<PAGE>
FY97: THIRD QUARTER
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 4, 1997
Commission File Number 1-6101
ROHR, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1607455
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910-2098
(Address of principal executive offices)
(619) 691-4111
(Registrant's Telephone No.)
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
--- ---
As of May 22, 1997, there were 25,295,794 shares of the Registrant's common
stock outstanding.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
MAY 4, JULY 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C>
ASSETS
- ------
Cash and cash equivalents $ 55,839 $ 88,403
Short-term investments 11,529 -
Accounts receivable 160,874 129,523
Inventories:
Work-in-process 428,943 423,312
Raw materials, purchased parts and supplies 27,656 26,220
Less customers' progress payments and advances (42,565) (67,165)
------------ ------------
Inventories - net 414,034 382,367
Prepaid expenses and other current assets 8,298 14,587
------------ ------------
TOTAL CURRENT ASSETS 650,574 614,880
PROPERTY, PLANT, AND EQUIPMENT - Net 189,208 196,052
DEFERRED TAX ASSET 139,095 156,863
PREPAID PENSION COSTS 84,823 -
OTHER ASSETS 36,540 64,742
------------ ------------
$ 1,100,240 $ 1,032,537
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Trade accounts and other payables $ 161,806 $ 125,974
Salaries, wages, and benefits 33,204 44,094
Deferred income tax liability 56,250 56,250
Current portion of long-term debt 29,679 25,962
------------ ------------
TOTAL CURRENT LIABILITIES 280,939 252,280
LONG-TERM DEBT 452,056 481,481
PENSION AND POST-RETIREMENT OBLIGATIONS - Long-Term 19,693 46,096
OTHER OBLIGATIONS 16,691 17,503
COMMITMENTS AND CONTINGENCIES
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
25,293,401 and 22,329,793 shares, respectively 25,293 22,330
Additional paid-in capital 189,887 142,656
Retained earnings 115,681 96,622
Minimum pension liability adjustment - (26,431)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 330,861 235,177
------------ ------------
$ 1,100,240 $ 1,032,537
============ ============
</TABLE>
Page 1
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
-----------------------------------------------
(in thousands except for per share data)
----------------------------------------
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 249,308 $ 203,711 $ 664,487 $ 534,813
Costs and Expenses 214,360 177,810 581,414 468,414
General & Administrative Expenses 7,127 7,336 20,926 19,311
----------- ----------- ----------- -----------
Operating Income 27,821 18,565 62,147 47,088
Interest Income 1,075 661 3,688 2,321
Interest Expense 10,806 11,491 33,964 36,451
Charge for Exchange of Convertible Notes - 827 - 4,902
----------- ----------- ----------- -----------
Income Before Taxes on Income 18,090 6,908 31,871 8,056
Taxes on Income 7,272 2,778 12,812 3,239
----------- ----------- ----------- -----------
Net Income $ 10,818 $ 4,130 $ 19,059 $ 4,817
=========== =========== =========== ===========
Net Income per Share:
Primary $ 0.42 $ 0.19 $ 0.76 $ 0.24
=========== =========== =========== ===========
Assuming Full Dilution $ 0.39 $ 0.18 $ 0.73 $ 0.24
=========== =========== =========== ===========
Cash Dividends per Share
of Common Stock $ - $ - $ - $ -
=========== =========== =========== ===========
Weighted Average Common Stock and
Common Stock Equivalents Used to
Compute Net Income Per Share 26,053 22,312 25,202 20,168
</TABLE>
Page 2
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
(in thousands)
-------------
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 10,818 $ 4,130 $ 19,059 $ 4,817
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 5,490 5,252 15,839 15,857
Charge for exchange of convertible notes - 827 - 4,902
Changes due to (increase) decrease in operating assets:
Accounts receivable (25,884) (34,385) (51,418) (41,595)
Inventories - net (7,419) 16,911 (31,667) (30,615)
Prepaid expenses and other assets 1,506 (1,030) 6,779 2,904
Changes due to increase (decrease) in operating liabilities:
Accounts payable and other liabilities 2,467 (8,631) 24,602 1,346
Pension and post-retirement obligations 1,403 (3,235) (200) 368
Taxes on income and deferred taxes 7,187 2,841 12,278 2,879
Other (1,198) (645) (1,871) 293
----------- ----------- ----------- -----------
Net cash used in operating activities (5,630) (17,965) (6,599) (38,844)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of assets 87 2,921 2,455 3,060
Net sale (purchase) of short-term investments 1,382 - (11,529) -
Purchase of Property, Plant, and Equipment (4,247) (2,676) (11,618) (7,912)
Proceeds from sale of Rohr Credit Corporation - - 20,142 -
Other 77 (216) 37 (70)
----------- ----------- ----------- -----------
Net cash provided by (used in) investing activities (2,701) 29 (513) (4,922)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Annual principal payment on 9.35% senior notes - (12,025) (12,025) (12,025)
Annual principal payment on 9.33% senior notes - - (8,850) -
Proceeds from Long-term borrowings - 1,106 - 1,106
Increase (decrease) in short-term borrowings - 448 (3,615) 2,427
Repayment of other long-term borrowings (432) (445) (517) (1,379)
Cash collateral for receivable sales program (75) 8,850 (75) 6,351
Other (20) (154) (370) 1,138
----------- ----------- ----------- -----------
Net cash used in financing activities (527) (2,220) (25,452) (2,382)
----------- ----------- ----------- -----------
DECREASE IN CASH AND
CASH EQUIVALENTS (8,858) (20,156) (32,564) (46,148)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 64,697 58,592 88,403 84,584
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 55,839 $ 38,436 $ 55,839 $ 38,436
=========== =========== =========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest, net of amount capitalized $ 13,671 $ 13,863 $ 36,402 $ 38,974
Income taxes 74 94 556 360
Non-cash financing activities:
Exchange of 7.75% convertible notes - (5,614) - (33,735)
Change in equity due to exchange of 7.75%
convertible notes - 6,441 - 38,637
Charge for exchange of convertible notes - (827) - (4,902)
Rohr common stock contribution to defined benefit plans - - 48,000 -
</TABLE>
Page 3
<PAGE>
ROHR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
The consolidated balance sheet as of May 4, 1997, and statements of earnings and
cash flows for the third quarter and nine months ended May 4, 1997, and April
28, 1996, reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. Financial
results for interim periods are not necessarily indicative of results to be
expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements included in the Form 10-K
for the year ended July 31, 1996.
In February 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." This
statement specifies the computation, presentation, and disclosure requirements
for earnings per share for entities with publicly held common stock. SFAS No.
128 is not in effect for the Company in the third quarter of fiscal 1997, but
will be in effect for financial statements issued for periods ending after
December 15, 1997, including interim periods. The Company does not expect the
adoption of SFAS No. 128 to have a material effect on its net income per share.
CONTINGENCIES
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 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
Page 4
<PAGE>
follows: 65 percent to the State of California and 10 percent to the
Stringfellow entities, leaving 25 percent to the generator/counterclaimants
(including the Company) and other users of the site (or a maximum of up to 28
percent depending on the allocation of any Stringfellow entity orphan share). On
the state law claims, the special master recommended a 95 percent share for the
State of California, and 5 percent for the Stringfellow entities, leaving 0
percent 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.
From inception to date, the Company has expended approximately $3.9 million on
cleanup costs for this site. The Company also estimates that its future cleanup
expenditures for this site are likely to range from $5 million to $8 million
over and above the sums spent to date, as explained in greater detail in the
Company's Annual Report on Form 10-K for fiscal 1996 in "Management's Discussion
and Analysis of Financial Condition and Results of Analysis -- Environmental
Matters."
The Company intends to continue to vigorously defend itself in the Stringfellow
matter. Based upon the information currently available to it, including the fact
that the Company has reached settlement agreements with its primary
comprehensive general liability insurers with respect to this matter and has
established reserves in connection with its expected future cleanup liabilities,
the Company believes that the ultimate resolution of this matter 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, liquidity or results of operations of the Company.
Page 5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's analysis of operating results for the third quarter and nine months
ended May 4, 1997, and April 28, 1996, is presented below. Material developments
in the Company's liquidity and capital resources since July 31, 1996, are also
presented. These discussions should be read in conjunction with the financial
statements and notes thereto and Management's Discussion and Analysis thereof
included in the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996.
OUTLOOK
As a result of the growth in air travel and the need to replace aging aircraft,
the demand for new commercial aircraft has been increasing. The increased load
factor of commercial aircraft, stable fare structures, and aggressive cost
reduction measures have substantially improved commercial airline profitability.
Airline operators have responded by ordering large quantities of new commercial
aircraft. Industry orders for new commercial jet aircraft in calendar year 1996
were 1,113 compared to 662 and 304 in calendar years 1995 and 1994,
respectively. Industry analysts continue to predict a potentially large
replacement market for commercial aircraft driven by noise legislation and the
need to replace aging fleets.
Delivery rates of commercial aircraft have been accelerating. The Company's
sales for the nine months ending May 4, 1997, reflect this acceleration of
deliveries and fiscal year 1997 sales are anticipated to exceed fiscal year 1996
sales by more than 20 percent. The Company's current projections indicate
that sales will continue to increase in fiscal 1998, although at a reduced rate.
In December 1996, The Boeing Company and McDonnell Douglas Corporation announced
their intent to merge. Boeing produces aircraft which compete with models
produced by McDonnell Douglas. Although Boeing and McDonnell Douglas have said
that they will continue to produce McDonnell Douglas aircraft in response to
customer demand, aerospace analysts differ as to the anticipated effect of the
proposed merger on the future production of McDonnell Douglas aircraft.
Approximately 25 percent of the Company's products, by revenue, are manufactured
for installation on the McDonnell Douglas MD-90, MD-95 (in development), MD-80,
and MD-11 aircraft programs.
Page 6
<PAGE>
In its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, McDonnell Douglas reported that it had received only 4 percent of the
orders for commercial aircraft during the past year and that several of its long
standing customers have recently chosen Boeing or Airbus Industrie in major
competitions for a significant number of aircraft. In addition, McDonnell
Douglas reported that Delta Airlines, as part of its fleet rationalization
strategy, intends in time to replace all of its current fleet of 16 MD-90
aircraft, and is considering its alternatives for the 15 MD-90 aircraft it has
on firm order. McDonnell Douglas reported that Delta also has many options for
this aircraft. Even though it has an enforceable contract for the firm orders,
McDonnell Douglas reported that it and Delta are forming a joint task force to
seek a business resolution to these firm orders.
As of April 1997, 46 MD-90 aircraft had been delivered by McDonnell Douglas to
its customers. Industry sources indicate that firm orders exist for 101
additional aircraft, and options and/or letters of intent exist for an
additional 85 aircraft (down from 104 aircraft at the end of the prior quarter).
These firm orders, options and/or letters of intent do not reflect any
adjustments for the uncertainties concerning Delta's MD-90 fleet rationalization
strategy discussed above. In light of low recent order activity for the MD-90
aircraft as compared to that of competitive aircraft and the anticipated merger
of McDonnell Douglas and Boeing, several aerospace analysts are less than
optimistic about the future of this aircraft.
At May 4, 1997, the Company's unrecovered investment on the MD-90 program was
$76.7 million in inventoried preproduction and excess-over-average costs, and
$18.1 million in production inventory. The Company's investment in this program
is recovered over the delivery of components for the aircraft. At May 4, 1997,
the Company had delivered components for 61 MD-90 aircraft and has additional
firm orders for components scheduled to be delivered within the next 12 months
for 39 MD-90 aircraft. Assuming these firm orders are delivered but no further
orders are obtained, the Company estimates that it could incur a pre-tax loss
approximating $75 million, which includes investments then remaining in
preproduction and excess-over-average inventory and other potential obligations
related to the program. If the Company ultimately delivers components for the
firm orders, options and letters of intent that McDonnell Douglas has received
(232 aircraft in total), the Company anticipates that it would recover all of
its program costs and not incur a loss. In view of the uncertainty as to the
number of aircraft which may be delivered, the Company decided, during the
second quarter of fiscal 1997, to discontinue the recognition of profits on the
MD-90 program.
The McDonnell Douglas MD-95 program is a new 100 passenger aircraft currently
under development. The Company has invested $41 million for design and
development costs on the
Page 7
<PAGE>
MD-95 program through May 4, 1997. The Company anticipates spending an
additional $35 million for preproduction costs through mid 1999, the aircraft's
scheduled Federal Aviation Administration (FAA) certification date. Most of this
remaining $35 million of expenditures will occur prior to the flight test
program, which is scheduled to commence in April, 1998. If the program is
canceled prior to FAA certification, the Company expects substantial recovery of
these costs. If the aircraft is certified and actively marketed, the amount of
these costs and initial production start-up costs recovered by the Company will
depend upon the number of aircraft delivered. To date, there are 50 firm orders
and 50 options from the launch customer, ValuJet.
The Company continues to closely monitor the market demand for both the MD-90
and the MD-95 aircraft and to evaluate the Company's ability to recover its
investment in these programs. In addition, the Company produces nacelles and/or
components for many aircraft that compete with the MD-90 and MD-95, which could
lessen the impact in the long term from reduced sales on these programs.
The McDonnell Douglas MD-11 program, on which the Company provides pylons and
nacelles, and the MD-80 program, on which the Company provides nacelles, have
been in production for several years. The Company has previously recovered its
initial investment on these programs. As a result of the maturity of these
programs and existing contractual provisions, the Company does not expect to
incur any losses in the event of a reduction in program quantity.
- --------------------------------------------------------------------------------
Forward-Looking Information is Subject to Risk and Uncertainty
This document contains forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995, that involve risk and uncertainty.
Actual sales in fiscal year 1997 and 1998 may be materially less than the sales
projected in the forward-looking statements if the Company's customers cancel or
delay current orders or reduce the rate at which the Company is building or
expects to build products for such customers. The aggregate operating results
that the Company will experience on the MD-90 program may differ from those
projected in the forward-looking statements if the timing of the Company's sales
on that program occur at a substantially different rate than currently estimated
by the Company, if the Company's manufacturing performance on that program fails
to improve in accordance with the learning curves currently projected by the
Company, if the Company fails to resolve contractual items with its customer and
suppliers as currently anticipated, if spare sales on this program are
substantially different than currently projected by the Company, or if one or
more suppliers to the Company on that program fail to meet their contractual
obligations. The additional preproduction investment that the Company will make
on the MD-95 program may differ from that projected in the forward-looking
statements if the cost of MD-95 product and tooling design, tooling
manufacturing and production planning exceeds the Company's estimates.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
RESULTS OF OPERATIONS
Third Quarter Fiscal Year 1997 Compared to Third Quarter Fiscal Year 1996
Sales for the third quarter of fiscal 1997 were $249.3 million, up 22 percent
from the $203.7 million reported for the third quarter of fiscal 1996. The
increased sales resulted primarily from increased deliveries on a number of
commercial programs, reflecting increased customer delivery schedules.
The Company's operating income for the third quarter of fiscal 1997 was $27.8
million, an operating margin of 11.2 percent. Operating income for the same
period of the prior fiscal year was $18.6 million, an operating margin of 9.1
percent. Operating income has improved due to the increase in sales and the
resolution of various program issues as discussed below. Operating income was
adversely impacted by the discontinuance of the recognition of profit on the
MD-90 program in the second quarter of fiscal 1997 due to market uncertainties
as discussed in the "Outlook" section. Historically, operating results for any
period, including the third quarter of fiscal 1997, have included the resolution
of various program issues, the amount of which can vary from period to period.
Of significance to the third quarter of fiscal 1997 was the resolution of claims
against the U.S. Navy on the E3/E6 program, resulting in increased sales and
operating profit of $3.5 million.
Net interest expense was $9.7 million for the third quarter of fiscal 1997
compared to $10.8 million for the same period of the prior fiscal year. Interest
income increased reflecting higher levels of invested funds, while interest
expense declined primarily as a result of reduced debt levels.
During the third quarter of the prior fiscal year, the Company negotiated the
exchange of 600,000 shares of the Company's common stock for $5.6 million of its
7.75% Convertible Subordinated Notes due 2004. The shares of common stock issued
in the exchange in excess of the shares required for conversion were valued at
$0.8 million, which was expensed during the third quarter of the prior year.
Net income for the third quarter of fiscal 1997 was $10.8 million or 42 cents
per share. This compares to net income of $4.1 million or 19 cents per share for
the third quarter of the prior fiscal year. The charge due to the exchange of
the convertible notes, as discussed above, reduced net income by $0.5 million or
2 cents per share in the third quarter of the prior fiscal year.
Page 9
<PAGE>
First Nine Months of Fiscal 1997 Compared to First Nine Months of Fiscal 1996
In the first nine months of fiscal 1997 sales increased to $664.5 million, up 24
percent from the $534.8 million reported for the first nine months of fiscal
1996. The increase in sales resulted from increased deliveries on a number of
commercial programs, particularly the Airbus Industrie A320 and A340 and the
McDonnell Douglas MD-90 programs.
Operating income for the first nine months of fiscal 1997 was $62.1 million, an
operating margin of 9.4 percent. Operating income for the same period of the
prior year was $47.1 million, an operating margin of 8.8 percent. Operating
income has improved due to the increase in sales and the resolution of various
program issues as discussed below. Operating income was adversely impacted by
the discontinuance of the recognition of profit on the MD-90 program during the
second quarter of fiscal 1997 due to market uncertainties as discussed in the
"Outlook" section. Historically, operating results for any period, including the
first nine months of fiscal 1997, have included the resolution of various
program issues, the amount of which can vary from period to period. The first
nine months of fiscal 1997 benefited from the resolution of contractual issues
on the E3/E6 and Titan programs.
Net interest expense declined from $34.1 million in the first nine months of
fiscal 1996 to $30.3 million in the first nine months of this fiscal year.
Interest income increased due to higher levels of invested funds, while interest
expense declined primarily as a result of reduced debt levels.
As discussed above, during the first nine months of the prior fiscal year, the
Company incurred a charge of $4.9 million resulting from the exchange of 3.6
million shares of the Company's stock for $33.7 million of its 7.75% Convertible
Subordinated Notes due 2004.
Net income for the first nine months of fiscal 1997 was $19.1 million or 76
cents per share. During the same period of the prior year, the Company reported
net income of $4.8 million or 24 cents per share. The charge due to the exchange
of the convertible notes reduced net income by $2.9 million or 15 cents per
share in the first nine months of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
On May 4, 1997, the Company had $67.4 million of cash, cash equivalents, and
short-term investments. The Company has requested and received proposals from
several banks for a replacement for its prior revolving credit agreement, which
expired on April 25, 1997, as scheduled. The Company is evaluating these
proposals in light of its requirements and expects to have a satisfactory credit
agreement in place prior to any need for funds from such agreement.
Page 10
<PAGE>
Over the next several years, the Company expects to increase its investment in
production inventory in connection with increased deliveries on existing
programs. The Company continues to seek business opportunities which would
require future investments. The Company believes that its financial resources
will be adequate to meet such requirements during such period.
Net cash used in operating activities for the third quarter of fiscal year 1997
was $5.6 million compared to $18.0 million for the third quarter of the prior
fiscal year. Net cash used in operating activities for the first nine months of
fiscal 1997 was $6.6 million compared to $38.8 million for the same period of
the prior fiscal year. Contributing to the use of cash in the first nine months
of fiscal 1997 was an increase in inventory and receivables, reflecting an
increased level of sales activity. Net cash provided by operations is subject to
significant variations from period to period.
Contributing to cash flow from investing activities in the first nine months of
fiscal 1997 was the collection of a note receivable of $20.1 million from the
sale of Rohr Credit Corporation, which was completed in the fourth quarter of
fiscal 1996. Cash of $11.5 million was used in investing activities for the
purchase of short-term investments.
The Company's total financings declined to $541.5 million on May 4, 1997,
compared to $569.2 million on July 31, 1996. Total financings decreased due to
the principal payments made during the second quarter of 1997 of $12.0 million
on the 9.35% Senior Notes and $8.9 million on the 9.33% Senior Notes. Total
financings include balance sheet debt, a $40.0 million ongoing accounts
receivable sales program, and $19.8 million of equipment leases.
Accounts receivable increased from $129.5 million on July 31, 1996, to $160.9
million on May 4, 1997. This increase is due primarily to an increase in sales.
In addition, a change in customer mix and the timing of deliveries and payments
from customers contributed to the increase in receivables.
The Company's net inventory increased from $382.4 million on July 31, 1996, to
$414.0 million on May 4, 1997. The inventory increase is primarily due to a
build-up of production inventory in preparation for higher deliveries, an
increase in preproduction investment on the MD-95 program, and the reduction of
advances from customers.
On October 31, 1996, the Company completed the previously announced contribution
of Company common stock valued at $48.0 million to its primary pension plans.
This contribution resulted in the Company's primary pension plans achieving a
fully funded status on such date. This contribution, which is reflected as a
prepaid asset, allowed the Company to reverse the liability and deferred asset
related to the underfunded position, and to eliminate the $26.4 million
Page 11
<PAGE>
charge to shareholders' equity, net of the tax benefit of $17.8 million. In
addition to the stock contribution, the Company also made a cash contribution of
$3.9 million during the first quarter of fiscal 1997. The pension plans' funded
status is primarily impacted by discount rates (adjusted annually to reflect
then prevailing market interest rates), market performance of plan assets, the
granting of additional benefits, changes in actuarial assumptions, including
mortality assumptions, and funding made by the Company during the year.
The Company's contribution of stock to its pension plans increased shareholders'
equity by $73.9 million, net of the anticipated registration cost. This resulted
in an improvement to the Company's debt-to-equity ratio to 1.5 to 1 on May 4,
1997, down from 2.2 to 1 on July 31, 1996. This improved ratio enhances the
Company's ability to negotiate a new bank credit agreement (currently in
process) under more favorable terms. In addition, the stock contribution
improved the Company's future liquidity by reducing future cash funding
requirements and also by reducing the benefit plans' annual expense due to the
actuarially expected return on the increased assets and reduced future Pension
Benefit Guarantee Corporation insurance premiums.
Capital expenditures for property, plant, and equipment is projected to
approximate $15 million for fiscal 1997 and will be financed by internally
generated cash flow.
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 $1.4 billion and $1.2 billion on May 4, 1997,
and July 31, 1996, respectively. Approximately $260 million of the $1.4 billion
backlog is scheduled to be delivered in the remainder of fiscal 1997. (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 equitable adjustment in contract amounts.
Page 12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits:
*10.2 Rohr, Inc., Supplemental Retirement Plan (Restated 1997)
*10.9 Rohr, Inc., Executive Deferred Compensation Plan
*11.1 Calculation of Primary Net Income Per Share of Common Stock
*11.2 Calculation of Fully Diluted Net Income Per Share of Common
Stock
*27. Financial Data Schedule (Filed with EDGAR filing only.)
(b) Reports on Form 8-K:
There were no reports on Form 8-K during this period.
- ---------------------------
*Exhibits filed with this report.
Page 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ROHR, INC.
May 28, 1997 By: S/ L. A. CHAPMAN
-----------------------------
L. A. Chapman
Senior Vice President and
Chief Financial Officer
May 28, 1997 By: S/ A. L. MAJORS
-----------------------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
Page 14
<PAGE>
EXHIBIT 10.2
[LOGO OF ROHR]
ROHR, INC.
SUPPLEMENTAL
RETIREMENT
PLAN
(Restated 1997)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
<S> <C>
I DEFINITIONS..................................................... 1
II ELIGIBILITY AND RETIREMENT...................................... 7
2.01 General................................................... 7
2.02 Normal Retirement......................................... 7
2.03 Early Retirement.......................................... 7
2.04 Late Retirement........................................... 7
2.05 Disability Retirement..................................... 7
2.06 Deferred Vested Retirement Benefit........................ 8
2.07 Purchase of Annuity Following Change in Control........... 11
III BENEFITS........................................................ 14
3.01 Normal Retirement Benefit................................. 14
3.02 Early Retirement Benefit.................................. 17
3.03 Disability Retirement Benefits............................ 17
3.04 Deferred Vested Retirement Benefits....................... 17
3.05 Time of Payments.......................................... 19
3.06 Conditions of Benefits.................................... 20
3.07 Survivors Benefits........................................ 20
3.08 No Alienation or Assignment of Benefits................... 22
3.09 Payment for the Benefit of a Participant.................. 22
3.10 Benefits Under Former Plan Provisions..................... 22
3.11 Retirement Benefits Upon Reemployment..................... 22
3.12 Lump Sum Payments......................................... 23
3.13 Benefits After Distribution for Change in Control......... 23
IV COMMITTEE....................................................... 24
4.01 Appointment of Committee.................................. 24
4.02 Meeting of Committee...................................... 24
4.03 Powers.................................................... 25
4.04 Indemnification........................................... 25
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.05 Allocation and Delegation of Duties....................... 27
4.06 Claims Procedure.......................................... 27
V COST OF PLAN; PAYMENT OF BENEFITS............................... 29
VI AMENDMENT, DISCONTINUANCE AND TERMINATION OF PLAN............... 30
VII MISCELLANEOUS PROVISIONS
7.01 Company's Rights.......................................... 31
7.02 Notices and Applications for Benefits..................... 32
7.03 Records Conclusive........................................ 32
7.04 Miscellaneous............................................. 33
7.05 Legal Expenses............................................ 34
EXHIBIT A - "Special Provisions"
</TABLE>
(ii)
<PAGE>
[LOGO OF ROHR]
ROHR, INC.
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
(Restated, 1997)
This is an amendment and restatement to the Rohr, Inc., Supplemental Retirement
Plan, originally approved by the Board of Directors of the Company on or about
February 12, 1968, and amended from time to time thereafter.
ARTICLE I
DEFINITIONS
-----------
1.01 "Average Monthly Compensation" means one-sixtieth (1/60th) of the
Participant's total Compensation while an Employee during the highest five (5)
consecutive calendar years in the last ten (10) calendar years preceding the
Participant's retirement, whether or not during such years the Participant was
then eligible to participate in the Plan.
1.02 "Board" means the Board of Directors of the Company.
1.03 "Cash Balance Plan" means the Rohr, Inc., Cash Balance Retirement
Plan, effective January 1, 1995, as it may be amended from time to time.
1.04 (A) For purposes of this Plan, "Change in Control" shall mean:
(1) an agreement shall have been entered or a document signed
providing for the merger, consolidation or liquidation of the Company; or
(2) the beneficial ownership (the direct or indirect beneficial
ownership for purposes of Section 13 (d) of the Securities Exchange Act of 1934
(the "1934
<PAGE>
Act") and Regulations 13D-G thereunder, or any comparable or successor law or
regulation) of 20 percent or more of the Company's shares by any person or
associated or affiliated group of persons (as defined by Rule 12b-2 of the
General Rules and Regulations under the 1934 Act, as in effect on the date
hereof); or
(3) an agreement shall have been entered or a document signed
providing for the sale, mortgage, lease or other transfer in one or more
transactions (other than transactions in the ordinary course of business) of the
assets or earning power aggregating more than 50 percent of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to any
Person or associated or affiliated group of Persons; or
(4) any Acquiring Person (as hereinafter defined) shall receive
the benefit, directly or indirectly (except proportionately as a shareholder or
upon terms and conditions not less favorable to the Company than the Company
would be able to obtain in arm's length negotiations with an unaffiliated party)
of any loans, advances, guarantees, pledges or other financial assistance, or
any tax credits or other tax advantage provided by the Company or its
subsidiaries; or
(5) Change in Control shall also mean, and a Change of Control
shall be deemed to have occurred, if at any time, the Board of Directors of the
Company shall be composed of a majority of Directors which are not Continuing
Directors.
(B) For purposes of a Change in Control, "Acquiring Person" shall mean
any Person (as defined) who or which, together with all Affiliates and
Associates (as such terms are defined in Rule 12b-2 of the General Rules and
Regulations under the 1934 Act, as in effect on the date hereof) of such Person,
shall be the Beneficial Owner (as defined in Rule 13d-3 of the General Rules and
Regulations under the 1934 Act, as in effect on the date hereof) of 15 percent
or more of the Voting Shares of the Company then outstanding; provided, however,
that an Acquiring Person shall not include the Company, any wholly-owned
subsidiary of the Company and any employee benefit plan of the Company or of a
subsidiary of the Company or any Person holding Voting Shares of the Company for
or pursuant to the terms of any such plan. For purposes of this paragraph, the
percentage of the outstanding
2
<PAGE>
shares of Voting Shares of which a Person is a Beneficial Owner shall be
calculated in accordance with said Rule 13d-3.
(C) For purposes of a Change in Control, "Continuing Director" shall
mean a director if he or she was a member of the board as of the date hereof and
any successor of a Continuing Director or director filling a newly created
position on the Board of Directors who is elected or nominated to succeed a
Continuing Director or to fill such newly created position by a majority of
Continuing Directors then on the Board.
(D) For purposes of a Change in Control, "Person" shall mean any
individual, firm, partnership, corporation, trust, estate, association, group
(as such term is used in Rule 13d-5 under the Exchange Act) or other entity, and
any two or more of the foregoing acting in concert or pursuant to an agreement,
arrangement, or understanding for the purpose of acquiring, holding, voting or
disposing of capital stock of the Company, and shall include any successor (by
merger or otherwise) of such entity.
(E) For purposes of a Change in Control, "Voting Shares" shall mean
(1) shares of the Company's $1 par value common stock, and (2) any other share
of capital stock of the Company entitled to vote generally in the election of
directors or entitled to vote in respect of any merger, consolidation, sale of
all or substantially all of the Company's assets, liquidation, dissolution or
winding up. References in this Agreement to a percentage or portion of the
outstanding Voting Shares shall be deemed a reference to the percentage or
portion of the total votes entitled to be cast by the holders of the outstanding
Voting Shares.
1.05 "Committee" means the persons appointed by the Board or by a Committee
of the Board to administer the Plan as provided hereinafter.
1.06 "Company" means Rohr, Inc., a Delaware corporation, its predecessors
and successors.
1.07 (A) "Compensation" of a Participant for a particular calendar year
shall be the sum of:
3
<PAGE>
(1) The base cash salary (including any lump sum payment paid in
lieu of annual merit increases under the Company "Pay for Performance" system)
paid during such year, including that deferred for any reason (including that
paid as a pretax savings contribution under the Pretax Savings Plan), or reduced
and paid as a Company contribution pursuant to a cafeteria plan described in
Internal Revenue Code Section 125. Compensation shall include restricted stock
received in lieu of merit increases, which stock shall be valued for these
purposes as the closing price on the date of the grant of stock.
(2) The award, if any, paid or credited to the Participant with
respect to such calendar year under the Rohr Management Incentive Plan, whether
paid in cash, deferred or paid in the form of restricted stock or stock options
(in which case, the restricted stock or stock options shall be valued for these
purposes as the amount of cash surrendered by the Participant from his award to
received such restricted stock or stock options).
(B) No other form of remuneration shall be included in the term
"Compensation" for purposes of this Plan. Compensation shall not include the
value of fringe benefits, such as group insurance, medical or dental benefits,
restricted stock or stock options (except to the extent specifically provided
for above), relocation allowance, per diem or out-of-plant field allowances, and
shall not include any payment or reimbursement for vacation earned but not
taken.
1.08 "Effective Date" means April 3, 1997, which is the effective date of
this Restatement of the Plan; provided, however, the rights of previous and
future Participants shall be governed by the provisions of the Plan in effect on
the date of their retirement or other date when they obtained rights under the
Plan.
1.09 "Employee" means any person who is actively employed on a permanent,
full-time basis by the Company or any of its wholly-owned subsidiaries.
1.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
4
<PAGE>
1.11 (A) "Participant" means each Employee who, on the business day
immediately preceding his retirement (or death, in the case of a benefit under
the provisions of Paragraph 3.07):
(1) was an officer of the Company elected by its Board or
appointed by the chief executive officer of the Company;
(2) was designated on the personnel records of the Company as an
executive Employee of the Company; or
(3) who was an officer of such wholly-owned subsidiaries of the
Company which have been designated by resolution of the Board to participate in
the Plan; and
(4) has been employed in one or another of case (1), (2) and (3),
above, for at least sixty (60) of the one hundred twenty (120) months
immediately preceding such date.
(B) "Participant" also means any officer of the Company meeting the
aforesaid requirements of the above subparagraph (A)(1) on the date of a Change
in Control of the Company, regardless of the length of time served as an officer
prior to such date.
(C) "Participant" does not mean an Employee who, on the date of his
death or retirement, is permanently assigned on the applicable personnel records
to a specific geographic location which has been excluded from the Plan by the
Board.
(D) Notwithstanding any provision of this Paragraph, the Board or a
Committee of the Board, in its discretion, may designate an Employee as a
Participant. These actions shall be set forth on Exhibit "A" to this Plan, which
shall be revised appropriately from time to time.
1.12 "Plan" means the retirement plan set forth herein, and as it may be
amended hereafter, which shall be known as the "ROHR SUPPLEMENTAL RETIREMENT
PLAN (Restated 1997)."
5
<PAGE>
1.13 "Pretax Savings Plan" means the Pretax Savings Plan for the Salaried
Employees of Rohr, Inc. (Amended and Restated 1994), as it may be amended from
time to time.
1.14 "Rohr Management Incentive Plan" means the Rohr, Inc., Management
Incentive Plan (Restated 1982), as it may be amended from time to time.
1.15 "Salaried Retirement Plan" shall mean the Salaried Retirement Plan of
Rohr, Inc. (Restated January 1, 1994), as it may be amended from time to time.
1.16 "Severance Compensation Agreement" means any agreement between a
Participant and the Company under which the Participant receives compensation in
connection with a Change in Control.
1.17 "Social Security Benefit" shall mean the Social Security Benefit
defined by the Salaried Retirement Plan.
1.18 "Spouse" means the person of the opposite sex to whom the Participant
is legally married.
1.19 "Transition Date" shall mean July 1, 1996.
1.20 "Years of Credited Service" shall mean the number of years and
fractional years of Benefit Service, as that term is defined and calculated
under the provisions of the Salaried Retirement Plan, and for the purposes of
determining the Years of Credited Service under the Plan, disregarding the
provisions of 1.4 (d) of the Salaried Retirement Plan which limit the number of
years of Benefit Service under that plan.
6
<PAGE>
ARTICLE II
ELIGIBILITY AND RETIREMENT
--------------------------
2.01 General. No Participant shall have a right to any benefit under this
-------
Plan if his employment with the Company is terminated for any reason other than
(A) retirement, whether at his Early Retirement Date, his Normal Retirement
Date, or at a date after his Normal Retirement Date, (B) disability retirement
as hereinafter provided, (C) death, provided that no benefit shall be payable
upon death (whether such death occurs during employment or after retirement)
except as specifically provided at Paragraph 3.07 or (D) a Change Termination
(defined at paragraph 2.06) resulting in a deferred vested retirement benefit.
Notwithstanding the foregoing, any Participant who has reached his
Normal Retirement Date, his Early Retirement Date or is eligible for a
disability retirement, will not be precluded from receiving benefits under the
Plan, upon application and compliance with the other provisions of the Plan, by
virtue of the fact that his employment is terminated by the Company for other
reasons.
2.02 Normal Retirement. A Participant's Normal Retirement Date shall be on
-----------------
the first day of the calendar month coinciding with or next following the month
in which the sixty-fifth (65th) anniversary of the Participant's birth date
occurs.
2.03 Early Retirement. A Participant may elect to retire at an Early
----------------
Retirement Date which is the first day of any month following the fifty-fifth
(55th) anniversary of the Participant's birth date and completion of ten (10) or
more Years of Vesting Service (as defined in the Salaried Retirement Plan)
earned while an Employee.
2.04 Late Retirement. At his option, a Participant may continue his
---------------
employment beyond his Normal Retirement Date and his rights under the Plan shall
not be affected, increased or diminished by such decision.
2.05 Disability Retirement. A Participant whose employment is terminated
---------------------
prior to his sixty-fifth (65th) birthday as a result of total and permanent
disability will be eligible for a disability retirement benefit in accordance
with the provisions of Article III. A Participant shall
7
<PAGE>
be deemed to be totally and permanently disabled when, on the basis of medical
evidence satisfactory to the Committee, the Committee finds that he is wholly or
permanently prevented from engaging in any occupation or employment for wage or
profit as the result of bodily injury or disease, either occupational or non-
occupational in cause, except such employment as is found by the Committee to be
so irregular as to time and nature that it should be expected or is found by the
Committee to be for purposes of rehabilitation. A Participant shall not be
deemed disabled if, on the basis of proof satisfactory to the Committee, the
Committee finds that his incapacity arises out of chronic alcoholism, addiction
to narcotics, an injury self-inflicted or incurred while he was engaged in a
felonious enterprise, or resulted therefrom, or resulted from service in the
armed forces of any country.
2.06 Deferred Vested Retirement Benefit.
-----------------------------------
(A) In the event that, following a Change in Control, the employment
of a Participant who is then an elected or appointed officer of the Company is
terminated or is deemed terminated (as, for example of a deemed termination, a
constructive termination of employment) under the provisions of any Severance
Compensation Agreement, such termination or deemed termination being known as a
"Change Termination," then such Participant shall be eligible for a deferred
vested retirement benefit on
(1) the first day of the month following his 65th birthday or
(2) on the first day of any month following his 55th birthday,
in either case, in the amount set forth at Paragraph 3.04.
A Change Termination shall not include a Voluntary Termination or
a Termination for Cause, nor shall a deferred vested retirement benefit under
this Paragraph be due if, in connection with said Change in Control, said
officer will have obtained, except proportionately as a shareholder, a
participatory interest in the ownership of the surviving corporation (in the
case of a merger or consolidation), in the ownership of the entity beneficially-
owing the requisite percentage of Company stock (in the case of any entity
owning 20% of the Company), in the receipt of assets or earning power of the
Company and its
8
<PAGE>
subsidiaries taken as a whole (in the case of a transfer of 50% or more of said
assets or earning power), or in the loans, advances, guarantees, pledges, other
financial assistance, tax credits or other tax advantages (in the case of an
Acquiring Person receiving the benefits of such a loan, advance, guarantee,
etc.).
Whether a termination of employment was a Voluntary Termination shall
be based on a review of the facts, the language of the Plan and any applicable
law. The filing, itself, of an application for retirement following a Change
of Control shall not be deemed (either in determining rights under this Plan or
in connection with the determination of any other right of an employee of the
Company) to constitute or to be determinative that the termination of employment
was a Voluntary Termination, as a Participant is entitled to apply for benefits
under this Plan whether, in fact, his or her termination was voluntary or not
voluntary.
(B) For these purposes, the following definitions apply:
(1) "Voluntary Termination" is the voluntary termination of
employment by the Participant not constituting a Constructive Termination.
(2) "Constructive Termination" means any of the following events
unless it occurs with the Participant's express prior written consent or in
connection with a Termination for Cause.
(a) Any significant change in the Participant's position,
duties, titles, offices, responsibilities and status with the Company as such
existed immediately prior to a Change in Control or the assignment to the
Participant by the Company of any duties inconsistent therewith, or in
derogation thereof;
(b) a reduction within twenty-four (24) months after the
occurrence of a Change in Control in the Participant's base salary as in effect
on the date of the Change in Control, or the Company's failure to increase the
Participant's base salary after a Change in Control at a rate which is
substantially similar to the average increase in base salary effected during the
preceding twelve (12) months for those executives of the Company who are in the
same compensation category as the Participant;
9
<PAGE>
(c) any failure by the Company to continue in effect any
benefit plan or arrangement or any material fringe benefit in which the
Participant was participating immediately prior to a Change in Control (or
failure to substitute and continue other plans providing the Participant with
substantially similar benefits), or any action by the Company that would
adversely affect the Participant's participation in or materially reduce the
Participant's benefits under any such benefit plan or arrangement or deprive the
Participant of any material fringe benefit enjoyed by the Participant at the
time of the Change in Control;
(d) any failure by the Company to continue in effect any
incentive plan or arrangement, such as but not limited to the Rohr Management
Incentive Plan, in which the Participant is participating at the time of a
Change in Control or to substitute and continue other plans or arrangements
providing the Participant with substantially similar benefits, or the taking of
any action by the Company that would adversely affect the Participant's
participation in any such incentive plan or reduce the Participant's benefits
under any such incentive plan in an amount which is not substantially similar,
on a percentage basis, to the average percentage reduction of benefits under any
such incentive plan effected during the preceding twelve (12) months for all
officers of the Company participating in any such incentive plan;
(e) the Participant's relocation to any place other than the
location at which the Participant performed the Participant's duties prior to a
Change in Control; or
(f) any material breach by the Company of any provision of
this Plan.
(3) "Termination for Cause" means termination of the Participant's
employment by the Company solely by reason of one or more of:
(a) an act by the Participant constituting a felony, and
resulting in a conviction, and resulting or intended to result directly or
indirectly in substantial
10
<PAGE>
gain or personal enrichment at the expense of the Company or any of its
affiliated corporations, or
(b) the Participant's willful and deliberate engagement in an
act of gross misconduct that results in demonstrably material and irreparable
injury to the Company or any of its affiliated corporations, and which was
demonstrably (i) done in bad faith and (ii) without a reasonable belief that
such act was in the best interests of the Company, or
(c) the Participant's willful, deliberate and continued
failure substantially to perform the Participant's duties to the Company, which
is demonstrably committed (i) in bad faith and (ii) without a reasonable belief
that any such breach of duties is in the best interests of the Company, and
which is not remedied within three months after the written demand notice
referred to below.
In the event a Termination for Cause is believed to be justified, then, in order
to effectuate the applicable provisions of the Plan relative to a Termination
for Cause, a written notice thereof shall be delivered to the Participant by the
Company's chief executive officer (or by the Company's Board of Directors if the
Participant is the chief executive officer) which specifically and in detail
identifies and explains the manner in which it is believed that the Participant
has performed an act which justifies a Termination for Cause.
2.07 Purchase of Annuity Following Change in Control
-----------------------------------------------
(A) Notwithstanding any other provision of the Plan to the contrary,
immediately upon the occurrence of a Change in Control, the chief executive
officer of the Company, after consulting with the Chairmen of the Finance
Committee and of the Executive Compensation and Development Committee of the
Board, shall distribute, directly from its general funds and/or indirectly from
a trust (the "Rabbi Trust") which the Company has established for this purpose,
to each Participant entitled to a normal, early, disability or deferred vested
retirement benefit (whether or not said Participant is then receiving or is then
eligible to commence receiving his benefit under the Plan) hereunder (x) a paid-
up annuity contract (except as provided in Paragraph 2.07(A)(1)(d) below) from a
reputable insurance
11
<PAGE>
company with the highest rating by both Moody's and Standard & Poor's plus (y)
an amount in cash, each determined as set forth below.
(1) Annuity Contract
----------------
(a) The annuity contract shall provide for annual payments
(which may be made on a monthly basis) equal to the Plan Benefit Annuity (as
defined at subparagraph (b), hereafter) multiplied by the Tax Adjustment Factor
(as defined at subparagraph (c), hereafter).
(b) The "Plan Benefit Annuity" shall equal the annual benefit
accrued by the Participant as of the Change in Control based on the following
factors and assumptions:
(i) the formula at Paragraph 3.04, which, among other
things, references Section 3.01 (and all other Paragraphs of the Plan which
refer to Paragraph 3.01) or, as applicable, the alternate special benefits for
identified persons on Exhibit "A";
(ii) Average Monthly Compensation and Years of Credited
Service as of the Change of Control but adding three further Years of Credited
Service (or, if higher, the number of additional Years of Credited Service
provided for in any Severance Compensation Agreement for a particular
Participant), or, in the case of a retired Participant, using the Average
Monthly Compensation and Years of Credited Service which were used in
calculating his benefit;
(iii) benefit payments to commence upon the first day of
the month following the earliest date the Participant could commence benefits
under the Plan (as may be modified under the provisions of any Severance
Compensation Agreement) or, in the case of a retired Participant, the continued
benefit payments to commence upon the first day of the month following the
Change of Control Date (in the case of either Participants or retired
Participants, such payment commencement date being referred to as the "Benefit
Commencement Date");
12
<PAGE>
(iv) payment of the Plan Benefit Annuity in the form of a
joint and survivor benefit as provided in paragraph 3.07 hereof, if the
Participant is married on the Benefit Commencement Date (and also payable in the
form of a joint and survivor benefit in the case of a retired Participant who
has previously elected a joint and survivor benefit);
(v) Use of the 1983 Group Annuity Mortality Table;
(vi) the Participant's benefit under the Salaried
Retirement Plan (which offsets the benefit under this plan as provided at
Paragraph 3.01(B)(1) hereof) shall be calculated, for the purpose of determining
the Plan Benefit Annuity, based upon the following assumptions:
(A) the Salaried Retirement Plan benefit shall be
assumed to commence on the Benefit Commencement Date (unless, under the terms of
the Salaried Retirement Plan, the Participant was not then eligible to receive a
benefit, in which case for the purpose of computing the Plan Benefit Annuity,
the offsetting benefit under the Salaried Retirement Plan shall be assumed to
commence as of the date on which the Participant would first be eligible in the
future to receive a benefit under that Plan);
(B) the Salaried Retirement Plan benefit shall be
calculated using the actuarial assumptions under the Salaried Retirement Plan in
effect on the date of the Change in Control;
(C) the benefit accrued under the Salaried Retirement
Plan shall be that accrued thereunder as of the Benefit Commencement Date.
(c) The "Tax Adjustment Factor" shall equal the quotient of A
divided by B, where A equals 1 - X, and B equals 1 - X(1-Y), and X equals
F+S(1 - F). For this purpose F equals the highest marginal federal income tax
rate on the Change in Control date (for 1996, F = __%) and S equals the highest
marginal state income tax rate on the Change of Control date for 1996, S = __%
in the State of California; and Y equals the exclusion ratio expressed as the
quotient of the cost per dollar of one dollar of Plan Benefit Annuity starting
at
13
<PAGE>
the Participant's Benefit Commencement Date divided by the Participant's life
expectancy at the Benefit Commencement Date (as determined from life expectancy
multiples published under the Regulations to Section 72 of the Internal Revenue
Code or any successor provision thereto) or the number of years of remaining
payments, whichever is applicable.
(d) If the premium for the Participant's annuity is less than
$5,000, he shall receive the premium amount in cash, in lieu of an annuity
contract, in addition to the cash amount specified in Paragraph 2.07(A)(2)
below.
(2) Cash Amount
-----------
The amount of cash that the Participant shall receive shall be equal
to (a) the premium value for the annuity at the Change in Control date
multiplied by the quotient of X divided by 1 - X, where X is as determined
above, and (b) all excise taxes imposed upon the officer as a result of Section
67 of the Tax Reform Act of 1984 (and any successor provisions and any similar
state tax provisions) and all federal and state taxes imposed thereupon.
(B) To the extent of payments from the Plan Benefit Annuity, then the
obligations of the Company under Paragraph 2.06 shall be discharged, pro tanto.
Notwithstanding the foregoing, in the event that the benefit accrued to a
Participant under the Salaried Retirement Plan is not actually paid (or is
suspended or reduced), then to that extent, the obligations of the Company under
Paragraph 2.06 are not discharged by payments from the Plan Benefit Annuity.
ARTICLE III
BENEFITS
--------
3.01 Normal Retirement Benefit. The monthly benefit of a Participant who
-------------------------
is eligible, after the Effective Date, for a normal retirement benefit shall be
equal to the amount calculated at Subparagraph (A), below, reduced by the
amounts calculated at Subparagraph (B), below:
14
<PAGE>
(A) (1) For Participants who first met the criteria described in
Subparagraphs (1), (2), or (3) of Subparagraph (A) of Paragraph 1.11 prior to
the Transition Date, and who (unless the provisions of Subparagraph (B) of
Paragraph 1.11 are applicable), on the business day immediately preceding his
retirement (or death, in the case of a benefit under the provisions of paragraph
3.07), meet the requirements of subsection (4) of Subparagraph (A) of Paragraph
1.10: the Participant's Average Monthly Compensation multiplied by two percent
(2%) for each of the Participant's Years of Credited Service (including any
fractional part), up to a total maximum of thirty-five (35) years, reduced by 75
percent of the Social Security Benefit for which the Participant is then
eligible, whether or not such Participant applies for or loses all or part of
such benefit; provided, however, at the sole discretion of the Board or a
Committee of the Board expressed by resolution or by an act of unanimous written
consent, the foregoing benefit may be increased by substituting a greater
percentage than the aforesaid two percent (2%) in order to provide additional
retirement income to a Participant whose normal benefit is deemed inadequate, in
which case such increased benefit will be set forth on Exhibit "A" to this Plan;
provided, further, that the figure reached by the multiplication of such
substituted percentage by the number of Years of Credited Service (including
fractional parts) of such Participant shall not exceed sixty percent (60%) of
such Participant's Average Monthly Compensation.
(2) For Participants who first met the criteria described in
Subparagraphs (1), (2) or (3) of Subparagraph (A) of Paragraph 1.11 on or after
the Transition Date, and who (unless the provisions of Subparagraph (B) of
Paragraph 1.11 are applicable), on the first business day immediately preceding
his retirement (or death, in the case of a benefit under the provisions of
paragraph 3.07), meet the requirements of subsection (4) of Subparagraph (A) of
Paragraph 1.11: the Participant's Average Monthly Compensation multiplied by
one and sixty-seven hundredths percent (1.67%) for each of the Participant's
Years of Credited Service (including any fractional part) up to a total maximum
of thirty-five (35) years, reduced by ____ percent of the Social Security
Benefit for which the Participant is then eligible, whether or not such
Participant applies for or loses all or part of such benefit; provided, however,
at the sole discretion of the Board or a Committee of the Board expressed by
resolution or by an act of unanimous written consent, the foregoing benefit may
be increased by substituting a greater percentage than the aforesaid one and
sixty-seven
15
<PAGE>
hundredths percent (1.67%) in order to provide additional retirement income to a
Participant whose normal benefit is deemed inadequate, in which case such
increased benefit will be set forth on Exhibit "A" to this Plan; provided,
further, that the figure reached by the multiplication of such substituted
percentage by the number of Years of Credited Service (including fractional
parts) of such Participant (a) shall not exceed sixty percent (60%) of such
Participant's Average Monthly Compensation and (b) shall be offset by any
pension benefit accrued by such Participant in a prior employer's plan.
(B) The sum of:
(1) The monthly benefit under the Salaried Retirement Plan, if
any, (a) which Participant is then receiving; or (b) if he has not yet applied
for such benefit, the amount which the Participant is then eligible to receive.
For the purposes of calculating this benefit, a Participant
who first met the criteria described in Subparagraphs (1), (2) or (3) of
Subparagraph (A) of Paragraph 1.11 on or after the Transition Date, and who is
married, will be deemed to have selected a 50% Qualified and Joint Survivor
Annuity under Section 5.3 of the Salaried Retirement Plan, regardless of the
actual selection made by the Participant; provided that if such Participant has
elected to reject a benefit for his Spouse in the fashion provided at Section
5.3, then such election will be given effect in the calculation of this benefit.
The aforesaid reduction on account of the benefit under the
Salaried Retirement Plan shall be determined for these purposes as of the date
such benefit is first payable and shall not be redetermined thereafter unless
(x) the maximum benefit received under the Salaried Retirement Plan shall be
reduced after payments commence due to governmental requirements, or (y) such
benefits are refused, reduced or suspended in whole or part for any reason,
whatsoever, in either of which cases such a redetermination shall be made for
the purposes of this Plan, using such reduced Salaried Retirement Plan benefit
(or using no offset for the Salaried Retirement Plan benefit if such benefit has
been suspended or eliminated in toto) for so long as such circumstances
continue.
16
<PAGE>
In the event a Participant entitled to receive a benefit under
the Salaried Retirement Plan has elected to take advantage of the Social
Security leveling election provided for at paragraph 5.6 of the Salaried
Retirement Plan, the reduction provided for in this subparagraph 3.02(B)(1)
shall be calculated as if such Social Security leveling election had not
occurred.
plus:
-----
(2) The monthly benefit, if any, payable to the Participant under
any long term disability insurance program maintained by the Company. Any such
benefit for which the Participant was eligible but failed or refused to enroll
shall nonetheless be deducted hereunder.
plus:
-----
(3) An amount which is equal to the monthly life annuity which is
the Actuarial Equivalent of the Predecessor Plan Account of such Participant
under the Salaried Retirement Plan, if any, but only if the Participant elects
to take his Predecessor Plan Account in a lump sum payment and his monthly
benefit under such Salaried Retirement Plan is accordingly reduced. (For these
purposes, "Actuarial Equivalent" means the determination of a form of benefit
having the same value as the form of benefit which it replaces. Such
determination shall be based on the interest rates and actuarial tables approved
and adopted from time to time by the Committee.)
plus:
-----
(4) An amount under the Cash Balance Plan equal to the monthly
life annuity, if any, which (a) the Participant is then receiving or (b) if he
has not yet applied for such benefit, the amount of which the Participant is
then eligible to receive, it being understood that if the Participant has
elected to receive his benefit as a lump sum, then the Actuarial Equivalent
(defined in subparagraph (3) above) in the form of a monthly life annuity of
that sum shall be the amount deducted under this provision.
17
<PAGE>
3.02 Early Retirement Benefit. The benefit for early retirement after the
------------------------
Effective Date shall be a benefit equal to the benefit computed in Paragraph
3.01, payable on and after the Participant's Early Retirement Date, except that
(A) the sum calculated at Subparagraph 3.01 (A) (1) or (2), before the reduction
for the Participant's Social Security Benefit, shall first be reduced by three-
tenths of one percent (0.3%) for each month the Early Retirement Date precedes
the Normal Retirement Date; provided, however, that such reduction shall not
apply to Participants who have accrued thirty (30) or more years of Vesting
Service (as defined in the Salaried Retirement Plan) as an Employee as of their
Early Retirement Date; and (B) the Social Security Benefit offset for Paragraph
3.01 (A) (1) or (2) shall be determined from the "Maximum Offset Percentage"
table (as may be amended from time to time) shown on the Salaried Retirement
Plan at Section 4.4.
3.03 Disability Retirement Benefit. The monthly benefit of a Participant
-----------------------------
who is eligible for a disability retirement benefit shall be equal to the
benefit described at Paragraph 3.01, above, but using the number of Years of
Credited Service as of the date of his disability retirement (without
consideration of the Social Security Benefit offset) provided, however, that
such disability benefit under this Plan shall be reduced as of such future date
as the Participant commences receiving a benefit under the Salaried Retirement
Plan.
3.04 Deferred Vested Retirement Benefits.
-----------------------------------
(A) Once a Participant is entitled to a deferred vested retirement
benefit, the amount of such benefit shall not necessarily be limited to the
Years of Credited Service or Average Monthly Compensation in existence on the
date of a Change of Control. Accordingly, the monthly normal retirement benefit
of a Participant eligible for a deferred vested retirement benefit, as provided
in Paragraph 2.06, shall be equal to the benefit described at Paragraph 3.01,
above, except:
(1) using (a) the number of Years of Credited Service accrued as
of the date of his termination or deemed termination plus (b) an additional
three years of Credited Service which will be credited for all purposes to a
Participant entitled to a deferred vested retirement benefit forthwith upon a
Change in Control (unless a Severance Compensation Agreement entered into
between the Participant and the Company shall provide for a higher
18
<PAGE>
number of Years of Credited Service, which provisions of said Severance
Compensation Agreement will govern and prevail over the provisions of (a) and
(b) above); and
(2) for purposes of determining his Average Monthly Compensation:
(a) substituting the words "Participant's termination of employment (or deemed
termination)" in place of the words "Participant's retirement" in the definition
of Average Monthly Compensation at Article I; and (b) using, if higher, the ten
consecutive calendar years preceding his said termination (or deemed
termination); and
(3) for the purposes of calculating the offsetting benefit under
the Salaried Retirement Plan, conclusively assuming, in the case of a married
Participant who has not elected to reject a benefit for his Spouse in the
fashion provided at Section 5.3 of the Salaried Retirement Plan, that such
Participant selected either (a) a 100 percent Joint and Survivor Annuity under
Section 5.4 (a) of the Salaried Retirement Plan, if the Participant first met
the criteria described in Subparagraph (1), (2) or (3) of Paragraph 1.11 before
the Transition Date or (b) a 50 percent Qualified Joint and Survivor Annuity
under Section 5.3 of the Salaried Retirement Plan, if such Participant met the
aforesaid criteria on or after the Transition Date, it being the intent in the
case of either (a) or (b), to disregard for the purposes of this Subparagraph
the actual selection by the Participant.
(B) A Participant may elect to receive his deferred vested retirement
benefit as an early retirement benefit, in which case the amount of the benefit
calculated at Subparagraph (A), above, shall be utilized and actuarially reduced
in the same manner as set forth in Paragraph 3.02.
(C) In the event a Participant entitled to a deferred vested
retirement benefit remains an Employee for three years next following a Change
in Control (or such longer period as provided in a Severance Compensation
Agreement between the Participant and the Company), then for such three years
(or longer period), he shall not receive any additional Years of Credited
Service.
19
<PAGE>
3.05 Time of Payments
----------------
(A) The first monthly payment of a benefit hereunder (other than in
the case of a deferred vested retirement benefit or a disability retirement
benefit hereunder, if any) shall be due on the first day of the calendar month
following the Participant's Normal Retirement Date or Early Retirement Date, as
applicable, but conditioned upon the filing of a written application under this
Plan for benefits hereunder.
(B) The first monthly payment of a disability retirement benefit shall
be due, upon the filing of a written application therefore, on the first day of
the calendar month following the determination of disability under the Plan.
(C) The first monthly payment of the deferred vested retirement
benefit provided for at Paragraph 3.04 shall be due on the first day of the
calendar month following the Participant's eligibility therefor under the
provisions of paragraphs 2.06 and upon the filing of a written application
therefor.
(D) Subject to the provisions of Paragraphs 3.06 and without intending
to affect the rights of a Spouse's benefit under 3.07, payments of benefits
under the Plan shall continue on the first day of each calendar month thereafter
during the Participant's lifetime, with the last monthly payment being the one
payable on the month following the death of the Participant. In the case of a
surviving Spouse, the last payment shall be the one payable on the month
following the death of said Spouse.
3.06 Conditions of Benefits.
------------------------
(A) After a Participant's retirement, payments to the Participant
shall be subject to the Participant's compliance with the following
requirements:
(1) The Participant shall not directly or indirectly become or
serve as an owner, member of a partnership, participant, or an officer or
employee of any individual partnership or corporation conducting a business
which competes significantly with the
20
<PAGE>
Company in the judgment of the Board (which is delivered in writing to the
Participant), unless the Participant shall have obtained the prior written
consent of said Board.
(2) The Participant shall consult with and shall act in an
advisory capacity on policy matters with respect to important decisions relating
to the business of the Company as may from time to time be requested, at such
reasonable and convenient times and places as may be mutually agreed upon, but
in no event shall the Participant be required to devote in excess of ten (10)
days in any one (1) calendar year to such consulting and advisory duties. This
requirement shall not apply to Participants who are totally disabled.
(B) In the event that the Participant breaches any or all of the
conditions above set forth, no further benefits under this Plan shall be paid
from and after the date of any such breach until such condition shall have been
cured to the satisfaction of the Committee.
3.07 Survivors' Benefits
-------------------
(A) After Benefits Have Commenced.
-----------------------------
The benefit under this Plan, whether a Normal, Early, disability,
or deferred vested retirement benefit, is payable as a single life annuity for
the life of the Participant, but in addition, and not as an actuarial reduction
of such life annuity under this Plan, following the death of a Participant for
whom Benefits have commenced, his surviving Spouse shall receive monthly
payments during the lifetime of such Spouse equal to 50 percent of the
Participant's monthly benefit from this Plan.
(B) Death prior to retirement.
----------------------------
Following the death of a Participant who has remained employed
beyond the date he is first eligible for a Normal, Early or deferred vested
retirement benefit, or who received disability retirement status in accordance
with Paragraph 2.05 of this Plan, and who is not receiving benefits under this
Plan, then his surviving Spouse shall receive monthly payments during the
lifetime of such Spouse equal to 50 percent of the Participant's monthly Benefit
from this Plan, calculated as if such Participant had retired on the date of his
death and
21
<PAGE>
further calculated, as aforesaid, without an actuarial reduction of such
Participant's monthly Benefit due to the existence of this Spouse survivor
benefit.
3.08 No Alienation or Assignment of Benefits.
---------------------------------------
To the extent permitted by law, none of the benefits payable hereunder
shall be subject to the claims of any creditor of any Participant, nor shall the
same be subject to attachment, garnishment or other legal or equitable process
by any creditor of the Participant, nor shall any Participant have any right to
alienate, anticipate, withdraw, commute, pledge, surrender, assign or otherwise
encumber any of such benefits. In case any person shall attempt to alienate,
anticipate, withdraw, commute, pledge, surrender, assign or otherwise encumber
any payment to which he is or may be entitled under the Plan, the Committee, in
its discretion, may terminate the interest of such person in any such payment,
and hold or apply the same or any part thereof to or for the benefit of the
Participant, the Participant's Spouse, children or other dependents, or any of
them, in such manner and in such proportions as the Committee may consider
proper.
3.09 Payment for the Benefit of a Participant.
----------------------------------------
If the Committee shall determine that any Participant to whom benefits
are payable is unable to care for his affairs because of illness, accident or
other incapacity, any payment due (unless prior claim therefor shall have been
made by a duly qualified guardian or other legal representative) may be paid to
the Spouse, parent, brother or sister or any other person that the Committee may
determine. Any such payment shall be a payment for the account of such
individual and shall, to the extent thereof, be a complete discharge of any
liability under this Plan.
3.10 Benefits Under Former Plan Provisions.
-------------------------------------
The benefit payable to any Participant who retired with a benefit
commencing prior to the Effective Date, shall be the benefit payable pursuant to
the provisions of the Plan as in effect on such Participant's date of
retirement.
22
<PAGE>
3.11 Retirement Benefits Upon Reemployment.
-------------------------------------
If any retired Participant is rehired by the Company, payment of his
Benefit shall continue during the period of such reemployment. However, no
retired Participant shall earn any further Years of Credited Service under this
Plan for the period of such reemployment.
3.12 Lump Sum Payments.
-----------------
(A) A Participant (or, if the Participant has died, the Participant's
Spouse) may elect to receive a benefit in the form of a single lump sum payment,
if the Present Value of the benefit (or the unpaid, remaining portion of the
benefit, in the case of a benefit whose payment has already commenced) equals
$5,000 or less.
(B) Such payment shall be payable on the date on which the Participant
would otherwise commence benefits under the applicable provision of the Plan;
provided that if the electing Participant (or Spouse of a deceased Participant)
has commenced receipt of a benefit under any provision of this Plan, the lump
sum payment shall be paid as soon as reasonably possible following the election.
(C) The election under Subparagraph (A) may be made at any time, must
be in writing and must be consented to by the Participant's Spouse, if any.
(D) For purposes of this Paragraph, the "Present Value" of the
Participant's benefit shall mean the value of such benefit, as of (1) the day
prior to the benefit commencement date, in the case of Participants or Spouses
who have not yet commenced receiving a benefit, or (2) in the case of
Participants or Spouses whose benefit has already commenced and who are
requesting a lump sum payment of their remaining benefit, then upon the actual
payment date of the lump sum, in either case determined based on: (a) the 1984
Unisex Pension Mortality Table with a three-year setback for Beneficiaries, and
(b) the interest rate used by the Pension Benefit Guaranty Corporation to value
immediate annuities for plans terminated as of the first day of November last
preceding such date.
23
<PAGE>
3.13 Benefits After Distribution for Change in Control. In the event a
-------------------------------------------------
Plan Benefit Annuity is distributed to a Participant under Paragraph 2.07
hereof, but (A) this Plan continues in effect after the Change in Control and
(B) the Participant does not retire, but instead, continues to be an Employee of
the Company, then upon the Participant's ultimate retirement, his monthly
benefit (and, as applicable, his Spouse's survivor benefit) calculated under the
terms of the Plan shall be reduced by the actuarial equivalent, expressed in
terms of monthly benefits, of the Plan Benefit Annuity plus the cash paid under
Paragraph 2.07 hereof, using the actuarial factors utilized in calculating the
Plan Benefit Annuity.
ARTICLE IV
COMMITTEE
---------
4.01 Appointment of Committee.
------------------------
The Plan shall be administered by a Committee of at least three
persons who shall be appointed and may be removed by the Board or a Committee of
the Board. All members of the Committee shall hold office at the pleasure of
the Board or such Committee of the Board, and any member may resign by giving
written notice to (a) the Board, (b) such Committee of the Board, or (c) the
Committee and the chief executive officer of the Company. Vacancies may be
filled by the chief executive officer of the Company until the next meeting of
its Board or Board Committee.
4.02 Meetings of Committee.
---------------------
(A) The Committee shall hold meetings upon such notice, at such place,
or places, and at such time or times as it may from time to time determine.
Notice shall not be required if waived in writing. A majority of the members of
the Committee at the time in office shall constitute a quorum for the
transaction of business. All resolutions or other actions taken by the
Committee at any meeting shall be by vote of a majority of those present at any
such meeting and entitled to vote. Resolutions may be adopted or other action
taken without a meeting upon written consent signed by at least two-thirds
(2/3rds) of the members of the Committee. No member of the Committee shall have
any right to vote or decide upon any matter relating solely to himself or to
decide any of his rights or benefits under the Plan.
24
<PAGE>
(B) The Committee shall appoint one of its members to act as its
Chairman and may appoint a Secretary who need not be a member of the Committee.
4.03 Powers.
------
(A) The Committee shall have all powers necessary to administer the
Plan in accordance with its terms and provisions. The Committee shall authorize
disbursements of benefits under the Plan and may provide rules and regulations
for administration of the Plan consistent with its terms and provisions. Any
construction, interpretation or application of the Plan by the Committee shall
be final, conclusive and binding on all persons.
(B) The Committee may appoint agents and may employ attorneys,
accountants, actuaries, trustees, consultants, and other experts and advisors,
as necessary, any of whom may be employed or retained by the Company.
(C) The Company shall pay all expenses authorized and incurred by the
Committee in the administration of the Plan. The members of the Committee shall
serve without compensation for services.
4.04 Indemnification.
---------------
(A) Except as prohibited by law, the Company shall indemnify any
Committee member, or such other persons as the Committee may specify, who was or
is a party or is threatened to be a party to any threatened, pending, or
contemplated action, suit or proceeding, where such claim, action, suit or
proceedingalleges an act or omission in connection with the administration,
management, or other activity under or in connection with the Plan.
(B) Right of Indemnification. The aforesaid right of
------------------------
indemnification shall be contingent upon the following:
25
<PAGE>
(1) Where a person designated in Subparagraph (A), above, is
found not liable in an adjudication on the merits, the Company shall indemnity
such person for all expenses of litigation including attorneys' fees.
(2) Where a claim or suit is terminated by reason of a
settlement, the Company shall indemnify such person against all expenses in
connection therewith, including cost of settlement and attorneys' fees, where,
in the judgment of the Company or of any counsel the Company may request make
such a determination, said person would not be liable as a result of an act of
willful misconduct or intentional fraud or an act intended to attain a personal
benefit or advantage materially adverse to the Plan or its Participants, in an
adjudication on the merits.
(3) Where such person is determined to be liable in an
adjudication on the merits, and either (a) such adjudication includes a finding
that such person participated in an act of willful misconduct or intentional
fraud or act for the purpose of attaining a personal benefit or advantage
materially adverse to the interest of the Plan or its participants, or (b) if
the adjudication does not expressly so provide, in the judgment of the Company,
or any counsel of whom the Company may request make such a determination, such
person's action constituted any of the conduct described in Subparagraph (a),
hereof, there shall be no right of indemnification.
(4) When authorized by the Company, expenses incurred in
litigation may be paid in advance of the final disposition of such action or
suit upon receipt of an undertaking by such person to repay any amounts so
advanced unless the conditions specified in (1) or (2) are met.
(5) In all cases where indemnification is sought under these
provisions, upon the assertion or institution of any such claim, action, suit or
proceeding, the party requesting indemnification shall in writing give the
Committee an opportunity at its own expense, to handle and defend such claim,
suit, action or proceeding on his behalf.
26
<PAGE>
(C) Liability Insurance.
-------------------
The Company, at its own expense, shall purchase adequate
liability insurance covering the Committee, and such other persons as the
Company deems appropriate, for acts or omissions of such persons in
administration of the Plan.
4.05 Allocation and Delegation of Duties; Authorization to Sign Documents.
--------------------------------------------------------------------
(A) By action of the Committee, fully reflected in the minutes of the
Committee, the Committee may allocate its responsibilities among its members and
may designate other persons to carry out its responsibilities under the Plan.
Without limiting the foregoing, the Committee, and any person delegated under
the provisions hereof to carry out any responsibilities under the Plan, shall be
entitled to rely upon certificates, reports, and opinions made or given by any
actuary, accountant, legal counsel or other expert or advisor selected or
approved by the Committee; and the members of the Committee and any delegate
thereof shall not be liable, except to the extent provided by law, for any
action taken, suffered or omitted by them in good faith or for any such action
in reliance upon any such actuary, accountant, legal counsel or other expert or
advisor.
(B) The Committee shall designate the person or persons who shall be
authorized to sign documents and make payments for the Committee; provided,
however, that any member of the Committee shall be authorized on behalf of the
Committee, the same as if the Committee had unanimously acted, to execute
documents in connection with benefit payment authorizations made upon the
request of persons entitled thereto or their legal representative, and to take
or to authorize such actions as are necessary or desirable to effectuate such
authorizations.
4.06 Claims Procedure
----------------
The provisions of this 4.06 are not applicable for claims for or
concerning a deferred vested retirement benefit, defined at Section 2.06, or a
Plan Benefit Annuity.
27
<PAGE>
(A) Claims for Benefit. Claims for benefit under the Plan shall be
------------------
made in writing to any member of the Committee, who individually may act upon
such claim.
(B) Notice of Denial of Claim.
-------------------------
If such claim for benefits is wholly or partially denied, the
Committee member to whom the claim has been submitted shall, within a reasonable
period of time, but no later than 90 days after receipt of the claim, notify the
claimant of the denial of the claim. Such notice of denial (1) shall be in
writing, and given in accordance with the provisions for notices elsewhere
herein, (2) shall be written in a manner calculated to be understood by the
claimant, and (3) shall contain (a) the specific reason or reasons for denial of
the claim, (b) a specific reference to the pertinent Plan provisions upon which
the denial is based, (c) a description of any additional material or information
necessary for the claimant to perfect the claim, along with an explanation why
such material or information is necessary, and (d) an explanation of the Plan's
claim review procedure.
(C) Request for Review of Denial of Claim. Within 120 days of the
-------------------------------------
receipt by a claimant of a written notice of denial of a claim, or such later
time as shall be deemed reasonable, taking into account the nature of the
benefit subject to the claim and any other attendant circumstances or, if the
claim has not been acted upon within 90 days after receipt of the claim by the
Committee, the claimant may file a written request that the full Committee
conduct a full and fair review of the denial of (or inaction on) the claimant's
claim for benefits, including the holding of a hearing, if deemed necessary by
the full Committee. In connection with the claimant's appeal of the denial of
(or inaction on) his claim, the claimant may review pertinent documents and may
submit issues and comments in writing.
(D) Decision on Review of Denial of Claim. The full Committee shall
-------------------------------------
deliver to the claimant a written decision on the claim promptly, but not later
than 60 days after the receipt of the claimant's request for review, except that
if there are special circumstances (such as the need to hold a hearing) which
require an extension of time for processing, the aforesaid 60 day period shall
be extended to 120 days. Such decision shall (1) be in writing, and given in
accordance with the provisions for notices elsewhere herein, (2) be written in a
manner calculated to be understood by the claimant, (3) include specific reasons
for the decision, and
28
<PAGE>
(4) contain specific references to the pertinent Plan provisions upon which the
decision is based.
(E) Finality of Decision
--------------------
All decisions made by the above procedure shall be final and
there shall be no right of appeal.
ARTICLE V
COST OF PLAN; PAYMENT OF BENEFITS
---------------------------------
5.01
(A) As this Plan is not a funded Plan, all benefits payable under this
Plan shall be paid directly by the Company to the Participants. Notwithstanding
the foregoing, 30 percent of all accrued liabilities under the Plan as of the
end of fiscal year ending July 31, 1989, shall be funded forthwith through the
Rabbi Trust with the balance of such liabilities, including those accruing in
the five fiscal years thereafter, to be funded ratably over said next five
fiscal years commencing with fiscal year 1990. In the event of and upon a
Change in Control, however, all amounts necessary to provide the annuities (as
well as cash payments) described in Section 2.07 hereof shall be immediately due
and payable to the Participants entitled thereto, it being intended that the
Company purchase the said annuities with a combination of the sums in the Trust
and also its general funds, but if for any reason whatsoever, the sums in the
trust are not made available, forthwith on demand, then the Company will
purchase the said annuities (and make the said cash payments) entirely from its
general funds.
(B) In the event of and upon a Change in Control, however, all amounts
necessary to provide the Plan Benefit Annuities (as well as cash payments)
described in Paragraph 2.07 hereof shall be immediately due and payable to the
Participants entitled thereto, it being intended that the Company purchase the
Plan Benefit Annuities with a combination of the sums in the Rabbi Trust and
also its general funds, but if for any reason whatsoever, the sums in the Rabbi
Trust are not made available, forthwith on demand, then
29
<PAGE>
the Company will purchase the Plan Benefit Annuities (and make the said cash
payments) entirely from its general funds.
ARTICLE VI
AMENDMENT, DISCONTINUANCE AND TERMINATION OF PLAN
-------------------------------------------------
6.01
(A) All benefits to be paid to Participants and/or their Spouses or
other beneficiaries pursuant to this Plan are unfunded obligations of the
Company. Except as specifically provided for in the Plan, the Company is not
required to segregate any monies from its general funds or to create any trusts,
or to make any special deposits with regards to these obligations. The Company
hopes and expects to continue the Plan and the payment of benefits hereunder
indefinitely, but (except for (I) Participants who have retired hereunder, (ii)
Participants who continued to work past the first date when they are eligible
for a Benefit under this Plan and (iii) Participants who may become entitled to
a deferred vested retirement benefit, and in each case, the Spouses of such
Participants) such continuance is not assumed as a contractual obligation. The
Company expressly reserves the right, at any time and from time to time, to
modify or amend, in whole or part, any or all of the provisions of the Plan, or
to terminate or otherwise discontinue the Plan at any time without the consent
of any other party, without liability except as set forth above, acting by a
resolution adopted by action of (x) the Board, or (y) a Committee of the Board
(the "Board Committee"), to the extent such Board Committee has been delegated
such authority, or (z) the Committee, to the extent that such Committee has been
delegated such authority as to specific amendments or issues, by a resolution
adopted by the Board or by the Board Committee. In any of such cases, such
amendment shall be set forth in an instrument in writing executed in the name of
Rohr, Inc., by an officer or officers duly authorized to execute such
instrument.
Retroactive Plan amendments may not decrease the benefits of any
Employee determined as of the time the amendment was adopted, the same as if,
for this limited purpose, the said benefits were then fully vested.
30
<PAGE>
(B) Notwithstanding the foregoing, no amendment, modification,
termination or other discontinuance of the Plan shall serve to (i) reduce the
benefits of a person below those which he has been receiving as a retired
Participant, (ii) in the case of a plan amendment, either (x) reduce the
benefit accrual provisions at Paragraph 3.01(a) or elsewhere for Years of
Credited Service earned prior to the date of such amendment or (y) after the
occurrence of a Change in Control, increase the eligibility requirements at
Paragraph 1.11 to be a Participant, or (iii) in the case of a Plan termination
or other discontinuance, reduce those benefits which a person would have been
entitled to receive if he had been eligible to retire and had retired on the
date immediately prior to the effective date of such termination or other
discontinuance, assuming for these purposes (conclusively and without regard to
such person's actual age) that on the date of such termination or other
discontinuance such person had reached a retirement date and met the
requirements to be a Participant. In the case of subparagraph (iii), it is the
intent hereby in such event of termination or other discontinuance to fully vest
a benefit equal to that which would have been earned under the provisions of
this Plan as if such person had then been fully eligible to retire, provided
that (A) in the calculations of the amount of such benefit, the person's actual
Years of Credited Service (or, following a Change in Control, if higher, the
number of Years of Credited Service established under the Plan or in a Severance
Compensation Agreement) on the said effective date of termination or other
discontinuance shall be used; and (B) that payment of these vested benefits
under this subparagraph (iii) shall not be made until the reaching the person's
actual Normal Retirement Date or Early Retirement Date (provided that, in the
case of an early retirement benefit, the actuarial reduction provided for at
Paragraph 3.02 shall be applicable), or until the payment date called for in the
case of a deferred vested retirement benefit after application therefor is made.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
7.01 Company's Rights. The Company's rights to discipline or discharge
----------------
Participants or otherwise to exercise any of the Company's rights with respect
to the employment of Participants shall not be affected by reason of the
existence of the Plan or any action under the Plan by the Company or the
Committee. Participation in the Plan shall not give any
31
<PAGE>
Employee the right to be retained in the Company's employ or, upon dismissal, to
have any right or interest in the Plan, except as specifically provided in the
Plan.
7.02 Notices and Applications for Benefits
-------------------------------------
(A) All notices, statements and other communications from the Company
to an Employee, Participant or Spouse required or permitted hereunder shall be
deemed to have been duly given, furnished, delivered or transmitted, as the case
may be, when delivered to (or when mailed first-class mail, postage prepaid and
addressed to) the Employee, Participant or Spouse at the address last appearing
on the books of the Company.
(B) All notices, instructions and other communications from an
Employee, Participant or Spouse to the Company required or permitted hereunder
shall be on the respective forms from time to time prescribed therefor by the
Committee, shall be mailed by first-class mail or delivered to such location as
shall be specified in regulations or upon the forms prescribed by the Committee,
and shall be deemed to have been duly given and delivered upon receipt by the
Company at such location.
(C) Each Participant shall be responsible for furnishing the
Committee with such Participant's current address and the name and the current
address of the Participant's Spouse, if any. The Committee and the Company
shall have no obligation or duty to locate such Participant or the Spouse. In
the event a Participant or his Spouse becomes entitled to a payment under this
Plan and such payment cannot then be made because the current address referred
to above is incorrect, because such Participant or Spouse fails to respond to
notice sent to the current address referred to above, because of conflicting
claims to such payment, or for any other reason, the amount of such payment,
when and if made, shall be the dollar value determined as provided in Article
III on the date relevant for the determination of such payment under Article III
hereof, regardless of the date such payment is actually made, and no interest
thereon or other sums shall be paid in addition to such dollar value so
determined.
7.03 Records Conclusive. The records of the Company and the Committee
------------------
shall be conclusive in respect to all matters involved in the administration of
the Plan.
32
<PAGE>
7.04 Miscellaneous
-------------
(A) All provisions of the Plan, including definitions, shall be
construed according to ERISA or, to the extent, if any, not preempted by ERISA,
according to the laws of the State of California.
(B) Words used in the masculine gender include the feminine gender.
Words used in the singular or plural shall be construed as if plural or
singular, respectively, where they would so apply.
(C) Titles of articles are inserted for convenience and shall not
affect the meaning or construction of the Plan.
(D) Nothing herein contained shall in any manner modify, impair, or
affect the existing or future rights of any Participant to participate in any
and all Company plans of any kind for which said Participant would otherwise be
eligible.
(E) This agreement shall be binding upon any successor of the Company
and any successor shall substitute for the Company under the terms hereof. The
term "successor" as used herein shall include any person, firm, corporation or
other business entity which at any time acquires all or substantially all of the
stock, assets or business of the Company by merger, consolidation, purchase or
otherwise.
(F) In the event that the performance hereof, or of any portion
hereof, shall be in contravention of any law, rule or regulation of any
governmental body having or claiming to have jurisdiction, then, to the extent
of any such illegality or violation, this Plan shall be inoperative without in
any manner impairing its other provisions and obligations but nothing herein
contained shall be construed to require any Participant to forsake or relinquish
any of his rights hereunder.
33
<PAGE>
7.05 Legal Expenses
--------------
In the event a Participant commences or is required to defend a claim
or litigation in order to obtain or retain the benefits of the Plan, and
thereafter through litigation or settlement he is successful in whole or in
part, the Company shall reimburse the Participant for all fees and expenses
(including but not limited to attorneys fees and out-of-pocket costs or other
expenses such as reduced salary from any other employment due to time spent in
said litigation) relating to or arising from such claim or litigation.
After a Change in Control:
(A) the Company will pay on demand all reasonable attorney fees
which the Participant may incur in ascertaining and demanding enforcement of his
rights under the Plan, whether or not litigation follows, and
(B) upon written agreement to repay the Company if he is not entitled
to reimbursement under this paragraph 7.05, the Company shall advance to the
Participant all funds to commence or defend said litigation.
A reasonable amount of funds estimated to be necessary for such
reimbursement shall be set aside in a trust (the "Expenses Trust") immediately
upon the occurrence of a Change in Control.
IN WITNESS WHEREOF, the Company has caused this document to be
executed by duly authorized officers on April 3, 1997.
ROHR, INC.
/s/ R. W. Madsen
----------------
Vice President
34
<PAGE>
EXHIBIT A
General
- -------
Notwithstanding any other provision of this Plan to the contrary, including but
not limited to Articles I, II and III of this Plan, a special benefit as defined
herein shall be paid to the persons designated below, under terms and conditions
set forth in this Article. Except as provided herein, all other provisions of
the Plan shall apply.
1. Robert H. Rau
-------------
(A) The Company and Robert H. Rau ("Rau") have entered into an
employment agreement on or about April 9, 1993, (as amended, the "Employment
Agreement.") The Company has also entered into a Retirement Agreement, executed
on the 7th day of May 1996 (the "Retirement Agreement") with Robert H. Rau,
under which it has agreed to provide a retirement benefit and also has agreed to
provide a life insurance policy with a cash surrender value build-up that will
provide security for such retirement benefit. The purpose of this paragraph
8.16 is to implement the provision of the Employment Agreement, as amended, and
to supplement in the fashion set forth below the Retirement Agreement.
(i) In the event that Mr. Rau forfeits his rights under the
Retirement Agreement to a benefit and to the aforementioned security for a
benefit, then the provisions of Section 8.16 (b), below, apply to establish a
substitute retirement benefit (the "SERP Benefit") under the Plan which
supersedes and satisfies all obligations of the Company to Mr. Rau and his
Spouse concerning his retirement from the Company, other than whatever rights he
may have under the Pretax Savings Plan for Salaried Employees and the Cash
Balance Plan.
(ii) Alternately, in the event that Mr. Rau does not forfeit his
rights under the Retirement Agreement to a benefit and to the aforesaid security
for a benefit, then the provisions of Section 8.16 (c), below, apply , so as to
provide an incremental increase (the "SERP Incremental Benefit") in the
benefits to which Mr. Rau and his Spouse are entitled under the terms of the
Retirement Agreement.
1
<PAGE>
(iii) No benefit shall be due to Mr. Rau, however, under either
Section 8.16 (b) or (c) if Mr. Rau voluntarily terminates his employment with
the Company prior to April 19, 1996. (For these purposes, a voluntary
termination does not include a Constructive Termination, as defined in the
Retirement Agreement.)
(B) Complete Benefit Under the Plan. Mr. Rau is hereby declared
-------------------------------
eligible for the SERP Benefit as set forth below.
(i) Age 62 retirement: $464,400 per year, payable monthly, and
-----------------
reduced by the monthly amounts of all defined benefit retirement and pension
benefits (whether qualified or unqualified) payable by the Company and by Parker
Hannifin, such amounts calculated as payable in the form of a ten year certain
and life annuity with full survivor benefits (using the same actuarial
equivalent factors for such reduction as set forth in Paragraph 2.04 of the
Retirement Agreement). This is in lieu of Mr. Rau's early retirement benefit
under paragraph 2.03 of the Plan.
(ii) Retirement after age 62: $464,400 per year, payable monthly
-----------------------
and calculated the same as set forth at subparagraph (i), next above, plus an
additional annual benefit (included in the aforesaid monthly payments) equal to
$2,322 multiplied by the number of months by which his retirement occurs after
his 62nd birthday. (For example, if Mr. Rau remains in the employment of the
Company until he reaches age 63, then the $464,400 annual benefit will be
increased by $2,322 X 12, or an additional $27,864.) This is in lieu of Mr.
Rau's normal retirement benefit under paragraph 2.02 of the Plan
(iii) Survivor's Benefit:
------------------
(A) After benefits have commenced:
Mr. Rau's Spouse shall be entitled to receive the
lifetime monthly benefit provided for at paragraph 8.16 (b) (i) or (ii), above,
as applicable; provided, that such benefit shall be paid to the Spouse (or her
estate) for at least ten years following Mr. Rau's death and there shall not be
an actuarial reduction from the lifetime annuity set forth above on account of
this ten-year-certain provision.
2
<PAGE>
(B) Death prior to retirement:
Pursuant to the terms of the Retirement Agreement, the
Company has provided for a life insurance policy upon the life of Mr. Rau, under
which his Spouse will receive an amount at Mr. Rau's death, supplemented, if
necessary, by certain additional sums paid by the Company so as to enable his
Spouse to acquire an annuity, all as set forth in more detail in the Retirement
Agreement. The aforesaid provisions shall be in lieu of a Benefit under the
Plan.
(iv) Disability Retirement Benefits and Deferred Vested Benefits:
-----------------------------------------------------------
The amounts provided for at subparagraphs 8.16 (b) (i) and
(ii), above, shall be used in the calculation of any disability retirement
benefit to which Mr. Rau might become entitled under paragraph 2.05 of the Plan,
and a Deferred Vested Retirement Benefit under paragraph 2.06 of the Plan. The
amount at subparagraph (i) shall be used in the event of a benefit under
paragraphs 2.05 or 2.06 to which Mr. Rau becomes entitled at or before age 62
and the amount at subparagraph (ii) shall be used for such benefit calculations
after age 62.
(C) Partial Benefit Under the Plan. Mr. Rau is hereby declared
------------------------------
eligible for the SERP Incremental Benefit as set forth below.
(i) Age 62 retirement: An amount, payable in the form of a ten-
-----------------
year certain and life annuity with full survivor benefits, equal to the
difference between the amounts described in paragraphs (aa) and (bb) below.
(aa) The amount described under this paragraph (aa) shall be
the product of the annual retirement benefit payable under paragraph 8.16(b)(i)
hereof multiplied by 0.6.
(bb) The amount described under this paragraph (bb) shall be
the after-tax portion of each annuity payment determined as the sum of (I) and
(II) where (I) and (II) are:
3
<PAGE>
(I) The product of "A" multiplied by "E":
(II) The product of "A" multiplied by (I-E) multiplied
by 0.6.
For purposes of paragraph (bb), "A" shall equal the
annual annuity payment (payable under an annuity purchased with the after-tax
proceeds of the insurance and cash payments described in the Retirement
Agreement) and "E" shall equal the exclusion ratio which is the quotient of the
annuity factor (i.e., the cost per dollar of one dollar of annuity starting at
the annuity starting date) divided by Mr. Rau's life expectancy at the annuity
starting date.
In the event, for the tax year prior to his receiving the
SERP Incremental Benefit, that Rau's combined federal and state income tax rate
(assuming conclusively for these purposes that his total income for such year
was limited to the payment of the applicable annual benefit provided for at
Section 2.01(b) of the Retirement Agreement) would be different than .4, then:
(x) such proforma combined tax rate shall be determined
by Deloitte and Touche;
(y) such proforma combined tax rate shall be subtracted
from "1"; and
(z) the resultant after-tax income percentage shall be
used in place of the figure ".6" wherever such figure appears in this Paragraph
8.16(c)(i).
The SERP Incremental Benefit of this Paragraph
8.16(c)(i) is illustrated by the following example:
Assume that, at the time Mr. Rau starts to receive
annuity payments, each installment is $464,000 per year. Assume also that the
annuity factor is 11.5, meaning that the annuity costs $11.50 per dollar of
annuity at the starting date and that Rau's life expectancy is 20 years. Assume
finally that the annuity acquired with the after-tax
4
<PAGE>
insurance and cash proceeds pays an annual amount equal to $278,400. The annual
supplemental payment, therefore, is:
($464,000 X 0.6) - $278,400 X 11.5/20 +
$278,400 X 8.5/20 X 0.6 =
$278,400 - $231,072 =
$47,328, or $3,944 per month.
(ii) Retirement after age 62: An amount determined in the same
-----------------------
manner as in subparagraph (i), next above, and payable in the form of a ten year
certain and life annuity with full survivor benefits, except that in making such
determination and using all of the calculations there provided, the amount
described in subparagraph (c)(i)(aa), above, and to be multiplied by 0.6 as
therein provided, shall be the annual retirement benefit payable under
paragraph 8.16 (b) (ii), rather than the amount payable under paragraph
8.16(b)(i).
(iii) Survivor's Benefit:
------------------
Whether occurring as a result of death prior to retirement
or occurring after benefits have commenced:
Mr. Rau's Spouse shall be entitled to receive the lifetime
monthly benefit provided for at paragraph 8.16 (c) (i) or (ii), above, as
applicable; provided, that such benefit shall be paid to the Spouse (or her
estate) for at least ten years following Mr. Rau's death and there shall not be
an actuarial reduction from the lifetime annuity set forth above on account of
this ten-year-certain provision.
(iv) Disability Retirement Benefits and Deferred Vested Benefits:
-----------------------------------------------------------
The amounts provided for at subparagraphs 8.16 (c) (i) and
(ii), above, shall be used in the calculation of any disability retirement
benefit to which Mr. Rau might become entitled under paragraph 2.05 of the Plan,
and a Deferred Vested Retirement Benefit under paragraph 2.06 of the Plan. The
amount at subparagraph (i) shall be used in the event of a benefit under
paragraphs 2.05 or 2.06 to which Mr. Rau becomes entitled at or
5
<PAGE>
before age 62 and the amount at subparagraph (ii) shall be used for such benefit
calculations after age 62.
(d) All other provisions of the Plan not inconsistent with this
paragraph 8.16 shall remain applicable.
2. David 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, with one year of Credited Service for each year he remains as an
Employee thereafter.
(b) In the event of a Change in Control, Mr. Ramsay will be credited
for an additional number of Years of Credited Service, over and above what he
has accrued under the provisions of Section 8.14(a), which is equal to eleven
years minus the number of years he has been an Employee of the Company; provided
that, if he remains an Employee after the Change of Control, he will be entitled
to accrue additional Years of Service only at the rate of one year for each year
he remains an employee; and further provided that, if Mr. Ramsay has become
entitled to any additional Years of Credited Service under a Severance
Compensation Agreement, such provisions shall be given full effect (including
any provision in the Severance Compensation Agreement suspending the accrual of
additional Years of Credited Service following the Change of Control if Mr.
Ramsay remains an Employee).
(c) 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.
6
<PAGE>
3. Laurence Chapman
----------------
(a) The normal retirement benefit for which Mr. Chapman is entitled
under the Plan shall be established as provided at Paragraph 3.01 of the Plan;
provided, however, that Mr. Chapman will be credited with two Years of Credited
Service for each year, up to a maximum of thirteen years, that he remains an
Employee, with one year of Credited Service for each year he remains as an
Employee thereafter.
(b) In the event of a Change in Control, Mr. Chapman will be credited
for an additional number of Years of Credited Service, over and above what he
has accrued under the provisions of Section 8.15(a), which is equal to thirteen
years minus the number of years he has been an Employee of the Company; provided
that, if he remains an Employee after the Change of Control, he will be entitled
to accrue additional Years of Service only at the rate of one year for each year
he remains an employee; and further provided that, if Mr. Chapman has become
entitled to any additional years of Credited Service under a Severance
Compensation Agreement, such provisions shall be given full effect (including
any provision in the Severance Compensation agreement suspending the accrual of
additional Years of Credited Service following the Change of Control if Mr.
Chapman remains an Employee).
(c) 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.
4. Emmet Wolfe
-----------
Notwithstanding the provisions of Paragraph 1.11, Emmet Wolfe is declared
to remain eligible as a Participant in the Plan until his retirement; provided
that his Years of Credited Service, his Compensation and his Average Monthly
Compensation shall be determined as of July 31, 1998; and further provided that
the determination of his Compensation on such date shall not include any award
under the Management Incentive Plan for any fiscal year following fiscal year
1996.
7
<PAGE>
5. Uwe Bockenhauer
---------------
Notwithstanding the provisions of Paragraph 1.11, Uwe Bockenhauer 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 will also be
deemed eligible to retire on or before such date even though he is not then aged
60.
6. Gary Ramsdell
-------------
Notwithstanding the provisions of Paragraph 1.11, Gary Ramsdell 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.
7. David Canedo
------------
Notwithstanding the provisions of Paragraph 1.11, 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.
8. F. Patrick Burke
----------------
(a) Eligibility: Mr. Burke will be deemed eligible for the normal
-----------
retirement benefit set forth at Paragraph 3.01 on January 1, 1998.
(b) Benefit: For the purposes of calculating Mr. Burke's benefits under
-------
Paragraph 3.01 and elsewhere in the Plan:
(i) "Years of Credited Service" shall mean, as of January 1, 1998,
thirty Years of Credited Service.
8
<PAGE>
(ii) Subparagraph (B) of Paragraph 3.01 is hereby deemed to be
amended to add the following language at the end thereof:
"plus
----
An amount of $1750, whether or not Mr. Burke is eligible for, or has
applied for, or is receiving, a retirement benefit under the pension plan
maintained for employees of RMI, Inc."
(iii) The following amounts will be used and deemed as the five
highest consecutive calendar years for the purposes of establishing Average
Monthly Compensation; provided that the sum set forth for 1997 earnings will be
increased to the extent Mr. Burke is entitled to a "RONA" bonus under the
Management Incentive Plan, as set forth at paragraph 1 (d) of the Severance
Agreement and Release between the Company and Mr. Burke, dated December 21,
1996:
<TABLE>
<CAPTION>
YEAR "EARNINGS"
---- ----------
<S> <C>
1993 $ 208,036
1994 $ 208,036
1995 $ 219,094
1996 $ 260,245
1997 $ 219,094
</TABLE>
9. Robert Gustafson
----------------
(a) The normal retirement benefit for which Mr. Gustafson is entitled
to under the Plan shall be as established at Paragraph 3.01 of the Plan;
provided, however, that Mr. Gustafson will be credited with two Years of
Credited Service for each year, up to a maximum of fifteen years, that he
remains an Employee, with one year of Credited Service for each year he remains
as an Employee thereafter.
(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.
9
<PAGE>
EXHIBIT 10.9
[LOGO OF ROHR, INC.]
================================================================================
ROHR, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective April 3, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
<S> <C>
I DEFINITIONS........................................................ 1
II PARTICIPANT AND COMPANY CONTRIBUTIONS.............................. 4
2.1 PARTICIPANT ELECTIVE DEFERRAL OF BASE SALARY.................. 4
2.2 PARTICIPANT ELECTIVE DEFERRAL OF INCENTIVE COMPENSATION
AND BONUSES................................................... 5
2.3 NON-ELECTIVE CREDITS TO ADJUST FOR LIMITS ON SAVINGS PLAN
CONTRIBUTIONS................................................. 5
III DETERMINING THE BALANCE OF THE PARTICIPANTS' INTEREST.............. 7
3.1 MEMORANDUM ACCOUNT............................................ 7
3.2 ADJUSTMENT TO MEMORANDUM ACCOUNT FOR EARNINGS AND LOSSES...... 7
3.3 CASH BALANCE SUPPLEMENT....................................... 7
IV PAYMENTS TO PARTICIPANTS AND BENEFICIARIES......................... 8
4.1 DISTRIBUTION UPON TERMINATION OF SERVICE...................... 8
4.2 INSTALLMENT PAYMENTS.......................................... 8
4.3 REVALUATION AFTER TERMINATION OF SERVICE--INSTALLMENT
PAYMENTS ONLY................................................. 9
4.4 PAYMENT DATES................................................. 9
4.5 FULL PAYMENT OF AMOUNTS PAYABLE UNDER SAVINGS PLAN............ 9
4.6 INCAPACITY OF PARTICIPANT OR BENEFICIARY...................... 9
4.7 WITHHOLDING TAXES............................................. 10
4.8 HARDSHIP BENEFITS............................................. 10
V ADMINISTRATION OF THE PLAN......................................... 10
5.1 APPOINTMENT OF COMMITTEE...................................... 10
5.2 MEETINGS OF COMMITTEE......................................... 10
5.3 POWERS OF THE COMMITTEE....................................... 11
5.4 INDEMNIFICATION............................................... 11
5.5 ALLOCATION AND DELEGATION OF DUTIES........................... 12
5.6 CLAIMS PROCEDURE.............................................. 13
VI. COST OF PLAN; PAYMENT OF BENEFITS.................................. 14
6.1 UNFUNDED OBLIGATION............................................ 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.2 Discretionary Investments by Company.......................... 14
6.3 Exemptions from Certain ERISA Provisions...................... 15
VII AMENDMENT, DISCONTINUANCE AND TERMINATION OF PLAN.................. 15
VIII MISCELLANEOUS PROVISIONS........................................... 16
8.1 COMPANY'S RIGHTS.............................................. 16
8.2 NOTICES AND APPLICATIONS FOR BENEFITS......................... 16
8.3 RECORDS CONCLUSIVE............................................ 17
8.4 NO ALIENATION OR ASSIGNMENT OF BENEFITS....................... 17
6.3 EXEMPTIONS FROM CERTAIN ERISA PROVISIONS...................... 17
8.5 MISCELLANEOUS................................................. 17
8.6 LEGAL EXPENSES................................................ 18
</TABLE>
ii
<PAGE>
ROHR, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
PREAMBLE
A. Adoption of Plan. THIS ROHR, INC. EXECUTIVE DEFERRED COMPENSATION
----------------
PLAN (hereafter referred to as the "Plan") is hereby adopted effective as of
April 3, 1997.
B. Purpose of Plan. This Plan is adopted for the purpose of enabling the
---------------
Company to continue to attract and retain exceptional executives by providing
retirement and other benefits to selected officers and key salaried employees of
outstanding competence.
C. Nature of Plan. This Plan is not intended nor expected to qualify
--------------
under the provisions of Section 401 of the Internal Revenue Code of 1986. For
purposes of the Employee Retirement Income Security Act of 1974, the Plan is
intended and expected to be an employee benefit plan which is an unfunded plan
and which covers only a select group of management and highly compensated
employees and, therefore, which is exempt from various provisions of such act.
SECTION 1
DEFINITIONS
1.1 "Accounts" means Accounts as defined in the Savings Plan.
--------
1.2 "Base Salary" means, with respect to any Participant for any Plan
-----------
Year, the base salary of such Participant during such Plan Year, including lump
sums and restricted stock paid in lieu of annual merit increases (with such
stock valued for these purposes at the closing price of such stock on the date
of grant) and amounts of base salary the receipt of which is deferred for any
reason (for example, deferral elections resulting in Pretax Savings
Contributions to the Savings Plan, deferrals resulting in a Company contribution
pursuant to a cafeteria plan described in Code Section 125, and elections under
Sections 2.1 of this Plan), but excluding Incentive Compensation and Bonuses and
---------
other non-periodic forms of compensation.
1.3 "Beneficiary" means the individual(s) designated by a Participant (in
-----------
such manner as established by the Committee from time to
1
<PAGE>
time) to receive benefits from this Plan in the event of the Participant's
death. If no designated Beneficiary survives the Participant, the Beneficiary
shall be the person or persons in the first of the following classes who survive
the Participant:
(a) the Participant's spouse at date of death,
(b) the Participant's descendants, by right of representation,
(c) the Participant's parents,
(d) the Participant's brothers and sisters, and
(e) the Participant's estate.
1.4 "Cash Balance Supplement" means, with respect to any Participant, the
-----------------------
additional benefit, if any, described in Section 3.3.
1.5 "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
1.6 "Committee" means the committee appointed pursuant to Section 5 to
---------
administer the Plan.
1.7 "Company" means Rohr, Inc. and any successor corporation or entity.
-------
1.8 "Company Matching Contribution" means Company Matching Contribution as
-----------------------------
defined in the Savings Plan.
1.9 "Compensation" means Compensation as defined in the Savings Plan.
------------
1.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
1.11 "Incentive Compensation and Bonuses" means incentive awards and
----------------------------------
bonuses payable to a Participant with respect to a Plan Year, including the
---------
award, if any, paid or credited to the Participant during such Plan Year under
the Rohr Management Incentive Plan, whether paid in cash, deferred or paid in
the form of restricted stock or stock options (in which case, the restricted
stock or stock options shall be valued for these purposes as the amount of cash
surrendered by the Participant from his or her award to receive such restricted
stock or stock options) and any other amount of incentive awards and bonuses the
receipt of which is deferred for any reason, but excluding the grant of
---------
restricted stock or stock options (except to the extent specifically provided
for above), the vesting of restricted stock and the exercise of stock options.
2
<PAGE>
1.12 "Memorandum Account" means, with respect to each Participant, the
------------------
account established under Section 3.1 with respect to such Participant.
1.13 "Participant" means each individual who:
-----------
(a) is actively employed on a permanent, full-time basis by the
Company or any of its wholly-owned subsidiaries, and
---
(b) is (i) an officer of the Company elected by its Board of Directors
or appointed by the chief executive officer of the Company, or (ii) designated
on the personnel records of the Company as an executive employee of the Company,
or (iii) an officer of a wholly-owned subsidiary of the Company which has been
designated by resolution of the Board to participate in the Plan, and
---
(c) first satisfies one of the qualifications described in subsection
(b) above on or after July 1, 1996.
In addition, the Committee may designate other officers and key
salaried employees of the Company or its wholly-owned subsidiaries as
Participants.
Notwithstanding the foregoing provisions of this Section 1.13, no
person shall become a Participant until the earlier to occur of (A) a
registration statement with respect to this Plan has beed filed with the
Securities and Exchange Commission and become effective, or (B) the Company's
General Counsel has provided a certificate to the Compensation and Benefits
Committee of the Company's Board of Directors indicating that a registration
statement with respect to this Plan need not be filed with the Securities and
Exchange Commission.
1.14 "Plan" means the Rohr, Inc. Executive Deferred Compensation Plan, as
----
set forth in this document and as amended from time to time.
1.15 "Plan Year" means (a) the period that commences on the effective date
---------
of this Plan and ends on December 31, 1997, and (b) each subsequent twelve month
period which commences January 1 and ends on December 31.
1.16 "Pretax Savings Contribution" means Pretax Savings Contribution as
---------------------------
defined inthe Savings Plan.
3
<PAGE>
1.17 "Savings Plan" means the Pretax Savings Plan for the Salaried
------------
Employees of Rohr, Inc. (Amended and Restated 1994), as amended to date and as
it may be further amended from time to time.
1.18 "Termination of Service" means the termination of a Participant's
----------------------
employment with the Company or any wholly-owned subsidiary, whether by voluntary
or involuntary separation, retirement, permanent and total disability, or death
(but excluding transfers between the Company and any wholly-owned subsidiary or
between wholly-owned subsidiaries).
SECTION 2
PARTICIPANT AND COMPANY CONTRIBUTIONS
2.1 Participant Elective Deferral of Base Salary
--------------------------------------------
(a) Before the first day of any Plan Year, each Participant may elect
to defer his or her receipt of up to one hundred percent (100%) of his or her
Base Salary for the Plan Year (but only to the extent that such Base Salary
would have been paid to such Participant in cash during the Plan Year except as
the result of the Participant's election under this Section 2.1).
(b) An individual who first becomes a Participant during a Plan Year
may make such election on or before thirty days from the date on which he or she
becomes a Participant and such election shall apply for so much of the Plan Year
as commences on the date on which the Committee receives the election (or as
soon thereafter as is reasonably practicable).
(c) The election shall be irrevocable and shall be made in the manner
and on the form prescribed by the Committee. The election shall apply only to
that Plan Year or, if applicable, partial Plan Year.
(d) All amounts deferred under this Section with respect to a
Participant shall be credited to the Participant's Memorandum Account
established pursuant to Section 3.1.
4
<PAGE>
2.2 Participant Elective Deferral of Incentive Compensation and Bonuses
--------------------------------------------------------------------
(a) Before the first day of any Plan Year, each Participant may elect
to defer his or her receipt of up to one hundred percent (100%) of his or her
Incentive Compensation and Bonuses payable during the Plan Year (but only to the
extent that such Incentive Compensation and Bonuses would have been paid to such
Participant in cash during the Plan Year except as the result of the
Participant's election under this Section 2.2).
(b) An individual who first becomes a Participant during a Plan Year
may make such election on or before thirty days from the date on which he or she
becomes a Participant and such election shall apply for so much of the Plan Year
as commences on the date on which the Committee receives the election (or as
soon thereafter as is reasonably practicable).
(c) The election shall be irrevocable and shall be made in the manner
and on the form prescribed by the Committee. The election shall apply only to
that Plan Year or, if applicable, partial Plan Year.
(d) All amounts deferred under this Section with respect to a
Participant shall be credited to the Participant's Memorandum Account
established pursuant to Section 3.1.
2.3 Non-Elective Credits to Adjust for Limits on Savings Plan
----------------------------------------------------------
Contributions
-------------
(a) This Section 2.3 shall apply to any Participant in this Plan only
for any Plan Year in which the Participant's Pretax Savings Contribution
election under the Savings Plan is at least equal to the maximum Pretax Savings
Contribution that could be made without resulting in the application under the
terms of such Plan of any of the limitations referred to in paragraph (ii) of
subsection (c) of this Section 2.3.
(b) For each Participant described in subsection (a) of this Section,
a credit to the Participant's Memorandum Account shall be made for each payroll
period (or such other period as may be determined by the Committee) in an amount
equal to the excess of (i) the "Adjusted Company Matching Contribution" for such
period over (ii) the actual Company Matching Contribution made to the Accounts
of the Participant under the Savings Plan with respect to such period. For
purposes of this Section, the Adjusted Company Matching Contribution means the
Company Matching Contribution that would have been made for the
5
<PAGE>
period, under the terms of the Savings Plan as in effect for such period, if the
Participant had elected to make the largest Pretax Savings Contribution
permitted under the terms of such Savings Plan (and if the terms of such Plan
were adjusted as set forth in subsection (c)).
(c) The adjustment referred to in subsection (b) above are the
following:
(i) For the purposes of determining Pretax Savings Contributions
and Company Matching Contributions, the Participant's Compensation shall be
equal to his or her Base Salary, plus his or her Incentive Compensation and
Bonuses, as defined in this Plan, without regard to:
(A) Limitations or includible compensation contained in Code
Section 401(a)(17); and
(B) Any reductions in Compensation resulting from an election
by the Participant under any cafeteria plan described in Code Section 125 or
from an election by the Participant under Section 2.1 or 2.2 of this Plan.
(ii) The amounts which may be contributed to the Savings Plan as
Pretax Savings Contributions and as Company Matching Contributions shall not be
limited or reduced by any of the following provisions:
(A) Any limitation on contributions contained in Code
Section 415;
(B) The limitation on elective deferrals contained in Code
Section 402(g);
(C) Any limitation on elective deferrals or on matching
contributions which is applied under the Savings Plan as a result of the
contribution percentage requirements of Code Section 401(k)(3)(ii) or 401(m)(l).
6
<PAGE>
SECTION 3
DETERMINING THE BALANCE OF
THE PARTICIPANT'S INTEREST
3.1 Memorandum Account
------------------
The Committee shall cause a ledger account (the "Memorandum Account")
to be established with respect to each Participant. Such Memorandum Account
shall be credited with all amounts deferred by such Participant pursuant to
Sections 2.1 and 2.2, and all amounts credited in lieu of Company Matching
Contributions pursuant to Section 2.3, and shall be adjusted for earnings and
losses pursuant to Section 3.2. The Committee shall cause a statement to be
provided to each Participant as to the balance in such Participant's Memorandum
Account on a quarterly basis (or at such other intervals as may be determined by
the Committee).
3.2 Adjustment to Memorandum Account for Earnings and Losses
--------------------------------------------------------
For each quarter (or such other interval as may be determined by the
Committee), the aggregate amount credited to a Participant's Memorandum Account
shall be increased or decreased at a percentage rate equal to the average
percentage rate of increases or decreases for such quarter (or other interval)
to such Participant's Accounts under the Savings Plan attributable to investment
of such Accounts. Such increase or decrease shall be credited periodically to
the Participant's Memorandum Account as contemplated by Section 3.1 hereof.
3.3 Cash Balance Supplement.
------------------------
Each Participant who makes an election to defer Base Salary under
Section 2.1 or to defer Incentive Compensation and Bonuses under Section 2.2 and
who subsequently becomes entitled to payments under Section 4 shall be entitled
to an additional payment equal to the amount by which the Participant's Cash
Balance Account under the Rohr, Inc. Cash Balance Retirement Plan would increase
as of the date of such payment under Section 4 if the Participant's Compensation
under such Cash Balance Retirement Plan were to be determined without regard to
the Participant's elections under Section 2.1 and 2.2 of this Plan (but taking
into account the limitations contained in such Cash Balance Retirement Plan
including but not limited to dollar limitations on
7
<PAGE>
recognized Compensation (as defined in such Cash Balance Retirement Plan) and
dollar and percentage limitations on benefits).
SECTION 4
PAYMENTS TO
PARTICIPANTS AND BENEFICIARIES
4.1 Distribution Upon Termination of Service
----------------------------------------
Upon a Participant's Termination of Service, the Company shall pay the
balance in the Participant's Memorandum Account and the balance in the
Participant's Cash Balance Supplement to the Participant (or, in the event of
the Participant's death, to the Participant's Beneficiary) as follows:
(a) in a lump sum cash payment, or
(b) if the Participant (or the Beneficiary of a deceased Participant)
has elected to receive such amounts on an installment basis, in accordance with
Section 4.2.
4.2 Installment Payments
--------------------
A Participant may elect to receive the amounts which are payable under
Section 4.1 in substantially equal annual installments (subject to the provision
for revaluation set forth in Section 4.3 below). Such election shall be made in
accordance with such procedures and forms as may be specified by the Committee.
An election to receive payments in installments shall specify the number of
years, from five to fifteen, over which the annual installments will be paid;
provided, however, that the payment period elected by the Participant shall not
result in the payment of an amount of annual installment of less than one
thousand dollars ($1,000), and provided, further, that a Participant may not
elect an installment payment unless he or she has also elected an installment
payment under the Savings Plan, and the installment period elected under this
Plan may not exceed the installment period elected under the Savings Plan.
8
<PAGE>
4.3 Revaluation After Termination of Service--Installment Payments Only
-------------------------------------------------------------------
If a Participant elects an installment payment, the amounts which are
payable under Section 4.1 and which remain to be paid shall be revalued
throughout the installment period in the manner set forth in Section 3.2. The
amount of each installment shall equal the undistributed portion of the
Participant's balance remaining to be paid under Section 4.1 (as revalued
hereunder) as of the revaluation date immediately preceding the anniversary of
the most recent installment payment, multiplied by a fraction, the numerator of
which is one and the denominator of which is the number of installments
(including the current one) which remain to be made.
4.4 Payment Dates
-------------
Amounts payable under this Plan shall be paid to a Participant as soon
as practicable after such amounts become payable under this Section 4. If
payments are made in installments, each installment shall be payable as of the
anniversary date of the initial payment.
4.5 Full Payment of Amounts Payable Under Savings Plan
--------------------------------------------------
If for any reason an amount remains to be paid to a Participant under
this Plan after all amounts in such Participant's Savings Plan Accounts have
been paid to or for the account of such Participant, the amount remaining to be
paid shall cease to be revalued in accordance with Section 3.2 and shall be paid
to the Participant or his or her Beneficiary as soon as practicable.
4.6 Incapacity of Participant or Beneficiary
---------------------------------------
If the Committee finds that any Participant (or Beneficiary) to whom a
payment is payable under the Plan is unable to care for his or her affairs
because of illness or accident or other incapacity, any payment due (unless a
prior claim therefor shall have been made by a duly qualified guardian or other
legal representative) may be paid, at the discretion of the Committee, to the
spouse, child or children, parent(s), brother(s) and sister(s) of such
Participant (or Beneficiary) or to any person that the Committee may determine.
Any such payment shall be a payment for the account of such Participant (or
Beneficiary) and shall, to the extent thereof, be a complete discharge of the
obligations of the Company under the provisions of the Plan.
9
<PAGE>
4.7 Withholding Taxes
-----------------
Appropriate payroll taxes shall be withheld from cash payments made to
Participants or Beneficiaries pursuant to this Plan.
4.8 Hardship Benefits
------------------
A Participant may be permitted to elect to receive a payment under
this Plan, substantially in accordance with procedures established pursuant to
Section 8.2 of the Savings Plan, related to a hardship as contemplated by
Section 8.2 of the Savings Plan. Before such a payment shall be authorized with
respect to this Plan, the Participant shall apply for all loans and hardship
withdrawals allowable on the Participant's Account balance under the Savings
Plan.
In the event that a hardship payment is made in accordance with this
provision, the Participant shall forfeit five percent (5%) of the amount of
such payment, and the Participant's Memorandum Account shall be reduced by such
forfeiture and by the amount of the payment.
SECTION 5
ADMINISTRATION OF THE PLAN
5.1 Appointment of Committee
------------------------
The Plan shall be administered by Committee of at least three persons
(the "Committee") who shall be appointed and may be removed by the Board of
Directors or a Committee of the Board. All members of the Committee shall hold
office at the pleasure of the Board of Directors or such Committee of the Board,
and any member may resign by giving written notice to (a) the Board of
Directors, (b) such Committee of the Board, or (c) the Committee and the chief
executive officer of the Company. Vacancies may be filled by the chief
executive officer of the Company until the next meeting of its Board of
Directors or such Committee of the Board.
5.2 Meetings of Committee
---------------------
The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time determine. Notice
shall not be required if waived in writing. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business. All resolutions or other actions taken by the Committee at any
meeting shall be by vote of a majority of
10
<PAGE>
those who are present at any such meeting and who are entitled to vote.
Resolutions may be adopted or other action taken without a meeting upon written
consent signed by at least two-thirds of the members of the Committee. No member
of the Committee shall have any right to vote or decide upon any matter relating
solely to himself or to decide any of his or her rights or benefits under the
Plan.
The Committee shall appoint one of its members to act as its Chairman
and may appoint a Secretary who need not be a member of the Committee.
5.3 Powers of the Committee
-----------------------
The Committee shall have all powers necessary to administer the Plan
in accordance with its terms and provisions. The Committee shall authorize
disbursement of payments under the Plan and may provide rules and regulations
for administration of the Plan consistent with its terms and provisions. Any
construction, interpretation or application of the Plan by the Committee shall
be final, conclusive and binding on all persons.
The Committee may appoint agents and may employ attorneys,
accountants, actuaries, and other consultants, and other experts and advisors,
as necessary, any of whom may be employed or retained by the Company.
The Company shall pay all expenses authorized and incurred by the
Committee in the administration of the Plan. The members of the Committee shall
serve without compensation for services.
5.4 Indemnification
---------------
(a) Except as prohibited by law, the Company shall indemnify any
Committee member, or such other persons as the Committee may specify, who was or
is a party or is threatened to be a party to any threatened, pending, or
contemplated claim, action, suit or proceeding, where such claim, action, suit
or proceeding alleges an act or omission in connection with administration,
management, or other activity under or in connection with the Plan.
(b) Right of Indemnification. The aforesaid right of indemnification
------------------------
shall be contingent upon the following:
(i) Where a person designated in subsection (a), above, is found
not liable in an adjudication on the merits, the Company
11
<PAGE>
shall indemnify such person for all expenses of litigation including attorneys'
fees.
(ii) Where a claim or suit is terminated by reason of a
settlement, the Company shall indemnify such person against all expenses in
connection therewith, including cost of settlement and attorneys' fees, where,
in the judgment of the Company or of any counsel the Company may request make
such a determination, said person would not be liable as a result of an act of
willful misconduct or intentional fraud or an act intended to attain a personal
benefit or advantage materially adverse to the Plan or its Participants, in an
adjudication on the merits.
(iii) Where such person is determined to be liable in an
adjudication on the merits, and either (A) such adjudication includes a finding
that such person participated in an act of willful misconduct or intentional
fraud or acted for the purpose of attaining a personal benefit or advantage
materially adverse to the interest of the Plan or its participants, or (B) if
the adjudication does not expressly so provide, in the judgment of the Company,
or any counsel whom the Company may request make such a determination, such
person's action constituted any of the conduct described in subsection (A)
hereof, there shall be no right of indemnification.
(iv) When authorized by the Company, expenses incurred in
litigation may be paid in advance of the final disposition of such action or
suit upon receipt of an undertaking by such person to repay any amounts so
advanced unless the conditions specified in (i) or (ii) are met.
(v) In all cases where indemnification is sought under these
provisions, upon the assertion or institution of any such claim, action, suit or
proceeding, the party requesting indemnification shall in writing give the
Committee an opportunity at is own expense, to handle and defend such claim,
suit, action or proceeding on his or her behalf.
(c) Liability Insurance. The Company, at its own expense, shall
-------------------
purchase adequate liability insurance covering the Committee, and such other
persons as the Company deems appropriate, for acts or omissions of such persons
in the administration of the Plan.
5.5 Allocation and Delegation of Duties
-----------------------------------
By action of the Committee, fully reflected in the minutes of the
Committee, the Committee may allocate its responsibilities among its members and
may designate other persons to carry out its responsibilities under the Plan.
Without limiting the foregoing, the
12
<PAGE>
Committee, and any person delegated under the provisions hereof to carry out any
responsibilities under the Plan, shall be entitled to rely upon certificates,
reports, and opinions made or given by any actuary, accountant, legal counsel or
other expert or advisor selected or approved by the Committee; and the members
of the Committee and any delegate thereof shall not be liable, except to the
extent provided by law, for any action taken, suffered or omitted by them in
good faith or for any such action in reliance upon any such actuary, accountant,
legal counsel or other expert or advisor.
The Committee shall designate the person or persons who shall be authorized
to sign documents and make payments for the Committee; provided, however, that
any member of the Committee shall be authorized on behalf of the Committee, the
same as if the Committee had unanimously acted, to execute documents in
connection with benefit payment authorizations made upon the request of persons
entitled thereto or their legal representative, and to take or to authorize such
actions as are necessary or desirable to effectuate such authorizations.
5.6 Claims Procedure
----------------
(a) Claims for Benefit. Claims for benefit under the Plan shall be
------------------
made in writing to any member of the Committee, who individually may act upon
such claim.
(b) Notice of Denial of Claim. If such claim for benefits is wholly
-------------------------
or partially denied, the Committee member to whom the claim has been submitted
shall, within a reasonable period of time, but no later than 90 days after
receipt of the claim, notify the claimant of the denial of the claim. Such
notice of denial (i) shall be in writing, and given in accordance with the
provisions for notices elsewhere herein, (ii) shall be written in a manner
calculated to be understood by the claimant, and (iii) shall contain (A) the
specific reason or reasons for denial of the claim, (B) a specific reference to
the pertinent Plan provisions upon which the denial is based, (C) a description
of any additional material or information necessary for the claimant to perfect
the claim, along with an explanation why such material or information is
necessary, and (D) an explanation of the Plan's claim review procedure.
(c) Request for Review of Denial of Claim. Within 120 days of the
-------------------------------------
receipt by the claimant of the written notice of denial of the claim, or such
later time as shall be deemed reasonable, taking into account the nature of the
benefit subject to the claim and any other attendant circumstances, or, if the
claim has not been acted upon within 90 days after receipt of the claim by the
Committee, the claimant may file a written request that the full Committee
conduct a full and fair review of
13
<PAGE>
the denial of (or inaction on) the claimant's claim for benefits, including the
holding of a hearing, if deemed necessary by the full Committee. In connection
with the claimant's appeal of the denial of (or inaction on) his or her claim,
the claimant may review pertinent documents and may submit issues and comments
in writing.
(d) Decisions on Review of Denial of Claim. The full Committee shall
--------------------------------------
deliver to the claimant a written decision on the claim promptly, but no later
than 60 days after the receipt of the claimant's request for review, except that
if there are special circumstances (such as the need to hold a hearing) which
require an extension of time for processing, the aforesaid 60 day period shall
be extended to 120 days. Such decision shall (i) be in writing and given in
accordance with the provisions for notice elsewhere hereunder (ii) be written in
a manner calculated to be understood by the claimant, (iii) include specific
reasons for the decision, and (iv) contain specific references to the pertinent
Plan provisions upon which the decision is based.
All decisions made by the above procedure shall be final and there
shall be no right of appeal.
SECTION 6
COST OF PLAN; PAYMENT OF BENEFITS
6.1 Unfunded Obligation
-------------------
All benefits to be paid to Participants and/or their Beneficiaries
pursuant to this Plan are unfunded obligations of the Company. The Company is
not required to segregate any monies from its general funds or to create any
trusts, or to make any special deposits with respect to these obligations. As
the Plan is not a funded plan, all benefits payable under the Plan shall be paid
directly by the Company to the Participant.
6.2 Discretionary Investments by Company
------------------------------------
The Company may from time to time invest funds to provide all or any
portion of the amounts to be paid under this Plan as the Company, in its sole
discretion, shall determine. The Company may in its sole discretion determine
that all or some portion of the amount to be invested shall be paid into one or
more grantor trusts to be established by the Company of which the Company shall
be the beneficiary. The Company may designate an investment advisor to direct
investment and
14
<PAGE>
reinvestment of the funds, including investments of any grantor trusts
hereunder.
Any investments including trust investments which the Company may make
to provide funding for the Company's obligations shall at all times continue to
be part of the general funds of the Company. The segregation of any assets or
and the creation or maintenance of any trust or Memorandum Accounts shall not
create or constitute a trust or a fiduciary relationship between the Committee
or the Company and a Participant, or otherwise create any vested or beneficial
interest whatsoever in any Participant or his or her Beneficiary or his or her
creditors in any assets of the Company. Any claims which the Participants and
their Beneficiaries may have under this Plan shall not include any claim against
the Company for any changes in the value of any assets which may be invested or
reinvested by the Company with respect to this Plan.
6.3 Exemptions from Certain ERISA Provisions.
-----------------------------------------
This Plan is unfunded and is maintained primarily for the purposes of providing
deferred compensation for a select group of management or highly compensated
employees and, accordingly, is intended to be exempt from certain provisions of
ERISA pursuant to applicable provisions of ERISA and related Regulations and
rulings.
SECTION 7
AMENDMENT, DISCONTINUANCE AND TERMINATION OF PLAN
7.1 The Company hopes and expects to continue the Plan and the payment of
benefits hereunder indefinitely, but such continuance is not assumed as a
contractual obligation. The Company expressly reserves the right, at any time
and from time to time, to modify or amend, in whole or part, any or all of the
provisions of the Plan or to terminate or otherwise discontinue the Plan at any
time without the consent of any other party, without liability except as set
forth in the final sentence of this Section 7.1, acting by a resolution adopted
by action of (i) the Board, or (ii) a Committee of the Board, to the extent such
Committee of the Board has been delegated such authority, or (iii) the
Committee, to the extent that such Committee has been delegated such authority
as to specific amendments or issues, by a resolution adopted by the Board or by
the Committee of the Board. In any of such cases, such amendment shall be set
forth in an instrument in writing executed in the name of Rohr, Inc., by an
officer or officers duly authorized to execute such instrument. Notwithstanding
the foregoing, no termination or discontinuance of the
15
<PAGE>
Plan shall serve to reduce the benefits of a Participant or those which he or
she would have been eligible to receive if he or she had terminated his or her
employment on the date prior to such termination or discontinuance of the Plan.
SECTION 8
MISCELLANEOUS PROVISIONS
8.1 Company's Rights
----------------
The Company's rights to discipline or discharge Participants or exercise any of
the Company's rights with respect to the employment of Participants shall not be
affected by reason of the existence of the Plan or any action under the Plan by
the Company or the Committee. Participation in the Plan shall not give any
Employee the right to be retained in the Company's employ or, upon dismissal, to
have any right or interest in the Plan, except as specifically provided in the
Plan.
8.2 Notices and Applications for Benefits
-------------------------------------
(a) All notices, statements and other communications from the Company
to a Participant or Beneficiary required or permitted hereunder shall be deemed
to have been duly given, furnished, delivered or transmitted, as the case may
be, when delivered to (or when mailed first-class mail, postage prepaid and
addressed to) the Participant or Beneficiary at his or her address last
appearing on the books of the Company.
(b) All notices, instructions and other communications from a
Participant or Beneficiary to the Company required or permitted hereunder shall
be on the respective forms from time to time prescribed therefor by the
Committee, shall be mailed by first-class mail or delivered to such location as
shall be specified in regulations or upon the forms prescribed by the Committee,
and shall be deemed to have been duly given and delivered upon receipt by the
Company at such location.
(c) Each Participant shall be responsible for furnishing the Committee
with such Participant's current address and the name and current address of his
or her Beneficiary. The Committee and the Company shall have no obligation or
duty to locate such Participant or his or her Beneficiary. In the event a
Participant or his or her Beneficiary becomes entitled to a payment under this
Plan and such payment cannot then be made because the current address referred
to above is incorrect, because such Participant or Beneficiary fails to respond
to notice sent to the address referred to above, because of conflicting claims
to such
16
<PAGE>
payment, or for any other reason, then the amount of such payment, when and if
made, shall be the dollar value that would have originally been payable as of
the date determined in Section 4, regardless of the date such payment is
actually made, and no interest thereon or other sums shall be paid in addition
to such dollar value so determined.
8.3 Records Conclusive
------------------
The records of the Company and the Committee shall be conclusive in
respect to all matters involved in the administration of the Plan.
8.4 No Alienation or Assignment of Benefits.
-----------------------------------------
To the extent permitted by law, none of the benefits payable hereunder
shall be subject to the claims of any creditor of any Participant, nor shall the
same be subject to attachment, garnishment or other legal or equitable process
by any creditor of the Participant, nor shall any Participant have any right to
alienate, anticipate, withdraw, commute, pledge, assign or otherwise encumber
any of such benefits. In case any person shall attempt to alienate, anticipate,
withdraw, commute, pledge, assign or otherwise encumber any payment to which he
or she is or may be entitled under the Plan, the Committee, in its discretion,
may terminate the interest of such person in any such payment, and hold or apply
the same or any part thereof to or for the benefit of such the Participant, his
or her Beneficiary, to the spouse, children or other dependents, parent(s),
brother(s) and sister(s) of such Participant or any of them in such manner and
in such proportions as the Committee may consider proper.
8.5 Miscellaneous
-------------
(a) All provisions of the Plan, including definitions, shall be
construed according to ERISA or, to the extent, if any not preempted by ERISA,
according to the laws of the State of California.
(b) Words used in the masculine gender include the feminine gender.
Words used in the singular or plural shall be construed as if plural or
singular, respectively, where they would so apply.
(c) Titles of sections are inserted for convenience and shall not
affect the meaning or construction of the Plan.
(d) Nothing herein contained shall in any manner modify, impair, or
affect the existing or future rights of any Participant to
17
<PAGE>
participate in any and all Company plans of any kind for which he or she would
otherwise be eligible.
(e) This agreement shall be binding upon any successor of the Company
and any successor shall substitute for the Company under the terms hereof. The
term "successor" as used herein shall include any person, firm, corporation or
other business entity which at any time acquires all or substantially all of the
stock, assets or business of the Company by merger, consolidation, purchase or
otherwise.
(f) In the event that the performance hereof, or of any portion
hereof, shall be in contravention of any law, rule or regulation of any
governmental body having or claiming to have jurisdiction, then, to the extent
of any such illegality or violation, this Plan shall be inoperative without in
any manner impairing its other provisions and obligations but nothing herein
contained shall be construed to require any Participant to forsake or relinquish
any of his or her rights hereunder.
8.6 Legal Expenses
--------------
In the event a Participant commences or is required to defend a claim
or litigation in order to obtain or retain the benefits of the Plan, and
thereafter through litigation or settlement he or she is successful in whole or
in part, the Company shall reimburse the Participant for all fees and expenses
(including but not limited to attorneys' fees and out-of-pocket costs or other
expenses such as reduced salary from any other employment due to time spent in
said litigation) relating to or arising from such claim or litigation.
IN WITNESS WHEREOF, Rohr, Inc., has caused the Plan to be executed on
the 3rd day of April 1997.
ROHR, INC.
By: /s/ R. W. Madsen
------------------------
Name: R. W. Madsen
----------------------
Title: Vice President
----------------------
18
<PAGE>
EXHIBIT 11.1
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF PRIMARY NET INCOME PER SHARE
-------------------------------------------
OF COMMON STOCK
---------------
(in thousands except for earnings per share data)
-------------------------------------------------
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income applicable to primary
earnings per common share $ 10,818 $ 4,130 $ 19,059 $ 4,817
========== ========== ========== ==========
Common stock and common stock equivalents:
Average shares of common stock
outstanding during the period 25,294 21,635 24,333 19,560
Net effect of common stock equivalents
(principally stock options and rights) 759 677 869 608
---------- ---------- ---------- ----------
Total common stock and common stock
equivalents 26,053 22,312 25,202 20,168
========== ========== ========== ==========
Primary net income per average
common share $ 0.42 $ 0.19 $ 0.76 $ 0.24
========== ========== ========== ==========
</TABLE>
Page 15
<PAGE>
EXHIBIT 11.2
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF FULLY DILUTED NET INCOME PER SHARE
-------------------------------------------------
OF COMMON STOCK - UNAUDITED
---------------------------
(in thousands except for earnings per share data)
-------------------------------------------------
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income from continuing operations
applicable to primary earnings per
common share $ 10,818 $ 4,130 $ 19,059 $ 4,817
Add back interest and issue expense on
dilutive convertible debentures and notes -
net of tax adjustment 236 283 725 1,561
---------- ---------- ---------- ----------
Net income applicable to fully diluted
earnings per share $ 11,054 $ 4,413 $ 19,784 $ 6,378
========== ========== ========== ==========
Average number of shares outstanding on
a fully diluted basis:
Shares used in calculating primary earnings
per share 26,053 22,312 25,202 20,168
Unexercised options 111 24 - 92
Shares issuable on dilutive conversion
of debentures and notes 1,905 2,291 1,905 2,291
---------- ---------- ---------- ----------
Average number of shares outstanding on
a fully diluted basis 28,069 24,627 27,107 22,551
========== ========== ========== ==========
Fully diluted net income per
average common share $ 0.39 $ 0.18 $ 0.73 $ 0.28
========== ========== ========== ==========
</TABLE>
Note:
Fully diluted net income per average common share is not presented in the
Company's Consolidated Statements of Earnings for the nine months period ending
April 28, 1996, as the effect of the assumed conversion of the Company's
convertible debentures and notes was anti-dilutive.
Page 16
<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> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> MAY-04-1997
<CASH> 55,839
<SECURITIES> 11,529
<RECEIVABLES> 160,874
<ALLOWANCES> 0
<INVENTORY> 414,034
<CURRENT-ASSETS> 650,574
<PP&E> 524,009
<DEPRECIATION> (334,801)
<TOTAL-ASSETS> 1,100,240
<CURRENT-LIABILITIES> 280,939
<BONDS> 452,056
0
0
<COMMON> 25,293
<OTHER-SE> 305,568
<TOTAL-LIABILITY-AND-EQUITY> 1,100,240
<SALES> 0
<TOTAL-REVENUES> 664,487
<CGS> 0
<TOTAL-COSTS> 581,414
<OTHER-EXPENSES> 20,926
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,276
<INCOME-PRETAX> 31,871
<INCOME-TAX> 12,812
<INCOME-CONTINUING> 19,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,059
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.73
</TABLE>
