated Event and not as a
Prepayment Event, and the Company will be required to comply with paragraph
4E in connection therewith. In the event that the Prepayment Event would
also be an event which results in an Event of Default, this paragraph 5H
shall not be deemed to in any respects limit the rights and remedies of the
holders under paragraph 7.
(vii) Prepayments made pursuant to this paragraph 5H shall be applied
ratably to the obligations of the Company to make required prepayments in
respect of the Notes pursuant to paragraph 4A hereof and to pay the
remaining principal amount thereof at maturity.
6. NEGATIVE COVENANTS. The Company covenants that on and after the
Closing Date, and so long as any Notes are outstanding, it shall comply with the
following:
6A. LIMITATIONS ON LIENS.
(I) NEGATIVE PLEDGE. The Company will not, and will not permit any
Subsidiary to, create, assume, or suffer to exist any Lien upon any of the
Property of the Company or any Subsidiary, whether now owned or hereafter
acquired, except:
(a) Liens securing Debt and other obligations in an aggregate
principal amount at any time not exceeding ten percent (10%) of
Consolidated Tangible Net Worth at such time, provided, however, that
neither the Company nor any Subsidiary shall create, assume or
otherwise incur any Lien upon any of its respective Properties unless
the Company is in compliance with paragraph 6R of this Agreement;
(b) Liens arising out of transactions contemplated by the terms
of the Trade Receivables Agreement;
(c) Purchase Money Mortgages if, after giving effect thereto and
to any concurrent transactions:
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<PAGE>
(I) each such Purchase Money Mortgage secures an amount not
exceeding one hundred percent (100%) of the cost of the
particular Property to which it relates (or, in the case of a
Lien existing on any Property of any corporation at the time it
becomes a Subsidiary, the Fair Market Value of such Property at
such time);
(II) such Purchase Money Mortgage encumbers only Property
(A) purchased after the Closing Date and (B) acquired with the
proceeds of the Debt secured thereby; and
(III) such Property was acquired in the ordinary course of
business of the corporation acquiring such Property,
provided, however, that neither the Company nor any Subsidiary shall
create, assume or otherwise incur any Purchase Money Mortgage unless
the Company is in compliance with paragraph 6R of this Agreement;
(d) Liens incurred in connection with Lease Transactions to the
extent that such Liens encumber Property covered by such Lease
Transactions; provided, however, that neither the Company nor any
Subsidiary shall create, assume or otherwise incur any such Liens
unless the Company is in compliance with paragraph 6R of this
Agreement, and provided further that, immediately after giving effect
to the investment of the Company or the Subsidiary in such Lease
Transaction, the aggregate amount of the investments then outstanding
of the Company and the Subsidiaries in all Lease Transactions does not
exceed Fifty Million Dollars ($50,000,000), it being agreed that for
the purpose of such calculation the amount of each investment shall be
determined on a Net After-Tax Cash Basis;
(e) Liens upon San Marcos Bonds, and the proceeds thereof, which
have been repurchased upon tender by the holders thereof in accordance
with the terms of the indenture governing such San Marcos Bonds,
until, but only until, the trustee with respect to such San Marcos
Bonds has received the purchase price therefor upon the remarketing
thereof and the issuer of the letter of credit that was drawn in
connection with such tender has been reimbursed for such amounts
drawn; provided, however, that the Company shall actively seek to
remarket such bonds pursuant to the provisions of the IDB Financing of
the Company's San Marcos, Texas facility or, to the extent necessary
in connection with any termination of any outstanding letter of credit
relating to such facility, to modify the structure of such IDB
Financing to the extent necessary to permit a long-term reissuance of
the repurchased San Marcos Bonds; and
(f) unless, at the time of incurrence thereof, a Default or an
Event of Default shall occur or be continuing, Liens incurred in
connection with the deposit of cash collateral to secure reimbursement
obligations of the Company relating to the San Marcos Bonds, but only
in connection with the extension of an outstanding letter of credit
relating to such facility and only in an amount of cash collateral not
exceeding the maximum amount which may be drawn under such
A-15
<PAGE>
letter of credit; provided, however, that the Company shall actively
seek to obtain a replacement letter of credit that does not require
cash collateralization (and thus relieves the Company of any
requirement to deposit cash collateral or to secure such reimbursement
obligations);
it being understood that each such Lien may be allocated by the Company to
any one of the preceding categories in which it may, by the terms of such
category, be included.
(II) FINANCING STATEMENTS. The Company will not, and will not permit
any Subsidiary to, sign or file a financing statement under the Uniform
Commercial Code of any jurisdiction that names the Company or such
Subsidiary as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement, except, in
any such case, a financing statement filed or to be filed to perfect or
protect a Lien that the Company or such Subsidiary is entitled to create,
assume or incur, or permit to exist, under the foregoing provisions of this
paragraph ^6 or to evidence for informational purposes a lessor's interest
in Property leased to the Company or any such Subsidiary.
6B. LIMITATIONS ON LEASES.
(I) LIMITATIONS ON LEASES. The Company will not, and will not permit
any Subsidiary to, at any time be or become liable at any time as lessee
under any lease (other than a lease giving rise to a Capitalized Lease
Obligation) having an original (or then unexpired) term of one year or more
if:
(a) the aggregate Net Rentals payable in any period of twelve
(12) consecutive calendar months following such time under such lease
and all other such leases under which the Company or a Subsidiary is
lessee, minus
(b) all amounts of a similar nature due from sub-lessees under
such leases that are reasonably expected to be collected during the
same period,
would exceed ten percent (10%) of Consolidated Tangible Net Worth at such
time.
(II) SUBSIDIARY. Any corporation that becomes a Subsidiary after the
Closing Date shall be deemed to have become liable as lessee, at the time
it becomes a Subsidiary, under all leases (under which it is liable as
lessee) of such corporation existing immediately after it becomes a
Subsidiary.
6C. LIMITATIONS ON INDEBTEDNESS. The Company will not, and will not
permit any Subsidiary to, create, issue, assume or guarantee any Debt (other
than Intercompany Debt) except that:
(i) on or prior to April 26, 1997:
(a) the Company may incur Debt under the Credit Agreement or an
Acceptable Replacement Credit Facility;
A-16
<PAGE>
(b) the Company may incur the 1994 Senior Debt and the 1994
Subordinated Debt;
(c) the Company and the Subsidiaries may incur unsecured Debt, in
an aggregate principal amount not to exceed $10,000,000 at any time
outstanding; provided, however, that no more than $5,000,000 of such
amount may be Debt of Subsidiaries;
(d) the Subsidiaries may incur Debt under revolving credit
facilities so long as the aggregate amount of all such Debt
outstanding at any time shall not exceed $5,000,000;
(e) the Company and the Subsidiaries may incur Debt described in
clause (vi) of the definition of "Debt" contained in paragraph 10B;
(f) Debt incurred in connection with the resale or remarketing of
San Marcos Bonds, but only to the extent that:
(I) San Marcos Bonds in an aggregate principal amount of
Sixteen Million Five Hundred Thousand Dollars ($16,500,000) were
issued and outstanding and held and owned by Persons other than
the Company, any Subsidiary or any Affiliate on May 10, 1994; and
(II) the San Marcos Bonds to be resold or remarketed were
repurchased by the Company upon tender by the holders thereof
after May 10, 1994 in accordance with the terms of the indenture
governing the San Marcos Bonds;
and
(g) replacement unsecured San Marcos Bonds, in an aggregate
principal amount not exceeding Sixteen Million Five Hundred Thousand
Dollars ($16,500,000), if, and only if, Sixteen Million Five Hundred
Thousand Dollars ($16,500,000) in aggregate amount of San Marcos Bonds
were redeemed in full as a result of the failure of the bank which has
issued any letter of credit relating to the San Marcos Bonds to extend
or renew such outstanding letter of credit (for the avoidance of
doubt, the aggregate principal amount of San Marcos Bonds and
replacement San Marcos Bonds, whether outstanding on the date hereof
or thereafter issued pursuant to clause (f) or clause (g) of this
paragraph 6C(i), shall not exceed Sixteen Million Five Hundred
Thousand Dollars ($16,500,000) at any time);
in each case, so long as after the incurrence thereof, and after giving
effect thereto, no Default or Event of Default (including any Default or
Event of Default arising out of any breach of paragraph 6L hereof) shall
have occurred or be continuing; and
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<PAGE>
(ii) on or after April 27, 1997, and at any time during any period set
forth in the tables below, the Company or any Subsidiary may incur Debt if,
immediately after giving effect to such incurrence of Debt:
(a) Consolidated Senior Debt would not exceed the percentage
applicable to such period of the sum of Consolidated Total Debt plus
Consolidated Tangible Net Worth, all as set forth in the table
immediately below:
If such time occurs during the period: Percentage:
------------------------------------- ----------
From April 27, 1997 through
and including July 31, 1998 38.00%
At all times on or after
August 1, 1998 35.00%;
--------------
and
(b) Combined Subsidiary Debt would not exceed five percent (5%)
of Consolidated Tangible Net Worth;
and so long as after the incurrence thereof, and after giving effect
thereto, no Default or Event of Default (including any Default or Event of
Default arising out of any breach of paragraph 6L or paragraph 6R hereof)
shall have occurred or be continuing.
6D. LIMITATIONS ON MERGERS AND SALES OF ASSETS. The Company will not, and
will not permit any Subsidiary to (whether in a single transaction or a series
of transactions), consolidate with, merge into or transfer substantially all of
its Property (whether now owned or hereafter acquired) to any other Person, or
permit any other Person to consolidate with, merge into, or transfer
substantially all of its Property to, the Company, except that any Subsidiary
may merge or consolidate with or into, or transfer substantially all of its
Property to, or acquire substantially all of the Property of, any other Person
and the Company may merge or consolidate with or into, or acquire substantially
all of the Property of, any other Person, if:
(i) in the case of any merger or consolidation involving the Company,
the corporation that results from such merger or consolidation is organized
under the laws of the United States of America or any jurisdiction thereof
and such corporation expressly assumes in writing the due and punctual
payment of the principal of, and Yield-Maintenance Premium, if any, and
interest on, all of the Notes, according to their tenor, and the due and
punctual performance and observance of all the covenants in the Notes and
this Agreement to be performed or observed by the Company, all in an
agreement or instrument satisfactory in form and substance to the Required
Holders;
(ii) immediately after the consummation of the transaction, and after
giving effect thereto, the Company, the corporation that results from any
such merger or consolidation with the Company or the Person that acquires
such Property from the Company, and in each case, its Subsidiaries shall be
engaged principally in the businesses of either or both of manufacturing
and distributing aerospace products or technically related products and of
providing services related to such products;
A-18
<PAGE>
(iii) immediately after the consummation of the transaction, and after
giving effect thereto, no Event of Default or Default would exist; and
(iv) immediately after the consummation of the transaction, and after
giving effect thereto, the Company could incur at least One Dollar ($1.00)
of additional Debt pursuant to paragraph 6.C hereof.
6E. ADJUSTED CONSOLIDATED TANGIBLE NET WORTH MAINTENANCE. The Company
will maintain at all times Adjusted Consolidated Tangible Net Worth of not less
than the sum of:
(i) $125,000,000; plus
(ii) the sum of the Fiscal Quarter Net Worth Increase Amounts for
each fiscal quarter of the Company ended after July 31, 1994; plus
(iii) the aggregate amount of all capital contributions (which
amount shall include, without limitation, all amounts attributable to
the conversion of debt of the Company to equity of the Company, valued
at the amount added to stockholders' equity in accordance with GAAP)
received by the Company or any Consolidated Subsidiary (in each case,
other than contributions originally made by the Company or any
Consolidated Subsidiary) in cash, in Property other than cash or by
conversion of Debt of the Company at any time after the Third
Amendment Date.
6F. LIMITATIONS ON DISTRIBUTIONS.
(I) LIMIT ON DISTRIBUTIONS. The Company will not, and will not permit
any Subsidiary to, at any time declare or make or incur any liability to
declare or make any Distribution; provided, however, that:
(a) the Company may, repurchase, purchase, redeem or otherwise
acquire shares of its common stock or warrants, rights or options to
acquire such stock issued pursuant to Restricted Stock Plans, Stock
Option Plans, Stock Incentive Plans, the Rights Agreement, the ESOP,
or Non-Employee Directors Stock-Option Plans;
(b) the Company may declare or make any Distribution if,
immediately after giving effect to such Distribution,
(I) the Debt Ratio would not exceed 2.50:1.00;
(II) the Company could incur $1.00 of additional Debt
pursuant to paragraph 6.C hereof;
(III) if the time of declaration or making, as the case may
be, of such Distribution is on or prior to April 26, 1997,
Consolidated Senior Debt at such time would not exceed thirty-
eight percent (38%) of the sum of
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<PAGE>
Consolidated Total Debt plus Consolidated Tangible Net Worth at
such time; and
(IV) after giving effect to such transactions, no Event of
Default or Default would then exist; and
(c) the Company may declare or make any Permitted Preferred
Dividend if, prior to and immediately after giving effect to such
Permitted Preferred Dividend, no Default or Event of Default shall
exist.
(II) TIME OF PAYMENT. The Company will not authorize a Distribution
on its capital stock which is not payable within sixty (60) days of
authorization.
6G. LIMITATIONS ON CAPITAL EXPENDITURES. The Company will not, and will
not permit any Subsidiary to, make, on or before April 26, 1997, any
expenditures for fixed or capital assets which would cause the aggregate of all
such expenditures made by the Company and the Subsidiaries in any period of four
full consecutive fiscal quarters to exceed the sum of the amounts set forth
below opposite such four fiscal quarters:
<TABLE>
<CAPTION>
Fiscal Quarters Amount
--------------- ------
<S> <C>
Each Fiscal Quarter 1994 $4,500,000
Each Fiscal Quarter 1995 $6,000,000
Each Fiscal Quarter 1996 $7,500,000
Each Fiscal Quarter 1997 $7,500,000.
</TABLE>
6H. PRIVATE OFFERING. The Company will not, and will not permit anyone
acting on its behalf to, offer the Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
6I. TRANSACTIONS WITH AFFILIATES.
(I) EXCHANGE LISTING. During any period that the Company does not have
common stock listed on the New York Stock Exchange or the American Stock
Exchange, the Company will not, and will not permit any Subsidiary to, sell or
transfer any Property to, or purchase or acquire any Property of, or otherwise
engage in any other transaction with, any Affiliate, except at prices and on
terms and conditions not less favorable to the Company or such Subsidiary than
could be obtained on an arms' length basis from unrelated third parties.
(II) CONTROL PERSONS. During any period that the Company has common stock
listed on the New York Stock Exchange or the American Stock Exchange, the
Company will not, and will not permit any Subsidiary to, sell or transfer any
Property to, or purchase or acquire any Property of, or otherwise engage in any
other transaction with, any Control Person, except at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arms' length basis from unrelated third parties.
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<PAGE>
6J. LINE OF BUSINESS. The Company shall not, nor shall it permit any
Subsidiary to, make any change in the nature of its business if such change
would constitute a material change in the nature of the business of the Company
and the Subsidiaries taken as a whole as conducted on the Closing Date, or
commence or permit any Subsidiary to commence any major project for the
development of a new line of products or services other than aerospace products
or technically related products or services related to such products; provided
that the Company or any Subsidiary may commence any project for the development
of such new line of products or services if, and only if, the aggregate costs
and expenses related to all such projects (including, without limitation,
budgeted costs (determined from time to time) for such new project minus any
reasonably budgeted reimbursements for such costs due from parties other than
the Company or the Subsidiaries) shall not exceed ten percent (10%) of
Consolidated Tangible Net Worth at the time each such project is commenced.
6K. FIXED CHARGE COVERAGE. The Company will maintain for each day a ratio
of Consolidated Net Income Available for Fixed Charges for the period of 365
consecutive days (or 366 consecutive days for any such period that includes
February 29) ending on such day to Consolidated Fixed Charges for such period,
of not less than the ratio set forth in the chart below opposite the period set
forth below in which such day occurs:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fiscal Year 1994 1.40 to 1.00
Fiscal Year 1995 1.55 to 1.00
Fiscal Year 1996 1.90 to 1.00
Fiscal Year 1997 and thereafter 2.00 to 1.00;
</TABLE>
6L. DEBT RATIO. The Company shall not permit the Debt Ratio for any day
to be greater than the ratio set forth opposite the period set forth in the
chart below in which such day occurs:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1994 5.60 to 1.00
1995 5.00 to 1.00
1996 4.10 to 1.00
1997 3.20 to 1.00
1998 2.80 to 1.00
1999 and thereafter 2.50 to 1.00.
</TABLE>
6M. INCORPORATION OF NEGATIVE COVENANTS.
(i) During all such times as both the Credit Agreement shall remain in
force, and either any Debt shall be outstanding thereunder or the lenders
party thereto shall have any obligation to lend or make advances
thereunder:
(a) the provisions of paragraph 6A (except for clauses (i)(e) and
(i)(f) thereof, to the extent provided in paragraph 6M(i)(c) below)
and paragraph 6B of this Agreement shall be of no force and effect;
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<PAGE>
(b) the provisions of Sections 5.02(b), 5.02(c), 5.02(d),
5.02(e), 5.02(g), 5.02(h) and 5.02(i) of the Credit Agreement, as in
effect on the Third Amendment Date (after giving effect to the Seventh
Amendment to the Credit Agreement), but without amendment, supplement
or modification (except as set forth in paragraph 6M(ii) hereof), and
together with all relevant definitions pertaining thereto, shall be
incorporated herein by reference, mutatis mutandis;
(c) the Company shall not, nor shall it permit any Subsidiary to,
create, assume or suffer to exist any Lien securing any Debt existing
on the date hereof or incurred thereafter in connection with any IDB
Financing, except for such Liens as are expressly permitted by the
provisions of clause (e) or clause (f) of paragraph 6A(i) hereof;
provided, however, that at all times during which either the Credit
Agreement shall be of no force or effect, or there shall be no Debt
outstanding thereunder and no obligation on the part of the lenders thereto
to lend or make any advance thereunder, the provisions of paragraph 6A and
paragraph 6B of this Agreement shall be in full force and effect.
(ii) If at any time:
(a) after the Third Amendment Date, the Credit Agreement is
amended, supplemented or modified to provide Financial Covenants in
addition to, or which are more restrictive of the Company or the
Consolidated Subsidiaries than, the provisions of the Credit
Agreement, as in effect on the Third Amendment Date (after giving
effect to the Seventh Amendment to the Credit Agreement dated as of
such date);
(b) after the First Amendment Date, the Company enters into any
other agreement governing, or executes any other instrument
evidencing, any Debt (or any commitment to lend), other than Debt or
commitments solely among the Company and/or one or more Consolidated
Subsidiaries; or
(c) after the First Amendment Date, the Company enters into any
amendment, supplement or modification of any agreement governing, or
any instrument evidencing, any Debt (or any commitment to lend), other
than Debt or commitments solely among the Company and/or one or more
Consolidated Subsidiaries;
then, and in each such case, each Financial Covenant set forth in such
amendment, supplement, modification or other agreement or instrument shall
be incorporated by reference herein for the remaining term of such
agreement or instrument, but only to the extent that such covenant is more
restrictive of the Company or the Consolidated Subsidiaries than the
corresponding provision of this Agreement.
(iii) In the event that any Financial Covenant contained in any other
agreement governing, or instrument evidencing, any Debt (or commitment to
lend), which Financial Covenant has been or is incorporated into this
Agreement pursuant to the provisions of paragraph 6M(ii) hereof, is
amended, supplemented or modified to make such Financial
A-22
<PAGE>
Covenant less restrictive of the Company or the Consolidated Subsidiaries
than the incorporated Financial Covenant, the more restrictive incorporated
Financial Covenant shall continue to be incorporated herein for the
remaining term of such agreement or instrument notwithstanding such
amendment, supplement or modification. Notwithstanding the foregoing
sentence, if the provisions of such incorporated Financial Covenant were
expressed when incorporated to be more restrictive on a temporary basis, or
more restrictive only for a prescribed period, such more restrictive
provision shall be incorporated herein only on such temporary basis or only
for such prescribed period, as the case may be.
(iv) No Financial Covenant incorporated herein by virtue of paragraph
6M(ii) or paragraph 6M(iii) hereof shall supersede, replace, amend,
supplement or modify any other provision of this Agreement, including any
covenant contained herein which addresses a subject matter similar to that
of such incorporated Financial Covenant.
6N. MAINTENANCE OF SENIOR STATUS. The Company will not take any action at
any time to amend, modify or supplement any subordination provision (or any
definition of any defined term as used in any such provision) in the Existing
Subordinated Notes, the 1994 Subordinated Notes or any indenture governing the
provisions of any thereof, or otherwise take any action which would result in
any of the Existing Subordinated Notes or 1994 Subordinated Notes not being
junior or subordinated in right of payment to the Notes to the same extent such
Existing Subordinated Notes or 1994 Subordinated Notes, as the case may be, are
subordinated to the Notes on the Third Amendment Date (after giving effect to
the issuance of the 1994 Subordinated Notes). The Company shall not take any
action which would result in the Notes not constituting, or not being fully
entitled to the benefits of, "Senior Indebtedness" and "Designated Senior
Indebtedness" as defined in the indenture governing the 1994 Subordinated Notes.
6O. CERTAIN AMENDMENTS. The Company shall not, nor shall it permit any
Consolidated Subsidiary to, consent to any amendment, modification, supplement
or waiver of:
(i) any of the provisions of any of Sections 3.02, 3.03, 3.04 or 3.05
of the Credit Agreement, as in effect on the Third Amendment Date (after
giving effect to the Seventh Amendment to the Credit Agreement), or any
other provision referred to therein or any defined term as used therein,
other than a waiver by the banks party thereto of any condition set forth
therein; or
(ii) any other provision of the Credit Agreement or, prior to April
25, 1997, any Acceptable Replacement Credit Facility, to the extent that
such amendment, modification, supplement or waiver would have the effect
of:
(a) reducing the amount or availability of credit thereunder,
changing the timing of or reducing the commitments of the lenders
thereunder to lend or make credits available pursuant thereto;
(b) making more restrictive upon the Company any condition
precedent to the funding of the credits available thereunder;
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<PAGE>
(c) requiring the Company or any Subsidiary to grant any lender
thereunder any Lien securing the obligations thereunder; or
(d) requiring the Company or any Subsidiary to maintain any
deposit accounts in any minimum amount, compensating balances, cash
management or clearing house relationship or similar arrangements,
with the lenders thereunder;
in each case, without the prior written consent of the Required Holders.
6P. SALES OF ASSETS. The Company will not, and will not permit any
Consolidated Subsidiary to, at any time after the First Amendment Date, sell,
lease, transfer or otherwise dispose of any Property (except for sales of
inventory and of obsolete or surplus Property in the ordinary course of
business, sales of accounts receivable, the issuance of director's qualifying
shares and sales, leases, transfers or other dispositions of Property to the
Company or a Consolidated Subsidiary (collectively, "Excepted Property"));
provided, however, that the foregoing restrictions shall not apply to the sale,
lease, transfer or other disposition of any such Property to any Person if all
of the following conditions are met:
(i) the book value of all such Property then being sold, leased,
transferred or otherwise disposed of, together with the book value of all
other Property (other than Excepted Property) sold, leased, transferred or
otherwise disposed of by the Company and the Consolidated Subsidiaries
since the First Amendment Date shall not, in the aggregate, exceed ten
percent (10%) of Consolidated Tangible Assets, determined as of the end of
the then most recently ended fiscal quarter of the Company;
(ii) in the case of the sale, lease, transfer or other disposition of
a Consolidated Subsidiary (whether by disposition of any capital stock of
such Consolidated Subsidiary, the Property thereof or otherwise) or a line
or segment of business of the Company or a Consolidated Subsidiary, in
either case, substantially as an entirety (except with respect to the sale,
lease, transfer or other disposition of capital stock of a Consolidated
Subsidiary), the sum of:
(A) that portion, expressed as a percentage, of Gross Operating
Income attributable to or contributed by all Property of a type
described in this paragraph 6P(ii) and then being sold, leased,
transferred or otherwise disposed of, for the period of eight (8) full
consecutive fiscal quarters most recently ended on or prior to the
date of such sale, lease, transfer or other disposition; plus
(B) with respect to each other sale, lease, transfer or other
disposition of Property of a type described in this paragraph 6P(ii)
occurring during the period beginning on the later of the First
Amendment Date and the beginning of the eight full (8) fiscal quarters
of the Company most recently ended prior to the consummation of the
transaction referred to in clause (A) above, and ending on the date of
the transaction referred to in clause (A) above, that portion,
expressed as a percentage, of Gross Operating Income attributable to
or contributed by such Property described in this clause (B) for the
period of eight (8) full consecutive fiscal quarters most recently
ended on or prior to the date of such sale, lease, transfer or other
disposition thereof;
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<PAGE>
shall not exceed ten percent (10%);
(iii) in the good faith opinion of the board of directors of the
Company (or a committee of such board to whom such matter has been properly
delegated), the sale, lease, transfer or other disposition is for Fair
Market Value and is in the best interests of the Company; and
(iv) immediately after the consummation of such sale, lease, transfer
or other disposition, and after giving effect thereto, no Default or Event
of Default would exist.
Sales and other dispositions of accounts receivable shall be subject to
paragraph 6Q of this Agreement. Sales of all or any portion of the capital
stock of a Consolidated Subsidiary shall, for purposes of determining the book
value thereof in clause (i) above, be deemed to be the sale of all or such
portion of the book value of the assets of the Consolidated Subsidiary which
shall have issued such capital stock. Sales of all or a portion of the capital
stock of any Consolidated Subsidiary shall, for purposes of determining its
contribution to Gross Operating Income in clause (ii) above, be deemed to have
contributed all or such portion of that proportion of Gross Operating Income
attributable to the Consolidated Subsidiary which shall have issued such capital
stock. As used in this paragraph 6P, the term `lease' shall mean an original
lease, as lessor, by the Company or any Consolidated Subsidiary, and the
continuance, extension or renewal of any existing lease shall not be treated as
a lease pursuant to, or restricted by, this paragraph 6P.
6Q. SALE OF RECEIVABLES. The Company covenants that it will not, and will
not permit any Consolidated Subsidiary to, sell with recourse or otherwise sell
for less than the face value thereof, any of its notes or accounts receivable,
except pursuant to the Trade Receivables Agreement; provided, however, that the
Company and any Consolidated Subsidiary may sell for book value the accounts
receivable owing from any Person (i) that has commenced a voluntary case under
the Bankruptcy Law of the United States or any proceedings under the Bankruptcy
Law of any other jurisdiction, or (ii) against whom any such case or proceedings
have been commenced and have remained undismissed for a period of at least sixty
(60) days.
6R. LIMITATION ON CERTAIN OBLIGATIONS. The Company will not at any time
permit the sum of (w) obligations secured by Liens allocated by the Company to
the category described in paragraph 6A(i)(a) hereof, (x) obligations secured by
Liens allocated by the Company to the category described in paragraph 6A(i)(c)
hereof, (y) obligations secured by Liens allocated by the Company to the
category described in paragraph 6A(i)(d) hereof which obligations were incurred
on or subsequent to the Closing Date, and (z) Combined Subsidiary Debt, in each
case at such time, to exceed fifteen percent (15%) of Consolidated Tangible Net
Worth at such time.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
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<PAGE>
(i) the Company defaults in the payment of any principal of or
premium on any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than ten (10) days after the date due; or
(iii) the Company or any Subsidiary defaults in any payment of
principal of or interest on any obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full
or partial payment for Property whether or not secured by a Purchase Money
Mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to any originally
stated maturity, or to be repurchased by the Company or any Subsidiary,
provided that the aggregate amount of all obligations as to which such a
payment default shall occur and be continuing or such a failure or other
event causing or permitting acceleration shall occur and be continuing
exceeds Fifteen Million Dollars ($15,000,000), and provided, further, that
obligations for the deferred purchase price of goods or services
(including, without limitation, Capitalized Lease Obligations and Purchase
Money Mortgages) shall be excluded from the operation of this clause (iii)
so long as such obligations are being contested in good faith by
appropriate proceedings and adequate reserves have been established
therefor; or
(iv) any representation or warranty made by the Company herein, in
the First Amendment, the Second Amendment, the Third Amendment or any other
amendment, modification or supplement hereto, or in the Warrant Agreement,
or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement (including, without
limitation, the certificates furnished by the Company at the closing) shall
be false in any material respect on the date as of which made; or
(v) the Company or any Subsidiary shall fail to perform or observe
any covenant contained in paragraph 6 hereof, paragraph 4E hereof,
paragraph 5D(ii) or paragraph 5H hereof; or
(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein, in the First Amendment, the Second
Amendment, the Third Amendment or in the Warrant Agreement or the Warrants,
and such failure shall not be remedied within thirty (30) days after the
occurrence of such failure first becomes known to any Senior Officer of the
Company; or
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(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due as such phrase is defined in Section 303(h)(1) of the Bankruptcy
Code of 1978; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "Bankruptcy Law"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or the taking of
possession by, a trustee, receiver, custodian, liquidator or similar
official, of the Company or any Subsidiary, or of any substantial part of
the assets of the Company or any Subsidiary, or commences a voluntary case
under the Bankruptcy Law of the United States or any proceedings (other
than proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary under the Bankruptcy
Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceeding
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary that requires the divestiture of Properties representing
at least ten percent (10%), or the divestiture of the stock of a Subsidiary
whose assets represent at least ten percent (10%), of the consolidated
assets of the Company and the Subsidiaries (determined in accordance with
generally accepted accounting principles) or that requires the divestiture
of assets, or stock of a Subsidiary, that shall have contributed at least
ten percent (10%) to Consolidated Net Income for any of the three (3)
fiscal years most recently ended as of the date such order, judgment or
decree shall be entered, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(xiii) a final judgment in an amount in excess of Fifteen Million
Dollars ($15,000,000) is rendered against the Company or any Subsidiary
and, within sixty (60) days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within sixty (60)
days after the expiration of any such stay, such judgment is not
discharged; or
(xiv) any lender under the Credit Agreement or any Acceptable
Replacement Credit Facility fails or refuses, or announces its intention to
fail or refuse, to make any
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required advance under such Credit Agreement or any Acceptable Replacement
Credit Facility, or refuses to lend due to or as a result of any material
adverse change in the business, Properties, profits or condition (financial
or otherwise) of the Company; or
(xv) there shall occur any "Change of Control" as defined in the
indenture relating to the 1994 Subordinated Debt;
then
(a) if such event is an Event of Default specified in clause (viii),
clause (ix) or clause (x) of this paragraph ^7 with respect to the Company,
all of the Notes at the time outstanding shall automatically become
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company, and
(b) if such event is any other Event of Default, the Required Holders
may at their option, by notice in writing to the Company, declare all of
the Notes to be, and all of the Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Premium, if any, with respect to each
Note, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Company, provided that the Yield-
Maintenance Premium, if any, with respect to each Note shall be due and
payable upon such declaration only if
(I) such event is an Event of Default specified in any of clause
(i) to clause (vi), inclusive, of this paragraph ^7,
(II) the Required Holders shall have given to the Company, at
least ten (10) Business Days before such declaration, written notice
stating its or their intention so to declare the Notes to be
immediately due and payable and identifying one or more such Events of
Default whose occurrence on or before the date of such notice permits
such declaration and
(III) one or more of the Events of Default so identified shall
be continuing at the time of such declaration.
7B. ACCELERATION ON PAYMENT DEFAULT.
(I) ACCELERATION ON PAYMENT DEFAULT. During the existence of an Event of
Default described in paragraph ^7(i) hereof or paragraph ^7(ii) hereof, and
irrespective of whether the Required Holders shall have declared all the Notes
to be due and payable pursuant to paragraph ^7, any holder of Notes may, at his
or its option, by notice in writing to the Company, declare the Notes then held
by such holder to be, and such Notes shall thereupon become, immediately due and
payable together with all interest accrued thereon, without any presentment,
demand, protest or other notice of any kind (other than as provided above), all
of which are hereby expressly waived, and the Company shall immediately pay to
such holder the entire principal of and interest accrued on such Notes and the
Yield-Maintenance Premium due at such time with respect to such Notes in
accordance with the provisions of paragraph ^7(b) hereof (provided
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that the requirement of paragraph ^7(b)(II) that the Required Holders give
notice may be satisfied by such holder giving such notice so long as the other
requirements of paragraph ^7(b) hereof with respect to such notices have been
satisfied).
(II) ANNULMENT OF ACCELERATION OF NOTES. If a declaration is made
pursuant to clause (i) of this paragraph ^7 by any holder or holders of Notes,
then and in every such case, the Required Holders may, by written instrument
filed with the Company and such holder or holders, rescind and annul such
declaration, and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal of,
or interest or Yield-Maintenance Premium on, the Notes that shall have
become due and payable by reason of such declaration under clause (i) of
this paragraph ^7) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to paragraph ^11 hereof or otherwise made good or cured.
No such rescission and annulment shall extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.
7C. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants:
8A. SUBSIDIARIES. Annex 2 to this Agreement states,
(i) the name of each of the Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company
and each other Subsidiary, and
(ii) the name of each of the Company's joint ventures and the nature
thereof.
Each of the Company and the Subsidiaries has good and marketable title to
all of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and nonassessable.
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8B. CORPORATE ORGANIZATION AND AUTHORITY. The Company
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(ii) has all requisite legal and corporate power and authority to own
and operate its Properties and to carry on its business as now conducted
and as presently proposed to be conducted,
(iii) has all necessary licenses, certificates and permits to own and
operate its Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have any
such licenses, certificates and permits, together with all other such
failures, would not be likely to have a material and adverse effect on the
business or financial condition of the Company and the Subsidiaries, taken
as a whole, or the ability of the Company to perform its obligations set
forth in this Agreement and in the Notes, and
(iv) has duly qualified or has been duly licensed, and is authorized
to do business and is in good standing as a foreign corporation, except
where the failure to be so qualified, licensed and authorized in any
jurisdiction, together with all such other failures, would not be likely to
have a material and adverse effect on the business or financial condition
of the Company and the Subsidiaries, taken as a whole, or the ability of
the Company to perform its obligations set forth in this Agreement and in
the Notes.
The revenues and net income of the Company for the year ended July 31,
1989, and the total assets of the Company as of July 31, 1989, exceed eighty-
five percent (85%) of the consolidated revenues, consolidated net income, and
consolidated assets of the Company and the Subsidiaries for such period and at
such time.
8C. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company:
(i) a consolidated balance sheet of the Company and the Subsidiaries
as at July 31 in each of the years 1987 to 1993 inclusive, and consolidated
statements of earnings and changes in financial condition or cash flows, as
the case may be, of the Company and the Subsidiaries for the year ended
July 31 in each of the years 1987 to 1993, inclusive, all certified by
Deloitte & Touche; and
(ii) a consolidated balance sheet of the Company and the Subsidiaries
as at January 30, 1994 and January 31, 1993, and consolidated statements of
earnings and cash flows for the three (3) month periods ended on January
30, 1994 and on January 31, 1993 prepared by the Company.
Such financial statements (including all related schedules and notes, subject,
as to interim statements, to changes resulting from audits and year-end
adjustments) have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved (except as
otherwise noted therein) and fairly present all liabilities, direct and
contingent, of the Company and the Subsidiaries required to be shown in
accordance with such
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principles. The balance sheets fairly present the condition of the Company and
the Subsidiaries as at the dates thereof, and the statements of earnings and
changes in financial condition or cash flows, as the case may be, fairly present
the results of the operations of the Company and the Subsidiaries for the
periods indicated. There has been no material adverse change in the business or
financial condition of the Company and the Subsidiaries, taken as a whole, since
July 31, 1993, except for charges in the third Fiscal Quarter of Fiscal Year
1994 to shareholders' equity in connection with the increases in the underfunded
status of the Company's pension plans, and to income in connection with the
expensing of unamortized pension benefit past service costs, each as described
in the Company's Quarterly Report on Form 10-Q for Fiscal Quarter ended January
30, 1994.
8D. ACTIONS PENDING. There is no action, suit, investigation or
proceeding or group of similar actions, suits, investigations or proceedings
(including, as such a group, without limitation, all actions, suits,
investigations or proceedings arising out of federal or state environmental
protection laws), pending, or, to the knowledge of the Company, threatened
against the Company or any of the Subsidiaries, or any Properties or rights of
the Company or any of the Subsidiaries, by or before any court, arbitrator or
administrative or governmental body that would be more likely than not to have a
material and adverse effect on the business or financial condition of the
Company and the Subsidiaries, taken as a whole, or the ability of the Company to
perform its obligations set forth in this Agreement and in the Notes.
8E. OUTSTANDING DEBT. Neither the Company nor any of the Subsidiaries has
outstanding any Debt except as permitted by paragraph ^6 hereof. There exists
no default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.
8F. TITLE TO PROPERTIES. Each of the Company and the Subsidiaries has
good and indefeasible title to its respective real Properties (other than
Properties that it leases) and good title to all of its other respective
Properties, including the Properties reflected in the balance sheet as at
January 30, 1994 referred to in paragraph ^8 hereof (other than Properties
disposed of in the ordinary course of business), subject to no Lien of any kind
except Liens permitted by paragraph ^6 hereof. All leases necessary in any
material respect for the conduct of the respective businesses of the Company and
the Subsidiaries are valid and subsisting and are in full force and effect.
8G. PATENTS, TRADEMARKS, LICENSES, ETC. Each of the Company and the
Subsidiaries owns or possesses all of the patents, trademarks, service marks,
trade names, copyrights, licenses, and rights with respect thereto, necessary
for the present conduct of its business, without any known conflict with the
rights of others.
8H. TAXES. Each of the Company and the Subsidiaries has filed all
Federal, State and other income tax returns that, to the best knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
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8I. CONFLICTING AGREEMENTS AND OTHER MATTERS.
(I) RESTRICTIONS. Neither the Company nor any of the Subsidiaries is
subject to any charter or by-law restriction that would, in the aggregate with
all other such charter or by-law restrictions, be more likely than not to have a
material and adverse effect on the business or financial condition of the
Company and the Subsidiaries, taken as a whole, or the ability of the Company to
perform its obligations set forth in this Agreement and in the Notes.
(II) CONFLICTS. Neither the execution nor delivery of this Agreement or
the Notes, nor the offering, issuance and sale of the Notes, nor the fulfillment
of nor the compliance with the terms and provisions hereof and of the Notes will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the Properties of the Company or any of the
Subsidiaries pursuant to, the charter or by-laws of the Company or any of the
Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of the Subsidiaries is subject.
(III) RESTRICTIONS ON DEBT. Neither the Company nor any of the
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing indebtedness of the Company or such Subsidiary, any
agreement relating thereto or any other contract or agreement (including its
charter) that limits the amount of, or otherwise imposes restrictions on the
incurring of, Debt of the Company of the type to be evidenced by the Notes
except as set forth in the agreements listed in Annex 3 attached hereto.
(IV) SALE IS LEGAL AND AUTHORIZED. Each of the sale of the Notes by the
Company and compliance by the Company and each Subsidiary with all of the
provisions of this Agreement and of the Notes:
(a) is within the corporate powers of the Company and each
Subsidiary; and
(b) is legal and does not conflict with, result in any breach of any
of the provisions of, constitute a default under, or result in the creation
of any Lien upon any Property of the Company or any Subsidiary under the
provisions of, any agreement, charter instrument, bylaw or other instrument
to which it is a party or by which it or any of its Property may be bound.
(V) NOTES ARE ENFORCEABLE. The obligations of the Company under this
Agreement and the Notes are valid, binding and enforceable in accordance with
the terms of this Agreement and the Notes, except the enforceability hereof or
thereof, as the case may be, may be:
(a) limited by bankruptcy, insolvency or other similar laws affecting
the enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
8J. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or
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solicited any offers to buy the Notes or any similar security of the Company
from, or otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither the Company nor any agent
acting on its behalf has taken or will take any action that would subject the
issuance or sale of the Notes to the provisions of section 5 of the Securities
Act or to the provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8K. REGULATION G, ETC. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
("margin stock"). The proceeds of sale of the Notes will be used for general
corporate purposes. None of such proceeds will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any indebtedness that was originally incurred to purchase or carry any
stock that is currently a margin stock or for any other purpose that might
constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this agreement or the Notes to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Exchange Act, as amended, in each
case as in effect now or as the same may hereafter be in effect.
8L. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
other action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Closing Date with either
or both of the Securities and Exchange Commission and state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions hereof or of the Notes.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Company in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to the Company or any of
the Subsidiaries that in the future (so far as the Company can now foresee)
would, in the aggregate with all other such facts, be more likely than not to
have a material and adverse effect on the business or financial condition of the
Company and the Subsidiaries, taken as a whole, or the ability of the Company to
perform its obligations set forth in this Agreement and in the Notes and that
has not been set forth in this Agreement or in the other documents, certificates
and statements furnished to you by or on behalf of the Company prior to the date
hereof in connection with the transactions contemplated hereby.
8N. COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary:
(i) is in violation of any law, ordinance, governmental rule or
regulation to which it is subject; or
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(ii) has failed to obtain any license, certificate, permit, franchise
or other governmental authorization necessary to the ownership of its
Property or to the conduct of its business;
which violation or failure to obtain is more likely than not to have, in the
aggregate with all other such violations or failures, a material and adverse
effect on the business or financial condition of the Company and the
Subsidiaries, taken as a whole, or the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes.
8O. CERTAIN LAWS.
(I) INVESTMENT COMPANY ACTS. The Company is not, and is not directly or
indirectly controlled by, or acting on behalf of any Person which is, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(II) ABSENCE OF FOREIGN OR ENEMY STATUS. The Company is not
(a) an "enemy" or an "ally of the enemy" within the meaning of
Section 2 of the Trading with the Enemy Act, as amended, or any executive
orders or regulations issued or promulgated pursuant thereto,
(b) a "national" of any "designated enemy country" as such terms are
defined in Executive Order No. 9095, as amended, of the President of the
United States of America, or
(c) a "national" of any "designated foreign country" within the
meaning of the Foreign Assets Control Regulations of the United States of
America (Code of Federal Regulations, Title 31, Chapter V, Part 500 to
543).
(III) HOLDING COMPANY STATUS. The Company is not a "holding company" or
an "affiliate" of a "holding company," or a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public Utilities
Holding Company Act of 1935, as amended.
9. REPRESENTATIONS OF THE PURCHASER. You represent, and in making this
sale to you it is specifically understood and agreed, that you are not acquiring
the Notes to be purchased by you hereunder with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act, provided that the lawful disposition of your Property shall at all times be
and remain within your control. You also represent that no part of the funds
being used by you to pay the purchase price of the Notes being purchased by you
hereunder constitutes assets allocated to any separate account maintained by you
in which any employee benefit plan, other than employee benefit plans identified
on a list which has been furnished by you to the Company, participates to the
extent of five percent (5%) or more. For the purpose of this paragraph ^9, the
terms "separate account" and "employee benefit plan" shall have the respective
meanings specified in Section 3 of ERISA.
10. DEFINITIONS. For the purpose of this Agreement the following terms
shall have the meanings specified with respect thereto below:
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10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid or purchased pursuant to paragraph ^4,
paragraph ^4 or paragraph 5H hereof (any partial prepayment being applied
in satisfaction of required payments of principal in inverse order of their
scheduled due dates) or is declared to be immediately due and payable
pursuant to paragraph ^7 hereof, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on a semiannual basis) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time)
on the Business Day next preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page 678" on the
Telerate Service (or such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall
not be ascertainable,
(ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release # H15
(519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date.
Such implied yield shall be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between reported
yields. Reinvestment Yield calculated as aforesaid shall be increased by
twenty-five one-hundredths percent (0.25%) per annum in the case of any
Settlement Date occurring after January 29, 1996.
"REMAINING AVERAGE LIFE" means, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
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(a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest one-
twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of
such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to
such Called Principal if no payment of such Called Principal were made
prior to its scheduled due date.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid or purchased
pursuant to paragraph ^4, paragraph ^4 or paragraph 5H hereof or is
declared to be immediately due and payable pursuant to paragraph ^7 hereof,
as the context requires.
"YIELD-MAINTENANCE PREMIUM" means, with respect to any Note, a premium
equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of
(i) such Called Principal, plus
(ii) interest accrued thereon as of (including interest due on)
the Settlement Date with respect to such Called Principal.
The Yield-Maintenance Premium shall in no event be less than zero.
10B. OTHER TERMS.
"1994 SENIOR DEBT" shall mean the Company's Senior Notes Due 2003, in
the aggregate principal amount of One Hundred Million Dollars
($100,000,000) on substantially the terms and conditions set forth under
the heading "DESCRIPTION OF SENIOR NOTES" in Amendment No. 1 to the
Registration Statement on Form S-3 of the Company, as filed with the
Securities and Exchange Commission on April 19, 1994, relating thereto.
"1994 SUBORDINATED DEBT" shall mean the Company's Convertible
Subordinated Notes Due 2004, in the aggregate principal amount of up to
Fifty-Seven Million Five Hundred Thousand Dollars ($57,500,000) and which
are subordinated to payment of principal, interest and Yield-Maintenance
Premium in respect of the Notes, and all other obligations under this
Agreement, on substantially the terms and conditions set forth under the
heading "DESCRIPTION OF SUBORDINATED NOTES" in Amendment No. 2 to the
Registration Statement on Form S-3 of the Company, as filed with the
Securities and Exchange Commission on April 19, 1994 relating thereto.
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"ACCEPTABLE AVAILABILITY" shall mean, at any time on or after the date
shown in the first column of the chart below, and on or prior to the date
shown in the second column of the chart below, the availability under the
Credit Agreement at such time reflected in the third column of the chart
below:
<TABLE>
<CAPTION>
ON AND AFTER: TO AND INCLUDING: ACCEPTABLE AVAILABILITY:
======================================================================
<S> <C> <C>
Third Amendment Date October 24, 1995 $110,000,000
October 25, 1995 April 24, 1996 $100,000,000
April 25, 1996 October 24, 1996 $ 90,000,000
October 25, 1996 April 24, 1997 $ 80,000,000
April 25, 1997 and thereafter $ 0
======================================================================
</TABLE>
"ACCEPTABLE REPLACEMENT CREDIT FACILITY" shall mean, with respect to
any replacement, refunding or refinancing of the Credit Agreement, a
revolving credit facility:
(i) making available to the Company at least the Acceptable
Availability:
(ii) which, if such facility provides for extension of credit in
forms (including, without limitation, letters of credit or banker's
acceptances) other than cash, provides that, at the option of the
Company, at least the Acceptable Availability shall be available to
the Company in cash; provided, however, that, should the Company
actually draw credit in forms other than cash (including, without
limitation, the issuance of one or more letters of credit), the amount
of cash available under such facility may be reduced by the aggregate
amount of such credits for so long as such credits are outstanding, so
that the aggregate amount available need not exceed the Acceptable
Availability at such time;
(iii) which shall not require the maintenance of any
compensating balance or other similar arrangement in any amount
greater than the difference between the aggregate amount of cash
available under such facility minus the Acceptable Availability;
(iv) which shall not contain, at the time of the effectiveness of
such facility:
(a) any financial covenants, events of default or other
conditions with which the Company would not be able to comply at
such time, based on the most recent business plan presented to
the Board of Directors (including updates thereto through the
date of effectiveness of such facility) of the Company at such
time or, prior to January 25, 1997, that were more onerous than
those contained in the Credit Agreement at the time of the
effectiveness of such facility; and
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<PAGE>
(b) any borrowing base provision or similar lending
constraints; or
(c) any conditions precedent to making advances thereunder
that would, based on the most recent business plan presented to
the Board of Directors (and updates thereto) of the Company at
such time, be reasonably likely to prevent the Company from fully
utilizing the Acceptable Availability to it under such credit
facility at any time during the term of such credit facility or,
prior to January 25, 1997, that were more onerous than those
contained in the Credit Agreement at the time of the
effectiveness of such facility ;
(v) which shall not have a maturity date earlier than that of the
Credit Agreement immediately prior to giving effect to such
replacement, refunding or refinancing; and
(vi) which shall be unsecured and shall not rank senior in right
of payment in any respect to the Notes.
"ADJUSTED CONSOLIDATED DEBT" shall mean and include all Debt of the
Company and the Consolidated Subsidiaries.
"ADJUSTED CONSOLIDATED NET INCOME" shall mean for any period
(i) the gross revenues of the Company and the Consolidated
Subsidiaries for such period, determined on a consolidated basis; less
(ii) all operating and non-operating expenses of the Company and
the Consolidated Subsidiaries for such period, including all charges
of a proper character (including, without limitation, current and
deferred taxes on income, provision for taxes on unremitted foreign
earnings which are included in gross revenues, and current additions
to reserves), determined on a consolidated basis;
but not including in such gross revenues
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses arising from the sale, conversion or other
disposition of capital assets, other than gains arising out of any
transaction or series of related transactions in which such gains do
not exceed One Hundred Thousand Dollars ($100,000);
(ii) any gain arising from any write-up of assets subsequent to
July 31, 1992;
(iii) earnings of any Consolidated Subsidiary accrued prior to
the date it became a Consolidated Subsidiary;
A-38
<PAGE>
(iv) earnings of any Person, substantially all the assets of
which have been acquired in any manner, realized by such Person prior
to the date of such acquisition;
(v) net earnings or net losses of any Person in which the Company
or any Consolidated Subsidiary shall have an ownership interest
unless, in the case of net earnings, such net earnings shall have
actually been received by the Company or such Consolidated Subsidiary
in the form of cash distributions;
(vi) any portion of the net earnings of any Consolidated
Subsidiary which for any reason is unavailable for payment of
dividends to the Company or any other Consolidated Subsidiary;
(vii) the earnings of any Person to which assets of the Company
shall have been sold, transferred or disposed of, or into which the
Company shall have merged, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities
of the Company or any Consolidated Subsidiary;
(ix) any portion of the net earnings of the Company that cannot
be freely converted into United States dollars; and
(x) any deferred credit representing the excess of equity in any
Consolidated Subsidiary at the date of acquisition over the cost of
investment in such Consolidated Subsidiary.
"ADJUSTED CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time the
excess of total assets of the Company and the Consolidated Subsidiaries at
such time, determined on a consolidated basis, over total liabilities of
the Company and the Consolidated Subsidiaries at such time, determined on a
consolidated basis, in each case determined in accordance with generally
accepted accounting principles, excluding, however, from the determination
of total assets
(i) all assets that would be classified as intangible assets
under such generally accepted accounting principles, including,
without limitation, goodwill (whether representing the excess of cost
over book value of assets acquired or otherwise), patents, trademarks,
trade names, copyrights, franchises, unamortized debt discount and
expense, organization costs, research and development costs and other
deferred charges (other than prepaid insurance and taxes and pre-
production and production costs including, but not limited to,
engineering and tooling costs, that are amortized over anticipated
deliveries),
(ii) treasury stock and minority interests in any Person,
(iii) cash, Securities or other Property set apart and held in a
sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock,
A-39
<PAGE>
(iv) to the extent not already deducted from total assets, reserves
for depreciation, depletion, obsolescence or amortization of
Properties and all other reserves or appropriations of retained
earnings that, in accordance with such generally accepted accounting
principles, should be established in connection with the business
conducted by the relevant corporation, and
(v) any revaluation or other write-up in book value of assets
subsequent to July 31, 1992.
Notwithstanding the foregoing, (A) net deferred income tax assets recorded
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109") shall be treated as a tangible
asset (and not deducted pursuant to clause (i) or (iv) of this definition)
and shall be calculated without regard to any valuation allowance with
respect to such net deferred tax asset recorded by the Company in
accordance with SFAS 109, and (B) any asset established pursuant to
Statement of Financial Accounting Standards No. 87, Employers Accounting
for Pensions ("SFAS 87") which corresponds to an additional minimum pension
liability recorded pursuant to SFAS No. 87 and any prepaid pension asset
which arises from amounts funded by the Company in accordance with Internal
Revenue Service regulations (but not in excess of the minimum amounts
required to be contributed thereunder) in excess of amounts expensed in
accordance with SFAS 87, shall be treated as a tangible asset (and not
deducted pursuant to clause (i) or (iv) of this definition).
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract or otherwise.
"AGREED PUT CONSIDERATION" shall mean as of the date of prepayment by
the Company upon the exercise by any holder of Notes of its Right to Put or
option to be repaid pursuant to paragraph 5H, the sum of
(i) the principal amount of the Notes held by such holder subject
to the prepayment on such date, plus
(ii) all accrued and unpaid interest to such date on such Notes,
plus
(iii) the Yield-Maintenance Premium as of such date with respect
to such Notes.
"AGREEMENT" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
"BANK LENDERS" shall mean the Lenders as defined in the Credit
Agreement.
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<PAGE>
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized
to be closed.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the
amount thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CLOSING" shall have the meaning assigned to such term in paragraph 2
of this Agreement.
"CLOSING DATE" shall have the meaning assigned to such term in
paragraph 2 of this Agreement.
"COMBINED SUBSIDIARY DEBT" shall mean at any time all unsecured Debt
of the Subsidiaries at such time (after eliminating intercompany
transactions among the Subsidiaries).
"COMPANY" shall have the meaning specified in the introductory
paragraph of this Agreement.
"CONFIDENTIAL INFORMATION" shall mean any information furnished to any
holder of Notes by the Company or any agent of the Company in connection
with this Agreement (including, without limitation, any information
furnished to you pursuant to paragraph 5D hereof) or obtained by any holder
of Notes in connection with an inspection made pursuant to paragraph 5G
hereof, that is about the Company (or in respect of which the Company has a
confidentiality obligation) and that is marked by the Company as being
confidential, other than any such information,
(i) that was publicly known, or otherwise known to you, at the
time the information was furnished to you,
(ii) that subsequently becomes publicly known through no act or
omission by you, or
(iii) that otherwise becomes known to you, other than through
disclosure by the Company or any Subsidiary.
"CONSOLIDATED FIXED CHARGES" shall mean, for any period, the sum,
without duplication, of
(i) interest expense related to Debt of the Company and the
Consolidated Subsidiaries,
A-41
<PAGE>
(ii) amortization expense related to Debt of the Company and the
Consolidated Subsidiaries issued at a discount,
(iii) dividends in respect of preferred stock of Consolidated
Subsidiaries,
(iv) dividends in respect of Permitted Preferred Stock to the
extent paid to Persons other than the Company or any wholly-owned
Consolidated Subsidiary, plus
(v) rentals payable in respect of Capitalized Lease Obligations
of the Company and the Consolidated Subsidiaries,
in each case calculated for such period on a consolidated basis in
accordance with generally accepted accounting principles.
"CONSOLIDATED NET INCOME" shall mean for any period
(i) the gross revenues of the Company and the Subsidiaries for
such period, determined on a consolidated basis; less
(ii) all operating and non-operating expenses of the Company and
the Subsidiaries for such period, including all charges of a proper
character (including, without limitation, current and deferred taxes
on income, provision for taxes on unremitted foreign earnings which
are included in gross revenues, and current additions to reserves),
determined on a consolidated basis;
but not including in such gross revenues
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses arising from the sale, conversion or other
disposition of capital assets, other than gains arising out of any
transaction or series of related transactions in which such gains do
not exceed One Hundred Thousand Dollars ($100,000);
(ii) any gain arising from any write-up of assets subsequent to
July 31, 1992;
(iii) earnings of any Subsidiary accrued prior to the date it
became a Subsidiary;
(iv) earnings of any Person, substantially all the assets of
which have been acquired in any manner, realized by such Person prior
to the date of such acquisition;
(v) net earnings or net losses of any Person in which the Company
or any Subsidiary shall have an ownership interest unless, in the case
of net earnings, such net earnings shall have actually been received
by the Company or such Subsidiary in the form of cash distributions;
A-42
<PAGE>
(vi) any portion of the net earnings of any Subsidiary which for
any reason is unavailable for payment of dividends to the Company or
any other Subsidiary;
(vii) the earnings of any Person to which assets of the Company
shall have been sold, transferred or disposed of, or into which the
Company shall have merged, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities
of the Company or any Subsidiary;
(ix) any portion of the net earnings of the Company that cannot
be freely converted into United States dollars; and
(x) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of investment in
such Subsidiary.
"CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES" shall mean, for
any period, the sum of
(i) Adjusted Consolidated Net Income for such period, plus
(ii) the aggregate amount of
(a) Consolidated Fixed Charges,
(b) provisions for taxes on earnings,
(c) depreciation expense,
(d) the Special Charge;
(e) in the case of any such period that includes the fiscal
month ending May 2, 1993, the cumulative effect through May 2,
1993 of the accounting changes adopted by the Company, effective
as of August 1, 1992, as described in the Company's Form 10-Q
filed with the Securities and Exchange Commission for the third
quarter of its 1993 Fiscal Year;
(f) in the case of any such period that includes the fiscal
month ending May 2, 1993, the provisions and charges, not in
excess of $38,000,000 in the aggregate, established by the
Company in the third quarter of its 1993 Fiscal Year; and
(g) the Tax Adjustment Amount;
A-43
<PAGE>
in each case to the extent, and only to the extent, reflected in the
computation of Adjusted Consolidated Net Income for such period. As
used in this definition,
`Special Charge' shall mean that certain special provision of
Fifty Million Dollars ($50,000,000) taken by the Company during the
third quarter of its 1992 Fiscal Year;" and
`Tax Adjustment Amount' shall mean, for any period, the lesser of
(i) accrued interest expense on taxes on earnings for such
period minus any interest income on tax refunds for such period
and
(ii) Three Hundred Thirty-Three Thousand Dollars ($333,333)
multiplied by the number of fiscal months in such period;
provided, however, that, notwithstanding the foregoing, to the extent
that such period includes one or more fiscal months of the Company
during the third quarter of the Company's 1992 Fiscal Year, "Tax
Adjustment Amount" shall be deemed to mean an amount equal to Six
Million One Hundred Thousand Dollars ($6,100,000) for each such fiscal
month.
"CONSOLIDATED SENIOR DEBT" shall mean at any time Senior Debt at such
time, determined on a consolidated basis, minus Non-Recourse Debt of the
Company and the Subsidiaries at such time, determined on a consolidated
basis.
"CONSOLIDATED SUBSIDIARY" shall mean any corporation more than fifty
percent (50%) of the total combined voting power of all classes of Voting
Stock of which shall, at the time as of which any determination is being
made, be owned, directly or indirectly, by the Company.
"CONSOLIDATED TANGIBLE ASSETS" shall mean, at any time, the sum of:
(i) Adjusted Consolidated Tangible Net Worth at such time; plus
(ii) the total amount of all liabilities of the Company and the
Consolidated Subsidiaries on a consolidated basis at such time.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time the excess of
total assets of the Company and the Subsidiaries at such time, determined
on a consolidated basis, over total liabilities of the Company and the
Subsidiaries at such time, determined on a consolidated basis, in each case
determined in accordance with generally accepted accounting principles,
excluding, however, from the determination of total assets:
(i) all assets that would be classified as intangible assets
under such generally accepted accounting principles, including,
without limitation, goodwill (whether representing the excess of cost
over book value of assets acquired or otherwise), patents, trademarks,
trade names, copyrights, franchises, unamortized debt discount and
expense, organization costs, research and development costs
A-44
<PAGE>
and other deferred charges (other than prepaid insurance and taxes and
pre-production and production costs including, but not limited to,
engineering and tooling costs, that are amortized over anticipated
deliveries);
(ii) treasury stock and minority interests in Subsidiaries;
(iii) cash, Securities or other Property set apart and held in a
sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock;
(iv) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence or amortization of
Properties and all other reserves or appropriations of retained
earnings that, in accordance with such generally accepted accounting
principles, should be established in connection with the business
conducted by the relevant corporation; and
(v) any revaluation or other write-up in book value of assets
subsequent to July 31, 1992.
Notwithstanding the foregoing, (A) net deferred income tax assets recorded
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109") shall be treated as a tangible
asset (and not deducted pursuant to clause (i) or (iv) of this definition)
and shall be calculated without regard to any valuation allowance with
respect to such net deferred tax asset recorded by the Company in
accordance with SFAS 109, and (B) any asset established pursuant to
Statement of Financial Accounting Standards No. 87, Employers Accounting
for Pensions ("SFAS 87") which corresponds to an additional minimum pension
liability recorded pursuant to SFAS No. 87 and any prepaid pension asset
which arises from amounts funded by the Company in accordance with Internal
Revenue Service regulations (but not in excess of the minimum amounts
required to be contributed thereunder) in excess of amounts expensed in
accordance with SFAS 87, shall be treated as a tangible asset (and not
deducted pursuant to clause (i) or (iv) of this definition).
"CONSOLIDATED TOTAL DEBT" shall mean, at any time, Debt of the Company
and the Subsidiaries at such time minus Non-Recourse Debt of the Company
and the Subsidiaries at such time, determined on a consolidated basis.
"CONTROL PERSON" shall mean a Person who possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of April
26, 1989, among the Company and the lenders party thereto and the agent
thereunder, as such Credit Agreement may be amended or supplemented from
time to time.
A-45
<PAGE>
"DEBT" shall mean, without duplication,
(i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other
similar instruments (as such term is defined in Article 9 of the
Uniform Commercial Code as from time to time in effect in the State of
New York),
(iii) obligations to pay the deferred purchase price of Property
or services (excluding advances, deposits or partial or progress
payments, unpaid wages and related employee obligations and excluding
trade payables),
(iv) obligations as lessee under Capitalized Lease Obligations,
(v) obligations under Guaranties of indebtedness or obligations
of others of the kinds referred to in clauses (i) through (iv) above,
(vi) obligations under Title IV of ERISA for each Plan and
Multiemployer Plan, in respect of unfunded accrued liabilities for
such plans, if any, as of the first day of the plan year as shown in
the annual actuarial report most recently delivered to the obligor in
respect of such obligations by the actuary for each such Plan and
Multiemployer Plan, and
(vii) in the case of any Consolidated Subsidiary, all preferred
stock of such Consolidated Subsidiary held by Persons other than the
Company or a wholly-owned Consolidated Subsidiary, such preferred
stock to be valued at the aggregate liquidation preference thereof.
"DEBT RATIO" shall mean, at any time, the ratio of Adjusted
Consolidated Debt to Adjusted Consolidated Tangible Net Worth.
"DEFAULT" shall mean any event or condition that, with notice or the
passage of time, or both, would become an Event of Default.
"DE MINIMUS PAYMENTS" shall mean, with respect to any Debt of the
Company or any Subsidiary (other than Debt governed or evidenced by the
Notes, the 9.33% Senior Notes due December 15, 2002, the Credit Agreement,
any Acceptable Replacement Credit Facility, the 1994 Senior Notes, the 1994
Subordinated Notes or the Existing Subordinated Notes of either Series),
payments, prepayments, defeasances and redemptions (in each case, other
than Originally Scheduled Payments) in respect of any such Debt aggregating
not more than Five Hundred Thousand Dollars ($500,000) in any Fiscal Year.
"DESIGNATED EVENT" shall mean the occurrence of any one or more of the
following after the Closing Date:
(i) the direct or indirect acquisition by any person (as such
term is used in Section 13(d) and Section 14(d)(2) of the Exchange
Act), or related
A-46
<PAGE>
persons constituting a group (as such term is used in Rule 13d-5 under
the Exchange Act), of (i) beneficial ownership of issued and
outstanding shares of Voting Stock of the Company the result of which
acquisition is that such person or such group possesses in excess of
fifty percent (50%) of the combined voting power of all then issued
and outstanding Voting Stock of the Company or (ii) within any period
of three-hundred sixty-five (365) consecutive days, all or
substantially all of the assets of the Company; or
(ii) following the election or removal of directors, a majority
of the Company's board of directors consists of individuals who were
not members of the Company's board of directors two years before such
election or removal, unless the election of each director who was not
a director at the beginning of such two-year period has been approved
in advance by directors representing at least a majority of the
directors then in office who were directors at the beginning of the
two-year period; or
(iii) the consolidation with, or merger into, any Person by the
Company in a transaction in which more than thirty percent (30%) by
number of votes of the Voting Stock of the Company is exchanged (the
calculation of which shall be made by dividing the number of votes
attributable to the Voting Stock so exchanged by the aggregate number
of votes attributable to the Voting Stock immediately prior to such
transaction); or
(iv) (a) any transaction or series of transactions (whether
related or unrelated) in which the Company repurchases or
otherwise retires in the aggregate, within any period of three
hundred sixty-five (365) consecutive days, thirty percent (30%)
or more (by number) of the Company's outstanding common stock
(the calculation of which shall be made by dividing the number of
shares outstanding immediately after giving effect to each such
repurchase or retirement, other than any such shares owned by a
Subsidiary, by the highest number of shares outstanding at any
time during the period of three hundred sixty-five (365)
consecutive days ending on (and including) the date of such
repurchase or retirement (adjusting in each case for stock
splits, stock dividends and other similar transactions, excluding
in each case shares held in treasury, and assuming in each case
that all securities then convertible into, or representing then
effective rights to purchase, common stock have been exercised at
such time), or
(b) any Distribution made by the Company the Fair Market
Value of which, together with the aggregate Fair Market Value of
all other Distributions made by the Company during the period of
three hundred sixty-five (365) days ending on (and including) the
date of such Distribution (each Distribution being valued on the
date it is made), equals or exceeds thirty percent (30%) of the
Fair Market Value the Company's outstanding common stock
(determined at the commencement of such period);
in each case if as a result of such event or events Consolidated Total Debt
shall, at any time during the period beginning on the date of such
transaction (or the date of the
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completion of such series of transactions, as the case may be) and ending
three hundred sixty-five (365) days thereafter, equal or exceed seventy-
five percent (75%) of the sum of Consolidated Total Debt plus Consolidated
Tangible Net Worth at such time.
"DISTRIBUTION" shall mean:
(i) dividends or other distributions on or in respect of the
capital stock of the Company or any Subsidiary (except distributions
solely in such stock or in Rights, as such term is defined in the
Rights Agreement and except to the extent made to the Company or any
Wholly-Owned Subsidiary);
(ii) the repurchase, purchase, redemption or acquisition of
capital stock of the Company or any Subsidiary, or of warrants, rights
or other options to purchase such stock (except when solely in
exchange for such stock and except to the extent made from the Company
or a Wholly-Owned Subsidiary) unless made, contemporaneously, from the
net proceeds of a sale of such stock; and
(iii) all payments in respect of Subordinated Debt (other than
mandatory scheduled payments and prepayments), including optional or
voluntary prepayments and including all payments made to acquire
Subordinated Debt (except to the extent such payment is made to the
Company or a Wholly-Owned Subsidiary).
"EQUITY ISSUANCE ACQUISITIONS" shall mean the acquisition by the
Company of Debt (including, without limitation, Notes, the 1994
Subordinated Notes, the Company's 9.35% Senior Notes due January 29, 2000
or the Company's 7% Convertible Subordinated Debentures due 2012), or any
portion thereof, for consideration consisting solely of common stock of the
Company and in connection with tenders of such Debt by the holders thereof
in payment of the exercise or purchase price of any rights, warrants or
options to acquire such common stock, or upon conversion of such Debt into
such common stock.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
(i) is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the IRC) as the Company, or
(ii) is under common control (within the meaning of Section
414(c) of the IRC) with the Company.
"ESOP" shall mean the Salaried Employees Stock Ownership Plan,
effective August 1, 1983, as amended from time to time.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A hereof.
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"EXCEPTED PROPERTY" shall have the meaning set forth in paragraph 6P
of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXISTING SUBORDINATED NOTES" shall mean and include:
(i) the Company's 9.25% Subordinated Debentures due 2017; and
(ii) the Company's 7% Convertible Subordinated Debentures due
2012;
and the Existing Subordinated Notes of each such series (but not the
Existing Subordinated Notes of the other series) shall be referred to
collectively as a "SERIES" of Existing Subordinated Notes.
"FAIR MARKET VALUE" shall mean at any time with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer, and
an informed and willing seller, under no compulsion to buy or sell,
respectively.
"FINANCIAL COVENANT" shall mean any covenant, agreement or provision
(including, without limitation, the definitions applicable thereto) of or
applicable to the Company or any Consolidated Subsidiary contained in any
agreement governing, or instrument evidencing, any Debt (or commitment to
lend), other than Debt or a commitment to lend among the Company and one or
more Consolidated Subsidiaries, of the Company or any Consolidated
Subsidiary in an aggregate principal amount greater than $5,000,000, which
covenant, agreement or provision:
(i) requires the Company or any Consolidated Subsidiary to
maintain specified financial amounts or ratios or to meet other
financial tests;
(ii) restricts the ability of the Company or any Consolidated
Subsidiary to:
(a) make Distributions, investments, capital expenditures or
operating expenditures of any kind;
(b) incur, create or maintain any Debt (or other
obligations) or Liens;
(c) merge, consolidate or acquire or be acquired by any
Person;
(d) sell, lease, transfer or dispose of any Property (other
than restrictions imposed solely upon collateral, and not upon
Property of the Company or any Consolidated Subsidiary generally,
by holders of Liens thereon which are permitted by this
Agreement; or
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<PAGE>
(e) issue or sell any capital stock of any kind;
(iii) is similar to any provision in paragraph 6 of this
Agreement; or
(iv) provides that a default or event of default shall occur, or
that the Company or any Consolidated Subsidiary shall be required to
prepay, redeem or otherwise acquire for value any Debt or security as
a result of its failure to comply with any provision similar to any of
those set forth in any of the foregoing clauses (i), (ii) or (iii).
"FIRST AMENDMENT" shall mean the Amendment Agreement, entered into as
of June 30, 1993, between the Company and the holders of Notes named
therein.
"FIRST AMENDMENT DATE" shall mean the "Effective Date," as such term
is defined in the First Amendment.
"FISCAL YEAR" shall mean any fiscal year of the Company ending on July
31 .
"FISCAL QUARTER NET WORTH INCREASE AMOUNTS" shall mean for any fiscal
quarter of the Company, the greater of (i) Zero Dollars ($0) and (ii) fifty
percent (50%) of Adjusted Consolidated Net Income for such fiscal quarter.
"FUJI" shall mean The FUJI Bank, Limited.
"GROSS OPERATING INCOME" shall mean for any period, sales minus costs
and expenses (other than depreciation and amortization), in each case, as
reflected as a line item on the consolidated statements of earnings and
cash flows of the Company and the Consolidated Subsidiaries for such
period.
"GUARANTIES" shall mean, with respect to any Person (the "Guarantor"),
any obligation (except the endorsement in the ordinary course of business
of negotiable instruments for deposit or collection) of the Guarantor
guaranteeing or in effect guaranteeing any indebtedness, dividend or other
obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Guarantor:
(i) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(ii) to loan, advance or supply funds, make any capital
contribution or purchase Property from any Person
(a) for the purpose of payment of such indebtedness or
obligation, or
(b) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary
Obligor or otherwise to
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<PAGE>
advance or make available funds for the purchase or payment of
such indebtedness or obligation; or
(iii) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner
of such indebtedness or obligation of the ability of the Primary
Obligor to make payment of the indebtedness or obligation or, in the
case of any such lease, under terms providing that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use;
(iv) to contract or agree to purchase any Property or services if
such contract or agreement requires that payment for such Property or
services (a) shall be made regardless of whether delivery of such
Property or services is ever made or tendered or (b) shall be
subordinated to any indebtedness (of the purchaser or user of such
Property or the Person entitled to the benefit of such services) owed
or to be owed to any Person; or
(v) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
"IDB FINANCING" shall mean any industrial development bond or similar
financing in which a state or other governmental authority incurs Debt to
construct, improve or acquire (or, in the case of the San Marcos Bonds, to
refinance the construction, improvement or acquisition of) fixed assets for
use primarily by the Company or a Subsidiary under a lease or similar
arrangement of at least five years' duration and in connection with which
the Company or such Subsidiary is obligated (directly or indirectly), under
such lease or other arrangement, to make payments to such state or other
governmental authority which are used to service such Debt.
"INSTITUTIONAL INVESTOR" shall mean
(i) any original purchaser of any of the Notes,
(ii) the subsidiaries and affiliates of any such purchaser and
nominees controlled by any such purchaser, and
(iii) any insurance company, pension fund, mutual fund,
investment company, bank, savings bank, savings and loan association,
investment banking company, trust company, finance or credit company,
any portfolio or any investment fund managed by any of the foregoing,
and any other institutional investor, and any nominee of the foregoing
controlled by any such Person, provided that in each case such Person
has assets of at least Five Hundred Million Dollars ($500,000,000).
"INTERCOMPANY DEBT" shall mean Debt owed by the Company or any
Subsidiary to the Company or any Subsidiary.
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<PAGE>
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"LEASE TRANSACTION" shall mean a transaction (including, without
limitation, a transaction with respect to qualified leased Property meeting
the requirements of Section 168(f)(8) of the IRC) pursuant to which the
Company or any Subsidiary makes an investment (as a lessor as contemplated
by said Section 168(f)(8) or on an equity basis with the meaning of Section
4(1) of Revenue Procedure 75-21, 1975-1 C.B. 715, as amended or
supplemented), in all or part of the purchase price of Property, which
Property, concurrently with the purchase thereof, is leased under a
Capitalized Lease Obligation by the Company or such Subsidiary (acting
directly or through either or both of a trust or partnership and with or
without other investors) to a lessee, provided that such investment is made
in part for the purpose of saving or deferring Federal income tax liability
and that the Company or such Subsidiary incurs no obligation, and creates
no Lien in connection with such transaction except that:
(i) the Company or such Subsidiary, directly or indirectly
(a) may borrow part of the funds necessary to pay the
purchase price of such Property (and any related leases, contract
rights, general intangibles or accounts), and
(b) may secure such borrowings by Liens provided that such
Liens do not extend to or cover any Property other than Property
referred to in subclause (a) above and do not secure any
obligations other than those incurred in connection with such
purchase and lease transaction, and
(ii) the Company or such Subsidiary may incur other obligations
in connection with such transaction (and the Company may guarantee any
such obligation of a Subsidiary) provided that such obligations and
guarantee
(a) constitute Non-Recourse Debt,
(b) are incidental and necessary to effect such transaction,
and
(c) are of the type frequently incurred by lessors or equity
investors in connection with the business of leasing Property.
"LETTER OF CREDIT PREPAYMENT EVENT" shall mean either:
(i) the redemption, reacquisition or repurchase of any San Marcos
Bonds (other than in connection with a Permitted IDB Acquisition); or
(ii) any deposit after November 30, 1994, of cash collateral to
secure reimbursement obligations of the Company relating to the San
Marcos Bonds or any letter of credit relating thereto;
A-52
<PAGE>
in either case, solely as result of and in response to the failure of the
bank which has issued any letter of credit relating to the San Marcos Bonds
to extend or renew such outstanding letter of credit; provided, however,
that prior to effecting such redemption, reacquisition, repurchase or cash
collateralization the Company shall have used its best efforts to retain
such letter of credit. The Company covenants, in connection with any
Letter of Credit Prepayment Event described in clause (i) above, to
actively seek to remarket the redeemed, reacquired or repurchased San
Marcos Bonds or, to the extent necessary, to modify the structure of such
IDB Financing to the extent necessary to permit a long-term reissuance of
the repurchased San Marcos Bonds, and, in connection with any Letter of
Credit Prepayment Event described in clause (ii) above, to continue to seek
to obtain an unsecured letter of credit not requiring such cash
collateralization.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including
any agreement to give any of the foregoing (but excluding negative pledge
clauses in agreements related to the borrowing of money), any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction (but excluding informational
filings made in respect of leases)) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"MAXIMUM PENSION CONTRIBUTION" shall mean, for any fiscal year of the
Company, a contribution to any or all Plans or Multiemployer Plans not
exceeding the greater of:
(i) the sum of:
(a) the amount set forth in the chart below under the
heading "Base Contribution" for such fiscal year; plus
(b) the lesser of:
(I) the amount set forth in the chart below under the
heading "Maximum Additional Contribution" for such fiscal
year; and
(II) the amount, if positive, by which cash provided by
operating activities of the Company and the Subsidiaries
(calculated in a manner consistent with the preparation of
the projections contained in the Company's February 28,
1994, financial plan, as provided to the Purchasers) for
such fiscal year exceeds the amount set forth in the chart
below under the heading "Projected Cash Flow" for such
fiscal year, so long as, but only so long as, for a period
of not less than thirty (30) days prior to and thirty (30)
days following each date on which any contribution made by
the Company and the Subsidiary would cause the aggregate
amount of contributions during such fiscal year to exceed
the "Base Contribution" set forth in the chart below for
such
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<PAGE>
fiscal year, the amount of Debt outstanding under the Credit
Agreement (or any replacement, renewal or refinancing
thereof) is Zero Dollars ($0);
and
(ii) the minimum contribution permitted during such fiscal year
pursuant to ERISA, the IRC and the rules and regulations under ERISA
and the IRC.
A contribution to a Plan or Multiemployer Plan permitted by clause (b) of
this definition may be made within a period of ninety (90) days immediately
following the end of such fiscal year.
<TABLE>
<CAPTION>
MAXIMUM PROJECTED CASH
ADDITIONAL PROVIDED BY
FISCAL YEAR BASE CONTRIBUTION CONTRIBUTION OPERATIONS
====================================================================
<S> <C> <C> <C>
1994 $17,000,000 $ 0 $36,700,000
1995 $36,000,000 $ 3,200,000 $15,600,000
1996 $37,000,000 $ 6,900,000 $46,100,000
1997 $30,000,000 $10,500,000 $64,900,000
1998 $23,000,000 $18,200,000 $53,400,000
===================================================================
</TABLE>
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA) in respect
of which the Company or any ERISA Affiliate is an "employer" (as such term
is defined in Section 3 of ERISA).
"MULTIPLE EMPLOYER PLAN" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA other than a Multiemployer Plan,
subject to Title IV of ERISA, to which the Company or any ERISA Affiliate
and an employer (as such term is defined in Section 3 of ERISA) other than
an ERISA Affiliate or the Company contribute.
"NET AFTER-TAX CASH BASIS" shall mean at any time in respect of any
investment made in connection with a Lease Transaction, the initial amount
of such investment made by the Company or any Subsidiary in such Lease
Transaction, less
(i) the net aggregate amount (on a cash basis) received by or
distributed to the Company or such Subsidiary, on or prior to such
time, after payment and deduction of all expenses (including but not
limited to insurance and trustee's fees and after payment of interest
and principal on any loan incurred in such Lease Transaction) to the
extent all such expenses are related to and incurred in connection
with such Lease Transaction, and,
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<PAGE>
(ii) the net aggregate amount (on a cash basis), on account of
reductions in the Company's quarterly estimated tax payments to the
United States and to the State of California, on or prior to such
time, as such shall be adjusted at year-end to reflect the actual tax
benefits obtained on account of reduced taxes payable by virtue of
such Lease Transaction. In computing quarterly estimated tax payments,
the Company shall take into consideration, on a consolidated basis,
the full taxable year's anticipated benefits of the Lease Transaction,
including allowable depreciation and interest, expenses, deductions,
investment and other tax credits, and net rental income.
"NET RENTALS" shall mean, with respect to any period, all fixed
payments that the lessee is required to make during such period by the
terms of any lease having an original term of one year or more, but shall
not include amounts required to be paid in respect of maintenance, repairs,
income taxes, property taxes, insurance, assessments or other similar
charges or additional rentals (in excess of fixed minimums) based upon a
percentage of gross receipts.
"NON-EMPLOYEE DIRECTORS STOCK-OPTION PLANS" shall mean the Company's
1988 Non-Employee Directors Stock-Option Plan and any other comparable
future plan.
"NON-RECOURSE DEBT" shall mean, as to any Person, in connection with a
Lease Transaction, all indebtedness and other obligations of such Person
(i) incurred in connection with such Lease Transaction and (ii) of the type
described in clause (i) of the definition of Lease Transaction; provided,
that the obligations of such Person to repay borrowed money shall be
expressly limited as to recourse solely to (A) the property subject to such
Lease Transaction (including the proceeds of such property) and (B) the
amounts payable by or on behalf of the lessee under or in connection with
such Lease Transaction.
"NOTEHOLDER ACCEPTANCE" shall have the meaning set forth in paragraph
5H(ii) of this Agreement.
"NOTEHOLDER SHARE" shall mean, in respect of any holder of Notes and
any Ratable Prepayment Amount, such holder's ratable share of such Ratable
Prepayment Amount, such ratable share being determined by reference to the
outstanding principal amount of Notes held by such holder as a percentage
of the outstanding principal amount of all Notes.
"NOTICE OF SALE" shall have the meaning specified in clause (ii) of
paragraph 4.E hereof.
"OFFER PERIOD" shall have the meaning set forth in paragraph 5I(ii) of
this Agreement.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents, its Chief
Financial Officer, its Controller, its Secretary or its Treasurer.
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<PAGE>
"ORIGINALLY SCHEDULED PAYMENTS" shall mean and include:
(i) payment of any Debt at scheduled maturity;
(ii) with respect to any Debt, originally scheduled prepayments,
originally scheduled redemptions, originally scheduled sinking fund
payments or originally scheduled reductions in maximum commitments
thereof; and
(iii) payments in respect of any revolving credit agreement,
including, without limitation, the Credit Agreement, which do not
result in a permanent reduction of the original commitment thereunder.
As used in the preceding sentence, "original" or "originally scheduled"
means the maturity, payments, prepayments, or reductions in commitment
established as of the Third Amendment Date, or, if later, at the time of
execution of the relevant credit facility but does not include any
payments, prepayments or reductions in commitment which result from the
occurrence of any contingency, even if the provision requiring such
payment, prepayment or reduction as a result of such contingency was
originally contained in the agreements governing such Debt, and even if the
occurrence of such contingency was foreseeable, at the time of the
execution of the documentation of such issue of Debt.
"OTHER NOTE AGREEMENT" shall have the meaning assigned to such term in
paragraph 2 of this Agreement.
"OTHER PURCHASERS" shall have the meaning assigned to such term in
paragraph 2 of this Agreement.
"PERMITTED EXISTING SUBORDINATED DEBT ACQUISITIONS" shall mean, with
respect to either Series of Existing Subordinated Notes, the purchase or
acquisition by the Company or any Subsidiary of Existing Subordinated Notes
of such Series in anticipation of satisfying an Originally Scheduled
Payment thereof; provided, however, that all of the following conditions
are met:
(i) no Existing Subordinated Notes may be acquired more than
three hundred sixty-four (364) days prior to the date of any such
Originally Scheduled Payment thereof;
(ii) the Company or any Subsidiary, more than one hundred eighty
(180) days, but not more than three hundred sixty-four (364) days,
prior to the date of the next succeeding Originally Scheduled Payment
thereof, may acquire no more than fifty percent (50%) of the aggregate
principal amount of Existing Subordinated Notes of such Series
required to be prepaid or redeemed on the date of the next succeeding
Originally Scheduled Payment;
(iii) the Company or any Subsidiary, not more than one hundred
eighty (180) days prior to the date of the next succeeding Originally
Scheduled Payment thereof, may acquire an aggregate principal amount
of Existing Subordinated Notes of such Series not exceeding (together
with any Existing Subordinated
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<PAGE>
Notes of such Series acquired more than one hundred eighty (180) days,
but not more than three hundred sixty-four (364) days, prior to the
date of the next succeeding Originally Scheduled Payment thereof) one
hundred percent (100%) of the aggregate principal amount of Existing
Subordinated Notes of such Series required to be prepaid or redeemed
on the date of the next succeeding Originally Scheduled Payment;
(iv) at the time of such acquisition:
(a) no Default or Event of Default shall be continuing;
(b) the Company shall not reasonably foresee the occurrence
of any Default or Event of Default at any time prior to the date
of the next succeeding Originally Scheduled Payment thereof;
(c) the Debt Ratio would not exceed 2.50:1.00; and
(d) the Company could incur $1.00 of additional Debt;
(v) the purchase price paid by the Company and the Subsidiaries
in respect of such acquisition of Existing Subordinated Notes shall be
less than one hundred percent (100%) of the principal amount of
Existing Subordinated Notes so acquired; and
(vi) the Company, on the date of each Originally Scheduled
Payment in respect of the Existing Subordinated Notes, shall actually
apply, in accordance with the provisions of such Existing Subordinated
Notes, all Existing Subordinated Notes of such Series acquired by the
Company and the Subsidiaries to the prepayment or redemption of such
Existing Subordinated Notes required to be prepaid or redeemed on such
date.
"PERMITTED IDB ACQUISITIONS" shall mean:
(i) prepayments or repurchases of San Marcos Bonds upon tender by
the holders thereof after May 10, 1994 in accordance with the terms of
the indenture governing the San Marcos Bonds; provided, however, that
San Marcos Bonds in an aggregate principal amount of Sixteen Million
Five Hundred Thousand Dollars ($16,500,000) shall have been issued,
outstanding and held and owned by Persons other than the Company, any
Subsidiary or any Affiliate on May 10, 1994 (whether or not
subsequently repurchased by the Company); and provided, further, that
the Company shall be actively seeking to either remarket the San
Marcos Bonds that were so prepaid or repurchased pursuant to the
provisions of the IDB Financing of the Company's San Marcos, Texas
facility or, to the extent necessary in connection with any
termination of any outstanding letter of credit relating to such
facility, to modify the structure of such IDB Financing to the extent
necessary to permit a long-term reissuance of the repurchased San
Marcos Bonds; and
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<PAGE>
(ii) the redemption in full on or before June 1, 1994 of all the
San Marcos Bonds, but solely as result of and in response to the
failure of FUJI to extend or renew its outstanding letter of credit
relating to the IDB Financing of the Company's San Marcos, Texas
facility; provided, however, that:
(a) prior to effecting such redemption, the Company shall
have used its best efforts to retain such letter of credit by
offering to deposit cash collateral to secure its obligations to
FUJI under the Reimbursement Agreement, dated as of May 1, 1990,
with the Company relating to such IDB Financing;
(b) following the making of such redemption, the Company
shall use its best efforts to obtain a replacement unsecured
letter of credit to issue replacement unsecured San Marcos Bonds,
and shall thereafter use its best efforts to market or sell such
San Marcos Bonds.
"PERMITTED INVESTMENTS" means any of the following, to the extent
owned by the Company free and clear of all Liens (except such Liens as are
permitted by the terms of this Agreement):
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States government or issued by an agency or
instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within one year after the date of
acquisition thereof;
(ii) marketable direct obligations issued by any state of the
United States or any political subdivision of any such state or any
public instrumentality thereof maturing within 180 days after the date
of acquisition thereof and, at the time of acquisition, having a
rating of A or higher from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then one of
the three highest ratings from another nationally recognized rating
service reasonably acceptable to the Required Holders) and not listed
in the Credit Watch published by S&P;
(iii) commercial paper (other than commercial paper issued by
the Company or any Affiliate or Consolidated Subsidiary) maturing no
more than 180 days after the date of creation thereof and, at the time
of acquisition, having a rating of at least A-1 or P-1 from either S&P
or Moody's (or, if at any time neither S&P nor Moody's shall be rating
such obligations, then the highest rating from other nationally
recognized rating services reasonably acceptable to the Required
Holders);
(iv) domestic and Eurodollar certificates of deposit or time
deposits, bankers' acceptances or bank notes maturing within one year
after the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States or any state thereof or
the District of Columbia having a rating of A or higher from S&P or
Moody's;
A-58
<PAGE>
(v) money market funds having an average portfolio maturity, at
the time of acquisition thereof, of not more than 180 days, which
money market funds either:
(a) have a rating from a nationally recognized rating
service reasonably acceptable to the Required Holders which is
equivalent to a rating of either AAAm-G or AAAm from S&P or a
rating of Prime-1 from Moody's; or
(b) are required to invest at least 95% of their assets in
instruments described in other clauses of this definition;
(vi) repurchase obligations with a term of not more than 30 days
for instruments described in clauses (i) and (ii) of this definition;
(vii) investments made in connection with the Citibank, N.A.,
overnight Nassau Sweep Account; and
(viii) repurchase obligations having Kidder, Peabody & Co.,
Inc., or any other investment bank organized under the laws of any
state of the United States and approved by the Required Holders as the
counterparty, with a term of not more than 45 days for whole loans
secured by commercial or residential real estate mortgages.
"PERMITTED PREFERRED DIVIDEND" shall mean dividends in respect of any
Permitted Preferred Stock in an aggregate amount not to exceed in any
period of 365 days (or 366 days in any year in which there is a February
29th) the product of
(i) the lesser of:
(a) an amount equal to 100 basis points in excess of the
yield on the U.S. Treasury security with a constant maturity of
30 years on the date of issuance of the Permitted Preferred
Stock; and
(b) 10% per annum,
times
(ii) the aggregate cash consideration paid to the Company in
consideration of the issuance of the Permitted Preferred Stock.
"PERMITTED PREFERRED STOCK" shall mean any issue of preferred stock of
the Company which is not required to be redeemed, repurchased or otherwise
acquired or retired, in whole or in part, for value by the Company, upon
the occurrence of any contingency or otherwise, prior to July 1, 2003.
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<PAGE>
"PERSON" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
"PLAN" shall mean at any time any "employee pension benefit plan" (as
such term is defined in Section 3 of ERISA) maintained by the Company or
any ERISA Affiliate for employees of the Company or such ERISA Affiliate,
excluding any Multiemployer Plan, but including, without limitation, any
Multiple Employer Plan.
"PREPAYMENT EVENT" shall mean any Letter of Credit Prepayment Event,
any mandatory or optional defeasance, prepayment or repurchase, in whole or
in part, of any issue of Debt (other than Debt owing solely to the Company
or any Wholly-Owned Subsidiary), or reduction in commitment in any credit
facility, of the Company or any Subsidiary, or any event which occurs that
gives rise to an obligation of the Company or any Subsidiary to make any
such defeasance, prepayment, repurchase or reduction, in each case, other
than:
(i) Originally Scheduled Payments;
(ii) Permitted Existing Subordinated Debt Acquisitions;
(iii) Permitted IDB Acquisitions;
(iv) Equity Issuance Acquisitions; and
(v) De Minimus Payments.
In connection with any Debt described in clause (vi) of the definition of
"Debt," payments in respect of contributions of amounts not exceeding,
during any fiscal year of the Company, the Maximum Pension Contribution for
such fiscal year to any Plan or Multiemployer Plan shall not give rise to a
Prepayment Event, but a Prepayment Event will result from the payment or
contribution to any such Plan or Multiemployer Plan of any amount in excess
of the Maximum Pension Contribution during any fiscal year.
"PREPAYMENT OFFER" shall have the meaning set forth in paragraph 5H(i)
of this Agreement.
"PREPAYMENT PORTION" shall have the meaning set forth in paragraph
5I(iii) of this Agreement.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"PURCHASE MONEY MORTGAGES" shall mean a Lien held by any Person
(whether or not the seller of such assets) on tangible assets (other than
assets acquired to replace, repair, upgrade or alter assets owned by the
Company or any Subsidiary on the Closing Date) acquired, improved or
constructed by the Company or any Subsidiary after the Closing Date, which
Lien secures all or a portion of the related purchase price or
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<PAGE>
improvement or construction costs of such assets (or Debt incurred to pay
such purchase price or costs), or any Lien existing on any tangible assets
of any corporation at the time it becomes a Subsidiary, and extensions (as
to time), renewals and replacements of any such Lien or the Debt secured
thereby, provided that, in each such case such Lien does not extend to any
other asset of the Company or any Subsidiary; provided, further, that any
Lien on acquired Property, or on Property of a corporation at the time it
becomes a Subsidiary, was not created in contemplation of such acquisition
or such corporation becoming a Subsidiary, as the case may be.
"PURCHASERS" shall mean you and the Other Purchasers.
"RATABLE PREPAYMENT AMOUNT" shall mean, in respect of the Notes:
(i) in connection with any Letter of Credit Prepayment Event, an
amount equal to the product of:
(a) the aggregate principal amount of San Marcos Bonds
redeemed, reacquired or repurchased, or with respect to which
cash collateral has been deposited to secure reimbursement
obligations of the Company relating to the San Marcos Bonds or
any letter of credit relating thereto, as the case may be, by the
Company; times
(b) the quotient of:
(I) the aggregate amount of Notes then outstanding;
divided by
(II) the aggregate amount of the Notes and the 9.33%
Senior Notes due December 15, 2002 of the Company then
outstanding;
and
(ii) with respect to each other Prepayment Event, a principal
amount of the Notes equal to the product of:
(a) the highest percentage of any issue of Debt being
prepaid, or as to which any offer to prepay shall apply, as a
result of the occurrence of such Prepayment Event, multiplied by
(b) the outstanding principal amount of the Notes.
"REQUIRED HOLDERS" shall mean at any time the holder or holders of at
least sixty-six and two-thirds percent (66 2/3%) of the aggregate principal
amount of the Notes outstanding at such time, provided that Notes owned by
the Company, any Subsidiary or any Affiliate at such time shall be deemed
not to be outstanding for purposes of determining such percentage.
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"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of
the Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"RESTRICTED STOCK PLANS" shall mean the 1969, 1970, 1972, 1974 and
1984 Restricted Stock Plans of the Company and any other comparable future
plan.
"RIGHT TO PUT" shall have the meaning specified in clause (i) of
paragraph 4.E hereof.
"RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of August
15, 1986, between the Company and The First National Bank of Chicago, as in
effect on December 21, 1992.
"S&P" means Standard & Poor's Corporation.
"SAN MARCOS BONDS" shall mean bonds originally issued in connection
with the IDB Financing of Company's San Marcos, Texas facility, or
replacement bonds issued on substantially the same terms as the originally
issued bonds.
"SECOND AMENDMENT" shall mean the Second Amendment Agreement entered
into as of September 24, 1993, between the Company and the holder of Notes
named therein.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall have the meaning specified in Section 2(1) of the
Securities Act.
"SENIOR DEBT" shall mean all Debt of Subsidiaries, all Debt of the
Company secured by any Lien and all other Debt ranking senior to or pari
passu with the Notes with respect to distributions of the Company's
Property in any bankruptcy proceeding.
"SENIOR OFFICER" shall mean with respect to any corporation each of
the Chairman, President, any Vice-President, the Chief Financial Officer,
the Secretary, and the Treasurer of such corporation.
"STOCK INCENTIVE PLANS" shall mean the 1989 Stock Incentive Plan of
the Company and any other future comparable plan.
"STOCK OPTION PLANS" shall mean the 1972, 1973, 1974, 1982 and 1984
Stock Option Plans of the Company and any other future comparable plan.
"SUBSIDIARY" shall mean any corporation organized under the laws of
any state of the United States of America, Canada, or any province of
Canada, that has the majority of its Property located in and makes the
major portion of its sales to Persons located in the United States of
America or Canada, and more than fifty percent (50%) of the total
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combined voting power of all classes of Voting Stock of which shall, at the
time as of which any determination is being made, be owned, directly or
indirectly, by the Company.
"THIRD AMENDMENT" shall mean the Third Amendment Agreement entered
into as of May 10, 1994, between the Company and the holder of Notes named
therein.
"THIRD AMENDMENT DATE" shall mean the "Effective Date," as such term
is defined in the Third Amendment.
"TRADE RECEIVABLES AGREEMENT" shall mean
(i) the Amended and Restated Trade Receivables Purchase and Sale
Agreement dated as of January 26, 1990 and as amended thereafter among
the Company, Corporate Asset Funding Company, Inc., Citibank, N.A. and
Citicorp North America, Inc., individually and as agent,
(ii) the Amended and Restated Trade Receivables Purchase and Sale
Agreement dated as of January 26, 1990 and as amended thereafter among
the Company, Citibank, N.A. and Citicorp North America, Inc.,
individually and as agent, and
(iii) other agreements for the sale of receivables, or other
amounts payable to the Company on account of any pre-production costs,
by the Company or any Subsidiary, with recourse to the Company or such
Subsidiary no greater than as set forth in the agreement referred to
in clause (i) of this definition,
provided that in no event shall
(a) the Company or any Subsidiary sell Property (or subject
Property to any Liens) under any such agreements other than Property
of the type that may be sold under any such agreements in accordance
with the terms of any such agreements as in effect on the Closing
Date, and in no event shall such sales be made unless they are sales
of interests in accounts and general intangibles as such terms are
defined by the Uniform Commercial Code as in effect in New York,
(b) at any time the aggregate amount of claims (whether or not
asserted at such time) against any one or more of the Company or the
Subsidiaries, or assets of any of them, arising out of such agreements
(but only that portion of such claims that represents principal)
exceed the greater of,
(I) thirty-five percent (35%) of Adjusted Consolidated
Tangible Net Worth, or
(II) Sixty Million Dollars ($60,000,000), and
(c) for any period of ten consecutive Business Days, the
aggregate amount of claims (whether or not asserted at such time)
against any one or more of the Company or the Subsidiaries, or assets
of any of them, arising out of such
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agreements (but only that portion of such claims that represents
principal) exceed ninety-one percent (91%) of the aggregate face
amount of the receivables and general intangibles with respect to
which the Company may or has sold interests under any such agreements
and which receivables and general intangibles are outstanding at such
time.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WARRANT AGREEMENT" shall mean that certain Warrant Agreement entered
into among the Company and holders of the Notes and certain other Debt of
the Company on or after the Amendment Date in compliance with the
provisions of paragraph 7A of the Amendment.
"WARRANTS" shall mean warrants to purchase shares of the common stock
of the Company issued pursuant to the Warrant Agreement.
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary one hundred
percent (100%) of the capital stock of which (other than directors'
qualifying shares) is held of record and beneficially owned by the Company
or any other Wholly-Owned Subsidiary.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as you shall hold any
Note, it will make payments of principal thereof, premium, if any, Agreed Put
Consideration, and interest thereon, by wire transfer of immediately available
funds for credit to your account or accounts as specified in the Purchaser
Schedule attached hereto, or such other account or accounts in the United States
as you may designate in writing, notwithstanding any contrary provision herein
or in any Note with respect to the place of payment. You agree that, before
disposing of any Note, you will make a notation thereon (or on a schedule
attached thereto) of all principal payments previously made thereon and of the
date to which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 11.A to any Transferee that shall have made the same
agreement as you have made in this paragraph 11.A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you and any
Transferee harmless against liability for the payment of all out-of-pocket
expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and
expenses of any special counsel engaged by you or any Transferee in
connection with this Agreement, the transactions contemplated hereby and
any subsequent proposed
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modification of, or proposed consent under, this Agreement, whether or not
such proposed modification shall be effected or proposed consent granted,
and
(ii) the costs and expenses, including attorneys' fees, incurred by
you or any Transferee in enforcing any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process issued in
connection with this Agreement or the transactions contemplated hereby or
by reason of you or any Transferee having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case,
provided that the Company shall be required to pay for such attorney's fees only
to the extent that such attorneys are retained by the Required Holders to
represent, as a group, the Required Holders and all other holders of Notes which
shall consent to such representation. The obligations of the Company under this
paragraph 11.B shall survive the transfer of any Note or portion thereof or
interest therein by you or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement and the Note may be amended,
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holder(s) except that, without the written consent of the holder or holders of
all Notes at the time outstanding, no amendment to this Agreement shall change
the maturity of any Note, or change the principal of, or the rate or time of
payment of interest or any premium payable with respect to any Note, or affect
the time, amount or allocation of any required prepayments, or reduce the
proportion of the principal amount of the Notes required with respect to any
consent. With respect to waivers or consents to amendments to or concerning the
provisions of paragraph 5H hereof, the provisions of such paragraph and (except
as set forth in this sentence) the definitions used therein (as used therein)
may not be waived, amended or supplemented without the consent of each holder of
Notes, but waivers concerning the occurrence of any Prepayment Event, and
waivers and consents to amendments or supplements to the definition of
Prepayment Event, may be given by the Required Holders.
Each holder of any Note at the time or thereafter outstanding shall be
bound by any consent authorized by this paragraph 11.C, whether or not such Note
shall have been marked to indicate such consent, but any Notes issued thereafter
may bear a notation referring to any such consent. No course of dealing between
the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The
Notes are issuable as registered notes without coupons in denominations of at
least One Million Dollars ($1,000,000), except as may be necessary to reflect
any principal amount not evenly divisible by, One Million Dollars ($1,000,000).
The Company shall keep at its principal office a register in which the Company
shall provide for the registration of Notes and of transfers of Notes. Upon
surrender for registration of transfer of any Note at the principal office of
the Company, the Company shall, at its expense, execute and deliver one or more
new Notes of like tenor and of a like aggregate principal amount, registered in
the name of the Transferee or Transferees so long as any such Transferee or
Transferees are Institutional Investors. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized
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denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes that the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed by
the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue that were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation, upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and premium, if any, and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Company shall not be affected by notice to the contrary.
Subject to the preceding sentence, the holder of any Note may from time to time
grant participations in all or any part of such Note to any Institutional
Investor on such terms and conditions as may be determined by such holder in its
sole and absolute discretion, it being understood that such holder's obligations
under this Agreement shall remain unchanged and that such holder shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and in addition, that you agree that you shall only grant such
participations in compliance with any applicable provisions of the Securities
Act.
11F. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements contained in the Company's Quarterly Report on Form 10-Q for fiscal
quarter ended May 2, 1993. If any change in accounting principles from those
used in the preparation of such financial statements hereafter occasioned by the
promulgation of rules and regulations by or required by the Financial Accounting
Standards Board, the Cost Accounting Standards Board or the Securities and
Exchange Commission (or successors thereto or agencies with similar functions)
result in a material change in the accounting principles used to prepare the
financial statements contained in the Company's Annual Reports on Form 10-K or
Quarterly Reports on Form 10-Q, the Company and the holders of Notes agree, upon
notification of such change by the Company to the holders of Notes or by a
holder of Notes to the Company, to enter into negotiations in order to amend
paragraph 6 and the Financial Covenants incorporated by reference herein, as
applicable, so as to equitably reflect such change with the desired result that
the criteria for evaluating the Company's financial condition shall be the same
after such change as if such change had not been made.
11G. DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
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11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
11I. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
11J. DISCLOSURE TO OTHER PERSONS. You agree to use your best efforts to
hold in confidence and not to disclose any Confidential Information, provided,
that you will be free, after notice to the Company, to correct any false or
misleading information that may become public concerning your relationship to
the Company and the Subsidiaries or to the transactions contemplated by this
Agreement. Notwithstanding the foregoing, the Company acknowledges that the
holder of any Note may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder (including, without limitation, Confidential Information), by or
on behalf of the Company or any Subsidiary in connection with or pursuant to
this Agreement, to
(i) such holder's directors, officers, employees, agents and
professional consultants,
(ii) any other holder of any Note,
(iii) any Institutional Investor to which such holder sells or offers
to sell such Note or any part thereof, provided that such Institutional
Investor signs a written agreement to comply with the confidentiality
provisions of this Agreement, regardless of whether or not such offeree
purchases any Notes, and provided further that no such agreement shall be
required so long as such Institutional Investor is furnished only with
information that is not Confidential Information,
(iv) any Institutional Investor to which such holder sells or offers
to sell a participation in all or any part of such Note, provided that such
Institutional Investor signs a written agreement to comply with the
confidentiality provisions of this Agreement, regardless of whether or not
such offeree purchases any Notes, and provided further that no such
agreement shall be required so long as such Institutional Investor is
furnished only with information that is not Confidential Information,
(v) any federal or state regulatory authority having jurisdiction over
such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization or
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(vii) any other Person to which such delivery or disclosure may be
necessary,
(a) in compliance with any law, rule, regulation or order
applicable to such holder,
(b) in response to any subpoena or other legal process, or
(c) in connection with any litigation to which such holder is a
party.
11K. NOTICES. All written communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid), and
(i) if to you, addressed to you at the address specified for such
communications in the Purchaser Schedule attached hereto, or at such other
address as you shall have specified to the Company in writing,
(ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified
an address to the Company, then addressed to such other holder in care of
the last holder of such Note which shall have so specified an address to
the Company, and
(iii) if to the Company, addressed to it at
Rohr, Inc.
Foot of H Street
Chula Vista, CA 92012
Attention: Treasurer
copy to: General Counsel
or at such other address as the Company shall have specified to the holder
of each Note in writing; provided, however, that any such communication to
the Company may also, at the option of the holder of any Note, be delivered
by any other means either to the Company at its address specified above or
to any officer of the Company.
Any written communication sent in accordance with the first sentence of this
paragraph 11K, other than in accordance with the proviso thereto, shall be
deemed to have been received when sent; any written communication delivered in
accordance with such proviso shall be deemed to have been received when
delivered.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement,
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holders, the determination
of such satisfaction shall be made by you or the Required Holders, as the case
may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
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11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF NEW YORK.
11O. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
11P. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
ROHR, INC.
By:
------------------------------------
Name:
Title:
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The foregoing Agreement is
hereby accepted as of the
date first above written.
[NAME OF PURCHASER]
By:
-----------------------------------
Name:
Title:
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EXHIBIT B1
FORM OF OPINION OF GIBSON, DUNN & CRUTCHER
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Rohr, Inc.
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement dated as of May 10, 1994
(the "Third Amendment") among Rohr, Inc., a Delaware corporation (together with
its predecessor, Rohr Industries, Inc., the "Company"), and each of the Persons
listed on Annex 1 hereto (the "Holders"), which Third Amendment, among other
things, amends those certain Note Agreements (collectively, the "Original Note
Agreement"), each dated as of January 15, 1990, between the Company and each of
the Holders, as previously amended by that certain Amendment Agreement dated
June 30, 1993 (the "First Amendment") and that certain Second Amendment
Agreement dated September 24, 1993 (the "Second Amendment," and, collectively,
the "Existing Note Agreement," and, as amended and restated by the Third
Amendment, the "Amended Note Agreement"). The capitalized terms used herein and
not defined herein have the meanings assigned to them by or pursuant to the
terms of the Third Amendment. The Third Amendment, the Amended Note Agreement
and the Company's 9.35% Notes due January 29, 2000 (as amended by the First
Amendment, the "Notes") are hereinafter referred to collectively as the
"Amendment Documents."
We have acted as special counsel to the Company in connection with the
transactions contemplated by the Third Amendment. This opinion is delivered to
you pursuant to paragraph 4B(i) of the Third Amendment. In acting as such
counsel, we have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
(d) a certified copy of the certificate of incorporation and bylaws of
the Company as in effect on the date hereof;
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(e) the opinion of Hebb & Gitlin, special counsel to the Holders,
dated the date hereof; and
(f) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates as we have deemed necessary or appropriate to enable us to
render this opinion.
In rendering our opinion, we have assumed with your permission the
following:
(a) the authenticity of all documents submitted to us as originals;
(b) the conformity of any documents submitted to us as copies to their
respective originals;
(c) the accuracy of all reports and certificates received from public
officials;
(d)(i) each Holder has all requisite power and authority to execute
and deliver the Third Amendment and to perform its obligations under the
Amended Note Agreement (and at all relevant times had the requisite power
and authority to execute and deliver the Original Note Agreement, the First
Amendment and the Second Amendment and to perform its obligations under the
Existing Note Agreement); (ii) the execution and delivery of the Third
Amendment by such Holder and performance of the obligations of such Holder
under the Amended Note Agreement have been duly authorized by all necessary
action (and the execution and delivery of the Original Note Agreement, the
First Amendment and the Second Amendment by such Holder and the performance
of the obligations of such Holder pursuant to the Amended Note Agreement
were at all relevant times duly authorized by all necessary action); (iii)
the Third Amendment has been executed and delivered by duly authorized
officers of such Holder (and the Original Note Agreement, the First
Amendment and the Second Amendment were executed and delivered by duly
authorized officers of such Holder); and (iv) the Third Amendment and the
Amended Note Agreement are legal, valid and binding obligations of such
Holder, enforceable against it in accordance with their respective terms;
(e) the Company is a corporation duly incorporated, validity existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business and own
its Property;
(f) the Company has the requisite corporate power and authority to
execute and deliver the Third Amendment and to perform its obligations set
forth in the Amended Note Agreement (and the Company had at all relevant
times the requisite corporate power and authority to execute and deliver
the Original Note Agreement, the First Amendment and the Second Amendment
and to perform its obligations under the Existing Note Agreement);
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(g) the Third Amendment and the Amended Note Agreement have been duly
authorized by all necessary corporate action on the part of the Company and
the Third Amendment has been executed and delivered by duly authorized
officers of the Company (and the Existing Note Agreement was at all
relevant times duly authorized by all necessary corporate action on the
part of the Company and the Original Note Agreement, the First Amendment,
the Second Amendment were executed and delivered by duly authorized
officers of the Company);
(h) all parties to the Third Amendment have filed all required
franchise tax returns, if any, and paid all required taxes, if any, under
the California Revenue & Taxation Code (see White Dragon Productions, Inc.
----------------------------------
v. Performance Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745
-------------------------------
(1987); Damato v. Slevin, 214 Cal. App. 3d 668, 262 Cal. Rptr. 879 (1989);
----------------
California Revenue and Taxation Code Section 23301 et seq.);
------
(i) there are no agreements or understandings between or among the
Company, any Holder or third parties which would expand, modify or
otherwise affect the terms of the Third Amendment or the Amended Note
Agreement or the respective rights or obligations of the parties thereunder
and each of the foregoing documents correctly and completely sets forth the
intent of all parties thereto (see Trident Center v. Connecticut General
--- -------------------------------------
Life Insurance Company, 847 F.2d 564 (9th Cir. 1989));
----------------------
(j) Each Holder holds its Note, as amended, for its own account and
not with a view to the distribution thereof within the meaning of the
Securities Act of 1933, as amended; and
(k) Each Holder is an "incorporated admitted insurer" within the
meaning of Section 1100.1 of the California Insurance Code.
In rendering our opinion, we have relied, as to certain factual matters, on
warranties and representations contained in the Third Amendment, certificates of
officers of the Company or certificates obtained from public officials.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. Each of the Third Amendment, the Amended Note Agreement and the Notes
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
2. The execution and delivery of the Third Amendment by the Company, the
repayment of Debt by the Company pursuant to the Third Amendment and Amended
Note Agreement and the consummation of the transactions which are contemplated
by the Third Amendment to be consummated by the Company on the Effective Date do
not violate the certificate of incorporation or bylaws of the Company or any
statute, rule or regulation of the
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State of California or the Untied States of America applicable to the Company
which is generally applicable to transactions in the nature of those
contemplated by the Third Amendment and the Amended Note Agreement, or the
Delaware General Corporation Law.
3. No consents, approvals or authorizations of any governmental
authorities of the State of California or the United States of America are
required by law to be obtained on the part of the Company in connection with the
execution and delivery of the Third Amendment or the performance of the Amended
Note Agreement, except such consents, approvals or authorizations that have been
obtained on or prior to the date hereof.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. Our opinion is based upon the laws of the State of California, the
State of Delaware (with respect to corporate law) and the United States of
America. We have relied upon the opinion of Hebb & Gitlin with respect to all
matters governed by New York law. We have not examined the question of what law
would govern the interpretation or enforcement of the Third Amendment, the
Amended Note Agreement and the Notes and our opinion is based on the assumption
that the internal laws of the State of California and the laws of the United
States of America would govern the provisions of such agreements and instruments
and the transactions contemplated thereby. However, we note that if any such
agreement or instrument is not, in fact, enforceable under the laws of New York,
such agreement or instrument may not be enforced by a California court under
applicable conflict-of-law principles.
B. This opinion is limited to the effect of the present state of the laws
of the State of California, the United States of America and, to the limited
extent set forth above, the State of Delaware and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the
event of future changes in such laws or the interpretations thereof or such
facts.
C. Our opinions, and our assumptions and qualifications relating to
enforceability of agreements or instruments against parties other than the
Company, are subject to (i) the effect of any bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting the
enforcement of creditors' rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent transfers or preferential
transfers) and (ii) general principles of equity, including without limitation
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether enforceability is considered in a
proceeding in equity or at law.
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D. We express no opinion with respect to the legality, validity, binding
nature or enforceability of any provision of the Amendment Documents to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
E. We express no opinion as to the legality, validity, binding nature or
enforceability (i) of any provision of the Amendment Documents insofar as it
provides for the payment or reimbursement of costs and expenses or for claims,
losses or liabilities in excess of a reasonable amount determined by any court
or other tribunal or (ii) regarding any Holder's ability to collect attorneys'
fees and costs in an action involving the Amendment Documents and the Amended
Note Agreement if the Holder is not the prevailing party in such action (we call
your attention to the effect of Section 1717 of the California Civil Code, which
provides that, where a contract permits one party thereto to recover attorneys'
fees, the prevailing party in any action to enforce any provision of the
contract shall be entitled to recover its reasonable attorneys' fees).
F. We express no opinion as to the legality, validity, binding nature or
enforceability of (i) any waiver of rights existing, or duties owed, that is
broadly or vaguely stated or does not describe the right or duty purportedly
waived with reasonable specificity, (ii) any waivers or consents (whether or not
characterized as a waiver or consent in the Amendment Documents relating to the
rights of the Company or duties owing to it existing as a matter of law,
including, without limitation, waivers of the benefits of statutory or
constitutional provisions, to the extent such waivers or consents may be found
by a California court to be against public policy or which are ineffective
pursuant to California statutes and judicial decisions or (iii) provisions in
the Amendment Documents that may be construed as imposing penalties,
forfeitures, late payment charges or an increase in the interest rate upon
delinquency in payment or the occurrence of default.
G. We express no opinion as to any provision of the Amendment Documents
requiring written amendments or waivers of such documents insofar as it suggests
that oral or other modifications, amendments or waivers could not be effectively
agreed upon by the parties or that the doctrine of promissory estoppel might not
apply.
H. We express no opinion as to the applicability or effect of each
Holder's compliance with any state or federal laws applicable to the
transactions contemplated by the Amendment Documents because of the nature of
its business.
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This opinion is rendered to the Holders in connection with the Third
Amendment and the Amended Note Agreement and may not be relied upon by any
person other than the Holders or by the Holders in any other context, without
our written consent, which consent will not be unreasonably withheld, provided
that the Holders may provide this opinion (i) to regulatory authorities should
they so request or in connection with their normal examinations, (ii) to the
independent auditors and attorneys of the Holders, (iii) pursuant to order or
legal process of any court or governmental agency or (iv) in connection with any
legal action to which the Holder is a party arising out of the transactions
contemplated by the Amendment Documents. This opinion may not be quoted without
the prior written consent of this Firm.
Very truly yours,
Gibson, Dunn & Crutcher
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<PAGE>
ANNEX 1
ADDRESSEES
The Prudential Insurance Company of America
Four Gateway Center, 9th Floor
Newark, NJ 07102-4069
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Connecticut General Life Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Securities Accounting Department
CIGNA Property and Casualty Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Life Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Sun Life Assurance Company of Canada
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Sun Life Assurance Company of Canada (U.S.)
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Hebb & Gitlin P.C.
One State Street
Hartford, CT 06103-3178
A-77
<PAGE>
EXHIBIT B2
FORM OF OPINION OF RICHARD MADSEN, ESQ.
[LETTERHEAD OF RICHARD MADSEN, ESQ.]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Third Amendment Agreement, dated as of May 10, 1994
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement dated as of May 10, 1994
(the "Third Amendment") among Rohr, Inc., a Delaware corporation (together with
its predecessor, Rohr Industries, Inc., the "Company"), and each of the Persons
listed on Annex 1 hereto (the "Holders"), which Third Amendment, among other
things, amends those certain several Note Agreements (collectively, the
"Original Note Agreement"), each dated as of January 15, 1990, between the
Company and each of the Holders, as previously amended by that certain Amendment
Agreement dated June 30, 1993 (the "First Amendment") and that certain Second
Amendment Agreement dated September 24, 1993 (the "Second Amendment," and,
collectively, the "Existing Note Agreement," and, as amended and restated by the
Third Amendment, the "Amended Note Agreement"). The capitalized terms used
herein and not defined herein have the meanings assigned to them by or pursuant
to the terms of the Third Amendment. The Third Amendment, the Amended Note
Agreement and the Company's 9.35% Notes due January 29, 2000 (as amended by the
First Amendment, the "Notes") are hereinafter referred to collectively as the
"Amendment Documents."
I am the General Counsel of the Company and have acted in such capacity in
connection with the transactions contemplated by the Third Amendment. This
opinion is delivered to you pursuant to paragraph 4B(ii) of the Third Amendment.
In acting as such counsel, I have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
(d) the certificates delivered to the Holders pursuant to paragraph 4C
of the Third Amendment;
A-78
<PAGE>
(e) the amendment described in paragraph 4I of the Third Amendment;
(f) the Seventh Amendment to the Credit Agreement, dated of even date
herewith;
(g) a certified copy of the restated certificate of incorporation of
the Company, and a copy of the bylaws of the Company, each as in effect on
the date hereof (the "Charter" and the "Bylaws", respectively); and
(h) a long-form good standing certificate from the state of Delaware
for the Company and foreign good standing certificates or similar
certificates for the Company from each of the states set forth on Annex 2
hereto.
I have also examined (or at my direction, a lawyer on my staff has examined
and reported to me concerning) originals, or copies certified or otherwise
identified to my (or his or her) satisfaction, of such other records of the
Company, documents, agreements, instruments and certificates of public officials
as I have deemed necessary or appropriate to enable me to render this opinion.
In rendering my opinion, I have assumed the following:
(a) the authenticity of all documents submitted to me as originals;
(b) the conformity of any documents submitted to me as copies to their
respective originals; and
(c) the accuracy of all reports and certificates received from public
officials.
In rendering my opinion, I have relied as to matters of fact, to the extent
I deem necessary and proper, on warranties and representations as to factual
matters contained in the Third Amendment. Without making any investigation
thereof, I have no actual knowledge of any material inaccuracies in any of the
facts contained in the Third Amendment.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and own its Property.
2. The Company has duly qualified and is in good standing as a foreign
corporation in the States of California, Maryland, Arkansas, Alabama and Texas.
3. To the best of my knowledge after reasonable inquiry, there is no
default or existing condition which, with the passage of time or notice, or
both, would result in a default by the Company or any Subsidiary under any
contract, lease or commitment known to me to which any one or more of the
Company or any Subsidiary is a party or by which their respective Properties may
be bound, except where such default would not have a material adverse effect
A-79
<PAGE>
on the ability of the Company to perform its obligations set forth in each of
the Amendment Documents.
4. Except as set forth in Annex 2 to the Third Amendment, to the best of
my knowledge after due inquiry, there is no judgment, order, action, suit,
proceeding, inquiry or investigation, at law or in equity, before any court or
governmental authority, arbitration board or tribunal, pending or threatened
against the Company, except for any such judgment, order, action, suit,
proceeding, inquiry, or investigation that is not reasonably likely to have a
material adverse effect on the ability of the Company to perform its obligations
under the Amendment Documents.
5. The Company has the requisite corporate power and authority to execute
and deliver the Third Amendment and to perform its obligations set forth in each
of the Amendment Documents.
6. The Third Amendment has been duly authorized by all necessary
corporate action on the part of the Company and has been executed and delivered
by a duly authorized officer of the Company.
7. The execution and delivery of the Third Amendment by the Company, the
repayment of the Debt of the Company governed and evidenced by the Amendment
Documents and the consummation of the transactions which are contemplated by the
Third Amendment to be consummated by the Company on the Effective Date:
(a) do not violate:
(i) the Charter or the Bylaws; or
(ii) any statute, rule or regulation of the State of California
or the United States of America applicable to the Company which is
generally applicable to transactions of the nature of those
contemplated by the Third Amendment, or the Delaware General
Corporation Law;
(b) to the best of my knowledge after reasonable inquiry, will not
conflict with, result in a breach of, or constitute a default under, any
indenture, mortgage, deed of trust, bank loan, credit agreement or similar
agreement of which I have knowledge to which the Company or any of its
Subsidiaries is a party or by which it or any of them or its or any of
their Property may be bound; and
(c) to the best of my knowledge after reasonable inquiry, do not
result in or require the creation of any Lien or encumbrance upon or with
respect to any of the Company's Property or the Property of any Subsidiary.
8. No consents, approvals or authorizations of any governmental
authorities of the State of California, the State of Delaware or the United
States of America are required by law to be obtained on the part of the Company
in connection with the execution and delivery of the Third Amendment, except
such consents, approvals or authorizations that have been obtained on or prior
to the date hereof.
A-80
<PAGE>
I render no opinion herein as to matters involving the laws of any
jurisdiction other than the State of California and the United States of America
and, to the limited extent discussed below, the laws of the State of Delaware.
I am generally familiar with the Delaware General Corporation Law and, for the
limited purpose of my opinions in paragraphs 1, 5, 6, 7(a) and 8 and limited
solely to the Delaware General Corporation Law, I have expressed my opinions
regarding the effect of the Delaware General Corporation Law and did not feel it
necessary to obtain the opinion of Delaware counsel.
This opinion is limited to the effect of the present state of the laws of
the States of California and, for the limited purpose referred to above,
Delaware, and of the United States of America and to the facts bearing upon this
opinion as they presently exist. I assume no obligation to revise or supplement
this opinion in the event of future changes in such laws or the interpretations
thereof or in such facts.
This opinion is rendered to the Holders in connection with the Third
Amendment and may not be relied upon by any person other than the Holders and
their successors and assigns or by the Holders in any other context, without our
written consent, which consent will not be unreasonably withheld, provided that
the Holders may provide this opinion (i) to regulatory authorities should they
so request or in connection with their normal examinations, (ii) to the
independent auditors and attorneys of the Holders, (iii) pursuant to order or
legal process of any court or governmental agency or (iv) in connection with any
legal action to which the Holder is a party arising out of the transactions
contemplated by the Amendment Documents. This opinion may not be quoted without
my prior written consent.
Sincerely,
R. W. Madsen
General Counsel and Secretary
A-81
<PAGE>
ANNEX 1
ADDRESSEES
The Prudential Insurance Company of America
Four Gateway Center, 9th Floor
Newark, NJ 07102-4069
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Connecticut General Life Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Securities Accounting Department
CIGNA Property and Casualty Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Life Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Sun Life Assurance Company of Canada
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Sun Life Assurance Company of Canada (U.S.)
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Hebb & Gitlin P.C.
One State Street
Hartford, CT 06103-3178
A-82
<PAGE>
ANNEX 2
FOREIGN QUALIFICATIONS
Alabama
Arkansas
California
Maryland
Texas
A-83
<PAGE>
EXHIBIT B3
FORM OF OPINION OF HEBB & GITLIN
[LETTERHEAD OF HEBB & GITLIN]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Rohr, Inc.
----------
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement (the "Third Amendment"),
dated as of May 10, 1994, among Rohr, Inc., a Delaware corporation (together
with its predecessor, Rohr Industries, Inc., the "Company"), and each of the
Persons listed on Annex 1 hereto (the "Holders"), which Third Amendment, among
other things, amends those certain several Note Agreements (collectively, the
"Original Note Agreement"), each dated as of January 15, 1990, between the
Company and, respectively, each of the Purchasers identified on Annex 1 thereto,
as said Note Agreement has been previously amended by that certain Amendment
Agreement (the "First Amendment") dated June 30, 1993 and that certain Second
Amendment Agreement (the "Second Amendment"), dated September 24, 1993
(collectively, the "Existing Note Agreement," and, as amended and restated by
the Third Amendment, the "Amended Note Agreement"). The capitalized terms used
herein and not defined herein have the meanings assigned to them by or pursuant
to the terms of the Third Amendment. The Third Amendment, the Amended Note
Agreement and the Company's 9.35% Notes due January 29, 2000 (as amended by the
First Amendment, the "Notes") are hereinafter referred to collectively as the
"Amendment Documents."
We have acted as special counsel to the Holders in connection with the
transactions contemplated by the Third Amendment. This opinion is delivered to
you pursuant to paragraph 4B(iii) of the Third Amendment. In acting as such
counsel, we have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
A-84
<PAGE>
(d) a certificate of officers of the Company, substantially in the
form attached to the Third Amendment as Exhibit C;
(e) a certificate of the Secretary of the Company, substantially in
the form attached to the Third Amendment as Exhibit D;
(f) copies of the certificate of incorporation (the "Certificate of
Incorporation") and bylaws (the "Bylaws") of the Company, as attached to a
certificate of the Secretary of the Company, dated July 9, 1993 and
delivered to the holders in connection with the transactions contemplated
by the First Amendment;
(g) the opinion of Gibson, Dunn & Crutcher, special counsel to the
Company, dated the date hereof;
(h) the opinion of Richard Madsen, Esq., general counsel to the
Company, dated the date hereof; and
(i) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates of public officials as we have deemed necessary or appropriate
to enable us to render this opinion.
In rendering our opinion, we have relied, to the extent we deem necessary
and proper, on:
(a) warranties and representations as to factual matters contained in
the Third Amendment and the Amended Note Agreement; and
(b) said opinions of Gibson, Dunn & Crutcher and Richard Madsen, Esq.,
with respect to all questions governed by California law, Delaware
corporate law and with respect to all questions concerning the due
incorporation, valid existence, corporate power and authority, good
standing of, and the authorization, execution and delivery of instruments
by, the Company (except that we have made an independent examination of the
Certificate of Incorporation and the Bylaws, and of the aforementioned
certificates of officers of the Company); based on such investigation as we
have deemed appropriate, said opinion is satisfactory in form and content
to us and in our opinion the Holders and we are justified in relying
thereon. As to such opinions and the matters therein upon which we are
relying, we incorporate herein the assumptions and qualifications to such
opinions set forth therein.
In rendering our opinion, we have assumed the following:
(a) the authenticity of all documents submitted to us as originals;
(b) the conformity of any documents submitted to us as copies to their
respective originals;
A-85
<PAGE>
(c) the authenticity of all signatures other than those of officers
and directors of the Company executing the Third Amendment and the
documents and instruments executed pursuant to the terms thereof;
(d) the legal capacity of all natural persons;
(e) the accuracy of all reports and certificates received from public
officials; and
(f) as to corporations other than the Company, the corporate power and
authority to execute and deliver, and the due authorization of, all
documents, instruments and agreements contemplated by the Third Amendment.
Based on the foregoing, we are of the following opinions:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the state of Delaware.
2. The Company has the requisite corporate power and authority to execute
and deliver the Third Amendment and to perform its obligations set forth in each
of the Amendment Documents.
3. The Third Amendment has been duly authorized by all necessary
corporate action on the part of the Company and has been executed and delivered
by duly authorized officers of the Company. Each of the Third Amendment and the
Amended Note Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4. The execution and delivery of the Third Amendment by the Company and
the performance by the Company of its obligations under the Amendment Documents
will not conflict with, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien upon any of
its Property pursuant to, the Certificate of Incorporation or Bylaws of the
Company.
All opinions herein contained with respect to the enforceability of
documents and instruments are qualified to the extent that:
(a) the availability of equitable remedies, including without
limitation, specific enforcement and injunctive relief, is subject to the
discretion of the court before which any proceedings therefor may be
brought; and
(b) the enforceability of certain terms provided in the Third
Amendment and the Amendment Documents may be limited by:
(i) applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally as at the time in effect;
A-86
<PAGE>
(ii) general principles of equity and the discretion of a court
in granting equitable remedies (whether enforceability is considered
in a proceeding at law or in equity); and
(iii) common law or statutory requirements with respect to
commercial reasonableness.
One or more members of this firm are admitted to the Bar in the State of
New York. We express no opinion as to the law of any jurisdiction other than
the law of such state and United States federal law. Gibson, Dunn & Crutcher
and Richard Madsen, Esq., may rely on this opinion with respect to matters
governed by the laws of the State of New York for the sole purpose of rendering
their opinions to be rendered pursuant to paragraph 4B(i) and paragraph 4B(ii)
of the Third Amendment. Subsequent holders of the Notes may rely on this
opinion as if it were addressed to them.
Very truly yours,
A-87
<PAGE>
ANNEX 1
ADDRESSEES
The Prudential Insurance Company of America
Four Gateway Center, 9th Floor
Newark, NJ 07102-4069
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Connecticut General Life Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Securities Accounting Department
CIGNA Property and Casualty Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Life Insurance Company of North America
c/o CIGNA Investments, Inc.
Hartford, Connecticut 06152
Attention: Private Placement Department
Sun Life Assurance Company of Canada
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Sun Life Assurance Company of Canada (U.S.)
Wellesley Hills, MA 02181
Attention: Investment Department/Private Placements SC #1303
Hebb & Gitlin P.C.
One State Street
Hartford, CT 06103-3178
A-88
<PAGE>
EXHIBIT C
FORM OF OFFICERS' CERTIFICATE
CERTIFICATE OF OFFICERS OF ROHR, INC.
We, L.A. Chapman and R.W. Madsen, each hereby certify that we are,
respectively, the Senior Vice President and the Chief Financial Officer, and the
Vice President, General Counsel and Secretary of ROHR, INC., a Delaware
corporation (the "Company"), and that, as such, we are authorized to execute and
deliver this Certificate in the name and on behalf of the Company, and that:
1. This certificate is being delivered pursuant to paragraph 4C of the
Third Amendment Agreement (the "Third Amendment"), dated as of May 10, 1994,
between the Company and the holders of the Company's 9.35 Senior Notes due
January 29, 2000 listed on Annex 1 thereto (collectively, the "Purchasers").
The terms used in this certificate and not defined herein shall have the
respective meanings ascribed to them in the Third Amendment.
2. The warranties and representations contained in paragraph 5 of the
Third Amendment are true in all material respects on the date hereof with the
same effect as though made on and as of the date hereof.
3. The Company has performed and complied with all agreements and
conditions contained in the Third Amendment that are required to be performed or
complied with by the Company before or at the date hereof, and no unwaived
Default or Event of Default exists on the date hereof.
4. R.W. Madsen is on and as of the date hereof, and at all times
subsequent to March 31, 1994 has been, the duly elected, qualified and acting
Secretary of the Company, and the signature appearing on the Certificate of
Secretary dated the date hereof and delivered to the Purchasers
contemporaneously herewith is his genuine signature.
IN WITNESS WHEREOF, we have executed this Certificate in the name and on
behalf of the Company on May ____, 1994.
ROHR, INC.
By:
-------------------------------
Name:
By:
-------------------------------
Name:
A-89
<PAGE>
EXHIBIT D
FORM OF SECRETARY'S CERTIFICATE
CERTIFICATE OF SECRETARY OF ROHR, INC.
I, R.W. Madsen, hereby certify that:
I am the duly elected, qualified and acting Secretary of ROHR, INC., a
Delaware corporation (the "Company"), and that, as such, I have access to its
corporate records and am familiar with the matters herein certified, and I am
authorized to execute and deliver this Certificate in the name and on behalf of
the Company, and that:
1. This certificate is being delivered pursuant to paragraph 4C of the
Third Amendment Agreement (the "Third Amendment"), dated as of May 10, 1994,
between the Company and the holders of the Company's 9.35% Senior Notes due
January 29, 2000 listed on Annex 1 thereto (collectively, the "Purchasers").
The terms used in this certificate and not defined herein shall have the
respective meanings ascribed to them in the Third Amendment.
2. Attached hereto as Attachment A is a true and correct copy of
resolutions, and the preamble thereto, adopted by the Board of Directors of the
Company on March 31 and April 1, 1994, and such resolutions and preamble set
forth in Attachment A hereto were duly adopted by said Board of Directors and
are in full force and effect on and as of the date hereof, not having been
amended, altered or repealed, and such resolutions are filed with the records of
the Board of Directors.
3. The Third Amendment was executed and delivered by the Company pursuant
to and in accordance with the resolutions set forth in Attachment A hereto.
4. The bylaws of the Company were last amended by the Board of Directors
of the Company on, and have been in full effect in said form at all times from
and after January 7, 1993 to and including the date hereof, without modification
or amendment in any respect.
5. Each of the following named persons is on and as of the date hereof,
and at all times subsequent to January 7, 1993, has been a duly elected,
qualified and acting officer of the Company holding the office or offices set
forth below opposite his name (except for Mr. Chapman, who became an officer of
the Company on May 1, 1994):
<TABLE>
<CAPTION>
Name Office Signature
- - ---- ------ ---------
<C> <S> <C>
Vice President, /s/
General Counsel and Secretary --------------------------------
Assistant Secretary /s/
--------------------------------
Vice President and /s/
Treasurer --------------------------------
</TABLE>
A-90
<PAGE>
6. The signature appearing opposite the name of each such person set
forth above is his or her genuine signature.
7. Attached hereto as Attachment B is a long-form good standing
certificate in respect of the Company from the State of Delaware, which
certificate
(i) lists all corporate documents filed with the Secretary of State of
Delaware on or prior to the date hereof in respect of the Company,
(ii) bears the certification of the Secretary of State of Delaware,
and
(iii) is true, correct and complete.
8. There have been no amendments or supplements to or restatements of the
Certificate of Incorporation of the Company since December 13, 1991.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of the Company on ______ __, 1994. [Closing Date]
ROHR, INC.
Secretary
A-91
<PAGE>
ATTACHMENT A
RESOLUTIONS OF THE BOARD OF DIRECTORS
Intentionally Omitted
A-92
<PAGE>
ATTACHMENT B
GOOD STANDING CERTIFICATE AND CHARTER DOCUMENTS
Intentionally Omitted
A-93
<PAGE>
EXHIBIT 4.6
FORM OF AMENDED AND RESTATED NOTE AGREEMENT
ROHR, INC.
--------------
AMENDED AND RESTATED NOTE AGREEMENT
--------------
DATED AS OF MAY 10, 1994
$62,000,000 9.33% SENIOR NOTES DUE DECEMBER 15, 2002
A-1
<PAGE>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. AUTHORIZATION OF ISSUE OF NOTE ....................................... A-5
2. PURCHASE AND SALE OF NOTES ........................................... A-5
3. CONDITIONS OF CLOSING ................................................ A-6
3A. Opinion of Purchasers' Special Counsel .......................... A-6
3B. Opinion of Company's Counsel .................................... A-6
3C. Representations and Warranties; No Default ...................... A-6
3D. Purchase Permitted By Applicable Laws ........................... A-6
3E. Proceedings ..................................................... A-6
3F. Sale of Notes to Other Purchasers ............................... A-6
3G. Closing Expenses ................................................ A-7
4. PREPAYMENTS .......................................................... A-7
4A. Required Prepayments ............................................ A-7
4B. Optional Prepayment With Yield-Maintenance Amount ............... A-7
4C. Notice of Optional Prepayment ................................... A-7
4D. Partial Payments Pro Rata ....................................... A-7
4E. Right to Put .................................................... A-8
4F. Retirement of Notes ............................................. A-8
4G. Tender of Notes in Payment of Warrant Exercise Price ............ A-8
5. AFFIRMATIVE COVENANTS ................................................ A-9
5A. Payment of Taxes and Claims ..................................... A-9
5B. Maintenance of Properties and Corporate Existence; Other Matters. A-9
5C. Payment of Notes and Maintenance of Office ...................... A-10
5D. Financial Statements ............................................ A-10
5E. Default Notices ................................................. A-13
5F. Information Required by Rule 144A ............................... A-13
5G. Inspection of Property .......................................... A-13
5H. Covenant to Secure Note Equally ................................. A-13
5I. Involuntary Prepayment .......................................... A-14
6. NEGATIVE COVENANTS ................................................... A-16
6A. Limitations on Liens ............................................ A-16
6B. Limitations on Leases ........................................... A-18
6C. Limitations on Indebtedness ..................................... A-18
6D. Limitations on Mergers and Sales of Assets ...................... A-20
6E. Adjusted Consolidated Tangible Net Worth Maintenance ............ A-20
6F. Limitations on Distributions .................................... A-21
6G. Fixed Charge Coverage ........................................... A-22
6H. Limitations on Capital Expenditures ............................. A-22
6I. Private Offering ................................................ A-22
</TABLE>
A-2
<PAGE>
TABLE OF CONTENTS (Continued)
(NOT PART OF AGREEMENT)
<TABLE>
<S> <C>
6J. Transactions with Affiliates .................................... A-22
6K. Line of Business ................................................ A-22
6L. Limitation on Certain Obligations ............................... A-23
6M. Incorporation of Negative Covenants ............................. A-23
6N. Maintenance of Senior Status .................................... A-24
6O. Certain Amendments .............................................. A-25
6P. Sales of Assets ................................................. A-25
6Q. Sale of Receivables ............................................. A-27
6R. Debt Ratio ...................................................... A-27
7. EVENTS OF DEFAULT .................................................... A-27
7A. Acceleration .................................................... A-27
7B. Rescission of Acceleration ...................................... A-30
7C. Notice of Acceleration or Rescission ............................ A-30
7D. Other Remedies .................................................. A-30
8. REPRESENTATIONS AND WARRANTIES ....................................... A-31
8A. Subsidiaries .................................................... A-31
8B. Corporate Organization and Authority ............................ A-31
8C. Financial Statements ............................................ A-32
8D. Actions Pending ................................................. A-32
8E. Outstanding Debt ................................................ A-32
8F. Title to Properties ............................................. A-32
8G. Patents, Trademarks, Licenses, etc. ............................. A-33
8H. Taxes ........................................................... A-33
8I. Conflicting Agreements and Other Matters ........................ A-33
8J. Offering of Notes ............................................... A-34
8K. Use of Proceeds ................................................. A-34
8L. ERISA ........................................................... A-34
8M. Governmental Consent ............................................ A-35
8N. Environmental Compliance ........................................ A-35
8O. Disclosure ...................................................... A-35
8P. Compliance with Law ............................................. A-36
8Q. Certain Laws .................................................... A-36
9. REPRESENTATIONS OF EACH PURCHASER .................................... A-36
9A. Nature of Purchase .............................................. A-36
9B. Source of Funds ................................................. A-37
10. DEFINITIONS .......................................................... A-37
10A. Yield-Maintenance Terms ......................................... A-37
10B. Other Terms ..................................................... A-38
11. MISCELLANEOUS ........................................................ A-66
11A. Note Payments ................................................... A-66
11B. Expenses ........................................................ A-67
</TABLE>
A-3
<PAGE>
TABLE OF CONTENTS (Continued)
(NOT PART OF AGREEMENT)
<TABLE>
<S> <C>
11C. Consent to Amendments ........................................... A-67
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes .. A-68
11E. Persons Deemed Owners; Participations ........................... A-68
11F. Accounting ...................................................... A-68
11G. Directly or Indirectly .......................................... A-69
11H. Survival of Representations and Warranties; Entire Agreement .... A-69
11I. Successors and Assigns .......................................... A-69
11J. Disclosure to Other Persons ..................................... A-69
11K. Notices ......................................................... A-70
11L. Payments Due on Non-Business Days ............................... A-71
11M. Satisfaction Requirement ........................................ A-71
11N. Governing Law ................................................... A-71
11O. Severability .................................................... A-71
11P. Descriptive Headings ............................................ A-71
11Q. Counterparts .................................................... A-71
11R. Severalty of Obligations ........................................ A-71
</TABLE>
Annex 1 -- Purchaser Schedule
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company
Exhibit A -- Form of 9.33% Senior Note Due December 15,
Exhibit B1 -- Form of Purchasers' Special Counsel's Opinion
Exhibit B2 -- Form of Company's General Counsel Opinion
Exhibit C -- Form of Officers' Certificate
Exhibit D -- Form of Secretary's Certificate
Exhibit E -- Form of Notice of Sale
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ROHR, INC.
FOOT OF H STREET
CHULA VISTA, CALIFORNIA 92012
--------------
AMENDED AND RESTATED NOTE AGREEMENT
--------------
$62,000,000 9.33% SENIOR NOTES DUE DECEMBER 15, 2002
Dated as of May 10, 1994
[Insert Name and Address
of Each Purchaser]
Ladies and Gentlemen:
The undersigned, Rohr, Inc. (herein called, together with its successors,
the "Company"), hereby agrees with the purchasers named in the Purchaser
Schedule attached hereto as Annex 1 (herein called the "Purchasers") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company has authorized the
issuance of its senior promissory notes in the aggregate principal amount of
$62,000,000, dated the date of issue thereof, to mature December 15, 2002,
bearing interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of nine and
thirty-three one-hundredths percent (9.33%) per annum and on overdue payments at
the rate specified therein, which senior promissory notes have been amended
pursuant to the First Amendment and, as amended, are substantially in the form
of Exhibit A attached hereto. The term "Notes" as used herein shall include
each such senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. The Company sold to each Purchaser and,
subject to the terms and conditions herein set forth, each Purchaser purchased
from the Company the aggregate principal amount of Notes set forth opposite such
Purchaser's name in the Purchaser Schedule attached hereto as Annex 1 at one
hundred percent (100%) of such aggregate principal amount. On the date of
closing, December 22, 1992 (herein called the "Closing Date"), the Company
delivered to each Purchaser, at the offices of Hebb & Gitlin, a Professional
Corporation, at One State Street, Hartford, Connecticut, one or more Notes
registered in such Purchaser's name, evidencing the aggregate principal amount
of Notes to be
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purchased by such Purchaser and in the denomination or denominations specified
with respect to such Purchaser in the Purchaser Schedule attached as Annex 1
hereto against payment of the purchase price thereof by transfer of immediately
available funds as directed by the Company on Annex 2 attached hereto.
3. CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and
pay for the Notes to be purchased by such Purchaser hereunder was subject to the
satisfaction, on or before the Closing Date, of the following conditions:
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL. Such Purchaser shall have
received from Hebb & Gitlin, who is acting as special counsel for the Purchasers
in connection with this transaction, a favorable opinion satisfactory to such
Purchaser as to such matters incident to the matters herein contemplated as it
may reasonably request, substantially in the form of Exhibit B1 attached hereto.
3B. OPINION OF COMPANY'S COUNSEL. Such Purchaser shall have received from
Richard Madsen, Esq., general counsel for the Company, a favorable opinion
satisfactory to such Purchaser and substantially in the form of Exhibit B2
attached hereto.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 hereof shall be true on and as of the
Closing Date, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Closing Date no Event of Default or
Default; and the Company shall have delivered to such Purchaser a certificate
dated the Closing Date, substantially in the form of Exhibit C attached hereto,
and signed by the officers indicated in such form, to such effect. The Company
shall have delivered a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Company, substantially in the form of
Exhibit D attached hereto, with respect to the matters therein set forth.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the Closing Date on the terms
and conditions herein provided (including the use of the proceeds of such Notes
by the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and such
Purchaser shall have received such certificates or other evidence as it may
request to establish compliance with this condition.
3E. PROCEEDINGS. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and such Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
3F. SALE OF NOTES TO OTHER PURCHASERS. The Company shall have sold to the
other Purchasers the Notes to be purchased by them at the closing and shall have
received payment in full therefor.
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3G. CLOSING EXPENSES. The Company shall have paid at the closing the
statement for fees and disbursements of the special counsel for the Purchasers
presented at the closing.
4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to
the required prepayments specified in paragraph 4A hereof, prepayment with
respect to the optional prepayments permitted by paragraph 4B hereof, repurchase
by the Company at the option of each holder as specified in paragraph 4E,
paragraph 4G hereof and paragraph 5I hereof.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
Eight Million Eight Hundred Fifty Thousand Dollars ($8,850,000) on December 15
in each of the years 1996 to 2001, inclusive, and such principal amounts of the
Notes, together with interest thereon to the prepayment dates, shall become due
on such prepayment dates. The remaining Eight Million Nine Hundred Thousand
Dollars ($8,900,000) in principal amount of the Notes, together with interest
accrued thereon, shall become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes shall be
subject to prepayment, in whole at any time or from time to time in part (in
multiples of $5,000,000), at the option of the Company, at one hundred percent
(100%) of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield-Maintenance Amount, if any, with respect to each
Note. Any partial prepayment of the Notes pursuant to this paragraph 4B shall
be applied in satisfaction of required payments of principal in inverse order of
their scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder of
each Note irrevocable written notice of any prepayment pursuant to paragraph 4B
hereof not less than 30, nor more than 60, days prior to the prepayment date,
specifying such prepayment date and the principal amount of the Notes, and of
the Notes held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to paragraph 4B of this Agreement. Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the Yield-Maintenance Amount, if any, with respect thereto,
shall become due and payable on such prepayment date. The Company shall, on or
before the day on which it gives written notice of any prepayment pursuant to
paragraph 4B hereof, give telephonic notice of the principal amount of the Notes
to be prepaid and the prepayment date to each Significant Holder which shall
have designated a recipient of such notices in the Purchaser Schedule attached
hereto or by notice in writing to the Company. In addition, the Company shall,
on the day before such prepayment date, deliver, by facsimile, a written notice
to such recipient of the amount of the Yield-Maintenance Amount, if any,
together with supporting calculations in reasonable detail.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the Notes
pursuant to paragraph 4A or paragraph 4B of this Agreement, the principal amount
so prepaid shall be allocated to all Notes at the time outstanding (including,
for the purpose of this paragraph 4D only, all Notes prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of the
Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A,
paragraph 4B or paragraph 5I) in proportion to the respective outstanding
principal amounts thereof.
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4E. RIGHT TO PUT.
(i) GRANTING OF PUT. The Company hereby gives and grants to each
holder of Notes the option, right and privilege (such option, right and
privilege herein collectively referred to as the "Right to Put") to require
the Company, upon or after the occurrence of any Designated Event, to
purchase from such holder on the terms and conditions hereinafter set
forth, and the Company agrees so to purchase from such holder, for an
amount equal to the Agreed Put Consideration, all, but not less than all,
of the Notes held by such holder.
(ii) EXERCISE OF PUT. Within ten (10) Business Days after the
occurrence of any Designated Event, the Company shall give each holder of
Notes substantially simultaneous written notice thereof describing such
Designated Event, and the facts and circumstances surrounding the
occurrence thereof, in reasonable detail. At any time prior to ninety (90)
days after any holder of Notes shall receive such notice, such holder may
exercise its Right to Put by delivering to the Company a notice of sale (a
"Notice of Sale") substantially in the form of Exhibit E hereto. If a
holder of Notes shall deliver a Notice of Sale, the Company shall purchase
the Notes then held by such holder on the date specified in such notice
(which shall be not less than fifteen (15) days after delivery of such
Notice of Sale), and such holder shall sell such Notes to the Company
without recourse, representation or warranty (other than as to such
holder's full right, title and interest to such Notes free of any adverse
claim therein), at a price, payable in immediately available funds by wire
transfer to the account specified pursuant to paragraph 11.A hereof or to
such other account as may be specified in such notice, equal to the Agreed
Put Consideration. Promptly after (and, in any event, within two (2)
Business Days of) its receipt of any Notice of Sale, the Company shall give
substantially simultaneous written notice thereof to all other holders of
Notes. Each holder of Notes shall have the rights specified in this
paragraph 4.E with respect to each Designated Event which shall occur,
regardless of any act or omission to act with respect to any previous
Designated Event.
4F. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of the Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A or paragraph 4B or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly (other than pursuant to paragraph 4E hereof, paragraph 4G or
paragraph 5I hereof), Notes held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same proportion of the
aggregate principal amount of Notes held by each other holder of Notes at the
time outstanding upon the same terms and conditions. Any Notes so prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
the Subsidiaries or Affiliates shall not be deemed to be outstanding for any
purpose under this Agreement except as provided in paragraph 4D hereof.
4G. TENDER OF NOTES IN PAYMENT OF WARRANT EXERCISE PRICE. The Warrant
Agreement will provide that the purchase price for the Warrants issuable
thereunder may be paid, in whole or in part, by a tender of Notes. The Company
shall be deemed to have reacquired a principal amount of Notes equal to the
aggregate principal amount of Notes tendered in payment of the
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<PAGE>
Warrant exercise price, and such Notes so deemed to have been reacquired shall
not be considered outstanding for any purposes of this Agreement. In the event
that less than the entire outstanding principal amount of a Note is tendered in
payment of the Warrant exercise price, the Company shall issue and deliver to
the holder thereof a new Note equal in principal amount to the outstanding
principal amount of the Note so tendered less the portion thereof applied to the
Warrant exercise price.
5. AFFIRMATIVE COVENANTS.
5A. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each
Subsidiary to, pay before they become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed
upon it or its Property, and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons that, if unpaid, will more
likely than not result in the creation of a Lien upon its Property,
provided that items of the foregoing description need not be paid while being
contested in good faith and in an appropriate manner.
5B. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE; OTHER MATTERS. The
Company will, and will cause each Subsidiary to,
(i) PROPERTY -- maintain its Property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto;
(ii) INSURANCE --
(a) maintain, with financially sound and reputable insurers,
insurance (or maintain self-insurance, including without limitation,
insurance with subsidiaries, if that shall be reasonable in the
circumstances) with respect to its Property and business against such
casualties and contingencies, of such types (including, without
limitation, loss or damage, public liability, business interruption,
larceny, embezzlement or other criminal misappropriation) and in such
amounts as is reasonably appropriate for the risks associated with the
business of the Company and the Subsidiaries; and
(b) at the request of any Significant Holder, deliver to such
Significant Holder for examination, as soon as practicable, policies
or certificates of insurance or self-insurance or certificates of
insurance brokers evidencing compliance with the provisions of this
clause (ii);
(iii) FINANCIAL RECORDS -- keep true books of records and accounts in
which full and correct entries shall be made of all its business
transactions so that the financial statements required by paragraph 5D
hereof may be prepared in accordance with generally accepted accounting
principles as in effect at the time of such preparation;
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(iv) CORPORATE EXISTENCE AND RIGHTS -- maintain, preserve and renew
the Company's existence as a corporation organized under the laws of a
state of the United States of America;
(v) COMPLIANCE WITH LAW -- not be in violation of any law, ordinance
or governmental rule or regulation to which it is subject (including,
without limitation, laws, ordinances, rules or regulations relating to
environmental matters) and not fail to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of
its Properties or to the conduct of its business, which violation or
failure to obtain will, more likely than not, materially adversely affect
the business or financial condition of the Company and the Subsidiaries,
taken as a whole, or the ability of the Company to perform its obligations
set forth in this Agreement and in the Notes;
(vi) OFFERING OF NOTES -- take no action (and will allow no agent
acting on its behalf to take any action) that would subject the issuance or
sale of the Notes to the provisions of section 5 of the Securities Act or
to the registration or qualification provisions of any securities or Blue
Sky law of any applicable jurisdiction; and
(vii) USE OF PROCEEDS -- use the proceeds of sale of the Notes to
repay Debt of the Company, to reduce the amount of receivables sold
pursuant to the Trade Receivables Agreement and for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" as defined in Regulation G (12 CFR Part 207) of
the Board of Governors of the Federal Reserve System (herein called "margin
stock") or for the purpose of maintaining, reducing or retiring any Debt
which was originally incurred to purchase or carry any stock that is
currently a margin stock or for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of such Regulation
G. Neither the Company nor any agent acting on its behalf has taken or
will take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T, Regulation U, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate the Exchange Act, in each case as was in effect on the Closing
Date, as is now in effect or as the same may hereafter be in effect.
5C. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE. The Company will
punctually pay, or cause to be paid, the principal and interest (and Yield-
Maintenance Amount, if any) to become due in respect of the Notes according to
the terms thereof and shall maintain an office at the address of the Company set
forth in paragraph 11K hereof where notices, presentations and demands in
respect of this Agreement or the Notes may be made upon it. Such office shall
be maintained at such address until such time as the Company shall notify in
writing the holders of the Notes of any change of location of such office.
5D. FINANCIAL STATEMENTS. The Company covenants that it will deliver to
each Significant Holder in quadruplicate:
(i) as soon as practicable and in any event within sixty (60) days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income and cash
flows of the Company and the Subsidiaries
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for such period and for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidated balance sheet
of the Company and the Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, accompanied by
additional financial statements containing the same information prepared in
accordance with generally accepted accounting principles as then in effect
if the accounting principles applied by the Company in the preparation of
the financial statements first described in this clause (i) differ in any
material respect from generally accepted accounting principles as then in
effect, in both cases in reasonable detail and satisfactory in form to the
Required Holders and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments, provided,
however, that so long as the accounting principles applied by the Company
in the preparation of the financial statements first described in this
clause (i) do not differ in any material respect from generally accepted
accounting principles as then in effect, delivery pursuant to clause (iii)
below of copies of the Quarterly Report on Form 10-Q of the Company for
such quarterly period filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this clause (i) (provided
that such Form 10-Q is accompanied by any other financial information
incorporated by reference in such Form 10-Q, and provided further, that the
Company provide to each holder of Notes who so requests in writing any
document incorporated by reference in such Form 10-Q);
(ii) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of stockholders' equity
of the Company and the Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and the Subsidiaries as at the
end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit,
accompanied by additional financial statements containing the same
information prepared in accordance with generally accepted accounting
principles as then in effect if the accounting principles applied by the
Company in the preparation of the financial statement first described in
this clause (ii) differ in any material respect from generally accepted
accounting principles as then in effect, in both cases all in reasonable
detail and satisfactory in form to the Required Holders and, as to the
consolidated statements prepared in accordance with generally accepted
accounting principles as then in effect, reported on by independent public
accountants of recognized national standing selected by the Company whose
report shall be without limitation as to the scope of the audit and
satisfactory in form and substance to the Required Holders and, as to the
consolidating statements and financial statements not certified by such
independent public accountants, certified by an authorized financial
officer of the Company, provided, however, that so long as the accounting
principles applied by the Company in the preparation of the financial
statements first described in this clause (ii) do not differ in any
material respect from generally accepted accounting principles as then in
effect, delivery pursuant to clause (iii) below of copies of the Annual
Report on Form 10-K of the Company for such fiscal year filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii) (provided that such Form 10-K is
accompanied by any other financial information incorporated by reference in
such Form 10-K, and provided further, that the Company provide to each
holder of Notes who so requests in writing any document incorporated by
reference in such Form 10-K);
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(iii) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its
public stockholders and copies of all registration statements (without
exhibits) and all reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
(iv) a copy of each other report submitted to the Company or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any
Subsidiary (to be provided to each Significant Holder at such time, if any,
as the contents of or analysis contained within any such report is (or
becomes likely to be) incorporated into a Form 10-Q or a Form 10-K filing
to be made by the Company with the Securities and Exchange Commission);
(v) copies of all agreements governing and instruments evidencing Debt
(other than Debt of a type described in subsection (vi) of the definition
of Debt) of the Company or any Consolidated Subsidiary containing any
Financial Covenant, and all agreements amending, modifying or supplementing
any such agreement or instrument affecting, adding or deleting any
Financial Covenant, in each case, entered into on or after the First
Amendment Date;
(vi) all certificates and notices delivered or required to be
delivered to the holders of any other Debt of the Company or any
Consolidated Subsidiary on or after the First Amendment Date, in each case,
in connection with the compliance by the Company or any Consolidated
Subsidiary with any Financial Covenant; and
(vii) with reasonable promptness, such other financial data as such
Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i)
and (ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate (a) demonstrating (with computations in reasonable detail, where
appropriate) compliance by the Company and the Subsidiaries with the provisions
of paragraph 6A through paragraph 6M hereof and paragraph 5I, (b) demonstrating
a reconciliation in reasonable detail of the differences between financial
statements prepared in accordance with generally accepted accounting principles
as then in effect and any other similar financial statements provided
contemporaneously therewith prepared other than in accordance with generally
accepted accounting principles, (c) stating that there exists no Event of
Default or Default, or, if any Event of Default or Default exists, specifying
the nature and period of existence thereof and what action the Company proposes
to take with respect thereto, and (d) stating whether or not there has been any
material change in the self-insurance requirements of the Company.
Together with each delivery of financial statements required by clause (ii)
above, the Company will deliver to each Significant Holder a certificate of such
accountants stating that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any Event of Default or
Default, or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event
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of Default or Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.
5E. DEFAULT NOTICES. The Company covenants that immediately after any
Responsible Officer obtains knowledge of an Event of Default or Default, it will
deliver to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto.
5F. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of any Significant Holder, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such Significant Holder may reasonably determine to be
necessary in order to permit compliance with the information requirements of
Rule 144A under the Securities Act in connection with the resale of Notes,
except at such times as the Company is subject to the reporting requirements of
sections 13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5F,
the term "qualified institutional buyer" shall have the meaning specified in
Rule 144A under the Securities Act.
5G. INSPECTION OF PROPERTY. The Company will permit any Person designated
in writing by any Significant Holder, at such Significant Holder's expense (or
if an Event of Default or a Default shall exist, at the expense of the Company),
to visit and inspect any of the Properties of the Company and the Subsidiaries,
to examine the corporate books and financial records of the Company and the
Subsidiaries and make copies thereof or extracts therefrom, all at such
reasonable times and as often as such Significant Holder may reasonably request.
In addition, so long as (i) a Default or an Event of Default shall have occurred
and be continuing, (ii) in the reasonable judgment of any Significant Holder, a
material adverse change shall have occurred with respect to the business or
financial condition of the Company and the Subsidiaries taken as a whole, or
(iii) any Significant Holder shall have a reasonable basis for questioning the
validity of any line item in any financial statement of the Company or the
validity of such financial statement as a whole, the Company will permit any
Person designated in writing by any Significant Holder to discuss the affairs,
finances and accounts of any of such corporations with the principal officers of
the Company and its independent public accountants, all at such reasonable times
and as often as such Significant Holder may reasonably request.
5H. COVENANT TO SECURE NOTE EQUALLY. The Company covenants that, if it or
any Subsidiary shall create or assume any Lien upon any of its Property, whether
now owned or hereafter acquired, other than Liens permitted by the provisions of
paragraph 6A hereof or any similar provision incorporated herein by reference
(unless prior written consent to the creation or assumption thereof shall have
been obtained pursuant to paragraph 11C hereof), it will make or cause to be
made effective provision whereby the Notes will be secured by such Lien equally
and ratably with any and all other Debt thereby secured so long as any such
other Debt shall be so secured.
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5I. INVOLUNTARY PREPAYMENT.
(i) Upon the occurrence of any Prepayment Event, the Company shall
make an offer to the holders of Notes to repurchase the Notes as set forth
in this paragraph 5I. Immediately upon the occurrence of the Prepayment
Event but in any event within five (5) Business Days thereafter, the
Company shall give each holder of the Notes substantially simultaneous
written notice thereof describing such Prepayment Event in reasonable
detail including, without limitation, a description of the issue of Debt
giving rise to such Prepayment Event, the facts and circumstances
surrounding the occurrence thereof, the manner of the prepayment,
redemption or defeasance of such other Debt in connection therewith and the
manner specified in this paragraph 5I of accepting or rejecting such offer
by the holder. Such notice shall also contain the Company's offer (the
"Prepayment Offer") to purchase from each such holder of Notes a principal
amount of the Notes held by such holder equal to its Noteholder Share of
the Ratable Prepayment Amount at a purchase price equal to the Agreed Put
Consideration.
(ii) A holder of Notes may accept the Prepayment Offer, in whole or in
part, through a written acceptance (the "Noteholder Acceptance") delivered
to the Company within forty-five (45) days of such holder's receipt of the
Prepayment Offer (the "Offer Period"). Promptly after (and, in any event,
within two (2) Business Days of) its receipt of any Noteholder Acceptance,
the Company shall give substantially simultaneous written notice thereof to
all other holders of Notes.
(iii) If such holder shall accept the offer, the Company shall
purchase that portion (the "Prepayment Portion"), expressed as a
percentage, of the principal amount of Notes held by such holder specified
in its Noteholder Acceptance, provided that the principal amount of Notes
the Company is required to purchase shall not exceed such holder's
Noteholder Share of the Ratable Prepayment Amount. Such purchase shall be
made on the fifteenth (15th) day after the expiration of the Offer Period
or, if later, the first day on which any holder of any other issue of Debt
would receive a prepayment in respect of such Prepayment Event but in no
event later than sixty (60) days after the expiration of the Offer Period.
On the date of purchase, such holder shall sell the Prepayment Portion of
such Notes to the Company without recourse, representation or warranty
(other than as to such holder's full right, title and interest to the
Prepayment Portion of such Notes free of any adverse claim created by such
holder therein), at a price, payable in immediately available funds by wire
transfer to the account specified pursuant to paragraph 11.A hereof or to
such other account as may be specified in such notice, equal to the Agreed
Put Consideration.
(iv) Upon any partial prepayment of a Note pursuant to this paragraph
5I, such Note may, at the option of the holder thereof, be:
(a) surrendered to the Company, in which case the Company shall
promptly execute and issue to the holder thereof a new Note in a
principal amount equal to the principal amount remaining unpaid on the
surrendered Note after giving effect to such prepayment; or
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(b) made available to the Company for notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Note is prepaid, such Note shall
be surrendered to the Company for cancellation and shall not be reissued,
and no Note shall be issued in lieu of the prepaid principal amount of any
Note.
(v) If the occurrence of any Prepayment Event causes the Company or
any Subsidiary to defease, prepay, repurchase or have a reduction in the
available commitment under any issue of Debt prior to the time that any
Notes would be repurchased hereunder, then simultaneously with such
defeasance, prepayment, repurchase or reduction in respect of such other
Debt, the Company shall pay to each holder an amount equal to its
Noteholder Share of the Ratable Prepayment Amount at a purchase price equal
to the Agreed Put Consideration, which payment shall satisfy all
obligations of the Company to the holders in respect of clauses (i) through
(iii), inclusive, of this paragraph 5I. At the time of the making of such
payment, the Company shall notify the holder of such payment in writing,
which notice shall state that such payment is being made pursuant to this
paragraph 5I(v), shall contain a description of the issue of Debt giving
rise to such Prepayment Event, the facts and circumstances surrounding the
occurrence thereof and the manner of the prepayment, redemption or
defeasance of such other Debt in connection therewith (unless such
information shall have been contained in a previously delivered notice
pursuant to paragraph 5I(i) with respect to such Prepayment Event) and
describe the procedure detailed in this paragraph 5I(v) pursuant to which a
holder may elect to rescind such payment.
In the event that a holder of Notes receiving a payment pursuant to
this paragraph 5I(v) elects to rescind the prepayment arising from such
Prepayment Event with respect to all Notes or any portion of the Notes held
by such holder, such holder shall deliver to the Company, within forty-five
(45) days of such holder's receipt of the notice specified in this
paragraph 5I(v), written notice of such recision, and shall
contemporaneously pay to the Company in immediately available funds an
amount equal to the amount so paid such holder pursuant to this paragraph
5I(v) or, in the case of a recision with respect to only a portion of the
prepayment made to such holder, an amount equal to that portion of such
prepayment which such holder wishes to rescind.
(vi) Each holder of Notes shall have the rights specified in this
paragraph 5I with respect to each Prepayment Event which shall occur,
regardless of any act or omission to act with respect to any previous
Prepayment Event. In the event that the Prepayment Event is also a
Designated Event subject to paragraph 4 of this Agreement, the Company
shall comply with the provisions of clause (v) of this paragraph 5I with
respect to the matters contained therein; in all other respect such
Designated Event will be treated as a Designated Event and not as a
Prepayment Event, and the Company will be required to comply with paragraph
4E in connection therewith. In the event that the Prepayment Event would
also be an event which results in an Event of Default, this paragraph 5I
shall not be deemed to in any respects limit the rights and remedies of the
holders under paragraph 7.
A-15
<PAGE>
(vii) Prepayments made pursuant to this paragraph 5I shall be applied
ratably to the obligations of the Company to make required prepayments in
respect of the Notes pursuant to paragraph 4A hereof and to pay the
remaining principal amount thereof at maturity.
6. NEGATIVE COVENANTS.
6A. LIMITATIONS ON LIENS.
(i) NEGATIVE PLEDGE. The Company will not, and will not permit any
Subsidiary to, create, assume, or suffer to exist any Lien upon any of the
Property of the Company or any Subsidiary, whether now owned or hereafter
acquired, except:
(a) Liens securing Debt and other obligations in an aggregate
principal amount at any time not exceeding ten percent (10%) of
Consolidated Tangible Net Worth at such time, provided, however, that
neither the Company nor any Subsidiary shall create, assume or
otherwise incur any Lien upon any of its respective Properties unless
the Company is in compliance with paragraph 6L of this Agreement;
(b) Liens arising out of transactions contemplated by the terms
of the Trade Receivables Agreement;
(c) Purchase Money Mortgages if, after giving effect thereto and
to any concurrent transactions:
(i) each such Purchase Money Mortgage secures an amount not
exceeding one hundred percent (100%) of the cost of the
particular Property to which it relates (or, in the case of a
Lien existing on any Property of any corporation at the time it
becomes a Subsidiary, the Fair Market Value of such Property at
such time);
(ii) such Purchase Money Mortgage encumbers only Property
(A) purchased after the Closing Date and (B) acquired with the
proceeds of the Debt secured thereby; and
(iii) such Property was acquired in the ordinary course of
business of the corporation acquiring such Property,
provided, however, that neither the Company nor any Subsidiary shall
create, assume or otherwise incur any Purchase Money Mortgage unless
the Company is in compliance with paragraph 6L of this Agreement;
(d) Liens incurred in connection with Lease Transactions to the
extent that such Liens encumber Property covered by such Lease
Transactions; provided, however, that neither the Company nor any
Subsidiary shall create, assume or otherwise incur any such Liens
unless the Company is in compliance with paragraph 6L of this
Agreement, and provided further that, immediately after
A-16
<PAGE>
giving effect to the investment of the Company or the Subsidiary in
such Lease Transaction, the aggregate amount of the investments then
outstanding of the Company and the Subsidiaries in all Lease
Transactions does not exceed Fifty Million Dollars ($50,000,000), it
being agreed that for the purpose of such calculation the amount of
each investment shall be determined on a Net After-Tax Cash Basis;
(e) Liens upon San Marcos Bonds, and the proceeds thereof, which
have been repurchased upon tender by the holders thereof in accordance
with the terms of the indenture governing such San Marcos Bonds,
until, but only until, the trustee with respect to such San Marcos
Bonds has received the purchase price therefor upon the remarketing
thereof and the issuer of the letter of credit that was drawn in
connection with such tender has been reimbursed for such amounts
drawn; provided, however, that the Company shall actively seek to
remarket such bonds pursuant to the provisions of the IDB Financing of
the Company's San Marcos, Texas facility or, to the extent necessary
in connection with any termination of any outstanding letter of credit
relating to such facility, to modify the structure of such IDB
Financing to the extent necessary to permit a long-term reissuance of
the repurchased San Marcos Bonds; and
(f) unless, at the time of incurrence thereof, a Default or an
Event of Default shall occur or be continuing, Liens incurred in
connection with the deposit of cash collateral to secure reimbursement
obligations of the Company relating to the San Marcos Bonds, but only
in connection with the extension of an outstanding letter of credit
relating to such facility and only in an amount of cash collateral not
exceeding the maximum amount which may be drawn under such letter of
credit; provided, however, that the Company shall actively seek to
obtain a replacement letter of credit that does not require cash
collateralization (and thus relieves the Company of any requirement to
deposit cash collateral or to secure such reimbursement obligations);
it being understood that each such Lien may be allocated by the Company to
any one of the preceding categories in which it may, by the terms of such
category, be included.
(ii) FINANCING STATEMENTS. The Company will not, and will not permit
any Subsidiary to, sign or file a financing statement under the Uniform
Commercial Code of any jurisdiction that names the Company or such
Subsidiary as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement, except, in
any such case, a financing statement filed or to be filed to perfect or
protect a Lien that the Company or such Subsidiary is entitled to create,
assume or incur, or permit to exist, under the foregoing provisions of this
paragraph 6.A or to evidence for informational purposes a lessor's interest
in Property leased to the Company or any such Subsidiary.
A-17
<PAGE>
6B. LIMITATIONS ON LEASES.
(i) LIMITATIONS ON LEASES. The Company will not, and will not permit
any Subsidiary to, at any time be or become liable at any time as lessee
under any lease (other than a lease giving rise to a Capitalized Lease
Obligation) having an original (or then unexpired) term of one year or more
if:
(a) the aggregate Net Rentals payable in any period of twelve
(12) consecutive calendar months following such time under such lease
and all other such leases under which the Company or a Subsidiary is
lessee, minus
(b) all amounts of a similar nature due from sub-lessees under
such leases that are reasonably expected to be collected during the
same period,
would exceed ten percent (10%) of Consolidated Tangible Net Worth at such
time.
(ii) SUBSIDIARY. Any corporation that becomes a Subsidiary after the
Closing Date shall be deemed to have become liable as lessee, at the time
it becomes a Subsidiary, under all leases (under which it is liable as
lessee) of such corporation existing immediately after it becomes a
Subsidiary.
6C. LIMITATIONS ON INDEBTEDNESS. The Company will not, and will not
permit any Subsidiary to, create, issue, assume or guarantee any Debt (other
than Intercompany Debt) except that:
(i) on or prior to April 26, 1997:
(a) the Company may incur Debt under the Credit Agreement or an
Acceptable Replacement Credit Facility;
(b) the Company may incur the 1994 Senior Debt and the 1994
Subordinated Debt;
(c) the Company and the Subsidiaries may incur unsecured Debt, in
an aggregate principal amount not to exceed $10,000,000 at any time
outstanding; provided, however, that no more than $5,000,000 of such
amount may be Debt of Subsidiaries;
(d) the Subsidiaries may incur Debt under revolving credit
facilities so long as the aggregate amount of all such Debt
outstanding at any time shall not exceed $5,000,000;
(e) the Company and the Subsidiaries may incur Debt described in
clause (vi) of the definition of "Debt" contained in paragraph 10B;
(f) Debt incurred in connection with the resale or remarketing of
San Marcos Bonds, but only to the extent that:
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<PAGE>
(i) San Marcos Bonds in an aggregate principal amount of
Sixteen Million Five Hundred Thousand Dollars ($16,500,000) were
issued and outstanding and held and owned by Persons other than
the Company, any Subsidiary or any Affiliate on May 10, 1994; and
(ii) the San Marcos Bonds to be resold or remarketed were
repurchased by the Company upon tender by the holders thereof
after May 10, 1994 in accordance with the terms of the indenture
governing the San Marcos Bonds;
and
(g) replacement unsecured San Marcos Bonds, in an aggregate
principal amount not exceeding Sixteen Million Five Hundred Thousand
Dollars ($16,500,000), if, and only if, Sixteen Million Five Hundred
Thousand Dollars ($16,500,000) in aggregate amount of San Marcos Bonds
were redeemed in full as a result of the failure of the bank which has
issued any letter of credit relating to the San Marcos Bonds to extend
or renew such outstanding letter of credit (for the avoidance of
doubt, the aggregate principal amount of San Marcos Bonds and
replacement San Marcos Bonds, whether outstanding on the date hereof
or thereafter issued pursuant to clause (f) or clause (g) of this
paragraph 6C(i), shall not exceed Sixteen Million Five Hundred
Thousand Dollars ($16,500,000) at any time);
in each case, so long as after the incurrence thereof, and after giving
effect thereto, no Default or Event of Default (including any Default or
Event of Default arising out of any breach of paragraph 6R hereof) shall
have occurred or be continuing; and
(ii) on or after April 27, 1997, and at any time during any period set
forth in the tables below, the Company or any Subsidiary may incur Debt if,
immediately after giving effect to such incurrence of Debt:
(a) Consolidated Senior Debt would not exceed the percentage
applicable to such period of the sum of Consolidated Total Debt plus
Consolidated Tangible Net Worth, all as set forth in the table
immediately below:
If such time occurs during the period: Percentage:
------------------------------------- ----------
From April 27, 1997 through
and including July 31, 1998 38.00%
At all times on or after
August 1, 1998 35.00%;
and
(b) Combined Subsidiary Debt would not exceed five percent (5%)
of Consolidated Tangible Net Worth;
A-19
<PAGE>
and so long as after the incurrence thereof, and after giving effect
thereto , no Default or Event of Default (including any Default or Event of
Default arising out of any breach of paragraph 6L or paragraph 6R hereof)
shall have occurred or be continuing.
6D. LIMITATIONS ON MERGERS AND SALES OF ASSETS. The Company will not, and
will not permit any Subsidiary to (whether in a single transaction or a series
of transactions), consolidate with, merge into or transfer substantially all of
its Property (whether now owned or hereafter acquired) to any other Person, or
permit any other Person to consolidate with, merge into, or transfer
substantially all of its Property to, the Company, except that any Subsidiary
may merge or consolidate with or into, or transfer substantially all of its
Property to, or acquire substantially all of the Property of, any other Person
and the Company may merge or consolidate with or into, or acquire substantially
all of the Property of, any other Person, if:
(i) in the case of any merger or consolidation involving the Company,
the corporation that results from such merger or consolidation is organized
under the laws of the United States of America or any jurisdiction thereof
and such corporation expressly assumes in writing the due and punctual
payment of the principal of, and Yield-Maintenance Amount, if any, and
interest on, all of the Notes, according to their tenor, and the due and
punctual performance and observance of all the covenants in the Notes and
this Agreement to be performed or observed by the Company, all in an
agreement or instrument satisfactory in form and substance to the Required
Holders;
(ii) immediately after the consummation of the transaction, and after
giving effect thereto, the Company, the corporation that results from any
such merger or consolidation with the Company or the Person that acquires
such Property from the Company, and in each case, its Subsidiaries shall be
engaged principally in the businesses of either or both of manufacturing
and distributing aerospace products or technically related products and of
providing services related to such products;
(iii) immediately after the consummation of the transaction, and
after giving effect thereto, no Event of Default or Default would exist;
and
(iv) immediately after the consummation of the transaction, and after
giving effect thereto, the Company could incur at least One Dollar ($1.00)
of additional Debt pursuant to paragraph 6.C hereof.
6E. ADJUSTED CONSOLIDATED TANGIBLE NET WORTH MAINTENANCE. The Company
will maintain at all times Adjusted Consolidated Tangible Net Worth of not less
than the sum of:
(i) $125,000,000; plus
(ii) the sum of the Fiscal Quarter Net Worth Increase Amounts for
each fiscal quarter of the Company ended after July 31, 1994; plus
(iii) the aggregate amount of all capital contributions (which
amount shall include, without limitation, all amounts attributable to
the conversion of debt of the Company to equity of the Company, valued
at the amount added to
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<PAGE>
stockholders' equity in accordance with GAAP) received by the Company
or any Consolidated Subsidiary (in each case, other than contributions
originally made by the Company or any Consolidated Subsidiary) in
cash, in Property other than cash or by conversion of Debt of the
Company at any time after the Third Amendment Date.
6F. LIMITATIONS ON DISTRIBUTIONS.
(i) LIMIT ON DISTRIBUTIONS. The Company will not, and will not permit
any Subsidiary to, at any time declare or make or incur any liability to
declare or make any Distribution; provided, however, that:
(a) the Company may, repurchase, purchase, redeem or otherwise
acquire shares of its common stock or warrants, rights or options to
acquire such stock issued pursuant to Restricted Stock Plans, Stock
Option Plans, Stock Incentive Plans, the Rights Agreement, the ESOP,
or Non-Employee Directors Stock-Option Plans;
(b) the Company may declare or make any Distribution if,
immediately after giving effect to such Distribution,
(i) the Debt Ratio would not exceed 2.50:1.00;
(ii) the Company could incur $1.00 of additional Debt
pursuant to paragraph 6.C hereof;
(iii) if the time of declaration or making, as the case may
be, of such Distribution is on or prior to April 26, 1997,
Consolidated Senior Debt at such time would not exceed thirty-
eight percent (38%) of the sum of Consolidated Total Debt plus
Consolidated Tangible Net Worth at such time; and
(iv) after giving effect to such transactions, no Event of
Default or Default would then exist; and
(c) the Company may declare or make any Permitted Preferred
Dividend if, prior to and immediately after giving effect to such
Permitted Preferred Dividend, no Default or Event of Default shall
exist.
(ii) TIME OF PAYMENT. The Company will not authorize a Distribution
on its capital stock which is not payable within sixty (60) days of
authorization.
A-21
<PAGE>
6G. FIXED CHARGE COVERAGE. The Company will maintain for each day a ratio
of Consolidated Net Income Available for Fixed Charges for the period of 365
consecutive days (or 366 consecutive days for any such period that includes
February 29) ending on such day to Consolidated Fixed Charges for such period,
of not less than the ratio set forth in the chart below opposite the period set
forth below in which such day occurs:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fiscal Year 1994 1.40 to 1.00
Fiscal Year 1995 1.55 to 1.00
Fiscal Year 1996 1.90 to 1.00
Fiscal Year 1997 and thereafter 2.00 to 1.00;
</TABLE>
6H. LIMITATIONS ON CAPITAL EXPENDITURES. The Company will not, and will
not permit any Subsidiary to, make, on or before April 26, 1997, any
expenditures for fixed or capital assets which would cause the aggregate of all
such expenditures made by the Company and the Subsidiaries in any period of
four full consecutive fiscal quarters to exceed the sum of the amounts set
forth below opposite such four fiscal quarters:
<TABLE>
<CAPTION>
Fiscal Quarters Amounts
--------------- -------
<S> <C>
Each Fiscal Quarter 1994 $4,500,000
Each Fiscal Quarter 1995 $6,000,000
Each Fiscal Quarter 1996 $7,500,000
Each Fiscal Quarter 1997 $7,500,000.
</TABLE>
6I. PRIVATE OFFERING. The Company will not, and will not permit anyone
acting on its behalf to, offer the Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
6J. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Subsidiary to, sell or transfer any Property to, or purchase or
acquire any Property of, or otherwise engage in any other transaction with, any
Affiliate, except at prices and on terms and conditions not less favorable to
the Company or such Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties, provided, however, that this paragraph 6J shall
not prohibit any transaction between (i) the Company or any Subsidiary and (ii)
any Affiliate that is an EEC Affiliate, if such transaction will not have a
material, adverse effect on the business, condition (financial or otherwise) or
operations of the Company, any Subsidiary or any EEC Affiliate.
6K. LINE OF BUSINESS. The Company shall not, nor shall it permit any
Subsidiary to, make any change in the nature of its business if such change
would constitute a material change in the nature of the business of the Company
and the Subsidiaries taken as a whole as conducted on the Closing Date, or
commence or permit any Subsidiary to commence any major project for the
development of a new line of products or services other than aerospace products
or technically related products or services related to such products; provided
that the Company or any Subsidiary may commence any project for the development
of such new line of products
A-22
<PAGE>
or services if, and only if, the aggregate costs and expenses related to all
such projects (including, without limitation, budgeted costs (determined from
time to time) for such new project minus any reasonably budgeted reimbursements
for such costs due from parties other than the Company or the Subsidiaries)
shall not exceed ten percent (10%) of Consolidated Tangible Net Worth at the
time each such project is commenced.
6L. LIMITATION ON CERTAIN OBLIGATIONS. The Company will not at any time
permit the sum of (w) obligations secured by Liens allocated by the Company to
the category described in paragraph 6A(i)(a) hereof, (x) obligations secured by
Liens allocated by the Company to the category described in paragraph 6A(i)(c)
hereof, (y) obligations secured by Liens allocated by the Company to the
category described in paragraph 6A(i)(d) hereof which obligations were incurred
on or subsequent to the Closing Date, and (z) Combined Subsidiary Debt, in each
case at such time, to exceed fifteen percent (15%) of Consolidated Tangible Net
Worth at such time.
6M. INCORPORATION OF NEGATIVE COVENANTS.
(i) During all such times as both the Credit Agreement shall remain in
force, and either any Debt shall be outstanding thereunder or the lenders
party thereto shall have any obligation to lend or make advances
thereunder:
(a) the provisions of paragraph 6A (except for clauses (i)(e) and
(i)(f) thereof, to the extent provided in paragraph 6M(i)(c) below)
and paragraph 6B of this Agreement shall be of no force and effect;
(b) the provisions of Sections 5.02(b), 5.02(c), 5.02(d),
5.02(e), 5.02(g), 5.02(h) and 5.02(i) of the Credit Agreement, as in
effect on the Third Amendment Date (after giving effect to the Seventh
Amendment to the Credit Agreement), but without amendment, supplement
or modification (except as set forth in paragraph 6M(ii) hereof), and
together with all relevant definitions pertaining thereto, shall be
incorporated herein by reference, mutatis mutandis;
(c) the Company shall not, nor shall it permit any Subsidiary to,
create, assume or suffer to exist any Lien securing any Debt existing
on the date hereof or incurred thereafter in connection with any IDB
Financing, except for such Liens as are expressly permitted by the
provisions of clause (e) or clause (f) of paragraph 6A(i) hereof;
provided, however, that at all times during which either the Credit
Agreement shall be of no force or effect, or there shall be no Debt
outstanding thereunder and no obligation on the part of the lenders thereto
to lend or make any advance thereunder, the provisions of paragraph 6A and
paragraph 6B of this Agreement shall be in full force and effect.
(ii) If at any time:
(a) after the Third Amendment Date, the Credit Agreement is
amended, supplemented or modified to provide Financial Covenants in
addition to, or which are more restrictive of the Company or the
Consolidated Subsidiaries than, the provisions of the Credit
Agreement, as in effect on the Third Amendment Date
A-23
<PAGE>
(after giving effect to the Seventh Amendment to the Credit Agreement
dated as of such date);
(b) after the First Amendment Date, the Company enters into any
other agreement governing, or executes any other instrument
evidencing, any Debt (or any commitment to lend), other than Debt or
commitments solely among the Company and/or one or more Consolidated
Subsidiaries; or
(c) after the First Amendment Date, the Company enters into any
amendment, supplement or modification of any agreement governing, or
any instrument evidencing, any Debt (or any commitment to lend), other
than Debt or commitments solely among the Company and/or one or more
Consolidated Subsidiaries;
then, and in each such case, each Financial Covenant set forth in such
amendment, supplement, modification or other agreement or instrument shall
be incorporated by reference herein for the remaining term of such
agreement or instrument, but only to the extent that such covenant is more
restrictive of the Company or the Consolidated Subsidiaries than the
corresponding provision of this Agreement.
(iii) In the event that any Financial Covenant contained in any other
agreement governing, or instrument evidencing, any Debt (or commitment to
lend), which Financial Covenant has been or is incorporated into this
Agreement pursuant to the provisions of paragraph 6M(ii) hereof, is
amended, supplemented or modified to make such Financial Covenant less
restrictive of the Company or the Consolidated Subsidiaries than the
incorporated Financial Covenant, the more restrictive incorporated
Financial Covenant shall continue to be incorporated herein for the
remaining term of such agreement or instrument notwithstanding such
amendment, supplement or modification. Notwithstanding the foregoing
sentence, if the provisions of such incorporated Financial Covenant were
expressed when incorporated to be more restrictive on a temporary basis, or
more restrictive only for a prescribed period, such more restrictive
provision shall be incorporated herein only on such temporary basis or only
for such prescribed period, as the case may be.
(iv) No Financial Covenant incorporated herein by virtue of paragraph
6M(ii) or paragraph 6M(iii) hereof shall supersede, replace, amend,
supplement or modify any other provision of this Agreement, including any
covenant contained herein which addresses a subject matter similar to that
of such incorporated Financial Covenant.
6N. MAINTENANCE OF SENIOR STATUS. The Company will not take any action at
any time to amend, modify or supplement any subordination provision (or any
definition of any defined term as used in any such provision) in the Existing
Subordinated Notes, the 1994 Subordinated Notes or any indenture governing the
provisions of any thereof, or otherwise take any action which would result in
any of the Existing Subordinated Notes or 1994 Subordinated Notes not being
junior or subordinated in right of payment to the Notes to the same extent such
Existing Subordinated Notes or 1994 Subordinated Notes, as the case may be, are
subordinated to the Notes on the Third Amendment Date (after giving effect to
the issuance of the 1994 Subordinated Notes). The Company shall not take any
action which would result in the Notes not constituting,
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<PAGE>
or not being fully entitled to the benefits of, "Senior Indebtedness" and
"Designated Senior Indebtedness" as defined in the indenture governing the 1994
Subordinated Notes.
6O. CERTAIN AMENDMENTS. The Company shall not, nor shall it permit any
Consolidated Subsidiary to, consent to any amendment, modification, supplement
or waiver of:
(i) any of the provisions of any of Sections 3.02, 3.03, 3.04 or 3.05
of the Credit Agreement, as in effect on the Third Amendment Date (after
giving effect to the Seventh Amendment to the Credit Agreement), or any
other provision referred to therein or any defined term as used therein,
other than a waiver by the banks party thereto of any condition set forth
therein; or
(ii) any other provision of the Credit Agreement or, prior to April
25, 1997, any Acceptable Replacement Credit Facility, to the extent that
such amendment, modification, supplement or waiver would have the effect
of:
(a) reducing the amount or availability of credit thereunder,
changing the timing of or reducing the commitments of the lenders
thereunder to lend or make credits available pursuant thereto;
(b) making more restrictive upon the Company any condition
precedent to the funding of the credits available thereunder;
(c) requiring the Company or any Subsidiary to grant any lender
thereunder any Lien securing the obligations thereunder; or
(d) requiring the Company or any Subsidiary to maintain any
deposit accounts in any minimum amount, compensating balances, cash
management or clearing house relationship or similar arrangements,
with the lenders thereunder;
in each case, without the prior written consent of the Required Holders.
6P. SALES OF ASSETS. The Company will not, and will not permit any
Consolidated Subsidiary to, at any time after the First Amendment Date, sell,
lease, transfer or otherwise dispose of any Property (except for sales of
inventory and of obsolete or surplus Property in the ordinary course of
business, sales of accounts receivable, the issuance of director's qualifying
shares and sales, leases, transfers or other dispositions of Property to the
Company or a Consolidated Subsidiary (collectively, "Excepted Property"));
provided, however, that the foregoing restrictions shall not apply to the sale,
lease, transfer or other disposition of any such Property to any Person if all
of the following conditions are met:
(i) the book value of all such Property then being sold, leased,
transferred or otherwise disposed of, together with the book value of all
other Property (other than Excepted Property) sold, leased, transferred or
otherwise disposed of by the Company and the Consolidated Subsidiaries
since the First Amendment Date shall not, in the aggregate, exceed ten
percent (10%) of Consolidated Tangible Assets, determined as of the end of
the then most recently ended fiscal quarter of the Company;
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<PAGE>
(ii) in the case of the sale, lease, transfer or other disposition of
a Consolidated Subsidiary (whether by disposition of any capital stock of
such Consolidated Subsidiary, the Property thereof or otherwise) or a line
or segment of business of the Company or a Consolidated Subsidiary, in
either case, substantially as an entirety (except with respect to the sale,
lease, transfer or other disposition of capital stock of a Consolidated
Subsidiary), the sum of:
(A) that portion, expressed as a percentage, of Gross Operating
Income attributable to or contributed by all Property of a type
described in this paragraph 6P(ii) and then being sold, leased,
transferred or otherwise disposed of, for the period of eight (8) full
consecutive fiscal quarters most recently ended on or prior to the
date of such sale, lease, transfer or other disposition; plus
(B) with respect to each other sale, lease, transfer or other
disposition of Property of a type described in this paragraph 6P(ii)
occurring during the period beginning on the later of the First
Amendment Date and the beginning of the eight full (8) fiscal quarters
of the Company most recently ended prior to the consummation of the
transaction referred to in clause (A) above, and ending on the date of
the transaction referred to in clause (A) above, that portion,
expressed as a percentage, of Gross Operating Income attributable to
or contributed by such Property described in this clause (B) for the
period of eight (8) full consecutive fiscal quarters most recently
ended on or prior to the date of such sale, lease, transfer or other
disposition thereof;
shall not exceed ten percent (10%);
(iii) in the good faith opinion of the board of directors of the
Company (or a committee of such board to whom such matter has been properly
delegated), the sale, lease, transfer or other disposition is for Fair
Market Value and is in the best interests of the Company; and
(iv) immediately after the consummation of such sale, lease, transfer
or other disposition, and after giving effect thereto, no Default or Event
of Default would exist.
Sales and other dispositions of accounts receivable shall be subject to
paragraph 6Q of this Agreement. Sales of all or any portion of the capital
stock of a Consolidated Subsidiary shall, for purposes of determining the book
value thereof in clause (i) above, be deemed to be the sale of all or such
portion of the book value of the assets of the Consolidated Subsidiary which
shall have issued such capital stock. Sales of all or a portion of the capital
stock of any Consolidated Subsidiary shall, for purposes of determining its
contribution to Gross Operating Income in clause (ii) above, be deemed to have
contributed all or such portion of that proportion of Gross Operating Income
attributable to the Consolidated Subsidiary which shall have issued such capital
stock. As used in this paragraph 6P, the term `lease' shall mean an original
lease, as lessor, by the Company or any Consolidated Subsidiary, and the
continuance, extension or renewal of any existing lease shall not be treated as
a lease pursuant to, or restricted by, this paragraph 6P.
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<PAGE>
6Q. SALE OF RECEIVABLES. The Company covenants that it will not, and will
not permit any Consolidated Subsidiary to, sell with recourse or otherwise sell
for less than the face value thereof, any of its notes or accounts receivable,
except pursuant to the Trade Receivables Agreement; provided, however, that the
Company and any Consolidated Subsidiary may sell for book value the accounts
receivable owing from any Person (i) that has commenced a voluntary case under
the Bankruptcy Law of the United States or any proceedings under the Bankruptcy
Law of any other jurisdiction, or (ii) against whom any such case or proceedings
have been commenced and have remained undismissed for a period of at least sixty
(60) days.
6R. DEBT RATIO. The Company shall not permit the Debt Ratio for any day
to be greater than the ratio set forth opposite the period set forth in the
chart below in which such day occurs:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1994 5.60 to 1.00
1995 5.00 to 1.00
1996 4.10 to 1.00
1997 3.20 to 1.00
1998 2.80 to 1.00
1999 and thereafter 2.50 to 1.00.
</TABLE>
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or Yield-
Maintenance Amount payable with respect to any Note when the same shall
become due, either by the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than five (5) days after the date due; or
(iii) the Company or any Subsidiary defaults in any payment of
principal of or interest on any obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full
or partial payment for Property whether or not secured by a Purchase Money
Mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to any originally
stated maturity, or to be repurchased by the Company or any Subsidiary,
provided that the aggregate
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<PAGE>
amount of all obligations as to which such a payment default shall occur
and be continuing or such a failure or other event causing or permitting
acceleration shall occur and be continuing exceeds Fifteen Million Dollars
($15,000,000), and provided, further, that obligations for the deferred
purchase price of goods or services (including, without limitation,
Capitalized Lease Obligations and Purchase Money Mortgages) shall be
excluded from the operation of this clause (iii) so long as such
obligations are being contested in good faith by appropriate proceedings
and adequate reserves have been established therefor; or
(iv) any representation or warranty made by the Company herein, in the
First Amendment, the Second Amendment, the Third Amendment or any other
amendment, modification or supplement hereto, or in the Warrant Agreement,
or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement (including, without
limitation, the certificates furnished by the Company at the closing) shall
be false in any material respect on the date as of which made; or
(v) the Company or any Subsidiary shall fail to perform or observe any
covenant contained in paragraph 6 hereof, in paragraph 4E hereof, paragraph
5E hereof or paragraph 5I hereof; or
(vi) the Company fails to perform or observe any other agreement, term
or condition contained herein, in the First Amendment, the Second
Amendment, the Third Amendment or in the Warrant Agreement or the Warrants,
and such failure shall not be remedied within thirty (30) days after the
occurrence of such failure first becomes known to any Senior Officer of the
Company; or
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (herein called the
"Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or the taking of
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Subsidiary, or of any substantial part of
the assets of the Company or any Subsidiary, or commences a voluntary case
under the Bankruptcy Law of the United States or any proceedings (other
than proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary under the Bankruptcy
Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Subsidiary and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings,
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<PAGE>
and such order, judgment or decree remains unstayed and in effect for more
than sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary that requires the divestiture of Properties representing
at least ten percent (10%), or the divestiture of the stock of a Subsidiary
whose assets represent at least ten percent (10%), of the consolidated
assets of the Company and the Subsidiaries (determined in accordance with
generally accepted accounting principles) or that requires the divestiture
of assets, or stock of a Subsidiary, that shall have contributed at least
ten percent (10%) to Consolidated Net Income for any of the three (3)
fiscal years most recently ended as of the date such order, judgment or
decree shall be entered, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(xiii) a final judgment in an amount in excess of Fifteen Million
Dollars ($15,000,000) is rendered against the Company or any Subsidiary
and, within sixty (60) days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within sixty (60)
days after the expiration of any such stay, such judgment is not
discharged; or
(xiv) the Company or any Subsidiary is generally not paying its debts
as such debts become due; or
(xv) the Company or any ERISA Affiliate, in its capacity as an
employer under a Multiemployer Plan, makes a complete or partial withdrawal
from such Multiemployer Plan resulting in the incurrence by such
withdrawing employer of a withdrawal liability in an amount exceeding Ten
Million Dollars ($10,000,000); or
(xvi) any lender under the Credit Agreement or any Acceptable
Replacement Credit Facility fails or refuses, or announces its intention to
fail or refuse, to make any required advance under such Credit Agreement or
any Acceptable Replacement Credit Facility, or refuses to lend due to or as
a result of any material adverse change in the business, Properties,
profits or condition (financial or otherwise) of the Company; or
(xvii) there shall occur any "Change of Control" as defined in the
indenture relating to the 1994 Subordinated Debt;
then
(a) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 7A, the holder of any Note (other than the Company
or any of the Subsidiaries or Affiliates) may at its option, by notice in
writing to the Company, declare such Note to be, and such Note shall
thereupon be and become, immediately due and payable at par
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<PAGE>
together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company,
(b) if such event is an Event of Default specified in clause (vii),
(viii), (ix) or (x) of this paragraph 7A with respect to the Company, all
of the Notes at the time outstanding shall automatically become immediately
due and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, and
(c) if such event is not an Event of Default specified in clause
(vii), (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, the Required Holders may at its or their option, by notice in
writing to the Company, declare all of the Notes to be, and all of the
Notes shall thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company, provided that the Yield-Maintenance Amount, if any, with respect
to each Note shall be due and payable upon such declaration only if (x)
such event is an Event of Default specified in any of clauses (i) to (vi),
inclusive, of this paragraph 7A, (y) the Required Holders shall have given
to the Company, at least ten (10) Business Days before such declaration,
written notice stating its or their intention so to declare the Notes to be
immediately due and payable and identifying one or more such Events of
Default whose occurrence on or before the date of such notice permits such
declaration and (z) one or more of the Events of Default so identified
shall be continuing at the time of such declaration.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph 7A
hereof, the Required Holders may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes, the principal of and Yield-Maintenance
Amount, if any, payable with respect to any Notes which have become due
otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 11C hereof, and (iv) no judgment or decree shall have been entered
for the payment of any amounts due pursuant to the Notes or this Agreement. No
such rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A hereof or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B hereof, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under
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<PAGE>
applicable law, either by suit in equity or by action at law, or both, whether
for specific performance of any covenant or other agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
8. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
as follows:
8A. SUBSIDIARIES. Annex 2 to this Agreement accurately states,
(i) the name of each of the Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company
and each other Subsidiary, and
(ii) the name of each of the Company's joint ventures and the nature
thereof.
Each of the Company and the Subsidiaries has good and marketable title to
all of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and nonassessable.
8B. CORPORATE ORGANIZATION AND AUTHORITY. The Company
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(ii) has all requisite legal and corporate power and authority to own
and operate its Properties and to carry on its business as now conducted
and as presently proposed to be conducted,
(iii) has all necessary licenses, certificates and permits to own and
operate its Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have any
such licenses, certificates and permits, together with all other such
failures, would not be likely to have a material and adverse effect on the
business or financial condition of the Company and the Subsidiaries, taken
as a whole, or the ability of the Company to perform its obligations set
forth in this Agreement and in the Notes, and
(iv) has duly qualified or has been duly licensed, and is authorized
to do business and is in good standing as a foreign corporation, except
where the failure to be so qualified, licensed and authorized in any
jurisdiction, together with all such other failures, would not be likely to
have a material and adverse effect on the business or financial condition
of the Company and the Subsidiaries, taken as a whole, or the ability of
the Company to perform its obligations set forth in this Agreement and in
the Notes.
The revenues and net income of the Company for the fiscal year ended July 31,
1992, and the total assets of the Company as of July 31, 1992, in each case
exceed ninety percent (90%) of
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<PAGE>
the consolidated revenues, consolidated net income, and consolidated assets of
the Company and the Subsidiaries for such period and at such time.
8C. FINANCIAL STATEMENTS. The Company has furnished each Purchaser with
the following financial statements, identified by a principal financial officer
of the Company:
(i) a consolidated balance sheet of the Company and its subsidiaries
as at July 31 in each of the years 1990 to 1993, inclusive, and
consolidated statements of income, stockholders' equity and cash flows of
the Company and its subsidiaries for each such year, all reported on by
Deloitte & Touche; and
(ii) a consolidated balance sheet of the Company and its subsidiaries
as at January 30, 1994 and January 31, 1993 and consolidated statements of
income and cash flows for the three month period ended on each such date,
prepared by the Company.
Such financial statements (including any related schedules and/or notes) are
true and correct in all material respects (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles as in effect at such
time and consistently followed throughout the periods involved (except as
otherwise noted therein) and show all liabilities, direct and contingent, of the
Company and its subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, condition
(financial or otherwise) or operations of the Company and the Subsidiaries taken
as a whole since July 31, 1993, except for charges in the third Fiscal Quarter
of Fiscal Year 1994 to shareholders' equity in connection with the increases in
the underfunded status of the Company's pension plans, and to income in
connection with the expensing of unamortized pension benefit past service costs,
each as described in the Company's Quarterly Report on Form 10-Q for Fiscal
Quarter ended January 30, 1994.
8D. ACTIONS PENDING. Except as set forth on Annex 3 hereto, it is not
reasonably foreseeable that any action, suit, investigation or proceeding or
group of similar actions, suits, investigations or proceedings (including, as
such a group, without limitation, all actions, suits, investigations or
proceedings arising out of federal or state environmental protection laws),
pending or, to the knowledge of the Company, threatened against the Company or
any of the Subsidiaries, or any properties or rights of the Company or any of
the Subsidiaries, by or before any court, arbitrator or administrative or
governmental body would result in any material adverse change in the business,
condition (financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
8E. OUTSTANDING DEBT. Neither the Company nor any of the Subsidiaries has
outstanding any Debt except as permitted by paragraph 6C hereof. There exists
no default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.
8F. TITLE TO PROPERTIES. Each of the Company and the Subsidiaries has
good and indefeasible title to its respective real Properties (other than
Properties that it leases) and good
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<PAGE>
title to all of its other respective Properties, including the Properties
reflected in the balance sheet as at January 30, 1994 referred to in paragraph
8C(ii) hereof (other than Properties disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by paragraph 6A
hereof. All leases necessary in any material respect for the conduct of the
respective businesses of the Company and the Subsidiaries are valid and
subsisting and are in full force and effect.
8G. PATENTS, TRADEMARKS, LICENSES, ETC. Each of the Company and the
Subsidiaries owns or possesses all of the patents, trademarks, service marks,
trade names, copyrights, licenses, and rights with respect thereto, necessary
for the present conduct of its business, without any known conflict with the
rights of others.
8H. TAXES. Each of the Company and the Subsidiaries has filed all
federal, state and other income tax returns that are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments received
by it to the extent that such taxes have become due, except such taxes as are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with generally accepted accounting
principles.
8I. CONFLICTING AGREEMENTS AND OTHER MATTERS.
(i) RESTRICTIONS. Neither the Company nor any of the Subsidiaries is
a party to any contract or agreement or subject to any charter or bylaw
restriction that would, in the aggregate with all other such contracts,
agreements, or charter or bylaw restrictions, be more likely than not to
have a material and adverse effect on the business or financial condition
of the Company and the Subsidiaries, taken as a whole, or the ability of
the Company to perform its obligations set forth in this Agreement and in
the Notes.
(ii) CONFLICTS. Neither the execution nor delivery of this Agreement
or the Notes, nor the offering, issuance and sale of the Notes, nor the
fulfillment of nor the compliance with the terms and provisions hereof and
of the Notes will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon any of the
Properties of the Company or any of the Subsidiaries pursuant to, the
charter or bylaws of the Company or any of the Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of the Subsidiaries is subject.
(iii) RESTRICTIONS ON DEBT. Neither the Company nor any of the
Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other contract or
agreement (including its charter) that limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type
to be evidenced by the Notes except as set forth in the agreements listed
in Annex 3 attached hereto.
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<PAGE>
(iv) SALE IS LEGAL AND AUTHORIZED. Each of the sale of the Notes by
the Company and compliance by the Company and each Subsidiary with all of
the provisions of this Agreement and of the Notes:
(a) is within the corporate powers of the Company and each
Subsidiary; and
(b) is legal and does not conflict with, result in any breach of
any of the provisions of, constitute a default under, or result in the
creation of any Lien upon any Property of the Company or any
Subsidiary under the provisions of, any agreement, charter instrument,
bylaw or other instrument to which it is a party or by which it or any
of its Property may be bound.
(v) NOTES ARE ENFORCEABLE. The obligations of the Company under this
Agreement and the Notes are valid, binding and enforceable in accordance
with the terms of this Agreement and the Notes, except the enforceability
hereof or thereof, as the case may be, may be:
(a) limited by bankruptcy, insolvency or other similar laws
affecting the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
8J. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than institutional investors, and neither the
Company nor any agent acting on its behalf has taken any action that would
subject the issuance or sale of the Notes to the provisions of section 5 of the
Securities Act or to the provisions of any securities or Blue Sky law of any
applicable jurisdiction.
8K. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any margin stock. The proceeds of sale of
the Notes will be used to repay Debt of the Company, to reduce the amount of
receivables sold pursuant to the Trade Receivables Agreement and for general
corporate purposes. None of such proceeds will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any Debt which was originally incurred to purchase or carry any stock
that is currently a margin stock or for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of such Regulation G.
Neither the Company nor any agent acting on its behalf has taken or will take
any action which might cause this Agreement or the Notes to violate Regulation
G, Regulation T, Regulation U or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Exchange Act, in each case as
was in effect on the Closing Date, as in effect now or as the same may hereafter
be in effect.
8L. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the IRC), whether or not waived, exists with respect
to any Plan (other than a Multiemployer Plan). No liability to the Pension
Benefit Guaranty Corporation has been or is
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<PAGE>
expected by the Company or any ERISA Affiliate to be incurred with respect to
any Plan (other than a Multiemployer Plan) by the Company, any Subsidiary or any
ERISA Affiliate which is or would be materially adverse to the business,
condition (financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and the Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the issuance and sale of the
Notes will be exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the IRC.
The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of each Purchaser's representation in
paragraph 9B hereof.
8M. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
other action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Closing Date with either
or both of the Securities and Exchange Commission and state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions hereof or of the Notes.
8N. ENVIRONMENTAL COMPLIANCE. The Company and the Subsidiaries and all of
their respective properties and facilities have complied at all times and in all
respects with all federal, state, local and regional statutes, laws, ordinances
and judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not result in a material adverse effect on the business,
condition (financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
8O. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Company or any of the Subsidiaries that in the future (so far as the Company can
now foresee) would, in the aggregate with all other such facts, be more likely
than not to have a material and adverse effect on the business or financial
condition of the Company and the Subsidiaries, taken as a whole, or the ability
of the Company to perform its obligations set forth in this Agreement and in the
Notes and that has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to each Purchaser by or on
behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
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<PAGE>
8P. COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary:
(i) is in violation of any law, ordinance, governmental rule or
regulation to which it is subject; or
(ii) has failed to obtain any license, certificate, permit, franchise
or other governmental authorization necessary to the ownership of its
Property or to the conduct of its business;
which violation or failure to obtain is more likely than not to have, in the
aggregate with all other such violations or failures, a material and adverse
effect on the business or financial condition of the Company and the
Subsidiaries, taken as a whole, or the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes.
8Q. CERTAIN LAWS.
(i) INVESTMENT COMPANY ACTS. The Company is not, and is not directly
or indirectly controlled by, or acting on behalf of any Person which is, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(ii) ABSENCE OF FOREIGN OR ENEMY STATUS. The Company is not
(a) an "enemy" or an "ally of the enemy" within the meaning of
Section 2 of the Trading with the Enemy Act, as amended, or any
executive orders or regulations issued or promulgated pursuant
thereto,
(b) a "national" of any "designated enemy country" as such terms
are defined in Executive Order No. 9095, as amended, of the President
of the United States of America, or
(c) a "national" of any "designated foreign country" within the
meaning of the Foreign Assets Control Regulations of the United States
of America (Code of Federal Regulations, Title 31, Chapter V, Part 500
to 543).
(iii) HOLDING COMPANY STATUS. The Company is not a "holding company"
or an "affiliate" of a "holding company," or a "subsidiary company" of a
"holding company," or a "public utility" within the meaning of the Public
Utilities Holding Company Act of 1935, as amended.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents as
follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes to be
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's Property shall at all times be and remain within
its control.
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<PAGE>
9B. SOURCE OF FUNDS. No part of the funds being used by such Purchaser to
pay the purchase price of the Notes being purchased by such Purchaser hereunder
constitutes assets allocated to any separate account maintained by such
Purchaser in which any employee benefit plan, other than employee benefit plans
identified on a list which has been furnished by such Purchaser to the Company,
participates to the extent of ten percent (10%) or more. For the purpose of
this paragraph 9B, the terms "separate account" and "employee benefit plan"
shall have the respective meanings specified in section 3 of ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms defined in
the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below:
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid or purchased pursuant to paragraph 4B, paragraph
4.E or paragraph 5I hereof (any partial prepayment being applied in satisfaction
of required payments of principal in inverse order of their scheduled due dates)
or is declared to be immediately due and payable pursuant to paragraph 7A
hereof, as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by
(i) the yields reported, as of 10:00 a.m. (New York City time) on
the Business Day next preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page 678" on the
Telerate Service (or such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall
not be ascertainable,
(ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date.
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<PAGE>
Such implied yield shall be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between yields
reported for various maturities. Reinvestment Yield calculated as
aforesaid shall be increased by twenty-five one-hundredths percent (0.25%)
per annum in the case of any Settlement Date occurring after December 15,
1998.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
(a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest one-
twelfth year) which will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of
such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to
such Called Principal if no payment of such Called Principal were made
prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid or
purchased pursuant to paragraph 4B, paragraph 4E or paragraph 5I hereof or
is declared to be immediately due and payable pursuant to paragraph 7A
hereof, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of
(i) such Called Principal plus
(ii) interest accrued thereon as of (including interest due on)
the Settlement Date with respect to such Called Principal.
The Yield-Maintenance Amount shall in no event be less than zero.
10B. OTHER TERMS.
"1994 SENIOR DEBT" shall mean the Company's Senior Notes Due 2003, in
the aggregate principal amount of One Hundred Million Dollars
($100,000,000) on substantially the terms and conditions set forth under
the heading "DESCRIPTION OF
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<PAGE>
SENIOR NOTES" in Amendment No. 1 to the Registration Statement on Form S-3
of the Company, as filed with the Securities and Exchange Commission on
April 19, 1994, relating thereto.
"1994 SUBORDINATED DEBT" shall mean the Company's Convertible
Subordinated Notes Due 2004, in the aggregate principal amount of up to
Fifty-Seven Million Five Hundred Thousand Dollars ($57,500,000) and which
are subordinated to payment of principal, interest and Yield-Maintenance
Amount in respect of the Notes, and all other obligations under this
Agreement, on substantially the terms and conditions set forth under the
heading "DESCRIPTION OF SUBORDINATED NOTES" in Amendment No. 2 to the
Registration Statement on Form S-3 of the Company, as filed with the
Securities and Exchange Commission on April 19, 1994 relating thereto.
"ACCEPTABLE AVAILABILITY" shall mean, at any time on or after the date
shown in the first column of the chart below, and on or prior to the date
shown in the second column of the chart below, the availability under the
Credit Agreement at such time reflected in the third column of the chart
below:
<TABLE>
<CAPTION>
ON AND AFTER: TO AND INCLUDING: ACCEPTABLE AVAILABILITY:
======================================================================
<S> <C> <C>
Third Amendment Date October 24, 1995 $110,000,000
October 25, 1995 April 24, 1996 $100,000,000
April 25, 1996 October 24, 1996 $ 90,000,000
October 25, 1996 April 24, 1997 $ 80,000,000
April 25, 1997 and thereafter $ 0
======================================================================
</TABLE>
"ACCEPTABLE REPLACEMENT CREDIT FACILITY" shall mean, with respect to
any replacement, refunding or refinancing of the Credit Agreement, a
revolving credit facility:
(i) making available to the Company at least the Acceptable
Availability:
(ii) which, if such facility provides for extension of credit in
forms (including, without limitation, letters of credit or banker's
acceptances) other than cash, provides that, at the option of the
Company, at least the Acceptable Availability shall be available to
the Company in cash; provided, however, that, should the Company
actually draw credit in forms other than cash (including, without
limitation, the issuance of one or more letters of credit), the amount
of cash available under such facility may be reduced by the aggregate
amount of such credits for so long as such credits are outstanding, so
that the aggregate amount available need not exceed the Acceptable
Availability at such time;
(iii) which shall not require the maintenance of any
compensating balance or other similar arrangement in any amount
greater than the difference
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<PAGE>
between the aggregate amount of cash available under such facility
minus the Acceptable Availability;
(iv) which shall not contain, at the time of the effectiveness of
such facility:
(a) any financial covenants, events of default or other
conditions with which the Company would not be able to comply at
such time, based on the most recent business plan presented to
the Board of Directors (including updates thereto through the
date of effectiveness of such facility) of the Company at such
time or, prior to January 25, 1997, that were more onerous than
those contained in the Credit Agreement at the time of the
effectiveness of such facility; and
(b) any borrowing base provision or similar lending
constraints; or
(c) any conditions precedent to making advances thereunder
that would, based on the most recent business plan presented to
the Board of Directors (and updates thereto) of the Company at
such time, be reasonably likely to prevent the Company from fully
utilizing the Acceptable Availability to it under such credit
facility at any time during the term of such credit facility or,
prior to January 25, 1997, that were more onerous than those
contained in the Credit Agreement at the time of the
effectiveness of such facility ;
(v) which shall not have a maturity date earlier than that of the
Credit Agreement immediately prior to giving effect to such
replacement, refunding or refinancing; and
(vi) which shall be unsecured and shall not rank senior in right
of payment in any respect to the Notes.
"ADJUSTED CONSOLIDATED DEBT" shall mean and include all Debt of the
Company and the Consolidated Subsidiaries.
"ADJUSTED CONSOLIDATED NET INCOME" shall mean for any period
(i) the gross revenues of the Company and the Consolidated
Subsidiaries for such period, determined on a consolidated basis; less
(ii) all operating and non-operating expenses of the Company and
the Consolidated Subsidiaries for such period, including all charges
of a proper character (including, without limitation, current and
deferred taxes on income, provision for taxes on unremitted foreign
earnings which are included in gross revenues, and current additions
to reserves), determined on a consolidated basis;
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<PAGE>
but not including in such gross revenues
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses arising from the sale, conversion or other
disposition of capital assets, other than gains arising out of any
transaction or series of related transactions in which such gains do
not exceed One Hundred Thousand Dollars ($100,000);
(ii) any gain arising from any write-up of assets subsequent to
July 31, 1992;
(iii) earnings of any Consolidated Subsidiary accrued prior to
the date it became a Consolidated Subsidiary;
(iv) earnings of any Person, substantially all the assets of
which have been acquired in any manner, realized by such Person prior
to the date of such acquisition;
(v) net earnings or net losses of any Person in which the Company
or any Consolidated Subsidiary shall have an ownership interest
unless, in the case of net earnings, such net earnings shall have
actually been received by the Company or such Consolidated Subsidiary
in the form of cash distributions;
(vi) any portion of the net earnings of any Consolidated
Subsidiary which for any reason is unavailable for payment of
dividends to the Company or any other Consolidated Subsidiary;
(vii) the earnings of any Person to which assets of the Company
shall have been sold, transferred or disposed of, or into which the
Company shall have merged, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities
of the Company or any Consolidated Subsidiary;
(ix) any portion of the net earnings of the Company that cannot
be freely converted into United States dollars; and
(x) any deferred credit representing the excess of equity in any
Consolidated Subsidiary at the date of acquisition over the cost of
investment in such Consolidated Subsidiary.
"ADJUSTED CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time the
excess of total assets of the Company and the Consolidated Subsidiaries at
such time, determined on a consolidated basis, over total liabilities of
the Company and the Consolidated Subsidiaries at such time, determined on a
consolidated basis, in each case determined in accordance with generally
accepted accounting principles, excluding, however, from the determination
of total assets
A-41
<PAGE>
(i) all assets that would be classified as intangible assets
under such generally accepted accounting principles, including,
without limitation, goodwill (whether representing the excess of cost
over book value of assets acquired or otherwise), patents, trademarks,
trade names, copyrights, franchises, unamortized debt discount and
expense, organization costs, research and development costs and other
deferred charges (other than prepaid insurance and taxes and pre-
production and production costs including, but not limited to,
engineering and tooling costs, that are amortized over anticipated
deliveries),
(ii) treasury stock and minority interests in any Person,
(iii) cash, Securities or other Property set apart and held in a
sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock,
(iv) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence or amortization of
Properties and all other reserves or appropriations of retained
earnings that, in accordance with such generally accepted accounting
principles, should be established in connection with the business
conducted by the relevant corporation, and
(v) any revaluation or other write-up in book value of assets
subsequent to July 31, 1992.
Notwithstanding the foregoing, (A) net deferred income tax assets recorded
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109") shall be treated as a tangible
asset (and not deducted pursuant to clause (i) or (iv) of this definition)
and shall be calculated without regard to any valuation allowance with
respect to such net deferred tax asset recorded by the Company in
accordance with SFAS 109, and (B) any asset established pursuant to
Statement of Financial Accounting Standards No. 87, Employers Accounting
for Pensions ("SFAS 87") which corresponds to an additional minimum pension
liability recorded pursuant to SFAS No. 87 and any prepaid pension asset
which arises from amounts funded by the Company in accordance with Internal
Revenue Service regulations (but not in excess of the minimum amounts
required to be contributed thereunder) in excess of amounts expensed in
accordance with SFAS 87, shall be treated as a tangible asset (and not
deducted pursuant to clause (i) or (iv) of this definition).
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract or otherwise.
"AGREED PUT CONSIDERATION" shall mean as of the date of prepayment by
the Company upon the exercise by any holder of Notes of its Right to Put or
option to be repaid pursuant to paragraph 5I, the sum of
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<PAGE>
(i) the principal amount of the Notes held by such holder
subject to the prepayment on such date, plus
(ii) all accrued and unpaid interest to such date on such Notes,
plus
(iii) the Yield-Maintenance Amount as of such date with respect
to such Notes.
"AGREEMENT" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
"BANK LENDERS" shall mean the Lenders as defined in the Credit
Agreement.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized
to be closed.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the
amount thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CLOSING DATE" shall have the meaning assigned to such term in
paragraph 2 of this Agreement.
"COMBINED SUBSIDIARY DEBT" shall mean at any time all unsecured Debt
of the Subsidiaries at such time (after eliminating intercompany
transactions among the Subsidiaries).
"COMPANY" shall have the meaning specified in the introductory
paragraph of this Agreement.
"CONFIDENTIAL INFORMATION" shall mean any information furnished to any
holder of Notes by the Company or any agent of the Company in connection
with this Agreement (including, without limitation, any information
furnished to you pursuant to paragraph 5D hereof) or obtained by any holder
of Notes in connection with an inspection made pursuant to paragraph 5G
hereof, that is about the Company (or in respect of which the Company has a
confidentiality obligation) and that is marked by the Company as being
confidential, other than any such information,
(i) that was publicly known, or otherwise known to you, at the
time the information was furnished to you,
(ii) that subsequently becomes publicly known through no act or
omission by you, or
A-43
<PAGE>
(iii) that otherwise becomes known to you, other than through
disclosure by the Company or any Subsidiary.
"CONSOLIDATED FIXED CHARGES" shall mean, for any period, the sum,
without duplication, of
(i) interest expense related to Debt of the Company and the
Consolidated Subsidiaries,
(ii) amortization expense related to Debt of the Company and the
Consolidated Subsidiaries issued at a discount,
(iii) dividends in respect of preferred stock of Consolidated
Subsidiaries,
(iv) dividends in respect of Permitted Preferred Stock to the
extent paid to Persons other than the Company or any wholly-owned
Consolidated Subsidiary, plus
(v) rentals payable in respect of Capitalized Lease Obligations
of the Company and the Consolidated Subsidiaries,
in each case calculated for such period on a consolidated basis in
accordance with generally accepted accounting principles.
"CONSOLIDATED NET INCOME" shall mean for any period
(i) the gross revenues of the Company and the Subsidiaries for
such period, determined on a consolidated basis; less
(ii) all operating and non-operating expenses of the Company and
the Subsidiaries for such period, including all charges of a proper
character (including, without limitation, current and deferred taxes
on income, provision for taxes on unremitted foreign earnings which
are included in gross revenues, and current additions to reserves),
determined on a consolidated basis;
but not including in such gross revenues
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses arising from the sale, conversion or other
disposition of capital assets, other than gains arising out of any
transaction or series of related transactions in which such gains do
not exceed One Hundred Thousand Dollars ($100,000);
(ii) any gain arising from any write-up of assets subsequent to
July 31, 1992;
(iii) earnings of any Subsidiary accrued prior to the date it
became a Subsidiary;
A-44
<PAGE>
(iv) earnings of any Person, substantially all the assets of
which have been acquired in any manner, realized by such Person
prior to the date of such acquisition;
(v) net earnings or net losses of any Person in which the Company
or any Subsidiary shall have an ownership interest unless, in the case
of net earnings, such net earnings shall have actually been received
by the Company or such Subsidiary in the form of cash distributions;
(vi) any portion of the net earnings of any Subsidiary which for
any reason is unavailable for payment of dividends to the Company or
any other Subsidiary;
(vii) the earnings of any Person to which assets of the Company
shall have been sold, transferred or disposed of, or into which the
Company shall have merged, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities
of the Company or any Subsidiary;
(ix) any portion of the net earnings of the Company that cannot
be freely converted into United States dollars; and
(x) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of investment in
such Subsidiary.
"CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES" shall mean, for
any period, the sum of
(i) Adjusted Consolidated Net Income for such period, plus
(ii) the aggregate amount of
(a) Consolidated Fixed Charges,
(b) provisions for taxes on earnings,
(c) depreciation expense,
(d) the Special Charge;
(e) in the case of any such period that includes the fiscal
month ending May 2, 1993, the cumulative effect through May 2,
1993 of the accounting changes adopted by the Company, effective
as of August 1, 1992, as described in the Company's Form 10-Q
filed with the Securities and Exchange Commission for the third
quarter of its 1993 Fiscal Year;
A-45
<PAGE>
(f) in the case of any such period that includes the fiscal
month ending May 2, 1993, the provisions and charges, not in
excess of $38,000,000 in the aggregate, established by the
Company in the third quarter of its 1993 Fiscal Year; and
(g) the Tax Adjustment Amount;
in each case to the extent, and only to the extent, reflected in the
computation of Adjusted Consolidated Net Income for such period. As
used in this definition,
`Special Charge' shall mean that certain special provision of
Fifty Million Dollars ($50,000,000) taken by the Company during the
third quarter of its 1992 Fiscal Year;" and
`Tax Adjustment Amount' shall mean, for any period, the lesser of
(i) accrued interest expense on taxes on earnings for such
period minus any interest income on tax refunds for such period
and
(ii) Three Hundred Thirty-Three Thousand Dollars ($333,333)
multiplied by the number of fiscal months in such period;
provided, however, that, notwithstanding the foregoing, to the extent
that such period includes one or more fiscal months of the Company
during the third quarter of the Company's 1992 Fiscal Year, "Tax
Adjustment Amount" shall be deemed to mean an amount equal to Six
Million One Hundred Thousand Dollars ($6,100,000) for each such fiscal
month.
"CONSOLIDATED SENIOR DEBT" shall mean at any time Senior Debt at such
time, determined on a consolidated basis, minus Non-Recourse Debt of the
Company and the Subsidiaries at such time, determined on a consolidated
basis.
"CONSOLIDATED SUBSIDIARY" shall mean any corporation more than fifty
percent (50%) of the total combined voting power of all classes of Voting
Stock of which shall, at the time as of which any determination is being
made, be owned, directly or indirectly, by the Company.
"CONSOLIDATED TANGIBLE ASSETS" shall mean, at any time, the sum of:
(i) Adjusted Consolidated Tangible Net Worth at such time; plus
(ii) the total amount of all liabilities of the Company and the
Consolidated Subsidiaries on a consolidated basis at such time.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time the excess of
total assets of the Company and the Subsidiaries at such time, determined
on a consolidated basis, over total liabilities of the Company and the
Subsidiaries at such time, determined
A-46
<PAGE>
on a consolidated basis, in each case determined in accordance with
generally accepted accounting principles, excluding, however, from the
determination of total assets:
(i) all assets that would be classified as intangible assets
under such generally accepted accounting principles, including,
without limitation, goodwill (whether representing the excess of cost
over book value of assets acquired or otherwise), patents, trademarks,
trade names, copyrights, franchises, unamortized debt discount and
expense, organization costs, research and development costs and other
deferred charges (other than prepaid insurance and taxes and pre-
production and production costs including, but not limited to,
engineering and tooling costs, that are amortized over anticipated
deliveries);
(ii) treasury stock and minority interests in Subsidiaries;
(iii) cash, Securities or other Property set apart and held in a
sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock;
(iv) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence or amortization of
Properties and all other reserves or appropriations of retained
earnings that, in accordance with such generally accepted accounting
principles, should be established in connection with the business
conducted by the relevant corporation; and
(v) any revaluation or other write-up in book value of assets
subsequent to July 31, 1992.
Notwithstanding the foregoing, (A) net deferred income tax assets recorded
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109") shall be treated as a tangible
asset (and not deducted pursuant to clause (i) or (iv) of this definition)
and shall be calculated without regard to any valuation allowance with
respect to such net deferred tax asset recorded by the Company in
accordance with SFAS 109, and (B) any asset established pursuant to
Statement of Financial Accounting Standards No. 87, Employers Accounting
for Pensions ("SFAS 87") which corresponds to an additional minimum pension
liability recorded pursuant to SFAS No. 87 and any prepaid pension asset
which arises from amounts funded by the Company in accordance with Internal
Revenue Service regulations (but not in excess of the minimum amounts
required to be contributed thereunder) in excess of amounts expensed in
accordance with SFAS 87, shall be treated as a tangible asset (and not
deducted pursuant to clause (i) or (iv) of this definition).
"CONSOLIDATED TOTAL DEBT" shall mean, at any time, Debt of the Company
and the Subsidiaries at such time minus Non-Recourse Debt of the Company
and the Subsidiaries at such time, determined on a consolidated basis.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of April
26, 1989, among the Company and the lenders party thereto and the agent
thereunder, as such Credit Agreement may be amended or supplemented from
time to time.
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<PAGE>
"DEBT" shall mean, without duplication,
(i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other
similar instruments (as such term is defined in Article 9 of the
Uniform Commercial Code as from time to time in effect in the State of
New York),
(iii) obligations to pay the deferred purchase price of Property
or services (excluding advances, deposits or partial or progress
payments, unpaid wages and related employee obligations and excluding
trade payables),
(iv) obligations as lessee under Capitalized Lease Obligations,
(v) obligations under Guaranties of indebtedness or obligations
of others of the kinds referred to in clauses (i) through (iv) above,
(vi) obligations under Title IV of ERISA for each Plan and
Multiemployer Plan, in respect of unfunded accrued liabilities for
such plans, if any, as of the first day of the plan year as shown in
the annual actuarial report most recently delivered to the obligor in
respect of such obligations by the actuary for each such Plan and
Multiemployer Plan, and
(vii) in the case of any Consolidated Subsidiary, all preferred
stock of such Consolidated Subsidiary held by Persons other than the
Company or a wholly-owned Consolidated Subsidiary, such preferred
stock to be valued at the aggregate liquidation preference thereof.
"DEBT RATIO" shall mean, at any time, the ratio of Adjusted
Consolidated Debt to Adjusted Consolidated Tangible Net Worth.
"DEFAULT" shall mean any event or condition that, with notice or the
passage of time, or both, would become an Event of Default.
"DE MINIMUS PAYMENTS" shall mean, with respect to any Debt of the
Company or any Subsidiary (other than Debt governed or evidenced by the
Notes, the 9.35% Senior Notes due January 29, 2000, the Credit Agreement,
any Acceptable Replacement Credit Facility, the 1994 Senior Notes, the 1994
Subordinated Notes or the Existing Subordinated Notes of either Series),
payments, prepayments, defeasances and redemptions (in each case, other
than Originally Scheduled Payments) in respect of any such Debt aggregating
not more than Five Hundred Thousand Dollars ($500,000) in any Fiscal Year.
"DESIGNATED EVENT" shall mean the occurrence of any one or more of the
following after the Closing Date:
(i) the direct or indirect acquisition by any person (as such
term is used in Section 13(d) and Section 14(d)(2) of the Exchange
Act), or related
A-48
<PAGE>
persons constituting a group (as such term is used in Rule 13d-5 under
the Exchange Act), of (i) beneficial ownership of issued and
outstanding shares of Voting Stock of the Company the result of which
acquisition is that such person or such group possesses in excess of
fifty percent (50%) of the combined voting power of all then issued
and outstanding Voting Stock of the Company or (ii) within any period
of three-hundred sixty-five (365) consecutive days, all or
substantially all of the assets of the Company; or
(ii) following the election or removal of directors, a majority
of the Company's board of directors consists of individuals who were
not members of the Company's board of directors two years before such
election or removal, unless the election of each director who was not
a director at the beginning of such two-year period has been approved
in advance by directors representing at least a majority of the
directors then in office who were directors at the beginning of the
two-year period; or
(iii) the consolidation with, or merger into, any Person by the
Company in a transaction in which more than thirty percent (30%) by
number of votes of the Voting Stock of the Company is exchanged (the
calculation of which shall be made by dividing the number of votes
attributable to the Voting Stock so exchanged by the aggregate number
of votes attributable to the Voting Stock immediately prior to such
transaction); or
(iv) (a) any transaction or series of transactions (whether
related or unrelated) in which the Company repurchases or
otherwise retires in the aggregate, within any period of three
hundred sixty-five (365) consecutive days, thirty percent (30%)
or more (by number) of the Company's outstanding common stock
(the calculation of which shall be made by dividing the number of
shares outstanding immediately after giving effect to each such
repurchase or retirement, other than any such shares owned by a
Subsidiary, by the highest number of shares outstanding at any
time during the period of three hundred sixty-five (365)
consecutive days ending on (and including) the date of such
repurchase or retirement (adjusting in each case for stock
splits, stock dividends and other similar transactions, excluding
in each case shares held in treasury, and assuming in each case
that all securities then convertible into, or representing then
effective rights to purchase, common stock have been exercised at
such time), or
(b) any Distribution made by the Company the Fair Market
Value of which, together with the aggregate Fair Market Value of
all other Distributions made by the Company during the period of
three hundred sixty-five (365) days ending on (and including) the
date of such Distribution (each Distribution being valued on the
date it is made), equals or exceeds thirty percent (30%) of the
Fair Market Value the Company's outstanding common stock
(determined at the commencement of such period);
in each case if as a result of such event or events Consolidated Total Debt
shall, at any time during the period beginning on the date of such
transaction (or the date of the
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<PAGE>
completion of such series of transactions, as the case may be) and ending
three hundred sixty-five (365) days thereafter, equal or exceed seventy-
five percent (75%) of the sum of Consolidated Total Debt plus Consolidated
Tangible Net Worth at such time.
"DISTRIBUTION" shall mean:
(i) dividends or other distributions on or in respect of the
capital stock of the Company or any Subsidiary (except distributions
solely in such stock or in Rights, as such term is defined in the
Rights Agreement and except to the extent made to the Company or any
Wholly-Owned Subsidiary);
(ii) the repurchase, purchase, redemption or acquisition of
capital stock of the Company or any Subsidiary, or of warrants, rights
or other options to purchase such stock (except when solely in
exchange for such stock and except to the extent made from the Company
or a Wholly-Owned Subsidiary) unless made, contemporaneously, from the
net proceeds of a sale of such stock; and
(iii) all payments in respect of Subordinated Debt (other than
mandatory scheduled payments and prepayments), including optional or
voluntary prepayments and including all payments made to acquire
Subordinated Debt (except to the extent such payment is made to the
Company or a Wholly-Owned Subsidiary).
"EEC AFFILIATE" shall mean any corporation organized under the laws of
any country which is a member nation of the European Economic Community (as
used herein, the "EEC") as such organization is constituted on the Closing
Date, that has the majority of its Property located in and makes the major
portion of its sales to Persons located in the United States of America,
Canada, or the EEC, and more than fifty percent (50%) of the total combined
voting power of all classes of Voting Stock of which shall, at the time as
of which any determination is being made, be owned, directly or indirectly,
by the Company.
"EQUITY ISSUANCE ACQUISITIONS" shall mean the acquisition by the
Company of Debt (including, without limitation, Notes, the 1994
Subordinated Notes, the Company's 9.35% Senior Notes due January 29, 2000
or the Company's 7% Convertible Subordinated Debentures due 2012), or any
portion thereof, for consideration consisting solely of common stock of the
Company and in connection with tenders of such Debt by the holders thereof
in payment of the exercise or purchase price of any rights, warrants or
options to acquire such common stock, or upon conversion of such Debt into
such common stock.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
(i) is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the IRC) as the Company, or
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(ii) is under common control (within the meaning of Section
414(c) of the IRC) with the Company.
"ESOP" shall mean the Salaried Employees Stock Ownership Plan,
effective August 1, 1983, as amended from time to time.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A hereof.
"EXCEPTED PROPERTY" shall have the meaning set forth in paragraph 6P
of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXISTING SUBORDINATED NOTES" shall mean and include:
(i) the Company's 9.25% Subordinated Debentures due 2017; and
(ii) the Company's 7% Convertible Subordinated Debentures due
2012;
and the Existing Subordinated Notes of each such series (but not the
Existing Subordinated Notes of the other series) shall be referred to
collectively as a "SERIES" of Existing Subordinated Notes.
"FAIR MARKET VALUE" shall mean at any time with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer, and
an informed and willing seller, under no compulsion to buy or sell,
respectively.
"FINANCIAL COVENANT" shall mean any covenant, agreement or provision
(including, without limitation, the definitions applicable thereto) of or
applicable to the Company or any Consolidated Subsidiary contained in any
agreement governing, or instrument evidencing, any Debt (or commitment to
lend), other than Debt or a commitment to lend among the Company and one or
more Consolidated Subsidiaries, of the Company or any Consolidated
Subsidiary in an aggregate principal amount greater than $5,000,000, which
covenant, agreement or provision:
(i) requires the Company or any Consolidated Subsidiary to
maintain specified financial amounts or ratios or to meet other
financial tests;
(ii) restricts the ability of the Company or any Consolidated
Subsidiary to:
(a) make Distributions, investments, capital expenditures or
operating expenditures of any kind;
(b) incur, create or maintain any Debt (or other
obligations) or Liens;
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(c) merge, consolidate or acquire or be acquired by any
Person;
(d) sell, lease, transfer or dispose of any Property (other
than restrictions imposed solely upon collateral, and not upon
Property of the Company or any Consolidated Subsidiary generally,
by holders of Liens thereon which are permitted by this
Agreement; or
(e) issue or sell any capital stock of any kind;
(iii) is similar to any provision in paragraph 6 of this
Agreement; or
(iv) provides that a default or event of default shall occur, or
that the Company or any Consolidated Subsidiary shall be required to
prepay, redeem or otherwise acquire for value any Debt or security as
a result of its failure to comply with any provision similar to any of
those set forth in any of the foregoing clauses (i), (ii) or (iii).
"FIRST AMENDMENT" shall mean the Amendment Agreement, entered into as
of June 30, 1993, between the Company and the holders of Notes named
therein.
"FIRST AMENDMENT DATE" shall mean the "Effective Date," as such term
is defined in the First Amendment.
"FISCAL YEAR" shall mean any fiscal year of the Company ending on July
31 .
"FISCAL QUARTER NET WORTH INCREASE AMOUNTS" shall mean for any fiscal
quarter of the Company, the greater of (i) Zero Dollars ($0) and (ii) fifty
percent (50%) of Adjusted Consolidated Net Income for such fiscal quarter.
"FUJI" shall mean The FUJI Bank, Limited.
"GROSS OPERATING INCOME" shall mean for any period, sales minus costs
and expenses (other than depreciation and amortization), in each case, as
reflected as a line item on the consolidated statements of earnings and
cash flows of the Company and the Consolidated Subsidiaries for such
period.
"GUARANTIES" shall mean, with respect to any Person (the "Guarantor"),
any obligation (except the endorsement in the ordinary course of business
of negotiable instruments for deposit or collection) of the Guarantor
guaranteeing or in effect guaranteeing any indebtedness, dividend or other
obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Guarantor:
(i) to purchase such indebtedness or obligation or any Property
constituting security therefor;
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(ii) to loan, advance or supply funds, make any capital
contribution or purchase Property from any Person
(a) for the purpose of payment of such indebtedness or
obligation, or
(b) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary
Obligor or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation; or
(iii) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner
of such indebtedness or obligation of the ability of the Primary
Obligor to make payment of the indebtedness or obligation or, in the
case of any such lease, under terms providing that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use;
(iv) to contract or agree to purchase any Property or services if
such contract or agreement requires that payment for such Property or
services (a) shall be made regardless of whether delivery of such
Property or services is ever made or tendered or (b) shall be
subordinated to any indebtedness (of the purchaser or user of such
Property or the Person entitled to the benefit of such services) owed
or to be owed to any Person; or
(v) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
"IDB FINANCING" shall mean any industrial development bond or similar
financing in which a state or other governmental authority incurs Debt to
construct, improve or acquire (or, in the case of the San Marcos Bonds, to
refinance the construction, improvement or acquisition of) fixed assets for
use primarily by the Company or a Subsidiary under a lease or similar
arrangement of at least five years' duration and in connection with which
the Company or such Subsidiary is obligated (directly or indirectly), under
such lease or other arrangement, to make payments to such state or other
governmental authority which are used to service such Debt.
"INSTITUTIONAL INVESTOR" shall mean
(i) any original purchaser of any of the Notes,
(ii) the subsidiaries and affiliates of any such purchaser and
nominees controlled by any such purchaser, and
(iii) any insurance company, pension fund, mutual fund,
investment company, bank, savings bank, savings and loan association,
investment banking company, trust company, finance or credit company,
any portfolio or any
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investment fund managed by any of the foregoing, and any other
institutional investor, and any nominee of the foregoing controlled by
any such Person, provided that in each case such Person has assets of
at least Five Hundred Million Dollars ($500,000,000).
"INTERCOMPANY DEBT" shall mean Debt owed by the Company or any
Subsidiary to the Company or any Subsidiary.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"LEASE TRANSACTION" shall mean a transaction (including, without
limitation, a transaction with respect to qualified leased Property meeting
the requirements of Section 168(f)(8) of the IRC) pursuant to which the
Company or any Subsidiary makes an investment (as a lessor as contemplated
by said Section 168(f)(8) or on an equity basis with the meaning of Section
4(1) of Revenue Procedure 75-21, 1975-1 C.B. 715, as amended or
supplemented), in all or part of the purchase price of Property, which
Property, concurrently with the purchase thereof, is leased under a
Capitalized Lease Obligation by the Company or such Subsidiary (acting
directly or through either or both of a trust or partnership and with or
without other investors) to a lessee, provided that such investment is made
in part for the purpose of saving or deferring Federal income tax liability
and that the Company or such Subsidiary incurs no obligation, and creates
no Lien in connection with such transaction except that:
(i) the Company or such Subsidiary, directly or indirectly
(a) may borrow part of the funds necessary to pay the
purchase price of such Property (and any related leases, contract
rights, general intangibles or accounts), and
(b) may secure such borrowings by Liens provided that such
Liens do not extend to or cover any Property other than Property
referred to in subclause (a) above and do not secure any
obligations other than those incurred in connection with such
purchase and lease transaction, and
(ii) the Company or such Subsidiary may incur other obligations
in connection with such transaction (and the Company may guarantee any
such obligation of a Subsidiary) provided that such obligations and
guarantee
(a) constitute Non-Recourse Debt,
(b) are incidental and necessary to effect such transaction,
and
(c) are of the type frequently incurred by lessors or equity
investors in connection with the business of leasing Property.
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"LETTER OF CREDIT PREPAYMENT EVENT" shall mean either:
(i) the redemption, reacquisition or repurchase of any San Marcos
Bonds (other than in connection with a Permitted IDB Acquisition); or
(ii) any deposit, after November 30, 1994, of cash collateral to
secure reimbursement obligations of the Company relating to the San
Marcos Bonds or any letter of credit relating thereto;
in either case, solely as result of and in response to the failure of the
bank which has issued any letter of credit relating to the San Marcos Bonds
to extend or renew such outstanding letter of credit; provided, however,
that prior to effecting such redemption, reacquisition, repurchase or cash
collateralization the Company shall have used its best efforts to retain
such letter of credit. The Company covenants, in connection with any
Letter of Credit Prepayment Event described in clause (i) above, to
actively seek to remarket the redeemed, reacquired or repurchased San
Marcos Bonds or, to the extent necessary, to modify the structure of such
IDB Financing to the extent necessary to permit a long-term reissuance of
the repurchased San Marcos Bonds, and, in connection with any Letter of
Credit Prepayment Event described in clause (ii) above, to continue to seek
to obtain an unsecured letter of credit not requiring such cash
collateralization.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including
any agreement to give any of the foregoing (but excluding negative pledge
clauses in agreements related to the borrowing of money), any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction (but excluding informational
filings made in respect of leases)) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"MAXIMUM PENSION CONTRIBUTION" shall mean, for any fiscal year of the
Company, a contribution to any or all Plans or Multiemployer Plans not
exceeding the greater of:
(i) the sum of:
(a) the amount set forth in the chart below under the
heading "Base Contribution" for such fiscal year; plus
(b) the lesser of:
(I) the amount set forth in the chart below under the
heading "Maximum Additional Contribution" for such fiscal
year; and
(II) the amount, if positive, by which cash provided by
operating activities of the Company and the Subsidiaries
(calculated in a manner consistent with the preparation of
the
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<PAGE>
projections contained in the Company's February 28, 1994,
financial plan, as provided to the Purchasers) for such
fiscal year exceeds the amount set forth in the chart below
under the heading "Projected Cash Flow" for such fiscal
year, so long as, but only so long as, for a period of not
less than thirty (30) days prior to and thirty (30) days
following each date on which any contribution made by the
Company and the Subsidiary would cause the aggregate amount
of contributions during such fiscal year to exceed the "Base
Contribution" set forth in the chart below for such fiscal
year, the amount of Debt outstanding under the Credit
Agreement (or any replacement, renewal or refinancing
thereof) is Zero Dollars ($0);
and
(ii) the minimum contribution permitted during such fiscal year
pursuant to ERISA, the IRC and the rules and regulations under ERISA
and the IRC.
A contribution to a Plan or Multiemployer Plan permitted by clause (b) of
this definition may be made within a period of ninety (90) days immediately
following the end of such fiscal year.
<TABLE>
<CAPTION>
MAXIMUM PROJECTED
ADDITIONAL CASH
FISCAL YEAR BASE CONTRIBUTION CONTRIBUTION PROVIDED BY
OPERATIONS
===================================================================
<S> <C> <C> <C>
1994 $17,000,000 $ 0 $36,700,000
1995 $36,000,000 $ 3,200,000 $15,600,000
1996 $37,000,000 $ 6,900,000 $46,100,000
1997 $30,000,000 $10,500,000 $64,900,000
1998 $23,000,000 $18,200,000 $53,400,000
===================================================================
</TABLE>
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA) in respect
of which the Company or any ERISA Affiliate is an "employer" (as such term
is defined in Section 3 of ERISA).
"MULTIPLE EMPLOYER PLAN" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA other than a Multiemployer Plan,
subject to Title IV of ERISA, to which the Company or any ERISA Affiliate
and an employer (as such term is defined in Section 3 of ERISA) other than
an ERISA Affiliate or the Company contribute.
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"NET AFTER-TAX CASH BASIS" shall mean at any time in respect of any
investment made in connection with a Lease Transaction, the initial amount
of such investment made by the Company or any Subsidiary in such Lease
Transaction, less
(i) the net aggregate amount (on a cash basis) received by or
distributed to the Company or such Subsidiary, on or prior to such
time, after payment and deduction of all expenses (including but not
limited to insurance and trustee's fees and after payment of interest
and principal on any loan incurred in such Lease Transaction) to the
extent all such expenses are related to and incurred in connection
with such Lease Transaction, and,
(ii) the net aggregate amount (on a cash basis), on account of
reductions in the Company's quarterly estimated tax payments to the
United States and to the State of California, on or prior to such
time, as such shall be adjusted at year-end to reflect the actual tax
benefits obtained on account of reduced taxes payable by virtue of
such Lease Transaction. In computing quarterly estimated tax
payments, the Company shall take into consideration, on a consolidated
basis, the full taxable year's anticipated benefits of the Lease
Transaction, including allowable depreciation and interest, expenses,
deductions, investment and other tax credits, and net rental income.
"NET RENTALS" shall mean, with respect to any period, all fixed
payments that the lessee is required to make during such period by the
terms of any lease having an original term of one year or more, but shall
not include amounts required to be paid in respect of maintenance, repairs,
income taxes, property taxes, insurance, assessments or other similar
charges or additional rentals (in excess of fixed minimums) based upon a
percentage of gross receipts.
"NON-EMPLOYEE DIRECTORS STOCK-OPTION PLANS" shall mean the Company's
1988 Non-Employee Directors Stock-Option Plan and any other comparable
future plan.
"NON-RECOURSE DEBT" shall mean, as to any Person, in connection with a
Lease Transaction, all indebtedness and other obligations of such Person
(i) incurred in connection with such Lease Transaction and (ii) of the type
described in clause (i) of the definition of Lease Transaction; provided,
that the obligations of such Person to repay borrowed money shall be
expressly limited as to recourse solely to (A) the property subject to such
Lease Transaction (including the proceeds of such property) and (B) the
amounts payable by or on behalf of the lessee under or in connection with
such Lease Transaction.
"NOTEHOLDER ACCEPTANCE" shall have the meaning set forth in paragraph
5I(ii) of this Agreement.
"NOTEHOLDER SHARE" shall mean, in respect of any holder of Notes and
any Ratable Prepayment Amount, such holder's ratable share of such Ratable
Prepayment Amount, such ratable share being determined by reference to the
outstanding principal amount of Notes held by such holder as a percentage
of the outstanding principal amount of all Notes.
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"NOTICE OF SALE" shall have the meaning specified in clause (ii) of
paragraph 4.E hereof.
"OFFER PERIOD" shall have the meaning set forth in paragraph 5I(ii) of
this Agreement.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents, its Chief
Financial Officer, its Controller, its Secretary or its Treasurer.
"ORIGINALLY SCHEDULED PAYMENTS" shall mean and include:
(i) payment of any Debt at scheduled maturity;
(ii) with respect to any Debt, originally scheduled prepayments,
originally scheduled redemptions, originally scheduled sinking fund
payments or originally scheduled reductions in maximum commitments
thereof; and
(iii) payments in respect of any revolving credit agreement,
including, without limitation, the Credit Agreement, which do not
result in a permanent reduction of the original commitment thereunder.
As used in the preceding sentence, "original" or "originally scheduled"
means the maturity, payments, prepayments, or reductions in commitment
established as of the Third Amendment Date, or, if later, at the time of
execution of the relevant credit facility but does not include any
payments, prepayments or reductions in commitment which result from the
occurrence of any contingency, even if the provision requiring such
payment, prepayment or reduction as a result of such contingency was
originally contained in the agreements governing such Debt, and even if the
occurrence of such contingency was foreseeable, at the time of the
execution of the documentation of such issue of Debt.
"PERMITTED EXISTING SUBORDINATED DEBT ACQUISITIONS" shall mean, with
respect to either Series of Existing Subordinated Notes, the purchase or
acquisition by the Company or any Subsidiary of Existing Subordinated Notes
of such Series in anticipation of satisfying an Originally Scheduled
Payment thereof; provided, however, that all of the following conditions
are met:
(i) no Existing Subordinated Notes may be acquired more than
three hundred sixty-four (364) days prior to the date of any such
Originally Scheduled Payment thereof;
(ii) the Company or any Subsidiary, more than one hundred eighty
(180) days, but not more than three hundred sixty-four (364) days,
prior to the date of the next succeeding Originally Scheduled Payment
thereof, may acquire no more than fifty percent (50%) of the aggregate
principal amount of Existing Subordinated Notes of such Series
required to be prepaid or redeemed on the date of the next succeeding
Originally Scheduled Payment;
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(iii) the Company or any Subsidiary, not more than one hundred
eighty (180) days prior to the date of the next succeeding Originally
Scheduled Payment thereof, may acquire an aggregate principal amount
of Existing Subordinated Notes of such Series not exceeding (together
with any Existing Subordinated Notes of such Series acquired more than
one hundred eighty (180) days, but not more than three hundred sixty-
four (364) days, prior to the date of the next succeeding Originally
Scheduled Payment thereof) one hundred percent (100%) of the aggregate
principal amount of Existing Subordinated Notes of such Series
required to be prepaid or redeemed on the date of the next succeeding
Originally Scheduled Payment;
(iv) at the time of such acquisition:
(a) no Default or Event of Default shall be continuing;
(b) the Company shall not reasonably foresee the occurrence
of any Default or Event of Default at any time prior to the date
of the next succeeding Originally Scheduled Payment thereof;
(c) the Debt Ratio would not exceed 2.50:1.00; and
(d) the Company could incur $1.00 of additional Debt;
(v) the purchase price paid by the Company and the Subsidiaries
in respect of such acquisition of Existing Subordinated Notes shall be
less than one hundred percent (100%) of the principal amount of
Existing Subordinated Notes so acquired; and
(vi) the Company, on the date of each Originally Scheduled
Payment in respect of the Existing Subordinated Notes, shall actually
apply, in accordance with the provisions of such Existing Subordinated
Notes, all Existing Subordinated Notes of such Series acquired by the
Company and the Subsidiaries to the prepayment or redemption of such
Existing Subordinated Notes required to be prepaid or redeemed on such
date.
"PERMITTED IDB ACQUISITIONS" shall mean:
(i) prepayments or repurchases of San Marcos Bonds upon tender by
the holders thereof after May 10, 1994 in accordance with the terms of
the indenture governing the San Marcos Bonds; provided, however, that
San Marcos Bonds in an aggregate principal amount of Sixteen Million
Five Hundred Thousand Dollars ($16,500,000) shall have been issued,
outstanding and held and owned by Persons other than the Company, any
Subsidiary or any Affiliate on May 10, 1994 (whether or not
subsequently repurchased by the Company); and provided, further, that
the Company shall be actively seeking to either remarket the San
Marcos Bonds that were so prepaid or repurchased pursuant to the
provisions of the IDB Financing of the Company's San Marcos, Texas
facility or, to the extent necessary in connection with any
termination of any outstanding
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letter of credit relating to such facility, to modify the structure of
such IDB Financing to the extent necessary to permit a long-term
reissuance of the repurchased San Marcos Bonds; and
(ii) the redemption in full on or before June 1, 1994 of all the
San Marcos Bonds, but solely as result of and in response to the
failure of FUJI to extend or renew its outstanding letter of credit
relating to the IDB Financing of the Company's San Marcos, Texas
facility; provided, however, that:
(a) prior to effecting such redemption, the Company shall
have used its best efforts to retain such letter of credit by
offering to deposit cash collateral to secure its obligations to
FUJI under the Reimbursement Agreement, dated as of May 1, 1990,
with the Company relating to such IDB Financing;
(b) following the making of such redemption, the Company
shall use its best efforts to obtain a replacement unsecured
letter of credit to issue replacement unsecured San Marcos Bonds,
and shall thereafter use its best efforts to market or sell such
San Marcos Bonds.
"PERMITTED INVESTMENTS" means any of the following, to the extent
owned by the Company free and clear of all Liens (except such Liens as are
permitted by the terms of this Agreement):
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States government or issued by an agency or
instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within one year after the date of
acquisition thereof;
(ii) marketable direct obligations issued by any state of the
United States or any political subdivision of any such state or any
public instrumentality thereof maturing within 180 days after the date
of acquisition thereof and, at the time of acquisition, having a
rating of A or higher from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then one of
the three highest ratings from another nationally recognized rating
service reasonably acceptable to the Required Holders) and not listed
in the Credit Watch published by S&P;
(iii) commercial paper (other than commercial paper issued by
the Company or any Affiliate or Consolidated Subsidiary) maturing no
more than 180 days after the date of creation thereof and, at the time
of acquisition, having a rating of at least A-1 or P-1 from either S&P
or Moody's (or, if at any time neither S&P nor Moody's shall be rating
such obligations, then the highest rating from other nationally
recognized rating services reasonably acceptable to the Required
Holders);
(iv) domestic and Eurodollar certificates of deposit or time
deposits, bankers' acceptances or bank notes maturing within one year
after the date of
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acquisition thereof issued by any commercial bank organized under the
laws of the United States or any state thereof or the District of
Columbia having a rating of A or higher from S&P or Moody's;
(v) money market funds having an average portfolio maturity, at
the time of acquisition thereof, of not more than 180 days, which
money market funds either:
(a) have a rating from a nationally recognized rating
service reasonably acceptable to the Required Holders which is
equivalent to a rating of either AAAm-G or AAAm from S&P or a
rating of Prime-1 from Moody's; or
(b) are required to invest at least 95% of their assets in
instruments described in other clauses of this definition;
(vi) repurchase obligations with a term of not more than 30 days
for instruments described in clauses (i) and (ii) of this definition;
(vii) investments made in connection with the Citibank, N.A.,
overnight Nassau Sweep Account; and
(viii) repurchase obligations having Kidder, Peabody & Co.,
Inc., or any other investment bank organized under the laws of any
state of the United States and approved by the Required Holders as the
counterparty, with a term of not more than 45 days for whole loans
secured by commercial or residential real estate mortgages.
"PERMITTED PREFERRED DIVIDEND" shall mean dividends in respect of any
Permitted Preferred Stock in an aggregate amount not to exceed in any
period of 365 days (or 366 days in any year in which there is a February
29th) the product of
(i) the lesser of:
(a) an amount equal to 100 basis points in excess of the
yield on the U.S. Treasury security with a constant maturity of
30 years on the date of issuance of the Permitted Preferred
Stock; and
(b) 10% per annum,
times
(ii) the aggregate cash consideration paid to the Company in
consideration of the issuance of the Permitted Preferred Stock.
"PERMITTED PREFERRED STOCK" shall mean any issue of preferred stock of
the Company which is not required to be redeemed, repurchased or otherwise
acquired or
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retired, in whole or in part, for value by the Company, upon the occurrence
of any contingency or otherwise, prior to July 1, 2003.
"PERSON" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
"PLAN" shall mean at any time any "employee pension benefit plan" (as
such term is defined in Section 3 of ERISA) maintained by the Company or
any ERISA Affiliate for employees of the Company or such ERISA Affiliate,
excluding any Multiemployer Plan, but including, without limitation, any
Multiple Employer Plan.
"PREPAYMENT EVENT" shall mean any Letter of Credit Prepayment Event,
any mandatory or optional defeasance, prepayment or repurchase, in whole or
in part, of any issue of Debt (other than Debt owing solely to the Company
or any Wholly-Owned Subsidiary), or reduction in commitment in any credit
facility, of the Company or any Subsidiary, or any event which occurs that
gives rise to an obligation of the Company or any Subsidiary to make any
such defeasance, prepayment, repurchase or reduction, in each case, other
than:
(i) Originally Scheduled Payments;
(ii) Permitted Existing Subordinated Debt Acquisitions;
(iii) Permitted IDB Acquisitions;
(iv) Equity Issuance Acquisitions; and
(v) De Minimus Payments.
In connection with any Debt described in clause (vi) of the definition of
"Debt," payments in respect of contributions of amounts not exceeding,
during any fiscal year of the Company, the Maximum Pension Contribution for
such fiscal year to any Plan or Multiemployer Plan shall not give rise to a
Prepayment Event, but a Prepayment Event will result from the payment or
contribution to any such Plan or Multiemployer Plan of any amount in excess
of the Maximum Pension Contribution during any fiscal year.
"PREPAYMENT OFFER" shall have the meaning set forth in paragraph 5I(i)
of this Agreement.
"PREPAYMENT PORTION" shall have the meaning set forth in paragraph
5I(iii) of this Agreement.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"PURCHASE MONEY MORTGAGES" shall mean a Lien held by any Person
(whether or not the seller of such assets) on tangible assets (other than
assets acquired to replace,
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repair, upgrade or alter assets owned by the Company or any Subsidiary on
the Closing Date) acquired, improved or constructed by the Company or any
Subsidiary after the Closing Date, which Lien secures all or a portion of
the related purchase price or improvement or construction costs of such
assets (or Debt incurred to pay such purchase price or costs), or any Lien
existing on any tangible assets of any corporation at the time it becomes a
Subsidiary, and extensions (as to time), renewals and replacements of any
such Lien or the Debt secured thereby, provided that, in each such case
such Lien does not extend to any other asset of the Company or any
Subsidiary; provided, further, that any Lien on acquired Property, or on
Property of a corporation at the time it becomes a Subsidiary, was not
created in contemplation of such acquisition or such corporation becoming a
Subsidiary, as the case may be.
"PURCHASERS" shall have the meaning specified in the introductory
paragraph of this Agreement.
"RATABLE PREPAYMENT AMOUNT" shall mean, in respect of the Notes:
(i) in connection with any Letter of Credit Prepayment Event, an
amount equal to the product of:
(a) the aggregate principal amount of San Marcos Bonds
redeemed, reacquired or repurchased, or with respect to which
cash collateral has been deposited to secure reimbursement
obligations of the Company relating to the San Marcos Bonds or
any letter of credit relating thereto, as the case may be, by the
Company; times
(b) the quotient of:
(I) the aggregate amount of Notes then outstanding;
divided by
(II) the aggregate amount of the Notes and the 9.35%
Senior Notes due January 29, 2000 of the Company then
outstanding;
and
(ii) with respect to each other Prepayment Event, a principal
amount of the Notes equal to the product of:
(a) the highest percentage of any issue of Debt being
prepaid, or as to which any offer to prepay shall apply, as a
result of the occurrence of such Prepayment Event, multiplied by
(b) the outstanding principal amount of the Notes.
"REQUIRED HOLDERS" shall mean at any time the holder or holders of at
least sixty-six and two-thirds percent (66 2/3%) of the aggregate
principal amount of the Notes
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outstanding at such time, provided that Notes owned by the Company, any
Subsidiary or any Affiliate at such time shall be deemed not to be
outstanding for purposes of determining such percentage.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of
the Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"RESTRICTED STOCK PLANS" shall mean the 1969, 1970, 1972, 1974 and
1984 Restricted Stock Plans of the Company and any other comparable future
plan.
"RIGHT TO PUT" shall have the meaning specified in clause (i) of
paragraph 4.E hereof.
"RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of August
15, 1986, between the Company and The First National Bank of Chicago, as in
effect on December 21, 1992.
"S&P" means Standard & Poor's Corporation.
"SAN MARCOS BONDS" shall mean bonds originally issued in connection
with the IDB Financing of Company's San Marcos, Texas facility or
replacement bonds issued on substantially the same terms as the originally
issued bonds.
"SECOND AMENDMENT" shall mean the Second Amendment Agreement entered
into as of September 24, 1993, between the Company and the holder of Notes
named therein.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall have the meaning specified in Section 2(1) of the
Securities Act.
"SENIOR DEBT" shall mean all Debt of Subsidiaries, all Debt of the
Company secured by any Lien and all other Debt ranking senior to or pari
passu with the Notes with respect to distributions of the Company's
Property in any bankruptcy proceeding.
"SENIOR OFFICER" shall mean with respect to any corporation each of
the Chairman, President, any Vice-President, the Chief Financial Officer,
the Secretary, and the Treasurer of such corporation.
"SIGNIFICANT HOLDER" shall mean (i) each Purchaser, so long as such
Purchaser shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least five percent (5%) of the
aggregate principal amount of the Notes from time to time outstanding.
"STOCK INCENTIVE PLANS" shall mean the 1989 Stock Incentive Plan of
the Company and any other future comparable plan.
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"STOCK OPTION PLANS" shall mean the 1972, 1973, 1974, 1982 and 1984
Stock Option Plans of the Company and any other future comparable plan.
"SUBSIDIARY" shall mean any corporation organized under the laws of
any state of the United States of America, Canada, or any province of
Canada, that has the majority of its Property located in and makes the
major portion of its sales to Persons located in the United States of
America or Canada, and more than fifty percent (50%) of the total combined
voting power of all classes of Voting Stock of which shall, at the time as
of which any determination is being made, be owned, directly or indirectly,
by the Company.
"THIRD AMENDMENT" shall mean the Third Amendment Agreement entered
into as of May 10, 1994, between the Company and the holder of Notes named
therein.
"THIRD AMENDMENT DATE" shall mean the "Effective Date," as such term
is defined in the Third Amendment.
"TRADE RECEIVABLES AGREEMENT" shall mean
(i) the Amended and Restated Trade Receivables Purchase and Sale
Agreement dated as of January 26, 1990 and as amended thereafter among
the Company, Corporate Asset Funding Company, Inc., Citibank, N.A. and
Citicorp North America, Inc., individually and as agent,
(ii) the Amended and Restated Trade Receivables Purchase and Sale
Agreement dated as of January 26, 1990 and as amended thereafter among
the Company, Citibank, N.A. and Citicorp North America, Inc.,
individually and as agent, and
(iii) other agreements for the sale of receivables, or other
amounts payable to the Company on account of any pre-production costs,
by the Company or any Subsidiary, with recourse to the Company or such
Subsidiary no greater than as set forth in the agreement referred to
in clause (i) of this definition,
provided that in no event shall
(a) the Company or any Subsidiary sell Property (or subject
Property to any Liens) under any such agreements other than Property
of the type that may be sold under any such agreements in accordance
with the terms of any such agreements as in effect on the Closing
Date, and in no event shall such sales be made unless they are sales
of interests in accounts and general intangibles as such terms are
defined by the Uniform Commercial Code as in effect in New York,
(b) at any time the aggregate amount of claims (whether or not
asserted at such time) against any one or more of the Company or the
Subsidiaries, or assets of any of them, arising out of such agreements
(but only that portion of such claims that represents principal)
exceed the greater of,
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(I) thirty-five percent (35%) of Adjusted Consolidated
Tangible Net Worth, or
(II) Sixty Million Dollars ($60,000,000), and
(c) for any period of ten consecutive Business Days, the
aggregate amount of claims (whether or not asserted at such time)
against any one or more of the Company or the Subsidiaries, or assets
of any of them, arising out of such agreements (but only that portion
of such claims that represents principal) exceed ninety-one percent
(91%) of the aggregate face amount of the receivables and general
intangibles with respect to which the Company may or has sold
interests under any such agreements and which receivables and general
intangibles are outstanding at such time.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WARRANT AGREEMENT" shall mean that certain Warrant Agreement entered
into among the Company and holders of the Notes and certain other Debt of
the Company on or after the Amendment Date in compliance with the
provisions of paragraph 7A of the Amendment.
"WARRANTS" shall mean warrants to purchase shares of the common stock
of the Company issued pursuant to the Warrant Agreement.
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary one hundred
percent (100%) of the capital stock of which (other than directors'
qualifying shares) is held of record and beneficially owned by the Company
or any other Wholly-Owned Subsidiary.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and
Agreed Put Consideration and any Yield-Maintenance Amount payable with respect
to, such Note, by wire transfer of immediately available funds for credit (not
later than 12:00 noon, New York City time, on the date due) to such Purchaser's
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, such Purchaser will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously made thereon and
of the date to which interest thereon has been paid. The Company agrees
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to afford the benefits of this paragraph 11A to any Transferee which shall have
made the same agreement as each Purchaser has made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save each Purchaser and
any Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and
expenses of any special counsel engaged by such Purchaser or such
Transferee in connection with this Agreement, the transactions contemplated
hereby and any subsequent proposed modification of, or proposed consent
under, this Agreement, whether or not such proposed modification shall be
effected or proposed consent granted, and
(ii) the costs and expenses, including attorneys' fees, incurred by
such Purchaser or such Transferee in enforcing (or determining whether or
how to enforce) any rights under this Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions
contemplated hereby or by reason of such Purchaser's or such Transferee's
having acquired any Note, including without limitation costs and expenses
incurred in any bankruptcy case.
The obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by any Purchaser or
any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement and the Notes may be amended,
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holders except that, without the written consent of the holder or holders of all
Notes at the time outstanding, no amendment to this Agreement shall change the
maturity of any Note, or change the principal of, or the rate or time of payment
of interest on or any Agreed Put Consideration or Yield-Maintenance Amount
payable with respect to any Note, or affect the time, amount or allocation of
any prepayments, or change the proportion of the principal amount of the Notes
required with respect to any consent, amendment, waiver or declaration. With
respect to waivers or consents to amendments to or concerning the provisions of
paragraph 5I hereof, the provisions of such paragraph and (except as set forth
in this sentence) the definitions used therein (as used therein) may not be
waived, amended or supplemented without the consent of each holder of Notes, but
waivers concerning the occurrence of any Prepayment Event, and waivers and
consents to amendments or supplements to the definition of Prepayment Event, may
be given by the Required Holders.
Each holder of any Note at the time or thereafter outstanding shall be
bound by any consent authorized by this paragraph 11C, whether or not such Note
shall have been marked to indicate such consent, but any Notes issued thereafter
may bear a notation referring to any such consent. No course of dealing between
the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights
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of any holder of such Note. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The
Notes are issuable as registered notes without coupons in denominations of at
least One Million Dollars ($1,000,000), except as may be necessary to reflect
any principal amount not evenly divisible by One Million Dollars ($1,000,000).
The Company shall keep at its principal office a register in which the Company
shall provide for the registration of Notes and of transfers of Notes. Upon
surrender for registration of transfer of any Note at the principal office of
the Company, the Company shall, at its expense, execute and deliver one or more
new Notes of like tenor and of a like aggregate principal amount, registered in
the name of the Transferee or Transferees, provided that any such Transferee or
Transferees are Institutional Investors. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever
any Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled
to receive. Every Note surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any
Institutional Investor on such terms and conditions as may be determined by such
holder in its sole and absolute discretion, provided that any such participation
shall be in a principal amount of at least One Hundred Thousand Dollars
($100,000).
11F. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements contained in the Company's Quarterly Report on Form 10-Q for fiscal
quarter ended May 2, 1993. If any change in accounting principles from those
used in the preparation of such financial statements hereafter occasioned by the
promulgation of rules and regulations by or required by the Financial Accounting
Standards Board, the Cost Accounting Standards Board or the Securities and
Exchange Commission (or successors thereto or agencies with similar functions)
result in a material change
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in the accounting principles used to prepare the financial statements contained
in the Company's Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q,
the Company and the holders of Notes agree, upon notification of such change by
the Company to the holders of Notes or by a holder of Notes to the Company, to
enter into negotiations in order to amend paragraph 6 and the Financial
Covenants incorporated by reference herein, as applicable, so as to equitably
reflect such change with the desired result that the criteria for evaluating the
Company's financial condition shall be the same after such change as if such
change had not been made.
11G. DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
11I. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
11J. DISCLOSURE TO OTHER PERSONS. Each Purchaser agrees to use its best
efforts to hold in confidence and not to disclose any Confidential Information,
provided, that any Purchaser will be free, after notice to the Company, to
correct any false or misleading information that may become public concerning
its relationship to the Company and the Subsidiaries or to the transactions
contemplated by this Agreement. Notwithstanding the foregoing, the Company
acknowledges that the holder of any Note may deliver copies of any financial
statements and other documents delivered to such holder, and disclose any other
information disclosed to such holder (including, without limitation,
Confidential Information), by or on behalf of the Company or any Subsidiary in
connection with or pursuant to this Agreement, to
(i) such holder's directors, officers, employees, agents and
professional consultants,
(ii) any other holder of any Note,
(iii) any Institutional Investor to which such holder sells or offers
to sell such Note or any part thereof, provided that such Institutional
Investor signs a written agreement to comply with the confidentiality
provisions of this Agreement, regardless of whether or not such offeree
purchases any Notes, and provided further that no such
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agreement shall be required so long as such Institutional Investor is
furnished only with information that is not Confidential Information,
(iv) any Institutional Investor to which such holder sells or offers
to sell a participation in all or any part of such Note, provided that such
Institutional Investor signs a written agreement to comply with the
confidentiality provisions of this Agreement, regardless of whether or not
such offeree purchases any Notes, and provided further that no such
agreement shall be required so long as such Institutional Investor is
furnished only with information that is not Confidential Information,
(v) any federal or state regulatory authority having jurisdiction over
such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization or
(vii) any other Person to which such delivery or disclosure may be
necessary,
(a) in compliance with any law, rule, regulation or order
applicable to such holder,
(b) in response to any subpoena or other legal process, or
(c) in connection with any litigation to which such holder is a
party.
11K. NOTICES. All written communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid) and
(i) if to any Purchaser, addressed to such Purchaser at the address
specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as such Purchaser shall have specified to
the Company in writing,
(ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified
an address to the Company, then addressed to such other holder in care of
the last holder of such Note which shall have so specified an address to
the Company, and
(iii) if to the Company, addressed to it at:
Rohr, Inc.
Foot of H Street
Chula Vista, CA 92012
Attention: Treasurer
copy to: General Counsel
or at such other address as the Company shall have specified to the holder
of each Note in writing; provided, however, that any such communication to
the Company may also,
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at the option of the holder of any Note, be delivered by any other means
either to the Company at its address specified above or to any officer of
the Company.
11L. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser or to the Required Holders, the
determination of such satisfaction shall be made by such Purchaser or the
Required Holders, as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK.
11O. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11P. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
11R. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers are to
be several sales, and the obligations of the Purchasers under this Agreement are
several obligations. Except as provided in paragraph 3F, no failure by any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and no
Purchaser shall be responsible for the obligations of, or any action taken or
omitted by, any other Purchaser hereunder.
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If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among the
Company and the Purchasers.
Very truly yours,
ROHR, INC.
By__________________________________________
Name:
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
[PURCHASER]
By_________________________________________
Name:
Title:
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EXHIBIT B1
FORM OF OPINION OF GIBSON, DUNN & CRUTCHER
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Rohr, Inc.
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement dated as of May 10, 1994
(the "Third Amendment") among Rohr, Inc., a Delaware corporation (the
"Company"), and each of the Persons listed on Annex 1 hereto (the "Holders"),
which Third Amendment, among other things, amends that certain Note Agreement
(the "Original Note Agreement"), dated as of December 21, 1992 between the
Company and each of the Holders, as previously amended by that certain Amendment
Agreement dated June 30, 1993 (the "First Amendment") and that certain Second
Amendment Agreement dated as of September 24, 1993 (the "Second Amendment," and,
collectively, the "Existing Note Agreement," and, as amended and restated by the
Third Amendment, the "Amended Note Agreement"). The capitalized terms used
herein and not defined herein have the meanings assigned to them by or pursuant
to the terms of the Third Amendment. The Third Amendment, the Amended Note
Agreement and the Company's 9.33% Notes due December 15, 2002 (as amended by the
First Amendment, the "Notes") are hereinafter referred to collectively as the
"Amendment Documents."
We have acted as special counsel to the Company in connection with the
transactions contemplated by the Third Amendment. This opinion is delivered to
you pursuant to paragraph 4B(i) of the Third Amendment. In acting as such
counsel, we have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
(d) a certified copy of the certificate of incorporation and bylaws of
the Company as in effect on the date hereof;
(e) the opinion of Hebb & Gitlin, special counsel to the Holders,
dated the date hereof; and
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(f) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates as we have deemed necessary or appropriate to enable us to
render this opinion.
In rendering our opinion, we have assumed with your permission the
following:
(a) the authenticity of all documents submitted to us as originals;
(b) the conformity of any documents submitted to us as copies to their
respective originals;
(c) the accuracy of all reports and certificates received from public
officials;
(d)(i) each Holder has all requisite power and authority to execute
and deliver the Third Amendment and to perform its obligations under the
Amended Note Agreement (and at all relevant times had the requisite power
and authority to execute and deliver the Original Note Agreement, the First
Amendment and the Second Amendment and to perform its obligations under the
Existing Note Agreement); (ii) the execution and delivery of the Third
Amendment by such Holder and performance of the obligations of such Holder
under the Amended Note Agreement have been duly authorized by all necessary
action (and the execution and delivery of the Original Note Agreement, the
First Amendment and the Second Amendment by such Holder and the performance
of the obligations of such Holder pursuant to the Amended Note Agreement
were at all relevant times duly authorized by all necessary action); (iii)
the Third Amendment has been executed and delivered by duly authorized
officers of such Holder (and the Original Note Agreement, the First
Amendment and the Second Amendment were executed and delivered by duly
authorized officers of such Holder); and (iv) the Third Amendment and the
Amended Note Agreement are legal, valid and binding obligations of such
Holder, enforceable against it in accordance with their respective terms;
(e) the Company is a corporation duly incorporated, validity existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business and own
its Property;
(f) the Company has the requisite corporate power and authority to
execute and deliver the Third Amendment and to perform its obligations set
forth in the Amended Note Agreement (and the Company had at all relevant
times the requisite corporate power and authority to execute and deliver
the Original Note Agreement, the First Amendment and the Second Amendment
and to perform its obligations under the Existing Note Agreement);
(g) the Third Amendment and the Amended Note Agreement have been duly
authorized by all necessary corporate action on the part of the Company and
the Third Amendment has been executed and delivered by duly authorized
officers of the Company
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(and the Existing Note Agreement was at all relevant times duly authorized
by all necessary corporate action on the part of the Company and the
Original Note Agreement, the First Amendment, the Second Amendment were
executed and delivered by duly authorized officers of the Company);
(h) all parties to the Third Amendment have filed all required
franchise tax returns, if any, and paid all required taxes, if any, under
the California Revenue & Taxation Code (see White Dragon Productions, Inc.
----------------------------------
v. Performance Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745
-------------------------------
(1987); Damato v. Slevin, 214 Cal. App. 3d 668, 262 Cal. Rptr. 879 (1989);
----------------
California Revenue and Taxation Code Section 23301 et seq.);
------
(i) there are no agreements or understandings between or among the
Company, any Holder or third parties which would expand, modify or
otherwise affect the terms of the Third Amendment or the Amended Note
Agreement or the respective rights or obligations of the parties thereunder
and each of the foregoing documents correctly and completely sets forth the
intent of all parties thereto (see Trident Center v. Connecticut General
--- -------------------------------------
Life Insurance Company, 847 F.2d 564 (9th Cir. 1989));
----------------------
(j) Each Holder holds its Note, as amended, for its own account and
not with a view to the distribution thereof within the meaning of the
Securities Act of 1933, as amended; and
(k) Each Holder is an "incorporated admitted insurer" within the
meaning of Section 1100.1 of the California Insurance Code.
In rendering our opinion, we have relied, as to certain factual matters, on
warranties and representations contained in the Third Amendment, certificates of
officers of the Company or certificates obtained from public officials.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. Each of the Third Amendment, the Amended Note Agreement and the Notes
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
2. The execution and delivery of the Third Amendment by the Company, the
repayment of Debt by the Company pursuant to the Third Amendment and Amended
Note Agreement and the consummation of the transactions which are contemplated
by the Third Amendment to be consummated by the Company on the Effective Date do
not violate the certificate of incorporation or bylaws of the Company or any
statute, rule or regulation of the State of California or the Untied States of
America applicable to the Company which is generally applicable to transactions
in the nature of those contemplated by the Third Amendment and the Amended Note
Agreement, or the Delaware General Corporation Law.
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3. No consents, approvals or authorizations of any governmental
authorities of the State of California or the United States of America are
required by law to be obtained on the part of the Company in connection with the
execution and delivery of the Third Amendment or the performance of the Amended
Note Agreement, except such consents, approvals or authorizations that have been
obtained on or prior to the date hereof.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. Our opinion is based upon the laws of the State of California, the
State of Delaware (with respect to corporate law) and the United States of
America. We have relied upon the opinion of Hebb & Gitlin with respect to all
matters governed by New York law. We have not examined the question of what law
would govern the interpretation or enforcement of the Third Amendment, the
Amended Note Agreement and the Notes and our opinion is based on the assumption
that the internal laws of the State of California and the laws of the United
States of America would govern the provisions of such agreements and instruments
and the transactions contemplated thereby. However, we note that if any such
agreement or instrument is not, in fact, enforceable under the laws of New York,
such agreement or instrument may not be enforced by a California court under
applicable conflict-of-law principles.
B. This opinion is limited to the effect of the present state of the laws
of the State of California, the United States of America and, to the limited
extent set forth above, the State of Delaware and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the
event of future changes in such laws or the interpretations thereof or such
facts.
C. Our opinions, and our assumptions and qualifications relating to
enforceability of agreements or instruments against parties other than the
Company, are subject to (i) the effect of any bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting the
enforcement of creditors' rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent transfers or preferential
transfers) and (ii) general principles of equity, including without limitation
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether enforceability is considered in a
proceeding in equity or at law.
D. We express no opinion with respect to the legality, validity, binding
nature or enforceability of any provision of the Amendment Documents to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
E. We express no opinion as to the legality, validity, binding nature or
enforceability (i) of any provision of the Amendment Documents insofar as it
provides for the payment or
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reimbursement of costs and expenses or for claims, losses or liabilities in
excess of a reasonable amount determined by any court or other tribunal or (ii)
regarding any Holder's ability to collect attorneys' fees and costs in an action
involving the Amendment Documents and the Amended Note Agreement if the Holder
is not the prevailing party in such action (we call your attention to the effect
of Section 1717 of the California Civil Code, which provides that, where a
contract permits one party thereto to recover attorneys' fees, the prevailing
party in any action to enforce any provision of the contract shall be entitled
to recover its reasonable attorneys' fees).
F. We express no opinion as to the legality, validity, binding nature or
enforceability of (i) any waiver of rights existing, or duties owed, that is
broadly or vaguely stated or does not describe the right or duty purportedly
waived with reasonable specificity, (ii) any waivers or consents (whether or not
characterized as a waiver or consent in the Amendment Documents relating to the
rights of the Company or duties owing to it existing as a matter of law,
including, without limitation, waivers of the benefits of statutory or
constitutional provisions, to the extent such waivers or consents may be found
by a California court to be against public policy or which are ineffective
pursuant to California statutes and judicial decisions or (iii) provisions in
the Amendment Documents that may be construed as imposing penalties,
forfeitures, late payment charges or an increase in the interest rate upon
delinquency in payment or the occurrence of default.
G. We express no opinion as to any provision of the Amendment Documents
requiring written amendments or waivers of such documents insofar as it suggests
that oral or other modifications, amendments or waivers could not be effectively
agreed upon by the parties or that the doctrine of promissory estoppel might not
apply.
H. We express no opinion as to the applicability or effect of each
Holder's compliance with any state or federal laws applicable to the
transactions contemplated by the Amendment Documents because of the nature of
its business.
This opinion is rendered to the Holders in connection with the Third
Amendment and the Amended Note Agreement and may not be relied upon by any
person other than the Holders or by the Holders in any other context, without
our written consent, which consent will not be unreasonably withheld, provided
that the Holders may provide this opinion (i) to regulatory authorities should
they so request or in connection with their normal examinations, (ii) to the
independent auditors and attorneys of the Holders, (iii) pursuant to order or
legal process of any court or governmental agency or (iv) in connection with any
legal action to which the Holder is a party arising out of the transactions
contemplated by the Amendment Documents. This opinion may not be quoted without
the prior written consent of this Firm.
Very truly yours,
Gibson, Dunn & Crutcher
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<PAGE>
ANNEX 1
ADDRESSEES
The Prudential Insurance Company of America
Principal Mutual Life Insurance Company
Massachusetts Mutual Life Insurance Company
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<PAGE>
EXHIBIT B2
FORM OF OPINION OF RICHARD MADSEN, ESQ.
[LETTERHEAD OF RICHARD MADSEN, ESQ.]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Third Amendment Agreement, dated as of May 10, 1994
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement dated as of May 10, 1994
(the "Third Amendment") among Rohr, Inc., a Delaware corporation (the
"Company"), and each of the Persons listed on Annex 1 hereto (the "Holders"),
which Third Amendment, among other things, amends that certain Note Agreement
(the "Original Note Agreement"), dated as of December 21, 1992, between the
Company and each of the Holders, as previously amended by that certain Amendment
Agreement dated June 30, 1993 (the "First Amendment") and that certain Second
Amendment Agreement dated as of September 24, 1993 (the "Second Amendment," and,
collectively, the "Existing Note Agreement," and, as amended and restated by the
Third Amendment, the "Amended Note Agreement"). The capitalized terms used
herein and not defined herein have the meanings assigned to them by or pursuant
to the terms of the Third Amendment. The Third Amendment, the Amended Note
Agreement and the Company's 9.33% Notes due December 15, 2002 (as amended by the
First Amendment, the "Notes") are hereinafter referred to collectively as the
"Amendment Documents."
I am the General Counsel of the Company and have acted in such capacity in
connection with the transactions contemplated by the Third Amendment. This
opinion is delivered to you pursuant to paragraph 4B(ii) of the Third Amendment.
In acting as such counsel, I have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
(d) the certificates delivered to the Holders pursuant to paragraph 4C
of the Third Amendment;
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(e) the amendment described in paragraph 4I of the Third Amendment;
(f) the Seventh Amendment to the Credit Agreement, dated of even date
herewith;
(g) a certified copy of the restated certificate of incorporation of
the Company, and a copy of the bylaws of the Company, each as in effect on
the date hereof (the "Charter" and the "Bylaws", respectively); and
(h) a long-form good standing certificate from the state of Delaware
for the Company and foreign good standing certificates or similar
certificates for the Company from each of the states set forth on Annex 2
hereto.
I have also examined (or at my direction, a lawyer on my staff has examined
and reported to me concerning) originals, or copies certified or otherwise
identified to my (or his or her) satisfaction, of such other records of the
Company, documents, agreements, instruments and certificates of public officials
as I have deemed necessary or appropriate to enable me to render this opinion.
In rendering my opinion, I have assumed the following:
(a) the authenticity of all documents submitted to me as originals;
(b) the conformity of any documents submitted to me as copies to their
respective originals; and
(c) the accuracy of all reports and certificates received from public
officials.
In rendering my opinion, I have relied as to matters of fact, to the extent
I deem necessary and proper, on warranties and representations as to factual
matters contained in the Third Amendment. Without making any investigation
thereof, I have no actual knowledge of any material inaccuracies in any of the
facts contained in the Third Amendment.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and own its Property.
2. The Company has duly qualified and is in good standing as a foreign
corporation in the States of California, Maryland, Arkansas, Alabama and Texas.
3. To the best of my knowledge after reasonable inquiry, there is no
default or existing condition which, with the passage of time or notice, or
both, would result in a default by the Company or any Subsidiary under any
contract, lease or commitment known to me to which any one or more of the
Company or any Subsidiary is a party or by which their respective Properties may
be bound, except where such default would not have a material adverse effect
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on the ability of the Company to perform its obligations set forth in each of
the Amendment Documents.
4. Except as set forth in Annex 2 to the Third Amendment, to the best of
my knowledge after due inquiry, there is no judgment, order, action, suit,
proceeding, inquiry or investigation, at law or in equity, before any court or
governmental authority, arbitration board or tribunal, pending or threatened
against the Company, except for any such judgment, order, action, suit,
proceeding, inquiry, or investigation that is not reasonably likely to have a
material adverse effect on the ability of the Company to perform its obligations
under the Amendment Documents.
5. The Company has the requisite corporate power and authority to execute
and deliver the Third Amendment and to perform its obligations set forth in each
of the Amendment Documents.
6. The Third Amendment has been duly authorized by all necessary
corporate action on the part of the Company and has been executed and delivered
by a duly authorized officer of the Company.
7. The execution and delivery of the Third Amendment by the Company, the
repayment of the Debt of the Company governed and evidenced by the Amendment
Documents and the consummation of the transactions which are contemplated by the
Third Amendment to be consummated by the Company on the Effective Date:
(a) do not violate:
(i) the Charter or the Bylaws; or
(ii) any statute, rule or regulation of the State of California
or the United States of America applicable to the Company which is
generally applicable to transactions of the nature of those
contemplated by the Third Amendment, or the Delaware General
Corporation Law;
(b) to the best of my knowledge after reasonable inquiry, will not
conflict with, result in a breach of, or constitute a default under, any
indenture, mortgage, deed of trust, bank loan, credit agreement or similar
agreement of which I have knowledge to which the Company or any of its
Subsidiaries is a party or by which it or any of them or its or any of
their Property may be bound; and
(c) to the best of my knowledge after reasonable inquiry, do not
result in or require the creation of any Lien or encumbrance upon or with
respect to any of the Company's Property or the Property of any Subsidiary.
8. No consents, approvals or authorizations of any governmental
authorities of the State of California, the State of Delaware or the United
States of America are required by law to be obtained on the part of the Company
in connection with the execution and delivery of the Third Amendment, except
such consents, approvals or authorizations that have been obtained on or prior
to the date hereof.
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I render no opinion herein as to matters involving the laws of any
jurisdiction other than the State of California and the United States of America
and, to the limited extent discussed below, the laws of the State of Delaware.
I am generally familiar with the Delaware General Corporation Law and, for the
limited purpose of my opinions in paragraphs 1, 5, 6, 7(a) and 8 and limited
solely to the Delaware General Corporation Law, I have expressed my opinions
regarding the effect of the Delaware General Corporation Law and did not feel it
necessary to obtain the opinion of Delaware counsel.
This opinion is limited to the effect of the present state of the laws of
the States of California and, for the limited purpose referred to above,
Delaware, and of the United States of America and to the facts bearing upon this
opinion as they presently exist. I assume no obligation to revise or supplement
this opinion in the event of future changes in such laws or the interpretations
thereof or in such facts.
This opinion is rendered to the Holders in connection with the Third
Amendment and may not be relied upon by any person other than the Holders and
their successors and assigns or by the Holders in any other context, without our
written consent, which consent will not be unreasonably withheld, provided that
the Holders may provide this opinion (i) to regulatory authorities should they
so request or in connection with their normal examinations, (ii) to the
independent auditors and attorneys of the Holders, (iii) pursuant to order or
legal process of any court or governmental agency or (iv) in connection with any
legal action to which the Holder is a party arising out of the transactions
contemplated by the Amendment Documents. This opinion may not be quoted without
my prior written consent.
Sincerely,
R. W. Madsen
General Counsel and Secretary
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<PAGE>
ANNEX 1
ADDRESSEES
The Prudential Insurance Company of America
Principal Mutual Life Insurance Company
Massachusetts Mutual Life Insurance Company
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<PAGE>
ANNEX 2
FOREIGN QUALIFICATIONS
Alabama
Arkansas
California
Maryland
Texas
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<PAGE>
EXHIBIT B3
FORM OF OPINION OF HEBB & GITLIN
[LETTERHEAD OF HEBB & GITLIN]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Rohr, Inc.
----------
Ladies and Gentlemen:
Reference is made to the Third Amendment Agreement (the "Third Amendment"),
dated as of May 10, 1994, among Rohr, Inc. (the "Company"), a Delaware
corporation, and each of the Persons listed on Annex 1 hereto (the "Holders"),
which Third Amendment, among other things, amends that certain Note Agreement
(the "Original Note Agreement"), dated as of December 21, 1992, between the
Company and each of the Purchasers identified on Annex 1 thereto, as said Note
Agreement has been previously amended by that certain Amendment Agreement (the
"First Amendment") dated June 30, 1993 and that certain Second Amendment
Agreement (the "Second Amendment"), dated September 24, 1993 (collectively, the
"Existing Note Agreement," and, as amended and restated by the Third Amendment,
the "Amended Note Agreement"). The capitalized terms used herein and not
defined herein have the meanings assigned to them by or pursuant to the terms of
the Third Amendment. The Third Amendment, the Amended Note Agreement and the
Company's 9.33% Notes due December 15, 2002 (as amended by the First Amendment,
the "Notes") are hereinafter referred to collectively as the "Amendment
Documents."
We have acted as special counsel to the Holders in connection with the
transactions contemplated by the Third Amendment. This opinion is delivered to
you pursuant to paragraph 4B(iii) of the Third Amendment. In acting as such
counsel, we have examined:
(a) the Third Amendment, together with the Amended and Restated Note
Agreement set forth as Exhibit A thereto;
(b) conformed copies of the Original Note Agreement, the First
Amendment and the Second Amendment;
(c) a copy of the form of the Notes;
(d) a certificate of officers of the Company, substantially in the
form attached to the Third Amendment as Exhibit C;
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(e) a certificate of the Secretary of the Company, substantially in
the form attached to the Third Amendment as Exhibit D;
(f) copies of the certificate of incorporation (the "Certificate of
Incorporation") and bylaws (the "Bylaws") of the Company, as attached to a
certificate of the Secretary of the Company, dated July 9, 1993 and
delivered to the holders in connection with the transactions contemplated
by the First Amendment;
(g) the opinion of Gibson, Dunn & Crutcher, special counsel to the
Company, dated the date hereof;
(h) the opinion of Richard Madsen, Esq., general counsel to the
Company, dated the date hereof; and
(i) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates of public officials as we have deemed necessary or appropriate
to enable us to render this opinion.
In rendering our opinion, we have relied, to the extent we deem necessary
and proper, on:
(a) warranties and representations as to factual matters contained in
the Third Amendment and the Amended Note Agreement; and
(b) said opinions of Gibson, Dunn & Crutcher and Richard Madsen, Esq.,
with respect to all questions governed by California law, Delaware
corporate law and with respect to all questions concerning the due
incorporation, valid existence, corporate power and authority, good
standing of, and the authorization, execution and delivery of instruments
by, the Company (except that we have made an independent examination of the
Certificate of Incorporation and the Bylaws, and of the aforementioned
certificates of officers of the Company); based on such investigation as we
have deemed appropriate, said opinion is satisfactory in form and content
to us and in our opinion the Holders and we are justified in relying
thereon. As to such opinions and the matters therein upon which we are
relying, we incorporate herein the assumptions and qualifications to such
opinions set forth therein.
In rendering our opinion, we have assumed the following:
(a) the authenticity of all documents submitted to us as originals;
(b) the conformity of any documents submitted to us as copies to their
respective originals;
(c) the authenticity of all signatures other than those of officers
and directors of the Company executing the Third Amendment and the
documents and instruments executed pursuant to the terms thereof;
(d) the legal capacity of all natural persons;
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(e) the accuracy of all reports and certificates received from public
officials; and
(f) as to corporations other than the Company, the corporate power and
authority to execute and deliver, and the due authorization of, all
documents, instruments and agreements contemplated by the Third Amendment.
Based on the foregoing, we are of the following opinions:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the state of Delaware.
2. The Company has the requisite corporate power and authority to execute
and deliver the Third Amendment and to perform its obligations set forth in each
of the Amendment Documents.
3. The Third Amendment has been duly authorized by all necessary
corporate action on the part of the Company and has been executed and delivered
by duly authorized officers of the Company. Each of the Third Amendment and the
Amended Note Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4. The execution and delivery of the Third Amendment by the Company and
the performance by the Company of its obligations under the Amendment Documents
will not conflict with, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien upon any of
its Property pursuant to, the Certificate of Incorporation or Bylaws of the
Company.
All opinions herein contained with respect to the enforceability of
documents and instruments are qualified to the extent that:
(a) the availability of equitable remedies, including without
limitation, specific enforcement and injunctive relief, is subject to the
discretion of the court before which any proceedings therefor may be
brought; and
(b) the enforceability of certain terms provided in the Third
Amendment and the Amendment Documents may be limited by:
(i) applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally as at the time in effect;
(ii) general principles of equity and the discretion of a court
in granting equitable remedies (whether enforceability is considered
in a proceeding at law or in equity); and
(iii) common law or statutory requirements with respect to
commercial reasonableness.
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<PAGE>
One or more members of this firm are admitted to the Bar in the State of
New York. We express no opinion as to the law of any jurisdiction other than
the law of such state and United States federal law. Gibson, Dunn & Crutcher
and Richard Madsen, Esq., may rely on this opinion with respect to matters
governed by the laws of the State of New York for the sole purpose of rendering
their opinions to be rendered pursuant to paragraph 4B(i) and paragraph 4B(ii)
of the Third Amendment. Subsequent holders of the Notes may rely on this
opinion as if it were addressed to them.
Very truly yours,
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<PAGE>
ANNEX 1
ADDRESSEES
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Specialized Finance Group
Four Gateway Center, 9th Floor
Newark, NJ 07102-4069
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
711 High Street
Des Moines, IA 50392
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, MA 01111
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<PAGE>
EXHIBIT C
FORM OF OFFICERS' CERTIFICATE
CERTIFICATE OF OFFICERS OF ROHR, INC.
We, L.A. Chapman, and R.W. Madsen, each hereby certify that we are,
respectively, the Senior Vice President and Chief Financial Officer, and the
Vice President, General Counsel and Secretary of ROHR, INC., a Delaware
corporation (the "Company"), and that, as such, we are authorized to execute and
deliver this Certificate in the name and on behalf of the Company, and that:
1. This certificate is being delivered pursuant to paragraph 4C of the
Third Amendment Agreement (the "Third Amendment"), dated as of May 10, 1994,
between the Company and the holders of the Company's 9.33% Senior Notes due
December 15, 2002 listed on Annex 1 thereto (collectively, the "Purchasers").
The terms used in this certificate and not defined herein shall have the
respective meanings ascribed to them in the Third Amendment.
2. The warranties and representations contained in paragraph 5 of the
Third Amendment are true in all material respects on the date hereof with the
same effect as though made on and as of the date hereof.
3. The Company has performed and complied with all agreements and
conditions contained in the Third Amendment that are required to be performed or
complied with by the Company before or at the date hereof, and no unwaived
Default or Event of Default exists on the date hereof.
4. R. W. Madsen is on and as of the date hereof, and at all times
subsequent to March 31, 1994 has been, the duly elected, qualified and acting
Secretary of the Company, and the signature appearing on the Certificate of
Secretary dated the date hereof and delivered to the Purchasers
contemporaneously herewith is his genuine signature.
IN WITNESS WHEREOF, we have executed this Certificate in the name and on
behalf of the Company on ___________ ____, 1994
ROHR, INC.
By:
--------------------------------------
Name:
By:
---------------------------------------
Name:
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<PAGE>
EXHIBIT D
FORM OF SECRETARY'S CERTIFICATE
CERTIFICATE OF SECRETARY OF ROHR, INC.
I, R. W. Madsen, hereby certify that:
I am the duly elected, qualified and acting Secretary of ROHR, INC., a
Delaware corporation (the "Company"), and that, as such, I have access to its
corporate records and am familiar with the matters herein certified, and I am
authorized to execute and deliver this Certificate in the name and on behalf of
the Company, and that:
1. This certificate is being delivered pursuant to paragraph 4C of the
Third Amendment Agreement (the "Third Amendment"), dated as of May 10, 1994,
between the Company and the holders of the Company's 9.33% Senior Notes due
December 15, 2002 listed on Annex 1 thereto (collectively, the "Purchasers").
The terms used in this certificate and not defined herein shall have the
respective meanings ascribed to them in the Third Amendment.
2. Attached hereto as Attachment A is a true and correct copy of
resolutions, and the preamble thereto, adopted by the Board of Directors of the
Company on March 31 and April 1, 1994, and such resolutions and preamble set
forth in Attachment A hereto were duly adopted by said Board of Directors and
are in full force and effect on and as of the date hereof, not having been
amended, altered or repealed, and such resolutions are filed with the records of
the Board of Directors.
3. The Third Amendment was executed and delivered by the Company pursuant
to and in accordance with the resolutions set forth in Attachment A hereto.
4. The bylaws of the Company were last amended by the Board of Directors
of the Company on, and have been in full effect in said form at all times from
and after January 7, 1993 to and including the date hereof, without modification
or amendment in any respect.
5. Each of the following named persons is on and as of the date hereof,
and at all times subsequent to January 7, 1993, has been a duly elected,
qualified and acting officer of the Company holding the office or offices set
forth below opposite his name (except for Mr. Chapman, who became an officer of
the Company on May 1, 1994):
<TABLE>
<CAPTION>
Name Office Signature
<S> <C> <C>
Vice President, /s/
General
Counsel and Secretary
Assistant Secretary /s/
Vice President and /s/
Treasurer
</TABLE>
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<PAGE>
6. The signature appearing opposite the name of each such person set
forth above is his or her genuine signature.
7. Attached hereto as Attachment B is a long-form good standing
certificate in respect of the Company from the State of Delaware, which
certificate
(i) lists all corporate documents filed with the Secretary of State of
Delaware on or prior to the date hereof in respect of the Company,
(ii) bears the certification of the Secretary of State of Delaware,
and
(iii) is true, correct and complete.
8. There have been no amendments or supplements to or restatements of the
Certificate of Incorporation of the Company since December 13, 1991.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of the Company on ______ __, 1994. [Closing Date]
ROHR, INC.
Secretary
A-92
<PAGE>
ATTACHMENT A
RESOLUTIONS OF THE BOARD OF DIRECTORS
Intentionally Omitted
A-93
<PAGE>
ATTACHMENT B
GOOD STANDING CERTIFICATE AND CHARTER DOCUMENTS
Intentionally Omitted
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<PAGE>
EXHIBIT 10.2.23
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
TWENTY-THIRD AMENDMENT
Pursuant to Article 6, this amendment to the Supplemental Retirement Plan is
hereby adopted.
1. Pursuant to provisions of Section 1.02, the following persons are declared
to be eligible to be Participants in the Plan and eligible for a benefit
herender, as provided below:
The calculation of their benefits would be based only on actual service to
date of actual retirement, and all early retirement reductions under
Section 3.02 (as applicable) shall apply.
(a) Claude LeBrun, who shall be deemed to remain eligible as a Participant
under the Plan after the date he is removed from general eligibility
as a Participant hereunder (but for the application of these special
provisions) until April 1, 1995.
(b) Sandy Madera, who will also be deemed to remain eligible as a
Participant under the Plan until April 1, 1996.
(c) Alek Mikolajczak, who will also be deemed to remain eligible as a
Participant under the Plan until July 31, 1994.
(d) Jack Ferguson, who also will be deemed to remain eligible as a
Participant under the Plan until the first day of the calendar month
following his reaching the age of 65.
(e) Pat Schlesinger, who will also be deemed to be eligible even though he
did not reach age 60 as of the date of his retirement.
2. In all other respects, the Plan is hereby ratified and confirmed.
IN WITNESS WHEREOF, Rohr, Inc., has caused its duly authorized officers to
execute this Amendment on the 23 day of September 1993.
ROHR, INC.
By: /s/ R. W. Madsen
-----------------------------------
R. W. Madsen
Vice President, General Counsel
and Secretary
<PAGE>
EXHIBIT 10.2.24
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
TWENTY-FOURTH AMENDMENT
Pursuant to Article 6, this amendment to the Supplemental Retirement Plan is
hereby adopted.
1. Pursuant to provisions of Section 1.02, the following persons are declared
to be eligible to be Participants in the Plan and eligible for a benefit
herender, as provided below:
The calculation of their benefits would be based only on actual service to
date of actual retirement, and all early retirement reductions under
Section 3.02 (as applicable) shall apply.
(a) Ron Heitman, who shall be deemed to remain eligible as a Participant
under the Plan after the date he is removed from general eligibility
as a Participant hereunder (but for the application of these special
provisions) until April 1, 1995, and who will also be deemed eligible
to retire on or before such date even though he is not then aged 60.
(b) John Walsh, who will be deemed to be eligible to retire even though he
does not reach age 60 as of the date of his retirement and, upon his
retirement on December 1, 1995, the early retirement actuarial
reduction will be calculated as if he were then age 60.
(c) Ann Davis-McNeil, who will also be deemed eligible to retire even
though she does not reach age 60 as of the date of her retirement, and
upon her retirement on February 28, 1994, the early retirement
actuarial reduction will be calculated as if she were then age 60.
(d) Uwe Bockenhauer, who shall be deemed to remain eligible as a
Participant under the Plan after the date he is removed from general
eligibility as a Participant hereunder (but for the application of
these special provisions) until March 1, 1997, and who will also be
deemed eligible to retire on or before such date even though he is not
then aged 60.
2. A new Section 8.13 is hereby added, to read in full as follows:
"8.13 Robert Daly
-----------
a. The normal retirement benefit for which Mr. Daly is entitled
under the Plan shall be established as provided at Paragraph 3.01
of the Plan; provided, however, that "two percent" for each Year
of Credited Service in such paragraph shall be deleted and the
percentage "three percent" shall be substituted.
Page 1
<PAGE>
b. All other Benefits provided in the Plan, including Early
Retirement, Disability Retirement and Survivor Benefits, shall be
as set forth in the Plan, also based upon the above-described
normal retirement benefit."
3. In all other respects, the Plan is hereby ratified and confirmed.
IN WITNESS WHEREOF, Rohr, Inc., has caused its duly authorized officers to
execute this Amendment on the 3rd day of December 1993.
ROHR, INC.
By: R. W. Madsen
----------------------------------
R. W. Madsen
Vice President, General Counsel
and Secretary
Page 2
<PAGE>
EXHIBIT 10.2.25
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
TWENTY-FIFTH AMENDMENT
Pursuant to Article 6, this amendment to the Supplemental Retirement Plan is
hereby adopted.
1. The following person is declared to be eligible to be a Participant in the
Plan and eligible for a benefit hereunder, as provided below:
David Canedo will be deemed to be eligible to retire on December 1, 2000,
and upon his retirement, the early retirement actuarial reduction will not
be applied, as he will be deemed as if he then had 30 years of credited
service.
2. In all other respects, the Plan is hereby ratified and confirmed.
IN WITNESS WHEREOF, Rohr, Inc., has caused its duly authorized officers to
execute this Amendment on the 5th day of May 1994.
ROHR, INC.
By: R. W. Madsen
---------------------------------
R. W. Madsen
Vice President, General Counsel
and Secretary
Page 1
<PAGE>
EXHIBIT 10.2.26
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
TWENTY-SIXTH AMENDMENT
Pursuant to Article 6, this amendment to the Supplemental Retirement Plan is
hereby adopted.
1. A new Section 8.14 is hereby added, to read in full as follows:
8.14 David A. Ramsay
---------------
(a) The normal retirement benefit for which Mr. Ramsay is entitled
under the Plan shall be established as provided at Paragraph 3.01
of the Plan; provided, however, that Mr. Ramsay will be credited
with two years of Credited Service for each year, up to a maximum
of eleven years, that he remains an Employee.
All other Benefits provided in the Plan, including Early
Retirement, Disability Retirement and Survivor Benefits, shall be
as set forth in the Plan, also based upon the above-described
normal retirement benefit.
2. In all other respects, the Plan is hereby ratified and confirmed.
IN WITNESS WHEREOF, Rohr, Inc., has caused its duly authorized officers to
execute this Amendment on the 3rd day of June 1994.
ROHR, INC.
By: R. W. Madsen
----------------------------------
R. W. Madsen
Vice President, General Counsel
and Secretary
<PAGE>
EXHIBIT 10.2.27
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
TWENTY-SEVENTH AMENDMENT
Pursuant to Article 6, this amendment to the Supplemental Retirement Plan is
hereby adopted.
1. Pursuant to provisions of Section 1.07, the following persons are declared
to be eligible to be Participants in the Plan and eligible for a benefit
herender, as provided below:
The calculation of their benefits would be based only on actual service to
date of actual retirement, and, except as provided below, all early
retirement reductions under Section 3.02 (as applicable) shall apply.
(a) Tony Derczo, who shall be deemed to remain eligible as a Participant
under the Plan after the date he is removed from general eligibility
as a Participant hereunder (but for the application of these special
provisions) until May 1, 1995, and who will also be deemed eligible to
retire on or before such date even though he is not then aged 60.
(b) Don Mayo, who will be deemed to be eligible to retire on April 1,
1995, and upon his retirement, the early retirement actuarial
reduction will not apply but his benefit will be calculated on the
basis of the Years of Credited Service earned by Mr. Mayo as of his
retirement date.
(c) Nick Bucur, who will be deemed eligible to retire on July 1, 1995,
even though he does not reach age 60 as of the date of his retirement,
and upon his retirement, the early retirement actuarial reduction will
not apply and his benefit will be calculated as if he had 30 years of
service upon such retirement. In addition, Mr. Bucur's surviving
spouse benefit under Section 3.06(a) and (b) shall be $6,000 per month
during her lifetime.
(d) Gary Ramsdell, who shall be deemed to remain eligible as a Participant
under the Plan after the date he is removed from general eligibility
as a Participant hereunder (but for the application of these special
provisions) until June 30, 1997.
1
<PAGE>
2. In all other respects, the Plan is hereby ratified and confirmed.
IN WITNESS WHEREOF, Rohr, Inc., has caused its duly authorized officers to
execute this Amendment on the 19th day of August 1994.
ROHR, INC.
By: R. W. Madsen
----------------------------------
R. W. Madsen
Vice President, General Counsel
and Secretary
2
<PAGE>
EXHIBIT 10.12
April 12, 1994
Mr. Laurence Chapman
2672 Gloucester Drive
Upper St. Clair, PA 15241
Dear Laurence:
We are very eager to have you join us in the position of Senior Vice President
and Chief Financial Officer. This letter sets forth the key elements of the
position, and it is my sincere hope that your response to it will be positive.
SALARY AND BONUS
- - ----------------
As Senior Vice President and Chief Financial Officer, your starting salary would
be $228,000 per year, and you would be reporting to me. You will receive a merit
review on August 1, 1994.
The position carries a forty percent (40%) of base salary as the annual target
bonus opportunity under our Management Incentive Program (MIP), which as you
know pays on the basis of cash generated and average net assets. Your first
full year eligibility to participate in this program will be effective with the
start of our fiscal year 1995 on August 1, 1994. However, you will receive
$22,800 bonus on September 15, 1994, for fiscal 1994. The bonus opportunity for
fiscal 1995 and on is significantly leveraged up and down, depending upon
Company performance, but you will receive a guaranteed bonus of a minimum of
$68,400 for fiscal 1995 or a greater amount, depending on Company and personal
performance in accordance with the provisions of the MIP. After that, of
course, you would remain eligible to receive any award earned in accordance with
the provisions of the MIP. All incentive compensation (both bonus and stock)
elements are subject to Board of Directors' discretionary approval and do not
represent entitlements.
You would also be eligible for all benefits described on the enclosed Summary of
Executive Benefits, although for vacation, you would receive four weeks instead
of what is there shown.
<PAGE>
Letter to Laurence Chapman
September 2, 1994
Page 2
RESTRICTED STOCK PLAN
- - ---------------------
It would be the intention of the Board of Directors to provide a Restricted
Stock Grant of 20,000 shares of common stock at a price of $1 per share. This
Grant would vest over the next five years at the rate of 20% per year.
NON-QUALIFIED STOCK OPTION PLAN
- - -------------------------------
Rohr has a Non-Qualified Stock Option Plan and, under it, you would be provided
with an initial grant of Non-Qualified Stock of 50,000 shares at fair market
value. The option price of shares would be at the market value on the day that
such shares are formally granted. The Board believes that any such option
should have long-term value because of Rohr's current low market price. This
initial grant would vest over five years at a rate of 20% per year.
CHANGE OF CONTROL PROVISION
- - ---------------------------
As is the case with our other senior executives, we would provide a Severance
Compensation Agreement whereby you would be covered in the event of a Change of
Control of Rohr. In addition, under circumstances stated below, you would
recover an additional $250,000.
SERP
- - ----
We would be prepared to amend our current Supplemental Executive Retirement Plan
(SERP) to provide you with credited service at the rate of two years for each
year employed by Rohr for the first 13 years of employment. After that, you
would earn a year of service for each year employed. An explanation of this
Plan and also the funded Salaried Retirement Plan is included in the Summary of
Executive Benefits enclosed. Your rights to a pension under the SERP would vest
as you earned credited service, so that if your employment terminates for
whatever reason, you will be entitled to a pension based on the years of
credited service earned to the date of such termination.
ONE-TIME STARTING BONUS
- - -----------------------
The Board's offer would also include a one-time starting bonus of $114,000,
payable one-half on May 1, 1994, and the balance on November 1, 1994.
OTHER ONE-TIME BENEFITS
- - -----------------------
A. In order to compensate you for the loss of your Westinghouse options, we
would make the following arrangements:
<PAGE>
Letter to Laurence Chapman
September 2, 1994
Page 3
* Rohr will pay, on May 1, 1997, the amount of $13,270 for each one-
eighth of a point that the highest closing price of Westinghouse
common stock between November 1, 1996, and April 30, 1997, exceeds the
closing price of Westinghouse common stock on May 1, 1994. This
amount, however, will not exceed $250,000.
* If there is a change in control of Rohr prior to November 1, 1996, you
will receive $250,000 forthwith, in lieu of other sums payable to you
under the heading "Other One-Time Benefits."
* If Westinghouse is merged or substantially all of its assets are sold
to a third party before November 1, 1996, the $13,270 per one-eighth
of a point shall be measured between May 1, 1994, and the closing
price on the last day Westinghouse common stock is publicly traded.
This alternate calculation is also limited to $250,000, and whatever
sum is due hereunder will be payable on May 1, 1997.
TERMINATION
- - -----------
* In the event you are terminated without cause before the third
anniversary of your starting date, Rohr will pay you a lump sum of
$228,000 within 30 days thereafter. For these purposes, a "cause" is
defined as either of the following occurrences:
(a) Conviction, by a court of competent and final jurisdiction, of a
felony or any crime involving moral turpitude committed at any
time while an employee of the Company; provided, however, this
shall not include any criminal liability imposed upon the
employee by virtue of the fact that he is an officer of the
Company without any significant, direct personal involvement by
the employee in the criminal act; or
(b) Commission of any act of fraud or deceit upon, or otherwise
materially evidencing bad faith toward, the Company while an
employee of the Company.
* If you voluntarily leave Rohr, for any reason other than disability or
death, then all unvested Restricted stock and options will terminate.
In case of involuntary termination, however caused, the vesting of the
Restricted Stock and options will continue each year until fully
vested.
<PAGE>
Letter to Laurence Chapman
September 2, 1994
Page 4
RELOCATION EXPENSES
- - -------------------
The Company will pay for your complete household move and transportation costs
of all household and personal effects excluding any unusual items such as
airplanes, boats, etc. We will also pay for the expenses related to the in-
transit expenses to San Diego for you and your family. While you seek permanent
housing arrangements, Rohr will pay for your reasonable temporary housing
expenses for up to 180 days. Storage costs for your personal household effects
will be paid for 180 days.
HOME SALE INCENTIVE
- - -------------------
The first option is one in which you would be responsible for selling your home
and your second home yourself and we would reimburse you for the cost of the
realtor's commission, escrow fees and any prepayment penalty. We would also
give you a home sale incentive payment of $75,000 in the aggregate for both
homes. Under this option, the reimbursements and $75,000 payment would be
subject to the applicable federal and state taxes.
The second option is one in which you would be responsible for finding a
purchaser for your home and also a buyer for your secondary residence but
Prudential Relocation Management would handle those transactions. In this case,
also, the home sale incentive still would be $75,000 but, because of
Prudential's handling of the transaction, the reimbursements noted above are not
taxable, but the $75,000 payment would be.
Regardless of your choice of options related to the sale of your current homes,
if you purchase a principal residence in San Diego, you will be reimbursed for
the reasonable and customary closing fees for the area. This reimbursement is
available even if you decide to retain your home in Upper St. Clair for some
period of time. These fees include such items as title insurance, mortgage
preparation fees, recording fees, fees for obtaining the mortgage and reasonable
attorney or escrow fees.
As you know, there are certain income tax consequences associated with your
move. Under Federal Tax Law, any amount paid to you directly or indirectly by
the Company will be included in your W-2 Form as gross income. You will be able
to deduct certain of these reimbursable expenses for both federal and state tax
purposes. However, certain of these reimbursed expenses will not be deductible
and will increase your taxable income in the year of your move.
I have enclosed a Rohr Employment Application and Conditional Offer of
Employment which are required as part of our routine employment
<PAGE>
Letter to Laurence Chapman
September 2, 1994
Page 5
administration. These would need to be completed and returned as soon as
possible to David Ramsay. We also require a pre-employment physical exam that
includes a drug screen. This can be arranged with a physician in your local
area. David Ramsay can coordinate this issue.
Laurence, I believe that you will be a very key addition to Rohr's top
management team. You have much to contribute to the Company's success and I
think that you will personally find both challenge and opportunity here. Please
call me directly with your response. I look forward to hearing from you soon.
Sincerely,
R. H. Rau
President and Chief Executive Officer
Enclosures
<PAGE>
EXECUTIVE BENEFITS
Company-paid life Insurance and AD&D 3 X annual salary
- - -------------------------------------
Optional Group Universal Life Employee choice
- - -----------------------------
Paid sick leave 3 months
- - ---------------
Company-paid 24-hour accident insurance $100,000
- - ---------------------------------------
Company-paid estate planning Legal expenses reimbursed
- - -----------------------------
Vacation Service Days
- - -------- ------- ----
1 year 15*
5 years 20
15 years 25
*Days are accrued monthly
Long-Term Disability Insurance 66.70% of monthly salary up to
- - ------------------------------ $10,000 maximum (employee and
company split premium cost)
Medical/Dental No employee monthly premium
- - -------------- currently for PacifiCare HMO; other
alternatives available
401(k) Company matches 25% of first 5% of
- - ------ pay, contributed in Rohr stock**
Retirement Plan 1.5% per year of service X final
- - --------------- average pay less 50% of estimated
Social Security Benefits
Supplemental Retirement Plan .5% per year of service
- - ----------------------------
Holidays 11 - 13 per year
- - --------
** Match suspended for executives in FY93.
4/94
<PAGE>
EXHIBIT 10.17.1
FIRST AMENDMENT
TO POOLING AND SERVICING AGREEMENT
This First Amendment (the "Amendment"), dated as of October 7, 1993, by
and between RI Receivables, Inc., a Delaware corporation ("Transferor"), Rohr,
Inc., a Delaware corporation ("Rohr"), and Bankers Trust Company, a New York
State banking corporation as Trustee (the "Trustee"), amends that certain
Pooling and Servicing Agreement (the "Agreement") dated as of December 23, 1992
among the Transferor, Rohr and the Trustee. Capitalized terms used in this
Amendment and not defined herein shall have the respective meaning ascribed to
them in the Agreement.
The parties hereto agree as follows:
1. Amendment to Agreement. The Agreement is amended, effective as of the
----------------------
date hereof, as follows:
(a) The definition of "Cure Period" contained in Section 1.01 of the
-----------
Agreement is amended by adding the following to the end of the last sentence
thereof:
unless (A) the Transferor shall have provided written notice to
the Trustee and to each Investor Certificateholder that it
intends to deposit Cure Funds into the Reserve Fund which will
increase the aggregate amount of Cure Funds held in the Reserve
Fund to more than 20% of the Invested Amount, and (B) no Investor
Certificateholder shall have provided written notice of objection
to such deposit or deposits to the Transferor and the Trustee on
or prior to 3:00 p.m. (New York City time) on the second Business
Day after the day such Investor Certificateholder received the
written notice from the Transferor.
(b) The second paragraph of Section 4.03 of the Agreement is amended
to read as follows:
In the case of Cure Funds held in the Reserve Fund from time
to time, the Trustee shall release all or a portion of such Cure
1
<PAGE>
Funds to the Transferor on any Business Day specified by the
Transferor if, but only if, the Transferor shall deliver to the
Trustee a written request for such release, substantially in the
form of Exhibit G hereto, at least two Business Days prior to
such specified Business Day and on such specified Business Day
the Trustee shall not have received written notice that any
Partial Amortization Period or Amortization Period shall have
commenced and be continuing or would commence after giving effect
to such release.
(c) A new Exhibit G is added to the Agreement, to read in the
form of Exhibit G to this Amendment.
2. Waiver of Requirement to Reduce Invested Amount. The Trustee and the
-----------------------------------------------
undersigned Investor Certificateholders hereby agree that Rohr, as Servicer,
need not deposit any portion of the Collections received from August 2, 1993
through August 16, 1993 to the Trustee's Account for payment to the Investor
Certificateholders to reduce the Invested Amount.
3. Waiver of Requirement to Provide Notice of Amendment. The Trustee
----------------------------------------------------
need not furnish written notification of the substance of this Amendment to the
Investor Certificateholders pursuant to Section 13.01(c) of the Agreement.
4. Effectiveness. This First Amendment shall become effective as of the
-------------
date on which it has been executed by each of Rohr, Transferor and Trustee, and
has received the consent of the Investor Certificateholders: The Prudential
Insurance Company of America, John Hancock Mutual Life Insurance Company and
John Hancock Variable Life Insurance Company.
5. Costs and Expenses. Rohr agrees to pay on demand all costs and
------------------
expenses of the Trustee and the Investor Certificateholders in connection with
the preparation, execution and delivery of this First Amendment.
6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
2
<PAGE>
7. Counterparts. This Amendment may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when executed and delivered shall be deemed to be an original and all of
which when taken together shall constitute the same instrument.
IN WITNESS WHEREOF, the Transferor, Rohr and the Trustee have caused this
Amendment to be duly executed by their respective officers as of the day and
year first above written.
RI RECEIVABLES, INC.
By: /s/ R. M. Miller
--------------------------------
Name: R. M. Miller
--------------------------------
Title: President and Treasurer
--------------------------------
ROHR, INC.
By: /s/ R. W. Madsen
--------------------------------
Name: R. W. Madsen
--------------------------------
Title: Vice President
--------------------------------
BANKERS TRUST COMPANY, Trustee
By: /s/ Elizabeth Robinson
--------------------------------
Name: Elizabeth Robinson
--------------------------------
Title: Assistant Treasurer
--------------------------------
3
<PAGE>
The undersigned, constituting all of the Investor Certificateholders,
hereby consent to the foregoing Amendment.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Kevin Lalor
--------------------------------
Name: Kevin Lalor
--------------------------------
Title: Vice President
--------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
4
<PAGE>
EXHIBIT 10.17.2
SECOND AMENDMENT
TO POOLING AND SERVICING AGREEMENT
This Second Amendment (the "Amendment"), dated as of April 25, 1994, by
and between RI Receivables, Inc., a Delaware corporation ("Transferor"), Rohr,
Inc., a Delaware corporation ("Rohr"), and Bankers Trust Company, a New York
State banking corporation as Trustee (the "Trustee"), amends that certain
Pooling and Servicing Agreement (the "Agreement") dated as of December 23, 1992
among the Transferor, Rohr and the Trustee. Capitalized terms used in this
Amendment and not defined herein shall have the respective meaning ascribed to
them in the Agreement.
The parties hereto agree as follows:
1. Amendment to Agreement. The Agreement is amended, effective as of the
----------------------
date hereof, as follows:
(a) The definition of "Cure Funds" contained in Section 1.01 of the
----------
Agreement is amended to read as follows:
"'Cure Funds' shall mean amounts deposited to the Reserve Fund
----------
pursuant to the definition of 'Cure Period' or the second proviso of the
first sentence of Section 4.04(a). In addition, amounts held in the
Concentration Account pursuant to the second proviso of the first sentence
of Section 4.04(a) shall be deemed, for purposes of this Agreement, to be
Cure Funds held in the Reserve Fund."
(b) The definition of "Cure Period" contained in Section 1.01 of the
-----------
Agreement is amended to read as follows:
"'Cure Period' shall mean the period (i) beginning on the day on which
-----------
a Partial Amortization Period would otherwise commence, if the Transferor
shall have notified the Servicer and the Trustee in writing on such day
that, until the end of the Cure Period, the Servicer shall (on such day and
continuing on each day thereafter on which it receives any amount of
Collections either allocated to the Transferor Interest or allocated to the
Investor Interest and to be paid to the
1
<PAGE>
Transferor for reinvestment pursuant to Section 4.04(a)) deposit all such
amounts of Collections to the Reserve Fund on the day collected, and (ii)
continuing until either: (a) the percentage that is the Transferor
Percentage equals at least 2% and the Net Receivable Balance equals at
---
least 120% of the excess of the Invested Amount over the Cure Funds held in
the Reserve Fund at such time; or (b) the Servicer shall have failed at any
time to deposit to the Reserve Fund an amount of Collections which the
Servicer is obligated to deposit to the Reserve Fund pursuant to clause (i)
above in connection with such Cure Period, at which time a Partial
Amortization Period would commence as set forth in the definition of the
term 'Partial Amortization Period' contained in this Section 1.01.
Notwithstanding the foregoing, if the Servicer deposits any amount of Cure
Funds into the Reserve Fund, or holds any amount in the Concentration
Account pursuant to the second proviso of the first sentence of Section
4.04(a), and if such amount, together with the aggregate amount of all
other Cure Funds held in the Reserve Fund at such time, would exceed 20% of
the Invested Amount, the Transferor shall promptly provide written notice
to the Trustee and each Investor Certificateholder that the aggregate
amount of all Cure Funds exceeds 20% of the Invested Amount. If any
Investor Certificateholder objects to the aggregate amount of Cure Funds
exceeding 20% of the Invested Amount, and provides written notice of such
objection to the Transferor and the Trustee on or prior to 3:00 p.m. (New
York City time) on the second Business Day after the day such Investor
Certificateholder received the written notice from the Transferor, then a
Partial Amortization Period shall commence as of the date of the deposit."
(c) The definition of "Partial Amortization Period" contained in Section
---------------------------
1.01 of the Agreement is amended to read as follows:
"'Partial Amortization Period' shall mean, unless the Amortization
---------------------------
Period shall have commenced prior thereto, either (a) the period beginning
on the third Business Day following the Business Day on which the
Transferor shall request the commencement of such period and the reduction
during such period of the Invested Amount by a specified amount pursuant to
Sections 4.04(b) and 5.01(b), in a writing furnished by the Transferor to
the Trustee (provided that the amount by which the Invested Amount is to be
--------
reduced as a result of the commencement of such period, as so specified in
such writing, must be in
2
<PAGE>
increments of $5,000,000) and continuing each day thereafter until the
Invested Amount shall have been reduced by such specified amount pursuant
to Section 4.04(b) and 5.01(b); (b) the period beginning on the day on
which either (i) the percentage that is the Transferor Percentage falls
below 2%, and continuing each day thereafter until the percentage that is
the Transferor Percentage shall have increased to at least 2%, or (ii) the
Net Receivables Balance falls below 120% of the excess of the Invested
Amount over the Cure Funds held in the Reserve Fund at such time, and
continuing each day thereafter until the Net Receivables Balance shall be
equal to or greater than 120% of the excess of the Invested Amount over the
Cure Funds held in the Reserve Fund at such time; or (c) the period
beginning on the Business Day on which an Investor Certificateholder shall
have objected, in accordance with the definition of 'Cure Period', to the
Cure Funds exceeding 20% of the Invested Amount, and continuing each day
thereafter until (1) the Invested Amount shall have decreased by an amount
equal to the sum of all deposits to the Reserve Fund since the date of the
Transferor notice which preceded the Investor Certificateholder's objection
and any amount of Investor Collections then held in the Concentration
Account pursuant to the second proviso of the first sentence of Section
4.04(a), (2) the percentage that is the Transferor Percentage is equal to
at least 2%, and (3) the Net Receivables Balance is equal to at least 120%
of the excess of the Invested Amount over the Cure Funds held in the
Reserve Fund at such time; provided, however, that upon the commencement of
-------- -------
a Partial Amortization Period the Transferor shall pay to the Trustee for
the account of the Investor Certificateholders the estimated Market Make
Whole Premium with respect to such period in accordance with the provisions
of Section 4.05. With respect to any Partial Amortization Period described
in subsection (c) hereof, the Transferor will cause the Trustee to pay from
the Reserve Fund to the Paying Agent, for distribution to the Investor
Certificateholders, an amount equal to the sum of all deposits to the
Reserve Fund since the date of the Transferor notice which preceded the
Investor Certificateholder's objection and any amount of Investor
Collections then held in the Concentration Account pursuant to the second
proviso of the first sentence of Section 4.04(a). The payment of such
amount shall be in addition to any amounts payable pursuant to Section
5.01(b) hereof.
3
<PAGE>
(d) The second paragraph of Section 4.03 of the Agreement is amended to
read as follows:
"In the case of Cure Funds held in the Reserve Fund from time to time,
the Trustee shall release all or a portion of such Cure Funds to the
Transferor as soon as reasonably practicable (but in no event later than
one Business Day after the delivery of a written request therefor) if, but
only if, the Transferor shall have delivered to the Trustee a written
request for such release substantially in the form of Exhibit G hereto and
no Partial Amortization Period or Amortization Period shall have commenced
and be continuing or would commence after giving effect to such release;
provided however, the Trustee shall not release any such funds during the
-------- -------
two day period that Investor Certificateholders may object to certain
deposits into the Reserve Fund in accordance with the last sentence of the
definition of 'Cure Period.'"
(e) The proviso in the first sentence of Section 4.04(a) is amended to read
as follows:
"provided however, in no event shall the recomputation of the Floating
-------- -------
Allocation Percentage or the deposit of Investor Collections to the
Transferor's Account reduce either (i) the Transferor Percentage below
2% or (ii) the Net Receivables Balance below 120% of the excess of the
Invested Amount over the Cure Funds held in the Reserve Fund, in each
case after taking into account the proposed deposit to the
Transferor's Account on that day; and provided further, that any
-------- -------
amounts not deposited to the Transferor's Account because of the
limitation set forth in the first proviso hereto shall be (x)
deposited as Cure Funds in the Reserve Fund or (y) held in the
Concentration Account for no more than one Business Day and then
deposited (A) as Cure Funds in the Reserve Fund or (B) in the
Transferor Account for reinvestment for the benefit of the Investor
Certificateholders, if and only if, after giving effect to such
transfer to the Transferor Account, the percentage that is the
Transferor Percentage shall be at least 2% and the Net Receivables
Balance shall be equal to or greater than 120% of the excess of the
Invested Amount over the Cure Funds held in the Reserve Fund at such
time."
4
<PAGE>
(f) The words "Section 9.01(a) or (h)" in Section 4.05 are amended to read
"Section 9.01(a), (h) or (l)".
(g) Section 9.01 is amended by adding immediately after subsection (k)
thereto a new subsection (l) as follows:
"(l) if, at any time, for any reason other than Receivables becoming
Defaulted Receivables or Disputed Receivables, either (1) the Net
Receivables Balance falls below 120% of the excess of the Invested Amount
over the Cure Funds held in the Reserve Fund at such time, or (2) the
Transferor Percentage is less than 2%, and in either such case, a Cure
Period is not then in effect or applicable."
(h) A new Exhibit G is added to the Agreement, to read in the form of
Exhibit G to this Amendment.
2. Waiver of Requirement to Provide Notice of Amendment. The Trustee
----------------------------------------------------
need not furnish written notification of the substance of this Amendment to the
Investor Certificateholders pursuant to Section 13.01(c) of the Agreement.
3. Effectiveness. This Second Amendment shall become effective as of the
-------------
date on which it has been executed by each of Rohr, Transferor and Trustee, and
has received the consent of Holders of Investor Certificates evidencing more
than 50% of the Invested Amount.
4. Costs and Expenses. Rohr agrees to pay on demand all costs and
------------------
expenses of the Trustee and the Investor Certificateholders in connection with
the preparation, execution and delivery of this Second Amendment.
5. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
5
<PAGE>
6. Counterparts. This Amendment may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when executed and delivered shall be deemed to be an original and all of
which when taken together shall constitute the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the Transferor, Rohr and the Trustee have caused this
Amendment to be duly executed by their respective officers as of the day and
year first above written.
RI RECEIVABLES, INC.
By: /s/ R. M. Miller
--------------------------------
Name: R. M. Miller
--------------------------------
Title: President and Treasurer
--------------------------------
ROHR, INC.
By: /s/ R. W. Madsen
--------------------------------
Name: R. W. Madsen
--------------------------------
Title: Vice President
--------------------------------
BANKERS TRUST COMPANY, Trustee
By: /s/ Elizabeth Robinson
--------------------------------
Name: Elizabeth Robinson
--------------------------------
Title: Assistant Treasurer
--------------------------------
7
<PAGE>
The undersigned, constituting all of the Investor Certificateholders,
hereby consent to the foregoing Amendment.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Kevin Lalor
--------------------------------
Name: Kevin Lalor
--------------------------------
Title: Vice President
--------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:
--------------------------------
Name:
--------------------------------
Title: `
--------------------------------
-
8
<PAGE>
EXHIBIT 11.1
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF PRIMARY NET INCOME PER SHARE OF COMMON STOCK
-----------------------------------------------------------
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------------------
1994 1993 1992 1991 1990
------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net Income (loss) from
continuing operations before
cumulative effect of accounting
changes $ 4,669 $ (24,257) $ 996 $28,566 $ (442)
Income (loss) from discontinued
operations, net of taxes 2,258 (6,324) 459 1,951 481
Cumulative effect of accounting
changes, net of taxes - (223,950) - - -
------- --------- ------- ------- -------
Net income (loss) applicable to
primary earnings per common
share $ 6,927 (254,531) $ 1,455 $30,517 $ 39
======= ========= ======= ======= =======
Common stock and common stock
equivalents:
Average shares of common stock
outstanding during the year 18,017 17,908 17,647 17,502 17,752
Net effect of common stock
equivalents (principally
stock options and rights) 45 1 63 23 35
------- --------- ------- ------- -------
Total common stock and common
stock and equivalents 18,062 17,909 17,710 17,525 17,787
======= ========= ======= ======= =======
Net income (loss) per average
share of common stock:
Net income (loss) from
continuing operations before
cumulative effect of
accounting changes $ 0.26 $ (1.35) $ 0.05 $ 1.63 $ (0.02)
Income (loss) from
discontinued operations, net
of taxes 0.12 (0.36) 0.03 0.11 0.02
Cumulative effect of
accounting changes - net of
taxes (12.50)
------- --------- ------- ------- -------
Primary net income (loss) per
share $ 0.38 $ (14.21) $ 0.08 $ 1.74 $ 0.00
======= ========= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 11.2
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF FULLY DILUTED NET INCOME PER SHARE OF COMMON STOCK
-----------------------------------------------------------------
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------------------------------------
1994 1993 1992 1991 1990
-------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Income (loss) from continuing
operations before cumulative
effect of accounting changes
applicable to primary earnings
per common share $ 4,669 $ (24,257) $ 996 $28,566 $ (442)
Add back interest and issue
expense on convertible
debentures, net of tax adjustment 5,477 4,941 4,941 4,930 4,926
------- --------- ------- ------- -------
Adjusted income (loss)from
continuing operations before
cumulative effect of accounting
changes applicable to common
stock on a fully diluted basis 10,146 (19,316) 5,937 33,496 4,484
Income (loss) from discontinued
operations, net of taxes 2,258 (6,324) 459 1,951 481
Cumulative effect of accounting
changes, net of taxes (223,950)
------- --------- ------- ------- -------
Net income (loss) applicable to
fully diluted earnings per share $12,404 $(249,590) $ 6,396 $35,447 $ 4,965
======= ========= ======= ======= =======
Average number of shares
outstanding on a fully diluted
basis:
Shares used in calculating
primary earnings per share 18,062 17,909 17,710 17,525 17,787
Unexercised options 4 2
Shares on conversion of 7%
debentures 2,674 2,674 2,674 2,674 2,674
Shares on conversion of 7.75%
debentures 1,157
Average number of shares
outstanding on a fully diluted
basis 21,893 20,583 20,388 20,201 20,461
======= ========= ======= ======= =======
Fully diluted net income (loss)
per common share before
cumulative effect of accounting
changes $ 0.47 $ (0.94) $ 0.29 $ 1.66 $ 0.22
Income (loss) from discontinued
operations, net of taxes 0.10 (0.31) 0.02 0.09 0.02
Loss from cumulative effect of
accounting changes, net of taxes (10.88)
------- --------- ------- ------- -------
Fully diluted net income (loss)
per average common share $ 0.57 $ (12.13) $ 0.31 $ 1.75 $ 0.24
======= ========= ======= ======= =======
</TABLE>
Note: Fully diluted net income (loss) per average share is not presented in the
- - ---- Company's Consolidated Statements of Operations as the effect of the
assumed conversion of the Company's convertible debentures was anti-
dilutive.
<PAGE>
ROHR, INC.
1994 ANNUAL REPORT
TABLE OF CONTENTS
ROHR PROFILE.......................................................... A-1
SELECTED FINANCIAL DATA............................................... A-2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................. A-3
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................... A-18
<PAGE>
ROHR PROFILE
Incorporated in Delaware in 1969, Rohr, Inc., is the successor to an aerospace
manufacturing company founded in San Diego in 1940 and is now headquartered in
Chula Vista, California.
The Company had approximately 4,900 full-time employees at the end of fiscal
1994 and is an Equal Opportunity Employer.
Shareholder Information
Rohr's common stock is traded principally on the following markets:
-- New York Stock Exchange (RHR)
-- Pacific Stock Exchange (RHR)
-- The Stock Exchange, London
The number of common shareholders of record on July 31, 1994 was 4,915. The
Company's fiscal year is August 1 to July 31.
10-K Report Requests
The Company will provide a copy of its most recent report to the Securities
and Exchange Commission on Form 10-K (excluding the exhibits thereto) upon the
written request of any beneficial owner of the Company's securities as of the
record date for the Annual Meeting (October 7, 1994) without charge. Copies of
the exhibits to Form 10-K are also available upon request and after payment of
the cost of reproducing such exhibits. Such request should be addressed to Rohr,
Inc., Attention: Shareholder Services, 850 Lagoon Drive, Chula Vista, CA
91910-4308.
Transfer Agent and Registrar
Rohr's common stock transfer agent and registrant is the First Chicago Trust
Company of New York at:
P.O. Box 2500, Jersey City, NJ 07303-2500
(Correspondence and address changes)
P.O. Box 2506, Jersey City, NJ 07303-2506
(Certificate transfers)
Telephone: (800) 446-2617.
Communicating with Rohr
Mailing Address and Parcel Deliveries:
850 Lagoon Drive
Chula Vista, CA 91910-4308
Main Telephone: (619) 691-4111
Employment: (619) 691-4062
Investor Relations: (619) 691-3002
Purchasing: (619) 691-2331
Shareholder Services: (619) 691-2214
Telecopier: (619) 691-2905
Telex: 69-5038
Stock Price by Fiscal Quarter
<TABLE>
<CAPTION>
1994 1993
- - ------------------------------------------------------------------------
High Low High Low
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 8-3/4 $6-3/4 $12-7/8 $10-1/8
Second Quarter 11-1/2 7-1/8 13-1/8 9-1/4
Third Quarter 11-1/8 8 12-1/2 8-5/8
Fourth Quarter 11-5/8 8-1/4 10-1/4 6-1/2
- - ------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
SELECTED FINANCIAL DATA
(in thousands except for per-share data, number of employees, percentages and
ratios)
<TABLE>
<CAPTION>
Year ended July 31,
- - --------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations (1):
Sales $ 918,141 $1,149,503 $1,251,502 $1,361,766 $1,067,770
Operating income (2) 51,389 8,562 44,801 97,353 30,810
Operating profit margin 5.6% 0.7% 3.6% 7.1% 2.9%
Net income (loss) from continuing
operations 4,669 (24,257) 996 28,566 (442)
Income (loss) from discontinued operations -
net of taxes 2,258 (6,324) 459 1,951 481
Cumulative effect through July 31, 1992
of accounting changes - net of taxes (3) - (223,950) - - -
Net income (loss) $ 6,927 $ (254,531) $ 1,455 $ 30,517 $ 39
Net income (loss) per average share
of common stock:
Income (loss) from continuing operations $ 0.26 $ (1.35) $ 0.05 $ 1.63 $ (0.02)
Income (loss) from discontinued operations 0.12 (0.36) 0.03 0.11 0.02
Cumulative effect through July 31, 1992,
of accounting changes - net of taxes (3) - (12.50) - - -
Net income (loss) $ 0.38 $ (14.21) $ 0.08 $ 1.74 $ 0.00
Proforma amounts from continuing operations (4)
Income (loss) $ 4,669 $ (24,257) $ (35,314) $ (20,944) $ (58,410)
Income (loss) per average share of
common stock $ 0.26 $ (1.35) $ (1.99) $ (1.20) $ (3.28)
Cash dividends per share of
common stock - - - - -
- - --------------------------------------------------------------------------------------------------------------------------
Financial Position at July 31:
Total assets $1,056,847 $1,017,786 $1,363,958 $1,411,498 $1,329,308
Indebtedness 588,990 531,608 572,594 636,070 551,227
Net financings (5) 537,567 601,669 656,472 730,512 645,709
Shareholders' equity 146,909 182,243 448,866 441,401 413,713
Debt-to-equity ratio 4.01:1 2.92:1 1.28:1 1.44:1 1.33:1
Return on average equity 4.2% - 0.3% 7.1% -
Book value per common share 8.14 10.13 25.17 25.23 23.42
Number of full-time employees
at year end 4,900 6,500 9,200 11,200 11,500
Backlog - firm 1,200,000 1,400,000 1,900,000 2,200,000 2,500,000
Backlog - anticipated 2,500,000 2,600,000 2,300,000 2,800,000 2,600,000
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Results of Operations through fiscal 1993 have been restated to separately
reflect discontinued operations.
(2) Fiscal year 1993 and 1992 include special provisions as more fully discussed
in Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations.
(3) In the third quarter of fiscal 1993, the Company changed certain elements of
its application of accounting principles relating to long-term programs and
contracts, and adopted the provisions of SFAS Nos. 106 and 109. See Note 2
of the Notes to the Consolidated Financial Statements.
(4) Assumes the changes in the application of accounting principles for long-
term programs and contracts are applied retroactively.
(5) Net financings include indebtedness plus the receivables sales program,
which is reflected as a reduction to accounts receivable, and two sale-
leaseback transactions, accounted for as operating leases, reduced by cash,
cash equivalents, and short-term investments. See Notes 3 and 7 of the
Notes to the Consolidated Financial Statements.
A-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The following discussion and analysis presents management's assessment of
material developments affecting the Company's results of operations, liquidity
and capital resources for the three years ended July 31, 1994. Years prior to
1994 have been restated for the effect of the sale of the business jet line of
business as a discontinued operation. These discussions should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto. Comparisons between periods may not be meaningful because of
significant changes the Company made in certain of its accounting policies,
effective August 1, 1992, and the substantial provisions taken in the third
quarters of both fiscal 1992 and 1993.
On certain long-term programs under which spares are sold directly to the
airlines, the Company accounts for profit and loss under the program method of
accounting. Under the program method of accounting, the quantity of units in
the profit center includes existing and anticipated orders and is predicated
upon contractual arrangements with customers and market forecasts. Included
within the program quantity are spares anticipated to be sold concurrent with
production units which, as a percentage of total deliveries, increase as a
program matures. Historically, spares have been sold at higher prices than
production units. This inclusion of anticipated orders for production units and
spares in the program quantity generally increases margins in the early program
years and decreases margins in the later program years compared to the margins
that would be reported under other methods of accounting. Programs for which
the Company uses the program method of accounting and for which spares are
significant are as follows: V2500, CF6-80C, CFM56-5, A340 and MD-90. See
"Notes to Consolidated Financial Statements--Note 1b."
Industry Outlook
Commercial airlines' demand for new aircraft is highly dependent upon consumer
demand for air travel, stability of fuel and ticket prices, replacement of older
aircraft (which is influenced by the time required for, and the economics of,
compliance with noise and maintenance regulations), the availability of
temporarily deactivated aircraft, and the financial capabilities of the airlines
and leasing companies to accept ordered aircraft and to exercise aircraft
purchase options. Such demands and capabilities historically have been related
to the stability and health of the United States and world economies. Since the
production of aircraft can take up to two years, production in the aircraft
manufacturing industry (including production by subcontractors such as the
Company) lags behind changes in the general economy.
A-3
<PAGE>
In 1990 through 1992, airlines' passenger capacity increased rapidly as the
commercial aircraft industry produced record numbers of aircraft, peaking with
830 aircraft in 1991. During this same period, the United States and world
economies experienced recession and slow growth, United States scheduled
airlines reported operating losses averaging approximately $2 billion per year,
while non-United States scheduled airlines reported significantly reduced
profits. In 1991, United States and world airline passenger traffic decreased
by 1.9% and 2.3%, respectively. This was the first year in the history of the
industry that world airline passenger traffic had decreased. Aircraft
deliveries by the commercial aircraft manufacturing industry have been
declining. The industry delivered 830 new commercial transport aircraft in
1991, 785 in 1992 and 628 in 1993. In response to the deferral and cancellation
of orders from their customers, airframe and engine manufacturers have
rescheduled future production levels, laid off workers, shortened employee work
periods, and passed production slowdowns on to their suppliers, including the
Company. Although aircraft order backlog remains relatively high, excess
capacity currently exists in the airline industry due to the high number of
deliveries in the early 1990s, unused aircraft which were previously delivered
and the weakened condition of the airline industry. Offsetting factors include
the potentially large aircraft replacement market fueled by noise legislation
and aging fleets.
In 1993, United States scheduled airlines achieved approximately $1 billion of
operating profit. In addition, world airline passenger traffic grew by 8.2% in
1992 and 3.5% in 1993.
Industry analysts have predicted, consistent with long-term historical
patterns, that worldwide airline passenger traffic will grow on the average
approximately 5% to 6% per year over the long-term. Factors favoring long-term
passenger traffic growth include the improving economic outlook, pricing
pressures from low-cost carriers and the potential expansion of air travel in
emerging markets.
Company Outlook
As a result of the slow-down in the commercial aerospace industry and
reductions in the Company's military and space programs, the Company's revenues
from continuing operations have decreased approximately 33% from a high in
fiscal 1991 to fiscal 1994. In response to these conditions, management has
taken aggressive actions to reduce costs, increase competitiveness, improve
earnings, and maximize cash flow.
The Company has reduced its workforce from a peak of approximately 12,100 at
July 31, 1989, to approximately 6,500 at July 31, 1993, and approximately 4,900
at July 31, 1994. The Company has improved the ratio of indirect employees to
direct employees from 1:2.0 at July 31, 1993, to 1:2.8 at July 31, 1994.
A-4
<PAGE>
To reduce excess capacity and to increase overall production efficiencies
through higher utilization of its remaining facilities, the Company sold its
Auburn, Washington plant and deferred completion of a new facility in
Arkadelphia, Arkansas. The Company also has reduced capital expenditures from
an average of $45 million per year over the prior five fiscal years to $5.8
million in fiscal 1994. Expenditures over the next four years are expected to
average under $20 million per year.
The Company has experienced pressures from customers to reduce prices. In
response, the Company, on certain programs, has incorporated or is in process of
incorporating design changes, allowing for a more cost effective manufacture of
certain products and is exerting pressure on its own suppliers to reduce prices.
The Company's commercial airline customers have also reduced their spare parts
inventory levels. The Company expects that orders for and deliveries of
commercial aircraft will continue to be affected through calendar 1995 by the
adverse United States and world economic conditions which existed in prior
years.
Results of Operations
Discontinued Operations
In the fourth quarter of fiscal 1994 the Company sold and commenced the
transfer of its business jet line of business which is accounted for as a
discontinued operation in accordance with Accounting Principles Board Opinion
No. 30. The purchase agreement requires the Company, over the next several
months, to manufacture and deliver certain components and transfer program
engineering and tooling. The statements of operations for prior fiscal years
have been restated to account for the business jet line of business as a
discontinued operation. This business generated approximately $40.3 million,
$25.6 million and $28.2 million of revenue respectively in fiscal 1994, fiscal
1993 and fiscal 1992. See "Notes to Consolidated Financial Statements--Note
11."
Fiscal 1994 compared to Fiscal 1993
Sales from continuing operations declined 20% from $1,149.5 million in fiscal
year 1993 to $918.1 million for fiscal 1994, due primarily to reduced
deliveries. Commercial sales aggregated 86% and government sales 14% in both
fiscal 1994 and fiscal 1993.
The Company reported operating income of $59.3 million, an operating margin of
6.5% for fiscal year 1994, excluding the impact from unusual items. Including
the effect of the unusual items of $7.9 million, operating income was $51.4
million, a margin of 5.6%. The unusual items were the write-off of unamortized
pension past service costs related to the reduction of employment levels, net of
a gain on the sale of the Company's Auburn, Washington facility. Operating
results in fiscal 1994 benefited from the Company's downsizing, related
reductions in overhead expenses and improved program results. During fiscal
1993, the
A-5
<PAGE>
Company reported operating income of $8.6 million after the effect of
a $25.0 million net provision for asset and liability valuations and other costs
related to the planned consolidation activity. In addition, fiscal 1993 results
were adversely impacted by losses on tooling and design efforts and cost
problems related to certain programs.
Net interest expense was $46.8 million for the year ended July 31, 1994,
compared to $47.9 million for fiscal 1993. The new financings described in
"Liquidity and Capital Resources" will increase interest expense in fiscal year
1995.
Net income from continuing operations for fiscal 1994 was $4.7 million or 26
cents per share compared to a net loss from continuing operations of $24.3
million or $1.35 per share in fiscal 1993. The net impact of the unusual items
described above was to reduce net income for fiscal 1994 by $4.8 million or 27
cents per share. The increase in federal income tax rates resulting from the
Omnibus Budget Reconciliation Act, implemented in August 1993, increased net
income in fiscal 1994 by $2.8 million or 16 cents per share and increased the
deferred tax asset.
Additional Items
The Company is still experiencing softness in orders by airlines for spare
components, which caused the Company to revise its spare delivery forecast on
certain programs. The Company generally attributes recent reductions in spares
sales to the surplus aircraft in the current marketplace. As a result of such
surplus, aircraft deliveries have declined and the initial spares sold to
support newly delivered aircraft have also declined. In addition, airlines are
maintaining lower spares levels; the existence of surplus aircraft has reduced
the level of spares supplies needed to keep an airline's entire fleet in
operation. Also, improved product quality appears to have reduced spares
requirements.
The Company expects the percentage of Company revenues attributable to
government sales to decline in future years. The production for the Titan
rocket motor casing program, which accounted for 4% of revenues in fiscal 1994,
is expected to decline substantially in fiscal 1995 and may end. The Company's
military sales are primarily associated with older programs which are being
phased out of production. The Company expects to complete its production of the
C-130 program in 1996.
The Company reached an agreement with International Aero Engines on the V2500
program for Airbus A319, A320, and A321 aircraft under which the Company will
continue to manufacture key program components and provide total system support.
Retention of this program under mutually agreeable contractual terms was a key
objective of the Company.
A-6
<PAGE>
During fiscal 1994, the Company and the U.S. Air Force settled various
contract disputes. Contemporaneously with this settlement the Company and the
United States Attorney for the Central District of California settled the
previously reported civil and criminal investigations. These settlements were
in line with reserves previously provided.
The Company has determined not to sell its overhaul and repair business and
now intends to retain the business as part of its total product support
services.
Fiscal 1993 Compared with Fiscal 1992
Sales from continuing operations declined from $1,251.5 million in fiscal 1992
to $1,149.5 million in fiscal 1993. Commercial sales benefited from deliveries
on the Airbus A340 program, and start-up of the MD-90 program. However,
commercial sales in fiscal 1993 were negatively impacted by delivery rate
reductions. Government sales for the comparable period declined due to events
in the previous year, including the termination of the C-5 spare pylon program
and completion of F-14 production deliveries. Commercial sales aggregated 86%
and government sales 14% in both fiscal 1993 and fiscal 1992.
General and administrative expenditures declined $9.2 million from $53.0
million in fiscal 1992 to $43.8 million in fiscal 1993. The decline was
primarily the result of work force reductions, postponement of annual wage
increases, and other ongoing cost cutting efforts. General and administrative
expenses in fiscal 1993 were charged as period expenses. General and
administrative expenditures in fiscal 1992 were, in part, inventoried and
relieved through cost of sales as units were delivered. This change was made as
part of the change in application of accounting principles.
The Company's operating income from continuing operations was $8.6 million for
fiscal 1993 compared to operating income of $44.8 million for fiscal 1992.
Fiscal 1993 operating income was negatively impacted by $36.3 million due to the
change in application of accounting principles relating to long-term programs
and contracts. These changes will also continue to impact results negatively in
the near term, but are expected to positively impact operating results in the
long-term. Results for the year were also adversely affected by net provisions
aggregating $25.0 million for plant closure, inventory obsolescence and other
asset valuations, other costs related to the planned consolidation process, and
various items of litigation. In addition, results reflect a reduction in
anticipated sale of spare parts on the V2500, CF6-80C, CFM56-5 and A340
programs. The Company generally attributes recent reductions in spares sales to
the surplus aircraft in the current marketplace. As a result of such surplus,
aircraft deliveries have declined and the initial spares sold to support newly
delivered aircraft have also declined. In addition, airlines are maintaining
lower spares levels; the existence of surplus aircraft has reduced the level of
spares supplies sufficient to keep an airline's entire fleet in operation.
Also, improved product quality appears to have reduced spares requirements. In
addition, fiscal 1993 results
A-7
<PAGE>
reflect increased costs associated with assembly labor performance on certain
out-of-production spare programs. Operating results in fiscal 1992 were
adversely impacted by a number of special provisions approximating $50 million.
Paramount was a provision for potential losses arising as a result of the
government's termination for default of the C-5 spare pylon program. Operating
results for fiscal 1992 were also impacted by provisions relating to the
Company's investment in the Valsan 727 re-engining program, which was negatively
impacted by delayed implementation of U.S. noise regulations, and by provisions
for closure of the Company's Auburn facility and future settlement of possible
criminal and civil proceedings concerning certain government programs. In fiscal
year 1992, operating results were also impacted by cost problems on certain out-
of production spares programs.
In fiscal 1993, the Company achieved better labor performance than in fiscal
1992. This is attributed, in part, to the generally higher seniority level of
the Company's work force as a result of the Company's recent downsizing
activities.
Estimates of anticipated spare part sales were reduced on the McDonnell
Douglas MD-90 program resulting in a decline of projected operating income from
this program in future years. Negotiation of a new long-term agreement on the
PW4000 program resulted in revised cash flow estimates that delay recovery of
the Company's investment on that program.
Net interest expense was $47.9 million for the year ended July 31, 1993, as
compared to $63.4 million for the same period the previous year. The 1992
period included a charge of $18.3 million during the third quarter of fiscal
1992 for interest cost attributed to the IRS audit adjustment to the Company's
1984 and 1985 federal tax returns. The 1993 period also included interest
expense for income tax liabilities. Net of the interest for income tax
liabilities, interest expense in 1993 was lower than in fiscal 1992 due to lower
average borrowings and lower interest rates.
Effective August 1, 1992, the Company changed certain elements of its
application of accounting principles relating to long-term programs and
contracts and general and administrative expenses; adopted SFAS No. 106,
"Employers' Accounting for Post-Retirement Benefits Other than Pensions;" and
adopted SFAS No. 109, "Accounting for Income Taxes." The combined effect of
adopting the new accounting changes for fiscal year 1993 was a charge to net
income of $24.6 million ($1.37 per average common share). The effect on
continuing operations was $22.4 million ($1.25 per average common share). The
cumulative effect through July 31, 1992 of adopting the new accounting changes
was a one-time charge of $224.0 million, net of income taxes ($12.50 per average
common share), with a corresponding reduction in shareholders' equity.
A-8
<PAGE>
Net loss was $254.5 million for the year ended July 31, 1993, as compared
to income of $1.5 million for fiscal 1992, primarily as a result of the $224.0
million charge for the cumulative effect of the accounting changes described
above, the effect of the accounting change in 1993 of $39.9 million ($24.6
million after tax) and the $25.0 million ($15.4 million after tax) special
provision.
The net loss for the year ended July 31, 1993 is net of tax benefits totaling
$158.0 million. These tax benefits offset existing deferred tax liabilities at
July 31, 1992 and resulted in a net deferred tax asset of $103.0 million at July
31, 1993.
Liquidity and Capital Resources
The Company significantly improved its liquidity in fiscal 1994 and believes
that it has sufficient resources to meet its needs. At July 31, 1994, the
Company had $133.6 million of cash, cash equivalents and short-term investments
in addition to a $110 million revolving credit agreement. There were no amounts
outstanding under this agreement at July 31, 1994. However the total
availability is reduced by any letters of credit issued under the agreement; at
July 31, 1994, a $16.9 million letter of credit was outstanding.
For fiscal year 1994, cash provided by operating activities totaled $80.5
million compared with $81.1 million for fiscal 1993. Cash provided by
operating activities for fiscal 1994 included significant settlements associated
with the restructuring of certain contracts, several one time payments for non-
recurring tasks and proceeds from the sale of the business jet line of business.
In fiscal 1993, cash provided by operating activities included one-time receipts
by the Company for design and tooling efforts and similar non-recurring tasks.
Also contributing to the positive cash flow in both fiscal 1994 and 1993 were
cost reduction efforts, improved productivity and increased utilization of
assets partly arising from programs to shorten lead times allowing the Company
to respond more timely to changing customer requirements. Cash provided by
operations is subject to significant variations from period to period.
In the fourth quarter of fiscal 1994, the Company completed its public
offering of $100 million of 11.625% Senior Notes due May 2003, and the
concurrent public offering of $57.5 million of 7.75% Convertible Subordinated
Notes due May 2004. Both series of notes are general unsecured obligations of
the Company paying interest semiannually commencing November 1994, and do not
have sinking fund requirements. The convertible subordinated notes are
convertible at the option of the holder at any time prior to maturity into
shares of the Company's common stock at a conversion price of $10.35 per share.
A-9
<PAGE>
Upon the issuance of the notes, the Company used $64 million of the proceeds
to repay all borrowings under its revolving credit agreement. Also, effective
upon the issue date of these new notes, the Company amended the revolving credit
agreement, extending the credit commitment through April 1997. The revised
commitment is initially for $110 million and is reduced by $10 million every six
months beginning October 1995 until it reaches $80 million. This amendment, as
well as amendments to other of the Company's principal financing agreements,
revised the existing financial covenant levels and removed the requirement that
the Company issue $100 million of subordinated debt on or prior to August 1,
1994.
The Company's total financings (balance sheet debt plus off-balance sheet
financings) aggregated $671.1 million at July 31, 1994, an increase of $27.2
million from July 31, 1993. Balance sheet debt increased $57.4 million from
$531.6 million on July 31, 1993 to $589.0 million on July 31, 1994. During
fiscal 1994, the Company repaid its $35 million medium term note, made the
annual $12.5 million principal payment on its 9.35% senior notes and repaid the
$50 million bank debt outstanding at July 31, 1993. At July 31, 1994, the
Company had $133.6 million of cash, cash equivalents and short term investments
compared to $42.2 million at July 31, 1993.
The Company is a party to a $60.0 million accounts receivable facility, an
off-balance sheet financing, under which it sells receivables from specified
customers on an on-going basis. Due to the slowdown in the aerospace industry,
the amount of outstanding receivables from these customers has fallen below
levels which existed at the start of the facility. As a result, the Company has
elected to deposit cash collateral from time to time as required to support the
facility and has withdrawn such cash when it is no longer required to be
deposited. At July 31, 1994, $26.5 million of cash collateral was on deposit.
Subsequent to the end of the fiscal year, the Company applied $20 million of
this cash on deposit to reduce the financing level to $40 million.
The Company is also a party to certain equipment leases, treated as an off-
balance sheet financing, and has granted the lessors a security interest in
selected customer receivables to secure $10 million of obligations. If the
parties who lease this equipment to the Company do not assign approximately one-
half of their beneficial interest in the leased equipment by January, 1995, the
equipment lessors may require the Company to prepay up to $10 million of its
equipment lease obligation. Subsequent to the end of the fiscal year, the
Company notified the equipment lessors of its intent to repurchase approximately
$22 million of equipment to satisfy this requirement and release the security
interest.
A-10
<PAGE>
The Company's existing debt level reflects the substantial investments made by
the Company in the late 1980s and early 1990s in the design, development,
tooling, certification and other start-up costs associated with new aircraft
programs. Except for the MD-90, the Company has substantially completed the
large investments required by these programs and most are now well into
production. Airframe and engine manufacturers are expected to introduce
relatively few new programs in the next several years, and accordingly, the
Company believes that its financing requirements for new programs have been
reduced as compared to prior periods.
At July 31, 1994, the reported underfunded status (excess of accrued benefit
obligations over plan assets) of the Company's defined benefit plans increased
by $68.6 million from July 31, 1993 to a total of $124.1 million. This increase
in the underfunded status resulted primarily from a reduction in the discount
rate used to calculate the present value of future pension plan liabilities for
financial reporting purposes. The Company reduced its discount rate to 7.5 %
for its fiscal year 1994 valuation from the 8.5% used for its 1993 valuation.
This increase in the underfunded pension liabilities resulted in a charge to
shareholders' equity in fiscal 1994 of $42.6 million and a $29.3 million
increase to the Company's deferred tax asset account.
The Company's required minimum annual contribution to its defined benefit
plans is determined in accordance with IRS regulations. Due to the underfunded
status of the plans, these regulations required the Company to increase its
annual cash contributions to the pension plans. These regulations are designed
to substantially eliminate pension plan underfunding within five years based on
the current funded status of the plans. During fiscal 1994, the Company's
contributions to its defined benefit plans aggregated $17.0 million and
subsequent to year end the Company made a contribution of $36.0 million in
fiscal 1995. This increased level of contributions is expected to continue
until the funded status of the plans improves. The Company expects to have
sufficient liquidity to make these increased contributions. See Note 9 of the
Notes to Consolidated Financial Statements.
The Company's net inventory decreased to $363.2 million at July 31, 1994 from
$439.7 million at July 31, 1993. Production inventory declined reflecting the
reduced sales volume and the efforts of management to control inventory levels
through shorter lead times and just-in-time contracts. These reductions were
partially offset by an increase in pre-production inventory, primarily in the
MD-90 and A340 programs.
Capital expenditures for property, plant and equipment totaled $5.8 million
for fiscal year 1994, down from $27.5 million for fiscal year 1993. Capital
expenditures in fiscal year 1993 were higher than fiscal year 1994, due to
expenditures for new office and manufacturing facilities. In addition, the
Company substantially curtailed capital expenditures for fiscal year 1994 in
line with other cost
A-11
<PAGE>
cutting efforts. The Company believes that the amount it plans to spend on
capital expenditures over the next several years will be sufficient to meet the
Company's production requirements.
The Company's firm backlog, which includes the sales price of all undelivered
units covered by customers' orders for which the Company has production
authorization, was approximately $1.2 billion at July 31, 1994 compared to $1.4
billion at July 31, 1993. Approximately $0.7 billion of the $1.2 billion
backlog is scheduled to be delivered in fiscal year 1995. (Sales during any
period include sales which were not part of backlog at the end of the prior
period.) Customer orders in firm backlog are subject to rescheduling and/or
termination for customer convenience; however, in certain cases the Company is
entitled to an adjustment in contract amounts. The Company has an additional
$2.5 billion in anticipated backlog, which represents the sales price of units
which the Company expects that its customers will order under existing contracts
and the Company will deliver within seven years.
Environmental Matters
The Company has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA" or "Superfund"), and under certain analogous state
laws for the cleanup of contamination resulting from past disposal of hazardous
substances at several sites to which the Company, among others, sent such
substances in the past. CERCLA requires the cleanup of sites from which there
has been a release or threatened release of hazardous substances, and authorizes
the Environmental Protection Agency ("EPA") to take any necessary response
actions at such sites, including ordering PRPs to cleanup or contribute to the
cleanup of a Superfund site. Courts have interpreted CERCLA to impose strict,
joint and several liability upon all persons liable for response cost.
In June 1987, the U.S. District Court of Los Angeles, in U.S. et al, vs.
Stringfellow, granted partial summary judgment against the Company and 14 other
defendants on the issue of liability under CERCLA. Subsequently, the State of
California was found liable and an allocation of its responsibility was made.
The most recent estimate the Company has made of its liability, assuming the
court order allocating substantial liability to the State of California is
upheld, assuming the 1989 EPA estimate of total cleanup costs is not exceeded
(although the EPA cautioned the actual costs could have a variation of 30% less
or 50% higher than its estimate), and assuming tentative allocations among the
Company and all other users of the site will approximate the final allocation of
aggregate user liability, shows a Company expenditure ranging from $5 to $8
million over and above sums spent to date. However, the Company estimates
further assume that the EPA selects a final remedial action of moderate
technology and cost, rather than one of several more radical ones previously
suggested, but apparently discarded at this point, by the EPA. Expenditures by
the Company for cleanup of this site during fiscal 1994 were approximately $0.8
million and are expected to be approximately
A-12
<PAGE>
$0.6 million during fiscal 1995. From inception to July 31, 1994, the Company
has expended approximately $3.3 million on cleanup costs for this site.
Applicable law provides for continuing liability for future remedial work beyond
existing agreements and consent decrees. The Company also has claims against its
comprehensive general liability insurers for insurance reimbursement, for past
and future costs, none of which has yet been recorded in the financial records
of the Company except for sums actually paid in certain insurance settlements.
The Company is also involved in several other proceedings and investigations
related to waste disposal sites and other environmental matters. It is
difficult to estimate the ultimate level of environmental expenditures for these
various other environmental matters due to a number of uncertainties at this
early stage, including the complexity of the related laws and their
interpretation, alternative cleanup technologies and methods, insurance and
other recoveries, and in some cases the extent or uncertainty of the Company's
involvement. However, preliminary estimates of cleanup costs for the Rio Bravo,
Chatham Brothers and Casmalia waste disposal sites were approximately $7
million, $30 million and $70 million respectively, and the Company's share
(based on estimated, respective volumes of discharges into such sites by all
generators, all of which cannot now be known with certainty) could approximate
$0.5 million for the Rio Bravo site, $0 for the Chatham Brothers site (based on
the Company's belief that it never used that site), and $1.8 million for the
Casmalia site. The Company does not yet know about the ability of all of the
other waste generators using the Casmalia and Rio Bravo sites to fund their
allocable share, and the Company could be found jointly and severally liable
with all waste generators using such sites. The Company has made claims against
its insurance carriers for certain of these items, and has received claims
acknowledgment letters reserving the rights of such carriers. The insurers have
alleged or may allege various defenses to coverage, although no litigation has
been commenced.
During the year ended July 31, 1994, the Company expended, for the
environmental items described above and also for other environmental matters
(including environmental protection activities in the normal operation of its
plants), a total of approximately $6.1 million. These expenditures covered
various environmental elements, including hazardous waste treatment and disposal
costs, environmental permits, environmental consultants, fines or donations
(which were not material, either individually or in the aggregate) and
environmental remediation (including Stringfellow), no significant part of which
was capitalized. Assuming the usage of all of these various environmental
elements remains substantially the same for fiscal 1995 as in fiscal 1994, which
the Company anticipates, costs for these elements in fiscal year 1995 should be
comparable to the current rate of expenditure for fiscal 1994.
Based upon presently available information, the Company believes it has
sufficient reserves and that aggregate costs in relation to all environmental
matters of the Company will not have a material adverse effect on the Company's
financial condition, liquidity, results of operations or capital expenditures.
A-13
<PAGE>
Income Taxes
In fiscal 1993, the Company adopted, SFAS No. 109, "Accounting for Income
Taxes." This standard requires the recognition of future tax benefits,
predicated upon current tax law, attributable to tax credit carryforwards,
deductible temporary differences, and net operating losses (NOLs). The value of
the tax asset is effectively reduced through the establishment of a valuation
allowance if, based on the weight of available evidence, it is "more likely than
not" that some or all of the deferred tax asset will not be realized.
When tax effected at July 31, 1994 tax rates, the Company's deductible
temporary differences, tax credit carryforwards and NOLs result in a deferred
tax asset of $133.5 million, consisting of $112.9 million for federal tax
purposes and $20.6 million for state tax purposes. Based on tax rates in effect
on July 31, 1994, the Company must generate approximately $339 million of future
taxable income (net of $142 million of taxable income that the Company will
report as a result of the automatic reversal of existing taxable temporary
differences between asset and liability values for financial reporting and
income tax purposes) prior to the expiration of the Company's NOLs in 2003
through 2009 for full realization of the net deferred tax asset. The Company
believes it will be able to generate, on average, at least $38 million in pretax
income for each of the next nine years, in order to fully utilize the deferred
tax asset (assuming all temporary differences between asset and liability values
for financial reporting and income tax purposes reverse during that period).
This level of pretax income would be $33.4 million in excess of reported fiscal
1994 pretax income of $4.6 million from continuing operations.
The ultimate realization of the Company's deferred tax asset is dependent upon
the generation of sufficient future taxable income during the available federal
and state NOL carryforward periods. Management expects that a sufficient level
of taxable income will result in years subsequent to fiscal 1994 and prior to
the expiration of the NOLs to realize the deferred tax asset recorded at July
31, 1994. The Company's long-term contracts and programs require long range
sales and profit forecasts, but also provide the Company opportunities to
generate future taxable income necessary to realize the deferred tax asset
recorded. Following is a summary of the positive evidence which leads the
Company to believe that a valuation allowance is not necessary, as it is more
likely than not that the deferred tax assets will be realized:
A-14
<PAGE>
. During fiscal years 1990 through 1993, there were a number of highly unusual
and unpredictable events and other industry factors that caused the Company to
have poor financial results. These items are generally described below.
The aerospace industry was experiencing unprecedented growth in the late 1980s
and through 1991. The Company was required to deliver its products more rapidly
and was involved in several new product development efforts for a number of
engine nacelles and pylons. The Company added a significant number of engineers
to handle design changes for new products under development, and experienced
even greater engineering demands due mostly to difficulties in changing the
PW4000 nacelle from the Airbus A300/A310 configuration to the new MD-11
configuration and in developing the MD-11 pylon.
The Company's rapid expansion of its work force, introduction of new programs
and start-up of satellite facilities were extremely disruptive and cost
consuming. As the Company worked to produce initial units under new programs, a
substantial portion of work was being performed by relatively inexperienced
employees. Additionally, there were significant start-up costs in relocating
production among facilities. The Company also experienced difficulties on its
government programs as a result of disagreements over redefined acceptance
criteria.
. The conditions leading to an expanding work force, transfers to satellite
plants and heavy use of engineers on new programs have drastically changed.
Currently, the Company and the industry are in a downturn with orders being
delayed and/or canceled. The Company has been downsizing and has implemented
and will continue to make significant cost reductions in response to the
industry downturn in order to enhance overall profitability. Additionally, the
Company should be able to utilize its resources in a more balanced and stable
manner. Engineering needs have been drastically reduced as most of the programs
that were in the development stage throughout the late 1980s and early 1990s
have been introduced to the market. Significant design costs for new product
development are not anticipated over the next several years.
. The Company's direct sales of spare parts to the airlines are expected to
increase as nacelle programs on which the Company sells spare parts directly to
the airlines mature. Generally, the Company earns a higher margin on the direct
sales of spare parts to airlines than it does on the sales of spare parts to
prime contractors (for resale to the airlines). Prices for direct spare part
sales are higher than prices for spare parts sold to prime contracts, in part,
because of additional costs related to the technical and customer support
activities provided to the airlines.
. The Company's assets present significant opportunities to accelerate
taxable income into the NOL
A-15
<PAGE>
carryforward period. Tax planning strategies such as leveraged lease
transactions, the sale-leaseback of certain property, the revision of
depreciation methods for tax purposes and reductions in foreign sales
corporation commissions could generate taxable income in excess of $100 million.
The following table shows the taxable income that will need to be generated
over the next 20 years in order to realize the deferred tax asset:
<TABLE>
<CAPTION>
5-Year Time Interval
----------------------------------------------
1995-99 2000-04 2005-09 2010 & Beyond
-------- -------- -------- -------------
(Dollar amounts in millions)
<S> <C> <C> <C> <C>
NOLs $ 0 $ 79 $ 61 $ 0
Tax credits 0 21 3 0
Future deductible temporary differences 0 0 0 317
------ ------ ------ ----
Total $ 0 $ 100 $ 64 $317
====== ====== ====== ====
</TABLE>
Future deductible temporary differences begin to reverse in fiscal 1995.
Taxable income needed to realize the portion of the deferred tax asset related
to future deductible temporary differences will need to be generated before the
end of the 15-year period following the reversal of those temporary differences.
The availability of the Company's NOLs may be limited under the Tax Reform Act
of 1986 as a result of changes that may occur in the ownership of the Company's
stock in the future, principally relating to a change in control. Management
has considered this factor in reaching its conclusion that it is "more likely
than not" that future taxable income will be sufficient to realize fully the
deferred tax asset reflected on the balance sheet.
The IRS has audited the Company's tax returns through fiscal 1985. In fiscal
1993, the IRS issued a Revenue Agent's Report challenging the Company's adoption
in 1984 of the completed contract method of accounting ("CCMA"), the Company's
tax deduction for funding liabilities related to a Voluntary Employee Benefit
Association and certain other matters. The Company filed a protest with the
Appeals Office of the IRS and, in fiscal 1994, the IRS conceded that the Company
was entitled to use CCMA. The Company is negotiating a resolution of the
remaining adjustment issues with the IRS. The Company believes that the
resolution of these remaining issues will not have a material adverse effect on
the Company and its financial position.
A-16
<PAGE>
Reconciliation of the Company's income (loss) before taxes for financial
statement purposes to U.S. taxable income for the years ended July 31, 1994,
1993 and 1992 is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Income (loss) before taxes from continuing operations $ 4,553 $(39,321) $(18,572)
Income (loss) before taxes from discontinued operations 3,777 (10,250) 757
-------- -------- --------
Income (loss) before taxes 8,330 (49,571) (17,815)
Non-U.S. income (1,160) (3,181) (5,493)
Add (subtract) permanent differences 1,187 (1,464) (1,872)
State taxes (11) (259) (151)
Temporary differences:
Inventories 37,895 (12,222) (66,706)
Employee benefits (1,878) (10,386) (9,253)
Depreciation (19,333) 13,766 19,187
Leveraged leasing 6,193 5,128 21,253
Deferred gain on sale/leaseback (1,177) 21,906
Other items - net (4,861) (3,887) (1,421)
-------- -------- --------
U.S. taxable income (loss) $ 25,185 $(40,170) $(62,271)
======== ======== ========
</TABLE>
A-17
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
July 31,
- - ------------------------------------------------------------------------------------
1994 1993
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 115,996 $ 42,186
Short-term investments 17,568 -
Accounts receivable 93,143 94,140
Inventories:
Work-in-process 444,076 560,139
Raw materials, purchased parts and supplies 23,441 32,575
Less customers' progress payments and advances (104,321) (152,976)
- - ------------------------------------------------------------------------------------
Inventories - net 363,196 439,738
Deferred tax asset 36,353 13,654
Prepaid expenses and other current assets 18,493 16,861
- - ------------------------------------------------------------------------------------
Total Current Assets 644,749 606,579
Property, Plant and Equipment - Net 222,063 239,045
Investment in Leases 37,145 38,233
Deferred Tax Asset 97,135 89,348
Other Assets 55,755 44,581
- - ------------------------------------------------------------------------------------
$1,056,847 $1,017,786
====================================================================================
Liabilities and Shareholders' Equity
Trade accounts and other payables $ 129,674 $ 166,916
Salaries, wages and benefits 37,100 38,623
Taxes on income 2,343 -
Current portion of long-term debt 14,952 50,719
- - -----------------------------------------------------------------------------------
Total Current Liabilities 184,069 256,258
Long-Term Debt 574,038 480,889
Pension and Post-Retirement Obligations - Long-Term 125,004 63,040
Other Obligations 26,827 35,356
Commitments and Contingencies (Note 8) - -
Shareholders' Equity:
Preferred stock, $1 par value per share,
10 million shares authorized, none issued - -
Common stock, $1 par value per share,
authorized 50,000,000 shares; issued and
outstanding 18,041,680 and 17,995,866 shares,
respectively 18,042 17,996
Additional paid-in capital 102,598 102,312
Retained earnings 82,168 75,241
Minimum pension liability adjustment (55,899) (13,306)
- - ------------------------------------------------------------------------------------
Total Shareholders' Equity 146,909 182,243
- - ------------------------------------------------------------------------------------
$1,056,847 $1,017,786
====================================================================================
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
A-18
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per-share data)
<TABLE>
<CAPTION>
Year ended July 31,
- - --------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $918,141 $1,149,503 $1,251,502
Costs and Expenses 830,474 1,097,141 1,196,534
General and Administrative Period
Expenses (Notes 2 & 4) 28,352 43,800 10,167
Unusual Items (Note 9) 7,926 - -
- - --------------------------------------------------------------------------------------
Operating Income 51,389 8,562 44,801
Interest - Net 46,836 47,883 63,373
- - --------------------------------------------------------------------------------------
Income (Loss) From Continuing Operations
Before Taxes On Income 4,553 (39,321) (18,572)
Taxes (Benefit) on Income (116) (15,064) (19,568)
- - --------------------------------------------------------------------------------------
Income (Loss) From Continuing Operations 4,669 (24,257) 996
Income (Loss) from Discontinued Operations
- Net of Taxes 2,258 (6,324) 459
Cumulative Effect Through
July 31, 1992, of Accounting Changes
- Net of Taxes (Note 2) - (223,950) -
- - --------------------------------------------------------------------------------------
Net Income (Loss) $6,927 $(254,531) $ 1,455
======================================================================================
Net Income (Loss) Per Average Share
of Common Stock:
Income (Loss) From Continuing Operations $ 0.26 $ (1.35) $ 0.05
Income (Loss) From Discontinued Operations 0.12 (0.36) 0.03
Cumulative Effect Through July 31, 1992, of
Accounting Changes (Note 2) - (12.50) -
- - --------------------------------------------------------------------------------------
Net Income (Loss) $ 0.38 $ (14.21) $ 0.08
======================================================================================
Pro Forma Amounts from Continuing Operations
Assuming the Changes in the Application of
Accounting Principles for Long-Term Programs and
Contracts are Applied Retroactively:
Net Income (Loss) $4,669 $ (24,257) $(35,314)
Net Income (Loss) per Average Share
of Common Stock $ 0.26 $ (1.35) $ (1.99)
======================================================================================
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
A-19
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Common Stock Additional Minimum Pension
Par Value Paid-In Retained Liability
$1 a Share Capital Earnings Adjustment
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at August 1, 1991 $17,497 $ 95,587 $328,317 $ -
Common stock issued to employee benefit plans 319 4,995
Stock plans activity 17 679
Net income 1,455
- - ----------------------------------------------------------------------------------------------------------------
Balance at July 31, 1992 17,833 101,261 329,772
Common stock issued to employee benefit plans 67 673
Stock plans activity 96 378
Net loss (254,531)
Minimum pension liability adjustment (Note 9) (13,306)
- - ----------------------------------------------------------------------------------------------------------------
Balance at July 31, 1993 17,996 102,312 75,241 (13,306)
Stock plans activity 46 286
Net Income 6,927
Minimum pension liability adjustment (Note 9) (42,593)
- - ----------------------------------------------------------------------------------------------------------------
Balance at July 31, 1994 $18,042 $102,598 $82,168 $(55,899)
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
A-20
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents (in thousands)
<TABLE>
<CAPTION>
Year ended July 31,
- - -----------------------------------------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ 6,927 $(254,531) $ 1,455
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 22,538 25,578 27,855
Cumulative effect of accounting changes - net of taxes - 223,950 -
Changes due to (increase) decrease in operating assets:
Accounts receivable 27,500 84,013 53,174
Inventories - net 71,497 34,447 5,990
Prepaid expenses and other assets (1,459) 4,514 10,910
Changes due to increase (decrease) in operating liabilities:
Trade accounts and other payables (49,429) (17,478) 27,362
Taxes on income and deferred taxes 1,176 (29,432) (20,816)
Other 1,783 9,996 4,412
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 80,533 81,057 110,342
- - -----------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchase of short-term investments (17,568) - -
Proceeds from sale-leaseback transactions - 52,247 -
Purchase of property, plant and equipment (5,784) (27,536) (62,933)
Net advances on discontinued operations 5,045 - -
Other, including investment in leases (907) (1,180) 21,789
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (19,214) 23,531 (41,144)
- - -----------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from 9.33% senior notes - 62,000 -
Net proceeds from 11.625% senior notes 95,690 - -
Net proceeds from 7.75% convertible subordinated notes 55,515 - -
Annual principal payment of 9.35% senior notes (12,500) (12,500) -
Repayment of medium-term notes (35,000) (10,000) (5,000)
Net short-term borrowings (repayments) - (20,000) (57,000)
Long-term borrowings under revolving credit agreement 115,000 90,000 300,000
Repayment of borrowings under revolving credit agreement (165,000) (120,000) (290,000)
Repayment of other long-term borrowings (2,618) (36,387) (11,890)
Proceeds (repayment) from cash values in insurance policies (9,907) 9,907 -
Reduction in sales of receivable equivalents - (45,000) (15,000)
Cash collateral for receivable sales program (26,503) - -
Stock contributions to employee benefit plans - 741 5,314
Other (2,186) (2,285) (58)
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 12,491 (83,524) (73,634)
- - -----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 73,810 21,064 (4,436)
Cash and Cash Equivalents, Beginning of Year 42,186 21,122 25,558
- - -----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 115,996 $ 42,186 $ 21,122
- - -----------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash Paid During the Year for:
Interest, net of amount capitalized $ 41,622 $ 47,758 $ 53,936
Income taxes 174 9,802 2,243
Non-Cash Investing and Financing Activities:
Sale of receivables - 60,000 -
Repurchase of receivable or inventory equivalents - (105,000) -
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
A-21
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies reflects the accounting
policies in effect as of August 1, 1992. See Note 2 for changes in
accounting policies which became effective August 1, 1992.
a. Principles of Consolidation
The consolidated statements include the accounts of Rohr, Inc. and all
subsidiaries ("Company"). Total assets and sales of foreign subsidiaries
are not significant.
Prior years' statements of operations have been restated to reflect the
business jet line of business as a discontinued operation. In addition, certain
reclassifications have been made to prior years to conform to current year
presentation.
b. Sales and Earnings
The Company follows the guidelines of Statement of Position 81-1,
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts" (the contract method of accounting) for certain commercial and all
governmental contracts, except that the Company's contract accounting policies
differ from the recommendations of SOP 81-1 in that revisions of estimated
profits on contracts are included in earnings by the Company under the
reallocation method rather than the cumulative catch-up method. Contract
accounting generally places limitations on the combining of contracts and
prohibits the anticipation of future contracts in determining the contract
profit center. Approximately one-half of the Company's sales during fiscal year
1994 are accounted for using the contract method of accounting. In the third
quarter of fiscal 1993, the Company made significant changes, effective August
1, 1992, to certain elements of its application of accounting principles
relating to its long-term contracts as described in Note 2.
Several major commercial programs, under which spares and technical
product support are sold directly to airlines, are accounted for under the
program method of accounting, a method which existed in practice for many years
prior to the issuance of SOP 81-1. Guidelines for use of program accounting have
been developed in practice and are not codified by authoritative accounting
literature. This method of accounting is followed by relatively few public
companies in a limited number of industries. It applies in situations where the
economics of producing and marketing the program product extend beyond the
initial production order. The most significant differences from contract
accounting are that (1) the quantity of units included in the profit center
under program accounting
A-22
<PAGE>
includes existing and anticipated contracts, and (2) program units may be sold
to more than one customer. The Company uses program accounting in those
circumstances where it is able to make reasonably dependable estimates of (1)
the value of anticipated production units and spares sales in future contracts,
(2) the length of time to produce and sell those additional production units and
spares, and (3) the production costs and selling prices associated with such
units and spares. Typically, the Company applies program accounting on programs
for which the Company is responsible for total systems integration and
continuing product support. The Company initially adopted the program method of
accounting in 1988 in response to the changing characteristics of its
contracting environment.
Profit is estimated based on the difference between total estimated
revenue and total estimated cost of a contract or program and is recognized
evenly as a uniform percentage of sales value on all remaining units to be
delivered. Current revenue does not anticipate higher or lower future prices,
but includes units delivered at actual sales prices. A constant contract or
program margin is achieved by deferring or accelerating a portion of the average
unit cost on each unit delivered. Cost includes the estimated cost of the pre-
production effort (primarily tooling and design), plus the cost of manufacturing
both a specified number of production units and, under the program method of
accounting, those spares which are expected to be delivered concurrently with
such production units. The specified number of production units used to
establish the profit margin is predicated upon market forecasts and does not
exceed the lesser of those quantities assumed in original program pricing or
those quantities which the Company now expects to deliver in the periods assumed
in original program pricing. The number of units used to estimate profit margin
is increased when firm orders exceed the number of units used for pricing
purposes (a firm order authorizes the Company to commence production). Spares,
as a percentage of total deliveries, increase as a program matures and
historically have been sold at higher prices than production units. This higher
price reflects, in part, additional costs related to technical and customer
support activities.
Under both the contract and program methods of accounting, the Company's
sales are primarily under fixed-price contracts, many of which contain
escalation clauses and require delivery of products over several years. Sales
and profits on each contract or program are recognized primarily in accordance
with the percentage-of-completion method of accounting, using the units-of-
delivery method. Revisions of estimated profits on contracts or programs are
included in earnings by the reallocation method, which spreads the change in
estimate over current and future deliveries. Any anticipated losses on contracts
or programs and overruns of program preproduction costs are charged to earnings
when identified. Both the contract and program methods of accounting involve the
use of various estimating techniques to project estimated costs at completion
and may include estimates of recoveries on claims asserted against the customer
for changes in specification. These estimates involve various assumptions and
projections relative to the outcome of future events. Paramount are assumptions
relative to labor performance and anticipated future labor rates, and
projections relative to material and overhead costs. These assumptions involve
various levels of expected performance
A-23
<PAGE>
improvements. Program accounting also requires estimates of the market for a
program and the spares expected to be ordered. The Company reevaluates its
estimates quarterly for all significant contracts and programs. Changes in
estimates are reflected in the current and future periods.
Included in sales are amounts arising from contract terms that provide for
invoicing a portion of the contract price at a date after delivery. Also
included are: negotiated values for units delivered; and anticipated price
adjustments for contract changes, claims, escalation, and estimated earnings in
excess of billing provisions resulting from the percentage-of-completion method
of accounting. Certain contract costs are estimated based on the learning curve
concept discussed in Note 1c.
c. Inventories
Inventories of raw materials, purchased parts and supplies are stated at
the lower of average cost or estimated realizable value. Inventoried costs on
long-term contracts and programs include certain pre-production costs,
consisting primarily of tooling and design costs, and production costs,
including applicable overhead. As the production costs for early units are
charged to work-in-process inventory at an actual unit cost in excess of the
estimated average cost for all units projected to be delivered over the entire
contract or program, a segment of inventory described as the excess of
production costs over estimated average unit cost (and referred to as excess-
over-average inventory) is created. Generally, excess-over-average inventory,
which may include production (but not pre-production) cost over-runs, builds
during the early years of the contract or program when the efficiencies
resulting from learning are not yet fully realized and declines as the program
matures. Under the learning curve concept, an estimated decrease in unit labor
hours is assumed as tasks and production techniques become more efficient
through repetition of the same manufacturing operation and through management
action such as simplifying product design, improving tooling, purchasing new
capital equipment, improving manufacturing techniques, etc. For programs under
the program method of accounting, excess-over-average inventory also builds
until sales of spares, as a percentage of total sales, equal or exceed the
percentage used for the overall profit margin calculation.
Inventoried costs are reduced by the estimated average cost of deliveries
computed as a uniform percentage of sales value.
In the event that work-in-process inventory plus estimated costs to
complete a specific contract or program exceeds the anticipated remaining sales
value of such contract or program, such excess is charged to current earnings,
thus reducing inventory to estimated realizable value.
In accordance with industry practice, costs in inventory include amounts
relating to programs and contracts with long production cycles, much of which is
not expected to be realized within one year.
A-24
<PAGE>
See Note 2, which describes certain changes in the application of
accounting principles and the effect of such changes on inventories.
d. Property, Plant and Equipment
Property, plant and equipment is recorded at cost or, in the case of assets
under capital leases, the lower of the present value of minimum lease payments
or fair market value. Depreciation and amortization is computed by the straight-
line method over the estimated useful lives of the various classes of assets or,
in the case of capitalized leased assets, over the lease term if shorter. When
assets are retired or disposed of, the assets and related accumulated
depreciation are eliminated and any resulting gain or loss is reflected in
income.
e. Pension and Health Plans
Pension costs include current costs plus the amortization of transition assets
over periods up to 14 years. The Company funds pension costs in accordance with
plan and legal requirements. The Company adopted, effective August 1, 1992, the
provisions of Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Post-Retirement Benefits other than Pensions". This
standard requires the Company to accrue the expected cost of subsidizing an
employee's post-retirement health care benefits during the employee's service
period. See Note 9b.
f. Research and Development
Research and development costs incurred for the development of proprietary
products are expensed as incurred. These costs have not been material to
operations during the periods presented. Design efforts performed under contract
generally consist of the adaptation of an existing capability to a particular
customer need and are accounted for as an element of contract costs.
g. Income Taxes
The Company adopted, effective August 1, 1992, the provisions of SFAS No. 109,
"Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and
liabilities are recognized based upon temporary differences between financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. See Note 6.
h. Net Income Per Average Share of Common Stock
Net income per share was determined by dividing net income by the weighted
average number of common shares and common share equivalents outstanding during
the year. The assumed
A-25
<PAGE>
conversion of the Company's convertible debentures was anti-dilutive. As a
result, only primary earnings per share is presented in the Company's
Consolidated Statements of Operations.
i. Cash Equivalents
For purpose of the statement of cash flows, the Company considers all
investments and highly liquid debt instruments with a maturity of three months
or less to be cash equivalents. Cash equivalents are stated at cost which
approximates market.
j. Short-Term Investments
Short-term investments are highly liquid investments with a maturity of 91
days to one-year and generally issued by the U.S. Treasury, federal agencies,
municipalities, banks and major corporations. Short-term investments are
stated at cost which approximates market.
k. Industry Segments
The Company considers itself to operate in one significant industry
segment.
Note 2 - Accounting Changes
a. Introduction
In the third quarter of fiscal 1993, the Company changed, effective August 1,
1992, certain elements in the application of accounting principles relating to
long-term programs and contracts. In addition, in fiscal 1993, the Company
adopted the provisions of SFAS No. 106, "Employers' Accounting for Post-
Retirement Benefits Other than Pensions," and SFAS No. 109, "Accounting for
Income Taxes". Each change requires that the Company calculate the effect of the
change in accounting principles on retained earnings as of the first day in the
fiscal year of change. These changes do not affect the Company's cash flow. Each
of these changes is discussed separately below.
Prior year financial statements have not been restated to apply the provisions
of adopting these standards.
A-26
<PAGE>
b. Long-Term Contracts
In fiscal 1993, the Company changed certain elements of its application of
accounting principles relating to long-term programs and contracts, effective
August 1, 1992. Certain costs previously carried in inventory for amortization
over future deliveries are now expensed. These costs included certain pre-
certification costs, consisting primarily of tooling and design expenses in
excess of negotiated contractual values, that are now expensed as identified. In
addition, prior to the accounting change, general and administrative expenses
were expensed as period charges, except for (1) such expenses that were clearly
related to production in accordance with Accounting Research Bulletin No. 43 and
had contractual revenue coverage and (2) other amounts charged to commercial
programs which did not have a material impact upon the results of operations.
The financial result of capitalizing these latter amounts of general and
administrative expense was not material due to the offsetting impact upon
operations resulting from their inclusion as an element of total costs for
purposes of determining contract and program gross margins. Following a thorough
review of its accounting policies, the Company concluded there was a need,
particularly in light of the current aerospace environment, to have financial
results more closely reflect near-term program economics (cash flow and internal
rate of return). As a result, these program changes generally reduced the number
of production units and spares used in the calculation of overall profit
margins. While the previous methods of applying the Company's accounting
principles were in accordance with generally accepted accounting principles
(GAAP), the changed policies are preferable. The application of these policies
produces program and contract estimates that are based on shorter delivery
periods, allowing a better matching of revenues and expenses. The cumulative
effect of these changes for the periods through July 31, 1992, was a charge of
$219.7 million, net of income tax benefits of $136.3 million. The effect of
these changes on the year ended July 31, 1993, was to increase the net loss from
continuing operations before the cumulative effect of the changes in accounting
principles by $22.4 million ($1.25 per average common share), net of income tax
benefits of $13.9 million.
In accordance with Accounting Principles Board Opinion No. 20, "Accounting
Changes", pro forma amounts from continuing operations are shown for net income
(loss) and net income (loss) per average share of common stock for all periods
presented. The pro forma amounts presented in the Consolidated Statements of
Operations reflect the retroactive application of these accounting changes, net
of income tax benefits (which were allocated ratably over the pro forma
restated periods) for each period presented. Primarily as a result of these
changes, excess-over-average inventory decreased from $323.7 million at July
31, 1992 to $75.4 million at July 31, 1993 and pre-production inventory
decreased from $258.4 million at July 31, 1992 to $181.0 million at July 31,
1993.
A-27
<PAGE>
c. Post-Retirement Benefits Other Than Pensions
The Company adopted, effective August 1, 1992, SFAS No. 106, "Employers'
Accounting for Post-Retirement Benefits Other than Pensions". The accumulated
post-retirement benefit obligation for active employees and retirees was
recorded using the immediate recognition transition option. See Note 9b. This
standard requires companies to accrue the expected cost of providing health care
benefits to retired employees and their dependents during the employees' service
periods. The Company previously charged the cost of providing these benefits on
a pay-as-you-go basis. The cumulative effect of this change for the periods
through July 31, 1992 was a charge of $4.3 million, net of income tax benefits
of $2.7 million. The effect of the change on the year ended July 31, 1993 was
not material.
d. Income Taxes
The Company also adopted, effective August 1, 1992, SFAS No. 109, "Accounting
for Income Taxes". See Note 6. The cumulative effect of this change for periods
through July 31, 1992 was not material by itself. However, under this standard,
the Company recorded a substantial deferred tax asset as a result of the other
changes in accounting principles and certain other charges recorded in the year
ended July 31, 1993.
e. Effect of Changes
The cumulative effect of the changes as of August 1, 1992 and the effect of
the changes on net loss before the cumulative effect of the changes in
accounting principles on the year ended July 31, 1993 were as follows ($ in
millions except per share data):
<TABLE>
<CAPTION>
Cumulative Effect Effect on the Year
at August 1, 1992 Ended July 31, 1993
--------------------------------- ------------------------------
(Loss) Per (Loss) Per
Net Average Share of Net Average Share of
(Loss) Common Stock (Loss) Common Stock (1)
-------- ----------------- -------- -----------------
<S> <C> <C> <C> <C>
Change in application of accounting
principles relating to long-term
programs and contracts-net of taxes $(219.7) $(12.26) $(24.6) $(1.37)
Post-retirement benefits other than
pensions-net of taxes (4.3) (.24) - -
------- ------- ------ ------
$(224.0) $(12.50) $(24.6) $(1.37)
======= ======= ====== ======
</TABLE>
(1) Effect on continuing operations was a loss of $22.4 million or $1.25 per
share, net of income tax benefits of $13.9 million.
A-28
<PAGE>
The cumulative effect of adopting SFAS No. 109, "Accounting for Income Taxes",
for periods through July 31, 1992 and the effect on the year ended July 31, 1993
was not material by itself. However, under this standard, the Company recorded a
substantial deferred tax asset as a result of the other changes in accounting
principles and certain other charges recorded in the year ended July 31, 1993.
Note 3 - Accounts Receivable
Accounts receivable, which relate primarily to long-term programs and
contracts, consist of the following (in thousands):
<TABLE>
<CAPTION>
July 31,
- - ---------------------------------------------------------------
1994 1993
- - ---------------------------------------------------------------
<S> <C> <C>
Amount billed $67,487 $40,628
Recoverable costs and accrued profit on
units delivered but not billed 10,351 13,436
Recoverable costs and accrued profit on
progress completed but not billed 871 810
Unrecovered costs and estimated profit
subject to future negotiations 14,434 39,266
- - ---------------------------------------------------------------
$93,143 $94,140
===============================================================
</TABLE>
"Recoverable costs and accrued profit on units delivered but not billed"
represent revenue recognized on contracts for amounts not billable to customers
at the balance sheet date. This amount principally represents delayed payment
terms along with escalation and repricing predicated upon deliveries and final
payment after acceptance. Some of these recoverable costs are expected to be
billed and collected in the normal course of business beyond one year.
"Recoverable costs and accrued profit on progress completed but not billed"
represent revenue recognized on contracts based on the percentage-of-completion
method of accounting and is anticipated to be billed and collected in
accordance with contract terms, which may be longer than one year.
"Unrecovered costs and estimated profit subject to future negotiations"
consist of contract tasks completed for which a final price has not been
negotiated with the customer. Amounts in excess of agreed upon contract prices
are recognized when it is probable that the claim will result in additional
contract revenue and the amounts can be reliably estimated. Included in this
amount at July 31, 1994 are estimated recoveries on constructive change claims
related to government imposed redefined acceptance criteria on the Grumman F-14
and the Boeing E3/E6 programs. During fiscal year 1994, the claims on the
Boeing KC-135 and Lockheed C-5 production programs, which in addition to the
claims above were included in the 1993 balance, were settled. Management
believes that amounts
A-29
<PAGE>
reflected in the financial statements are reasonable estimates of the ultimate
settlements. The resolution of these items may take several years.
The Company is party to a $60 million accounts receivable facility under
which it sells receivables through a subsidiary to a trust on an ongoing basis.
The investors' interests in the trust, net of the cash collateral discussed
below, are reported as a reduction to accounts receivable. The Company's
subsidiary holds the remaining interest in the trust which fluctuates in value
depending upon the amount of receivables owned by the trust from time to time.
Due to the slowdown in the aerospace industry, the amount of outstanding
receivables owned by the trust has fallen below levels which existed at the
start of the facility. As a result, the Company has elected to deposit cash
collateral from time to time as required to support the facility. At July 31,
1994, the Company had cash collateral on deposit totaling $26.5 million. The
cost associated with the sale of receivables under the current facility is 7.57%
per year. These costs, and those of the predecessor facility, all of which have
been reflected as a reduction in sales values, were $4.5 million, $5.3 million,
and $7.0 million in fiscal 1994, 1993, and 1992 respectively.
Sales
The Company's sales to major customers including related program spares,
expressed as a percentage of total sales, during the following periods are
summarized as follows:
<TABLE>
<CAPTION>
Year ended July 31,
---------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
International Aero Engines 16% 9% 8%
General Electric 15 14 12
Pratt & Whitney 14 17 15
Rolls-Royce 10 8 7
CFM International 9 8 2
Boeing 9 11 13
McDonnell Douglas 7 11 18
Lockheed 6 3 3
U.S. Government 3 2 2
Airbus Industrie 3 6 9
Grumman 1 - 1
Other 7 11 10
---------------------------------------------------------------
</TABLE>
Total sales to the U.S. Government (including direct sales and indirect sales
through prime contractors) accounted for 14% of sales from continuing operations
in each of the three years ended July 31, 1994.
A-30
<PAGE>
Commercial products sold by the Company to jet engine manufacturers are
ultimately installed on aircraft produced by the major commercial airframe
manufacturers, Airbus Industrie, Boeing and McDonnell Douglas. Sales to
foreign customers accounted for 24%, 26% and 22% of total sales for fiscal
1994, 1993 and 1992, respectively. Of the total sales, 22%, 23% and 19% were
to Europe for fiscal 1994, 1993 and 1992, respectively.
A-31
<PAGE>
Note 4 - Inventories
Work-in-process inventories, which relate primarily to long-term contracts
and programs, are summarized as follows (in thousands, except quantities):
<TABLE>
<CAPTION>
Aircraft Order Status (1) Company Order Status
------------------------------- -----------------------------------------------
As of 6/30/94 As of 7/31/94
(2) Firm(3)
Delivered Unfilled Unfilled Program Unfilled Fiscal Year
Program to Airlines Orders Options Quantity Delivered Orders Complete(6)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A340 nacelle (4) (5) 33 94 85 121 55 25 1997
PW4000 nacelle for the
A300/A310 and
MD-11 (4) 217 43 72 422 260 30 2001
MD-90 (4) (5) 0 67 82 401 4 25 2006
V2500 nacelle for the
A319/A320/A321 (4) (5) 160 105 198 284 181 45 1998
CF6-80C nacelle for the
747/767, MD-11 and
A300/A310 (5) 580 235 325 763 612 124 1997
CFM56-5 nacelle for the
A319/A320/A321 (5) 312 171 141 462 322 113 1999
MD-11 (4) (5) 119 53 92 200 131 29 1998
Others
- - -----------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1994
========================================================================================================================
Balance at July 31, 1993
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Work-in-Process Inventory
--------------------------------------------------------
Pre- Excess
Program Production Production Over Average Total
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A340 nacelle (4) (5) $ 14,583 $ 65,094 $10,376 $ 90,053
PW4000 nacelle for the
A300/A310 and
MD-11 (4) 26,330 13,678 20,946 60,954
MD-90 (4) (5) 1,932 84,911 10,977 97,820
V2500 nacelle for the
A319/A320/A321 (4) (5) 15,607 7,839 0 23,446
CF6-80C nacelle for the
747/767, MD-11 and
A300/A310 (5) 25,223 2,411 20,908 48,542
CFM56-5 nacelle for the
A319/A320/A321 (5) 24,672 6,968 5,771 37,411
MD-11 (4) (5) 8,037 0 0 8,037
Others 56,415 21,398 0 77,813
- - -----------------------------------------------------------------------------------------------
Balance at July 31, 1994 $172,799 $202,299 $68,978 $444,076
===============================================================================================
Balance at July 31, 1993 $303,786 $180,988 $75,365 $560,139
===============================================================================================
</TABLE>
(1) Represents the aircraft order status as announced by the aircraft
manufacturers for the related aircraft and engine option. The Company's
orders frequently are less than the announced orders shown above.
(2) Represents the number of aircraft used to obtain average unit cost. Spares
(which are not included in this quantity) anticipated to be delivered
concurrently with the production units for the above aircraft are also used
in calculating average unit cost. Total spares sales value used in
calculating average unit cost at July 31, 1994 were $86,465 on the A340,
$319,715 on the PW4000, $283,744 on the MD90, $114,791 on the V2500,
$178,568 on the CF6-80C, $227,190 on the CFM56-5, and $17,748 on the MD-11.
Total spares value sold as of July 31, 1994 were $23,304 on the A340,
$202,059 on the PW4000, $0 on the MD90, $70,065 on the V2500, $120,826 on
the CF6-80C, $120,936 on the CFM56-5, and $14,366 on the MD-11. The
Company does not have orders for all of these units at this time.
(3) Represents the number of aircraft for which the Company has firm unfilled
orders.
(4) Program quantity represents initial program quantities and does not exceed
the lesser of those quantities assumed in original program pricing or those
quantities which the Company now expects to deliver in the periods assumed
in original program pricing.
(5) Programs accounted for in accordance with the program method of accounting.
(6) The year presented for each program or contract represents the fiscal year
in which the final production and spares units included in the program
quantity will be delivered. The expected life of a program is often
significantly longer and as additional orders are received, program
quantity is increased and this date is extended.
A-32
<PAGE>
On certain long-term programs, the Company has agreed to recover pre-
production costs (primarily tooling and design) over an expected number of
deliveries, including spare parts. The number of deliveries over which
production costs are to be amortized is predicated upon initial pricing
agreements and does not exceed the Company's overall assessment of the market
for that program.
Excess-over-average inventory represents the cost of in-process and delivered
units less, for each such unit, the current estimated average cost of the units
in the program. Recovery of these inventoried costs assumes (i) certain
production efficiencies, (ii) the sale of the program quantity used in
estimating the profit margin, (iii) a specified allocation of sales among
production units and spare units, and (iv) the attainment of an estimated
spares margin that is substantially higher than the margin of production units.
Spares prices are higher than production unit prices, in part, due to
additional costs related to technical and customer support activities. If
these program assumptions are not attained, then substantial amounts of
unrecoverable costs may be charged to expense in subsequent periods.
To the extent that a forward loss is encountered on a program, the amount of
such loss is offset against the inventory of such program, (until such
inventory has been depleted). The loss is offset first against excess-over-
average, followed by pre-production, then production.
Contractual terms on certain programs provide varying levels of recovery
commitments for specified amounts of pre-production costs. Certain programs
also provide for the repricing of units in the event that less than a specified
quantity is sold, which allows for recovery of additional excess-over-average
inventory in such circumstances. The Company, in turn, has provided certain
subcontractors with similar recovery commitments and repricing provisions on
these programs.
The excess of deferred program costs over the total costs allocated to units
in process and delivered (less recoveries from customers due to repricing
provisions) that would not be recovered based on existing firm orders as of
July 31, 1994 is $2.4 million on the A340, $95.9 million on the MD-90, and $6.0
million on the V2500.
The Company uses forward contracts to manage its exchange risk on a portion
of its purchase commitments from vendors of aircraft components denominated in
foreign currencies and to manage its exchange risk for sums paid to its French
subsidiary for services. The extent to which the Company utilizes forward
contracts varies and depends upon management's evaluation of current and
projected foreign currency exchange rates, but the Company does not acquire
forward contracts in excess of its current hedging requirements. At July 31,
1994, $3 million of foreign exchange contracts were outstanding to purchase
foreign currencies.
A-33
<PAGE>
As described in Note 2, effective August 1, 1992, the Company changed
accounting principles and began expensing certain general and administrative
expenses as incurred; these expenses were previously inventoried. The amount
charged to inventories as incurred (prior to the accounting change, effective
August 1, 1992), for general and administrative expenses was $42.8 million for
the year ended July 31, 1992.
Note 5 - Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
July 31,
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 25,234 $ 24,833
Buildings 208,635 188,643
Machinery and equipment 253,480 251,298
Construction in progress 12,688 31,678
- - --------------------------------------------------------------------------------
500,037 496,452
Less accumulated depreciation and amortization (277,974) (257,407)
- - --------------------------------------------------------------------------------
Property, plant and equipment - net $ 222,063 $ 239,045
================================================================================
</TABLE>
Included in the above categories are assets recorded under capitalized leases
totaling $50,584 and $50,541 at July 31, 1994 and 1993, respectively.
Note 6 - Taxes on Income
The provision (benefit) for taxes on income is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
Liability Method Deferred Method
--------------------- ---------------
July 31, July 31,
- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Currently Payable:
Federal income taxes $ 1,320 $ 400 $ 3,500
Foreign income taxes 400 1,000 1,700
State income taxes 1,200 - 2,300
Deferred:
Federal income taxes (3,660) (12,935) (23,257)
State income taxes 624 (3,529) (3,811)
- - -------------------------------------------------------------------
$ (116) $(15,064) $(19,568)
===================================================================
</TABLE>
A-34
<PAGE>
The deferred portion of the federal income tax provision (benefit) is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
Deferred Method
----------------------
July 31,
- - -----------------------------------------------------------------------------------------------------------
1992
- - -----------------------------------------------------------------------------------------------------------
<S> <C>
Contract profit and loss recognition $ (657)
Employee benefits 5,900
Depreciation (8,400)
California franchise tax 500
General and administrative expenses 2,300
Provision for estimated losses and expenses (19,800)
Rate differences (1,100)
Utilization of reserves previously provided for tax assessments (9,800)
Offset of loss and credit carryforwards against deferred taxes (3,100)
Utilization of loss and credit carryforwards 18,600
Leveraged leasing (7,900)
Other items - net 200
- - -----------------------------------------------------------------------------------------------------------
$(23,257)
===========================================================================================================
</TABLE>
The difference between the income tax provision (benefit) computed at the
federal statutory rate and the actual tax provision (benefit) is accounted for
as follows (in thousands):
<TABLE>
<CAPTION>
Liability Method Deferred Method
--------------------- ----------------
July 31, July 31,
- - -----------------------------------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes (benefit) computed at the federal
statutory tax rate $ 1,594 $(13,369) $ (6,314)
Increase (reduction) resulting from:
State income taxes, net of federal tax benefit 237 (2,176) (541)
Leverage leasing (1,300)
Effect of statutory rate increase (2,870)
Tax-exempt income from Foreign Sales Corporation (680) (700)
Rate differences (1,100)
Non-deductible items 2,270
Utilization of reserves previously provided
for tax assessments (860) (9,800)
Other 193 481 187
- - -----------------------------------------------------------------------------------------------------------
$ (116) $(15,064) $(19,568)
===========================================================================================================
</TABLE>
A-35
<PAGE>
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and
(b) operating loss and tax credit carryforwards.
The components of the Company's deferred tax asset which reflect the tax
effects of the Company's temporary differences, tax credit carryforwards and
net operating loss carryforwards (NOLs) are listed below (in thousands):
<TABLE>
<CAPTION>
July 31,
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Current:
Inventories $ 36,512 $ 11,557
Employee benefits 5,443 6,885
State taxes (5,602) (4,788)
- - -------------------------------------------------------------------
Net deferred tax asset - current $ 36,353 $ 13,654
- - -------------------------------------------------------------------
Long-term:
Depreciation $ 25,308 $ 31,872
Deferred gain on sale/leaseback 8,707 9,201
Minimum pension liability adjustment 37,578 8,259
Net operating loss carryforward 53,440 73,053
Tax credit carryforward 10,107 7,949
Investment in leases (39,393) (41,237)
Other - net 1,388 251
- - -------------------------------------------------------------------
Net deferred tax asset - long-term $ 97,135 $ 89,348
- - -------------------------------------------------------------------
</TABLE>
The Company has federal NOLs totaling approximately $140 million at July 31,
1994, which expire in the years 2003 through 2009, and tax credit carryforwards
totaling $10.1 million which expire in the years 2003 through 2010.
When tax effected at the rates in effect July 31, 1994, the net deductible
temporary differences, tax credit carryforwards, and NOLs result in a deferred
tax asset of $133.5 million, consisting of $112.9 million for federal tax
purposes and $20.6 million for state tax purposes. Based on rates in effect
July 31, 1994, approximately $339 million of future taxable income is required
prior to expiration of the Company's NOLs and credits for full realization of
the deferred tax asset. The Company believes that its future taxable income
will be sufficient for full realization of the deferred tax asset.
A-36
<PAGE>
The IRS has audited the Company's tax returns through fiscal 1985. In fiscal
1993, the IRS issued a Revenue Agent's Report challenging the Company's
adoption in 1984 of the completed contract method of accounting ("CCMA"), the
Company's tax deduction for funding liabilities related to a Voluntary Employee
Benefit Association ("VEBA") and certain other matters. The Company filed a
protest with the Appeals Office of the IRS and, in fiscal 1994, the IRS
conceded that the Company was entitled to use CCMA. The Company is negotiating
a resolution of the remaining adjustment issues with the IRS. Based upon all
the information available to it, the Company believes that the resolution of
these matters will not have a material effect on the financial position or
results of the Company.
A-37
<PAGE>
Note 7 - Indebtedness
The maturity schedule of the Company's debt is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Scheduled Maturities
---------------------- Total at
Fiscal Year Ended July 31, July 31,
- - ------------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 Thereafter 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current portion of
Long-Term Debt $14,952 $ $ $ $ $ $ 14,952 $ 50,719
Long-Term Debt:
11.625% Senior Notes 100,000 100,000
Revolving Credit 50,000
9.35% Senior Notes 12,500 12,500 12,500 12,500 12,500 62,500 75,000
9.33% Senior Notes 8,850 8,850 8,850 35,450 62,000 62,000
Other Debt 361 314 257 55 16,555 17,542 18,403
- - ------------------------------------------------------------------------------------------------------------------------------------
12,861 21,664 21,607 21,405 164,505 242,042 205,403
Capital Leases 1,762 1,674 1,587 1,500 6,918 13,441 15,268
Less Imputed Interest (754) (672) (591) (510) (1,418) (3,945) (4,782)
- - ------------------------------------------------------------------------------------------------------------------------------------
1,008 1,002 996 990 5,500 9,496 10,486
Subordinated Debt:
7.75% Convertible Notes 57,500 57,500
9.25% Debentures 7,500 7,500 135,000 150,000 150,000
7.00% Convertible Debentures 5,750 109,250 115,000 115,000
- - ------------------------------------------------------------------------------------------------------------------------------------
7,500 13,250 301,750 322,500 265,000
- - ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 13,869 22,666 30,103 35,645 471,755 574,038 480,889
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt $14,952 $13,869 $22,666 $30,103 $35,645 $471,755 $588,990 $531,608
====================================================================================================================================
</TABLE>
The fair value of the Company's long-term debt as of July 31, 1994 is
estimated to be $525 million compared to the carrying value of $589 million
reflected in the table above. This fair value was derived using quoted market
prices on publicly traded debt and estimated market value of the privately held
debt.
The Company's total financings at July 31, 1994 included: indebtedness, shown
in the table above; the accounts receivable facility in the net amount (after
the deposit of cash collateral) of $33.5 million, which is reported as a
reduction to accounts receivable (see Note 3); and two sale-leaseback
transactions, accounted for as operating leases, totaling $48.6 million. The
Company's total financings were $671.1 million and $643.9 million at July 31,
1994 and 1993, respectively.
The Company's unsecured revolving credit agreement with a group of banks was
amended in May, 1994 to increase the total commitment and extend the maturity.
The revised commitment is initially for $110 million and is reduced by $10
million every six months beginning October, 1995 until it reaches $80 million.
This credit facility matures in April, 1997. Up to $30 million of the
commitment is available to support the issuance of letters of credit. At July
31, 1994, $16.9 million of the commitment was used to support an industrial
development bond financing. No borrowings were outstanding on July 31, 1994.
Borrowings under this credit agreement incur interest at an annual rate equal
to one of the following at the Company's option: prime rate
A-38
<PAGE>
plus 0% to 2.25%; or London Interbank Offered Rate plus 0.75% to 3.25%; or a
Domestic Money Market Bid Rate plus 0.875% to 3.375%; or competitive bid. In
addition, the agreement provides for a facility fee, payable on a monthly basis
at the rate of 0.35 to 0.75 of 1% on each lender's total commitment. The
specific interest rate and facility fee payable at any time are based upon the
Company's credit rating and the amount drawn under the credit agreement.
During the fourth quarter of fiscal 1994, the Company completed its public
offering of $100 million of 11.625% Senior Notes due May, 2003 and the
concurrent offering of $57.5 million of 7.75% Convertible Subordinated Notes
due May, 2004. The Company used $64 million of the net proceeds from these
offerings to repay all amounts outstanding under the Company's revolving credit
agreement. The remaining net proceeds will be used for general corporate
purposes. Both series of notes are general unsecured obligations of the
Company paying interest semi-annually commencing November, 1994 and do not have
sinking fund requirements. The Convertible Subordinated Notes are convertible
at the option of the holder at any time prior to maturity into shares of the
Company's common stock at a conversion price of $10.35 per share.
The Company's privately placed 9.35% Senior Notes mature in 2000 and require
principal payments of $12.5 million in January of each year until repaid. The
Company's privately placed 9.33% Senior Notes mature in 2002 and require
principal payments of approximately $8.9 million in December of each year,
beginning in 1996, until repaid. Principal prepayments may require a premium
for yield adjustment. The note holders can require the Company to purchase the
remaining principal amount of the notes plus accrued interest and premium for
yield adjustment in the event of certain changes in control or ownership of the
Company.
The Company's 9.25% Subordinated Debentures due March, 2017 are subject to
mandatory annual sinking fund payments of $7.5 million beginning March, 1998.
The Company's 7.00% Convertible Subordinated Debentures due October, 2012 are
convertible prior to maturity, unless previously redeemed at a conversion price
of $43.00 per share, subject to adjustment under certain conditions. Both
debentures are redeemable at the Company's option with premiums as are
specified in the indenture under which the debentures were issued, provided,
however, no redemption of the 9.25% debentures may be effected prior to March,
1997 directly or indirectly, from borrowed money having a cost of less than
9.25% per annum. In addition, several of the Company's principal financing
agreements substantially restrict the Company's ability to acquire, prepay or
redeem subordinated debt prior to its scheduled maturity.
Several of the Company's principal financing agreements were amended in
fiscal 1994 to modify financial covenant levels. The Company is required to
maintain a Consolidated Tangible Net Worth (as defined) of $125 million plus
50% of positive consolidated net income from August 1, 1994; a ratio of
Consolidated Net Income Available for Fixed Charges (as defined) to Fixed
Charges (as defined) of 1.55 to 1 during fiscal year 1995, 1.90 to 1 during
fiscal year 1996, and 2.00 to 1 thereafter; and a ratio of Debt to Consolidated
Tangible Net Worth (as defined) of 5.00 to 1 during fiscal year 1995, 4.10 to 1
during fiscal year 1996, and 3.20 to 1 thereafter. Compliance with such ratios
is certified monthly. The Company's principal financing agreements
A-39
<PAGE>
also contain other restrictions, including restrictions on new indebtedness,
prepayments of indebtedness, amendments to debt agreements, liens, dividends,
lease obligations, mergers, sales of assets, investments and capital
expenditures. If the Company were to breach a covenant in any of its principal
financing agreements, the lenders under such agreement could, at their option,
accelerate the maturity of the debt evidenced by such agreement. In addition,
any such default (or, in some cases, an acceleration after the occurrence of
such a default) would cause defaults under cross-default provisions (or cross-
acceleration provisions) in other Company financing agreements.
Note 8 - Commitments and Contingencies
Minimum rental commitments under operating leases with non-cancelable terms
of more than one year as of July 31, 1994 are as follows (in thousands):
<TABLE>
--------------------------
<S> <C>
1995 $ 9,500
1996 7,500
1997 6,700
1998 5,700
1999 5,100
Thereafter 18,100
--------------------------
$52,600
==========================
</TABLE>
Generally, leases have provisions for rent escalation based on inflation.
Certain leases provide for options to renew with substantially similar terms
(except negotiable rent increases). The total expense under all operating
leases was approximately $13.1 million, $15.9 million and $15.3 million for
fiscal 1994, 1993 and 1992, respectively.
The Company is also a party to certain equipment leases treated as an off-
balance sheet financing and has granted the lessors a security interest in
selected customer receivables to secure $10 million of obligations. If the
parties who lease this equipment to the Company do not assign approximately
one-half of their beneficial interest in the leased equipment by January, 1995,
the equipment lessors may require the Company to prepay up to $10 million of
its equipment lease obligation.
In June 1987, the U.S. District Court of Los Angeles, in U.S. et al, vs.
Stringfellow, granted partial summary judgment against the Company and 14 other
defendants on the issue of liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). This suit alleges that the
defendants are jointly and severally liable for all damage in connection with
the Stringfellow hazardous waste disposal site in Riverside County, California.
In June 1989, a federal jury and a special master appointed by the federal
court found the State of California also liable for the cleanup costs. On
November 30, 1993, the special master released his "Findings of Fact,
Conclusions of Law and Reporting Recommendations of the Special Master
Regarding the State Share Fact Finding Hearing." In it, he allocated liability
between the State of
A-40
<PAGE>
California and other parties. As this hearing did not involve the valuation of
future tasks and responsibilities, the order did not specify dollar amounts of
liability. The order, phrased in percentages of liability, recommended
allocating liability on the CERCLA claims as follows: 65% to the State of
California and 10% to the Stringfellow entities, leaving 25% to the
generator/counterclaimants (including the Company) and other users of the site
(or a maximum of up to 28% depending on the allocation of any Stringfellow
entity orphan share). On the state law claims, the special master recommended a
95% share for the State of California, and 5% for the Stringfellow entities,
leaving 0% for the generator/counterclaimants. This special master's finding is
subject to a final decision and appeal. The Company and the other generators of
wastes disposed at the Stringfellow site, which include numerous companies with
assets and equity significantly greater than the Company, are jointly and
severally liable for the share of cleanup costs for which the generators, as a
group, may ultimately be found to be responsible. Notwithstanding, CERCLA
liability is sometimes allocated among hazardous waste generators who used a
waste disposal site based on the volume of hazardous waste they disposed at the
site. The Company is the second largest generator of waste by volume disposed
at the site, although it and certain other generators have argued the final
allocation of cleanup costs among generators should not be determined solely by
volume. The largest volume generator of wastes disposed at the Stringfellow
site has indicated it is significantly dependent on insurance to fund its share
of any cleanup costs, and that it is in litigation with certain of its
insurers.
The Company has claims against its comprehensive general liability insurers
for reimbursement of its cleanup costs at the site. These claims are the
subject of separate litigation, although the insurers nevertheless are paying
substantially all of the Company's costs of defense in the CERCLA and state
actions against the generators of wastes disposed at the site. Certain of
these insurance policies have pollution exclusion clauses which are being
argued as a defense and the insurers are alleging various other defenses to
coverage. The Company has entered settlements with some of the insurance
carriers and is engaged in settlement discussions with certain others.
The Company intends to continue to vigorously defend itself in the
Stringfellow matter and believes, based upon currently available information,
that the ultimate resolution will not have a material adverse effect on the
financial position, liquidity, or results of operations of the Company.
The Company is involved as plaintiff or defendant in various other legal and
regulatory actions and inquiries incident to its business, none of which are
believed by management to have a material adverse effect on the financial
position or results of operations of the Company.
Included in trade accounts and other payables at July 31, 1994 and 1993 are
allowances aggregating $21.0 million and $49.8 million, respectively, for plant
closure, other costs related to the planned downsizing process and various
items of litigation.
A-41
<PAGE>
Note 9 - Employee Benefit Plans
a. Pension Plan
The Company has non-contributory pension plans covering substantially all of
its employees. Benefits for the salaried employees' plan are based on salary
and years of service, while those for the hourly employees' plan are based on
negotiated benefits and years of service. The Company has historically made
contributions to an independent trust for the minimum funding requirements of
these plans under IRS regulations. In addition, the Company has unfunded
supplemental retirement plans.
Pension expense consists of the following components (in thousands):
<TABLE>
<CAPTION>
Year ended July 31,
- - -------------------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 7,017 $ 12,250 $ 8,123
Interest cost on projected benefit obligation 36,686 34,601 32,260
Actual gain on plan assets (9,168) (29,379) (40,344)
Net amortization and deferral (20,093) 1,605 13,356
- - -------------------------------------------------------------------------------
Pension expense $14,442 $19,077 $ 13,395
===============================================================================
</TABLE>
An amendment to the hourly employees' pension plan, reflecting increased
benefits resulting from union negotiations, accounted for approximately $.6
million of additional pension expense in fiscal 1993. An amendment to the
salaried employees' retirement plan accounted for approximately $3.6 million of
additional pension expense in fiscal 1992.
A-42
<PAGE>
The following table summarizes the funded status of these plans and the
amounts recognized in the Consolidated Balance Sheets (in thousands):
<TABLE>
<CAPTION>
July 31,
- - -------------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 471,678 $413,460
Non-vested 22,702 18,483
- - -------------------------------------------------------------------------------------
Accumulated benefit obligation 494,380 431,943
Effect of projected future salary increases 6,023 10,145
- - -------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date 500,403 442,088
Plan assets at fair value, primarily stocks, bonds,
other fixed income obligations and real estate 370,331 376,474
- - -------------------------------------------------------------------------------------
Plan assets less than projected benefit obligation (130,072) (65,614)
Unrecognized net loss 111,288 46,140
Unrecognized net asset from initial application
of SFAS No. 87 being recognized over
plans' average remaining service life (15,822) (18,202)
Unrecognized prior service cost 28,472 38,353
Additional minimum liability (119,132) (58,550)
- - -------------------------------------------------------------------------------------
Pension liability recognized in the
Consolidated Balance Sheets $(125,266) $(57,873)
=====================================================================================
</TABLE>
At July 31, 1994, the Company's additional minimum liability was in excess of
the unrecognized prior service costs and net transition obligation and recorded
as a reduction of $55.9 million to shareholders' equity, net of tax benefits of
$37.6 million, in accordance with SFAS No. 87, "Employers' Accounting for
Pensions". The remaining portion of the additional minimum liability of $25.7
million was recorded as intangible assets and additional minimum pension
liability and included in Other Assets and Pension and Post-Retirement
Obligations respectively, in the Consolidated Balance Sheets.
The weighted average discount rate used in determining the present value of
the projected benefit obligation was 7.5 percent and 8.5 percent respectively
for the years ended July 31, 1994 and 1993. For compensation based plans, the
rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation and service cost
was based upon an experience-related table and approximated 4.0 percent on
current salaries through January 1, 1995, in accordance with plan terms. The
expected long-term rate of return on plan assets was 9 percent for the periods
presented.
During fiscal 1994, the Company recognized a curtailment loss of $10.6
million for the write-off of unamortized pension past service costs relating to
the downsizing of employment levels in line with current business conditions.
This loss is reflected as an unusual item for the 1994 statement of operations
net of a gain recognized on the sale of a facility.
A-43
<PAGE>
The Company also has certain defined contribution plans covering most
employees. Expenses for these plans amounted to $1.7 million, $3.4 million and
$6.7 million in fiscal 1994, 1993 and 1992, respectively.
b. Post-Retirement Benefit Obligations Other Than Pensions
The Company has a retirement health care program that pays a specified fixed
amount to supplement the medical insurance payments made by retirees who are
under age 65 and their spouses and covered dependents. Eligibility for and the
amount of the supplement provided by the Company is based on age and years of
service. The program requires deductibles and employee contributions.
The Company, effective August 1, 1992, adopted the provisions of SFAS No.
106, "Employers' Accounting for Post-Retirement Benefits Other Than Pensions"
using the immediate recognition transition option. See Note 2. This standard
requires recognition, during an employee's service with the Company, of the
cost of his or her retiree health care benefits. The Company recognized the
accumulated post-retirement benefit obligation for past service cost as a one-
time charge to earnings (the transition obligation) as of August 1, 1992 of
$4.3 million, net of income tax benefit of $2.7 million ($.24 per average share
of common stock). In fiscal 1994, 1993 and 1992, the Company paid post-
retirement health care benefits totaling $1.7 million, $2.0 million and $2.9
million, respectively. The costs of health care benefits was provided largely
under a self-insured plan, which was terminated on January 1, 1994. The effect
of adopting the new standard on net periodic post-retirement benefit expense
for the year ended July 31, 1993 was not material. The accumulated post-
retirement benefit obligation was determined using a weighted average discount
rate of 7.5 percent and 8.5 percent respectively for the years ended July 31,
1994 and 1993. The plan is unfunded. Each year the Company funds the benefits
paid.
SFAS No. 106 requires disclosure of the effect on the Company's accumulated
post-retirement benefit obligation, and net periodic post-retirement benefit
cost, using the assumption that the health care cost trend will increase by 1%
each year. This disclosure is not applicable because the Company is not
affected by future health care cost trends since its obligation is to pay a
fixed amount as a health care supplement for retirees entitled to this benefit.
A-44
<PAGE>
Net periodic post-retirement benefit costs included the following components
(in thousands):
<TABLE>
<CAPTION>
Year ended July 31,
- - -------------------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits attributed to service during the period $ 168 $ 196
Interest cost on accumulated post-retirement benefit obligation 465 549
- - -------------------------------------------------------------------------------------------
Net periodic post-retirement benefit cost $ 633 $ 745
===========================================================================================
</TABLE>
The liability for post-retirement health care benefits included the following
components (in thousands):
<TABLE>
<CAPTION>
July 31,
- - -------------------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees $2,671 $2,749
Fully eligible active plan participants 214 376
Other active plan participants 2,749 2,929
Unrecognized net loss (634) -
- - -------------------------------------------------------------------------------------------
Liability for post-retirement health care benefits $5,000 $6,054
===========================================================================================
</TABLE>
c. Post-Employment Benefits
The Financial Accounting Standards Board has issued SFAS No. 112, Employers'
Accounting for Post-Employment Benefits. The new standard is effective for
fiscal years beginning after December 15, 1993 and requires employers to
recognize the obligation to provide post-employment benefits to former or
inactive employees, their beneficiaries, and covered dependents when certain
conditions are met. The Company does not expect there to be a material adverse
effect on the financial position or result of operations in the year of
adoption.
Note 10 - Shareholders' Equity
Under the terms of certain covenants in several of the Company's principal
financing agreements, the Company may not pay cash dividends until after April
25, 1997. (See Note 7.) Thereafter, the Company's ability to pay cash
dividends is restricted substantially.
The Company's 1989 Stock Incentive Plan provides that qualified employees are
eligible to receive stock options and various other stock-based awards.
Subject to certain adjustments, the plan provides that up to 2,500,000 shares
of common stock may be sold or issued under the plan. As a result of previous
option
A-45
<PAGE>
grants under this plan, 248,431 and 371,281 stock options and other stock-based
awards remained available for grant at July 31, 1994 and 1993, respectively.
The plan has no specific termination date except that Incentive Stock Options
may not be granted after July 31, 1999. The terms and conditions of the stock-
based awards are determined by a Committee of the Board of Directors on each
grant date and may include provisions for the exercise price, expiration,
vesting, restriction on sale and forfeiture, as applicable. Restricted shares
purchased under this plan are subject to restrictions on sale or disposal,
which lapse in varying installments from one to 10 years. During fiscal 1994,
36,000 restricted shares were purchased by grantees and 300 restricted shares
were repurchased from grantees, in each case at a price of $1.00 per share .
The Company's 1982 Stock Option Plan, under which no future options will be
granted, provided for the issuance of non-qualified stock options at the market
price of the Company's common stock at the date of grant. The options become
exercisable in installments from one to two years after date of grant and
expire 10 years from date of grant.
The Company has a director stock plan under which non-employee directors are
automatically granted, on the first business day following the annual meeting
of shareholders, an option to purchase 1,000 shares of common stock. The
option exercise price is equal to the fair market value of the stock on the
date the option is granted. Options granted under the plan generally becomes
exercisable six months after the date of grant and expire 10 years from the
date of grant. Subject to certain adjustments, the plan provides that up to
100,000 shares of common stock may be sold or issued under the plan. As a
result of previous option grants under the plan, 50,000 and 59,000 shares
remained available for grant at July 31, 1994 and 1993, respectively.
The Company also has a stock compensation plan for non-employee directors
pursuant to which the Company will issue or deliver to each such director, in
partial consideration for the services rendered by such director during the
Company's prior fiscal year, 250 shares of the Company's common stock, subject
to certain adjustments. The shares will be issued or delivered on the date of
the first meeting of the Board that occurs after the end of each fiscal year.
A-46
<PAGE>
Under the various stock option plans, outstanding options for 2,037,769 and
1,671,947 shares of common stock were exercisable as of July 31, 1994 and 1993,
respectively. Activity in these stock option plans for the three years ended
July 31, 1994 is summarized as follows:
<TABLE>
<CAPTION>
Options Option Price
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at August 1, 1991 1,331,420 $ 12.50 - $31.625
Granted 1,548,803 10.625 - 22.125
Relinquished (16,760) 16.50 - 31.625
Forfeited (33,600) 12.00 - 22.125
Exercised (34,000) 12.00 - 19.375
- - ------------------------------------------------------------------------------
Balance Outstanding at July 31, 1992 2,795,863 $10.625 - $31.625
Granted 155,000 8.875 - 11.375
Relinquished (30,880) 16.50 - 31.625
Forfeited (254,134) 10.625 - 22.125
- - ------------------------------------------------------------------------------
Balance Outstanding at July 31, 1993 2,665,849 $ 8.875 - $31.625
Granted 109,000 8.375 - 10.250
Relinquished (18,655) 16.500 - 31.625
Forfeited (33,150) 10.625 - 22.125
- - ------------------------------------------------------------------------------
Balance Outstanding at July 31, 1994 2,723,044 $8.375 - $31.625
==============================================================================
</TABLE>
The Company's stockholder rights plan generally entitles the holder of each
right to purchase one one-hundredths of a share of Series C preferred stock, $1
par value, from the Company for $100, subject to adjustment. A right is
included with, and attaches to, each share of common stock issued and expires
on August 25, 1996 and is redeemable by the Company. The rights become
exercisable and separate from the common stock under certain circumstances
generally when a person or group of affiliated or associated persons has
acquired or obtained the right to acquire 15 percent or more of the Company's
outstanding voting stock or has made a tender offer to acquire 15 percent or
more of such voting stock. Under certain circumstances, each right would
entitle the holder to purchase a certain number of the Company's common stock
at one-half of fair market value.
In May 1993, in connection with certain amendments to the financial covenants
of its principal financing agreements, the Company issued warrants to certain
lenders. The warrants are exercisable for 600,000 shares of common stock at
$9.00 per share and expire in seven years.
A-47
<PAGE>
Authorized, unissued shares of common stock were reserved for the following:
<TABLE>
<CAPTION>
July 31,
- - -------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Various stock plans 3,021,475 3,096,130
Conversion of subordinated debentures and notes 8,229,973 2,674,418
Warrants 600,000 600,000
- - -------------------------------------------------------------------------------
11,851,448 6,370,548
===============================================================================
</TABLE>
Note 11 - Discontinued Operations
In the fourth quarter of fiscal 1994, the Company sold and commenced the
transfer of its business jet line of business. The purchase agreement requires
the Company, over the next several months, to manufacture and deliver certain
components and transfer program engineering and tooling for a total
consideration of $32.5 million. The Company received an initial payment of
$21.5 million, of which $8.5 million will be applied to future deliveries. The
operating results of the business jet line of business are included in earnings
from discontinued operations summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended July 31,
- - -------------------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $40,286 $ 25,649 $28,154
Income (loss) before taxes 3,777 (10,250) 757
Taxes on income (benefit) 1,519 (3,926) 298
Net income (loss) 2,258 (6,324) 459
Net income (loss) per average share
of common stock $ 0.12 $ (0.36) $ 0.03
===============================================================================
</TABLE>
A-48
<PAGE>
Quarterly Results of Operations (Unaudited)
(in thousands except for per-share data)
<TABLE>
<CAPTION>
Year ended July 31, 1994
- - -------------------------------------------------------------------------------------------
1st 2nd 3rd 4th
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $237,091 $234,800 $221,696 $224,554
Operating income before unusual items 16,567 14,048 14,099 14,601
Operating income after unusual items 16,567 14,048 6,173 14,601
Income (loss) from continuing operations
before taxes 4,728 2,206 (4,868) 2,487
Income (loss) from continuing operations 5,761 1,341 (2,953) 520
Income from discontinued operations,
net of taxes 302 331 266 1,359
Net Income (loss) $ 6,063 $ 1,672 $ (2,687) $ 1,879
Net income (loss) per average share
of common stock:
From continuing operations $ 0.32 $ 0.07 $ (0.16) $ 0.03
From discontinued operations 0.02 0.02 0.01 0.07
Net Income (loss) per average share
of common stock $ 0.34 $ 0.09 $ (0.15) $ 0.10
===========================================================================================
</TABLE>
The first three quarters of fiscal 1994 have been restated to separately
reflect discontinued operations.
The third quarter includes unusual items aggregating $7.9 million,
representing the write-off of unamortized pension past service costs related to
the downsizing of employment levels in line with current business conditions,
net of a gain on the sale of the Auburn, Washington facility, which was closed
during the prior fiscal year.
A-49
<PAGE>
<TABLE>
<CAPTION>
Year ended July 31, 1993
- - ----------------------------------------------------------------------------------------------
1st 2nd 3rd 4th
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 278,281 $336,037 $290,106 $245,079
Operating income (loss) 18,109 (3,838) (19,689) 13,980
Income (loss) from continuing operations
before taxes 7,413 (15,912) (32,307) 1,485
Income (loss) from continuing operations 4,574 (9,818) (19,931) 918
Loss from discontinued operations,
net of taxes (991) (2,280) (2,270) (783)
Cumulative effect of accounting changes,
net of taxes (223,950)
Net Income (loss) $(220,367) $(12,098) $(22,201) $ 135
Net income (loss) per average share
of common stock:
From continuing operations $ 0.26 $ (0.55) $ (1.11) $ 0.05
From discontinued operations (0.06) (0.13) (0.13) (0.04)
Effect of accounting changes (12.50)
Net Income (loss) per average share
of common stock $ (12.30) $ (0.68) $ (1.24) $ 0.01
- - ----------------------------------------------------------------------------------------------
</TABLE>
Fiscal 1993 has been restated to separately reflect discontinued operations.
The third quarter of fiscal 1993 includes the impact of net provisions of
$25.0 million for restructuring and other costs as described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations."
A-50
<PAGE>
Report by Management
To the Shareholders and Board of Directors of Rohr Inc.
The consolidated financial statements have been prepared by the Company in
accordance with generally accepted accounting principles. These statements
necessarily include amounts based on judgments and estimates by the accounting
process.
The Company's operating and financial managers apply systems of internal
accounting controls that are designed to provide reasonable, but not absolute,
assurance that assets are safeguarded, that transactions are executed and
recorded in accordance with management's established policies and procedures,
and that accounting records are adequate for preparation of financial
statements and other financial information. Management's judgment with respect
to the relative cost and expected benefits of specific measures determines the
design, monitoring and revision of internal accounting control systems.
The Company has a staff of internal auditors to review accounting records,
controls and practices on a planned, rotational basis and to determine
compliance with corporate policies.
The consolidated financial statements have been audited by Deloitte & Touche
LLP, independent certified public accountants, appointed annually by the Board
of Directors and ratified by the shareholders. Their responsibility is to
audit the Company's financial statements in accordance with generally accepted
auditing standards and to render an opinion that the statements presented are
in conformity with generally accepted accounting principles.
The members of the Audit Committee of the Board of Directors, none of whom are
employees of the Company, review the activities of the internal auditors and
independent certified public accountants to ascertain that each is properly
discharging its responsibility. These groups have free access to the Audit
Committee, and certain meetings with the independent certified public
accountants are held without the presence of management. The Audit Committee
held four meetings during fiscal 1994.
L. A. Chapman R. H. Rau
Senior Vice President and President and Chief Executive Officer
Chief Financial Officer
A.L. Majors
Vice President and Controller
(Chief Accounting Officer)
September 12, 1994
A-51
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Directors of Rohr, Inc.:
We have audited the accompanying consolidated balance sheets of Rohr, Inc. and
its subsidiaries as of July 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended July 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Rohr, Inc. and its subsidiaries as
of July 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended July 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in fiscal year
1993 the Company changed certain elements in the application of accounting
principles relating to long-term programs and contracts and changed its method
of accounting for income taxes and for post-retirement benefits other than
pensions.
Deloitte & Touche L L P
San Diego, California
September 12, 1994
================================================================================
A-52
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements on Form
S-3 (Nos. 33 - 53113, 33-12340, 33-13373 and 33-17536); Form S-8 (Nos. 2-75423,
2-83877, 33-14382, 33-29351, and 33-32839); and Form S-16 (Nos. 2-76538 and
2-76656) of Rohr, Inc., of our reports dated September 12, 1994, appearing and
incorporated by reference in this Annual Report on Form 10-K of Rohr, Inc., for
the year ended July 31, 1994.
Deloitte & Touche L L P
San Diego, California
September 26, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 115,996
<SECURITIES> 17,568
<RECEIVABLES> 93,143
<ALLOWANCES> 0
<INVENTORY> 363,196
<CURRENT-ASSETS> 644,749
<PP&E> 500,037
<DEPRECIATION> (277,974)
<TOTAL-ASSETS> 1,056,847
<CURRENT-LIABILITIES> 184,069
<BONDS> 574,038
<COMMON> 18,042
0
0
<OTHER-SE> 128,867
<TOTAL-LIABILITY-AND-EQUITY> 1,056,847
<SALES> 0
<TOTAL-REVENUES> 918,141
<CGS> 0
<TOTAL-COSTS> 830,474
<OTHER-EXPENSES> 36,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,836
<INCOME-PRETAX> 4,553
<INCOME-TAX> (116)
<INCOME-CONTINUING> 4,669
<DISCONTINUED> 2,258
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,927
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
