-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCy1hs9AHKNyxH0mUijMBhfph6hm2H/avyjclzIU6+nZr60aZfeSg3jz9OEbQhfL 1y3LYedbyOr740Z4SoVT5Q== 0000083573-97-000009.txt : 19970514 0000083573-97-000009.hdr.sgml : 19970514 ACCESSION NUMBER: 0000083573-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RHI HOLDINGS INC CENTRAL INDEX KEY: 0000083573 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 341545939 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00373 FILM NUMBER: 97602376 BUSINESS ADDRESS: STREET 1: 300 WEST SERVICE ROAD STREET 2: P.O. BOX 10803 CITY: CHANTILLY STATE: VA ZIP: 22021 BUSINESS PHONE: 7034785800 MAIL ADDRESS: STREET 1: 300 WEST SERVICE RO STREET 2: P.O. BOX 10803 CITY: CHANTILLY STATE: VA ZIP: 22021 FORMER COMPANY: FORMER CONFORMED NAME: REXNORD HOLDINGS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: REXNORD INC DATE OF NAME CHANGE: 19880821 FORMER COMPANY: FORMER CONFORMED NAME: REX CHAINBELT INC DATE OF NAME CHANGE: 19730131 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------------- FORM 10-Q -------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 1997 Commission File Number: 1-373 RHI HOLDINGS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 34-1545939 - ------------------------------- - ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Washington Dulles International Airport 300 West Service Road, P.O. Box 10803 Chantilly, Virginia 20153 --------------------------------------- (Address of principal executive offices) (Zip Code) (703) 478-5800 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class March 30, 1997 - ----- - -------------- Common Stock, $1.00 par value 100,000 Registrant meets the conditions set forth in general instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with reduced disclosure format. RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES* INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 30, 1997 (Unaudited) and June 30, 1996 3 Consolidated Statements of Earnings for the Three and Nine Months Ended March 30, 1997 and March 31, 1996 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 30, 1997 and March 31, 1996 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 *For purposes of Part I of this Form 10-Q, the term "Company" means RHI Holdings, Inc., and its subsidiaries, unless otherwise indicated. For purposes of Part II, the term "Company" means RHI Holdings, Inc., unless otherwise indicated. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
March 30, June 30, ASSETS 1997 1996 - ------ ----------- - ----------- (Unaudited) (*) Current Assets: Cash and cash equivalents, $5,811 and $6,761 restricted................................. $ 21,016 $ 36,112 Short-term investments....................... 21,841 10,427 Accounts receivable-trade, less allowances of $7,589 and $6,071....................... 126,025 96,488 Notes Receivable............................. -- 170,384 Inventories: Finished goods............................ 280,912 235,859 Work-in-process........................... 34,592 16,294 Raw materials............................. 19,502 18,586 --------- - --------- 335,006 270,739 Prepaid expenses and other current assets.... 38,539 20,248 --------- - --------- Total Current Assets......................... 542,427 604,398 Property, plant and equipment net of accumulated depreciation of $124,137 and $76,183.................................... 122,005 87,281 Net assets held for sale..................... 47,449 43,609 Cost in excess of net assets acquired, (Goodwill) less accumulated amortization of $34,482 and $31,119........................ 153,319 135,241 Investments and advances, affiliated companies.................................. 123,491 120,890 Prepaid pension assets....................... 57,837 57,660 Deferred loan costs.......................... 6,002 3,822 Other assets................................. 9,803 8,627 --------- - --------- Total Assets................................. $1,062,333 $1,061,528 ========= ========= *Condensed from audited financial statements. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
March 30, June 30, LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996 - ------------------------------------ ----------- - ------------ (Unaudited) (*) Current Liabilities: Bank notes payable and current maturities of long-term debt.......................... $ 66,931 $ 84,678 Accounts payable............................. 76,363 64,486 Other accrued liabilities.................... 93,241 74,987 Income taxes................................. 13,853 60,012 --------- - -------- Total Current Liabilities.................... 250,388 284,163 Long-term debt, less current maturities...... 201,149 194,233 Other long-term liabilities.................. 19,250 17,692 Retiree health care liabilities.............. 41,503 44,452 Noncurrent income taxes...................... 69,477 33,569 Minority interest in subsidiaries............ 65,735 58,647 --------- - --------- Total Liabilities............................ 647,502 632,756 Stockholder's Equity: Common Stock................................. 100 100 Preferred Stock.............................. 100 100 Paid-in capital.............................. 229,260 229,260 Retained earnings............................ 176,273 183,355 Cumulative translation adjustment............ (535) 2,751 Net unrealized holding gain on available-for- sale securities............................ 9,633 13,206 --------- - --------- Total Stockholder's Equity................... 414,831 428,772 --------- - --------- Total Liabilities and Stockholder's Equity... $1,062,333 $1,061,528 ========= ========= * Condensed from audited financial statements. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands) Three Months Ended Nine Months Ended March 30, March 31, March 30, March 31, 1997 1996 1997 1996 ------------ ------------ ----------- ----------- Revenue: Net sales of products............. $190,525 $121,951 $496,010 $292,717 Revenues from services............ -- 15,063 -- 54,820 Other income, net................. 537 777 1,219 1,111 ------- ------- ------- ------- 191,062 137,791 497,229 348,648 Costs and Expenses: Cost of goods sold................ 137,807 96,645 365,147 233,150 Cost of services.................. -- 11,165 -- 39,039 Selling, general & administrative. 41,789 23,925 111,896 62,055 Research and development.......... 24 24 69 68 Amortization of goodwill.......... 1,208 1,251 3,363 3,553 Restructuring..................... -- 959 -- 1,244 ------- ------- ------- ------- 180,828 133,969 480,475 339,109 Operating income.................... 10,234 3,822 16,754 9,539 Interest expense.................... 7,393 10,293 21,566 32,635 Interest income..................... (1,066) (3,476) (5,207) (6,012) ------- ------- ------- ------- Net interest expense................ 6,327 6,817 16,359 26,623 Investment income, net.............. 726 1,150 2,187 3,062 Equity in earnings of affiliates.... 1,607 763 3,994 2,686 Minority interest................... (1,076) (329) (2,637) (1,414) ------- ------- ------- ------- Earnings (loss) from continuing operations before non-recurring income and taxes.................. 5,164 (1,411) 3,939 (12,750) Non-recurring income (See Note 2)... -- 162,544 -- 162,544 ------- ------- ------- ------- Earnings from continuing operations before taxes...................... 5,164 161,133 3,939 149,794 Income tax provision (benefit)...... 1,055 548 1,021 (2,631) ------- ------- ------- ------- Earnings from continuing operations. 4,109 160,585 2,918 152,425 Earnings from discontinued operations, net................... -- 1,769 -- 9,059 Gain on disposal of discontinued operations, net................... -- 61,286 -- 61,259 Extraordinary items, net............ -- (10,436) -- (10,436) ------- ------- ------- ------- Net earnings........................ $ 4,109 $213,204 $ 2,918 $212,307 ======= ======= ======= ======= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended March 30, March 31, 1997 1996 ---------- ---------- Cash flows provided by (used for) Operations: Net earnings ...................................... $ 2,918 $212,307 Depreciation and amortization...................... 14,987 22,762 Accretion of discount on long-term liabilities..... 2,855 2,777 Gain on the merger of subsidiaries (See Note 2).... -- (162,859) Gain on the sale of discontinued operations (See Note 3)...................................... -- (117,573) Distributed (undistributed) earnings of affiliates, net.................................. 378 (1,903) Minority interest.................................. 2,637 1,414 Changes in assets and liabilities.................. (89,180) 23,507 ------- ------- Net cash used for operations....................... (65,405) (19,568) Investments: Collections on notes receivable from operations sold............................................. 173,719 -- Proceeds received from the sale of discontinued operations....................................... -- 78,400 Acquisition of subsidiaries, net of cash acquired.. (52,555) -- Purchase of property, plant and equipment.......... (8,809) (12,257) Changes in investments............................. (18,092) (1,015) Changes in investment in affiliates................ (3,208) (9,812) Changes in net assets held for sale................ (4,275) 5,670 Other, net......................................... 34 37 ------- ------- Net cash provided by investments................... 86,814 61,023 Financing: Proceeds from issuance of debt..................... 108,229 60,960 Debt repayments and repurchase of debentures, net.................................. (132,583) (75,920) Payment of dividends............................... (10,000) (35,481) ------- ------- Net cash used for financing........................ (34,354) (50,441) Effect of exchange rate changes on cash................ (2,151) 447 Net decrease in cash and cash equivalents.............. (15,096) (8,539) Cash and cash equivalents, beginning of period......... 36,112 64,174 ------- ------- Cash and cash equivalents, end of period............... $ 21,016 $ 55,635 ======= ======= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RHI HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands, except per share information) Note 1 - Financial Statements The consolidated balance sheet as of March 30, 1997 and the consolidated statements of earnings and cash flows for the nine months ended March 30, 1997 and March 31, 1996 have been prepared by the Company, without audit. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 30, 1997 and for all periods presented, have been made. The balance sheet at June 30, 1996 was also condensed from the audited financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 1996 Form 10-K and Banner Aerospace, Inc.'s March 31, 1996 Form 10-K. The results of operations for the period ended March 30, 1997 are not necessarily indicative of the operating results for the full year. Certain amounts in prior years' quarterly financial statements have been reclassified to conform to the current presentation. Note 2 - Merger Agreement The Company, The Fairchild Corporation ("TFC"), the Company's parent and Fairchild Industries, Inc. ("FII"), the Company's subsidiary, entered into an Agreement and Plan of Merger dated as of November 9, 1995 (as amended, the "Merger Agreement") with Shared Technologies Inc. ("STI"). On March 13, 1996, in accordance with the Merger Agreement, STI succeeded to the telecommunications systems and services business operated by the Company's Fairchild Communications Services Company ("FCSC"). The transaction was effected by a merger of FII with and into STI (the "Merger") with the surviving company renamed Shared Technologies Fairchild Inc. ("STFI"). Prior to the Merger, FII transferred all of its assets to, and all of its liabilities were assumed by Fairchild Holding Corp. ("FHC"), a wholly owned subsidiary of the Company, except for the assets and liabilities of FCSC, and $223,500 of the FII's existing debt and preferred stock. As a result of the Merger, the Company received shares of Common Stock and Preferred Stock of STFI, representing approximately a 41% ownership interest in STFI. The Merger was structured as a reorganization under section 386(a)(1)(A) of the Internal Revenue Code of 1986, as amended. The Company recorded a $162,544 non-recurring gain from this transaction, in the third quarter ended March 31, 1996. Note 3 - Discontinued Operations On February 22, 1996, pursuant to an Asset Purchase Agreement dated January 26, 1996, the Company, through one of its subsidiaries, completed the sale of certain assets, liabilities and the business of the D-M-E Company ("DME") to Cincinnati Milacron Inc. ("CMI"), for a sales price of approximately $244,331, as adjusted. The sales price consisted of $74,000 in cash, and two 8% promissory notes in the aggregate principal amount of $170,331 (together, the "8% CMI Notes"). On July 29, 1996, CMI paid in full the 8% CMI Notes. As a result of the sale of DME, the Company recorded a gain on disposal of discontinued operations of approximately $61,338, net of a $56,235 tax provision, in the quarter ended March 31, 1996. On January 27, 1996, FII completed the sale of Fairchild Data Corporation ("Data") to SSE Telecom, Inc. ("SSE") for (i) cash of approximately $4,400, (ii) 100,000 shares of SSE's common stock valued at $9.06 per share, or $906, at January 26, 1996, and (iii) warrants to purchase an additional 50,000 shares of SSE's common stock at $11.09 per share. Accordingly, DME and Data have been accounted for as discontinued operations. The combined net sales of DME and Data totaled $16,789 and $108,131 for the third quarter and first nine months of Fiscal 1996, respectively. Net earnings from discontinued operations was $1,769 in the third quarter of Fiscal 1996, and $9,059 for the nine months ended March 30, 1996. Note 4 - Majority Interest Business Combination Effective February 25, 1996, the Company completed a transfer of the Company's Harco Division ("Harco") to Banner Aerospace, Inc. ("Banner") in exchange for 5,386,477 shares of Banner common stock. The exchange has increased the Company's ownership of Banner common stock from approximately 47.2% to 59.3%, resulting in the Company becoming the majority shareholder of Banner. Accordingly, the Company consolidated Banner on February 25, 1996. Banner is a leading international supplier to the aerospace industry as a distributor, providing a wide range of aircraft parts and related support services. Note 5 - Pro forma Financial Statements The following unaudited pro forma information for the nine months ended March 31, 1996, provides the results of the Company's operations as though (i) the disposition of DME and Data, (ii) the Merger of FCSC, and (iii) the transfer of Harco to Banner, resulting in the consolidation of Banner, had been in effect since the beginning of the period. The pro forma information is based on the historical financial statements of the Company, DME, Data, FCSC and Banner, giving effect to the aforementioned transactions. In preparing the pro forma data, certain assumptions and adjustments have been made, which (i) reduce interest expense for revised debt structures, (ii) increase interest income for notes receivable, (iii) reduce minority interest to exclude Series C Preferred Stock of FII redeemed, and (iv) adjust equity in earnings of affiliates to include the estimated results of STFI. The following unaudited pro forma financial information is not necessarily indicative of the results of operations that actually would have occurred if the transactions had been in effect since the beginning of the Fiscal 1996 period, nor is it necessarily indicative of future results of the Company.
Nine Months Ended March 31, 1996 ------------------ Sales................................... $447,796 Loss from continuing operations......... (1,922) Net loss................................ (2,036)
The pro forma financial information has not been adjusted for non- recurring income or expense and gains from disposal of discontinued operations that have been or are expected to be incurred from these transactions, within the ensuing year. Note 6 - Acquisitions The following acquisitions by the Company have been accounted for using the purchase method. The purchase prices assigned to the net assets acquired were based on the fair value of such assets and liabilities at the respective acquisition dates. The Company included the results of operations of the acquired companies as of the date of acquisition. On January 16, 1997, Banner, through its subsidiary, Dallas Aerospace, Inc., consummated the acquisition of 100% of the outstanding stock of PB Herndon Company ("PB Herndon") for approximately $14,700. In addition, Banner paid approximately $1,300 to repay certain loans of PB Herndon. Banner recorded approximately $4,500 of goodwill as a result of this acquisition. Banner financed this transaction by borrowing $16,000 from RHI. PB Herndon is a distributor of aerospace fasteners and other aerospace related components. On February 4, 1997, Banner, through its subsidiary, Professional Aviation Associates, acquired the assets of Air Marine and Air Marine Accessories for $1,200. Banner recorded approximately $585 in goodwill as a result of this acquisition. On February 26, 1997, the Company completed a transaction pursuant to which the Company acquired from Mines de Kali Sainte-Therese S.A. ("KST") common shares and convertible debt representing an 84.2% interest, on a fully diluted basis, of Simmonds S.A. ("Simmonds"), for approximately $21,000. Additionally, the Company paid approximately $14,000 to repay certain loans of Simmonds. The Company has initiated a tender offer to purchase the remaining shares of common stock and convertible debt of Simmonds, held by the public (together with the purchase from KST and the repayment of debt, the "Simmonds Acquisition"). Management estimates that the total cost of the Simmonds Acquisition, including debt assumed, will be approximately $56,500. The Company recorded approximately $15,800 in goodwill as a result of this acquisition. The Company funded the Simmonds Acquisition with available cash and borrowings. Simmonds is one of Europe's leading manufacturers and distributors of aerospace and automotive fasteners. Proforma financial statements are not required for these acquisitions. Note 7 - Summarized Statement of Earnings Information The following table presents summarized historical financial information, on a combined 100% basis, of the Company's principal investments, which are accounted for using the equity method.
Nine Months Ended - ------------------------ March 30, March 31, 1997 1996 ---------- - ---------- Net sales................................. $ 209,153 $ 78,310 Gross profit.............................. 95,967 25,705 Earnings from continuing operations....... 5,813 9,471 Net earnings.............................. 5,812 9,471
The Company owns approximately 31.9% of Nacanco common stock. The Company recorded equity earnings of $2,537 and $2,611 from this investment for the nine months ended March 30, 1997 and March 31, 1996, respectively. Since March 13, 1996, as a result of the Merger in which the Company received an ownership interest of approximately 41% in STFI, the Company has accounted for its investment in STFI using the equity method. Prior to March 13, 1996, the Company consolidated the results of FCSC, which was merged into STFI (see Note 2). The Company recorded equity earnings (loss) of $1,490 and $(60) from this investment during the nine months ended March 30, 1997 and March 31, 1996, respectively. On March 30, 1997, the Company's investments in STFI consisted of (i) $21,267 carrying value for the $25,000 face value 6% Cumulative Convertible Preferred Stock, (ii) $10,646 carrying value for the $20,000 face value Special Preferred Stock, and (iii) $(989) carrying value for 6,200,000 shares of common stock of STFI. At the close of trading on March 27, 1997, STFI's common stock was quoted at $6.125 per share. Based on this price, the Company's investment in STFI common stock had an approximate market value of $37,975. Effective February 25, 1996, the Company increased its percentage of ownership of Banner Common Stock from 47.2% to approximately 59.3%. Since February 25, 1996, the Company has consolidated Banner's results. Prior to February 25, 1996, the Company accounted for its investment in Banner using the equity method and held its investment in Banner as part of investments and advances-affiliated companies. The Company recorded equity earnings of $430 from this investment for the nine months ended March 31, 1996. In connection with the Company's December 23, 1993 sale of its interest in Rexnord Corporation to BTR Dunlop Holdings, Inc. ("BTR"), the Company placed shares of Banner, with a fair market value of $5,000, in escrow to secure the Company's remaining indemnification of BTR against a contingent liability. Once the contingent liability is resolved, the escrow will be released. The company is accounting for its investments in TFC at market value. As of March 30, 1997, the carrying value of the Company's investment in 4,369,400 shares of TFC common stock was $58,441 and included an increase of $13,835, before tax, to market value. The Company recorded a net unrealized gain (loss) of $(3,573) and $17,961 from its investment in TFC common stock in the nine months ended March 30, 1997 and March 31, 1996, respectively. Note 8 - Restricted Cash The Company had approximately $5,811 and $6,761 of restricted cash on March 30, 1997 and June 30, 1996, respectively, all of which is maintained as collateral for certain debt facilities. Note 9 - Credit Agreements Prior to July 29, 1996, the Company through RHI's subsidiary Fairchild Holding Corp. ("FHC"), borrowed under an Interim Credit Agreement (the "Interim Credit Agreement") with a consortium of banks. The Interim Credit Agreement at FHC matured on July 29, 1996, at which time the Company repaid in full the loans made under the Interim Credit Agreement. On July 26, 1996, the Company amended and restated the terms and provisions of the Interim Credit Agreement, in their entirety (the "Restated Credit Agreement"). The Restated Credit Agreement extends to July 28, 2000, the maturity of FHC's revolving credit facility (the "FHC Revolver"). The FHC Revolver has a borrowing limit of $52,000 and requires a borrowing base to determine availability under the limit. The borrowing base is determined monthly based upon specified percentages of FHC's accounts receivable, inventories and the appraised value of equipment and real property. The FHC Revolver generally bears interest at a base rate of 1 1/2% over the greater of (i) Citibank New York's base rate, or (ii) the Federal Funds Rate plus 1 1/2% for domestic borrowings and at 2 1/2% over Citibank London's base rate for foreign borrowings. The Restated Credit Agreement was further amended on February 21, 1997 to permit the Simmonds Acquisition. Terms modified by the February 21, 1997 amendment included a provision in which the interest rate on the FHC Revolver will increase by 1/4% on each of September 30, 1997 and December 31, 1997, in the event that the Restated Credit Agreement is not restructured or refinanced by such dates. FHC's Revolver is subject to a non-use commitment fee of 1/2% on the average unused availability; and outstanding letters of credit are subject to fees of 2 3/4% per annum. The Restated Credit Agreement requires FHC to comply with certain financial and non-financial loan covenants, including maintaining a minimum net worth of $150,000 and maintaining certain interest and fixed charge coverage ratios at the end of each Fiscal Quarter. Additionally, the Restated Credit Agreement restricts the FHC's annual capital expenditures to $12,000. Substantially all of FHC's assets are pledged as collateral under the Restated Credit Agreement. At March 30, 1997, FHC was in compliance with all the covenants under the Restated Credit Agreement. FHC may transfer available cash as dividends to the Company. On July 1, 1996 and again on December 12, 1996, Banner amended its credit agreement (the "Banner Credit Agreement"), which provides Banner and its subsidiaries with funds for working capital and potential acquisitions. The facilities under the Banner Credit Agreement consist of (i) a $55,000 term loan, (ii) a $71,000 revolving credit facility, both of which initially bear interest at prime plus 1 1/4% or London Interbank Offered Rate ("LIBOR") plus 2 1/2%, and require that loans made to Banner do not exceed a defined borrowing base, which is based upon a percentage of inventories and accounts receivable, (iii) a $30,000 seven-year term loan ("Tranche B Loan"), which bears interest at Prime plus 1 3/4% or LIBOR plus 3%, and (iv) a $40,000 six- year term loan ("Tranche C Loan"), which initially bears interest at prime plus 1 1/2% or LIBOR 2 3/4%. Banner's term loans require certain semiannual loan payments. Interest rates on Banner's borrowings, whether computed at the prime rate or LIBOR, may increase by 1/4% or decrease by up to 1% based upon certain performance criteria. Banner's performance level resulted in borrowings under the $55,000 term loan and the $71,000 revolving credit facility being at an interest rate of prime plus 1% and LIBOR plus 2 1/4% for the quarter ended March 30, 1997. Banner's revolving credit facility is subject to a non-use fee of 1/2% of the unused availability. Substantially all of Banner's assets are pledged as collateral under the Banner Credit Agreement. The Banner Credit Agreement requires quarterly compliance with various financial and non-financial loan covenants, including maintenance of minimum net worth, and minimum ratios of interest coverage, fixed charge coverage, and debt to earnings before interest, taxes, depreciation and amortization. Banner also has certain limitations on the incurrence of additional debt. As of March 30, 1997, Banner was in compliance with all covenants under the Banner Credit Agreement. Banner has several interest rate hedge agreements ("Hedge Agreements") to manage its exposure to increases in interest rates on its variable rate debt. The Hedge Agreements provide interest rate protection on $60,000 of debt through September 2000, by providing a cap of 7% if the 90-day LIBOR rate exceeds 7%. If the 90-day LIBOR rate drops below 5%, Banner will be required to pay a floor rate of approximately 6%. In November 1996, Banner entered into an additional hedge agreement ("Additional Hedge Agreement") with one of its major lenders to provide interest rate protection on $20,000 of debt for a period of three years. Effectively, the Additional Hedge Agreement provides for a cap of 7 1/4% if the 90-day LIBOR exceeds 7 1/4%. If the 90-day LIBOR drops below 5%, Banner will be required to pay interest at a floor rate of approximately 6%. No cash outlay was required to obtain the Additional Hedge Agreement as the cost of the cap was offset by the sale of the floor. Note 10 - Minority Interests in Consolidated Subsidiaries Included in the Company's $65,735 of minority interest at March 30, 1997, is $61,336 representing approximately 40.7% of Banner's common stock effectively outstanding on a consolidated basis. Note 11 - Dividends Paid to Parent During the nine months ended March 30, 1997 and March 31, 1996, the Company paid cash dividends of $10,000 and $10,000, respectively, to TFC. Note 12 - Commitments and Contingencies Government Claims - ----------------- The Corporate Administrative Contracting Officer (the "ACO"), based upon the advice of the United States Defense Contract Audit Agency, has made a determination that FII did not comply with Federal Acquisition Regulations and Cost Accounting Standards in accounting for (i) the 1985 reversion to FII of certain assets of terminated defined benefit pension plans, and (ii) pension costs upon the closing of segments of FII's business. The ACO has directed FII to prepare cost impact proposals relating to such plan terminations and segment closings and, following receipt of such cost impact proposals, may seek adjustments to contract prices. The ACO alleges that substantial amounts will be due if such adjustments are made. The Company believes it has properly accounted for the asset reversions in accordance with applicable accounting standards. The Company has held discussions with the government to attempt to resolve these pension accounting issues. Environmental Matters - --------------------- The Company and other aerospace fastener and industrial product manufacturers are subject to stringent Federal, state and local environmental laws and regulations concerning, among other things, the discharge of materials into the environment and the generation, handling, storage, transportation and disposal of waste and hazardous materials. To date, such laws and regulations have not had a material effect on the financial condition, results of operations, or net cash flows of the Company, although the Company has expended, and can be expected to expend in the future, significant amounts for investigation of environmental conditions and installation of environmental control facilities, remediation of environmental conditions and other similar matters, particularly in the Aerospace Fasteners segment. In connection with its plans to dispose of certain real estate, the Company must investigate environmental conditions and may be required to take certain corrective action prior or pursuant to any such disposition. In addition, management has identified several areas of potential contamination at or from other facilities owned, or previously owned, by the Company, that may require the Company either to take corrective action or to contribute to a clean-up. The Company is also a defendant in certain lawsuits and proceedings seeking to require the Company to pay for investigation or remediation of environmental matters and has been alleged to be a potentially responsible party at various "Superfund" sites. Management of the Company believes that it has recorded adequate reserves in its financial statements to complete such investigation and take any necessary corrective actions or make any necessary contributions. No amounts have been recorded as due from third parties, including insurers, or set off against, any liability of the Company, unless such parties are contractually obligated to contribute and are not disputing such liability. As of March 30, 1997, the consolidated total recorded liabilities of the Company for environmental matters approximated $9,059, which represented the estimated probable exposures for these matters. It is reasonably possible that the Company's total exposure for these matters could be approximately $16,890. Other Matters - ------------- The Company is involved in various other claims and lawsuits incidental to its business, some of which involve substantial amounts. The Company, either on its own or through its insurance carriers, is contesting these matters. In the opinion of management, the ultimate resolution of the legal proceedings, including those discussed above, will not have a material adverse effect on the financial condition, or future results of operations or net cash flows of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------------------------------------------------- RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- Item 2 of Form 10-Q is omitted in accordance with General Instruction H(I)(a) and (b), Omission of Information by Certain Wholly-Owned Subsidiaries. Management's narrative analysis of the results of operations is furnished in lieu thereof: MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS - ------------------------------------------------------------ RHI Holdings, Inc. (the "Company"), formerly known as Rexnord Holdings Inc., is essentially a holding company incorporated in the State of Delaware. It has two operating subsidiaries, Fairchild Holding Corporation ("FHC") and Banner Aerospace, Inc. ("Banner"). The Company is a wholly-owned subsidiary of The Fairchild Corporation ("TFC"). The Company also holds a significant equity interest in Shared Technologies Fairchild Inc., ("STFI") and Nacanco Paketleme ("Nacanco"). CAUTIONARY STATEMENT Certain statements in the financial discussion and analysis by management contain "forward-looking" information that involves risk and uncertainty, including current trend information, projections for deliveries, backlog, and other trend projections. Actual future results may differ materially depending on a variety of factors, including product demand; performance issues with key suppliers; customer satisfaction and qualification issues; labor disputes; governmental export and import policies; worldwide political stability and economic growth; and legal proceedings. RECENT DEVELOPMENTS On January 16, 1997, Banner, through its subsidiary, Dallas Aerospace, Inc., consummated the acquisition of 100% of the outstanding stock of PB Herndon Company ("PB Herndon") for approximately $14.7 million. In addition, Banner paid approximately $1.3 million to repay certain loans of PB Herndon. Banner recorded approximately $4.5 million of goodwill as a result of this acquisition. Banner financed this transaction by borrowing $16.0 million from RHI. PB Herndon is a distributor of aerospace fasteners and other aerospace related components. On February 4, 1997, Banner, through its subsidiary, Professional Aviation Associates, acquired the assets of Air Marine and Air Marine Accessories for $1.2 million. Banner recorded approximately $.6 million in goodwill as a result of this acquisition. On February 26, 1997, the Company completed a transaction pursuant to which the Company acquired from Mines de Kali Sainte-Therese S.A. ("KST") common shares and convertible debt representing an 84.2% interest, on a fully diluted basis, of Simmonds S.A. ("Simmonds"), for approximately $21.0 million. Additionally, the Company paid approximately $14.0 million to repay certain loans of Simmonds. The Company has initiated a tender offer to purchase the remaining shares of common stock and convertible debt of Simmonds, held by the public (together with the purchase from KST and the repayment of debt, the "Simmonds Acquisition"). Management estimates that the total cost of the Simmonds Acquisition, including debt assumed, will be approximately $56.5 million. The Company recorded approximately $15.8 million in goodwill as a result of this acquisition. The Company funded the Simmonds Acquisition with available cash and borrowings. Simmonds is one of Europe's leading manufacturers and distributors of aerospace and automotive fasteners. FISCAL 1996 SIGNIFICANT TRANSACTIONS - ------------------------------------ The Company, TFC and Fairchild Industries, Inc. ("FII"), the Company's former subsidiary, entered into an Agreement and Plan of Merger dated as of November 9, 1995 (as amended, the "Merger Agreement") with Shared Technologies Inc. ("STI"). On March 13, 1996, in accordance with the Merger Agreement, STI succeeded to the telecommunications systems and services business operated by the Company's Fairchild Communications Services Company ("FCSC"). The transaction was effected by a Merger of FII with and into STI (the "Merger") with the surviving company renamed STFI. Prior to the Merger, FII transferred all of its assets to, and all of its liabilities were assumed by FHC, except for the assets and liabilities of FCSC, and $223.5 million of the FII's existing debt and preferred stock. As a result of the Merger, the Company received shares of Common Stock and Preferred Stock of STFI, representing approximately a 41% ownership interest in STFI. On February 22, 1996, pursuant to the Asset Purchase Agreement dated January 26, 1996, the Company, through its subsidiaries, completed the sale of certain assets, liabilities and the business of the D-M-E Company ("DME") to Cincinnati Milacron Inc. ("CMI"), for a sales price of approximately $244.3 million, as adjusted. The sales price consisted of $74.0 million in cash, and two 8% promissory notes in the aggregate principal amount of $170.3 million (together, the "8% CMI Notes"). On July 29, 1996, CMI paid in full the 8% CMI Notes. On January 27, 1996, FII completed the sale of Fairchild Data Corporation ("Data") to SSE Telecom, Inc. ("SSE") for book value of approximately $4.4 million and 100,000 shares of SSE's common stock valued at $9.0625 per share, or $.9 million, at January 26, 1996, and warrants to purchase an additional 50,000 shares of SSE's common stock at $11.09 per share. Accordingly, DME and Data have been accounted for as discontinued operations. The combined net sales of DME and Data totaled $16.8 million and $108.1 million for the third quarter and first nine months of Fiscal 1996, respectively. Net earnings from discontinued operations was $1.8 million in the third quarter of Fiscal 1996 and $9.1 million for the nine months ended March 31, 1996. Effective February 25, 1996, the Company completed the transfer of Harco to Banner in exchange for 5,386,477 shares of Banner common stock. The exchange has increased the Company's ownership of Banner common stock from approximately 47.2% to 59.3%, resulting in the Company becoming the majority shareholder of Banner. Accordingly, the Company consolidated Banner on February 25, 1996. Banner is a leading international supplier to the aerospace industry as a distributor, providing a wide range of aircraft parts and related support services. RESULTS OF OPERATIONS The Company currently operates in three principal business segments: Aerospace Fasteners, Aerospace Distribution (Banner) and Technology Products (formerly Industrial Products). In the nine months ended March 30, 1996, the Company consolidated pre March 13, 1996 operating results from the Communications Services segment, and, effective February 25, 1996, began to consolidate the operating results of the Aerospace Distribution segment. The following table illustrates the historical sales and operating income of the Company's continuing operations for the three and nine month periods ended March 30, 1997 and March 30, 1996.
(In thousands) Three Months Ended Nine Months Ended March 30, March 31, March 30, March 31, 1997 1996 1997 1996 --------- --------- - ---------- ---------- Sales by Business Segment: Aerospace Fasteners................ $ 64,073 $ 57,895 $175,614 $165,875 Aerospace Distribution (a)......... 113,743 35,698 294,835 35,698 Technology Products................ 15,827 17,169 35,254 54,674 Communications Services (b)........ -- 26,262 -- 91,290 Eliminations (c)................... (3,118) -- (9,693) -- ------- ------- ------- ------- Total................................. $190,525 $137,014 $496,010 $347,537 ======= ======= ======= ======= Operating Income (Loss) by Business Segment: Aerospace Fasteners................ $ 3,563 $ 828 $ 7,827 $ (88) Aerospace Distribution (a)......... 9,061 742 21,114 742 Technology Products ............... 1,468 (244) (2,830) 1,977 Communications Services (b)........ -- 4,773 -- 14,544 ------- ------- ------- ------- Total................................. 14,092 6,099 26,111 17,175 Corporate administrative expense... (2,690) (2,640) (8,099) (7,796) Other corporate income............. (1,168) 363 (1,258) 160 ------- ------- ------- ------- Operating income...................... 10,234 3,822 16,754 9,539 Net interest expense.................. (6,327) (6,817) (16,359) (26,623) Investment income, net................ 726 1,150 2,187 3,062 Equity in earnings of affiliates...... 1,607 763 3,994 2,686 Minority interest..................... (1,076) (329) (2,637) (1,414) ------- ------- ------- ------- Earnings (loss) from continuing operations before non-recurring income and taxes..................... 5,164 (1,411) 3,939 (12,750) Non-recurring income.................. -- 162,544 -- 162,544 ------- ------- ------- ------- Earnings from continuing operations before income taxes................. 5,164 161,133 3,939 149,794 Income tax provision (benefit)........ 1,055 548 1,021 (2,631) ------- ------- ------- ------- Earnings from continuing operations... $ 4,109 $160,585 $ 2,918 $152,425 ======= ======= ======= ======= (a) Effective February 25, 1996, the Company became the majority shareholder of Banner Aerospace, Inc. in and accordingly, began consolidating their results. (b) Effective March 13, 1996, the Company's investment in the Communications Services segment was recorded using the equity method. (c) Represents intersegment sales from the Aerospace Fasteners segment to the Aerospace Distribution segment.
Consolidated Results - -------------------- Sales of $190.5 million for the third quarter and $496.0 million for the nine months ended March 30, 1997, improved by $53.5 million, or 39.1%, and $148.5 million, or 42.7%, over comparable periods of the prior year. Operating income increased $6.4 million in the third quarter and $7.2 million in the Fiscal 1997 nine-month period, compared to operating income for the same periods in Fiscal 1996. The improvements reflected strong performance increases contributed by the Aerospace Fasteners and Aerospace Distribution segments reflecting the recent turnaround of the commercial aerospace industry. The first nine months of Fiscal 1997 include sales and operating income from the Aerospace Distribution segment, offset partially by the exclusion of sales and operating income from the Communications Services segment which was unconsolidated effective March 13, 1996, as a result of the Merger into STI. (See discussion above). Aerospace Fasteners - ------------------- Sales in the Aerospace Fasteners segment increased $6.2 million or 10.7%, in the third quarter, and $9.7 million, or 5.9%, in the Fiscal 1997 nine-month period, compared to the corresponding Fiscal 1996 periods, reflecting growth within the commercial aerospace industry. New orders have been strong in recent months, resulting in a backlog of $158.4 million at March 30, 1997, up from $109.9 million at June 30, 1996. On February 26, 1997, the Company purchased an 84.2% interest in Simmonds and began consolidating the results of Simmonds. The Harco division was transferred to the Aerospace Distribution segment on February 25, 1996. Excluding Simmonds sales in the first nine months of Fiscal 1997, and Harco's sales in the first nine months of Fiscal 1996, sales improved 17.3% in the Fiscal 1997 nine- month period. Operating income in the Aerospace Fasteners segment increased $2.7 million in the third quarter and $7.9 million in the Fiscal 1997 nine-month period, compared to the Fiscal 1996 periods. The prior year nine month period was adversely affected by $1.2 million in restructuring charges, resulting from severance pay provided to employees and the closing of a small subsidiary. Excluding Simmonds, results in the current year nine months, and Harco's results and restructuring charges in the prior year nine months, operating income improved by $9.1 million in the Fiscal 1997 nine-month period. Management intends to continue to implement productivity improvements and reduce costs. Aerospace Distribution - ---------------------- The Aerospace Distribution segment continued its record growth reporting sales of $113.7 million in the third quarter and $294.8 million for the nine- month period ended March 30, 1997, reflecting the recent resurgence of the commercial aerospace industry. Operating income was $9.1 million in the third quarter and $21.1 million for the nine-month period ended March 30, 1997. The prior year periods include results from this segment only for five weeks of operations which began on February 25, 1996, when the Company acquired a majority interest in Banner. Since February 25, 1996, Harco's results were reported as part of the Aerospace Distribution segment. Previously, Harco's results were reported as part of the Aerospace Fasteners segment. Technology Products - ------------------- Sales in the Technology Products segment, which primarily includes Fairchild Technologies ("FT"), decreased $1.3 million in the third quarter and $19.4 million in the first nine months of Fiscal 1997, compared to the Fiscal 1996 periods. The decrease in the current nine-month period is primarily attributable to the temporary slowdown in the growth of DRAM chip demand which negatively affected FT's semiconductor production equipment line. However, this is expected to be a temporary decrease, as evidenced by several multimillion dollar orders recently received and which are scheduled to be shipped over the next six months. During the first nine months of Fiscal 1997, FT received new orders totaling approximately $64.0 million. The sales decrease in the current third quarter period was partially offset from record growth achieved by the Fairchild Scandinavian Bellyloading Company ("SBC"), a start-up company whose sales increased by $2.6 million, or 428%, compared to the prior year third quarter. FT reported operating income of $.6 million in the third quarter and an operating loss of $3.2 million for the nine months ended March 30, 1997, which was recorded in the Technology Products segment. FT's nine-month period loss was partially due to the lower level of sales, but also due to expansion of the sales staff into the Pacific Rim. SBC had a nine-month operating income of $.3 million, a $1.2 million improvement over the prior year nine month loss, reflecting the record growth mentioned above. The Technology Products segment reported an operating loss of $.2 million in the Fiscal 1996 third quarter and operating income of $2.0 million in the Fiscal 1996 nine months. Communications Services - ----------------------- As a result of the Merger of the Communications Services segment into STI on March 13, 1996, the Company is accounting for its current investment in STFI, the merged company, using the equity method. For the three and nine months ended March 31, 1996, this segment reported sales of $26.3 million and $91.3 million, respectively, and operating profit of $4.8 million and $14.5 million, respectively. Other Expenses/Income - --------------------- Net interest expense decreased 7.2% in the third quarter and 38.6% in the nine-month period ended March 30, 1997, compared to the prior year periods, due primarily to lower debt outstanding, as a result of the sale of DME and the Merger, and higher interest income earned on higher weighted average cash balances during the first nine months of Fiscal 1997. Non-recurring income in the Fiscal 1996 periods includes a $162.5 million nontaxable gain resulting from the Merger. Expenses relating to other potential transactions which did not take place partially offset the above gain. In the first nine months of Fiscal 1997, the Company recorded a tax provision of $1.0 million on a pretax income of $3.9 million. A tax benefit of $2.6 million was recorded from the continuing operations loss, excluding the nontaxable non-recurring gain, incurred in the prior year's nine months. Earnings from discontinued operations, net, of $1.8 million in the Fiscal 1996 third quarter and $9.1 million for the nine months ended March 30, 1996, include the earnings, net of tax, provided by DME and Data. The $61.3 million net gain on disposal of discontinued operations recorded in the prior year period resulted primarily from the sale of DME. The prior year's extraordinary items totaled $10.4 million, net of taxes, and resulted from the write-off of deferred fees and the premium costs associated with the early extinguishment of FII's senior notes and bank debt. The $2.9 million net earnings from continuing operations for the nine months ended March 30, 1997 was a $13.0 million improvement over the Fiscal 1996 nine-month period $10.1 million net loss from continuing operations, excluding non-recurring income. The improvement resulted primarily from: (i) an $7.2 million increase in operating income, and (ii) a $10.3 million decrease in net interest expense, partially offset by a $3.7 million increase in the tax provision. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES As of March 30, 1997, the Company's current ratio was 2.17:1, down from 2.13:1 at June 30, 1996. Working capital at March 30, 1997, was $292.0 million, which was $28.2 million lower than at June 30, 1996. The principal reasons for this change included a $15.1 million decrease in cash, a $170.4 million decrease in notes receivable, and a $30.1 million increase in accounts payable and other accrued liabilities. These decreases of working capital were partially offset by a $64.3 million increase in inventory, a $46.2 million decrease in current income taxes, a $29.5 million increase in accounts receivable, a $18.3 million increase in Prepaid and other current assets, a $11.4 million increase in short-term investments, and a $17.7 million reduction in short- term notes payable. The Company's principal sources of liquidity are cash on hand, cash generated from operations and borrowings under its credit agreement. At March 30, 1997, $69.1 million was available to be borrowed from the Company's credit agreements (see Note 9 in the notes to the condensed consolidated financial statements), of which $51.6 million is available only to Banner. The Company also expects to generate cash from the sale of certain assets and liquidation of investments. Net assets held for sale at March 30, 1997, had a book value of $47.4 million and included two parcels of real estate in California, a 68-acre parcel of real estate located in Farmingdale, New York, two landfills in Pennsylvania, a real estate joint venture in California, and several other parcels elsewhere, which the Company plans to sell, lease or develop, subject to market conditions or, with respect to certain of the parcels, the resolution of environmental matters. The Company's principal cash requirements include debt service, capital expenditures, acquisitions, and payment of other liabilities. Other liabilities that require the use of cash include post-employment benefits for retirees, environmental investigation and remediation obligations, litigation settlements and related costs. Property, plant and equipment increased $34.7 million from June 30, 1996, primarily as a result of the Simmonds Acquisition. Goodwill increased by $18.1 million as a result of the Company's acquisitions in the current fiscal year. The Company expects that cash on hand, cash generated from operations, borrowings, and asset sales will be adequate to satisfy cash requirements. Management intends to take appropriate action to refinance portions of its debt, if necessary to meet cash requirements. PART II. OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Note 12 of Notes to Consolidated Financial Statements. Item 5. Other Information Articles have appeared in the French press reporting an investigation by a French magistrate into certain allegedly improper business transactions involving Elf Acquitaine, its former chairman and various third parties, including Maurice Bidermann. In connection with this investigation, the magistrate has made inquiry into allegedly improper transactions between Jeffrey Steiner and that petroleum company. In response to the magistrate's request that Mr. Steiner appear in France as a witness, Mr. Steiner submitted a written statement concerning the transactions and has offered to appear in person if certain arrangements were made. According to the French press, the magistrate also has requested permission to investigate other allegedly improper transactions involving another French petroleum company and, if granted, inquiry into transactions between Mr. Steiner and such company, could ensue. The Board of Directors of the Company has formed a special committee of outside directors to advise it with respect to these matters, and the special committee has retained counsel. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits -------- (i) Amendment No. 1, dated as of January 21, 1997, to the Restated and Amended Credit Agreement dated as of July 26, 1996. (ii) Amendment No. 2 and Consent, dated as of February 21, 1997, to the Restated and Amended Credit Agreement dated as of July 26, 1996. (iii) Financial Data Schedules (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during this quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. For RHI HOLDINGS, INC. (Registrant) and as its Chief Financial Officer: By: Colin M. Cohen Vice President and Chief Financial Officer and Controller Date: May 13, 1997 EX-27 2
5 1,000 9-MOS JUN-30-1997 MAR-30-1997 21,016 21,841 133,614 (7,589) 335,006 542,427 246,687 124,137 1,062,333 250,388 201,149 0 100 100 414,831 1,062,333 496,010 497,229 365,147 480,475 0 0 16,359 3,939 1,021 2,918 0 0 0 2,918 0 0
EX-10 3 AMENDMENT NO. 1 to AMENDED AND RESTATED CREDIT AGREEMENT Dated as of July 26, 1996 THIS AMENDMENT NO. 1 ("Amendment") is entered into as of January 21, 1997 by and among Fairchild Holding Corp., a Delaware corporation (the "U.S. Borrower"), Kaysel, a private unlimited liability company formed under the laws of The Republic of Ireland d/b/a/ Fairchild Finance Company (the "U.K. Borrower"), and the institutions identified on the signature pages hereof as Lenders. Capitalized terms used herein but not defined herein shall have the meanings provided in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the U.S. Borrower, the U.K. Borrower, and the Lenders are parties to that certain Amended and Restated Credit Agreement dated as of July 26, 1996 (together with the Exhibits and Schedules thereto, the "Credit Agreement"), pursuant to which the Lenders have agreed to provide certain financial accommodations to the Borrowers; and WHEREAS, the U.S. Borrower has requested an amendment of Section 10.01 of the Credit Agreement to permit the incurrence of certain intercompany Indebtedness in addition to that heretofore permitted thereunder and the waiver of Lenders' rights and remedies arising due to the amendment of the Tax Allocation Agreement pursuant to a Tenth Amended and Restated Tax Allocation Agreement dated as of December 23, 1996 attached hereto as Exhibit 1 and made a part hereof (the "Tenth Amended Tax Allocation Agreement"); NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Amendment to Credit Agreement; Waiver. Effective as of January 21, 1997, upon satisfaction of the conditions precedent set forth in Section 2 below, (a) the Credit Agreement is hereby amended to delete the provisions of Section 10.01(g) in their entirety and substitute the following therefor: (g) Indebtedness arising from intercompany loans (i) from the U.S. Borrower to any of its Subsidiaries which is a Guarantor or from any such Subsidiary to the U.S. Borrower or any other such Subsidiary, (ii) from the U.K. Borrower to any of the European Subsidiary Borrowers, (iii) from the U.K. Borrower to the U.S. Borrower in the amount of $1,450,000 evidenced by a promissory note in form and substance satisfactory to the Administrative Agent, (iv) from RHI to the U.S. Borrower provided that such loans are subordinated to the payment and performance of the Obligations and are evidenced by a promissory note in form and substance satisfactory to the Administrative Agent, (v) in an aggregate amount outstanding at any time not to exceed $10,000,000 from the U.S. Borrower to Subsidiaries not described in clauses (i) through (iii) above or from such Subsidiaries to the U.S. Borrower, and (vi) from the U.S. Borrower to Technologies in an aggregate amount outstanding at any time not to exceed the amount which is equal to (a) $25,000,000 minus (b) the amount of Indebtedness outstanding under clause (v) above; and (b) the rights and remedies of the Lenders arising due to the execution of the Tenth Amended Tax Allocation Agreement are hereby waived. 2. Conditions to Effectiveness. This Amendment shall become effective as of January 21, 1997 upon receipt by the Administrative Agent, by no later than January 21, 1997, of executed counterparts of this Amendment signed on behalf of the Borrower and the Requisite Lenders. 3. Representations, Warranties and Covenants. 3.1 The Borrowers hereby represent and warrant that this Amendment and the Credit Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. 3.2 The Borrowers hereby represent and warrant that, before and after giving effect to this Amendment, no Event of Default or Potential Event of Default has occurred and is continuing except under Section 9.13 with respect to execution of the Tenth Amended Tax Allocation Agreement. 3.3 Each Borrower hereby reaffirms all agreements, covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and made in the other Loan Documents to which it is a party; and agrees that all such agreements, covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. To the extent the Credit Agreement is amended hereby to modify or add agreements, covenants and/or representations and warranties, such agreements, covenants and/or representations and warranties are made as of the date on which this Amendment becomes effective with respect thereto. 4. Reference to and Effect on the Credit Agreement. 4.1 Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import shall mean and be a reference to the Credit Agreement as amended hereby. 4.2 Except as specifically amended above, the Credit Agreement shall remain in full force and effect, and is hereby ratified and confirmed. 4.3 The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or Lenders, or constitute a waiver of any provision of any of the Loan Documents. 5. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. FAIRCHILD HOLDING CORP. Karen L. Schneckenburger Vice President & Treasurer KAYSEL Karen L. Schneckenburger Attorney CITICORP USA, INC. Timothy L. Freeman Attorney-in-Fact NATIONSBANK, N.A. Michael R. Heredia Vice President CAISSE NATIONALE DE CREDIT AGRICOLE David Bouhl F.V.P. Head of Corporate Banking, Chicago UNION BANK OF CALIFORNIA Cedric M. Henly Credit Officer Cary Moore Vice President EX-10 4 AMENDMENT NO. 2 and CONSENT to AMENDED AND RESTATED CREDIT AGREEMENT Dated as of July 26, 1996 THIS AMENDMENT NO. 2 and CONSENT ("Amendment") is entered into as of February 21, 1997 by and among Fairchild Holding Corp., a Delaware corporation (the "U.S. Borrower"), Fairchild Finance Company (f/k/a Kaysel), a private unlimited liability company formed under the laws of The Republic of Ireland (the "U.K. Borrower"), and the institutions identified on the signature pages hereof as Lenders. Capitalized terms used herein but not defined herein shall have the meanings provided in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the U.S. Borrower, the U.K. Borrower, and the Lenders are parties to that certain Amended and Restated Credit Agreement dated as of July 26, 1996 (together with the Exhibits and Schedules thereto, the "Credit Agreement"), pursuant to which the Lenders have agreed to provide certain financial accommodations to the Borrowers; WHEREAS, the U.S. Borrower has informed the Administrative Agent and Lenders of its desire to acquire 100% of the Capital Stock of Simmonds S.A., a corporation formed under the laws of France, and in connection therewith, to form a new Subsidiary under the laws of France which would be owned in partnership by two Wholly-Owned Subsidiaries of the U.S. Borrower, Meow, Inc., a Delaware corporation, and Fairchild Fasteners Corp., a Delaware corporation, with Meow, Inc. having a 90% interest and Fairchild Fasteners Corp. having a 10% interest; and WHEREAS, the U.S. Borrower has requested certain consents in connection with the aforesaid proposed acquisition and a further amendment of Section 10.01 of the Credit Agreement and an amendment of the Borrowing Base Certificate with respect to calculation of the EBITDA Borrowing Base; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Amendment to Credit Agreement. Effective as of February 21, 1997, upon satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement is hereby amended as follows: 1.1 Article I is amended to (a) delete the definitions of "Base Rate Margin" and "Eurocurrency Rate Margin" in their entirety and substitute the following therefor: "Base Rate Margin" means (i) with respect to Obligations of the U.S. Borrower, a rate equal to one and one-half percent (1.50%) per annum and (ii) with respect to Obligations of the U.K. Borrower, a rate equal to two and one-half percent (2.50%) per annum; provided, however, that in the event the Loans and other financial accommodations provided for in this Agreement are not restructured or refinanced by September 30, 1997, the aforesaid per annum rates shall be increased, effective as of September 30, 1997, by one- quarter of one percent (0.25%) per annum and provided further that in the event the Loans and other financial accommodations provided for in this Agreement are not restructured or refinanced by December 31, 1997, the aforesaid per annum rates shall be further increased, effective as of December 31, 1997, by an additional one-quarter of one percent (0.25%) per annum. "Eurocurrency Rate Margin" means (i) with respect to Obligations of the U.S. Borrower, a rate equal to two and three- quarters percent (2.75%) per annum and (ii) with respect to Obligations of the U.K. Borrower, a rate equal to two and one-half percent (2.50%) per annum; provided, however, that in the event the Loans and other financial accommodation provided for in this Agreement are not restructured or refinanced by September 30, 1997, the aforesaid per annum rates shall be increased, effective as of September 30, 1997, by one-quarter of one percent (0.25%) per annum and provided further that in the event the Loans and other financial accommodations provided for in this Agreement are not restructured or refinanced by December 31, 1997, the aforesaid per annum rates shall be further increased, effective as of December 31, 1997, by an additional one-quarter of one percent (0.25%) per annum. and (b) add the following definitions: "Simmonds S.A." means Simmonds S.A., a corporation formed under the laws of France. "Support Agreement" means the written agreement executed and delivered to the Administrative Agent for the benefit of the Holders by RHI described in Section 3 of that certain Amendment No. 2 and Consent dated as of February 21, 1997 and delivered with respect to this Agreement. 1.2 Section 10.01 is amended to delete the provisions of Section 10.01(g) in their entirety and substitute the following therefor: (g) Indebtedness arising from (i) intercompany loans from the U.S. Borrower to any of its Subsidiaries which is a Guarantor (other than Fairchild Technologies USA, Inc.) or from any such Subsidiary to the U.S. Borrower or any other such Subsidiary, (ii) those certain intercompany loans identified on Schedule 10.01-G attached hereto and made a part hereof incurred on or before February 21, 1997 or under promissory notes identified on Schedule 10.01-G evidencing Indebtedness owing (A) between the U.S. Borrower and Fairchild Retiree Medical Services, Inc. and (B) by the U.K. Borrower to the U.S. Borrower upon the assignment by the U.S. Borrower of the promissory note executed on February 20, 1997 by Simmonds Holding to the U.K. Borrower as referenced on Schedule 10.01-G, (iii) Indebtedness incurred after February 21, 1997 in addition to that permitted under clause (i) above, in an amount not to exceed $12,000,000 in the aggregate, exclusive of fees and interest with respect thereto, arising from intercompany loans (A) from the U.S. Borrower to Fairchild Technologies USA, Inc. and any of the U.S. Borrower's Subsidiaries which are not Guarantors or from any such Subsidiary of the U.S. Borrower to the U.S. Borrower or any other such Subsidiary, (B) from the U.K. Borrower to any Subsidiary of the U.S. Borrower, and (iv) from RHI to the U.S. Borrower; provided that such loans are subordinated to the payment and performance of the Obligations and are evidenced by promissory notes in form and substance satisfactory to the Administrative Agent, which terms of such promissory notes executed with respect to loans from RHI to the U.S. Borrower on or after February 21, 1997, the proceeds of which are used, directly or indirectly, to effect the acquisition of Capital Stock and convertible bonds of Simmonds, S.A. and compliance with the requirements of the Support Agreement, shall include, without limitation, provisions stating that such loans are not payable until the Obligations are satisfied in full, in cash, and that interest payable with respect thereto shall not be payable in cash, but only in kind, and provided further that the amount of Indebtedness permitted in clause (iii) hereof shall be in addition to the amount of proceeds of loans permitted in clause (iv) hereof which are in turn loaned by the U.S. Borrower to a Subsidiary of the U.S. Borrower or by such a Subsidiary to another such Subsidiary; 1.3 Exhibit B is amended, under the heading "II. Calculation of EBITDA Borrowing Base", at line 14 to read as follows: 14. EBITDA for most recent four fiscal quarters $______ x 3.5 2. Consents. The Lenders signatory hereto hereby consent to: 2.1 the formation by Meow, Inc. and Fairchild Fasteners Corp., Wholly-Owned Subsidiaries of the U.S. Borrower, under the laws of France, of a new Subsidiary to be named Fairchild Fasteners Europe - Simmonds S.A.R.L. ("Simmonds Holding Corp.") solely for the purpose of acquiring 100% of the Capital Stock of Simmonds S.A., a corporation organized under the laws of France ("Simmonds S.A."), provided that 65% of the Capital Stock of Simmonds Holding Corp. is pledged to the Administrative Agent on terms and conditions and subject to agreements satisfactory to the Administrative Agent; 2.2 the exercise by Simmonds Holding Corp., as assignee of Fairchild France, Inc., of the option to purchase Capital Stock and convertible bonds of Simmonds S.A. evidenced by that certain Call Option dated January 23, 1997 executed by Fairchild France, Inc., a Subsidiary of RHI and Mines de Kali Sainte Therese S.A.("KST"), a translation of which is attached hereto as Exhibit 1 (the "Call Option") in accordance with the terms of the Call Option; 2.3 the consummation of the acquisition, by Simmonds Holding Corp., of (a) the Capital Stock of Simmonds S.A. and, indirectly, the Subsidiaries and Investments of Simmonds S.A. identified on Exhibit 2 attached hereto and made a part hereof, and (b) Indebtedness in the form of bonds convertible into Capital Stock of Simmonds S.A., in each instance, on the terms and conditions set forth in the Call Option; provided that (i) proceeds of Loans under the Credit Agreement and cash from operations of the U.S. Borrower and its Subsidiaries used, directly or indirectly, to effect such acquisition do not exceed $30,000,000 in the aggregate; (ii) the sources and uses with respect to the aforesaid acquisition consist of: Sources U.S. Borrower Cash FF165,000,000 Borrowing from RHI 64,456,080 Indebtedness on Books 101,890,218 of Simmonds S.A. & its Subsidiaries Total FF 331,346,298 Uses Purchase of 87.58% of FF 69,364,000 Simmonds S.A. Capital Stock from Related Parties Purchase of 12.42% of 9,836,000 Simmonds S.A. Capital Stock from Public Purchase of Convertible 47,301,000 Bonds from Related Parties Purchase of Convertible 12,099,000 Bonds from Public Repayment of Indebtedness 45,149,730 to KST Repayment of Indebtedness 40,706,350 to Bank Rivaud Indebtedness on Books 101,890,218 of Simmonds S.A. & its Subsidiaries Transaction Costs 5,000,000 Total FF 331,346,298 (iii) there shall exist no contractual restriction of any kind on the ability of Simmonds S.A. to pay dividends to Simmonds Holding Corp. or for Simmonds Holding Corp. to pay dividends to Meow, Inc. or Fairchild Fasteners Corp. 2.4 the continuation, from and after the consummation of the acquisition described in Section 2.3 above, of Indebtedness in the aggregate amount of Fr 101,890,218 owing by Simmonds S.A. and its Subsidiaries to the Persons identified on Exhibit 3 attached hereto and made a part hereof, approximately FF 11,250,000 of which is owing to Credit Nationale and secured by a Lien against 29,000 shares of the Capital Stock of Transfix S.A.; 2.5 incurrence by Simmonds Holding Corp. of Indebtedness to the U.S. Borrower or U.K. Borrower (directly or by assignment of the promissory note evidencing the same originally payable to the U.S. Borrower) in the aggregate principal amount of approximately FF 85,856,080 subject to agreements in form and substance satisfactory to the Administrative Agent to refinance Indebtedness in the amount of FF 45,149,730 owing by Simmonds S.A. and Mecaero S.A. to KST and Indebtedness in the amount of approximately FF 40,706,350 owing by Simmonds S.A. to Bank Rivaud, which Indebtedness shall be in addition to that permitted under Section 10.01(g)(iii), as amended by this Amendment; 2.6 in the event the assignment referenced in Section 2.5 above is effected, incurrence by the U.K. Borrower of Indebtedness to the U.S. Borrower in the aggregate principal amount of the Indebtedness referenced in Section 2.5 above subject to a promissory note in form and substance satisfactory to the Administrative Agent representing the consideration paid for such assignment, which Indebtedness shall be in addition to that permitted under Section 10.01(g)(iii), as amended by this Amendment; 2.7 the acquisition by the U.S. Borrower of 99.99% of the Capital Stock of Simmonds Mecaero Fasteners, Inc., a Delaware corporation ("Mecaero US"), from Simmonds S.A. for an amount equal to the book value thereof approximating $1,500,000 and the subsequent liquidation of Mecaero US into the U.S. Borrower, provided that promptly following such acquisition and liquidation, the U.S. Borrower executes and delivers to the Administrative Agent such Loan Documents as are requested by the Administrative Agent to perfect Liens on the assets theretofore owned by Mecaero US as part of the Collateral and, in the event the purchase price is paid by promissory note rather than in cash, such promissory note shall be on terms and conditions satisfactory in form and substance to the Administrative Agent; 2.8 the incurrence by Simmonds Holding Corp. of Indebtedness to the U.S. Borrower in the amount of FF 143,550,000 in connection with the capitalization of Simmonds Holding Corp.; provided that (i) the U.S. Borrower's claims with respect to such Indebtedness may be assigned to the U.K. Borrower in exchange for a promissory note in the amount of FF 143,550,000 and (ii) the terms and conditions of such Indebtedness of Simmonds Holding Corp. and the U.K. Borrower are subject to agreements in form and substance satisfactory to the Administrative Agent, which Indebtedness, in each case, shall be in addition to that permitted under Section 10.01(g)(iii), as amended by this Amendment; 2.9 dissolution of Mecair, a Canadian Subsidiary of Mecaero, S.A.; 2.10 further amendment of the Tax Allocation Agreement, in a manner consistent with substantially similar amendments previously made, solely to reflect the acquisition of Simmonds S.A. and its Subsidiaries; and 2.11 maintenance by Simmonds Holding Corp. and Simmonds S.A. of a fiscal year end as September 30. 3. Conditions to Effectiveness. 3.1 The provisions of this Amendment set forth in Section 2.1 and Section 2.2 shall become effective as of February 21, 1997 upon receipt by the Administrative Agent, by no later than 5:00 p.m. (New York time) on February 21, 1997, of (a) executed counterparts of this Amendment signed on behalf of the Borrowers and the Requisite Lenders, (b) the written agreement of RHI in the form attached hereto as Exhibit 4 to provide (i) Technologies and Fairchild Technologies USA, Inc., directly, with all financial support required in excess of that permitted under Section 10.01(g)(iii) of the Credit Agreement, as amended hereby, and (ii) the Administrative Agent and the Lenders with written notice of the provision of such support contemporaneously with such provision of support to Technologies and Fairchild Technologies USA, Inc., and (c) payment, for the account of the Lenders executing and delivering a counterpart of this Amendment by February 21, 1997, of an amendment fee in the amount of one-quarter of one percent (0.25%) of the Commitments of such Lenders. 3.2 Provided that the conditions set forth in Section 3.1 above are satisfied as and when specified therein, all other provisions of this Amendment shall be become effective as of February 21, 1997 upon receipt by the Administrative Agent of a certificate of the U.S. Borrower that the exercise of the option described in Section 2.2 above has been effected by Simmonds Holding Corp. in conformance with the provisions of the Call Option. 4. Representations, Warranties and Covenants. 4.1 The Borrowers hereby represent and warrant that this Amendment and the Credit Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. 4.2 The Borrowers hereby represent and warrant that, before and after giving effect to this Amendment, no Event of Default or Potential Event of Default has occurred and is continuing except under Section 9.13 with respect to execution of the Tenth Amended Tax Allocation Agreement the Lenders' rights and remedies with respect to which were waived as of January 21, 1997. 4.3 Each Borrower hereby reaffirms all agreements, covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and made in the other Loan Documents to which it is a party; and agrees that all such agreements, covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. To the extent the Credit Agreement is amended hereby to modify or add agreements, covenants and/or representations and warranties, such agreements, covenants and/or representations and warranties are made as of the date on which this Amendment becomes effective with respect thereto. 5. Reference to and Effect on the Credit Agreement. 5.1 Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import shall mean and be a reference to the Credit Agreement as amended hereby. 5.2 Except as specifically amended above, the Credit Agreement shall remain in full force and effect, and is hereby ratified and confirmed. 5.3 The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or Lenders, or constitute a waiver of any provision of any of the Loan Documents. 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. FAIRCHILD HOLDING CORP. Karen L. Schneckenburger Vice President & Treasurer FAIRCHILD FINANCE COMPANY (f/k/a KAYSEL) Karen L. Schneckenburger Attorney CITICORP USA, INC. Timothy L. Freeman Attorney-in-Fact NATIONSBANK, N.A. Michael R. Heredia Senior Vice President CAISSE NATIONALE DE CREDIT AGRICOLE David Bouhl, F.V.P. Head of Corporate Banking, Chicago UNION BANK OF CALIFORNIA Cedric M. Henley Credit Officer Cary Moore Vice President SCHEDULE 10.01-G to Amended and Restated Credit Agreement Dated as of July 26, 1996 Intercompany Indebtedness Outstanding as of February 21, 1997 Indebtedness Owing by U.S. Borrower to a Subsidiary of U.S. Borrower: Principal Subsidiary Amount Evidenced By U.K. Borrower $1,450,000 Promissory Note dated February 12, 1997 Fairchild Retiree $1,500,000 Promissory Note dated Medical Services, December 31, 1996 Inc. Fairchild $2,000,000 Promissory Note dated Retiree Medical December 31, 1996 Services, Inc. Indebtedness Owing by Subsidiaries of U.S. Borrower to U.S. Borrower: Principal Subsidiary Amount Evidenced By Fairchild Tech- DM15,370,956.69 Books & records nologies GmbH Fairchild Tech- $1,485,512 Books & records nologies GmbH Fairchild Retiree $2,000,000 Promissory Note dated Medical Services, December 31, 1996 Inc. Fairchild Fasteners Fr45,100,000 Promissory Note dated Europe-Simmonds February 20, 1997 S.A.R.L. Indebtedness Owing by a Subsidiary of the U.S. Borrower to Another Subsidiary of the U.S. Borrower: Principal Obligor Obligee Amount Evidenced By VSI Holdings, Fairchild $35,600,000 Promissory Note Inc. Retiree Medical dated December 31, Services, Inc. 1996 Fairchild Camloc DM13,569,000 Share Purchase Technologies Holdings, Inc. Agreement dated GmbH July 1, 1992 Fairchild Fairchild DM716,684 Books and records Technologies Technologies USA, Inc. GmbH Voi-Shan VSI Holdings, DM1,860,000 Promissory Note Diessel GmbH Inc. dated March 1, 1994 Voi-Shan Fairchild DM231,428 Promissory Note Diessel GmbH Technologies dated March 1, 1994 GmbH Voi-Shan Fairchild $281,814.01 Promissory Note Diessel GmbH Technologies dated October 30, GmbH 1996 Voi-Shan Camloc GmbH DM1,800,000 Loan Agreement dated Diessel GmbH May 24, 1996 Voi-Shan Fairchild DM738,397.90 Promissory Note Diessel GmbH Fasteners dated December 9, France S.A.R.L. 1996 Camloc GmbH Fairchild DM300,000 Loan Agreement dated Fasteners May 29, 1996 France S.A.R.L. Banner JJS Limited GBP2,070,314 Books and records Investments (UK) PLC EXHIBIT 1 to Amendment No. 2 and Consent dated as of February 21, 1997 Call Option Agreement Translation Attached EXHIBIT 2 to Amendment No. 2 and Consent dated as of February 21, 1997 Subsidiaries and Investments of Simmonds S.A. Subsidiaries: Simmonds Mecaero Fasteners Inc., a Delaware corporation, 99.9% owned by Simmonds S.A. Mecaero S.A., a French corporation, 59.5% owned by Simmonds S.A., 36.5% owned by Transfix S.A., and 4% owned by Tofinso S.A. (a bank) Transfix S.A., a French corporation, 99.98% owned by Simmonds S.A. Euroism, a Portuguese corporation, 99.98% owned by Simmonds S.A. Other Equity Investments: Conforma SRL, an Italian corporation, 50% owned by Simmonds S.A. (inactive) 0.185% in S.E.M. Circuit 24h du Mans, a Societe d'Economie Mixte incorporated under the laws of France (inactive) 13.16% interest in G.I.E. Mecafaster, a Groupement d'Interet Economique incorporated under the laws of France EXHIBIT 3 to Amendment No. 2 and Consent dated as of February 21, 1997 Debt of Simmonds S.A. and its Subsidiaries Attached EXHIBIT 4 to Amendment No. 2 and Consent dated as of February 21, 1997 Form of Support Agreement Attached -----END PRIVACY-ENHANCED MESSAGE-----