-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A64zFY6kEbp1JScEKGbk2Jr1Vc4CiX63HAe95BIvwPBmSaK2QASWlKB8DYAKKKzB 8tqC3OlmkA3j3yZoN7Gtaw== 0000898430-97-000263.txt : 19970130 0000898430-97-000263.hdr.sgml : 19970130 ACCESSION NUMBER: 0000898430-97-000263 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19970129 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITTAKER CORP CENTRAL INDEX KEY: 0000106945 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 954033076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20609 FILM NUMBER: 97512684 BUSINESS ADDRESS: STREET 1: 10880 WILSHIRE BLVD STE 800 CITY: LOS ANGELES STATE: CA ZIP: 90024-4163 BUSINESS PHONE: 2134759411 10-K 1 ANNUAL REPORT FOR THE FISCAL YEAR ENDED 10/31/96 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------- FOR FISCAL YEAR ENDED OCTOBER 31, 1996 COMMISSION FILE NUMBER 1-5407 WHITTAKER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-4033076 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1955 N. SURVEYOR AVENUE 93063 SIMI VALLEY, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- Common Stock, par value $.01 per share New York Stock Exchange Pacific Stock Exchange Series A Participating Cumulative New York Stock Exchange Preferred Stock Purchase Rights Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE (TITLE OF CLASS) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405 of the Securities Exchange Act of 1934) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] State the aggregate market value of the voting stock held by nonaffiliates of the Registrant: $131,520,142 as of December 31, 1996. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 11,149,473 shares of Common Stock as of December 31, 1996. ================================================================================ DOCUMENTS INCORPORATED BY REFERENCE
WHERE Document INCORPORATED -------- ------------ Definitive Proxy Statement for the Annual Meeting of Stockholders Part III to be held April 4, 1997 to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the "Proxy Statement")
PART I ITEM 1. BUSINESS. GENERAL Whittaker Corporation ("Whittaker" or the "Company") was incorporated in California in 1947 and became a Delaware corporation in 1986. Whittaker maintains its principal executive and administrative offices at 1955 N. Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-5700). The Company has been active during fiscal 1996 in the aerospace business, including defense electronics, and in the data networking and communications business. The Company's Aerospace Group develops, manufactures and markets proprietary fluid (pneumatic, hydraulic, and fuel) control valves and control systems and fire and overheat detection products and systems for aircraft, land- based gas turbines, and other industrial applications, and defense electronic products and systems. The Company's Communications division develops remote access and other wide-area network ("WAN") and local-area network ("LAN") products and systems for general business communications applications and provides professional services for the integration of hospital data networks. For the fiscal year ended October 31, 1996, the Company's total sales were $221.9 million, of which 59% were generated by the Aerospace Group and 41% were generated by the Communications division. Set forth below is a description of these two business areas. AEROSPACE GROUP - --------------- The business and operations which comprise the Aerospace group are conducted by the Company's defense electronics and industrial products units. PRODUCTS Principal applications and representative products of the Company's Aerospace group include: Fluid and Pneumatic Controls. The Company designs and manufactures a broad range of fluid control devices for both commercial and military aircraft. The products are designed to control pneumatic, hydraulic and fuel flows in aircraft systems. In commercial applications, they are used on virtually all Boeing, McDonnell Douglas, and AirBus commercial aircraft, and virtually all other aircraft and jet engines manufactured in the world, with the exception of those manufactured in the former Communist countries. In addition, commercial and industrial applications include ground fueling devices for airports and valving systems, heat exchangers, and fuel skids for land-based gas turbines, off-shore oil platforms, and petrochemical complexes. In military applications, the products are used on military transports, bombers, helicopters, fighters and landing craft. Both commercial and military applications include aircraft turbine engines built by General Electric, Rolls Royce and Pratt & Whitney. Sales of fluid control products were $73.9 million in fiscal 1996, $59.5 million in fiscal 1995 and $52.9 million in fiscal 1994. Fire and Overheat Detectors. The Company designs and manufactures continuous length pneumatic fire and overheat detectors as well as optical flame and smoke detectors and systems for commercial and military aircraft and gas turbine engines. This equipment is widely used on a broad spectrum of aircraft manufactured by Boeing, AirBus, McDonnell Douglas, Northrop Grumman and many small manufacturers, as well as on small naval vessels, helicopters, and railcars. The aircraft range from large commercial transports to small commuter aircraft, private twin engine airplanes, helicopters, military fighters and transport aircraft. The fire and overheat detectors are used on aircraft engines manufactured by General Electric, Pratt & Whitney and Rolls Royce. Industrial applications of such products include complete fire protection systems for vehicles, gas turbine powered pumping and electric power generation applications, as well as large scale systems to protect oil platforms and refineries. Sales of fire and overheat detectors and systems were $21.8 million in fiscal 1996, $21.8 million in fiscal 1995, and $10.5 million in fiscal 1994, the year during which the Company acquired this business. 1 Command, Control and Communications. The Company designs and manufactures electronic systems for command, control and communications, including display and analysis systems, digital data lines, signal data converters, tactical simulation systems, and wide-band encrypted secure voice and data systems that permit secure communications. The Company also has developed modular software that is designed to be portable to any real-time operating system. A user- friendly, window-based display and a unique table-driven architecture provide easy interface between various equipment and facilitate the addition of new equipment. Sales of command, control and communications systems were $7.7 million in fiscal 1996, $18.9 million in fiscal 1995, and $24.5 million in fiscal 1994. Radio Frequency/Survivability Systems. The Company designs radar countermeasure systems and electronic combat systems that provide radar and proximity fuse jamming using an internally developed radio frequency memory unit. Experience in technique development was used by the Company to invent a proprietary monopulse radar countermeasures generator that is applicable to most modern jamming systems. Based on this technology, the Company is under contract with the United States Army to develop enhancements to a Company-designed and produced electronic protection system, the Shortstop Electronic Protection System ("SEPS"), that prematurely detonates incoming artillery, mortar and other proximity-fused weapons, significantly enhancing the survivability of personnel and high value assets. Other radar surveillance and tracking systems of the Company, including replicas of enemy radar systems, are used in tactical training, including the production of airborne pods that provide real time simulations for air combat crew training. Other Electronics Products. The Company designs and manufactures high reliability silicon dioxide insulated coaxial and multiple conductor cable systems which permit broad-band data transmission and control function operation in extreme environments. Atmospheric monitoring systems are produced for timely warning of emergency conditions. Applications for these technologies include signal transmission and control functions inside nuclear power plants and reactors, power and control monitoring and electronic valve control at oil refineries, extreme environmental condition cable applications near jet engines, and critical connections in airborne electronic countermeasure systems. PRODUCT DEVELOPMENT In 1996, the Company completed development of several products for the industrial market. The Company developed and produced its first gas turbine fuel skid. This device employs a number of valves, instruments and associated plumbing which connect a gas turbine to its fuel supply and regulates the fuel flow in response to an electronic fuel controller to control the speed and output of the engine. The Company also completed the development of a liquefied natural gas fuel nozzle under a contract with DARPA, which will be used to refuel automobiles and other vehicles which are powered by low polluting liquefied natural gas. The Company also developed new products for the aircraft market. The Company completed the qualification and initial deliveries of the fire detection system for the third generation Boeing 737. The system utilizes a newly designed, customer friendly electronic controller, lighter weight product, and uses an improved detection system. The Company also completed the development and initial deliveries of the cargo compartment ventilation and heating valves for the Boeing 777. This was a rapid development resulting from a system requirement change that surfaced during the initial operation of the aircraft in service. The Aerospace group spent $2.5 million, $3.4 million and $2.7 million on research and development activities in fiscal 1996, 1995 and 1994, respectively. MARKETS AND CUSTOMERS Sales to commercial customers, including foreign customers, were the major contributor to Aerospace sales and profit in 1996. In past years, the principal contributor to sales and profit for the Aerospace group had been the United States Government and its prime contractors. Sales directly or indirectly to the United States Government, primarily under military procurement contracts, continued to decrease as a percentage of Aerospace sales, dropping to 35% of sales in 1996 compared to 41% of sales in 1995 and 49% in 1994. Export sales to customers outside the United States continued to increase, representing 25% of Aerospace sales for 1996, compared to 23% in 1995 and 20% in 1994. 2 The Company has been able to achieve increased sales of its aircraft fluid and pneumatic control devices over the past three years despite relatively low new aircraft build rates in 1994 and 1995. Increased emphasis has been placed on expanding sales from overhaul repairs, retrofits, upgrades and spare components to end-users such as airlines, cargo carriers, maintenance stations, military bases and government agencies. New aircraft production is now rising, which may continue to contribute to an improved business climate for these Company products. The Company has also positioned itself for continued growth in the Aerospace segment by expanding its product offerings through acquisitions and growth in related markets, including fire and overheat detection equipment and industrial markets. During fiscal 1996, the Company continued to market its products to manufacturers of industrial, land-based gas turbines, resulting in increased sales to industrial customers in 1996 compared to 1995. In certain geographic areas and for certain products, sales are often made indirectly through independent representatives or distributors. Companies engaged in supplying military equipment to the United States Government are subject to competition, changes in the continuing availability of Congressional appropriations, changes in contract timing and scheduling, complexity of designs and the potential for obsolescence, and other changes which may result from world events. Contracts with the United States Government are subject to termination for the convenience of the Government if deemed in its best interests. Contracts which are terminated for convenience generally provide for payments to a contractor for its costs and for fees or profits related to work accomplished through the date of termination. BACKLOG At October 31, 1996, Aerospace Group backlog totaled $60.6 million (compared to $66.9 million at October 31, 1995), of which $6.3 million is not expected to be filled within fiscal 1997. Aerospace backlog includes no unfunded amounts relating to government contracts. COMPETITION The military and commercial industries in which the Aerospace Group operates are generally highly competitive, with competition centering on price, technical innovation, product performance and product support. Competitors of the Company in such markets may have substantially greater financial resources, research and design capabilities, and manufacturing capacity. COMMUNICATIONS DIVISION - ----------------------- The business and operations of the Communications division are conducted by Xyplex Networks, the combined organization of Whittaker Communications, Inc. and of Xyplex, Inc., which was acquired in April 1996. Xyplex Networks is a leading provider of network access solutions for the enterprise edge market. The Company designs, develops and markets a comprehensive line of networking products that allow its customers a migration path from their existing legacy infrastructures to new and emerging data networking architectures. In addition, the Company offers high-performance Ethernet and Asynchronous Transfer Mode (ATM) Local Area Network switching and hub products and provides a full range of network design, consulting, integration, and support services for small businesses and large enterprise-wide solutions. The local area network (LAN) market was born in the 1980's as mainframe dominance was being seriously challenged by departmental minicomputers supporting multiple users through terminals and personal computers. Decentralized computing brought many advantages, but limitations on sharing information and communicating quickly became evident. LANs provided the foundation for cooperative computing concepts, better resource sharing, and the further dissemination of computing power throughout businesses, government agencies and schools. 3 In the 1990's, new applications such as digital imaging, client/server, and multimedia have begun to tax the bandwidth of early LAN technologies such as Ethernet and Token Ring. The emergence of new technologies such as 100 megabit per second (Mbps) Fast Ethernet connectivity from the server to the desktop and ATM are critical in order to keep up with the demands of emerging applications. In addition, the recent rapid expansion of the Internet as well as e-mail, multimedia servers, fax, groupware, and video conferencing have made wide area networks (WANs) a commonplace phenomenon, with networking and computing brought to the masses. Looking forward, the development of the telecommunications infrastructure, deregulation under the Telecommunications Act of 1996, and the arrival of new technologies can enable high speed services to be brought to the home and business cost effectively. The xDSL (Digital Subscriber Line), V.34 (analog modem services), ATM, ISDN, and frame relay markets coupled with remote access software and switching have the capabilities for high volume deployment by businesses, carriers, alternative carriers and Internet Service Providers (ISPs). There is potential for developments in the areas of wide area networking, the enterprise edge, and the Internet edge. The enterprise edge is the point in the network where the corporate network connects to the Internet (via an ISP or telecommunications carrier). [GRAPHIC DESCRIPTION OF THE ENTERPRISE EDGE MARKET] PRODUCTS AND SERVICES Xyplex Networks is a leading provider of network access solutions for the enterprise edge market. Xyplex currently sells products that meet the needs of both the corporate "edge" and the Internet service provider "edge" and is well positioned to take a leadership role at this point in the network. The Company also offers high-performance Ethernet and ATM switching and hub products. Principal network access and internetworking products of the Company's Communications Division include: Network 9000(R) -- a multi-function 3-, 6- and 15-slot hub that enables the integration of routing, switching, access serving and media concentration technologies. Primarily used at the central site of corporate networks and at the edge of ISP networks, the Network 9000(R) supports any combination of Ethernet, Fiber Distributed Data Interface (FDDI), Token Ring, Integrated Service Digital Network (ISDN), ATM, local and remote bridge/router connectivity. Network 3000 -- a family of branch office routers that provides a modular, scaleable solution geared toward accessing the corporate network and the Internet from remote offices. Any combination of Ethernet, ISDN, Frame Relay and asynchronous connections is available. RouteRunner(TM) is a low-cost ISDN router designed to meet the WAN needs of small office home offices and branch offices such as doctor's offices or sales offices. 4 MAXserver(R) -- a family of low-cost, scaleable remote access server solutions that enable terminals, PCs, modems, printers and other asynchronous devices to connect to the LAN and/or WAN. Ideal for supporting workgroups, the stackable MAXserver(R) offers 8-40 ports (and up to 280 ports in the modular Network 9000(R) solution) to provide network access locally and remotely via dial-up services. A variety of protocols are supported including TCP/IP, IPX, and Appletalk. Security capabilities such as Kerberos, RADIUS, SecurID, password and dial-back are also offered. ControlPoint(TM) -- Xyplex Networks' SNMP-based network management application that enables network managers to remotely manage the Company's hubs, routers and access servers via the industry standard SunNet Manager and HP OpenView platforms, and FocalPoint -- a graphical users interface (GUI) configuration tool for Xyplex Networks routers that helps network managers configure internetworks through point and click operations. Principal LAN switching and hub products of the Company's Communications division include: Network 9000(R) -- a hub equipped with a SwitchPlane(TM) fabric that provides an internal bandwidth of up to 8.4 Gbps to support a large number of non- blocking LAN switch ports. Switching functions are provided by the 610 LAN Switch Processor modules and 600 Series Switching I/O modules. The product supports Ethernet (10 or 100 Mbps) as well as wide area connections. Model 6701 and 6801 -- low-cost, high-performance standalone Ethernet workgroup switches, designed for use as workgroup switches or small collapsed backbones and providing 16-ports of 10 Mbps LAN switching with optional slots for 100Base-TX, 100Base-FX and FDDI connectivity for server or backbone connections. These switches are manufactured by Plaintree Systems under an Original Equipment Manufacturers' ("OEM") agreement. Enterprise Hub(TM) -- an ATM switching device, available in 5 and 14-slot chassis, providing up to 155 Mbps switching for connections to other Enterprise Hubs(TM), legacy LANs, server clusters and bandwidth-hungry workstations. The Enterprise Hub(TM) offers scaleable bandwidth, high reliability, low cost of entry and an incremental and modular upgrade to ATM technology. Any mix of hot- swappable Ethernet, Token Ring, FDDI and ATM modules is offered. The ATM Enterprise Hub(TM) is able to integrate legacy LANs such as Token Ring, Ethernet and FDDI, and migrate customers to the new high speed services of ATM. This product is particularly well-suited to the healthcare sector, a industry that has experienced significant growth of information technology expenditures. Sales of Enterprise Hubs(TM) were $30.3 million in fiscal 1996 and $23.4 million in fiscal 1995, the year in which the Company acquired Whittaker Communications, Inc. Xyplex Networks also offers a wide range of service and support programs to help customers install and manage their networking equipment and a spectrum of professional services focused on designing and maximizing the customers' networking. These services include installation, network integration, consulting, project management and training and a full range of integration and support with full turn-key networking solutions, including the integration of third-party products and services with the Company's own products and services. PRODUCT DEVELOPMENT The internetworking and remote access engineering development efforts are focused on network access, network management products and enterprise and ISP edge products. Future products will continue to leverage the Company's switching, routing, access server software and high performance transmission (i.e. ATM) expertise. In order to extend the breadth of the network access product lines, Xyplex Networks will continue to develop partnerships with leading edge suppliers of complementary technology. The next generation of products from Xyplex Networks are being designed to recognize the requirement to increase speeds over the wide area network. This will involve leveraging the Company's strong remote access and routing software and ATM background and building products which combine the two. It will also require the integration of digital modems and xDSL technologies in the future. The Communications division spent $17.5 million on research and development activities in fiscal 1996 and $4.3 million in fiscal 1995, the first year of the Company's Communications division. 5 MARKETS AND CUSTOMERS Xyplex Networks' customers are network managers from Fortune 5000 companies from virtually all industries, including manufacturing, professional services, finance, defense, petrochemicals, technology and telecommunications. The Company has a strong presence the healthcare sector, with equipment installed more than 1000 major hospitals and healthcare provider organizations worldwide. In addition, Xyplex Networks has a substantial installed base in municipal governments and education (both K-12 and higher education) and has made significant inroads among mid-size ISPs. The Company's customers are migrating from mainframe-centric networks to a distributed computing network supporting multiple-remote sites via client-server applications. The networks they are building support a hybrid of technologies ranging from Ethernet, FDDI, and ATM. Xyplex Networks sells to customers through direct and indirect channels, including value-added resellers, distributors, systems integrators and OEMs. The Company operates sales offices in the United Kingdom, South Africa, Germany, France, Asia, and Latin America. In fiscal 1996, approximately 34% of Xyplex Networks' sales were derived from customers outside the United States. MANUFACTURING AND SUPPLIERS Xyplex Networks' primary manufacturing, including purchasing, testing, final assembly, and quality assurance, has been conducted at its Boxborough, Massachusetts and Santa Clara, California facilities. Manufacturing is currently being consolidated in the Boxborough facility. In addition, the Company plans to close its Santa Clara facility in early 1997 and integrate those operations into its Littleton facility. Xyplex procures 90% of its product content in the form of products and subassemblies through subcontractors. PATENTS, LICENSES AND RELATED MATTERS Xyplex Networks relies on U.S. and foreign patents, copyrights, trademarks and trade secrets to establish and maintain proprietary rights in its technology and products. Although Xyplex Networks believes that its patents and applications have value, it also believes that its competitive position depends primarily on the innovative skills, technological expertise and management abilities of its employees. Many of Xyplex's products are designed to include software or other intellectual property licensed from third parties. Xyplex Networks actively seeks to license software that promotes the compatibility of its products with industry standards, including standard protocols and architectures. The loss of rights in software or other intellectual property licensed from a third party and designed into a particular product might disrupt or delay Xyplex's distribution of that product. Although it may be necessary in the future to seek or renew licenses relating to various aspects of its products, Xyplex Networks believes that based upon past experience and standard industry practice, such licenses generally could be obtained on commercially reasonable terms. BACKLOG Xyplex Networks manufactures its products based upon its forecasted demand of its customers worldwide and maintains some inventories of finished products in advance of receiving orders from its customers. Product orders are generally placed by the customer on an as-needed basis and products are usually shipped within two days to two weeks after receipt of an order. Such orders generally may be rescheduled or canceled by the customer without significant penalty. Accordingly, Xyplex does not maintain a substantial backlog, and backlog as of any particular date may not be indicative of actual sales in any succeeding period. At October 31, 1996, Xyplex's backlog totaled $9.8 million, all which is expected to be filled in fiscal 1997. 6 COMPETITION Competition in the network systems business, formerly characterized by niche- based competitors focused on a single industry segment, has shifted toward more broad-based suppliers offering multiple product lines. This has been achieved through mergers and acquisitions, joint marketing agreements and internally developed products. This industry consolidation will likely continue, intensifying competition among a small group of companies with broad product offerings. The network access market has experienced significant growth over the past year, and hardware-based solutions dominate this market today. Principal competitors include Cisco Systems, Novell, Shiva, Ascend, and Bay Networks. Xyplex Networks is a significant player in this market segment. The router market's growth also continues strong despite mounting pressure from LAN switching and the saturation of customer internetworks. Customers are adopting lower-priced routers as organizations expand their enterprise internetwork beyond larger sites and out on the Internet. Currently, the router market is dominated by Cisco Systems, Bay Networks and 3Com with their high-end and mid- range product segments. Xyplex is a challenger in the mid-range and low-end router segment. Xyplex Networks participates in the LAN switching market at the high-end segment with the ATM Enterprise Hub(TM), which solves network bandwidth limitations for an extended number of LANs located in a building or campus backbone environment. The Enterprise Hub(TM) was the first hub designed with ATM from the ground up. Xyplex shares the high-end segment with three major players: Cisco, Fore Systems, and 3Com. In the intelligent hub market, Xyplex's Network 9000(R) continues to compete with Cabletron Systems, 3Com and Bay Networks hubs. Xyplex was the first vendor to deliver an integrated suite of functions ranging from LAN concentration to access server through the Network 9000. Several of Xyplex Networks' competitors have greater name recognition, more extensive engineering, manufacturing and marketing capabilities and greater financial, technological and personnel resources than those available to Xyplex Networks. However, Xyplex has a broad product line well integrated and supported by its ControlPoint(TM) network management platform. The Company believes that this product line, coupled with the Company's reputation for customer-focused service, will allow Xyplex Networks to continue to compete. There can be no assurance, however, that Xyplex Networks will be able to compete successfully in the future with existing or new competitors. Xyplex(R), Network 9000(R) and MAXserver(R) are registered trademarks of Xyplex Networks. ControlPoint, RouteRunner(TM) and Enterprise Hub(TM) are trademarks of Xyplex Networks. All other trademarks are the property of their respective companies. DISCONTINUED OPERATIONS Since the beginning of the Company's divestiture program in 1989, the Company has sold or spun off its Anjac/Doron, Duall/Wind, Chemical Coatings, Heico Chemicals, Park Chemical, Ram Chemicals, Special Chemicals, Technibilt, Water Management, Whittaker Metals, Winters Industries, Yardney Electric Corporation, and BioWhittaker units. The divestiture program has been substantially completed. Remaining to be divested is a 996-acre parcel of land formerly used, until 1987, by the Company's former Bermite division, a discontinued technology unit. The land is located in the City of Santa Clarita, California, approximately 35 miles from downtown Los Angeles. In September 1995, the city granted the entitlements necessary to develop this property as a mixed-use, residential, commercial, and light industrial development. In February 1996 the city approved a Development Agreement which, among other things, extended the ten-year life of the entitlements to over 20 years. See Note 3 to Consolidated Financial Statements in Part II, Item 8 of the Form 10-K for information about the parcel remaining to be divested. 7 ACQUISITIONS On April 10, 1996, the Company acquired all of the stock of Xyplex, Inc. from Raytheon Company for a purchase price of $67.5 million in cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of the Company's common stock. The cash paid to Raytheon was obtained under an amendment to the Company's credit facility entered into on April 10, 1996. See Note 2 to the Consolidated Financial Statements in Part II, Item 8, for additional information regarding acquisition. The Company intends to continue its strategy of growth by selective acquisitions that complement the Company's existing businesses and product lines at such time as the Company's financial condition makes such acquisitions feasible. ENVIRONMENTAL Compliance with Federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has had no material effect upon the capital expenditures, earnings or competitive position of the Company, nor is the Company estimating any material capital expenditures for environmental control facilities in fiscal 1997 or 1998. EMPLOYEE RELATIONS As of October 31, 1996, the Company employed approximately 1,150 persons in its businesses, about 5% of whom were represented by labor organizations. The Company believes that it has generally good relations with its employees. ITEM 2. PROPERTIES. The Company's corporate headquarters are located in its facilities in Simi Valley, California, which consist of approximately 276,000 square feet in three buildings owned by the Company. The Company owns a 30,000 square foot production facility in Colorado. The Company also leases three facilities in California which consist of approximately 305,000 square feet under leases that expire from March 1997 to January 1999 and two facilities in Massachusetts which consist of approximately 146,000 square feet under leases that expire from 1997 to 1998. The Company has options to renew certain of these leases for various terms. Approximately 72% of the square footage is used for manufacturing, engineering, and product development, while the remainder is used for sales, marketing, and other general and administrative support. The Company also leases and occupies sales and technical support officers throughout the United States as well as in Europe, Mexico, Southeast Asia, and South Africa. The Company believes that in general its plants and equipment are adequately maintained, in good operating condition and adequate for the Company's present needs. The Company regularly upgrades and modernizes its facilities and equipment and expands it facilities as necessary to meet customer requirements. ITEM 3. LEGAL PROCEEDINGS. ENVIRONMENTAL MATTERS As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to past treatment and disposal of hazardous substances. The Company also is a potentially responsible party in a number of actions brought under state laws patterned after CERCLA. CERCLA and such other state laws provide for the imposition of clean-up liability on anyone who arranges for the disposal or treatment of hazardous substances at designated sites. Accordingly, anyone who generates hazardous substances may be a potentially responsible party if the treatment, storage, or disposal facility that 8 handles the substances becomes the subject of an environmental clean-up under such laws. This is true even if the treatment, storage, or disposal facility has the proper licenses and permits issued by appropriate governmental authorities and treats, stores, or disposes of the hazardous substances in accordance with the terms of such licenses and permits. The various state environmental agencies and the U.S. Environmental Protection Agency take the position under these environmental laws that all responsible parties are jointly and severally liable for the costs of cleaning up sites subject to their jurisdiction and for any environmental damages caused by the treatment or disposal of hazardous substances at such sites. In nearly all of the environmental matters in which the Company is involved as a potentially responsible party, the Company contributed a very small amount (generally much less than 1%) of the total wastes treated or disposed of at these various treatment or disposal facilities and participates as a so-called "de minimis" party. De minimis parties are generally allowed to settle their potential liability for clean-up activities by agreeing with the state or Federal environmental authorities and the other, larger responsible parties to bear a share of the past and estimated future clean-up costs based on the volume of the waste each de minimis party contributed, plus a "premium" or "multiplier." These premiums or multipliers are designed to allow for the uncertainty of estimates of future costs and the desirability of settling liability early to avoid so-called transaction costs, i.e., the legal, consulting, and other expenses, which tend to consume a significant amount of the funds actually spent on the resolution of environmental matters. Where the Company does not qualify for such treatment, the Company's potential liability on a particular environmental matter could be significant, or the Company believes that the premium or multiplier for a de minimis settlement is unreasonable, the Company may elect to participate in the settlement or remediation activities as, or on the same basis as, a major party, generally paying its allocated share of remediation expenses and transaction costs as they are incurred, often over several years. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and clean-up activities at facilities currently or formerly occupied by its operating units. In the most significant of these sites, the Company has "clean closed" 13 of 14 facilities regulated under the Resource Conservation and Recovery Act at its former Bermite division in Santa Clarita, California. The Company is currently working to close the 14th of such facilities and to complete an investigation of the entire 996-acre property in anticipation of the development of the property for a planned mixed-use residential and commercial development. In 1996, the Company made cash expenditures of approximately $1.8 million on environmental matters, excluding expenditures for clean-up activities at its former Bermite division. This amount was charged to reserves for environmental contingencies which were previously established as part of the Company's divestiture and restructuring program for discontinued operations. OTHER LEGAL MATTERS There are also various other claims and suits pending against the Company. Based on an evaluation, which included consultation with counsel concerning the legal and factual issues involved, the Company is of the opinion that such claims and suits pending against the Company, including the environmental matters discussed above, will not have a material adverse effect, singly or in the aggregate, on the financial position of the Company. See Note 10 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 9 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth the names, ages and positions of the current executive officers of the Registrant.
NAME AGE POSITIONS ---- --- --------- Joseph F. Alibrandi.......... 68 President and Chief Executive Officer Richard B. Levin............. 46 Vice President and Chief Administrative Officer Lynne M. O. Brickner......... 44 Vice President and Secretary John K. Otto................. 42 Vice President and Treasurer Eva Jonutis.................. 47 Controller Joseph J. Fernandes.......... 62 President, Aerospace Group Michael C. Thurk............. 43 President, Xyplex, Inc. and Whittaker Communications, Inc.
Mr. Alibrandi joined Whittaker in July 1970 as President and Director and served as Chief Executive Officer from November 1974 through January 1995. He became Chairman of the Board in December 1985 and has continuously served in such capacity since then. He was appointed President and Chief Executive Officer on September 30, 1996. Mr. Levin joined Whittaker in May 1994, at which time he was appointed Vice President, Chief Financial Officer and Secretary. Mr. Levin resigned as Chief Financial Officer in August 1996 and as Secretary in September 1996. He was appointed Chief Administrative Officer in October 1996. From 1978 until joining Whittaker, Mr. Levin was a practicing attorney with the law firm of Stutman, Treister & Glatt. Ms. Brickner joined Whittaker in September 1995 as Assistant General Counsel and Assistant Vice President. She was named Secretary and General Counsel in September 1996 and as Vice President in October 1996. Prior to joining Whittaker, Ms. Brickner was a practicing attorney with Kaye, Scholer, Fierman, Hays & Handler. Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and Cash. He was named Assistant Treasurer in 1986 and Treasurer in 1988. He was appointed Vice President of the Company in December 1996. Ms. Jonutis joined Whittaker in 1974 as a cost accountant and served as its Director of Financial Services from 1987 to 1993. She rejoined Whittaker in October 1996 and was appointed Controller in December 1996. Mr. Fernandes joined Whittaker in July 1992 as President of Whittaker Controls, Inc. He was named President of Whittaker's Aerospace Group on November 1, 1995. Mr. Thurk joined Whittaker in June 1996 as President of Xyplex, Inc. and of Whittaker Communications, Inc. Prior to joining Whittaker, he was Senior Vice President of General DataComm. The term of office of each executive officer (except for Mr. Fernandes and Mr. Thurk, who serve at the discretion of the Board of Directors) will expire at the next annual meeting of the Board of Directors, which is scheduled to be held on April 4, 1997. 10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. PRINCIPAL MARKETS The Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange (Symbol: WKR). The Series A Participating Cumulative Preferred Stock Purchase Rights are listed on the New York Stock Exchange and the Pacific Stock Exchange, and, at the present time, trade with the Common Stock and are not separately transferable. The Series D Participating Convertible Preferred Stock (the "Series D Preferred Stock") is not listed or traded on any exchange. See Note 6 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. COMMON STOCKHOLDERS As of December 31, 1996 there were 5,240 registered holders of the Common Stock. COMMON STOCK PRICES The following table sets forth the high and low sales prices of the Common Stock during Whittaker's two most recent fiscal years.
QUARTER ENDED --------------------------------------------------------------------- JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 --------------- --------------- --------------- --------------- HIGH LOW HIGH LOW HIGH LOW HIGH LOW ------ ------ ------ ------ ------ ------ ------ ------ 1995.......... 20 5/8 16 1/8 21 1/8 17 3/8 24 5/8 20 23 1/8 18 1996.......... 24 3/4 16 7/8 26 3/8 22 1/4 23 1/8 13 5/8 14 3/4 13 1/8
DIVIDENDS Dividends of $0.25 were declared on each share of Series D Preferred Stock, for each quarter of fiscal 1995 and for the first two quarters of fiscal 1996. Dividends of $1.25 were declared on each share of the $5.00 Cumulative Convertible Preferred Stock ("$5.00 Preferred Stock") for the first two quarters of fiscal 1995. On April 28, 1995, all of the outstanding shares of $5.00 Preferred Stock were redeemed or converted into Common Stock. No dividends have been declared on the Common Stock during the two most recent fiscal years. Under the Company's current credit facility with a group of banks, there are restrictions that materially limit the amount of cash dividends that may be paid on the Common Stock. The Company may pay cash dividends on the Common Stock if the Company satisfies a minimum tangible net worth requirement and meets a cash flow test measured at the end of the fiscal quarter immediately preceding the payment of the dividend, and the cumulative amount of all cash dividends paid on the Common Stock does not exceed $100,000 plus 20% of the net income of the Company determined on a cumulative basis from May 1, 1996 through the end of the fiscal quarter immediately preceding the payment of the dividend. Furthermore, under the terms of the Company's 7% convertible subordinated note to Hughes Electronics Corporation, the Company may not pay or declare cash dividends or redeem shares of the Company if the Company's tangible net worth is less than $15 million. As of April 30, 1996, the Company's tangible net worth was less than $15 million and thus has not paid or declared dividends (including any quarterly dividend for the Series D Preferred Stock) or redeemed shares since that date. Thus, dividends on the Series D Preferred stock have been accrued since that date. In the foreseeable future, in light of the Company's current financial condition and its strategy of using earnings from operations to fund growth internally, the Company's present intention is to refrain from paying cash dividends on the Common Stock, even if the Company is otherwise able to do so under its current credit facility and its convertible subordinated note. See Note 5 and Note 6 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further description of the Company's credit facility and of the convertible subordinated note. 11 SALES OF UNREGISTERED SECURITIES During the three most recent fiscal years, the Company has issued 1,974,333 unregistered shares of common stock to Raytheon on April 10, 1996. Such shares were issued as partial consideration for the Company's acquisition of Xyplex and the holders of such shares are subject to certain limitations set forth in the Stockholder's Agreement between Raytheon and the Company. The shares were issued in reliance upon Section 3(b) and 4(a) of the 1934 Act and Regulation D promulgated thereunder. A registration statement on Form S-3 covering the shares was filed by the Company on May 15, 1996. TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK CHASE MELLON SHAREHOLDER SERVICES 85 Challenger Road Overpeck Centre Ridgefield Park, New Jersey 07660 RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS MELLON BANK N.A. Post Office Box 444 Pittsburgh, Pennsylvania 15230 12 ITEM 6. SELECTED FINANCIAL DATA. WHITTAKER CORPORATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- SUMMARY OF OPERATIONS Sales................................... $ 221,877 $ 159,479 $ 126,448 $ 115,386 $ 159,915 Income (loss) from continuing operations, before accounting change... $ (17,127) $ 7,865 $ 10,061 $ 7,698 $ 13,377 Cumulative effect of accounting change.. -- -- -- $ 1,512 -- Income (loss) from discontinued operations............................. -- -- -- $ (1,954) $ 2,300 Net income (loss)....................... $ (17,127) $ 7,865 $ 10,061 $ 7,256 $ 15,677 Earnings (loss) per share Continuing operations, before accounting change................... $ (1.70) $ .82 $ 1.06 $ .81 $ 1.42 Accounting change.................... -- -- .16 -- Discontinued operations.............. -- -- (.21) .24 Net income (loss).................... $ (1.70) $ .82 $ 1.06 $ .76 $ 1.66 Average common and common equivalent shares outstanding (in thousands)...... 10,065 9,625 9,502 9,491 9,407 Dividends per common share.............. -- -- -- -- -- OTHER DATA Working capital......................... $ (65,731) $ 72,272 $ 79,983 $ 73,924 $ 85,926 Total assets............................ $ 379,484 $ 250,959 $ 209,307 $ 201,869 $ 218,279 Long-term debt.......................... $ 453 $ 70,694 $ 54,742 $ 56,782 $ 66,644 Stockholders' equity.................... $ 131,136 $ 102,424 $ 93,950 $ 83,748 $ 75,200 Current ratio........................... 0.69:1 2.44:1 3.18:1 2.77:1 2.74:1 Capital additions....................... $ 4,800 $ 6,400 $ 2,500 $ 1,300 $ 2,200 Stockholders of record.................. 5,200 5,500 5,700 7,100 8,500
13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. RESULTS OF OPERATIONS COMPARISON OF 1996 AND 1995 Acquisition of Xyplex. On April 10, 1996, the Company acquired all of the capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon"). Xyplex is a producer of high-speed internetworking equipment, terminal servers and shared media products for business local area networks. Xyplex also provides remote access products that interconnect with phone companies' wide area networks. The purchase price was $67.5 million in cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of the Company's common stock. Other direct costs associated with the acquisition were approximately $1.4 million. The cash paid to Raytheon was obtained from the Company's bank lending group pursuant to an amendment to the Company's existing credit facility entered into on April 10, 1996. The acquisition was accounted for as a purchase, and the balance sheet of Xyplex was combined with the Company's balance sheet as of April 30, 1996. The acquisition of Xyplex resulted in the acquisition of intangible assets valued at $39.2 million, which is being amortized on a straight-line basis over periods ranging from five to fifteen years, goodwill of $62.8 million which is being amortized on a straight-line basis over twenty years, and accrued liabilities assumed of $14.9 million. Acquired in-process research and development valued at $11.7 million was expensed at the acquisition date. Sales of Xyplex products and services contributed substantial revenues to the Company beginning in the third quarter, as well as resulting in increased operating expenses. A significant portion of the increase in operating expenses for 1996 over 1995 was due to the acquisition of Xyplex. Sales. The Company's sales for fiscal 1996 of $221.9 million increased by $62.4 million (39.1%) over sales of the prior fiscal year. The increase was due primarily to $61.0 million of additional sales generated by the Communications segment, which did not exist prior to April 30, 1995. Aerospace segment sales for fiscal 1996 increased by $1.4 million (1.1%) over sales of the prior fiscal year, due to increased sales of aircraft fluid and pneumatic controls devices substantially offset by reduced sales of defense electronics products and systems. The Company has been able to achieve increased sales of its aircraft fluid and pneumatic control devices over the past three years despite relatively low new aircraft build rates in 1994 and 1995. Increased emphasis has been placed on expanding sales from overhaul repairs, retrofits, upgrades and spare components to end-users such as airlines, cargo carriers, maintenance stations, military bases and government agencies. New aircraft production is on the rise, which may further contribute to an improved business climate for these Company products. The Company has also positioned itself for continued growth in the Aerospace segment by expanding its product offerings through acquisitions and growth in related markets, including fire and overheat detection equipment and industrial markets. During fiscal 1996, the Company continued its prior practice of marketing its aircraft fluid control and other aerospace products to manufacturers of industrial, land-based gas turbines, which are similar to jet engines. A reduced United States defense budget contributed to both the decline in sales to the U.S. government and delays in the receipt of new contract bookings in the Aerospace segment. Gross margin. The Company's gross margin for fiscal 1996 as a percentage of sales was 41.5%, compared to 43.6% for the prior fiscal year. The gross margin for fiscal 1996 consists of Communications segment gross margin of $42.6 million (46.5% of sales), and Aerospace segment gross margin of $48.6 million (37.3% of sales). Communications segment margin as a percentage of sales increased from 44.5% in 1995 to 46.5% in 1996 because of sales of higher margin products related to the 1996 Xyplex acquisition partially offset by an increased proportion of lower margin service and support revenues. The decrease in Aerospace segment gross margin percentage from 1995 (43.4% of sales) to 1996 (37.3% of sales) is due to decreased margins on defense electronics products and the absence in 1996 of several items which contributed $5.0 million to gross margin in 1995, offset by increased 14 margins and improved manufacturing yields on commercial aircraft after market and industrial product lines. Aerospace segment gross margin for fiscal 1995 included a contract claim settlement of $1.1 million, a credit of approximately $2.1 million for income from the Company's defined benefit pension plan and a $1.8 million recovery related to the Company's insurance claim for damage from the 1994 Northridge, California earthquake. Without these items, Aerospace segment gross margin would have been 40.4% of sales for 1995. Approximately $0.6 million of pension income was reclassified from SG&A expense to cost of sales in the third quarter of 1995. Engineering and Development. Engineering and development expenses for fiscal 1996 increased by $12.2 million from the prior fiscal year. Engineering and development expenses for 1996 consist of Communications segment expenses of $17.5 million (19.1% of sales) and Aerospace segment expenses of $2.5 million (1.9% of sales). Communications segment engineering and development expenses increased by $13.2 million from 1995 to 1996 due to the Xyplex acquisition in April 1996 and a full year of expense for Whittaker Communications, Inc. ("WCI") in 1996 compared with only six months of WCI expense following its acquisition in April 1995. To maintain its competitive market position in the Communications segment, the Company expects to continue to invest a significant amount of its resources in the development of new Communications products and product enhancements. Aerospace segment engineering and development expenses decreased by $1.0 million from 1995 to 1996, but are expected to grow somewhat in 1997. Selling, General and Administrative. SG&A expenses for fiscal 1996 increased by $39.0 million from the prior fiscal year, from 24.8% of sales in 1995 to 35.4% of sales in 1996, primarily due to the acquisition of Xyplex. Communications segment SG&A expenses for fiscal 1996 were $45.6 million (49.8% of sales), which included amortization expense of $6.9 million related to goodwill and intangible assets. Communications segment SG&A expenses for 1995 were $10.0 million (32.9% of sales), which included amortization expense of $1.0 million related to goodwill and intangible assets. Aerospace segment SG&A expenses were $31.4 million (24.1% of sales) for fiscal 1996 compared with $30.4 million (23.5% of sales) for 1995. In 1996, Aerospace segment SG&A expenses as a percentage of sales increased due to sales decreases in defense electronics products, credits, as described below, included in 1995 SG&A expenses partially offset by sales increases in commercial aircraft and industrial products which were more than proportional to expense increases and streamlining actions in the defense electronics business unit. In 1995, Aerospace segment SG&A expenses reflected a credit of approximately $0.5 million for income from the Company's defined benefit pension plan and a $1.3 million recovery related to the Company's insurance claim for damage from the 1994 Northridge, California earthquake. Without these items, Aerospace segment SG&A expenses would have been 24.9% of sales for 1995. Approximately $0.6 million of pension income was reclassified from SG&A expense to cost of sales in the third quarter of 1995. Restructuring Costs. During 1996, the Company incurred certain costs for restructuring, including severance payments of $2.3 million and move related costs of $0.3 million. The Communications segment incurred costs of $1.6 million related to streamlining Xyplex and integrating it with WCI. The Aerospace segment incurred costs of $1.0 million related to the streamlining of the Company's defense electronics business unit and the move of its Safety Systems Division from Concord, California to Simi Valley, California. The Aerospace segment is expected to incur additional restructuring expenses in the first quarter of fiscal 1997 in connection with the move of its Safety Systems Division. Interest Expense. Interest expense increased to $11.0 million for fiscal 1996 from $5.9 million in 1995 primarily as a result of higher interest rates and the incremental debt related to the acquisition of WCI and Xyplex. Income Taxes. The Company's effective tax rate for fiscal 1996 was 34.7%, compared to an effective tax rate of 39.6% for the prior fiscal year. The nondeductibility of goodwill (WCI in 1995) increases the effective tax rate for periods with taxable income by increasing the tax provision with respect to income before taxes. The nondeductibility of goodwill (WCI and Xyplex in 1996) in a period with taxable losses decreases the effective tax rate by decreasing the tax benefit with respect to losses. 15 COMPARISON OF 1995 TO 1994 Sales for the Company for fiscal 1995 were $159.5 million, an increase of $33.0 million (26.1%) over fiscal 1994. Sales increased in 1995 largely as a result of the Company's acquisitions of a data networking and communications business in April 1995, which contributed $30.5 million to 1995 sales, and an aerospace business in March of 1994. In the aggregate, the acquired businesses and product lines accounted for $52.3 million of 1995 sales, compared to $10.5 million in 1994, reflecting the implementation of the Company's previously announced strategy of growth by selective acquisitions to complement the Company's existing businesses and product lines. The acquisitions offset decreases in government sales and termination claims. In the first quarter of 1994, $4.0 million of sales were recognized related to the partial settlement of a termination claim against a defense electronics products customer. An additional, final settlement of $1.1 million was recognized in the second quarter of 1995. Gross margin for the Company increased in fiscal 1995 to $69.5 million, or 43.6% of sales, from $53.2 million, or 42.0% of sales in fiscal 1994. Gross margin for the Communications segment was 44.5% in fiscal 1995. Gross margin for the Aerospace segment increased to 43.4% of sales from 42.0% of sales in fiscal 1994. Affecting the comparability of the years were three items which had a net positive impact of $5.0 million on Aerospace gross margin in 1995, compared to $4.1 million in 1994. The first item was recognition in 1995 of $1.8 million of gross margin related to the Company's insurance claim for earthquake damage brought about by the January 17, 1994 Northridge, California earthquake. The second item was recognition in 1995 of $2.1 million of gross margin related to the Company's defined benefit pension plan, while related gross margin in 1994 was $0.6 million. This actuarially determined pension income is the result of an expected return on plan assets which exceeded the interest cost on the projected benefit obligation. The last item was a termination claim settlement which contributed $1.1 million of gross margin in 1995, compared to $3.5 million in 1994. When the effects of these items are removed from both years, Aerospace segment gross margin as a percentage of sales was 40.4% in 1995 compared to 40.1% in 1994. Engineering expenses for the Company as a percentage of sales increased to 4.9% in 1995 from 2.2% in 1994. This increase was due to the inclusion of six months of results of the Communications segment in 1995. Engineering expenses as a percentage of sales in the Aerospace segment increased to 2.7% in 1995, from 2.2% in 1994, due to up-front costs related to its industrial business product lines. Selling, general and administrative expenses for the Company as a percentage of sales increased to 24.8% in 1995 from 24.1% in 1994. In 1995, the Aerospace segment received a $1.3 million earthquake recovery which was reflected as a reduction in selling, general and administrative expenses. Excluding the effects of the termination claim included in 1994 and 1995 revenues, as well as the earthquake recovery in 1995, the Aerospace segment's selling, general and administrative expenses as a percentage of sales increased to 19.5% in 1995 from 19.3% in 1994. The Communications segment of the business spends more on salespeople and marketing programs, as a percentage of sales, than the Aerospace segment. Consequently, the inclusion of six months of Communications segment results has increased the overall percentage for the Company. During the second quarter of 1995, concurrent with the acquisition of WCI, a charge to earnings was recorded related to acquired in-process research and development. The effect was to reduce net income for the second quarter and the year by $1.9 million, or $0.20 per share. During the third quarter of 1995, a charge to earnings was recorded to reflect restructuring actions at WCI, along with expenses associated with combining a substantial portion of the Company's Beaverton, Oregon operation into the WCI operation in Santa Clara, California. The effect was to reduce net income for the third quarter and year by $0.2 million, or $0.02 per share. Interest expense increased to $5.9 million for fiscal 1995 from $4.0 million in fiscal 1994 primarily as a result of higher interest rates and incremental debt from the purchase of WCI. GENERAL In fiscal 1996, 1995, and 1994, approximately 23%, 34%, and 49%, respectively, of the Company's sales were directly or indirectly attributable to the United States Government. All of these sales, with the exception of a minor amount in 1995, relate to the Aerospace segment. Companies engaged in supplying military equipment to the United States Government are subject to competition, changes in the continuing availability of Congressional 16 appropriations, changes in contract timing and scheduling, complexity of designs and the potential for obsolescence, and other changes which may result from world events. A loss of Government business, although not anticipated by the Company, could have a material adverse effect on the Company's operations. In August 1994, the Company was awarded a cost-reimbursement contract, currently valued at $12.9 million, from the United States Army to develop three new versions of the Company's previously developed battlefield electronic countermeasures system, capable of detonating incoming artillery and mortar rounds, designated the Shortstop Electronic Protection System ("SEPS"). During 1996 and 1995, the Company met performance requirements and developed three full scale SEPS development models. The contract did not contribute a material amount of revenue to the Company in 1996 or 1995, but successful development of the new SEPS versions slated for delivery starting late in fiscal 1997 could, subject to all of the risks and uncertainties that apply to military procurement generally, as discussed above, result in subsequent SEPS production contracts, which could then have a material effect on the Company's sales. There can be no assurance, however, whether or when any such contracts would be awarded. FINANCIAL CONDITION On April 10, 1996, in conjunction with the purchase of Xyplex, the Company amended and increased its bank credit facility and borrowed an additional $76.5 million under such facility. At that time the amended credit agreement consisted of an $85.0 million revolving credit facility with a five-year term and an $85.0 million term loan repayable in quarterly installments over five years. The cash payment to Raytheon Company for the purchase of Xyplex on April 10, 1996 was $67.3 million. At October 31, 1996, the Company's debt totaled $161.9 million, which consisted of $65.0 million of loans under the revolving credit facility, $81.0 million under the term loan, $15.0 million of convertible subordinated debt, and $0.9 million of other debt. In addition, there were $12.2 million of letters of credit outstanding under the revolving credit facility. The Company was not in compliance with one of its financial ratio covenants under the credit agreement at July 31, 1996 and with several of the financial ratio covenants at October 31, 1996. The Company has obtained waivers of the defaults up to, but not including February 28, 1997. Consequently, bank debt in the amount of $136.0 million, which otherwise would have been classified as noncurrent, has been classified as current. The Company and its bank lending group are currently discussing alternatives for reducing the Company's bank debt. Some of these alternative measures may result in financing that is more expensive than the Company's current bank financing. If a reduction of the bank debt cannot be achieved, the bank lending group may elect to pursue its remedies, including acceleration of the total bank indebtedness. There is no assurance that in future periods, the Company will be in compliance with all of the financial covenants contained in its amended credit agreement or that additional waivers of the financial covenants will be obtained. Furthermore, acceleration of the debt under the bank credit agreement by the bank lending group upon the Company's failure to comply with a financial covenant would be an event of default under the $15 million 7% convertible subordinated note issued by the Company to Hughes Electronics Corporation as partial consideration for its purchase of WCI in 1995. Because of this possible cross default, the entire $15 million principal balance of the 7% convertible subordinated note has also been classified as current debt. The Company believes that its existing cash and available credit will be adequate to meet future operating cash needs. It is anticipated that the Company will generate sufficient cash flow to service debt under its amended credit facility. The cash flow required to service the Company's debt will reduce its liquidity, which may in turn reduce its ability to fund internal growth, additional acquisitions, and capital improvements. Debt as a percent of total capitalization (stockholders' equity plus debt) was 55.3% at October 31, 1996, compared with 42.8% at October 31, 1995. The increase in debt was primarily due to the acquisition of Xyplex. The current ratio at October 31, 1996 was 0.69, compared with 2.44 at October 31, 1995, while working capital was ($65.7) million at October 31, 1996, compared with $72.3 million at October 31, 1995. The decreases in the current ratio and working capital were due to the classification of bank debt and the convertible subordinated note as current debt because of the Company's noncompliance with one of the financial ratio covenants in its bank credit agreement at July 31, 1996 and, to a lesser extent, the acquisition of Xyplex. Excluding the debt reclassification, the current ratio would have been 2.36 and working capital would have been $85.3 million at October 31, 1996. 17 Cash flow provided by operations in 1996 was $0.4 million, compared to $20.8 million in 1995. The $20.4 million decrease from 1995 to 1996 was due primarily to a decrease in net income of $25.0 million, increases in deferred income tax assets and decreases in operating liabilities, offset in part by higher depreciation, amortization and an in-process research and development charge. Capital expenditures during 1996 were $4.8 million, compared to $6.4 million for 1995. At October 31, 1996, there were approximately $1.0 million of approved capital expenditures outstanding for the replacement and upgrade of existing plant and equipment at the Company's various facilities. Funds for these and other capital expenditures are expected to be provided from operations. Capital expenditures are subject to limitations by covenants contained in the Company's credit agreement. It is anticipated that the amounts permitted by the covenants will be sufficient to allow the Company to continue to maintain and upgrade existing facilities. In April of 1996, the Company received a federal income tax refund related to 1987 and 1988 tax returns of $5.2 million and related interest income of $5.2 million. In July of 1996, the Company recognized a federal income tax refund for research and development tax credits related to its 1988 tax year of $0.5 million and related interest income of $0.3 million. The Company's program for divestiture of its discontinued operations was substantially complete by the end of fiscal 1992. A 996-acre parcel of land, which was formerly used by a discontinued technology unit, remains. The land is located in the city of Santa Clarita, California, approximately 35 miles from downtown Los Angeles. In September 1995, the City granted entitlements necessary to develop this property as a mixed-use residential, commercial, and light industrial development. The initial term of the entitlements was ten years. In February 1996, the City approved a development agreement which, among other things, extended the ten-year term of the entitlements to over 20 years. The Company is evaluating the most advantageous means to realize the value of this asset. Cash expenditures related to the environmental remediation of this property were $4.0 million during 1996. Subsequent Event In connection with the integration and streamlining efforts in the Company's Communications segment, the Company's Board of Directors on January 24, 1997, approved a plan that will result in a pre-tax charge currently estimated at $10 million during the first quarter of 1997. The charge will be taken to cover the one-time costs of closing its Santa Clara, California facility and integrating those operations into its Littleton, Massachusetts facilities. These one-time costs include severance payments associated with the consolidation and reduction of the combined workforces, the writedown of assets to net realizable value and other costs related to this consolidation. The Enterprise Hub product line will be sold through Xyplex Networks sales channels and will continue to be supported from the Littleton facilities. Statements made herein that are not based on historical fact are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The risk factors that could cause actual results to differ from the forward looking statements include delay in developing new programs and products, inability to qualify for new programs or to develop new products, loss of existing business and inability to attract new business and customers, reduced spending by commercial and defense customers and development of competing products. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. 18 REPORT OF INDEPENDENT AUDITORS To the Stockholders and Board of Directors of Whittaker Corporation We have audited the accompanying consolidated balance sheets of Whittaker Corporation as of October 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended October 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Whittaker Corporation at October 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Los Angeles, California December 16, 1996 19 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Sales................................................. $ 221,877 $ 159,479 $ 126,448 Costs and expenses Cost of sales...................................... 129,890 89,974 73,286 Engineering and development........................ 19,964 7,741 2,720 Selling, general and administrative................ 78,562 39,608 30,429 Acquired in-process research and development....... 11,700 3,250 -- Restructuring costs................................ 2,574 382 -- --------- --------- --------- Operating income (loss)............................... (20,813) 18,524 20,013 Interest expense...................................... 11,018 5,897 3,967 Interest income....................................... (6,299) (568) (568) Other expense......................................... 684 169 82 --------- --------- --------- Income (loss) before provision (benefit) for taxes.... (26,216) 13,026 16,532 Provision (benefit) for taxes......................... (9,089) 5,161 6,471 Net income (loss)..................................... $ (17,127) $ 7,865 $ 10,061 ========= ========= ========= Earnings (loss) per share $ (1.70) $ 0.82 $ 1.06 ========= ========= =========
The accompanying notes are an integral part of these statements. 20 WHITTAKER CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
AT OCTOBER 31, ------------------------- 1996 1995 --------- --------- (DOLLARS IN THOUSANDS) CURRENT ASSETS Cash................................................... $ 1,566 $ 161 Receivables............................................ 74,258 64,708 Inventories............................................ 46,087 38,975 Prepaids and other current assets...................... 2,319 2,053 Income taxes recoverable............................... 5,443 1,452 Deferred income taxes.................................. 17,928 15,151 --------- --------- Total Current Assets................................ 147,601 122,500 --------- --------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements............................. 5,770 5,770 Buildings and improvements............................. 29,010 27,503 Equipment.............................................. 54,004 44,381 Construction in progress............................... 1,003 405 --------- --------- 89,787 78,059 Less accumulated depreciation and amortization......... (46,421) (36,641) --------- --------- 43,366 41,418 --------- --------- OTHER ASSETS Goodwill, net of amortization.......................... 95,003 33,414 Other intangible assets, net of amortization........... 45,422 10,585 Notes and other noncurrent receivables................. 2,898 4,218 Other noncurrent assets................................ 14,065 11,709 Assets held for sale or development.................... 31,129 27,115 --------- --------- 188,517 87,041 --------- --------- $ 379,484 $ 250,959 ========= =========
The accompanying notes are an integral part of these statements. 21 WHITTAKER CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES & STOCKHOLDERS' EQUITY
AT OCTOBER 31, ------------------------ 1996 1995 ---------- --------- (DOLLARS IN THOUSANDS) CURRENT LIABILITIES Current maturities of long-term debt........................ $ 161,482 $ 6,048 Accounts payable............................................ 13,830 14,650 Accrued liabilities......................................... 38,020 29,530 --------- --------- Total Current Liabilities................................ 213,332 50,228 --------- --------- OTHER LIABILITIES Long-term debt.............................................. 453 70,694 Other noncurrent liabilities................................ 12,019 11,340 Deferred income taxes....................................... 22,544 16,273 --------- --------- Total Other Liabilities.................................. 35,016 98,307 --------- --------- Commitments and contingencies (Notes 3, 9, and 10) STOCKHOLDERS' EQUITY Capital Stock: Preferred Stock, par value $1 per share, authorized 5,000,000 shares -- $5.00 Cumulative Convertible Preferred Stock, outstanding 0 shares at October 31, 1996 and October 31, 1995...................................... -- -- Series D Participating Convertible Preferred Stock, outstanding 577.18 shares at October 31, 1996 and 895.18 shares at October 31, 1995............ 1 1 Common Stock, authorized 40,000,000 shares -- Par value, $.01 per share, outstanding 11,029,155 shares at October 31, 1996 and 8,588,982 shares at October 31, 1995..................................... 110 86 Additional paid-in capital.................................. 70,321 19,261 Retained earnings........................................... 60,704 83,076 --------- --------- Total Stockholders' Equity............................... 131,136 102,424 --------- --------- $ 379,484 $ 250,959 ========= =========
The accompanying notes are an integral part of these statements. 22 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, --------------------------------------- 1996 1995 1994 --------- --------- --------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net income (loss)............................................. $ (17,127) $ 7,865 $ 10,061 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization................................. 18,639 8,065 5,658 Net periodic pension income................................... (205) (2,720) (782) Acquired in-process research and development.................. 11,700 3,250 -- Income taxes recoverable...................................... (3,991) (1,386) 3,416 Deferred taxes................................................ (7,183) 2,899 2,913 Changes in operating assets and liabilities: Receivables................................................... 10,017 8,860 5,555 Inventories and prepaid expenses.............................. 582 (427) (2,372) Accounts payable and other liabilities........................ (12,003) (5,650) (2,889) --------- --------- --------- Net cash provided by operating activities..................... 429 20,756 21,560 --------- --------- --------- INVESTING ACTIVITIES Businesses acquired.............................................. (68,740) (31,013) (12,992) Purchase of property, plant and equipment........................ (4,828) (6,376) (2,545) Collections of notes receivable.................................. 1,380 1,147 2,553 Increase in assets held for sale or development.................. (4,014) (1,626) (851) Contingent payments on purchased business........................ (1,839) -- -- Other items, net................................................. 1,663 (1,631) (1,748) --------- --------- --------- Net cash used by investing activities............................ (76,378) (39,499) (15,583) --------- --------- --------- FINANCING ACTIVITIES Issuance of convertible subordinated debt........................ -- 15,000 -- Issuance of other debt........................................... 84,800 56,960 -- Reduction of debt................................................ -- (55,500) (2,862) Reduction (increase) in deferred debt costs...................... (3,281) (808) 119 Dividends paid................................................... (1) (4) (12) Purchases of common stock........................................ (6,472) (1,094) -- Proceeds from shares issued under stock option plans............. 2,308 843 115 --------- --------- --------- Net cash provided (used) by financing activities................. 77,354 15,397 (2,640) --------- --------- --------- Net increase (decrease) in cash.................................. 1,405 (3,346) 3,337 Cash at beginning of year........................................ 161 3,507 170 --------- --------- --------- Cash at end of year.............................................. $ 1,566 $ 161 $ 3,507 ========= ========= ========= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest...................................................... $ 9,792 $ 5,079 $ 3,780 ========= ========= ========= Income taxes.................................................. $ 280 $ 1,424 $ 3,918 ========= ========= =========
The accompanying notes are an integral part of these statements. 23 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS ENDED OCTOBER 31, 1996 (IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL ----------------- ---------------- PAID-IN RETAINED $5.00 SERIESD SHARES AMOUNT CAPITAL EARNINGS TOTAL ------- ------- ------ ------ ---------- -------- -------- BALANCE AT NOVEMBER 1, 1993............. $ 2 $1 8,472 $ 85 $17,634 $66,026 $ 83,748 Net income.............................. -- -- -- -- -- 10,061 10,061 Cash dividends--preferred stock......... -- -- -- -- -- (12) (12) Shares issued under stock option plans.. -- -- 14 -- 115 -- 115 Income tax benefits from stock options exercised.............................. -- -- -- -- 38 -- 38 --- -- ------ ------ ------- ------- -------- BALANCE AT OCTOBER 31, 1994............. 2 1 8,486 85 17,787 76,075 93,950 Net income.............................. -- -- -- -- -- 7,865 7,865 Cash dividends--preferred stock......... -- -- -- -- -- (4) (4) Conversion of preferred stock........... (2) -- 4 -- (7) -- (9) Shares issued under stock option plans.. -- -- 154 1 842 -- 843 Purchases of common stock............... -- -- (55) -- (225) (860) (1,085) Income tax benefits from stock options exercised.............................. -- -- -- -- 864 -- 864 --- -- ------ ------ ------- ------- -------- BALANCE AT OCTOBER 31, 1995............. -- 1 8,589 86 19,261 83,076 102,424 Net loss................................ -- -- -- -- -- (17,127) (17,127) Cash dividends--preferred stock......... -- -- -- -- -- (1) (1) Conversion of preferred stock........... -- -- 104 1 -- (1) -- Shares issued under stock option plans.. -- -- 660 6 2,213 -- 2,219 Shares reacquired....................... -- -- (298) (3) (1,226) (5,243) (6,472) Shares issued on acquisition of business -- -- 1,974 20 49,984 -- 50,004 Income tax benefits from stock options exercised.............................. -- -- -- -- 89 -- 89 --- -- ------ ------ ------- ------- -------- BALANCE AT OCTOBER 31, 1996............. $-- $1 11,029 $110 $70,321 $60,704 $131,136 === == ====== ====== ======= ======= ========
The accompanying notes are an integral part of these statements. 24 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles may require management to make certain estimates and assumptions that could effect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions include, among other things, future costs to complete long term contracts, valuation of slow moving or obsolete inventories, and amounts of estimated liabilities for contingent losses and future costs of litigation. Actual costs could differ from these estimates. (B) Risks and Uncertainties: Certain risks and uncertainties related to the Company's network systems business could have a material adverse effect on the financial position of the Company. These risks and uncertainties include the Company's ability to anticipate future markets, develop products in advance of its competition and finance the production and delivery of these products in a timely manner. In the event that circumstances indicate that the goodwill and intangible assets related to the Company's network systems business may be impaired, an evaluation of recoverability would be performed to determine if a write-down of these assets is required. (C) Inventories: Inventories are stated at the lower of cost or market. Cost has been determined principally on the first-in, first-out (FIFO) method. Certain of the Company's inventories relate to long term programs and may require more than one year to be realized. Inventories consisted of the following:
OCTOBER 31, ------------------- 1996 1995 -------- -------- (IN THOUSANDS) Parts and materials..................... $22,482 $23,518 Work in process......................... 14,162 11,500 Finished goods.......................... 8,349 3,332 Costs relating to long-term contracts... 1,289 1,744 Unliquidated progress billings.......... (195) (1,119) ------- ------- $46,087 $38,975 ======= =======
(D) Intangibles: Goodwill is amortized using the straight-line method over periods ranging from 20 to 40 years. Other intangible assets principally relate to acquired intangibles and include patents, technology, and customer lists. Amortization is recorded on a straight-line basis, generally over periods ranging from 5 to 15 years. Accumulated amortization of goodwill and of other intangible assets at October 31, 1996 amounted to $5,758,000 and $11,836,000, respectively, and at October 31, 1995 amounted to $2,722,000 and $6,906,000, respectively. (E) Property and Depreciation: Property, plant and equipment is recorded at cost. Depreciation is computed principally by use of the straight-line method based upon the estimated useful lives of such assets, ranging from four to thirty years. Depreciation of leasehold improvements is computed on a straight- line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. During 1996, 1995 and 1994 depreciation of $10.7 million, $6.1 million, and $4.7 million, respectively, was charged to expense. (F) Revenue Recognition: For the majority of its operations, the Company recognizes revenues upon shipment of its product or upon completion of the services it renders. The Company accrues estimated warranty and installation costs at the time of shipment. The Company generally uses the percentage-of- completion method for recognition of revenues and profits on significant long- term contracts. 25 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) (G) Engineering and Development Costs: Company-sponsored engineering and development costs are expensed as incurred. Costs related to engineering and development contracts are included in inventory and charged to cost of goods sold upon recognition of related revenue. (H) Restructuring Costs: During 1996, the Company incurred certain costs for restructuring, including severance payments of $2.3 million and relocation costs of $0.3 million. The Communications segment incurred costs of $1.6 million related to streamlining Xyplex and integrating it with WCI. The Aerospace segment incurred costs of $1.0 million related to the streamlining of the Company's defense electronics business unit and the move of its Safety Systems Division from Concord, California to Simi Valley, California. The Aerospace segment is expected to incur additional restructuring expenses in the first quarter of 1997 in connection with the move of its Safety Systems Division. (I) Earnings (Loss) Per Share: Earnings (loss) per share have been computed based on the weighted average number of common and common equivalent shares outstanding during the periods, after deducting from 1995 net income the dividend requirements on the $5.00 Cumulative Convertible Preferred Stock. Common stock equivalents include Series D Participating Convertible Preferred Stock, on an if converted method and dilutive employee stock options, calculated using the treasury stock method. Common equivalent shares have been excluded from the 1996 calculation as antidilutive. Fully diluted earnings (loss) per share include the additional potential dilutive effect of employee stock options. The inclusion of additional shares assuming the conversion of the convertible subordinated debt would have been antidilutive. Fully diluted earnings (loss) per share are not presented because the calculations result in dilution of less than 3%. (J) Reclassification: Certain previously reported amounts have been reclassified to conform to the current period presentation. (K) New Accounting Standards: In March of 1995, the Financial Accounting Standards Board issued a new standard, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121). The Company will not be required to adopt this standard until the first quarter of fiscal 1997. The Company does not expect adoption of this standard to have a material effect on its consolidated financial statements. In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the 1996 fiscal year. Under SFAS No. 123, compensation expense for all stock-based compensation plans would be recognized based on the fair value of the options at the date of grant using an option pricing model. As permitted under SFAS No. 123, the Company may either adopt the new pronouncement or follow the current accounting methods as prescribed under APB No. 25. The Company plans to continue to recognize compensation expense in accordance with APB No. 25. In October 1996, the Accounting Standards Executive Committee issued SOP 96-1 "Environmental Remediation Liabilities." The Company will not be required to adopt this standard until fiscal 1998 and has not determined what, if any, impact the adoption will have on the financial position of the Company. NOTE 2. ACQUISITIONS On April 10, 1996, the Company acquired all of the capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon"). Xyplex is a producer of high-speed internetworking equipment, terminal servers and shared media products for business local area networks. Xyplex also provides remote access products that interconnect with phone companies' wide area networks. The purchase price was $67.5 million in cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of the Company's common stock. Other direct costs associated with the acquisition were approximately $1.4 million. The cash paid to Raytheon was obtained from the Company's bank lending group pursuant to an amendment to the Company's existing credit facility entered into on April 10, 1996. 26 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. ACQUISITIONS--(CONTINUED) The Xyplex acquisition was accounted for as a purchase and the balance sheet of Xyplex was combined with the Company's balance sheet as of April 30, 1996. The transaction resulted in the acquisition of intangible assets valued at $39.2 million, which is being amortized on a straight-line basis over periods ranging from 5 to 15 years and goodwill of $62.8 million which is being amortized on a straight-line basis over 20 years. Acquired in-process research and development valued at $11.7 million was expensed at the acquisition date. The Company also assumed accrued liabilities of $16.6 million at the acquisition date. On April 24, 1995, the Company acquired all of the stock of Hughes LAN Systems, Inc., a subsidiary of Hughes Electronics Corporation. The subsidiary was renamed Whittaker Communications, Inc. ("WCI") and is a designer and manufacturer of high speed switching and Asynchronous Transfer Mode ("ATM") compatible local area network communication hubs and network management software systems. WCI was acquired for a purchase price of $16.0 million in cash, subject to certain adjustments, and a $15.0 million 7% convertible subordinated note. The 7% convertible subordinated note is due on May 1, 2005, and is convertible into the Company's common stock at a price of $24.25 per share. The agreement also provides for contingent deferred payments, not to exceed $25 million, over the years 1996 to 1999 based on future sales of WCI's hub products and derivatives. The acquisition was accounted for as a purchase and accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. Goodwill amounted to $14.2 million, which is being amortized on a straight-line basis over 20 years. Other intangible assets which resulted from the acquisition include developed technology with a value of $3.3 million and a customer list with a value of $5.6 million which is being amortized on a straight-line basis over periods ranging from 5 to 15 years. Acquired in- process research and development valued at $3.3 million was expensed at the acquisition date. The Company also assumed liabilities of $18.1 million at the acquisition date. The accompanying consolidated financial statements of income reflect the operating results of Xyplex and WCI since the effective dates of the acquisitions. The pro forma results of operations for 1996 and 1995, assuming the consummation of the acquisitions and issuance of 7% debt and common stock at the beginning of each period, are summarized below (in thousands except per share amounts):
1996 1995 --------- --------- Net sales........................... $276,869 $289,072 Net loss............................ (15,630) (6,188) Loss per share...................... (1.43) (0.58)
These pro forma results have been prepared for comparative purposes only and may not be indicative of the results of operations which actually would have occurred had the combination been in effect at the beginning of the respective periods or of future results of operations of the consolidated entities. The Company acquired another business for $13.0 million in cash during fiscal 1994. The acquisition was accounted for under the purchase method, and the results of operations for 1994 include sales of $10.5 million, related to that business. This acquisition resulted in goodwill of $5.6 million in 1994 which is being amortized on a straight-line basis over 40 years. 27 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 3. ASSETS HELD FOR SALE OR DEVELOPMENT Assets held for sale or development are carried at the lower of cost or net realizable value. These assets at October 31, 1996 and October 31, 1995, include $29.1 million and $25.1 million, respectively, of land formerly used by a discontinued technology unit. The land is located in the City Santa Clarita, California, approximately 35 miles from downtown Los Angeles. In September 1995, the City granted the entitlements necessary to develop this property as a mixed-use, residential commercial, and light industrial development. In February 1996, the City approved a development agreement which, among other things, extends the life of the entitlements from 10 years after they were granted to 20 years after the completion of all environmental remediation of the property. The Company is currently exploring the real estate market and evaluating the most advantageous means to realize the value of this property. One of the conditions to development of any portion of the property, however, is the completion of all environmental remediation activities for the entire property. The Company has completed the remedial investigation of the property and although there can be no assurance, believes that the remediation activities themselves can be accomplished within a reasonable period of time and at a reasonable cost, subject, however, to delays that may result from compliance with governmental review, hearing and approval procedures. As a result, realization of value from the property is not likely to occur until such time as the remediation requirements are completed or are modified or an agreement can be reached with appropriate governmental authorities on a firm schedule for completion and approval of the remediation activities. The Company believes that current real estate market conditions are less likely to result in realization of the highest value of the property from a cash sale than either from an agreement with a developer to participate in the development of the property's infrastructure for sale of parcels to merchant builders or from the Company's infrastructure development of the property itself. There can be no assurance, however, that such a development agreement will be reached or that the Company will have the financial and development capabilities to develop the property itself. The Company believes that the undiscounted cash flows from the development of this property will be sufficient to cover its carrying value as well as the costs to complete remediation activities. NOTE 4. RECEIVABLES Receivables consisted of the following:
October 31, ------------------ 1996 1995 ------- ------- (IN THOUSANDS) Trade accounts receivable--billed....... $50,380 $37,861 Trade accounts receivable--unbilled..... 21,993 25,213 Other receivables....................... 4,249 2,810 Allowance for doubtful accounts......... (2,364) (1,176) ------- ------- Total receivables....................... $74,258 $64,708 ======= =======
Unbilled receivables represent recoverable costs and accrued profits, not billable to customers at the balance sheet date, which are generally billable upon product delivery and acceptance and/or completion of milestones. All amounts are reduced by appropriate progress billings. Amounts representing retainages under contracts are not material. Claims subject to further negotiations and which may not be collected within one year are not significant at October 31, 1996. 28 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5. LONG-TERM DEBT Long-term debt consisted of the following:
OCTOBER 31, --------------------------------------------- 1996 1995 -------------------- -------------------- (IN THOUSANDS) INTEREST INTEREST AMOUNT RATE AMOUNT RATE ------- -------- ------- -------- Borrowings under revolving credit facility.................... $ 65,000 8.6% $29,500 7.6% Borrowings under term loan.................................... 81,000 8.6% 31,250 7.5% Other note, payable semiannually to 1999, with interest at the lesser of 10% or 65% of prime................ 459 5.4% 659 5.7% 7% convertible subordinated note due May 1, 2005 (Note 2)..................................................... 15,000 7.0% 15,000 7.0% Capitalized lease obligations payable in varying monthly or quarterly installments through 1999, with interest rates ranging to 9.67% (Note 9).................... 476 333 8.8% -------- ------- $161,935 76,742 Less current maturities....................................... 161,482 6,048 -------- ------- $ 453 $70,694 ======== =======
Maturities of long-term debt are as follows for the periods stated:
YEAR ENDING OCTOBER 31 (IN THOUSANDS) ----------- -------------- 1996................... $161,482 1997................... 345 1998................... 98 1999................... 10 2000................... --
On January 24, 1995, the Company and a group of banks entered into a credit agreement which consisted of a $65.0 million revolving credit facility with a three-year term expiring in January 1998 and a $35.0 million term loan that was payable in quarterly installments over five years. On April 10, 1996, the Company and its existing agent bank entered into an amendment to the credit agreement pursuant to which the amount of the credit facility was increased to $170.0 million and all of the credit commitments under the agreement were assigned to the agent bank. At October 31, 1996, the credit facility consisted of an $85.0 million revolving credit facility that expires in April 2001 and an $81.0 million term loan payable in quarterly installments until 2001. Interest on loans outstanding under the credit agreement are based, at the Company's option, on LIBOR or the agent bank's prime rate and the increment over LIBOR or the prime rate is based on the levels of cash flow and debt of the Company. At October 31, 1996, the annual interest rate based on LIBOR was LIBOR plus 3.0%, and the annual interest rate based on the prime rate was prime plus 1.0%. The Company is obligated to pay letter of credit fees which, at October 31, 1996, ranged between 2.625% per annum and 3.125% per annum on the aggregate amount of outstanding letters of credit, and commitment fees which, at October 31, 1996 were .50% per annum on the unused amount of the revolving credit facility. Additional borrowings under the amended credit facility were used to fund the acquisition of Xyplex, and will be used going forward to fund working capital and other corporate requirements. 29 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5. LONG-TERM DEBT--(CONTINUED) The Company's obligations under the credit agreement are secured by a pledge of shares of stock of subsidiaries of the Company, accounts receivable, inventory, equipment, intellectual property and other assets of the Company and its subsidiaries. The agreement includes financial covenants with respect to financial leverage, cash flow, and net worth. At July 31, 1996, the Company was not in compliance with one of the financial ratio covenants, and at October 31, 1996, the Company was not in compliance with several of the financial ratio covenants. The Company has obtained waivers of the defaults up to, but not including February 28, 1997. The Company and its bank lending group are currently discussing alternatives for reducing the Company's bank debt. Some of these alternative measures may result in financing that is more expensive than the Company's current bank financing. If a reduction in the bank debt cannot be achieved, the bank lending group may elect to pursue its remedies, including accelerating the total bank indebtedness. On April 24, 1995, the Company issued a $15 million 7.0% convertible subordinated note to Hughes Electronics Corporation, with a scheduled maturity on May 1, 2005. The note is convertible at the option of the holder into common stock of the Company at a conversion price of $24.25 per share, interest is payable semiannually, and the note is redeemable, at the option of the Company, at any time with no premium. The note prohibits the Company from paying dividends or redeeming its capital stock if its tangible net worth is less than $15 million. Under the Company's 7% convertible subordinated note to Hughes Electronics Company, the Company may not pay or declare cash dividends or redeem shares of the Company if the Company's tangible net worth is less than $15 million. As of April 30, 1996, the Company's tangible net worth was less than $15 million and the Company has not paid or declared dividends (including the quarterly dividend for the Series D Preferred Stock) or redeemed shares since that date. Thus, dividends on the Series D Preferred Shares have been accrued since that date. There is no assurance that in future periods the Company will be in compliance with all of the financial covenants contained in its amended credit agreement, or, that additional waivers of the financial covenants will be obtained. Acceleration of the debt under the bank credit agreement by the bank lending group upon the Company's failure to comply with a financial covenant would be an event of default under the $15 million 7% convertible subordinated note. Because of this possible cross default, the entire $15 million principal balance of the 7% convertible subordinated note has been classified as current debt. In order to reduce the risk of higher interest expense under the Company's credit agreement that could result from an increase in LIBOR, the Company in June 1996 purchased an interest rate cap with an initial notional amount of $42.5 million. Under the terms of the interest rate cap, the Company will receive a payment at the end of each quarterly period, as defined in the interest rate cap, if three-month LIBOR at the beginning of the period exceeds 7.5%. The amount of such payment will be the interest rate cap at the beginning of such period at an interest rate equal to the difference between 7.5% and LIBOR at the beginning of such period. The interest rate cap expires in July 1999. The cost of this interest rate cap is being amortized over its 37 month term. At October 31, 1996, the unamortized cost was $242 thousand. At October 31, 1996, there were $12.2 million of letters of credit outstanding under the revolving credit facility. 30 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. CAPITAL STOCK On April 28, 1995, all the outstanding shares of $5.00 Cumulative Convertible Preferred Stock were either redeemed or converted into Common Stock. Each share of the $5.00 Cumulative Convertible Preferred Stock was voting, cumulative and convertible into 1.854 shares of Common Stock plus $74.16 in cash, was redeemable, at the Company's option, at $100 per share and was entitled to preference of $100 per share upon voluntary liquidation and $50 per share upon involuntary liquidation. Each share of Series D Participating Convertible Preferred Stock is nonvoting, cumulative and, in connection with a qualifying transfer, convertible into 326.531 shares of Common Stock. Holders of the Series D Participating Convertible Preferred Stock, of which there is presently only one, are entitled to a $1.00 per share liquidation preference and to the greater of $.25 per share per quarter or any dividends paid in respect of the number of shares of Common Stock underlying each share of Series D Participating Convertible Preferred Stock. The Board of Directors is authorized to issue preferred stock in series, to fix dividend rates, conversion rights, voting rights, rights and terms of redemption and liquidation preferences, and to increase or decrease the number of shares of any series. Common Stock reserved for issuance at October 31, 1996 was as follows:
SHARES IN THOUSANDS --------- For conversion of Series D Participating Convertible Preferred Stock................ 188 For stock options................................................................... 1,797 For conversion of 7% convertible subordinated note.................................. 619 ----- 2,604 =====
On December 16, 1994, the Board of Directors adopted, and on March 24, 1995, the shareholders approved, an amendment to the Whittaker Corporation Long-Term Stock Incentive Plan (1989) (the "1989 Plan"), that increased from 1,000,000 to 2,000,000 the number of shares of Common Stock of the Company which may be made subject to stock options and other awards authorized by the 1989 Plan. The Company had reserved 1,796,683 shares of Common Stock at October 31, 1996 for future issuances under the 1989 Plan, as well as a prior stock option plan for employees, and a non-employee director stock option plan. Options to purchase Common Stock generally are conditioned upon continued employment, expire from five to ten years after the grant date, and become exercisable in whole or in part either commencing with the second year or upon the attainment of certain predetermined goals, or both. The following information for the three years ended October 31, 1996 relates to options granted from 1981 through 1996 under the plans. 31 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. CAPITAL STOCK--(CONTINUED)
OPTIONS OUTSTANDING PRICE RANGE ----------- -------------- IN THOUSANDS Balance, October 31, 1993............. 1,251 2.41 to 15.06 Options granted.................... 191 14.19 to 16.37 Options canceled or expired........ (61) 6.32 to 16.37 Options exercised.................. (14) 4.10 to 15.06 ------ Balance, October 31, 1994............. 1,367 2.41 to 16.37 Options granted.................... 544 18.00 to 22.50 Options canceled or expired........ (35) 15.06 to 22.25 Options exercised.................. (154) 3.82 to 18.63 ------ Balance, October 31, 1995............. 1,722 2.41 to 22.50 Options granted.................... 1,201 13.44 to 26.25 Options canceled or expired........ (1,150) 13.44 to 26.25 Options exercised.................. (660) 2.41 to 22.50 ------ Balance, October 31, 1996............. 1,113 4.10 to 26.25 ======
At October 31, 1996, options for 380,040 shares were exercisable. The Company also had reserved 618,557 shares of Common Stock at October 31, 1996 for possible conversion of the 7% convertible subordinated note at the option of the holders. The Company's Stockholder Rights Plan gives each holder of the Company's Common Stock one right for each share of Common Stock held. Each right entitles the holder to purchase from the Company 1/100 of a share of a new series of the Company's preferred stock (Series A Participating Cumulative Preferred Stock) at an exercise price of $125 per 1/100 of a share. The rights will become exercisable and will detach from the Common Stock 10 days after any person or group acquires 25% or more of the Company's Common Stock, or 10 business days after any person or group commences a tender or exchange offer which, if consummated, would result in that person or group owning at least 25% of the Company's Common Stock. If any person acquires 25% or more of the Company's Common Stock, each right will entitle the holder, other than the acquiring person, to purchase for the exercise price Common Stock of the Company with a value of twice the exercise price. In addition, if following an acquisition by any person or group of 25% or more of the Company's Common Stock, the Company is involved in a merger or other business combination transaction, or sells more than 50% of its assets or earning power to any person, each right will entitle the holder, other than the acquiring person, to purchase for the exercise price Common Stock of the acquiring person with a value of twice the exercise price. The Company may redeem the rights at $.01 per right at any time until the tenth day after any person or group has acquired 25% or more of its Common Stock. The rights will expire November 29, 1998, unless earlier redeemed. The Stockholder Rights Plan may be supplemented or amended at the direction of the Company without the approval of the holders of rights, except as otherwise set forth in the Stockholder Rights Plan. At October 31, 1996, 150,000 preferred shares were reserved for these rights. 32 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. INCOME TAXES Income tax expense (benefit) relating to continuing operations consists of the following:
YEARS ENDED OCTOBER 31, 1996 1995 1994 -------- -------- ------ (IN THOUSANDS) Current provision - U.S. Federal........................... $(5,314) $(1,154) $1,247 State.................................. 266 527 1,100 ------- ------- ------ (5,048) (627) 2,347 Deferred provision - U.S. Federal........................... (2,835) 5,634 4,124 State.................................. (1,206) 154 -- ------- ------- ------ (4,041) 5,788 4,124 ------- ------- ------ Provision (benefit) for taxes............. $(9,089) $ 5,161 $6,471 ======= ======= ======
Foreign income taxes were not material. The tax expense (benefit) is different than the amount computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for the differences are as follows:
YEARS ENDED OCTOBER 31, 1996 1995 1994 ------ ------ ------ U.S. federal statutory rate................ (34.0%) 34.2% 34.4% State taxes, net of U.S. federal income tax benefit............................... (2.4%) 3.4% 4.3% Goodwill amortization...................... 3.5% 1.8% -- Other items................................ (1.8%) 0.2% 0.4% ---- ---- ---- Effective tax rate......................... (34.7%) 39.6% 39.1% ==== ==== ====
33 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. INCOME TAXES--(CONTINUED) Deferred income taxes reflect the net tax effects of temporary differences between the reported amounts of assets and liabilities in the financial statements and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities at October 31 are as follows:
1996 1995 1994 ------- -------- ------- (IN THOUSANDS) Deferred tax assets: Receivables valuation................ $ 858 $ 1,416 $ 1,395 Inventory valuation.................. 8,397 4,033 4,030 Self-insurance reserves.............. 1,384 1,737 2,142 Pending refund from federal tax audit -- 5,160 4,031 Reserves for discontinued operations. 1,163 848 1,348 Other................................ 12,553 7,160 7,028 ------- ------- ------- Total before valuation allowance........ 24,355 20,354 19,974 Valuation allowance..................... (390) (490) (757) ------- ------- ------- Net deferred tax assets................. $23,965 $19,864 $19,217 ======= ======= ======= Deferred tax liabilities: Excess of tax over book depreciation. $ 1,487 $ 3,450 $ 3,070 Assets held for sale or development.. 7,919 6,148 5,937 Intangible assets.................... 15,667 1,977 -- Pension costs........................ 1,904 1,822 780 Other................................ 2,745 7,589 8,005 ------- ------- ------- $29,722 $20,986 $17,792 ======= ======= =======
In March 1996 the Company received a net tax refund of $5.2 million under an agreement reached with the Internal Revenue Service closing the audit of the 1987 and 1988 income tax returns. The changes in the valuation allowance are the result of changes in temporary differences which impact the deferred state income tax provision. NOTE 8. EMPLOYEE BENEFIT PLANS Prior to October 31, 1994, most of the Company's domestic employees were covered by the Whittaker Corporation Employees' Pension Plan (the "Pension Plan"), its noncontributory defined benefit pension plan. The benefits are based on years of service and the employee's highest compensation for five consecutive years during the last ten years of credited service. Effective October 31, 1994, the Company amended the Pension Plan to "freeze" benefits for all participants: adjustments for changes in credited years of service ceased on October 31, 1994 and adjustments for changes in remuneration ceased on December 31, 1994. The effect of the amendment was to reduce the Pension Plan's projected benefit obligation at October 31, 1994 by $3,877,000. The amount was fully absorbed by unrecognized net losses at October 31, 1994 related to the Pension Plan and accordingly, no curtailment gain was recognized. Vested service continues to accrue in accordance with applicable Pension Plan provisions, and Pension Plan funding will continue until such time that the Pension Plan is terminated and all benefit obligations are satisfied. The Company funds the Pension Plan in accordance with the Employee Retirement Income Security Act of 1974, as amended (ERISA). 34 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED) The following table sets forth the Pension Plan's funded status and amounts recognized in the Company's consolidated balance sheet:
OCTOBER 31 ---------------------- 1996 1995 ---------- --------- (IN THOUSANDS) Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $118,782 in 1996 and $123,543 in 1995............................. $(119,525) $(124,457) ========= ========= Projected benefit obligation for service rendered through October 31, 1994.................................................. (119,525) (124,457) Plan assets at fair value, government, government agency and fixed income securities.............................................. 119,892 126,278 --------- --------- Plan assets in excess of projected benefit obligation................. 367 1,821 Items not yet recognized in earnings: Unrecognized net loss.............................................. 4,446 2,999 Unrecognized net transition asset at November 1, 1985 net of amortization....................................................... -- (212) --------- --------- Net prepaid pension cost recorded in the consolidated balance sheet.. $ 4,813 $ 4,608 ========= =========
The weighted average discount rates used in determining the actuarial present value of the projected benefit obligation were 7.5% and 7.0%, respectively, at October 31, 1996 and 1995. The expected long-term rate of return on plan assets was 7.5% for the year ended October 31, 1996, and 8.75% for the years ended October 31, 1995 and 1994. As a result of the amendment described above, there are no projected increases in future compensation levels. The Company also sponsors unfunded supplemental nonqualified executive and director plans. At October 31, 1996, the projected benefit obligation for those plans totaled $5,516,000, of which $1,048,000 is subject to later amortization. The remaining $4,468,000 is accrued as a liability in the consolidated balance sheet. Effective November 1, 1994, the Company amended its defined contribution 401(k) plan and renamed it the Whittaker Corporation Partnership Plan ("Partnership Plan"). The amendment provided for new investment alternatives, added a profit sharing component to Company contributions to the Partnership Plan, and allowed certain rollover contributions from other qualified plans. The Partnership Plan contains a matched savings provision that permits pretax employee contributions. Participants can contribute from 1% to 12% of compensation and receive a maximum matching employer contribution of 50% on up to 6% of their annual compensation. In addition to matching of employee contributions, beginning with fiscal 1995, the Company has recorded as expense amounts which may range from 0% to 7.5% of eligible employee compensation, based on the attainment of specified financial goals by participating divisions of the Company. The Partnership Plan covers most of the Company's employees, excluding those employed by Xyplex and WCI. Xyplex and WCI sponsor defined contribution 401(k) plans covering a majority of their domestic employees under which participants can make pretax contributions of up to 15% of eligible compensation and receive a matching contribution of 75% on up to 6% of their eligible compensation. 35 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED) Total pension and retirement expense was as follows:
YEARS ENDED OCTOBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- (IN THOUSANDS) Cost components of funded defined benefit plan: Service cost--benefits earned during the period.......................... $ 540 $ 490 $ 2,253 Interest cost on projected benefit obligation.......................... 8,500 8,658 8,723 Actual return on plan assets......... (15,892) (20,204) 5,086 Net amortization and deferral........ 6,647 8,336 (16,844) -------- -------- -------- Net periodic pension (income) for funded defined benefit plan............ (205) (2,720) (782) Cost for unfunded defined benefit plans. 703 549 644 Cost for defined contribution plans..... 1,589 2,983 708 -------- -------- -------- Total pension and retirement plan expense................................ $ 2,087 $ 812 $ 570 ======== ======== ========
NOTE 9. LEASED ASSETS AND LEASE COMMITMENTS Whittaker has various leases covering real property and equipment. Property, Plant and Equipment includes $500,000 at October 31, 1996 and $183,000 at October 31, 1995 for leases that have been capitalized. The amortization of these assets is included in depreciation expense. Future minimum payments under capital leases and under noncancellable operating leases, net of rentals to be received from existing noncancellable operating subleases, as of October 31, 1996, were as follows:
CAPITAL OPERATING YEARS ENDED OCTOBER 31, LEASES LEASES ----------------------- ------- --------- (IN THOUSANDS) 1997................................. $ 308 $2,792 1998................................. 154 2,285 1999................................. 41 743 2000................................. 10 175 2001................................. -- 77 2002 and subsequent.................. -- -- ------ ------ Total commitments............................. 513 $6,072 ====== Amounts representing interest................. 37 ------ Present value of net minimum lease payments... $ 476 ======
Rental expense for operating leases, net of rental income from subleases, was as follows:
YEARS ENDED OCTOBER 31, (IN THOUSANDS) ----------------------- -------------- 1996................................... $3,282 1995................................... 2,292 1994................................... 1,710
36 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 10. COMMITMENTS AND CONTINGENCIES In certain years, after evaluating the availability and cost of insurance, the Company did not purchase insurance for certain risks, including workers' compensation and product liability. Consequently, the Company is without insurance for various risks, including product liability for certain products it manufactured. The Company currently has workers' compensation insurance and product liability insurance for products it currently manufactures. The Company's insurance carriers have taken the position that in certain cases the Company is uninsured for environmental matters, a position that the Company disputes in certain instances. As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and cleanup activities at facilities currently or formerly occupied by its operating units. There are also various other claims and suits pending against the Company. At October 31, 1996, the Company had provided for its aggregate liability related to various claims, including uninsured risks and potential claims in connection with the environmental matters noted above, excluding the environmental remediation activities related to the property located in the City of Santa Clarita, California. The amounts provided on the Company's books for contingencies, including environmental matters, are recorded at gross amounts. Because of the uncertainty with respect to the amount of probable insurance recoveries, these potential insurance recoveries are not taken into account as a reduction of those amounts provided unless an insurance carrier has agreed to such coverage. The Company does not anticipate that these matters will have a material adverse effect on the Company's financial position or on its ability to meet its working capital and capital expenditure needs. Although the Company has recorded estimated liabilities for contingent losses, including uninsured risks and claims in connection with environmental matters, in accordance with generally accepted accounting principles, the absence of or denial of various insurance coverages and the filing of future environmental claims which are unknown to the Company at this time represent a potential exposure for the Company, and the net income of the Company in future periods could be adversely affected if uninsured losses in excess of amounts recorded were to be incurred. In connection with the discontinuance of various businesses, the Company remains liable for certain retained obligations and for certain future claims, principally environmental and product liability. The noncurrent portion of such items is included in "Other Noncurrent Liabilities" in the consolidated balance sheet. The Company periodically assesses the adequacy of its accruals for these and other liabilities, as well as the carrying value of assets, related to former operations and programs and makes adjustments as required. During 1996, certain of these adjustments were offset, in part, by the reversal of tax related reserves arising from operations prior to 1990 which were determined to be excess. 37 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1996 and 1995 follow (in millions of dollars except for per share amounts):
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR ------- ------- ------- ------- -------- 1996 Sales........................ $44.4 $ 47.6 $ 62.2 $ 67.7 $221.9 Cost of sales................ 24.9 27.5 36.8 40.7 129.9 Net income (loss)............ 1.9 (4.9) (5.9) (8.2) (17.1) Earnings (loss) per share*... $0.20 $(0.52) $(0.54) $(0.74) $(1.70) 1995 Sales........................ $26.7 $ 31.7 $ 44.3 $ 56.8 $159.5 Cost of sales................ 16.0 19.1 23.1 31.8 90.0 Net income................... 1.7 0.2 1.8 4.2 7.9 Earnings per share........... $0.18 $ 0.02 $ 0.18 $ 0.44 $ 0.82
* The sums of quarterly per share amounts do not equal the annual amounts reported since per share calculations are made independently for each quarter and the full year based upon respective average shares outstanding. NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Long-term debt: The carrying amounts of the Company's borrowings approximate their fair value. The Company's bank credit facility is a variable rate facility that reprices frequently. Notes receivable: The carrying amounts of the Company's notes receivable approximate their fair value. NOTE 13. BUSINESS SEGMENTS The Company develops specialized aerospace and electronic technologies to create products and customer solutions for aircraft, defense, communications and industrial markets. The Company operates in two business segments: Aerospace, which designs, manufactures, and distributes a wide variety of fluid control devices and fire detection systems, as well as defense electronics products and systems, and Communications, which designs, develops, and markets a comprehensive line of data networking products and services. Prior to fiscal year 1995, the Company's communications operations were not material enough to comprise a separate business segment. Operating profit is total revenue less operating expenses. General corporate expenses have not been allocated to the business segments and are shown as a separate expense element of operating profit to reconcile to consolidated operating income or loss. Identifiable assets are those assets used in the Company's operations in each industry. Corporate assets are principally cash, notes receivable, deferred income taxes, and assets held for sale. 38 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 13. BUSINESS SEGMENTS--(CONTINUED) Information about Whittaker's operations by business segment at October 31, 1996, 1995, and 1994 and for the years then ended follows (dollars in millions):
DEPRECIATION AND OPERATING IDENTIFIABLE AMORTIZATION CAPITAL SALES PROFIT (LOSS) ASSETS EXPENSE EXPENDIRES ------ ------------ ------------ ---------------- ---------- 1996 Aerospace.............. $130.4 $ 20.3 $133.9 $ 6.7 $2.0 Communications......... 91.5 (30.7) 171.0 11.7 2.7 Corporate.............. -- (10.4) 74.6 0.3 0.1 ------ ------ ------ ----- ---- Consolidated........... $221.9 $(20.8) $379.5 $18.7 $4.8 ====== ====== ====== ===== ==== 1995 Aerospace.............. $129.0 $ 29.2 $143.8 $ 5.8 $4.8 Communications......... 30.5 (3.4) 46.9 2.1 0.7 Corporate.............. -- (7.3) 60.3 0.2 0.9 ------ ------ ------ ----- ---- Consolidated........... $159.5 $ 18.5 $251.0 $ 8.1 $6.4 ====== ====== ====== ===== ==== 1994 Aerospace.............. $126.4 $ 26.8 $153.5 $ 5.4 $2.5 Corporate.............. -- (6.8) 55.8 0.3 -- ------ ------ ------ ----- ---- Consolidated........... $126.4 $ 20.0 $209.3 $ 5.7 $2.5 ====== ====== ====== ===== ====
Communications operating profit for fiscal 1996 and 1995 reflects the writeoff of $11.7 million and $3.3 million, respectively, of in-process research and development cost, which was recorded as an expense at the acquisition date. In fiscal 1996, 1995, and 1994 approximately 23%, 34%, and 49%, respectively, of Whittaker's sales were directly or indirectly to the United States Government. All of those sales, with the exception of a minor amount in 1995, were attributable to the Aerospace segment. In fiscal 1996, 1995, and 1994 approximately 29%, 27%, and 20%, respectively, of Whittaker's sales arose from exports to customers outside the United States, primarily in Europe and the Middle East. Approximately 14% of the Company's accounts receivable are from the U.S. Government, and the balance is primarily from commercial customers, prime defense contractors with the U.S. Government, and foreign customers. NOTE 14. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITOR (UNAUDITED) In connection with the integration and streamlining efforts in the Company's Communications segment, the Company's Board of Directors on January 24, 1997, approved a plan that will result in a pre-tax charge currently estimated at $10 million during the first quarter of 1997. The charge will be taken to cover the one-time costs of closing its Santa Clara, California facility and integrating those operations into its Littleton, Massachusetts facilities. These one-time costs include severance payments associated with the consolidation and reduction of the combined workforces, the writedown of assets to net realizable value and other costs related to this consolidation. The Enterprise Hub product line will be sold through Xyplex Networks sales channels and will continue to be supported from the Littleton facilities. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 39 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information called for by Item 10 is incorporated by reference to the information under the following captions in the Proxy Statement: CAPTION Election of Directors--Directors Compliance with Section 16(a) of the Securities Exchange Act Certain of the information called for by Item 10 with respect to executive officers of the Registrant appears as Item 4A in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information called for by Item 11 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Election of Directors--Executive Compensation and Other Information ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by Item 12 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Equity Securities and Principal Holders Thereof ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Item 13 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Election of Directors--Directors 40 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as part of this report:
PAGE REFERENCE --------- FORM 10-K (A-1) FINANCIAL STATEMENTS: Report of Independent Auditors.................................................................... 19 Consolidated Statements of Income for the three years ended October 31, 1996...................... 20 Consolidated Balance Sheets as of October 31, 1996 and 1995....................................... 21 Consolidated Statements of Cash Flows for the three years ended October 31, 1996.................. 23 Consolidated Statements of Stockholders' Equity for the three years ended October 31, 1996........ 24 Notes to Consolidated Financial Statements........................................................ 25
(A-2) FINANCIAL STATEMENT SCHEDULES: All supplemental schedules are omitted as inapplicable or because the required information is included in the Consolidated Financial Statements or the Notes to Consolidated Financial Statements.
(A-3) EXHIBITS:* 3.1 Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K for fiscal year ended October 31, 1989), as amended on March 16, 1990 (Exhibit 3.1 to Form 10-K for fiscal year ended October 31, 1995). 3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1994). and on December 16, 1996. 4.1 Reference is made to Exhibit 3.1. 4.2 Reference is made to Exhibit 3.2. 4.3 Rights Agreement dated as of November 18, 1988 between Registrant and Manufacturers Hanover Trust Company (currently being performed by Mellon Bank N.A. as rights agent) concerning Series A Participating Cumulative Preferred Stock Purchase Rights (Exhibits 1 and 2 to Form 8-A filed on November 23, 1988), as amended as of June 28, 1989 (Exhibit 4.4 to Form 10-K for fiscal year ended October 31, 1989). 4.4 Certificate of Designation of Series D Participating Convertible Preferred Stock (Exhibit 4.2 to Form S-4, Registration No. 33- 29028), as amended on March 16, 1990 (Exhibit 4.4 to Form 10-K for fiscal year ended October 31, 1995). 4.5 7% Convertible Subordinated Note dated April 24, 1995 (Exhibit 10.1 to Form 8-K dated May 8, 1995). 4.6 Registration Rights Agreement dated April 24, 1995 between Registrant and Hughes Electronics Corporation (Exhibit 10.1 to Form 8-K dated May 8, 1995). 4.7 Stockholder's Agreement dated April 10, 1996 between Registrant and Raytheon Company (Exhibit 4.1 to Form 8-K dated April 24, 1996). 4.8 Term Note dated April 10, 1996 by the Registrant in favor of NationsBank of Texas, N.A. (Exhibit 4.2 to Form 8-K dated April 24, 1996).
41 4.9 Revolving Note dated April 10, 1996 by the Registrant in favor of NationsBank of Texas, N.A. (Exhibit 4.3 to Form 8-K dated April 24, 1996). (Other instruments defining the rights of holders of long-term debt are not filed because the total amount of securities authorized under any such instrument does not exceed 10% of the consolidated total assets of Registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.) 10.1 Amended and Restated 1977 Nonqualified Stock Option Plan (Exhibit 10.5 to Form 10-K for fiscal year ended October 31, 1982).** 10.2 Restated 1980 Nonqualified Stock Option Plan (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1982).** 10.3 Amended and Restated Whittaker Corporation 1992 Stock Option Plan for Non-Employee Directors.** 10.4 1981 Incentive and Nonqualified Stock Option Plan, as amended January 22, 1982 (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1981), and as amended June 26, 1987 (Exhibit 10.6 to Form 10-K for fiscal year ended October 31, 1987).** 10.5 Directors' Deferred Compensation Plan dated February 1983 (Exhibit 10.9 to Form 10-K for fiscal year ended October 31, 1984), as amended on May 18, 1990 (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1990).** 10.6 Restated Directors' Retirement Plan effective as of August 2, 1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K for fiscal year ended October 31, 1990), as amended on December 16, 1996.** 10.7 Amended and Restated Whittaker Corporation Long-Term Stock Incentive Plan (1989).** 10.8 Whittaker Corporation Supplemental Benefit Plan dated November 23, 1988, as amended June 12, 1990 and as amended July 12, 1991.** 10.9 Whittaker Corporation Excess Benefit Plan dated November 23, 1988, as amended June 21, 1990.** 10.10 Whittaker Corporation Supplemental Disability Benefit Plan dated November 23, 1988.** 10.11 Whittaker Corporation Supplemental Retirement and Disability Trust Agreement dated November 23, 1988 (Exhibit 10.13 to Form 10- K for fiscal year ended October 31, 1988).** 10.12 Amended and Restated Whittaker Corporation Supplemental Executive Retirement Plan, dated as of January 1, 1996, as amended January 24, 1997.** 10.13 Amendment and Restatement of Whittaker Corporation Employees' Pension Plan dated December 22, 1994, as amended December 15, 1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October 31, 1995), and as amended effective October 1, 1996.** 10.14 Whittaker Corporation Partnership Plan (formerly the Whittaker Corporation Savings and Stock Investment Plan), as amended and restated effective November 1, 1994 (Exhibit 10.11 to Form 10-K for fiscal year ended October 31, 1995) and as amended June 21, 1996 (Exhibit 10.2 to Form 10-Q dated September 13, 1996).** 10.15 Amended and Restated Credit Agreement dated as of April 10, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto (Exhibit 10.2 to Form 8-K dated April 24, 1996). 10.16 First Amendment and Waiver dated as of September 9, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto (Exhibit 10.1 to Form 10-Q dated September 13, 1996).
42 10.17 Second Amendment and Waiver dated as of October 30, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 10.18 Third Amendment and Waiver dated as of December 17, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 10.19 Stock Purchase Agreement dated as of March 23, 1995 between Registrant and Hughes Aircraft Company, as amended on April 24, 1995 (Exhibit 10.1 to Form 8-K dated May 8, 1995). 10.20 Stock Purchase Agreement dated as of March 2, 1996, between Registrant and Raytheon Company (Exhibit 10.1 to Form 8-K dated April 24, 1996) 11. Calculation of earnings per share for the three years ended October 31, 1996. 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. 27. Financial Data Schedule.
* Exhibits followed by a parenthetical reference are incorporated by reference to the document described therein. Upon written request to the Secretary of the Company, a copy of any exhibit referred to above will be furnished without charge. ** Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. (B) REPORTS ON FORM 8-K: During the quarter ended October 31, 1996, the Company did not file any reports on Form 8-K. 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. WHITTAKER CORPORATION By: /s/ Lynne M. O. Brickner ---------------------------- Lynne M. O. Brickner Vice President Date: January 24, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------------------------- ---------------------- ---------------- /s/ Joseph F. Alibrandi Director and Principal January 24, 1997 - ----------------------------- Executive Officer (Joseph F. Alibrandi) /s/ Eva Jonutis Principal January 24, 1997 - ----------------------------- Accounting Officer (Eva Jonutis) /s/ George H. Benter, Jr. Director January 24, 1997 - ----------------------------- (George H. Benter, Jr.) /s/ George Deukmejian Director January 24, 1997 - ----------------------------- (George Deukmejian) /s/ Jack L. Hancock Director January 24, 1997 - ----------------------------- (Jack L. Hancock) /s/ Edward R. Muller Director January 24, 1997 - ----------------------------- (Edward R. Muller) /s/ Gregory T. Parkos Director January 24, 1997 - ----------------------------- (Gregory T. Parkos) /s/ Malcolm T. Stamper Director January 24, 1997 - ----------------------------- (Malcolm T. Stamper)
S-1 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NO. * DESCRIPTION NUMBERED PAGE - -------------- ----------------------------------- ------------- 3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1994). and on December 16, 1996. 10.3 Amended and Restated Whittaker Corporation 1992 Stock Option Plan for Non-Employee Directors. 10.6 Restated Directors' Retirement Plan effective as of August 2, 1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K for fiscal year ended October 31, 1990), as amended on December 16, 1996. 10.7 Amended and Restated Whittaker Corporation Long-Term Stock Incentive Plan (1989). 10.8 Whittaker Corporation Supplemental Benefit Plan dated November 23, 1988, as amended June 12, 1990 and as amended July 12, 1991. 10.9 Whittaker Corporation Excess Benefit Plan dated November 23, 1988, as amended June 21, 1990. 10.10 Whittaker Corporation Supplemental Disability Benefit Plan dated November 23, 1988. 10.12 Amended and Restated Whittaker Corporation Supplemental Executive Retirement Plan, dated as of January 1, 1996, as amended January 24, 1997. 10.13 Amendment and Restatement of Whittaker Corporation Employees' Pension Plan dated December 22, 1994, as amended December 15, 1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October 31, 1995), and as amended effective October 1, 1996. 10.17 Second Amendment and Waiver dated as of October 30, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 10.18 Third Amendment and Waiver dated as of December 17, 1996 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 11. Calculation of earnings per share for the three years ended October 31, 1996. 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. 27. Financial Data Schedule.
* Exhibits followed by a parenthetical reference are incorporated by reference to the documents described therein. EX-3.2 2 RESTATED BYLAWS EXHIBIT 3.2 CERTIFICATE OF ADOPTION OF RESOLUTIONS BY THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION --------------------- WHEREAS, the Board of Directors is authorized to amend the Bylaws of this corporation. NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 2(b) of the Bylaws of this corporation be, and hereby is, amended in its entirety to read as follows: "No person may stand for election to, or be elected to, the board of directors or be appointed by the directors to fill a vacancy on the board of directors who is 72 years of age or older, who shall have made, or be making, improper or unlawful use of the corporation's confidential information, or who has interests which conflict materially with the interests of the corporation. Directors need not be stockholders." * * * * * * * * * * I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held on December 16, 1996, at which meeting a quorum of said Board was at all times present and acting and that said Board resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Dated: December 18, 1996 /s/ Lynne M. O. Brickner ------------------------ Lynne M. O. Brickner Secretary EX-10.3 3 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS EXHIBIT 10.3 WHITTAKER CORPORATION AMENDED AND RESTATED 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS SECTION 1. Purpose. The purposes of the Plan are to attract and ------- retain highly qualified individuals to serve as directors of the Company, to encourage non-employee directors to acquire an equity interest in the Company in order to align more closely the interests of directors with those of the Company's stockholders, and to compensate non-employee directors for their contributions to the Company's growth and profitability. SECTION 2. Definitions. As used in the Plan, the following terms ----------- shall have the meanings set forth below: "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day except a Saturday, Sunday or other day on which the New York Stock Exchange is authorized by law to close. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall mean Whittaker Corporation, and any successor thereto. "Eligible Director" shall mean each director of the Company who is not an employee of the Company or any of its affiliates. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, (i) with respect to the Shares, as of any date, the last reported sales price regular way on the New York Stock Exchange or, if not reported for the New York Stock Exchange, on the Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked quotations on the New York Stock Exchange and (ii) with respect to any property other than the Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Board. "Option" shall mean either a "Fixed Option" or a "Formula Option" granted under Section 5 of the Plan. "Option Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Option, which may, but need not, be executed or acknowledged by a Participant. "Participant" shall mean any Eligible Director granted an Option under the Plan. "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. "Plan" shall mean this Whittaker Corporation 1992 Stock Option Plan for Non-Employee Directors, as amended and restated on January 24, 1997. "SEC" shall mean the Securities and Exchange Commission, or any successor thereto. "Shares" shall mean the common shares of the Company, $.01 par value. "Termination Date" shall mean the earlier to occur of (i) the first business day in January of the year [2007] and (ii) the date the Shares are de- listed from the New York Stock Exchange. SECTION 3. Administration. The Plan shall be administered by the -------------- Board. Subject to the terms of the Plan, the Board shall have the power to interpret the provisions and supervise the administration of the Plan. SECTION 4. Shares Available for Options. ---------------------------- (a) Shares Available. Subject to adjustment as provided in Section ---------------- 4(b): (i) Calculation of Number of Shares Available. The number of Shares ----------------------------------------- with respect to which Options may be granted under the Plan shall be one hundred and fifty thousand (150,000). If, after the effective date of the Plan, any Shares covered by an Option granted under the Plan are forfeited, or if an Option otherwise terminates or is canceled without the delivery of Shares or of other consideration, then the Shares covered by such Option, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Options may be granted, to the extent of any such forfeiture, termination or cancellation, shall again be, or shall become, Shares with respect to which Options may be granted. (ii) Sources of Shares Deliverable Under Options. Any Shares ------------------------------------------- delivered pursuant to an Option may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. (b) Adjustments. The number and type of Shares with respect to which ----------- Options may be granted, the number and type of Shares subject to each Option to be granted, the number and type of Shares subject to outstanding Options, and the grant or exercise price with respect to any Option shall be appropriately adjusted by the Board in order to prevent reduction or enlargement of the benefits of Options that would otherwise result from any extraordinary dividend or other distribution (whether in the form of cash, securities, or other property), recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, 2 repurchase, or exchange of Shares, issuance of warrants or other rights to purchase Shares, at a price below fair market value or other similar corporate event. SECTION 5. Options. ------- (a) Fixed Options. On the date of each annual meeting of the ------------- Company's stockholders, each Eligible Director who is a member of the Board on such date shall be granted an Option (the "Fixed Option") to acquire one thousand (1,000) Shares. (b) Formula Options. On the date of each annual meeting of the --------------- Company's stockholders, each Eligible Director who is a member of the Board on such date shall be granted an Option (the "Formula Option") to acquire a number of Shares based upon the following formula: (x) one hundred fifty percent (150%) of the Eligible Director's basic annual fee as a member of the Board for the twelve (12) month period beginning upon the date of grant of such Option, divided by (y) the product of the "Black-Scholes Percentage" (as defined below) and the Fair Market Value of a Share on the date of grant of such Option. For the purposes of the foregoing formula, the "Black-Scholes Percentage" shall be the percentage obtained by dividing (x) the value of a Formula Option, as determined by the Board, for one (1) Share under the Black-Scholes option pricing model using the historical price volatility of the Shares during the five (5) year period immediately preceding the date of the grant of such Option, by (y) the Fair Market Value of one (1) Share on the date of grant of such Option. (c) Exercise Prices. The exercise price per Share under an Option --------------- shall be the per Share Fair Market Value on the date of grant of such Option. (d) Time and Method of Exercise. Except in the case of the death of --------------------------- a Participant, any Fixed Option granted pursuant to the Plan shall not be exercisable until the date which is six months from the date of grant of such Option. Except in case of the death of a Participant, any Formula Option granted pursuant to the Plan shall not be exercisable until the date which is one (1) year from the date of grant of such Option. In the case of the death of a Participant, any Fixed Option or Formula Option held by such Participant that is not then exercisable shall be immediately exercisable. (e) General. ------- (i) Limits on Transfer of Options. ----------------------------- (A) Each Option and each right under any Option, shall be exercisable only by the Participant during the Participant's lifetime, or, if permissible under applicable law, by the Participant's guardian or legal representative. (B) No Option and no right under any such Option may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution and any such purported assignment, alienation, 3 pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company; provided that the designation of a -------- beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale transfer or encumbrance. (ii) Term of Options. Subject to Section 5(c)(v), each Option shall --------------- expire ten years from its date of grant. (iii) Share Certificate. Certificates for Shares to which a ----------------- Participant is entitled pursuant to the exercise of any Option shall not be delivered until the Board determines that such delivery will comply with all applicable rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares are then listed, and any applicable federal or state laws. Upon delivery, all such certificates shall be subject to such stop transfer orders and other restrictions as the Board may deem advisable under the Plan or such rules, regulations, requirements and laws. The Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (iv) Delivery of Shares and Payment of Participant of Consideration. -------------------------------------------------------------- No Shares shall be delivered pursuant to the exercise of any Option until payment in full of any amount required to be paid pursuant to the Plan or the applicable Option Agreement is received by the Company. The holder may make such payment in cash, cash equivalents or, in whole or in part, in Shares; provided that the combined value of any cash or cash equivalents and the Fair Market Value of any Shares tendered to the Company, as of the date of such tender, is at least equal to the full amount required to be paid pursuant to the Plan and the applicable Option Agreement to the Company. (v) Termination of Service. If a Participant's service as an ---------------------- Eligible Director is terminated for any reason, including death, any Option held by such Participant shall remain exercisable for one (1) year after such termination, but in no event beyond the expiration date of such Option. Upon the expiration of such one (1) year period, any unexercised Options held by such Participant shall be canceled. SECTION 6. Amendment and Termination. Except to the extent ------------------------- prohibited by applicable law and unless otherwise expressly provided in an Option Agreement or in the Plan: (a) Amendments to the Plan. The Board may amend, alter, suspend, ---------------------- discontinue, or terminate the Plan; provided that any such amendment, alteration, suspension, discontinuation, or termination that would materially impair the rights of any Participant or a beneficiary thereof as to any outstanding Option shall not to that extent be effective without the approval of the affected Participant or beneficiary; and provided further that -------- ------- notwithstanding any other provision of the Plan or any Option Agreement, without the approval of the stockholders of the Company no such amendment, alteration, suspension, discontinuation, or termination shall be made that would: 4 (i) increase the total number of Shares available for Options under the Plan, except as provided in Section 4 of the Plan; (ii) permit Options encompassing rights to purchase Shares to be granted with per Share exercise or purchase prices of less than the Fair Market Value of a Share on the date of grant thereof; or (iii) otherwise cause the Plan to cease to comply with any tax or regulatory requirement, including for these purposes any approval or other requirement which is a prerequisite for exemptive relief from Section 16(b) of the Exchange Act. (b) Correction of Defects, Omissions and Inconsistencies. Subject to ---------------------------------------------------- Section 6(a), the Board may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Option or Option Agreement in the manner and to the extent it shall deem necessary to carry the Plan into effect. In the event of a conflict between any term or provision contained in an Option or an Option Agreement and a term or provision contained in the Plan, the applicable terms and conditions of the Plan shall govern and prevail. SECTION 7. General Provisions. ------------------ (a) Withholding. The Company is hereby authorized to withhold from ----------- any transfer of Shares pursuant to the exercise of an Option or from any compensation or other amount owing to a Participant the amount (in cash, Shares or other property) of any applicable withholding taxes in respect of the exercise of an Option or any payment or transfer under an Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. Without limiting the foregoing, a Participant may elect to satisfy any tax withholding obligations that may arise upon the exercise of an Option by directing the Company to withhold a number of Shares otherwise deliverable upon such exercise having a Fair Market Value equivalent to the amount of such obligation. (b) No Limit on Other Compensation Arrangements. Nothing contained ------------------------------------------- in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. (c) Governing Law. The validity, construction, and effect of the ------------- Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware. (d) Severability. If any provision of the Plan or any Option is or ------------ becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Option, or would disqualify the Plan or any Option under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board, materially 5 altering the intent of the Plan or the Option, such provision shall be stricken as to such jurisdiction, Person or Option and the remainder of the Plan and any such Option shall remain in full force and effect. (e) No Trust or Fund Created. Neither the Plan nor any Option shall ------------------------ create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Option, such right shall be no greater than the right of any unsecured general creditor of the Company. (f) No Fractional Shares. No fractional Shares shall be issued or -------------------- delivered pursuant to the Plan or any Option, and the Board shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. (g) Headings. Heading are given to the Sections and subsections of -------- the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 8. Effective Date of Plan. The Plan was effective as of June ---------------------- 28, 1991, and was approved by the Company's stockholders at their annual meeting on March 27, 1992. The Amended and Restated Plan shall be effective as of January 1, 1997, subject to its being approved by the Company's stockholders at their annual meeting on April 4, 1997. In the event the Company's stockholders do not so approve the Amended and Restated Plan, the Plan, as approved by the Company's stockholders at their annual meeting on March 27, 1992, shall remain in full force and effect, and the Amended and Restated Plan shall be of no further force or effect. 6 EX-10.6 4 RESTATED DIRECTORS' RETIREMENT PLAN EXHIBIT 10.6 CERTIFICATE OF ADOPTION CERTIFIED COPY OF RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION --------------------- WHEREAS, this corporation has implemented a Restated Directors' Retirement Plan ("Retirement Plan") and the 1992 Stock Option Plan for Non- Employee Directors ("1992 Plan") to provide certain retirement benefits and stock option grants to directors of this corporation. WHEREAS, it is in the best interest of this corporation and its stockholders to amend the terms of the Retirement Plan and 1992 Plan in keeping with prevailing trends, issues and concerns of other publicly-owned corporations similar to this corporation. WHEREAS, the Board of Directors has the authority under Section 9(c) of the Retirement Plan to terminate the Retirement Plan and under Section 6 of the 1992 Plan to amend the 1992 Plan. NOW, THEREFORE, BE IT RESOLVED, that the terms and provisions of Amendment No. I to the 1992 Plan be, and hereby are, approved in the form as presented to the Directors. RESOLVED FURTHER, that the first sentence of Section 4(a)(1) of the Retirement Plan be amended to include the phrase "ending April 4, 1997" at the end of such sentence; that Section 4(a)(2)(A) and Section 4(a)(3)(A) of the Retirement Plan be amended to include the phrase "ending April 4, 1997" following the word "Director" and preceding the semi-colon; and that Section 4(a)(2)(B) and Section 4(a)(3)(B) be amended to include the phrase "ending April 4, 1997" following the word "Director" and preceding the period. RESOLVED FURTHER, that the Retirement Plan be terminated in accordance with the express provisions of the Retirement Plan. RESOLVED FURTHER, that the effective date of the amendment of termination of the Retirement Plan shall be as of the date of the approval of Amendment No. I to the 1992 Plan by the stockholders of this corporation. * * * * * * * * * * I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held on December 16, 1996, at which meeting a quorum of said Board was at all times present and acting and that said Board resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Dated: January 24, 1997 /s/ Lynne M. O. Brickner --------------------------- Lynne M. O. Brickner Secretary 2 EX-10.7 5 LONG-TERM STOCK INCENTIVE PLAN EXHIBIT 10.7 AMENDED AND RESTATED WHITTAKER CORPORATION LONG-TERM STOCK INCENTIVE PLAN (1989) SECTION 1. Purpose The purposes of the Whittaker Corporation Long-Term Incentive Plan (1989) (the "Plan") are to promote the interests of Whittaker Corporation (the "Company") and its shareholders by (i) attracting and retaining executive personnel and other key employees of outstanding ability; (ii) motivating executive personnel and other key employees, by means of performance-related incentives, to achieve longer-range performance goals; and (iii) enabling such employees to participate in the long-term growth and financial success of the Company. SECTION 2. Definitions "Affiliate" shall mean any corporation or other entity which is not a Subsidiary but as to which the Company possesses a direct or indirect ownership interest and has representation on the board of directors or any similar governing body. "Award" shall mean a grant or award under Section 6 through 10, inclusive, of the Plan, as evidenced in a written document delivered to a Participant as provided in Sec tion 11(b). "Board of Directors" shall mean the board of directors of the Company. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean the Compensation and Stock Option Committee of the Board of Directors. "Common Stock" or "Stock" shall mean the common stock, par value $.01 per share, of the Company. "Corporation" shall mean the Company and its Subsidiaries and Affiliates. "Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive amounts due the Participant in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate. "Employee" shall mean any employee of the Corporation. "Incentive Stock Option" shall mean a stock option granted under Section 6 which is intended to meet the requirements of Section 422 of the Code. "Nonqualified Stock Option" shall mean a stock option granted under Section 6 which is not intended to be an Incentive Stock Option. "Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option. "Participant" shall mean an Employee who is selected by the Committee to receive an Award under the Plan. "Payment Value" of an earned Performance Share shall mean the fair market value of a share of Common Stock on the day of the Committee's determination under Section 8(c)(2) with respect to the applicable Performance Cycle. "Performance Cycle" or "Cycle" shall mean the period of years selected by the Committee during which the performance is measured for the purpose of determining the extent to which an award of Performance Shares has been earned. "Performance Goals" shall mean the objectives established by the Committee for a Performance Cycle, for the purpose of determining the extent to which Performance Shares which have been contingently awarded for such Cycle are earned. "Performance Share" shall mean an award granted pursuant to Section 8 of the Plan. "Restricted Period" shall mean the period selected by the Committee during which a grant of Restricted Stock or Restricted Stock Units may be forfeited to the Company. "Restricted Stock" shall mean shares of Common Stock contingently granted to a Participant under Section 9 of the Plan. "Restricted Stock Unit" shall mean a fixed or variable dollar denominated unit contingently awarded under Section 9 of the Plan. "Stock Appreciation Right" shall mean a right granted under Section 7. "Stock Unit Award" shall mean an award of Common Stock or units granted under Section 10. "Subsidiary" shall mean any corporation or other entity in which the Company possesses directly or indirectly 50% or more of the total combined voting power. "Substitute Awards" shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Corporation or with which the Corporation combines. 2 SECTION 3. Administration The Plan shall be administered by the Committee. The Committee shall have sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time deem advisable, and to interpret the terms and provisions of the Plan. The Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not executive officers or directors of the Company provided the Committee shall fix the maximum amount of such Awards for the group and a maximum for any one Participant. The Committee's decisions, or the decisions of its delegates, shall be binding upon all persons, including the Company, stockholders, employees, Participants and Designated Beneficiaries. SECTION 4. Eligibility All Employees who, in the opinion of the Committee, have the capacity for contributing in a substantial measure to the successful performance of the Company are eligible to be Participants in the Plan. SECTION 5. Maximum Amount Available for Awards (a) The maximum number of shares of Stock in respect of which Awards may be granted under the Plan shall be 2,000,000 shares of Common Stock. No person may receive Awards under the Plan in any calendar year that relate to more than 200,000 shares of Stock. Shares of Common Stock may be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market. In the event that (i) an Option or Stock Appreciation Right expires or is terminated unexercised as to any shares of Common Stock covered thereby or (ii) any award in respect of shares of Common Stock is forfeited or otherwise cancelled for any reason under the Plan, such shares shall thereafter be again available for award pursuant to the Plan. In the event that any Option or other Award granted hereunder is exercised through the delivery of shares of Stock, the number of shares of Stock available for awards under the Plan shall be increased by the number of shares of Stock surrendered. (b) In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, securities or other property), recapitalization, reorganization, merger, consolidation, split-up, spinoff, combination, repurchase or exchange of shares, issuance of warrants or other rights to purchase Common Stock at a price below fair market value or other similar corporate event affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in its sole discretion, and in such manner as the Committee may deem equitable, adjust any or all of (1) the number and kind of shares which may thereafter be made the subject of Awards, in aggregate and with respect to the individual limit set forth in Section 5(a), (2) the number and kind of shares (or other securities or assets) subject to outstanding Awards, and (3) the grant or exercise price with 3 respect to any Award and/or, if deemed appropriate, make provision for a cash payment to a Participant or a person who has an outstanding Award; provided that the number of shares subject to any Award shall always be a whole number. (c) Any shares of Common Stock underlying Substitute Awards shall not, except in the case of shares with respect to which Substitute Awards are granted to Employees who are officers or directors of the Company for purposes of Section 16 of the Securities Exchange Act of 1934 or any successor section thereto, be counted against the shares of Common Stock available for Awards under the Plan. SECTION 6. Stock Options (a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall establish the option price at the time each Option is granted, which price, except in the case of an Option that is a Substitute Award, shall not be less than 100% of the fair market value of the Common Stock on the date of grant (determined in accordance with procedures established by the Committee). The Committee shall have the authority to grant Incentive Stock Options, Nonqualified Stock Options or both. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code and any implementing regulations. (b) Exercise. (1) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award or thereafter, provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of 10 years from the date of such grant. The Committee may impose such conditions with respect to the exercise of Options, including any relating to applicable federal or state securities laws, as it may deem necessary or advisable. (2) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price, or provision therefor, is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by exchanging shares of Common Stock owned by the optionee (which are not the subject of any pledge or other security interest), or by a combination of the foregoing; provided that the combined value of all cash and cash equivalents and the fair market value of any such Common Stock so tendered to the Company, value (in accordance with procedures established by the Committee) as of the date of such tender, is at least equal to such option price. SECTION 7. Stock Appreciation Rights (a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Stock Appreciation Rights shall be 4 granted, the number of shares to be covered by each Stock Appreciation Right, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights may be granted in tandem with an Option, in addition to an Option or freestanding and unrelated to an Option. Stock Appreciation Rights granted in tandem with or in addition to an Option may be granted either at the same time as the Option or at a later time. Stock Appreciation Rights shall not be exercisable earlier than six months after grant nor after the expiration of 10 years from the date of grant, and except for Stock Appreciation Rights which are Substitute Awards, shall have a grant price of not less than 100% of the fair market value of the Common Stock on the date of grant or, if granted in tandem with an Option but at a later time, on the date of grant of such Option (determined in accordance with procedures established by the Committee). (b) Each Stock Appreciation Right shall entitle the Participant to receive from the Company with respect to each share covered thereby an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise of the Stock Appreciation Right over the grant price, provided that the Committee may for administrative convenience determine that, for any Stock Appreciation Right, which is not related to an Incentive Stock Option and can only be exercised during limited periods of time in order to satisfy the conditions of certain rules of the Securities and Exchange Commission, the exercise of any such Stock Appreciation Right for cash during such limited period shall be deemed to occur for all purposes hereunder on the day during such limited period on which the fair market value of the Stock is the highest. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted or exercised prior to such determination as well as Stock Appreciation Rights granted or exercised thereafter. The Committee shall determine upon the exercise of a Stock Appreciation Right whether such Stock Appreciation Right shall be settled in cash, shares of Common Stock or a combination of cash and shares of Common Stock. SECTION 8. Performance Shares (a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees who shall be granted Performance Shares, the number of Performance Shares to be granted to each Participant for each Performance Cycle, the Performance Goals for each Performance Cycle, the duration of each Performance Cycle and the value of each Performance Share. There may be more than one Performance Cycle in existence at any one time, and the duration of Performance Cycles may differ from each other. (b) The Committee shall establish Performance Goals for each Cycle on the basis of such criteria and to accomplish such objectives as the Committee may from time to time select. During any Cycle, the Committee may adjust the Performance Goals for such Cycle as it deems equitable in recognition of unusual or nonrecurring events affecting the Corporation or changes in applicable tax laws or accounting principles or such other factors as the Committee may determine. 5 (c) (1) The Committee shall, as soon as practicable after the expiration of each Performance Cycle, determine the number of Performance Shares which have been earned on the basis of performance in relation to the Performance Goals established for such Performance Cycle. (2) Payment Values of earned Performance Shares shall be distributed to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary, as soon as practicable after the Committee's determination under paragraph (1) above. The Committee shall determine whether Payment Values are to be distributed in the form of cash, shares of Common Stock or a combination of cash and shares of Common Stock. SECTION 9. Restricted Stock and Restricted Stock Units (a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom shares of Restricted Stock and Restricted Stock Units shall be granted, the number of shares of Restricted Stock and the number of Restricted Stock Units to be granted to each Participant, the duration of the Restricted Period during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company, and the other terms and conditions of such Awards. (b) Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except as herein provided, during the Restricted Period. Certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and deposited by him, together with a stock power endorsed in blank, with the Company or in escrow with an escrow agent designated by the Company. At the expiration of the Restricted Period, the Company shall deliver or cause such certificates to be delivered to the Participant. Payment for Restricted Stock Units shall be made by the Corporation in cash, shares of Common Stock or a combination of cash and shares of Common Stock. SECTION 10. Other Stock Based Awards (a) In addition to Awards granted pursuant to other provisions of the Plan, subject to the provisions of the Plan, the Committee shall have sole and complete authority to grant to Participants Stock Unit Awards which can be in the form of Common Stock or units, the value of which is based, in whole or in part, on the value of Common Stock. Subject to the provisions of the Plan, including Section 10(b) below, Stock Unit Awards shall be subject to such terms, restrictions, conditions, vesting requirements and payment rules (all of which are sometimes hereinafter collectively referred to as "rules") as the Committee may determine with sole and complete discretion at the time of grant. The rules need not be identical for each Stock Unit Award. (b) In the sole and complete discretion of the Committee, a Stock Unit Award may be granted subject to the following rules: 6 (1) Any shares of Common Stock which are part of a Stock Unit Award may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued or, if later, the date provided by the Committee at the time of grant of the Stock Unit Award. (2) Stock Unit Awards may provide for the payment of cash consideration by the person to whom such Award is granted or provide that the Award, and any Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; provided that for any Common Stock to be purchased in connection with a Stock Unit Award, except in the case of a Stock Unit Award which is a Substitute Award, the purchase price shall be at least 50% of the fair market value of such Common Stock on the date such Award is granted (determined in accordance with procedures established by the Committee). (3) Stock Unit Awards may relate in whole or in part to certain performance criteria established by the Committee at the time of grant. (4) Stock Unit Awards may provide for deferred payment schedules and/or vesting over a specified period of employment. (5) In such circumstances as the Committee may deem advisable, the Committee may waive or otherwise remove, in whole or in part, any restriction or limitation to which a Stock Unit Award was made subject at the time of grant. (c) In the sole and complete discretion of the Committee, an Award, whether made as a Stock Unit Award under this Section 10 or as an Award granted pursuant to Sections 6 through 9, may provide the Participant with (i) dividends or dividend equivalents (payable on a current or deferred basis) and (ii) cash payments in lieu of or in addition to an Award. SECTION 11. General Provisions (a) Withholding. The Corporation shall have the right to deduct from all amounts paid in cash to a Participant (whether under the Plan or otherwise) any taxes required by law to be withheld in respect of Awards hereunder to such Participant. In the case of payments of Awards in the form of Common Stock, at the Committee's discretion the Participant may be required to pay to the Corporation the amount of any taxes required to be withheld with respect to such Common Stock, or in lieu thereof, the Corporation shall have the right to retain (or the Participant may be offered the opportunity to elect to tender) the number of shares of Common Stock whose fair market value, determined in accordance with procedures established by the Committee, equals the amount required to be withheld. (b) Awards. Each Award hereunder shall be evidenced by a writing delivered to the Participant which shall specify the terms and conditions thereof and any rules applicable thereto, including the effect on such Award of the death, retirement or other termination of 7 employment of the Participant and the effect thereon, if any, of a change in control of the Company. (c) Nontransferability. No Award shall be assignable or transferable, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant, except by will or the laws of descent and distribution, provided, however, that an Award may be transferable, to the -------- ------- extent set forth in the applicable Award agreement, (i) if such Award agreement provisions do not disqualify such Award for exemption under Rule 16b-3 under the Securities Exchange Act of 1934, or (ii) if such Award is not intended to qualify for exemption under such rule. (d) No Right to Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Corporation. Further, the Corporation may at any time dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any agreement entered into with respect to an Award. (e) No Rights as Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she has become the holder thereof. Notwithstanding the foregoing, in connection with each grant of Restricted Stock hereunder, the applicable Award shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Stock. (f) Construction of the Plan. The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Delaware. (g) Effective Date. Subject to the approval of the stockholders of the Company, the Plan shall be effective on the date of initial stockholder approval. No Awards may be granted under the Plan after the tenth anniversary of the date of the initial stockholder approval. (h) Amendment of Plan. The Board of Directors may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement with which or for which the Board deems it necessary or desirable for the Plan to comply or qualify, including for these purposes any approval requirement which is a prerequisite for exemptive relief from Section 16(b) of the Securities Exchange Act of 1934. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary so as to have the Plan conform with local rules and regulations. (i) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award with the Participant's consent at any time prior to payment or exercise in 8 any manner not inconsistent with the terms of the Plan, including (1) to change the date or dates as of which (A) an Option or Stock Appreciation Right becomes exercisable, (B) a Performance Share is deemed earned or (C) Restricted Stock or a Restricted Stock Unit becomes nonforfeitable or (2) to cancel and reissue an Award under such different terms and conditions as it determines, with sole and complete discretion appropriate. 9 EX-10.8 6 SUPPLEMENTAL BENEFIT PLAN EXHIBIT 10.8 WHITTAKER CORPORATION SUPPLEMENTAL BENEFITS PLAN -------------------------- This Supplemental Benefit Plan (hereinafter referred to as the "Plan") has been adopted by the Board of Directors of Whittaker Corporation, a Delaware corporation (hereinafter referred to as the "Company"), effective as of January 1, 1988. 1. Purpose ------- The purpose of the Plan is to provide supplemental retirement income for certain Employees who participate in the Whittaker Corporation Employees' Pension Plan whose retirement benefits are reduced because of the maximum limitation on annual compensation under Code Section 401(a)(17). 2. Definitions ----------- The following definitions, set forth in alphabetical order, are used throughout the Plan. Terms or phrases appearing in capital letters that are not defined below shall have the same meanings as under the Retirement Plan, as defined below. (a) "Board of Directors" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. (c) "Committee" means the Compensation and Stock Option Committee of the Board of Directors. (d) "Participant" means an executive officer of Whittaker Corporation who satisfies the conditions for eligibility described in Section 3. The term "Participant" shall also include the Beneficiary of a deceased Participant. (e) "Retirement Plan" means the Whittaker Corporation Employees' Pension Plan, as amended from time to time, which is a defined benefit pension plan qualified under Section 401(a) of the Code. (f) "Supplemental Benefit" means the benefit described in Section 4. 3. Eligibility to Participate -------------------------- Each Participant whose aggregate pension benefit under the Retirement Plan and any other defined benefit pension -1- of an Affiliated Company is reduced by reason of the maximum limitation on annual compensation under Code Section 401(a)(17). 4. Supplemental Benefits --------------------- (a) Amount of Benefits ------------------ Each Participant shall be entitled to a Supplemental Benefit under this Plan in an amount equal to the actuarial equivalent of (i) - [(ii) + (iii)], where: (i) equals the aggregate amount of monthly pension benefit payable to the Participant under the Retirement Plan and any other defined benefit pension plan of an Affiliated Company on the normal benefit commencement date specified in the Retirement Plan and such other defined benefit pension plan, as determined under the normal retirement benefit formula of the Retirement Plan and such other defined benefit pension plan before applying any provision of the Plan that would reduce benefits because of the maximum benefit limitations under Code Section 415 or the maximum dollar limitation on annual compensation under Code Section 401(a)(17); (ii) equals the aggregate amount of a Participant's monthly pension benefit determined in paragraph (i) above after applying the maximum benefit limitations under Code Section 415 and the maximum dollar limitation on annual compensation under Code Section 401(a)(17); and (iii) equals the aggregate amount of the monthly pension benefit payable to the Participant pursuant to the terms of the Whittaker Corporation Excess Benefit Plan, as amended from time to time thereafter. (b) Form of Benefits ---------------- The Supplemental Benefit determined in subsection (a) above shall be paid to the Participant in the form of a monthly, straight-life annuity. The amount of such annuity shall be determined by the actuary for the Retirement Plan using the actuarial assumptions set forth in the Retirement Plan for purposes of determining the actuarial equivalent of alternative forms of benefits. 5. Vesting ------- Subject to the rights of general creditors as set forth in Section 7 and the right of the Company to discontinue the Plan as provided in Section 10, a Participant shall have a vested and nonforfeitable interest in the Supplemental Benefit -2- to the same extent and in the same manner as the Participant's benefits become vested under the Retirement Plan. 6. Commencement of Benefits ------------------------ The Supplemental Benefit under this Plan shall commence on the later of: (a) the date on which the Participant is first eligible to begin receiving a benefit under the Retirement Plan; or (b) the first day of the month next following the date of the Participant's Severance from the Company. 7. Funding of Benefits ------------------- (a) The Plan shall be unfunded and each Participant shall have the status of a general unsecured creditor with respect to the Company's obligation to make payments under this Plan. All benefits payable under the Plan shall be paid from the Company's general assets, and nothing contained in the Plan shall require the Company to set aside or hold in trust any funds for the benefit of a Participant. Any funds of the Company available to pay benefits under the Plan shall be subject to the claims of general creditors of the Company and may be used for any purpose by the Company. (b) Notwithstanding the provisions of subsection (a), the Company may, at the direction, and in the absolute discretion, of the Board of Directors, transfer to the trustee of one or more trusts established for the benefit of one or more Participants assets from which all or a portion of the benefits provided under the Plan will be satisfied, provided that such assets held in trust shall at all times be subject to the claims of general unsecured creditors of the Company, and no Participant shall at any time have a prior claim to such assets. 8. Administration of the Plan -------------------------- The Committee shall administer the Plan. The Committee shall keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee shall include, without limitation, the following: -3- (a) Resolving all questions relating to the eligibility Of an Employee to become a Participant; (b) Determining the amount of benefits payable to Participants and authorizing and directing the Company with respect to the payment of benefits under the Plan; (c) Construing and interpreting the Plan whenever necessary to carry out its intention and purpose and making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; and (d) Compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan. Any action taken or determination made by the Committee shall, except as otherwise provided in Section 11 below, be conclusive on all parties. No member of the Committee shall vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action shall be taken by the Board of Directors. Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan. 9. Claims Procedure ---------------- (a) If a Participant (hereinafter referred to as the "Claimant") does not receive the timely payment of the benefits which the Claimant believes are due under the Plan, the Claimant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan shall be made in writing and shall be signed by the Claimant. Claims shall be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." If the Claimant does not furnish sufficient information with the claim for the Claims Coordinator to determine the validity of the claim, the Claims Coordinator shall indicate to the Claimant any additional information which is necessary for the Claims Coordinator to determine the validity of the claim. -4- Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 90 days following the receipt by the Claims Coordinator of the information necessary to process the claim. In the event the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator shall notify the Claimant in writing of the denial of the claim and notify the Claimant of his or her right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the Claimant, the specific reason for such denial, the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim with an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Claimant's claim within 90 days after receipt by the Claims Coordinator, such claim shall be deemed to be denied for purposes of the following appeals procedure. (b) Any Claimant whose claim for benefits is denied in whole or in part may appeal for a review of the decision by the Committee. Such appeal must be made within three months after the Claimant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must: (i) request a review by the Committee of the claim for benefits under the Plan; (ii) set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and (iii) set forth any issues or comments which the Claimant deems pertinent to the appeal. The Committee shall regularly review appeals by Claimants. The Committee shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. The Committee shall make a full and fair review of each appeal and any written materials submitted by the Claimant in connection therewith. The Committee may -5- require the Claimant to submit such additional facts, documents or other evidence as the Committee in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee, provided the Committee finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee shall make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits shall be final and conclusive upon all parties thereto. In the event the Committee denies an appeal in whole or in part, the Committee shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent provisions of the Plan on which the Committee's decision is based. 10. Miscellaneous ------------- (a) Nothing in the Plan shall confer upon a Participant the right to continue in the employ of the Company or an Affiliated Company or shall limit or restrict the right of the Company or any Affiliated Company to terminate the employment of a Participant at any time with or without cause. (b) Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit shall be void. No such right or benefit shall in any manner be liable for or subject to the debts, liabilities or torts of a Participant. In addition, none of the rights of a Participant are transferable by inter vivos gift or testamentary disposition. (c) The Plan may be amended at any time by the Committee provided such amendment does not have the effect of increasing, directly or indirectly, the benefit of any Participant. The Plan may also be amended or terminated by the Board of Directors at any time, and any amendment adopted by the Board of Directors shall supersede any prior or later amendment adopted by the Committee that is inconsistent with the action of the Board of Directors. No amendment shall have the effect of decreasing a Participant's accrued benefit. -6- (d) The Plan is intended to provide benefits for "management or highly compensated" employees within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, except for Supplemental Benefits in pay status, in the event it is determined by a court of competent jurisdiction or by an opinion of counsel based on judicial decisions or administrative pronouncements of the Department of Labor that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so exempt, in the sole discretion of the Board of Directors either (i) the Plan shall thereafter be modified and operated and administered in such a manner as to comply with the provisions of Parts 2, 3 and 4 of Title I of ERISA or (ii) the Plan shall terminate and no further benefits shall accrue hereunder. If the Plan is terminated, the benefit of each Participant accrued under the Plan on the date of termination shall be paid immediately to such Participant in a single lump sum payment. (e) If any benefit payment hereunder becomes payable to a Participant determined by the Committee to be under any legal incapacity, payments under this Plan shall be made to the guardian or legal representative of such person and such payment shall constitute a full and complete discharge of all obligations under this Plan to the Participant. (f) If multiple claims are received by the Committee with respect to any benefits payable under this Plan, payment by the Committee to such person or persons as the Committee determines to be entitled to receive such payment shall constitute a full and complete discharge of all obligations with respect to such payment. Benefit payment under this Plan may be suspended by the Committee pending resolution to the satisfaction of the Committee of multiple claims. (g) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way. (h) The Plan shall be construed and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the law of the State of California. -7- Executed at Los Angeles, California this 23rd day of November, 1988. ---- -------- WHITTAKER CORPORATION By: /s/ ^^??^^ ---------------------- Its: VP ----------------- -8- the beginning thereof. WHEREAS the Board of Directors of this corporation (the "Board") previously adopted the Whittaker Corporation Supplemental Benefit Plan (the "Plan"); and WHEREAS Section 10(c) of the Plan provides that the Board may amend the Plan at any time, and the Board has determined that it is now necessary and appropriate to amend the Plan as hereinafter set forth. NOW, THEREFORE, BE IT RESOLVED that Section 2 of the Plan is hereby amended by adding the following new paragraphs at the end thereof: "(g) `Day of Service' means, in the case of any Employee, each day during any period commencing with the day on which the Employee first enters into active service as an Employee on or following his most recent date of rehire by the Company or any Affiliated Company and ending on the date of his next following Severance. If an Employee's Severance date is the date of his retirement, discharge or voluntary termination of employment, then Day of Service shall also include each day between such Severance date and the date upon which the Employee recommences active service as an Employee if the Employee recommences such active service Prior to: (1) The first anniversary of such Severance date if such Severance date did not occur during an absence from service by the Employee for a reason other than retirement, discharge or voluntary termination of employment; or 4 (2) The first anniversary of the date on which the Employee was first absent from service for a reason other than retirement, discharge or voluntary termination of employment if such Severance date occurred during such absence. Credit for Days of Service shall be given with respect to periods of military service to such extent and for such purposes as are required by applicable federal law. Credit for Days of Service shall be given with respect to service performed for an operating unit, division or subsidiary of any corporation, trade or business that is acquired by the Company or any Affiliated Company commencing on the effective date of such acquisition. Notwithstanding the provisions of paragraph (1), the Board of Directors or the Committee by resolution may provide that, for purposes of determining Vested Service, credit for Days of Service also shall be given with respect to service performed for such an entity prior to the effective date of the acquisition. Finally, Days of Service shall include any period of service that constitutes service with a predecessor employer within the meaning of Section 414(a)(1) of the Code. (h) 'Early Retirement Age' means the date on which a Participant attains age 55 and completes at least 10 years of Vested Service, as determined for purposes of this Plan and the Retirement Plan. (i) 'Normal Retirement Age' means the date on which a Participant attains age 65. Notwithstanding the foregoing, effective with respect to Participants who are hired after attaining age 60 and after December 31, 1988, Normal Retirement Age means the fifth anniversary of the date on which such a Participant becomes a Participant in the Plan. (j) 'Severance' means a Participant's termination of employment with the Company and all Affiliated Companies for any reason at any time. (k) 'Vested Service' means the number of years of an Employee's Vested Service determined according to this subsection. An Employee shall be deemed to accrue a full year of Vested Service for each calendar year during which he completes at least 365 Days of Service as an Employee. In addition, an Employee shall be deemed to accrue a fractional year of Vested Service in any calendar year in which he 5 completes one or more but less than 365 Days of Service as an Employee. Such fractional year of Vested Service shall be computed by dividing the number of Days of Service completed by the Employee during such calendar year by 365." RESOLVED FURTHER that Section 5 of the Plan is hereby amended in its entirety to read as follows: "5. Reduction of Excess Benefits ---------------------------- Notwithstanding any provision of the Plan to the contrary, the Supplemental Benefit of each Participant who has a Severance prior to the date on which he attains Normal Retirement Age and is not again an Employee on such date shall be proportionately reduced in accordance with the following schedule: Participant's Years Reduction of Vested Service Percentage - ------------------- ---------- Less than 5 100% At least 5 0%" RESOLVED FURTHER that Section 6 of the Plan is hereby amended in its entirety to read as follows: "6. Commencement of Benefits The Supplemental Benefit under this Plan shall commence on the first day of the month next following the later of: (a) the date on which the Participant has a Severance; (b) in the case of a Participant who completes at least 10 years of Vested Service prior to his Severance, the date on which the Participant attains Early Retirement Age; or (c) in the case of a Participant who does not complete at least 10 years of Vested Service prior to his Severance, the date on which the Participant attains Normal Retirement Age." RESOLVED FURTHER that the last two paragraphs of Section 8 of the Plan are hereby amended to read as follows: "Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan. Any action taken or determination made by the Committee or its delegatees shall, except as otherwise provided in 6 Section 10, be conclusive as to all parties. Neither a member of the Committee nor a delegatee may vote on, or take any action with respect to, any matter relating to such member or delegatee. If a delegatee cannot take any action with respect to a matter, such action shall be taken by the Committee. Similarly, if a majority of the members of the Committee cannot take any action with respect to a matter, such action shall be taken by the Board of Directors." RESOLVED FURTHER that the first sentence of Section 10(b) of the Plan is hereby amended by deleting the phrase "Except as otherwise provided in the Plan," from the beginning thereof. RESOLVED FURTHER that Section 10(c) of the Plan is hereby amended by adding the following two sentences at the end thereof: "If the Plan is terminated, no additional Supplemental Benefits shall accrue after the termination date. Any Supplemental Benefits that have already accrued as of the termination date shall be distributed at the time and in the manner specified in Section 4(b) and Section 6, above." RESOLVED FURTHER that Section 10(d) of the Plan is hereby amended in its entirety to read as follows: "The Plan is intended to provide benefits for 'management or highly compensated employees' within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, if a court of competent jurisdiction, the Department of Labor or the Internal Revenue Service, as the case may be, makes a final determination that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so exempt, then in the sole discretion of the Board of Directors either (i) the Plan shall thereafter be modified and operated and administered in such a manner as to comply with the provisions of Parts 2, 3 and 4 of Title I of ERISA, or (ii) the Plan shall terminate and no further benefits shall accrue hereunder. If the Plan is so terminated, then, notwithstanding Section 10(c), the benefit accrued under the Plan as of the termination date by each Participant (including a Participant whose benefit is in pay status) shall be paid to such Participant in a single lump sum payment within 30 7 days after the termination date." RESOLVED FURTHER that Section 10 of the Plan is hereby amended by moving Section 10(f) to the end of Section 9 and redesignating Sections 10(g) and 10(h) as Sections 10(f) and 10(g), respectively. 8 * * * * * * * * * * * * * I, Edward R. Muller, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation: that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held May 18, 1990, at which meeting a quorum of said Board was at all times present and acting and that said resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Date: June 12, 1990 /s/ Edward R. Muller ------------------------ Edward R. Muller Secretary 11 CERTIFIED COPY OF RESOLUTIONS OF THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION WHEREAS the Board of Directors of this corporation (the "Board") previously adopted the Whittaker Corporation Supplemental Benefit Plan (the "Plan"); and WHEREAS Section 10(c) of the Plan provides that the Board may amend the Plan at any time, and the Board has determined that it is now necessary and appropriate to amend the Plan as hereinafter set forth. NOW, THEREFORE, BE IT RESOLVED that Section 4(a)(i) of the Plan is hereby amended in its entirety to read as follows: "(i) equals the aggregate amount of monthly pension benefit payable to the Participant under the Retirement Plan (without regard to the Third Amendment to such Plan) and any other defined benefit pension plan of an Affiliated Company on the normal benefit commencement date specified in the Retirement Plan and such other defined benefit pension plan, as determined under the normal retirement benefit formula of the Retirement Plan (without regard to the Third Amendment to such Plan) and such other defined benefit pension plan before applying any provisions of such plans that would reduce benefits because of the maximum benefit limitations under Code Section 415 or the maximum dollar limitation on annual compensation under Code Section 401(a)(17);". * * * * * * * * * * * I, Nadine D. Leonsky, do hereby certify that I am a duly elected and acting Assistant Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held November 9, 1990, at which meeting a quorum of said Board was at all times present and acting and that said resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Date: July 12, 1991 /s/ Nadine D. Leonsky ------------------------ Nadine D. Leonsky Assistant Secretary EX-10.9 7 EXCESS BENEFIT PLAN EXHIBIT 10.9 WHITTAKER CORPORATION EXCESS BENEFIT PLAN ------------------- This Excess Benefit Plan (hereinafter referred to as the "Plan") has been adopted by the Board of Directors of Whittaker Corporation, a Delaware corporation (hereinafter referred to as the "Company"), effective as of January 1, 1988. 1. Prior Plan ---------- This Plan amends, restates and supercedes the provisions of the Whittaker Corporation Supplemental Benefit Plan effective September 1, 1982, relating to the payment of benefits to certain participants of the Whittaker Corporation Employees' Pension Plan whose benefits under such Plan are reduced because of the limitations under Code Section 415 (the "Prior Plan"). The provisions of this Plan shall only apply to (a) participants in the Prior Plan whose benefits under such Prior Plan were not in pay status on January 1, 1988, and (b) individuals who become eligible to participate herein on or after January 1, 1988. 2. Purpose ------- The purpose of the Plan is to provide additional retirement income for certain Employees who participate in the Whittaker Corporation Employees' Pension Plan whose retirement benefits are reduced because of the limitations under Code Section 415. 3. Definitions ----------- The following definitions, set forth in alphabetical order, are used throughout the Plan. Terms or phrases appearing in capital letters that ar not defined below shall have the same meanings as under the Retirement Plan, as defined below. (a) "Board of Directors" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. (c) "Committee" means the Compensation and Stock Option Committee of the Board of Directors. (d) "Excess Benefit" means the benefit described in Section 5. -1- (e) "Participant" means an executive officer of Whittaker Corporation who satisfies the conditions for eligibility described in Section 4. The term "Participant" shall also include the Beneficiary of a deceased Participant. (f) "Retirement Plan" means the Whittaker Corporation Employees' Pension Plan, as amended from time to time, which is a defined benefit pension plan qualified under Section 401(a) of the Code. 4. Eligibility to Participate -------------------------- Each Participant whose aggregate pension benefit under the Retirement Plan and any other defined benefit pension of an Affiliated Company is reduced by reason of the maximum benefit limitations of Code Section 415 shall become a Participant in the Plan. 5. Excess Benefits --------------- (a) Amount of Benefits ------------------ Each Participant shall be entitled to an Excess Benefit under this Plan in an amount equal to the actuarial equivalent of the difference between (i) and (ii), where: (i) equals the aggregate amount of monthly pension benefit payable to the Participant under the Retirement Plan and any other defined benefit pension plan of an Affiliated Company on the normal benefit commencement date specified in the Retirement Plan and such other defined benefit pension plan, as determined under the normal retirement benefit formula of the Retirement Plan and such other defined benefit pension plan before applying any provision of the Plan that would reduce benefits because of the maximum benefit limitations under Code Section 415; and (ii) equals the aggregate amount of a Participant's monthly pension benefit determined in paragraph (i) above after applying the maximum benefit limitations under Code Section 415. (b) Form of Benefits ---------------- The Excess Benefit determined in subsection (a) above shall be paid to the Participant in the form of a monthly, straight-life annuity. The amount of such annuity shall be determined by the actuary for the Retirement Plan using the actuarial assumptions set forth in the Retirement Plan for purposes of determining the actuarial equivalent of alternative forms of benefits. -2- 6. Vesting ------- Subject to the rights of general creditors as set forth in Section 8 and the right of the Company to discontinue the Plan as provided in Section 11, a Participant shall have a vested and nonforfeitable interest in the Excess Benefit to the same extent and in the same manner as the Participant's benefits become vested under the Retirement Plan. 7. Commencement of Benefits ------------------------ The Excess Benefit under this Plan shall commence on the later of: (a) the date on which the Participant is first eligible to begin receiving a benefit under the Retirement Plan; or (b) the first day of the month next following the date of the Participant's Severance from the Company. 8. Funding of Benefits ------------------- (a) The Plan shall be unfunded and each Participant shall have the status of a general unsecured creditor with respect to the Company's obligation to make payments under this Plan. All benefits payable under the Plan shall be paid from the Company's general assets, and nothing contained in the Plan shall require the Company to set aside or hold in trust any funds for the benefit of a Participant. Any funds of the Company available to pay benefits under the Plan shall be subject to the claims of general creditors of the Company and may be used for any purpose by the Company. (b) Notwithstanding the provisions of subsection (a), the Company may, at the direction, and in the absolute discretion, of the Board of Directors, transfer to the trustee of one or more trusts established for the benefit of one or more Participants assets from which all or a portion of the benefits provided under the Plan will be satisfied, provided that such assets held in trust shall at all times be subject to the claims of general unsecured creditors of the Company, and no Participant shall at any time have a prior claim to such assets. 9. Administration of the Plan -------------------------- The Committee shall administer the Plan. The Committee shall keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations -3- necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee shall include, without limitation, the following: (a) Resolving all questions relating to the eligibility of an Employee to become a Participant; (b) Determining the amount of benefits payable to Participants and authorizing and directing the Company with respect to the payment of benefits under the Plan; (c) Construing and interpreting the Plan whenever necessary to carry out its intention and purpose and making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; and (d) Compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan. Any action taken or determination made by the Committee shall, except as otherwise provided in Section 11 below, be conclusive on all parties. No member of the Committees shall vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action shall be taken by the Board of Directors. Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan. 10. Claims Procedure ---------------- (a) If a Participant (hereinafter referred to as the "Claimant") does not receive the timely payment of the benefits which the Claimant believes are due under the Plan, the Claimant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan shall be made in writing and shall be signed by the Claimant. Claims shall be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." If the Claimant does not furnish sufficient -4- information with the claim for the Claims Coordinator to determine the validity of the claim, the Claims Coordinator shall indicate to the Claimant any additional information which is necessary for the Claims Coordinator to determine the validity of the claim. Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 90 days following the receipt by the Claims Coordinator of the information necessary to process the claim. In the event the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator shall notify the Claimant in writing of the denial of the claim and notify the Claimant of his or her right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the Claimant, the specific reason for such denial, the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim with an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Claimant's claim within 90 days after receipt by the Claims Coordinator, such claim shall be deemed to be denied for purposes of the following appeals procedure. (b) Any Claimant whose claim for benefits is denied in whole or in part may appeal for a review of the decision by the Committee. Such appeal must be made within three months after the Claimant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must: (i) request a review by the Committee of the claim for benefits under the Plan; (ii) set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and (iii) set forth any issues or comments which the Claimant deems pertinent to the appeal. The Committee shall regularly review appeals by Claimants. The Committee shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered by the Committee as soon as -5- possible but not later than 120 days after the appeal is received by the Committee. The Committee shall make a full and fair review of each appeal and any written materials submitted by the Claimant in connection therewith. The Committee may require the Claimant to submit such additional facts, documents or other evidence as the Committee in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee, provided the Committee finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee shall make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits shall be final and conclusive upon all parties thereto. In the event the Committee denies an appeal in whole or in part, the Committee shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent provisions of the Plan on which the Committee's decision is based. 11. Miscellaneous ------------- (a) Nothing in the Plan shall confer upon a Participant the right to continue in the employ of the Company or an Affiliated Company or shall limit or restrict the right of the Company or any Affiliated Company to terminate the employment of a Participant at any time with or without cause. (b) Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit shall be void. No such right or benefit shall in any manner be liable for or subject to the debts, liabilities or torts of a Participant. In addition, none of the rights of a Participant are transferable by inter vivos gift or testamentary disposition. (c) The Plan may be amended at any time by the Committee provided such amendment does not have the effect of increasing, directly or indirectly, the benefit of any Participant. The Plan may also be amended or terminated by the -6- Board of Directors at any time, and any amendment adopted by the Board of Directors shall supersede any prior or later amendment adopted by the Committee that is inconsistent With the action of the Board of Directors. No amendment shall have the effect of decreasing a Participant's accrued benefit. (d) If any benefit payment hereunder becomes payable to a Participant determined by the Committee to be under any legal incapacity, payments under this Plan shall be made instead to the guardian or legal representative of such person and such payment shall constitute a full and complete discharge of all obligations under this Plan to the Participant. (e) If multiple claims are received by the Committee with respect to any benefits payable under this Plan, payment by the Committee to such person or persons as the Committee determines to be entitled to receive such payment shall constitute a full and complete discharge of all obligations under this Plan with respect to such payment. Benefit payments under this Plan may be suspended by the Committee pending resolution of multiple claims to the satisfaction of the Committee. (f) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way. (g) The Plan shall be construed and governed in all respects in accordance with the law of the State of California. Executed at Los Angeles, California this 23rd day of November, 1988. WHITTAKER CORPORATION By: /s/ ?? --------------------- Its: VP ----------------- -7- CERTIFIED COPY OF RESOLUTIONS OF THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION WHEREAS the Board of Directors of this corporation (the "Board") previously adopted the Whittaker Corporation Excess Benefit Plan (the "Plan"); and WHEREAS Section 11(c) of the Plan provides that the Board may amend the Plan at any time, and the Board has determined that it is now necessary and appropriate to amend the Plan as hereinafter set forth. NOW, THEREFORE, BE IT RESOLVED that Section 3 of the Plan is hereby amended by adding the following new paragraphs at the end thereof: "(g) `Day of Service' means, in the case of any Employee, each day during any period commencing with the day on which the Employee first enters into active service as an Employee on or following his most recent date of rehire by the company or any Affiliated Company and ending on the date of his next following Severance. If an Employee's Severance date is the date of his retirement, discharge or voluntary termination of employment, then Day of Service shall also include each day between such Severance date and the date upon which the Employee recommences active service as an Employee if the Employee recommences such active service prior to: (l) The first anniversary of such Severance date if such Severance date did not occur during an absence from service by the Employee for a reason other than retirement, discharge or voluntary termination of employment; or (2) The first anniversary of the date on which the Employee was first absent from service for a reason other than retirement, discharge or voluntary termination of employment if such Severance date occurred during such absence. Credit for Days of Service shall be given with respect to periods of military service to such extent and for such purposes as are required by applicable federal law. Credit for Days of Service shall be given with respect to service performed for an operating unit, division or subsidiary of any corporation, trade or business that is acquired by the Company or any Affiliated Company commencing on the effective date of such acquisition. Notwithstanding the provisions of paragraph (l), the Board of Directors or the committee by resolution may provide that, for purposes of determining Vested Service, credit for Days of Service also shall be given with respect to service performed for such an entity prior to the effective date of the acquisition. Finally, Days of Service shall include any period of service that constitutes service with a predecessor employer within the meaning of Section 414(a)(1) of the Code. (h) `Early Retirement Age' means the date on which a Participant attains age 55 and completes at least 10 years of Vested Service, as determined for purposes of this Plan and the Retirement Plan. (i) `Normal Retirement Age' means the date on which a Participant attains age 65. Notwithstanding the foregoing, effective with respect to Participants who are hired after attaining age 60 and after December 31, 1988, Normal Retirement Age means the fifth anniversary of the date on which such a Participant becomes a Participant in the Plan. (j) `Severance' means a Participant's termination of employment with the Company and all Affiliated Companies for any reason at any time. (k) `Vested Service' means the number of years of an Employee's Vested Service determined according to this subsection. An Employee shall be deemed to accrue a full year of Vested Service for each calendar year during which he completes at least 365 Days of Service as an Employee. In addition, an Employee shall be deemed to accrue a fractional year of Vested Service in any calendar year in which he completes one or more but less than 365 Days of Service as an Employee. Such fractional year of Vested Service shall be computed by dividing the number of Days of Service completed by the Employee during such calendar year by 365." RESOLVED FURTHER that Section 6 of the Plan is hereby amended in its entirety to read as follows: "6. Reduction of Excess Benefits ---------------------------- Notwithstanding any provision of the Plan to the contrary, the Excess Benefit of each Participant who has a Severance prior to the date 2 on which he attains Normal Retirement Age and is not again an Employee on such date shall be proportionately reduced in accordance with the following schedule: Participant's Years Reduction of Vested Service Percentage ------------------- ---------- Less than 5 100% At least 5 0%" RESOLVED FURTHER that Section 7 of the Plan is hereby amended in its entirety to read as follows: "7. Commencement of Benefits ------------------------ The Excess Benefit under this Plan shall commence on the first day of the month next following the later of: (a) the date on which the Participant has a Severance; (b) in the case of a Participant who completes at least 10 years of Vested Service prior to his Severance, the date on which the Participant attains Early Retirement Age; or (c) in the case of a Participant who does not complete at least 10 years of Vested Service prior to his Severance, the date on which the Participant attains Normal Retirement Age." RESOLVED FURTHER that the last two paragraphs of Section 9 of the Plan are hereby amended to read as follows: "Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan. Any action taken or determination made by the Committee or its delegatees shall, except as otherwise provided in Section 11, be conclusive as to all parties. Neither a member of the Committee nor a delegatee may vote on, or take any action with respect to, any matter relating to such member or delegatee. If a delegatee cannot take any action with respect to a matter, such action shall be taken by the Committee. Similarly, if a majority of the members of the Committee cannot take any action with respect to a matter, such action shall be taken by the Board of Directors." RESOLVED FURTHER that the first sentence of Section 11(b) of the Plan is hereby amended by deleting the phrase "Except as otherwise provided in the Plan," from 3 the beginning thereof. RESOLVED FURTHER that Section 11(c) of the Plan is hereby amended by adding the following two sentences at the end thereof: "If the Plan is terminated, no additional Excess Benefits shall accrue after the termination date. Any Excess Benefits that have already accrued as of the termination date shall be distributed at the time and in the manner specified in Section 5(b) and Section 7, above." RESOLVED FURTHER that Section 11 of the Plan is hereby amended by moving Section 11(e) to the end of Section 10 and redesignating Sections 11(f) and 11(g) as Sections 11(e) and 11(f), respectively. 4 "(i) in a single, lump sum payment to be made on the first day of the month next following the date of the Participant's death, or" RESOLVED FURTHER that Section VII of the Plan is hereby amended by adding the following new paragraph at the end thereof: * * * * * * * * * * * * I, Edward R. Muller, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held May 18, 1990, at which meeting a quorum of said Board was at all times present and acting and that said resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Date: June 12, 1990 /s/ Edward R. Muller -------------------- Edward R. Muller Secretary 11 EX-10.10 8 DISABILITY BENEFIT PLAN EXHIBIT 10.10 WHITTAKER CORPORATION SUPPLEMENTAL DISABILITY BENEFIT PLAN ------------------------------------ This Supplemental Disability Benefit Plan (hereinafter referred to as the "Plan") has been adopted by the Board of Directors of Whittaker Corporation, a Delaware corporation (hereinafter referred to as the "Company"), effective as of January 1, 1988. 1. Prior Plan ---------- This Plan amends, restates and supersedes the provisions of the Whittaker Corporation Supplemental Benefit Plan effective September 1, 1982, relating to the payment of disability benefits to certain participants of the Whittaker Corporation Insured Income Continuation Plan whose benefits under such Plan are reduced because of the Five Thousand Dollar ($5,000) maximum monthly benefit limitation provided in such Plan (the "Prior Plan"). The provisions of this Plan shall only apply to (a) participants in the Prior Plan whose benefits under such Prior Plan were not in pay status on January 1, 1988, and (b) individuals who become eligible to participate herein on or after January 1, 1988. 2. Purpose ------- The purpose of the Plan is to provide supplemental disability income for certain Employees who participate in the Whittaker Corporation Insured Income Continuation Plan whose disability benefits are reduced because of the maximum dollar amount of the monthly benefit provided in such Plan. 3. Definitions ----------- The following definitions, set forth in alphabetical order, are used throughout the Plan. Terms or phrases appearing in capital letters that are not defined below shall have the same meanings as under the Retirement Plan, as defined below. (a) "Board of Directors" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. (c) "Committee" means the Compensation and Stock Option Committee of the Board of Directors. -1- (d) "Supplemental Disability Benefit" means the benefit described in Section 5. (e) "Insured Plan" means the Whittaker Corporation Insured Income Continuation Plan, as amended from time to time, which is an insured disability plan. (f) "Participant" means an executive officer of Whittaker Corporation who satisfies the conditions for eligibility described in Section 4. The term "Participant" shall also include the Beneficiary of a deceased Participant. (g) "Retirement Plan" means the Whittaker Corporation Employees' Pension Plan, as amended from time to time, which is a defined benefit pension plan qualified under Section 401(a) of the Code. 4. Eligibility to Participate -------------------------- Each Participant whose monthly disability benefit under the Insured Plan is reduced because of the maximum dollar amount of the monthly benefit provided in such Plan shall become a Participant in the Plan. 5. Supplemental Benefits --------------------- (a) Amount of Benefits ------------------ Each Participant shall be entitled to a monthly Supplemental Disability Benefit under this Plan in an amount equal to the difference between (i) and (ii); where: (i) equals the monthly disability benefit that would be payable to the Participant under the Insured Plan before applying the maximum dollar amount of the monthly benefit limitation provided in such Plan; and (ii) equals the maximum dollar amount of the monthly benefit provided in such Plan. (b) Form of Benefits ---------------- The Supplemental Disability Benefit determined in subsection (a) above shall be paid to the Participant in the same form and subject to the same terms, conditions and restrictions as disability benefits payable under the Insured Plan. 6. Commencement of Benefits ------------------------ The Supplemental Disability Benefit under this Plan shall be paid or shall commence at the same time as the -2- Participant's disability benefit is paid or commences under the Insured Plan. 7. Funding of Benefits ------------------- (a) The Plan shall be unfunded and each Participant shall have the status of a general unsecured creditor with respect to the Company's obligation to make payments under this Plan. All benefits payable under the Plan shall be paid from the Company's general assets, and nothing contained in the Plan shall require the Company to set aside or hold in trust any funds for the benefit of a Participant. Any funds of the Company available to pay benefits under the Plan shall be subject to the claims of general creditors of the Company and may be used for any purpose by the Company. (b) Notwithstanding the provisions of subsection (a), the Company may, at the direction, and in the absolute discretion, of the Board of Directors, transfer to the trustee of one or more trusts established for the benefit of one or more Participants assets from which all or a portion of the benefits provided under the Plan will be satisfied, provided that such assets held in trust shall at all times be subject to the claims of general unsecured creditors of the Company, and no Participant shall at any time have a prior claim to such assets. 8. Administration of the Plan -------------------------- The Committee shall administer the Plan. The Committee shall keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee shall include, without limitation, the following: (a) Resolving all questions relating to the eligibility of an Employee to become a Participant; (b) Determining the amount of benefits payable to Participants and authorizing and directing the Company with respect to the payment of benefits under the Plan; (c) Construing and interpreting the Plan whenever necessary to carry out its intention and purpose and -3- making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; and (d) Compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan. Any action taken or determination made by the Committee shall, except as otherwise provided in Section 11 below, be conclusive on all parties. No member of the Committee shall vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action shall be taken by the Board of Directors. Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan. 9. Claims Procedure ---------------- (a) If a Participant (hereinafter referred to as the "Claimant") does not receive the timely payment of the benefits which the Claimant believes are due under the Plan, the Claimant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan shall be made in writing and shall be signed by the Claimant. Claims shall be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." If the Claimant does not furnish sufficient information with the claim for the Claims Coordinator to determine the validity of the claim, the Claims Coordinator shall indicate to the Claimant any additional information which is necessary for the Claims Coordinator to determine the validity of the claim. Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 90 days following the receipt by the Claims Coordinator of the information necessary to process the claim. In the event the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator shall notify the Claimant in writing of the denial of the claim and notify the Claimant of his or her right to a review of the Claims Coordinator's decision by the Committee. Such notice by the claims Coordinator shall also set forth, in a manner -4- calculated to be understood by the Claimant, the specific reason for such denial, the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim with an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Claimant's claim within 90 days after receipt by the Claims Coordinator, such claim shall be deemed to be denied for purposes of the following appeals procedure. (b) Any Claimant whose claim for benefits is denied in whole or in part may appeal for a review of the decision by the Committee. Such appeal must be made within three months after the Claimant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must: (i) request a review by the Committee of the claim for benefits under the Plan; (ii) set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and (iii) set forth any issues or comments which the Claimant deems pertinent to the appeal. The Committee shall regularly review appeals by Claimants. The Committee shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. The Committee shall make a full and fair review of each appeal and any written materials submitted by the Claimant in connection therewith. The Committee may require the Claimant to submit such additional facts, documents or other evidence as the Committee in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee, provided the Committee finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee shall make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the -5- Committee on any claim for benefits shall be final and conclusive upon all parties thereto. In the event the Committee denies an appeal in whole or in part, the Committee shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent provisions of the Plan on which the Committee's decision is based. 10. Miscellaneous ------------- (a) Nothing in the Plan shall confer upon a Participant the right to continue in the employ of the Company or an Affiliated Company or shall limit or restrict the right of the Company or any Affiliated Company to terminate the employment of a Participant at any time with or without cause. (b) Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit shall be void. No such right or benefit shall in any manner be liable for or subject to the debts, liabilities or torts of a Participant. In addition, none of the rights of a Participant are transferable by inter vivos gift. (c) The Plan may be amended at any time by the Committee provided such amendment does not have the effect of increasing, directly or indirectly, the benefit of any Participant. The Plan may also be amended or terminated by the Board of Directors at any time, and any amendment adopted by the Board of Directors shall supersede any prior or later amendment adopted by the Committee that is inconsistent with the action of the Board of Directors. No amendment shall have the effect of decreasing a Participant's accrued benefit. (d) The Plan is intended to provide benefits for "management or highly compensated" employees within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, except for Supplemental Benefits in pay status, in the event it is determined by a court of competent jurisdiction or by an opinion of counsel based on judicial decisions or administrative pronouncements of the Department of Labor that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so exempt, in the sole discretion of the Board of Directors either (i) the Plan shall thereafter be modified and operated and administered in such a manner as to comply with the -6- provisions of Parts 2, 3 and 4 of Title I of ERISA or (ii) the Plan shall terminate and no further benefits shall accrue hereunder. If the Plan is terminated, the benefit of each Participant accrued under the Plan on the date of termination shall be paid immediately to such Participant in a single lump sum payment. (e) If any benefit payment hereunder becomes payable to a Participant determined by the Committee to be under any legal incapacity, payments under this Plan shall be made instead to the guardian or legal representative of such person and such payment shall constitute a full and complete discharge of all obligations under this Plan to the Participant. (f) If multiple claims are received by the Committee with respect to any benefits payable under this Plan, payment by the Committee to such person or persons as the Committee determines to be entitled to receive such payment shall constitute a full and complete discharge of all obligations under this Plan with respect to such payment. Benefit payments under this Plan may be suspended by the Committee pending resolution of multiple claims to the satisfaction of the Committee. (g) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way. (h) The Plan shall be construed and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the law of the State of California. Executed at Los Angeles, California this 23rd day of November, 1988. ---- -------- WHITTAKER CORPORATION BY: __________________________ ITS: _____________________ -7- EX-10.12 9 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT 10.12 WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (AMENDED AND RESTATED) WHITTAKER CORPORATION TABLE OF CONTENTS ARTICLE I - INTRODUCTION I-1 1.01 Purpose I-1 1.02 Effective Date and Term I-1 1.03 Participation I-1 1.04 Participation Agreement I-1 1.05 Applicability of ERISA I-2 ARTICLE I - DEFINITIONS II-1 2.01 Affiliated Company II-1 2.02 Average Monthly Compensation II-1 2.03 Benefit Accrual Percentage II-1 2.04 Board; Board of Directors II-1 2.05 Change in Control II-1 2.06 Code II-2 2.07 Committee II-2 2.08 Compensation II-2 2.09 Covered Employer II-2 2.10 Defined Benefit Plan II-3 2.11 Early Retirement II-3 2.12 Effective Date II-3 2.13 ERISA II-3 2.14 50% Joint and Survivor Annuity II-3 2.15 401(k) Plan II-3 2.16 Full-Time Employment II-3 2.17 Normal Benefit Date II-3 2.18 Normal Benefit Form II-4 2.19 Normal Retirement II-4 2.20 Participant II-4 2.21 Payment Commencement Date II-4 2.22 Plan II-4 2.23 Retirement; Retirement Date II-4 2.24 Service Years II-5 2.25 Single Life Annuity II-5 2.26 Specified Rate II-5 2.27 Sponsor II-5 2.28 Spouse II-5 2.29 Termination II-5 2.30 Termination Date II-6 2.31 Termination for Cause II-6
i WHITTAKER CORPORATION TABLE OF CONTENTS ARTICLE III - ADMINISTRATION OF THE PLAN III-1 3.01 Administration III-1 3.02 Board and Committee Authority; Rules and Regulations III-1 3.03 Appointment of Agents III-1 3.04 Leave of Absence III-2 3.05 Actuarial Assumptions III-2 ARTICLE IV - BENEFITS IV-1 4.01 Eligibility and Vesting IV-1 4.02 Form of Supplemental Benefit IV-1 4.03 Payment of Supplemental Benefit IV-2 4.04 Monthly Annuity Amount IV-2 4.05 Target Monthly Benefit IV-2 4.06 Monthly Offset Amount IV-3 4.07 Special Rules for Early Retirement IV-7 4.08 Termination other than Early or Normal Retirement IV-7 4.09 Termination of Plan Participation IV-7 4.10 Disability IV-8 4.11 Change of Control IV-8 4.12 Termination for Cause IV-8 ARTICLE V - DEATH OF A PARTICIPANT V-1 5.01 Termination by Reason of Death V-1 5.02 Form and Payment of Death Benefit V-1 5.03 Monthly Death Benefit Amount V-1 ARTICLE VI - MISCELLANEOUS PROVISIONS VI-1 6.01 Payments During Incapacity VI-1 6.02 Prohibition Against Assignment VI-1 6.03 Binding Effect VI-1 6.04 No Transfer of Interest VI-1 6.05 Amendment or Termination of the Plan VI-2 6.06 No Right to Employment VI-2 6.07 Notices VI-2 6.08 Governing Law VI-3 6.09 Titles and Headings; Gender of Terms VI-3 6.10 Severability VI-3 6.11 Tax Effect of Plan VI-3 6.12 Entire Agreement VI-4
ii WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I INTRODUCTION 1.01 PURPOSE. The Whittaker Corporation Supplemental Executive Retirement ------- Plan was originally established by the Board of Directors of the Sponsor to enable the Sponsor and such Affiliated Companies to attract, retain and motivate selected executives of the Sponsor and such Affiliated Companies by providing to such executives certain additional retirement income as more fully set forth herein. The Plan is hereby amended and restated to make certain technical corrections and clarifications. 1.02 EFFECTIVE DATE AND TERM. The amended and restated Plan is adopted ----------------------- effective as of January 1, 1996, and shall continue in effect until terminated by the Board of Directors. 1.03 PARTICIPATION. Participation in this Plan is open only to those ------------- executives of the Sponsor or any Affiliated Company who are selected for participation in the Plan by the President of the Sponsor and approved by the Board of Directors. The participation in this Plan by any such executive, and the payment of any benefits under this Plan to any such executive, shall be governed by the terms of this Plan and by the terms of the Participation Agreement entered into by such executive with respect to this Plan pursuant to Section 1.04 hereof. Participation in this Plan shall constitute a waiver of all rights to benefits under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. 1.04 PARTICIPATION AGREEMENT. As a condition to the commencement of ----------------------- participation in this Plan, each executive selected and approved for participation in the Plan as provided in Section 1.03 hereof shall enter into an agreement covering such executive's participation in the Plan (a "Participation Agreement"), which agreement shall be executed by the Sponsor and such executive and, if such executive is employed by an Affiliated Company, such Affiliated Company. Each Participation Agreement shall include such terms and conditions relating to the executive's participation in the Plan as the President of the Sponsor may deem appropriate. I-1 Participation in this Plan shall constitute a waiver of all rights to benefits under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. 1.05 APPLICABILITY OF ERISA. This Plan is intended to be a "top-hat" plan ---------------------- - - that is, an unfunded plan maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees within the meaning of ERISA. I-2 ARTICLE II DEFINITIONS 2.01 AFFILIATED COMPANY. "Affiliated Company" means only Whittaker ------------------ Corporation, a Delaware corporation, and such other affiliates, if any, of the Sponsor as the Board may from time to time expressly designate as having the status of an Affiliated Company for purposes of this Plan. 2.02 AVERAGE MONTHLY COMPENSATION. "Average Monthly Compensation" means, ---------------------------- with respect to any Participant and as of any date of reference (the "Determination Date"), the quotient obtained by dividing (a) the highest aggregate amount of Compensation earned by such Participant during any consecutive 36-month period prior to (or ending on) such Determination Date, by (b) a factor of 36. Notwithstanding the preceding sentence, in the case of a Participant who, as of any applicable Determination Date, has not been employed by one or more Covered Employers during at least the consecutive 36-month period ending on such Determination Date, such participant's Average Monthly Compensation as of such Determination Date shall be the quotient obtained by dividing (i) the total amount of Compensation earned by such Participant prior to (and including) such Determination Date, by (ii) a factor equal to the number of months prior to (and including) such Determination Date during which such Participant was employed by a Covered Employer. 2.03 BENEFIT ACCRUAL PERCENTAGE. "Benefit Accrual Percentage" means, with -------------------------- respect to any Participant and as of any date of reference, the percentage obtained by multiplying (a) 60%, by (b) a fraction (not to exceed 1) having a numerator equal to such Participant's Service Years (determined as of such reference date), and having a denominator equal to the greater of fifteen years or the total number of Service Years such Participant would have if such Participant continued in the employ of Sponsor uninterrupted through Normal Retirement. 2.04 BOARD; BOARD OF DIRECTORS. "Board" and "Board of Directors" each ------------------------- mean the board of directors of the Sponsor. 2.05 CHANGE IN CONTROL. "Change in Control" means (1) any consolidation ----------------- or merger of the Sponsor in which the Sponsor is not the surviving corporation, other than a merger of the Sponsor in which the holders of common stock or assets of the Sponsor immediately prior to the II-1 merger have the same proportionate ownership of the surviving corporation immediately after the merger; or (2) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Sponsor; or (3) during any period of two consecutive years, the individuals who at the beginning of such period constitute the Board of Directors of the Sponsor cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Sponsor's shareholders, of each new director was approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of that period; or (4) the acquisition after the date hereof by any person (as such term is used in section 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended, but excluding the Sponsor and any Affiliated Company) that results in such person holding directly or indirectly 20% or more of the combined voting power of the then outstanding securities of the Sponsor as a result of a tender or exchange offer, open market purchase(s), privately-negotiated purchase(s) or otherwise; or (5) the acquisition by any person(s), firm(s), employee benefit plan(s) or corporation(s) of direct or indirect ownership of 20% or more of the assets of the Sponsor which do not own at least 10% of the assets of the Sponsor as of January 1, 1996. 2.06 CODE. "Code" means the Internal Revenue Code of 1986, as amended. ---- 2.07 COMMITTEE. "Committee" means the committee (if any) that the Board --------- appoints to administer this Plan as set forth in Section 3.01 hereof, provided, however, the Committee shall contain at least one non-employee. 2.08 COMPENSATION. "Compensation" means, with respect to any Participant, ------------ the base salary paid to such Participant by any Covered Employer, including any amounts not currently includible in such Participant's gross income by reason of any amount deferred for the period pursuant to any non-qualified deferred compensation arrangement between the Participant and any Covered Employer or, Code Section 402(e)(3) and/or Code Section 125. Except as provided in the following sentence, Compensation shall also include any annual or other short term bonus paid by any Covered Employer to a Participant other than any bonus paid to a Participant who is a division manager. Notwithstanding the foregoing, the Committee shall have the sole and absolute discretion to determine, at the time of any award under a bonus plan, or the payment of any bonus, that such bonus does not constitute Compensation for purposes of this Plan. 2.09 COVERED EMPLOYER. "Covered Employer" means and includes both (a) the ---------------- Sponsor, and (b) any Affiliated Company. II-2 2.10 DEFINED BENEFIT PLAN. "Defined Benefit Plan" means the Whittaker -------------------- Corporation Employees' Pension Plan, which was frozen effective as of October 31, 1994. 2.11 EARLY RETIREMENT. "Early Retirement" means, with respect to any ---------------- Participant, any Retirement of such Participant other than Normal Retirement, which occurs before the Participant attains age 65, and on or after the date Participant has attained age 55 and completed at least 10 Service Years. The Participant shall specify the date on which he wishes to commence Early Retirement in a written request for benefits to the Board. 2.12 EFFECTIVE DATE. "Effective Date" means January 1, 1996. -------------- 2.13 ERISA. "ERISA" means the Employee Retirement Income Security Act of ----- 1974, as amended. 2.14 50% JOINT AND SURVIVOR ANNUITY. "50% Joint and Survivor Annuity" ------------------------------ means an annuity which (a) provides a specified level monthly benefit during the life of the primary beneficiary, and (b) following the death of the primary beneficiary, provides a level monthly benefit to, and during the remaining life of, such primary beneficiary's surviving spouse (if any) equal to 50% of the monthly benefit provided to such primary beneficiary. 2.15 401(K) PLAN. "401(k) Plan" means the Whittaker Corporation ----------- Partnership Plan, as such Plan is in effect as of the Effective Date hereof and as it may be amended from time to time hereafter. 2.16 FULL-TIME EMPLOYMENT. "Full-Time Employment" means, with respect to -------------------- any Participant, any employment or independent contractor relationship with any organization or person, whether or not the Sponsor or an Affiliated Company, pursuant to which such Participant performs services on a regular and continuous basis, provided, however, that any such relationship shall not constitute Full- Time Employment unless the Participant devotes at least an average of 35 hours per week to the performance of services pursuant to such relationship. For purposes of determining as of any given date whether the Participant meets the 35-hour requirement set forth in the preceding sentence, no more than the three- month period immediately preceding such given date shall be taken into account. 2.17 NORMAL BENEFIT DATE. "Normal Benefit Date" means, with respect to ------------------- any Participant, the ninetieth (90th) day immediately following the day upon which such Participant attains (or is expected to attain) age 65. II-3 2.18 NORMAL BENEFIT FORM. "Normal Benefit Form" means a Single Life ------------------- Annuity, starting at age 65. 2.19 NORMAL RETIREMENT. "Normal Retirement" means, with respect to any ----------------- Participant, any Retirement of such Participant having a Retirement Date which falls on or after the date such Participant attains age 65. 2.20 PARTICIPANT. "Participant" means any executive of the Sponsor or any ----------- Affiliated Company who is selected and approved for participation in this Plan as provided in Section 1.03 hereof and who has executed a Participation Agreement as required under Section 1.04 hereof. 2.21 PAYMENT COMMENCEMENT DATE. "Payment Commencement Date" means, with ------------------------- respect to any Participant, the ninetieth (90th) day after the earlier of (a) such Participant's Early Retirement, or (b) the later to occur of (i) such Participant's Termination Date and (ii) age 65. 2.22 PLAN. "Plan" means this Whittaker Corporation Supplemental Executive ---- Retirement Plan adopted as of the Effective Date hereof and as it may be amended from time to time. 2.23 RETIREMENT; RETIREMENT DATE. "Retirement" occurs with respect to any --------------------------- Participant only if and when such Participant permanently ceases, for whatever reason (whether voluntary or involuntary and including death or Disability), all Full-Time Employment. The temporary cessation of a Participant's Full-Time Employment shall not constitute Retirement. The cessation of a Participant's Full-Time Employment shall be deemed to be temporary if, following such cessation, such Participant commences (or intends to commence) actively seeking Full-Time Employment; provided, however, that if such Participant subsequently abandons his search (or intended search) for Full-Time Employment prior to obtaining such Full-Time Employment, such Participant shall be deemed to incur Retirement at the time of such abandonment. The determination as to whether (and when) a Participant incurs Retirement shall be made solely by the Board based on such evidence as the Board, in its discretion, deems appropriate. Such evidence may, but is not required to include a representation of Retirement presented to the Board by the Participant. If, following a determination by the Board that a Participant has incurred Retirement, such participant recommences Full-Time Employment, such Participant shall nevertheless be deemed for all purposes of this Plan to have incurred Retirement in accordance with the Board's original determination. A Participant's "Retirement Date" shall be the first day, as determined by the Board, on which such Participant meets the requirements of Retirement as set forth in this Section 2.23. Notwithstanding the foregoing requirements, a II-4 Participant who has attained age 65 shall be deemed to meet the requirements of this Section 2.23 when such Participant permanently ceases Full-Time Employment with all Covered Employers. Subsequent Full-Time Employment with an entity other than a Covered Employer will be disregarded for purposes of the preceding sentence. 2.24 SERVICE YEARS. "Service Years" means with respect to any ------------- Participant, the whole number of complete years (disregarding any incomplete year) elapsing during the period commencing on the date such Participant initially commenced employment with any Covered Employer and ending on such Participant's final Termination Date. In the case of any Participant who (a) commenced employment with a Covered Employer, (b) terminated such employment, and (c) prior to the Effective Date hereof, re-commenced employment with any Covered Employer, such Participant shall be credited with Service Years for those periods prior to the Effective Date hereof during which he was actually employed by any Covered Employer notwithstanding the fact that such pre- Effective Date employment with such covered Employer(s) was not continuous. Except as otherwise provided in Section 3.04 hereof (concerning leaves of absence), or as otherwise designated by the Participation Agreement, it is intended that a Participant shall cease earning Service Years upon his incurring any Termination after the Effective Date hereof, regardless of whether such Participant is thereafter employed by the Sponsor, an affiliate of the Sponsor or any Affiliated Company. 2.25 SINGLE LIFE ANNUITY. "Single Life Annuity" means an annuity which ------------------- provides a specified level monthly benefit until the death of the beneficiary. 2.26 SPECIFIED RATE. "Specified Rate" means an interest rate equal to 8% -------------- per annum, or such other annual interest rate as the Board may from time to time designate as the Specified Rate, with any such designation to be given effect only on a prospective basis. 2.27 SPONSOR. "Sponsor" means Whittaker Corporation, a Delaware ------- corporation. 2.28 SPOUSE. "Spouse" means, with respect to any Participant, only that ------ person (if any) to whom such Participant is married as of such Participant's Termination Date, provided, however, that a person who has been married to a Participant for less than one year as of such Participant's Termination Date shall not be deemed to be the "Spouse" of such Participant. 2.29 TERMINATION. "Termination" means the voluntary or involuntary ----------- termination of a Participant's employment with the Sponsor and all Affiliated Companies for any reason (including Disability or death). The determination as to whether a Participant's Termination II-5 constitutes Retirement shall be made by the Board in accordance with the provisions of Section 2.23 hereof. 2.30 TERMINATION DATE. "Termination Date" means, with respect to any ---------------- Participant, the effective date of such Participant's Termination. 2.31 TERMINATION FOR CAUSE. "Termination for Cause" means, with respect --------------------- to any Participant, a Termination (whether voluntary or involuntary) incurred by such Participant as a result of any one or more of the following causes: (a) The Participant's substantial neglect of his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (b) The Participant's theft or other misappropriation of, or any malfeasance with respect to, any property of the Sponsor or any Affiliated Company; (c) A conviction of the Participant for any criminal offense, whether or not involving property of the Sponsor or any Affiliated Company, unless the Board reasonably determines such conviction will not adversely affect either (i) the reputation of the Sponsor or any Affiliated Company, or (ii) the Participant's ability to effectively perform his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (d) The Participant's use of illegal drugs or alcohol to an extent that such use interferes with his ability to perform, in an acceptable manner, his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (e) The Participant's solicitation of business on behalf of, or diversion of business to, any competitor of the Sponsor or any Affiliated Company with whom the Participant expects to become employed or otherwise associated following such Participant's Termination. The determination as to whether (and when) a Participant incurs a Termination for Cause shall be made by the Board in its sole discretion. II-6 ARTICLE III ADMINISTRATION OF THE PLAN 3.01 ADMINISTRATION. This Plan shall be administered by the Board of -------------- Directors, provided however, that the Board may, in its discretion, delegate the administration of this Plan to a Committee composed of at least two individuals appointed from time to time by the Board. Any member of the Board or the Committee may be a Participant in this Plan, provided however, that any action to be taken by the Board or Committee solely with respect to the particular interest in this Plan of a Board or Committee member who is also a Participant in this Plan shall be taken by the remaining members of the Board or Committee. 3.02 BOARD AND COMMITTEE AUTHORITY; RULES AND REGULATIONS. The Board ---------------------------------------------------- shall have discretionary authority to (a) make, amend, interpret and enforce all appropriate rules and regulations for the administration of the Plan, and (b) decide or resolve, in its discretion, any and all questions, including interpretations of the Plan and any questions of fact, as may arise in connection with the Plan. If a Committee is appointed by the Board pursuant to Section 3.01 hereof to administer the Plan, such Committee shall have authority to take or approve, in its discretion, all such actions relating to the Plan (including, without limitation, actions described in the preceding sentence) as may be taken or approved by the Board; provided, however, that the Committee shall have no authority (i) to approve executives for participation in the Plan, (ii) to approve the terms of any Participation Agreement, (iii) to amend or terminate the Plan, or (iv) to terminate a Participant's participation in the Plan pursuant to Section 4.09 hereof. Notwithstanding the preceding sentence, the Board may, by written notice to the Committee, withdraw all or any part of the Committee's authority at any time, in which case such withdrawn authority shall immediately revest in the Board. Any decision or action of the Board (and, subject to the limitations set forth herein above, any decision or action of the Committee, if appointed) in respect of any question arising out of or in connection with the administration, interpretation and application of this Plan and the rules and regulations promulgated hereunder and all factual questions shall be final, conclusive and binding upon all persons having any interest in the Plan. 3.03 APPOINTMENT OF AGENTS. In the administration of this Plan, the Board --------------------- and/or the Committee may from time to time employ agents (which may include officers and/or employees III-1 of the Sponsor) and delegate to them such administrative duties as the Board or the Committee (as applicable) deems appropriate. 3.04 LEAVE OF ABSENCE. In the event the Participant takes a leave of ---------------- absence from active employment with the Sponsor or any Affiliated Company, the Committee shall determine, in its discretion, (a) whether such leave of absence shall be deemed to constitute a Termination for purposes of this Plan, and (b) if such leave of absence is not deemed to constitute a Termination under this Plan, whether such Participant shall continue to earn Service Years during such leave of absence notwithstanding the provisions of Section 2.24 hereof. The Committee shall establish such standards and procedures as may be necessary so that, with respect to any determinations made by the Committee pursuant to either clause (a) or clause (b) of the preceding sentence, Participants in substantially similar circumstances shall be treated substantially alike. 3.05 ACTUARIAL ASSUMPTIONS. In any case in which it is necessary to make --------------------- actuarial adjustments in order to carry out the provisions of this Plan (including, without limitation, the provisions requiring the determination of an actuarially equivalent benefit under Section 4.02 hereof), the following rules shall apply: (a) The interest/discount rate assumed in making such actuarial adjustments shall be a fixed rate equal to the Specified Rate then in effect at the time such actuarial adjustments are calculated; and, (b) The mortality table used in making such actuarial adjustments shall be the 1971 Unisex Group Annuity Table (85% of male rate and 15% of female rate). III-2 ARTICLE IV BENEFITS 4.01 ELIGIBILITY AND VESTING. Except as otherwise provided in Section ----------------------- 4.12 and Article V hereof, upon incurring Termination, a Participant shall receive a supplemental benefit under this Plan (a "Supplemental Benefit"), which Supplemental Benefit shall be paid to the extent vested, in such form and amounts, and at such times, as provided under this Plan. Notwithstanding the foregoing, and except as otherwise provided in Sections 4.10 and 4.11 hereof, a Participant who incurs a Termination shall be entitled to receive a Supplemental Benefit under this Plan only to the extent such Participant is vested in such Benefit. A Supplemental Benefit shall vest and become nonforfeitable up to a maximum of 100% as follows: SERVICE YEARS VESTED PERCENTAGE ------------- ----------------- Less than 6 years 0% 6 years but less than 7 years 10% 7 years but less than 8 years 20% 8 years but less than 9 years 30% 9 years but less than 10 years 40% 10 years but less than 11 years 50% 11 years but less than 12 years 60% 12 years but less than 13 years 70% 13 years but less than 14 years 80% 14 years but less than 15 years 90% 15 or more years 100% A Supplemental Benefit shall also be 100% vested upon the death or Disabled status of a Participant. 4.02 FORM OF SUPPLEMENTAL BENEFIT. Any Participant who is entitled to a ---------------------------- Supplemental Benefit pursuant to Section 4.01 hereof shall receive such Supplemental Benefit in the form of an annuity, which annuity shall provide a series of level monthly payments for a period determined in accordance with the rules set forth hereinbelow. With respect to any Participant, the amount of the level monthly payment provided by such annuity (the "Monthly IV-1 Annuity Amount") shall be determined in accordance with Section 4.04 hereof, subject to such modifications as may be applicable under this Section 4.02: (a) Except as provided in subsection (b) below, a Participant shall receive his Supplemental Benefit in the Normal Benefit Form specified in Section 2.18. (b) A Participant who is entitled to receive a Supplemental Benefit may, with the consent of the Board elect in writing, on such form designated by the Plan Administrator and received by the Plan Administrator at least 15 months prior to the Payment Commencement Date, to receive his Supplemental Benefit in the form of a 50% Joint and Survivor Annuity. Notwithstanding such election, such Participant shall be entitled to receive his Supplemental Benefit in the form of a 50% Joint and Survivor Annuity only if such Participant has a spouse as of such Participant's Termination Date and also has been married continuously for at least one year preceding such Participant's Retirement Date. The amount of the Supplemental Benefit so designated by the Participant shall be the Actuarial Equivalent of the amount otherwise payable to the Participant in the Normal Benefit Form pursuant to Section 2.18. If such election is not made or is invalid or void, the Participant's Supplemental Benefit shall be paid in the Normal Benefit Form specified in Section 2.18. 4.03 PAYMENT OF SUPPLEMENTAL BENEFIT. Notwithstanding any other ------------------------------- provisions of this Plan, payment of a Participant's Supplemental Benefit (or any portion thereof) shall commence on such Participant's Payment Commencement Date. 4.04 MONTHLY ANNUITY AMOUNT. Except to the extent modified pursuant to ---------------------- Sections 4.01 or 4.02 hereof, a Participant's "Monthly Annuity Amount" shall be the amount of such Participant's Target Monthly Benefit (as defined in Section 4.05 hereof) reduced, but not below zero, by such Participant's Monthly Offset Amount (as defined in Section 4.06 hereof). 4.05 TARGET MONTHLY BENEFIT. A Participant's "Target Monthly Benefit" ---------------------- shall be determined as of his Termination Date and shall be the amount calculated by multiplying (a) the Participant's Average Monthly Compensation determined as of his Termination Date, by (b) his Benefit Accrual Percentage determined as of his Termination Date (or if later, the date of a finding of Disabled status) by (c) his vesting percentage as of his Termination Date under Section 4.01. IV-2 4.06 MONTHLY OFFSET AMOUNT. A Participant's "Monthly Offset Amount" shall --------------------- be the amount equal to the sum of (1) such Participant's Social Security Offset Amount, plus (2) such Participant's Qualified Offset Amount (both as defined herein below). (a) A Participant's "Social Security Offset Amount" shall be determined in accordance with the following rules: (i) In the case of any Participant whose Termination constitutes Normal Retirement, such Participant's Social Security Offset Amount shall be 50% of the amount of the monthly Primary Social Security Benefit (as calculated by the Board under paragraph (iii) below) to which such Participant is entitled following such Termination. (ii) In the case of any Participant whose Termination does not constitute Normal Retirement (either because such Termination does not constitute Retirement or because such Termination constitutes Early Retirement), such Participant's Social Security Offset Amount shall be 50% of the amount of the monthly Primary Social Security Benefit (as calculated by the Board under paragraph (iii) below) to which such Participant would be entitled commencing on his Normal Benefit Date paid to such Participant in the Normal Benefit Form if, with respect to the period (if any) between such Participant's Termination Date and his Normal Benefit Date, (A) such Participant had continued to earn a constant monthly salary equal to the Participant's Compensation for the month immediately preceding the month of such Participant's Termination, and (B) the Social Security wage base and other provisions of the Social Security law relevant to the determination of benefits thereunder (including any applicable regulations and/or other pronouncements, such as wage base and other provisions) in effect as of such Participant's Termination Date had remained unchanged. (iii) Each Participant shall submit to the Committee, for use in calculating such Participant's Primary Social Security Benefit and the corresponding Social Security Offset Amount under paragraphs (i) or (ii) above, as applicable, either (A) a written earnings history obtained from the Social Security Administration, or (B) written evidence satisfactory to the Committee showing that, such Participant has never earned wages subject to the jurisdiction of the U.S. Social Security system (e.g., a foreign Participant IV-3 with no U.S. wages). In the event a Participant fails to comply with the requirements of the preceding sentence within 90 days following such Participant's Payment Commencement Date, the Participant's Primary Social Security Offset Benefit (for purposes of calculating his Social Security Offset Amount under paragraphs (i) or (ii) above, as applicable) shall be determined by the Committee using an estimated wage history, applying a salary scale projected backwards from the Participant's Retirement Date, and based on (I) for the two years prior to the Participant's Retirement Date, an increase of six percent (6%) per annum, and (II) for the period prior to such two year period, the actual change in average wages from year to year as determined by the Social Security Administration. Such estimated wage history shall be deemed correct for all purposes of this Plan. (iv) A Participant's Social Security Offset Amount shall be determined without regard to any suspension or reduction of the Participant's Primary Social Security benefits after Retirement due to post Retirement earnings. (b) A Participant's "Qualified Plan Offset Amount" shall be the sum of the Defined Benefit Plan Offset Amount and the 401(k) Plan Offset Amount determined with respect to such Participant under the following provisions, as applicable: (i) With respect to any Participant who was a Participant in the Defined Benefit Plan, such Participant's "Defined Benefit Plan Offset Amount" shall be the employer-provided portion (i.e., the portion attributable to employer contributions) of the amount of the monthly annuity payment to which such Participant would be entitled under the Defined Benefit Plan if his benefit thereunder were paid in the Normal Benefit Form commencing on his Normal Benefit Date. The "Defined Benefit Plan Offset Amount" shall be zero with respect to any Participant who was not a participant in the Defined Benefit Plan, or to any Participant who would have become a participant in the Defined Benefit Plan following the date such Plan's benefit accruals were frozen. (ii) With respect to any Participant, such Participant's "401(k) Plan Offset Amount" shall be the amount of the monthly annuity payment to which such Participant would be entitled if the balance (determined as of such IV-4 Participant's Payment Commencement Date) in such Participant's 401(k) Offset Account (as defined herein below) were paid to such Participant in the Normal Benefit Form commencing on his Normal Benefit Date. For purposes of this paragraph (ii), a Participant's "401(k) Offset Account" shall be a hypothetical account established and maintained with respect to such Participant as follows: A Participant's 401(k) Offset Account shall be established as of December 31, 1995, and such 401(k) Offset Account shall have an initial balance equal to the actual balance (if any) as of December 31, 1995, in the account maintained under the 401(k) Plan for employer contributions made with respect to such Participant (excluding any employer contributions not currently includible in gross income by reason of Code Section 402(e)(3)). Thereafter (A) commencing with the 1996 calendar year and ending with the calendar year in which such Participant incurs a Termination (the "Termination Year"), the balance in such Participant's 401(k) Offset Account shall be increased as of the end of each such calendar year (or, in the case of the Termination Year, as of such Participant's Termination Date) by the amount of such Participant's Hypothetical Employer Contribution (as defined in paragraph (iii) below) for such calendar year and the actual employer profit sharing contribution made for such calendar year with respect to such Participant under the terms of the 401(k) Plan; and (B) commencing January 1, 1996, and ending on such Participant's Payment Commencement Date, such Participant's 401(k) Offset Account shall also be increased as if the balance in such account (as increased from time to time by the Hypothetical Employer Contributions Described in Clause (A) above) were earning interest, compounded annually, (I) from January 1, 1996, until such Participant's Termination Date, at the Specified Rate applicable from time to time, and (II) from such Participant's Termination Date until his Payment Commencement Date, at the Specified Rate in effect as of such Participant's Termination Date. (iii) As used in paragraph (ii) above, "Hypothetical Employer Contribution" means, with respect to any Participant, (A) for any calendar year prior to such Participant's Termination Year the maximum employer matching contribution that would have been made for such calendar year with respect to such Participant under the terms of the 401(k) Plan IV-5 (disregarding the limits imposed by reason of Code Section 401(m)) assuming such Participant's before-tax deferral to the 401(k) Plan for such calendar year is equal to his Hypothetical Participant Deferral (as defined in paragraph (iv) below) with respect to such calendar year; and (B) for such Participant's Termination Year, an amount equal to the product obtained by multiplying (i) the Hypothetical Employer Contribution determined with respect to such Participant for the immediately preceding calendar year, by (ii) a fraction having a numerator equal to the number of days in such Termination Year prior to and including such Participant's Termination Date, and having a denominator equal to 365. (iv) For purposes of paragraph (iii) above, the "Hypothetical Participant Deferral" applicable to any Participant for any calendar year shall be the amount determined under the following provisions, whichever is applicable: (A) If, with respect to any calendar year, the 401(k) Plan administrative committee does not take any action, either during or after the close of such year, to reduce the level of Participant deferrals permitted to be made by any 401(k) Plan Participant for such year, then the Hypothetical Participant Deferral with respect to any Participant for such calendar year shall be the lesser of (I) the maximum amount such Participant would be permitted to contribute to the 401(k) Plan for such year under Code Section 402(g), or (II) the maximum amount the Participant would be permitted to contribute under the terms of the 401(k) Plan. (B) If, with respect to any calendar year, the 401(k) Plan administrative committee takes action during and/or after such year to reduce the level of Participant deferrals permitted to be made by any 401(k) Plan Participant for such year, then the Hypothetical Participant Deferral with respect to any Participant for such year shall be the lesser of (I) the maximum amount such Participant would be permitted to contribute to the 401(k) Plan for such year under Code Section 402(g), or (II) the product determined by multiplying such Participant's compensation for such year (as determined under the 401(k) Plan for anti- discrimination testing purposes), by the IV-6 maximum "actual deferral percentage" for any highly compensated employee for such year (as determined under Code Section 401(k)(3)(B) after giving effect to any corrections made following the close of such year) applicable to "highly-compensated employees" (as defined in Code Section 414(q)). 4.07 SPECIAL RULES FOR EARLY RETIREMENT. In the case of any Participant ---------------------------------- who incurs Early Retirement, such Participant's Monthly Annuity Amount shall be determined as provided in Section 4.04 hereof, and then shall be reduced to reflect the commencement of benefits on a date earlier than the Normal Benefit Date as follows: (a) If the Participant's Early Retirement commences on or after the first day of the month next following his sixty-second birthday, then the reduction shall be 0.25% for each full month by which the date of Early Retirement precedes the first day of the month next following his attainment of age 65. (b) If the Participant's Early Retirement commences prior to the first day of the month next following his sixty-second birthday, then the reduction shall be 9.00% (representing the reduction from age 65 to age 62 described in paragraph (a) above) plus 0.50% for each full month by which the date of Early Retirement precedes the first day of the month next following his sixty-second birthday. 4.08 TERMINATION OTHER THAN EARLY OR NORMAL RETIREMENT. In the case of ------------------------------------------------- any Participant who incurs a Termination (other than a Termination for Cause) prior to meeting the requirements of Early Retirement or Normal Retirement, such Participant's Monthly Annuity Amount shall be determined as provided in Section 4.04 hereof. In such case, the applicable Payment Commencement Date shall be the ninetieth (90th) day after the date the Participant meets the requirements of Early Retirement or Normal Retirement at the election of such Participant, subject to the provisions of Section 4.07 in the case of Early Retirement. 4.09 TERMINATION OF PLAN PARTICIPATION. In the event that the Board of --------------------------------- Directors in its sole discretion determines that a Participant's employment performance is no longer at a level which merits continued participation in the Plan, the Board may terminate such Participant's participation in the Plan (without necessarily terminating such Participant's employment) as of the date specified by the Board (the "Participation Severance Date"). Accordingly, notwithstanding any other provision of this Plan, the Supplemental Benefit payable to any Participant whose Plan participation is terminated pursuant to this Section 4.09 shall be IV-7 calculated by taking into account, in determining the amount of such Participant's Target Monthly Benefit and whether such Participant has met the vesting requirement of Section 4.01 hereof, only the Service Years and Compensation earned by such Participant as of his Participation Severance Date. Such Supplemental Benefit shall be paid to the Participant pursuant to the provisions of Section 4.03 herein. 4.10 DISABILITY. In the event that a Participant incurs a Termination as ---------- a result of such Participant's becoming Disabled, the Supplemental Benefit payable to such Participant under this Plan shall be determined with regard to the vesting requirement applicable to Disabled status under Section 4.01 hereof. For purposes of this Plan, a Participant shall be deemed to be "Disabled" if and when, as a result of injury or sickness, such Participant is permanently impaired to such an extent that he cannot perform, and is not reasonably expected ever to be able to perform, each of the material duties of his position of employment with the Sponsor or any Affiliated Company. For the purpose of determining whether a Participant is Disabled, the Board may require the Participant to submit to an examination by a competent physician or medical clinic selected by the Board. The final determination as to whether (and when) a Participant is Disabled shall be made by the Board in its sole discretion. 4.11 CHANGE OF CONTROL. Notwithstanding any other provision of this Plan, ----------------- upon a Change in Control, all Participants in the Plan shall be fully vested in their Supplemental Benefits. All Participants shall be entitled to the Supplemental Benefit they would otherwise receive pursuant to this Article IV hereof. Upon and following a Change of Control, no Participant shall be removed from the Plan, nor shall his benefit at the time of the Change in Control be terminated, modified, reduced or eliminated without his express written consent. 4.12 TERMINATION FOR CAUSE. Notwithstanding any other provision of this --------------------- Plan except Section 4.11, a Participant who incurs a Termination for Cause prior to a Change of Control shall not be entitled to a Supplemental Benefit, regardless of Service Years, under this Plan. 1V-8 ARTICLE V DEATH OF A PARTICIPANT 5.01 TERMINATION BY REASON OF DEATH. In the event that a Participant ------------------------------ incurs a Termination by reason of his death, (a) such Participant shall not be entitled to receive a Supplemental Benefit under this Plan, and (b) if such Participant has a Spouse at the time of his death, such Participant's Spouse (the "Surviving Spouse") shall be entitled to receive a special benefit (a "Death Benefit") at the times and in the amounts set forth in this Article V. No Death Benefit shall be paid in respect of any Participant who does not have a Spouse at the time of his death. 5.02 FORM AND PAYMENT OF DEATH BENEFIT. A Surviving Spouse who is --------------------------------- entitled to receive a Death Benefit pursuant to Section 5.01 hereof shall receive such Death Benefit in the form of a Single Life Annuity which provides a level monthly payment equal to the Monthly Death Benefit Amount specified in Section 5.03 hereof. Except as otherwise provided hereinbelow, payment of a Surviving Spouse's Death Benefit shall commence on the Payment Commencement Date which would have been applicable to the Participant if such Participant was assumed to have incurred a Termination on the date of death. 5.03 MONTHLY DEATH BENEFIT AMOUNT. The "Monthly Death Benefit Amount" ---------------------------- applicable to any Surviving Spouse shall be an amount equal to the 50% survivor portion of the Monthly Annuity Amount of the Supplemental Benefit (accrued as of the date of death) that would have been payable to the deceased Participant under Article IV hereof, modified, if applicable, by the provisions of Section 4.07, provided, however, that the determination of such Monthly Annuity Amount shall take into account the following assumptions and special rules: (a) In the case of a Participant who dies after the date on which the Participant met the requirements for Early Retirement, such Participant shall be assumed to have elected an immediate 50% Joint and Survivor Annuity on the day before his death. In the case of a Participant who dies on or before the date on which the Participant would have met the requirements for Early Retirement, such Participant shall be assumed to have incurred a Termination on the date of death, survived to Early Retirement and elected a 50% Joint and Survivor A nnuity at Early Retirement and died following such date. V-1 (b) Such Monthly Annuity Amount shall be determined as if the Participant was 100% vested in the Supplemental Benefit accrued as of the date of death. (c) The Payment Commencement Date used in determining such Monthly Annuity Amount shall be deemed to be the Surviving Spouse's date of Early Retirement (disregarding any provision in Article IV to the contrary. The provisions of Section 4.07 hereof shall be applied in determining the deceased Participant's Monthly Annuity Amount. V-2 ARTICLE VI MISCELLANEOUS PROVISIONS 6.01 PAYMENTS DURING INCAPACITY. In the event a Participant (or -------------------------- Beneficiary) is under mental or physical incapacity at the time of any payment to be made to such Participant (or Beneficiary) pursuant to this Plan, any such payment may be made to the conservator or other legally appointed personal representative having authority over and responsibility for the person or estate of such Participant (or Beneficiary), as the case may be, and for purposes of such payment references in this Plan to the Participant (or Beneficiary) shall mean and refer to such conservator or other personal representative, whichever is applicable. In the absence of any lawfully appointed conservator or other personal representative of the person or estate of the Participant (or Beneficiary), any such payment may be made to any person or institution that has apparent responsibility for the person and/or estate of the Participant (or Beneficiary) as determined by the Committee. Any payment made in accordance with the provisions of Section 6.01 to a person or institution other than the Participant (or Beneficiary) shall be deemed for all purposes of this Plan as the equivalent of a payment to such Participant (or Beneficiary), and the Sponsor shall have no further obligation or responsibility with respect to such payment. 6.02 PROHIBITION AGAINST ASSIGNMENT. Except as otherwise expressly ------------------------------ provided in Section 6.01 hereof, the rights, interests and benefits of a Participant under this Plan (a) may not be sold, assigned, transferred, pledged, hypothecated, gifted, bequeathed or otherwise disposed of to any other party by such Participant or any Beneficiary, executor, administrator, heir, distributee or other person claiming under such Participant, and (b) shall not be subject to execution, attachment or similar process. Any attempted sale, assignment, transfer, pledge, hypothecation, gift, bequest or other disposition of such rights, interests or benefits contrary to the foregoing provisions of this Section 6.02 shall be null and void and without effect. 6.03 BINDING EFFECT. The Provisions of this Plan shall be binding upon -------------- the Sponsor, the Participants, all Affiliated Companies employing any Participants, and any successor-in-interest to the Sponsor. 6.04 NO TRANSFER OF INTEREST. Benefits under this Plan shall be payable ----------------------- solely from the general assets of the Sponsor (and, with respect to any Participant who is an employee of an Affiliated Company, also from the general assets of such Affiliated Company), and no person VI-1 shall be entitled to look to any other source for payment of such benefits. The Sponsor (and, if applicable, any Affiliated Company) shall have and possess all title to, and beneficial interest in, any and all funds or reserves maintained or held by the Sponsor (or such Affiliated Company) on account of any obligation to pay benefits as required under this Plan, whether or not earmarked as a fund or reserve for such purpose; any such funds, other property or reserves shall be subject to the claims of the creditors of the Sponsor (or such Affiliated Company), and the provisions of this Plan are not intended to create, and shall not be interpreted as vesting, in any Participant, Beneficiary or other person, any right to or beneficial interest in any such funds, other property or reserves. Nothing in this Section 6.04 shall be construed or interpreted as prohibiting or restricting the establishment of a grantor trust within the meaning of Code Section 671 which is unfunded for purposes of Sections 201(2), 301(a)(3), and 401(a)(l) of ERISA, from which benefits under this Plan may be payable. 6.05 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may ------------------------------------ amend this Plan from time to time in any respect that it deems appropriate or desirable, and the Board may terminate this Plan at any time; provided, however, that any such amendment or termination may not, without the written consent of a Participant, eliminate or reduce the Supplemental Benefit that has accrued with respect to such Participant as of the effective date of such amendment or termination. For purposes of this Section 6.05, the Supplemental Benefit that has accrued with respect to any Participant as of the date of any amendment of termination of the Plan shall be deemed to be the Supplemental Benefit to which such Participant would be entitled pursuant to Article IV hereof if such Participant incurred Retirement immediately prior to such Plan amendment or Plan termination. 6.06 NO RIGHT TO EMPLOYMENT. This Plan is voluntary on the part of the ---------------------- Sponsor and its Affiliated Companies, and the Plan shall not be deemed to constitute an employment contract between any Participant and the Sponsor or any Affiliated Company, nor shall the adoption or existence of the Plan or any provision contained in the Plan be deemed to be a required condition of the employment of any Participant. Nothing contained in this Plan shall be deemed to give any Participant the right to continued employment with the Sponsor or any Affiliated Company, and the Sponsor and its Affiliated Companies may terminate any Participant at any time with or without cause, with or without prior notice, in which case the Participant's rights arising under this Plan shall be only those expressly provided under the terms of this Plan. 6.07 NOTICES. All notices, requests, or other communications (hereinafter ------- collectively referred to as "Notices") required or permitted to be given hereunder or which are given with VI-2 respect to this Plan shall be in writing and may be personally delivered, or may be deposited in the United States mail, postage prepaid and addressed as follows: To the Sponsor any Affiliated Whittaker Corporation Company or the Committee at: Attention: Board of Directors 1955 Surveyor Avenue Simi Valley, California 93063-3386 To Participant at: The Participant's residential mailing address as reflected in the Sponsor's or Affiliated Company's employment records A Notice which is delivered personally shall be deemed given as of the date of personal delivery, and a Notice mailed as provided herein shall be deemed given on the second business day following the date so mailed. Any Participant may change his address for purposes of Notices hereunder pursuant to a Notice to the Committee, given as provided herein, advising the Committee of such change. The Sponsor, any Affiliated Company and/or the Committee may at any time change its address for purposes of Notices hereunder. 6.08 GOVERNING LAW. This Plan shall be governed by, interpreted under, ------------- and construed and enforced in accordance with ERISA as a Top Hat plan. 6.09 TITLES AND HEADINGS; GENDER OF TERMS. Article and Section headings ------------------------------------ herein are for reference purposes only and shall not be deemed to be part of the substance of this Plan or in any way to enlarge or limit the meaning or interpretation of any provision in this Plan. Use in this Plan of the masculine, feminine or neuter gender shall be deemed to include each of the omitted genders wherever the context so requires. 6.10 SEVERABILITY. In the event that any provision of this Plan is found ------------ to be invalid or otherwise unenforceable by a court or other tribunal of competent jurisdiction, such invalidity or unenforceability shall not be construed as rendering any other provision contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 6.11 TAX EFFECT OF PLAN. Neither the Sponsor nor any Affiliated Company ------------------ warrants any tax benefit nor any financial benefit under the Plan. Without limiting the foregoing, the Sponsor and each Affiliated Company and their directors, officers, employees and agents shall be held harmless by the Participant from, and shall not be subject to any liability on account of, any VI-3 Federal or State tax consequences or any consequences under ERISA of any determination as to the amount of Plan benefits to be paid, the method by which Plan benefits are paid, the persons to whom Plan benefits are paid, or the commencement or termination of the payment of Plan benefits. 6.12 ENTIRE AGREEMENT. The Plan represents the entire agreement regarding ---------------- nonqualified retirement benefits provided by Sponsor to each Participant. Further, the Plan supersedes all Participant benefits or accruals under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. IN WITNESS WHEREOF, the Sponsor has caused this Plan to be executed by its duly authorized officer effective as of the Effective Date hereof. WHITTAKER CORPORATION By______________________________________ Title___________________________________ VI-4 WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT is made and entered into this ____________ day of _______________________, 1995, by and between Whittaker Corporation, a Delaware corporation (hereinafter referred to as the "Sponsor"), and __________________, an executive of the Sponsor (hereinafter referred to as the "Executive"). WITNESSETH WHEREAS, the Executive is employed by the Sponsor or an Affiliated Company; and WHEREAS, the Sponsor recognizes the value of the services performed by the Executive and wishes to offer a supplemental retirement benefit to the Executive as an inducement to remain as an employee; and WHEREAS, the Executive wishes to be assured that he will be entitled to a supplemental retirement benefit if he continues to render substantial services to the Sponsor; and WHEREAS, the Sponsor had previously established the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan to provide certain supplemental benefits; and WHEREAS, the Sponsor and Executive wish to revise the supplemental benefits to be provided to the Executive; and WHEREAS, the Sponsor hereto has established the Whittaker Corporation Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan") to supersede all benefits provided to the Executive under the Whittaker Corporation Supplemental Benefit Plan and Whittaker Corporation Excess Benefit Plan; and WHEREAS, the Whittaker Corporation Supplemental Executive Retirement Plan provides the terms and conditions upon which the Sponsor shall pay such supplemental retirement benefits to those executives of the Sponsor who are selected for participation in the Plan by the President of the Sponsor and approved by the Board of Directors; and WHEREAS, the parties hereto intend that the Plan be considered an unfunded arrangement, maintained primarily to provide deferred compensation benefits for the Executive, a member of a select group of management and a highly compensated employee of the Sponsor, within the meaning of the Employee Retirement Security Act of 1974 (ERISA) as amended; and NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the parties hereto agree to be bound by the terms and conditions set forth in the Plan and as set forth herein below: 1. All capitalized terms used, but not defined herein, shall have the meaning ascribed to them in the Plan. 2. The terms and conditions of the Executive's participation in the Plan shall be governed by the provisions of the Plan. Any additional terms and conditions of the Executive's participation shall be designated in an Addendum to this agreement. 3. The Executive hereby designates the Form of Supplemental Benefit from the choices below as the desired form of distribution of the Supplemental Benefit: [ ] Single Life Annuity [ ] 50% Joint and Survivor Annuity If no election is made or the election is invalid or void, the Supplemental Benefit shall be paid in the form of a Single Life Annuity. 4. If the Executive is married at the time of his death, his surviving spouse shall receive the applicable Death Benefit pursuant to the terms and conditions of the Plan. The following individual is married to the Executive and is hereby designated as the Executive's Surviving Spouse for purposes of receiving the Executive's Death Benefit: _________________________________ If the Executive is not married, no person shall be designated as the Surviving Spouse and no Death Benefit shall be paid pursuant to Article V of the Plan. 5. The Executive shall promptly notify the Sponsor of any changes in his marital status. 6. By executing this Agreement, Executive waives all rights to benefits under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. IN WITNESS WHEREOF, the Sponsor and the Executive have executed this agreement to be effective as of the day and year first above written. _______________________ _________________________ Sponsor Executive CERTIFIED COPY OF RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION --------------------- WHEREAS, this corporation adopted the Whittaker Corporation Amended and Restated Supplemental Executive Retirement Plan, effective January 1, 1996 (the "Plan"). WHEREAS, this corporation may amend the Plan at any time. NOW THEREFORE, BE IT RESOLVED, that the second sentence of Section 2.08 of the Plan is hereby amended in its entirety as follows: "Except as provided in the following sentence, Compensation shall also include any annual or other short term bonus paid by any Covered Employer to a Participant other than the amount of any bonus in excess of $100,000 paid to a Participant who is a division manager." * * * * * * * * * * I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held on January 24, 1997, at which meeting a quorum of said Board was at all times present and acting and that said Board resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Dated: January 24, 1997 /s/ Lynne M. O. Brickner ------------------------------------ Lynne M. O. Brickner Secretary EX-10.13 10 EMPLOYEES' PENSION PLAN EXHIBIT 10.13 CERTIFIED COPY OF RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION --------------------- WHEREAS, Whittaker Corporation (hereafter the "Employer"), a Delaware corporation, maintains the Whittaker Corporation Employees' Pension Plan as amended and restated effective as of January 1, 1994 (hereafter the "Plan"); and WHEREAS, pursuant to Article XIII of the Plan, the Employer may amend the Plan from time to time; and WHEREAS, the Board of Directors (hereafter the "Board") desires to amend the Plan. NOW THEREFORE, BE IT RESOLVED that the Plan be amended as follows effective as of January 1, 1996: Subsection (a) of Section 5.10 shall be amended and restated in its entirety as follows: "(a) General Rule. If a Participant who is receiving periodic retirement benefits from the Plan and who has been receiving such benefits for less than 12 consecutive months either again becomes an Employee of a Participating Company or pursuant to an agreement between a Participating Company and a Leasing Organization (as defined in Section 2.05(a)) performs services for the Participating Company, the Participant's retirement benefits will be suspended for each calendar month during which the Participant completes at least 40 Hours of Service with a Participating Company in Section 203(a)(3)(B) Service. Similarly, a retirement benefit which commences later than Normal Benefit Commencement Date will be computed as if the Employee had been receiving benefits since Normal Benefit Commencement Date and had been reemployed, without actuarial increase for amounts which would have been subject to suspension under the preceding sentence." * * * * * * * * * * I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held on October 18, 1996, at which meeting a quorum of said Board was at all times present and acting and that said Board resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Dated: December 19, 1996 /s/ Lynne M. O. Brickner ---------------------------- Lynne M. O. Brickner Secretary EX-10.17 11 SECOND AMENDMENT AND WAIVERS EXHIBIT 10.17 SECOND AMENDMENT AND WAIVER DATED AS OF OCTOBER 30, 1996 This SECOND AMENDMENT AND WAIVER (this "Waiver") is among WHITTAKER CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions party to the Credit Agreement referred to below (the "Lenders"), and NATIONSBANK OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder. PRELIMINARY STATEMENTS: 1. The Borrower, the Lenders and the Agent have entered into an Amended and Restated Credit Agreement dated as of April 10, 1996 (as amended to date, the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement). 2. The Borrower has requested that the Lenders (i) waive, during the period starting on and including November 3, 1996 to (but not including) December 18, 1996 (the "Waiver Period"), any Default arising as a result of non- compliance with Section 6.04(a), (b) or (c) of the Credit Agreement, and (ii) amend the Credit Agreement to permit a sale-leaseback transaction that would not otherwise be permitted under the terms of the Credit Agreement. 3. The Required Lenders are, on the terms and conditions stated below, willing to grant the requests of the Borrower. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date ------------------------------ hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.01 of the Credit Agreement is amended by adding thereto, in appropriate alphabetical order, the following defined terms: "`FIRST AMENDMENT' means the First Amendment and Waiver dated as of --------------- September 9, 1996 among the Borrower, the Lenders and the Agent. `SECOND AMENDMENT' means the Second Amendment and Waiver dated as of ---------------- October 30, 1996 among the Borrower, the Lenders and the Agent. `SECOND AMENDMENT EFFECTIVE DATE' means the first date on which each ------------------------------- of the conditions set forth in Section 3 of the Second Amendment is satisfied or waived." (b) The definition of the term "Applicable Margin" appearing in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "`APPLICABLE MARGIN' means, with respect to any Base Rate Advances or ----------------- Eurodollar Rate Advances, a percentage per annum determined by reference to the applicable Cash Flow Ratio as set forth below:
Applicable Margin for Applicable Margin for Cash Flow Ratio Base Rate Advances Eurodollar Rate Advances --------------- --------------------- ------------------------ less than 1.75:1.0 0.0% 1.00% 1.75:1.0 or greater, but 0.0% 1.375% less than 2.50:1.0 2.50:1.0 or greater, but 0.25% 1.625% less than 3.25:1.0 3.25:1.0 or greater, but 0.50% 1.875% less than 4.00:1.0 4.00:1.0 or greater, but 1.00% 2.500% less than 5.00:1.0 5.00 or greater 1.00% 3.00%
The Applicable Margin for each Base Rate Advance and Eurodollar Rate Advance shall be determined by reference to the Cash Flow Ratio in effect from time to time; provided, however, that (i) from and after the Second Amendment Effective -------- ------- Date until receipt by the Agent of the Borrower's audited financial statements for the fiscal year ended October 31, 1996 and the related Compliance Certificate required pursuant to Section 6.03(e), the Cash Flow Ratio shall be deemed to be 5.00:1.0 or greater, (ii) no change (except pursuant to the foregoing clause (i) and except as provided in clause (iii) below) in the Applicable Margin shall be effective until three Business Days after the date on which the Agent receives financial statements pursuant to Section 6.03(c) or (d) and a Compliance Certificate delivered pursuant to Section 6.03(e), demonstrating such Cash Flow Ratio, (iii) if at any time, and for so long as, a Default has occurred and is continuing based on the Borrower's failure to deliver the financial statements and Compliance Certificates required pursuant to Section 6.03(c), (d) and (e), as the case may be, the Cash Flow Ratio shall be deemed to be 5.00:1.0 or greater and any change in the Applicable Margin resulting from such deemed Cash Flow Ratio shall be effective, (iv) except as provided in the following clause (v), upon the effectiveness of any change in the Applicable Margin, the new Applicable Margin shall be given retroactive effect as to each outstanding Advance to the then most recent of (a) the first day of the then current fiscal quarter of the Borrower, and (b) the last date on which interest was due and payable in respect of such Advance, and (v) upon the effectiveness of any change in the Applicable Margin pursuant to the foregoing clause (i), or pursuant to the foregoing clause (ii) at any time when the Applicable Margin is determined pursuant to the foregoing clause (iii), the new Applicable Margin shall be given effect only as of the effectiveness thereof (and shall not be given retroactive effect)." (c) Section 6.02(b)(vi) of the Credit Agreement is hereby amended by adding thereto, immediately following the words "aggregate outstanding principal amount", the following: "for all such 2 Debt (other than any Debt in respect of a Capitalized Lease, if any, of the properties subject to the sale-leaseback transaction permitted under Section 6.02(e)(ix))". (d) Section 6.02(e) of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of Section 6.02(e)(vii), (ii) deleting the period at the end of Section 6.02(e)(viii) and replacing it with "; and" and (iii) adding thereto a new Section 6.02(e)(ix) to read as follows: "(ix) the sale by the Borrower of its three building office complex located in Simi Valley, California in connection with a sale-lease back of such property but only if such sale (A) is for fair market value and is consummated on or prior to January 30, 1997, (B) is for cash and results in gross cash proceeds to the Borrower of not less than $13,000,000, and (C) the lease obligations entered into in connection therewith do not require payments by the Borrower or any of its Subsidiaries in excess of $2,500,000 in any period of twelve consecutive months." SECTION 2. WAIVER. Effective as of (and including) November 3, 1996 ------ and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Lenders hereby waive, during the Waiver Period only, any Default arising as a result of non-compliance with Section 6.04(a), (b) or (c) of the Credit Agreement. SECTION 3. CONDITIONS TO EFFECTIVENESS. This Waiver shall become --------------------------- effective when (a) the Agent has executed this Waiver and has received counterparts of this Waiver executed by the Borrower and the Required Lenders and counterparts of the Consent appended hereto (the "Consent") executed by each of the Guarantors and Grantors (as defined in the Security Agreement) listed therein (such Guarantors and Grantors, together with the Borrower, each a "Loan Party" and, collectively, the "Loan Parties"), and (b) the Agent shall have received favorable opinions of (i) Latham & Watkins, special counsel to the Borrower, as to the enforceability of this Waiver and the Loan Documents as modified hereby and as to such other matters as the Agent or the Required Lenders may reasonably request, and (ii) the Vice President-General Counsel of the Borrower, as to the due authorization, execution and delivery of this Waiver and as to such other matters as the Agent or the Required Lenders may reasonably request. SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents ------------------------------ and warrants as follows: (A) AUTHORITY. The Borrower and each other Loan Party has the --------- requisite corporate power and authority to execute and deliver this Waiver or the Consent, as applicable, and to perform its obligations hereunder and under the Loan Documents (as modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Waiver and by each other Loan Party of the Consent, and the performance by each Loan Party of each Loan Document (as modified hereby) to which it is a party have been duly approved by all necessary corporate action of such Loan Party and no other corporate proceedings on the part of such Loan Party are necessary to consummate such transactions. (B) ENFORCEABILITY. This Waiver has been duly executed and -------------- delivered by the Borrower. The Consent has been duly executed and delivered by each Guarantor. This 3 Waiver and each Loan Document (as modified hereby) is the legal, valid and binding obligation of each Loan Party party hereto or thereto, enforceable against such Loan Party in accordance with its terms, and is in full force and effect. (C) REPRESENTATIONS AND WARRANTIES. The representations and ------------------------------ warranties contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (D) NO DEFAULT. After giving effect to this Waiver, no event ---------- has occurred and is continuing that constitutes a Default. SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon --------------------------------------------- and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby. (b) Except as specifically modified above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Secured Obligations under and as defined therein, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Waiver shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 6. EXECUTION IN COUNTERPARTS. This Waiver may be executed in ------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Waiver or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Waiver or such Consent. SECTION 7. GOVERNING LAW. This Waiver shall be governed by, and ------------- construed in accordance with, the laws of the State of New York. [Signature Pages Follow] 4 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be executed by their respective officers thereunto duly authorized, as of the date first above written. WHITTAKER CORPORATION, a Delaware corporation By: /s/ John K. Otto ------------------------------------------- John K. Otto Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ Andrea C. Defterios ------------------------------------------- Andrea C. Defterios Vice President S-1 Lenders: ------- NATIONSBANK OF TEXAS, N.A. By: /s/ Andrea C. Defterios ------------------------------------------- Andrea C. Defterios Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Lori Y. Kannegieter ------------------------------------------- Title: Managing Director CIBC INC. By: /s/ R. Wagner ------------------------------------------- Title: Agent CITY NATIONAL BANK, N.A. By: /s/ Erich Bollinger ------------------------------------------- Title: Vice President COMERICA BANK-CALIFORNIA By: /s/ Scott J. Smith ------------------------------------------- Title: Assistant Vice President IMPERIAL BANK By: /s/ John F. Farrace ------------------------------------------- Title: Assistant Vice President S-2 KREDIETBANK N.V. By: /s/ Robert Snauffer ------------------------------------------- Title: Vice President By: /s/ Tod R. Angus ------------------------------------------- Title: Vice President SANWA BANK CALIFORNIA By: ------------------------------------------- Title: SUMITOMO BANK OF CALIFORNIA, N.A. By: ------------------------------------------- Title: TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules ------------------------------------------- Title: Senior Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ William Swiontek ------------------------------------------- Title: Vice President S-3 EX-10.18 12 THIRD AMENDMENT AND WAIVER EXHIBIT 10.18 THIRD AMENDMENT AND WAIVER TO WHITTAKER CORPORATION AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF DECEMBER 17, 1996 This THIRD AMENDMENT AND WAIVER (this "Amendment") is among WHITTAKER CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions party to the Credit Agreement referred to below (the "Lenders"), NATIONSBANK OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder and CIBC INC., as co-agent ("Co-Agent") for the Lenders thereunder. PRELIMINARY STATEMENTS: 1. The Borrower, the Lenders, the Co-Agent and the Agent have entered into an Amended and Restated Credit Agreement dated as of April 10, 1996 (as amended to date, the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement). 2. The Borrower has requested that the Lenders, among other things, (i) waive, during the period starting on and including December 18, 1996 to (but not including) February 28, 1997 (the "Waiver Period"), any Default arising as a result of non-compliance with Section 6.04(a), (b), (c) or (d) of the Credit Agreement; and (ii) consent to an incentive compensation plan for employees of certain of the Borrower's Subsidiaries. 3. The Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrower. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date ------------------------------ hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.01 of the Credit Agreement is amended by adding thereto, in appropriate alphabetical order, the following defined terms: `COMMUNICATIONS SUBSIDIARIES' means Xyplex, Inc., a Massachusetts --------------------------- corporation, Whittaker Communications, Inc., a California corporation, and each of their respective Subsidiaries and any Subsidiary of the Borrower formed solely for the purpose of holding the capital stock of the other Communications Subsidiaries. `DEBT REDUCTION AMOUNT' means an amount equal to the sum of (a) --------------------- --- the aggregate amount of prepayments made by the Borrower to the Agent under the Credit Agreement on or after the Third Amendment Effective Date and applied to the reduction of Term Advances pursuant to Section 2.05 plus (b) the aggregate ---- amount of HLS Subordinated Debt that, on or after the Third Amendment Date, is converted into common stock of the Borrower or into other capital stock of the Borrower, in either event, on terms reasonably satisfactory to the Required Lenders (it being understood and agreed that the amount under this clause (b) as of any date shall be determined by the Agent based on an officer's certificate delivered to the Agent on or prior to such date setting forth such amount and on such other evidence, if any, as the Agent or the Required Lenders may reasonably require). `DEED OF TRUST' has the meaning set forth in Section 6.01(j). ------------- . `ENVIRONMENTAL INDEMNITY' has the meaning set forth in Section ----------------------- 6.01(j). `FIRST REDUCTION DATE' means the first date on which the Debt -------------------- Reduction Amount equals or exceeds $15,000,000. `REDUCTION AMOUNT' has the meaning specified in Section ---------------- 2.05(b)(viii). `SECOND REDUCTION DATE' means the first date on which the Debt --------------------- Reduction Amount equals or exceeds $30,000,000. `THIRD AMENDMENT' means the Third Amendment and Waiver to --------------- Whittaker Corporation Amended and Restated Credit Agreement dated as of December 17, 1996, among the Borrower, the Lenders, the Agent and the Co- Agent. `THIRD AMENDMENT EFFECTIVE DATE' means the first date on which ------------------------------ each of the conditions set forth in Section 4 of the Third Amendment is satisfied or waived." (c) The following definitions in Section 1.01 of the Credit Agreement are hereby amended as set forth below: (i) The definition of "Applicable Margin" is hereby amended and restated in its entirety as follows: "`APPLICABLE MARGIN' means, (a) if the First Reduction Date ----------------- has not occurred on or prior to January 31, 1997, then from January 31, 1997 through and including the First Reduction Date, 2.00% with respect to Base Rate Advances and 4.50% with respect to Eurodollar Rate Advances, (b) if the Second Reduction Date has not occurred on or prior to January 31, 1997, then from the later to occur of (i) January 31, 1997 and (ii) the First Reduction Date and through and including the Second Reduction Date, 2.00% with respect to Base Rate Advances and 4.00% with respect to Eurodollar Rate Advances, and (c) at all times prior to January 31, 1997 and at all times after the Second Reduction Date, with respect to any Base Rate Advances or Eurodollar Rate Advances, a percentage per annum determined by reference to the applicable Cash Flow Ratio as set forth below: 2
Applicable Margin for Applicable Margin for Cash Flow Ratio Base Rate Advances Eurodollar Rate Advances --------------- --------------------- ------------------------ less than 1.75:1.0 0.0% 1.00% 1.75:1.0 or greater, but 0.0% 1.375% less than 2.50:1.0 2.50:1.0 or greater, but 0.25% 1.625% less than 3.25:1.0 3.25:1.0 or greater, but 0.50% 1.875% less than 4.00:1.0 4.00:1.0 or greater, but 1.00% 2.500% less than 5.00:1.0 5.00 or greater 1.00% 3.00%
At all times during which clause (c) above shall be applicable, the Applicable Margin for each Base Rate Advance and Eurodollar Rate Advance shall be determined by reference to the Cash Flow Ratio in effect from time to time; provided, however, that (i) from and after -------- ------- the Second Amendment Effective Date until receipt by the Agent of the Borrower's audited Financial Statements for the Fiscal Year ended October 31, 1996 and the related Compliance Certificate required pursuant to Section 6.03(e), the Cash Flow Ratio shall be deemed to be 5.00:1.0 or greater, (ii) no change (except as provided in clause (iii) or clause (v) below) in the Applicable Margin shall be effective until three Business Days after the date on which the Agent receives financial statements pursuant to Section 6.03(c) or (d) and a Compliance Certificate delivered pursuant to Section 6.03(e), demonstrating such Cash Flow Ratio, (iii) if at any time, and for so long as, a Default has occurred and is continuing based on the Borrower's failure to deliver the financial statements and Compliance Certificates required pursuant to Section 6.03(c), (d) and (e), as the case may be, the Cash Flow Ratio shall be deemed to be 5.00:1.0 or greater and any change in the Applicable Margin resulting from such deemed Cash Flow Ratio shall be effective, (iv) except as provided in the following clause (v), upon the effectiveness of any change in the Applicable Margin, the new Applicable Margin shall be given retroactive effect as to each outstanding Advance to the then most recent of (a) the first day of the then current fiscal quarter of the Borrower, and (b) the last date on which interest was due and payable in respect of such Advance, and (v) upon the effectiveness of any change in the Applicable Margin (A) pursuant to the foregoing clause (ii) at any time when the Applicable Margin is determined pursuant to the foregoing clause (iii), or (B) as a result of the occurrence of the First Reduction Date or the Second Reduction Date, the new Applicable Margin shall be given effect only as of the effectiveness thereof (and shall not be given retroactive effect)." (ii) The definition of "Collateral Documents" in Section 1.01 of the Credit Agreement is hereby amended by adding the following immediately after the words "Security 3 Agreement,": "any Deed of Trust or Environmental Indemnity executed pursuant to Section 6.01(j),". (d) Section 2.04(b) of the Credit Agreement is amended and restated in its entirety to read as follows: "(b) Mandatory Reductions of the Revolving Commitments. The ------------------------------------------------- Revolving Facility shall be automatically and permanently reduced on a pro rata basis on each date on which prepayment thereof is required to be made pursuant to Sections 2.05(b)(ii), (iii), (iv), (v) or (vi), in an amount equal to the applicable Reduction Amount, provided that each such reduction -------- of the Revolving Facility shall be made ratably among the Revolving Lenders in accordance with their Revolving Commitments." (e) Section 2.05(b)(ii) of the Credit Agreement is amended and restated in its entirety as follows: "(ii) Permitted Refinancings and Certain Other Debt. When the --------------------------------------------- Borrower issues, creates or otherwise incurs Debt which is a Permitted Refinancing, or which is Debt permitted under Section 6.02(b)(iii), the Borrower shall, on the date of receipt of the proceeds thereof, prepay the Advances in an amount equal to the principal amount of such Debt so incurred (or, if greater in the case of any revolving credit or working capital facility, the maximum amount available to be borrowed (assuming compliance with all conditions for borrowing)). Each such payment shall be applied first, to the prepayment of scheduled principal installments of the ----- Term Advances in inverse order of maturity, until the Term Advances are repaid in full, and second, to the prepayment of the Revolving Facility as ------ set forth in Section 2.05(b)(viii)." (f) Section 2.05(b)(iii) of the Credit Agreement is amended and restated in its entirety to read as follows: "(iii) SPECIFIED BERMITE LAND PROCEEDS. On the first Business ------------------------------- Day after any Specified Bermite Land Proceeds are received by the Borrower or any of its Subsidiaries, the Borrower shall prepay the Advances in an amount equal to such Specified Bermite Land Proceeds. Each such payment shall be applied first, to the scheduled principal installments of the Term ----- Advances (ratably in accordance with the respective principal amounts of each such installment), until the Term Advances are repaid in full and, second, to the prepayment of the Revolving Facility as set forth in Section ------ 2.05(b)(viii)." (g) Section 2.05(b)(iv) of the Credit Agreement is amended by deleting the last four lines of such Section beginning with the words "pay to each Term Lender" and inserting the following in lieu thereof: "prepay the Advances in an amount equal to such Net Cash Proceeds. Each such payment shall be applied first, to the scheduled principal ----- installments of the Term Advances (ratably in accordance with the respective principal amounts of each such installment), until the Term Advances are repaid in full and, second, to the prepayment of the Revolving ------ Facility as set forth in Section 2.05(b)(viii)." 4 (h) Section 2.05(b)(v) of the Credit Agreement is amended by deleting the last nine lines of such Section beginning with the words "pay to each Term Lender" and inserting the following in lieu thereof: "prepay the Advances in an amount equal to 100% of such Net Cash Proceeds. Each such payment shall be applied first, to the scheduled principal ----- installments of the Term Advances in inverse order of maturity, until the Term Advances are repaid in full and, second, to the prepayment of the ------ Revolving Facility as set forth in Section 2.05(b)(viii)." (i) Section 2.05(b)(vi) of the Credit Agreement is amended by deleting the last eight lines of such Section beginning with the words "pay to each Term Lender" and inserting the following in lieu thereof: "prepay the Advances in an amount equal to 50% of such Excess Cash Flow. Each such payment shall be applied first, to the scheduled principal ----- installments of the Term Advances (ratably in accordance with the respective principal amounts of each such installment), until the Term Advances are repaid in full and, second, to the prepayment of the Revolving ------ Facility as set forth in Section 2.05(b)(viii)." (j) Section 2.05(b) of the Credit Agreement is amended by adding thereto a new Section 2.05(b)(viii) to read as follows: "(viii) APPLICATION OF CERTAIN PREPAYMENTS. Prepayments of the ---------------------------------- Revolving Facility made pursuant to Sections 2.05(b)(ii), (iii), (iv), (v) and (vi) shall be first applied to prepay L/C Advances then outstanding ----- until such Advances are paid in full, second applied to prepay Revolving ------ Advances then outstanding (ratably in accordance with the respective principal amounts of each such Advance) until such Advances are paid in full, and third deposited in the L/C Cash Collateral Account to cash ----- collateralize 100% of the aggregate Available Amount of the Letters of Credit then outstanding; and, in the case of any such prepayments, the amount remaining (if any) after the prepayment in full of the L/C Advances and Revolving Advances then outstanding and the 100% cash collateralization of the aggregate Available Amount of Letters of Credit then outstanding (the sum of such prepayment amounts, cash collateralization amounts and remaining amount being referred to herein as the "Reduction Amount") may be ---------------- retained by the Borrower and the Revolving Facility shall be permanently reduced as set forth in Section 2.04(b). Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the applicable Issuing Bank or the Revolving Lenders, as applicable." (k) Section 2.07 is amended by adding thereto a new section 2.07(d) to read as follows: "(d) Certain Post-Closing Fees. If the First Reduction Date has ------------------------- not occurred on or prior to February 28, 1997, the Borrower agrees to pay to the Agent on such date, in accordance with Section 2.09(a), for the account of each Lender, a fee equal to 0.15% of the sum of the principal amount of all outstanding Advances owed to such Lender, the Unused Revolving Commitment, if any, of such Lender and, in the case of each Revolving Lender, such Lender's Pro Rata share of the aggregate outstanding Letter of Credit Obligations as of such date." 5 (l) Section 6.01 of the Credit Agreement is amended by adding a new Section 6.01(j) to read as follows: "(j) DEED OF TRUST. Within 30 days after receipt of a written request ------------- by the Agent (acting at the direction or with the consent of the Required Lenders), the Borrower shall deliver to the Agent the following: (i) a Deed of Trust, Assignment of Rents and Fixture Filing, granting the Agent a first priority lien on the Bermite Land, duly executed and acknowledged by Whittaker Porta Bella Development, Inc. and otherwise in form and substance reasonably satisfactory to the Agent (as amended, supplemented or otherwise modified from time to time, the "DEED OF TRUST") ------------- in proper form for recordation in the Official Records of Los Angeles County, California; (ii) a First American Title Insurance Company 1992 ALTA loan policy of title insurance (the "TITLE INSURANCE POLICY") in favor of the ---------------------- Agent, in such amount as the Agent shall determine, insuring the validity and priority of the Deed of Trust and otherwise in form and substance reasonably satisfactory to the Agent; (iii) an environmental indemnity agreement, executed by the Borrower and Whittaker Porta Bella Development, Inc. with respect to the Bermite Land in form and substance reasonably satisfactory to the Agent (as amended, supplemented or otherwise modified from time to time, the "ENVIRONMENTAL INDEMNITY"); and ------------------------ (iv) a favorable opinion of the Vice President-General Counsel of the Borrower, as to the due authorization, execution and delivery of the Deed of Trust, the Environmental Indemnity, and as to such other matters as the Agent or the Required Lenders may reasonably request." (m) Section 6.02(g)(viii) is amended by deleting the "and" at the end thereof. (n) Section 6.02(g)(ix) is amended by deleting the period at the end thereof and adding "; and" in lieu thereof. (o) Section 6.02(g) is amended by adding thereto a new Section 6.02(g)(x) as follows: "(x) so long as no Event of Default has occurred and is continuing, the granting of stock options by the Communications Subsidiaries to their employees in an aggregate amount not to exceed 8% of the number of shares of issued and outstanding common stock of the Communications Subsidiaries at the time of the grant." (p) Section 6.03(b) of the Credit Agreement is amended and restated in its entirety as follows: "(b) Monthly and Semi-Monthly Reports. (i) Not later than 21 -------------------------------- Business Days after the end of each fiscal month of the Borrower (subject to the proviso set forth below), a written report for such fiscal month, which shall set forth, for such month and as of the last Business Day of such month, in substantially the form submitted to the Lenders (as defined therein) pursuant to the Original Credit Agreement, Consolidated and consolidating summaries 6 of sales and profits for that month and for the period from the beginning of the current fiscal year to the end of that month, showing in comparative form for such month and year-to-date periods (A) the Consolidated figures for the corresponding periods of the previous fiscal year and (B) the Consolidated figures for the corresponding periods contained in the most recent plan or budget delivered pursuant to Section 6.03(f), (ii) not later than 30 Business Days after the end of each fiscal month of the Borrower (subject to the proviso set forth below) (A) the Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such month, (B) Consolidated and consolidating statements of income of the Borrower and its Subsidiaries as at the end of such month and (C) Consolidated and consolidating statements of cash flow of the Borrower and its Subsidiaries, in each case, for such month and for the period from the beginning of the current fiscal year to the end of that month, showing in comparative form the Consolidated figures for the corresponding periods of the previous fiscal year; provided, however, that in the case of a fiscal -------- ------- month which (x) is the last fiscal month of any of the first three fiscal quarters of a fiscal year, the foregoing reports for that month shall be delivered no later than 45 calendar days after the last day of that month, and (y) is the last fiscal month of a fiscal year, the foregoing reports for that month shall be delivered no later than 90 calendar days after the last day of that month; and (iii) on January 15, 1997, and on the first and fifteenth day of each month thereafter a written estimate of Consolidated and consolidating weekly cash flow of the Borrower and its Subsidiaries for the immediately following four weeks. All of the foregoing reports shall be in reasonable detail and certified by the chief financial officer, controller or treasurer of the Borrower as, to the extent applicable, having been prepared in accordance with GAAP and as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries as at the dates and for the period indicated, subject to changes resulting from audit and normal year-end adjustments.". SECTION 2. WAIVER. Effective as of (and including) December 18, 1996 ------ and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Lenders hereby waive, during the Waiver Period only, any Default arising as a result of non-compliance with Section 6.04(a), (b), (c) or (d) of the Credit Agreement. SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become --------------------------- effective when each of the following conditions has been satisfied (the "Effective Date"): (a) the Agent has executed this Amendment and has received counterparts of this Amendment executed by the Borrower and the Required Lenders and counterparts of the Consent appended hereto (the "Consent") executed by each of the Guarantors and Grantors (as defined in the Security Agreement) listed therein (such Guarantors and Grantors, together with the Borrower, each a "Loan Party" and, collectively, the "Loan Parties"); (b) the Borrower has paid to the Agent in accordance with Section 2.09(a) of the Credit Agreement for the account of each Lender, a fee equal to 0.15% of the sum of the principal amount of all outstanding Advances owed to such Lender, the Unused Revolving Commitment, if any, of such Lender and, in the case of each Revolving Lender, such Lender's Pro Rata share of the aggregate outstanding Letter of Credit Obligations as of such date; and (c) the Agent has received favorable opinions of (i) Latham & Watkins, special counsel to the Borrower, as to the enforceability of this Amendment, the Consent and the Loan Documents as modified hereby and as to such other matters as the Agent or the Required Lenders 7 may reasonably request, and (ii) the Vice President General Counsel of the Borrower, as to the due authorization, execution and delivery of this Amendment, the Consent and as to such other matters as the Agent or the Required Lenders may reasonably request. SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents ------------------------------ and warrants as follows: (a) AUTHORITY. The Borrower and each other Loan Party has the --------- requisite corporate power and authority to execute and deliver this Amendment or the Consent, as applicable, and to perform its obligations hereunder and under the Loan Documents (as modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and by each other Loan Party of the Consent, and the performance by each Loan Party of each Loan Document to which it is a party have been duly approved by all necessary corporate action of such Loan Party and no other corporate proceedings on the part of such Loan Party are necessary to consummate such transactions. (b) ENFORCEABILITY. This Amendment has been duly executed and -------------- delivered by the Borrower. The Consent has been duly executed and delivered by each Guarantor and Grantor. This Amendment and each Loan Document (as modified hereby) is the legal, valid and binding obligation of each Loan Party hereto or thereto, enforceable against such Loan Party in accordance with its terms, and is in full force and effect. (c) REPRESENTATIONS AND WARRANTIES. The representations and ------------------------------ warranties contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) NO DEFAULT. After giving effect to this Amendment, no event ---------- has occurred and is continuing that constitutes a Default. SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon --------------------------------------------- and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby. (b) Except as specifically modified above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Secured Obligations under and as defined therein, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as an amendment of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute an amendment of any provision of any of the Loan Documents. 8 SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed ------------------------- in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and ------------- construed in accordance with, the laws of the State of New York. SECTION 8. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on ------------------------- demand all out-of-pocket expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Amendment and any other documents prepared or obtained in connection therewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities hereunder and thereunder and the costs of the Title Insurance Policy. Borrower further agrees to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses), of the Agent, the Co-Agent and the Lenders in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 8. [Signature Pages Follow] 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. WHITTAKER CORPORATION, a Delaware corporation By: /s/ John K. Otto ------------------------------------------- John K. Otto Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ Andrea C. Defterios ------------------------------------------- Andrea C. Defterios Vice President CIBC INC., as Co-Agent By: /s/ R. Wagner ------------------------------------------- Title: Agent S-1 Lenders: ------- NATIONSBANK OF TEXAS, N.A. By: /s/ Andrea C. Defterios ------------------------------------------- Andrea C. Defterios Vice President CIBC INC. By: /s/ R. Wagner ------------------------------------------- Title: Agent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Lori Y. Kannegieter ------------------------------------------- Title: Managing Director CITY NATIONAL BANK, N.A. By: /s/ Gregory Meis ------------------------------------------- Title: Vice President COMERICA BANK-CALIFORNIA By: /s/ Scott J. Smith ------------------------------------------- Title: Assistant Vice President IMPERIAL BANK By: /s/ Ray Vadalma ------------------------------------------- Title: Senior Vice President S-2 KREDIETBANK N.V. By: /s/ Robert Snauffer ------------------------------------------- Title: Vice President By: /s/ Tod R. Angus ------------------------------------------- Title: Vice President SANWA BANK CALIFORNIA By: ------------------------------------------- Title: SUMITOMO BANK OF CALIFORNIA, N.A. By: ------------------------------------------- Title: TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules ------------------------------------------- Title: Senior Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ William Swiontek ------------------------------------------- Title: Vice President S-3 CONSENT DATED AS OF DECEMBER 17, 1996 The undersigned, as Guarantors under the "Guaranty" and as Grantors under the "Security Agreement" (as such terms are defined in and under the Credit Agreement referred to in the foregoing Amendment), each hereby consents and agrees to the foregoing Third Amendment and Waiver and hereby confirms and agrees that (i) the Guaranty, the Security Agreement and the Confirmation are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of, the said Amendment, each reference in the Guaranty, the Security Agreement and the Confirmation to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by the said Amendment and (ii) the Security Agreement and the Confirmation and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations as defined in the Security Agreement. BLUE BELL LEASE, INC., a California corporation, METROPOLITAN FINANCIAL SERVICES CORPORATION, a Colorado corporation, PARK CHEMICAL COMPANY, a Michigan corporation, WHITTAKER COMMUNICATIONS, INC., a California corporation,WHITTAKER CONTROLS, INC., a California corporation, WHITTAKER CORP., a Maine corporation, WHITTAKER ORDNANCE, INC., a Delaware corporation, WHITTAKER PORTA BELLA DEVELOPMENT, INC., a California corporation, WHITTAKER SERVICES CORPORATION, a California corporation, WHITTAKER TECHNICAL PRODUCTS, INC., a Colorado corporation, WHITTAKER DEVELOPMENT CO., a Delaware corporation and XYPLEX, INC., a Massachusetts corporation By: /s/ John K. Otto ------------------------------------------------- John K. Otto Treasurer of each of the foregoing Loan Parties EX-11 13 CALCULATION OF EARNINGS PER SHARE EXHIBIT 11 WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE
Year Ended October 31, ----------------------------------------- 1996 1995 1994 -------- -------- -------- PRIMARY EARNINGS PER SHARE EARNINGS ($ IN 000) Income (Loss)................................... ($17,127) $7,865 $10,061 Deduct: Dividends on $5.00 Cumulative Convertible Preferred Stock..... - (4) (12) -------- ------- ------- Net income (loss) used in primary earnings per share calculations.................. ($17,127) $7,861 $10,049 ======== ======= ======= AVERAGE COMMON AND COMMON EQUIVALENT SHARES (IN 000) Weighted average number of common shares outstanding...................... 10,065 8,531 8,481 Common equivalent shares: Series D Participating Convertible Preferred Stock................. - 292 292 Stock options included under treasury stock method........... - 802 729 -------- ------- ------- Total........................................... 10,065 9,625 9,502 ======== ======= ======= Primary Earnings (Loss) Per Share............... ($1.70) $0.82 $1.06 ======== ====== =======
WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE (Continued)
Year Ended October 31, ---------------------------------------- 1996 1995 1994 -------- -------- -------- FULLY DILUTED EARNINGS PER SHARE EARNINGS ($ IN 000) Net income used in primary earnings per share calculations.................. ($17,127) $7,861 $10,049 Adjustments: - - - Net income (loss) used in fully diluted earnings per share calculations......... ($17,127) $7,861 $10,049 ======== ====== ======= AVERAGE SHARES USED TO CALCULATE FULLY DILUTED EARNINGS PRE SHARE (IN 000) Average common and common equivalent shares, above........................... 10,065 9,625 9,502 Add: Additional stock options included under treasury stock method........... - - 88 -------- ------ ------- Total........................................... 10,065 9,625 9,590 ======== ====== ======= Fully Diluted Earnings (Loss) Per Share......... ($1.70) $0.82 $1.05 ======== ====== =======
WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE (Continued) NOTES Earnings per share nave been computed based on the weighted average number of common and common equivalent shares outstanding during the periods, after deducting from net income for 1995 and 1994 the the dividend requirements on the then outstanding $5.00 Cumulative Convertible Preferred Stock. Common stock equivalents include Series D Participating Preferred Stock and dilutive employee stock options calculated using the treasury stock method. For 1994 fully diluted earnings per share include the additional potential dilutive effect of employee stock options. Common equivalent shares have been excluded from the 1996 calculations and additional shares assuming conversion of subordinated convertible debt have been excluded from the 1996 and 1995 calculations as inclusion of such shares would have been antidilutive. EX-21 14 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF WHITTAKER CORPORATION A DELAWARE CORPORATION
PLACE OF NAME OF COMPANY INCORPORATION - --------------- ------------- U.S. SUBSIDIARIES - ----------------- Blue Bell Lease, Inc. California Metropolitan Financial Services Colorado Corporation Park Chemical Company Michigan Whittaker Communications, Inc. California Whittaker Controls, Inc. California Whittaker Corp. Maine Whittaker Development Co. Delaware Whittaker Ordnance, Inc. Delaware Whittaker Political Action California Committee, Inc. Whittaker Porta Bella California Development, Inc. Whittaker Services Corporation California Whittaker Technical Colorado Products, Inc. Xyplex, Inc. Massachusetts FOREIGN SUBSIDIARIES - -------------------- Whittaker Communications England Limited Whittaker International, Inc. Barbados
EX-23 15 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment Number 2 to Registration Statement Number 2-74481 on Form S-8 dated January 28, 1983, as amended and supplemented to date, Post-Effective Amendment Number 3 to Registration Statement Number 2-74481 on Form S-8 dated October 10, 1983, Post- Effective Amendment Number 1 to Registration Statement Number 2-97149 on Form S- 8 dated September 30, 1985, Post-Effective Amendment Number 3 to Registration Statement Number 2-76480 on Form S-8 dated April 22, 1985, Post-Effective Amendment Number 2 to Registration Statement Number 2-70806 on Form S-8 dated May 20, 1981, Post-Effective Amendment Numbers 2, 1-A and 1-B to Registration Statement Number 33-04320 on Form S-4 dated March 26, 1986, as supplemented and amended to date, Post-Effective Amendment Numbers 2-A and 2-B to Registration Statement Number 33-04320 on Form S-8 to Form S-4 dated June 1, 1987, Registration Statement Numbers 33-35762 and 33-35763 on Form S-8 dated July 6, 1990, Registration Statement Number 33-52295 on Form S-8 dated February 16, 1994, Registration Statement Number 33-58323 on Form S-8 dated March 31, 1995, and Registration Statement Number 333-03753 on Form S-3 dated May 15, 1996 of our report dated December 16, 1996 with respect to the consolidated financial statements of Whittaker Corporation in the Annual Report (Form 10-K) for the year ended October 31, 1996. We also consent to the reference to our firm under the caption "Experts" in the aforementioned Registration Statements insofar as that reference relates to our report for the year ended October 31, 1996. ERNST & YOUNG LLP Los Angeles, California January 28, 1997 EX-27 16 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR OCT-31-1996 OCT-31-1996 556 1,010 76,622 2,364 46,087 147,601 89,787 46,421 379,484 213,332 453 0 1 110 131,025 379,484 221,877 221,877 129,890 129,890 34,238 0 11,018 (26,216) (9,089) (17,127) 0 0 0 (17,127) (1.70) 0
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