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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Transition period from to Commission
file number 1-5129
MOOG INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-0757636
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
East Aurora, New York 14052-0018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (716) 652-2000
Securities registered pursuant to
Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Class A Common Stock, $1.00 Par Value American Stock Exchange
Class B Common Stock, $1.00 Par Value American Stock Exchange
9-7/8% Convertible Subordinated American Stock Exchange
Debentures due 2006
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The aggregate market value of the Common Stock outstanding and held by
non-affiliates (as defined in Rule 405 under the Securities Act of 1933) of
the registrant, based upon the closing sale price of the Common Stock on
the American Stock Exchange on December 9, 1994 was approximately
$48,407,157.
The number of shares of Common Stock outstanding as of the close of
business on December 9, 1994 was:
Class A 6,042,238; Class B 1,677,814.
The Documents listed below have been incorporated by reference into this
Annual Report on Form 10-K:
(1) Specific sections of the Annual Report to Shareholders for the
fiscal year ended September 30, 1994 (the "1994 Annual Report")
(2) Specific sections of the Proxy Statement to Shareholders dated
January 6, 1995 (the "1995 Proxy")
MOOG INC.
FORM 10-K INDEX
PART I PAGE
Item 1 - Business 21
Item 2 - Properties 22
Item 3 - Legal Proceedings 22
Item 4 - Submission of Matters to a 22
Vote of Security Holders
PART II
Item 5 - Market for the Registrant's 22
Common Equity and Related
Stockholder Matters
Item 6 - Selected Financial Data 22-23
Item 7 - Management's Discussion and 24-28
Analysis of Financial Condition and
Results of Operations
Item 8 - Financial Statements and 29-43
Supplementary Data
Item 9 - Changes in and Disagreements with 43
Accountants on Accounting and
Financial Disclosure
PART III
Item 10 - Directors and Executive Officers 43-44
of the Registrant
Item 11 - Executive Compensation 45
Item 12 - Security Ownership 45
of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and 45
Related Transactions
PART IV
Item 14 - Exhibits, Financial Statement 45-48
Schedules, and Reports
on Form 8-K
Part I
The Registrant, Moog Inc., a New York corporation formed in
1951, is referred to in this Annual Report on Form 10-K as
"Moog," "the Company" or in the nominative "we" or the possessive
"our."
ITEM 1. Business.
Certain information required herein is contained in part in
the 1994 Annual Report, specific pages of which are referred to
in parentheses.
Description of the Company's Business. (See pages 2 through
18.)
Distribution. Moog primarily uses its own sales and
engineering personnel in the sale of its products. In selective
markets, independent manufacturers' representatives are retained.
Industry and Competitive Conditions. Moog experiences
considerable competition in its Domestic Controls segment,
principally in the areas of product performance and price. These
competitors are associated with parent companies larger than the
Company as measured by total assets and sales. These include the
Hydraulics Research and Manufacturing Division of Textron Inc.,
NWL Control Systems owned by Abex Inc., the Parker Bertea
Aerospace Group of Parker Hannifin Corporation, E-Systems
Corporation and Vickers, a Division of Trinova Corporation.
The International Controls segment experiences similar
competition from numerous domestic and foreign corporations,
particularly Mannesmann Rexroth, a Mannesmann AG company, and
Robert Bosch AG.
Backlog. Substantially all backlog will be recorded as
sales in the next twelve months. The information required herein
is incorporated by reference to Item 6, Selected Financial Data,
on page 23.
Raw Materials. Materials, supplies and components are
purchased from numerous suppliers. The loss of any one supplier
would not materially affect the Company's operations.
Seasonality. Moog's business is generally not seasonal.
Patents. Moog has a number of patents and has filed
applications for others. While the aggregate protection afforded
by these is of value, the Company does not consider the
successful conduct of any material part of its business is
dependent upon such protection. The Company's patents and patent
applications, including U.S., Canadian, European and Japanese
patents, relate to electrohydraulic, pneumatic and mechanical
actuation mechanisms and control valves, electronic control
component systems and interface devices.
Research Activities. Research and product development
activity has been and continues to be significant to the Company.
The information required herein is incorporated by reference to
Item 6, Selected Financial Data, on page 23.
Employees. The information required herein is incorporated
by reference to Item 6, Selected Financial Data, on page 23.
Segment Financial Information. See page 40.
Customers. The information required herein is incorporated
by reference to pages 2 through 18 and 40. Moog's military
activities in aerospace, through its Domestic Controls segment,
are subject to changes in national defense policy, Department of
Defense (DoD) procurement practice, and contract termination. In
commercial aerospace, principally commercial aviation, Moog's
activities are subject to changes in the delivery schedules of
the major commercial aircraft manufacturers.
International Operations. Moog's International Controls
segment is an aggregate of operations located predominantly in
Europe and the Far East. (See pages 2 through 18, 40 and 46.)
The Company's international operations are subject to the
usual risks inherent in foreign trade, including currency
fluctuations, local governmental foreign investment restrictions,
exchange controls, regulation of the import and distribution of
foreign goods, as well as changing economic and social conditions
in countries in which such operations are conducted.
Working Capital. Working capital includes items which will
not be realized within one year, reflecting the procurement and
production cycle associated with long term contracts. Long-term
contract receivables include substantial amounts not yet billed
under progress payment terms of contracts, and which provide that
certain holdback amounts cannot be billed until shipment of
completed units. Inventories reflect the extended production and
procurement cycle on most Moog products. Contract loss reserves
include expenditures to be incurred over development and
production periods extending beyond one year.
Environmental Matters. See pages 27, 28 and 41.
ITEM 2.
Properties. Corporate headquarters are located in East
Aurora, New York. Principal manufacturing facilities for the
Domestic Controls segment are located in East Aurora, New York
and Torrance, California. The facilities consist of 756,000
square feet which are owned and 54,000 square feet which are
leased under capital lease obligations. Facilities under capital
leases are financed primarily by industrial revenue bonds, which
allow the Company to purchase the facilities at nominal prices
upon expiration. The Domestic segment leases 140,000 square feet
in East Aurora under operating leases. With respect to the
Company's facilities, third parties have leased 91,000 square
feet of owned space through December 1996 and 65,000 square feet
of leased space through August 1997. Outside of the U.S., the
Domestic segment owns two low cost manufacturing centers in the
Philippines and India. The Philippines facility consists of
64,000 square feet, and the India facility consists of 25,000
square feet.
The International Controls segment maintains major
manufacturing facilities in Germany, England and Japan. Of the
major European facilities 4,000 square feet are owned and 202,000
square feet are leased under operating lease agreements. The
Japanese facility, consisting of 68,000 square feet, is owned.
Smaller specialty manufacturing operations are located in Ireland
and Denmark. The Irish facility, with 26,000 square feet, is
owned, while the Danish facility of 30,000 square feet is leased
under an operating lease. In various other major markets,
including Italy, France, Spain, Sweden, Finland, Brazil,
Australia, South Korea, Hong Kong and Singapore, the Company has
sales and applications engineering offices. Of these facilities,
30,000 square feet are owned and 41,000 square feet are leased
under operating leases. Operating leases of the International
facilities expire at varying times from January 1995 through
January 2013.
In September 1994, Moog terminated a long term operating
lease for 73,000 square feet at the former Engine Controls
facility in Florida. The Company had provided reserves covering
the cost of terminating this lease in the 1994 and 1992
restructuring actions. The Company consolidated its German
facilities, vacating a facility consisting of 55,000 square feet
under a long-term operating lease. This facility was sub-leased
effective January 1, 1994 through the remaining lease term.
The capacity of Moog's manufacturing facilities is
considered adequate for current and future production
requirements.
ITEM 3. Legal Proceedings.
There are no legal proceedings presently pending by or
against Moog or its subsidiaries which would have a material
adverse effect on the financial condition or results of
operations of Moog and its subsidiaries taken as a whole.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend restrictions are detailed in Note 7 on page 35 of
Item 8, Financial Statements and Supplementary Data. Dividends
on common stock were suspended by the Board of Directors on
November 29, 1988.
Other information required herein is incorporated by
reference to pages 23 and 46.
ITEM 6. Selected Financial Data - Notes and Discussion.
The following is a brief summary of sales and net earnings
for the five year fiscal period 1990 - 1994. For a more detailed
discussion of 1992 through 1994 refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations on
pages 24 through 28 and Notes to Consolidated Financial
Statements on pages 33 through 42.
During the five year period, sales have increased 1.2%.
Excluding the 1994 acquisition of the hydraulic and mechanical
actuation Product Lines of AlliedSignal Inc. and the related
incremental sales of approximately $22,400, sales would have
declined 6.2%. This decline is primarily the result of reduced
appropriations for defense hardware by the U.S. Government. The
Product Line acquisition, however, is expected to add
approximately $75,000 to $80,000 in annual revenue, enhancing the
Domestic Controls segment's position in its core aerospace
markets. Sales for the International Controls segment also
declined 3.0%, principally due to weak capital goods markets in
Europe partially offset by strong sales growth in Asian-Pacific
operations.
Domestic net earnings during the five year period have
approximated 3% or more of net sales, excluding the pre-tax
inventory obsolescence and restructuring charges of $3,390 in
1994 and $10,504 in 1992.
The International Controls segment experienced a significant
deterioration in net earnings from 1990 to 1992. The decline
results from investing significant resources to bring new
industrial and aerospace applications to existing markets in
conjunction with the prolonged weakness in European capital goods
markets, which resulted in significantly reduced margins on the
traditionally high margin industrial hydraulic product line. The
Company has taken various actions throughout the last three years
to consolidate manufacturing and development activities, increase
utilization of low cost manufacturing centers, and increase
product line specialization. As a result, International Controls
segment losses were reduced significantly in 1993 and 1994.
ITEM 6. Selected Financial Data.
(dollars in thousands except per share data)
Years Ended
September 30 1994 1993 1992 1991 1990
RESULTS FROM OPERATIONS
Net Sales $ 307,370 $ 293,680 $ 307,004 $ 321,283 $ 303,709
Government 57% 57% 60% 61% 61%
Commercial 43% 43% 40% 39% 39%
Earnings (Loss)
before Income
Taxes,
Extraordinary
Item and
Cumulative Effect
of Change in
Accounting Principle 3,040 8,620 (6,284) 12,209 13,242
Effective Tax Rate 46.8% 40.6% (7.8%) 37.5% 48.0%
Earnings (Loss)
before Extraordinary
Item and Cumulative
Effect of Change
in Accounting
Principle 1,618 5,118 (6,773) 7,631 6,886
Extraordinary Item - (357) - - -
Cumulative Effect of
Change in Accounting
Principle 505 - - - -
NET EARNINGS $ 2,123 $ 4,761 $ (6,773) $ 7,631 $ 6,886
(LOSS)
PER SHARE
Earnings (Loss)
before
Extraordinary
Item and
Cumulative Effect
of Change in
Accounting
Principle $ .21 $ .66 $ (.88) $ .97 $ .86
Extraordinary
Item - (.04) - - -
Cumulative Effect
of Change in
Accounting
Principle .06 - - - -
Net Earnings
(Loss) $ .27 $ .62 $ (.88) $ .97 $ .86
Equity per
Common Share 13.25 12.00 12.61 12.93 11.66
FINANCIAL POSITION
Total Assets $ 424,456 $ 318,130 $ 335,986 $ 334,938 $ 321,448
Working Capital 152,036 123,533 114,694 107,363 107,526
Total Debt and
Convertible
Subordinated
Debentures 204,176 137,597 143,985 145,575 150,813
Shareholders'
Equity 102,184 92,561 97,374 100,438 92,945
SUPPLEMENTAL FINANCIAL DATA
Capital
Expenditures $ 8,893 $ 10,216 $ 15,295 $ 18,467 $ 20,640
Depreciation and
Amortization of
Property, plant
and equipment 15,032 15,665 17,189 17,834 17,316
R&D - Company
Sponsored 19,923 16,128 17,927 16,946 13,842
- Customer
Sponsored 25,332 30,986 29,220 24,896 32,802
Backlog - Domestic 181,405 149,035 169,800 192,400 190,200
- Interna-
tional 35,856 32,046 42,300 38,600 38,600
ADDITIONAL DATA
Number of Employees 3,140 2,824 2,886 3,309 3,349
Number of Shareholders
- Class A 2,424 2,665 2,855 3,014 3,175
- Class B 1,088 1,201 1,257 1,343 1,403
Average Common
Shares
Outstanding 7,714,444 7,713,465 7,717,791 7,836,780 7,977,246
RATIOS
Net Return on Sales .7% 1.6% N/A 2.4% 2.3%
Return on Equity 2.2% 5.0% N/A 7.9% 7.8%
Current Ratio 2.47 2.33 2.14 1.98 2.13
Total Debt and
Debentures to
Equity 2.00 1.49 1.48 1.45 1.62
INTERNATIONAL SUBSIDIARIES
Net Sales $ 92,507 $ 102,071 $ 96,314 $ 99,423 $ 96,231
Foreign Currency
Exchange (Gain)
Loss (24) 86 655 92 665
Net Earnings
(Loss) $ (2,036) $ (3,363) $ (7,189) $ 285 $ 1,635
ITEM 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Earnings per share in 1994 were $.27 compared with $.62 in
1993 and a loss of $.88 in 1992. Net earnings in 1994 were $2.1
million or 0.7% of net sales compared with $4.8 million or 1.6%
of net sales in 1993 and compared with a net loss of $6.8 million
or 2.2% of net sales in 1992. Net earnings in 1994 include the
cumulative positive effect of $.5 million related to the adoption
of SFAS No. 109, "Accounting for Income Taxes", a change in
accounting principle. Conversely, 1994 net earnings were
negatively affected by significant inventory obsolescence and
restructuring charges. During the second quarter of 1994, the
Company initiated a program to dispose of obsolete inventory
resulting in a pretax charge of $2.6 million which primarily
reflects the recent decline in Domestic repair activities and
spare parts requirements on many government programs. Prior to
the end of 1994, the Company physically disposed of $6.8 million
of obsolete inventory, principally covered by reserves. The 1994
pretax restructuring charge of $2.1 million included $1.8 million
of severance benefit costs related to workforce reductions
totaling 140 employees in the Company's operations in the U.S.,
England, Germany and Denmark. The remaining $.3 million
restructuring charge was related to lease termination costs. The
restructuring actions were taken in response to Defense spending
reductions and to persistently weak capital goods markets in
Europe. The workforce reduction is expected to decrease annual
wages and benefit costs by approximately $6.0 million.
Net earnings in 1993 included a $.4 million net after-tax
extraordinary charge related to prepayment costs on the early
retirement of $10.2 million of 12 7/8% debt. The 1992 loss
included a $13.8 million pretax restructuring charge primarily
representing actions taken in 1992 in response to the U.S.
position on the post-Soviet Defense environment. Programs
including Maverick, M-X, F-15, Small ICBM, and SRAM II were then
targeted for reduction, cancellation or phase-out. The 1992
restructuring charge also included amounts related to the
Company's European operations in response to the weak capital
goods markets and the consolidation of European manufacturing and
development activities.
Acquisition - On June 17, 1994, Moog Inc. acquired the
hydraulic and mechanical actuation product lines (the Product
Lines) of AlliedSignal Inc. located in Torrance, California. The
Product Lines are applied to a variety of commercial and military
aircraft. Mechanical actuators include drive systems for the
leading edge flaps on the F/A-18 C/D and Boeing 777, and
hydraulic actuators include the primary flight controls for the
Boeing 747 and 757 and the Airbus A330 and A340. The acquisition
strengthens Moog's position in the actuation market and will
improve utilization of existing manufacturing facilities and the
overhead structure. The Product Lines are expected to add annual
revenues of approximately $75 million to $80 million in the near
term. The purchase price for the Product Lines including payment
for specified transition services was $78 million in cash subject
to adjustment based upon finalization of the net book value of
assets transferred. The transition services principally relate
to computer services, engineering, and manufacturing support for
a period of approximately one year.
At the present time, the Company and AlliedSignal are
attempting to resolve the final purchase price of the Product
Lines. The Purchase Agreement provides for an adjustment to the
purchase price based upon the Net Assets delivered at closing.
The Company has recorded a receivable from AlliedSignal of $3.6
million at September 30, 1994 which represents AlliedSignal's
initial calculation of the shortfall in Net Assets delivered at
closing. In addition, notification has been sent to AlliedSignal
of several items that the Company believes require further
reduction in the purchase price. In the event that the Company and
AlliedSignal cannot reach a resolution of this matter, the Purchase
Agreement provides for the use of an independent arbitrator to resolve
the issue. The resolution of the Net Assets delivered is not
expected to have a material adverse effect on the Company's
future financial position or results of operations, since any
reduction in the Net Assets transferred at closing from
AlliedSignal's initial calculation would result in a cash refund
to the Company, be used to pay down outstanding debt, and reduce
the intangibles recorded on the opening balance sheet.
In conjunction with the acquisition, the Company refinanced
its Domestic credit facilities. On June 15, 1994, the Company
completed a $152 million Revolving Credit and Term Loan Agreement
with a banking group and extended the Maturity of an existing $20
million, 10-1/4% Note. The $152 million Agreement provides for
$85 million in a revolving facility and a $67 million term loan.
See Financial Condition and Liquidity for additional information.
Operations - Operating profit for the Domestic Controls
segment in 1994 was $20.4 million or 9.2% of segment sales
compared with $21.7 million or 10.8% of segment sales in 1993 and
with $16.6 million or 7.6% of segment sales in 1992. Excluding
pretax Domestic inventory obsolescence and restructuring charges
of $3.4 million in 1994 and $10.5 million in 1992, Domestic
segment operating profit would have been $23.8 million or 10.7%
of segment sales in 1994, while 1992 operating profit would have
been $27.1 million or 12.4% of segment sales. The increase in
Domestic segment operating profit, excluding the obsolescence and
restructuring charges, from 1993 to 1994 results from the
acquisition of the Product Lines. The decrease in operating
profit, excluding the restructuring charge from 1992 to 1993, was
mainly due to lower margins within the Motion Systems group,
where net sales declined by approximately 20%. Operating profit
for the Motion Systems group continued to decline in 1994
primarily as a result of decreasing sales on the Missiles product
line. The 1994 restructuring actions were specifically targeted
to reverse the recent trend of declining operating profit for the
Motion Systems group.
Operating profit for the International Controls segment in
1994 was $1.1 million or 1.1% of segment sales compared with $5.1
million or 4.7% of segment sales in 1993. This also compares
with a loss of $3.7 million or 3.7% of segment sales in 1992.
Included in operating profit for the International Controls
segment are inventory obsolescence and restructuring charges of
$1.3 million in 1994 and $3.3 million in 1992. Excluding these
charges, operating profit for the International Controls segment
would have been $2.4 million or 2.4% of segment sales in 1994 and
a loss of $.4 million or .4% of segment sales in 1992. The
change in operating profit from 1993 to 1994 for the
International Controls segment results primarily from a decrease
of profits at the Company's English subsidiary on a variety of
industrial products, and to a decline in operating profit from
the Pacific subsidiaries due to a slow Japanese economy and from
strong shipments in 1993 on aerospace programs in Korea. The
operating profit for the fourth quarter of 1994 at the Company's
English subsidiary showed a strong increase from the first three
quarters due to higher sales and the positive effects of
previously implemented staff reductions. The improvement of
operating profit exclusive of the restructuring charge from 1992
to 1993 for the International Controls segment was the result of
increased sales and margins within the Pacific operations and
improvements in Europe from the previous year's operating loss to
a break-even situation due to cost reduction efforts.
Improvements in future operating profits of the European
operations will, in part, be dependent on further product cost
reductions and increased sales associated with the strengthening
of economic conditions.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in the first quarter
of 1994. SFAS No. 106 costs were $1.1 million in 1994 including
the amortization of the initial transition obligation of $7.9
million over twenty years. The 1994 cost is $.4 million greater
than the annual cost of postretirement benefits other than
pensions in 1993 of $.7 million, determined on a cost incurred
basis.
At September 30, 1994, the Company had a valuation reserve
of $5.2 million or 24% of the gross Deferred Tax Asset related
primarily to the Company's subsidiaries in Germany, France and
England in accordance with SFAS No. 109. During the fourth
quarter of 1994, the Company recorded Deferred Tax Assets from
future utilization of Net Operating Losses and reversing
Temporary Deductions resulting in additional earnings of $.4
million.
Financial Condition and Liquidity - On June 15, 1994, the
Company completed a new $152 million Revolving Credit and Term
Loan Facility (the Credit Facilities) with a banking group. The
Credit Facilities consist of an $85 million revolving credit
facility and a $67 million term loan. The revolving credit
facility is for a five year period, reducing by $5 million per
year commencing in October 1995. The term loan is a seven year
agreement, with quarterly principal payments commencing on
January 1, 1995. The credit facilities provide for interest at
LIBOR plus 2.125%, compared with the previous Domestic credit
arrangements at LIBOR plus .625%. To provide protection from
interest rate increases, the Company entered into $60 million of
interest rate swap arrangements. This has the effect of
converting $60 million into fixed rate debt for two years at
8.2%. In addition to the new credit facilities, the Company
amended the terms of its existing $20 million, 10-1/4% Note.
This Note, which previously required $5 million in annual
principal payments from 1996 through 1999, has been amended to
require annual principal payments of $1.7 million in 1995, $2.7
million in 1996, and $3.0 million in 1997 through 2001.
The $152 million Credit Facilities were used principally to
1acquire the Product Lines, including transition services, from
AlliedSignal for $78 million and to refinance approximately $46
million of then existing Domestic term loans, with the balance
available for future working capital requirements. The Credit
Facilities and amended Note are secured by substantially all of
the Company's Domestic assets, including the common shares of all
Domestic and International subsidiaries. The Credit Facilities
and amended Note include customary covenants for transactions of
this nature, including interest coverage, loan payment coverage,
current ratio and maintenance of tangible net worth to total
liabilities.
Net cash provided by operating activities for 1994 was $11.1
million compared with $14.3 million in 1993 and with $20.6
million in 1992. Other than net earnings, the items most
significantly affecting the comparison of Net cash provided by
operating activities for 1994, 1993 and 1992 are Deferred income
taxes, Receivables, Accounts payable and accrued expenses and
Other liabilities. In 1994, cash was generated due to lower
Deferred tax assets attributable to the physical scrapping of
$6.8 million of obsolete inventory, principally covered by
reserves for obsolescence. Current income tax benefits were also
generated in 1994 related to book and tax accounting differences
on the acquired Product Lines. In 1992, cash was used related to
Deferred income taxes resulting from the increase in deferred tax
assets associated with significant year-end severance and other
restructuring charges. Receivables increased in 1994, thereby
using cash, primarily related to the Product Line acquisition.
In 1992, Receivables decreased mainly due to the timing of
collections on Domestic programs with billing arrangements based
on the achievement of milestones. Accounts payable and accrued
expenses increased in 1994, offsetting the cash used related to
the decrease in Other liabilities. This was mainly due to the
classification of a reserve for a loss expected on the sublease
of a facility from non-current to current. The use of cash in
1993 related to the decrease in Accounts payable and accrued
expenses was due to the payment of severance for amounts accrued
in 1992. The cash generated in 1992 related to the increase in
Other liabilities was due to a year-end accrual for anticipated
losses associated with a decision to close the Engine Controls
facility in Florida.
At September 30, 1994, the Company had reserves for work
force reductions of $3.8 million, $2.3 million of which related
to the acquisition of the Product Lines. The remaining $1.5
million relates to other severance arrangements, primarily in the
U.S.
At September 30, 1994, the Company has worldwide unused
lines of credit of $33.9 million, plus cash and cash equivalents
of $8.7 million. In comparison, the Company had worldwide unused
lines of credit of $18.4 million and cash of $18.6 million at
September 30, 1993.
Total consolidated assets increased 33% to $424 million at
September 30, 1994 compared with $318 million a year ago. This
increase principally reflects the acquisition of the Product
Lines. The strengthening of foreign currencies relative to the
U.S. dollar based on spot exchange rates at the balance sheet
dates also contributed to the increase by approximately $5.9
million.
In 1993, the Company sold machinery and equipment for $5.8
million and leased the equipment back under operating leases. No
gain or loss was recognized and the proceeds were used to pay
down outstanding borrowings.
Capital expenditures in 1994 were $8.9 million compared with
$10.2 million in 1993 and with $15.3 million in 1992. Capital
expenditures were well below depreciation and amortization levels
of $15.0 million in 1994 and $15.7 million in 1993. Capital
expenditures in 1992 were closer to depreciation and amortization
of $17.2 million, in part due to $2.6 million spent to upgrade
software for Management Information Systems. Additions to
Property, Plant and Equipment in 1995 are expected to remain well
below depreciation levels. Purchase commitments outstanding at
September 30, 1994 are $1.2 million for machinery and equipment.
In December 1992, the Company prepaid $10.2 million of long-
term debt on a capital lease with an interest rate of 12 7/8% in
order to take advantage of the significant decrease in U.S.
market interest rates. The annual pretax savings was
approximately $.8 million compared with the pretax extraordinary
charge required in the first quarter of 1993 of $.5 million. The
Company used existing revolving lines of credit to finance the
prepayment.
The Company monitors total debt-to-equity as a key financial
ratio. This ratio includes short-term and long-term debt and
subordinated debentures. The ratio at September 30, 1994 was
2.00 compared with 1.49 at September 30, 1993 and with 1.48 at
September 30, 1992. The increase in the ratio as of
September 30, 1994 results from the acquisition of the Product
Lines which was financed entirely by long-term debt. Working
capital at September 30, 1994 was $152 million compared with $124
million at September 30, 1993 and with $115 million at September
30, 1992. The current ratio was 2.47 at September 30, 1994
compared with 2.33 and 2.14 at September 30, 1993 in 1992,
respectively. The strengthening of working capital and the
current ratio at September 30, 1994 also relates to the
acquisition of the Product Lines.
Net Sales increased 4.7% to $307 million in 1994 compared
with $294 million in 1993. Net sales in 1993 were down 4.3% from
net sales of $307 million in 1992. Net sales for the Domestic
segment in 1994 increased 12.6% to $213 million compared with
$189 million in 1993. Domestic segment net sales in 1993 were
down 9.4% from $209 million in 1992. In 1994, net sales of $22.4
million from the newly acquired Product Lines was the principal
reason for the increase. Within the Domestic Controls segment,
sales of the Missiles product line continued to decline as a
result of the affects of reduced U.S. Defense spending,
accompanied by sales declines on the Engine Controls product
line. These decreases were offset in 1994 by increased sales on
the B-2 program and stronger sales in the commercial aircraft
business. The net sales decline in 1993 compared with 1992
primarily reflects the effects of the reductions in new orders on
U.S. Defense related programs.
Net sales for the International Controls segment in 1994
declined 9.8% to $94.1 million compared with $104 million in
1993. This also compares with $98.0 million of net sales in
1992. Fluctuations in foreign currencies relative to the U.S.
dollar in 1994 did not impact the sales decline. The decline is
principally attributable to lower sales in Germany in aerospace
and Defense markets, in conjunction with lower industrial sales
in England and France due to the persistently weak European
capital goods market. The increase of net sales in 1993 compared
with 1992 resulted primarily from net sales increases reported by
the Pacific companies, primarily Japan, Hong Kong and Korea.
During 1993, foreign currencies weakened on average relative to
the U.S. dollar, reducing net sales by $3.0 million compared with
1992. Within the Company's International activities, operations
conducted in more than ten countries helped to level the effect
of translating multiple currencies into U.S. dollars on the
Company's operating results.
Worldwide commercial sales were $133 million or 43% of
consolidated sales in 1994. This compares with worldwide
commercial sales of $127 million in 1993 or 43% of consolidated
sales in 1993 and with $122 million or 40% of consolidated sales
in 1992. Worldwide government sales were $174 million in 1994 or
57% of consolidated sales compared with $167 million or 57% of
consolidated sales in 1993 and with $185 million or 60% of
consolidated sales in 1992. In light of the decline in U.S.
Defense spending in recent years, the Company has focused on the
development of its commercial product lines. Since 1990, as a
percentage of consolidated sales, commercial business has
increased from 39% to 43% in 1994.
Consolidated net sales in 1994 increased from 1993 primarily
due to unit volume changes and, to a lesser extent, due to minor
average price increases. Within the Domestic Controls segment,
the increase in net sales results primarily from the acquisition
of the Product Lines while the decrease in net sales for the
International segment is nearly all due to lower unit volume
partially offset by minor price increases, principally within
Europe. Comparing consolidated net sales in 1993 with 1992, the
decline is also due to unit volume changes partially offset by
some minor average price increases. Within the Domestic Controls
segment, the 1993 decrease was due to lower unit volume partially
offset by a minor increase in prices. For the International
segment, exclusive of the 1993 impact of changing foreign
currencies, nearly all of the increase was due to unit volume
partially offset by minor price reductions resulting from
competitive pressures in Europe.
Other Income was $2.5 million in 1994 compared with $2.7
million in 1993 and $3.4 million in 1992. Included in 1992 Other
Income was $.5 million related to the leasing of one of the
Company's facilities in Europe. Other Income generally includes
rents, royalties and interest.
Cost of Sales as a percent of net sales in 1994 was 69.8%
compared with 70.5% in 1993 and 1992. Cost of sales as a percent
of net sales for the Domestic Controls segment was 73.3% in 1994
compared with 72.9% in 1993 and 71.4% in 1992. The increasing
trend of Domestic Cost of Sales as a percent of sales over the
past three years results primarily from reduced higher margin
sales on the Missiles product line, which included favorable cost
experience in previous years on various long-term development
contracts. Cost of Sales as a percent of sales for the
International Controls segment improved to 65.6% of net sales in
1994 compared with 67.0% in 1993 and 69.6% in 1992. This
continued improvement over the three year period results
primarily from the benefits of cost reduction actions initiated
in 1992 and continued through 1994.
Research and Development Expenses were $19.9 million or 6.5%
of net sales in 1994 compared with $16.1 million or 5.5% of net
sales in 1993 and with $17.9 million or 5.8% of net sales in
1992. The 1994 increase is the result of a shift toward Company-
sponsored R&D projects from customer-sponsored projects. The
increase in 1994 R&D results primarily from efforts on
entertainment simulators, brushless motors, radio controls and
development of high performance engine control valves. The
decline in 1993 reflected a shift of emphasis from R&D activities
to sales and marketing activities which the Company has
classified as SG&A expenses. Total Company-sponsored and
customer-sponsored research and development expenses were $45.3
million in 1994 compared with $47.1 million in 1993 and in 1992.
Customer-sponsored R&D was $25.3 million in 1994 compared with
$31.0 million in 1993 and $29.2 million in 1992. Customer-
sponsored R&D reflects the Company's involvement in a number of
development programs including the B-2, the Taiwanese Indigenous
Defense Fighter (IDF) and a number of military ground vehicle
programs in Europe.
Selling, General & Administrative Expenses were $56.2
million or 18.3% of net sales in 1994 compared with $52.7 million
or 18.0% of net sales in 1993 and $53.6 million or 17.5% of net
sales in 1992. The increased costs in 1994 in absolute terms is
primarily due to the acquisition of the Product Lines. As a
percentage of net sales, the increase in 1994 SG&A
relates primarily to increased staffing costs in Japan, Hong Kong
and Singapore in order to pursue future sales opportunities that
currently exist in the Pacific.
Interest Expense was $11.4 million or 3.7% of net sales in
1994 compared with $11.0 million or 3.7% of net sales in 1993 and
with $13.3 million or 4.3% of net sales in 1992. The increase in
1994 primarily reflects the increase in debt related to the
acquisition of the Product Lines. The decrease in 1993 was due
to lower average Domestic interest rates in addition to interest
cost savings related to the December 1992 prepayment of $10.2
million of long-term debt which carried an interest rate of
12-7/8%.
Foreign Currency Exchange (Gain) Loss was a gain of $.5
million in 1994 compared with a loss of $.1 million in 1993 and a
loss of $.7 million in 1992. The foreign currency gain in 1994
primarily relates to a short-term loan denominated in Deutsche
Marks between the parent company and the German subsidiary during
which time the Deutsche Mark strengthened. Included in the 1992
currency loss was $.4 million related to the Company's Italian
subsidiary resulting from the September 1992 devaluation of the
Italian Lira.
Inventory Obsolescence Charge of $2.6 million in 1994
represents a second quarter charge for the write-off of Domestic
obsolete inventory. This charge reflects the recent decline in
repair activities and spare parts requirements on many government
programs.
Restructuring Expense of $2.1 million in 1994 represents the
costs to restructure operations primarily in response to the
effects of continued reductions in U.S. Defense spending as well
as the effects of the persistent weakness of capital goods
markets in Europe, particularly as it affects operations in
England, Germany and Denmark. Approximately $1.8 million of this
1994 charge represents severance benefit costs relating to
workforce reductions and $.3 million relates to the costs of
disposing of a leased facility.
Income Taxes - The high effective tax rate in 1994 of 46.8%
results primarily from losses incurred at our German subsidiary
against which the amount of tax benefits recognized in accordance
with SFAS No. 109 were limited. At September 30, 1994, the
German company had approximately $6.7 million of net operating
loss carryforwards. These tax losses, which may be carried
forward indefinitely, can be used to reduce taxes otherwise due
on German income earned in future years.
The effective tax rate for 1993 of 40.6% was comprised of a
low effective rate on Domestic earnings of 20.8% offset by a tax
expense of $1.4 million for the International Controls segment on
a pre-tax loss of $1.4 million. The low effective Domestic tax
rate in 1993 resulted primarily from a $1.1 million benefit
received in 1993 from the utilization of prior year foreign tax
credit carryforwards computed at September 30, 1992 in accordance
with SFAS No. 96. The unusual 1993 tax situation for the
International Controls segment resulted from paying taxes at
certain subsidiaries primarily in the Pacific where taxable
earnings were generated, offset by pretax losses in Europe that
generated virtually no benefit. In 1992, despite a significant
pretax loss, the Company reported income tax expense of $.5
million for the year. The unusual effect in 1992 reflected the
combination of a high effective tax rate for the Domestic
Controls segment which had pretax earnings, offset by a
relatively low tax benefit for the International Controls
segment, which had a pretax loss. In 1992, the benefits from the
utilization of losses at the foreign subsidiaries as well as the
benefits from calculated Domestic foreign tax credits were
limited under SFAS No. 96.
Backlog - Consolidated backlog increased to $217 million at
September 30, 1994 compared with $181 million at September 30,
1993. Backlog for the Domestic Controls segment increased to
$181 million at September 30, 1994 compared with $149 million a
year ago. Within the Domestic Controls segment, this increase is
primarily due to the acquisition of the new Product Lines. Also
within the Domestic Controls segment, there has been a noticeable
decline in backlog for the B-2 program related to Defense
spending reductions.
International Controls segment backlog was $35.9 million at
September 30, 1994 compared with $32.0 million a year ago.
Approximately $.5 million of this increase resulted from the
strengthening of foreign currencies relative to the U.S. dollar
from 1993 to 1994. The Company is cautiously optimistic that a
European capital goods recovery is near as backlog for the
European subsidiaries increased 26% from a year ago, mostly
during the fourth quarter of 1994. Offsetting this increase in
Europe is a decrease in backlog within the Pacific companies,
primarily due to reduced aerospace orders from the strong levels
a year ago.
Environmental Matters - At September 30, 1994, the Company
has been named a potentially responsible party (PRP) in the
clean-up of three Superfund sites in Western New York. On
November 23, 1994, a final settlement became effective regarding
one of the three sites. In addition, the Company was notified in
August 1993 by a PRP Group at a related site that it will seek
contribution from the Company and others to the extent the group
is responsible for remediation costs at the related site. The
Company also is in the process of evaluating potential
environmental remediation actions at a Company-owned facility
leased to a third party. At September 30, 1994, the Company
believes that adequate reserves have been established for
environmental issues for which financial exposure is probable and
quantifiable. Because of the uncertainties associated with
environmental matters, the Company could be requested to
participate in future remediation activities, if any, at the two
Superfund sites. With respect to the related site, the clean-up
effort has not progressed sufficiently to allow an accurate
assessment of total clean-up costs or the Company's relative
responsibility for those costs. Based on currently available
data, while it is difficult to predict, the Company does not
expect that these environmental matters will have a material
effect on the financial position of the Company in excess of
amounts previously reserved.
Defense Contracting Environment - Current industry
conditions continue to represent significant challenges for the
Company. In 1994 and prior years, more than half of the
Company's sales were to either the U.S. Government or various
foreign governments for military and space hardware on programs
that extend over many years. The Company shares risks of
cancellation as a participant in these programs similar to the
risks assumed by all government contractors.
Many of the Company's products are on the leading edge of
new technologies. Development problems on projects on which the
Company is performing under fixed-price contracts and is unable
to recover the additional costs are part of the risks of being on
the forefront of such technology. In this regard, the Company's
risk of technical development and design problems is similar to
other high-technology companies. Since the production of these
products involves highly precise, complex operations and vendor
supplied component parts, a similar risk exists for products in
the production phase.
Continued Government emphasis on audit and investigative
activity in the U.S. Defense Industry presents risks of
unanticipated financial exposure for companies with substantial
activity in Government contract work. The audit process is an
on-going one which includes post-award reviews and audits of
compliance with the various procurement requirements. Although
Government regulations provide that under certain circumstances a
contractor may be fined, penalized, have its progress payments
withheld or be debarred from contracting with the Government, the
Company does not anticipate a material financial impact from the
various and on-going procurement reviews. The Company believes
that adequate reserves have been established for any issues on
which financial exposure is known and quantifiable as of
September 30, 1994.
The last 30 years have produced a continuing stream of
opportunities for the Company on precision hydraulic
servosystems. However, continual improvements in the power
density of electric motors and the current carrying capacity of
controller circuitry continually erode the application base for
hydraulic controls. Recognizing this phenomenon, the Company
broadened its purview and is a supplier of high performance
industrial control systems rather than just a supplier of
components for hydraulic systems. The industrial world today is
shifting to digital control for increased functionality. The
Company plans to provide increasingly intelligent digital control
as part of its electric drive systems and as a complement to its
hydraulic controls. The Company's objective is to offer the
world's most advanced systems capability together with the
world's highest performance hydraulic and electric drives, to
manufacture these products in world class facilities and to
present them to markets around the world through a network of
sales and application engineering subsidiaries.
ITEM 8. Financial Statements and Supplementary Data.
MOOG INC.
Consolidated Statements of Operations
(dollars in thousands except per share data)
Years ended
September 30 1994 1993 1992
NET SALES $ 307,370 $ 293,680 $ 307,004
OTHER INCOME 2,489 2,663 3,371
309,859 296,343 310,375
COSTS AND EXPENSES
Cost of sales 214,418 206,985 216,373
Research and development
expenses 19,923 16,128 17,927
Selling, general and
administrative expenses 56,181 52,723 53,619
Interest expense 11,402 10,974 13,346
Foreign currency exchange
(gain) loss (451) 60 673
Other expenses 665 853 887
Inventory obsolescence
charge (note 4) 2,574 - -
Restructuring expense
(note 10) 2,107 - 13,834
306,819 287,723 316,659
EARNINGS (LOSS) BEFORE
INCOME TAXES,
EXTRAORDINARY
ITEM AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,040 8,620 (6,284)
INCOME TAXES (note 9) 1,422 3,502 489
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 1,618 5,118 (6,773)
EXTRAORDINARY ITEM,
LOSS FROM EARLY
EXTINGUISHMENT OF
DEBT, NET OF INCOME
TAXES OF $119 (note 7) - (357) -
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (note 9) 505 - -
NET EARNINGS (LOSS) $ 2,123 $ 4,761 $ (6,773)
NET EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary
item and cumulative
effect of change in
accounting principle $ .21 $ .66 $ (.88)
Extraordinary item - (.04) -
Cumulative effect of
change in accounting
principle .06 - -
Net earnings (loss) $ .27 $ .62 $ (.88)
AVERAGE COMMON
SHARES OUTSTANDING 7,714,444 7,713,465 7,717,791
See accompanying Notes to Consolidated Financial Statements.
MOOG INC.
Consolidated Balance Sheets
(dollars in thousands)
As of September 30 1994 1993
ASSETS
CURRENT ASSETS
Cash and cash
equivalents $ 8,749 $ 18,589
Receivables, net (note 3) 144,197 123,009
Inventories (note 4) 78,642 66,862
Deferred income taxes 15,392 6,412
Prepaid expenses and
other current assets 8,445 1,842
TOTAL CURRENT ASSETS 255,425 216,714
PROPERTY, PLANT AND EQUIPMENT,
net (notes 5, 7, 8 and 16) 146,472 95,855
INTANGIBLE ASSETS, at cost,
less applicable amortization
(note 2) 18,154 2,197
OTHER ASSETS 4,405 3,364
TOTAL ASSETS $ 424,456 $ 318,130
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (note 6) $ 9,569 $ 9,851
Current installments of
long-term debt and
convertible subordinated
debentures (note 7) 15,201 18,793
Accounts payable 21,339 13,912
Accrued salaries, wages
and commissions 20,641 16,736
Contract loss reserves (note 2) 14,964 5,396
Other accrued liabilities 11,214 9,531
Accrued income taxes 391 195
Customer advances 10,070 8,767
TOTAL CURRENT LIABILITIES 103,389 93,181
LONG-TERM DEBT, excluding current
installments (note 7) 160,006 78,153
LONG-TERM PENSION OBLIGATION
(note 11) 20,093 25,110
OTHER LONG TERM LIABILITIES 1,195 5,144
DEFERRED INCOME TAXES 16,671 1,857
CONVERTIBLE SUBORDINATED
DEBENTURES, excluding
current installments (note 7) 19,400 20,800
MINORITY INTEREST IN SUBSIDIARY
COMPANY 1,518 1,324
COMMITMENTS AND CONTINGENCIES
(note 16) - -
SHAREHOLDERS' EQUITY (see page 32
and notes 11, 12, and 13)
9% Series B Cumulative, Convertible,
Exchangeable Preferred stock -
Par Value $1.00 Authorized
10,000,000 shares. Issued 100,000
shares. 100 100
Common Stock - Par Value $1.00
Class A - Authorized 30,000,000
shares. Issued 6,599,306
shares in 1994 and
6,598,989 shares in 1993. 6,599 6,599
Class B - Authorized 30,000,000
shares. Convertible to
Class A on a one for
one basis. Issued
2,534,817 shares in
1994 and 2,535,134
shares in 1993. 2,535 2,535
Additional paid-in capital 47,737 47,780
Retained earnings 56,373 54,259
Treasury shares (17,929) (18,002)
Equity adjustments 7,867 564
Loan to Savings and Stock
Ownership Plan (1,098) (1,274)
TOTAL SHAREHOLDERS' EQUITY 102,184 92,561
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 424,456 $ 318,130
See accompanying Notes to Consolidated Financial Statements.
MOOG INC.
Consolidated Statements of Cash Flows
(dollars in thousands)
Years ended September 30 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 2,123 $ 4,761 $ (6,773)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 15,700 15,621 17,767
Provisions for losses 5,860 5,839 7,548
Deferred income taxes 5,428 837 (2,477)
Other 418 40 152
Change in assets and liabilities
providing (using) cash:
Receivables (10,813) (2,906) 11,575
Inventories (1,376) (969) (3,234)
Other assets (4,797) 2,806 (2,038)
Accounts payable and accrued expenses 3,520 (12,059) (3,703)
Other liabilities (4,792) 2,046 7,039
Accrued income taxes (1) (353) (3,517)
Customer advances (127) (1,384) (1,720)
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,143 14,279 20,619
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Product Lines, including
a receivable from AlliedSignal Inc.
of $3,648 (note 2) (78,000) - -
Acquisition of Buhl Automation and
Esprit Technology - - (1,351)
Purchase of property, plant and
equipment (7,741) (9,887) (14,889)
Proceeds from sale of assets 526 9,538 2,984
Payments received on loan to
Savings and Stock Ownership Plan 177 161 186
NET CASH USED IN INVESTING ACTIVITIES (85,038) (188) (13,070)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in notes payable (10,635) (486) (3,670)
Proceeds from revolving lines of
credit 70,000 31,852 44,392
Payments on revolving lines of credit (151) (21,521) (37,679)
Proceeds from issuance of long-term
debt 69,695 1,686 1,333
Payments on long-term debt and
capital lease obligations (63,276) (15,419) (10,800)
Purchase of convertible subordinated
debentures (1,282) (177) (161)
Dividends paid (9) (9) (9)
Purchase of treasury stock - - (387)
Proceeds from issuance of treasury
stock 30 - -
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 64,372 (4,074) (6,981)
Effect of exchange rate changes
on cash (317) 466 505
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (9,840) 10,483 1,073
Cash and cash equivalents at beginning
of year 18,589 8,106 7,033
Cash and cash equivalents at end
of year $ 8,749 $ 18,589 $ 8,106
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (notes 6 and 7) $ 11,359 $ 10,830 $ 12,116
Income taxes, net of refunds 367 2,405 7,810
Non-cash investing and financing activities:
Equity adjustment from change in
pension liability versus
unrecognized prior service
cost (note 11) 5,568 (5,523) (143)
Adjustment required to recognize
minimum pension liability (note 11) (5,654) 5,704 942
Leases capitalized net of leases
terminated 1,160 401 729
See accompanying Notes to Consolidated Financial Statements
MOOG INC.
Consolidated Statements of Shareholders' Equity
(dollars in thousands except per share data)
Years ended September 30 1994 1993 1992
PREFERRED STOCK (note 13) $ 100 $ 100 $ 100
COMMON STOCK (note 13) 9,134 9,134 9,134
ADDITIONAL PAID-IN CAPITAL
Beginning of year 47,780 47,780 47,780
Issuance of Treasury Shares at
less than cost (43) - -
End of year 47,737 47,780 47,780
RETAINED EARNINGS
Beginning of year 54,259 49,507 56,289
Net earnings (loss) 2,123 4,761 (6,773)
Preferred dividends ($.09 per share
in 1994, 1993 and 1992) (9) (9) (9)
End of year 56,373 54,259 49,507
TREASURY SHARES, AT COST*
Beginning of year (18,002) (18,002) (17,615)
Shares acquired (1992 - 49,300
Class A Shares, 7,100 Class B Shares) - - (387)
Shares issued related to options
(1994 - 5,500 Class A Shares) 73 - -
End of year (17,929) (18,002) (18,002)
EQUITY ADJUSTMENTS**
Beginning of year 564 10,290 6,371
Adjustment from foreign currency
translation, net of applicable
deferred taxes of $330 in
1994, $362 in 1993, and $763 in 1992 1,735 (4,203) 4,062
Adjustment from change in
pension liability versus
unrecognized prior service cost 5,568 (5,523) (143)
End of year 7,867 564 10,290
LOAN TO SAVINGS AND STOCK OWNERSHIP
PLAN (SSOP) (note 11)
Beginning of year (1,274) (1,435) (1,621)
Payments received on loan to SSOP 176 161 186
End of year (1,098) (1,274) (1,435)
TOTAL SHAREHOLDERS' EQUITY $ 102,184 $ 92,561 $ 97,374
* Class A Common Stock in treasury: 557,055 shares as of September 30,
1994; 562,555 shares as of September 30, 1993 and 1992.
Class B Common Stock in treasury: 858,103 shares as of September 30,
1994, 1993 and 1992.
** End of year balance includes foreign currency translation of 1994 -
$7,965; 1993 - $6,230; 1992 - $10,433; and pension liability
adjustments of 1994 - ($98); 1993 - ($5,666); 1992 - ($143). Included
in foreign currency translation are deferred losses of $545 in 1994,
$228 in 1993, and $16 in 1992 related to hedging net investments in,
and long term advances to, various international subsidiaries.
See accompanying Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
(dollars in thousands except per share data)
Note 1 - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements
include the accounts of Moog Inc. and all of its U.S. and
International subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
Cash and Cash Equivalents: The Company considers all highly
liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Revenue Recognition: The percentage of completion
(cost-to-cost) method of accounting is followed for long-term
contracts received by the Company. Under this method, revenues
are recognized as the work progresses toward completion. Other
than on long term contracts, revenues are recognized as units are
delivered. Contract incentive awards affect earnings when the
amounts can be determined. For contracts with anticipated losses
at completion, the projected loss is accrued at the time it can
reasonably be estimated.
Inventories: Inventories are stated at the lower of cost or
market using the first-in, first-out (FIFO) method of valuation.
Consistent with industry practice, aerospace related inventories
include amounts relating to contracts having long production and
procurement cycles, portions of which are not expected to be
realized within one year.
Foreign Currency: Foreign subsidiary assets and liabilities
are translated using rates of exchange as of the balance sheet
date and the statements of operations are translated at the
average rates of exchange during the year. Gains and losses
resulting from translation and hedging of net investments in, or
long term advances to, foreign subsidiaries are accumulated in
the equity section as "Equity Adjustments." Gains and losses
resulting from foreign currency transactions are included in
income.
Depreciation and Amortization: Plant and equipment are
depreciated principally using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements and
assets considered capital leases are amortized on a straight-line
basis over the term of the lease or the estimated useful life of
the asset, whichever is shorter. Debt issuance costs are
amortized over the term of the related debt agreements.
Intangibles associated with acquisitions are amortized over
their estimated useful lives, generally 7 to 12 years. The
Company annually reviews acquisition related intangibles for
impairment. The method used to determine whether such
intangibles have been impaired is generally based upon forecasted
undiscounted cash flows.
Income Taxes: The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," in 1994. The Company separately reported the cumulative
effect of the adoption of SFAS No. 109 in the Consolidated
Statements of Operations.
Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for future tax
consequences attributed to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Under the previously used asset and
liability method of SFAS No. 96, deferred tax assets and
liabilities were recognized for all events that had been
recognized in the financial statements, with generally no
consideration of any future events in calculating deferred taxes.
Note 2 - Acquisition
On June 17, 1994, the Company acquired the hydraulic and
mechanical actuation product lines (the Product Lines) of
AlliedSignal Inc., located in Torrance, California. The Product
Lines include mechanical drive systems for leading edge flaps and
hydraulic servoactuators for primary and secondary flight
controls used on a wide variety of commercial and military
aircraft. The Company paid $78 million for the Product Lines
including payment for specified transition services, subject to
adjustment based upon finalization of the net book value of
assets transferred. The acquisition has been accounted for under
the purchase method, and accordingly, the operating results for
the Product Lines have been included in the Consolidated
Statement of Operations since the date of acquisition. The cost
of the acquisition has been preliminarily allocated on the basis
of the estimated fair value of assets acquired and the
liabilities assumed, including contract loss reserves.
The acquisition was financed with proceeds from a Revolving
Credit and Term Loan Agreement with a banking group (Note 7).
The acquisition resulted in Product Line intangible assets of
$14,320, which are being amortized over a 12 year period.
The following summary, prepared on a pro-forma basis,
combines the unaudited consolidated results of operations as if
the Product Lines had been acquired at the beginning of the
periods presented. The pro-forma consolidated results include
the impact of certain adjustments, including amortization of
intangibles, increased interest expense on acquisition debt, and
related income tax effects.
(Unaudited) 1994 1993
Net sales $ 375,545 $ 394,130
Net earnings before extraordinary
item and cumulative effect of
change in accounting principle 6,916 7,461
Net earnings 7,421 7,104
Earnings per share $ .96 $ .92
The pro-forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been in
effect for the periods presented. In addition, they are not
intended to be a projection of future results.
As part of the acquisition strategy, the Company will
relocate certain production from Torrance, California to the
Company's facilities in Western New York. Accordingly, the
Company has provided a reserve for $2,400 related to expected
work force reductions of 130 employees at the Torrance facility.
As of September 30, 1994, the Torrance work force has been
reduced by 30, with the remainder of the reductions to take place
in 1995. Of the Torrance related severance liability, $2,270
remains unpaid as of September 30, 1994. An additional liability
of $600 was recorded to cover product line relocations and
out-placement costs which will be completed in 1995.
Note 3 - Receivables
Receivables consist of:
September 30 1994 1993
Long term contracts:
Amounts billed $ 22,035 $ 30,915
Unbilled recoverable costs
and profits 63,151 54,880
Unbilled costs and profits
subject to negotiation 571 1,455
Total long-term contract
receivables 85,757 87,250
Trade 53,812 36,306
Refundable income taxes 5,504 403
Other 617 914
Total receivables 145,690 124,873
Less allowance for doubtful
accounts (1,493) (1,864)
Receivables, net $144,197 $123,009
The long term contract amounts identified above are
primarily associated with prime U.S. Government contractors.
These amounts include retainage in accordance with the terms of
the contracts. Unbilled costs and profits subject to negotiation
represent claims on terminated contracts. Substantially all
unbilled amounts are expected to be collected within one year.
In situations where billings exceed revenues recognized, the
excess is included in customer advances.
Note 4 - Inventories
Inventories consist of the following:
September 30 1994 1993
Raw materials and purchased parts $ 19,356 $ 14,641
Work in process 48,517 47,176
Finished goods 10,769 5,045
$ 78,642 $ 66,862
In March 1994, the Company recorded a pre-tax charge of
$2,574 to write off obsolete domestic inventory. This charge
reflects a recent decline in repair activities and spare parts
requirements on various government programs.
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
September 30 1994 1993
Land $ 7,870 $ 4,441
Buildings and improvements 87,124 76,595
Machinery and equipment 207,769 156,341
Property, plant and equipment,
at cost 302,763 237,377
Less accumulated depreciation and
amortization (156,291) (141,522)
Property, plant and equipment, net $146,472 $ 95,855
Note 6 - Notes Payable
The Company maintains short term lines of credit with
various banks throughout the world. These short term lines of
credit, along with $14,750 available on the long term U.S.
Revolving Credit Agreement detailed in Note 7, provide credit
availability amounting to $33,860. The short term credit lines
are principally demand lines and subject to revision by the
banks. Commitment fees are charged on some credit arrangements
based on a percentage of the unused amounts available. At
September 30, 1994, $9,200 of notes payable to banks at an
average rate of 8.8% were outstanding under these lines of
credit.
Note 7 - Long Term Debt and Subordinated Debentures
Long-Term Debt consists of the following:
September 30 1994 1993
U.S. revolving credit agreement $ 70,000 $ -
U.S. term loan agreements 67,000 59,549
10-1/4% Note 20,000 20,000
International and other U.S.
term loan agreements 13,359 12,950
Obligations under capital leases 3,448 3,165
173,807 95,664
Less current installments:
Long-term debt 12,978 16,571
Capital lease obligations 823 940
$160,006 $ 78,153
In conjunction with the 1994 acquisition of the Product
Lines (Note 2), the Company refinanced its U.S. credit
facilities. On June 15, 1994, the Company entered into a
$151,750 Revolving Credit and Term Loan Agreement (the Agreement)
with a banking group. The Agreement provides for an $84,750
revolving credit facility and a $67,000 term loan. The revolving
credit portion of the Agreement is for a five year period through
May 1999. The maximum amount available under the revolving
credit facility will be reduced by $5,000 commencing October 1,
1995 and in each subsequent year through October 1, 1998. The
term loan portion of the Agreement is for a seven year period
through June 2001. The term loan requires quarterly principal
payments of $1,925 commencing January 1, 1995, $2,310 commencing
January 1, 1996, and $2,502 from January 1, 1997 through April 1,
2001, with a final payment of $5,005 on June 1, 2001. Interest
on the Agreement is LIBOR plus 2.125%. In order to provide for
interest rate protection, the Company has entered into interest
rate swap agreements for $60,000, effectively converting this
amount to fixed rate debt of 8.2% for a two year period through
June of 1996.
The 10-1/4% Note was amended as part of the refinancing.
The term of the Note was extended from July 1999 to July 2001,
and the payment schedule modified to quarterly principal payments
of $550 commencing January 1, 1995, increasing to $700 on January
1, 1996 and $750 on January 1, 1997.
Both the Agreement and the Note contain various covenants
which, among others, specify minimum interest and payment
coverage, maintenance of tangible net worth, working capital and
current ratio levels, and limit liabilities in relation to
tangible net worth. The Agreement and the Note provide for
restrictions on dividends. The Agreement and the Note are
secured by substantially all of the Company's U.S. assets and the
common shares of all Domestic and International subsidiaries.
The Agreement and the Note will convert to unsecured arrangements
when the Company has three consecutive quarters whereby the ratio
of consolidated liabilities to tangible net worth is less than
200%.
International and other U.S. term loan agreements of $13,359
at September 30, 1994 consist principally of financing provided
by various banks to individual International subsidiaries. These
term loans are being repaid through 2004, and carry interest
rates ranging from 2.875% to 16.1% in 1994 and 3.5% to 16.1% in
1993.
Convertible subordinated debentures at 9-7/8% total $20,800
at September 30, 1994. The debentures are subordinated in right
of payment to all senior indebtedness, as defined, and are
convertible, subject to prior redemption, into shares of Class A
Common Stock at $22.88 per share at any time up to and including
the maturity date of January 15, 2006 (Note 13). The Company
purchased $0, $182, and $177 of debentures in 1994, 1993, and
1992, respectively. Gains realized from these purchases of $9 and
$18 for 1993 and 1992, respectively, are included in other
income. The purpose of these purchases was to meet annual sinking
fund payments of $1,400 which commenced on January 15, 1992. The
Company may accelerate annual sinking fund payments to redeem an
additional $1,400 annually. The debentures are redeemable at the
option of the Company, at any time, in whole or in part, at 100%
of their principal amount. The quoted market price of the
debentures at September 30, 1994 and 1993, was 100 and 101,
respectively.
Maturities of long-term debt (including capital lease
obligations) and subordinated debentures for the next five years
are $15,201 in 1995, $20,941 in 1996, $20,991 in 1997, $21,309 in
1998, $70,012 in 1999, and $46,153 thereafter.
In the first quarter of 1993, the Company extinguished
$10,186 of 12-7/8% Domestic long-term debt prior to its scheduled
maturity in order to take advantage of a decline in U.S. interest
rates. Funds from existing credit facilities were used to
accomplish the extinguishment. The cost of the extinguishment
was $357, net of $119 in income tax benefits, which has been
recorded as an extraordinary charge in the Consolidated Statement
of Operations.
At September 30, 1994, the Company has pledged assets with a
net book value of $268,493 as security for long-term debt.
Note 8 - Leases
The Company leases certain facilities and equipment under
various lease arrangements. Such arrangements generally include
fair market value renewal and/or purchase options. Some of the
capital leases (primarily land and buildings) allow for the
Company to purchase the asset at a nominal price upon expiration.
Substantially all leases provide that the Company pay applicable
taxes, maintenance, insurance, and certain other operating
expenses. Assets under leases that have been accounted for as
capital leases and included in property, plant and equipment are
summarized as follows:
September 30 1994 1993
Capital leases at cost $ 6,861 $ 11,871
Less accumulated amortization 2,534 4,423
Net assets under capital leases $ 4,327 $ 7,448
Future minimum rental payments required under noncancelable
operating leases are $5,644 in 1995, $5,316 in 1996, $4,746 in
1997, $4,156 in 1998, $3,403 in 1999 and $14,890 thereafter.
The Company subleases various facilities to third parties.
Gross rental income from such activities was $1,247 in 1994, $780
in 1993, and $1,160 in 1992. Future minimum rental income under
noncancelable operating leases is $1,586 in 1995, $1,582 in 1996,
$1,057 in 1997, $637 in 1998 and $111 in 1999.
Rent expense under operating leases amounted to $7,049 in
1994, $6,366 in 1993, and $6,336 in 1992. Amortization of assets
recorded as capital leases is included with depreciation and
amortization of plant and equipment. Interest expense includes
$261 in 1994, $715 in 1993, and $2,095 in 1992 attributable to
obligations under capital leases.
Note 9 - Income Taxes
The Company adopted SFAS No. 109 "Accounting for Income
Taxes" in 1994. SFAS No. 109 supersedes SFAS No. 96 "Accounting
For Income Taxes." The impact of adopting SFAS No. 109 on the
Consolidated Statement of Operations was to increase earnings by
$505, which was recorded in the first quarter of 1994 as a
cumulative effect of change in accounting principle.
The reconciliation of the provision for income taxes with
the amount computed by applying the U.S. federal statutory tax
rate of 34% to earnings (loss) before income taxes, extraordinary
item and cumulative effect of change in accounting principle is
as follows:
1994 1993 1992
Earnings (loss) before income
taxes, extraordinary item
and cumulative effect of
change in accounting
principle:
Domestic $ 6,054 $ 10,376 $ 1,715
Foreign (3,440) (1,741) (8,427)
Eliminations 426 (15) 428
Total $ 3,040 $ 8,620 $ (6,284)
Computed expected tax expense
(benefit) $ 1,034 $ 2,931 $ (2,136)
Increase (decrease) in income
taxes resulting from:
Foreign tax rates 32 402 (1,001)
Deferred tax rate differential - (1,092) 904
Nontaxable FSC earnings (350) (325) -
State taxes net of federal
benefit 79 168 676
Limitation on benefits from
foreign net operating
losses 375 1,498 1,822
Other 252 (80) 224
Income taxes $ 1,422 $ 3,502 $ 489
Effective income tax rate 46.8% 40.6% (7.8%)
The fluctuation in the rates among the three years is due
primarily to limitations on the amount of deferred tax assets or
liabilities that were recorded, including the limitation on
benefits related to International subsidiary net operating
losses. At September 30, 1994, certain International
subsidiaries had net operating loss carryforwards totalling
$8,217. These loss carryforwards do not expire and can be used
to reduce current taxes otherwise due on future earnings of those
subsidiaries.
Accumulated undistributed earnings of International
subsidiaries intended to be permanently reinvested are $7,263 at
September 30, 1994. If such earnings were remitted to the
Company, income taxes, based on the applicable current rates,
would be payable after reductions for any foreign taxes
previously paid on such earnings and subject to applicable
limitations.
The components of income taxes excluding the extraordinary
item and cumulative effect of change in accounting principle are
as follows:
1994 1993 1992
Current:
Federal $ (3,255) $ 1,320 $ 2,836
Foreign (249) 2,180 (1,024)
State - 213 958
Total current (3,504) 3,713 2,770
Deferred:
Federal 5,440 305 (2,133)
Foreign (634) (558) (214)
State 120 42 66
Total deferred 4,926 (211) (2,281)
Total income taxes $ 1,422 $ 3,502 $ 489
The tax effects of temporary differences that give rise to
deferred tax assets and liabilities at September 30, 1994 are as
follows:
Deferred tax assets:
Contract loss reserves not currently deductible $ 5,575
Net operating loss carryforwards 3,730
Accrued vacation 3,621
Deferred compensation 3,212
Accrued expenses not currently deductible 2,698
Inventory 2,436
Other 845
Total gross deferred tax assets 22,117
Less: Valuation reserve (5,223)
Net deferred tax assets 16,894
Deferred tax liabilities:
Differences in bases and depreciation of property,
plant and equipment 13,591
Goodwill and other intangible assets 2,832
Prepaid pension 884
Other 866
Total gross deferred tax liabilities 18,173
Net deferred tax liabilities $ 1,279
Net deferred taxes are presented in the accompanying
Consolidated Balance Sheets as follows:
Noncurrent deferred tax liabilities $ 16,671
Current deferred tax assets 15,392
Net deferred tax liabilities $ 1,279
In 1993 and 1992, deferred taxes resulted from differences
in the tax and financial accounting for depreciation,
restructuring charges, and estimated losses on contracts and
inventories.
Note 10 - Restructuring Charges
In 1994, the Company provided $2,107 in pre-tax
restructuring charges, with $890 related to the Domestic Controls
segment and $1,217 related to the International Controls segment.
The restructuring actions were taken in response to continuing
defense spending reductions and the persistently weak capital
goods markets in Europe. The restructuring charge includes
$1,757 of severance benefit costs relating to work force
reductions totalling 140 employees in the Company's operations in
the United States, England, Germany and Denmark. The Company has
reduced its work force by 60 people as of September 30, 1994,
with the remainder of the reductions scheduled for 1995. Of the
total severance related charge, $702 remained accrued as of
September 30, 1994. A charge of $350 was also recorded for the
termination of a long term operating lease in September 1994.
In 1992, the Company incurred pre-tax restructuring charges
of $13,834, with $10,504 related to the Domestic Controls segment
and $3,330 for the International Controls segment. The Domestic
Controls segment restructuring charge was taken in response to
defense spending reductions and included work force reductions,
closing a facility in Florida, and consolidating manufacturing in
Western New York. In the International Controls segment, the
restructuring charges were taken in response to the weak capital
goods markets in Europe and to consolidate European manufacturing
operations. From the 1992 restructuring accrual, $852 remains
unpaid principally related to long term severance arrangements.
Note 11 - Employee Benefit Plans
Employee and management profit share plans provide for the
computation of profit share based on net earnings as a percent of
net sales multiplied by base wages, as defined. Profit share
expense was $459 in 1994, $1,119 in 1993, and $0 in 1992. No
management profit share was expensed in 1994, 1993, or 1992.
The Company has a Savings and Stock Ownership Plan (SSOP)
which includes an Employee Stock Ownership Plan (ESOP). As one
of the investment alternatives, participants in the SSOP can
acquire Company stock at market value, with the Company providing
a 25% share match. At inception, the ESOP purchased 150,000
shares of Class B Common Stock to provide the matching shares.
At the time the ESOP purchased the shares, Shareholders' Equity
was reduced by $2,213, representing the Company's prepayment of
future compensation expense. As the Company makes contributions
to the ESOP, the loan to the Company and the amount of prepaid
compensation is reduced. ESOP compensation expense is recognized
on a share allocation method. Contributions to the ESOP by the
Company for 1994, 1993 and 1992 were $273, $161 and $186,
respectively, and shares allocated to ESOP participants for 1994,
1993 and 1992 were 11,979, 10,891 and 12,563, respectively. At
September 30, 1994, 390,000 Class B Common Shares were owned by
the SSOP or its participants, including the Company match,
representing 23% of the issued and outstanding Class B shares.
In 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Post-retirement Benefits Other than Pensions." Under SFAS No.
106, the cost of postretirement benefits other than pensions must
be recognized as employees perform services to earn the benefits,
instead of when benefits are paid, as had been the practice in
1993 and prior years.
Postretirement health care benefits for U.S. employees are
the only costs that need to be accrued by the Company in
accordance with SFAS No. 106. Substantially all of the Company's
U.S. employees hired prior to March 1, 1989 will become eligible
for benefits when they reach normal retirement age while working
for the Company. Further, changes in the Company's health care
plans have limited the amount of retiree health care benefits to
employees who retire after October 1, 1989. This includes
limiting the Company's annual premium cost increases to 2.5% per
year on a non-cumulative basis.
The 1994 SFAS No. 106 cost of $1,075 is comprised of $103
for service cost, $577 for interest cost and $395 for the
amortization of the October 1, 1993 transition obligation over a
20 year period. The health care costs for retirees expensed in
1993 and 1992 were $741 and $760, respectively, based on claims
as incurred.
The discount rate assumed at September 30, 1994 was 9.0%
compared with the 7.5% rate used to determine the October 1, 1993
initial transition obligation. In June 1994, the Company's SFAS
No. 106 obligation increased by $569 due to the acquisition of
the Product Lines (Note 2). This incremental obligation was
determined using a 7.5% discount rate. The health care cost
trend rates assumed are 2.5% per year beginning in 1995 for
qualified employees who are presently under 65 years of age, and
12.5% in 1995, 11.0% in 1996, 10.0% in 1997 and 2.5% for 1998 and
all subsequent years for Plan participants who are currently
older than 65 years of age. The effect of a one percentage point
increase in the assumed health care cost trend rate would
increase the accumulated postretirement benefit obligation as of
September 30, 1994 by approximately 4%, and increase the
aggregate of the service and interest cost components of net
annual postretirement benefit cost by approximately 4%.
A reconciliation of the funded status of the plan with the
accrued liability at September 30, 1994 is shown below. There
were no Plan Assets at September 30, 1994.
September 30 1994
Accumulated Postretirement Benefit Obligation (APBO)
- Inactives $ (4,414)
- Actives fully eligible (342)
- Actives not fully eligible (2,167)
Total APBO (Funded Status) (6,923)
Unrecognized Transition Obligation 7,493
Unrecognized Gains (1,498)
Accrued Postretirement Benefit Cost $ (928)
The pension plans of the Company and its subsidiaries cover
substantially all employees, including certain employees in
foreign countries. Total pension expense for all plans in 1994,
1993, and 1992 was $7,050, $5,684, and $4,194, respectively.
Included as an offset to 1992 pension expense is a $580
curtailment gain from the conversion of participants from a
defined benefit plan to a defined contribution plan at an
International subsidiary.
With the exception of certain International subsidiaries,
the Company funds pension costs accrued, including amortization
of prior service costs, over a 15-year period. The table below
sets forth the funded status of the domestic and foreign defined
benefit plans at September 30, 1994 and 1993, and pension expense
in 1994 and 1993 for such defined benefit plans.
At September 30, 1994 and 1993, the minimum pension
liability adjustments were $989 and $6,643, respectively. This
liability is offset by an intangible asset of $891 in 1994 and
$977 in 1993, and a reduction of shareholders' equity, net of
deferred taxes, of $98 and $5,666 in 1994 and 1993, respectively.
The 1994 and 1993 minimum pension liability adjustment reflects
the change in the discount rate for measuring U.S. plan
obligations. In 1994, the discount rate for the U.S. was
increased to 9.0% from 7.5% in 1993. The comparable discount
rate for 1992 was 8.5%.
Plan Assets consist primarily of government obligations and
publicly traded stocks, bonds and mutual funds.
Principal actuarial assumptions are:
1994 1993
Weighted average discount rate 8.7% 7.5%
Weighted average return on assets 8.9% 8.9%
Rate of compensation increase 3.3% 3.3%
1994 1993
U.S. U.S.
Employee Employee Other Plans
Plan with Plan with Plans with with
Assets in Other Plans Plans with Accumulated Assets in Accumulated
Excess of with Assets Accumulated Benefits in Excess of Benefits in
Accumulated in Excess of Benefits in Excess of Accumulated Excess of
Benefits Accumulated Excess of Plan Assets Benefits Plan Assets
Benefits Plan Assets
Funded Status:
Accumulated
benefit
obligation
- Vested $77,075 $3,528 $11,852 $85,865 $3,311 $11,977
- Nonvested 313 - 3,361 239 - 1,878
- Total $77,388 $3,528 $15,213 $86,104 $3,311 $13,855
Projected
benefit
obligation (PBO) $82,437 $3,675 $20,854 $91,136 $3,478 $18,625
Plan assets at
fair value 84,793 4,068 1,585 76,342 3,466 1,318
Plan assets in
excess of
(or less than) PBO 2,356 393 (19,269) (14,794) (12) (17,307)
Unrecognized
cumulative
experience loss
(gain) 2,741 (615) (738) 12,773 (392) 174
Unrecognized net
(asset) liability
from SFAS no. 87
adoption date,
amortized
over 15 years (2,840) (3) 2,453 (3,208) (4) 2,576
Unrecognized prior
service cost 43 - 355 256 - 118
Adjustment required
to recognize minimum
liability - - (989) (4,789) - (1,854)
Accrued pension
(liability)
asset $ 2,300 $ (225) $ (18,188) $ (9,762) $ (408) $ (16,293)
Pension Expense:
Service cost -
benefits earned
during the year $ 2,880 $ 293 $ 1,044 $ 2,644 $ 277 $ 1,019
Interest cost on
projected benefit
obligation 6,903 268 1,301 6,313 293 1,230
Actual gain on
Plan assets (2,568) (394) (55) (10,663) (534) (49)
Net amortization
and deferral (3,338) 121 291 4,244 304 351
Curtailment gain - (62) (17) - - (10)
Pension expense
for defined
benefit plans $ 3,877 $ 226 $ 2,564 $ 2,538 $ 340 $ 2,541
Note 12 - Stock Option Plans
The 1983 Non-Statutory Stock Option Plan provides for granting options
on 133,412 Class B Shares (Note 13) to directors, officers, and key
employees at September 30, 1994. Stock appreciation rights were granted in
tandem with the options and are exercisable only to the extent the options
are exercised. The 1983 Incentive Stock Option Plan provides for granting
options on 380,000 Class A shares to officers and key employees at
September 30, 1994. The Plans terminated on December 31, 1992 and
outstanding options expire no later than ten years after the date of grant.
Options were granted at prices not less than market value on the date
of the grant. Shares under option are as follows:
Non-Statutory Incentive
Plan Plan
(Class B) (Class A)
Outstanding at September 30, 1991 196,020 387,500
Granted in 1992 - ($7.50 per share) - 62,000
Cancelled in 1992 (51,000) (106,100)
Outstanding at September 30, 1992 145,020 343,400
Granted in 1993 - ($5.625 per share) - 57,000
Cancelled in 1993 (5,304) (11,100)
Outstanding at September 30, 1993 139,716 389,300
Cancelled or expired in 1994 (6,304) (3,800)
Exercised in 1994 - (5,500)
Outstanding and exercisable
at September 30, 1994:
Class A ($5.625 to $10.50 per share) - 380,000
Class B ($11.00 to $17.25 per share) 133,412 -
Note 13 - Capital Stock
Class A Common Stock (Class A) and Class B Common Stock (Class B)
share equally in the earnings of the Company, and are identical in most
respects except (i) Class A has limited voting rights, each share of
Class A being entitled to one-tenth of a vote on most matters and each
share of Class B being entitled to one vote, (ii) Class A shareholders are
entitled to elect at least 25% of the Board of Directors (rounded up to the
nearest whole number) with Class B shareholders entitled to elect the
balance of the directors, (iii) cash dividends may be paid on Class A
without paying a cash dividend on Class B and no cash dividend may be paid
on Class B unless at least an equal cash dividend is paid on Class A, and
(iv) Class B shares are convertible at any time into Class A on a
one-for-one basis at the option of the shareholder. The number of common
shares issued reflects conversion of Class B to Class A of 317 shares in
1994, 373 shares in 1993, and 295 shares in 1992.
Series B Preferred Stock is 9% Cumulative, Convertible, Exchangeable,
Preferred Stock with a $1.00 par value. 100,000 shares of Series B
Preferred Stock have been issued and are convertible into Class A Common
Shares. The Board of Directors may authorize, without further shareholder
action, the issuance of additional Preferred Stock which ranks senior to
both classes of Common Stock of the Company with respect to the payment of
dividends and the distribution of assets on liquidation. The Preferred
Stock, when issued, would have such designations relative to voting and
conversion rights, preferences, privileges and limitations as determined by
the Board of Directors.
Of the Class B common stock, 133,412 shares are reserved for issuance
under the 1983 Non-Statutory Stock Option Plan (note 12). Class A shares
reserved for issuance at September 30, 1994 are as follows:
Shares
Conversion of Class B to Class A shares 2,668,229
Conversion of 9-7/8% convertible
subordinated debentures (note 7) 909,091
1983 Incentive Stock Option Plan (note 12) 380,000
Conversion of Series B Preferred Stock to Class A shares 8,585
3,965,905
Note 14 - Industry Segments
The Company's two industry segments, Domestic Controls and
International Controls, manufacture and market precision control systems
and components primarily for North America and for industrialized economies
in Europe and the Far East, respectively.
1994 1993 1992
Domestic Controls
Net Sales:
Government $ 157,928 $ 147,532 $ 167,207
Commercial 55,322 41,833 41,751
Intersegment sales 7,804 12,488 10,054
Total sales $ 221,054 $ 201,853 $ 219,012
Operating profit (O.P.) $ 20,373 $ 21,726 $ 16,642
Inventory obsolescence and
restructuring charges
included in O.P. 3,390 - 10,504
Net earnings 4,394 7,604 1,911
Identifiable assets 288,886 182,289 191,591
Capital expenditures 5,263 6,093 8,010
Depreciation expense 7,725 7,389 8,664
International Controls
Net Sales:
Government $ 16,385 $ 19,240 $ 18,268
Commercial 77,735 85,075 79,778
Intersegment sales 5,634 4,231 2,406
Total sales $ 99,754 $ 108,546 $ 100,452
Operating profit (O.P.) $ 1,135 $ 5,097 $ (3,685)
Inventory obsolescence and
restructuring charges
included in O.P. 1,291 - 3,330
Net loss (2,366) (2,842) (8,883)
Identifiable assets 106,231 104,630 117,450
Capital expenditures 3,019 2,888 3,855
Depreciation expense 5,129 5,996 6,567
Consolidated operations
Net Sales $ 307,370 $ 293,680 $ 307,004
Operating profit (O.P.) 21,508 26,823 12,957
Inventory obsolescence and
restructuring charges
included in O.P. 4,681 - 13,834
Deductions from operating profit:
Interest expense 11,402 10,974 13,346
Currency (gain) loss (451) 60 834
Other expenses, net 7,613 7,170 5,260
Eliminations (96) (1) (199)
Total deductions 18,468 18,203 19,241
Earnings (loss) before income
taxes, extraordinary item
and cumulative effect of
change in accounting principle 3,040 8,620 (6,284)
Income taxes 1,422 3,502 489
Earnings (loss) before
extraordinary item
and cumulative effect of
change in accounting
principle 1,618 5,118 (6,773)
Extraordinary item - (357) -
Cumulative effect of change
in accounting principle 505 - -
Net earnings (loss) $ 2,123 $ 4,761 $ (6,773)
Total identifiable assets $395,117 $286,919 $309,041
Corporate assets 50,179 42,085 33,325
Eliminations (20,840) (10,874) (6,380)
Total assets $424,456 $318,130 $335,986
Intersegment sales, which are transacted at appropriate transfer
prices, have been eliminated in net sales. Operating profit is total
revenue less cost of sales and other operating expenses. The deductions
from operating profit have been charged to the respective segments by being
directly identified with the segments or allocated on the basis of assets
or earnings.
Included in 1994 net sales for Domestic Controls is $118,807 in sales
to the U.S. Government or to prime U.S. Government contractors, of which
$38,752 represents sales on the B-2 Advanced Technology Bomber with
Northrop Corporation.
Note 15 - Geographic Areas and Export Sales
United Europe Pacific & Corporate & Consol-
States Other Eliminations idated
Identifiable Assets:
1994 $276,757 $ 66,156 $ 48,023 $ 33,520 $424,456
1993 172,751 67,169 47,311 30,899 318,130
1992 188,743 87,033 41,034 19,176 335,986
Sales to Unaffiliated Customers:
1994 214,863 64,446 28,061 307,370
1993 191,608 75,343 26,729 293,680
1992 210,690 75,716 20,598 307,004
Inter-area Sales to Affiliates:
1994 8,127 6,012 7,679 21,818
1993 9,317 5,948 7,940 23,205
1992 8,533 4,635 6,482 19,650
Export Sales:
1994 41,698 18,373 2,069 62,140
1993 25,623 31,760 3,297 60,680
1992 28,254 25,867 2,152 56,273
Net Earnings (Loss):
1994 4,407 (2,658) 1,202 (828) 2,123
1993 7,828 (4,815) 1,659 89 4,761
1992 143 (7,273) (85) 442 (6,773)
Sales between geographic areas are transacted at appropriate transfer
prices. Export sales from the United States are primarily to areas other
than Europe. Export sales from Europe and all other geographic areas are
principally to countries within their geographic area.
Note 16- Commitments and Contingencies
The Company has been named a potentially responsible party (PRP) in
the clean-up of three Superfund sites in Western New York. In addition,
the Company was notified in August 1993 by a PRP group at a related site
that it will seek contribution from the Company and others to the extent
the group is responsible for remediation costs at the related site. The
Company also is in the process of evaluating potential environmental
remediation actions at a Company owned facility leased to a third party.
At September 30, 1994, the Company believes that adequate reserves
have been established for environmental issues for which financial exposure
is probable and quantifiable. Because of the uncertainties associated with
environmental matters, the Company could be requested to participate in
future remediation activities, if any, at the three Superfund sites. With
respect to the related site, the clean-up effort has not progressed
sufficiently to allow an accurate assessment of total clean-up costs or,
the Company's relative responsibility for those costs. Based upon
currently available data, while it is difficult to predict, the Company
does not expect that these environmental matters will have a material
effect on the financial position of the Company in excess of amounts
previously reserved.
In the ordinary course of business, subsidiaries of the Company have
discounted promissory notes received in settlement of trade receivables at
banks. The aggregate proceeds from discounted notes were $14,809 in 1994,
$13,663 in 1993, and $15,100 in 1992. Under the recourse provisions of
such transactions, the subsidiaries are contingently liable for $2,926 at
September 30, 1994.
The Company has $9,464 in open letters of credit at September 30,
1994, which principally relate to cash advances received on a contract.
Purchase commitments outstanding at September 30, 1994 are $1,186 for
machinery and equipment.
Note 17 - Financial Instruments and Credit Concentration
The Company uses a variety of financial instruments, including foreign
exchange instruments, letters of credit, and interest rate swaps. These
instruments are utilized to meet the financing needs of the Company and to
reduce exposure to fluctuating foreign exchange rates. The Company is
exposed to credit loss in the event of nonperformance by the
counter-parties to the instruments. The Company, however, does not expect
nonperformance by the counter-parties.
Foreign exchange instruments are used to hedge the Company's equity
in, and long term advances to, various International subsidiaries. At
September 30, 1994 and September 30, 1993, the Company had $9,935 and
$8,659, respectively, of such instruments outstanding at fair value. Gains
and losses on these hedges of equity and long term advances are included in
shareholders' equity. Foreign currency forward contracts are utilized to
hedge known foreign currency cash flows. Gains and losses on such
contracts are netted against the gain or loss on the underlying amounts
receivable or payable. Foreign currency forward contracts outstanding at
fair value on September 30, 1994 were $1,934. The Company has three
interest rate swap agreements which convert a notional amount of $60,000 in
variable rate long term debt to 8.2% fixed rate debt. The agreements
mature in June 1996. The differential interest paid or received is accrued
as interest rates change and is recognized over the life of the agreements.
Cash and cash equivalents and notes payable are carried at amounts
which approximate fair value at September 30, 1994 because of their short
maturity. The fair value of long-term debt was estimated based on a
discounted cash flow analysis using current rates offered to the Company
for debt with the same remaining maturities. At September 30, 1994, the
carrying value and estimated fair value of long-term debt was $175,207 and
$177,000, respectively.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade receivables. The Company places its temporary
investments with highly rated financial institutions for maturities of
generally three months or less. Concentrations of credit risk with respect
to trade receivables are limited due to the significant amount of business
with prime U.S. Government contractors or large commercial aerospace
companies, and to the number of customers and their dispersion over a large
geographic area.
Note 18- Quarterly Data - Unaudited
Net Sales and Earnings
(dollars in thousands except per share data)
Year Ended Year Ended
September 1994 September 1993
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
Net Sales $68,818 $75,127 $73,215 $90,210 $307,370 $68,118 $74,840 $72,151 $78,571 $293,680
Gross Profit 20,276 23,007 23,334 26,334 92,952 21,338 22,705 20,823 21,829 86,695
Earnings (Loss)
before Income
Taxes,
Extraordinary
Item and
Cumulative
Effect
of Change
in Accounting
Principle 311 (2,138) 2,151 2,716 3,040 1,202 2,452 2,536 2,430 8,620
Earnings (Loss)
before
Extraordinary
Item and
Cumulative
Effect of
Change in
Accounting
Principle 198 (1,241) 1,212 1,449 1,618 901 1,612 1,522 1,083 5,118
Extraordinary Item - - - - - (357) - - - (357)
Cumulative Effect
of Change in
Accounting
Principle 505 - - - 505 - - - - -
Net Earnings
(Loss) $ 703 $(1,241) $1,212 $ 1,449 $ 2,123 $ 544 $1,612 $1,522 $1,083 $4,761
Net Earnings
(Loss) Per
Common Share:
Before
Extraordinary
Item and
Cumulative
Effect of
Change in
Accounting
Principle $ .03 $ (.16) $ .16 $ .19 $ .21 $ .11 $ .21 $ .20 $ .14 $ .66
Extraordinary
Item - - - - - (.04) - - - (.04)
Cumulative
Effect of
Change in
Accounting
Principle .06 - - - .06 - - - - -
Net Earnings
(Loss) $ .09 $ (.16) $ .16 $ .19 $ .27 $ .07 $ .21 $ .20 $ .14 $ .62
Note: The 1994 quarterly Earnings Per Share do not add to the total due to rounding.
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors of Moog Inc.:
We have audited the consolidated financial statements of Moog Inc. and
subsidiaries listed in Item 14 (a)(1) of the annual report on Form 10-K for
the fiscal year 1994. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement
schedules listed in Item 14 (a)(2) of the annual report on Form 10-K for
the fiscal year 1994. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based
on our audits. We did not audit the financial statements of certain
wholly-owned consolidated subsidiaries, which statements reflect total
assets constituting 13% and 18% as of September 30, 1994 and 1993, and
total net sales constituting 18%, 22% and 21% of the related consolidated
totals for the years ended September 30, 1994, 1993 and 1992, respectively.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for such consolidated subsidiaries, is based solely on the reports
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
and the reports of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Moog Inc. and subsidiaries
as of September 30, 1994 and 1993, and the results of their operations and
their cash flows for each of the years in the three-year period ended
September 30, 1994, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all materials respects, the
information set forth therein.
As discussed in Notes 1 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1994 to adopt
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." As discussed in Note 11, the Company has
also adopted the provisions of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" in 1994.
KPMG PEAT MARWICK LLP
Buffalo, New York
November 23, 1994
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
ITEM 10. Directors and Executive Officers of the Registrant.
The information required herein with respect to directors of the
Company is incorporated by reference to "Election of Directors" in the 1994
Proxy.
Executive Officers of the Registrant.
The names and ages of all executive officers of Moog are set forth on
the following page.
Other than John B. Drenning, the principal occupations of the
following officers for the past five years have been their employment with
the Company. Mr. Drenning's principal occupation is partner in the law
firm of Phillips, Lytle, Hitchcock, Blaine & Huber.
Executive Officers and Positions Held Age Year First
Elected Officer
Robert T. Brady
President; Chief Executive Officer;
Director; Member, Executive Committee 53 1967
Richard A. Aubrecht
Chairman of the Board;
Director; Member, Executive Committee 50 1980
Joe C. Green
Executive Vice President;
Chief Administrative Officer;
Director; Member, Executive Committee 53 1973
Robert R. Banta
Executive Vice President;
Chief Financial Officer;
Director; Assistant Secretary;
Member, Executive Committee 52 1983
Kenneth D. Garnjost
Vice President - Engineering 68 1961
Philip H. Hubbell
Vice President - Contracts and
Government Accounting 55 1988
Stephen A. Huckvale
Vice President 45 1990
Robert H. Maskrey
Vice President 53 1985
Richard C. Sherrill
Vice President 56 1991
Kenneth G. Smith
Vice President 58 1990
William P. Burke
Treasurer 59 1985
John B. Drenning
Secretary 57 1989
Donald R. Fishback
Controller 38 1985
ITEM 11. Executive Compensation.
The information required herein is incorporated by reference to
"Compensation Committee Report," "Stock Price Performance Graph," "Summary
Compensation Table," "Fiscal Year-End Option/SAR Values," "Employees'
Retirement Plan," "Supplemental Retirement Plan," "Employment Termination
Benefits Agreements" and "Compensation of Directors" in the 1995 Proxy.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information required herein is incorporated by reference to
"Certain Beneficial Owners" and "Election of Directors" in the 1995 Proxy.
ITEM 13. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference to
"Transactions With Moog Controls Inc." in the 1995 Proxy.
Part IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
1. Index to Financial Statements.
The following financial statements are included:
(i) Consolidated Statements of Operations for the years ended
September 30, 1994, 1993, and 1992.
(ii) Consolidated Balance Sheets as of September 30, 1994 and
1993.
(iii) Consolidated Statements of Cash Flows for the years ended
September 30, 1994, 1993, and 1992.
(iv) Consolidated Statements of Shareholders' Equity for the
years ended September 30, 1994, 1993, and 1992.
(v) Notes to Consolidated Financial Statements.
(vi) Reports of Independent Auditors.
2. Index to Financial Statement Schedules.
The following Financial Statement Schedules as of and for the
years ended September 30, 1994, 1993, and 1992, are included in
this Annual Report on Form 10-K:
V. Property, Plant and Equipment.
VI. Accumulated Depreciation and Amortization of Property, Plant
and Equipment.
VIII. Valuation and Qualifying Accounts.
IX. Short-Term Borrowings.
3. Exhibits.
The exhibits required to be filed as part of this Annual Report
on Form 10-K have been included as follows:
(2) Stock Purchase Agreement between Moog Inc., Moog Torrance Inc.
and AlliedSignal Inc., incorporated by reference to
exhibit 2.1 of the Company's report on Form 8-K dated
June 15, 1994.
(3) Restated Certificate of Incorporation and By-laws of the Company,
incorporated by reference to exhibit (3) of the Company's
Annual Report on Form 10-K for its fiscal year ended
September 30, 1989.
(4) Instruments defining the rights of security holders.
Instruments defining the rights of holders of long-term debt
of the Company and its subsidiaries are not being filed
since the total amount of securities authorized under any
such instrument does not exceed 10 percent of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of any such
instruments to the Securities and Exchange Commission upon
request.
(9) (i) Agreement as to Voting, effective October 15, 1988,
incorporated by reference to exhibit (i) of October 15, 1988
Report on Form 8-K dated November 30, 1988.
(ii) Agreement as to Voting, effective November 30, 1983,
incorporated by reference to exhibit (i) of November 1983
Report on Form 8-K dated December 9, 1983.
(10) Material contracts.
(i) Management Profit Sharing Plan, incorporated by reference to
exhibit 10(i) of the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1991.
(ii) Supplemental Retirement Plan dated October 1980, as amended,
incorporated by reference to exhibit (iv) of November 1983
Report on Form 8-K, dated December 9, 1983, as amended, and
reported in August 30, 1988 Report on Form 8-K, dated
October 3, 1988, and amended on October 20, 1988,
incorporated by reference thereto.
(iii) Deferred Compensation Plan for Directors and Officers,
incorporated by reference to exhibit (i) of November 1985
Report on Form 8-K, dated December 3, 1985.
(iv) Incentive Stock Option Plan, incorporated by reference to
exhibit 4(b) of the Registration Statement on Form S-8, File
No. 33-36721, filed with the Securities and Exchange
Commission on September 7, 1990.
(v) Non-Statutory Stock Option Plan, as amended, incorporated by
reference to exhibits 10(v) and 10(vi) of the Company's
Annual Report on Form 10-K for its fiscal year ended
September 30, 1989.
(vi) Savings and Stock Ownership Plan, incorporated by reference
to exhibit 4(b) of the Company's Annual Report on Form 10-K
for its fiscal year ended September 30, 1989.
(vii) Executive Termination Benefits Agreement incorporated by
reference to January 29, 1988 Report on Form 8-K dated
February 4, 1988.
(viii) Indemnity Agreement, incorporated by reference to Annex A to
1988 Proxy Statement dated January 4, 1988.
(ix) Revolving Credit and Term Loan Agreement dated June 15, 1994
(11) Statement re: Computation of per share earnings.
(13) 1994 Report to Shareholders. (Except for those portions which
are expressly incorporated by reference to the Annual Report on
Form 10-K, this exhibit is furnished for the information of the
Securities and Exchange Commission and is not deemed to be filed
as part of this Annual Report on Form 10-K.)
(22) Subsidiaries of the Company.
Subsidiaries of the Company are listed below:
(i) Esprit Technology, Inc., Incorporated in California,
wholly-owned subsidiary
(ii) Moog AG, Incorporated in Switzerland, wholly-owned
subsidiary with branch operation in Ireland
(iii) Moog Australia Pty. Ltd., Incorporated in Australia,
wholly-owned subsidiary
(iv) Moog do Brasil Controles Ltda., Incorporated in Brazil,
wholly-owned subsidiary
(v) Moog Buhl Automation, a branch office of Moog Inc. operating
under Danish law
(vi) Moog Controls Corporation, Incorporated in Ohio,
wholly-owned subsidiary with branch operation in the
Republic of the Philippines
(vii) Moog Controls Hong Kong Ltd., Incorporated in Hong Kong,
wholly-owned subsidiary
(viii) Moog Controls (India) Private Ltd., Incorporated in India,
wholly-owned subsidiary
(ix) Moog Controls Ltd., Incorporated in the United Kingdom,
wholly-owned subsidiary
(a) Moog Norden A.B., Incorporated in Sweden, wholly-owned
subsidiary of Moog Controls Ltd.
(b) Moog OY, Incorporated in Finland, wholly-owned
subsidiary of Moog Controls Ltd.
(x) Moog FSC Ltd., Incorporated in the Virgin Islands,
wholly-owned subsidiary
(xi) Moog GmbH, Incorporated in Germany, wholly-owned subsidiary
(a) Moog Italiana S.r.l., Incorporated in Italy,
wholly-owned subsidiary of Moog GmbH
(xii) Moog Industrial Controls Corporation, Incorporated in New
York, wholly-owned subsidiary
(xiii) Moog Japan Ltd., Incorporated in Japan, 90% owned subsidiary
(xiv) Moog Korea Ltd., Incorporated in South Korea, wholly-owned
subsidiary
(xv) Moog Properties, Inc., Incorporated in New York,
wholly-owned subsidiary
(xvi) Moog Sarl, Incorporated in France, wholly-owned subsidiary
(a) Moog SNC, Incorporated in France, wholly-owned
subsidiary of Moog Sarl
(xvii) Moog Singapore Pte. Ltd., Incorporated in Singapore,
wholly-owned subsidiary
(xviii) Moog Torrance Inc., Incorporated in Delaware, wholly-owned
subsidiary
(24) Consent of KPMG Peat Marwick; Consents and Audit Reports of
Coopers & Lybrand
(28) Additional Exhibits.
Information, Financial Statements and Exhibits required by Form
11-K for the Moog Inc. Savings and Stock Ownership Plan (to be
filed by amendment).
(b) Reports on Form 8-K.
On August 29, 1994, the Company filed its report on Form 8-K/A,
reporting under Item 7 the audited Financial Statements of the
AlliedSignal Mechanical and Hydraulic Actuation Division for 1993
and 1992, and Pro Forma Condensed Combined Financial Statements
for Moog Inc. and the AlliedSignal Mechanical and Hydraulic
Actuation Division for 1993 and 1992.
Quarterly Stock Prices
Stock Prices
Fiscal Year Class B Class A
Ended High Low High Low
Sept. 30, 1994
1st Quarter $11 $ 9-3/8 $9-1/2 $7-1/2
2nd Quarter 13 9-3/8 9-3/8 7
3rd Quarter 12-3/4 11-1/2 9 7-5/8
4th Quarter 14 12-3/8 9-5/8 7-1/2
Sept. 30, 1993
1st Quarter $ 7-1/8 $ 5-7/8 $6-1/4 $3-7/8
2nd Quarter 8-5/8 6-7/8 6-3/4 5-5/8
3rd Quarter 8-1/8 7-3/8 7-1/2 6
4th Quarter 10-3/4 7-3/4 8-3/8 7
Stock Listing
Moog Inc.'s two classes of common shares (symbols MOGA and MOGB) and
convertible subordinated debentures are listed on the American Stock
Exchange.
MOOG INC. Schedule V
Property, Plant and Equipment - Years ended September 30, 1994, 1993 and 1992
(dollars in thousands)
Balance at Acquisitions/ Balance
beginning Additions Exchange at end
Description of period at cost Retirements rate changes1 of period
Year ended 1992:
Land $ 3,999 $ 202 $ 184 $ 260 $ 4,277
Buildings and
improvements 63,411 2,326 1,196 1,692 66,233
Leasehold
improvements 8,817 109 185 909 9,650
Machinery and
equipment 151,954 12,658 3,366 5,611 166,857
$ 228,181 $ 15,295 $ 4,931 $ 8,472 $ 247,017
Year ended 1993:
Land $ 4,277 $ - $ - $ 164 $ 4,441
Buildings and
improvements 66,233 1,881 146 45 68,013
Leasehold
improvements 9,650 38 266 (840) 8,582
Machinery and
equipment 166,857 8,297 12,398 (6,415) 156,341
$ 247,017 $ 10,216 $ 12,810 $ (7,046) $ 237,377
Year ended 1994:
Land $ 4,441 $ - $ - $ 3,429 $ 7,870
Buildings and
improvements 68,013 335 31 11,002 79,319
Leasehold
improvements 8,582 109 1,103 217 7,805
Machinery and
equipment 156,341 8,449 3,539 46,518 207,769
$ 237,377 $ 8,893 $ 4,673 $ 61,166 $ 302,763
Note:
1 Represents the impact of changes in currency exchange rates during the year and the acquisition
of Esprit and Buhl in 1992. Includes $55,499 of additions related to the 1994 acquisition of
the Product Lines (Note 2).
MOOG INC. Schedule VI
Accumulated Depreciation and Amortization of Property, Plant and Equipment -
Years ended September 30, 1994, 1993 and 1992
(dollars in thousands)
Additions
Balance at Charged to Balance
beginning costs and Exchange at end
Description of period expenses Retirements rate changes1 of period
Year ended 1992:
Buildings and
improvements $ 19,692 $ 2,305 $ 747 $ 572 $ 21,822
Leasehold
improvements 4,139 680 125 508 5,202
Machinery and
equipment 94,633 14,204 2,513 4,029 110,353
$ 118,464 $ 17,189 $ 3,385 $ 5,109 $ 137,377
Year ended 1993:
Buildings and
improvements $ 21,822 $ 2,961 $ 91 $ 38 $ 24,730
Leasehold
improvements 5,202 610 80 (481) 5,251
Machinery and
equipment 110,353 12,094 6,202 (4,704) 111,541
$ 137,377 $ 15,665 $ 6,373 $ (5,147) $ 141,522
Year ended 1994:
Buildings and
improvements $ 24,730 $ 2,422 $ - $ (296) $ 26,856
Leasehold
improvements 5,251 523 465 154 5,463
Machinery and
equipment 111,541 12,087 3,864 4,208 123,972
$ 141,522 $ 15,032 $ 4,329 $ 4,066 $ 156,291
Note:
1 Represents the impact of changes in currency exchange rates during the year.
MOOG INC. Schedule VIII
Valuation and Qualifying Accounts - Years ended September 30, 1994, 1993 and 1992
(dollars in thousands)
Additions
Balance at charged to Acquisitions/ Balance
beginning costs and Exchange at end
Description of period expenses Deductions rate changes1 of period
Year ended 1992:
Reserve for
contract losses $ 7,953 $ 2,491 $ 3,259 $ 76 $ 7,261
Allowance for
doubtful
accounts 1,478 458 487 56 1,505
Reserve for
inventory
valuation 3,724 4,599 2,157 276 6,442
Year ended 1993:
Reserve for
contract losses $ 7,261 $ 1,876 $ 3,677 $ (64) $ 5,396
Allowance for
doubtful
accounts 1,505 719 215 (145) 1,864
Reserve for
inventory
valuation 6,442 1,986 2,963 (393) 5,072
Year ended 1994:
Reserve for
contract losses $ 5,396 $ 998 $ 2,654 $ 11,224 $ 14,964
Allowance for
doubtful
accounts 1,864 329 725 25 1,493
Reserve for
inventory
valuation 5,072 4,533 6,240 121 3,486
Note:
1 Represents the impact of changes in currency exchange rates during the year and, in 1994,
reserves for contract losses related to the acquisition of the Product Lines (Note 2).
MOOG INC. Schedule IX
Short Term Borrowings - Years ended September 30, 1994, 1993 and 1992
(dollars in thousands)
Weighted Maximum Average Weighted
average amount amount average
Balance interest outstanding outstanding interest
at end of rate at at any during rate during
year end of year month end the year the year1
1992 Notes payable
to banks $21,511 11.2% $24,837 $24,085 10.7%
1993 Notes payable
to banks $17,637 9.7% $21,776 $19,977 9.5%
1994 Notes payable
to banks $ 9,200 8.8% $17,305 $14,291 7.9%
Note:
1 The weighted average interest rate during the year was calculated by dividing the interest
expense for the year by the monthly weighted average of short-term borrowings.
Signatures
Pursuant to the requirements of Section 13, or 15(d) 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.
Moog Inc.
(Registrant)
Date: December 2, 1994
By ROBERT T. BRADY
Robert T. Brady
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
By ROBERT R. BANTA
Robert R. Banta
Executive Vice President,
Chief Financial Officer,
Assistant Secretary,and Director
(Principal Financial Officer)
By DONALD R. FISHBACK
Donald R. Fishback
Controller (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and on the dates indicated.
By RICHARD A. AUBRECHT By PETER P. POTH
Richard A. Aubrecht Peter P. Poth
Director, December 2, 1994 Director, December 2, 1994
By JOE C. GREEN By ARTHUR S. WOLCOTT
Joe C. Green Arthur S. Wolcott
Director, December 2, 1994 Director, December 2, 1994
By KENNETH J. MC ILRAITH By JOHN D. HENDRICK
Kenneth J. McIlraith John D. Hendrick
Director, December 2, 1994 Director, December 2, 1994
EXHIBIT 10(ix)
REVOLVING CREDIT AND TERM LOAN
AGREEMENT
REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made this ____ day of June, 1994
among the banks identified in Exhibit A attached to and made a
part of this Agreement (collectively the "Banks" and individually
a "Bank"), Marine Midland Bank, a New York banking corporation
having its chief executive office at One Marine Midland Center,
Buffalo, New York 14203, ("Marine"), as agent for the Banks, and
Moog Inc., a New York business corporation having its chief
executive office at Jamison Road and Seneca Street, East Aurora,
New York 14052-0018, (the "Borrower").
The Banks, Marine as agent for the Banks and the
Borrower agree as follows:
1. REFERENCE TO DEFINITIONS. For purposes of this
Agreement, each of the following terms has the meaning given it
in Section 12 of this Agreement: (a) Accumulated Funding
Deficiency, (b) Acquisition, (c) Affiliate, (d) Agent,
(e) Bankruptcy Law, (f) Business Day, (g) CERCLA, (h) Collateral,
(i) Consolidated Liabilities to Worth Ratio, (j) Contingent
Obligation, (k) Contract, (l) Control, (m) Default, (n)
Designated Financial Officer, (o) Designated Officer,
(p) Distribution, (q) Domestic Subsidiary, (r) EBITDA,
(s) Environmental Law, (t) ERISA, (u) Event of Default,
(v) Existing Senior Indebtedness, (w) Foreign Subsidiary,
(x) Governmental Authority, (y) Hazardous Material,
(z) Indebtedness, (aa) Internal Revenue Code, (bb) Investment,
(cc) Law, (dd) Lending Entity, (ee) LIBOR Rate, (ff) LIBOR Rate
Election, (gg) LIBOR Rate Margin, (hh) LIBOR Rate Period,
(ii) LIBOR Rate Period Commencement Date, (jj) LIBOR Rate
Portion, (kk) Lien, (ll) Loan, (mm) Loan Document, (nn) Major
Foreign Subsidiary, (oo) Marine Prime Rate, (pp) Minor Foreign
Subsidiary, (qq) Net Proceeds, (rr) Pension Plan, (ss) Permitted
Distribution, (tt) Permitted Indebtedness, (uu) Permitted
Investment, (vv) Permitted Lien, (ww) Person, (xx) Prime Rate
Margin, (yy) Prohibited Transaction, (zz) Pro Rata Share,
(aaa) Release, (bbb) Reportable Event, (ccc) Required Banks,
(ddd) Revolving Loan, (eee) Revolving Loan Maximum Principal
Amount, (fff) Sharing Creditor, (ggg) Significant Economic
Impact, (hhh) Subsidiary, (iii) Term Loan, (jjj) Torrance and
(kkk) Torrance Merger.
2. REVOLVING LOANS.
a. Making and Obtaining Revolving Loans. Upon and
subject to each term and condition of this Agreement, at any time
and from time to time during the period beginning on the date of
this Agreement and ending on May 31, 1999, the Borrower may
obtain from the Banks, and the Banks shall make to the Borrower,
Revolving Loans; provided, however, that if each such term and
condition to the making of the first Revolving Loan is not
fulfilled on or before June 30, 1994, the Banks shall be under no
further obligation to make Revolving Loans. The aggregate
principal amount of all Revolving Loans made on any day shall be
at least $3,000,000 and shall be an integral multiple of
$1,000,000, and the total of the outstanding principal amounts of
all Revolving Loans shall not at any time exceed the Revolving
Loan Maximum Principal Amount. The Revolving Loan made by each
Bank on any day shall be in a principal amount equal to such
Bank's Pro Rata Share of all Revolving Loans made on such day,
and the total of the outstanding principal amounts of all
Revolving Loans made by each Bank shall not at any time exceed
the maximum commitment of such Bank to make Revolving Loans as
described in Exhibit A attached to and made a part of this
Agreement, which maximum commitment shall reduce proportionately
with each reduction in the Revolving Loan Maximum Principal
Amount. Each Bank may make any Revolving Loan in reliance upon
any oral (including, but not limited to, telephonic), written
(including, but not limited to, facsimile) or other request for
such Revolving Loan that such Bank believes in good faith to be
valid and to have been made by any Designated Financial Officer,
and such Bank shall not incur any liability to the Borrower or
any other Person as a direct or indirect result of making such
Revolving Loan. Each request for a Revolving Loan shall state
the principal amount of such Revolving Loan and the date upon
which such Revolving Loan is requested to be made and, if a LIBOR
Rate Election is being made for any LIBOR Rate Portion for such
Revolving Loan, the LIBOR Rate Period and LIBOR Rate Period
Commencement Date for such LIBOR Rate Portion. Each request for
a Revolving Loan shall be irrevocable once made and must be
received by the Agent at least three but not more than five
Business Days before the date any Revolving Loan with a LIBOR
Rate Portion is to be made and no later than 11:00 A.M. on the
date any other Revolving Loan is to be made, and the Agent shall
inform each Bank of its receipt of such request orally
(including, but not limited to, by telephone) followed by a
written (including, but not limited to, facsimile) confirmation
or in writing (including, but not limited to, by facsimile) by
10:00 A.M. on the following Business Day, in the case of any
Revolving Loan with a LIBOR Rate Portion, and by 1:00 P.M. on the
same date in the case of any other Revolving Loan. The Agent
shall not incur any liability to the Borrower or any other Person
as a direct or indirect result of the failure of any Bank to
make, or any delay by any Bank in making, any Revolving Loan, and
no Bank shall incur any such liability as a direct or indirect
result of any such failure or delay of any other Bank. No Bank's
obligation to make any Revolving Loan shall be affected by any
such failure or delay of any other Bank.
b. Revolving Loan Note. Each Bank shall set forth on
the schedule attached to and made a part of its Revolving Loan
Note referred to in clause (i) of Section 4d of this Agreement,
on any separate similar schedule, on any continuation of such
attached schedule or of any such separate similar schedule or on
any similar schedule maintained on computer software annotations
evidencing the date and principal amount of each Revolving Loan
made by such Bank, the date and amount of each payment to be
applied to the outstanding principal amount of such Revolving
Loan Note, the outstanding principal amount of such Revolving
Loan Note after each such payment, each LIBOR Rate Portion for
such Revolving Loan and the LIBOR Rate Period, LIBOR Rate Period
Commencement Date, LIBOR Rate and rate of interest for any LIBOR
Rate Portion for such Revolving Loan. Each entry on such
attached schedule, on any such similar schedule, on any such
continuation or on any such similar schedule maintained on
computer software shall be presumptive evidence of the
information such entry sets forth. No failure of any Bank to
make, and no error by any Bank in making, any annotation on such
attached schedule, on any such separate similar schedule, on any
such continuation or on any such similar schedule maintained on
computer software shall affect the obligation of the Borrower to
repay the principal amount of each Revolving Loan, the obligation
of the Borrower to pay interest on the outstanding principal
amount of each Revolving Loan or any other obligation of the
Borrower to any Lending Entity pursuant to this Agreement. With
each periodic interest statement sent by the Agent to the
Borrower, the Agent shall also send to the Borrower a statement
reconciling the outstanding principal amount of each Revolving
Loan.
c. Repayment. The Borrower shall repay the principal
amounts of all Revolving Loans on June 1, 1999, when the Borrower
shall pay all interest and other amounts owing to any Lending
Entity pursuant to this Agreement in connection with any
Revolving Loan and remaining unpaid.
d. Optional Repayment in Advance. The Borrower shall
have the option of repaying the principal amount of any Revolving
Loan in advance in full or in part at any time and from time to
time without any premium or penalty, except that, during the
LIBOR Rate Period for any LIBOR Rate Portion for any Revolving
Loan, the Borrower shall not have such option with respect to
such LIBOR Rate Portion without paying each amount required
pursuant to Section 2i of this Agreement; provided, however, that
(i) no such repayment shall be made unless at least three but not
more than five Business Days before the making thereof the Agent
receives a written notice executed by a Designated Financial
Officer and specifying the date and amount thereof, (ii) the
total of all such repayments in part on any day shall be at least
$3,000,000 and shall be an integral multiple of $1,000,000 and
(iii) immediately after the making of any such repayment the
ratio of the total of the outstanding principal amounts of all
Revolving Loans made by any Bank to the total of the outstanding
principal amounts of all Revolving Loans shall be the same as
immediately before the making thereof.
e. Mandatory Repayment in Advance. If at any time
the total of the outstanding principal amounts of all Revolving
Loans exceeds the Revolving Loan Maximum Principal Amount, the
Borrower shall immediately repay in advance such outstanding
principal amounts in excess of the Revolving Loan Maximum
Principal Amount. In addition, upon the receipt by the Borrower
or by any Subsidiary of any Net Proceeds, the Borrower shall
repay in advance the outstanding principal amounts of all
Revolving Loans by the amount of such Net Proceeds distributable
by the Agent to any Bank pursuant to Section 4 of the
Intercreditor Agreement referred to in clause (xxiv) of
Section 4d of this Agreement, as such Intercreditor Agreement may
hereafter be amended at any time. Immediately after the making
of any such repayment the ratio of the total of the outstanding
principal amounts of all Revolving Loans made by any Bank to the
total of the outstanding principal amounts of all Revolving Loans
shall be the same as immediately before the making thereof. The
making of any such repayment described in the second preceding
sentence of this Section 2e will permanently thereafter reduce
the Revolving Loan Maximum Principal Amount by an equal amount.
f. Interest. From and including the date each
Revolving Loan is made to but not including the date the
outstanding principal amount of such Revolving Loan is repaid in
full, the Borrower shall pay to the Bank that made such Revolving
Loan interest, calculated on the basis of a 360-day year for the
actual number of days of each year (365 or 366, as applicable),
on such outstanding principal amount at a rate per year that
shall (i) on each day beginning before the maturity, whether by
acceleration or otherwise, of such outstanding principal amount
be (A) except with respect to any LIBOR Rate Portion for such
Revolving Loan on which interest is charged pursuant to clause
(i)(B) of this sentence for such day, the rate per year,
expressed as a percentage, that is the sum of the Prime Rate
Margin and the rate in effect such day as the Marine Prime Rate
or (B) with respect to any LIBOR Rate Portion for such Revolving
Loan if such day falls within the LIBOR Rate Period for such
LIBOR Rate Portion, the rate per year, expressed as a percentage
and rounded, if necessary, to the next higher .125%, that is the
rate obtained by dividing (I) the sum of the LIBOR Rate Margin
and the LIBOR Rate for such LIBOR Rate Period by (II) expressed
as a decimal, the difference between 100% and the maximum
percentage of reserve requirement (including any emergency,
supplemental or other marginal percentage of reserve requirement)
for such day specified by Regulation D of the Board of Governors
of the Federal Reserve System for such Bank with respect to
liabilities consisting of or including United States dollar
deposits in immediately available funds and (ii) on each day sub-
sequent to the last day described in clause (i) of this sentence
be 2% above the rate in effect such subsequent day as the Marine
Prime Rate; provided, however, that (1) such interest shall not
be charged as provided in clause (i)(B) of this sentence with
respect to any LIBOR Rate Portion for such Revolving Loan if
(a) before the LIBOR Rate Period Commencement Date on which the
LIBOR Rate Period for such LIBOR Rate Portion begins any
Governmental Authority asserts that it is unlawful, or such Bank
determines that it is unlawful, for such Bank to charge interest
on any Revolving Loan at a rate determined by reference to the
LIBOR Rate, (b) such Bank determines that United States dollar
deposits in immediately available funds in an aggregate amount
approximating such LIBOR Rate Portion are not available to such
Bank for such LIBOR Rate Period or (c) before such LIBOR Rate
Period Commencement Date such Bank determines that information
necessary to determine the rate to be charged pursuant to such
clause (i)(B) is unavailable, (2) in no event shall such interest
be payable at a rate in excess of the maximum rate permitted by
applicable law and (3) solely to the extent necessary to result
in such interest not being payable at a rate in excess of such
maximum rate, any amount that would be treated as part of such
interest under a final judicial interpretation of applicable law
shall be deemed to have been a mistake and automatically
canceled, and, if received by such Bank, shall be refunded to the
Borrower, it being the intention of each Bank and of the Borrower
that such interest not be payable at a rate in excess of such
maximum rate. Except as otherwise provided in Section 2c of this
Agreement, (i) a payment of such interest shall become due on the
first day of each calendar month, beginning on July 1, 1994,
except with respect to any LIBOR Rate Portion for any Revolving
Loan, and (ii) all of such interest payable with respect to any
LIBOR Rate Portion for any Revolving Loan shall become due on the
day after the last day in the LIBOR Rate Period for such LIBOR
Rate Portion and, if such LIBOR Rate Period is six months, on the
three-month anniversary of the LIBOR Rate Period Commencement
Date.
g. LIBOR Rate Election. At any time and from time to
time, any Designated Financial Officer may irrevocably make a
LIBOR Rate Election on behalf of the Borrower in an oral
(including, but not limited to, telephonic) or written
(including, but not limited to, facsimile) notice to the Agent
that (i) specifies (A) the LIBOR Rate Portion for any Revolving
Loan to which such LIBOR Rate Election relates, (B) a Business
Day that is to be the LIBOR Rate Period Commencement Date for the
LIBOR Rate Period elected pursuant to such LIBOR Rate Election
and (C) whether such LIBOR Rate Election elects a one-month, two-
month, three-month or six-month option as to the length of such
LIBOR Rate Period; provided, however, that (I) such LIBOR Rate
Period may not extend beyond May 31, 1999 and (II) such LIBOR
Rate Election need not be honored by any Lending Entity if
(1) such notice is received by the Agent less than three or more
than five Business Days before such LIBOR Rate Period
Commencement Date, (2) any Event of Default occurs or exists
before the time such written notice is received by the Agent or
exists at such time, (3) the aggregate of all LIBOR Rate Portions
as to which LIBOR Rate Elections are made on any day is not at
least $3,000,000 or in an integral multiple of $1,000,000 or (4)
such LIBOR Rate Period would overlap more than eight other LIBOR
Rate Periods. If such LIBOR Rate Election elects a one-month
option as to the length of such LIBOR Rate Period, such LIBOR
Rate Period shall end on the day before the one-month anniversary
of such LIBOR Rate Period Commencement Date or, if such one-month
anniversary is not a Business Day, on the day before the first
day following such one-month anniversary that is a Business Day.
If such LIBOR Rate Election elects a two-month option as to the
length of such LIBOR Rate Period, such LIBOR Rate Period shall
end on the day before the two-month anniversary of such LIBOR
Rate Period Commencement Date or, if such two-month anniversary
is not a Business Day, on the day before the first day following
such two-month anniversary that is a Business Day. If such LIBOR
Rate Election elects a three-month option as to the length of
such LIBOR Rate Period, such LIBOR Rate Period shall end on the
day before the three-month anniversary of such LIBOR Rate
Commencement Date or, if such three-month anniversary is not a
Business Day, on the day before the first day following such
three-month anniversary that is a Business Day. If such LIBOR
Rate Election elects a six-month option as to the length of such
LIBOR Rate Period, such LIBOR Rate Period shall end on the day
before the six-month anniversary of such LIBOR Rate Commencement
Date or, if such six-month anniversary is not a Business Day, on
the day before the first day following such six-month anniversary
that is a Business Day. Each Lending Entity may rely upon, and
the Borrower shall be bound by, any LIBOR Rate Election that such
Lending Entity believes in good faith to be valid and to have
been made on behalf of the Borrower by any Designated Financial
Officer of the Borrower, and such Lending Entity shall not incur
any liability to the Borrower or to any other Person as a direct
or indirect result of such LIBOR Rate Election. Any record kept
by any Lending Entity as to LIBOR Rate Portions for any Revolving
Loan and LIBOR Rate Periods, LIBOR Rate Period Commencement
Dates, LIBOR Rates and rates of interest for any LIBOR Rate
Portion for any such Revolving Loan shall, in the absence of
manifest error, be conclusive and binding upon the Borrower.
h. Late Charge. If any scheduled installment of the
principal amount of any Revolving Loan is not repaid, or any
interest owing pursuant to this Agreement in connection with any
Revolving Loan is not paid, by the tenth day after the date it
becomes due, the Borrower shall pay to the Bank that made such
Revolving Loan on demand a late charge equal to such Bank's Pro
Rata Share of $16,000.
i. LIBOR Breakage Cost. The Borrower shall pay to
the Agent, for the ratable benefit of each Bank, an amount
sufficient to reimburse each Bank for any and all loss, cost or
expense actually incurred by such Bank that such Bank determines
is attributable to (i) any payment, repayment, mandatory or
optional prepayment, or conversion of the LIBOR Rate Portion of
any Revolving Loan for any reason on a date other than the last
day of the LIBOR Rate Period for such LIBOR Rate Portion or
(ii) any failure by the Borrower for any reason to borrow,
convert or prepay the LIBOR Rate Portion for any Revolving Loan
on the date for such borrowing, conversion or prepayment
specified in any relevant notice given pursuant to this
Agreement. Any such determination by any Bank shall, in the
absence of manifest error, be conclusive and binding upon the
Borrower.
j. Non-Usage Fee. The Borrower shall pay to the
Agent, for the ratable benefit of each Bank, for each period
(i) beginning on the date of this Agreement and ending on the
last day of the calendar quarter containing such date,
(ii) consisting of a calendar quarter beginning after the
calendar quarter containing the date of this Agreement and ending
before the calendar quarter containing the last day on which the
Borrower may obtain Revolving Loans or (iii) beginning on the
first day of the calendar quarter containing the last day on
which the Borrower may obtain Revolving Loans and ending on such
last day, a non-usage fee equal to such Bank's Pro Rata Share of
the product obtained by multiplying (i) the difference between
the Revolving Loan Maximum Principal Amount and the total of the
daily average during such period of the outstanding principal
amounts of all Revolving Loans first by (ii) 1/2% and then by
(iii) the fraction obtained by dividing the number of days in
such period by 360; provided, however, that (A) in no event shall
there be payable any such non-usage fee that would result in
interest being payable on any such outstanding principal amount
at a rate in excess of the maximum rate permitted by applicable
law and (B) solely to the extent necessary to result in such
interest not being payable at a rate in excess of such maximum
rate, any amount that would be treated as part of such interest
under a final judicial interpretation of applicable law shall be
deemed to have been a mistake and automatically canceled, and, if
received by such Bank, shall be refunded to the Borrower, it
being the intention of each Bank and of the Borrower that such
interest not be payable at a rate in excess of such maximum rate.
Except as otherwise provided in Section 2c of this Agreement, the
Borrower shall pay each such non-usage fee within thirty days
after billing therefor by the Agent.
k. Voluntary Reduction of Revolving Loan Maximum
Principal Amount. The Borrower shall have the right to reduce
the Revolving Loan Maximum Principal Amount at any time or from
time to time by an amount of at least $5,000,000 and in integral
multiples of $1,000,000 by giving notice to the Agent at least
five but not more than eight Business Days before the effective
date of such reduction.
l. General Provisions as to Repayment and Payment.
Repayment of the principal amount of each Revolving Loan and
payment of all interest and other amounts owing by the Borrower
to any Bank pursuant to this Agreement in connection with any
Revolving Loan and payment of all other amounts owing by the
Borrower to any Lending Entity pursuant to this Agreement shall
be made in lawful money of the United States and in immediately
available funds by payment to the Agent for the account of the
Lending Entity to which such repayment or payment is being made
at the banking office of the Agent located at One Marine Midland
Center, Buffalo, New York, or at such other office of the Agent
as may at any time and from time to time be specified in any
notice delivered, given or sent to the Borrower by the Agent. No
such repayment or payment shall be deemed to have been received
by the Agent until received by the Agent at the office of the
Agent determined in accordance with the preceding sentence, and
any such repayment or payment received by the Agent at such
office after 11:00 A.M. on any day shall be deemed to have been
received by the Agent at the time such office opens for business
on the next Business Day. The Agent shall promptly remit to any
Lending Entity any such amounts received for the account of such
Lending Entity. If the time by which any of the principal amount
of any Revolving Loan is to be repaid is extended by operation of
law or otherwise, the Borrower shall pay interest on the
outstanding portion thereof during such period of extension as
provided in Section 2f of this Agreement. Each payment payable
by the Borrower pursuant to this Agreement shall be made without
any set-off, deduction or counterclaim whatsoever, and free and
clear of taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by
any Governmental Authority, unless the Borrower is compelled by
any applicable Law to make any such deduction or withholding, in
which case the provisions of clause (i) of Section 9c of this
Agreement shall be applicable.
3. TERM LOANS.
a. Making and Obtaining Loan. Upon and subject to
each term and condition of this Agreement, each Bank shall make
its respective Term Loan to the Borrower, and the Borrower shall
obtain such Term Loan from such Bank; provided, however, that if
each such term and condition is not fulfilled on or before
June 30, 1994, the Banks shall be under no further obligation to
make the Term Loans. The principal amount of each Term Loan
shall be as described in Exhibit A attached to and made a part of
this Agreement.
b. Repayment. The Borrower shall repay the principal
amount of each Term Loan to the Bank that made such Term Loan in
twenty-seven installments, with the first of such installments to
become due on January 1, 1995, one of such installments to become
due on the first day of each succeeding calendar quarter through
April 1, 2001 and a final installment to become due on June 1,
2001, when the Borrower shall repay the outstanding principal
amount of each Term Loan to the Bank that made such Term Loan and
pay all interest owing pursuant to this Agreement in connection
with such Term Loan and remaining unpaid and all other amounts
owing by the Borrower to any Lending Entity pursuant to this
Agreement and remaining unpaid. Each of the first four of such
installments shall be equal to such Bank's Pro Rata Share of
$1,925,300, each of the next four of such installments shall be
equal to such Bank's Pro Rata Share of $2,310,400, each of the
next eighteen of such installments shall be equal to such Bank's
Pro Rata Share of $2,502,900 and the final of such installments
unless sooner paid shall be equal to such Bank's Pro Rata Share
of $5,005,000.
c. Optional Repayment in Advance. The Borrower shall
have the option of repaying the principal amount of any Term Loan
in advance in full or in part at any time and from time to time
without premium or penalty, except that, during the LIBOR Rate
Period for any LIBOR Rate Portion for any Term Loan, the Borrower
shall not have such option with respect to such LIBOR Rate
Portion without paying each amount required pursuant to Section
3h of this Agreement; provided, however, that (i) no such
repayment shall be made unless at least five but not more than
eight Business Days before the making thereof the Agent receives
a written notice executed by a Designated Financial Officer and
specifying the date and amount thereof, (ii) the total of all
such repayments in part made on any day shall be at least
$5,000,000 and shall be an integral multiple of $1,000,000,
(iii) immediately after the making of any such repayment the
ratio of the total of the outstanding principal amount of the
Term Loan made by any Bank to the total of the outstanding
principal amounts of all Term Loans shall be the same as
immediately before the making thereof and (iv) upon making any
such repayment in full the Borrower shall pay to each Bank all
interest owing to such Bank pursuant to this Agreement in
connection with such Term Loan and remaining unpaid and pay to
each Lending Entity all other amounts owing by the Borrower to
such Lending Entity pursuant to this Agreement and remaining
unpaid. Each such repayment in part shall be applied to the
installments of the principal amount of each Term Loan in the
inverse order of such installments becoming due.
d. Mandatory Repayment in Advance. Upon the receipt
by the Borrower or by any Subsidiary of any Net Proceeds
remaining after application in accordance with Section 2e of this
Agreement and being distributable by the Agent to any Bank as
provided in such Section 2e, the Borrower shall repay in advance
the outstanding principal amounts of all Term Loans by the amount
of such remaining Net Proceeds. Immediately after the making of
any such repayment the ratio of the outstanding principal amount
of the Term Loan made by any Bank to the total of the outstanding
principal amounts of all Term Loans shall be the same as
immediately before the making thereof.
e. Interest. From and including the date each Term
Loan is made to but not including the date the outstanding
principal amount of such Term Loan is repaid in full, the
Borrower shall pay to the Bank that made such Term Loan interest,
calculated on the basis of a 360-day year for the actual number
of days of each year (365 or 366, as applicable), on such
outstanding principal amount at a rate per year that shall (i) on
each day beginning before the maturity, whether by acceleration
or otherwise, of such outstanding principal amount be (A) except
with respect to any LIBOR Rate Portion for such Term Loan on
which interest is charged pursuant to clause (i)(B) of this
sentence for such day, the rate per year, expressed as a
percentage, that is the sum of the Prime Rate Margin and the rate
in effect such day as the Marine Prime Rate or (B) with respect
to any LIBOR Rate Portion for such Term Loan if such day falls
within the LIBOR Rate Period for such LIBOR Rate Portion, the
rate per year, expressed as a percentage and rounded, if neces-
sary, to the next higher .125%, that is the rate obtained by
dividing (I) the sum of the LIBOR Rate Margin and the LIBOR Rate
for such LIBOR Rate Period by (II) expressed as a decimal, the
difference between 100% and the maximum percentage of reserve re-
quirement (including any emergency, supplemental or other
marginal percentage of reserve requirement) for such day
specified by Regulation D of the Board of Governors of the
Federal Reserve System for such Bank with respect to liabilities
consisting of or including United States dollar deposits in
immediately available funds and (ii) on each day subsequent to
the last day described in clause (i) of this sentence be 2% above
the rate in effect such subsequent day as the Marine Prime Rate;
provided, however, that (1) such interest shall not be charged as
provided in clause (i)(B) of this sentence with respect to any
LIBOR Rate Portion for such Term Loan if (a) before the LIBOR
Rate Period Commencement Date on which the LIBOR Rate Period for
such LIBOR Rate Portion begins any Governmental Authority asserts
that it is unlawful, or such Bank determines that it is unlawful,
for such Bank to charge interest on any Term Loan at a rate
determined by reference to the LIBOR Rate, (b) such Bank
determines that United States dollar deposits in immediately
available funds in an aggregate amount approximating such LIBOR
Rate Portion are not available to such Bank for such LIBOR Rate
Period or (c) before such LIBOR Rate Period Commencement Date
such Bank determines that information necessary to determine the
rate to be charged pursuant to such clause (i)(B) is unavailable,
(2) in no event shall such interest be payable at a rate in
excess of the maximum rate permitted by applicable law and
(3) solely to the extent necessary to result in such interest not
being payable at a rate in excess of such maximum rate, any
amount that would be treated as part of such interest under a
final judicial interpretation of applicable law shall be deemed
to have been a mistake and automatically canceled, and, if
received by such Bank, shall be refunded to the Borrower, it
being the intention of each Bank and of the Borrower that such
interest not be payable at a rate in excess of such maximum rate.
Except as otherwise provided in Section 3b of this Agreement,
(i) a payment of such interest shall become due on the first day
of each calendar month, beginning on July 1, 1994, except with
respect to any LIBOR Rate Portion for any Term Loan, and (ii) all
of such interest payable with respect to any LIBOR Rate Portion
for any Term Loan shall become due on the day after the last day
in the LIBOR Rate Period for such LIBOR Rate Portion and, if such
LIBOR Rate Period is six months, on the three-month anniversary
of the LIBOR Rate Period Commencement Date.
f. LIBOR Rate Election. At any time and from time to
time, any Designated Financial Officer may irrevocably make a
LIBOR Rate Election on behalf of the Borrower in an oral
(including, but not limited to, telephonic) or written
(including, but not limited to, facsimile) notice to the Agent
that (i) specifies (A) the LIBOR Rate Portion for any Term Loan
to which such LIBOR Rate Election relates, (B) a Business Day
that is to be the LIBOR Rate Period Commencement Date for the
LIBOR Rate Period elected pursuant to such LIBOR Rate Election
and (C) whether such LIBOR Rate Election elects a one-month, two-
month, three-month or six-month option as to the length of such
LIBOR Rate Period; provided, however, that (I) such LIBOR Rate
Period may not extend beyond May 31, 2001 and (II) such LIBOR
Rate Election need not be honored by any Lending Entity if
(1) such notice is received by the Agent less than three or more
than five Business Days before such LIBOR Rate Period
Commencement Date, (2) any Event of Default occurs or exists
before the time such written notice is received by the Agent or
exists at such time, (3) the aggregate of all LIBOR Rate Portions
as to which LIBOR Rate Elections are made on any day is not at
least $3,000,000 or in an integral multiple of $1,000,000 or (4)
such LIBOR Rate Period would overlap more than eight other LIBOR
Rate Periods. If such LIBOR Rate Election elects a one-month
option as to the length of such LIBOR Rate Period, such LIBOR
Rate Period shall end on the day before the one-month anniversary
of such LIBOR Rate Period Commencement Date or, if such one-month
anniversary is not a Business Day, on the day before the first
day following such one-month anniversary that is a Business Day.
If such LIBOR Rate Election elects a two-month option as to the
length of such LIBOR Rate Period, such LIBOR Rate Period shall
end on the day before the two-month anniversary of such LIBOR
Rate Period Commencement Date or, if such two-month anniversary
is not a Business Day, on the day before the first day following
such two-month anniversary that is a Business Day. If such LIBOR
Rate Election elects a three-month option as to the length of
such LIBOR Rate Period, such LIBOR Rate Period shall end on the
day before the three-month anniversary of such LIBOR Rate
Commencement Date or, if such three-month anniversary is not a
Business Day, on the day before the first day following such
three-month anniversary that is a Business Day. If such LIBOR
Rate Election elects a six-month option as to the length of such
LIBOR Rate Period, such LIBOR Rate Period shall end on the day
before the six-month anniversary of such LIBOR Rate Commencement
Date or, if such six-month anniversary is not a Business Day, on
the day before the first day following such six-month anniversary
that is a Business Day. Each Lending Entity may rely upon, and
the Borrower shall be bound by, any LIBOR Rate Election that such
Lending Entity believes in good faith to be valid and to have
been made on behalf of the Borrower by any Designated Financial
Officer of the Borrower, and such Lending Entity shall not incur
any liability to the Borrower or to any other Person as a direct
or indirect result of such LIBOR Rate Election. Any record kept
by any Lending Entity as to LIBOR Rate Portions for any Term Loan
and LIBOR Rate Periods, LIBOR Rate Period Commencement Dates,
LIBOR Rates and rates of interest for any LIBOR Rate Portion for
any such Term Loan shall, in the absence of manifest error, be
conclusive and binding upon the Borrower.
g. Late Charge. If any scheduled installment of the
principal amount of any Term Loan is not repaid, or any interest
owing pursuant to this Agreement in connection with any Term Loan
is not paid, by the tenth day after the date it becomes due, the
Borrower shall pay to the Bank that made such Term Loan on demand
a late charge equal to such Bank's Pro Rata Share of $16,000.
h. LIBOR Breakage Cost. The Borrower shall pay to
the Agent, for the ratable benefit of each Bank, an amount
sufficient to reimburse each Bank for any and all loss, cost or
expense actually incurred by such Bank that such Bank determines
is attributable to (i) any payment, repayment, mandatory or
optional prepayment, or conversion of the LIBOR Rate Portion of
any Term Loan for any reason on a date other than the last day of
the LIBOR Rate Period for such LIBOR Rate Portion or (ii) any
failure by the Borrower for any reason to borrow, convert or
prepay the LIBOR Rate Portion for any Term Loan on the date for
such borrowing, conversion or prepayment specified in any
relevant notice given pursuant to this Agreement. Any such
determination by any Bank shall, in the absence of manifest
error, be conclusive and binding upon the Borrower.
i. General Provisions as to Repayment and Payment.
Repayment of the principal amount of each Term Loan, payment of
all interest and other amounts owing by the Borrower to any Bank
pursuant to this Agreement in connection with any Term Loan and
payment of all other amounts owing by the Borrower to any Lending
Entity pursuant to this Agreement shall be made in lawful money
of the United States and in immediately available funds by
payment to the Agent for the account of the Lending Entity to
which such repayment or payment is being made at the banking
office of the Agent located at One Marine Midland Center,
Buffalo, New York, or at such other office of the Agent as may at
any time and from time to time be specified in any notice
delivered, given or sent to the Borrower by the Agent. No such
repayment or payment shall be deemed to have been received by the
Agent until received by the Agent at the office of the Agent
determined in accordance with the preceding sentence, and any
such repayment or payment received by the Agent at such office
after 11:00 A.M. on any day shall be deemed to have been received
by the Agent at the time such office opens for business on the
next Business Day. The Agent shall promptly remit to any Lending
Entity any such amounts received for the account of such Lending
Entity. If the time by which any of the principal amount of any
Term Loan is to be repaid is extended by operation of law or
otherwise, the Borrower shall pay interest on the outstanding
portion thereof during such period of extension as provided in
Section 3e of this Agreement. Each payment payable by the
Borrower pursuant to this Agreement shall be made without any
set-off, deduction or counterclaim whatsoever, and free and clear
of taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any Governmental
Authority, unless the Borrower is compelled by any applicable Law
to make any such deduction or withholding, in which case the
provisions of clause (i) of Section 9c of this Agreement shall be
applicable.
4. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan shall be conditioned upon the following:
a. No Default. (i) There not existing at the time
such Loan is to be made any Event of Default or Default and (ii)
such Bank not believing in good faith that any Event of Default
or Default so exists;
b. Representations and Warranties. (i) Each repre-
sentation and warranty made in this Agreement being true and
correct as of all times during the period beginning on the date
of this Agreement and ending at the time such Loan is to be made
and as of the time such Loan is to be made, except to the extent
updated in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity
before the time such Loan is to be made, (ii) each other
representation and warranty made to any Lending Entity by or on
behalf of the Borrower or any Subsidiary before the time such
Loan is to be made being true and correct as of the date thereof,
except to the extent updated in a certificate executed by a
Designated Officer and a Designated Financial Officer and
received by each Lending Entity before the time such Loan is to
be made, (iii) each financial statement provided to any Lending
Entity by or on behalf of the Borrower or any Subsidiary before
the time such Loan is to be made having fairly represented the
financial information that it purports to reflect as of the date
thereof and (iv) such Bank not believing in good faith that
(A) any such representation or warranty, except to the extent so
updated, was or is other than true and correct as of any time or
date of determination of the truth and correctness thereof or
(B) any such financial statement did not so fairly represent such
information as of the date thereof;
c. Proceedings. Such Bank being satisfied as to each
corporate or other proceeding of the Borrower and any Subsidiary
in connection with any transaction contemplated by this
Agreement; and
d. Receipt by Banks. The receipt by each Bank at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to each Lending Entity:
i. If such Loan is the first Revolving Loan, a
Revolving Loan Note, appropriately completed and duly executed by
the Borrower;
ii. If such Loan is a Term Loan, a Term Loan Note,
appropriately completed and duly executed by the Borrower;
iii. If such Loan is the first Revolving Loan or a Term
Loan, Guaranty Agreements, appropriately completed and duly
executed by each Domestic Subsidiary, unlimited as to amount;
iv. If such Loan is the first Revolving Loan or a Term
Loan, General Security Agreements, appropriately completed and
duly executed by the Borrower and each Domestic Subsidiary,
together with related Patent and Trademark Collateral Assignments
and Security Agreements, appropriately completed and duly
executed by the Borrower and each Domestic Subsidiary;
v. If such Loan is the first Revolving Loan or a Term
Loan, a Pledge Agreement, appropriately completed and duly
executed by the Borrower, covering, among other assets, all of
the issued and outstanding shares of each class of stock and
other ownership interests in each Domestic Subsidiary and each
directly owned Foreign Subsidiary, together with each agreement,
instrument and other writing evidencing any security covered
thereby;
vi. If such Loan is the first Revolving Loan or a Term
Loan, Mortgages or Deeds of Trust and Assignments of Leases and
Rents, appropriately completed and duly executed by, as required,
the Borrower and Torrance, limited, as to the maximum principal
amount the payment of which is secured thereby, to $12,900,000
with respect to such real property located in the State of New
York and $4,250,000 with respect to such real property located in
the State of California, covering, among other assets, the land
and improvements now or hereafter located at the real property
described in Exhibit A attached to and made a part of this
Agreement, together with related Environmental Indemnity
Agreements, appropriately completed and duly executed by the
Borrower;
vii. If such Loan is the first Revolving Loan or a Term
Loan, a mortgagee's title insurance policy issued by a title
insurer satisfactory to the Agent, limited, as to the maximum
principal amount insured thereby, to the amounts referred to in
clause (vi) of this Section 4d, insuring each mortgage lien on
the assets covered by the Mortgages, Deeds of Trust and
Assignments of Leases and Rents referred to in clause (vi) of
this Section 4d;
viii. If such Loan is the first Revolving Loan or a Term
Loan, ALTA or Niagara Frontier Land Surveyors Association surveys
of the land and improvements covered by the Mortgages, Deeds of
Trust and Assignments of Leases and Rents referred to in clause
(vi) of this Section 4d prepared by a surveyor or surveyors
satisfactory to the Agent and certified to each Lending Entity,
to each Sharing Creditor and to the title insurer referred to in
clause (vii) of this Section 4d;
ix. If such Loan is the first Revolving Loan or a Term
Loan, phase 1 environmental audits of the land and improvements
covered by the Mortgages, Deeds of Trust and Assignments of
Leases referred to in clause (vi) of this Section 4d prepared by
an environmental consultant or consultants satisfactory to the
Agent and, to the extent reasonably recommended by any such phase
1 audits, phase 2 environmental audits and other follow up
reports;
x. If such Loan is the first Revolving Loan or a Term
Loan, appraisals of the land and improvements covered by the
Mortgages, Deeds of Trust and Assignments of Leases referred to
in clause (vi) of this Section 4d prepared by MAI certified
appraisers satisfactory to the Agent;
xi. If such Loan is the first Revolving Loan or a Term
Loan, an opinion of Phillips, Lytle, Hitchcock, Blaine & Huber,
counsel to the Borrower;
xii. If such Loan is the first Revolving Loan or a Term
Loan, a certificate executed by a Designated Officer and a
Designated Financial Officer and stating that (A) there did not
occur or exist at any time during the period beginning on the
date of this Agreement and ending at the time such Loan is to be
made and there does not exist at the time such Loan is to be made
any Event of Default or Default and (B) each representation and
warranty made in this Agreement was true and correct as of all
times during the period beginning on the date of this Agreement
and ending at the time such Loan is to be made and is true and
correct as of the time such Loan is to be made, except to the
extent updated in a certificate executed by a Designated Officer
and a Designated Financial Officer and received by each Lending
Entity before the time such Loan is to be made;
xiii. If such Loan is the first Revolving Loan or a Term
Loan, evidence that each of the Borrower and all Domestic
Subsidiaries is at the time such Loan is to be made (A) in good
standing under the law of the jurisdiction in which it is incor-
porated and (B) duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in
which such qualification is necessary except where the failure to
qualify would not have a material adverse effect;
xiv. If such Loan is the first Revolving Loan or a Term
Loan, a copy of the certificate or articles of incorporation or
other charter document of each of the Borrower and all Domestic
Subsidiaries certified by its Secretary to be complete and
accurate at the time such Loan is to be made;
xv. If such Loan is the first Revolving Loan or a Term
Loan, a copy of the by-laws or other organizational document of
each of the Borrower and all Domestic Subsidiaries certified by
its Secretary to be complete and accurate at the time such Loan
is to be made;
xvi. If such Loan is the first Revolving Loan or a Term
Loan, evidence of the taking and the continuation in full force
and effect at the time such Loan is to be made of each corporate
or other action of the Borrower or any other Person necessary to
authorize the obtaining of all Loans by the Borrower and the
execution, delivery and performance of each Loan Document and the
imposition or creation of each security interest, mortgage and
other lien and encumbrance imposed or created pursuant to any
Loan Document;
xvii. If such Loan is the first Revolving Loan or a Term
Loan, evidence (A) that no asset subject to any Lien pursuant to
any Loan Document is at the time such Loan is to be made subject
to any other Lien, except for Permitted Liens, and (B) of the
making of each recording and filing, and of the taking of each
other action, deemed necessary or desirable by the Agent at the
sole option of the Agent to perfect or otherwise protect any such
Lien;
xviii. If such Loan is the first Revolving Loan or a Term
Loan, evidence that each requirement contained in any Loan
Document with respect to insurance is being met at the time such
Loan is to be made;
xix. If such Loan is the first Revolving Loan or a Term
Loan, payment on the date of this Agreement of a facility fee to
the Agent, for the ratable benefit of each Bank, equal to such
Bank's Pro Rata Share of the product obtained by multiplying the
following percentage applicable to such Bank by the sum of the
Revolving Loan Maximum Principal Amount and the aggregate
principal amount of all Term Loans: (A) 5/8% if such Bank is
obligated pursuant to this Agreement, subject to the terms and
conditions of this Agreement, to make Loans of at least
$35,000,000, (B) 1/2% if such Bank is obligated pursuant to this
Agreement, subject to the terms and conditions of this Agreement,
to make Loans of at least $25,000,000 but less than $35,000,000
pursuant to this Agreement and (C) 1/4% if such Bank is obligated
to make Loans pursuant to this Agreement, subject to the terms
and conditions of this Agreement, of at least $10,000,000 but
less than $25,000,000;
xx. If such Loan is the first Revolving Loan or a Term
Loan, a copy of the Stock Purchase Agreement dated June 7, 1994
between the Borrower and AlliedSignal Inc. and evidence of the
closing of the Acquisition in accordance with the terms thereof
including (A) the expiration of the related waiting period
therefor under Hart-Scott-Rodino and any other applicable Law,
(B) the execution and delivery by AlliedSignal Inc. in favor of
the Borrower and, by its terms, assignable to the Banks of a
covenant not to compete with respect to the product lines
described in Exhibit A attached to and made a part of this
Agreement and (C) the execution and delivery by AlliedSignal Inc.
in favor of the Borrower and, by its terms, separately in favor
of the Banks of an indemnity with respect to activities of the
product lines and other assets sold prior to the closing of the
Acquisition;
xxi. If such Loan is the first Revolving Loan or a Term
Loan, an unaudited consolidated balance sheet of the product
lines of AlliedSignal Inc. that are the subject of the
Acquisition dated as of March 31, 1994 prepared by AlliedSignal
Inc. in accordance with generally accepted accounting principles;
xxii. If such Loan is the first Revolving Loan or a Term
Loan, (A) audited consolidated statements of income and cash
flows of AlliedSignal Inc. for its fiscal year ended December 31,
1993 and (B) an audited consolidated balance sheet of
AlliedSignal Inc. dated as of December 31, 1993;
xxiii. If such Loan is the first Revolving Loan or a Term
Loan, a copy of the indenture governing the Borrower's
outstanding subordinated debentures certified by a Designated
Financial Officer to be complete and accurate at the time such
Loan is to be made;
xxiv. If such Loan is the first Revolving Loan or a Term
Loan, an Intercreditor Agreement, appropriately completed and
duly executed by the Agent, the Banks and each Sharing Creditor;
xxv. If such Loan is the First Revolving Loan or a Term
Loan, an agreement with respect to the Torrance Merger,
appropriately completed and duly executed by the Borrower;
xxvi. If such Loan is the first Revolving Loan or a Term
Loan, evidence of the existence of agreements with financial
institutions satisfactory to the Required Banks providing
interest rate protections with respect to a portion of the Loans;
xxvii. Each additional agreement, instrument and other
writing (including, but not limited to, (A) each agreement,
instrument and other writing intended to be filed or recorded
with any Governmental Authority to perfect or otherwise preserve
or protect the priority of any Lien created or imposed pursuant
to any Loan Document and (B) if such Loan is not the first
Revolving Loan or a Term Loan, each item referred to in any of
clauses (i) through (xxvi) of this Section 4d) required by any
Loan Document or reasonably deemed necessary or desirable by the
Required Banks; and
xxviii. Payment of all costs and expenses payable pursuant
to the first sentence of Section 9a of this Agreement at or
before the time such Loan is to be made.
5. REPRESENTATIONS AND WARRANTIES. Except as fully
and accurately described or referred to in Exhibit A attached to
and made a part of this Agreement, the Borrower represents and
warrants to each Lending Entity, and, except to the extent
updated in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity
before the time any Loan is made, the Borrower shall be deemed to
represent and warrant to each Lending Entity as of the time such
Loan is made, as follows:
a. Use of Proceeds. The proceeds of the first
Revolving Loan made by each Bank and of the Term Loans will be
used only for paying in full the Existing Senior Indebtedness,
the costs (including amounts paid for prepaid services) of the
Acquisition and the expenses of the transactions contemplated by
this Agreement. The proceeds of each subsequent Revolving Loan
will be used only for working capital and other cash needs
arising in the ordinary course of business (not including any
corporate or other acquisition).
b. Subsidiaries; Affiliates. The Borrower has (i) no
Subsidiary and (ii) no Affiliate that is not an individual.
c. Good Standing; Qualification; Authority. Each of
the Borrower and all Domestic Subsidiaries (i) is a corporation
duly incorporated and organized, validly existing and in good
standing under the law of the jurisdiction in which it is
incorporated, (ii) is duly qualified and in good standing as a
foreign corporation authorized to do business in each
jurisdiction in which such qualification is necessary except
where the failure to qualify would not have a material adverse
effect and (iii) has the corporate power and authority to conduct
its business and operations as now and as anticipated that its
business and operations will hereafter be conducted, own each of
its assets and use each of its assets as now and as anticipated
that such asset will hereafter be used.
d. Control. There is no Person other than the
Borrower and all Subsidiaries who or that, insofar as the
Borrower has knowledge or reason to know in the ordinary course
of its business, has (i) Control over the Borrower or any
Subsidiary or (ii) the right pursuant to any agreement with any
Person having such Control to acquire such Control.
e. Compliance. The present and anticipated conduct
of the business and operations of the Borrower and each Domestic
Subsidiary, the present and anticipated ownership and use of each
asset of the Borrower and each Domestic Subsidiary, the present
and anticipated use of each asset leased by the Borrower or any
Domestic Subsidiary as a lessee and the generation, treatment,
storage, recycling, transportation and disposal by the Borrower
or any Domestic Subsidiary of any Hazardous Material are in
compliance in each material respect with each applicable Law
(including, but not limited to, each applicable Environmental
Law). Each material authorization, certification, certificate,
approval, permit, consent, franchise and license from,
registration and filing with, declaration, report and notice to
and other act by or relating to any Person necessary for the
present or anticipated conduct of the business or operations of
the Borrower or any Domestic Subsidiary, the present or
anticipated ownership or use of any asset of the Borrower or any
Domestic Subsidiary, the present or anticipated use of any asset
leased by the Borrower or any Domestic Subsidiary as a lessee or
the generation, treatment, storage, recycling, transportation or
disposal by the Borrower or any Domestic Subsidiary of any
Hazardous Material has been duly obtained, made, given or done
and is in full force and effect. Each of the Borrower and all
Domestic Subsidiaries is in compliance in each material respect
with (i) each such authorization, certification, certificate,
approval, permit, consent, franchise and license with respect to
it, (ii) its certificate or articles of incorporation or other
charter document, (iii) its by-laws or other organizational
document and (iv) each agreement and instrument to which it is a
party or by which it or any of its assets is bound.
f. Environmental Matters. To the best of the
knowledge of the Borrower after diligent inquiry:
i. There has not been any Release or threatened
Release of any Hazardous Material at, in, on or under any proper-
ty now or previously owned, leased as a lessee or used by the
Borrower or any Domestic Subsidiary that, whether alone or
together with any other such Release or threatened Release or
other such Releases and threatened Releases, has had or will have
any Significant Economic Impact;
ii. No property now or previously owned, leased as a
lessee or used by the Borrower or any Domestic Subsidiary and no
property to which the Borrower or any Domestic Subsidiary has
transported or arranged for the transportation of any Hazardous
Material has been listed or proposed for listing on the National
Priorities List pursuant to CERCLA, the Comprehensive
Environmental Response, Compensation and Liability Information
System or any other list of sites requiring investigation or
clean-up that is maintained by any Governmental Authority, except
for any such listing that could not have any Significant Economic
Impact;
iii. There is no active or abandoned underground
storage tank, in, on or under property now or previously owned,
leased as a lessee or used by the Borrower or any Domestic
Subsidiary that, whether alone or together with any other such
storage tank or other such storage tanks, has had or will have
any Significant Economic Impact;
iv. There is no polychlorinated biphenyl or friable
asbestos present at, in or on any property now or previously
owned, leased as a lessee or used by the Borrower or any Domestic
Subsidiary that, whether alone or together with any other such
polychlorinated biphenyl or any other friable asbestos, has had
or will have any Significant Economic Impact; and
v. There exists no condition at, in, on or under any
property now or previously owned, leased as a lessee or used by
the Borrower or any Domestic Subsidiary that, after notice, lapse
of time or both notice and lapse of time, would give rise to any
material liability under any Environmental Law.
g. Legality. The obtaining of each Loan by the
Borrower (i) is and will be in furtherance of the purposes of the
Borrower and within the power and authority of the Borrower, (ii)
does not and will not (A) violate or result in any violation of
any Law or any judgment, order or award of any court, agency or
other Governmental Authority or arbitrator or (B) violate, result
in any violation of, constitute (whether immediately or after
notice, lapse of time or both notice and lapse of time) any
default under or result in or require the imposition or creation
of any Lien in or upon any asset of the Borrower pursuant to (I)
the certificate or articles of incorporation or other charter
document of the Borrower, (II) the by-laws or other
organizational document of the Borrower, (III) any shareholder
agreement, voting trust or similar arrangement applicable to any
of the outstanding shares of any class of stock of the Borrower,
(IV) any resolution or other action of record of the shareholders
or board of directors of the Borrower or (V) any agreement or
instrument to which the Borrower is a party or by which the
Borrower or any asset of the Borrower is bound and (iii) have
been duly authorized by each necessary action of the shareholders
or board of directors of the Borrower. The execution, delivery
and performance of each Loan Document by each Person other than
any Lending Entity that is contemplated by such Loan Document as
a party thereto and the imposition or creation of each Lien
imposed or created pursuant thereto (i) do not and will not (A)
violate or result in any violation of any Law or any judgment,
order or award of any Governmental Authority or arbitrator or (B)
violate, result in any violation of, constitute (whether
immediately or after notice, lapse of time or both notice and
lapse of time) any default under or, other than pursuant to such
Loan Document, result in or require the imposition or creation of
any Lien in or upon any asset of such Person pursuant to any
agreement or instrument to which such Person is a party or by
which such Person or any asset of such Person is bound and (ii)
if such Person is not an individual, (A) are and will be in
furtherance of the purposes of such Person and within the power
and authority of such Person, (B) do not and will not violate,
result in any violation of or result in or require the imposition
or creation of any Lien in or upon any asset of such Person
pursuant to (I) any certificate or articles of incorporation, by-
laws, partnership agreement, articles of association or other
charter, organizational or governing document of such Person,
(II) any shareholder agreement, voting trust or similar
arrangement applicable to any of the outstanding shares of any
class of stock of such Person or (III) any resolution or other
action of record of any shareholders or members of such Person,
any board of directors or trustees of such Person or any other
Person responsible for governing such Person and (C) have been
duly authorized by each necessary action of any shareholders or
members of such Person, any board of directors or trustees of
such Person or any other Person responsible for governing such
Person. Each authorization, certification, certificate,
approval, permit and consent from, registration and filing with,
declaration and notice to and other act by or relating to any
Person required as a condition of the obtaining of any Loan by
the Borrower, the execution, delivery or performance of any Loan
Document by any Person other than any Lending Entity or the
imposition or creation of any Lien imposed or created pursuant to
any Loan Document has been duly obtained, made, given or done and
is in full force and effect. Each Loan Document has been duly
executed and delivered by each Person other than any Lending
Entity that is contemplated by such Loan Document as a party
thereto.
h. Fiscal Year. The fiscal year of the Borrower and
of each Domestic Subsidiary is the year ending September 30.
i. Financial Statements. The Borrower has heretofore
delivered to each Bank a copy of each of the following financial
statements:
i. Audited consolidated and unaudited consolidating
statements of income and audited consolidated statements of cash
flows of the Borrower for its fiscal year ended September 30,
1993;
ii. An audited consolidated and unaudited
consolidating balance sheet of the Borrower dated as of September
30, 1993;
iii. Unaudited consolidated and consolidating
statements of income and unaudited consolidated statements of
cash flows of the Borrower for its fiscal quarter ended March 31,
1994; and
iv. An unaudited consolidated and consolidating
balance sheet of the Borrower dated as of March 31, 1994.
Each such financial statement (i) is in accordance with the
records of the Borrower and each Subsidiary and (ii) presents
fairly taken as a whole the results of the operations and cash
flows of the Borrower and all Subsidiaries for the fiscal period
covered thereby, or the financial position of the Borrower and
all Subsidiaries as of the date thereof, in conformity with
generally accepted accounting principles applied consistently
with the application of such principles with respect to the
preceding fiscal period of the Borrower.
j. Projected Financial Statements. The Borrower has
heretofore delivered to each Bank copies, dated March 24, 1994
and May 24, 1994, copies of which are attached to and made a part
of this Agreement as Exhibit B, of the following projected
financial statements:
i. Projected consolidated statements of income and
cash flows of the Borrower for its fiscal years to be ended
September 30, 1994, September 30, 1995, September 30, 1996,
September 30, 1997, September 30, 1998 and September 30, 1999;
and
ii. Projected consolidated balance sheets of the
Borrower as of September 30, 1994, September 30, 1995,
September 30, 1996, September 30, 1997, September 30, 1998 and
September 30, 1999.
Each such financial statement presents fairly the Borrower's
estimate as of the date of its preparation of the projected
results of the consolidated operations, and the projected
consolidated cash flows, of the Borrower for the fiscal period
covered thereby, or the projected consolidated financial position
of the Borrower as of the date thereof, in conformity with
generally accepted accounting principles applied consistently
with the application of such principles with respect to the
fiscal year of the Borrower ended September 30, 1993.
k. Significant Economic Impacts; Distributions.
Since March 31, 1994, (i) there has not occurred or existed any
event or condition that has had or will have any Significant
Economic Impact and (ii) neither the Borrower nor any Subsidiary
has declared, paid, made or agreed or otherwise incurred any
obligation to declare, pay or make any Distribution other than a
Permitted Distribution.
l. Tax Returns and Payments. Each of the Borrower
and all Domestic Subsidiaries has duly (i) filed each tax return
required to be filed by it and (ii) paid or caused to be paid
each tax, assessment, fee, charge, fine and penalty that has been
imposed by any Governmental Authority upon it or any of its
assets, income and franchises and has become due, except for any
such tax, assessment, fee, charge or penalty (A) the validity of
which is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, (B) for which
adequate reserves have been appropriately established in
accordance with generally accepted accounting principles, (C) not
resulting in any Lien or resulting in a Lien the execution or
other enforcement of which is effectively stayed and (D) the
nonpayment of which does not have any material adverse effect.
m. Indebtedness. Neither the Borrower nor any
Subsidiary has any Indebtedness, except for Permitted
Indebtedness.
n. Pension Obligations. No Pension Plan was or is a
multiemployer plan, as such term is defined in Section 3(37) of
ERISA. Since September 2, 1974, (i) no Prohibited Transaction
that could subject any Pension Plan to any tax or penalty imposed
pursuant to the Internal Revenue Code or ERISA has been engaged
in by any Pension Plan, (ii) there has not occurred or existed
with respect to any Pension Plan any Reportable Event or
Accumulated Funding Deficiency or any event or condition that (A)
but for a waiver by the Internal Revenue Service would constitute
an Accumulated Funding Deficiency, (B) after notice, lapse of
time or both notice and lapse of time will constitute a
Reportable Event or (C) constituted or will constitute grounds
for the institution by the Pension Benefit Guaranty Corporation
of any proceeding under ERISA seeking the termination of such
Pension Plan or the appointment of a trustee to administer such
Pension Plan, (iii) no Pension Plan has been terminated, (iv) no
trustee has been appointed by a United States District Court to
administer any Pension Plan, (v) no proceeding seeking the
termination of any Pension Plan or the appointment of a trustee
to administer any Pension Plan has been instituted, and (vi)
neither the Borrower nor any Domestic Subsidiary has made any
complete or partial withdrawal from any Pension Plan.
o. Assets; Liens and Encumbrances. Each of the
Borrower and all Subsidiaries has good and marketable title to
each asset it purports to own, and no such asset is subject to
any Lien, except for Permitted Liens.
p. Trademarks and Patents. Each of the Borrower and
all Subsidiaries owns or otherwise possesses, without any known
conflict with any right of any other Person, each trademark,
service mark, trade style, trade name, patent, copyright and
similar general intangible, and each right relating thereto,
necessary for, or conducive to, the present or anticipated
conduct of its business or operations or the present or
anticipated ownership or use of any of its assets, except for
trademarks, service marks, trade styles, trade names, patents,
copyrights and similar general intangibles that the failure to
own or possess would not have any material adverse effect.
q. Investments. Neither the Borrower nor any
Subsidiary has any Investment, except for Permitted Investments.
r. Contracts and Arrangements. There exists no
Contract or arrangement between the Borrower and any other
Person, between any Subsidiary and any other Person or applicable
to any asset of the Borrower or of any Subsidiary (i) that has
had or will have any Significant Economic Impact, (ii) that
restricts the ability of any Subsidiary to make any Distribution
or to make any cash advance or other payment of any nature to the
Borrower or to any Subsidiary of which such Subsidiary is a
subsidiary, (iii) that restricts the right of the Borrower or of
any Subsidiary to permit any asset of the Borrower or of any
Subsidiary to be subject to any Lien or (iv) pursuant to which
any Lien may be placed upon any asset of the Borrower or of any
Subsidiary.
s. Judgments and Litigation. There is no outstanding
judgment, order or award of any Governmental Authority or
arbitrator, and no pending claim, audit or investigation (other
than any claim, audit or investigation that is a normal part of
the review process for any Contract of the Borrower or any
Subsidiary) or action or other legal proceeding by or before any
Governmental Authority or before any arbitrator, that (i) is
against or otherwise involves the Borrower, any Domestic
Subsidiary, any Major Foreign Subsidiary or any asset of the
Borrower or any Domestic Subsidiary or Major Foreign Subsidiary,
(ii) has had or will have any Significant Economic Impact, or
(iii) renders invalid or questions the validity of any Loan
Document or any action taken or to be taken pursuant to any Loan
Document.
t. Transactions with Affiliates. There exists no
Contract, arrangement, transaction or other dealing (including,
but not limited to, the purchase, sale, lease, exchange or other
acquisition or disposition of any asset and the rendering of any
service) between the Borrower or any Subsidiary and any
Affiliate, except for Contracts, arrangements, transactions and
other dealings in the ordinary course of business of the Borrower
or any Subsidiary upon fair and reasonable terms no less
favorable to it than would apply in a comparable arm's length
Contract, arrangement, transaction or other dealing with a Person
who or that is not an Affiliate.
u. Default. There does not exist any Event of
Default or Default.
v. Full Disclosure. Neither any Loan Document nor
any certificate or other writing heretofore provided to any
Lending Entity by or on behalf of the Borrower or any Subsidiary
contains any statement of fact that is incorrect or misleading in
any material respect or omits to state any fact necessary to make
any statement of fact contained therein not incorrect or
misleading in any material respect nor does any financial
statement so heretofore provided not fairly represent the
financial information that it purports to reflect as of the date
thereof, and, specifically, since the date of the most current
financial statements of the Borrower so provided, there has been
no material adverse change in the business, operations, assets,
affairs or condition (financial or other) of the Borrower or of
any Subsidiary. Neither the Borrower nor any Subsidiary has
failed to disclose to any Lending Entity any fact that has had or
will have any Significant Economic Impact or material adverse
effect.
6. AFFIRMATIVE COVENANTS. During the term of this
Agreement, the Borrower shall do the following unless the prior
written consent of the Required Banks to not doing so shall have
been obtained by the Borrower:
a. Good Standing; Qualification. Cause each of the
Borrower and all Domestic Subsidiaries at all times to (i)
maintain its corporate existence in good standing and (ii) remain
or become and remain duly qualified and in good standing as a
foreign corporation authorized to do business in each
jurisdiction in which such qualification is or becomes necessary
except where the failure to qualify would not have a material
adverse effect;
b. Compliance. Cause each of the Borrower and all
Domestic Subsidiaries at all times to (i) conduct its business
and operations, own and use each of its assets, use each asset
leased by it as a lessee, and generate, treat, store, recycle,
transport and dispose of all Hazardous Material in its possession
or control, in compliance in each material respect with each
applicable Law (including, but not limited to, each applicable
Environmental Law), (ii) obtain, make, give or do and maintain in
full force and effect each material authorization, certification,
certificate, approval, permit, consent, franchise and license
from, registration and filing with, declaration, report and
notice to and other act by or relating to any Person necessary
for the conduct of its business or operations, the ownership or
use of any of its assets, the use of any asset leased by it as a
lessee or the generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Material in its
possession or control and (iii) remain in compliance in each
material respect with (A) each such authorization, certification,
certificate, approval, permit, consent, franchise and license,
(B) its certificate or articles of incorporation or other charter
document, (C) its by-laws or other organizational document and
(D) each agreement and instrument to which it is a party or by
which it or any of its assets is bound;
c. Current Ratio. Maintain at the end of each fiscal
quarter of the Borrower ending on or after September 30, 1994 all
consolidated current assets of the Borrower so that they are not
less than 120% of the sum of (i) all consolidated current
liabilities of the Borrower plus (ii) to the extent not already
included in clause (i), the total of the outstanding principal
amounts of all Revolving Loans;
d. Liabilities to Worth. Maintain at the end of each
fiscal quarter of the Borrower the Consolidated Liabilities To
Worth Ratio of the Borrower so that it does not exceed the
following applicable percentage: (i) for any such fiscal quarter
ending on or before June 30, 1995, 450%, (ii) for any such fiscal
quarter ending after June 30, 1995 and on or before June 30,
1996, 375% and (iii) for any such fiscal quarter ending
thereafter, 325%;
e. EBITDA. Maintain (i) EBITDA of the Borrower
during each fiscal year of the Borrower ending on or after
September 30, 1995 less the aggregate amount of all capital
expenditures of the Borrower and all Subsidiaries during such
fiscal year so that it is not less than 200% of the required
interest payments on all Indebtedness of the Borrower and all
Subsidiaries during such fiscal year and (ii) the sum of (A)
EBITDA of the Borrower during each fiscal year of the Borrower
ending on or after September 30, 1995 plus (B) the difference
between the Revolving Loan Maximum Principal Amount and the total
of the outstanding principal amounts of all Revolving Loans as of
the last day of such fiscal year plus (C) the amount of cash or
cash equivalents held by the Borrower and all Subsidiaries as of
the last day of such fiscal year so that it is at least 110% of
the sum of (W) the required principal and interest payments on
all Indebtedness of the Borrower and all Subsidiaries during such
fiscal year other than any principal payment relating to any
Revolving Loan plus (X) all income taxes paid to any Governmental
Authority by the Borrower and all Subsidiaries during such fiscal
year plus (Y) all capital expenditures made by the Borrower and
all Subsidiaries during such fiscal year plus (Z) all
Distributions made by the Borrower and all Subsidiaries during
such fiscal year other than Distributions described in clause
(ii) of Section 12ss of this Agreement.
f. Accounting; Tax Returns. Cause each of the
Borrower and all Subsidiaries at all times to (i) maintain a
system of accounting established and administered in accordance
with generally accepted accounting principles and (ii) file each
tax return it is required to file;
g. Financial and Other Information; Certificates of
No Default. Provide to each Lending Entity, in form satisfactory
to the Required Banks, (i) within sixty days after the end of
each of the first three fiscal quarters of each fiscal year of
the Borrower, consolidated and consolidating statements of income
and a consolidated statement of cash flows of the Borrower for,
with respect to such statements of income, such fiscal quarter
and, with respect to all such statements, the period from the
beginning of such fiscal year to the end of such fiscal quarter
and a consolidated and consolidating balance sheet of the
Borrower as of the end of such fiscal quarter, each to be in
reasonable detail, to set forth to the extent required in
securities filings prepared by or on behalf of the Borrower
comparative consolidated figures for the corresponding period in
the preceding fiscal year of the Borrower and to be certified by
the chief financial officer of the Borrower to be in accordance
with the records of the Borrower and each Subsidiary and to
present fairly taken as a whole the results of the operations and
cash flows of the Borrower and all Subsidiaries for, as
applicable, such fiscal quarter and the period from the beginning
of such fiscal year to the end of such fiscal quarter, and the
financial position of the Borrower and all Subsidiaries as of the
end of such fiscal quarter, in conformity with generally accepted
accounting principles applied consistently with the application
of such principles with respect to the preceding fiscal quarter
of the Borrower (except for any intervening changes in generally
accepted accounting principles), (ii) within one hundred and
twenty days after the end of each fiscal year of the Borrower,
consolidated and consolidating statements of income and a
consolidated statement of cash flows of the Borrower for such
fiscal year and a consolidated and consolidating balance sheet of
the Borrower as of the end of such fiscal year, each to be in
reasonable detail, to set forth comparative consolidated figures
for the preceding fiscal year of the Borrower, to be audited by
an independent nationally recognized certified public accountant
and to present fairly taken as a whole the results of the
operations and cash flows of the Borrower and all Subsidiaries
for such fiscal year, and the financial position of the Borrower
and all Subsidiaries as of the end of such fiscal year, in
conformity with generally accepted accounting principles applied
consistently with the application of such principles with respect
to the preceding fiscal year of the Borrower (except for any
intervening changes in generally accepted accounting principles)
and to have been based upon an audit by such accountant that was
made in accordance with generally accepted auditing standards,
(iii) together with each statement of income and balance sheet
required to be delivered by the Borrower to any Lending Entity
pursuant to clause (i) or (ii) of this Section 6g, a certificate
(A) executed by a Designated Officer and a Designated Financial
Officer, (B) setting forth in substantially the form attached to
and made a part of this Agreement as Exhibit C whatever
computations are required to establish whether the Borrower was
in compliance with (I) each of the covenants contained in
Sections 6c and 6d of this Agreement during the period covered by
such statement of income and (II) if the period covered by such
statement of income is a fiscal year of the Borrower, each of the
covenants contained in Section 6e of this Agreement during such
fiscal year, (C) stating that the signers of such certificate
have reviewed this Agreement and have made or have caused to be
made under their supervision a review of the business,
operations, assets, affairs and condition (financial or other) of
each of the Borrower and all Subsidiaries during the period
beginning on the first date covered by such statement of income
and ending on the date of such certificate and (D) if during the
period described in clause (iii)(C) of this Section 6g there did
not occur or exist and there does not then exist any Event of
Default or Default, so stating, or, if during such period any
Event of Default or Default occurred or existed or any Event of
Default or Default then exists, stating the nature thereof, the
date of occurrence or period of existence thereof and what action
the Borrower has taken, is taking or proposes to take with
respect thereto, (iv) as soon as available, each 10K, 10Q, 8K or
other securities filing prepared by or on behalf of the Borrower
and (v) promptly upon the request of the Agent all additional
information relating to the Borrower, any Subsidiary or the
business, operations, assets, affairs or condition (financial or
other) of the Borrower or any Subsidiary that is so reasonably
requested (subject to any Law that restricts, or to any Contract
with any Person other than an Affiliate that in good faith
restricts, the disclosure of such information);
h. Payment of Certain Indebtedness. Cause each of
the Borrower and all Domestic Subsidiaries to pay, before the end
of any applicable grace period, each tax, assessment, fee,
charge, fine and penalty imposed by any Governmental Authority
upon it or any of its assets, income and franchises and each
claim and demand of any materialman, mechanic, carrier, ware-
houseman, garageman or landlord against it; provided, however,
that no such tax, assessment, fee, charge, fine, penalty, claim
or demand shall be required to be so paid so long as (i) the
validity thereof is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, (ii)
adequate reserves have been appropriately established therefor,
(iii) the execution or other enforcement of any Lien resulting
therefrom is effectively stayed and (iv) the nonpayment thereof
does not have any material adverse effect;
i. Trademarks and Patents. Cause each of the
Borrower and all Subsidiaries at all times to maintain in full
force and effect, without any conflict with any right of any
other Person, each trademark, service mark, trade style, trade
name, patent, copyright and similar general intangible, and each
right relating thereto, necessary for, or conducive to, the
conduct of its business or operations or the ownership or use of
any of its assets, except for trademarks, service marks, trade
styles, trade names, patents, copyrights and similar general
intangibles that the failure to own or possess would not have any
material adverse effect and except for any licensing arrangements
described in Exhibit A attached to and made a part of this
Agreement;
j. Maintenance of Title and Assets; Insurance. Cause
each of the Borrower and all Subsidiaries to (i) at all times
maintain good and marketable title to each asset it purports to
own, (ii) at all times maintain each of its tangible assets in
good working order and condition, (iii) at any time and from time
to time make each replacement of any of its tangible assets
necessary or desirable for the conduct of its business or opera-
tions, (iv) at all times keep each of its insurable tangible
assets insured with financially sound and reputable insurance
carriers against fire and other hazards to which extended cover-
age applies in such manner and to the extent that the amount of
insurance carried on such asset shall not be less than the
replacement value of such asset and (v) at all times keep
adequately insured with financially sound and reputable insurance
carriers against business interruption and liability on account
of damage to any Person or asset or pursuant to any applicable
workers' compensation Law;
k. Inspections. Upon the request of the Agent or the
Required Banks, promptly permit each officer, employee,
accountant, attorney and other agent of each Lending Entity to
(i) visit and inspect each of the premises of the Borrower and
each Domestic Subsidiary, (ii) examine, audit, copy and extract
each record of the Borrower and each Domestic Subsidiary and
(iii) discuss the business, operations, assets, affairs and
condition (financial or other) of the Borrower and each Domestic
Subsidiary with each responsible officer of the Borrower and each
Domestic Subsidiary and each independent accountant of the
Borrower and each Domestic Subsidiary (subject to any Law that
restricts, or to any Contract with any Person other than an
Affiliate that in good faith restricts, the disclosure of any
information so obtained); provided, however, that each Lending
Entity shall appropriately maintain the confidentiality of any
such information;
l. Pension Obligations. (i) Promptly upon acquiring
knowledge or reason to know in the ordinary course of its
business of the occurrence or existence with respect to any
Pension Plan of any Prohibited Transaction, Reportable Event or
Accumulated Funding Deficiency or any event or condition that (A)
but for a waiver by the Internal Revenue Service would constitute
an Accumulated Funding Deficiency, (B) after notice, lapse of
time or both notice and lapse of time will constitute a
Reportable Event or (C) constitutes or will constitute grounds
for the initiation by the Pension Benefit Guaranty Corporation of
any proceeding under ERISA seeking the termination of such
Pension Plan or the appointment of a trustee to administer such
Pension Plan, provide to each Lending Entity a certificate
executed by a Designated Officer and specifying the nature of
such Prohibited Transaction, Reportable Event, Accumulated
Funding Deficiency, event or condition, what action the Borrower
has taken, is taking or proposes to take with respect thereto
and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation with respect thereto and (ii) promptly upon
acquiring knowledge or reason to know in the ordinary course of
its business of (A) the institution by the Pension Benefit
Guaranty Corporation or any other Person of any proceeding under
ERISA seeking the termination of any Pension Plan or the
appointment of a trustee to administer any Pension Plan or (B)
the complete or partial withdrawal or proposed complete or
partial withdrawal by the Borrower or any Subsidiary from any
Pension Plan, provide to each Lending Entity a certificate
executed by a Designated Officer and describing such proceeding,
withdrawal or proposed withdrawal;
m. Changes in Ownership and Control. Promptly upon
any change in (i) the beneficial ownership of any stock of the
Borrower or any Subsidiary by any Person having Control of the
Borrower or any Subsidiary or (ii) Control of the Borrower or any
Subsidiary, provide to each Lending Entity a certificate executed
by a Designated Officer and specifying such change;
n. Judgments. Promptly upon acquiring knowledge or
reason to know in the ordinary course of its business of any
judgment, order or award of any Governmental Authority or
arbitrator that (i) is against or otherwise involves the
Borrower, any Domestic Subsidiary any Major Foreign Subsidiary or
any asset of the Borrower or any Domestic Subsidiary or Major
Foreign Subsidiary, (ii) has or will have any Significant
Economic Impact, or (iii) renders invalid any Loan Document or
any action taken or to be taken pursuant to any Loan Document,
provide to each Lending Entity a certificate executed by a
Designated Officer and specifying the nature of such judgment,
order or award and what action the Borrower has taken, is taking
or proposes to take with respect thereto;
o. Litigation. (i) Promptly upon acquiring knowledge
or reason to know in the ordinary course of its business of the
commencement of any claim, audit or investigation (other than any
tax audit or any claim, audit or investigation that is a normal
part of the review process for any Contract of the Borrower or
any Subsidiary) or any action or other legal proceeding by or
before any Governmental Authority or before any arbitrator that
(A) is against or otherwise involves the Borrower, any Domestic
Subsidiary, any Major Foreign Subsidiary or any asset of the
Borrower or any Domestic Subsidiary or Major Foreign Subsidiary
and (I) either involves in excess of $1,000,000 or results in
excess of $1,000,000 in the aggregate for the Borrower and all
Domestic Subsidiaries and Major Foreign Subsidiaries being
involved in all such claims, audits, investigations and actions
and other legal proceedings by or before any Governmental
Authority or before any arbitrator against or otherwise involving
the Borrower, any Domestic Subsidiary, any Major Foreign
Subsidiary or any asset of the Borrower or any Domestic
Subsidiary or Major Foreign Subsidiary, (II) seeks injunctive or
similar relief or (III) relates or may relate to any
Environmental Law if such noncompliance or liability would have
any Significant Economic Impact, (B) has or will have any
Significant Economic Impact or (C) questions the validity of any
Loan Document or any action taken or to be taken pursuant to any
Loan Document, provide to each Lending Entity a certificate
executed by a Designated Officer and specifying the nature of
such claim, audit, investigation or action or other legal
proceeding and what action the Borrower has taken, is taking or
proposes to take with respect thereto and (ii) promptly upon
acquiring knowledge or reason to know in the ordinary course of
its business of any development with respect to any such claim,
audit, investigation or action or other legal proceeding
theretofore disclosed by the Borrower to any Lending Entity or of
any settlement of any tax audit that has or will have any
Significant Economic Impact, provide to each Lending Entity a
certificate executed by a Designated Officer and specifying the
nature of such development or settlement and what action the
Borrower has taken, is taking or proposes to take with respect
thereto;
p. Liens. Promptly upon acquiring knowledge or
reason to know in the ordinary course of its business that any
asset of the Borrower or any Subsidiary has or may become subject
to any Lien other than Permitted Liens, provide to each Lending
Entity a certificate executed by a Designated Officer and
specifying the nature of such Lien and what action the Borrower
has taken, is taking or proposes to take with respect thereto;
q. Defaults, Significant Economic Impacts and
Material Adverse Effects. Promptly upon acquiring knowledge or
reason to know in the ordinary course of its business of the
occurrence or existence of (i) any Event of Default or Default or
(ii) any event or condition that has or will have any Significant
Economic Impact or material adverse effect, provide to each
Lending Entity a certificate executed by a Designated Officer and
a Designated Financial Officer and specifying the nature of such
Event of Default, Default, event or condition, the date of
occurrence or period of existence thereof and what action the
Borrower has taken, is taking or proposes to take with respect
thereto;
r. Communications as to Indebtedness. Promptly upon
delivering any notice, request, certificate, report or other
written communication, or promptly upon receiving any notice,
request, demand or other written communication, relating to any
demand for payment or attempt to collect any Indebtedness of the
Borrower or of any Domestic Subsidiary arising from the borrowing
of any money or to realize upon any guaranty, endorsement,
collateral or other security or assurance of payment now or
hereafter directly or indirectly securing the payment of, or
otherwise now or hereafter directly or indirectly applicable to,
any such Indebtedness, provide a copy thereof to each Lending
Entity;
s. Torrance. Cause Torrance to be operated in a
manner prior to the Torrance Merger so as to minimize its
obligations to creditors other than the Banks and the Sharing
Creditors;
t. Interest Rate Protections. Execute and deliver or
cause to be executed and delivered agreements, in form and
substance satisfactory to the Agent, with financial institutions
satisfactory to the Required Banks providing, when aggregated
with similar protections previously delivered, interest rate
protections with respect to at least $60,000,000 for a period of
at least two years and deliver evidence satisfactory to the Agent
of the existence thereof no later than July 15, 1994; and
u. Further Actions. Promptly upon the request of the
Agent, execute and deliver or cause to be executed and delivered
each writing, and take or cause to be taken each other action,
that the Agent shall deem necessary or desirable at the sole
option of the Agent to perfect or otherwise preserve or protect
the priority of any Lien created or imposed by any Loan Document
or to correct any error in any Loan Document.
7. NEGATIVE COVENANTS. During the term of this
Agreement, the Borrower shall not, without the prior written
consent of the Required Banks, do, attempt to do or agree or
otherwise incur, assume or have any obligation to do, and the
Borrower shall assure that, without the prior written consent of
the Required Banks, no Subsidiary does, attempts to do or agrees
or otherwise incurs, assumes or has any obligation to do, any of
the following:
a. Fiscal Year. Unless a Foreign Subsidiary, change
its fiscal year;
b. Indebtedness. Create, incur, assume or have any
Indebtedness (i) arising from the borrowing of any money or the
deferral of the payment of the purchase price of any asset or
(ii) pursuant to any Contingent Obligation, except in each case
for Permitted Indebtedness;
c. Pension Obligations. (i) Engage in any Prohibit-
ed Transaction with respect to any Pension Plan, (ii) permit to
occur or exist with respect to any Pension Plan any Accumulated
Funding Deficiency or any event or condition that (A) but for a
waiver by the Internal Revenue Service would constitute an
Accumulated Funding Deficiency or (B) constitutes or will consti-
tute grounds for the institution by the Pension Benefit Guaranty
Corporation of any proceeding under ERISA seeking the termination
of such Pension Plan or the appointment of a trustee to adminis-
ter such Pension Plan, (iii) make any complete or partial with-
drawal from any Pension Plan, (iv) fail to make to any Pension
Plan any contribution that it is required to make, whether to
meet any minimum funding standard under ERISA or any requirement
of such Pension Plan or otherwise, or (v) terminate any Pension
Plan in any manner, or otherwise take or omit to take any action
with respect to any Pension Plan, that would result in the
imposition of any Lien upon any asset of the Borrower or any
Subsidiary pursuant to ERISA;
d. Liens. Cause or permit, whether upon the happen-
ing of any contingency or otherwise, any of its assets to be
subject to any Lien, except for Permitted Liens;
e. Supply Contracts. Issue, enter into, assume or
permit to exist any order or Contract for the purchase of any
asset if such order or Contract requires that it make payment for
such asset whether or not delivery of such asset is ever
tendered;
f. Investments. Make any Investment, except for
Permitted Investments;
g. Transactions with Affiliates. In the ordinary
course of its business or otherwise, enter into, assume or permit
to exist any agreement, arrangement, transaction or other dealing
(including, but not limited to, the purchase, sale, lease,
exchange or other acquisition or disposition of any asset and the
rendering of any service) between it and any Affiliate or other-
wise deal with any Affiliate, except for (i) reasonable compensa-
tion for services actually performed and customary and ordinary
levels of severance and benefits packages, (ii) advances made in
the ordinary course of its business to any Affiliate who is one
of its officers and employees for out-of-pocket expenses incurred
or to be incurred by such Affiliate on its behalf in the conduct
of its business or operations and (iii) Contracts or arrangements
in the ordinary course of its business upon fair and reasonable
terms no less favorable to it than would apply in a comparable
arm's-length Contract or arrangement dealing with a Person who or
that is not an Affiliate; (provided, however, that for purposes
of this Section 7g only, each Foreign Subsidiary shall be deemed
to be an Affiliate of the Borrower and each Domestic Subsidiary);
h. Distributions. Declare, pay or make any
Distribution, except for Permitted Distributions;
i. Corporate Changes. (i) Assign, sell or otherwise
transfer or dispose of all or any substantial portion of its
assets, (ii) participate in any merger, consolidation or other
absorption, (iii) acquire all or substantially all of the assets
of any other Person, (iv) do business under or otherwise use any
name other than its true name without first having given prior
written notice to each Lending Entity or (v) make any change in
its corporate or business structure or in its operation of a
precision control business that would have any material adverse
effect;
j. Sale of Receivables. Unless a Foreign Subsidiary,
assign, sell or otherwise transfer or dispose of any of its notes
receivable, accounts receivable and chattel paper, whether with
or without recourse;
k. Stock. Issue or sell (i) any stock of the
Borrower, except for cash or (ii) any stock of any Subsidiary,
except (A) to the minimum extent required by any applicable Law
to enable any individual to serve as a director of such
Subsidiary, (B) as a dividend to the shareholders of such
Subsidiary and (C) to the Borrower or another Subsidiary; or
l. Full Disclosure. Provide to any Lending Entity or
permit to be provided to any Lending Entity on its behalf (i) any
certificate or other writing that contains any statement of fact
that is incorrect or misleading in any material respect or
knowingly omits to state any fact necessary to make any statement
of fact contained therein not incorrect or misleading in any
material respect or (ii) any financial statement that does not
fairly represent the financial information that it purports to
reflect as of the date thereof.
8. INDEBTEDNESS IMMEDIATELY DUE. Upon or at any time
or from time to time after the occurrence or existence of any
Event of Default other than with respect to the Borrower, an
Event of Default described in clause (vi) of Section 12u of this
Agreement, the outstanding principal amount of each Loan, all
interest owing pursuant to this Agreement and remaining unpaid
and all other amounts owing by the Borrower to any Lending Entity
pursuant to this Agreement and remaining unpaid shall, at the
sole option of the Required Banks and without any notice, demand,
presentment or protest of any kind (each of which is knowingly,
voluntarily, intentionally and irrevocably waived by the
Borrower), become immediately due. Upon the occurrence or
existence of any Event of Default described in such clause (vi),
such outstanding principal amount, all such interest and all such
other amounts shall, without any notice, demand, presentment or
protest of any kind (each of which is knowingly, voluntarily,
intentionally and irrevocably waived by the Borrower), automati-
cally become immediately due.
9. EXPENSES; INDEMNIFICATION; ADDITIONAL COSTS.
a. Expenses. The Borrower shall pay to the Agent on
demand each cost and expense (including, but not limited to, the
reasonable fees and disbursements of counsel to the Agent) in-
curred by the Agent in connection with (i) the preparation of,
entry into or performance of any Loan Document, whether or not
any Loan is made, or (ii) any modification of, or release,
consent or waiver relating to any Loan Document, whether or not
such modification, release, consent or waiver becomes effective.
In addition, the Borrower shall pay to the Agent on demand each
cost and expense (including, but not limited to, the reasonable
fees and disbursements of counsel to the Agent, whether retained
for advice, litigation or any other purpose) incurred by the
Agent in endeavoring to (i) collect any of the outstanding
principal amount of any Loan, any interest owing pursuant to this
Agreement and remaining unpaid or any other amount owing by the
Borrower to any Lending Entity pursuant to this Agreement and
remaining unpaid, (ii) preserve or exercise any right or remedy
of any Lending Entity relating to, enforce or realize upon any
guaranty, endorsement, subordination, collateral or other
security or assurance of payment now or hereafter directly or
indirectly securing the repayment or payment of or otherwise now
or hereafter directly or indirectly applicable to any of such
outstanding principal amount, any such interest or any such other
amount, (iii) preserve or exercise any right or remedy of any
Lending Entity pursuant to any Loan Document or (iv) defend
against any claim, regardless of the basis or outcome thereof,
asserted against any Lending Entity as a direct or indirect
result of the entry into any Loan Document, except for any claim
for any tax imposed by any Governmental Authority upon any income
of any Lending Entity or any interest or penalty relating to any
such tax.
b. Indemnification. The Borrower shall indemnify
each Lending Entity and each officer, employee, accountant,
attorney and other agent of each Lending Entity on demand against
each liability, cost and expense (including, but not limited to,
the reasonable fees and disbursements of counsel to each Lending
Entity or such officer, employee, accountant, attorney or other
agent, whether retained for advice, litigation or any other
purpose, and all costs of any investigation, monitoring, removal,
containment, remediation or restoration) imposed on, incurred by
or asserted against such Bank or such officer, employee,
accountant, attorney or other agent as a direct or indirect
result of (i) (A) any Release or threatened Release of any
Hazardous Material at, in, on or under any property now or
previously owned, leased as a lessee or used by the Borrower or
any Subsidiary, (B) the transportation or arranging for the
transportation of any Hazardous Material to any such property,
(C) any active or abandoned underground storage tank in, on or
under any such property, (D) any polychlorinated biphenyl or
friable asbestos at, in or on any such property or (E) the
existence of any condition at, in, on or under any such property
that gives rise to any liability pursuant to any Environmental
Law and (ii) the transactions contemplated by this Agreement
(including, but not limited to, the contemplated use of the
proceeds of the Loans by the Borrower as described in Section 5a
of this Agreement).
c. Additional Costs. Notwithstanding any conflicting
provision of this Agreement to the contrary:
i. If any applicable Law not in effect as of the date
of this Agreement shall (A) subject any Lending Entity to any
tax, levy, impost, duty, charge, fee, deduction or withholding of
any nature with respect to any Loan or the payment by the
Borrower of any amount payable to such Lending Entity under this
Agreement or any other Loan Document, (B) materially change, in
the reasonable opinion of any Lending Entity, the basis of
taxation of any payment to such Lending Entity of any amount
payable to such Lending Entity under this Agreement or any other
Loan Document, (C) impose or increase or render applicable any
special or supplementary special deposit or reserve or similar
requirements (whether or not having the force of Law) against
assets held by, or deposits in or for the account of, or any
eligible liabilities of, or loans by any office or branch of, any
Lending Entity, or (D) impose on any Lending Entity any other
condition or requirement with respect to this Agreement or any
other Loan Document, and if the result of any of the foregoing is
(I) to increase the costs to such Lending Entity of making,
funding or maintaining all or any part of any Loan, (II) to
reduce any amount payable by the Borrower to such Lending Entity
under this Agreement or any other Loan Document or (III) to
require such Lending Entity to make any payment or to forego any
interest or other amount payable by the Borrower to such Lending
Entity under this Agreement or any other Loan Document the amount
of which payment or foregone interest or other amount is measured
by or calculated by reference to the gross amount receivable or
deemed received by such Lending Entity from the Borrower under
this Agreement or any other Loan Document, then, and in each such
case, the Borrower shall pay to the Agent for the account of such
Lending Entity within thirty days of written notice by such
Lending Entity, such additional amounts as will (in the
reasonable opinion of such Lending Entity) be sufficient to
compensate such Lending Entity for such additional cost,
reduction, payment or foregone interest or other amount;
provided, however, that the foregoing provisions of this
paragraph shall not apply in the case of any additional cost,
reduction, payment or foregone interest or other amount resulting
solely from or arising solely as a consequence of any taxes
charged upon or by reference to the overall net income, profits
or gains of any Lending Entity;
ii. If any present or future applicable Law shall make
it unlawful for the Borrower to perform any one or more of its
agreements under this Agreement or any other Loan Document, then
the obligations of the Banks to make any Loans under this
Agreement shall terminate immediately, and if any Lending Entity
shall at any time reasonably determine (which reasonable
determination shall be conclusive and binding on the Borrower)
(A) that as a consequence of the effect or operation (whether
direct or indirect) of any such applicable Law, any one or more
of the rights, remedies, powers or privileges of any Lending
Entity under or in respect of this Agreement or any other Loan
Document shall be or become invalid, unenforceable or restricted
and (B) that all or any one or more of the rights, remedies,
powers and privileges so affected are of importance to such
Lending Entity, then the Agent shall, at the direction of the
Required Banks, declare the outstanding principal amount of each
Loan, all interest owing pursuant to this Agreement and remaining
unpaid and all other amounts owing by the Borrower to any Lending
Entity pursuant to this Agreement and remaining unpaid, to be
immediately due, without any notice, demand, presentment or
protest of any kind (each of which is knowingly, voluntarily,
intentionally and irrevocably waived by the Borrower); and
iii. If any Lending Entity shall reasonably determine
that any Law not in effect as of the date of this Agreement is
adopted regarding capital adequacy, or in the event of any change
in any existing such Law or in the interpretation or
administration thereof by any Governmental Authority charged with
the interpretation or administration thereof, or compliance by
any Lending Entity with any request or directive regarding
capital adequacy (whether or not having the force of Law) from
any such Governmental Authority, has or would have the effect of
reducing the rate of return on such Lending Entity's capital, as
a consequence of its obligations under this Agreement, to a level
below that which such Lending Entity could have achieved but for
such adoption, change or compliance (taking into consideration
such Lending Entity's policies with respect to capital adequacy),
then the Borrower shall pay to such Lending Entity upon demand
such amount or amounts, in addition to the amounts payable under
the other provisions of this Agreement or any other Loan
Document, as will compensate such Lending Entity for such
reduction. Determinations by any Lending Entity of the
additional amount or amounts required to compensate such Lending
Entity in respect of the foregoing shall be conclusive in the
absence of manifest error. In determining such amount or amounts
each Lending Entity may use any reasonable averaging and
attribution methods of general application. If after any such
determination by any Lending Entity the Borrower notifies the
Agent and such Lending Entity that another banking institution
acceptable to the Agent is willing to replace such Lending Entity
under this Agreement, then upon the Borrower's delivery to the
Agent of all writings and evidences of action reasonably required
by the Agent, such Lending Entity and such banking institution to
effect an assignment to such banking institution of all
indebtedness, liabilities and obligations of the Borrower to such
Lending Entity pursuant to this Agreement and of all rights and
remedies of such Lending Entity pursuant to this Agreement, and
the payment in full to such Lending Entity of the outstanding
principal amount of its Loans, all interest owing to it pursuant
to this Agreement and remaining unpaid and all other amounts
owing by the Borrower to it pursuant to this Agreement and
remaining unpaid, notwithstanding the limitations of Section 11h
of this Agreement, such assignment shall be fully effective.
10. AGENT; RELATIONS AMONG LENDING ENTITIES.
a. Authorization. Each Bank authorizes the Agent to
(i) act on behalf of such Bank in connection with the
administration and collection of all Loans, in connection with
the holding of and realization upon all Collateral and pursuant
to and otherwise in connection with each Loan Document and
(ii) in so acting, take each action and exercise each right and
remedy, that is expressly delegated to, or expressly required to
be taken or exercised by, the Agent pursuant to any Loan
Document, together with each other action, right and remedy that
is reasonably incidental thereto.
b. Non-Relationships. In acting on behalf of any
Bank in connection with the administration or collection of any
Loan, in connection with the holding of or realization upon any
Collateral or pursuant to or otherwise in connection with any
Loan Document, the Agent shall not be deemed to be acting (i) in
any partnership or fiduciary relationship with respect to such
Bank or (ii) in any agency, partnership or fiduciary relationship
with respect to the Borrower or with respect to any Subsidiary.
c. Rights of Agent. The Agent (i) shall have the
right to make any loan, advance or other extension of credit to
the Borrower or to any Subsidiary, to accept any deposit from the
Borrower or from any Subsidiary and generally to engage in any
kind of banking, trust or other business with the Borrower or
with any Subsidiary, and to accept fees and other consideration
from the Borrower or from any Subsidiary in connection therewith,
as though the Agent were not the Agent, (ii) shall have, and may
exercise, each right and remedy with respect to the Loans made by
the Agent as a Bank as though the Agent were not the Agent, and
(iii) shall have the right to accept fees and other consideration
from the Borrower or from any Subsidiary in connection with its
role as the Agent without having to account therefor to any Bank.
d. Limitations on Obligations and Liability. The
Agent (i) shall not have any obligation to take any action, or to
exercise any right or remedy, that is not expressly delegated to,
or expressly required to be taken or exercised by, the Agent
pursuant to any Loan Document, and (ii) shall not be liable for
omitting to take any action, or to exercise any right or remedy,
that is not so expressly delegated or so expressly required to be
taken or exercised. Without limiting the generality of the
preceding sentence, the Agent shall not have any obligation to
do, and shall not be liable for failing to do, any of the
following things: (i) to provide to any Bank any information
relating to the Borrower, to any Subsidiary or to the business,
operations, assets, affairs or condition (financial or other) of
the Borrower or of any Subsidiary, except as expressly required
by this Section 10, (ii) to request any information relating to
the Borrower, to any Subsidiary or to the business, operations,
assets, affairs or condition (financial and other) of the
Borrower or of any Subsidiary, (iii) to inspect any of the
premises and records of the Borrower or of any Subsidiary,
(iv) to discuss the business, operations, assets, affairs or
condition of the Borrower or of any Subsidiary with any officer
or accountant of the Borrower or of any Subsidiary, (v) to
investigate whether any Event of Default or Default has occurred
or existed, (vi) to account to any Bank for any money or other
asset received by the Agent in connection with any lending,
deposit, fiduciary or other relationship now or hereafter
existing between the Agent and the Borrower or between the Agent
and any Subsidiary, except insofar as required pursuant to any
Loan Document, or (vii) to disclose to any Person any information
relating to the Borrower, to any Subsidiary or to the business,
operations, assets, affairs or condition (financial or other) of
the Borrower or of any Subsidiary if such disclosure would
violate any Law or give rise to any claim against the Agent by
the Borrower, by any Subsidiary or by any other Person. The
Agent shall not be liable (i) to the Borrower on account of any
failure of any Bank to perform, or any delay by any Bank in
performing, any obligation of such Bank pursuant to any Loan
Document, (ii) to any Bank on account of (A) any failure of the
Borrower or of any Subsidiary to perform, or any delay by the
Borrower or by any Subsidiary in performing, any of its
obligations pursuant to any Loan Document, (B) the inaccuracy or
incompleteness of any certificate, financial statement or other
writing, or of any information, heretofore or hereafter provided
to any Bank, whether through the Agent or otherwise, by or on
behalf of the Borrower or by or on behalf of any Subsidiary in
connection with the administration of collection of any Loan, in
connection with the holding of or realization upon any Collateral
or pursuant to or otherwise in connection with any Loan Document
or (C) the inaccuracy or incompleteness of any representation or
warranty heretofore or hereafter made to any Bank by or on behalf
of the Borrower or by or on behalf of any Subsidiary in
connection with the administration or collection of any Loan, in
connection with the holding of or realization upon any Collateral
or pursuant to or otherwise in connection with any Loan Document
or (iii) to any Bank for (A) the performance by the Borrower or
by any Subsidiary of any Loan Document, (B) the existence,
validity, enforceability, sufficiency or value of, or any title
to, any Collateral, (C) the legality, validity, binding effect,
enforceability, sufficiency or effectiveness of any Loan Document
or (D) the collectability of any amount owing by the Borrower or
by any Subsidiary pursuant to any Loan Document.
e. Instructions and Advice. If the Agent requests
any instruction or advice from any Bank, from the Required Banks
or from all Banks with respect to the taking of or omission to
take any action in connection with the administration or
collection of any Loan, in connection with the holding of or
realization upon any Collateral or pursuant to or otherwise in
connection with any Loan Document, the Agent shall (i) be
entitled to refrain from taking or omitting to take such action
until the Agent receives such instruction or advice and
(ii) shall not be liable for so refraining.
f. Failure to Act. The Agent shall be fully
justified in omitting to take any action (including, but not
limited to, commencing any action or other legal proceeding) in
connection with the administration or collection of any Loan, in
connection with the holding of or realization upon any Collateral
or pursuant to or otherwise in connection with any Loan Document,
and shall not be liable for omitting to take such action, if
(i) in the opinion of the Agent, such action would violate any
Law or any provision of any Loan Document, (ii) the Agent
requests any instruction or advice from any Bank, from the
Required Banks or from all Banks with respect to the taking of
such action and has not received such instruction or advice or
(iii) the Agent is not, upon its request, indemnified to its
satisfaction by all Banks against each liability, cost and
expense (including, but not limited to, the reasonable fees and
disbursements of counsel to the Agent) imposed on, incurred by or
asserted against it as a direct or indirect result of the taking
of such action.
g. Reliance. The Agent shall be fully justified in
relying on, and shall not be liable for relying on, (i) any oral
(including, but not limited to, telephonic), written (including,
but not limited to, facsimile) or other notice, request,
certificate or other communication that the Agent believes to be
genuine and correct and to have been given, sent or delivered by
the Person or Persons by whom or by which it purports to have
been given, sent or delivered and (ii) any advice or opinion
received by the Agent from any professional advisor (including,
but not limited to, any attorney, accountant, or other expert),
whether or not selected or retained by the Agent.
h. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence or existence of any Event of Default
or Default other than an Event of Default described in clause
(i) of Section 12u of this Agreement unless the Agent receives
(i) from any Bank a written notice that states that it is a
"Notice of Default" and identifies such Event of Default or
Default or (ii) a certificate described in Section 6g of this
Agreement that identifies such Event of Default or Default as
such. Subject to any other provision of this Section 10
(including, but not limited to, Section 10f of this Agreement),
the Agent shall take such action with respect to any Event of
Default or Default as is directed by the Required Banks;
provided, however, that until the Agent receives any such
direction, it may, but shall not be obligated to, take or omit to
take such action with respect to such Event of Default or Default
as it deems to be in the best interests of the Banks.
i. Provision of Information. Subject to any other
provision of this Section 10, the Agent shall (i) promptly
forward to each Bank a copy of any certificate or other writing
that is required to be provided to the Agent by the Borrower, or
by any officer of the Borrower, pursuant to this Agreement and
that is so provided (including, but not limited to, any
certificate from any officer of the Borrower referred to in
Section 10h of this Agreement) that the Agent reasonably believes
not to have been disclosed to such Bank, (ii) promptly notify
each Bank of any Event of Default described in clause (i) of
Section 12u of this Agreement that the Agent reasonably believes
not to have been disclosed to such Bank and (iii) promptly
forward to each Bank a copy of any written notice from any Bank
referred to in Section 10 of this Agreement that the Agent
reasonably believes not to have been disclosed to such Bank.
j. Non-Reliance. Each Bank represents and warrants
to the Agent and to each other Bank that it has (i) independently
made its own investigation into an appraisal of the business,
operations, assets, affairs and conditions (financial or other)
of the Borrower and of each Subsidiary, (ii) independently made
its own analysis and judgment as to the creditworthiness of the
Borrower, (iii) independently made its own decision concerning
whether to enter into this Agreement and (iv) not relied upon any
representation or warranty made, any action taken or omitted to
be taken, or any information provided, by the Agent or by any
other Bank in doing any of the things described in clauses (i)
through (iii), and shall not rely upon any representation or
warranty made, any action taken or omitted to be taken, or any
information provided, by the Agent or by any other Bank in doing
any of such things.
k. Exculpation. Neither the Agent nor any officer,
employee, accountant, attorney or other agent of the Agent shall
be liable for any action taken or omitted to be taken by it, him
or her in connection with the holding or realization upon any
Collateral or pursuant to or otherwise in connection with any
Loan Document unless such action directly results from its, his
or her gross negligence or willful misconduct.
l. Expenses. Each Bank shall pay to the Agent on
demand each reasonable cost and expense (including, but not
limited to, the reasonable fees and disbursements of counsel to
the Agent) incurred by the Agent in connection with the Agent's
acting on behalf of any Bank in connection with the
administration or collection of any Loan, in connection with the
holding of or realization upon any Collateral or pursuant to or
otherwise in connection with any Loan Document to the extent that
the Agent is not reimbursed for such cost or expense by the
Borrower; provided, however, that such Bank's liability pursuant
to this sentence shall be limited to its Pro Rata Share at the
time such cost or expense is so incurred.
m. Indemnification. Each Bank shall indemnify the
Agent against each liability and each reasonable cost and expense
(including, but not limited to, the reasonable fees and
disbursements of counsel to the Agent) imposed on, incurred by or
asserted against the Agent as a direct or indirect result of the
Agent's (i) acting on behalf of any Bank in connection with the
administration or collection of any Loan, in connection with the
holding of or realization upon any Collateral or pursuant to or
otherwise in connection with any Loan Document or (ii) in so
acting, taking or omitting to take any action unless such acting,
taking or omitting to take such action results from the Agent's
gross negligence or willful misconduct; provided, however, that
such Bank's liability pursuant to this sentence shall be limited
to its Pro Rata Share at the time such liability, cost or expense
is so imposed, incurred or asserted.
n. Successor. Any Person serving as the Agent may
resign from such service at any time, effective upon sending or
delivering notice of such resignation to the Borrower and to each
Bank and the appointment of a successor Agent pursuant to this
Section 10n. Upon any such resignation, the Required Banks may,
after consultation among the Banks and with the Borrower, appoint
another Bank as the Agent. If no other Bank is so appointed and
accepts such appointment within 30 days after the date of such
resignation, then the Person resigning as the Agent may, on
behalf of the Banks, after consultation with the Banks and the
Borrower, appoint as the Agent another Bank or any other
commercial banking institution organized under any Law of the
United States or of any state of the United States and having a
combined capital and surplus of at least $500,000,000. In either
case, reasonable efforts shall be made to appoint a successor
Agent having an office in Buffalo, New York. Upon accepting
appointment as the Agent, (i) any Person shall be entitled to
receive from its predecessor as the Agent such documents of
assignment or other transfer as such Person reasonably requests,
and shall succeed to all rights and obligations of such
predecessor, and (ii) such predecessor shall be discharged from
all obligations as the Agent. After any Person resigns as the
Agent, the provisions of this Section 10 (including, but not
limited to, Sections 101 and 10m of this Agreement) shall inure
to its benefit as to all actions taken or omitted to be taken by
it while it was the Agent.
o. Cooperation of Banks. Each Bank shall
(i) promptly notify each other Lending Entity of each Event of
Default or Default of which such Bank acquires knowledge and that
such Bank reasonably believes not to have been disclosed to each
other Lending Entity, (ii) provide each other Lending Entity with
all information and documentation that such other Lending Entity
reasonably requests in connection with the performance by such
other Lending Entity of any obligation of such other Lending
Entity pursuant to any Loan Document and (iii) cooperate with the
Agent in connection with all matters relating to the
administration or collection of any Loan, to the holding of or
realization upon any Collateral or to any Loan Document.
p. Sharing of Amounts. If any Bank shall obtain any
amount (whether by voluntary or involuntary payment, by operation
of law, by realization upon any Collateral, by exercise of any
right of setoff or otherwise) on account of any Loan that results
in all amounts received by such Bank on account of such Loan
exceeding its Pro Rata Share, then such Bank shall purchase or
repurchase from the rest of the Banks such participation
interests in the Loans made by them as shall be necessary to
result in such ratio being the same as immediately before such
receipt of such amount.
q. Benefit. The provisions of this Section 10 are
solely for the benefit of each Lending Entity, and the Borrower
shall not be entitled to any benefit because of the existence of,
to rely on, or to assert any claim or defense against any Lending
Entity based upon, any such provision. Such provisions may be
modified without any consent of or notice to the Borrower;
provided, however, that, without the written consent of the
Borrower, there may not be any such modification that would
(i) modify this sentence or (ii) modify the requirement of
Section 10n of this Agreement of notice to the Borrower of any
resignation of any Person serving as the Agent from such service.
11. GENERAL.
a. Term; Survival. The term of this Agreement shall
be until the principal amount of each Loan, all interest owing
pursuant to this Agreement and all other amounts owing by the
Borrower to any Lending Entity pursuant to this Agreement have
been fully, finally and indefeasibly repaid, paid or otherwise
discharged. The obligation of the Borrower to pay liabilities,
costs and expenses described in Section 9 of this Agreement shall
survive beyond the term of this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement contained in this Agreement
shall survive the making of each Loan and the execution and
delivery of each Loan Document and shall continue in full force
and effect during the term of this Agreement, except to the
extent modified in accordance with the terms of this Agreement.
Each such representation, warranty, covenant and agreement shall
be presumed to have been relied upon by each Lending Entity.
c. Cumulative Nature, Nonexclusive Exercise and
Waivers of Rights and Remedies. All rights and remedies of any
Lending Entity pursuant to this Agreement or arising as a result
of this Agreement shall be cumulative, and no such right or
remedy shall be exclusive of any other such right or remedy. For
example, all rights and remedies of any Lending Entity pursuant
to Section 8 of this Agreement shall be in addition to all other
rights and remedies of such Lending Entity, whether pursuant to
any Loan Document or pursuant to applicable law. No single or
partial exercise by any Lending Entity of any such right or
remedy shall preclude any other or further exercise thereof, or
any exercise of any other such right or remedy, by any Lending
Entity. No course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, no course of performance or
other conduct hereafter pursued, accepted or acquiesced in, no
oral or written agreement or representation heretofore made, and
no oral agreement or representation hereafter made, by or on
behalf of any Lending Entity, whether or not relied or acted
upon, and no usage of trade, whether or not relied or acted upon,
shall operate as a waiver of any such right or remedy. No delay
by any Lending Entity in exercising any such right or remedy,
whether or not relied or acted upon, shall operate as a waiver
thereof or of any other such right or remedy. No notice or
demand of any kind, and no attempted but unsuccessful notice or
demand of any kind, by any Lending Entity prior to exercising any
such right or remedy on any one occasion, whether or not relied
or acted upon, shall operate as a waiver of any right of any
Lending Entity to exercise the same or any other such right or
remedy on such or any future occasion without any notice or
demand of any kind. No waiver by any Lending Entity of any such
right or remedy shall be effective unless made in a writing duly
executed by the Required Banks and specifically referring to such
waiver; provided, however, that (i) without the written consent
of each Bank, there may not be made any such waiver that would
(A) change, or have the effect of changing, any requirement of
the last sentence of Section 11d of this Agreement, (B) release
any asset from any Lien imposed or created pursuant to any Loan
Document, (C) reduce (I) the rate of interest payable on the
outstanding principal amount of any Loan or (II) any fee payable
pursuant to any Lending Entity pursuant to this Agreement, (D)
extend the due date, or change the amount, of any repayment or
payment required to be made pursuant to this Agreement or (E)
reduce, or have the effect of reducing, the number of Banks or
percentage of the total outstanding principal amounts of all
Loans required for any action to be taken pursuant to this
Agreement and (ii) without the written consent of the Agent,
there may not be made any such waiver that would adversely affect
the interest, right or obligation of the Agent as agent for the
Banks. No waiver by any Lending Entity on any one occasion of
any such right or remedy shall operate as a waiver thereof or of
any other such right or remedy on any future occasion.
d. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination; provided, however, that (i) without the
written consent of each Bank, there may not be made any such
modification that would (A) modify this sentence, (B) release any
asset from any Lien imposed or created pursuant to any Loan
Document, (C) reduce (I) the rate of interest payable on the
outstanding principal amount of any Loan or (II) any fee payable
pursuant to any Lending Entity pursuant to this Agreement, (D)
extend the due date, or change the amount, of any repayment or
payment required to be made pursuant to this Agreement or (E)
reduce, or have the effect of reducing, the number of Banks or
percentage of the total outstanding principal amounts of all
Loans required for any action to be taken pursuant to this
Agreement and (ii) without the written consent of the Agent,
there may not be made any such modification that would adversely
affect any interest, right or obligation of the Agent as agent
for the Banks.
e. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to princi-
ples of conflict of laws.
f. Notices to Borrower. Each notice to, each demand
upon, and each other communication to, the Borrower by any
Lending Entity relating to this Agreement may be (i) delivered in
person in writing or (ii) sent by mail, by established overnight
courier service, by telegram or by mailgram. Each such notice,
demand and other communication sent by mail, by established
overnight courier service, by telegram or by mailgram shall be
directed as follows or as may at any time and from time to time
be specified in any notice delivered or sent to such Lending
Entity by the Borrower:
Moog Inc.
Jamison Road and Seneca Street
East Aurora, New York 14052-0018
Attention: William P. Burke, Treasurer
Each such notice, demand and other communication shall be deemed
to have been given (i) if sent by mail, two days after when
deposited in the mail, certified postage prepaid, return receipt
requested, or two days after when delivered to any post office
for sending by registered mail, return receipt requested,
directed to the Borrower at the address determined in accordance
with the preceding sentence, (ii) if sent by established
overnight courier service, one day after delivered to any office
of such service directed to the Borrower at the address
determined in accordance with the preceding sentence or (iii) if
sent by telegram or by mailgram, when delivered to any telegraph
or mailgram office directed to the Borrower at the address
determined in accordance with the preceding sentence.
g. Notices to Lending Entities. Each notice to, each
demand upon, and each other communication to, any Lending Entity
by the Borrower or by any other Lending Entity relating to this
Agreement may be (i) delivered in person in writing or (ii) sent
by mail, by established overnight courier service, by facsimile,
by telegram or by mailgram. Each such notice, demand and other
communication sent by mail, by established overnight courier
service, by facsimile, by telegram or by mailgram shall be
directed as follows as may at any time and from time to time be
specified in any notice delivered or sent to the Borrower and
each other Lending Entity by such Lending Entity:
Marine Midland Bank Fax: 716-855-0384
One Marine Midland Center
Buffalo, New York 14203
Attention: Regional Commercial
Banking Department
Manufacturers and Traders Fax: 716-848-7318
Trust Company
One Fountain Plaza
Buffalo, New York 14203
Attention: Western New York Commercial
Banking Department
Fleet Bank of New York Fax: 716-847-7260
10 Fountain Plaza
Buffalo, New York 14202
Attention: Gerald A. Lee,
Vice President
The Mitsubishi Bank, Ltd. Fax: 212-667-3562
225 Liberty Street
Two World Financial Center
New York, New York 10261-1059
Attention: Naoshi Kinoshita,
Assistant Vice President
U.S. Corporate Banking Department
The Daiwa Bank, Limited Fax: 212-818-0865
450 Lexington Avenue, Suite 1700
New York, New York 10017
Attention: James M. Drum,
Assistant Vice President
Barnett Bank of Pinellas County Fax: 813-892-1545
Barnett Tower, 18th Floor
One Progress Plaza
St. Petersburg, FL 33701
Attention: Harold G. Garlock, Jr.,
Senior Vice President
National Bank of Canada Fax: 716-852-6832
Suite 2540 - Main Place Tower
350 Main Street
Buffalo, New York 14202
Attention: Robert G. Uhrig, Vice
President
Each such notice, demand and other communication sent by the
Borrower shall be deemed to have been given (i) if sent by mail,
two days after when deposited in the mail, certified postage
prepaid, return receipt requested, or two days after when
delivered to any post office for sending by registered mail,
return receipt requested, directed to such Lending Entity at the
address determined in accordance with the preceding sentence,
(ii) if sent by established overnight courier service, one day
after delivered to any office of such service directed to such
Lending Entity at the address determined in accordance with the
preceding sentence or (iii) if sent by facsimile, by telegram or
by mailgram, when delivered to any facsimile operator or to any
telegraph or mailgram office directed to such Lending Entity at
the address determined in accordance with the preceding sentence.
Each such notice, demand and other communication sent by any
other Lending Entity shall be deemed to have been given when
actually received.
h. Assignments and Participations. This Agreement
shall inure to the benefit of, and be enforceable by, each
Lending Entity, each successor of each Lending Entity and each
assignee of any of the rights and remedies of each Lending Entity
pursuant to this Agreement, and shall be binding upon the
Borrower, upon each successor of the Borrower and upon each
assignee of any of the rights of the Borrower pursuant to this
Agreement; provided, however, that (i) the Borrower shall not
assign or otherwise transfer any of the rights of the Borrower
pursuant to this Agreement without the prior written consent of
each Lending Entity, and any such assignment or other transfer
without such prior written consent shall be void and (ii) no
consent by any Bank to any such assignment or other transfer
shall release the Borrower from any indebtedness, liability or
obligation of the Borrower pursuant to any Loan Document; and,
provided, however, that (i) no Bank shall assign or otherwise
transfer, or to grant any participation in, any indebtedness,
liability or obligation of the Borrower to such Bank pursuant to
this Agreement or any of the rights and remedies of such Bank
pursuant to this Agreement (other than any pledge of any
Revolving Loan Note or any Term Loan Note to any Federal Reserve
Bank) without, in the case of any such assignment or other
transfer, the prior written consent of the Required Banks and,
except upon or at any time or from time to time after the
occurrence or existence of any Event of Default, of the Borrower
and, in the case of any such granting of a participation
interest, the prior written consent of each Lending Entity and,
except upon or at any time or from time to time after the
occurrence or existence of any Event of Default, of the Borrower
(any such assignment or other transfer or granting of a
participation interest without such consent of the Borrower being
able to be only to a financial institution), and any such
assignment or other transfer or granting of a participation
interest without such prior written consent shall be void and
(ii) no consent to any such assignment or other transfer or
granting of a participation interest shall release such Bank from
any obligation of such Bank pursuant to any Loan Document.
i. Requests. Each request of any Lending Entity
pursuant to this Agreement may be made (i) at any time and from
time to time, (ii) at the sole option of such Lending Entity and
(iii) whether or not any Event of Default or Default has occurred
or existed; provided, however, that reasonable efforts shall be
made to coordinate similar requests to the Borrower from more
than one Lending Entity so as to limit the resultant
administrative burden on the Borrower.
j. Right of Setoff. Upon and at any time and from
time to time after the occurrence or existence of any Event of
Default, (i) each Bank shall have the right, at the sole option
of such Bank and without any notice or demand of any kind (each
of which is knowingly, voluntarily, intentionally and irrevocably
waived by the Borrower), to set off against the outstanding
principal amount of each Loan made by such Bank, against all
interest owing pursuant to this Agreement and remaining unpaid
and against all other amounts owing by the Borrower to such Bank
pursuant to this Agreement and remaining unpaid each indebtedness
of such Bank in any capacity to the Borrower in any capacity,
whether alone or otherwise and whether or not then due,
(including, but not limited to, any such indebtedness arising as
a direct or indirect result of any deposit account other than a
payroll or employee benefits account, whether evidenced by a
certificate of deposit or otherwise), and (ii) each holder of any
participation in any unpaid indebtedness of the Borrower to any
Bank pursuant to this Agreement shall have the right, at the sole
option of such holder and without any notice or demand of any
kind (each of which is knowingly, voluntarily, intentionally and
irrevocably waived by the Borrower), to set off against such
unpaid indebtedness, to the extent of such holder's participation
in such unpaid indebtedness, each indebtedness of such holder in
any capacity to the Borrower in any capacity, whether alone or
otherwise and whether or not then due, (including, but not
limited to, any such indebtedness arising as a direct or indirect
result of any deposit account other than a payroll or employee
benefits account, whether evidenced by a certificate of deposit
or otherwise). Each exercise of such right by such Bank or by
such holder shall be deemed to be immediately effective at the
time such Bank or such holder opts therefor even though evidence
thereof is not entered on the records of such Bank or of such
holder until later. If any such Bank or any such holder of any
participation inadvertently so sets off against any such payroll
or employee benefits account, upon discovery it shall promptly
reverse such set off.
k. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
l. Directly or Indirectly. Any provision of this
Agreement that prohibits or has the effect of prohibiting the
Borrower or any Subsidiary from taking any action shall be
construed to prohibit it from taking such action directly or
indirectly.
m. Accounting Terms and Computations. Each account-
ing term used in this Agreement shall be construed as of any time
in accordance with generally accepted accounting principles as in
effect at such time in the United States or, in the case of any
Minor Foreign Subsidiary (where consistent with the prior
practice of such Minor Foreign Subsidiary), in the jurisdiction
in which such Minor Foreign Subsidiary is located. Each
accounting computation that this Agreement requires to be made as
of any time shall be made in accordance with such principles as
in effect at such time, except where such principles are
incompatible with any requirement of this Agreement.
n. Reference to Law. Any reference in this Agreement
to any Law shall be deemed to be as of any time a reference to
such Law as in effect at such time or, if such Law is not in
effect at such time, a reference to any similar Law in effect at
such time.
o. Reference to Governmental Authority. Any refer-
ence in this Agreement to any Governmental Authority shall be
deemed to be as of any time after such Governmental Authority
ceases to exist a reference to the successor of such Governmental
Authority at such time.
p. Reference to Event of Default. Any reference in
this Agreement or in any other Loan Document to any Event of
Default shall be deemed as of any time a reference only to an
Event of Default that has not been waived pursuant to the terms
of this Agreement or such other Loan Document, as applicable.
q. Release of Certain Liens. Upon request of the
Borrower, the Agent shall release each mortgage and security
interest granted to the Agent as security for any amount owing by
the Borrower to any Lending Entity pursuant to this Agreement and
covering any real or personal property of the Borrower or any
Domestic Subsidiary if (i) there has not occurred or existed at
any time during the period beginning on the date of this
Agreement and ending at the time such release is to occur, and
there does not exist at the time such release is to occur, any
Event of Default or Default that has not been cured by the
Borrower or waived by the Required Banks and (ii) as of the end
of each of the three fiscal quarters of the Borrower immediately
preceding the fiscal quarter of the Borrower in which such
release is to occur the Consolidated Liabilities to Worth Ratio
is 200% or less.
r. Classified Programs. Notwithstanding any other
provision of this Agreement, no provision of this Agreement shall
operate to require the disclosure of any information relating to
any classified program involving the United States Department of
Defense in contravention of any restriction described in the
second parenthetical contained in clause (v) of Section 6g of
this Agreement or to require any party to a contract relating to
any such classified program to be performed by the Borrower or
any Subsidiary to accept performance by any other Person without
any prior consent required under such classified program.
s. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
t. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
12. DEFINITIONS. For purposes of this Agreement:
a. Accumulated Funding Deficiency. "Accumulated
Funding Deficiency" has the meaning given to such term in
Section 412(a) of the Internal Revenue Code.
b. Acquisition. "Acquisition" means the acquisition
by the Borrower of the mechanical and hydraulic actuation product
lines of AlliedSignal Inc. as contemplated by that certain Stock
Purchase Agreement dated June 7, 1994 between the Borrower and
AlliedSignal Inc.
c. Affiliate. "Affiliate" means, other than all
Subsidiaries, (i) any Person who or that now or hereafter has
Control of, or is now or hereafter under common Control with, the
Borrower or any Subsidiary or over whom or over which the
borrower or any Subsidiary now or hereafter has Control, (ii) any
Person who is now or hereafter related by blood, by adoption or
by marriage to any Person referred to in clause (i) of this
sentence or now or hereafter resides in the same home as any such
Person, (iii) any Person who is now or hereafter a director or
officer of the Borrower or (iv) any Person who is now or
hereafter related by blood, adoption or by marriage to any Person
referred to in clause (iii) of this sentence or now or hereafter
resides in the same home as any such Person or over whom or over
which any such Person now or hereafter has Control.
d. Agent. "Agent" means (i) Marine as agent for the
Banks or (ii) any direct or indirect successor to Marine as agent
for the Banks.
e. Bankruptcy Law. "Bankruptcy Law" means any
bankruptcy or insolvency Law or any other Law relating to the
relief of debtors, to the readjustment, composition or extension
of indebtedness, to liquidation or to reorganization.
f. Business Day. "Business Day" means any day other
than a Saturday or Sunday on which commercial banking
institutions are open for business in Buffalo, New York and, in
the context of any aspect of any LIBOR Rate Portion, on which
United States dollar deposits in immediately available funds are
offered in the London interbank eurodollar market.
g. CERCLA. "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended.
h. Collateral. "Collateral" means any collateral,
subordination, guaranty, endorsement or other security or
assurance of payment now or hereafter directly or indirectly
securing the repayment or payment of, or otherwise now or
hereafter directly or indirectly applicable to, any of the
principal amount of any Loan, any interest owing to any Bank
pursuant to this Agreement or any other amount owing by the
Borrower to any Lending Entity pursuant to any Loan Document
including, but not limited to, the guarantees, pledges, security
interests, mortgages, assignments and other security identified
as "Collateral" in Exhibit A attached to and made a part of this
Agreement.
i. Consolidated Liabilities To Worth Ratio.
"Consolidated Liabilities To Worth Ratio" means the ratio,
expressed as a percentage, of all consolidated liabilities of the
Borrower as of the end of any fiscal quarter of the Borrower to
the consolidated tangible net worth of the Borrower as of the end
of such fiscal quarter. For purposes of calculating such ratio,
tangible net worth means shareholders' equity, but excluding
therefrom any intangible assets (including but not limited to
goodwill).
j. Contingent Obligation. "Contingent Obligation"
means, with respect to any Person, any Contract pursuant to which
such Person guarantees, or is obligated in any other manner,
whether directly or indirectly or absolutely or contingently,
with respect to, the payment of any Indebtedness, the payment or
making of any Distribution, or the performance of any Contract,
by any other Person (including, but not limited to, any Contract
pursuant to which such Person is obligated to (i) maintain the
net worth of any other Person, (ii) purchase, repurchase or
otherwise acquire any such Indebtedness, Distribution or Contract
or any asset securing the payment of any such Indebtedness, the
payment or making of any such Distribution or the performance of
any such Contract, (iii) provide funds for or otherwise assure
the payment of any such Indebtedness, the payment or making of
any such Distribution or the performance of any such Contract,
whether by means of any Investment, by means of any sale,
purchase or lease as a lessor or lessee of any asset or service
or otherwise, or (iv) protect any other Person against loss with
respect to any such Indebtedness, Distribution or Contract, but
not including any Contract pursuant to which such Person
guarantees solely its own performance of such Contract), except
for any Contract resulting from the endorsement in the ordinary
course of business of any check or other negotiable instrument
for deposit or for collection.
k. Contract. "Contract" means, with respect to any
Person, any agreement, promise or other undertaking to which such
Person is a party or by which such Person or any asset of such
Person is bound.
l. Control. "Control" means, with respect to any
Person, whether direct or indirect, (i) if such Person is a
corporation, the power to vote 20% or more of the outstanding
shares of any class of stock of such Person ordinarily having the
power to vote for the election of directors of such Person,
(ii) the beneficial ownership of 20% or more of the outstanding
shares of any class of stock of such Person or of 20% or more of
any other ownership interest in such Person or (iii) the power to
direct or cause the direction of the management and policies of
such Person, whether by ownership of any stock or other ownership
interest, by agreement or otherwise; provided, however, that no
Pension Plan or employee stock ownership plan of the Borrower
shall be considered to Control the Borrower or any Subsidiary.
m. Default. "Default" means (i) any default by the
Borrower described in clauses (i) or (iv) of Section 12u of this
Agreement and (ii) the commencement of any case or other
proceeding against the Borrower or any Domestic Subsidiary or
Major Foreign Subsidiary described in clauses (vi) or (vii) of
Section 12u of this Agreement regardless of whether any notice,
lapse of time or both notice and lapse of time otherwise required
pursuant to such clauses (i), (iv), (vi) or (vii) has been given
or occurred.
n. Designated Financial Officer. "Designated
Financial Officer" means the chief financial officer, the
Treasurer or the Controller of the Borrower.
o. Designated Officer. "Designated Officer" means
the President or any Executive Vice President of the Borrower.
p. Distribution. "Distribution" means, with respect
to any corporation, (i) any dividend or other distribution,
whether in cash or in the form of any other asset, on account of
any of its stock or (ii) any payment on account of any purchase,
redemption, retirement or other acquisition of any of its stock.
q. Domestic Subsidiary. "Domestic Subsidiary" means
(i) any Subsidiary having any place of business located in the
United States other than Moog Controls Corporation, (ii) Moog FSC
Ltd. and any other Subsidiary that is a foreign sales corporation
and (iii) Torrance.
r. EBITDA. "EBITDA" means, for any fiscal year of
the Borrower, the sum of (i) the consolidated net income of the
Borrower for such fiscal year plus (ii) the consolidated interest
expense, income and franchise tax expense, amortization and
depreciation and other non-cash charges deducted in determining
such consolidated net income of the Borrower for such fiscal
year.
s. Environmental Law. "Environmental Law" means any
Law relating to public health or safety or to protection of the
environment, including, but not limited to, (i) CERCLA and
(ii) the Resource Conservation and Recovery Act, as amended.
t. ERISA. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
u. Event of Default. An "Event of Default" occurs or
exists if (i) the Borrower defaults in the repayment within ten
days of when due of any of the principal amount of any Loan or in
the payment when due of any interest owing pursuant to this
Agreement or of any other amount owing by the Borrower to any
Lending Entity pursuant to this Agreement, (ii) the Borrower or
any Domestic Subsidiary defaults in the payment within any
applicable grace period of when due, whether by acceleration or
otherwise, of any sum, whether payable for principal, for
interest or otherwise and whether the obligation to make payment
thereof now exists or hereafter arises, that is now or hereafter
owing by it to any Lending Entity not pursuant to this Agreement,
the maturity of any such sum is accelerated or there occurs or
exists any event or condition that permits the acceleration of
the maturity of any such sum, (iii) the Borrower or any Domestic
Subsidiary defaults in the payment within any applicable grace
period of when due, whether by acceleration or otherwise, of any
sum that involves an outstanding principal amount in excess of
$100,000, whether payable for principal, for interest or
otherwise and whether the obligation to make payment thereof now
exists or hereafter arises, that is now or hereafter owing by it
to any Person (including any Sharing Creditor) other than any
Lending Entity that is not also a Sharing Creditor other than
that the nonpayment of which is permitted by Section 6h of this
Agreement, the maturity of any such sum is accelerated or there
occurs or exists any event or condition that permits the
acceleration of the maturity of any such sum, (iv) the Borrower
or any Subsidiary defaults in the performance when due of any
obligation owing by it to any Lending Entity pursuant to this
Agreement or any other Loan Document other than an obligation to
pay money and, if such obligation is not pursuant to Sections 6c,
6d or 6e or Section 7 of this Agreement, such default continues
for thirty days after notice thereof is given by the Agent to the
Borrower, (v) the Borrower, any Domestic Subsidiary or any Major
Foreign Subsidiary is dissolved, ceases to exist, participates or
agrees to participate in any merger, consolidation or other
absorption (other than (A) any such dissolution, merger,
consolidation or other absorption of any Domestic Subsidiary that
results in all of the assets of such Domestic Subsidiary being
transferred to the Borrower and (B) any merger, consolidation or
other absorption of any Foreign Subsidiary into or with any other
Foreign Subsidiary), assigns, sells or otherwise transfers or
disposes of all or substantially all of its assets, makes or
permits a fraudulent transfer or fraudulent conveyance of any of
its assets, makes any bulk sale, sends any notice of any intended
bulk sale, becomes insolvent (however such insolvency is
evidenced), generally fails to pay its debts as they become due,
suspends or ceases its present business, has served or filed
against it or against any of its assets any attachment, levy, tax
lien, warrant or similar lien other than a Permitted Lien or has
entered against it or against any of its assets any judgment,
order or award of any Governmental Authority or of any
arbitrator, (vi) the Borrower has any receiver, trustee,
liquidator, sequestrator or custodian of it or of any of its
assets appointed (whether with or without its consent), makes any
assignment for the benefit of creditors or commences or has
commenced against it any case or other proceeding pursuant to any
Bankruptcy Law or any formal or informal proceeding for the
dissolution, liquidation or winding up of the affairs of, or for
the settlement of claims against, it that, in the case of any
such case or other proceeding commenced against it is not
dismissed within sixty days of its commencement, (vii) any
Domestic Subsidiary or any Major Foreign Subsidiary has any
receiver, trustee, liquidator, sequestrator or custodian of it or
of any of its assets appointed (whether with or without its
consent), makes any assignment for the benefit of creditors or
commences or has commenced against it any case or other
proceeding pursuant to any Bankruptcy Law or any formal or
informal proceeding for the dissolution, liquidation or winding
up of the affairs of, or for the settlement of claims against, it
that, in the case of any such case or other proceeding commenced
against it is not dismissed within sixty days of its
commencement, (viii) any representation or warranty made in this
Agreement proves, as of any time during the period beginning on
the date of this Agreement and ending at the time any Loan is
made or as of the time any Loan is made, to have been incorrect
or misleading in any material respect, except to the extent
updated in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity,
(ix) any representation or warranty heretofore or hereafter made
to any Lending Entity by or on behalf of the Borrower or by or on
behalf of any Subsidiary proves, as of the date of such
representation or warranty, to have been incorrect or misleading
in any material respect, or any financial statement heretofore or
hereafter provided to any Lending Entity by or on behalf of the
Borrower or by or on behalf of any Subsidiary proves, as of the
date of such financial statement, to not have fairly presented
the financial information it contains, (x) there occurs or exists
with respect to any Pension Plan any Prohibited Transaction,
Reportable Event or other event or condition that, in the
reasonable opinion of the Required Banks, constitutes or will
constitute grounds for the institution by the Pension Benefit
Guaranty Corporation of any proceeding under ERISA seeking the
termination of such Pension Plan or the appointment of a trustee
to administer such Pension Plan, the Pension Benefit Guaranty
Corporation institutes any proceeding under ERISA seeking the
termination of any Pension Plan or the appointment of a trustee
to administer any Pension Plan, any Person other than the Pension
Benefit Guaranty Corporation institutes any proceeding under
ERISA seeking the termination of any Pension Plan or the
appointment of a trustee to administer any Pension Plan that is,
in the reasonable opinion of the Required Banks, likely to result
in the termination of such Pension Plan, any trustee is appointed
by a United States District Court to administer any Pension Plan,
any Pension Plan is terminated or there are vested unfunded
liabilities under any Pension Plan that, in the reasonable
opinion of the Required Banks, have or will have any Significant
Economic Impact, (xi) there occurs any change in Control of the
Borrower or of any Subsidiary (other than (A) a loss of Control
by any Person without a gaining of Control by any other Person
and (B) a gaining of Control by any Person identified as an
"Allowed Control Person" in Exhibit A attached to and made a part
of this Agreement) that is, in the opinion of the Required Banks,
materially adverse to their interest (it being acknowledged by
each Bank that the acquisition of the remaining outstanding
shares of Moog Japan Ltd. by the Borrower would not constitute
any such change in Control) and is not corrected to their full
satisfaction within thirty days after the Agent delivers, gives
or sends to the Borrower a notice that they consider such change
materially adverse to their interest or (xii) any Loan Document
is rendered invalid or the Borrower or any Subsidiary questions
the validity of any Loan Document or of any Lien imposed or
created pursuant to any Loan Document.
v. Existing Senior Indebtedness. "Existing Senior
Indebtedness" means the Indebtedness described as such in
Exhibit A attached to and made a part of this Agreement.
w. Foreign Subsidiary. "Foreign Subsidiary" means
(i) any Subsidiary not having any place of business located in
the United States other than Moog FSC Ltd. or any other
Subsidiary that is a foreign sales corporation and (ii) Moog
Controls Corporation.
x. Governmental Authority. "Governmental Authority"
means, whether of the United States, of any state or territory
thereof or of any foreign jurisdiction, any government, political
subdivision, court, agency, central bank or other entity, body,
organization or group exercising any executive, legislative,
judicial, regulatory or administrative function of government.
y. Hazardous Material. "Hazardous Material" means
(i) any "hazardous substance" as such term is defined in
42 U.S.C. Section 9601(14), (ii) any "hazardous waste" as such term is
defined in 42 U.S.C. Section 6903(5), (iii) any pollutant, contaminant
or hazardous, dangerous or toxic chemical, material, waste or
other substance defined under or subject to any other
Environmental Law relating to or imposing liability or standard
of conduct with respect to any pollutant, contaminant or
hazardous, dangerous or toxic chemical, material, waste or other
substance or (iv) any petroleum product.
z. Indebtedness. "Indebtedness" means, with respect
to any Person, (i) any indebtedness, liability or obligation of
such Person that should, in accordance with generally accepted
accounting principles, be classified and accounted for as a
liability on a balance sheet of such Person, (ii) any
indebtedness, liability or obligation of such Person pursuant to
any Contingent Obligation of such Person, (iii) any indebtedness,
liability or obligation of such Person pursuant to any
conditional sale Contract, capital lease or other title retention
Contract with respect to any asset acquired by such Person even
though the seller, lessor or other creditor pursuant to such
conditional sale Contract, capital lease or other title retention
Contract is limited to repossession or sale of such asset to
satisfy such indebtedness, liability or obligation, (iv) any
indebtedness, liability or obligation secured by any Lien upon
any asset of such Person even though such Person is not obligated
to pay such indebtedness, liability or obligation, (v) any claim
or demand of any materialman, mechanic, carrier, warehouseman,
garageman or landlord that if unpaid would result in the
imposition or creation of any Lien upon any asset of such Person
or (vi) the face amount of any letter of credit issued for the
account of such Person.
aa. Internal Revenue Code. "Internal Revenue Code"
means the Internal Revenue Code of 1986, as amended.
bb. Investment. "Investment" means, with respect to
any Person, any loan, advance or other extension of credit (other
than unsecured normal trade credit extended upon customary terms
in the ordinary course of such Person's business) or capital
contribution to, any purchase or other acquisition of any
security of or interest in, or any other investment in, any other
Person.
cc. Law. "Law" means any statute, ordinance,
regulation, rule, interpretation, decision, guideline or other
requirement enacted or issued by any Governmental Authority.
dd. Lending Entity. "Lending Entity" means (i) any
Bank or (ii) the Agent.
ee. LIBOR Rate. "LIBOR Rate" means, for any period,
the rate, as determined by the Agent from any broker, quoting
service or commonly available source utilized by the Agent, at
which United States dollar deposits in immediately available
funds are offered in the London interbank eurodollar market at
11:00 a.m. London time (or as soon thereafter as practicable) on
the date that is two Business Days before the first day of such
period for delivery on the first day of such period for a period
equal to such period.
ff. LIBOR Rate Election. "LIBOR Rate Election" means
any election by the Borrower to have the interest charged for any
period on a portion of the outstanding principal amount of any
Loan determined by reference to the LIBOR Rate.
gg. LIBOR Rate Margin. "LIBOR Rate Margin" means (i)
at any time the Consolidated Liabilities To Worth Ratio of the
Borrower as of the end of its most recent fiscal quarter is
greater than 275%, 2.00%, (ii) at any time the Consolidated
Liabilities To Worth Ratio of the Borrower as of the end of its
most recent fiscal quarter is 275% or less, but not 250% or less,
1.75%, (iii) at any time the Consolidated Liabilities To Worth
Ratio of the Borrower as of the end of its most recent fiscal
quarter is 250% or less, but not 200% or less, 1.25% and (iv) at
any time the Consolidated Liabilities To Worth Ratio of the
Borrower as of the end of its most recent fiscal quarter is 200%
or less, 1.00%; provided, however, that until the completion of
the Torrance Merger, the percentages of 2.00%, 1.75%, 1.25% and
1.00% specified in clauses (i) through (iv) of this sentence
shall be increased to 2.125%, 1.875%, 1.375% and 1.125%
respectively.
hh. LIBOR Rate Period. "LIBOR Rate Period" means any
period for which interest is to be charged on any LIBOR Rate
Portion for any Loan at a rate determined by reference to the
LIBOR Rate for such period pursuant to a LIBOR Rate Election.
ii. LIBOR Rate Period Commencement Date. "LIBOR Rate
Period Commencement Date" means the date on which begins any
period for which interest is to be charged on any LIBOR Rate Loan
Portion for any Loan at a rate determined by reference to the
LIBOR Rate for such period pursuant to a LIBOR Rate Election.
jj. LIBOR Rate Portion. "LIBOR Rate Portion" means,
for any Loan, any portion of the outstanding principal amount of
such Loan on which interest is to be charged for any period at a
rate determined by reference to the LIBOR Rate for such period
pursuant to a LIBOR Rate Election.
kk. Lien. "Lien" means, with respect to any Person,
(i) any charge against or interest in any asset of such Person
securing the payment or other performance of any Indebtedness,
liability or obligation to, or of any claim or demand by, any
other Person, whether such charge or interest is based upon a Law
or upon a Contract, (including, but not limited to, any security
interest, whether purchase money or other, pledge, hypothecation,
assignment, mortgage, consignment, deposit, bailment for security
purposes, attachment levy, tax lien, warrant or other Lien),
(ii) any conditional sale Contract, capital lease or other title
retention Contract with respect to any asset of such Person or
(iii) the execution or filing of any financing statement that
names such Person as a debtor or the signing of any contract
authorizing any other Person to file any such financing
statement.
ll. Loan. "Loan" means any Revolving Loan or any Term
Loan.
mm. Loan Document. "Loan Document" means this
Agreement or any other agreement or instrument referred to in
Section 4d of this Agreement.
nn. Major Foreign Subsidiary. "Major Foreign
Subsidiary" means a Foreign Subsidiary having total shareholders'
equity in excess of $2,000,000.
oo. Marine Prime Rate. "Marine Prime Rate" means the
rate of interest publicly announced by Marine from time to time
as its prime rate and is a base rate for calculating interest on
certain loans.
pp. Minor Foreign Subsidiary. "Minor Foreign
Subsidiary" means a Foreign Subsidiary that is not a Major
Foreign Subsidiary.
qq. Net Proceeds. "Net Proceeds" means (i) with
respect to any sale or other disposition of any asset or group of
assets by the Borrower or by any Domestic Subsidiary, except for
(A) all sales of any of its inventory (including scrappage) in
the ordinary course of its business, (B) exchanges of assets for,
or sales of assets the net proceeds of which are used for, the
acquisition of similar assets and (C) sales of obsolete or worn-
operating assets for consideration aggregating not in excess of
$500,000 for the Borrower and all Domestic Subsidiaries in any
fiscal year of the Borrower, and (ii) with respect to the
issuance or sale of any stock of the Borrower (other than through
the exercise of any bona fide employee stock option or to any
employee stock ownership plan), the net proceeds of such sale or
other disposition or such issuance or sale, as the case may be,
in each case after the payment of the direct expenses thereof.
rr. Pension Plan. "Pension Plan" means (i) any
pension plan, as such term is defined in Section 3(2) of ERISA,
(A) that has heretofore been or is hereafter established or
maintained by the Borrower, by any Domestic Subsidiary or by any
other Person (other than a Foreign Subsidiary) that is, together
with the Borrower or with any Subsidiary, a member of a
controlled group of corporations for purposes of Section 414(b)
of the Internal Revenue Code, (B) to which contributions have
heretofore been or are hereafter made by the Borrower, by any
Domestic Subsidiary or by any such other Person or (C) to which
the Borrower, any Domestic Subsidiary or any such other Person
has heretofore agreed or hereafter agrees or otherwise has
heretofore incurred or hereafter incurs any obligation to make
contributions or (ii) any trust heretofore or hereafter created
under any such pension plan.
ss. Permitted Distribution. "Permitted Distribution"
means (i) dividends payable solely in any of its stock, (ii) cash
dividends paid to the Borrower by any Subsidiary, or by any
Subsidiary to another Subsidiary, all of the outstanding shares
of stock of which other than shares required by any applicable
Law to enable any individual to serve as a director of such
Subsidiary are owned by the Borrower, or such other Subsidiary,
as applicable, at the time of such payment and (iii) cash
dividends paid of up to $9,000 in any fiscal year of the Borrower
with respect to the Borrower's preferred shares.
tt. Permitted Indebtedness. "Permitted Indebtedness"
means any Indebtedness (including any related to any Contingent
Obligation) of the Borrower or of any Subsidiary (i) to any
Lending Entity pursuant to this Agreement, (ii) constituting
unsecured normal trade debt incurred upon customary terms in the
ordinary course of its business, (iii) resulting from the
endorsement in the ordinary course of its business of any check
or other negotiable instrument for deposition or collection, (iv)
to the extent incurred to pay, or to defer the payment of, the
purchase price of any equipment used in the ordinary course of
its business, (v) consisting of Indebtedness only of any Foreign
Subsidiary, (vi) to any Sharing Creditor to the extent described
in clause (ii) of Section 12fff of this Agreement or
(vii) identified as "Permitted Indebtedness" in Exhibit A
attached to and made a part of this Agreement.
uu. Permitted Investment. "Permitted Investment"
means (i) any Investment by the Borrower or by any Subsidiary in
(A) any readily marketable direct obligation of the United States
maturing within one year after the date of its acquisition
thereof, (B) any time deposit maturing within one year after the
date of its acquisition thereof and issued by any banking insti-
tution that is incorporated under any statute of the United
States or of any state of the United States and has a combined
capital and surplus of not less than $50,000,000, (C) any demand
or savings deposit with any such banking institution, (D) any
United States dollar deposits in the London interbank eurodollar
market with any such banking institution or any subsidiary of any
such banking institution, (E) any commercial paper rated at least
A-1 by Standard & Poors Ratings Group or P-1 by Moody's Investors
Services, Inc., (F) Investments aggregating not more than
$2,000,000 at any time for the Borrower and all Subsidiaries,
(G) any security of any Subsidiary if such security is owned by
it on the date of this Agreement or (H) identified as a
"Permitted Investment" in Exhibit A attached to and made a part
of this Agreement and (ii) any Investment by any Foreign
Subsidiary in (A) any readily marketable direct obligation of the
foreign country in which the principal place of business of such
Foreign Subsidiary is located maturing within one year after the
date of its acquisition thereof, (B) any time deposit maturing
within one year after the date of its acquisition thereof and
issued by any banking institution that is incorporated under any
statute of such foreign country or any political subdivision of
such foreign country and has a combined capital and surplus of
not less than $50,000,000, (C) any demand or savings deposit with
any such banking institution or (D) any other Foreign Subsidiary.
vv. Permitted Lien. "Permitted Lien" means (i) any
lease of any asset by the Borrower or by any Subsidiary as a
lessor in the ordinary course of its business and without
interference with the conduct of its business or operations,
(ii) any pledge or deposit made by the Borrower or by any
Subsidiary in the ordinary course of its business (A) in
connection with any workers' compensation, unemployment
insurance, social security or similar Law or (B) to secure the
payment of any Indebtedness, liability or obligation in
connection with any letter of credit, bid, tender, trade or
Contract, lease, surety, appeal or performance bond or Law, or of
any similar Indebtedness, liability or obligation, not incurred
in connection with the borrowing of any money or in connection
with the deferral of the payment of the purchase price of any
asset, (iii) any attachment, levy or similar Lien with respect to
the Borrower or with respect to any Subsidiary arising in
connection with any action or other legal proceeding so long as
(A) the validity of the claim or judgment secured thereby is
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, (B) to the extent required
by generally accepted accounting principles adequate reserves
have been appropriately established for such claim or judgment,
(C) the execution or other enforcement of such attachment, levy
or similar Lien is effectively stayed and (D) neither such claim
or judgment nor such attachment, levy or similar Lien has any
material adverse effect, (iv) any statutory Lien in favor of the
United States for any amount paid to the Borrower or to any
Subsidiary as a progress payment pursuant to any government
Contract, (v) any statutory Lien securing the payment of any tax,
assessment, fee, charge, fine or penalty imposed by any
Governmental Authority upon the Borrower, upon any Domestic
Subsidiary or upon any of the assets, income and franchises of
the Borrower or of any Domestic Subsidiary but not yet required
by Section 6h of this Agreement to be paid, (vi) any statutory
Lien securing the payment of any claim or demand of any
materialman, mechanic, carrier, warehouseman, garageman or
landlord against the Borrower or against any Domestic Subsidiary
but not yet required by Section 6h of this Agreement to be paid,
(vii) any Lien imposed or created pursuant to any Loan Document,
(viii) any purchase money security interest securing the payment
of any Indebtedness referred to in clause (iv) of Section 12tt of
this Agreement, (ix) any Lien in any asset only of any Foreign
Subsidiary, (x) any Lien in favor of a Sharing Creditor to the
extent described in clause (ii) of Section 12fff of this
Agreement or (xi) any Lien identified as a "Permitted Lien" in
Exhibit A attached to and made a part of this Agreement.
ww. Person. "Person" means (i) any individual,
corporation, partnership, joint venture, trust or unincorporated
association, (ii) any Governmental Authority or (iii) any other
entity, body, organization or group.
xx. Prime Rate Margin. "Prime Rate Margin" means (i)
at any time the Consolidated Liabilities To Worth Ratio of the
Borrower as of the end of its most recent fiscal quarter is
greater than 275%, .75%, (ii) at any time the Consolidated
Liabilities To Worth Ratio of the Borrower as of the end of its
most recent fiscal quarter is 275% or less, but not 250% or less,
.50%, (iii) at any time the Consolidated Liabilities To Worth
Ratio of the Borrower as of the end of its most recent fiscal
quarter is 250% or less, but not 200% or less, .25% and (iv) at
any time the Consolidated Liabilities To Worth Ratio of the
Borrower as of the end of its most recent fiscal quarter is 200%
or less, .00%; provided, however, that until the completion of
the Torrance Merger, the percentages of .75%, .50%, .25% and .00%
specified in clauses (i) through (iv) of this sentence shall be
increased to .875%, .625%, .375% and .125% respectively.
yy. Prohibited Transaction. "Prohibited Transaction"
(i) has the meaning given to such term in Section 4975(c) of the
Internal Revenue Code and (ii) means any transaction prohibited
by Section 406(a) of ERISA.
zz. Pro Rata Share. "Pro Rata Share" means the ratio
of (i) the total of the outstanding principal amounts of all
Loans made by any Bank to (ii) the aggregate outstanding
principal amount of all Loans, or, in the event that there are no
Loans then outstanding, such Bank's percentage of the aggregate
of all commitments to make Loans pursuant to this Agreement
aaa. Release. "Release" means any "release" as such
term is defined in 42 U.S.C. Section 9601(22).
bbb. Reportable Event. "Reportable Event" has the
meaning given to such term in Section 4043(b) of ERISA other than
a merger of two or more Pension Plans.
ccc. Required Banks. "Required Banks" means, as of any
time, those of the Banks to which is owed at least 66 2/3% of the
total of the outstanding principal amounts of all Loans at such
time or, in the event there are no Loans then outstanding, those
Banks having 66 2/3% of the aggregate of all commitments to make
Loans pursuant to this Agreement.
ddd. Revolving Loan. "Revolving Loan" means any loan
by any Bank to the Borrower pursuant to Section 2a of this
Agreement.
eee. Revolving Loan Maximum Principal Amount.
"Revolving Loan Maximum Principal Amount" means $84,750,000
reduced by (i) $5,000,000 on each of (A) October 1, 1995, (B)
October 1, 1996, (C) October 1, 1997 and (D) October 1, 1998,
except that to the extent any reductions in the Revolving Loan
Maximum Principal Amount are made pursuant to Section 2e of this
Agreement, the amount of such reductions shall be credited
against the amount of any future reductions otherwise scheduled
to be made pursuant to subclauses (A) through (D) of this clause
(i) in the order such future reductions are otherwise scheduled
to be made and (ii) any amounts by which reductions are made
pursuant to Sections 2e and 2k of this Agreement.
fff. Sharing Creditor. "Sharing Creditor" means
(i) any Person that is identified as a "Sharing Creditor" in
Exhibit A attached to and made a part of this Agreement and (ii)
any Lending Entity that becomes a creditor of the Borrower
sharing in the Collateral by issuing any letter of credit at any
time after the date of this Agreement upon application of the
Borrower, but only to the extent relating to the longest
outstanding $5,000,000 in aggregate face amounts collectively of
all such letters of credit so issued by all Lending Entities,
with any unreimbursed drawings against such face amounts to be
deemed, for purposes of the foregoing, to constitute outstanding
portions of such face amounts.
ggg. Significant Economic Impact. "Significant
Economic Impact" means an impact (i) on the consolidated
financial condition of the Borrower in excess of (A) in the case
of an impact on a statement of net income, $1,000,000 and (B) in
the case of an impact on a balance sheet, $7,000,000 or
(ii) being material with respect to (A) the ability of the
Borrower to repay when due any of the principal amount of any
Loan or to pay when due any interest owing to any Bank pursuant
to this Agreement or any other amount owing by the Borrower to
any Lending Entity pursuant to this Agreement or (B) the ability
of the Borrower or of any Domestic Subsidiary to perform when due
any obligation pursuant to any Loan Document.
hhh. Subsidiary. "Subsidiary" means any corporation or
other Person of which the Borrower now or hereafter has
beneficial ownership, whether direct of indirect, of (i) 50% or
more of the outstanding shares of any class of stock ordinarily
having the power to vote for the election of directors of such
corporation or of any class of equity interests of such other
Person or (ii) such lower percentage of the outstanding shares of
any class of such stock or equity interests as is sufficient to
render such Person a subsidiary of the Borrower for purposes of
generally accepted accounting principles as in effect at the time
of determination of the status of such Person for purposes of
this sentence.
iii. Term Loan. "Term Loan" means any loan by any Bank
to the Borrower pursuant to Section 3a of this Agreement.
jjj. Torrance. "Torrance" means Moog Torrance Inc., a
Delaware corporation.
kkk. Torrance Merger. "Torrance Merger" means a
statutory merger pursuant to each applicable law of Torrance into
the Borrower.
13. WAIVER OF TRIAL BY JURY. EACH LENDING ENTITY AND
THE BORROWER KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION, WHETHER BASED ON ANY CONTRACT, ON ANY
NEGLIGENT OR INTENTIONAL TORT, ON ANY LAW OR OTHERWISE, IN
CONNECTION WITH, OR OTHERWISE RELATING TO, (A) ANY LOAN, ANY LOAN
DOCUMENT OR ANY GUARANTY, ENDORSEMENT, SUBORDINATION, COLLATERAL
OR OTHER SECURITY OR ASSURANCE OF PAYMENT NOW OR HEREAFTER
DIRECTLY OR INDIRECTLY SECURING THE PAYMENT OR REPAYMENT OF, OR
NOW OR HEREAFTER DIRECTLY OR INDIRECTLY APPLICABLE TO, ANY OF THE
PRINCIPAL AMOUNT OF ANY LOAN, ANY INTEREST OWING PURSUANT TO THIS
AGREEMENT OR ANY OTHER AMOUNT OWING BY THE BORROWER TO ANY
LENDING ENTITY PURSUANT TO THIS AGREEMENT, (B) ANY OTHER WRITING
HERETOFORE OR HEREAFTER EXECUTED IN CONNECTION WITH, OR OTHERWISE
RELATING TO, ANY LOAN, ANY LOAN DOCUMENT OR ANY SUCH GUARANTY,
ENDORSEMENT, SUBORDINATION, COLLATERAL OR OTHER SECURITY OR
ASSURANCE OF PAYMENT OR (C) ANY COURSE OF DEALING, COURSE OF
PERFORMANCE OR OTHER CONDUCT HERETOFORE OR HEREAFTER PURSUED, ANY
ACTION HERETOFORE OR HEREAFTER TAKEN OR OMITTED TO BE TAKEN, OR
ANY ORAL OR WRITTEN REPRESENTATION HERETOFORE OR HEREAFTER MADE,
BY OR ON BEHALF OF THE OTHER IN CONNECTION WITH, OR OTHERWISE
RELATING TO, ANY LOAN, ANY LOAN DOCUMENT OR ANY SUCH GUARANTY,
ENDORSEMENT, SUBORDINATION, COLLATERAL OR OTHER SECURITY OR
ASSURANCE OF PAYMENT. THIS SECTION 13 IS A MATERIAL INDUCEMENT
FOR EACH LENDING ENTITY AND THE BORROWER IN CONNECTION WITH ITS
ENTRY INTO THIS AGREEMENT.
Each Lending Entity and the Borrower have caused this
Agreement to be duly executed on the date shown at the beginning
of this Agreement.
MARINE MIDLAND BANK
By _____________________________________
Title
MANUFACTURERS AND TRADERS TRUST COMPANY
By _____________________________________
Title
FLEET BANK OF NEW YORK
By _____________________________________
Title
THE MITSUBISHI BANK, LTD.
By _____________________________________
Title
THE DAIWA BANK, LIMITED
By _____________________________________
Title
By _____________________________________
Title
BARNETT BANK OF PINELLAS COUNTY
By _____________________________________
Title
NATIONAL BANK OF CANADA
By _____________________________________
Title
By _____________________________________
Title
MARINE MIDLAND BANK, AS AGENT
By _____________________________________
Title
MOOG INC.
By _____________________________________
Title
INTENTIONALLY LEFT BLANK
ACKNOWLEDGMENTS
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Marine Midland Bank,
the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Manufacturers and
Traders Trust Company, the corporation described in and which
executed the above instrument; and that _he signed his (her) name
thereto by order of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Fleet Bank of New York,
the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF ___________)
: SS.
COUNTY OF __________)
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of The Mitsubishi Bank,
Ltd., the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF ___________)
: SS.
COUNTY OF __________)
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of The Daiwa Bank,
Limited, the corporation described in and which executed the
above instrument; and that _he signed his (her) name thereto by
order of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF ___________)
: SS.
COUNTY OF __________)
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of The Daiwa Bank,
Limited, the corporation described in and which executed the
above instrument; and that _he signed his (her) name thereto by
order of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF ________ )
: SS.
COUNTY OF _______ )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Barnett Bank of
Pinellas County, the corporation described in and which executed
the above instrument; and that _he signed his (her) name thereto
by order of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of National Bank of
Canada, the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of National Bank of
Canada, the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Marine Midland Bank, as
Agent, the corporation described in and which executed the above
instrument; and that _he signed his (her) name thereto by order
of the board of directors of said corporation.
_____________________________________
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the _____ day of June in the year 1994, before me
personally came ______________________________________, to me
known, who, being by me duly sworn, did depose and say that _he
resides at
;
that __he is the _____________________ of Moog Inc., the
corporation described in and which executed the above instrument;
and that _he signed his (her) name thereto by order of the board
of directors of said corporation.
_____________________________________
Notary Public
Banks that are a Party to
this Agreement
Marine Midland Bank
Manufacturers and Traders Trust Company
Fleet Bank of New York
The Daiwa Bank, Limited
The Mitsubishi Bank, Limited
Barnett Bank of Pinellas County
National Bank of Canada
PAGE
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF PER
SHARE EARNINGS
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
1994 1993 1992
PRIMARY
Average Common Shares Outstanding 7,714,444 7,713,465 7,717,791
Net Earnings 2,123,000 4,761,000 (6,773,000)
Less: Cumulative Preferred Stock
Dividend (9,000) (9,000) (9,000)
__________ __________ ___________
Adjusted Net Earnings 2,114,000 4,752,000 (6,782,000)
__________ __________ ___________
PRIMARY EARNINGS PER SHARE 0.27 0.62 (0.88)
FULLY DILUTED
Average Common Shares Outstanding 7,714,444 7,713,465 7,717,791
Net Effect of Dilutive Stock
Options 39,105 9,630 0
Assumed Conversion of Preferred
Stock 8,585 8,585 8,585
Assumed Conversion of Convertible
Subordinate Debentures 923,214 966,087 976,780
_________ _________ _________
Total 8,685,348 8,697,767 8,703,156
Net Earnings 2,123,000 4,761,000 (6,773,000)
Add: Convertible Subordinate
Debentures Interest
Net of Profit Share and Federal
Income Tax Effect 1,239,000 1,157,000 2,380,000
_________ _________ _________
Adjusted Net Earnings 3,362,000 5,918,000 (4,393,000)
_________ _________ ___________
FULLY DILUTED EARNINGS PER SHARE 0.39 0.68 (0.51)
EXHIBIT (13)
1994 Report to Shareholders
To Our Shareholders, Employees and Friends,
The Year in Review
Fiscal Year '94 will be remembered as the year of the big acquisition.
At the end of our third quarter, we purchased the AlliedSignal Actuation
Systems product lines. It was a great opportunity for us. The products
are a perfect fit. Half the business is flight control actuation for
military aircraft, principally the F/A-18. The other half is flight
controls for commercial airplanes, the 747, 757, and 777. The addition of
the AlliedSignal products strengthens our overall position in flight
controls and enhances our relationship with the Boeing Commercial Airplane
Group. By our count, we now have more flight control applications on their
airplanes than any other supplier. During this period of limited defense
budgets nothing could be more welcome than a broader relationship with the
Boeing Company.
We paid $71 million to acquire these product lines. This investment
triggered a complete restructuring of all of our U.S. borrowings. A
syndicate of U.S. and Japanese banks led by the Marine Midland Bank of
Western New York provided $152 million of term loans and revolver financing
which made the acquisition possible.
Completion of the acquisition was the bright spot in our year. It
would be generous to characterize our financial results as mixed. We
entered the year thinking that we'd seen the bottom in the defense business
and that we would break even in Europe. Fiscal '94 was expected to be a
year of earnings improvement. Here's what happened.
On an operating basis, our U.S. operations had a good year. As a
result of the acquisition, we had a 14% sales increase in the U.S. and had
net earnings of $6.4 million. Our Pacific operation had a $1 million sales
increase reflecting growth in Hong Kong and Singapore and earned just under
$1 million for the year. On the other hand, our European results fell way
short. We had hoped that after losses in the first six months we would
turn the corner in the third quarter. A $10 million reduction in sales,
half industrial and half military, pushed the long-awaited recovery just
beyond the end of the year. We did break even in Europe in the fourth
quarter, but for the year our net losses were just over $2 million,
compared to a loss of $5 million the year before. Nevertheless, this
combination of results would have equalled a $5 million profit for the
year, a slight increase from last year's $4.8 million, were it not for a
$2.9 million mid-year restructuring charge which pulled our earnings down
to $2.1 million. A decline in spare part requirements on government
programs led us to write down our inventories by 4% and we also found it
necessary to make additional staff adjustments both in Europe and the U.S.
to reflect the current level of worldwide defense revenues.
The financial scoreboard is certainly the key measure of the Company's
progress, but it's not the only measure. There were in Fiscal '94, a
number of achievements in the general operation of the Company and in
certain product strategies. Among the most notable are these:
McDonnell Douglas awarded Moog certification as a Preferred Supplier
at the Silver level.
Our delivery and quality performance as measured by the Boeing
Commercial Airplane Group continued in excess of 99%.
Lockheed selected our Company to design the first ever "actuator
within the fin" for use on the THAADS Missile Defense System.
Bofors placed a follow-on order for our electric gun aiming system
used on the CV90, confirming the long-term viability of that product.
An astronaut flew in space, untethered, relying completely on Moog
thrusters used in the SAFER system.
We delivered nine motion bases to the entertainment industry.
Tuftco, a maker of carpet-tufting machinery, began to employ our
electric drive products in combination with our hydraulics.
Three injection molding machine manufacturers in Hong Kong selected
the Moog Buhl control in a worldwide competition.
We introduced a new servojet single inlet industrial servovalve and an
industrial direct drive servovalve.
Looking over this set of accomplishments and others mentioned in the
paragraphs that follow, we conclude that the Company is in a stronger
position for long term prosperity than at any time in the last few years.
Like many companies around the world, we've had to re-think, re-define, and
re-organize our way of doing business. In spite of, or perhaps because of,
the difficulties reflected in our financial reports over the last three
years, we're emerging a stronger company now than when we entered this
period. Our newly acquired product lines will provide a revenue increase
which will more than offset the last of the reductions expected in our
defense business. Our sales forecasts project a 12% increase in Fiscal '95
which will put us close to $350 million in sales. The draw-down in defense
and the recession in Europe had left our Company becalmed in terms of
revenue growth. The acquisition provides a fresh breeze and allows us to
regain our forward momentum. This growth coupled with the revival of our
international earnings is the basis for our renewed confidence and
optimism.
Market Analysis
The product lines we acquired in '94 will account for over 20% of our
sales in '95 and will stimulate the 12% increase in consolidated sales.
They will also change our market emphasis. The acquired products are
aircraft flight controls, both military and commercial. Their addition
will take aircraft flight controls to over 53% of our revenues.
In Fiscal '95, the sales volume of products for "other machines that
fly," the space and missiles business, will be about half of what it was
only four years ago. This is the area in which the worldwide defense draw-
down has had the most dramatic impact. Because this market has contracted
while we're adding revenue in other areas, the space and missiles business
will be about 13% of our revenues.
Controls for automated machinery will remain about one-third of our
business in spite of the increase in aircraft revenues. Machine controls
maintain their percentage in our mix because of our emphasis in recent
years on new products for injection molding and entertainment simulation.
Also, we believe that we'll have a discernible increase in our worldwide
sales of industrial hydraulics as a result of improved conditions in Europe
and a renewed emphasis on the U.S. market.
The mix of our business is displayed on this chart.
Aircraft Controls
Machine Controls
Space and Missiles
We expect that our top line will grow over the next few years as a
result of growth in the machine control segment and this will become an
increasing percentage of our overall business. Many of our shareholders
are interested in the balance between government and military-sponsored
sales versus commercial or industrial sales.
Commercial/Industrial
Government/Military
Because almost half the revenues in our acquisition are associated
with commercial airplanes, and because of the declines in the last few
years in government-sponsored business, 53% of our revenues in Fiscal '95
will be commercial-industrial. We expect this segment of our business to
grow to two-thirds of revenues over the next few years.
Another dimension of interest is the measure of our globalization.
United States
International
Since the customers for the acquired products are principally in the
U.S., the acquisition offsets what would otherwise be an increase in the
International percentage of our revenues. The balance continues at what
it was: approximately one-third of our revenues are with customers outside
the U.S. We expect that this balance will be maintained. We're looking
for growth in industrial products both inside and outside the U.S. We also
expect that before the end of the decade there will be a substantial
increase in sales to Boeing as production levels recover on the 747 and
757.
Aircraft Controls
The acquisition meshes beautifully with our aircraft business. It
includes two major product families. The first is the hydraulic actuation
business which was developed in the Bendix Corporation. During the late
'50's and early '60's, Bendix was a major player in actuation for flight
controls. Bendix actuators are used on the F-14 and the F-111, and the
Boeing 747. In the late '70's, they did the 757 flight controls and during
the '80's won the swashplate actuators on the V-22. They then became our
partner to win all the flight control actuators on the RAH-66 Comanche
helicopter.
The other product line is a family of mechanical rotary actuators.
They are primarily used in positioning leading edge flaps. They can be
powered by either an electric or hydraulic motor driving high-speed line
shafts which engage a planetary gear mechanism which in turn moves the
flight surface. The device could be thought of as a powered hinge. It was
developed within the AiResearch Division of the Garrett Corporation by
engineers skilled in the design of precision gearing and rotating
machinery.
The first of these two product lines falls in the center of Moog's
strength - hydraulic actuation. The mechanical actuation products are an
excellent complement and will allow airframe manufacturers something akin
to one-stop-shopping for flight controls at Moog.
Among the products included in the acquisition were the rotary
actuation systems for both the leading edge flap and the mechanical
wingfold on the F/A-18. We are currently in production on the C/D version
of the F/A-18 and our new team of mechanical actuation designers are in the
midst of re-designing these systems for the E/F version. Current
production, plus the design contracts for the E/F, plus the two jobs we
already had - the rudder directional control valve and leading edge
extension spoiler - will make the F/A-18 the Company's largest military
aircraft program.
Our products on the F-15 will continue in production until late in the
decade as we swing into the Saudi and Israeli buys.
Fiscal '94 was a big year for the B-2 program. We've now completed
delivery of actuation systems for all but the last four of the 20 aircraft
production program and we'll be complete in Fiscal '95. Beyond that we
expect our revenues will be maintained at a sustaining level unless
congressional supporters succeed in funding an additional 20 aircraft.
From our point of view, the politics of buying additional B-2's are too
speculative to count on.
Fiscal '94 was also a big production year for flight control actuators
for the Taiwanese Indigenous Defense Fighter (IDF). That 126 aircraft
production program will finish in 1995.
Our acquisition provides us a program position on the F-16 which is in
production for foreign military sales at the rate of about 100 a year. Our
products are a power drive unit for the leading edge flaps and associated
components.
In addition to the F/A-18, the Black Hawk (UH60) series of helicopters
is our other production program for the U.S. military. It appears that the
Black Hawk will be built until the start-up of the Comanche (RAH-66). We
are close to delivering main rotor and tail rotor actuators for the first
Comanche, though the fate of the program often seems uncertain. Much of
the time, it appears to be the program the Army cares most about. At other
times, it's a DoD candidate for cancellation. In any event, a two-aircraft
flight test program will occur over the next few years and then Congress
will ultimately decide whether or not it goes into production.
A more certain hope for the future is the Bell/Boeing V-22 Osprey
Tiltrotor aircraft. During '94, Congress provided strong support for a
four-aircraft pre-production program which involves a substantial re-design
of the actuator hardware. V-22 production will occur late in the decade
and it will be a big program for Moog. The acquisition brought six
swashplate actuators and six bladefold actuators per aircraft to add to the
eight flaperon and three elevator actuators which are already part of our
product line.
During the past year, we completed most of the design work for six
actuators on the Indian Light Combat Aircraft (LCA). We are about to make
delivery of hardware for two flight test aircraft. The Indians anticipate
a first flight in early '96 and then an extended flight test program. If
the LCA goes into production, it will be a turn-of-the-century aircraft.
The acquisition also brought us the leading edge flap actuation system
for the Japanese FSX, a derivative of the F-16. Well along in development,
it will go into production some time in '97.
Prior to the acquisition, fluctuation in delivery rates on the 747 and
767 determined which was our biggest commercial program. On the 747, we
were supplying nine autopilot actuators and all the servovalves. The
acquisition adds four aileron power control units and twelve spoiler
actuators. Each new 747 now employs $400,000 of original equipment from
Moog, making the 747 our largest commercial program.
The 757 will be the next biggest. Formerly, we had only servovalves
on the 757. Our new product line includes elevator and rudder power
control units and the spoilers.
The 767, on which we supply nine autopilot actuators and all the
servovalves, is now third in terms of current production volume and will
shortly be overtaken by our hardware package on the 777 which includes all
servovalves, flight spoilers and now the leading edge rotary actuation
system.
Taken all together, our deliveries of original equipment to Boeing
will total about $30 million in Fiscal '95. If, in the '97-'98 time frame,
production rates increase on the 747 and 757 as is predicted by many
industry observers, our sales to Boeing could increase by 60%.
The acquisition also brings us directly in contact with the airplane
builders in the Airbus consortium. We are now a supplier of aileron
actuators for the A330/340 family of aircraft.
Our participation on McDonnell Douglas commercial aircraft is as a
supplier of flight control servovalves, anti-skid brake valves and
hydraulic accumulators.
A couple of years ago we made our first contact with the general
aviation market. We designed flight control actuators for the Cessna
Citation X. The acquisition extends our contacts in that market to
Canadair, Gulfstream and Lear.
In our Engine Controls business, Fiscal '94 was another difficult
year. Production rates remain depressed. There were some interesting
realignments in this market. Woodward Governor acquired one of our
competitors, Hydraulic Servocontrols, and AlliedSignal began to use
servovalves of their own design. On the other hand, Hamilton Standard and
Lucas began exploring more collaborative relationships with us. Our
strategy in this market is to support our customers on whatever basis they
prefer, to reduce our product cost and to emphasize development of
technology for the next generation of engines. Twenty years ago we
initiated the use of servovalves in electronic engine control systems.
We're now working on technologies that will ultimately render the current
products obsolete.
We manufacture aerospace hardware in the U.S. for applications around
the world - except for Europe. Our English company, Moog Controls Ltd.
(MCL), is now responsible for the manufacture of most of our aerospace
equipment used in Europe. MCL supplies actuators for active control of
structural response on the Westland Augusta EH101 helicopter. MCL also
designs and manufactures engine control valves for the European market and
is responsible for flight control servovalves delivered to Airbus
customers.
All in all it was an eventful year for our Aircraft business. We
expect the first year of the acquisition to require a certain amount of
adjustment and expense, but our expanded family of products will ultimately
make us an even stronger player in the worldwide aircraft industry.
Space and Missiles
Satellite propulsion has become the central core of our space
business. We have a long history of supplying controls for satellites and
a broad line of standard products. Our major customers are Hughes, Martin,
and Loral in the U.S., Royal Ordnance and Matra Marconi Space in England
and BPD in Italy. Our propellant isolation valves will be used on the
much-publicized Motorola Iridium(TM) Satellite system which will go into
production toward the end of next year.
Space Shuttle launches have become a normal part of everyday life.
There are now about seven per year. The solid rocket boosters are recovered
after every launch and their actuators come back to Moog for refurbishment.
We've just completed a development program to design a new hydrazine flow
control system for use in the Auxiliary Power Unit in the boosters. This
new product will go into production the middle of next year.
For the Rocketdyne Division of Rockwell we're developing a highly
specialized fluid quick-disconnect that will be used in the electric power
and thermal control systems in the Space Station. The station is now known
as International Space Station Alpha. The Russian involvement will
probably secure the future of the program.
An astronaut's worst nightmare is getting detached from his tether
while working outside the shuttle. NASA has developed a self-rescue device
called SAFER (Simplified Aid for Extra-Vehicular Rescue). Worn as a
backpack, SAFER's actually a self-propelled space life jacket. For each
unit, Moog supplies 24 tiny cold gas thrusters each of which provides less
than one pound of thrust. If an astronaut breaks loose from his tether,
SAFER stabilizes his tumbling motion with computer controlled pulses from
the Moog thrusters.
Once stabilized, the astronaut can use a small joy stick to control
the thrusters and propel himself back to safety. SAFER also permits
astronauts to inspect parts of the orbiter that would be inaccessible on
the tether. On September 16th of this year, NASA invited the designer of
our cold gas thrusters, Hans Toews, to witness the launch and presented
Hans with a Manned Space Flight Awareness award. During the flight,
astronauts tested SAFER by traversing above the open cargo bay. The
astronauts were not only able to fly about at will, they were able to
instantly halt an induced tumble. NASA deemed the test a spectacular
success.
The tiny thrusters used in SAFER are a derivative of work done for the
Strategic Defense Initiative. We have other applications of component
miniaturization. In August, we were selected to design an entire Xenon
Propellant Management Assembly. This self-contained system encompasses all
the components between the propellant tank and the thruster in an electric
propulsion system. An electric field ionizes super-heated fuel in an
engine chamber and then expels it from the engine. This is state-of-the-
art in satellite propulsion. Moog will design the system, build it, weld
it together and deliver it to the satellite manufacturer for integration
directly into the satellite.
We are nearly complete on production deliveries for the Thrust Vector
Control (TVC) System designed for the booster rockets on the Titan IV
launch vehicle. This was a large design job and has been a great success.
The major task left is production of the actuator control electronics. In
August this year, we booked an $18 million purchase order to update the
design of the original TVC actuators for the Titan core vehicle. The re-
design work and production of 16 missile sets will take 3-1/2 years.
We have two programs underway for the French launch vehicle, Ariane 5.
One is the design of a propellant valve assembly which controls the flow of
fuel into a new upper stage engine; the other is an electromechanical
thrust vector control actuator for the same upper stage engine.
We continue to provide all the thrust vector control actuation for the
Trident submarine-launched missile which will continue in production at the
current volume through the year 2000.
Our tactical missile business has been limited over the last couple of
years. We continue to supply valves for use on the U.S. Patriot Program.
Patriot's in production in Japan as is the Sparrow. In Europe, our only
tactical missile activity in '94 was valve delivery for the Aspide, a
Sparrow derivative produced in Italy.
In 1991, the Congress passed the Missile Defense Act which anticipated
the development of the Theater High Altitude Area Defense (THAAD). It's an
anti-missile defense system that intercepts incoming missiles in the upper
atmosphere. We're supplying bipropellant thrusters for the attitude
control system and a pressure control module used to gimbal the infrared
seeker. In addition, Moog is designing the first ever "actuator within the
fin" for the THAAD missile.
If we add together our satellite propulsion business, the work we do
on satellite launch vehicles, the Space Shuttle program, an occasional
space probe to Pluto, the Trident missile and our tactical missile
projects, the combination of space and missiles products represents close
to 15% of our sales. This business is a small but strong specialty niche
for us. Since our expertise and experience in this area is formidable, we
intend to stick with it until the resurgence in space activity comes. When
it does, we'll be ready.
Automated Machine Controls
If our Company's founders hadn't diversified into industrial machine
controls, and today we were only an aerospace company, we would be two-
thirds our current size. In Fiscal '94, we did about $100 million, or a
third of our revenues in industrial machine controls.
The most important of our industrial markets is machinery that makes
products out of plastic. In injection molding machines we supply high
performance servovalves which control both the feed of material into the
injection cavity and the pressure in the mold. In blow molding machines
our valves control the way raw material is fed into the mold cavity. We
also supply electronic controls which manage the servovalve functions as
well as the sequence of machine operations and temperatures. On occasion,
we'll supply electronic controls and servovalves on the same machine.
Often times, the machine maker will use our servovalves in combination with
someone else's electronics and in many cases our electronics are used on
machines that don't require servovalves for closed-loop control.
Typically, the plastics market makes up about 25% of our industrial
sales. It's a big area for us but it's had a couple of bad years recently,
particularly in Europe. We're hoping for a better Fiscal '95. Our
customers in Europe, which include Battenfeld, Engel, Arburg, Techne,
Uniloy, Billion and others all show evidence of recovering. Also, we've
enjoyed eager acceptance of a set of new low cost products recently
developed by our Buhl organization. We're excited that the new Buhl
control has been selected by three injection molding OEM's in Hong Kong: Po
Yuen, Topfine and Elite.
In June '94, the National Plastics Exhibition was held in Chicago.
Twenty-one different companies displayed equipment using Moog components.
Moog Buhl controls were displayed on Korea's GoldStar injection molding
machine, among others. This is GoldStar's first high-performance closed-
loop machine. There was also considerable interest in the Moog blow
molding control used on a Braune and Wulsch machine. Makers of blow
molding machinery are increasingly attracted to the operating advantages of
the Moog control. It is a high-end, high-performance control and it
commands a premium price.
Another of the big market areas for industrial servovalves is control
of fuel flow in stationary gas turbines. We have customers all over the
world including European Gas Turbines, Nuovo Pignone, Phillips, Volvo, GEC,
MHI, Mitsui and Fuji Electric. Power generation is one of the growth
markets in industrial servos, driven in part by the huge infrastructure
investment required in the Pacific Rim and China.
Steel mills are another major market for servo-controls, a market that
will be buoyed by facility development in the Asian Pacific.
A fourth market is the manufacture of fatigue test equipment. Our
primary customers are Schenk and Mercedes in Germany, Instron and Kelsey
in England, Saginomiya and MHI in Japan, and Daewoo and Hyundai in Korea.
Although there are pockets of more rapid growth in the industrial
servovalve market, the worldwide average will be a modest 3-4%. On the
other hand, competition is lively. In Europe, Moog competes with Rexroth,
Bosch and Ultra (formerly Dowty). In Japan, there is one major competitor,
Tokyo Precision Products.
In 1988, we spun off our U.S. industrial servovalve division to Bill
Moog, our founder, in exchange for his stock in Moog Inc. Since that time,
we've been reluctant to invest in establishing our own U.S. sales and
distribution network or in duplicating Bill's facilities. We believed
there was a high likelihood that one day we'd be able to buy this company
back. In '94, Bill sold his company, but we did not buy it. The sale began
with a bidding contest that took the price to a level beyond what we
thought reasonable, since we already have the technology and can easily
match the facilities.
We now plan to increase our participation in this worldwide market
through a renewed emphasis in the U.S. It will take some years for us to
again be a factor in the U.S. market. Servovalve customers change
suppliers slowly. Also, gaining market share will not be easy. Bill sold
to Enidine, a company with an established network of distributors.
European competitors have made inroads on the U.S. and recently E-Systems
bought the Fluid Controls Division of BW/IP International which includes
the Atchley industrial servovalve product line. So, there is competition.
But the U.S. market for industrial valves exceeds $30 million per year and
we're currently doing less than $1 million. We have lots of room to grow.
Our electronic controls for injection and blow molding were developed
so we could control our servovalves. In a similar fashion, we've developed
electronic products in other areas. One of our more successful efforts is
the radio transmitter we supply to the mining industry for control of
continuous miners. Fiscal '94 was a tough year in the mines because of the
U.S. coal strike. However, that's over and we're seeing renewed interest.
We have a new product, a two-way digital radio, which has found acceptance
with four of our big customers.
It's been over twelve years since we made the strategic decision to
expand our product range beyond hydraulics and develop a line of electric
servomotors. We entered this market on the premise that there was a place
at the high end of the performance spectrum for a company of engineers who
can develop customized solutions and provide them in products with quality
and reliability. We've found plenty of opportunities to invest time and
energy in this pursuit. To date, our sales volume and associated margins
on the applications we've pursued have not recovered our engineering
investments, but we're coming close to that balance. Our motor is a good
design. It's a brushless DC motor that's smaller and lighter than
comparable products and we now have a good digital controller. A single
axis motion control can be incorporated directly in our digital controller.
Our hardware and software is optimized for use with the CANBUS digital
information bus which can deliver instructions to machine controls
throughout a factory.
To date, our major customer applications are robotics with Bosch
(Germany), material handling with ISI (U.S.) and Engel Automation
(Austria), and a wide variety of specialty machine applications. These
range from brush-making machines to textile, glass grinding, packaging,
weaving and printing machines. In many of these applications, the customer
is using the precision of digital control and the reliability of brushless
motors to replace control systems using mechanical cams for coordination.
In the bargain, he gets improved flexibility in both the original design
and in the later re-configuration of his system.
There are some applications wherein we sell only motors. The most
notable of these was mentioned in our '93 report. It's a vacuum device
used in German retail gas stations to dispose of fumes developed while
pumping gas. It's built by Deutsche Geratebau and our production is at an
annual rate of 3000 to 4000 motors.
A major offshoot of our industrial motor development work has been a
pioneering effort to apply electric drives in azimuth and elevation
controls for gun systems in military vehicles. This is a curious hybrid of
industrial-type hardware sold to defense companies with elaborate
specifications. The products are a high-torque brushless DC motor the size
of a breadbox and a 24-volt motor controller the size of a suitcase. The
challenge is to manage the electric power in the motor and controller.
There are large inertias involved in pointing the gun on a vehicle that's
bouncing through an open field. Our advantage is the elimination of the
hydraulic power supply and the risk of fire in the hydraulic fluid. One of
several different systems designed over the past few years has gone into
production and that makes the whole effort worthwhile. It's an elevation
and traverse drive system for the Combat Vehicle 90/40 built by Bofors for
the Swedish army. In the past year, we've completed qualification and
begun delivery of the first 168 production systems. More importantly, we
received a follow-on order for an additional 157 systems to be delivered
through the end of the decade. We have an additional order for this same
hardware from a Norwegian company, Hegglunds, who is also using the CV90.
Another important spin-off of our electric motor work is our entry
into the market for entertainment simulators. Three years ago, a business
development team canvassed the simulator market and identified the need for
an electrically-actuated motion base for the entertainment business. In
short order, a Moog design team extended some electric actuation work done
for NASA and developed the product line we're delivering today.
As previously mentioned, we delivered nine simulators this year. Four
went to customers in Japan - two to Shirahama Earth Adventure in Wakayama,
one to Portopia Land in Kobe and one to Geo-Bio World in Fukuoka. One went
to Ontario Place in Toronto, and two to the Empire State Building in New
York. Two were delivered to Tempus Expeditions. Tempus is the concept of a
Salt Lake City entrepreneur, Bill Sadleir, who has packaged high quality
audio-video-kinetic family entertainment in a retail establishment designed
for megamalls. His first installation is in the Mall of America in
Minneapolis. Given the increasing interest in theme parks in the Asian-
Pacific and the extraordinary opportunity for entertainment simulators in
U.S. megamalls, we're hopeful that our revenues in this market will soon
equal the revenues in the electric motors business that led us to this
product in the first place.
Unlike most of the businesses we're in, the entertainment industry
knows nothing about us. Theme park operators aren't acquainted with
aircraft flight controls, much less with Xenon thrusters. But one of our
employees has made a good start at showing these customers how Moog
operates. We'd like to tell you about it.
This summer, during the week that our plant shuts down for vacation,
one of Moog's senior engineers got a 3:00 a.m. phone call from Japan.
There had been a fire at the Kobe, Japan amusement park where one of our
customers was just installing our entertainment platform. The fire had
ruined the platform's power supply. Moog's engineer, Bill Lyons, described
over the phone to the customer how to replace the power unit. Later that
morning, he drove to the plant to fax more information. While he was
there, the customer called in a panic and said there was more damage than
originally thought. The grand opening for the theater was one day later.
The last flight that could get Bill to Japan in time to help was leaving
Buffalo in less than an hour. Would he come?
At times like this, in situations like this, a company is measured.
There wasn't time to go home and pack before the flight. Bill went to
Japan in the clothes he had on. There wasn't time to call his wife to say
he wouldn't be home for dinner. He called her from Chicago. (Bill stayed
in Japan for two weeks.) There wasn't time to take the equipment needed.
He asked fellow workers to ship it express. There wasn't time to test a
new design in Japan. So colleagues drove a prototype to Toronto to test it
after-hours on a platform already in place.
This kind of individual responsibility and commitment is what the
world can expect of Moog. And while this story is a great example, it's by
no means the only one. We have heroes and heroines moving around our
Company every day. They're the folks who have made our Company what it is,
who have carried the company through the last three difficult years and who
have brought us to this threshold of opportunity.
Directors and Officers
Robert T. Brady
President
Chief Executive Officer
Director
Richard A. Aubrecht
Chairman of the Board
Director
Robert R. Banta
Executive Vice President
Chief Financial Officer
Assistant Secretary
Director
Kenneth D. Garnjost
Vice President, Engineering
Joe C. Green
Executive Vice President
Chief Administrative Officer
Director
John D. Hendrick
Director
President, Okuma Machinery Inc.
Kenneth J. McIlraith
Director
Retired Banking Executive
Peter P. Poth
Director
Retired Executive
Arthur S. Wolcott
Director
Chairman, Seneca Foods Corporation
Warren B. Cutting
Director
Emeritus Business Consultant
Philip H. Hubbell
Vice President - Contracts
Stephen A. Huckvale
Vice President - Asia Pacific
Robert H. Maskrey
Vice President - Aircraft Group
Kenneth G. Smith
Vice President - Europe
Richard C. Sherrill
Vice President - Systems Group
William P. Burke
Treasurer
John B. Drenning
Secretary
Partner, Phillips Lytle
Moog Inc.
Headquarters
East Aurora, New York, USA
Moog Australia Pty., Ltd.
Mulgrave, Australia
Moog do Brasil Controles Ltda.
So Paulo, Brazil
Moog Buhl Automation
Copenhagen, Denmark
Moog Controls Ltd.
Tewkesbury, England
Moog OY
Espoo, Finland
Moog Sarl
Rungis, France
Moog GmbH
Bblingen, Germany
Moog Controls Hong Kong Ltd.
Hong Kong
Moog Controls (India) Pvt. Ltd.
Bangalore, India
Moog Ltd.
Ringaskiddy, Ireland
Moog Italiana S.r.l.
Malnate, Italy
Moog Japan Ltd.
Hiratsuka, Japan
Moog Korea Ltd.
Kwangju-Kun, Korea
Moog Controls Corporation
Baguio City, Philippines
Moog Singapore Pte. Ltd.
Singapore
Moog Sarl Sucursal En Espaa
Orio, Spain
Moog Norden A.B.
Askim, Sweden
Cover:
Boeing's fly-by-wire flight control systems on its new 777 aircraft depend
on Moog's servovalves and actuators to translate computer commands into
movement of the control surfaces. Our participation includes the hydraulic
spoiler actuators, all servovalves, the mechanical leading edge actuation
system, and various engine control functions.
Moog is a worldwide manufacturer of precision control components and
systems. Moog actuation devices control high-performance aircraft,
satellites and space vehicles, strategic and tactical missiles and
automated industrial machinery.
Moog has had a major worldwide presence for over 30 years. Located in 18
countries, our offices and manufacturing facilities allow Moog to better
serve our international customers and meet the demands of the ever-changing
global marketplace.
Moog supplies a diverse range of flight control actuators on the F/A-18
Fighter Program. In addition, Moog servovalves control the fuel flow and
configuration of the engines. As a result of the acquisition of
AlliedSignal's actuation systems, Moog now supplies mechanical actuation
systems to both the plane's leading edge flap and the wingfold. This
state-of-the-art hardware allows the aircraft to maneuver at supersonic
speeds and offers the pilot unparalleled flight control.
The Boeing 747 illustrates the broad spectrum of Moog's aircraft control
capability encompassing over 40 individual pieces of hardware. Pilot and
autopilot commands to the ailerons, spoiler and autopilot actuators control
the aircraft's flight path. Additionally, our servoactuation products
control the engine and auxiliary power units. With the recent addition of
AlliedSignal's actuation product line, Moog has significantly increased its
presence on the 747.
On September 16, 1994, U.S. astronauts conducted the first test of the
SAFER (Simplified Aid for Extra-Vehicular Rescue). Twenty-four of Moog's
miniature cold gas thrusters provide the astronaut with the control
capability to perform a self-rescue.
The global market for fuel-efficient, environmentally-friendly power
generation equipment will continue its rapid growth. Moog control
components are sold to gas and steam turbine manufacturers throughout the
world. These turbines range from very small - measuring only a few feet
and generating fractions of megawatts to massive turbines measuring
thousands of square feet and generating over 200 megawatts.
Machinery to form and mold plastic products benefits from Moog's ability to
precisely control all required functions. On injection molding machines,
Moog Buhl controllers as well as our servovalves enable faster set-up
times, reduced down times and consistent product quality.
Moog's all-electric entertainment simulator platforms are setting the
performance standard in this rapidly growing industry. The complete six
axis platform and cabin manufactured by Moog for Tempus Expeditions is our
latest development.
Investor Information
Reports
In addition to our Annual Report, each shareholder receives copies of
our three Quarterly Reports and the summary of our Annual Meeting.
Additional information about the Company, including exhibits to the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994, may be
obtained by writing:
Shareholder Relations
Moog Inc.
East Aurora, New York 14052-0018
PHONE - 716/652-2000
FAX - 716/687-4457
Annual Meeting
Moog Inc.'s Annual Meeting of Shareholders will be held February 8,
1995 at 9:15 a.m. at the Albright-Knox Art Gallery, 1285 Elmwood Avenue,
Buffalo, New York. Proxy cards should be dated, signed and returned
promptly to ensure that all shares are represented at the meeting and voted
in accordance with shareholder instructions.
Financial Mailing List
Shareholders who hold Moog stock in the names of their brokers or bank
nominees but wish to receive information directly from the Company should
contact Shareholder Relations at Moog Inc.
Transfer Agent and Registrar
Mellon Securities Trust Company
c/o Mellon Securities Transfer Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
201/296-4000
Affirmative Action Program
In recognition of our role as a contributing corporate citizen, Moog
has adopted all programs and procedures in our Affirmative Action Program
as a matter of corporate policy.
EXHIBIT (24)
Consent of KPMG Peat Marwick; Reports of
Coopers & Lybrand
KPMG Peat Marwick LLP
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Moog Inc.:
We consent to incorporation by reference in the Registration Statements
(No. 33-62968, 33-36722, 33-36721, 33-33958 and 33-20069) on Form S-8 of
Moog Inc. of our report dated November 23, 1994, relating to the
consolidated balance sheets of Moog Inc. and subsidiaries as of September
30, 1994 and 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows and related schedules for each of the
years in the three-year period ended September 30, 1994, which report
appears in the September 30, 1994 annual report on Form 10-K of Moog Inc.
KPMG Peat Marwick LLP
Buffalo, New York
December 29, 1994
COOPERS & LYBRAND
Wirtschaftsprufungsgesellschaft
Gesellschaft mit
beschrankter Haftung
MOOG INC.
East Aurora, New York 14052-0018
U.S.A.
November 21, 1994
Independent Auditors Report
The Board of Directors
Moog Inc.:
We have audited the consolidated balance sheet of Moog GmbH (a wholly-owned
subsidiary of Moog Inc.) and subsidiary (Moog Italiana SRL) as of
September 30, 1994 and 1993, and the related consolidated statements of
Earnings and Retained Earnings, changes in shareholder's equity and cash
flows for the year then ended. These consolidated financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Moog
GmbH and subsidiary as of September 30, 1994 and 1993, and the results of
its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States.
Coopers & Lybrand GmbH
Wirtschaftsprufungsgesellschaft
COOPERS & LYBRAND
The Board of Directors
Moog Inc.
East Aurora
NEW YORK
USA
23 November 1994
Dear Sirs
Independent Auditors' Report
We have audited the consolidated balance sheets of Moog Controls Limited (a
wholly-owned subsidiary of Moog Inc.) and subsidiaries as of September 30,
1994 and 1993, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
we conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
of the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Moog
Controls Limited and subsidiaries as of September 30, 1994 and 1993, and
the results of its operations and its cash flows for each of the years in
the three-year period ended September 30, 1994, in conformity with
accounting principles generally accepted in the United States.
Coopers & Lybrand
Chartered Accountants
Gloucester, England
23 November 1994