-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Zy1mkAWE2nidXIRRJPcEG/FEHBpELZYmJq9bbuXC8i2gYBtNYoNOIJyWr8nu3uEl W50EChYX/2CIWyKFw7MF5w== 0000031617-94-000005.txt : 19940505 0000031617-94-000005.hdr.sgml : 19940505 ACCESSION NUMBER: 0000031617-94-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDO CORP CENTRAL INDEX KEY: 0000031617 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 110707740 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03985 FILM NUMBER: 94519139 BUSINESS ADDRESS: STREET 1: 14 04 111TH ST CITY: COLLEGE POINT STATE: NY ZIP: 11356-1434 BUSINESS PHONE: 7183214000 MAIL ADDRESS: STREET 1: 14-04 11TH ST CITY: CPLLEGE POINT STATE: NY ZIP: 11356-1434 10-K 1 10-K WITH EXHIBIT LIST =============================================================================== FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended Commission File Number December 31, 1993 1-3985 EDO CORPORATION Exact name of Registrant as specified in its charter. State of Incorporation: IRS Employer Identification No.: New York 11-0707740 Address of principal executive offices: 14-04 111th Street, College Point, New York 11356-1434 Telephone No.: (718) 321-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Shares New York Stock Exchange par value $1 per share 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 by delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form. [X] State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 8, 1994............... $32,257,162 Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of March 8, 1994.................5,473,955 Documents Incorporated by Reference Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1993 are incorporated by reference into Part I and Part II. Portions of the Definitive Proxy Statement of the Registrant, dated March 23, 1994, are incorporated by reference into Part III. =============================================================================== EDO Corporation Table of Contents PART I...................................................................... 1 ITEM 1. BUSINESS............................................................ 1 MILITARY SYSTEMS.......................................................... 1 Aircraft Stores Suspension and Ejection Systems......................... 1 Sonar Systems........................................................... 1 Airborne Mine Countermeasure Systems.................................... 1 Command, Control and Communications (C3) Systems........................ 1 COMMERCIAL AND OTHER PRODUCTS............................................. 1 Acoustic Instrument Systems............................................. 1 Ceramic Components...................................................... 1 Spaceflight Systems..................................................... 2 Infrared Instrumentation................................................ 2 Fiber-Reinforced Structures............................................. 2 Composite Sports Products............................................... 2 Compressed Natural Gas Vehicle Products................................. 2 RESEARCH AND DEVELOPMENT.................................................. 2 MARKETING AND INTERNATIONAL SALES......................................... 2 BACKLOG................................................................... 3 GOVERNMENT CONTRACTS...................................................... 3 COMPETITION AND OTHER FACTORS............................................. 3 EMPLOYEES................................................................. 4 EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 4 ITEM 2. PROPERTIES.......................................................... 4 ITEM 3. LEGAL PROCEEDINGS................................................... 4 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 5 PART II..................................................................... 5 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................. 5 ITEM 6. SELECTED FINANCIAL DATA............................................. 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 5 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 5 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 5 PART III.................................................................... 5 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 5 ITEM 11. EXECUTIVE COMPENSATION............................................. 5 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 5 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 5 PART IV..................................................................... 5 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K... 5 (a) Financial Statements And Financial Statement Schedules And Exhibits.............................................. 5 1. Financial Statements............................................ 5 2. Financial Statement Schedules................................... 5 3. Exhibits........................................................ 6 (b) Reports on Form 8-K................................................. 7 SIGNATURES.................................................................. 8 INDEPENDENT AUDITORS' REPORT................................................ 9 Schedule V.................................................................. 9 Schedule VI................................................................. 10 Schedule X.................................................................. 10 PART I ITEM 1. BUSINESS The term "Registrant" as used in this Annual Report refers to EDO Corporation. The term "Company" as used in this Annual Report, except where the context otherwise requires, includes the Registrant and its subsidiaries. EDO Corporation was incorporated in New York in 1925 by Earl Dodge Osborn, from whose initials "EDO" is derived. In the early days of modern aviation, the Company pioneered in the development of seaplane floats and continues to manufacture floats for general aviation aircraft. Presently, the Company designs and manufactures advanced electronic, acoustic, aerodynamic and hydrodynamic equipment for military applications and for marine, aviation and other commercial markets. In response to defense spending reductions, the Company has been aggressively pursuing the application of its sophisticated and diverse defense-related technologies to civilian and commercial markets. The Company organizes its business into two segments: Military Systems; and Commercial and Other Products. A description of the principal products of the Company within the two industry segments is set forth below. The Company recently adopted a restructuring plan which consists of the discontinuance of the Company's defense business in Canada, the relocation of some United States production from New York to less costly locations, the related disposition of non-productive assets (principally land and buildings), and work force reductions. Additionally, information about the Company's restructuring plan is contained on page 14 and Note 2 on page 21 of the Company's 1993 Annual Report to Shareholders, and is incorporated by reference. Certain business segment information on the Company's operations is set forth under Note 18 on pages 27 and 28 of the Company's 1993 Annual Report to Shareholders and is incorporated by reference. MILITARY SYSTEMS The Company's operations in the Military Systems segment consist of the development and production of sophisticated electronic, acoustic, hydrodynamic and aerodynamic military systems. The Company additionally provides logistic support for its products following initial hardware deliveries. Such support consists of training operators and support personnel, supplying spare parts, and providing repair and refurbishment services. The revenues from such support services have been a significant portion of Military Systems' net sales. AIRCRAFT STORES SUSPENSION AND EJECTION SYSTEMS The Company developed and manufactures: bomb release units ("BRUs") for the U.S. Air Force F-15E; ejection release units ("ERUs") used on Tornado Multirole Combat Aircraft; and jettison release mechanisms ("JRMs") for the U.S. Navy F-14. The Company designed and is developing the Advanced Medium Range Air-to-Air Missile ("AMRAAM") for the F-22 Advanced Tactical Fighter. Funded development is expected to continue through 1994. For 1993, 1992 and 1991, respectively, sales of aircraft stores suspension and ejection systems represented 12%, 11% and 12% of consolidated net sales. SONAR SYSTEMS The Company develops and produces advanced sonar systems for use in a variety of military applications. These sonar systems are an important element in anti-submarine warfare. The Company's sonar products include active and passive, and variable depth and hull-mounted systems, covering an extensive range of size and capability. The Company developed and produces "Flat-Pak" hydrophones and associated electronics for a submarine-mounted passive listening sonar system. The Company also produces the acoustic portion of the MK-39 "EMATT" training target. This program is expected to be in production until late in the decade. For 1993, 1992 and 1991, respectively, sales of military sonar systems and acoustic products represented 21%, 25% and 32% of consolidated net sales. AIRBORNE MINE COUNTERMEASURE SYSTEMS The Company is the only manufacturer of the MK-105, a helicopter-towed magnetic minesweeping system designed and developed by the Company in cooperation with the U.S. Navy. During 1991 and early 1992, the Company received contracts to develop a major upgrade of the MK-105. For 1993, 1992 and 1991, respectively, sales of helicopter-towed mine countermeasure systems represented 13%, 13% and 9% of consolidated net sales. COMMAND, CONTROL AND COMMUNICATIONS (C3) SYSTEMS The Company manufactures Command, Control and Communications ("C3") systems and develops software for these systems using commercial off-the-shelf hardware and software components. COMMERCIAL AND OTHER PRODUCTS ACOUSTIC INSTRUMENT SYSTEMS The Company manufactures data/voice communications, velocity measurement and navigation sonar commercial undersea acoustic instruments. Although designed for commercial markets, these products are also supplied to military markets worldwide. CERAMIC COMPONENTS Piezoelectric materials transform acoustic or other mechanical energy into electrical energy and vice versa. The - 1 - Company designs and manufactures piezoelectric materials and components, which have applications in sonar systems, medical instruments, ultrasonics, actuators and other specialized products. SPACEFLIGHT SYSTEMS The Company designs and manufactures electro-optical products for space including horizon sensors that provide the stabilization and orientation signals for spacecraft. In addition, the Company manufactures scientific payloads, which measure various characteristics of planets, their atmosphere and other phenomena or events observable from orbiting satellites. For 1993, 1992 and 1991, respectively, sales of spaceflight systems represented 13%, 14% and 12% of consolidated net sales. INFRARED INSTRUMENTATION The Company manufactures a line of microthermal imagers for design and reliability analysis of semiconductors in commercial applications. This line includes instrumentation used to identify thermal stresses in integrated circuits, hybrids and printed circuit boards, and an emission microscope. FIBER-REINFORCED STRUCTURES The Company designs and manufactures fiber-reinforced composite structures, including filament-wound and layup processes. The Company has applied its filament-winding technology to produce stator rings for power turbines, VT-1 missile launch tubes, and water and waste-holding tanks for commercial aircraft, as well as laid-up, autoclave cured, aerodynamic structures for commercial aircraft and laid-up sonar dome structures for ships. The Company maintains an active business in the supply of spare parts and repairs for water and waste tanks for virtually every commercial airline in the world. COMPOSITE SPORTS PRODUCTS A wholly-owned subsidiary of the Registrant, EDO Sports was formed in 1991 to commercialize advancements in composite sporting goods through the use of new, proprietary fabrication techniques. EDO Sports designs, manufactures and distributes premium-grade, high-performance golf club and sport bicycle components. COMPRESSED NATURAL GAS VEHICLE PRODUCTS The Company designed, developed and manufactures all-composite fuel tanks for vehicles operating on compressed natural gas. These tanks have been certified for use in Canada and the U.S. In December 1993, the Company purchased the assets of Automotive Natural Gas, Inc., a manufacturer of refueling stations and conversion kits for compressed natural gas vehicles. RESEARCH AND DEVELOPMENT Research and development, performed both under development contracts with customers and at Company expense, are important factors in the Company's business. The Company's research and development efforts involve approximately 140 employees in the fields of acoustic, electronic, hydrodynamic, aerodynamic, structural and material engineering. Research and development programs are designed to develop technology for new products or to extend the capability of existing products and to assess their commercial potential. Customer-sponsored research and development programs are principally related to military programs in the Military Systems segment. Major customer-sponsored research and development programs include: continued development of improvements to the AN/SQR-18A(V) TACTAS system; improvements to the MK-105 mine countermeasures system; development of a new surface ship sonar system; development of a combat integration system; and development of new and improved stores launchers. Expenditures under development contracts with customers vary in amount from year to year because of the timing of contract funding. During 1993, expenditures for customer-sponsored research and development was down 13% primarily as a result of less available funding consistent with the general decline in military spending. Company-sponsored research and development has contributed to a number of advances in sonar systems, transducers, filament-wound structures, and a new technique for manufacturing golf club shafts. Principal current research and development involves image and signal processing and other improvements for sonars, improvements to minesweeping technology; continued development of its satellite-based sensors; new advancements in sporting goods products; and new products for the compressed natural gas market. The following table sets forth research and development expenditures for the periods presented. Year Ended December 31, 1993 1992 1991 (in thousands) - - ---------------------------------------------------------------- Customer-sponsored $14,100 $16,100 $20,700 Company-sponsored 6,000 5,300 3,800 Total $20,100 $21,400 $24,500 MARKETING AND INTERNATIONAL SALES Military sales of the Company's products to both the U.S. and foreign governments are usually made under negotiated long-term contracts or subcontracts covering one or more years of production. The Company believes that its long history of association with its military customers is an - 2 - important factor in the Company's overall business, and that the experience gained through this history has enhanced the Company's ability to anticipate its customers' needs. The Company's approach to its military business is to anticipate specific customer needs and to develop systems to meet those needs either at its own expense or pursuant to research and development contracts. The Company sells products in its Military Systems segment as a prime contractor and through subcontracts with other military prime contractors. In addition to military sales to the U.S. Department of Defense, the Company also sells Military Systems segment equipment to the U.S. Government for resale to foreign governments under the Foreign Military Sales program and, subject to approval by the U.S. Department of State, directly to foreign governments. Products within the Commercial and Other Products segment are sold in industrial and commercial markets. In foreign markets piezoelectric and electronic products are generally sold commercially through a network of sales representatives. Fiber-reinforced composite products are sold, in certain product areas, on a direct basis and, in other product areas, through sales representatives. The Company's sports products are generally sold through independent distributors, dealers, and original equipment manufacturers. It is the Company's policy to denominate all foreign contracts from its U.S. operations in U.S. dollars and to incur no significant costs in connection with long-term foreign contracts until the Company has received advance payments or letters of credit on amounts due under the contracts. The Company's only significant asset outside the United States is its majority-owned subsidiary, EDO (Canada) Limited, which represents approximately 5% of the Company's total consolidated assets. BACKLOG A significant portion of the Company's sales are made to the U.S. armed services and foreign governments pursuant to long-term contracts. Accordingly, the Company's backlog of unfilled orders consists in large part of orders under these government contracts. As of December 31, 1993, the Company's total backlog was approximately $89.2 million, as compared with $94.2 million on December 31, 1992. Of the total backlog as of December 31, 1993, approximately 66% was scheduled for delivery in 1994. Total backlog as of December 31, 1993, divided between the Company's two industry segments, was Military Systems, $64.2 million, and Commercial and Other Products, $25.0 million, as compared, respectively, with $66.8 million and $27.4 million as of December 31, 1992. GOVERNMENT CONTRACTS Sales to the U.S. Government, as a prime contractor and through subcontracts with other prime contractors, accounted for 56% of the Company's 1993 net sales compared with 60% in 1992 and 61% in 1991, and consisted primarily of sales to the Department of Defense. Such sales do not include sales of military equipment to the U.S. Government for resale to foreign governments under the Foreign Military Sales program. The Company's military business can be and has been significantly affected by changes in national defense policy and spending. The Company's U.S. Government contracts and subcontracts and certain foreign government contracts contain the usual required provisions permitting termination at any time for the convenience of the government with payment for work completed and committed along with associated profit at the time of termination. The Company's contracts with the Department of Defense consist of fixed price contracts, cost-reimbursable contracts and incentive contracts of both types. Fixed-price contracts provide fixed compensation for specified work. Cost-reimbursable contracts require the Company to perform specified work in return for reimbursement of costs (to the extent allowable under government regulations) and a specified fee. In general, while the risk of loss is greater under fixed-price contracts than under cost-reimbursable contracts, the potential for profit under such contracts is greater than under cost-reimbursable contracts. Under both fixed-price incentive contracts and cost-reimbursable incentive contracts, an incentive adjustment based on attainment of scheduling, cost, quality or other goals is made in the Company's fee. The distribution of the Company's government contracts among the categories of contracts referred to above varies from time to time, although in recent years only a small percentage of the Company's contracts have been on a cost-reimbursable basis. COMPETITION AND OTHER FACTORS The Company's products are sold in competitive markets containing a number of competitors substantially larger than the Company with greater financial resources. Direct sales of military products to U.S. and foreign governments are based principally on product performance and reliability. Such products are generally sold in competition with products of other manufacturers which may fulfill an equivalent function, but which are not direct substitutes. The Company purchases certain materials and components used in its systems and equipment from independent suppliers. These materials and components are normally not purchased under long-term contracts unless the Company has actually received a long-term sales contract requiring them. The Company believes that most of the items it purchases are obtainable from a variety of suppliers and it normally obtains alternative sources for major items, although the Company is sometimes dependent on a single supplier or a few suppliers for some items. - 3 - It is difficult to state precisely the Company's market position in all of its market segments because information as to the volume of sales of similar products by its competitors is not generally available and the relevant markets are often not precisely defined. However, the Company believes that it is a significant factor in the markets for stores ejectors for military aircraft, military sonar systems, helicopter-towed mine countermeasure systems, piezoelectric ceramics, satellite horizon sensors, and natural gas vehicle refueling stations. Although the Company owns some patents and has filed applications for additional patents, it does not believe that its operations depend upon its patents. In addition, most of the Company's U.S. Government contracts license it to use patents owned by others. Similar provisions in the U.S. Government contracts awarded to other companies make it impossible for the Company to prevent the use by other companies of its patents in most domestic defense work. However, several patents recently granted to the Company and pending in the areas of sports products and compressed natural gas vehicle products may prove to be important to the Company's business in these areas. EMPLOYEES As of December 31, 1993, the Company employed 1,051 persons. EXECUTIVE OFFICERS OF THE REGISTRANT Name Age Position and Term of Office - - ------------------------------------------------------------------------------- Gerald Albert 69 Chairman of the Board since November 1993, Chief Executive Officer since 1984 and Director since 1971. Frank A. Fariello 59 President and Chief Operating Officer since November 1993, Executive Vice President from 1989 to 1993, and Director since 1982. Marvin D. Genzer 53 Vice President since 1990, General Counsel since 1988, and Assistant Secretary since 1987. Michael J. Hegarty 54 Vice President-Finance since 1981, Treasurer since 1967, Secretary since 1985 and Director since 1982. Each executive officer is appointed by the Board of Directors (the "Board"), and holds office until the first meeting of the Board following the next succeeding annual meeting of shareholders, and thereafter until a successor is appointed and qualified, unless the executive officer dies, is disqualified, resigns or is removed in accordance with the Company's By-Laws. ITEM 2. PROPERTIES All operating properties are leased facilities, except for the College Point corporate headquarters and manufacturing facility. The Company's facilities are adequate for present purposes. Although all facilities in the following listing are suitable for expansion by using available but unused space, leasing additional available space, or by physical expansion of leased or owned buildings, the Company is offering for sale a material portion of its College Point facility. The Company's obligations under the various leases are set forth in Note 16 on page 27 of the Company's 1993 Annual Report to Shareholders, which is incorporated by reference. Set forth below is a listing of the Company's principal plants and other materially important physical properties. Approximate Floor Area Location (in sq. ft.) - - -------------------------------------------------------------------------- Military Systems: Marine and Aircraft College Point, NY 318,000 Marine and Aircraft Systems Salt Lake City, UT 28,000 Command Systems Chesapeake, VA 17,000 Undersea Warfare Systems Salt Lake City, UT 70,000 Commercial and Other Products: Acoustic Products Salt Lake City, UT 47,000 Electro-Optics Division Shelton, CT 71,000 Fiber Science Salt Lake City, UT 90,000 EDO (Canada) Limited Calgary, Alberta, Canada 65,000 ANGI Milton, WI 31,000 Sports Salt Lake City, UT 15,000 ITEM 3. LEGAL PROCEEDINGS The information set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 14, 15 and 16, and in Note 17 on page 27 of the Company's 1993 Annual Report to Shareholders is incorporated by reference. - 4 - ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the headings "Common Share Prices" and "Dividends" on page 16, together with dividend information contained in the "Consolidated Statements of Shareholders' Equity" table on page 19 and Notes 9 and 10 on pages 23 and 24 of the Company's 1993 Annual Report to Shareholders are incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA The information set forth under the heading "Selected Financial Data" on page 13 of the Company's 1993 Annual Report to Shareholders is incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 14, 15 and 16 of the Company's 1993 Annual Report to Shareholders is incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company, together with the Independent Auditors' Report thereon of KPMG Peat Marwick and the unaudited "Quarterly Financial Information" are set forth on pages 17 through 29 of the Company's 1993 Annual Report to Shareholders, which are incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors is set forth under "Election of Directors" on pages 1 and 2 of the Company's Proxy Statement dated March 23, 1994, which is incorporated by reference. Information regarding executive officers is set forth in Part I of this Report under "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION Information regarding compensation of the Company's executive officers is set forth under "Compensation of Executive Officers" on pages 4 through 7 of the Company's Proxy Statement dated March 23, 1994, which is incorporated by reference, except for such information required by Item 402(k) and (l) of Regulation S-K, which shall not be deemed to be filed as part of this Report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management is set forth on pages 3 and 8 of the Company's Proxy Statement dated March 23, 1994, which is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements And Financial Statement Schedules And Exhibits 1. Financial Statements. The consolidated financial statements for the years ended December 31, 1993, 1992 and 1991, together with the report thereon of KPMG Peat Marwick, independent auditors, dated March 4, 1994, appearing on pages 17 through 28 of the Company's 1993 Annual Report to Shareholders, are attached as Exhibit 13 to this Report. 2. Financial Statement Schedules. Schedule V - Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991. Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991. Schedule X - Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991. The above schedules have been included elsewhere in this Report. The Financial Statement Schedules should be read in conjunction with the consolidated financial statements in the 1993 Annual Report to Shareholders. The opinion of KPMG Peat Marwick, independent auditors, precedes the aforementioned schedules. Schedules not included in these Financial Statement Schedules have been omitted - 5 - either because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits. Exhibits which are noted with an asterisk (*) are management contracts or compensatory plans or arrangements. 3(i) Certificate of Incorporation of the Company and amendments thereto dated June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 3(ii) By-Laws of the Company. 4(a) Indenture dated December 1, 1986 between Manufacturers Hanover Trust Company, as Trustee, and EDO Corporation. Incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the Company in favor of National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(f) First Amended and Restated Credit Agreement, dated as of March 3, 1994, amongst The Bank of New York, individually and as agent, Chemical Banking Corporation, National Westminster Bank USA and EDO Corporation. 4(g) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b) above. Incorporated by reference to Exhibit 4(i) to the Company's Annual Report on Form 10-Q for the fiscal year ended December 31, 1992. 4(h) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b) above, effective March 3, 1994. 10(a)* EDO Corporation 1980 Stock Option Plan, as amended through July 22, 1988. Incorporated by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(b)* EDO Corporation 1985 Stock Option Plan, as amended through January 24, 1989. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(c)* EDO Corporation 1988 Stock Option Plan as amended through July 22, 1988. 10(d)* EDO Corporation 1983 Long-Term Incentive Plan as amended through July 22, 1988. 10(e)* EDO Corporation 1988 Long-Term Incentive Plan as amended through July 22, 1988. 10(f)* EDO Corporation Executive Termination Agreements, as amended through November 24, 1989, between the Company and four employees. Incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(g)* Executive Life Insurance Plan Agreements, as amended through January 23, 1990, between the Company and thirty-four employees and retirees. Incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(h)* Form of Directors' and Officers' Indemnification Agreements between EDO Corporation and twenty current or former Company directors and officers. Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. 10(i) Subscription Agreement, dated December 18, 1987, between EDO (Canada) Limited and Her Majesty the Queen in right of the Province of Alberta, as represented by the Minister of Economic Development - 6 - and Trade. Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(j) Consent Decree, entered on November 25, 1992, amongst the United States, EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc. Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 13 Annual Report to Shareholders of EDO Corporation for fiscal year ended December 31, 1993. Such report is furnished for the information of the Commission only and, except for those portions thereof which are expressly incorporated by reference in this Annual Report on Form 10-K, is not to be deemed filed as part of this Report (not filed electronically). 13(a) Pages 13-29 of the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1993. 21 List of Subsidiaries. 23 Accountants' Consent to the incorporation by reference in the Company's Registration Statements on Form S-8 of their reports included in the 1993 Annual Report to Shareholders and in Item 14(a)2 hereto. 24 Powers of Attorney used in connection with the execution of this Annual Report on Form 10-K. (b) Reports on Form 8-K A Current Report on Form 8-K was filed on December 2, 1993 reporting on the acquisition by the Company of substantially all the assets of Automotive Natural Gas, Inc. Financial statements associated with and required by such Report were filed on February 14, 1994. - 7 - 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. EDO CORPORATION (Registrant) Dated: March 28, 1994 By: Michael J. Hegarty Michael J. Hegarty Vice President-Finance Pursuant to the requirements of Instruction D to Form 10-K under the Securities Exchange Act of 1934, this Report has been signed below on March 28, 1994 by the following persons on behalf of the Registrant and in the capacities indicated. Signature Title Date - - ------------------------------------------------------------------------------- Michael J. Hegarty Vice President- March 28, 1994 (Michael J. Hegarty) Finance, Secretary, Treasurer and Director Gerald Albert Chairman of the Board, Chief Executive Officer and Director Frank A. Fariello President, Chief Operating Officer and Director Marvin D. Genzer Vice President, General Counsel and Assistant Secretary Kenneth A. Paladino Controller By: Michael J. Hegarty Alfred Brittain III Director Joseph F. Engelberger Director Michael J. Hegarty Robert M. Hanisee Director Attorney-in-Fact Robert A. Lapetina Director March 28, 1994 John H. Meyn Director Richard Rachals Director Ralph O. Romaine Director William R. Ryan Director - 8 - INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders EDO Corporation: Under date of March 4, 1994, we reported on the consolidated balance sheets of EDO Corporation and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in the notes to the consolidated financial statements, the Company changed its methods of accounting for income taxes and postretirement health care and life insurance benefits in 1993. KPMG PEAT MARWICK Jericho, New York March 4, 1994 SCHEDULE V EDO CORPORATION AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS) Balance Retirements, at sales or Balance at beginning Additions other end of Classification of period at cost changes period - - ------------------------------------------------------------------------------- Year ended December 31, 1993: Land and land $2,014 -- -- 2,014 improvements Buildings and 28,167 418 -- 28,585 building improvements Machinery and 49,341 2,786 (341) 51,786 equipment Leasehold 8,715 1,313 (24) 10,004 improvements -------- ------- ------- ------- $88,273 4,517 (365) 92,389 - - ------------------------------------------------------------------------------- Year ended December 31, 1992: Land and land $2,014 -- -- 2,014 improvements Buildings and 27,835 335 (3) 28,167 building improvements Machinery and 45,906 4,093 (658) 49,341 equipment Leasehold 8,621 138 (44) 8,715 improvements -------- ------- ------- ------- $84,376 4,566 (705) 88,237 - - ------------------------------------------------------------------------------- Year ended December 31, 1991: Land and land $2,014 -- -- 2,014 improvements Buildings and 27,523 312 -- 27,835 building improvements Machinery and 41,177 5,388 (659) 45,906 equipment Leasehold 8,850 (91) (138) 8,621 improvements -------- ------- ------- ------- $79,564 5,609 (797) 84,376 - - ------------------------------------------------------------------------------- - 9 - SCHEDULE VI EDO CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS) Additions Balance charged Retirements, at to costs sales or Balance beginning and other at end Classification of period expenses changes of period - - ------------------------------------------------------------------------------- Year ended December 31, 1993: Land and land $267 29 -- 296 improvements Buildings and 10,767 1,260 5,200 17,227 building improvements Machinery and 31,220 4,318 594 36,132 equipment Leasehold 3,605 844 408 4,857 improvements -------- ------- ------- ------- $45,859 6,451 6,202* 58,512 - - ------------------------------------------------------------------------------- Year ended December 31, 1992: Land and land $238 29 -- 267 improvements Buildings and 9,374 1,396 (3) 10,767 building improvements Machinery and 27,437 4,440 (657) 31,220 equipment Leasehold 3,055 595 (45) 3,605 improvements -------- ------- ------- ------- $40,104 6,460 (705) 45,859 - - ------------------------------------------------------------------------------- Year ended December 31, 1991: Land and land $207 31 -- 238 improvements Buildings and 7,929 1,438 7 9,374 building improvements Machinery and 23,966 4,137 (666) 27,437 equipment Leasehold 2,603 590 (138) 3,055 improvements -------- ------- ------- ------- $34,705 6,196 (797) 40,104 - - ------------------------------------------------------------------------------- * Includes $7,011 valuation allowance associated with restructuring. SCHEDULE X EDO CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (IN THOUSANDS) Charged to Costs and Expenses Item 1993 1992 1991 - - ---------------------------------------------------------- Maintenance and repairs $2,653 $2,999 $3,380 Amounts for depreciation and amortization of intangible assets, pre-operating costs and similar deferrals, taxes other than payroll and income taxes, royalties and advertising costs are not presented as such amounts are less than 1% of total sales. - 10 - EXHIBIT INDEX Exhibits which are noted with an asterisk (*) are management contracts or compensatory plans or arrangements. 3(i) Certificate of Incorporation of the Company and amendments thereto dated June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 3(ii) By-Laws of the Company. 4(a) Indenture dated December 1, 1986 between Manufacturers Hanover Trust Company, as Trustee, and EDO Corporation. Incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the Company in favor of National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(f) First Amended and Restated Credit Agreement, dated as of March 3, 1994, amongst The Bank of New York, individually and as agent, Chemical Banking Corporation, National Westminster Bank USA and EDO Corporation. 4(g) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b) above. Incorporated by reference to Exhibit 4(i) to the Company's Annual Report on Form 10-Q for the fiscal year ended December 31, 1992. 4(h) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b) above, effective March 3, 1994. 10(a)* EDO Corporation 1980 Stock Option Plan, as amended through July 22, 1988. Incorporated by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(b)* EDO Corporation 1985 Stock Option Plan, as amended through January 24, 1989. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(c)* EDO Corporation 1988 Stock Option Plan as amended through July 22, 1988. 10(d)* EDO Corporation 1983 Long-Term Incentive Plan as amended through July 22, 1988. 10(e)* EDO Corporation 1988 Long-Term Incentive Plan as amended through July 22, 1988. 10(f)* EDO Corporation Executive Termination Agreements, as amended through November 24, 1989, between the Company and four employees. Incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(g)* Executive Life Insurance Plan Agreements, as amended through January 23, 1990, between the Company and thirty-four employees and retirees. Incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(h)* Form of Directors' and Officers' Indemnification Agreements between EDO Corporation and twenty current or former Company directors and officers. Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. 10(i) Subscription Agreement, dated December 18, 1987, between EDO (Canada) Limited and Her Majesty the Queen in right of the Province of Alberta, as represented by the Minister of Economic Development and Trade. Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(j) Consent Decree, entered on November 25, 1992, amongst the United States, EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc. Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 13 Annual Report to Shareholders of EDO Corporation for fiscal year ended December 31, 1993. Such report is furnished for the information of the Commission only and, except for those portions thereof which are expressly incorporated by reference in this Annual Report on Form 10-K, is not to be deemed filed as part of this Report (not filed electronically). 13(a) Pages 13-29 of the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1993. 21 List of Subsidiaries. 23 Accountants' Consent to the incorporation by reference in the Company's Registration Statements on Form S-8 of their reports included in the 1993 Annual Report to Shareholders and in Item 14(a)2 hereto. 24 Powers of Attorney used in connection with the execution of this Annual Report on Form 10-K. EX-1 2 EXHIBIT 3(II) BY-LAWS EXHIBIT 3(ii) ================================================================================ EDO CORPORATION (A New York Corporation) BY-LAWS As Amended November 15, 1993 ================================================================================ EDO CORPORATION (A New York Corporation) By-Laws TABLE OF CONTENTS Page ARTICLE I Meetings of Shareholders Section 1.01 Annual Meetings ................................................ 1 Section 1.02 Special Meetings ............................................... 1 Section 1.03 Place of Meetings .............................................. 1 Section 1.04 Notice of Meetings ............................................. 1 Section 1.05 Quorum ......................................................... 2 Section 1.06 Inspectors of Election ......................................... 2 Section 1.07 Voting ......................................................... 2 Section 1.08 Proxies ........................................................ 3 Section 1.09 Record Date .................................................... 3 Section 1.10 Adjourned Meetings ............................................. 3 ARTICLE II Board of Directors Section 2.01 General Powers ................................................. 3 Section 2.02 Number, Term of Office, Election and Qualifications ............ 3 Section 2.03 Regular Meetings ............................................... 4 Section 2.04 Special Meetings ............................................... 4 Section 2.05 Quorum and Voting .............................................. 5 Section 2.06 Resignations ................................................... 5 Section 2.07 Removal of Directors ........................................... 5 Section 2.08 Newly Created Directorship and Vacancies ....................... 5 Section 2.09 Action by Written Consent ...................................... 6 Section 2.10 Participation in a Meeting by Telephone ........................ 6 i Page ARTICLE III Executive Committee and Other Committees Section 3.01 How Constituted ................................................ 6 Section 3.02 Powers of the Executive Committee .............................. 6 Section 3.03 Other Committees ............................................... 7 Section 3.04 Proceedings, Quorum and Manner of Acting ....................... 7 ARTICLE IV Notices Section 4.01 Form and Delivery .............................................. 7 Section 4.02 Waiver ......................................................... 7 ARTICLE V Officers Section 5.01 Number and Qualification ....................................... 8 Section 5.02 Appointment and Term of Office ................................. 8 Section 5.03 Subordinate Officers ........................................... 8 Section 5.04 Resignations ................................................... 8 Section 5.05 Removal ........................................................ 8 Section 5.06 Vacancies ...................................................... 8 Section 5.07 The Chairman of the Board of Directors ......................... 8 Section 5.08 The President .................................................. 9 Section 5.09 The Vice Presidents ............................................ 9 Section 5.10 The Secretary .................................................. 9 Section 5.11 The Treasurer .................................................. 9 ARTICLE VI Fiscal Matters Section 6.01 Execution of Instruments ...................................... 10 Section 6.02 Loans, etc. ................................................... 11 Section 6.03 Deposits ...................................................... 11 Section 6.04 Checks, Drafts, etc. .......................................... 11 ii Page ARTICLE VII Capital Stock Section 7.01 Certificates for Shares ....................................... 11 Section 7.02 Transfer of Shares; Registered Shareholders ................... 12 Section 7.03 Transfer Agents and Registrars ................................ 12 Section 7.04 Record Date ................................................... 12 Section 7.05 Lost or Destroyed Certificates ................................ 12 ARTICLE VIII Books and Records Section 8.01 Books and Records ............................................. 13 Section 8.02 Examination of Books .......................................... 13 ARTICLE IX Indemnification Section 9.01 Indemnification - Third Party and Derivative Actions .......... 13 Section 9.02 Payment of Indemnification; Repayment ......................... 15 Section 9.03 Procedure for Indemnification ................................. 15 Section 9.04 Survival; Preservation of Other Rights ........................ 16 Section 9.05 Savings Clause ................................................ 16 ARTICLE X Miscellaneous Section 10.01 Corporate Seal ............................................... 17 Section 10.02 Fiscal Year .................................................. 17 ARTICLE XI Amendments Section 11.01 Amendments ................................................... 17 Section 11.02 Notice of Amendment .......................................... 17 iii EDO CORPORATION (A New York Corporation) BY-LAWS ARTICLE I Meetings of Shareholders Section 1.01. Annual Meetings. The annual meeting of shareholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on the fourth Tuesday in April in each year, if not a legal holiday, or, if a legal holiday, then on the next succeeding day not a legal holiday, at such time as the Board of Directors may fix. [Sec. 602(a), (b)]* Section 1.02. Special Meetings. Special meetings of shareholders may be called at any time by the Chairman of the Board of Directors, or by the President, or by order of the Board of Directors, or by a majority of the directors then in office acting without a meeting. At any special meeting of shareholders, only such business may be transacted as is related to the purpose or purposes set forth in the notice required by Section 1.04. [Sec. 602(c)] Section 1.03. Place of Meetings. Each meeting of shareholders shall be held at the principal office of the Corporation in the State of New York or at such other place within or without the State of New York as may be specified in the notice of the meeting. [Sec. 602(a)] Section 1.04. Notice of Meetings. Written notice of the place, date and hour of each meeting of the shareholders shall be given as provided in Section 4.01 to each shareholder entitled to vote thereat, or otherwise entitled by law to notice thereof, not less than 10 nor more than 50 days before the meeting. Notice of a special meeting shall also state the purposes for which the meeting is called and indicate by or at whose direction the notice is being issued. If any action is proposed to be taken at any shareholders' meeting which would, if taken, entitle shareholders fulfilling the requirements of section 623 of the New York Business Corporation Law (relating to a shareholder's statutory appraisal rights) to receive payment for their shares, the notice shall also include - - ------------------------ * Except as otherwise noted, citations are to the New York Business Corporation Law as in effect on September 26, 1986 for Sections 1 to 800 and October 2, 1986 for Sections 801 to end. Bracketed citations are for reference only and do not constitute a part of the By-Laws. 1 a statement to that effect. Notice of any meeting need not be given to any shareholder with whom communication is then unlawful by virtue of any law of the State of New York or of the United States of America now or hereafter enacted or amended or any rule, regulation, proclamation or executive order issued under any such law. [Secs. 108, 605*] Section 1.05. Quorum. Except as otherwise provided by law and subject to the provisions of Section 1.07 and Section 6.02(b), the holders of a majority of the shares issued and outstanding entitled to vote thereas, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of shareholders. Once a quorum is present to organize a meeting, the subsequent withdrawal of any shareholders shall not be deemed to break the quorum. [Sec. 608] Section 1.06. Inspectors of Election. At each meeting of shareholders for the election of directors the chairman of the meeting, if requested to do so by any shareholder entitled to vote for the election of directors, whether or not present at such meeting, shall appoint two persons, who may but need not be shareholders or officers, to act as Inspectors of Election at the meeting. If any Inspector so appointed be absent or refuse or fail to act, the chairman of the meeting shall fill the vacancy by appointing a successor Inspector. If there be a failure so to appoint Inspectors, or to fill a vacancy, the shareholders present at the meeting in person or by proxy and entitled to vote, by a per capita vote, may choose temporary Inspectors of the number required. The Inspectors appointed to act at any meeting of shareholders, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of Inspectors at such meeting with strict impartiality, and according to the best of their ability, and the oath so taken shall be subscribed by them. [Secs. 610, 611] Section 1.07. Voting. At each meeting of shareholders each holder of record of shares entitled to vote at such meeting shall be entitled to one vote for each such share standing in his name on the books of the Corporation on the record date as determined pursuant to Section 1.09. Except as at the time otherwise expressly required by statute, by the Certificate of Incorporation of the Corporation or by Section 1.06 (regarding appointment of Inspectors), Section 2.02 (regarding election of directors) or Section 2.07 (regarding removal of directors), all corporate action to be taken by vote of the shareholders shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon at a meeting of the shareholders at which a quorum is present. Treasury shares and shares held by any other corporation (if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation) shall not be shares entitled to vote or to be counted in determining the total number of outstanding shares. [Secs. 612, 614] - - ------------------------ * As in effect prior to passage of 1982 N.Y. Laws ch. 202, sec. 2 and 1986 N.Y. Laws ch. 735, sec. 1, amending Sec. 605(a). 2 Section 1.08. Proxies. Any shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Each proxy must be in writing, signed by the shareholder or by his attorney-in-fact and shall be filed with the secretary of any meeting at which the holder thereof votes thereunder. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Each proxy shall be revocable at the pleasure of the shareholder executing it, except if and to the extent that an irrevocable proxy is given and is permitted by law. [Sec. 609] Section 1.09. Record Date. The Board of Directors may fix, in advance, a date as the record date for determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting. Such date shall be not more than 50 nor less than 10 days before the date of such meeting. [Sec. 604] Section 1.10. Adjourned Meetings. The holders of a majority of the shares present in person or by proxy at a meeting and entitled to vote thereat may from time to time adjourn the meeting, whether or not a quorum was present at the meeting. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made pursuant to Section 1.09, such determination shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting. When a meeting is adjourned to another time or place, no notice need be given if such time or place is announced at the meeting at which the adjournment is taken. However, if the Board of Directors fixes a new record date for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. [Secs. 604(c), 605(b), 608(d)] ARTICLE II Board of Directors Section 2.01. General Powers. The property, affairs and business of the Corporation shall be managed under the direction of the Board of Directors. [Sec. 701] Section 2.02. Number, Term of Office, Election and Qualifications. The full Board of Directors shall consist of not less than nine nor more than fifteen directors, all of whom shall be at least 21 years of age, and no more than 73 years of age on the date of the annual meeting of shareholders. The Board of Directors may also appoint a retiring Chairman of the Board to emeritus status which shall not include the right to vote, or to be counted toward the determination of the full Board of Directors or for the determination of a quorum. Past or present officers or employees of the Corporation shall not comprise more than one third of the 3 Board of Directors. Each director shall hold at least 100 shares of any class of the Corporation; provided that failure to hold such number of shares shall not prevent or disqualify any person not a director from being elected a director pursuant to this Section 2.02 or Section 2.08 or from serving as a director for a period of 60 days from the time of such election. Subject to the provisions of this Section and of Section 2.08, the number of directors, within the limits provided, necessary to constitute a full Board shall be determined from time to time by vote of a majority of the entire Board of Directors. Directors shall be elected at the annual meeting of shareholders. If the number of directors be increased between annual meetings of shareholders, the additional directors to fill the vacancies thus created shall be elected as provided in Section 2.08. There shall be three classes of directors. All classes shall be as nearly equal in number as possible, and no class shall include less than three directors. At each annual meeting of shareholders, each director elected to replace a director whose term expires at such annual meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting after his election. Each director shall hold office until the expiration of his term and until his successor is elected and qualified or until his earlier death, resignation or removal. A director elected to fill a vacancy, unless elected by the shareholders, shall be elected to hold office for a term expiring at the next meeting of shareholders at which the election of directors is in the regular order of business. If the number of directors is changed, (a) any newly created directorship or any decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible, and (b) when the number of directors is increased by the Board and any newly created directorships are filled by the Board, there shall be no classification of the additional directors until the next annual meeting of shareholders. At each meeting of shareholders for the election of directors the directors shall be chosen and elected by a plurality of the votes cast at such meeting by the holders of shares entitled to vote in the election. [Secs. 701-05] Section 2.03. Regular Meetings. Promptly after the close of each annual meeting of the shareholders, the Board of Directors shall, without notice, meet where such annual meeting was held, or at such other place as may be fixed by resolution of the Board of Directors, for the purpose of appointing officers and committees for the ensuing year and transacting other proper business. Other regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be scheduled by resolution of the Board of Directors, and such schedule may be changed at any regular meeting of the Board of Directors or at any special meeting called for that purpose, provided that notice of the change shall be given to all directors no later than 5 days prior to the first meeting held under such schedule as so changed. [Secs. 710, 711] Section 2.04. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the President, or any two directors. If such a meeting is called by the Chairman of the Board of Directors or by the President, such officer shall, or shall direct the Secretary to, fix a time and place for and give notice of 4 the time, place, and purposes of such meeting. If such a meeting is called by any two directors, upon delivery to the Chairman of the Board of Directors, President or Secretary, in person or by registered mail, of a request in writing for a special meeting, specifying the purposes thereof, it shall be the duty of the officer to whom the request is delivered to fix a time and place for (unless the requesting directors shall have fixed such time and place) and give notice of the time, place and purposes of such meeting. All such notices of meetings shall be given as provided in Section 4.01, if by mail, at least three days before the day on which the meeting is to be held, or, if by personal delivery, telephone or telegram, not later than the day before the day on which the meeting is to be held. [Secs. 710, 711] Section 2.05. Quorum and Voting. One third of the total number of directors which the Corporation would have if there were no vacancies shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if a quorum shall not be present thereat, a majority of the directors present may from time to time adjourn any such meeting until a quorum shall be present, and the meeting may be held at adjourned without further notice. If a quorum is present at any meeting, the vote of a majority of the directors present shall be the act of the Board of Directors, except as otherwise provided by law. The directors shall act only as a Board and, except as provided in Section 1.02 (relating to calling special meetings of the shareholders), Section 2.04 (relating to calling special meetings of the Board of Directors) and this Section 2.05 (relating to the adjournment of meetings in the absence of a quorum), individual directors shall have no powers as such. [Secs. 707, 708, 711(d)] Section 2.06. Resignations. Any director may resign at any time by delivering a written resignation to either the Chairman of the Board of Directors, the President, a Vice President or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon such delivery. Section 2.07. Removal of Directors. Any director may be removed at any time, either for or without cause, by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation entitled to vote for the election of directors, given at a meeting of the shareholders called for the purpose. Any vacancy in the Board of Directors caused by any such removal may be filled at such meeting by the shareholders entitled to vote for the election of directors; if the shareholders do not fill such vacancy at such meeting, such vacancy may be filled in the manner provided in Section 2.08. The provisions of this Section may be amended, altered or repealed only by the shareholders in the manner specified in clause (1) of Section 11.01. [Sec. 706] Section 2.08. Newly Created Directorships and Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board of Directors for any reason except the removal of directors without cause may be filled (unless theretofore filled by the shareholders in accordance with the provisions of Section 2.07) by vote of a majority of the directors then in office, al- 5 though less than a quorum exists. Any such newly created directorship or vacancy (unless theretofore filled by the directors in accordance with the provisions of this Section) may also be filled by the shareholders entitled to vote for the election of directors at any meeting held during the existence of such vacancy provided that the notice of the meeting shall have mentioned such vacancy or expected vacancy. [Sec. 705] Section 2.09. Action by Written Consent. Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board of Directors or committee shall be filed with the minutes of the proceedings of the Board of Directors or committee. [Sec. 708(b)] Section 2.10. Participation in a Meeting by Telephone. Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. [Sec. 708(c)] ARTICLE III Executive Committee and Other Committees Section 3.01. How Constituted. By resolution adopted by a majority of the entire Board of Directors, the Board may designate one or more committees, including an Executive Committee, each consisting of three or more directors. Each such committee shall serve at the pleasure of the Board. [Sec. 712] Section 3.02. Powers of the Executive Committee. Unless otherwise provided by resolution adopted by a majority of the entire Board of Directors, when the Board of Directors is not in session the Executive Committee shall have and may exercise all the powers of the Board of Directors, except that the Executive Committee shall not have the authority as to the following matters: (a) the submission to shareholders of any action as to which shareholders' approval is required by law; (b) the filling of vacancies in the Board of Directors or in any committee thereof; (c) the fixing of compensation of the directors for serving on the Board of Directors or any committee thereof; 6 (d) the amendment or repeal of the By-Laws, or the adoption of new By-Laws; or (e) the amendment or repeal of any resolution of the Board of Directors which by its terms shall not be so amendable or repealable. [Sec. 712] Section 3.03. Other Committees. To the extent provided by resolution adopted by a majority of the entire Board of Directors, other committees shall have and may exercise any of the powers of the Board of Directors except that no such committee shall have authority as to the matters set forth in Section 3.02(a)-(e). [Sec. 712] Section 3.04. Proceedings, Quorum and Manner of Acting. Subject to the control of the Board of Directors, each committee may adopt such rules and regulations governing its proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that a quorum shall not be less than two directors. ARTICLE IV Notices Section 4.01. Form and Delivery. Except as otherwise expressly provided by law or by these By-Laws, any written notice required to be given by law, the Certificate of Incorporation or these By-Laws to any shareholder, director or other person may be delivered personally or by mail or, in the case of notices to directors, by telephone or telegram. Notice by mail shall be deemed to have been given at the time when such notice is deposited in the United States mail, postage prepaid, addressed to such shareholder, director or other person at his last known address as the same appears on the records of the Corporation or, if a shareholder shall have filed with the Secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. [Secs. 605(a), 711(b)] Section 4.02. Waiver. No notice required to be given by any statute, by the Certificate of Incorporation or by these By-Laws need be given to any person otherwise entitled to notice who signs in person or, if a shareholder, by proxy, a waiver of notice, whether signed before or after the time of the action to which the notice relates. In addition, the attendance by any shareholder at any meeting of the shareholders in person or by proxy without protesting prior to the conclusion of such meeting the absence of notice thereof to him, and the attendance by any director at any meeting of the Board of Directors without protesting prior to such meeting or at its commencement such absence of notice, shall, in each such case, constitute a waiver of notice of such meeting. [Secs. 606, 711(c)] 7 ARTICLE V Officers Section 5.01. Number and Qualification. The officers of the Corporation shall be a Chairman of the Board of Directors, a President, one or more Vice Presidents, a Secretary and a Treasurer, and such other officers as may be appointed in accordance with the provisions of Section 5.03. Any one person may hold more than one of such offices except those of President and Secretary. The Chairman of the Board of Directors and the President shall be chosen from among the directors. No other officer need be a director. Officers shall be at least 21 years of age and, except for the Chairman of the Board of Directors, no more than 70 years of age on the date of the annual meeting of shareholders. [Sec. 715] Section 5.02. Appointment and Term of Office. Each officer (unless appointed under power delegated pursuant to the second sentence of Section 5.03) shall be appointed by the Board of Directors and (unless appointed under the provisions of Section 5.03 for a different term) shall hold office until the first meeting of the Board of Directors following the next succeeding annual meeting of shareholders and thereafter until his successor shall have been appointed and qualified or until his earlier death or disqualification or until he shall have resigned in the manner provided in Section 5.04 or shall have been removed in the manner provided in Section 5.05. [Sec. 715] Section 5.03. Subordinate Officers. The Board of Directors from time to time may appoint such other officers or agents as it may deem advisable, each of whom shall have such title, hold office for such period, have such authority and perform such duties as the Board of Directors from time to time may determine. The Board of Directors may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective titles, terms of office, authorities and duties. Section 5.04. Resignations. Any officer may resign at any time by delivering a written resignation to the Board of Directors, the Chairman of the Board of Directors, the President or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon such delivery. Section 5.05. Removal. Any officer may be removed at any time, either for or without cause, by action of the Board of Directors. [Sec. 716] Section 5.06. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause, may be filled in the manner prescribed in this Article for regular appointment to such office. [Sec. 715] Section 5.07. The Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of shareholders and the Board of Directors at which he shall be present. He shall 8 have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors. Section 5.08. The President. In the absence of the Chairman of the Board of Directors, the President shall preside at all meetings of the shareholders and of the Board of Directors at which he shall be present. He shall have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors. Section 5.09. The Vice Presidents. Each Vice President shall perform such duties as from time to time may be assigned to him by the Board of Directors, the Chairman of the Board of Directors or the President. The Vice President designated by the Board of Directors (or, in the absence of such designation, by the Chairman of the Board of Directors) shall, at the request of the Chairman of the Board of Directors or the President, or in the event of the absence or disability of both of such officers, perform all the duties of the Chairman of the Board of Directors or the President or both, as the case may be. When so acting, such designated Vice President shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board of Directors or the President or both, as the case may be. Section 5.10. The Secretary. The Secretary shall: (a) Keep the minutes of meetings of shareholders and of the Board of Directors and cause the same to be recorded in books provided by him for that purpose. (b) Upon the request of any shareholder given at or prior to any meeting of shareholders, produce at such meeting a list of shareholders as of the record date for such meeting, certified by the corporate officer responsible for its preparation or by a transfer agent. [Sec. 607] (c) Cause all notices to be duly given in accordance with the provisions of these By-Laws and as required by statute. [Sec. 605] (d) Be custodian of the records and seal of the Corporation, and cause such seal (or a facsimile thereof) to be affixed to all certificates for shares of the Corporation the issuance of which shall have been authorized by the Board of Directors, and to all instruments the execution of which under the seal of the Corporation shall have been duly authorized. [Sec. 508] (e) Cause a record of shareholders to be kept in accordance with Section 8.01. (f) In general, perform all duties incident to the office of the Secretary and such other duties as from time to time may be assigned to him by the Board of Directors, the Chairman of the Board of Directors or the President. Section 5.11. The Treasurer. The Treasurer shall: 9 (a) Have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation. (b) Cause the moneys and other valuable effects of the Corporation not otherwise employed to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected in accordance with Section 6.03. (c) Cause the moneys of the Corporation to be disbursed by checks or drafts (signed as provided in Section 6.04) upon the authorized depositaries of the Corporation, and cause to be taken and preserved proper vouchers for all moneys disbursed. (d) Render to the Board of Directors, the Chairman of the Board of Directors, or the President, whenever requested, a statement of the financial condition of the Corporation and of all his transactions as Treasurer, and render a full financial report at any annual meeting of shareholders if called upon to do so. (e) Cause to be kept at the principal office of the Corporation correct books of account of all its business and transactions and exhibit such books to any director upon application at such office during business hours. (f) Be empowered from time to time to require from all officers or agents of the Corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation. (g) In general, perform all duties incident to the office of the Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors, the Chairman of the Board of Directors or the President. ARTICLE VI Fiscal Matters Section 6.01. Execution of Instruments. The Chairman of the Board of Directors, the President, any Vice President or the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation in the ordinary course of its business. Subject to the approval of the Board of Directors, any officer or agent of the Corporation may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization may be general or confined to specific instances. 10 Section 6.02. Loans, etc. (a) No loans or advances to or by the Corporation shall be contracted, and no notes or other evidences of indebtedness shall be issued in its name, unless and except as authorized by the Board of Directors. Any such authorization may be general or confined to specific instances. So far as may be lawful, any officer or agent of the Corporation thereunto so authorized may effect loans and advances to or by the Corporation, and for loans and advances made to the Corporation may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. So far as may be lawful, any officer or agent of the Corporation thereunto so authorized may pledge, hypothecate or transfer, as security for the payment of any and all loans or advances to or indebtedness and liabilities of the Corporation, any and all stocks, bonds, claims and other personal property, securities or receivables at any time owned by the Corporation or to which it is or will be at any time entitled, and to that end may endorse, assign and deliver the same and take any action necessary or proper in connection therewith. (b) No loan shall be made by the Corporation to any director unless it is authorized by vote of the shareholders. For this purpose, the shares of the director who would be the borrower shall not be shares entitled to vote. [Sec. 714] Section 6.03. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositaries as the Board of Directors from time to time may select, or as may be selected by any officer or agent authorized to do so by the Board of Directors. Section 6.04. Checks, Drafts, etc. All notes, drafts, acceptances, checks, endorsements, and all evidences of indebtedness of the Corporation whatsoever, shall be signed by such officer or officers or such agent or agents of the Corporation and in such manner as the Board of Directors from time to time may determine. ARTICLE VII Capital Stock Section 7.01. Certificates for Shares. Shares of the Corporation shall be represented by certificates, in form approved by the Board of Directors, signed by the Chairman of the Board of Directors, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation. Such seal may be a facsimile, engraved, lithographed, printed or otherwise reproduced. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by 11 the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. [Sec. 508(a)*] Section 7.02. Transfer of Shares; Registered Shareholders. (a) Shares of the Corporation shall be transferable only upon the books of the Corporation kept for such purpose upon surrender to the Corporation or its transfer agent or agents of a certificate representing shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer. (b) The Board of Directors, subject to applicable law and these By-Laws, may make such rules, regulations and conditions as it may deem expedient concerning the subscription for, issue, transfer and registration of, shares of the Corporation. Except as otherwise provided by law, the Corporation, prior to due presentment for registration of transfer, may treat the registered owner of shares as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. [Sec. 508(d), UCC** Secs. 8-207, 8-401, 8-402, 8-403] Section 7.03. Transfer Agents and Registrars. The Board of Directors may appoint one or more transfer agents and may appoint one or more registrars of the shares of the Corporation, and upon such appointments being made, no certificate representing shares shall be valid unless and until countersigned by one of such transfer agents, if any, and registered by one of such registrars, if any. The same person may act as transfer agent and registrar for the shares of any class of the Corporation. Section 7.04. Record Date. The Board of Directors may fix, in advance, a date as the record date for determining the shareholders entitled to receive payment of any dividend, the allotment of any rights, the making of any distribution, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of shares. Such date shall be not more than 50 days prior to any such action. [Sec. 604(a)] Section 7.05. Lost or Destroyed Certificates. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it alleged to have been lost or destroyed, and the Board of Directors may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in such sum as the Board may direct, with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors, it is proper to do so. [Sec. 508(e); UCC Sec. 8-405] - - ------------------------ * As in effect prior to passage of 1985 N.Y. Laws ch. 578, sec. 1, amending sec. 508(a). ** New York Uniform Commercial Code, as in effect on September 15, 1986. 12 ARTICLE VIII Books and Records Section 8.01. Books and Records. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of the shareholders, the Board of Directors and the Executive Committee, if any. The Corporation shall keep at the principal office of the Corporation in the State of New York or at the office of its transfer agent or registrar in the State of New York a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. Unless otherwise expressly required by statute or by these By-Laws, the books and records of the Corporation shall be kept, within or outside the State of New York, at such place or places as may be designated from time to time by the Board of Directors. [Sec. 624(a)] Section 8.02. Examination of Books. So far as permitted by law, the Board of Directors shall have power to determine from time to time whether, to what extent, at what times and places and under what conditions and regulations, the books, records, documents and accounts of the Corporation, or any of them, shall be open to inspection by shareholders; and no shareholder shall have any right to inspect any books, records, documents or accounts of the Corporation, except as conferred by statute or these By-Laws or authorized by resolution of the shareholders or the Board of Directors. [Sec. 624(b)] Article IX Indemnification Section 9.01. Indemnification--Third Party and Derivative Actions. (a) The Company shall indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the Company to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Company served in any capacity at the request of the Company, by reason of the fact that he, his testator or intestate, was a director or officer of the Company, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service 13 for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Company and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. (b) The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such director or officer did not act, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service forany other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Company or that he had reasonable cause to believe that his conduct was unlawful. (c) The Company shall indemnify any person made, or threatened to be made, a party to an action by or in the right of the Company to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of any other corporation of any type or kind, domestic or foreign, of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred by him in connection with the defense or settlement of such action, or in connection with an appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Company, except that no indemnification under this subparagraph (c) shall be made in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. (d) For the purpose of this Section 1, the Company shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the Company also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be considered fines; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Company. [Sec. 722] 14 Section 9.02. Payment of Indemnification; Repayment. (a) A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 of this Article shall be entitled to indemnification as authorized in such Section. (b) Except as provided in the foregoing sentence, any indemnification under Section 1 of this Article, unless ordered by a court under Section 724 of the New York Business Corporation Law as from time to time amended, shall be made by the Company, only if authorized in the specific case: (1) by the Board of Directors acting by a quorum consisting of directors who are not parties to such action or proceeding upon a finding that the director or officer has met the standard of conduct set forth in Section 1 of this Article or otherwise established by the Company pursuant to the last sentence of Section 4 of this Article; or (2) if a quorum under the foregoing subparagraph (1) is not obtainable or, even if obtainable, a quorum of disinterested directors so directs: (i) by the Board of Directors upon the opinion in writing of independent legal counsel that indemnification is proper in the circumstances because the applicable standard of conduct set forth in such Section 1 of this Article or otherwise established by the Company pursuant to the last sentence of Section 4 of this Article has been met by such director or officer, or (ii) by the shareholders upon a finding that the director or officer has met such applicable standard of conduct. (c) Expenses incurred in defending a civil or criminal action or proceeding shall be paid by the Company in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount as, and to the extent, required by Section 2(d) of this Article. (d) All expenses incurred in defending a civil or criminal action or proceeding which are advanced by the Company under this Article or allowed by a court shall be repaid in case the person receiving such advancement or allowance is ultimately found, under the procedure set forth in this Article, not to be entitled to indemnification or, where indemnity is granted, to the extent the expenses so advanced by the Company or allowed by the court exceed the indemnification to which he is entitled. [Secs. 723,72 5(a)] Section 9.03. Procedure for Indemnification. Any indemnification of a director or officer of the Company under Section 1, or advance of costs, charges and expenses under Section 2(c) of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director or 15 officer in any court of competent jurisdiction if the Company denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Company. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 2(c) of this Article where the required undertaking, if any, has been received by the Company) that the claimant has not met the standard of conduct set forth in Section 1 of this Article or otherwise established by the Company pursuant to the last sentence of Section 4 of this Article, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, its independent legal counsel, and its stockholders), to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 of this Article or otherwise established by the Company pursuant to the last sentence of Section 4 of this Article, nor the fact that there has been an actual determination by the Company (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 9.04. Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Company and each director and officer (and each director and officer of any of its subsidiaries) who serves in such capacity at any time while these provisions as well as the relevant provisions of the New York Business Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a "contract right" may not be modified retroactively without the consent of such director or officer. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. The Company is hereby authorized to provide further indemnification if it deems it advisable by resolution of shareholders or directors or by agreement. [Sec. 721] Section 9.05. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each director or officer of the Company as to costs, charges and expenses (including 16 attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Company, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE X Miscellaneous Section 10.01. Corporate Seal. The seal of the Corporation shall be circular in form and shall bear the name of the Corporation and the words and figures "Corporate Seal - 1925 - New York". [Sec. 202(a)(3)] Section 10.02. Fiscal Year. The fiscal year of the Corporation shall be the calendar year. ARTICLE XI Amendments Section 11.01. Amendments. All By-Laws of the Corporation, whether adopted by the Board of Directors or the shareholders, shall be subject to amendment, alteration or repeal, and new by-laws may be made, either (1) by vote of the holders of the shares of the Corporation at the time entitled to vote in the election of directors, given at any annual or special meeting of shareholders the notice of which shall have specified or summarized the proposed amendment, alteration, repeal or new by-laws, or (2) by the affirmative vote of at least a majority of the total number of directors then necessary to constitute a full Board, as determined pursuant to Section 2.02, given at any annual, regular or special meeting the notice or waiver of notice of which, unless none is required under the provisions of Section 4.02, shall have specified or summarized the proposed amendment, alteration, repeal or new by-law, provided that the shareholders may at any time provide in the By-Laws that any specified provision or provisions of the By-Laws may be amended, altered or repealed only in the manner specified in the foregoing clause (1), in which event such provision or provisions shall be subject to amendment, alteration or repeal only in such manner. [Sec. 601(a)] Section 11.02. Notice of Amendment. If any by-law regulating an impending election of directors is adopted, amended or repealed by the 17 Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with a concise statement of the changes made. [Sec. 601(b)] 18 EX-2 3 EXHIBIT 4(F) CREDIT AGREEMENT EXHIBIT 4(f) 1 ______________________________________________________________________________ ______________________________________________________________________________ FIRST AMENDED AND RESTATED CREDIT AGREEMENT by and among EDO CORPORATION THE SIGNATORY BANKS HERETO, AND THE BANK OF NEW YORK, AS AGENT ________________ $15,000,000 _________________ Dated as of March 3, 1994 ______________________________________________________________________________ ______________________________________________________________________________ 2 TABLE OF CONTENTS 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . 1 1.2. Other Definitional Provisions. . . . . . . . . . . . 17 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT . . . . . . 18 2.1. Loans. . . . . . . . . . . . . . . . . . . . . . . . 18 2.2. Notes. . . . . . . . . . . . . . . . . . . . . . . . 18 2.3. Procedure for Borrowing. . . . . . . . . . . . . . . 19 2.4. Termination or Reduction of Commitments. . . . . . . 20 2.5. Prepayments of the Loans. . . . . . . . . . . . . . . 20 2.6. Intentionally Omitted. . . . . . . . . . . . . . . . 21 2.7. Interest Rates and Payment Dates. . . . . . . . . . . 21 2.8. Letter of Credit Sub-Facility. . . . . . . . . . . . 22 2.9. Letter of Credit Participation and Funding Commitments. . . . . . . . . . . . . . . . . . . . . 24 2.10. Absolute Obligation with respect to Letter of Credit Payments. . . . . . . . . . . . . . . . . . . 25 2.11. Increased Costs Based on Letters of Credit. . . . . 26 2.12. Intentionally Omitted. . . . . . . . . . . . . . . . 26 2.13. Taxes; Net Payments. . . . . . . . . . . . . . . . . 26 2.14. Intentionally Omitted. . . . . . . . . . . . . . . . 27 2.15. Intentionally Omitted. . . . . . . . . . . . . . . . 27 2.16. Intentionally Omitted. . . . . . . . . . . . . . . . 27 2.17. Intentionally Omitted. . . . . . . . . . . . . . . . 27 2.18. Use of Proceeds. . . . . . . . . . . . . . . . . . . 27 2.19. Capital Adequacy. . . . . . . . . . . . . . . . . . 27 2.20. Transaction Record. . . . . . . . . . . . . . . . . 28 3. FEES; PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 28 3.1. Commitment Fee. . . . . . . . . . . . . . . . . . . . 28 3.2. Facility Fee. . . . . . . . . . . . . . . . . . . . . 29 3.3. Agent's Fee. . . . . . . . . . . . . . . . . . . . . 29 3.4. Letter of Credit Commissions. . . . . . . . . . . . . 29 3.5. Pro Rata Treatment and Application of Payments. . . . 29 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 30 4.1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 30 4.2. Corporate Existence and Power. . . . . . . . . . . . 30 4.3. Corporate Authority. . . . . . . . . . . . . . . . . 31 4.4. Binding Agreement. . . . . . . . . . . . . . . . . . 31 4.5. Litigation. . . . . . . . . . . . . . . . . . . . . . 31 4.6. No Conflicting Agreements. . . . . . . . . . . . . . 32 4.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 32 4.8. Compliance with Applicable Laws. . . . . . . . . . . 32 4.9. Governmental Regulations. . . . . . . . . . . . . . . 33 4.10. Property. . . . . . . . . . . . . . . . . . . . . . 33 4.11. Federal Reserve Regulations; Use of Loan Proceeds. . 33 4.12. Plans. . . . . . . . . . . . . . . . . . . . . . . . 33 4.13. Financial Statements. . . . . . . . . . . . . . . . 34 3 4.14. Environmental Matters. . . . . . . . . . . . . . . . 34 4.15. Franchises, Intellectual Property, Etc. . . . . . . 35 4.16. Labor Relations. . . . . . . . . . . . . . . . . . . 35 4.17. Status as Senior Indebtedness. . . . . . . . . . . . 35 4.18. Brazilian Letter of Credit. . . . . . . . . . . . . 36 5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . 36 5.1. Evidence of Corporate Action. . . . . . . . . . . . . 36 5.2. Notes. . . . . . . . . . . . . . . . . . . . . . . . 36 5.3. ESOP Guaranty Amendment. . . . . . . . . . . . . . . 36 5.4. Compliance. . . . . . . . . . . . . . . . . . . . . . 36 5.5. Intentionally Omitted. . . . . . . . . . . . . . . . 37 5.6. Facility Fee. . . . . . . . . . . . . . . . . . . . . 37 5.7. Fees of Special Counsel. . . . . . . . . . . . . . . 37 5.8. Opinion of Counsel to the Company. . . . . . . . . . 37 5.9. Opinion of Special Counsel. . . . . . . . . . . . . . 37 5.10. Collateral. . . . . . . . . . . . . . . . . . . . . 37 5.11. Other Documents. . . . . . . . . . . . . . . . . . . 37 6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT. . . 37 6.1. Compliance. . . . . . . . . . . . . . . . . . . . . . 38 6.2. Loan Closings. . . . . . . . . . . . . . . . . . . . 38 6.3. Borrowing Request. . . . . . . . . . . . . . . . . . 38 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 38 7.1. Financial Statements. . . . . . . . . . . . . . . . . 38 7.2. Certificates; Other Information. . . . . . . . . . . 40 7.3. Legal Existence. . . . . . . . . . . . . . . . . . . 41 7.4. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 42 7.5. Insurance. . . . . . . . . . . . . . . . . . . . . . 42 7.6. Payment of Indebtedness and Performance of Obligations. . . . . . . . . . . . . . . . . . . . . 42 7.7. Condition of Property. . . . . . . . . . . . . . . . 43 7.8. Observance of Legal Requirements. . . . . . . . . . . 43 7.9. Inspection of Property; Books and Records; Discussions. . . . . . . . . . . . . . . . . . . . . 43 7.10. Environmental Matters. . . . . . . . . . . . . . . . 43 7.11. Licenses, Etc. . . . . . . . . . . . . . . . . . . . 44 7.12. Significant Subsidiaries. . . . . . . . . . . . . . 44 7.13. Audit Report. . . . . . . . . . . . . . . . . . . . 44 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 44 8.1. Borrowing. . . . . . . . . . . . . . . . . . . . . . 45 8.2. Liens. . . . . . . . . . . . . . . . . . . . . . . . 45 8.3. Merger and Acquisition or Sale of Property. . . . . . 46 8.4. Dividends; Purchase of Stock and Subordinated Debt. . 46 8.5. Investments, Loans, Etc. . . . . . . . . . . . . . . 46 8.6. Business Changes. . . . . . . . . . . . . . . . . . . 47 8.7. Sale of Property. . . . . . . . . . . . . . . . . . . 47 8.8. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 48 8.9. Quick Ratio. . . . . . . . . . . . . . . . . . . . . 48 8.10. Current Ratio. . . . . . . . . . . . . . . . . . . . 49 - 2 - 4 8.11. Leverage Ratio. . . . . . . . . . . . . . . . . . . 49 8.12. Interest Coverage Ratio. . . . . . . . . . . . . . . 49 8.13. Minimum Consolidated Capital Funds. . . . . . . . . 49 8.14. Minimum Consolidated Net Worth. . . . . . . . . . . 49 8.15. Capital Expenditures. . . . . . . . . . . . . . . . 49 8.16. Compliance with ERISA. . . . . . . . . . . . . . . . 50 8.17. Certificate of Incorporation and By-laws. . . . . . 50 8.18. Prepayments of Indebtedness. . . . . . . . . . . . . 50 8.19. Sale and Leaseback. . . . . . . . . . . . . . . . . 50 8.20. Amendments, Etc. of Certain Agreements. . . . . . . 50 8.21. Issuance of Additional Capital Stock. . . . . . . . 51 8.22. Fiscal Year. . . . . . . . . . . . . . . . . . . . . 51 8.23. Transactions with Affiliates. . . . . . . . . . . . 51 9. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 51 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 54 10.1. Appointment. . . . . . . . . . . . . . . . . . . . . 54 10.2. Delegation of Duties. . . . . . . . . . . . . . . . 55 10.3. Exculpatory Provisions. . . . . . . . . . . . . . . 55 10.4. Reliance by Agent. . . . . . . . . . . . . . . . . . 55 10.5. Notice of Default. . . . . . . . . . . . . . . . . . 56 10.6. Non-Reliance on Agent and Other Banks. . . . . . . . 56 10.7. Indemnification. . . . . . . . . . . . . . . . . . . 57 10.8. Agent in Its Individual Capacity. . . . . . . . . . 58 10.9. Successor Agent. . . . . . . . . . . . . . . . . . . 58 11. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 59 11.1. Amendments and Waivers. . . . . . . . . . . . . . . 59 11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . 59 11.3. No Waiver; Cumulative Remedies. . . . . . . . . . . 60 11.4. Survival of Representations and Warranties. . . . . 61 11.5. Payment of Expenses and Taxes; Indemnities. . . . . 61 11.6. Successors and Assigns. . . . . . . . . . . . . . . 62 11.7. Counterparts. . . . . . . . . . . . . . . . . . . . 64 11.8. Adjustments; Set-off. . . . . . . . . . . . . . . . 64 11.9. Lending Offices. . . . . . . . . . . . . . . . . . . 65 11.10. Governing Law. . . . . . . . . . . . . . . . . . . 66 11.11. Headings, Plurals. . . . . . . . . . . . . . . . . 66 11.12. Severability. . . . . . . . . . . . . . . . . . . . 66 11.13. Integration. . . . . . . . . . . . . . . . . . . . 66 11.14. Consent to Jurisdiction. . . . . . . . . . . . . . 66 11.15. Service of Process. . . . . . . . . . . . . . . . . 67 11.16. No Limitation on Service or Suit. . . . . . . . . . 67 11.17. WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . 67 11.18. Confidentiality. . . . . . . . . . . . . . . . . . 67 11.19. Return of Notes. . . . . . . . . . . . . . . . . . 68 11.20. Savings Clause. . . . . . . . . . . . . . . . . . . 68 11.21. Waiver of Certain Covenants under the Existing Credit Agreement. . . . . . . . . . . . . . . . . . 68 - 3 - 4 EXHIBITS Exhibit A Commitments Exhibit B Form of Note Exhibit C Form of Borrowing Base Certificate Exhibit D Form of Borrowing Request Exhibit E Form of Compliance Certificate Exhibit F Form of Assignment and Acceptance Agreement Exhibit G Form of Opinion of Counsel to the Company and the Guarantors Exhibit H Form of Opinion of Special Counsel SCHEDULES Schedule 1.1 List of Lending Offices Schedule 4.1 List of Subsidiaries Schedule 4.5 List of Litigation Schedule 4.12 List of Plans Schedule 4.14 Exceptions to Paragraph 4.14 (Environmental Matters) Schedule 8.1 List of Existing Indebtedness Schedule 8.2 List of Existing Liens - 4 - 5 FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 3, 1994, between EDO CORPORATION a New York corporation (the "Company"), the signatory Banks hereto (each a "Bank" and, collectively, the "Banks"), and THE BANK OF NEW YORK, as agent for the Banks (in such capacity, the "Agent"). RECITALS A. The Company, the Banks and the Agent entered into a Credit Agreement dated as of June 10, 1992 (as amended by Amendment No. 1, dated as of November 15, 1992, Amendment No. 2, dated as of March 27, 1993, and Amendment No. 3, dated as of November 5, 1993, the "Existing Credit Agreement"). Capitalized terms not defined in the Recitals have the meanings set forth in paragraph 1.1. B. The Company, the Banks and the Agent desire to amend the Existing Credit Agreement by amending and restating it in its entirety as hereinafter set forth. C. For convenience, this Agreement is dated as of March 3, 1994 (the "Restatement Effective Date") and references to certain matters related to the period prior hereto have been deleted. In consideration of the foregoing and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS 1.1. Defined Terms. As used in this Agreement, terms defined in the recitals have the meanings therein indicated, and the following terms have the following meanings: "Accountants": KPMG Peat Marwick, or such other firm of certified public accountants of recognized national standing selected by the Company and reasonably satisfactory to the Required Banks. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (i) to vote 5% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Each director or 6 officer of a Person shall be deemed to be an Affiliate of such Person. "Agent's Fee": as defined in paragraph 3.3. "Agreement": this First Amended and Restated Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Alternate Base Rate": on any date, a rate of interest per annum equal to the higher of (i) the BNY Rate in effect on such date or (ii) 1/2 of 1% plus the Federal Funds Rate in effect on such date. "Assignment and Acceptance Agreement": an assignment and acceptance agreement executed by an assignor and an assignee pursuant to which such assignor assigns all or any portion of such assignor's Notes and Commitment, substantially in the form of Exhibit F. "Assignment Fee": as defined in paragraph 11.6(b). "Authorized Signatory": as to any corporation, the president, the vice president of finance or other chief financial officer or any other duly authorized officer (acceptable to the Agent) thereof, and, as to any partnership, a general partner thereof. "BNY Rate": a rate of interest per annum equal to the prime commercial lending rate of BNY as publicly announced by BNY to be in effect from time to time, such rate of interest per annum to be adjusted automatically (without notice) on the effective date of any change in such publicly announced rate. "Benefited Bank": as defined in paragraph 11.8. "BNY": The Bank of New York. "Borrowing Base": at any time, (i) the sum of (a) 85% of Eligible Billed Receivables and (b) 60% of Eligible Unbilled Receivables less (ii) the amount of any Net Sales Proceeds not applied to the prepayment of Loans pursuant to paragraph 2.5(c), provided that such percentages shall be adjusted in the discretion of the Agent and the Required Banks upon receipt by the Agent and the Required Banks of the audit report referred to in paragraph 7.13. "Borrowing Base Certificate": a certificate in the form of Exhibit C. "Borrowing Date": any date specified in a Borrowing Request delivered pursuant to paragraph 2.3 as a date on which the - 2 - 7 Company requests the Banks to make Loans or BNY to issue a Letter of Credit. "Borrowing Request": a request in the form of Exhibit D. "Brazil Letter of Credit": Standby Letter of Credit No. 29748, dated December 12, 1993, issued by BNY for the account of the Company and in favor of Brazil Naval Commission in a face amount of $260,400. "Business Day": any day other than a Saturday, Sunday or other day on which commercial banks located in New York are authorized or required by law or other governmental action to close. "Capitalized Leases": as to any Person, at a particular time, all leases under which such Person is the lessee or obligor, the future rental payment obligations of which are required to be capitalized on a balance sheet of such Person in accordance with GAAP. "CERCLA": the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. section 9601, et seq. "Code": the Internal Revenue Code of 1986, as the same may be amended from time to time, or any successor thereto, and the rules and regulations issued thereunder, as from time to time in effect. "Commitment": as to any Bank, the amount set forth next to the name of such Bank in Exhibit A under the heading "Commitment," as such Commitment may be reduced from time to time pursuant to paragraph 2.4. "Commitment Fee": as defined in paragraph 3.1. "Commitments": the aggregate Commitments of all Banks. "Commitment Percentage": as to any Bank, the percentage set forth opposite the name of such Bank on Exhibit A under the heading "Commitment Percentage". "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Company or any Subsidiary within the meaning of Section 414(b) or 414(c) of the Code. "Compliance Certificate": a certificate in the form of Exhibit E. "Consolidated": the Company and its Subsidiaries taken together. - 3 - 8 "Consolidated Capital Funds": at any date of determination, the sum of Consolidated Net Worth plus the outstanding principal amount of Subordinated Debt at such date. "Consolidated Current Assets": at any date of determination, all amounts which would, in conformity with GAAP, be included under current assets on a Consolidated balance sheet of the Company and its Subsidiaries as at such date; provided, however, that such amount shall not include (a) any amounts for any Indebtedness owing by an Affiliate of the Company, unless such Indebtedness arose in connection with the sale of goods or other property in the ordinary course of business and would otherwise constitute current assets in conformity with GAAP, (b) any shares of Stock issued by an Affiliate of the Company, (c) the cash surrender value of any life insurance policy or (d) any Consolidated Intangibles. "Consolidated Current Liabilities": at any date of determination, all amounts which would, in conformity with GAAP, be included under current liabilities on a consolidated balance sheet of the Company and its Subsidiaries as at such date, including, without limitation, (a) all Indebtedness of the Company or any Subsidiary payable on demand or, at the option of the Person to whom such Indebtedness is owed, not more than twelve months after such date, (b) any payments in respect of any Indebtedness of the Company or any Subsidiary (whether installment, serial maturity or sinking fund payments or otherwise) required to be made not more than twelve months after such date and (c) all reserves in respect of liabilities or Indebtedness payable on demand or, at the option of the Person to whom such Indebtedness is owed, not more than twelve months after such date, the validity of which is contested at such date. "Consolidated Intangibles": at any date of determination, all assets of the Company and its Subsidiaries, determined on a Consolidated basis at such date, that would be classified as intangible assets in accordance with GAAP, including, without limitation, unamortized debt discount and expenses, unamortized organization and reorganization expense, costs in excess of the net asset value of acquired companies, patents, trade or servicemarks, franchises, trade names, goodwill and the amount of any write-up in the book value of any assets resulting from any revaluation (other than revaluations arising out of foreign currency valuations in accordance with GAAP) thereof after the Original Effective Date. "Consolidated Interest Expense": for any period, the sum of the amounts deducted for Consolidated interest expense in determining Consolidated Net Income for such period, excluding any amount contributed to the ESOP by the Company to enable the ESOP to pay interest on the ESOP Note. - 4 - 9 "Consolidated Interest Income": for any period, the sum of the amounts included as Consolidated interest income in determining Consolidated Net Income for such period. "Consolidated Net Income": for any period, the net income (or deficit) of the Company and its Subsidiaries for such period determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded therefrom (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Company or any Subsidiary, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest, except to the extent that such income has been actually received by the Company or such Subsidiary in the form of dividends or similar distributions, (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of the certificate of incorporation or by-laws or other organizational documents thereof, by any agreement to which such Subsidiary is a party or by which its Property is bound, or by any order of any Governmental Body applicable to such Subsidiary, (d) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period, (e) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets (such term to include all fixed assets, all inventory sold in conjunction with the disposition of fixed assets and all securities), provided, however, that any amounts so excluded by this clause, (e) shall be included in the determination of Consolidated Net Income in any year in which the Company and Subsidiaries did not incur a Consolidated operating loss as determined under GAAP, (f) any write-up of any assets, (g) any gain arising from the acquisition of any securities, (h) in the case of a successor to the Company by consolidation or merger or as a transferee of its assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets, and (i) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition over the cost of the investment in such Subsidiary. For purposes of computing the Interest Coverage Ratio for the fiscal quarter of the Company ending on March 31, 1993 and for the fiscal year of the Company ending on December 31, 1993, $9,400,000 shall be added to the amount determined under the preceding sentence. "Consolidated Net Worth": at any date of determination, the sum of all amounts which would be included under shareholders' equity on a Consolidated balance sheet of the Company and its Subsidiaries determined in accordance with GAAP as of such date. "Consolidated Tangible Net Worth": at any date of determination, Consolidated Net Worth minus Consolidated Intangibles. - 5 - 10 "Consolidated Total Liabilities": at any date of determination, all items which would, in conformity with GAAP, be classified as liabilities on a Consolidated balance sheet of the Company and its Subsidiaries as of such date, minus the initial charge incurred by the Company under FAS 106 in an aggregate amount not in excess of $14,000,000. "Consolidating": the Company and its Subsidiaries taken separately. "Contingent Obligation": as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or other obligation ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase Property, securities or services primarily for the purpose of assuring the beneficiary of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the beneficiary of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include the indorsement of instruments for deposit or collection in the ordinary course of business. The term Contingent Obligation shall also include the liability of a general partner for the liabilities of the partnership in which it is a general partner. The amount of any Contingent Obligation of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, where such Contingent Obligation is expressly limited to a portion of any such primary obligation, that portion to which it is so limited, or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. "Current Ratio": at any time, the ratio of Consolidated Current Assets to Consolidated Current Liabilities. "Debentures": the 7% Convertible Subordinated Debentures, due 2011, issued pursuant to the Indenture, as the same may be amended, supplemented or otherwise modified from time to time in accordance with paragraph 8.20. - 6 - 11 "Default": any of the events specified in paragraph 9, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dividend Limitation": for any fiscal year of the Company, an amount equal to the greater of (i) the sum of the product, for each fiscal quarter in such fiscal year in which a cash dividend was declared on such common Stock by the Company pursuant to paragraph 8.4(iii)(a), of (x) $0.07 multiplied by (y) the number of shares of common Stock of the Company issued and outstanding (other than treasury Stock) as of the applicable quarterly record date for each such quarter in each such year and (ii) an amount equal to 28% of Earnings Available to Common Shareholders for such immediately preceding fiscal year determined in accordance with GAAP, provided, however, that for the 1995 fiscal year of the Company and each fiscal year thereafter, the Dividend Limitation shall in no event exceed the net earnings of the Company for such fiscal year. "Documentary Trade Letter of Credit": a Letter of Credit issued for the account of the Company in support of the obligation of the Company in respect of the purchase of goods or services from the beneficiary of such Letter of Credit. "Dollars" and "$": lawful currency of the United States of America. "Earnings Available to Common Shareholders": for any fiscal year of the Company, an amount equal to the product of (i) the earnings per share of Common Stock as set forth on the financial statements of the Company for such fiscal year delivered pursuant to paragraph 7.1, multiplied by (ii) the weighted number of shares of Common Stock outstanding during such fiscal year, all as determined in accordance with GAAP. "EDO Automotive": EDO Automotive Natural Gas, Inc., a Delaware corporation. "EDO Canada": EDO (Canada) Limited, a Canadian corporation. "EDO Canada Line": the $1,000,000 unsecured line of credit extended by Canadian Imperial Bank of Commerce to EDO Canada. "EDO Energy": EDO Energy Corporation, a Delaware corporation. "EDO Sports": EDO Sports Inc., formerly EDO Sub Acquisition Corp., a Delaware corporation. - 7 - 12 "Eligible Billed Receivable": a Receivable (other than an Eligible Unbilled Receivable) arising in the ordinary course of business as to which the following requirements have been fulfilled to the satisfaction of the Agent: (a) such Receivable is payable to the Company or any Guarantor and the Company or such Guarantor, as the case may be, has lawful and absolute title thereto: (b) none of such Receivable is subject to any Lien in favor of any Person other than Permitted Liens; (c) such Receivable did not arise out of a transaction with any employee, officer, director or Affiliate of the Company or any Subsidiary (other than a Receivable arising out of a transaction with an Affiliate of the Company in the ordinary course of business); (d) the Company is not aware and has no reason to be aware of any reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition in respect of the account debtor of such Receivable; (e) such Receivable has not been outstanding more than 91 days from the original invoice date thereof; (f) such Receivable is a good and valid account representing a bona fide indebtedness incurred by the account debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an absolute sale upon the stated terms of goods sold or to be sold by the Company or any Guarantor and (g) the Agent and the Required Banks are, and continue to be reasonably satisfied with the credit standing of the account debtor in relation to the amount of credit extended and the collectibility of such Receivable; provided, however, that a Receivable arising out of a transaction with an Affiliate of the Company which would otherwise be an Eligible Billed Receivable shall not be an Eligible Billed Receivable if it arises out of the same sale of goods or rendering of services with respect to which a Receivable is already included in the Borrowing Base as an Eligible Billed Receivable. "Eligible Unbilled Receivable": a Receivable arising in the ordinary course of business consisting of cost input and related profit recognized as revenues on customer contracts based upon percentage completion accounting in accordance with GAAP, which amounts cannot be billed to customers because of contract terms until a future date, as to which the following requirements have been fulfilled to the satisfaction of the Agent: (a) such Receivable is payable to the Company or any Guarantor and the Company or such Guarantor, as the case may be, has lawful and absolute title thereto: (b) none of such Receivable is subject to any Lien in favor of any Person other than Permitted Liens; (c) such Receivable did not arise out of a transaction with any employee, officer, director or Affiliate of the Company or any Subsidiary (other than a Receivable arising out of a transaction with an Affiliate of the Company in the ordinary course of business); (d) the Company is not aware and has no reason to be aware of any reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition in respect of the account debtor of such Receivable; and (e) the Agent and the Required Banks are, and continue to be reasonably satisfied with the credit standing of the - 8 - 13 account debtor in relation to the amount of credit extended and the collectibility of such Receivable; provided, however, that a Receivable arising out of a transaction with an Affiliate of the Company which would otherwise be an Eligible Unbilled Receivable shall not be an Eligible Unbilled Receivable if it arises out of the same sale of goods or rendering of services with respect to which a Receivable is already included in the Borrowing Base as an Eligible Unbilled Receivable. "Environmental Complaint": as defined in paragraph 7.10. "Environmental Laws": all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and Hazardous Wastes, and the rules, regulations, decisions, orders and directives of all Governmental Bodies with respect thereto. "EPA Litigation": the proceeding of the United States Environmental Protection Agency relating to a site in Norwalk, Connecticut, formerly occupied by the Company's former Elinco Division, in which the Company has been named as a potentially responsible party. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time, any successor statute thereto, and the rules and regulations issued thereunder, as from time to time in effect. "ERISA Liabilities": without duplication, the aggregate of all unfunded vested benefits under all Plans and all potential withdrawal liabilities under all Multiemployer Plans. "ESOP": the EDO Corporation Employee Stock Ownership Plan. "ESOP Guaranty": the Guarantee Agreement, dated as of July 12, 1988, made by the Company to NatWest as successor in interest to MHT, as amended by an Amendment and Waiver, dated as of April 12, 1990, Amendment No. 2, dated as of October 9, 1990, Amendment No. 3, dated as of April 8, 1991, Amendment No. 4, dated March 26, 1992, Amendment No. 5, dated June 9, 1992 and Amendment No. 6, dated July 30, 1993 and the ESOP Guaranty Amendment, as the same may hereafter be amended, supplemented or otherwise modified, from time to time in accordance with paragraph 8.20. "ESOP Guaranty Amendment": Amendment No. 7 to the ESOP Guaranty, dated March 3, 1994. - 9 - 14 "ESOP Loan Documents": collectively, the ESOP Loan Agreement, the ESOP Guaranty, the ESOP Note, the ESOP Pledge Agreement and all other documents executed and delivered in connection therewith as each may be amended, supplemented or otherwise modified from time to time in accordance with paragraph 8.20. "ESOP Note": the Term Note, dated July 22, 1988, made by the ESOP Trustee to NatWest as successor in interest to MHT, as amended by an Amendment and Waiver, dated as of April 12, 1990, and as the same may hereafter be amended, supplemented or otherwise modified, from time to time in accordance with paragraph 8.20. "ESOP Pledge Agreement": the Pledge and Security Agreement, dated as of July 22, 1988, made by the ESOP Trustee to NatWest as successor in interest to MHT, as amended by an Amendment and Waiver, dated as of April 12, 1990, and as the same may hereafter be amended, supplemented or otherwise modified, from time to time in accordance with paragraph 8.20. "ESOP Preferred Stock": the ESOP Convertible Cumulative Preferred Shares, Series A of the Company, $213.72 par value per share. "ESOP Trustee": the trustee of the Trust under which the ESOP is funded. "Event of Default": any of the events specified in paragraph 9, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Existing Credit Agreement": as defined in the Recitals. "Existing Notes" the Notes, dated June 10, 1992, made by the Company to the respective Banks, each an "Existing Note". "Facility Fee": as defined in paragraph 3.2. "FAS 106": Statement of Financial Accounting Standards Board No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, issued on December 21, 1990. "Federal Funds Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by BNY and reported to the Agent from three - 10 - 15 Federal funds brokers of recognized standing selected by the Agent and the Required Banks. "Financial Statements": as defined in paragraph 4.13. "GAAP": generally accepted accounting principles as in effect from time to time, which shall include the official interpretations thereof by the Financial Accounting Standards Board, the Accounting Principles Board and the American Institute of Certified Public Accountants, in each case consistently applied. "Governmental Body": any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator. "Guarantor": collectively, (i) EDO Western, Barnes, EDO Sports, EDO Energy and EDO Automotive and (ii) each other Significant Subsidiary of the Company other than EDO Canada and EDO Op (Israel) Ltd. "Guaranty": collectively, (i) the Guaranty and Subordierations nation Agreement, dated as of June 10, 1992, made by EDO Western, Barnes and EDO Sports to the Agent, (ii) the Guaranty and Subordination Agreement, dated as of June 22, 1993, made by EDO Energy, (iii) the Guaranty and Subordination Agreement, dated as of December 1, 1993, made by EDO Automotive, and (iv) the Guaranty and Subordination Agreement, made by a Guarantor described in clause (ii) of the definition thereof, substantially in the form of the foregoing guaranties, as each may be amended, supplemented or otherwise modified from time to time. "Hazardous Discharge": as defined in paragraph 7.10. "Hazardous Substance": without limitation, any hazardous materials, Hazardous Wastes, hazardous or toxic substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA or any other applicable Environmental Law. "Hazardous Wastes": without limitation, all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal. "Highest Lawful Rate": the maximum rate of interest, if any, that at any time or from time to time may be contracted for, taken, charged or received on the Notes or which may be owing to any Bank pursuant to this Agreement under the laws applicable to such Bank and this transaction. - 11 - 16 "Indebtedness": as to any Person, at a particular time, all items which constitute, without duplication, (a) indebtedness for borrowed money or the deferred purchase price of Property (other than trade payables incurred in the ordinary course of business), (b) indebtedness evidenced by notes, bonds, debentures or similar instruments, (c) indebtedness in respect of ERISA Liabilities, (d) obligations with respect to any conditional sale or title retention agreement, (e) indebtedness arising under acceptance facilities and the amount available to be drawn under all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder to the extent such Person shall not have reimbursed the issuer in respect of the issuer's payment of such drafts, (f) all liabilities secured by any Lien on any Property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof (other than carriers', warehousemen's, mechanics', repairmen's or other like non-consensual Liens arising in the ordinary course of business), (g) all obligations under Capitalized Leases and (h) all Contingent Obligations. "Indemnified Liabilities": as defined in paragraph 11.5. "Indemnified Person": as defined in paragraph 11.5. "Indenture": the Indenture, dated as of November 15, 1986, made by the Company to MHT, as trustee, as the same may be amended, supplemented or otherwise modified from time to time in accordance with paragraph 8.20. "Information": as defined in paragraph 11.18. "Intellectual Property": all copyrights, trademarks, patents, trade names and service marks and names. "Interest Coverage Ratio": at any time of determination, the ratio of (a) the sum of (i) the product of Consolidated Net Income for the immediately preceding fiscal quarter of the Company multiplied by 4, (ii) the product of income taxes to the extent deducted in determining such Consolidated Net Income for such immediately preceding fiscal quarter of the Company multiplied by 4 and (iii) the product of Consolidated Interest Expense for such fiscal quarter multiplied by 4 minus the product of Consolidated Interest Income for such fiscal quarter multiplied by 4 to (b) the product of Consolidated Interest Expense for such fiscal quarter multiplied by 4 minus the product of Consolidated Interest Income for such fiscal quarter multiplied by 4. "Interest Payment Date": in respect of any Loan, the last day of each month commencing on the first of such days to occur after such Loan is made. "Investments": as defined in paragraph 8.5. - 12 - 17 "Lending Office": in respect of any Bank, initially, the office or offices of such Bank designated as such on Schedule 1.1; thereafter, such other office or offices of such Bank, if any, which shall be making or maintaining Loans, as reported by such Bank to the Agent. "Letter of Credit Commissions": as defined in paragraph 3.4. "Letter of Credit Commitment": the commitment of BNY to issue Letters of Credit having an aggregate outstanding face amount of up to $15,000,000, and the commitment of the Banks to participate in the Letter of Credit Exposure as set forth in paragraph 2.9. "Letter of Credit Exposure": at a particular date, the sum of (a) the undrawn face amounts of the outstanding Letters of Credit at such date and (b) the aggregate unpaid reimbursement obligations in respect of the outstanding Letters of Credit at such date (after giving effect to any Loans made on such date to pay any such reimbursement obligations). "Letters of Credit": as defined in paragraph 2.8(a). "L/C 27902": Performance Letter of Credit No. 27902 issued by BNY for the account of the Company and for the benefit of FR. Lurssen Werft (GMBH & Co.) in the face amount of $84,140 and with an expiration date of September 30, 1995. "Leverage Ratio": at any time, the ratio of (a) Consolidated Total Liabilities minus Subordinated Debt to (b) Consolidated Tangible Net Worth plus Subordinated Debt. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or other security agreement or security interest of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing. "Loan Documents": collectively, this Agreement, the Notes, the Guaranty and the Reimbursement Agreements. "Loan" or "Loans": as defined in paragraph 2.1. "Margin Stock": any "margin stock", as said term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time. - 13 - 18 "Material Adverse Change": a material adverse change in the financial condition, operations, business, prospects or Property of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect": a material adverse effect on the financial condition, operations, business, prospects or Property of the Company and its Subsidiaries taken as a whole. "Maturity Date": June 30, 1995, or such earlier date on which the Loans shall become due and payable pursuant to the provisions hereof, whether by acceleration or otherwise. "MHT": Manufacturers Hanover Trust Company. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA under which the Company or any Subsidiary is an employer. "NatWest": National Westminster Bank USA. "Net Sales Proceeds": the aggregate gross sales proceeds received by the Company or any Subsidiary from each sale or other disposition, direct or indirect, of Property (other than inventory sold in the ordinary course of business) less (a) sales and other commissions and legal and other expenses incurred in connection with such sale, (b) taxes reasonably estimated to be payable in cash by the Company or any Subsidiary for the taxable year in which such sale occurred (taking into consideration the Company's overall Consolidated tax position for such year) and (c) the amount of Indebtedness (other than the Indebtedness under the Loan Documents) secured by such Property which is required to be repaid upon such sale. "Note" or "Notes": as defined in paragraph 2.2. "Original Effective Date": June 10, 1992. "Party" or "Parties": the Agent, the Banks and the Company, or any one or more of them as the context requires. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any Governmental Body succeeding to the functions thereof. "Performance Letter of Credit": a Letter of Credit issued for the account of the Company in support of an obligation (other than a financial obligation) of the Company to the beneficiary of such Letter of Credit. "Permitted Liens": Liens permitted to exist pursuant to paragraph 8.2. - 14 - 19 "Person": an individual, a partnership, a corporation, a joint stock company, a trust, an unincorporated association, a Governmental Body or any other entity of whatever nature. "Plan": any pension plan which is covered by Title IV of ERISA or any other employee benefit plan which is subject to the minimum funding standards of Section 412 of the Code and in respect of which the Company, any Subsidiary or a Commonly Controlled Entity or Subsidiary is an "employer" as defined in Section 3(5) of ERISA. "Property": all types of real, personal, tangible, intan- gible or mixed property. "Quick Ratio": at any time, the ratio of (a) cash and cash equivalents plus Receivables, in each case of the Company and its Subsidiaries on a Consolidated basis to (b) Consolidated Current Liabilities. "Real Property": all real Property from time to time owned or leased by the Company or any Subsidiary. "Receivable": the right to payment arising as a result of, or in connection with, a sale of inventory, equipment or any other Property or the rendering of services by, and in the ordinary course of business of, the Company, any Guarantor or EDO Canada. "Release": any release, spill, discharge, leak or disposal, the reporting of which is required by an applicable Environmental Law. "RCRA": the Resource Conservation and Recovery Act, 42 U.S.C. sections 6901, et seq., as the same may be amended from time to time. "Reimbursement Agreement": as defined in paragraph 2.8(b). "Required Banks": at any time when no Loans or Letters of Credit are outstanding, Banks having Commitments equal to at least 67% of the aggregate Commitments of all the Banks, and at any time when Loans or Letters of Credit are outstanding, Banks holding Notes and participation interests in Letters of Credit having an aggregate unpaid principal balance and Letter of Credit Exposure equal to at least 67% of the aggregate of Loans outstanding and Letter of Credit Exposure. "Reportable Event": any event described in Section 4043(b) of ERISA, other than an event (excluding an event described in Section 4043(b)(1) relating to tax disqualification) - 15 - 20 with respect to which the 30-day notice requirement has been waived. "Restatement Effective Date": as defined in the Recitals. "Significant Subsidiary": (i) each wholly-owned Subsidiary, (ii) each Subsidiary (other than a wholly-owned Subsidiary) once the aggregate amount of investments (whether by way of equity contributions, advances, loans or otherwise) in such Subsidiary exceeds $2,000,000 and (iii) each Subsidiary (whether or not a wholly-owned Subsidiary) once the aggregate amount of investments (whether by way of equity contributions, advances, loans or otherwise) in all Subsidiaries (other than wholly-owned Subsidiaries) exceeds $4,000,000. "Single Employer Plan": any Plan which is not a Multiemployer Plan. "Special Counsel": Emmet, Marvin & Martin. "Standby Letter of Credit": a Letter of Credit issued for the account of the Company in support of a financial obligation of the Company to the beneficiary of such Letter of Credit. "Stock": any and all shares, interests, participations or other equivalents (however designated) of corporate stock. "Subordinated Debt": the Indebtedness of the Company under the Debentures and the Indenture, as each may be amended, supplemented or otherwise modified from time to time in accordance with paragraph 8.20. "Subsidiary": any corporation, association, partnership, joint venture or other business entity of which the Company alone or together with any Subsidiary of the Company, directly or indirectly, either (a) in respect of a corporation, owns or controls more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors or similar managing body, irrespective of whether or not a class or classes shall or might have voting power by reason of the happening of any contingency, or (b) in respect of an association, partnership, joint venture or other business entity, is entitled or obligated to share in more than 50% of the profits or losses, however determined. "Surety Letter of Credit": a Letter of Credit issued for the account of the Company to back a surety bond issued for the account of the Company. "Taxes": any present or future income, stamp or other taxes, levies, imposts, duties, fees, assessments, deductions, - 16 - 21 withholdings, or other charges of whatever nature, now or hereafter imposed, levied, collected, withheld, or assessed by any government or taxing authority. "Transaction Record": as defined in paragraph 2.20. 1.2. Other Definitional Provisions. (a) All terms defined in this Agreement shall have the meanings given such terms herein when used in the Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto, unless otherwise defined therein. (b) As used herein, in the other Loan Documents and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in paragraph 1.1, and accounting terms partly defined in paragraph 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein", "hereto" and "hereunder" and similar words when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and paragraph, schedule and exhibit references contained herein shall refer to paragraphs hereof or schedules or exhibits hereto unless otherwise expressly provided herein. (d) The word "or" shall not be exclusive; "may not" is prohibitive and not permissive; and the singular includes the plural. (e) Notwithstanding the foregoing, the Parties agree that in the event that any change in accounting principles from those used in the preparation of the Financial Statements is hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or Accounting Principles Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) and such change materially affects the calculation of any component of any financial covenant, standard or term contained in this Agreement, the Agent and the Company shall negotiate in good faith to amend such financial covenants, standards or terms found in this Agreement (other than in respect of financial statements to be delivered hereunder) so that, upon adoption of such changes, the criteria for evaluation of the Company's and its Subsidiaries' financial condition shall be the same in substance after such change as if such change had not been made; provided, however, that any such amendments shall not become effective for purposes of this Agreement unless approved by the Agent and the Required Banks, and if the Company, - 17 - 22 the Agent and the Required Banks cannot agree on such an amendment, then the calculations under such financial covenants, standards or terms shall continue to be computed without giving effect to such change in accounting principles. 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT 2.1 Loans. Subject to the terms and conditions of this Agreement, each Bank severally agrees to make revolving credit loans (each a "Loan" and, collectively, the "Loans") to the Company from time to time during the period from the Restatement Effective Date to, but excluding, the Maturity Date in an aggregate principal amount at any one time outstanding not to exceed such Bank's Commitment. At no time shall the sum of (i) the aggregate outstanding principal balance of the Loans and (ii) the Letter of Credit Exposure exceed the lesser of (a) the Commitments or (b) the Borrowing Base. During the period from the Restatement Effective Date to, but excluding, the Maturity Date, the Company may borrow, prepay in whole or in part and reborrow under the Commitments, all in accordance with the terms and conditions hereof. 2.2. Notes. The Loans made by each Bank shall be evidenced by an amended and restated promissory note of the Company, substantially in the form of Exhibit B, with appropriate insertions therein as to date and principal amount (each as indorsed or modified from time to time, including all replacements thereof and substitutions therefor, a "Note" and, collectively with the Notes of all other Banks, the "Notes"), payable to the order of such Bank and representing the obligation of the Company to pay the lesser of (a) the amount of the Commitment of such Bank and (b) the aggregate unpaid principal balance of all Loans made by such Bank, with interest thereon as prescribed in paragraph 2.7. Each Bank is hereby authorized to record (i) the outstanding principal amount of its Loans on the Restatement Effective Date, (ii) the date and amount of each Loan made by such Bank after the Restatement Effective Date and (iii) the date and amount of each payment or prepayment of principal of, any Loans, either on the schedule (and any continuations thereof) annexed to and constituting a part of its Note or in such Bank's internal records. No failure to so record or any error in so recording shall affect the obligation of the Company to repay the Loans, with interest thereon, as herein provided. Each Note shall (a) be dated the Restatement Effective Date, (b) be stated to mature on the Maturity Date, and (c) bear interest for the period from and including the date of such borrowing on the unpaid principal balance thereof from time to time outstanding at the applicable interest rate or rates per annum determined as provided in paragraph 2.7 and until such borrowing - 18 - 23 is repaid. Interest on each Note shall be payable as specified in paragraph 2.7. 2.3. Procedure for Borrowing. (a) The Company may borrow under the Commitments from time to time on any Business Day occurring on or after the Restatement Effective Date and before the Maturity Date, provided, that the Company shall give the Agent irrevocable written notice in the form of a Borrowing Request of any borrowing (which Borrowing Request must be received by the Agent prior to 10:00 A.M., New York City time one Business Day prior to the requested Borrowing Date, specifying (i) the aggregate amounts to be borrowed under the Commitments and (ii) the requested Borrowing Date. Each borrowing shall be in an aggregate principal amount equal to $500,000 or such amount plus a multiple of $100,000 in excess thereof. Upon receipt of each Borrowing Request, the Agent shall notify each Bank thereof, not later than 12:00 Noon, New York City time at least one Business Day prior to a Borrowing Date. Each Bank will make the amount of its Commitment Percentage of each borrowing available to the Agent for the account of the Company at the office of the Agent set forth in paragraph 11.2 not later than 12:00 Noon, New York City time, on the Borrowing Date requested by the Company, in funds immediately available to the Agent at such office. The amounts so made available to the Agent on a Borrowing Date will then, subject to the satisfaction of the terms and conditions of this Agreement as determined in good faith by the Agent, be made available on such date to the Company by the Agent at the office of the Agent specified in paragraph 11.2 by crediting the account of the Company on the books of such office with the aggregate of said amounts received by the Agent. (b) Unless the Agent shall have received prior notice from a Bank (by telephone or otherwise, such notice to be promptly confirmed by telex, telecopy or other writing) that such Bank will not make available to the Agent such Bank's pro rata share of the Loans requested by the Company, the Agent may assume that such Bank has made such share available to the Agent on such Borrowing Date in accordance with this paragraph, provided that such Bank received notice of the proposed borrowing from the Agent, and the Agent may, in reliance upon such assumption, make available to the Company on such Borrowing Date a corresponding amount. If and to the extent such Bank shall not make such pro rata share available to the Agent and the Agent shall have made available a corresponding amount, such Bank and the Company severally agree to pay to the Agent forthwith on demand such corresponding amount (to the extent not previously paid by the other), together with interest thereon for each day from the date such amount is made available to the Company until the date such amount is paid to the Agent, at a rate per annum equal to, in the case of the Company, the applicable interest rate set forth in paragraph 2.7, and, in the case of such Bank, the Federal Funds Rate in effect on such date - 19 - 24 (as determined by the Agent). Such payment by the Company, however, shall be without prejudice to its rights against such Bank. If such Bank shall pay to the Agent such corresponding amount, such amount so paid shall constitute such Bank's Loan as part of such Loans for purposes of this Agreement, which Loan shall be deemed to have been made by such Bank on the Borrowing Date applicable to such Loans. 2.4. Termination or Reduction of Commitments. (a) Voluntary Reductions. The Company shall have the right, upon at least three Business Days' prior written notice to the Agent, at any time to reduce permanently the Commitments in whole at any time, or in part from time to time, to an amount not less than the sum of (i) the aggregate principal balance of the Loans then outstanding (after giving effect to any contemporaneous prepayment thereof) and (ii) the Letter of Credit Exposure and, concurrently with any such reduction, the Company shall prepay the Loans in the amount, if any, by which the sum of (x) the aggregate unpaid principal balance of the Loans, plus (y) the Letter of Credit Exposure exceeds the Commitments as so reduced, provided that each partial reduction of the Commitments shall be in an amount equal to $1,000,000 or such amount plus a whole multiple thereof. (b) In General. Reductions of the Commitments shall be applied pro rata according to the Commitment Percentage of each Bank. Simultaneously with each reduction of the Commitments under this paragraph 2.4, the Company shall pay the Commitment Fee accrued on the amount by which the Commitments have been reduced and prepay the amount, if any, by which the aggregate unpaid principal balance of the Loans plus the Letter of Credit Exposure exceeds the amount of the Commitments as so reduced. 2.5. Prepayments of the Loans. (a) Voluntary Prepayments. The Company may, at its option, prepay the Loans, in whole or in part, at any time and from time to time by notifying the Agent in writing at least one Business Day prior to the proposed prepayment date specifying the amount of the Loans to be prepaid and the date of prepayment. Upon receipt of such notice, the Agent shall promptly notify each Bank thereof. If any such notice by the Company is given pursuant to this paragraph 2.5, such notice shall be irrevocable and payment of the amount specified in such notice shall be due and payable on the date specified, together with accrued interest to the date of such payment on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of $500,000 or such amount plus a multiple of $100,000 in excess thereof or, if less, the outstanding principal balance of the Loans. - 20 - 25 (b) Mandatory Borrowing Base Prepayment of Loans. If on any day the sum of (i) the aggregate outstanding principal balance of the Loans and (ii) the Letter of Credit Exposure shall exceed the Borrowing Base, the Company shall, within one Business Day of such day, prepay the Loans by an amount equal to such excess. If, after giving effect to such prepayment, the Letter of Credit Exposure exceeds the Borrowing Base, the Company shall deposit with the Agent collateral in cash or cash equivalents acceptable to the Agent to be held and applied in accordance with paragraph 2.8(d). Until such excess has been prepaid, the Company shall not be entitled to effect additional Loans, request the issuance of new Letters of Credit or request amendments to any Letters of Credit. (c) Mandatory Prepayments of the Loans Relating to Sales of Property. The Borrower shall prepay the Loans in the amounts, at the times and to the extent required by Section 8.7(d) in connection with certain sales of Property, provided that to the extent that the Net Sales Proceeds of any sale described therein exceeds the then outstanding principal balance of the Loans, such excess shall be applied as a permanent reduction of the Borrowing Base as described in the definition thereof. 2.6. Intentionally Omitted. 2.7. Interest Rates and Payment Dates. (a) Prior to Maturity. Prior to maturity, the outstanding principal balance of the Loans shall bear interest at the Alternate Base Rate plus 1/4%. (b) Default Rate. After the occurrence and during the continuance of an Event of Default, the outstanding principal amount of the Loans and any overdue interest or other amount payable by the Company to the Agent or any Bank under the Loan Documents shall, to the extent permitted by applicable law, bear interest at a rate per annum equal to the Alternate Base Rate plus 2-1/4%. All such interest shall be payable on demand. (c) General. Interest shall be calculated on the basis of a 360 day year for the actual number of days elapsed. Interest shall be payable in arrears on each Interest Payment Date and upon payment (including prepayment) of the Loans. Any change in the interest rate on the Loans resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate shall become effective. The Agent shall, as soon as practicable, notify the Company and the Banks of the effective date and the amount of each such change in the Alternate Base Rate, but failure to so notify shall not in any manner affect the obligation of the Company to pay interest on the Loans in the amounts and on the dates required. Each determination of the Alternate Base Rate by - 21 - 26 the Agent pursuant to this Agreement shall be conclusive and binding on the Company and the Banks absent manifest error. At no time shall the interest rate payable on the Loans, together with the Commitment Fee, the Facility Fee, the Agent's Fee, the Letter of Credit Commissions and all other fees and other amounts payable hereunder, to the extent the same are construed to constitute interest, exceed the Highest Lawful Rate. If interest payable on any date would exceed the maximum amount permitted by the Highest Lawful Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Highest Lawful Rate, shall be increased by the unpaid amount of such reduction. Any interest actually received for any period in excess of such maximum allowable amount for such period shall be deemed to have been applied as a prepayment of the Loans. The Company acknowledges that to the extent interest payable on the Loans is based on the BNY Rate, such Rate is only one of the bases for computing interest on loans made by the Banks, and by basing interest on the BNY Rate, the Banks have not committed to charge, and the Company has not in any way bargained for, interest based on a lower or the lowest rate at which the Banks may now or in the future make loans to other borrowers. 2.8. Letter of Credit Sub-Facility. (a) Subject to the terms and conditions of this Agreement, BNY agrees, in reliance on the agreement of the other Banks set forth in paragraph 2.9, to issue Standby, Performance, Documentary Trade and Surety Letters of Credit (the "Letters of Credit"; each, individually, an "Letter of Credit") for the account of the Company. The sum of the aggregate face amount of the Letters of Credit at any one time outstanding shall not exceed the lesser of (i) the excess, if any, of the sum of the Commitments over the sum of the aggregate outstanding principal balance of the Loans or (ii) the excess, if any, of the Borrowing Base over the sum of the aggregate outstanding principal balance of the Loans. Except for the L/C 27902, each Letter of Credit shall have an expiration date which shall be not later than one Business Day prior to the Maturity Date, provided, however, if the Company so requests, a Letter of Credit may, in the discretion of the Required Banks, be issued with an expiration date which is later than one Business Day prior to the Maturity Date if the Company deposits collateral in cash or cash equivalents acceptable to the Agent with the Agent in an amount equal to the face amount of such requested Letter of Credit in accordance with paragraph 2.8(d). Notwithstanding the foregoing, BNY shall not issue a Letter of Credit which constitutes a Surety Letter of Credit without the consent of the Banks if, after giving effect to the issuance thereof, the Letter of Credit Exposure attributable to Surety Letters of Credit will exceed $1,000,000. No Letter of Credit shall be issued if the Agent shall have determined that the conditions set forth in paragraph 6 have not been satisfied. - 22 - 27 (b) Each Letter of Credit shall be issued for the account of the Company in support of an obligation of the Company in favor of a beneficiary who has requested the issuance of such Letter of Credit as a condition to a transaction entered into in connection with the Company's or a Subsidiary's business. The Company shall give the Agent a Borrowing Request for the issuance of each Letter of Credit by 10:00 A.M., New York City time, three Business Days prior to the requested date of issuance. Such Borrowing Request shall be accompanied by BNY's standard Application and Agreement for a Standby, Performance, Documentary Trade or Surety Letter of Credit, as the case may be, then in use by BNY (each a "Reimbursement Agreement"), executed by an Authorized Signatory of the Company, and shall specify (i) the beneficiary of such Letter of Credit and the obligations of the Company in respect of which such Letter of Credit is to be issued, (ii) the Company's proposal as to the conditions under which a drawing may be made under such Letter of Credit and the documentation, if any, to be required in respect thereof, (iii) the maximum amount to be available under such Letter of Credit, and (iv) the requested date of issuance. In the case of a request for a Letter of Credit (other than one for a Documentary Trade Letter of Credit), BNY shall determine, based on such criteria as it, in its sole discretion, shall deem appropriate, whether the Letter of Credit to be issued shall be a Standby or Performance letter of credit. Upon receipt of such Borrowing Request from the Company, the Agent shall promptly notify each Bank thereof. BNY shall, on the proposed date of issuance and subject to the other terms and conditions of this Agreement, issue the requested Letter of Credit. Each Letter of Credit shall be in form and substance reasonably satisfactory to BNY, with such provisions with respect to the conditions under which a drawing may be made thereunder and the documentation required in respect of such drawing as BNY shall reasonably require. Each Letter of Credit shall be used solely for the purposes described therein. (c) Each payment by BNY of a draft drawn under a Letter of Credit shall give rise to an obligation on the part of the Company to reimburse BNY immediately for the amount thereof. If the Company shall have failed to reimburse BNY in full on or before 12:00 noon, New York City time, on the date BNY shall make payment on a draft drawn under a Letter of Credit, except as provided in paragraph 2.8(d), the Company's obligations to make such reimbursement shall be satisfied by the automatic making of a Loan by each Bank under its Note in the principal amount equal to its Commitment Percentage of the amount of such draft paid by BNY. BNY agrees to notify each Bank (in accordance with paragraph 2.8(c)) and the Company of the making of each such Loan. (d) In the event that the Company is required to deposit collateral in cash or cash equivalents acceptable to the Agent with the Agent, such deposit shall be made in immediately - 23 - 28 available funds, the Agent shall have no liability for interest thereon and the Agent shall hold such collateral for the ratable benefits of the Banks to be applied as set forth herein. With respect to such collateral delivered to the Agent in respect of a Letter of Credit issued with an expiration date which is later than one Business Day prior to the Maturity Date pursuant to paragraph 2.8(a), including, without limitation, the L/C 27902, in the event of a drawing on such Letter of Credit, the Agent shall apply all or a portion of such collateral to the reimbursement of BNY in respect of such drawing. In the event of the termination of such Letter of Credit prior to the Maturity Date and its return to BNY, the Agent shall return the unapplied portion of such collateral to the Company. 2.9. Letter of Credit Participation and Funding Commitments. (a) Each Bank hereby unconditionally, irrevocably, and severally for itself only and without any notice to or the taking of any action by such Bank, hereby takes an undivided participating interest in the obligations of BNY under and in connection with each Letter of Credit outstanding on the Restatement Effective Date (including, without limitation, the Brazil Letter of Credit) and each Letter of Credit issued on or after the Restatement Effective Date in accordance with the provisions of paragraph 2.8 (including, without limitation, the L/C 27902 and each other Letter of Credit which has an expiration date later than one Business Day prior to the Maturity Date in an amount equal to such Bank's Commitment Percentage of the amount of such Letter of Credit. Each Bank shall be liable to BNY for its Commitment Percentage of the unreimbursed amount of any draft drawn and honored under each Letter of Credit. Each Bank shall also be liable for an amount equal to the product of its Commitment Percentage and any amounts paid by the Company pursuant to paragraph 2.10 that are subsequently rescinded or avoided, or must otherwise be restored or returned. Such liabilities shall be unconditional and without regard to the occurrence of any Default or Event of Default or the compliance by the Company with any of its obligations under the Loan Documents. Each payment by a Bank of such Commitment Percentage of the amount of such Letter of Credit or of any amounts so rescinded, avoided, restored or returned shall be treated as the making by such Bank of an automatic Loan. (b) The Agent will promptly notify each Bank (which notice shall be promptly confirmed in writing) of the date and the amount of any draft presented under any Letter of Credit with respect to which full reimbursement of payment is not made by the Company as provided in paragraph 2.8, and forthwith upon receipt of such notice, such Bank (other than BNY) shall make available to the Agent for the account of BNY its Commitment Percentage of the amount of such unreimbursed draft (which shall constitute such Bank's automatic Loan) at the office of the Agent specified in - 24 - 29 paragraph 11.2, in lawful money of the United States and in immediately available funds, before 4:00 P.M., New York City time, on the day such notice is given by the Agent, if the relevant notice is given by the Agent at or prior to 1:00 P.M., New York City time, on such day, and before 12:00 noon, New York City time, on the next Business Day, if the relevant notice is given by the Agent after 1:00 P.M., New York City time, on such day. The Agent shall distribute the payments made by each Bank (other than BNY) pursuant to the immediately preceding sentence to BNY promptly upon receipt thereof in like funds as received. If a Bank does not make available to the Agent when due such Bank's Commitment Percentage of any unreimbursed payment made by BNY under a Letter of Credit (other than payments made by BNY by reason of its gross negligence or willful misconduct), such Bank shall be required to pay interest to the Agent for the account of BNY on such Bank's Commitment Percentage of such payment at a rate per annum equal to the Federal Funds Rate plus 1% from the date such Bank's payment is due until the date such payment is received by the Agent. The Agent shall distribute such interest payments to BNY upon receipt thereof in like funds as received. If the Agent receives a Bank's Commitment Percentage of any unreimbursed payment under a Letter of Credit after the date when due and the Agent receives interest on any late payment from such Bank in accordance with the provisions of the preceding sentence, such Bank's automatic Loan shall be deemed to have been made to the Company on the date BNY made payment under such Letter of Credit. (c) Whenever the Agent is reimbursed by the Company, for the account of BNY, for any payment under a Letter of Credit and such payment relates to an amount previously paid by a Bank in respect of its Commitment Percentage of the amount of such payment under such Letter of Credit, the Agent will pay over such payment to such Bank (i) before 4:00 P.M., New York City time on the day such payment from the Company is received, if such payment is received at or prior to 1:00 P.M., New York City time, on such day, or (ii) before 12:00 Noon, New York City time, on the next succeeding Business Day, if such payment from the Company is received after 1:00 P.M., New York City time, on such day. 2.10. Absolute Obligation with respect to Letter of Credit Payments. The Company's obligation to reimburse the Agent for the account of BNY in respect of a Letter of Credit for each payment under or in respect of such Letter of Credit shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Company may have or have had against the beneficiary of such Letter of Credit, the Agent, BNY or other issuer of such Letter of Credit, any Bank or any other Person, including, without limitation, any defense based on the failure of any drawing to conform to the terms of such Letter of Credit, any drawing document proving to be - 25 - 30 forged, fraudulent or invalid, or the legality, validity, regularity or enforceability of such Letter of Credit; provided, however, that the Company shall not be obligated to reimburse the Agent for the account of BNY or other issuer of a Letter of Credit for any wrongful payment under such Letter of Credit made as a result of BNY's or such other issuer's gross negligence or willful misconduct. 2.11. Increased Costs Based on Letters of Credit. If any law or regulation or any change in the interpretation or application thereof by any Governmental Body charged with the administration thereof or GAAP shall either (a) impose, modify or make applicable any reserve, special deposit, assessment or similar requirement against letters of credit issued by, or participated in, by any Bank, or (b) impose on the Agent or such Bank any other condition regarding the Letters of Credit (except for the imposition of, or changes in the rate of, tax on the overall net income of the Agent or such Bank) and the result of any event referred to in clause (a) or (b) above shall be to increase the cost to BNY (or any successor thereto as issuer of Letters of Credit) of issuing or maintaining the Letters of Credit or the cost to any Bank of making or maintaining any Loan pursuant to paragraph 2.8 or its obligations pursuant to paragraph 2.9, or the cost to the Agent of performing its functions hereunder with respect to the Letters of Credit, in any case by an amount which the Agent, BNY, or any Bank, as the case may be, deems material, then, upon demand by the Agent, BNY or such Bank, as the case may be, such demand to be made within 90 days after the officer of the Agent, BNY or such Bank, as the case may be, having primary responsibility for this Agreement has obtained knowledge of such increased cost, the Company shall immediately pay to the Agent, BNY or such Bank, as the case may be, from time to time as specified by the Agent, BNY or such Bank, additional amounts which shall be sufficient to compensate the Agent, BNY or such Bank, as the case may be, for such increased cost. A statement in reasonable detail as to such increased cost incurred by the Agent, BNY or such Bank, as the case may be, as a result of any event mentioned in clauses (a) or (b) above, submitted to the Company shall be conclusive, absent manifest error, as to the amount thereof. 2.12. Intentionally Omitted. 2.13. Taxes; Net Payments. (a) All payments under the Loan Documents shall be made free and clear of, and without reduction for or on account of, any Taxes required by law to be withheld from any amounts payable under the Loan Documents. (b) Each Bank which is not organized under the laws of the United States or any State thereof (and any holder (which is - 26 - 31 not organized under the laws of the United States or any State thereof) of a participation interest from such Bank) shall deliver to the Company such certificates, documents, or other evidence as the Company may reasonably request from time to time as are necessary to establish that such Bank (or such participant) is not subject to withholding under Section 1441 or 1442 of the Code or as may be necessary to establish, under any law imposing upon the Company, whether existing now or hereafter, an obligation to withhold any portion of the payments made by the Company under the Loan Documents, that payments to the Agent on behalf of such Bank (or such participant) are not subject to withholding. Notwithstanding any provision herein to the contrary, the Company shall have no obligation to pay to any Bank (or participant) any amount which the Company is liable to withhold due to the failure of such Bank (or such participant) to file any statement of exemption required by the Code. 2.14. Intentionally Omitted. 2.15. Intentionally Omitted. 2.16. Intentionally Omitted. 2.17. Intentionally Omitted. 2.18. Use of Proceeds. The proceeds of the Loans shall be used to reimburse the Banks in respect of any Letters of Credit upon which amounts have been drawn and for the general working capital needs of the Company. All Loans and the use to which the proceeds thereof are put shall conform with the provisions of paragraph 4.11. 2.19. Capital Adequacy. If (i) the introduction of, or any change or phasing in of any law or regulation or in the interpretation thereof by any United States or foreign Governmental Body charged with the administration thereof, (ii) compliance with any directive, guideline or request from any central bank or United States or foreign Governmental Body (whether or not having the force of law) promulgated or made after the date hereof, or (iii) compliance with the Risk-Based Capital Guidelines of the Federal Reserve System as set forth in 12 C.F.R. Parts 208 and 225, or of the Comptroller of the Currency, Department of the Treasury, as set forth in 12 C.F.R. Part 3, or other comparable or similar law, rule or regulation, affects or would affect the amount of capital required or expected to be maintained by a Bank (or any lending office of such Bank) or any corporation directly or indirectly owning or controlling such Bank, and such Bank shall have determined that such introduction, change or compliance has or would have the effect of reducing the rate of return on such Bank's or such corporation's capital or the - 27 - 32 asset value to such Bank or such corporation of any Loan made by, or Letter of Credit issued or participated in, such Bank as a consequence, directly or indirectly, of its obligations to make and maintain the funding of Loans and issue and participate in Letters of Credit hereunder to a level below that which such Bank could have achieved but for such introduction, change or compliance (after taking into account such Bank's or such corporation's policies regarding capital adequacy) by an amount deemed by such Bank to be material, then, upon demand by such Bank, the Company shall promptly pay to such Bank such additional amount or amounts as shall be sufficient to compensate such Bank for any such reduction. A certificate as to such amounts submitted to the Company and the Agent setting forth the determination of such amounts that will compensate such Bank for such reduction shall be presumed correct absent manifest error. 2.20. Transaction Record. The Agent has established a transaction record (the "Transaction Record") with respect to this Agreement. The Transaction Record shall set forth each Bank's Loans and the amount of its participation in each Letter of Credit, each payment by the Company of principal and interest on the Loans, repayment of amounts drawn under the Letters of Credit and certain additional information. The Transaction Record shall be presumptively correct absent manifest error as to the amount of each Bank's Loans hereunder, as to the Letter of Credit Exposure and as to the amount of principal and interest paid by the Company in respect of such Loans and as to the other information relating to the Loans, the Letters of Credit and amounts paid and payable by the Company hereunder and under the Notes set forth in the Transaction Record. 3. FEES; PAYMENTS 3.1. Commitment Fee. The Company agrees to pay to the Agent, for the pro-rata account of the Banks in accordance with each Bank's Commitment Percentage, a fee (the "Commitment Fee"), for the period from and including the Original Effective Date to and including the Maturity Date or earlier termination of such Bank's Commitment, equal to 3/8% per annum on the excess of (a) the Commitments over (b) the average daily sum of the outstanding principal balance of the Loans and the Letter of Credit Exposure. The Commitment Fee shall be payable quarterly in arrears on the last day of each March, June, September and December of each year, commencing on the first such day following the Original Effective Date, and ending on the date that the Commitments shall expire or otherwise terminate. The Commitment Fee shall be calculated on the basis of a 360 day year. - 28 - 33 3.2. Facility Fee. The Company agrees to pay to the Agent, for the pro-rata account of the Banks in accordance with each Bank's Commitment Percentage, a fee (the "Facility Fee") in an amount equal to 1/2% of the Commitments ($75,000), payable on the Restatement Effective Date. 3.3. Agent's Fee. The Company agrees to pay to the Agent, for its own account, a fee (the "Agent's Fee") for its services hereunder in the amount of $40,000 per year, payable quarterly in arrears on the last day of each March, June, September and December and continuing so long as this Agreement is in effect, any Loan remains outstanding and unpaid, or any other amount is owing under any of the Loan Documents to any Bank or the Agent. The Agent's Fee shall be prorated in the event that the Loans and all other amounts due under the Loan Documents are paid in full on any day other than the last day of March, June, September and December and the Commitments are terminated. 3.4 Letter of Credit Commissions. The Company agrees to pay the Agent, for the account of the Banks, commissions (the "Letter of Credit Commissions") with respect to each Letter of Credit for the period from and including the date of issuance thereof to, but not including the expiration date thereof, at a rate equal to 2% of the average daily face amount of each Letter of Credit. The Letter of Credit Commissions shall be payable quarterly in arrears and are non-refundable. In addition to the foregoing fees, the Company agrees to pay to BNY for its own account, (i) an additional fee equal to 1/8% of the face amount of each Letter of Credit and (ii) its standard fees and charges customarily charged to customers similar to the Company with respect to any Letter of Credit. 3.5 Pro Rata Treatment and Application of Payments. Each borrowing by the Company from the Banks and any reduction of the Commitments, shall be made pro rata according to the Commitment Percentage of each Bank. All payments (including prepayments) made by the Company to the Agent on account of principal of or interest on the Loans or the Letters of Credit shall be applied by the Agent pro rata according to the outstanding principal balance of each Bank's Loans. All payments by the Company shall be made without set-off or counterclaim and shall be made prior to 12:00 Noon (New York City time) on the date such payment is due, to the Agent for the account of the Banks at the Agent's office specified in paragraph 11.2, in each case in lawful money of the United States of America and in immediately available funds, and, as between the Company and the Banks, any payment by - 29 - 34 the Company to the Agent for the account of the Banks shall be deemed to be payment by the Company to the Banks. The failure of the Company to make any such payment by 12:00 Noon (New York City time) on such due date shall not constitute a Default or Event of Default hereunder, provided that such payment is made on such due date, but any such payment received by the Agent on any Business Day after 12:00 Noon (New York City time) shall be deemed to have been received on the immediately succeeding Business Day for the purpose of calculating any interest payable in respect thereof. The Agent agrees promptly to notify the Company if the Agent shall not have received any such payment by 12:00 Noon (New York City time) on the due date thereof, provided that the failure of the Agent to give such prompt notice shall in no way affect the Company's obligation to make any payment hereunder on the date such payment is due. The Agent shall distribute such payments to the Banks promptly upon receipt thereof in like funds as received. If any payment hereunder or on any Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 4. REPRESENTATIONS AND WARRANTIES In order to induce the Agent and the Banks to enter into this Agreement, to make the Loans and participate in Letters of Credit, and BNY to issue Letters of Credit, the Company hereby makes the following representations and warranties to the Agent and to each Bank: 4.1. Subsidiaries. The Company has only the Subsidiaries set forth on Schedule 4.1. The Subsidiaries designated as Significant Subsidiaries on Schedule 4.1 are the only Significant Subsidiaries of the Company. The shares of each such Subsidiary owned by the Company are duly authorized, validly issued, fully paid and nonassessable and are owned free and clear of all Liens, except Permitted Liens. 4.2. Corporate Existence and Power. The Company and each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has all requisite power and authority to own its Property and to carry on its business as now conducted, and is in good standing and authorized to do business in each jurisdiction in which the failure to be so authorized could reasonably be expected to have a Material Adverse Effect. - 30 - 35 4.3 Corporate Authority. The Company has full corporate power and authority to enter into, execute, deliver and carry out the terms of the Loan Documents to which it is a party, to make the borrowings contemplated thereby, to execute, deliver and carry out the terms of the Notes and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary corporate action and are in full compliance with its certificate of incorporation and by-laws. Each Guarantor has full power and authority to enter into, execute, deliver and carry out the terms of Loan Documents to which it is a party and to incur the obligations provided therein, all of which have been duly authorized by all proper and necessary corporate or other action and are in full compliance with its certificate of incorporation and by-laws or other governing documents. No consent or approval of, or exemption by, shareholders, any Governmental Body having jurisdiction over the Company or any Subsidiary or any other Person is required to authorize, or is required in connection with the execution, delivery and performance of, the Loan Documents or is required as a condition to the validity or enforceability of the Loan Documents which has not been obtained and which is not in full force and effect. 4.4. Binding Agreement. The Loan Documents (other than the Notes) constitute, and the Notes, when issued and delivered pursuant hereto for value received, will constitute, the valid and legally binding obligations of the Company and each Guarantor, in each case to the extent it is a party thereto, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally. 4.5. Litigation. Except as set forth on Schedule 4.5, there are no actions, suits, arbitration proceedings or claims (whether or not purportedly on behalf of the Company or any Subsidiary) pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary, or maintained by the Company or any Subsidiary, at law or in equity, before any Governmental Body having jurisdiction over the Company or any Subsidiary which, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 4.5, there are no judgments against the Company or any Subsidiary. There are no proceedings pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which call into question the validity or enforceability of any of the Loan Documents. - 31 - 36 4.6. No Conflicting Agreements. Neither the Company nor any Subsidiary is in default under any mortgage, indenture, contract, agreement, judgment, decree or order to which it is a party or by which it or any of its Property is bound, including, without limitation, the ESOP Loan Documents, which defaults, taken as a whole, could reasonably be expected to have a Material Adverse Effect. The execution, delivery or performance of the terms of the Loan Documents and the transactions contemplated thereby will not constitute a default under, conflict with, require any consent under (other than consents which have been obtained), or result in the creation or imposition of, or obligation to create, any Lien upon the Property of the Company or any Subsidiary pursuant to the terms of any such mortgage, indenture, contract, agreement, judgment, decree or order, which defaults, conflicts and consents, if not obtained, could reasonably be expected to have a Material Adverse Effect. 4.7 Taxes. The Company and each Subsidiary has filed or caused to be filed all tax returns required to be filed and has paid, or has made adequate provision for the payment of, all Taxes shown to be due and payable on said returns or in any assessments made against it (other than those being contested pursuant to paragraph 7.4) which, if unpaid, could reasonably be expected to have a Material Adverse Effect and no tax Liens have been filed. The charges, accruals and reserves on the books of the Company and each Subsidiary with respect to all Taxes are adequate for the payment of all such Taxes, and the Company knows of no unpaid assessment which is due and payable against it or any Subsidiary or any claims being asserted which could reasonably be expected to have a Material Adverse Effect, except such thereof as are being contested in good faith and by appropriate proceedings diligently conducted, and for which adequate reserves have been set aside in accordance with GAAP. 4.8. Compliance with Applicable Laws. Neither the Company nor any Subsidiary is in default with respect to any judgment, order, writ, injunction, decree or decision obtained or issued by any Governmental Body against or otherwise applicable to the Company or any Subsidiary, which default could reasonably be expected to have a Material Adverse Effect. The Company and each Subsidiary is complying in all material respects with all statutes and regulations of all Governmental Bodies applicable to the Company or such Subsidiary, the violation of which could reasonably be expected to have a Material Adverse Effect, including, without limitation, ERISA, the Federal Acquisition Regulations and any applicable Environmental Laws. - 32 - 37 4.9. Governmental Regulations. Neither the Company nor any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, and neither the Company nor any Subsidiary is subject to any statute or regulation which prohibits or restricts the incurrence of Indebtedness under the Loan Documents, including, without limitation, statutes or regulations relative to common or contract carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services. 4.10. Property. The Company and each Subsidiary has good and marketable title to, or a valid license or leasehold interest in, all Property which is material to the Company or such Subsidiary, subject to no Liens, except Permitted Liens, and, to the best of the Company's knowledge, no Property material to the Company or any Subsidiary is being condemned, expropriated or otherwise taken by any Governmental Body having jurisdiction over the Company, any Subsidiary or such Property, with or without compensation therefor, and, to the best of the Company's knowledge, no such condemnation, expropriation or taking has been proposed. 4.11. Federal Reserve Regulations; Use of Loan Proceeds. Neither the Company nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans will be used, directly or indirectly, for a purpose which violates the provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System, as amended. No part of the proceeds of the Loans will be used, directly or indirectly, to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. 4.12. Plans. The Company and its Subsidiaries have only the Plans listed on Schedule 4.12. Each Single Employer Plan and, to the best knowledge of the Company, each Multiemployer Plan, is in compliance in all material respects with the applicable provisions of ERISA and the Code, and the Company and each Subsidiary has filed all reports required to be filed by it under ERISA and the Code with respect to each such Plan, which filing, if not timely made, could reasonably be expected to have a Material Adverse Effect. The Company and each Subsidiary has met all material requirements imposed by ERISA and the Code with respect to the funding of all Plans, including Multiemployer Plans. Since the effective date of ERISA, there have not been, nor are there now existing, any events - 33 - 38 or conditions which would permit any Single Employer Plan or, to the best knowledge of the Company, Multiemployer Plan to be terminated under circumstances which would cause the Lien provided under Section 4068 of ERISA to attach to the Property of the Company or any Subsidiary. Within the last 5 years, no Reportable Event which may constitute grounds for the termination of any Single Employer Plan or, to the best knowledge of the Company, Multiemployer Plan under Title IV of ERISA has occurred and no Single Employer Plan or Multiemployer Plan has been terminated in whole or in part. 4.13. Financial Statements. The Company has heretofore delivered to the Agent and each Bank copies of the audited Consolidated Balance Sheets of the Company and its Subsidiaries as of December 31, 1991 and December 31, 1992, and the related Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows for the years then ended as filed with the Securities and Exchange Commission on Form 10-K and the unaudited Consolidated Balance Sheets of the Company and its Subsidiaries for the fiscal quarter of the Company ended September 25, 1993, together with the related Statements of Earnings and Cash Flows for the three month period then ended, as filed with the Securities and Exchange Commission on Form 10-Q (collectively, with the related notes and schedules, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of the operations of the Company and its Subsidiaries as of the dates and for the periods indicated therein and have been prepared in accordance with GAAP. Except as reflected in the Financial Statements as of the dates and for the periods indicated therein or in the footnotes thereto, neither the Company nor any Subsidiary has any obligation or liability of any kind (whether fixed, accrued, contingent, unmatured or otherwise) which, in accordance with GAAP, should have been shown on the Financial Statements and was not. Since December 31, 1992, the Company and each Subsidiary has conducted its business only in the ordinary course and there has been no Material Adverse Change. 4.14. Environmental Matters. Except as set forth on Schedule 4.14, neither the Company nor any Subsidiary (i) has received written notice of, or been threatened with, any claim, demand, action, event, condition, report or investigation indicating or concerning any threatened or actual liability which individually or in the aggregate could reasonably be expected to result in any liability of the Company or any Subsidiary in an aggregate amount (including the amount of any liabilities described in clauses (ii), (iii) and (iv) of this paragraph) in excess of $1,000,000 arising in connection with: (a) any non-compliance with or violation of the requirements of any applicable Environmental Laws or (b) the release or threatened release of any Hazardous Substance into the environment, (ii) to - 34 - 39 the actual knowledge of the corporate officers of the Company, has any threatened or actual liability in connection with the release or threatened release of any Hazardous Substance into the environment which individually or in the aggregate could reasonably be expected to result in any liability of the Company or any Subsidiary in an aggregate amount (including the amount of any liabilities described in clauses (i), (iii) and (iv) of this paragraph) in excess of $1,000,000, (iii) has received written notice of any federal or state investigation evaluating whether any remedial action is needed to respond to a release or threatened release of any Hazardous Waste or Hazardous Substance into the environment for which the Company or any Subsidiary is or may be liable, which individually or in the aggregate could reasonably be expected to result in any liability of the Company or any Subsidiary in an aggregate amount (including the amount of any liabilities described in clauses (i), (ii) and (iv) of this paragraph) in excess of $1,000,000, or (iv) has received notice that the Company or any Subsidiary is or may be liable to any Person under CERCLA or any analogous state law in an aggregate amount (including the amount of any liabilities described in clauses (i), (ii) and (iii) of this paragraph) in excess of $1,000,000. 4.15. Franchises, Intellectual Property, Etc. The Company and each Subsidiary possesses or has the right to use all franchises, Intellectual Property, licenses and other rights as are material to the conduct of its business, and with respect to which each of the Company and each such Subsidiary is in compliance, with no known conflict with the valid rights of others which could reasonably be expected to have a Material Adverse Effect. No event has occurred which permits or, to the best knowledge of the Company, after notice or lapse of time or any other condition, would permit, the revocation or termination of any such franchise, Intellectual Property, license or other right which could reasonably be expected to have a Material Adverse Effect. 4.16. Labor Relations. There are no material controversies pending between the Company and any of its employees, which could reasonably be expected to have a Material Adverse Effect. 4.17. Status as Senior Indebtedness. The Indebtedness of the Company under the Loan Documents constitutes Senior Indebtedness within the meaning of the Indenture and is either senior to, or pari passu with, all other Indebtedness of the Company. - 35 - 40 4.18. Brazilian Letter of Credit. The Brazilian Letter of Credit is the only letter of credit outstanding on the Restatement Effective Date which was not theretofore issued under Section 2.8. 5. CONDITIONS TO CLOSING In addition to the conditions precedent set forth in paragraph 6, the obligation of the Agent and the Banks to execute and deliver this Agreement shall be subject to the fulfillment of the following conditions precedent: 5.1. Evidence of Corporate Action. The Agent shall have received a certificate, dated the Restatement Effective Date, of the Secretary or an Assistant Secretary of the Company (i) attaching a true and complete copy of the resolutions of the Executive Committee of its Board of Directors (in form and substance satisfactory to the Agent and Special Counsel) taken by it to authorize this Agreement, the Notes and the ESOP Guaranty Amendment and the respective transactions contemplated thereby, (ii) certifying that there has been no change to its certificate of incorporation and by-laws since June 10, 1992 or, if so, setting forth the same, (iii) setting forth the incumbency of its officer or officers who may sign the Loan Documents, including therein a signature specimen of such officer or officers, and (iv) attaching a certificate of good standing of the Secretary of State of the State of New York and of each other state in which it is qualified to do business, together with such other documents as the Agent or Special Counsel shall reasonably require; and 5.2. Notes. The Agent shall have received and be in possession of the Notes duly executed by an Authorized Signatory of the Company which Notes shall be delivered by the Agent to the Banks. 5.3. ESOP Guaranty Amendment. The Agent and each Bank shall have received a fully executed copy of the ESOP Guaranty Amendment, duly executed by the parties thereto, and the ESOP Guaranty Amendment shall be in form and substance satisfactory to the Agent. 5.4. Compliance. The Company is in compliance with all of the terms, covenants and conditions of the Loan Documents, there exists no Default or Event of Default and no Material Adverse Change shall - 36 - 41 have occurred since December 31, 1992, and the Agent shall have received a certificate of an Authorized Signatory of the Company to such effect. 5.5. Intentionally Omitted. 5.6. Facility Fee. The Facility Fee shall have been paid. 5.7. Fees of Special Counsel. The fees and expenses of Special Counsel shall have been paid. 5.8. Opinion of Counsel to the Company. The Agent shall have received an opinion of Marvin D. Genzer, Vice President, General Counsel and Assistant Secretary of the Company and the Guarantors, addressed to the Agent and the Banks, dated the Restatement Effective Date, substantially in the form of Exhibit G. 5.9. Opinion of Special Counsel. The Agent shall have received an opinion of Special Counsel, addressed to the Agent and the Banks, dated the Restatement Effective Date, substantially in the form of Exhibit H. 5.10. Collateral. The Agent shall have received collateral in cash or cash equivalents acceptable to the Agent pursuant to paragraph 2.8(d) in respect of the L/C 27902 in the sum of $84,140. 5.11. Other Documents. The Agent shall have received such other documents and assurances as the Agent or Special Counsel shall reasonably require. 6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT. The obligation of each Bank to make any Loan or BNY to issue a Letter of Credit on a Borrowing Date is subject to the satisfaction of the following conditions precedent as of the date of such Loan: - 37 - 42 6.1. Compliance. On each Borrowing Date and after giving effect to the Loans to be made or Letter of Credit to be issued thereon, (a) the Company shall be in compliance with all of the terms, covenants and conditions of the Loan Documents, (b) there shall exist no Default or Event of Default, (c) the representations and warranties contained in the Loan Documents and in any certificate, report, or other information furnished in connection with the transactions contemplated hereby, shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on such Borrowing Date, except such exceptions to such representations and warranties as are indicated in each Borrowing Request which shall be satisfactory to the Agent and the Required Banks in their sole discretion and (d) after giving effect to the transactions contemplated by the Loan Documents, there shall have occurred no Material Adverse Change since December 31, 1992. Each borrowing by the Company shall constitute a certification by the Company as of the date of such borrowing that each of the foregoing matters is true and correct in all respects. 6.2. Loan Closings. All documents required by the provisions of this Agreement to be executed or delivered to the Agent on or before the applicable Borrowing Date shall have been executed and shall have been delivered at the office of the Agent set forth in paragraph 11.2 on or before such Borrowing Date. 6.3. Borrowing Request. The Agent shall have received a Borrowing Request duly executed by an Authorized Signatory of the Company. 7. AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as this Agreement is in effect, any Loan or reimbursement obligation (contingent or otherwise) in respect of any Letter of Credit remains outstanding and unpaid, or any other amount is owing under any Loan Document, the Company shall: 7.1. Financial Statements. Maintain, and cause each Subsidiary to maintain, a standard system of accounting in accordance with GAAP, and furnish or cause to be furnished to the Agent and each Bank: (a) As soon as available, but in any event within 90 days after the end of each fiscal year of the Company, a copy of - 38 - 43 (i) the Consolidated and Consolidating Balance Sheets of the Company and its Subsidiaries as at the end of such fiscal year and (ii) the Consolidated and Consolidating Statements of Earnings, Shareholders' Equity and Cash Flows of the Company and its Subsidiaries as of and through the end of such fiscal year, setting forth in each case in comparative form the figures for the preceding fiscal year. Such Consolidated Balance Sheets and Statements of Income, Retained Earnings and Cash Flows shall be certified by the Accountants, which certification shall (1) state that the examination by such Accountants in connection with such Consolidated financial statements has been made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances and (2) include the opinion of such Accountants that such Consolidated financial statements have been prepared in accordance with GAAP in all material respects in a manner consistent with prior fiscal periods, except as otherwise specified in such opinion. Notwithstanding any of the foregoing, the Company may satisfy its obligation to furnish Consolidated Balance Sheets and Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows of the Company by furnishing to the Agent and each Bank a copy of the Company's annual report on Form 10-K in respect of such fiscal year together with the financial statements required to be attached thereto, provided the Company is required to file such annual report on Form 10-K with the Securities and Exchange Commission and such filing is actually made. (b) As soon as available, but in no event later than 45 days after the end of each of the first three quarterly accounting periods in each fiscal year of the Company a copy of (i) the Consolidated and Consolidating Balance Sheets of the Company as at the end of each such quarterly period and (ii) the Consolidated and Consolidating Statements of Earnings and Cash Flows for such period and for the elapsed portion of the fiscal year through such date and the Consolidated Statements of Cash Flows for the elapsed portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the corresponding periods of the preceding fiscal year, subject to year end audit adjustments, certified by a senior financial officer or senior accounting officer of the Company (or such other officer acceptable to the Agent) as being complete and correct in all material respects and as presenting fairly the financial condition and results of operations and cash flows of the Company and its Subsidiaries on a Consolidated basis. Notwithstanding any of the foregoing, the Company may satisfy its obligation to furnish quarterly Consolidated Balance Sheets and Consolidated Statements of Earnings and Cash Flows of the Company by furnishing to the Agent and each Bank a copy of the Company's quarterly report on Form 10-Q in respect of such fiscal quarter together with the financial statements required to be attached thereto, provided the Company is - 39 - 44 required to file such quarterly report on Form 10-Q with the Securities and Exchange Commission and such filing is actually made. (c) The financial statements required to be delivered pursuant to paragraphs 7.1(a) and 7.1(b) shall be accompanied by a certificate of a senior financial officer or senior accounting officer of the Company (or such other officer as shall be acceptable to the Agent), in detail reasonably satisfactory to the Agent (i) stating that there has occurred no condition or event which would constitute a Default or Event of Default, and, if so, specifying in such certificate all such violations, conditions and events, and the nature and status thereof, (ii) containing computations showing compliance with the provisions of paragraphs 8.1, 8.3(ii), 8.4, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14 and 8.15 and (iii) setting forth the Receivables included in the Borrowing Base that are due from account debtors not located in the United States and which either (x) are not due from a foreign Governmental Body or (y) are not backed by a commercial letter of credit issued and/or confirmed by a financial institution reasonably satisfactory to the Agent and the Required Banks. (d) Within (i) 45 days after the end of each fiscal month of the Company (except 60 days after the end of the last fiscal month of the fiscal year), a Borrowing Base Certificate prepared as of the close of such month, and (ii) 45 days after the end of each fiscal quarter of the Company (except 90 days after the end of the last fiscal quarter of the fiscal year) a Compliance Certificate, prepared as of the close of such fiscal quarter, in each case certified by the Chief Financial Officer of the Company (or such other officer as shall be acceptable to the Agent). 7.2 Certificates; Other Information. Furnish to the Agent and each Bank: (a) Prompt written notice if: (i) any Indebtedness of the Company or any Subsidiary, individually or in the aggregate in excess of $25,000, is declared or shall become due and payable prior to its stated maturity, or called and not paid when due, (ii) a default shall have occurred under any note (other than the Notes) which could result individually or in the aggregate in a liability in excess of $25,000, or the holder of any such note, or other evidence of Indebtedness, certificate or security evidencing any such Indebtedness or any obligee with respect to any other Indebtedness of the Company or any Subsidiary has the right to declare any such Indebtedness due and payable prior to its stated maturity as a result of such default, or (iii) there shall occur and be continuing a Default or an Event of Default; - 40 - 45 (b) Prompt written notice of: (i) any citation, summons, subpoena, order to show cause or other order naming the Company or any Subsidiary a party to any proceeding before any Governmental Body (including, without limitation, proceedings relating to any alleged non-compliance with or alleged violation of the requirements of any applicable Environmental Law) which could reasonably be expected to have a Material Adverse Effect or which calls into question the validity or enforceability of any of the Loan Documents, and include with such notice a copy of such citation, summons, subpoena, order to show cause or other order, (ii) any lapse or other termination of any material license, permit, franchise or other authorization issued to the Company by any Governmental Body, (iii) any refusal by any Governmental Body to renew or extend any such material license, permit, franchise or other authorization and (iv) any cancellation or termination of any material contract or any dispute between the Company and any Person, which lapse, termination, refusal, cancellation, termination or dispute could reasonably be expected to have a Material Adverse Effect; (c) Prompt written notice in the event that (i) the Company or any Subsidiary shall receive notice from the Internal Revenue Service or the Department of Labor that the Company shall have failed to meet the minimum funding requirements of Section 412 of the Code with respect to a Single Employer Plan or a Multiemployer Plan, if applicable, and include therewith a copy of such notice, or (ii) the Company gives or is required to give notice to the PBGC of any Reportable Event with respect to a Plan, or knows that the plan administrator of a Plan or a Multiemployer Plan has given or is required to give notice of any such Reportable Event; (d) With respect to a Single Employer Plan, copies of any request for a waiver of the funding standards or any extension of the amortization periods required by Sections 303 and 304 of ERISA or Section 412 of the Code promptly after any such request is submitted to the Department of Labor or the Internal Revenue Service, as the case may be; (e) Any other information regarding the condition (financial or otherwise), operations, business, prospects or Property of the Company or any Subsidiary which may reasonably be requested by the Agent or any Bank. 7.3. Legal Existence. Maintain, and cause each Subsidiary to maintain, its corporate or other existence in good standing in the jurisdiction of its incorporation or formation and in each other jurisdiction in which the failure so to do could reasonably be expected to have a Material Adverse Effect. - 41 - 46 7.4. Taxes. Pay and discharge when due, and cause each Subsidiary so to do, all Taxes upon or with respect to the Company or such Subsidiary and upon the income, profits and Property of the Company and its Subsidiaries, which if unpaid, could reasonably be expected to have a Material Adverse Effect or become a Lien on the Property of the Company or such Subsidiary (other than a Permitted Lien) individually or in the aggregate in excess of $25,000, unless and to the extent that such Taxes, shall be contested in good faith and by appropriate proceedings diligently conducted by the Company or such Subsidiary and provided that any such contested Tax shall not constitute, or create, a Lien on any Property of the Company or such Subsidiary other than a Permitted Lien individually or in the aggregate in excess of $25,000, and further provided that such reserve or other appropriate provision, if any, as shall be required by the Accountants in accordance with GAAP shall have been made therefor. 7.5. Insurance. Maintain, and cause each Subsidiary to maintain, insurance with financially sound insurance carriers on such of its Property, against at least such risks, and in at least such amounts, as are usually insured against by similar businesses and which, in the case of property insurance, shall be in amounts sufficient to prevent the Company from becoming a co-insurer, including, without limitation, public liability (bodily injury and property damage), fidelity, and workers' compensation with deductibles not exceeding $25,000 per occurrence, and file with the Agent within 10 days after request therefor a detailed list of such insurance then in effect, stating the names of the carriers thereof, the policy numbers, the insureds thereunder, the amounts of insurance, dates of expiration thereof, and the Property and risks covered thereby, together with a certificate of the Chief Financial Officer (or such other officer as shall be acceptable to the Agent) of the Company certifying that in the opinion of such officer such insurance is adequate in nature and amount, complies with the obligations of the Company under this paragraph 7.5, and is in full force and effect. 7.6. Payment of Indebtedness and Performance of Obligations. Pay and discharge, and cause each Subsidiary to pay and discharge, when due all lawful Indebtedness, obligations (including, without limitation, royalties and fees due third parties) and claims for labor, materials and supplies or otherwise which, if unpaid, (i) could reasonably be expected to have a Material Adverse Effect, or (ii) would become a Lien upon Property of the Company or such Subsidiary other than a Permitted Lien, unless and to the extent that the validity of such Indebtedness, obligation - 42 - 47 or claim shall be contested in good faith and by appropriate proceedings diligently conducted by the Company or such Subsidiary, and further provided that such reserve or other appropriate provision, if any, as shall be required by the Accountants in accordance with GAAP shall have been made therefor. 7.7. Condition of Property. At all times and to the extent that it is within the control of the Company or a Subsidiary, maintain, protect and keep in good repair, working order and condition (ordinary wear and tear excepted), and cause each Subsidiary so to do, all Property material to the operation of the Company's, or such Subsidiary's, business. 7.8. Observance of Legal Requirements. Observe and comply, and cause each Subsidiary to observe and comply, in all material respects with all laws, ordinances, orders, judgments, rules, regulations, certifications, franchises, permits, licenses, directions and requirements of all Governmental Bodies, which now or at any time hereafter may become applicable to the Company or such Subsidiary, the violation of which could reasonably be expected to have a Material Adverse Effect, except such thereof as shall be contested in good faith and by appropriate proceedings diligently conducted by the Company or such Subsidiary, provided that such reserve or other appropriate provision, if any, as shall be required by the Accountants in accordance with GAAP shall have been made therefor. 7.9. Inspection of Property; Books and Records; Discussions. Keep, and cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of the Agent and each Bank to visit the offices of the Company and its Subsidiaries during normal business hours, to inspect any of its Property and examine and, at the Company's expense, make copies or abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, prospects, Property and financial condition of the Company and its Subsidiaries with the officers thereof and with the Accountants. 7.10. Environmental Matters. Notify the Agent and each Bank in writing within 5 Business Days, and cause each Subsidiary so to do, in the event the Company or such Subsidiary obtains, gives or receives notice of any new Release or threat of Release of any Hazardous Substances - 43 - 48 or Hazardous Wastes at any Real Property (any such event being hereinafter referred to as a "Hazardous Discharge") or receives any notice of violation, request for information or notification that the Company or such Subsidiary is potentially responsible for investigation or cleanup of environmental conditions at any Real Property, demand letter, complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting any Real Property or the Company's or such Subsidiary's interest therein (each of the foregoing, an "Environmental Complaint") from any Person, including any state agency responsible in whole or in part for environmental matters in the state in which such Real Property is located or the United States Environmental Protection Agency (each such Person, an "Authority") and which the Company has not previously disclosed to the Agent. The receipt of such information shall not create any obligation upon the Agent or any Bank with respect thereto other than as provided in paragraph 11.18. 7.11. Licenses, Etc. Maintain and cause each Subsidiary to maintain, in full force and effect, all licenses, copyrights, patents and other Intellectual Property, including all licenses, permits, applications, reports, authorizations and other rights as are necessary for the conduct of its business, the loss of which would have a Material Adverse Effect. 7.12. Significant Subsidiaries. Furnish to the Agent and each Bank prompt written notice if any Person which is not a Guarantor becomes a Significant Subsidiary and thereupon cause such Subsidiary promptly to execute and deliver to the Agent, a Guaranty and such other documentation, including, without limitation, resolutions, certificates and opinions of counsel, as the Agent shall reasonably request. 7.13. Audit Report. Furnish (at the Company's reasonable expense) to the Agent and each Bank within fourteen days after the Restatement Effective Date an audit report with respect to the Receivables of the Company and its Subsidiaries prepared by a Person selected by or satisfactory to the Agent. 8. NEGATIVE COVENANTS The Company hereby agrees that, so long as this Agreement is in effect, any Loan or reimbursement obligation (contingent or otherwise) in respect of any Letter of Credit remains outstanding and unpaid, or any other amount is owing under any Loan Document, the Company shall not, directly or indirectly: - 44 - 49 8.1. Borrowing. Create, incur, assume or suffer to exist any liability for Indebtedness, or permit any Subsidiary so to do, except (i) Indebtedness under the Loan Documents and in respect of the Letters of Credit, (ii) Indebtedness of the Company and its Subsidiaries existing on the Restatement Effective Date as set forth on Schedule 8.1, (iii) Indebtedness of EDO Canada under the EDO Canada Line not in excess of $1,000,000 at any one time outstanding, (iv) other Indebtedness of the Company and its Subsidiaries not exceeding the aggregate sum of $3,000,000 less the amount described in clause (v) below, (v) purchase money indebtedness incurred in connection with the purchase, after the date hereof, of any Property, in an aggregate principal amount not to exceed $500,000 at any one time outstanding, (v) the Subordinated Debt, (vi) Indebtedness in respect of the Letters of Credit and under the ESOP Guaranty and (vii) Indebtedness of a Subsidiary to another Subsidiary in respect of advances for working capital purposes in the ordinary course of business. 8.2. Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, or covenant or agree with any Person not to grant a Lien in favor of any other Person (other than in favor of the Agent and the Banks hereunder), or permit any Subsidiary so to do, except (i) Liens for taxes, assessments or similar charges incurred in the ordinary course of business which are not delinquent or which are being contested in accordance with paragraph 7.4, provided that enforcement of such Liens is stayed pending such contest, (ii) Liens in connection with workers' compensation, unemployment insurance or other social security obligations (but not ERISA), (iii) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of business, (iv) zoning ordinances, easements, subleases, rights-of-way, minor defects, irregularities, and other similar restrictions affecting real property which do not materially adversely affect the value of such real property or the financial condition of the Company or such Subsidiary or materially impair its use for the operation of the business of the Company or such Subsidiary, (v) statutory Liens arising by operation of law such as mechanics', materialmen's, carriers', warehousemen's, landlord's and other similar liens incurred in the ordinary course of business which are not delinquent or which are being contested in accordance with paragraph 7.6, provided that enforcement of such Liens is stayed pending such contest, (vi) Liens arising out of judgments or decrees (other than any judgment or decree issued with respect to the EPA Litigation) not in excess of $1,000,000 in the aggregate which have not been in existence - 45 - 50 for more than 60 days or which are being contested in accordance with paragraph 7.6, provided that enforcement of such Liens is stayed during such contest, (vii) purchase money Liens in Property of the Company acquired after the date hereof to secure Indebtedness of the Company, to the extent permitted by paragraph 8.1(v), incurred in connection with the acquisition of such Property, provided that the Lien thereof is limited to such Property so acquired, (viii) Liens to secure Indebtedness permitted by paragraph 8.1(iv) or (ix) Liens on Property of the Company and its Subsidiaries existing on the Restatement Effective Date as set forth on Schedule 8.2 and renewals thereof. 8.3. Merger and Acquisition or Sale of Property. Consolidate with, be acquired by, or merge into or with any Person, or sell, lease or otherwise dispose of all or substantially all of its Property or its Stock, or acquire all or substantially all of the Stock or Property of any Person, or permit any Subsidiary to do any of the foregoing without the prior written consent of the Agent and the Banks. 8.4. Dividends; Purchase of Stock and Subordinated Debt. Declare any dividends (other than dividends payable solely in common Stock) on, or make any payment on account of, or set apart Property for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Stock or other similar equity interests or warrants or other rights issued in respect thereof, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash, Property or otherwise, or permit any Subsidiary so to do, except (i) a wholly-owned Subsidiary may declare and pay dividends to the Company, (ii) the Company may declare and pay cash dividends on its ESOP Preferred Stock in an amount not in excess of $17.10 per share in any fiscal year of the Company provided that the Company has sufficient cash and cash equivalents on hand on the date of payment to make such payment, and (iii) provided that no Default or Event of Default has occurred and is then continuing or would occur giving effect to such declaration or payment, (a) the Company may declare and pay cash dividends for a fiscal year of the Company on its common Stock in an aggregate amount not in excess of the Dividend Limitation for such fiscal year and (b) the Company may repurchase shares of ESOP Preferred Stock to the extent required for the normal operation of the ESOP. 8.5. Investments, Loans, Etc. At any time, purchase or otherwise acquire, hold or invest in the Stock of, or any other interest in, any Person (including, without limitation, any investment in a partnership with respect to which the Company is a general partner), or make any - 46 - 51 loan or advance to, or enter into any arrangement for the purpose of providing funds or credit to, or make any other investment, whether by way of capital contribution or otherwise, in or with any Subsidiary or any other Person (all of which are sometimes referred to herein as "Investments"), or permit any Subsidiary so to do, except: (a) Investments in short-term certificates of deposit or overnight bank deposits issued by any Bank, or any other commercial bank, trust company or banking association incorporated under the laws of the United States or any State having undivided capital surplus and retained earnings exceeding $250,000,000; and (b) Investments in short-term direct obligations of the United States of America or agencies thereof whose obligations are guaranteed by the United States of America; (c) Investments in commercial paper rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Services, Inc.; (d) Investments made for working capital purposes in the ordinary course of business in wholly-owned Subsidiaries, provided that such Investments are made in the form of demand loans; and (e) (i) Investments in Subsidiaries (other than wholly-owned Subsidiaries) and (ii) Investments in any other Person constituting a minority interest in such Person, provided that such Investment shall not exceed (x) $2,000,000 in the case of each such Subsidiary or other Person and (y) $4,000,000 in the aggregate with respect to all such Subsidiaries and other Persons. Nothing herein shall be deemed to permit any Investment by the Company in any partnership in which the Company is a general partner. 8.6. Business Changes. Except to the extent expressly permitted by paragraph 8.3, materially change the nature of the business of the Company and its Subsidiaries taken as a whole as conducted on the date hereof, or alter or modify its corporate name or capital structure or alter its accounting principles, treatment or recording practices, except as required by GAAP, or permit any Subsidiary so to do. 8.7. Sale of Property. Sell, exchange, lease, transfer or otherwise dispose of any Property to any Person, or permit any Subsidiary so to do, except (a) sales of inventory in the ordinary course of business, - 47 - 52 (b) sales, transfers or dispositions of equipment in the ordinary course of business if effected for the purpose of replacing such equipment with equipment to be owned by the Company or such Subsidiary, (c) the sale of the Salt Lake City, Utah property and [(d) sales or other dispositions of other Property by the Company or any Subsidiary resulting in aggregate Net Sales Proceeds in excess of $1,000,000 for all such sales, as to which the following conditions have been satisfied: (i) no Default or Event of Default shall exist immediately before or after giving effect to such sale, (ii) the consideration received or to be received by the Company or any Subsidiary shall be payable in cash on or before the closing of such sale and shall not be less than the fair market value of the Property so sold as reasonably determined by the Board of Directors of the Company or such Subsidiary, (iii) 100% of the Net Sales Proceeds shall be applied to the prepayment of Loans and the reduction of the Borrowing Base pursuant to Section 2.5(c), and (iv) within 10 Business Days prior to each such sale, the Agent and the Banks shall have received a certificate in respect of each such sale signed by an Authorized Signatory of the Company identifying the Property to be sold and stating (x) that immediately before or after giving effect to such sale, no Default or Event of Default shall exist, (y) that the consideration received or to be received by the Company or such Subsidiary for the Property so sold has been determined by the Board of Directors thereof to be not less than the fair market value of such Property and (z) the total consideration to be paid in respect of such sale. 8.8. Subsidiaries. Except as otherwise permitted by paragraph 8.5(e), create or acquire any Significant Subsidiary, or permit any Subsidiary so to do, unless simultaneously therewith, such Significant Subsidiary shall become a Guarantor under a Guaranty and shall deliver such other documentation, including, without limitation, resolutions, certificates and opinions of counsel, as the Agent shall reasonably request. 8.9. Quick Ratio. Permit at any time the Quick Ratio to be less than 1.50:1.0. - 48 - 53 8.10. Current Ratio. Permit at any time the Current Ratio to be less than 2.0:1.0. 8.11. Leverage Ratio. Permit at any time the Leverage Ratio to exceed 1.0:1.0. 8.12. Interest Coverage Ratio. Permit (i) as of the end of the fiscal year of the Company ending December 31, 1994, the Interest Coverage Ratio to be less than 1.375:1.00 and (ii) as of the end of the fiscal quarters set forth below, the Interest Coverage Ratio to be less than the ratios set forth below: Fiscal Quarter Ending Ratio September 25, 1993 Not tested December 31, 1993 Not tested March 26, 1994 0.25:1.00 June 25, 1994 1.25:1.00 September 24, 1994 1.75:1.00 December 31, 1994 and each fiscal quarter thereafter 2.25:1.00. 8.13. Minimum Consolidated Capital Funds. Permit at any time (i) prior to December 31, 1994, Consolidated Capital Funds to be less than $62,300,000 and (ii) on and after December 31, 1994, Consolidated Capital Funds to be less than $63,300,000. 8.14. Minimum Consolidated Net Worth. Permit at any time (i) prior to December 31, 1994, Consolidated Net Worth to be less than $33,000,000 and (ii) on and after December 31, 1994, Consolidated Net Worth to be less than $34,000,000. 8.15. Capital Expenditures. During any fiscal year, make any capital expenditures or fixed asset acquisitions, or, without duplication, incur any obligation so to do or permit any Subsidiary so to do, in an aggregate Consolidated amount exceeding $4,000,000. Capital expenditures and fixed asset acquisitions shall be calculated on a non-cumulative basis so that amounts not expended in any fiscal year may not be carried over and expended in subsequent fiscal years. - 49 - 54 8.16. Compliance with ERISA. Adopt any Plan other than those listed on Schedule 4.12 or engage in any "prohibited transaction," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, with respect to any Plan which could reasonably be expected to result in any fine or tax in excess of $25,000, or incur any "accumulated funding deficiency," as such term is defined in Section 412 of the Code or Section 302 of ERISA in excess of $25,000, or terminate any Plan which could reasonably be expected to result in any liability to the PBGC, or permit the occurrence of any Reportable Event or any other event or condition which could reasonably be expected to result in a termination by the PBGC of any Plan, or withdraw or effect a partial withdrawal from any Multiemployer Plan, if any such withdrawal would result in any withdrawal liability in excess of $25,000, or permit any Subsidiary so to do. 8.17. Certificate of Incorporation and By-laws. Amend or otherwise modify its certificate of incorporation or by-laws, or permit any Subsidiary so to do, in any way which would adversely affect the interests of the Banks under any of the Loan Documents or the obligations of the Company and the Guarantors under the Loan Documents. 8.18. Prepayments of Indebtedness. Prepay, purchase or redeem, or obligate itself to prepay, purchase or redeem, in whole or in part, any Indebtedness (except the Notes), or permit any Subsidiary so to do. 8.19. Sale and Leaseback. Enter into any arrangement with any Person (the "Transferee Person"), or permit any Subsidiary so to do, providing for the leasing by the Company (or such Subsidiary) of Property which has been or is to be sold or transferred by the Company (or such Subsidiary) to such Transferee Person or to any other Person to whom funds have been or are to be advanced by such transferee Person on the security of such Property or rental obligations of the Company (or such Subsidiary). 8.20. Amendments, Etc. of Certain Agreements. Enter into or agree to any amendment, modification or waiver of any term or condition of, or, to the extent that it has the power or right to control the ESOP or the ESOP Trustee, permit the ESOP or the ESOP Trustee so to do, (a) the Debentures, the Indenture, in any way which would adversely affect the interests of the Agent or any Bank under any of the Loan Documents or the obligations of the Company or the Guarantors under the Loan Documents, (b) Sections 10(b)(i), 10(b)(iv), 10(b)(v), 10(b)(vi), - 50 - 55 10(b)(vii), 10(b)(viii), 10(b)(ix), 10(b)(x), 10(b)(xi), 10(b)(xii), 10(b)(xiii), 10(b)(xiv), 12, 13, 20 or 21, of the ESOP Guaranty, or any defined term applicable thereto, in any way which would be more restrictive on, or increase the liability of, the Company, (c) any provision of the ESOP Loan Agreement or the ESOP Note which directly or indirectly increases the amount of the Contingent Obligations of the Company or (d) Section 10 of the ESOP Pledge Agreement in any way which would be more restrictive on, or increase the liability of, the Company. 8.21. Issuance of Additional Capital Stock. Issue any additional Stock or other equity interests, or permit any Subsidiary so to do, except for (i) common Stock and (ii) such shares of ESOP Preferred Stock as may be required for the normal operation of the ESOP. 8.22. Fiscal Year. Change its fiscal year from that in effect on the Restatement Effective Date, or permit any Subsidiary to do so. 8.23. Transactions with Affiliates. Become, or permit any Subsidiary to become, a party to any transaction with an Affiliate of the Company or such Subsidiary unless the terms and conditions relating to such transaction are at least as favorable to the Company or such Subsidiary as those which would be obtainable at that time in an arm's length transaction with a Person other than an Affiliate. For purposes of this paragraph, (i) non-cash transactions with Affiliates, such as the loaning of employees, corporate manuals, in house accounting services and similar items, (ii) transactions with Affiliates (other than those described in clause (i)) which, in the good faith and sound business judgment of a corporate executive of the Company or such Subsidiary, will produce a benefit to the Company or to the Company and its Subsidiaries taken as a whole, in each case which are entered into in the ordinary course of the Company's or such Subsidiary's business as currently conducted, and (iii) transactions between (x) the Company and one or more Guarantors and (y) between two or more Guarantors shall not be deemed to be prohibited by this paragraph. 9. DEFAULT The following shall each constitute an "Event of Default" hereunder: (a) The failure of the Company to pay any installment of principal or interest on any Note or any fees, expenses or - 51 - 56 other amounts due under the Loan Documents on the date when due and payable; or (b) The use by the Company of the proceeds of any Loan in a manner inconsistent with or in violation of paragraph 2.18; or (c) The failure of the Company to observe or perform any covenant or agreement contained in paragraph 7.3 or paragraph 8; or (d) The failure of the Company to observe or perform any other term, covenant, or agreement contained in this Agreement and such failure shall have continued unremedied for a period of 45 days after the Company shall have obtained knowledge thereof; or (e) Any representation or warranty of the Company or any Subsidiary (or of any officer of the Company or any Subsidiary on its behalf) made in this Agreement or in any certificate, report, opinion (other than an opinion of counsel) or other document delivered or to be delivered pursuant to this Agreement, shall prove to have been incorrect in any material respect when made; or (f) Obligations of the Company (other than its obligations under the Notes) and its Subsidiaries, whether as principal, guarantor, surety or other obligor, for the payment of Indebtedness in excess of $1,000,000 in the aggregate (i) shall become or shall be declared to be in default and due and payable prior to the expressed maturity or expiration thereof, or (ii) shall not be paid when due or within any grace period for the payment thereof, or (iii) the holder of any thereof shall have the right to declare the same in default and due and payable prior to the expressed maturity thereof; or (g) The Company or any Subsidiary shall (i) suspend or discontinue its business, or (ii) make an assignment for the benefit of creditors, or (iii) generally not be paying its debts as such debts become due, or (iv) admit in writing its inability to pay its debts as they become due, or (v) file a voluntary petition in bankruptcy or be the subject of a petition for compulsory winding up or shall pass a resolution to wind up by means of a creditor's voluntary winding up, or (vi) become insolvent (however such insolvency shall be evidenced), or (vii) file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment of debt, liquidation or dissolution or similar relief under any present or future statute, law or regulation of any jurisdiction, or (viii) petition or apply to any tribunal for any receiver, custodian, administrator liquidator, fiscal agent or any trustee for any substantial part of its Property, or (ix) be the subject of any such proceeding filed against it which - 52 - 57 remains undismissed for a period of 60 days, or (x) file any answer admitting or not contesting the allegations of any such petition filed against it or any order, judgment or decree approving such petition in any such proceeding, or (xi) seek, approve, consent to, or acquiesce in any such proceeding, or in the appointment of any trustee, receiver, custodian, liquidator, or fiscal agent for it, or any substantial part of its Property, or an order is entered appointing any such trustee, receiver, custodian, liquidator or fiscal agent and such order remains in effect for 60 days, or (xii) take any formal action for the purpose of effecting any of the foregoing or looking to the winding up, liquidation or dissolution of the Company or any Subsidiary; or (h) An order for relief is entered under any bankruptcy, insolvency or similar laws or any other decree or order is entered by a court having jurisdiction (i) adjudging the Company or any Subsidiary, a bankrupt or insolvent, or (ii) approving as properly filed a petition seeking the reorganization, liquidation, arrangement, adjustment, winding up or composition of or in respect of the Company or any Subsidiary, under the United States bankruptcy laws or any other applicable Federal or state law, or (iii) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator, fiscal agent (or other similar official) of the Company or any Subsidiary, or of any substantial part of the Property thereof, or (iv) ordering the winding up or liquidation of the affairs of the Company or any Subsidiary, and any such decree or order continues unstayed and in effect for a period of 60 days; or (i) Judgments or decrees against the Company and/or its Subsidiaries in excess of $3,500,000 in the aggregate which are not covered by insurance shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 90 days; or (j) The occurrence of an Event of Default under and as defined in the Guaranty or any Guarantor shall disavow its obligations under the Guaranty; or (k) Any Loan Document shall cease, for any reason, to be in full force and effect or the Company or any Subsidiary shall so assert in writing. Upon the occurrence of an Event of Default or at any time thereafter during the continuance thereof, (a) if such event is an Event of Default specified in clauses (g) or (h) above, the Commitments shall immediately and automatically terminate and the Loans, all accrued and unpaid interest thereon, any reimbursement obligations owing or contingently owing in respect of all outstanding Letters of Credit, and all other amounts owing under the Loan Documents shall immediately become due and payable without declaration or notice to the Company, and the Company shall forthwith deposit an amount equal to the Letter of Credit Exposure in a - 53 - 58 cash collateral account with and under the exclusive control of the Agent, and the Agent may, and upon the direction of the Required Banks shall, exercise any and all remedies and other rights provided pursuant to the Loan Documents, and (b) if such event is any other Event of Default, any or all of the following actions may be taken: (i) with the consent of the Required Banks, the Agent may, and upon the direction of the Required Banks shall, by notice to the Company, declare the Commitments to be terminated, forthwith, whereupon the Commitments shall immediately terminate, and (ii) with the consent of the Required Banks, the Agent may, and upon the direction of the Required Banks shall, by notice of default to the Company, declare the Loans, all accrued and unpaid interest thereon, any reimbursement obligations owing or contingently owing in respect of all outstanding Letters of Credit, and all other amounts owing under the Loan Documents to be due and payable on demand or forthwith, whereupon the same shall immediately become so due and payable, and the Company shall forthwith deposit an amount equal to the Letter of Credit Exposure in a cash collateral account with and under the exclusive control of the Agent, and the Agent may, and upon the direction of the Required Banks shall, exercise any and all remedies and other rights provided pursuant to the Loan Documents. Except as otherwise provided in this paragraph 9, presentment, demand, protest and all other notices of any kind are hereby expressly waived. In the event that the Commitments shall have been terminated or the Notes shall have been declared due and payable pursuant to the provisions of this paragraph 9, any funds received by the Agent and the Banks from or on behalf of the Company shall be applied by the Agent and the Banks in liquidation of the Loans and the obligations of the Company hereunder and under the Letters of Credit and the Notes and the obligations of Guarantors in the following manner and order: (i) first, to reimburse the Agent and the Banks for any expenses due from the Company pursuant to the provisions of paragraph 11.5; (ii) second, to the payment of accrued and unpaid Commitment Fees, the Facility Fee and all other fees, expenses and amounts due hereunder and in the Loan Documents (other than principal and interest on the Notes); (iii) third, to the payment of interest due on the Notes; (iv) fourth, to the payment of principal outstanding on the Notes and the Letter of Credit Exposure; and (v) fifth, to the payment of any other amounts owing to the Agent and the Banks under any of the Loan Documents. 10. THE AGENT 10.1. Appointment. Each Bank hereby irrevocably designates and appoints BNY as the Agent of such Bank under the Loan Documents and each such Bank hereby irrevocably authorizes BNY, as the Agent for such - 54 - 59 Bank, to take such action on its behalf under the provisions of the Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of the Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or any of the other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein or therein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against the Agent. 10.2. Delegation of Duties. The Agent may execute any of its duties under the Loan Documents by or through agents or attorneys-in-fact and shall be entitled to rely upon the advice of counsel concerning all matters pertaining to such duties. 10.3. Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Loan Documents (except the Agent for its own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Person or any officer thereof contained in the Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, the Loan Documents or for the value, validity, perfection of Liens, effectiveness, genuineness, enforceability or sufficiency of any of the Loan Documents or for any failure of any party thereto, or any other Person to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Loan Documents, or to inspect the properties, books or records of the Company or any Subsidiary. The Agent shall not be under any liability or responsibility whatsoever, as Agent, to the Company or any Subsidiary or any other Person as a consequence of any failure or delay in performance, or any breach, by any Bank of any of its obligations under any of the Loan Documents. 10.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, opinion, letter, telegram, telecopy, telex or teletype message, statement, order or other document reasonably believed by it to be genuine and correct and to have been - 55 - 60 signed, sent or made by the proper Person and upon the advice and statements of counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Agent. The Agent may treat each Bank, or the Person designated in the last notice filed with it under this paragraph, as the holder of all of the interests of such Bank in its Loans and in its Notes until written notice of transfer, signed by such Bank (or the Person designated in the last notice filed with the Agent) and by the Person designated in such written notice of transfer, in form and substance satisfactory to the Agent, shall have been filed with the Agent. The Agent shall not be under any duty to examine or pass upon the validity, effectiveness or genuineness of the Loan Documents or any instrument, document or communication furnished pursuant thereto or in connection therewith, and the Agent shall be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. The Agent shall be fully justified in failing or refusing to take any action under the Loan Documents unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 10.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless one of the officers of the Agent immediately responsible for matters concerning this Agreement has received written notice thereof from a Bank or the Company. In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided, however, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem to be in the best interests of the Banks. 10.6. Non-Reliance on Agent and Other Banks. Each Bank expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent, including any review of the affairs of the Company or any Subsidiaries thereof, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any - 56 - 61 other Bank, and based on such documents and information as it has deemed appropriate, made its own evaluation of and investigation into the business, operations, Property, financial and other condition and creditworthiness of the Company and its Subsidiaries and made its own decision to enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, evaluations and decisions in taking or not taking action under this Agreement or any of the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, Property, financial and other condition and creditworthiness of the Company and its Subsidiaries. Each Bank acknowledges that a copy of the Loan Documents and all exhibits and schedules hereto and thereto have been made available to it and its individual legal counsel for review, and each Bank acknowledges that it is satisfied with the form and substance of the Loan Documents and the exhibits and schedules hereto and thereto. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, Property, financial and other condition or creditworthiness of the Company or its Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 10.7. Indemnification. Each Bank agrees to indemnify the Agent in its capacity as such, ratably according to its Commitment Percentage from and against any and all liabilities, obligations, claims, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever, including, without limitation, any amounts paid to the Banks (through the Agent) by the Company or any Guarantor pursuant to the terms hereof, that are subsequently rescinded or avoided, or must otherwise be restored or returned which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement, the other Loan Documents or any other documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing; provided, however, that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting solely from the gross negligence or willful misconduct of the Agent. The agreements in this paragraph shall survive the payment of the Notes and all other amounts payable under the other Loan Documents. - 57 - 62 10.8. Agent in Its Individual Capacity. BNY and its respective affiliates may make loans to, accept deposits from, issue letters of credit for the account of and generally engage in any kind of business with, the Company and its Subsidiaries as though BNY was not Agent hereunder. With respect to the Commitment made or renewed by BNY and any Note issued to BNY, BNY shall have the same rights and powers under the Loan Documents as any Bank and may exercise the same as though it was not the Agent, and the terms "Bank" and "Banks" shall in each case include BNY. 10.9. Successor Agent. If at any time the Agent deems it advisable, in its sole discretion, it may submit to each of the Banks a written notification of its resignation as Agent under the Loan Documents, such resignation to be effective on the thirtieth day after the date of such notice. Upon any such resignation, the Required Banks shall have the right, with the prior written consent of the Company (which consent shall not be unreasonably withheld) if at such time no Default or Event of Default exists, to appoint from among the Banks a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, with the prior written consent of the Company (which consent shall not be unreasonably withheld) if at such time no Default or Event of Default exists, appoint a successor Agent, which successor Agent shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent's rights, powers, privileges and duties as Agent under the Loan Documents shall be terminated. The Company and the Banks shall execute such documents as shall be necessary to effect such appointment. After any retiring Agent's resignation or removal under the Loan Documents as Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents. If at any time hereunder there shall not be a duly appointed and acting Agent, the Company agrees to make each payment due under the Loan Documents directly to the Banks entitled thereto. - 58 - 63 11. OTHER PROVISIONS. 11.1. Amendments and Waivers. With the written consent of the Required Banks (or, if the Letter of Credit Exposure attributable to Surety Letters of Credit exceeds $1,000,000, all of the Banks), the Agent and the appropriate parties to the Loan Documents may, from time to time, enter into written amendments, supplements or modifications thereof and, with the consent of the Required Banks (or, if the Letter of Credit Exposure attributable to Surety Letters of Credit exceeds $1,000,000, all of the Banks), the Agent on behalf of the Banks may execute and deliver to any such parties a written instrument waiving or consenting to the departure from, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of the Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such amendment, supplement, modification, waiver or consent shall (i) increase the Commitment of any Bank or the aggregate Commitments of the Banks, (ii) change the maturity date of any Note, (iii) change the rate of interest of, extend the time or manner of payment of or increase or forgive the principal amount of any Note, (iv) decrease the Commitment Fee, Letter of Credit Commissions or extend the time of payment thereof, (v) release any guarantor under any guarantee, (vi) increase the advance rate under the Borrowing Base with respect to the Loans and Letters of Credit or (vii) change the provisions of paragraphs 3.5, 8.3 or 11.1 without the consent of all of the Banks; and provided further that no such amendment, supplement, modification or waiver shall amend, modify or waive any provision of paragraph 10 or otherwise change any of the rights or obligations of the Agent under the Loan Documents without the written consent of the Agent. Any such amendment, supplement, modification, waiver or consent shall apply equally to each of the Banks and shall be binding upon the parties to the applicable Loan Document, the Banks, the Agent and all future holders of the Notes. In the case of any waiver, the parties to the applicable Loan Document, the Banks and the Agent shall be restored to their former position and rights under the Loan Documents, and any Default or Event of Default waived shall not extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 11.2. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or two Business Days after being deposited in the mail, first-class postage prepaid, or, in the case of telecopier notice, when sent, addressed as follows in the case of the Company and the Agent, and as set forth on Schedule 1.1 in the case of each of the Banks, or to such - 59 - 64 other addresses as to which the Agent may be hereafter notified by the respective parties hereto or any future holders of the Notes: if to the Company, at: EDO Corporation. 14-04 111th Street College Point, New York 11356-1434 Attention: Vice President-Finance Telecopy: (718) 321-4194 Telephone: (718) 321-4050 if to the Agent, at: The Bank of New York One Wall Street Agency Function Administration 18th Floor New York, New York 10286 Attention: Kalyani Bose Telephone: (212) 635-4693 Telecopy: (212) 635-6365 with a copy to: The Bank of New York 530 Fifth Avenue New York, New York 10036 Attention: Joanne Collett, Vice President Telephone: (212) 852-4047 Telecopy: (212) 852-4252 except that any notice, request or demand by the Company to or upon the Agent or the Banks pursuant to paragraphs 2.3, 2.4 or 2.5 shall not be effective until received. 11.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges under the Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. - 60 - 65 11.4. Survival of Representations and Warranties. All representations and warranties in any Loan Document or any other document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of the Loan Documents so long as any amount remains outstanding under any Loan Document. 11.5. Payment of Expenses and Taxes; Indemnities. (a) The Company agrees, promptly upon presentation of a statement or invoice therefor, and whether or not any Loan is made, (a) to pay or reimburse the Agent and the Banks for all their reasonable out-of-pocket costs and expenses reasonably incurred in connection with the development, preparation and execution of, and any amendment, waiver, consent, supplement or modification to, the Loan Documents, any documents prepared in connection therewith and the consummation of the transactions contemplated thereby, including, without limitation, the reasonable fees and disbursements of Special Counsel and counsel to each Bank, (b) to pay or reimburse the Agent and the Banks for all of their respective costs and expenses incurred in connection with the enforcement or preservation of any rights under the Loan Documents and any such documents, including, without limitation, reasonable fees and disbursements of counsel, (c) to pay, indemnify, and hold each Bank and the Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Loan Documents and any such other documents, and (d) to pay, indemnify and hold each Bank and the Agent and each of their respective officers, directors and employees harmless from and against any and all other liabilities, obligations, claims, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable counsel fees and disbursements) with respect to the execution, delivery, enforcement and performance of the Loan Documents or the use of the proceeds of the Loans (all the foregoing, collectively, the "Indemnified Liabilities") and, if and to the extent that the foregoing indemnity may be unenforceable for any reason, the Company agrees to make the maximum payment permitted under applicable law; provided, however, that the Company shall have no obligation hereunder to pay Indemnified Liabilities to the Agent or any Bank arising from the gross negligence or willful misconduct of the Agent or such Bank. The agreements in this paragraph shall survive the termination of the Commitments and the payment of the Notes, and all other amounts payable under the Loan Documents. - 61 - 66 (b) The Company agrees to indemnify and hold harmless the Agent and each Bank and their respective affiliates, directors, officers, employees, attorneys and agents (each an "Indemnified Person") from and against any loss, cost, liability, damage or expense (including the reasonable fees and out-of-pocket expenses of counsel of such Indemnified Person) incurred by such Indemnified Person in investigating, preparing for, defending against, or providing evidence, producing documents or taking any other action in respect of, any commenced or threatened litigation, administrative proceeding or investigation under any federal securities law or any other statute of any jurisdiction, or any regulation, or at common law or otherwise, which is alleged to arise out of or is based upon (a) any untrue statement or alleged untrue statement of any material fact by the Company or any Subsidiary in any document or schedule executed or filed with any Governmental Body by or on behalf of the Company or any Subsidiary; (b) any omission or alleged omission to state any material fact required to be stated in such document or schedule; (c) any acts, practices or omissions or alleged acts, practices or omissions of the Company, any Subsidiary or its respective agents relating to the use of the proceeds of any or all borrowings made by the Company which are alleged to be in violation of paragraph 2.18, or in violation of any federal securities law or of any other statute, regulation or other law of any jurisdiction applicable thereto; (d) any acquisition or proposed acquisition by the Company or any Subsidiary of all or a portion of the Stock, or all or a portion of the assets, of any Person whether or not such Indemnified Person is a party thereto or (e) any purchase by the Company of its Stock. Notwithstanding the foregoing, in the event that the Indemnified Persons do not, in the determination of the Agent, have conflicting interests, the Company shall not be obligated to pay for more than one counsel for the Indemnified Persons and one local counsel in each jurisdiction in which the Indemnified Persons determined that local counsel is necessary. The indemnity set forth herein shall be in addition to any other obligations or liabilities of the Company to each Indemnified Person hereunder or at common law or otherwise, and shall survive any termination of this Agreement, the expiration of the Commitments and the payment of all indebtedness of the Company under the Loan Documents, provided that the Company shall have no obligation under this paragraph to an Indemnified Person with respect to any of the foregoing to the extent found in a final judgment of a court to have resulted from the gross negligence or wilful misconduct of such Indemnified Person. 11.6. Successors and Assigns. (a) The Loan Documents to which the Company is a party shall be binding upon and inure to the benefit of the Company, the Banks, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Company may not - 62 - 67 assign, delegate or transfer any of its rights or obligations under any Loan Document without the prior written consent of the Agent and each Bank. (b) Each Bank shall have the right at any time, upon written notice to the Agent of its intent to do so, to sell, assign, transfer or negotiate all or any part of its Loans, its Commitment, its Letter of Credit Commitment and its Notes to one or more affiliates of such Bank, to one or more of the other Banks (or to affiliates of such other Banks) or with the prior written consent of the Company (which consent shall not be unreasonably withheld), to any other bank, insurance company, pension fund, mutual fund or other financial institution, provided that each such sale, assignment, transfer or negotiation shall be in a minimum amount equal to 10% of the Commitments, and for each assignment, the parties to such assignment shall execute and deliver to the Agent an Assignment and Acceptance Agreement along with a fee (the "Assignment Fee") of $2,000. Upon execution, delivery, acceptance and consent, and recording by the Agent, from and after the effective date specified in such Assignment and Acceptance Agreement and agreed to by the Agent, the assignee thereunder shall be a party hereto and a "Bank" and, to the extent provided in such Assignment and Acceptance Agreement, the assignor Bank thereunder shall be released from its obligations under this Agreement. No Bank shall sell, assign, transfer or negotiate more than 50% of the initial amount of its Note or Commitment without the written consent of the Company and the Agent. The Company agrees upon written request of the Agent to execute and deliver (i) to such assignee, Notes, dated the effective date of such Assignment and Acceptance Agreement, in an aggregate principal amount equal to the Loans assigned to, and Commitments assumed by, such assignee and (ii) to such assignor Bank, Notes, dated the effective date of such Assignment and Acceptance Agreement, in an aggregate principal amount equal to the balance of such assignor Bank's Loans and Commitments. Upon any such sole assignment or other transfer, the Commitments and the Commitment Percentages set forth in Exhibit A shall be adjusted accordingly. (c) Each Bank may grant participations in all or any part of its Loans, its Notes, its Letter of Credit Commitment and its Commitment only to one or more banks, insurance companies, pension funds, mutual funds or other financial institutions, provided that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Company, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, (iv) no sub-participations shall be permitted, (v) no Bank may sell participations in more than 50% of the initial amount of its Note or Commitment and (vi) the rights of any holder of any such participation shall be limited to the right to consent to any action - 63 - 68 taken or omitted to be taken by such Bank under the Loan Documents except any action which would (A) increase the Commitments of such Bank, (B) reduce the Commitment Fee, Letter of Credit Commissions or the interest rate payable on the Notes, (C) extend the maturity date of the Notes or postpone the payment or scheduled due dates for payments of principal, interest and Commitment Fees, or (D) result in the release of any guarantor under any guarantee. The Company hereby acknowledges and agrees that any such participant shall for purposes of paragraphs 2.11, 2.13, 2.19 and 11.9 be deemed to be a "Bank"; provided, however, that the Company shall not, at any time, be obligated to pay any participant in any interest of any Bank hereunder any sum in excess of the sum which the Company would have been obligated to pay to such Bank in respect of such interest had such Bank not sold such participation. (d) Any Bank may at any time assign all or any portion of its rights under the Loan Documents to a Federal Reserve Bank. No such assignment shall release such Bank from its obligations thereunder. (e) No Bank shall, as between and among the Company, the Agent, BNY and such Bank, be relieved of any of its obligations under the Loan Documents as a result of any sale, assignment, transfer or negotiation of, or granting of participations in, all or any part of its Loans, its Commitments or its Notes, except that a Bank shall be relieved of its obligations to the extent of any such sale, assignment, transfer, or negotiation of all or any part of its Loans, its Commitments or its Notes pursuant to paragraph (b) above. 11.7. Counterparts. The Loan Documents (other than the Notes) may be executed by one or more of the parties on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. In making proof of the Loan Documents (other than the Notes) it shall not be necessary to produce or account for more than one counterpart thereof executed by the party to be charged. 11.8. Adjustments; Set-off. (a) If any Bank (a "Benefited Bank") shall at any time receive any payment of all or any part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in paragraph 9 (g) or (h), or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Loans, or interest thereon, such Benefited Bank shall purchase for cash from the other Banks such portion of each such other Bank's Loans, or shall provide such other Banks with the - 64 - 69 benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Loans may exercise all rights of payment (including, without limitation, rights of set-off, to the extent permitted by law) with respect to such portion as fully as if such Bank were the direct holder of such portion. (b) In addition to any rights and remedies of the Banks provided by law, upon the occurrence of an Event of Default and acceleration of the obligations owing in connection with this Agreement, or at any time upon the occurrence and during the continuance of an Event of Default under paragraph 9(a), each Bank shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, to set-off and apply against any indebtedness, whether matured or unmatured, of the Company to such Bank, any amount owing from such Bank to the Company, at, or at any time after, the happening of any of the above-mentioned events. To the extent permitted by applicable law, the aforesaid right of set-off may be exercised by such Bank against the Company or against any trustee in bankruptcy, custodian, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of the Company, or against anyone else claiming through or against the Company or such trustee in bankruptcy, custodian, debtor in possession, assignee for the benefit of creditors, receivers, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Bank prior to the making, filing or issuance, or service upon such Bank of, or of notice of, any such petition, assignment for the benefit of creditors, appointment or application for the appointment of a receiver, or issuance of execution, subpoena, order or warrant. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application. 11.9. Lending Offices. Each Bank shall have the right at any time and from time to time on notice to the Agent and the Company to transfer any Loan to a different office. Such office shall thereupon become such Bank's Lending Office. - 65 - 70 11.10. Governing Law. The Loan Documents and the rights and obligations of the parties thereunder shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York, without regard to principles of conflict of laws. 11.11. Headings, Plurals. Paragraph headings have been inserted herein and in the other Loan Documents for convenience only and shall not be construed to be a part hereof or thereof. Unless the context otherwise requires, words in the singular number include the plural, and words in the plural include the singular. 11.12. Severability. Every provision of the Loan Documents is intended to be severable, and if any term or provision hereof or thereof shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions hereof or thereof shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction. 11.13. Integration. All exhibits to this Agreement shall be deemed to be a part of this Agreement or the applicable other Loan Document, as the case may be. The Loan Documents embody the entire agreement and understanding among the Company, the Agent and the Banks with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings among the Company, the Agent and the Banks with respect to the subject matter thereof. 11.14. Consent to Jurisdiction. The Parties hereby irrevocably submit to the jurisdiction of any New York State or Federal Court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Loan Documents. The Parties hereby irrevocably waive, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. The Parties hereby agree that a final judgment in any such suit, action or proceeding brought in such a court, after all appropriate appeals, shall be conclusive and binding upon it. - 66 - 71 11.15. Service of Process. Process may be served in any suit, action, counterclaim or proceeding of the nature referred to in paragraph 11.14 by mailing copies thereof by registered or certified mail, postage prepaid, return receipt requested, to the respective addresses of the Parties set forth in paragraph 11.2 or to any other address of which a Party shall have given written notice to the Agent. The Parties hereby agree that such service (a) shall be deemed in every respect effective service of process upon it in any such suit, action, counterclaim or proceeding, and (b) shall to the fullest extent enforceable by law, be taken and held to be valid personal service upon and personal delivery to it. 11.16. No Limitation on Service or Suit. Nothing in the Loan Documents or any modification, waiver, consent or amendment thereto shall affect the right of any Party to serve process in any manner permitted by law or limit the right of any Party to bring proceedings against any other Party in the courts of any jurisdiction or jurisdictions. Except as otherwise provided in paragraph 11.14, nothing herein shall be deemed a consent by the Company to the jurisdiction of the courts of any particular state. 11.17. WAIVER OF TRIAL BY JURY. THE PARTIES EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE PARTIES EACH HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF ANY OTHER PARTY OR COUNSEL TO ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH PARTY ACKNOWLEDGES THAT EACH OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH. 11.18. Confidentiality. (a) Each Bank agrees that it will use any information with respect to the Company which is non-public, confidential or proprietary in nature which is furnished by the Company to the Bank, or made available pursuant to paragraph 7.1, 7.2 or 7.9 (collectively, "Information") only for the purpose of making its credit decisions under the Loan Documents and decisions incident thereto, that it will take all reasonable steps to insure that the confidentiality of the Information is maintained and that it will not disclose any Information, provided, however, that a Bank may disclose any such Information (i) to its directors, employees, auditors or counsel, or those of its Subsidiaries or Affiliates - 67 - 72 (collectively "representatives") to whom it is necessary to show such Information, each of which shall be informed by such Bank of the confidential nature thereof; (ii) in any statements or testimony pursuant to a subpoena or order by any Governmental Body or as may otherwise be required by law (provided that the Bank shall give the Company prior written notice of the disclosure permitted by this clause (ii) unless such notice is prohibited by the subpoena, order or law); (iii) upon the request or demand of any Governmental Body having jurisdiction over such Bank (provided that such Bank shall give the Company prior written notice of the disclosure permitted by this clause (iii) unless such notice is prohibited by the request or demand); and (iv) to prospective participants and assignees in connection with the contemplated participation or assignment of any Loan or Commitment, provided that the prospective participant and assignee executes and delivers to such Bank a confidentiality agreement containing provisions comparable to those set forth above and such Bank has provided a copy thereof to the Company prior to disclosure of the Information. (b) The restrictions contained herein shall not apply to Information which (i) is or becomes generally available to the public other than as a result of a disclosure by a Bank or such Bank's representatives; or (ii) becomes available to the Bank on a non-confidential basis from a source other than the Company or one of its respective agents, the Agent or the other Banks, or (iii) was known to a Bank on a non-confidential basis prior to its disclosure to such Bank by the Company or one of its agents. 11.19. Return of Notes. Each Bank agrees that upon receipt of its new Note referred to in paragraph 2.2, it will return to the Company for cancellation its superceded Note. 11.20. Savings Clause. This Agreement is intended solely as an amendment of, and contemporaneous restatement of, the terms and conditions of the Existing Credit Agreement and is not intended and should not be construed as in any way extinguishing or terminating any rights which the Agent or any Bank may have under the Existing Credit Agreement. 11.21. Waiver of Certain Covenants under the Existing Credit Agreement. The Agent and the Banks hereby waive compliance by the Company with the provisions of (a) paragraph 8.12 of the Existing Credit Agreement (Interest Coverage Ratio) for the fiscal quarter of the Company ending September 25, 1993 and (b) paragraphs 8.12 (Interest Coverage Ratio), 8.13 (Consolidated Capital Funds) and - 68 - 73 8.14 (Consolidated Net Worth) for the fiscal quarter of the Company ending December 31, 1993. [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK] - 69 - 74 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. EDO CORPORATION By: Michael J. Hegarty Name: Michael J. Hegarty Title: Vice President-Finance THE BANK OF NEW YORK, Individually and as Agent By: Joanne M. Collett Name: Joanne M. Collett Title: Vice President CHEMICAL BANK By: Jonathan Russell Name: Jonathan Russell Title: Vice President NATIONAL WESTMINSTER BANK USA By: Richard S. Ferrari Name: Richard S. Ferrari Title: V P - 70 - 75 Each of the undersigned Guarantors hereby consents to the amendment and restatement of the Existing Credit Agreement as herein set forth and agrees that its Guaranty remains in full force and effect. EDO WESTERN CORPORATION BARNES ENGINEERING COMPANY EDO SPORTS, INC. EDO ENERGY CORPORATION EDO AUTOMOTIVE NATURAL GAS, INC. AS TO EACH OF THE FOREGOING By: Michael J. Hegarty Name: Michael J. Hegarty Title: Vice President - 71 - 76 EDO EXHIBIT A LIST OF COMMITMENTS Commitment Bank Commitment Percentage The Bank of New York $ 6,000,000 40% Chemical Bank $ 4,500,000 30% National Westminster Bank USA $ 4,500,000 30% TOTAL $15,000,000 100% 77 EDO EXHIBIT B FORM OF AMENDED AND RESTATED NOTE $________. March 3, 1994 New York, New York FOR VALUE RECEIVED, EDO CORPORATION, a New York corporation (the "Company") hereby promises to pay to the order of _______________ (the "Bank"), on the Maturity Date, at the office of THE BANK OF NEW YORK, as Agent (the "Agent), located at 530 Fifth Avenue, New York New York, or at such other address as the Bank may specify from time to time, in lawful money of the United States of America, the principal sum of _______________________________ ($_________) or such lesser unpaid principal balance as shall be outstanding hereunder, together with interest on the unpaid principal balance hereof, payable on the dates and at the rate or rates provided for in the First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and among the Company, the signatory Banks thereto and the Agent (as the same may be amended or otherwise modified from time to time, the "Agreement"). Capitalized terms used herein which are not herein defined shall have the meanings set forth in the Agreement. In no event shall the interest payable hereon exceed the Highest Lawful Rate. This Note is one of the Notes referred to in the Agreement and is entitled to the benefits of, and is subject to the terms, set forth therein. The principal of this Note is payable in the amounts and under the circumstances, and its maturity is subject to acceleration upon the terms, set forth in the Agreement. Except as otherwise provided in the Agreement, if any payment on this Note becomes due and payable on a day which is not a Business Day, the maturity thereof shall be extended to the next Business Day and interest shall be payable at the applicable rate or rates specified in the Agreement during such extension period. This Note is a partial substitute, and together with the other Notes, a whole substitute, for the Existing Notes (as defined in the Existing Credit Agreement), and does not extinguish the debt thereunder. The Bank is hereby authorized to record (i) the outstanding principal amount of its Loans on the Restatement Effective Date, (ii) the date and amount of each Loan made by such Bank after the Restatement Effective Date and (iii) the date and amount of each payment or prepayment of principal of, any Loan, on the schedule annexed hereto (and any continuation 78 thereof) or in such Bank's internal records. No failure to so record or any error in so recording shall affect the obligation of the Company to repay the Loans, together with interest thereon, as provided in the Agreement. Presentment for payment, demand, notice of dishonor, protest, notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note are hereby waived, except as specifically otherwise provided herein or in the Agreement. This Note is being delivered in, is intended to be performed in, shall be construed and interpreted in accordance with, and be governed by the internal laws of, the State of New York without regard to principles of conflict of laws. This Note may only be amended by an instrument in writing executed pursuant to the provisions of paragraph 11.1 of the Agreement. EDO CORPORATION By:_____________________________ Name: __________________________ Title: _________________________ - 2 - 79 SCHEDULE TO NOTE Amount of Principal Amount of paid or Notation Date Loan prepaid Made By 80 EDO EXHIBIT C FORM OF BORROWING BASE CERTIFICATE I, ____________________, do hereby certify that I am the _____________ of EDO Corporation, a New York corporation (the "Company"), and that, as such, I am duly authorized to execute and deliver this Borrowing Base Certificate on the Company's behalf pursuant to paragraph 7.1(d) of the First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and between the Company, the signatory Banks thereto and The Bank of New York, as Agent (the "Agent") (as the same may be amended or otherwise modified from time to time, the "Agreement"). Capitalized terms used herein that are defined in the Agreement shall have the meanings therein defined. I hereby certify that: 1. The Borrowing Base as of the last day of the immediately preceding month is $____________, computed as shown on Schedule 1. 2. The sum of (i) the aggregate outstanding principal balance of Loans and (ii) the Letter of Credit Exposure is less than or equal to the Borrowing Base set forth in paragraph 1. IN WITNESS WHEREOF, I have executed this Compliance Certificate on this ___ day of ______________, 19__. _________________________ 81 Schedule 1 to the Borrowing Base Certificate dated __/__/__ Computation of Borrowing Base (As of the Last Day of the Preceding Month) Eligible Billed Receivables. 1. Total Receivables of the Company, and the Guarantors (other than Eligible Unbilled Receivables (see below)) ........... $________ 2. Deductions: (a) Receivables subject to any Lien in favor of any Person other than Permitted Liens $________ (b) Receivables from employees officers, directors or Affiliates of the Company or any Subsidiary (other than Receivables from Affiliates in the ordinary course of business) $________ (c) Receivables from account debtors with respect to which the Company is aware or has reason to be aware of any reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition $________ (d) Receivables more than 91 days past due $________ (e) Receivables which are not a good and valid accounts representing a bona fide indebtedness incurred by the account debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an absolute sale upon the stated terms of goods sold or to be sold by the Company or a Guarantor $________ 82 (f) Receivables from account debtors whose credit standing or collectibility are not reasonably satisfactory to the Agent and the Required Banks $________ (g) Receivables arising out of a transaction with an Affiliate of the Company which would otherwise be an Eligible Billed Receivable but which arises out of the same sale of goods or rendering of services with respect to which a Receivable is already included in the Borrowing Base as an Eligible Billed Receivable $________ Total Deductions................... $__________ 3. Total Eligible Billed Receivables [item 1 less item 2]......................... $__________ Eligible Unbilled Receivables. 4. Receivables of the Company or the Guarantors consisting of cost input and related profit recognized as revenues on customer contracts based upon percentage completion accounting in accordance with GAAP, which amounts cannot be billed to customers because of contract terms until a future date, arising in the ordinary course of business .......................... $__________ 5. Deductions: (a) Receivables subject to any Lien in favor of any Person other than Permitted Liens $________ - 2 - 83 (b) Receivables from employees officers, directors or Affiliates of the Company or any Subsidiary (other than Receivables from Affiliates in the ordinary course of business) $________ (c) Receivables from account debtors with respect to which the Company is aware or has reason to be aware of any reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition $________ (d) Receivables from account debtors whose credit standing or collectibility are not reasonably satisfactory to the Agent and the Required Banks $________ (e) Receivables arising out of a transaction with an Affiliate of the Company which would otherwise be an Eligible Unbilled Receivable but which arises out of the same sale of goods or rendering of services with respect to which a Receivable is already included in the Borrowing Base as an Eligible Unbilled Receivable $________ Total Deductions................... $__________ 6. Total Eligible Unbilled Receivables [item 4 less item 5]......................... $__________ 7. Sum of 85% of item 3 plus 60% of item 6....................... $__________ 8. Net Sales Proceeds applied to the Reduction of the Borrowing Base.................... $__________ = 3 = 84 9. Borrowing Base Item 7 minus Item 8 ....................... $__________ - 4 - 85 EDO EXHIBIT D FORM OF BORROWING REQUEST _____________, 199_ The Bank of New York One Wall Street Agency Function Administration 18th Floor New York, New York 10286 Attention: Kalyani Bose The Bank of New York, as Agent 530 Fifth Avenue New York, New York 10036 Attention: Joanne Collett, Vice President Re: First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and among EDO CORPORATION, the signatory Banks thereto, and THE BANK OF NEW YORK, as Agent (the "Agreement") Capitalized terms used herein which are defined in the Agreement shall have the meanings therein defined. 1. Pursuant to paragraph 2.3 of the Agreement, the Company hereby gives notice of its intention to borrow $_____________ on ________________, 199_. 2. Pursuant to paragraph 2.8, the Company hereby requests that BNY issue Letters of Credit totalling $_________ pursuant to one or more Applications therefor submitted herewith. 3. The Company hereby certifies that on the date hereof and on the Borrowing Date set forth above, and after giving effect to the Loans and the Letters of Credit requested hereby: (a) The Company is and shall be in compliance with all of the terms, covenants and conditions of the Loan Docu- ments. (b) There exists and there shall exist no Default or Event of Default under the Agreement. 86 (c) The proceeds of such Loans will be used in accordance with paragraph 2.18 of the Agreement. (d) Each of the representations and warranties contained in the Agreement which is required to be made on such Borrowing Date is and shall be true and correct in all material respects. (e) Since December 31, 1992, there has occurred no Material Adverse Change. (f) After giving effect to the Loans, if any, requested to be made hereby, the sum of (i) the aggregate outstanding principal balance of the Loans and (ii) the Letter of Credit Exposure (including the Letters of Credit, if any, requested to be issued hereby) does not exceed the lesser of (x) the Commitments or (y) the Borrowing Base. (g) After giving effect to the Letters of Credit, if any, requested to be issued hereby, (i) the aggregate face amount of the Letters of Credit does not exceed the lesser of (1) the excess, if any, of the sum of the Commitments over the sum of the aggregate outstanding principal balance of the Loans or (2) the excess, if any, of the Borrowing Base over the sum of the aggregate outstanding principal balance of the Loans, and (ii) the aggregate outstanding face amount of the Letters of Credit does not exceed the Letter of Credit Commitment. IN WITNESS WHEREOF, the Company has caused this certificate to be executed by their respective duly authorized officers as of the date and year first written above. EDO CORPORATION By: __________________________ Name: ________________________ Title: _______________________ - 2 - 87 EDO EXHIBIT E FORM OF COMPLIANCE CERTIFICATE I, ______________, do hereby certify that I am the __________ of EDO Corporation, a New York corporation (the "Company"), and that, as such, I am duly authorized to execute and deliver this Compliance Certificate on the Company's behalf pursuant to paragraph 7.1(d) of the First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and between the Company, the signatory Banks thereto and The Bank of New York, as Agent (the "Agent") (as the same may be amended or otherwise modified from time to time, the "Agreement"). Capitalized terms used herein that are defined in the Agreement shall have the meanings therein defined. I hereby certify that: 1. The Quick Ratio (determined as of the end of the immediately preceding fiscal quarter of the Company) is ____:1.00, computed as shown on Schedule 1. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.9 of the Agreement. 2. The Current Ratio (determined as of the end of the immediately preceding fiscal quarter of the Company) is ____:1.00, computed as shown on Schedule 2. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.10 of the Agreement. 3. The Leverage Ratio (determined as of the end of the immediately preceding fiscal quarter of the Company) is ____:1.00, computed as shown on Schedule 3. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.11 of the Agreement. 4. The Interest Coverage Ratio (determined as of the end of the immediately preceding fiscal quarter of the Company) is ____:1.00, computed as shown on Schedule 4. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.12 of the Agreement. 5. Consolidated Capital Funds (determined as of the last day of the immediately preceding fiscal quarter of the 88 Company) is $______, computed as shown on Schedule 5. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.13 of the Agreement. 6. Consolidated Net Worth (determined as of the last day of the immediately preceding fiscal quarter of the Company) is $______, computed as shown on Schedule 6. Nothing has come to my attention to indicate that subsequent to the end of such fiscal quarter through the date hereof, the Company is not in compliance with paragraph 8.14 of the Agreement. IN WITNESS WHEREOF, I have executed this Compliance Certificate on this ___ day of ______________, 19__. _______________________ - 2 - 89 Schedule 1 to Compliance Certificate dated __/__/__ Computation of Quick Ratio 1. Cash and Cash Equivalents of the Company and its Subsidiaries (as determined in accordance with GAAP on a Consolidated basis).................................. $_________ 2. Receivables of the Company and its Subsidiaries (as determined in accordance with GAAP on a Consolidated basis).................................. $_________ 3. Item 1 plus Item 2...................... $_________ 4. Consolidated Current Liabilities ....... $_________ 5. Quick Ratio (Item 3:Item 4)......................... ____:1.00 6. Minimum Quick Ratio required by paragraph 8.9 ....................... 1.50:1.00 90 Schedule 2 to Compliance Certificate dated __/__/__ Computation of Consolidated Current Ratio 1. Consolidated Current Assets ............ $_________ 2. Consolidated Current Liabilities........ $_________ 3. Current Ratio (Item 1:Item 2)......................... ____:1.00 4. Minimum Current Ratio required by paragraph 8.10....................... 2.00:1.00 91 Schedule 3 to Compliance Certificate dated __/__/__ Computation of Leverage Ratio 1. Consolidated Total Liabilities ......... $_________ 2. Subordinated Debt....................... $_________ 3. Item 1 less Item 2...................... $_________ 4. Consolidated Tangible Net Worth......... $_________ 5. Item 4 plus Item 2...................... $_________ 6. Leverage Ratio [Item 3:Item 5]......................... ____:____ 7. Maximum Leverage Ratio permitted by paragraph 8.11....................... 1.00:1.00 92 Schedule 4 to Compliance Certificate dated __/__/__ Computation of Interest Coverage Ratio 1. Consolidated Net Income for the immediately preceding fiscal quarter..................................$________ 2. Item 1x4.................................$________ 3. Consolidated Interest Expense for such fiscal quarter................. $________ 4. Item 3x4.................................$________ 5. Income tax expense deducted in determining Item 1.................................. $________ 6. Item 5X4................................ $________ 7. Sum of Items 2, 4 and 6................. $________ 8. Consolidated Interest Income for such fiscal quarter................. $________ 9. Item 8X4................................ $________ 10. Item 7 minus Item 9..................... $________ 11. Item 4 minus Item 9..................... $________ 12. Interest Coverage Ratio [Item 10:Item 11]...................... ____:1.00 13. Minimum Interest Coverage Ratio required by paragraph 8.12.............. _.__:1.00 93 Schedule 5 to the Compliance Certificate dated __/__/__ Computation of Consolidated Capital Funds 1. Consolidated Net Worth (See Schedule 6). $_________ 2. Subordinated Debt....................... $_________ 3. Capital Funds (Item 1 plus Item 2).................... $__________ 4. Minimum Capital Funds required by paragraph 8.13.......................... $__________ 94 Schedule 6 to the Compliance Certificate dated __/__/__ Computation of Consolidated Tangible Net Worth 1. Consolidated Net Worth.................. $________ 2. Minimum Consolidated Net Worth required by paragraph 8.14.............. $________ 95 EDO EXHIBIT F FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT Dated _______________, 19__ Reference is made to the First Amended and Restated Credit Agreement, dated as of March 3, 1994 (the "Credit Agreement"), among EDO CORPORATION, a New York corporation (the "Company"), the signatory Banks thereto and THE BANK OF NEW YORK, as Agent for the Banks (in such capacity, the "Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. ____________________ (the "Assignor") and _________________________ (the "Assignee") hereby agree as follows: 1. Assignment. In consideration of the payment to be made by the Assignee to the Assignor pursuant to the provisions of paragraph 2 of this Assignment and Acceptance Agreement (this "Agreement"), effective as of the __________ __, 19__ (the "Effective Date hereof"), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, without recourse, a __% interest in and to all the Assignor's rights and obligations under the Loan Documents with respect to the Assignor's Loans and the Letters of Credit, including, without limitation, such percentage interest in the Assignor's Commitment on the Effective Date hereof (without giving effect to the assignments thereof hereunder). 2. Payments by Assignee. In consideration of the assignment made pursuant to paragraph 1 of this Agreement, the Assignee agrees to pay to the Assignor on the Effective Date hereof, the sum of $________________ representing, without duplication, the (i) aggregate principal amount of the outstanding Loans made by the Assignor pursuant to the Credit Agreement and (ii) unreimbursed reimbursement obligations in respect of Letters of Credit participated in by the Assignor pursuant to he Credit Agreement, multiplied by the percentage of the Assignor's interest which is being assigned hereunder. 96 [3. Payments by Assignor. In consideration for acceptance of the assignment made pursuant to paragraph 1 of the Agreement, the Assignor shall pay to the Assignee a fee in the amount of $__________ payable on the Effective Date hereof.] 4. Representations and Warranties of the Assignor. The Assignor represents and warrants that (i) as of the date hereof, (x) its Commitment (without giving effect to assignments thereof which have not yet become effective) is $_______, (y) the outstanding balance of its Loans (unreduced by any assignments thereof which have not yet become effective) is $________ and (z) its Commitment Percentage of unreimbursed reimbursement obligations in respect of Letters of Credit is $________ and (ii) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. The Company may rely on the foregoing representations and warranties. 5. Representations, Warranties and Agreements of the Assignee. The Assignee (a) represents and warrants that it is legally authorized to enter into this Agreement; (a) represents and warrants that it is an "accredited investor" (as such term is used in Regulation D of the SEC under the Securities Act of 1933, as amended); (c) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to paragraphs 7.1 and 7.2 thereof and such other documents and information, including, without limitation, the Loan Documents, as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (d) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (e) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (f) agrees that it will become a party to the Credit Agreement on the Effective Date hereof and will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; and (g) agrees that it will keep confidential all information with - 2 - 97 respect to the Company furnished to it by the Company or the Assignor (other than information generally available to the public or otherwise available to the Assignor on a nonconfidential basis). The Company may rely on the foregoing representations and warranties. 6. Recording and Acknowledgment by Agent. (a) Following the execution of this Agreement, the Assignor will deliver a duly executed copy of this Agreement to the Agent for acknowledgment and recording by the Agent and will also deliver the Assignor's Notes. The Agent shall cause the Company to exchange such Notes for new Notes as provided in paragraph 11.6 of the Credit Agreement. (b) Upon such acknowledgment and recording, from and after the Effective Date hereof, the Agent shall make all payments in respect of the interest assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustment in payments under the Credit Agreement for periods prior to the Effective Date hereof directly between themselves. 7. Effect of this Agreement. Upon recording and acknowledgment of this assignment by the Agent, from and after the Effective Date hereof, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Agreement, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Agreement, relinquish its right and be released from its obligations under the Credit Agreement, provided, however, that if the Assignor is not assigning its entire interest under the Loan Documents, it shall remain a Bank entitled to all of the benefits and subject to all of the obligations thereunder. 8. Payment Instructions. 1. All payments to be made to the Assignor by the Assignee hereunder shall be made by wire transfer of immediately available funds to the Assignor at its ___________ office, Attention: ____________, Reference: ______. 2. All payments to be made to the Assignee by the Assignor hereunder shall be made by wire transfer of immediately available funds to the Assignee at ___________ for the Account of ___________________, Account No. _______, ABA No. _________, Attention: _____________, Reference: ________. - 3 - 98 9. Assignee's Lending Office and Office for Notices. The Assignee specifies as its address for notices and as its Lending Office for all Loans, the offices set forth below: Notice Address: _______________________ _______________________ _______________________ Telephone: (___) ___-____ Telecopy: (___) ___-____ Lending Office: _______________________ _______________________ _______________________ Telephone: (___) ___-____ Telecopy: (___) ___-____ 10. Conditions Precedent. The obligations of the Assignor and the Assignee hereunder are conditioned upon [(a)] the performance by the Assignee of its obligations under paragraph 2 [and (b) the performance by the Assignor of its obligations under paragraph 3 of this Agreement]. 11. Headings Paragraph headings have been inserted herein for convenience only and shall not be construed to be a part hereof or thereof. 12. Amendments; Waivers. This Agreement may not be amended, changed, waived or modified except by a writing executed by the parties hereto. - 4 - 99 13. Entire Agreement. This Agreement embodies the entire agreement between the Assignor and the Assignee with respect to the subject matter hereof and supersedes all other prior arrangements and understandings relating to the subject matter hereof. 14. Counterparts. This Agreement may be executed in any number of counterparts each of which shall be deemed to be an original. Each such counterpart shall become effective when counterparts have been executed by all parties hereto. It shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart signed by the party to be charged. 15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Assignor and the Assignee and their respective successors and permitted assigns, except that neither party may assign or transfer any of its rights or obligations hereunder without the prior written consent of the other party. 16. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to principles of conflicts of law. [NAME OF ASSIGNOR] By: ______________________ Name: ____________________ Title: ___________________ [NAME OF ASSIGNEE] By: ______________________ Name: ____________________ Title: ___________________ - 5 - 100 Accepted this __ day of __________, 19__ THE BANK OF NEW YORK, as Agent By: ___________________________ Name: _________________________ Title: ________________________ - 6 - 101 EDO EXHIBIT G FORM OF OPINION OF COUNSEL TO THE COMPANY AND THE GUARANTORS March 3, 1994 To The Parties Listed on Schedule A Attached Hereto Re: First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and among EDO Corporation, the signatory Banks thereto, and The Bank of New York, as Agent (the "Agreement") I am the Vice President, General Counsel and Assistant Secretary of EDO Corporation, a New York corporation (the "Company") and have represented the Company and EDO Western Corporation, a Utah corporation, Barnes Engineering Company, a Delaware corporation, EDO Sports, Inc., a Delaware corporation (formerly EDO Sub Acquisition Corp.), EDO Energy Corporation, a Delaware corporation, and EDO Automotive Natural Gas, Inc., a Delaware corporation (each a "Guarantor") in connection with the Agreement, the amended and restated promissory notes to be delivered in connection therewith (the "Notes"), the other Loan Documents and the ESOP Guaranty Amendment. Capitalized terms used herein which are not defined herein and which are defined in the Agreement shall have the meanings therein defined. In furnishing this opinion, I have examined and relied upon originals or copies, certified or otherwise identified to my satisfaction as being true copies, of such instruments, documents and certificates of officers of the Company or of government officials, and have conducted such investigations of fact and law, as I have deemed necessary or appropriate as the basis for the opinions hereinafter expressed, including, without limitation, 102 (i) the Certificate of Incorporation and By-Laws of the Company, (ii) the Agreement and (iii) the Notes. With respect to questions of fact material to any opinions expressed herein, I have relied upon inquiries made of the appropriate officers of the Company. Based upon and subject to the foregoing, I am of the opinion that: 1. The Company has only the Subsidiaries set forth on Schedule 4.1 to the Agreement. The Significant Subsidiaries set forth on such Schedule 4.1 are the only Significant Subsidiaries of the Company. The shares of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable and are owned free and clear of any Liens, except Permitted Liens. 2. The Company and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power and authority to own its Property and to carry on its business as now conducted, and is in good standing and authorized to do business in each jurisdiction in which the failure to be so authorized would have a Material Adverse Effect. 3. The Company has full corporate power and authority to enter into, execute, deliver and carry out the terms of the Loan Documents to which it is a party and the ESOP Guaranty Amendment, to make the borrowings contemplated by the Loan Documents, to execute, deliver and carry out the terms of the Notes and to incur the obligations provided for therein, all of which have been duly authorized by all proper and necessary corporate action and are in full compliance with its charter and by-laws. Each Guarantor has full corporate power and authority to carry out the terms of Loan Documents to which it is a party and to incur the obligations provided therein, all of which have been duly authorized by all proper and necessary corporate action and are in full compliance with its certificate of incorporation and by-laws. No consent or approval of, or exemption by, shareholders, any Governmental Body having jurisdiction over the Company or any Guarantor or any other Person is required to authorize, or is required in connection - 2 - 103 with the execution, delivery and performance of, the Loan Documents or is required as a condition to the validity or enforceability of the Loan Documents which has not been obtained and which is not in full force and effect. 4. The Loan Documents and the ESOP Guaranty Amendment constitute the valid and legally binding obligations of the Company and each Guarantor, in each case to the extent it is a party thereto, enforceable in accordance with their respective terms. 5. Except as set forth on Schedule 4.5 to the Agreement, to the best of my knowledge after due inquiry, there are no actions, suits, arbitration proceedings or claims pending or threatened against the Company or any of its Subsidiaries, at law or in equity, before any Governmental Body having jurisdiction over the Company or any Guarantor which, if adversely determined to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect. To the best of my knowledge after due inquiry, there are no proceedings pending or threatened against the Company or any of its Subsidiaries which call into question the validity or enforceability of any of the Loan Documents. 6. To the best of my knowledge after due inquiry, neither the Company nor any Subsidiary is in default under any mortgage, indenture, contract, agreement, judgment, decree or order to which it is a party or by which it or any of its Property is bound, including, without limitation, the ESOP Loan Documents, which defaults, taken as a whole, could reasonably be expected to have a Material Adverse Effect. To the best of my knowledge after due inquiry, the delivery or performance of the terms of the Loan Documents and the transactions contemplated thereby will not constitute a default under, conflict with, require any consent under (other than consents which have been obtained), or result in the creation or imposition of, or obligation to create, any Lien upon the Property of the Company or any Subsidiary pursuant to the terms of any such mortgage, indenture, contract, agreement, judgment, decree or order, which defaults, conflicts and consents, if not obtained, could reasonably be expected to have a Material Adverse Effect. - 3 - 104 7. To the best of my knowledge, after due inquiry, neither the Company nor any Subsidiary is in default with respect to any judgment, order, writ, injunction, decree or decision obtained or issued by any Governmental Body against or otherwise applicable to the Company or such Subsidiary, which default could reasonably be expected to have a Material Adverse Effect. To the best of my knowledge, after due inquiry, the Company and each Subsidiary is complying in all material respects with all statutes and regulations applicable to the Company or such Subsidiary, including ERISA, of all Governmental Bodies applicable to the Company or such Subsidiary, the violation of which could reasonably be expected to have a Material Adverse Effect, including, without limitation, ERISA, the Federal Acquisition Regulations and any applicable Environmental Laws. 8. Neither the Company nor any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, and, to the best of my knowledge, neither the Company nor any Subsidiary is subject to any statute or regulation which prohibits or restricts the incurrence of Indebtedness under the Loan Documents, including, without limitation, statutes or regulations relative to common or contract carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services. 9. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. If used in accordance with paragraph 2.18 of the Agreement, no part of the proceeds of the Loans would be used, directly or indirectly, for a purpose which violates the provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System, as amended. 10. The Indebtedness of the Company under the Loan Documents constitutes Senior Indebtedness within the meaning of the Indenture and is either senior to, or pari passu with, all other Indebtedness of the Company. - 4 - 105 All opinions, to the extent they relate to the enforceability of any agreement or obligation, are subject to and qualified by the following: 1. the effect and application of bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws now or hereafter in effect which relate to or limit creditors' rights generally; and 2. the effect and application of general principles of equity, whether considered in a proceeding in equity or an action at law. 3. the effect and application of federal and state fraudulent conveyance and other similar laws. I am admitted to practice in the State of New York and express no opinion as to any question of law other than with respect to the laws of the State of New York, the corporate laws of the States of Delaware and Utah and the United States of America. This opinion is intended solely for your benefit in connection with the transactions contemplated herein and may not be relied upon by any other Person except Special Counsel in connection with the issuance of its opinion. Very truly yours, Marvin D. Genzer - 5 - 106 SCHEDULE A The Bank of New York, individually and as Agent 530 Fifth Avenue New York, New York 10036 Chemical Bank 95-25 Queens Blvd. Rego Park, New York 11374 National Westminster Bank USA 300 Cadman Plaza West Brooklyn, New York 11201 107 EDO EXHIBIT H FORM OF OPINION OF SPECIAL COUNSEL March 3, 1994 To The Parties Listed on Schedule A Attached Hereto Re: First Amended and Restated Credit Agreement, dated as of March 3, 1994, by and among EDO Corporation, the signatory Banks thereto, and The Bank of New York, as Agent (the "Agreement") We have acted as Special Counsel to you in connection with the Agreement. Capitalized terms used herein which are defined in the Agreement shall have the meanings therein defined, unless the context hereof otherwise requires. We have examined originals or copies certified to our satisfaction of the documents required to be delivered pursuant to the provisions of paragraph 5 of the Agreement. In conducting such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to originals of all documents submitted to us as copies. Based upon the foregoing examination, and relying with your permission upon the opinion of Marvin D. Genzer, Esq., Vice President, General Counsel and Assistant Secretary of the Company and upon the representations and warranties of the Company and the Guarantors, we are of the opinion that all legal preconditions to the closing of the Agreement have been satisfactorily met or waived. We call your attention to the provisions of paragraph 6 of the Agreement which contain conditions precedent to the making of Loans and the issuance of Letters of Credit. We express no opinion as to the satisfaction of such preconditions. This opinion is rendered solely for your benefit in connection with the transactions referred to herein and may not be relied upon by any other Person. 108 In rendering the foregoing opinion, we express no opinion as to laws other than the laws of the State of New York and the federal laws of the United States of America. Very truly yours, EMMET, MARVIN & MARTIN - 2 - 109 SCHEDULE A The Bank of New York, individually and as Agent 530 Fifth Avenue New York, New York 10036 Chemical Bank 95-25 Queens Blvd. Rego Park, New York 11374 National Westminster Bank USA 300 Cadman Plaza West Brooklyn, New York 11201 110 EDO SCHEDULE 1.1 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF LENDING OFFICES 1. The Bank of New York 530 Fifth Avenue New York, New York 10036 Attention: Joanne Collett, Vice President Telephone: (212) 852-4047 Telecopy: (212) 852-4252 2. Chemical Bank 95-25 Queens Blvd. Rego Park, New York 11374 Attention: Jonathan Russell, Vice President Telephone: (718) 830-5812 Telecopy: (718) 830-5835 3. National Westminster Bank USA 300 Cadman Plaza West Brooklyn, New York 11201 Attention: Richard Ferrari, Vice President Telephone: (718) 403-6617 Telecopy: (718) 403-6605 111 EDO SCHEDULE 4.1 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF SUBSIDIARIES I. Subsidiaries Jurisdiction of Name of Incorporation or Subsidiary Formation EDO Western Corporation Utah Barnes Engineering Company Delaware EDO Sports, Inc. (formerly, EDO Sub Acquisition Corp.) Delaware EDO (Canada), Ltd. Canada EDO Operations (Israel) Ltd. Israel EDO Foreign Sales Corp. Virgin Islands EDO International Corp. Delaware EDO Energy Corporation Delaware EDO Automotive Natural Gas, Inc. Delaware II. Significant Subsidiaries Name of Jurisdiction of Significant Incorporation or Subsidiary Formation EDO Western Corporation Utah Barnes Engineering Company Delaware EDO Sports, Inc. (formerly, EDO Sub Acquisition Corp.) Delaware EDO (Canada), Ltd. Canada EDO Operations (Israel) Ltd. Israel EDO Energy Corporation Delaware EDO Automotive Natural Gas, Inc. Delaware 112 EDO SCHEDULE 4.5 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF LITIGATION AND JUDGMENTS Litigation The proceeding of the United States Environmental Protection Agency relating to a site in Norwalk, Connecticut, formerly occupied by the Company's former Elinco Division, in which the Company has been named as a potentially responsible party, as more fully described in the Company's 10-K for the fiscal year ended December 31, 1992, copies of which have heretofore been delivered to the Agent and the Banks. Judgments The Supreme Court of Peru has granted a judgment to the Ministry of Defense of the Government of Peru against the Company on August 12, 1993, in the amount of $735,138 in a proceeding involving a terminated contract for sonar equipment. The judgment is presently being challenged. EDO SCHEDULE 4.12 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF PLANS 1. The EDO Corporation Employees Pension Plan. 2. The EDO Corporation Employee Stock Ownership Plan. 3. The EDO Corporation Payroll Based Employee Stock Ownership Plan. 4. The EDO Corporation Employees 401(K) Savings Plan. 5. The Barnes Engineering Employees 401(K) Savings Plan. 6. The EDO Automotive Natural Gas Employees 401(K) Savings Plan. 113 EDO SCHEDULE 4.14 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 EXCEPTIONS TO PARAGRAPH 4.14 (ENVIRONMENTAL MATTERS) The proceeding of the United States Environmental Protection Agency relating to a site in Norwalk, Connecticut, formerly occupied by the Company's former Elinco Division, in which the Company has been named as a potentially responsible party, as more fully described in the Company's 10-K for the fiscal year ended December 31, 1992, copies of which have heretofore been delivered to the Agent and the Banks. 114 EDO SCHEDULE 8.1 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF EXISTING INDEBTEDNESS 1. The Indebtedness of EDO (Canada) Limited under the EDO Canada Line. 2. The Indebtedness of the Company evidenced by the Deben- tures of which $29,317,000 face amount were outstanding as of December 31, 1993. 3. The Indebtedness of the Company under the ESOP Guaranty. 115 EDO SCHEDULE 8.2 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED MARCH 3, 1994 LIST OF EXISTING LIENS None. EX-3 4 EXHIBIT 4(H) AMENDMENT 7 TO GUARANTEE AGREEMENT EXHIBIT 4(h) AMENDMENT NO. 7 TO GUARANTEE AGREEMENT AMENDMENT NO. 7 (the "Amendment") dated March 3, 1994, effective as of the 31st day of December, 1993, to that certain Guarantee Agreement dated as of July 12, 1988 as amended by Amendment and Waiver dated as of April 12, 1990, Amendment No. 2 dated as of October 9, 1990, Amendment No. 3 dated as of April 8, 1991, Amendment No. 4 dated March 26, 1992, Amendment No. 5 dated June 9, 1992 and Amendment No. 6 dated July 30, 1993 (as so amended, the "EXISTING GUARANTEE") made by EDO Corporation, a New York corporation (the "Guarantor") in favor of NATIONAL WESTMINSTER BANK USA (the "BANK") (as successor in interest to Manufacturers Hanover Trust Company ("Manufacturers")). W I T N E S S E T H : WHEREAS, the Guarantor and Manufacturers were parties to the Existing Guarantee; WHEREAS, the Bank succeeded to all of Manufacturers' right, title and interest under the Existing Guarantee pursuant to that certain Assignment and Assumption Agreement dated as of June 8, 1990 between Manufacturers and the Bank; WHEREAS, the Guarantor has requested the Bank to amend certain provisions of the Existing Guarantee; WHEREAS, the Bank has agreed to such request subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. The Existing Guarantee is hereby amended as follows: (a) Subsection 10(b)(iv) is deleted in its entirety and there is substituted therefor the following: "(iv) Quick Assets Ratio. Permit the ratio of the sum of (a) cash and Cash Equivalents of the Guarantor and its Subsidiaries plus (b) the amount shown on a consolidated balance sheet of the Guarantor and its Subsidiaries as accounts receivable (less provision for doubtful accounts) to Consolidated Current Liabilities at any time to be less than 1.50 to 1.00." - 1 - (b) Subsection 10(b)(vii) is deleted in its entirety and there is substituted therefor the following: "(vii) Interest Coverage. (A) Permit (i) as of the end of the fiscal year of the Guarantor ending December 31, 1994, the Interest Coverage Ratio to be less than 1.375:1.000, and (ii) as of the end of the fiscal quarters set forth below, the Interest Coverage Ratio to be less than the ratios set forth below: Fiscal Quarter Ending Ratio March 31, 1994 0.25 to 1.00 June 30, 1994 1.25 to 1.00 September 30, 1994 1.75 to 1.00 December 31, 1994 and the 2.25 to 1.00 last day of each fiscal quarter thereafter" (c) Subsection 10(b)(viii) is deleted in its entirety and there is substituted therefor the following: "(viii) Maintenance of Capital Funds. Permit at any time (i) prior to December 31, 1994, Consolidated Capital Funds to be less than $62,300,000, and (ii) on and after December 31, 1994, Consolidated Capital Funds to be less than $63,300,000." (d) Subsection 10(b)(ix) is deleted in its entirety and there is substituted therefor the following: "(ix) Limitation on Dividends. From and after January 1, 1994, declare any dividends (other than dividends payable solely in common stock of the Guarantor) on, or make any payments on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of stock of the Guarantor, whether nor or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Guarantor or any Subsidiary, except that, so long as no Default or Event of Default has occurred and is continuing or would occur after giving effect to such declaration or payment, (a) the Guarantor may declare and pay cash dividends on its ESOP Convertible Cumulative Preferred Shares, Series A, and (b) the Guarantor may declare and pay cash dividends on the common - 2 - stock of the Guarantor or repurchase shares of the common stock of the Guarantor (x) during its 1994 fiscal year in an amount not in excess of $0.28 per share, and (y) during each of its fiscal years thereafter, in an amount not in excess of $0.28 per share provided such dividends are paid solely out of the Guarantor's Consolidated Net Income for such fiscal year." (e) Subsection 10(b)(x) is deleted in its entirety and there is substituted therefor the following: "(x) Limitation on Capital Expenditures. Make any capital expenditures or fixed asset acquisitions, or, without duplication, incur any obligation so to do or permit any Subsidiary so to do, with respect to the Guarantor and its Subsidiaries on a consolidated basis in an amount exceeding (i) $4,600,000 for the fiscal year ending December 31, 1993, and (ii) $4,000,000 in any fiscal year thereafter. Capital expenditures and fixed asset acquisitions shall be calculated on a non- cumulative basis so that amounts not expended in any fiscal year may not be carried over and expended in subsequent fiscal years." (f) Subsection 10(b)(xiv) is deleted in its entirety and there is substituted therefor the following: "(xiv) Limitation on Acquisitions. Acquire all or any substantial portion of the business, stock or assets of any company or permit any Subsidiary to do any of the foregoing, without the prior written consent of the Bank." (g) A new subsection 10(b)(xv) is added reading as follows: "(xv) Minimum Consolidated Net Worth. Permit at any time (i) prior to December 31, 1994, Consolidated Net Worth to be less than $33,000,000, and (ii) on and after December 31, 1994, Consolidated Net Worth to be less than $34,000,000." (h) The definitions of "Consolidated Interest Income" and "Interest Coverage Ratio" are inserted in the appropriate alphabetical order in Schedule 1 to the Existing Guarantee, reading as follows: "'Consolidated Interest Income': for any period, the sum of the amounts included as consolidated interest income in determining Consolidated Net Income for such period." - 3 - "'Interest Coverage Ratio': at any time of determination, the ratio of (a) the sum of (i) the product of Consolidated Net Income for the immediately preceding fiscal quarter of the Guarantor multiplied by 4, (ii) the product of income taxes to the extent deducted in determining such Consolidated Net Income for such immediately preceding fiscal quarter of the Guarantor multiplied by 4 and (iii) the product of Consolidated Interest Expense for such fiscal quarter multiplied by 4 minus the product of Consolidated Interest Income for such fiscal quarter multiplied by 4 to (b) the product of Consolidated Interest Expense for such fiscal quarter multiplied by 4 minus the product of Consolidated Interest Income for such fiscal quarter multiplied by 4." 2. In order to induce the Bank to execute and deliver this Amendment, the Guarantor hereby represents and warrants to the Bank that the representations and warranties set forth in Section 9 of the Existing Guarantee are true and correct as if made on the date hereof except for changes in the ordinary course of business, none of which, singly or in the aggregate, have had a material adverse effect on the business, operations or financial condition of the Guarantor or on the ability of the Guarantor to perform its obligations under the Existing Guarantee and other than as has been publicly reported by the Guarantor in its announcements, releases or filings with the Securities and Exchange Commission; provided, however, that all references to the term "Guarantee" shall be deemed to be references to the Existing Guarantee as amended by this Amendment. 3. Defined terms used in this Amendment not otherwise defined herein shall have the meanings set forth in the Existing Guarantee unless the context otherwise requires. Except as expressly amended hereby, all of the terms and conditions of the Existing Guarantee shall remain in full force and effect. - 4 - 4. This Amendment shall be governed by and construed in accordance with the laws of the State of New York and may be exe- cuted in any number of counterparts, all of which taken together, shall constitute one and the same document. IN WITNESS WHEREOF, the parties hereto have set their signatures as of the date first above written. EDO CORPORATION By M. J. Hegarty Vice President - Finance Title NATIONAL WESTMINSTER BANK USA By__________________________ Title - 5 - EX-4 5 EXHIBIT 10(C) 1988 STOCK OPTION PLAN EXHIBIT 10(c) EDO CORPORATION 1988 STOCK OPTION PLAN 1. Purpose The EDO Corporation 1988 Stock Option Plan (the "Plan") is intended to attract and retain qualified directors, executives and other key employees of EDO Corporation (the "Corporation") and its Subsidiaries by providing them with opportunities for stock ownership under the Plan. 2. Administration The Plan shall be administered by a committee (the "Committee") of not less than three directors of the Corporation selected by, and serving at the pleasure of, its Board of Directors (the "Board"). Directors who are also employees of the Corporation or any Subsidiary, or who have been such employees within one year, may not serve on the Committee. The Committee shall have the authority, subject to the terms of the Plan (including, without limitation, the grant of options to Outside Directors as specified in Section 3 below), to determine the persons eligible for options and those to whom options shall be granted, the number of shares to be covered by each option, the time or times at which options shall be granted, and the terms and provisions of the instruments by which options shall be evidenced; and to interpret the Plan and make all determination s necessary or advisable for its administration. The Committee may consult with legal counsel, who may be counsel to the Corporation, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. The Committee's decisions under the Plan to grant options shall be subject to the approval of the Board. 3. Eligibility Only employees who serve as an executive or other key employee of the Corporation or a Subsidiary shall be granted options. "Subsidiary" means any company of which the Corporation owns, directly or indirectly, the majority of the combined voting power of all classes of stock. In addition, directors of the Corporation who are not employees of the Corporation ("Outside Directors") shall receive a one-time grant of 2,000 non-qualified options. Except for the initial grant of options to Outside Directors, a mem ber of the Committee shall not be eligible, while a member, to receive an option under the Plan, but may exercise any previously granted options. 4. Stock The stock for which options may be granted shall be the Corporation's Common Shares ("Common Shares"). When options are exercised, the Corporation may either issue authorized but unissued Common Shares or transfer issued Common Shares held in its treasury. The total number of Common Shares which may be sold to optionees under the Plan pursuant to options shall not exceed 200,000 shares. If an option expires, or is otherwise terminated prior to its exercise, the Common Shares covered by such an option immedi ately prior to such expiration or other termination shall continue to be available under the Plan. 5. Granting of Options The date of grant of an option to employees under the Plan will be the date on which the option is awarded by the Committee. The granting of any option to any optionee shall neither entitle such optionee to, nor disqualify such optionee from, participation in any other grant of options. Current Outside Directors shall be granted their options effective as of January 26, 1988, and new Outside Directors (including directors who become Outside Directors upon termination of their employment with the Company) shall be granted their options on the date on which they first become Outside Directors. 6. Terms and Conditions of Options Options shall be designated non-qualified options or incentive stock options qualified under Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be evidenced by instruments in form approved by the Committee. Such instruments shall conform to the following terms and conditions. 6.1 Option price The option price per share for non-qualified options granted to Outside Directors and incentive stock options shall be the fair market value of the optioned shares on the day the option is granted, which shall be the mean of the high and low prices of the Common Shares on the Consolidated Trading Tape on that day or, if no sale of Common Shares is recorded on such Tape on that day, then on the next preceding day on which there was such a sale. The price for other non-qualified options shall be determined solely at the discretion of the Committee and the Board and shall be between 75% and 100% of fair market value as determined above. The option price shall be paid (i) in cash or (ii) in Common Shares of the Corporation having a fair market value equal to such option price or (iii) in a combination of cash and Common Shares. The fair market value of Common Shares delivered to the Corporation pursuant to the immediately preceding sentence shall be determined on the basis of the mean of the high and low price for a Common Share on the Consolidated Trading Tape on the day of exercise or, if there was no such sale on the day of exercise, on the day next preceding the day of exercise on which there was such a sale. Notwithstanding the above, no incentive stock option shall be granted to any person who, at the time the option is granted, owns (within the meaning of Section 425(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or of any Subsidiary, unless at the time the incentive stock option is granted to such person the option price is at least 110% of the fair market value (as described above) of the shares subject to the option. 6.2 Term and exercise of options Except in special circumstances, each option shall expire on the tenth anniversary of the date of its grant and shall be exercisable in four substantially equal annual installments commencing on the first anniversary of the date of grant; provided, however, that the Committee may include in any option instrument (other than in respect of any option granted to an Outside Director), initially or by amendment at any time, a provision making any installment or installments exercisable at such earlier date, or upon the occurrence of such earlier event, as may be specified by such provision, if the Committee deems such provision to be in the interests of the Corporation or necessary to realize the reasonable expectation of the optionee. After becoming exercisable, each installment shall remain exercisable until expiration or termination of the option. An option may be exercised from time to time, in whole or part, up to the total number of shares with respect to which it is then exercisable. The Committee may provide that payment of the option exercise price may be made following delivery of the certificate for the exercised shares. 6.3 Termination of employment or membership on the Board If an optionee ceases, other than by reason of death or retirement as determined under the Corporation's Pension Plan, to be employed by the Corporation or a Subsidiary, or if an Outside Director optionee ceases to be a member of the Board, all options granted to such optionee and exercisable on the date of such optionee's termination of employment or membership on the Board shall terminate on the earlier of such options' expiration or one month after the day such optionee's employment or membership ends. If an optionee retires, all options granted to such optionee and exercisable on the date of such optionee's retirement shall terminate on the earlier of such options' expiration or the third anniversary of the day of such optionee's retirement. Any installment not exercisable on the date of such termination or retirement shall lapse and be thenceforth unexercisable. Whether authorized leave of absence or absence in military or governmental service may constitute employment for the purposes of the Plan shall be conclusively determined by the Committee. Except with respect to the options granted to Outside Directors, the Committee could extend the period of exercisability in the event of optionee termination for other than death or retirement. 6.4 Exercise upon death of optionee If an optionee dies, such optionee's option may be exercised, to the extent of the number of shares with respect to which such optionee could have exercised it on the date of such optionee's death, by such optionee's estate, personal representative or beneficiary who acquires the option by will or by the laws of descent and distribution, at any time prior to the earlier of such option's expiration or the third anniversary of such optionee's death. On the earlier of such dates, the option shall terminate. The Committee may approve all cash payments to the estate of an optionee if circumstances warrant such a decision. 6.5 Assignability No option shall be assignable or transferable by the optionee except by will or by the laws of descent and distribution and during the lifetime of the optionee the option shall be exercisable only by such optionee. At the request of an optionee, Common Shares purchased on exercise of an option may be issued or transferred in the name of the optionee and another person jointly with the right of survivorship. 6.6 Repurchase of option shares (a) Any optionee (other than an Outside Director) may at the time of exercise or, provided such optionee has duly made an election under Section 83(b) of the Code, within thirty days thereafter request that the Corporation repurchase from such optionee a portion of the Common Shares to be purchased by the optionee upon such exercise with an aggregate fair market value not exceeding one-half of the amount by which (i) the fair market value of a Common Share on the day of exercise, multiplied by the number of Common Shares as to which the optionee is exercising an option, exceeds (ii) the total purchase price for that number of Common Shares under the terms of such option. (b) Subject to section 6.6(c), an optionee who is at the time of exercise a director or officer of the Corporation or the beneficial owner, directly or indirectly, of 10% or more of the Corporation's Common Shares may at a day following such exercise which complies with the requirement of section 6.6(c), request that the Corporation repurchase from such optionee a portion of the Common Shares which such optionee purchased upon exercise of such optionee's option, and which, after reduction (if any) for repurchase following a request pursuant to section 6.6(a), has an aggregate fair market value not exceeding one-half of the amount by which (i) the fair market value of a Common Share on the day of exercise (or day of request for repurchase if such optionee has not made an election under Section 83(b) of the Code) multiplied by the number of Common Shares as to which the optionee exercised such option exceeded (ii) the total purchase price for that number of Common Shares under the terms of such option. (c) Any request for repurchase made pursuant to section 6.6(b) shall be made not earlier than six months after date of exercise nor later than the end of the ninth business day of the initial period thereafter in which such optionee is permitted to trade in the Common Shares of the Corporation in compliance with Federal securities laws and rules, and policies of the New York Stock Exchange. (d) Upon receipt of a request for repurchase made pursuant to sections 6.6(a) or 6.6(b), the Committee shall then, in its sole discretion, determine whether the Corporation will purchase any or all of such Common Shares. If the Corporation purchases any such Common Shares, the purchase price thereof shall be determined on the basis of the fair market value of a Common Share on the day of receipt of the request for repurchase. The fair market value of a Common Share shall be the mean of the high and low price for a Common Share on the Consolidated Trading Tape on the day of such receipt of request, or, if there was no such sale on the day of such receipt of request, on the day next preceding the day of such receipt of request on which there was such a sale. (e) Any action taken by an optionee pursuant to this section 6.6 must be in the form of written notice to the Committee and shall be effective upon receipt thereof. 6.7 Limitation on incentive stock options Incentive stock options can only be granted to the extent that the aggregate fair market value (determined at the time the options are granted) of the stock subject to such options, exercisable for the first time during any calendar year, shall not exceed $100,000. 6.8 Other provisions Instruments evidencing options may contain such other provisions, not inconsistent with the Plan, as the Committee deems advisable, including a requirement that an optionee represent to the Corporation in writing, when an option is granted, or when such optionee receives shares on its exercise, that such optionee is accepting such option, or receiving such shares (unless they are then covered by a Securities Act of 1933 registration statement), for such optionee's own account for investment only. 7. Capital Adjustments The number and price of Common Shares covered by each option and the total number of shares that may be sold under the Plan shall be proportionally adjusted to reflect, as deemed equitable and appropriate by the Committee and subject to any required action by shareholders, any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change. 8. Effective Date of Plan The effective date of the Plan is January 26, 1988. The Plan will become effective as of that date provided that the Plan receives the approval of the holders of a majority of the outstanding Common Shares at the Corporation's 1988 Annual Meeting of Shareholders. If such approval is not forthcoming, the Plan shall be null and void. 9. Term; Amendment of Plan This Plan shall expire on January 25,1998 (except as to options outstanding on that date). The Board may terminate or amend the Plan in any respect at any time, except that, without the approval of the holders of a majority of the outstanding Common Shares, the total number of shares that may be sold, issued or transferred under the Plan may not be increased (except by adjustment pursuant to section 7), the provisions of section 3, regarding eligibility, may not be modified, the purchase price at which shares may be offered pursuant to options may not be reduced (except by adjustment pursuant to section 7), the expiration date of the Plan may not be extended and no change may be made which would cause the Plan not to comply with Rule 16(b)3, promulgated under the Securities Exchange Act of 1934, as amended from time to time. No action of the Board or shareholders, however, may, without the consent of an optionee, alter or impair such optionee's rights under any option previously granted to such optionee. 10. No Right of Employment Neither the action of the Corporation in establishing the Plan, nor the action taken by it or by the Board or the Committee under the Plan, nor any provision of the Plan, shall be construed as giving to any person the right to be retained in the employ of the Corporation or any Subsidiary. 11. Withholding Taxes The Corporation shall have the right to deduct withholding taxes from any payments made pursuant to the Plan or to make such other provisions as it deems necessary or appropriate to satisfy its obligations to withhold Federal, state or local income or other taxes incurred by reason of payments or the issuance of Common Shares under the Plan. Whenever under the Plan Common Shares are to be delivered upon exercise of an option, the Committee shall be entitled to require as a condition of delivery that the gra ntee remit an amount sufficient to satisfy all Federal, state and other governmental withholding tax requirements related thereto. 12. Plan not a Trust Nothing contained in the Plan and no action taken pursuant to the Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Corporation and any participant, the executor, administrator or other personal representative, or designated beneficiary of such participant, or any other persons. Any reserves that may be established by the Corporation in connection with the Plan shall continue to be part of the general funds of the Corporation and no individual or entity other than the Corporation shall have any interest in such funds until paid to a participant. If and to the extent that any participant or such participant's executor, administrator or other personal representative, as the case may be, acquires a right to receive any payment from the Corporation pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of the Corporation. 13. Notices Each participant shall be responsible for furnishing the Committee with the current and proper address for the mailing of notices and delivery of agreements, Common Shares and cash pursuant to the Plan. Any notices required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular United States mail, first-class and prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing will be suspended until the participant furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification if such notice is not required under the terms of the Plan or any applicable law. 14. Severability of Provisions If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 15. Payment to Minors, etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Corporation and other parties with respect thereto. 16. Headings and Captions The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 17. Controlling Law This Plan shall be construed and enforced according to the laws of the State of New York to the extent not preempted by Federal law, which shall otherwise control. EX-5 6 EXHIBIT 10(D) 1983 LONG-TERM INCENTIVE PLAN EXHIBIT 10(d) EDO CORPORATION 1983 LONG-TERM INCENTIVE PLAN 1. Purpose. The purpose of the 1983 Long-Term Incentive Plan (the "Plan") of EDO Corporation (the "Corporation") is to advance the interests of the Corporation and its shareholders by providing key employees of the Corporation and its Subsidiaries, upon whose judgment, initiative and efforts the successful conduct of the Corporation's business largely depends, with an additional incentive to continue their efforts on behalf of the Corporation, as well as to attract to the Corporation people of experience and ability. 2. Definitions. (a) "Applicable Percentage" means a percentage, ranging from 0'% to 200%, of the value (whether expressed in terms of Fair Market Value of the Common Shares or otherwise) of a Performance Unit. (b) "Award" means an award of Restricted Shares and/or Performance Units granted under the provisions of the Plan. (c) "Board of Directors" means the Board of Directors of the Corporation. (d) "Change in Control" means an occurrence in which (i) a "person," including a "group," other than the Corporation's Employee Stock Ownership Trust, becomes a "beneficial owner," directly or indirectly, of securities of the Corporation having 25% or more of the total number of votes which may be cast for directors of the Corporation (as the terms "person," "group" and "beneficial owner" are used in Sections 13(d) (3) and 14(d) (2) of the Securities Exchange Act of 1934) (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved at the time by a vote of at least two-thirds of the directors still in office who were directors at the beginning of the period; (iii) the shareholders of the Corporation shall approve any merger or other business combination, sale of assets or combination of the foregoing transactions; or (iv) a tender offer is commenced for at least 25% of the outstanding shares of the Corporation's common stock. (e) "Committee" means the Audit and Compensation Committee of the Corporation. (f) "Common Shares" means the common shares of the Corporation, par value $1.00 per share. (g) "Date of Grant" means the date on which an Award is granted by the Committee. (h) "Discharge for Cause" means the termination of employment of an employee for (i) providing the Corporation with materially false reports concerning his business interests or employment related activities, (ii) making materially false representations relied upon by the Corporation in furnishing information to shareholders, a stock exchange or the Securities and Exchange Commission, (iii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Corporation, (iv) misconduct causing a serious violation by the Corporation of state or federal laws, (v) theft of Corporation funds or corporate assets, or (vi) conviction of a crime (excluding traffic violations or similar misdemeanors). (i) "Fair Market Value" on any date is the mean of the high and low sale prices of the Common Shares on the American Stock Exchange composite tape on such date or if there is no sale on such date. then the mean of such high and low sale prices on the last previous date on which a sale is reported. (j) "Participant" means an employee of the Corporation or any of its Subsidiary chosen by the Committee to participate in the Plan. (k) "Performance Period" shall have the meaning specified in Section 8.2. (I) "Performance Target" means a financial target upon whose attainment the valuation of the Performance Units is dependent, which may include measures such as growth in corporate or divisional earnings or any other financial measure(s) selected by the Committee. (m) "Performance Threshold" means a minimum Performance Target which must be met before any value is accrued to a Performance Unit. (n) "Performance Unit" means the right to receive an amount of cash based upon the terms and subject to the restrictions set forth in Section 8. Performance Units are not Common Shares. (o) "Restricted Shares" means the Common Shares awarded upon the terms and subject to the restrictions set forth in Section 7. (p) "Restriction Period" shall have the meaning specified in Section 7.2. (q) "Share Restrictions" shall have the meaning specified in Section 7.2. (r) "Subsidiary" means any corporation of which the majority of the outstanding voting stock is owned, directly or indirectly, by the Corporation. 3. Effective Date of the Plan. The effective date of the Plan is January 1, 1983. The Plan will become effective as of that date upon the approval of the Corporation's Board of Directors, provided that the Plan receives the approval, within twelve months of its approval by the Board of Directors, of the holders of a majority of the Common Shares of the Corporation. If such approval is not forthcoming, the Plan and all Awards granted under it shall become null and void. 4. Administration. The Plan shall be administered by the Committee, which shall consist of three or more directors, none of whom shall be eligible to receive any Awards under the Plan. The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make whatever determinations and interpretations in connection with the Plan as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants in the Plan and on their legal representatives and beneficiaries. 5. Common Shares and Performance Units Subject to the Plan. Subject to adjustment as provided in Section 11, the maximum number of Common Shares which may be issued under the Plan is 75,000 Common Shares and the maximum number of Performance Units which may be awarded under the Plan is 75,000 units. In no event will any Participant be awarded during the term of the Plan more than 20% of the maximum number of Common Shares or Performance Units available under the Plan. The Common Shares issued under the Plan may be either authorized and unissued Common Shares or Common Shares previously issued and reacquired by the Corporation. Any Restricted Shares awarded and later forfeited and any Performance Units awarded and to which no value has accrued at the end of the Performance Period relating to such Award are again subject to award under the Plan. 6. Eligibility. The Committee will from time to time in its absolute discretion, subject to the approval of the Board of Directors, grant Restricted Share and Performance Unit Awards to those key employees of the Corporation and its subsidiaries whom it identifies as having significant responsibility for the long-term growth of the Corporation. Members of the Board of Directors who are not employees or officers of the Corporation shall not be eligible to receive Awards under the Plan. 7. Restricted Share Awards. 7.1 Grant of Restricted Share Awards. The Committee will determine for each Participant the number of Common Shares to be covered by each Restricted Share Award. 7.2. Restrictions. Common Shares issued to a Participant as a Restricted Share Award will be subject to the following restrictions ("Share Restrictions"): (a) Except as set forth in Sections 7.4 and 7.5, all of the Restricted Shares subject to an Award will be forfeited and returned to the Corporation and all rights of the Participant to such Restricted Shares will terminate without any payment of consideration by the Corporation, unless the Participant remains in the continuous employment of the Corporation or a Subsidiary for a period of time determined by the Committee but in no event less than one year from the Date of Grant ("Restriction Period"). (b) During the Restriction Period relating to an Award, none of the Restricted Shares subject to such Award may be sold, assigned, bequeathed, transferred, pledged, hypothecated or otherwise disposed of in any way by the Participant. 7.3 Rights As a Shareholder. Except as set forth in Section 7.2(b), the recipient of a Restricted Share Award will have all of the rights of a shareholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receive all dividends or other distributions made with respect to the Restricted Shares. 7.4 Lapse of Restrictions at Termination of Employment. In the event of the termination of employment of a Participant during the Restriction Period by reason of death, total and permanent disability, retirement, or discharge from employment other than a Discharge for Cause, the Committee may, at its discretion, remove Share Restrictions on a pro rata portion of the Restricted Shares subject to an Award. In any such case Share Restrictions will lapse on the date of such termination on the fraction of the total number of shares of Restricted Shares subject to such Award equal to: (i) the number of full calendar months between the Date of Grant of such Award and the date of termination of employment, divided by (ii) the total number of months in the Restriction Period. Restricted Shares to which the Share Restrictions have not so lapsed will be forfeited and returned to the Corporation as provided in Section 7.2(a). 7.5 Lapse of Restrictions at Discretion of the Committee. The Committee may shorten the Restriction Period or remove any or all Share Restrictions if, in the exercise of its absolute discretion, it determines that such action is in the best interests of the Corporation and equitable to the Participant. 7.6 Listing and Registration of Shares. The Corporation may, in its discretion, postpone the issuance and/or delivery of Restricted Shares until completion of stock exchange listing, or registration, or other qualification of such Restricted Shares under any law, rule or regulation. 8. Performance Unit Awards. 8.1 Grant of Performance Units. The Committee may grant Performance Units in connection with grants of Restricted Shares or separately. No fund will be set aside by the Corporation for the payment of Performance Units; rather, the Corporation will maintain a separate written account for each Participant and will record in each account the number of Performance Units awarded to the Participant. 8.2 Performance Period. The Committee will determine, with respect to each Performance Unit awarded, the period of time during which the attainment of the Performance Target pertaining to such Performance Unit will be measured (the "Performance Period"). Such Performance Period shall be at least one year in duration and shall correspond with the periods used by the Corporation for financial reporting purposes. 8.3 Valuation of Performance Units. At the Date of Grant, the Committee shall establish for each Performance Unit Award (i) the Performance Threshold, (ii) the Performance Target and (iii) the Applicable Percentage. As soon as practicable after the expiration of the Performance Period as the financial statements of the Corporation for such period are available in final form, the Committee will determine the value of each Award. The value of a Performance Unit will equal (i) the Applicable Percentage times (ii) the Fair Market Value of the Shares on the last day of the Performance Period or such other measure of value selected by the Committee. In the event that Fair Market Value is the measure used to value Performance Units, the value of any Performance Unit at the end of a Performance Period may not exceed three times the Fair Market Value of the Stock on the Date of Grant. In the event that the Performance Threshold in respect to an Award is not met, no payment will be made to Participant with respect to such Award. 8.4 Payment on Termination of Employment. Performance Units will have no value if the Participant is not an employee of the Corporation at the end of the Performance Period for which the Performance Unit was granted, provided however, that in the event of termination of employment by reason of death, total and permanent disability, retirement, or discharge from employment other than a Discharge for Cause, the Committee may, in its discretion, accrue value to a pro rata portion of the Performance Units subject to an Award. The fraction of such Performance Units with respect to which value has accrued will equal: (i) the number of full calendar months between the I )ate of Grant of the award and the date of termination of employment, divided by (ii) the total number of months in the Performance Period. 8.5 Payment at Discretion of the Committee. The Committee may shorten the Performance Period or declare any Performance Unit immediately payable if, in the exercise of its absolute discretion, it determines that such action is in the best interests of the Corporation and equitable to the Participant holding such Performance Unit. 8.6 Payment of Performance Units. Payment of the value of Performance Units will be made as soon as practical after valuation. Payments will be made in cash. 8.7 Assignment. No Performance Unit may be sold, assigned, bequeathed, transferred, pledged, hypothecated or otherwise disposed of in any way by any Participant. 9. Award Agreements. Each Restricted Share and/or Performance Unit Award will be evidenced by a written agreement, in form satisfactory to the Committee, executed by the Participant and the Corporation, which describes the conditions for receiving the Award including, if appropriate, Share Restrictions, applicable Restriction or Performance Periods, the Performance Threshold, the Performance Target, the Applicable Percentage, and any other terms and conditions as may be required by the Committee or applicable securities law. 10. Designation of Beneficiary. A participant may, with the consent of the Committee, designate a person or persons to receive, in the event of death, any Restricted Shares or payment of Performance Units to which he or she would then be entitled. Such designation will be made upon forms supplied by and delivered to the Corporation and may be revoked in writing by the Participant. If a Participant fails effectively to designate a beneficiary, then his or her estate will be deemed to be the beneficiary. 11. Dilution and Other Adjustments. In the event of any change in the outstanding Common Shares by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares, or other similar corporate change, the Committee shall make such adjustments as it, in its absolute discretion, deems equitable in the number or kind of Common Shares or units authorized by the Plan and, with respect to outstanding Awards, in the number or kind of shares of stock or units covered by grants made under the Plan. The Committee may also make adjustments, to the extent it deems appropriate, in the Performance Threshold and/or Performance Target for any Performance Units awarded, to reflect any significant changes which may have occurred during such period in accounting practices, tax laws, or any unusual circumstances outside of management's control which significantly affected the Corporation's performance. 12. Change in Control. Notwithstanding any other provision of this plan, in the event of a Change in Control, all Share Restrictions on all Restricted Shares previously awarded will lapse immediately, in each case from such date as will enable the Participants to obtain the same consideration available to any other shareholder. The Performance Periods applicable to all Performance Units previously awarded under the Plan will end immediately, and the Performance Units of any and all Participants shall immediately become payable in an amount determined by multiplying the amount which would have been payable, assuming the Performance Target with respect to such Performance Units had been achieved, by a fraction, the numerator of which is the number of calendar months or parts thereof between the Date of Grant and the date on which the Change of Control occurs, and the denominator of which is the total number of months in the Performance Period. 13. Withholding. There will be deducted from each distribution of cash and/or Common Shares under the Plan the amount of any tax required by any governmental authority to be withheld. 14. Amendment of the Plan. The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect; provided, however, that unless also approved or ratified by a vote of the holders of a majority of the Corporation's outstanding shares entitled to vote thereon, any such modification or amendment shall not increase the maximum number of Common Shares or units which may be granted under the Plan (subject, however, to the provisions of Section 11 hereof). No modification or amendment may adversely affect the rights of a Participant under a previously granted Award. 15. Termination of the Plan. The right to grant Awards under the Plan will terminate on December 31, 1992. The Board of Directors may, however, suspend or terminate the Plan at any time, provided that no such action will, without the consent of any Participant affected thereby, adversely affect his or her rights under a previously granted Award. 16. Employment. Nothing in the Plan or in any Award confers upon any Participant the right to continue in the employ of the Corporation or interferes with or restricts in any way the rights of the Corporation to discharge any Participant at any time for any reason whatsoever, with or without cause. 17. Applicable Law. The Plan will be interpreted in accordance with the laws of the State of New York. EX-6 7 EXHIBIT 10(E) 1988 LONG-TERM INCENTIVE PLAN EXHIBIT 10(e) EDO CORPORATION 1988 LONG-TERM INCENTIVE PLAN 1. Purpose The purpose of the 1988 Long-Term Incentive Plan (the "Plan") of EDO Corporation (the "Corporation") is to advance the interests of the Corporation and its shareholders by providing certain key employees of the Corporation and its Subsidiaries, upon whose judgment, initiative and efforts the successful conduct of the Corporation's business largely depends, with an additional incentive to continue their efforts on behalf of the Corporation, as well as to attract to the Corporation people of experience and ability. 2. Definitions (a) "Applicable Percentage" means a percentage, ranging from 0% to 200%, of the value (whether expressed in terms of Fair Market Value of the Common Shares or otherwise) of a Performance Unit. (b) "Award" means an award of Restricted Shares and/or Performance Units granted under the provisions of the Plan. (c) "Board" means the Board of Directors of the Corporation. (d) "Change in Control" means an occurrence in which (i) a "person," including a "group," other than the Corporation's Employee Stock Ownership Trust, becomes a "beneficial owner," directly or indirectly, of securities of the Corporation having 25% or more of the total number of votes which may be cast for directors of the Corporation (as the terms "person," "group" and "beneficial owner" are used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934), (ii) during any period of two cons ecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved at the time by a vote of at least two-thirds of the directors still in office who were directors at the - 1 - beginning of the period, (iii) the shareholders of the Corporation shall approve any merger or other business combination, sale of assets or combination of the foregoing transactions, or (iv) a tender offer is commenced for at least 25% of the outstanding shares of the Corporation's common stock. (e) "Committee" means the Audit and Compensation Committee of the Corporation. (f) "Common Shares" means the common shares of the Corporation, par value $1.00 per share. (g) "Date of Grant" means the date on which an Award is granted by the Committee. (h) "Discharge for Cause" means the termination of employment of an employee for (i) providing the Corporation with materially false reports concerning such employee's business interests or employment related activities, (ii) making materially false representations relied upon by the Corporation in furnishing information to shareholders, a stock exchange or the Securities and Exchange Commission, (iii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Corporation, (iv) misconduct causing a serious violation by the Corporation of state or Federal laws, (v) theft of Corporation funds or corporate assets, or (vi) conviction of a crime (excluding traffic violations or similar misdemeanors). (i) "Fair Market Value" on any date is the mean of the high and low sale prices of the Common Shares on the Consolidated Trading Tape on such date or, if no sale of Common Shares is recorded on such Tape on such day, then on the next preceding day on which there was such a sale. (j) "Participant" means an employee of the Corporation or any of its Subsidiaries chosen by the Committee to participate in the Plan. (k) "Performance Period" shall have the meaning specified in Section 8.2. - 2 - (l) "Performance Target" means a financial target upon whose attainment the valuation of the Performance Units is dependent, which may include measures such as growth in corporate or divisional earnings or any other financial measure(s) selected by the Committee. (m) "Performance Threshold" means a minimum Performance Target which must be met before any value is, accrued to a Performance Unit. (n) "Performance Unit" means the right to receive an amount of cash based upon the terms and subject to the restrictions set forth in Section 8. Performance Units are not Common Shares. (o) "Restricted Shares" means the Common Shares awarded upon the terms and subject to the restrictions set forth in Section 7. (p) "Restriction Period" shall have the meaning specified in Section 7.2. (q) "Share Restrictions" shall have the meaning specified in Section 7.2. (r) "Subsidiary" means any corporation of which the majority of the combined voting power of all classes of stock is owned, directly or indirectly, by the Corporation. 3. Effective Date of the Plan The effective date of the Plan is January 1, 1988. The Plan will become effective as of that date provided that the Plan receives the approval, within twelve months of its approval by the Board, of the holders of a majority of the outstanding Common Shares. If such approval is not forthcoming, the Plan and all Awards shall be null and void. 4. Administration The Plan shall be administered by the Committee, which shall consist of three or more directors, none of whom shall be eligible to receive any Awards. The Committee is authorized, subject to the provisions of the - 3 - Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make whatever determinations and interpretations in connection with the Plan as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants and on their legal representatives and beneficiaries. 5. Restricted Shares and Performance Units Subject to the Plan Subject to adjustment as provided in Section 11, the maximum number of Restricted Shares which may be issued under the Plan is 150,000 and the maximum number of Performance Units which may be awarded is 150,000. The Restricted Shares issued under the Plan may be either authorized and unissued Common Shares or Common Shares previously issued and reacquired by the Corporation. Any Restricted Shares awarded and later forfeited and any Performance Units awarded and to which no value has accrued at the end of the Performance Period relating to such Award are again subject to award under the Plan. 6. Eligibility The Committee will from time to time in its absolute discretion, subject to the approval of the Board, grant Restricted Share and/or Performance Unit Awards to those key employees of the Corporation and its Subsidiaries whom it identifies as having significant responsibility for the long-term growth of the Corporation. Members of the Board who are not employees of the Corporation shall not be eligible to receive Awards. 7. Restricted Share Awards 7.1 Grant of Restricted Share Awards The Committee will determine for each Participant the number of Common Shares to be covered by each Restricted Share Award. 7.2 Restrictions Common Shares issued to a Participant as a Restricted Share Award will be subject to the following restrictions ("Share Restrictions"). - 4 - (a) Except as set forth in Sections 7.4 and 7.5, all of the Restricted Shares subject to an Award will be forfeited and returned to the Corporation and all rights of the Participant to such Restricted Shares will terminate without any payment of consideration by the Corporation, unless the participant remains in the continuous employment of the Corporation or a Subsidiary for a period of time determined by the Committee but in no event less than one year from the Date of Grant ("Restriction Period"). (b) During the Restriction Period relating to an Award, none of the Restricted Shares subject to such Award may be sold, assigned, bequeathed, transferred, pledged, hypothecated or otherwise disposed of in any way by the Participant. 7.3 Rights as a Shareholder Except as set forth in Section 7.2(b), the recipient of a Restricted Share Award will have all of the rights of a shareholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receive all dividends or other distributions made with respect to the Restricted Shares. 7.4 Lapse of Restrictions at Termination of Employment In the event of the termination of employment of a Participant during the Restriction Period by reason of death, total and permanent disability, retirement as determined under the Corporation's Pension Plan, or discharge from employment other than a Discharge for Cause, the Committee may, at its discretion, remove Share Restrictions on a pro rata portion of the Restricted Shares subject to an Award. In any such case Share Restrictions will lapse on the date of such termination on the fraction of the total number of Restricted Shares subject to such Award equal to (i) the number of full calendar months between the Date of Grant of such Award and the - 5 - date of termination of employment, divided by (ii) the total number of months in the Restriction Period. Restricted Shares to which the Share Restrictions have not so lapsed will be forfeited and returned to the Corporation as provided in Section 7.2(a). 7.5 Lapse of Restrictions at Discretion of the Committee The Committee may shorten the Restriction Period or remove any or all Share Restrictions if, in the exercise of its absolute discretion, it determines that such action is in the best interests of the Corporation and equitable to the Participant. 7.6 Listing and Registration of Shares The Corporation may, in its discretion, postpone the issuance and/or delivery of Restricted Shares until completion of stock exchange listing, or registration, or other qualification of such Restricted Shares under any law, rule or regulation. 8. Performance Unit Awards 8.1 Grant of Performance Units The Committee may grant Performance Units in connection with grants of Restricted Shares or separately. No fund will be set aside by the Corporation for the payment of Performance Units; rather, the Corporation will maintain a separate written account for each Participant and will record in each account the number of Performance Units awarded to the Participant. 8.2 Performance Period The Committee will determine, with respect to each Performance Unit awarded, the period of time during which the attainment of the Performance Target pertaining to such Performance Unit will be measured (the "Performance Per- - 6 - iod"). Such Performance Period shall be at least one year in duration and shall correspond with the periods used by the Corporation for financial reporting purposes. 8.3 Valuation of Performance Units At the Date of Grant, the Committee shall establish for each Performance Unit Award (i) the Performance Threshold, (ii) the Performance Target and (iii) the Applicable Percentage. As soon as practicable after the expiration of the Performance Period as the financial statements of the Corporation for such period are available in final form, the Committee will determine the value of each Award. The value of a Performance Unit will equal (i) the Applicable Percentage times (ii) the Fair Market Value on the last day of the Performance Period or such other measure of value selected by the Committee. In the event that Fair Market Value is the measure used to value Performance Units, the value of any Performance Unit at the end of a Performance Period may not exceed three times the Fair Market Value on the Date of Grant. In the event that the Performance Threshold in respect to an Award is not met, no payment will be made with respect to such Award. 8.4 Payment on Termination of Employment Performance Units will have no value if the Participant is not an employee of the Corporation at the end of the Performance Period for which the Performance Unit was granted; provided, however, that in the event of termination of employment by reason of death, total and permanent disability, retirement as determined under the Corporation's Pension Plan, or discharge from employment other than a Discharge for Cause, the Committee may, in its discretion, accrue value to a pro rata portion of the Performance Units subject to an Award. The fraction of such Performance Units with respect to which value has accrued will equal (i) the number of full calendar months between the Date of Grant of the award and the date of termina- = 7 - tion of employment, divided by (ii) the total number of months in the Performance Period. 8.5 Payment at Discretion of the Committee The Committee may shorten the Performance Period or declare any Performance Unit immediately payable if, in the exercise of its absolute discretion, it determines that such action is in the best interests of the Corporation and equitable to the participant holding such Performance Unit. 8.6 Payment of Performance Units Payment of the value of Performance Units will be made as soon as practical after valuation. Payments will be made in cash. 8.7 Assignment No Performance Unit may be sold, assigned, bequeathed, transferred, pledged, hypothecated or otherwise disposed of in any way by any Participant. 9. Award Agreements Each Restricted Share and/or Performance Unit Award will be evidenced by a written agreement, in form satisfactory to the Committee, executed by the Participant and the Corporation, which describes the conditions for receiving the Award including, if appropriate, Share Restrictions, applicable Restriction or Performance Periods, the Performance Threshold, the Performance Target, the Applicable Percentage, and any other terms and conditions as may be required by the Committee or applicable securities law. 10. Designation of Beneficiary A Participant may, with the consent of the Committee, designate a person or persons to receive, in the event of death, any Restricted Shares or payment of Performance Units to which such Participant would then be entitled. Such designation will be made upon forms supplied by and delivered to the Corporation and may be revoked in writing by the Participant. - 8 - If a Participant fails effectively to designate a beneficiary, then such Participant's estate will be deemed to be the beneficiary. 11. Dilution and Other Adjustments In the event of any change in the outstanding Common Shares by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares, or other similar corporate change, the Committee shall make such adjustments as it, in its absolute discretion, deems equitable in the number or kind of Common Shares or Performance Units authorized by the Plan and, with respect to outstanding Awards, in the number or kind of Common Shares or Performance Units granted. The Committee may also make adjustments, to the extent it deems appropriate, in the Performance Threshold and/or Performance Target for any Performance Units awarded, to reflect any significant changes which may have occurred during such period in accounting practices, tax laws, or any unusual circumstances outside of management's control which significantly affected the Corporation's performance. 12. Change in Control Notwithstanding any other provision of this plan, in the event of a Change in Control, all Share Restrictions on all Restricted Shares previously awarded will lapse immediately, in each case from such date as will enable the Participants to obtain the same consideration available to any other shareholder. The Performance Periods applicable to all Performance Units previously awarded under the Plan will end immediately, and the Performance Units of any and all Participants shall immediately become payable in an amount determined by multiplying the amount which would have been payable, assuming the Performance Target with respect to such Performance Units had been achieved, by a fraction, the numerator of which is the number of calendar months or parts thereof between the Date of Grant and the date on which the Change of Control occurs, and the denominator of which is the total number of months in the Performance Period. 13. Withholding There will be deducted from each distribution of - 9 - cash and/or Common Shares under the Plan the amount of any tax required by any governmental authority to be withheld. 14. Amendment of the Plan The Board may at any time, and from time to time, modify or amend the Plan in any respect; provided, however, that unless also approved or ratified by a vote of the holders of a majority of the Corporation's outstanding shares entitled to vote thereon, any such modification or amendment shall not increase the maximum number of Common Shares or Performance Units which may be granted under the Plan (subject, however, to the provisions of Section 11 hereof). No modification or amendment may adversely affect the rights of a Participant under a previously granted Award. 15. Termination of the Plan The right to grant Awards will terminate on December 31, 1997. The Board may, however, suspend or terminate the Plan at any time; provided, that no such action will, without the consent of any Participant affected thereby, adversely affect such Participant's rights under a previously granted Award. 16. Employment Nothing in the Plan or in any Award confers upon any Participant the right to continue in the employ of the Corporation or any Subsidiary or interferes with or restricts in any way the rights of the Corporation or any Subsidiary to discharge any Participant at any time for any reason whatsoever, with or without cause. 17. Plan not a Trust Nothing contained in the Plan and no action taken pursuant to the Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Corporation and any Participant, the executor, administrator or other personal representative, or designated beneficiary of such Participant, or any other persons. Any reserves that may be established by the Corporation in connection with the Plan shall continue to be part of the general funds of the Corporation and no individual or entity other than the Corporation shall have any interest in such funds until paid to a Participant. - 10 - If and to the extent that any Participant or such Participant's executor, administrator or other personal representative, as the case may be, acquires a right to receive any payment from the Corporation pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of the Corporation. 18. Notices Each Participant shall be responsible for furnishing the Committee with the current and proper address for the mailing of notices and delivery of agreements, Common Shares and cash pursuant to the Plan. Any notices required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular United States mail, first-class and prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing will be suspended until the Participant furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification if such notice is not required under the terms of the Plan or any applicable law. 19. Severability of Provisions If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 20. Payment to Minors, etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefore shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Corporation and other parties with respect thereto. 21. Headings and Captions The headings and captions herein are provided for reference and convenience only, shall not be - 11 - considered part of the Plan, and shall not be employed in the construction of the Plan. 22. Controlling Law This Plan shall be construed and enforced according to the laws of the State of New York to the extent not preempted by Federal law, which shall otherwise control. - 12 - EX-7 8 EXHIBIT 13(A) FINANCIAL STATEMENTS OF ANNUAL RPT 1 EXHIBIT 13(a) PAGES 13 THROUGH 29 TO THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS 2 SELECTED FINANCIAL DATA EDO CORPORATION AND SUBSIDIARIES (Not covered by Independent Auditors' Report) - - ------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 (in thousands, except per share amounts) - - ------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net sales: Military Systems $ 66,915 89,681 108,109 104,730 118,225 Commercial and Other 37,223 36,090 37,584 34,018 31,569 Products - - ------------------------------------------------------------------------------- $ 104,138 125,771 145,693 138,748 149,794 - - ------------------------------------------------------------------------------- Operating earnings (loss): Military Systems $ (5,082)a 10,096 10,637 8,160 9,853 Commercial and Other Products (200) 4,543 4,256 3,170 3,569 - - ------------------------------------------------------------------------------- (5,282) 14,639 14,893 11,330 13,422 Net interest income (expense) (2,201) (2,504) (2,404) (2,087) (2,349) General corporate expense (4,146) (4,281) (3,785) (4,240) (3,445) Litigation settlement (1,166) - (5,589) - - Other income (expense), net (1,390) (443) (585) (58) (205) - - ------------------------------------------------------------------------------- Earnings (loss) before Federal and foreign income taxes, cumulative effect of accounting change, minority interest and extraordinary gain $(14,185) 7,411 2,530 4,945 7,423 Provision (benefit) for Federal and foreign income taxes (4,901) 1,684 458 947 1,480 - - ------------------------------------------------------------------------------- Net Earnings (loss) before cumulative effect of accounting change, minority interest and extraordinary gain (9,284) 5,727 2,072 3,998 5,943 - - ------------------------------------------------------------------------------- Net Earnings (loss) (16,348)a,b 5,677 1,809 5,400 5,943 Dividends on Preferred Shares 1,406 1,455 1,495 1,528 1,535 - - ------------------------------------------------------------------------------- Net Earnings (loss) available for common shares $(17,754)a,b 4,222 314 3,872 4,408 - - ------------------------------------------------------------------------------- PER COMMON SHARE DATA - - ------------------------------------------------------------------------------- Primary net earnings (loss) $ (3.28)a,b 0.78 0.05 0.44 0.81 Fully diluted net earnings $ - 0.69 - 0.42 0.71 Average number of shares 5,415 5,389 5,298 5,355 5,451 outstanding-primary Cash dividends per common share $ 0.28 0.28 0.28 0.28 0.28 Shareholders' equity $ 5.51 9.18 9.00 9.20 8.62 OTHER INFORMATION Working capital $ 41,065 52,022 47,468 47,897 52,882 Depreciation $ 6,451 6,460 6,196 5,869 5,462 Plant and equipment expenditures $ 4,517 4,566 5,609 9,489 8,216 Total assets $ 123,405 133,348 137,098 140,126 137,942 Long-term debt $ 29,317 30,544 30,577 30,808 36,670 ESOT loan obligation $ 15,045 16,005 16,895 17,718 18,480 Shareholders' equity $ 34,286 52,369 50,032 50,015 47,657 Backlog of unfilled orders $ 89,203 94,200 116,279 162,926 174,649 a Includes a restructuring charge of $9,800 relating to the discontinuance, relocation and downsizing of certain operations. b Includes the cumulative effect of change in accounting for postretirement health benefits of $9,400 or $1.74 per share on primary net earnings. - 13 - 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS ENVIRONMENT The Company's core business is in the defense market, which has been declining over the past several years and is not expected to recover in the near future. The Company continues to believe that, although uncertainty will continue as to the direction of defense spending, the Company will benefit from its diversified position in the market and its commitment to adjust its operations to meet this decline. Accordingly, the Company adopted a plan in 1993 to restructure its operations to more efficiently operate in this changing market. This restructuring has resulted in a charge to earnings of $9.8 million that is more fully explained in Note 2. In addition to restructuring its core business, the Company has been aggressively seeking to expand its commercial segment through use of its technological expertise when a market warrants it and through acquisition. This strategy is exemplified by the continuing increase in the level of research and development expenditures, despite the reduced level of sales, primarily on commercial market initiatives and the acquisition in 1993 of Automotive Natural Gas, Inc. (ANGI), a provider of natural gas filling stations. See Note 3 for more details. While the Company has been pursuing this strategy with more emphasis on its Commercial and Other Products segment, it has not yet achieved desired results. Operating earnings in this segment decreased by $4.7 million, principally due to the aforementioned increased R&D effort and startup costs in the Company's Sports and Energy businesses, partially offset by a $2.2 million contract recovery at the Fiber Science Division. Further, fiscal 1993 results in this segment were adversely affected by unanticipated contract costs in the Company's Barnes Engineering subsidiary, which are not expected to reoccur, and a reduction in satellite-system product sales. RESULTS OF OPERATIONS - 1993 COMPARED TO 1992 The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Post-Retirement Benefits Other Than Pensions," in the first quarter of 1993. This resulted in a onetime noncash charge of $13.4 million before income tax credits ($9.4 million after income tax credits, or $1.74 per common share). This charge includes the expensing of the transition obligation and is classified separately as a cumulative effect of accounting change. See Note 15 to the Consolidated Financial Statements for more information. The discussion that follows excludes the effect of this adoption when comparing results of 1993 to 1992. On December 2, 1993, the Company acquired substantially all the assets and certain liabilities of ANGI through its newly formed wholly-owned subsidiary, EDO Automotive Natural Gas, Inc. (EDO ANGI). The results of operations of EDO ANGI, which had a minimal impact on the Company's Consolidated operating results, are included from the date of acquisition (mentioned above and in Note 3 to the Consolidated Financial Statements). Sales for 1993 were $104.1 million, which represents a decline of 17% when compared with sales of $125.8 million in 1992. Sales in the Military Systems segment decreased 25%, to $66.9 million, due primarily to continuing reductions in military spending in general, the slippage in U.S. Government contract awards due to changing Administration priorities particularly in sonar, ceramic and fiber-reinforced composite sales, and the impact of the completion of a Canadian military fuel tank contract in early 1993 . Sales in the Commercial and Other Products segment increased by 3%, to $37.2 million, where decreases in satellite-systems product sales were offset by an increase in acoustic instruments and the results of EDO ANGI from the date of purchase. A loss from operations (before general corporate expense allocations) of $5.3 million was recorded in 1993 as compared to earnings of $14.6 million in 1992. Included in 1993 operating results is a restructuring charge of $9.8 million that is mentioned above and more fully explained in Note 2. Excluding this charge, operating earnings in the Military Systems segment decreased to $4.7 million in 1993 from $10.1 million in 1992 due primarily to lower sales volume and reduced margins partially offset by aggressive cost management. The Commercial and Other Products segment recorded an operating loss of $0.2 million, which is discussed above in Business Environment. Selling, general and administrative expenses decreased to $17.2 million from $18.5 million in 1992 due to cost reductions made as sales continued to decline in 1993. This reduction was partially offset by an increase in the Commercial and Other Products segment as a result of higher expenditures on new business initiatives. Company-sponsored research-and-development expenditures increased 14%, to $6.0 million. The increase results from higher expenditures for new commercial products in the Commercial and Other Products segment, where the increase was partially offset by a reduction in the Military Systems segment. Customer-sponsored research and development expenditures, which occur primarily in the Military Systems segment, declined $2.0 million, to $14.1 million consistent with the general decline in military spending. Interest expense, net of interest income, decreased to $2.2 million from $2.5 million in 1992. Interest expense primarily represents the interest paid on the 7% Convertible Subordinated Debentures Due 2011. The Company adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," in the first quarter of 1993, which did not result in a cumulative effect adjustment. The effect of adoption on earnings is that the tax benefit associated with the dividends paid on unallocated preferred shares is now credited directly to shareholders' equity and not as a reduction of the Federal income tax provision. In 1993 this represented approximately $0.3 million. See Note 11 for a discussion of the current year's tax benefit. The net loss, before the cumulative effect of accounting change - 14 - 4 and minority interest, in 1993 of $9.3 million compares to net earnings in 1992 of $5.7 million. The loss reflects, in addition to the items discussed above, a restructuring charge of $9.8 million, which is more fully explained in Note 2; a litigation settlement charge of $1.2 million, which is more fully explained in Note 17; and a $1.0 million charge to add to a general reserve for the Company's long-term investments, as explained in Note 1(f). The primary net loss per share before the cumulative effect of the accounting change and extraordinary gain from early retirement of debt, was $1.54 as compared to net earnings of $0.78 in 1992. The pro forma combined effect of the three 1993 charges mentioned above amounts to $2.22 per share. Primary earnings per share calculations were based on a weighted average of 5.4 million shares outstanding in both 1993 and 1992. The Company's 1993 year-end backlog was $89.2 million compared to $94.2 million in 1992. The reduction reflects the overall decline in military spending. In order to offset these continuing declines the Company is continuing to emphasize its strategy of diversifying into commercial markets and at the same time restructuring its military business to provide the cash and earnings to continue to pursue new opportunities in its commercial segment. LIQUIDITY AND CAPITAL RESOURCES As a result of the declining sales volume and emphasis on working capital management, cash and short-term investments increased $4.7 million; to $9.3 million at December 31, 1993. This increase is primarily attributable to reductions in accounts receivable and inventory, which were partially offset by the cash portion of the 1993 loss and cash outlays associated with the acquisition of ANGI. The restructuring charge of $9.8 million taken in 1993 results primarily from the write-down of existing assets, and as a result there is no immediate impact on cash flow. Cash proceeds from future disposal of these assets will positively affect cash flow. Additionally, the Company is in contract to sell a facility in Salt Lake City, Utah, which will generate approximately $3.0 million in cash in 1994. The Company has an ESOT obligation of $15.0 million which is funded principally through dividends on its ESOP Preferred Shares. The Company also has outstanding $29.3 million of 7% Convertible Subordinated Debentures Due 2011. During 1990, the Board of Directors authorized a plan to purchase up to $10 million of such debentures. As of December 31, 1993, the Company had acquired $5.7 million of such debentures in open market or privately negotiated transactions at prevailing market prices, which averaged about 50% of par value. These debentures will be used to satisfy sinking fund requirements commencing in 1996. The Company's results for 1993 resulted in its not meeting certain financial covenants in its ESOT obligation as well as its revolving credit agreement (Credit Agreement), which is explained in Note 9 and Note 10. Noncompliance provisions and the terms of the covenants on both obligations have been amended. The terms of the Credit Agreement have been amended to (a) reduce the line to $15 million, (b) extend its maturity to 1995 and (c) modify the interest rate. Additionally, the modified covenants may restrict dividend pay-ments on common stock commencing in 1995. Management believes it has sufficient capital resources to fund its future capital requirements. Capital expenditures in 1993 amounted to $4.5 million, as compared with $4.6 million in 1992. Depreciation expense of $6.5 million was charged to earnings in 1993 and 1992. As explained in Note 17, the Company is involved in an environmental matter which management believes is covered by liability insurance. Management does not believe the outcome of this matter will have a material effect on the Company's consolidated financial position. RESULTS OF OPERATIONS - 1992 COMPARED TO 1991 The Company is continuing efforts to reduce costs and to focus attention and resources on targeted new commercial products. Management believes that its current initiatives will strategically position the Company for the future. The Company has modified its segment reporting by reclassifying essentially all military products into the Military Systems segment and changing the Marine Systems and Specialized Products segment to the Commercial and Other Products segment. Current and historical segment data have been modified throughout this report to reflect this change. Sales for 1992 were $125.8 million, a 14% decrease when compared with sales of $145.7 million in 1991. Sales in the Military Systems segment decreased 17%, to $89.7 million, due primarily to reduced sales on sonar programs, continued delays in the award of anticipated programs; and, when awards are made, they are generally in smaller increments. Sales in the Commercial and Other Products segment decreased by 4%, to $36.1 million, primarily as a result of decreased fiber-reinforced product sales due to a customer-directed slowdown on an international program. Despite the reduction in sales, earnings from operations (before general corporate expense allocations) in 1992 decreased by less than 2%, to $14.6 million. The improvement in operating earnings as a percent of sales results primarily from a more favorable mix of high and low margin product deliveries averaged over the course of the year and from continuing cost reduction programs. Operating earnings in the Military Systems segment decreased to $10.1 million from $10.6 million in 1991, while the Commercial and Other Products segment recorded an increase in operating earnings of 7% to $4.5 million. Selling, general and administrative expenses increased to $17.1 million from $16.1 million in 1991. The increase occurred primarily in the Commercial and Other Products segment as new business - 15 - 5 initiatives incur a proportionately higher rate in the startup phase. Additionally, this increase in selling, general and administrative expenses does not reflect reductions within the Military Systems segment where these expenses are generally reported in cost of sales. Company-sponsored research and development expenditures increased 40%, to $5.3 million. The increase results from higher expenditures in both segments, with the largest increase occurring for new commercial products in the Commercial and Other Products segment. Customer-sponsored research and development expenditures declined $4.6 million, to $16.1 million, consistent with the general decline in military spending. Interest expense net of interest income increased slightly to $2.5 million, from $2.4 million in 1991. The provision for Federal and foreign income taxes as a percentage of pretax earnings was approximately 23% and 18% in 1992 and 1991, respectively. The low effective tax rate results principally from the deductibility of preferred share dividends. Net earnings, before minority interest and the extraordinary gain from early retirement of debt, increased from $2.1 million in 1991 to $5.7 million in 1992. This increase primarily reflects the inclusion in 1991 results of two nonoperating expenses, one of which was approximately $5.6 million relating to a litigation settlement explained in Note 17 and the other one of which was approximately $1.0 million for the addition to a general reserve for the Company's long-term investments. Primary net earnings per share, before the extraordinary gain from early retirement of debt were $0.78 in 1992 as compared to $0.05 in 1991. The pro forma combined after-tax effect of the two 1991 nonoperating charges mentioned above amounts to $0.76 per share. Primary earnings per share calculations were based on a weighted average of 5.4 million and 5.3 million shares outstanding in 1992 and 1991, respectively. The Company's 1992 year-end backlog was $94 million, compared to $116 million in 1991. The reduction reflects the overall decline in military spending. The Company is emphasizing its new and existing technical capabilities for commercial applications as well as the Company's core businesses to secure new opportunities to mitigate defense cutbacks. COMMON SHARE PRICES EDO common shares are traded on the New York Stock Exchange. As of February 18, 1994, there were 3,076 shareholders of record (brokers and nominees counted as one each). The price range in 1993 and 1992 was as follows: 1993 1992 HIGH LOW HIGH LOW 1st Quarter 7-5/8 6 8-3/4 6-1/4 2nd Quarter 6-7/8 5 6-1/2 4-1/4 3rd Quarter 6 4-1/2 5-7/8 4-5/8 4th Quarter 7-1/2 5-1/8 6-1/4 4-3/4 DIVIDENDS The Company has paid quarterly cash dividends without interruption since the fourth quarter of 1976. Fifty percent stock dividends were paid in February 1984, April 1983 and September 1982. While it is the present intention of the Company's Board of Directors to continue payment of regular quarterly dividends, decisions as to the payment of future dividends rest within the discretion of the Board of Directors and will be made in light of the Company's earnings, financial condition, and such other factors as the Board of Directors may deem relevant at such time. Two financing arrangements restrict the amount of funds that the Company may use for the payment of cash dividends, which will be based on earnings available for dividends, as defined, beginning in 1995. See Notes 9 and 10 to the Consolidated Financial Statements. - 16 - 6 CONSOLIDATED STATEMENTS OF OPERATIONS EDO CORPORATION AND SUBSIDIARIES - - ------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31 1993 1992 1991 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - - ------------------------------------------------------------------------------- INCOME Net sales $104,138 $125,771 $145,693 Other 556 395 333 - - ------------------------------------------------------------------------------- 104,694 126,166 146,026 - - ------------------------------------------------------------------------------- COSTS AND EXPENSES Cost of sales 81,097 92,045 112,919 Selling, general and administrative 17,181 18,477 18,232 Research and development 6,044 5,286 3,767 Restructuring charge 9,800 - - - - ------------------------------------------------------------------------------- 114,122 115,808 134,918 - - ------------------------------------------------------------------------------- OPERATING EARNINGS (LOSS) (9,428) 10,358 11,108 NON-OPERATING INCOME (EXPENSE) - - ------------------------------------------------------------------------------- Interest income 291 176 131 Interest expense (2,492) (2,680) (2,535) Litigation settlement (1,166) - (5,589) Other, net (1,390) (443) (585) - - ------------------------------------------------------------------------------- (4,757) (2,947) (8,578) - - ------------------------------------------------------------------------------- Earnings (loss) before Federal and foreign income taxes, cumulative effect of accounting change, minority interest and extraordinary gain (14,185) 7,411 2,530 Provision (benefit) for Federal and foreign income taxes (4,901) 1,684 458 - - ------------------------------------------------------------------------------- NET EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE, MINORITY INTEREST AND EXTRAORDINARY GAIN (9,284) 5,727 2,072 Minority interest 2,336 (50) (322) Cumulative effect of change in accounting for postretirement health benefits (net of taxes of $3,958) (9,400) - - Extraordinary gain on purchase of debt (net of taxes of $40 in 1991) - - 59 - - ------------------------------------------------------------------------------- NET EARNINGS (LOSS) (16,348) 5,677 1,809 Dividends on preferred shares 1,406 1,455 1,495 - - ------------------------------------------------------------------------------- NET EARNINGS (LOSS) AVAILABLE FOR COMMON SHARES $(17,754) $4,222 $314 EARNINGS (LOSS) PER COMMON SHARE: Primary: Net earnings (loss) before cumulative effect of change in accounting and extraordinary gain $(1.54) $0.78 $0.05 Cumulative effect of change in accounting (1.74) - - Extraordinary gain on purchase of debt - - 0.01 - - ------------------------------------------------------------------------------- $(3.28) $0.78 $0.06 - - ------------------------------------------------------------------------------- Fully diluted: Net earnings (loss) before cumulative effect of change in accounting and extraordinary gain * $0.69 $ * Cumulative effect of change in accounting * - - Extraordinary gain on purchase of debt - - * - - ------------------------------------------------------------------------------- $ * $0.69 $ * - - ------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. * Antidilutive in 1991 and 1993. - 17 - 7 CONSOLIDATED BALANCE SHEETS EDO CORPORATION AND SUBSIDIARIES - - ------------------------------------------------------------------------------- DECEMBER 31 1993 1992 (in thousands, except share amounts) - - ------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 9,284 $ 4,597 Recoverable Federal income taxes 2,322 - Accounts receivable 38,283 48,283 Inventories 18,155 20,702 Prepayments 1,319 1,126 - - ------------------------------------------------------------------------------- Total current assets 69,363 74,708 - - ------------------------------------------------------------------------------- Property, plant and equipment, at cost 92,389 88,237 Less accumulated depreciation and amortization 58,512 45,859 - - ------------------------------------------------------------------------------- Net property, plant and equipment 33,877 42,378 Cost in excess of fair value of net assets acquired 11,415 8,627 Deferred Federal and foreign income taxes 1,011 - Other assets 7,739 7,635 - - ------------------------------------------------------------------------------- $123,405 $133,348 - - ------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ - $ 34 Accounts payable and accrued liabilities 21,019 16,829 Contract advances and deposits 7,279 5,823 - - ------------------------------------------------------------------------------- Total current liabilities 28,298 22,686 - - ------------------------------------------------------------------------------- Deferred Federal and foreign income taxes - 6,273 Long-term debt, less current installments 29,317 30,544 ESOT loan obligation 15,045 16,005 Postretirement obligation 13,492 - Minority interest 2,967 5,471 SHAREHOLDERS' EQUITY Preferred shares, par value $1 per share, authorized 500,000 shares (80,056 issued in 1993 and 84,027 in 1992) 80 84 Common shares, par value $1 per share, authorized 25,000,000 shares (8,453,902 issued in both years) 8,454 8,454 Additional paid-in capital 41,784 43,366 Retained earnings 42,350 61,274 - - ------------------------------------------------------------------------------- 92,668 113,178 Less: Treasury shares at cost (2,982,853 shares in 1993 and 3,094,101 shares in 1992) (42,393) (43,973) Translation adjustment (749) (428) ESOT loan obligation (15,045) (16,005) Deferral under Long-Term Incentive Plans (195) (403) - - ------------------------------------------------------------------------------- Total shareholders' equity 34,286 52,369 - - ------------------------------------------------------------------------------- $123,405 $133,348 - - ------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. - 18 - 8 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY EDO CORPORATION AND SUBSIDIARIES - - ------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31 1993 1992 1991 (in thousands) AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES - - ------------------------------------------------------------------------------- Preferred Shares Balance at beginning of year $ 84 84 $ 87 87 $ 89 89 Par value of shares converted (4) (4) (3) (3) (2) (2) - - ------------------------------------------------------------------------------- Balance at end of year 80 80 84 84 87 87 - - ------------------------------------------------------------------------------- Common Shares - - ------------------------------------------------------------------------------- Par value of shares issued 8,454 8,454 8,454 8,454 8,454 8,454 - - ------------------------------------------------------------------------------- Additional paid-in capital Balance at beginning of year 43,366 45,056 45,535 Shares used for exercise of stock options (9) - (9) Shares (used) cancelled for Long- Term Incentive Plans 11 (735) 6 Conversion of preferred shares to common shares (1,584) (955) (476) - - ------------------------------------------------------------------------------- Balance at end of year 41,784 43,366 45,056 - - ------------------------------------------------------------------------------- Retained earnings Balance at beginning of year 61,274 58,560 59,730 Net earnings (loss) (16,348) 5,677 1,809 Common dividends - $0.28 per share (1,514) (1,508) (1,484) Preferred dividends (1,406) (1,455) (1,495) Tax benefit associated with dividends paid on unallocated preferred shares 344 - - - - ------------------------------------------------------------------------------- Balance at end of year 42,350 61,274 58,560 - - ------------------------------------------------------------------------------- Treasury shares at cost Balance at beginning of year (43,973) (3,094) (45,715) (3,146) (46,156) (3,175) Shares used for exercise of stock options 14 1 - - 14 1 Purchase of treasury shares - - (555) (106) (19) (3) Shares used (cancelled) for Long-Term Incentive Plans (22) (2) 1,339 92 (32) (2) Shares used for conversion of preferred shares 1,588 112 958 66 478 33 - - ------------------------------------------------------------------------------- Balance at end of year (42,393) (2,983) (43,973) (3,094) (45,715) (3,146) - - ------------------------------------------------------------------------------- Translation adjustment Balance at beginning of year (428) 485 449 Adjustment during the year (321) (913) 36 - - ------------------------------------------------------------------------------- Balance at end of year (749) (428) 485 - - ------------------------------------------------------------------------------- ESOT Loan Obligation Balance at beginning of year (16,005) (16,895) (17,718) Repayments made during year 960 890 823 - - ------------------------------------------------------------------------------- Balance at end of year (15,045) (16,005) (16,895) - - ------------------------------------------------------------------------------- Deferral under Long- Term Incentive Plans Balance at beginning of year (403) - (368) Shares used for Long-Term Incentive Plans 12 (604) 26 Amortization of Long-Term Incentive Plan deferrals 196 201 342 - - ------------------------------------------------------------------------------- Balance at end of year (195) (403) - - - ------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY $34,286 $52,369 $50,032 - - ------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. - 19 - 9 CONSOLIDATED STATEMENTS OF CASH FLOWS EDO CORPORATION AND SUBSIDIARIES - - ------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31 1993 1992 1991 (in thousands) - - ------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net earnings (loss) $(16,348) $5,677 $1,809 Adjustments to net earnings (loss) to arrive at cash from operations: Extraordinary gain (net of taxes of $40 in 1991) - - (59) Restructuring charge 9,800 - - Cumulative effect of change in accounting for postretirement health benefits 9,400 - - Depreciation and amortization 6,836 6,827 6,603 (Decrease) in current and deferred income taxes (9,578) (13) (2,156) Investments in technology companies 1,000 225 1,058 Common shares issued for employee benefits 201 201 347 Minority interest (2,336) 50 322 Changes in: Accounts receivable 11,072 3,614 (2,216) Inventories 3,840 (1,156) 2,546 Prepayments, other assets and other 493 (387) (286) Accounts payable and accrued liabilities 79 276 1,433 Contract advances and deposits 159 2,353 (9,243) - - ------------------------------------------------------------------------------- Cash provided by operations 14,618 17,667 158 INVESTING ACTIVITIES: Purchase of property, plant and equipment (4,517) (4,566) (5,609) Acquisition of ANGI, net of cash acquired (44) - - - - ------------------------------------------------------------------------------- Cash (used) by investing activities (4,561) (4,566) (5,609) FINANCING ACTIVITIES: Proceeds from (payments of) notes payable (1,189) (8,000) 8,000 Reduction of long-term debt (1,261) (30) (378) Purchase of treasury shares - (555) (19) Payment of common share cash dividends (1,514) (1,508) (1,484) Payment of preferred share cash dividends (1,406) (1,455) (1,495) Purchase of 7% Convertible Subordinated Debentures due 2011 - - (141) - - ------------------------------------------------------------------------------- Cash (used) provided by financing activities (5,370) (11,548) 4,483 - - ------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 4,687 1,553 (968) Cash and cash equivalents at beginning of year 4,597 3,044 4,012 - - ------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,284 $ 4,597 $ 3,044 - - ------------------------------------------------------------------------------- Supplemental disclosures: Cash paid for: Interest $ 2,243 $ 2,508 $ 2,327 Income taxes $ 608 $ 1,718 $ 2,901 See accompanying Notes to Consolidated Financial Statements. - 20 - 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of EDO Corporation and all majority-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. (b) CASH EQUIVALENTS For purposes of presenting a consolidated statement of cash flows, the Company considers all securities with an original maturity of three months or less at the date of acquisition to be cash equivalents. (c) INVENTORY Inventory under long-term contracts and programs reflects all accumulated production costs, including factory overhead, initial tooling and other related costs, including general and administrative expenses relating to the Company's Military Systems segment, less the portion of such costs charged to cost of sales. Inventory costs in excess of amounts recoverable under contracts are charged to cost of sales when they become known. All other inventory is stated at the lower of cost (principally first-in, first-out method) or market. Sales on long-term, fixed price contracts, including pro-rata profits, are generally recorded based on the relationship of total costs incurred to date to total projected final costs or, alternatively, as progress billings or deliveries are made. Sales under cost reimbursement contracts are recorded as costs are incurred. Sales on other than long-term contract orders (principally commercial products) are recorded as shipments are made. (d) DEPRECIATION AND AMORTIZATION Depreciation and amortization of property, plant and equipment have been provided using the declining balance and straight-line methods over the estimated useful lives of the assets. Leasehold improvements are being amortized over the lesser of their estimated useful lives or their respective lease periods. Deferred financing costs are amortized on a straight-line basis over the life of the related financing. The unamortized balance of $1,555,000 and $1,739,000 is included in other assets at December 31, 1993 and 1992. (e) COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED The excess of the total acquisition cost of Barnes Engineering Company over the fair value of net assets acquired of approximately $11 million is being amortized on a straight-line basis over thirty years. The excess of the total acquisition costs of ANGI over the fair value of net assets acquired of approximately $3 million is being amortized on a straight-line basis over fifteen years. (f) LONG-TERM INVESTMENTS The Company has minority positions in several small technology companies that it has been holding as long-term investments. These investments are carried in other assets at the lower of cost or net realizable value. During 1993, the Company charged other non-operating expense approximately $1,000,000 to reduce the carrying value of the Company's long-term investments based on the operating results and economic conditions affecting the business of these investments. At December 31, 1993 and 1992, the net carrying value of the long-term investments was $436,000 and $1,436,000, respectively. (g) INCOME TAXES The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in the first quarter of 1993. Statement 109 was adopted on a prospective basis and did not have any impact on the Company's financial statements at adoption. (h) EARNINGS PER SHARE Primary earnings per share amounts are determined by using the weighted average number of common shares and common share equivalents (stock options) outstanding during the year. Primary earnings per share amounts were based on 5,415,046, 5,388,818 and 5,298,263 shares outstanding for 1993, 1992 and 1991, respectively. Fully diluted earnings per share are based on the assumption that the convertible debentures and preferred shares, in the periods in which such securities are dilutive, are converted into common shares and their related interest and dividends are added back to net earnings, net of applicable income taxes. In 1992 the convertible debentures were antidilutive. In 1993 and 1991 both the convertible debentures and preferred shares were antidilutive. Fully diluted earnings per share were based on 6,542,451 shares outstanding for 1992. (2) RESTRUCTURING OF OPERATIONS During the fourth quarter of 1993, the Company adopted a restructuring plan to address the continuing worldwide decline in the defense and aerospace business, reduce costs and improve its competitiveness. This restructuring plan includes the discontinuance of the defense portion of business in Canada, the relocation of some United States production from New York to other less costly locations, the related disposition of nonproductive assets (principally land and buildings) and workforce reductions. The accompanying consolidated statements of operations reflect a pretax charge of $9,800,000 relating to this plan, including approximately $5,200,000 relating to a write-down of a major portion of its College Point production facility, which is the portion that will be placed for sale, and $3,620,000 related to the discontinuance of the defense related business in the Canadian operations. (3) AUTOMOTIVE NATURAL GAS, INC. (ANGI) ACQUISITION During December 1993, the Company acquired substantially all the - 21 - 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES assets and certain liabilities of ANGI. ANGI manufactures and installs pumping stations for natural gas refueling and vehicle conversion kits to allow the use of natural gas as an alternative fuel source. The purchase price was $68,000 plus the assumption of certain liabilities that were in excess of the value of assets acquired by approximately $2,600,000. Additional costs incurred as a result of the acquisition were approximately $422,000. The excess of the total acquisition costs over the fair value of net assets acquired (goodwill) of approximately $3,100,000 is being amortized on a straight-line basis over 15 years. The operating results for ANGI are included in the consolidated statements of operations from the purchase date. ANGI's results had a minimal impact on consolidated operating results for the year ended December 31, 1993. The following unaudited pro-forma consolidated results of operations assume that the purchase occurred on January 1, 1992 and reflect the historical operations of the Company and ANGI adjusted for reduced interest income as a result of the use of cash to acquire ANGI and the amortization of goodwill. - - ------------------------------------------------------------------------------- December 31 1993 1992 - - ------------------------------------------------------------------------------- Net Sales $ 116,662 $ 140,625 Net Earnings (loss) available for common shareholders (19,076) 3,698 - - ------------------------------------------------------------------------------- Earnings (loss) per share available for common shareholders ($3.52) $0.69 - - ------------------------------------------------------------------------------- (4) CANADIAN SUBSIDIARY EDO (Canada) Ltd. is approximately 40 percent owned by an agency of the Government of the Province of Alberta. The Company has an agreement with the Province of Alberta which provided for the purchase of nonconvertible, redeemable preferred shares. In 1990 and 1989, the Province of Alberta purchased $1,416,000 and $1,943,000 of such shares and the Company purchased $656,000 and $867,000, respectively. The preferred shares are to be redeemed on a pro-rata basis out of future earnings based on an agreed-upon formula. The Company has discontinued its defense business in Canada; however, it expects to continue its commercial business. (5) LONG-TERM CONTRACT RECEIVABLES Accounts receivable included $11,800,000 and $16,700,000 at December 31, 1993 and 1992, respectively, representing unbilled revenues, including accrued profits on long-term contracts. Substantially all of the unbilled balances at December 31, 1993 will be billed and collected during 1994. Total receivables due from the United States government, either directly or as a subcontractor to a prime contractor with the government, were $18,001,000 at December 31, 1993, and $22,417,000 at December 31, 1992. (6) INVENTORIES Inventories are summarized by major classification as follows at December 31, 1993 and 1992: - - ------------------------------------------------- 1993 1992 (in thousands) - - ------------------------------------------------- Raw material and supplies $ 8,343 $ 6,415 Work-in-process 8,713 13,151 Finished goods 1,099 1,136 - - ------------------------------------------------- $18,155 $20,702 - - ------------------------------------------------- Work-in-process inventory includes $2,500,000 and $5,500,000 at December 31, 1993 and 1992, respectively, applicable to long-term contracts. (7) PROPERTY, PLANT AND EQUIPMENT The Company's property, plant and equipment at December 31, 1993 and 1992, and their related useful lives are summarized as follows: - - --------------------------------------------------------------------- 1993 1992 Range in (in thousands) Years - - --------------------------------------------------------------------- Land and land improvements $ 2,014 $ 2,014 8 - 30 Buildings and building improvements 28,585 28,167 8 - 45 Machinery and equipment 51,786 49,341 3 - 10 Leasehold improvements 10,004 8,715 lease terms - - --------------------------------------------------------------------- $92,389 $88,237 - - --------------------------------------------------------------------- (8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consisted of the following at December 31, 1993 and 1992: - - ----------------------------------------------------------------- 1993 1992 (in thousands) - - ----------------------------------------------------------------- Trade payables $ 8,403 $ 7,732 Employee compensation 2,680 3,230 Employee retirement plans 186 183 Taxes on income other than Federal and foreign income taxes 3,274 3,285 Other 6,476 2,399 - - ----------------------------------------------------------------- $21,019 $16,829 - - ----------------------------------------------------------------- - 22 - 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES (9) NOTES PAYABLE AND LONG-TERM DEBT Long-term debt of the Company consisted of the following at December 31, 1993 and 1992: - - ----------------------------------------------------------------------- 1993 1992 (in thousands) - - ----------------------------------------------------------------------- 9.625% first mortgage note due 1994 $ - $ 1,261 7% Convertible Subordinated Debentures Due 2011 29,317 29,317 - - ----------------------------------------------------------------------- Total long-term debt 29,317 30,578 Current installments - (34) - - ----------------------------------------------------------------------- Long-term debt, less current installments $29,317 $30,544 - - ----------------------------------------------------------------------- The 7% Convertible Subordinated Debentures Due 2011 were issued in November 1986. During 1991 and 1990, respectively, the Company purchased $200,000 and $5,483,000 of these debentures for combined purchase prices of $96,000 and $2,790,000. The purchases resulted in extraordinary gains of $59,000 and $1,508,000 in 1991 and 1990, respectively, net of income taxes and other costs. The debentures are convertible at the rate of 45.45 common shares for each $1,000 principal amount, which is equivalent to $22 per share. Debentures are redeemable at the option of the Company at par plus (until December 15, 1996) a stated premium. Debentures are redeemable at the option of the holder under certain circumstances involving a change in control of the Company at par plus (until December 15, 1996) a stated premium. Annual sinking fund payments of $1,750,000 until retirement are due commencing in 1996. The purchased debentures may be used by the Company to satisfy annual sinking fund requirements. In June 1992, the Company entered into a $30 million unsecured revolving-credit agreement (Credit Agreement) with a bank syndicate. The Credit Agreement is for both short-term borrowings and letters of credit. Compliance with certain Credit Agreement financial covenants and others were amended by the bank as a result of the Company not meeting certain financial covenant tests for 1993. In March 1994, the Credit Agreement was modified to reduce the amount to $15 million and the maturity date was extended to June 1995. Borrowings under the Credit Agreement will carry interest based on the agent bank's prime rate plus 0.25%. The Company pays a commitment fee of 0.375% per annum on the average unused portion. The Credit Agreement, as amended, also contains certain financial covenants and restrictions, including a limitation on the payment of common dividends. Dividend payments in 1994 are limited to approximately the amount paid in 1993. Dividend payments beyond 1994 will be conditioned on future earnings. At December 31, 1993, there were no borrowings outstanding under the Credit Agreement. For the year ended December 31, 1993, the weighted average borrowing approximated $88,000, at a weighted average interest rate of approximately 6.0%, and there were no borrowings outstanding at any month end. For the year ended December 31, 1992, the weighted average borrowing approximated $4.1 million, at a weighted average interest rate of 5.7%, and the maximum amount outstanding at any month end was $9,500,000. (10) EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST The Company's Employee Stock Ownership Plan (ESOP) provides retirement benefits to substantially all employees. During 1993 and 1992, respectively, cash contributions of $314,000 and $328,000 were made to the ESOP. As of December 31, 1993, there were 470,710 common shares in the ESOP. During 1988, the Employee Stock Ownership Trust (ESOT) purchased 89,772 convertible preferred shares from the Company for approximately $19,185,000. The shares will be allocated to employees through 2003 on the basis of compensation. The preferred shares provide for dividends of 8% per annum, which are deductible by the Company for Federal and state income tax purposes. Each unallocated preferred share is convertible at its stated conversion rate into 10 common shares. Allocated shares are convertible at the greater of the stated conversion rate or the fair value of each preferred share ($165 at December 31, 1993) divided by the current market price of each common share. As of December 31, 1993, 32,073 shares have been allocated, 57,699 shares remained unallocated and 9,716 shares have been converted into 227,343 common shares. Until converted, each preferred share is entitled to 12.3 votes. The preferred shares are entitled to vote on all matters presented to holders of common shares voting together as a class, except that certain amendments and mergers could entitle the holders of preferred shares to vote separately as a class. The ESOP provides for pass-through of voting rights to the ESOP participants and beneficiaries. The ESOT purchased the preferred shares from the Company using the proceeds of a borrowing guaranteed by the Company. The ESOT services this obligation with the dividends received on the preferred shares and any additional contributions from the Company as required. Principal and interest payments on the note of the ESOT are to be made in quarterly installments through 2003. Interest is charged at 82% of the prime lending rate. During 1993 and 1992, respectively, the Company's cash contributions and preferred dividends were used to repay principal of $960,000 and $890,000 and pay interest of $780,000 and $911,000. Both the Company and the lender have the option to cancel or refinance the borrowing after 1995. The guarantee agreement also provides that the Company may be obligated to prepay the ESOT loan through redemption of the preferred shares at $213.71 per share upon the occurrence of certain prepayment events. In addition to these prepayment events, there are certain covenants placed on the Company that require that several predetermined ratios be maintained. Compliance with certain of these covenants and others were amended by the lender as a result of the - 23 - 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES Company not meeting certain financial covenant tests for 1993. In addition to these ratios, common dividends in 1994 will be limited to amounts paid in 1993. Dividends payable beyond 1994 will be conditioned on future earnings. The ESOT's borrowing guaranteed by the Company is reflected as a liability on the balance sheet with an equal amount as a reduction of shareholders' equity, offsetting the increase in the capital stock accounts. As the principal portion of the note is repaid through 2003, the liability and the ESOT loan obligation will be reduced concurrently. (11) FEDERAL AND FOREIGN INCOME TAXES The 1993, 1992 and 1991 provisions for Federal and foreign income taxes, excluding the cumulative effect of the change in accounting in 1993 and the extraordinary gain in 1991, were composed of the following amounts: - - --------------------------------------------- 1993 1992 1991 (in thousands) - - --------------------------------------------- Federal Current $ (877) $2,096 $ 1,707 Deferred (3,317) (530) (1,762) - - --------------------------------------------- (4,194) 1,566 (55) Foreign Current $ 28 $ - $ - Deferred (735) 118 513 - - --------------------------------------------- (707) 118 513 - - --------------------------------------------- Total $(4,901)* $1,684 $ 458 - - --------------------------------------------- * Excludes a tax benefit of $3,958 relating to the cumulative effect of the change to the accrual method of accounting for post-retirement health benefits. State income taxes of $178,000, $768,000 and $204,000 in 1993, 1992 and 1991 are included in general and administrative expenses. The sources of the deferred tax provisions and the related tax effects in each of the years were as follows: - - ----------------------------------------------------------------------- 1993 1992 1991 (in thousands) - - ----------------------------------------------------------------------- Long-term contract amounts $ (50) $ 1,642 $ (418) Postretirement benefit (629) - - Alternative minimum tax carryforward - (1,700) - Restructuring accruals (2,100) - - Depreciation and amortization (1,155) (87) (834) State and local income taxes 30 (154) 29 Other, net (148) (113) (26) - - ----------------------------------------------------------------------- Total $(4,052) $ (412) $(1,249) - - ----------------------------------------------------------------------- The effective Federal income tax rate, excluding the cumulative effect of the change in accounting in 1993 and the extraordinary gain in 1991, differed from the statutory Federal income tax rate for the following reasons: - - -------------------------------------------------------------------------- Percent of Pretax Earnings 1993 1992 1991 - - -------------------------------------------------------------------------- Tax at statutory rate (34.0%) 34.0% 34.0% Foreign Sales Corporation benefit (0.9) (1.9) (0.7) Preferred dividends (0.9) (6.7) (20.1) Earnings taxed at foreign tax rates (2.3) 0.5 2.5 Foreign losses without income tax benefit 13.2 - - Adjustment of prior year accruals (12.1) - - Other, net 2.5 (3.2) 2.4 - - -------------------------------------------------------------------------- Effective Federal income tax rate (34.5%) 22.7% 18.1% - - -------------------------------------------------------------------------- Deferred income taxes for 1993 and 1992 reflect the impact of temporary differences between the amounts of assets and liabilities recorded for financial reporting purposes and such amounts as measured in accordance with tax laws. The items that compose the significant portions of deferred tax assets and liabilities as of December 31, 1993 and January 1, 1993 are as follows: - - ------------------------------------------------------------------------------ December 31 January 1 Deferred Tax Asset 1993 1993 - - ------------------------------------------------------------------------------ Postretirement benefits other than pensions $4,590 $ - Foreign Net Operating loss carryforwards 2,573 - Restructuring costs 2,100 - Alternative minimum tax credits 1,727 1,694 Deferred compensation 1,100 951 Capital loss carryforwards 1,081 1,784 Vacation accruals 311 465 Other items 89 563 - - ------------------------------------------------------------------------------ Total deferred tax assets $13,571 $5,457 Less: Valuation allowance (3,548) - - - ------------------------------------------------------------------------------ $10,023 $5,457 Deferred Tax Liabilities Depreciation and amortization 6,049 9,321 Contract tax accounting 1,447 1,577 Other items 1,516 832 - - ------------------------------------------------------------------------------ Total deferred tax liabilities $9,012 $11,730 - - ------------------------------------------------------------------------------ Net deferred tax asset (liability) $1,011 $(6,273) - - ------------------------------------------------------------------------------ - 24 - 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES Deferred income tax assets as of December 31, 1993 include Canadian net operating loss carry-forwards and capital loss carry-forwards. Realization of these assets is dependent on future taxable earnings in Canada and capital gains. A valuation allowance has been established for these items since Canadian future earnings and capital gains cannot be reasonably assured. In the fourth quarter of 1993, $1.8 million of tax reserves no longer required were released and reduced the income tax provision. (12) SHAREHOLDERS' EQUITY At various times beginning in 1983, the Board of Directors has authorized and subsequently increased by amendments, a plan to purchase an aggregate amount of 4,190,000 of the Company's common shares. As of December 31, 1993, the Company had acquired approximately 3,957,000 shares in open market transactions at prevailing market prices. Approximately 974,000 of these shares have been used for various purposes, including conversion of preferred shares; contributions of shares to the EDO Corporation Employee Stock Ownership Plan; grants pursuant to the Company's Long-Term Incentive Plans; partial payment of a 50% stock dividend; and stock options exercised. As of December 31, 1993 and 1992, the Company held 2,982,853 and 3,094,101 treasury shares, respectively, for future use. At December 31, 1993, the Company had reserved, authorized and unissued common shares for the following purposes: - - ------------------------------------------------------------------------------- Shares - - ------------------------------------------------------------------------------- Conversion of 7% Convertible Subordinated Debentures Due 2011 1,332,590 Stock option plans 862,613 Long-Term Incentive Plans 14,390 Conversion of preferred shares 800,560 - - ------------------------------------------------------------------------------- 3,010,153 - - ------------------------------------------------------------------------------- (13) STOCK PLANS The Company has granted nonqualified stock options to officers, directors and other key employees, under plans approved by the shareholders in 1988, 1985 and 1980, for the purchase of its common shares at the fair market value of the shares on the date of grant. Options become exercisable in four substantially equal annual installments beginning on the first anniversary of the date of the grant and expiring on the tenth anniversary of the date of the grant. Changes in options outstanding are shown below. - - ------------------------------------------------------------------------------- 1993 1992 1991 SHARES SHARES SHARES SUBJECT SUBJECT SUBJECT PRICE TO PRICE TO PRICE TO RANGE OPTION RANGE OPTION RANGE OPTION - - ------------------------------------------------------------------------------- Beginning of year $4.31-21.79 807,413 $4.31-21.79 831,963 $4.31-21.79 756,538 Options granted 5.69- 6.94 20,000 5.56- 7.75 32,000 5.44- 7.32 112,850 Options exercised 4.31 (1,000) - - 5.69 (1,000) Options cancelled 7.00-21.79 (34,450) 4.31-21.79 (56,550) 5.69-21.79 (36,425) - - ------------------------------------------------------------------------------- End of year 4.31-16.94 791,963 $4.31-21.79 807,413 $4.31-21.79 831,963 - - ------------------------------------------------------------------------------- Exercisable at year end 596,407 440,076 271,419 - - ------------------------------------------------------------------------------- In 1983 and 1988, the shareholders of the Company approved the adoption of Long-Term Incentive Plans (the Plans) for key executives. The Plans provide for the awarding of up to 318,750 restricted common shares of the Company, and performance units which are payable in cash. As of December 31, 1992, Plan participants had been awarded 304,360 restricted common shares and performance units. The restrictions on 153,060 shares have lapsed previously. Restrictions on the remaining 151,300 shares will lapse in 1994 and 1995. The value of the performance units is based upon the market value of the Company's common shares at the end of the defined performance period and the attainment of predetermined operating goals. The cost of this award charged to operations in 1993, 1992 and 1991 was $191,000, $232,000 and $363,000 and, respectively. Additional Plan awards, if made, will be based upon the future performance of the Company. The 1983 Plan expired in 1992 and the 1988 Plan will expire in 1997. (14) OTHER EMPLOYEE BENEFIT PLANS The Company maintains a noncontributory defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employees' highest five-year average base salary in the final ten years of employment. The Company's funding policy is to make annual contributions to the extent such contributions are actuarially determined and tax deductible. The net pension expense for 1993, 1992 and 1991 was $732,000, $820,000 and $1,482,000, respectively, which assumed a - 25 - 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES discount rate of 8.00%, 8.25% and 9.00%, respectively. The expected long-term rate of return on plan assets was 9.0% in 1993 and 1992 and 10.0% in 1991. The actuarial computations assumed a discount rate on benefit obligations at December 31 of 7.00% for 1993 and 8.00% for 1992. The assumed rate of compensation increase approximates the Company's previous experience. A summary of the components of net periodic pension expense for 1993, 1992 and 1991 follows: - - ------------------------------------------------------------------------------- 1993 1992 1991 (in thousands) - - ------------------------------------------------------------------------------- Service cost $ 1,931 $ 1,900 $ 1,803 Interest cost on projected benefit obligation 5,209 5,054 4,912 Actual return on plan assets (9,078) (6,811) (17,770) Net amortization and deferral 2,670 677 12,537 - - ------------------------------------------------------------------------------- Net pension expense $ 732 $ 820 $ 1,482 - - ------------------------------------------------------------------------------- The funded status of the plan for 1993 and 1992 was as follows: - - --------------------------------------------------------------------- 1993 1992 (in thousands) - - --------------------------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $67,134 and 58,269 for 1993 and 1992, respectively $(69,348) $(60,966) - - --------------------------------------------------------------------- Projected benefit obligation for service rendered to date $(78,038) $(68,196) Plan assets at fair value 79,554 74,644 - - --------------------------------------------------------------------- Funded status of plan 1,516 6,448 Unrecognized net loss (gain) from past experience different from that assumed and effects of changes in assumptions (369) (4,865) Unrecognized prior service cost at December 31, being amortized over 8 years and 6 years, respectively 725 847 Unrecognized net (asset) at December 31, being amortized over 15 years (67) (75) - - --------------------------------------------------------------------- Prepaid pension cost $ 1,805 $ 2,355 - - --------------------------------------------------------------------- In addition, the Company established in 1988 a supplemental defined benefit plan for substantially all employees. In 1993, 1992 and 1991, the net pension expense for this plan was approximately $36,000, $32,000 and $31,000, respectively, and the projected benefit obligation exceeded plan assets by approximately $310,000 at December 31, 1993 and $254,000 at December 31, 1992. The Company also has a supplemental retirement plan for officers and certain employees under which the Company has agreed to pay, at the option of the individual, either a predetermined retirement benefit or a fully paid up life insurance policy. In the event of preretirement death or disability, the plan provides for similar benefits. At December 31, 1993, the projected benefit obligation of the plan was $3,775,000. The aggregate cash surrender value of the life insurance on the plan participants, which is intended to fund the supplemental retirement plan benefits, was $2,390,000 at the most recent anniversary date. Total expenses under this plan in 1993, 1992 and 1991 were $332,000, $321,000 and $283,000, respectively. (15) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company provides certain health care and life insurance benefits for qualified retired employees and dependents at certain locations. These benefits are funded on a pay-as-you-go basis, with the retiree paying a portion of the cost through contributions, deductibles and coinsurance provisions. The Company has always retained the right to modify or terminate the plans providing these benefits. Effective January 1, 1993, the Company has adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires recognition of these benefit expenses on an accrual basis as the employees earn them during their employment rather than when they are actually paid. The adoption has resulted in a onetime noncash charge of $13.4 million before income tax credits ($9.4 million after income tax credits, or $1.74 per common share) for the accumulated postretirement obligation recognized as a cumulative effect of accounting change. Cash outlays relating to retiree health care and life insurance benefits amounted to $1,086,000, $840,000 and $824,000 for 1993, 1992 and 1991, respectively. Postretirement health care and life insurance expense included the following components for the year ended December 31, 1993: - - -------------------------------------------------------------------------- (In thousands) - - -------------------------------------------------------------------------- Service cost - benefits earned during the period $ 129 Interest cost 1,100 - - -------------------------------------------------------------------------- Total postretirement health care and life insurance expense $1,229 - - -------------------------------------------------------------------------- The postretirement healthcare and life insurance expense assumed a discount rate of 8.5%. The funded status and breakdown of the postretirement health care and life insurance benefits are as follows as of December 31, 1993: - 26 - 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES - - -------------------------------------------------------------------- (In thousands) Acumulated postretirement benefit obligation: Retirees $11,070 Eligible Actives 1,674 Other ineligible actives 2,027 - - -------------------------------------------------------------------- Unfunded accumulated postretirement benefit obligation $14,771 Unrecognized net loss (1,279) - - -------------------------------------------------------------------- Accrued postretirement benefit cost $13,492 - - -------------------------------------------------------------------- Actuarial assumptions used in determining the cost and the accumulated postretirement benefit obligation include a discount rate of 7.5%. Effective January 1, 1993, the Company has modified these benefit plans to significantly limit the annual increase of these costs to the Company to a maximum of 5 percent per year through use of copayments from the employees and retirees. As a result, the Company's exposure to increases in the health care cost trend rate will be limited to this 5 percent ceiling. (16) COMMITMENTS AND CONTINGENCIES The Company is contingently liable under the terms of letters of credit (Note 9) aggregating approximately $5,200,000 at December 31, 1993, should it fail to perform in accordance with the terms of its contracts with foreign customers. At December 31, 1993, the Company and its subsidiaries were obligated under building and equipment leases expiring between 1994 and 1998. Rental expense under such leases for the years ended December 31, 1993, 1992 and 1991 amounted to $2,900,000, $2,700,000 and $3,300,000, respectively. Minimum future rentals under those obligations with noncancellable terms in excess of one year are as follows: 1994 - $2,700,000; 1995 - $2,300,000; 1996 - $1,800,000; 1997 - $1,700,000; and 1998 - $1,600,000. (17) LEGAL MATTERS The Company and three other companies have entered into a consent decree with the Federal government for the remediation of a Superfund site. The Company estimates that its share of the costs will be approximately $8.5 million. This estimate, subject to reasonable tolerances, represents amounts for capital requirements, government past and oversight costs, and the present value of maintenance and operation of the remedy over 30 years. A large portion of these costs, however, will be expended over the next two to three years. The Company believes others not party to the consent decree should share in a substantial portion of the costs and the Company is pursuing them for such costs. The Company also believes it is covered by liability insurance for all the costs it incurs. Its insurance carriers have neither agreed nor disagreed with the Company's position, but the matter is in court to determine the insurers' defense and indemnification obligations to the Company. The Company does not believe the ultimate outcome of this matter will have a material adverse effect on its consolidated financial position. Approximately $2.4 million of costs incurred through 1993 are included in other assets in the accompanying December 31, 1993, Consolidated Balance Sheet. In 1991, the Company reached an out-of-court settlement in connection with a contract dispute. As a result, the Company recorded a pre-tax charge of approximately $5.6 million. In 1993, the Company reached an out-of-court settlement in connection with a real estate contract dispute. As a result, the Company recorded a pre-tax charge of approximately $1.2 million. Additionally, the Company and its subsidiaries are subject to certain legal actions that arise out of the normal course of business. It is management's belief that the ultimate outcome of these actions will not have a material effect on the Company's consolidated financial position. (18) BUSINESS SEGMENTS The nature of the Company's products are described elsewhere in this Annual Report. In 1992, the Company modified its segment reporting by reclassifying essentially all military products into the Military Systems segment and changing the Marine Systems and Specialized Products segment to the Commercial and Other Products segment. Current and historical segment data have been modified throughout this report to reflect this change. This change has been made to distinguish between commercial products and military systems as the Company focuses on commercial product initiatives. Sales between industry segments approximate market price. Sales are made and credit is granted generally to the U.S. Government or to customers in the defense or aerospace industry. The Company considers the risks associated with such customers to be minimal. Domestic government sales, which include sales where the Company is a subcontractor to a prime contractor with the government, amounted to 56%, 60% and 61% of net sales, which were 69%, 69% and 68% of Military Systems sales and 33%, 39% and 42% of Commercial and Other Products sales for 1993, 1992 and 1991, respectively. Export sales comprised 22%, 24% and 27% of net sales for 1993, 1992 and 1991, respectively. Principal products and systems by industry segment are as follows: Military Systems: Ejection Release Units (ERU) Sonar Systems Acoustic Systems Airborne Mine Countermeasure Systems (AMCM) Electroceramic Components Command, Control, Communications & Intelligence Systems (C3I) Fiber-Reinforced Structures Commercial and Other Products: Electroceramic Components Acoustic Instrument Systems Spaceflight Systems Infrared Instrumentation Fiber-Reinforced Structures Composite Sports Products Natural Gas Vehicle Products - 27 - 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES The distribution of sales, operating earnings and identifiable assets of the Company's business segments follows: - - ------------------------------------------------------------------------------- 1993 1992 1991 (in thousands) - - ------------------------------------------------------------------------------- Sales: Military Systems: Unaffiliated customers $ 66,915 $ 89,681 $108,109 Intersegment sales - - 22 - - ------------------------------------------------------------------------------- 66,915 89,681 108,131 Commercial & Other Products: Unaffiliated customers 37,223 36,090 37,584 Intersegment sales 232 426 763 - - ------------------------------------------------------------------------------- 37,455 36,516 38,347 Less intersegment sales 232 426 785 - - ------------------------------------------------------------------------------- Net sales $104,138 $125,771 $145,693 - - ------------------------------------------------------------------------------- Operating (loss) earnings: Military Systems $ (5,082) $ 10,096 $ 10,637 Commercial & Other Products (200) 4,543 4,256 - - ------------------------------------------------------------------------------- (5,282) 14,639 14,893 Net interest (expense) (2,201) (2,504) (2,404) General corporate expenses (4,146) (4,281) (3,785) Litigation settlement (1,166) - (5,589) Other expense, net (1,390) (443) (585) - - ------------------------------------------------------------------------------- Earnings (loss) before Federal and foreign income taxes, cumulative effect of accounting change, minority interest and extraordinary gain $(14,185) $ 7,411 $ 2,530 - - ------------------------------------------------------------------------------- Identifiable assets: Military Systems $ 42,943 $ 75,922 $ 85,623 Commercial & Other Products 62,373 47,734 42,113 Corporate 18,089 9,692 9,362 - - ------------------------------------------------------------------------------- $123,405 $133,348 $137,098 - - ------------------------------------------------------------------------------- Depreciation expense: Military Systems $ 3,948 $ 4,536 $ 4,549 Commercial & Other Products 2,503 1,924 1,647 - - ------------------------------------------------------------------------------- $ 6,451 $ 6,460 $ 6,196 - - ------------------------------------------------------------------------------- Capital expenditures: Military Systems $ 960 $ 1,871 $ 3,882 Commercial & Other Products 3,557 2,695 1,727 - - ------------------------------------------------------------------------------- $ 4,517 $ 4,566 $ 5,609 - - ------------------------------------------------------------------------------- KPMG Peat Marwick INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders EDO Corporation We have audited the accompanying consolidated balance sheets of EDO Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EDO Corporation and subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in the notes to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statements of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes" in 1993. KPMG Peat Marwick Jericho, New York March 4, 1994 - 28 - 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 EDO CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth unaudited quarterly financial information for 1993 and 1992 (in thousands, except per share amounts). - - ------------------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER 1993 1992 1993 1992 1993 1992 1993 1992 - - ------------------------------------------------------------------------------- Net sales $27,473 $30,565 $26,764 $30,751 $22,450 $33,434 $27,451 $31,021 Gross profit 4,490 7,005 3,637 7,196 3,776 6,354 5,094 7,885 Net earnings (loss) before cumulative effect of accounting change 566 1,421 (936)a 1,395 (387) 1,386 (6,191)b 1,475 Cumulative effect of change in accounting for post- retirement benefits (9,400) - - - - - - ------------------------------------------------------------------------------- Net earnings (loss) $(8,834) $1,421 $(936) $1,395 $(387) $1,386 $(6,191) $1,475 Earnings (loss) per share: Primary: Net earnings (loss) before accounting change $0.04 $0.20 $(0.24) $0.19 $(0.14) $0.19 $(1.19) $0.21 Cumulative effect of accounting change (1.75) - - - - - - - - ------------------------------------------------------------------------------- Net earnings (loss) $(1.71) $0.20 $(0.24) $0.19 $(0.14) $0.19 $(1.19) $0.21 Fully diluted: Net earnings before accounting change $ - $0.18 $ - $0.17 $ - $0.17 $ - $0.18 Cumulative effect of accounting change - - - - - - - - - - ------------------------------------------------------------------------------- Net earnings $ - $0.18 $ - $0.17 $ - $0.17 $ - $0.18 Cash dividends per common share $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 Preferred dividends paid $359 $371 $359 $362 $346 $363 $342 $359 a The 1993 second quarter results include a nonoperating litigation settlement charge of approximately $1,200 representing $800 or $0.15 per share after pro forma tax effect. b The 1993 fourth quarter results include a restructuring charge of $9,800 which represents $6,200 or $1.15 per share after pro forma tax effect. These results also include a nonoperating charge of $1,000 or $0.18 per share, which the Company added to its general reserve for its long-term investments. - 29 - EX-8 9 EXHIBIT 21 LIST OF SUBSIDARIES EXHIBIT 21 LIST OF SUBSIDIARIES The following are subsidiaries of the Company, the respective jurisdictions of their incorporation and names (if any) under which they do business. The Company owns all of the voting securities (including directors' qualifying shares owned beneficially by the Company) of each such subsidiary except the Company owns only approximately 60% of EDO (Canada) Limited. The names of particular subsidiaries of the Company have been omitted. When considered in the aggregate as a single subsidiary, these omitted subsidiaries do not constitute a "significant subsidiary" as such term is defined in Rule 1-02(v) of Regulation S-X of the Securities Exchange Act of 1934, as amended. Jurisdiction Name Under Which of Subsidiary Name Incorporation Does Business EDO Western Corporation Utah EDO Corporation- Acoustic Division Barnes Engineering Company Delaware EDO Corporation- Barnes Engineering Division EDO (Canada) Limited Canada EDO Operations (Israel) Ltd. Israel EDO Foreign Sales Corporation U.S. Virgin Islands EDO Sports, Inc. Delaware EDO Western International Delaware Corporation EDO International Delaware Corporation VT Technologies, Inc. Delaware EDO Energy Corporation Delaware EDO Automotive Natural Gas, Inc. Delaware EX-9 10 EXHIBIT 23 ACCOUNTANTS CONSENT Exhibit 23 KPMG PEAT MARWICK Certified Public Accountants Consent of Independent Auditors Board of Directors EDO Corporation: We consent to incorporation by reference in the Registration Statements No.2- 69243, 33-1526 and 33-28020 on Form S-8 of EDO Corporation of our reports dated March 4, 1994, relating to the consolidated balance sheets of EDO Corporation and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of operations, shareholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which reports are incorporated by reference or appear in the December 31, 1993 annual report on Form 10-K of EDO Corporation. Our reports refer to changes in the methods of accounting for income taxes and postretirement health care and life insurance benefits. KPMG PEAT MARWICK Jericho, New York March 28, 1994 EX-10 11 EXHIBIT 24 POWERS OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY The undersigned hereby constitutes and appoints Gerald Albert, Michael J. Hegarty and Marvin D. Genzer, and each of them, with full power of substitution, the undersigned's true and lawful attorneys and agents to execute in his name and on his behalf, in any and all capabilities, the Annual Report on Form 10-K of EDO Corporation (the "Company"), a New York corporation, for the fiscal year ended December 31, 1993, and any and all other instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable the Company to comply with the annual reporting requirements of the Securities Exchange Act of 1934, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents shall have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has subscribed his signature this 18 day of March, 1994. Gerald Albert Frank A. Fariello Marvin D. Genzer Kenneth A. Paladino Alfred Brittain III Joseph F. Engelberger Robert M. Hanisee Robert A. Lapetina John H. Meyn Richard Rachals Ralph O. Romaine William R. Ryan EX-11 12 TRANSMITTAL LETTER March 30, 1994 Via Federal Express OFIS Filer Support S.E.C. Operations Center 6432 General Green Way Alexandria, VA 22312-2413 EDO Corporation File No. 1-3985 Dear Sir or Madam: On behalf of EDO Corporation (the "Company"), I enclose herewith a copy of the Company's Annual Report on Form 10-K, including all Exhibits as filed under EDGAR. I also enclose herewith eight copies of the Company's Definitive Proxy Statement, dated March 23, 1994, and the Company's 1993 Annual Report to Shareholders, portions of each of which are incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. Only those portions of the Company's 1993 Annual Report to Shareholders which are expressly incorporated by reference in the Company's Annual Report on Form 10-K are deemed to be filed with the Commission. One complete copy manually signed and one conformed copy of the Annual Report on Form 10-K are being filed with the New York Stock Exchange. Pursuant to General Instruction D.(3) to Form 10-K, the financial statements in the enclosed report do not reflect a change from the preceding year in any accounting principle or practice, or in the method of applying any such principle or practice. Very truly yours, Marvin D. Genzer General Counsel MDG:alb Enclosures -----END PRIVACY-ENHANCED MESSAGE-----