<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0347963
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
</TABLE>
FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RICHARD C. ILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRIUMPH GROUP, INC.
FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Edward D. Slevin, Esquire George P. Stamas, Esquire
Gerald J. Guarcini, Esquire Joanne F. Catanese, Esquire
Ballard Spahr Andrews & Ingersoll Wilmer, Cutler & Pickering
1735 Market Street, 51st Floor 100 Light Street
Philadelphia, Pennsylvania 19103 Baltimore, Maryland 21202
(215) 665-8500 (410) 986-2800
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share................................ 2,856,250 shares $18.00 $51,412,500 $17,728.45
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
AUGUST 23, 1996
2,375,000 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
---------
All of the 2,375,000 shares of Common Stock offered hereby are being offered
by Triumph Group, Inc. (the "Company"). Prior to this offering, there has been
no public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price of the Common Stock will be between
$16.00 and $18.00 per share. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price. The Company
also has a class of Class D Common Stock. Application has been made to list the
Common Stock for trading on The New York Stock Exchange.
Certain executive officers and directors of the Company and certain
employees of Citicorp Venture Capital, Ltd. ("CVC") have agreed to purchase
directly from the Company 125,000 shares of Common Stock at the Price to Public
less Underwriting Discounts and Commissions (the "Direct Sale"). See "Certain
Transactions," "Principal Stockholders" and "Direct Sale."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(2)................................. $ $ $
</TABLE>
(1) Before deducting expenses of this offering estimated at $1,000,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
356,250 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public as shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
--------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
ALEX. BROWN & SONS DILLON, READ & CO. INC.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[PHOTOS TO BE SUBMITTED BY AMENDMENT]
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------
AS USED IN THIS PROSPECTUS, REFERENCES TO "THE COMPANY" SHALL INCLUDE
TRIUMPH GROUP, INC. AND ITS DIRECT AND INDIRECT SUBSIDIARIES AND THE OPERATING
DIVISIONS OF SUCH SUBSIDIARIES. THE COMPANY CONDUCTS ITS OPERATIONS THROUGH ITS
WHOLLY OWNED SUBSIDIARY, TRIUMPH GROUP HOLDINGS, INC. AND ITS DIRECT AND
INDIRECT SUBSIDIARIES. ON AUGUST 21, 1996, THE REGISTRANT'S NAME WAS CHANGED
FROM "THE TRIUMPH GROUP HOLDINGS, INC." TO "TRIUMPH GROUP, INC."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT (I) THE
UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED, AND (II) THE
TRANSACTIONS DESCRIBED UNDER "RECAPITALIZATION" HAVE OCCURRED.
THE COMPANY
The Company designs, engineers, manufactures or repairs and overhauls
aircraft components such as mechanical and electromechanical control systems,
aircraft and engine accessories, auxiliary power units ("APUs"), avionics and
aircraft instruments. The Company serves a broad spectrum of the aviation
industry, including commercial airlines and air cargo carriers, as well as
original equipment manufacturers of aircraft and aircraft components ("OEMs"),
on a worldwide basis.
According to current U.S. Department of Commerce statistics, the annual
worldwide market for the design, engineering, manufacture, repair and overhaul
of aircraft components is approximately $45 billion. The aircraft component
production and repair industry is highly fragmented, consisting of both a
limited number of well-capitalized companies, which offer a broad range of
products and services, and a large number of smaller, specialized companies. The
Company believes that this market structure and industry trends will result in
continued industry consolidation.
The Company believes that there are a number of significant trends affecting
the demand for its products and services. Boeing's 1996 Market Outlook projects
that global air travel will increase by 70% and that the number of passenger and
cargo delivery aircraft in service will increase by 47% through the year 2005.
This continued growth in air transit and aircraft production will increase the
demand for aircraft component purchases and repairs. In addition to increased
air transit and aircraft in service, these trends include increased outsourcing
of the manufacture and maintenance of aircraft components, assemblies and
subassemblies by aircraft operators and OEMs, reductions by customers in the
number of approved suppliers and vendors of aviation products and services,
aging aircraft that require increased repair and maintenance, reduced supply of
surplus aircraft, increased emphasis on component traceability and more
stringent maintenance and safety requirements.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of these
trends due to:
BROAD ARRAY OF PRODUCT AND SERVICES. The Company offers the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers. In
certain cases, the Company retains the proprietary right to these designs and,
accordingly, the customer will rely on the Company to provide service on such
aircraft components at every stage of their useful lives, including the repair
and overhaul or replacement of such components. The Company also manufactures
aircraft components according to customer specifications. In addition, the
Company performs repair and overhaul services for customers on various aircraft
components manufactured by third parties.
GOVERNMENT CERTIFICATIONS. The Company operates nine repair stations
certified by the United States Federal Aviation Administration (the "FAA") and
has been granted licenses from the FAA and foreign regulatory counterparts to
perform repair and overhaul services on broad classifications of aircraft
instruments and accessories. Without such broad certifications and licenses,
other companies may not offer these products and services, thereby constituting
a significant barrier to entry. In addition, the Company holds two exclusive
licenses issued by the FAA that permit the Company to design, engineer and
repair products to its own specifications for certain aircraft components and
therefore to compete
3
<PAGE>
directly with OEMs with respect to such components. These exclusive licenses
enable the Company to offer, on a proprietary basis, certain repaired parts to
its customers at a lower cost than other companies that must purchase
replacement parts from third parties.
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain stringent quality control of its products and services. In addition to
domestic and foreign governmental regulations, OEMs and other customers require
that the Company satisfy certain requirements relating to the quality of its
products and services. The Company performs testing and certification procedures
on all of the products that it designs, engineers, manufactures, repairs and
overhauls, and maintains detailed records to ensure traceability of the
production of and service on each aircraft component. The expense required to
institute and maintain comparable quality control procedures represents a
barrier to entry.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers and OEMs. The
Company expects that its customer base will continue to strengthen and broaden
with increased cross-selling efforts by the Company of its various products and
services.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's aviation group have been involved in the aviation industry for an
average of over 30 years. These entities are characterized by experienced
management and highly-skilled employees. Due in large part to its established
industry presence, the Company enjoys strong customer relations, name
recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further augment its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
trend toward outsourcing and the reduction by aircraft operators and OEMs of the
number of approved suppliers and vendors.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services, as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. The Company
intends to build on its existing international presence through foreign
acquisitions and continued market penetration.
CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation
of the Company's operating divisions and subsidiaries, the Company plans to
increase cross-selling of its various capabilities to its customers. The
Company's operating divisions and subsidiaries will continue to share
independent sales representatives and jointly bid on projects where appropriate,
while still maintaining their individual identities.
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
4
<PAGE>
GROWTH THROUGH ACQUISITIONS. The Company expects to continue its growth
through acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
has successfully completed three acquisitions in the last 12 months. Because of
the fragmented nature of much of the market for aircraft products and services,
the Company believes that many additional acquisition opportunities exist in the
aviation industry.
ADDITIONAL BUSINESSES
In addition to the aviation group, the Company also operates a metals group
that, through its operating divisions and subsidiaries, processes, fabricates or
distributes metal products to manufacturers and other customers in the computer,
construction, container, farm equipment and office furniture industries,
primarily within North America. The metals group processes and distributes
carbon flat-rolled steel products and performs a variety of processes on these
products, including electrogalvanizing, slitting and blanking. The Company also
manufactures fuel tanks and hydraulic reservoirs and erects structural steel
frameworks. The metals group is a significant contributor to the Company's
financial strength and has consistently generated profits and positive cash
flows for the Company. The Company believes that it competes successfully in the
metals markets on the basis of price, quality and reliability of service.
COMPANY ORGANIZATION
The Company was incorporated in 1993 to purchase the aviation and metals
businesses of Alco Standard Corporation ("Alco") in a management buyout (the
"Acquisition") organized by 19 members of management and CVC. See "Historical
Background." The Company's executive offices are located at Four Glenhardie
Corporate Center, 1255 Drummers Lane, Suite 200, Wayne, Pennsylvania 19087-1565,
and its telephone number is (610) 975-0420.
RECAPITALIZATION
Immediately prior to the closing of this offering, the Company will
consummate a series of transactions to recapitalize. All of the outstanding
shares of Class A Common Stock, Class B Common Stock and Class C Common Stock,
each having par value $.001 per share, of the Company will be split 65-for-one
(the "Stock Split"). In addition, (i) all outstanding shares of Class A Common
Stock and Class C Common Stock of the Company and shares of Class B Common Stock
held by persons other than CVC and certain investors currently or previously
affiliated with CVC ("CVC Investors") will be exchanged (the "Common Stock
Conversion") for shares of the Company's Common Stock, par value $.001 per
share, (the "Common Stock"), (ii) all outstanding shares of Class A Common
Stock, par value $.001 per share, of Triumph Controls, Inc. ("TCI"), a
subsidiary of the Company, will be converted into shares of Common Stock (the
"TCI Conversion"), (iii) all outstanding shares of the Company's preferred
stock, par value $.01 per share, (the "Preferred Stock"), held by persons other
than CVC Investors, with an aggregate liquidation value plus accumulated
dividends to the date of this Prospectus will be exchanged at an estimated
exchange ratio of one-to-10.7 (the "Preferred Stock Exchange Ratio") and all
outstanding 14% junior subordinated promissory notes (the "14% JSDs"), held by
persons other than CVC Investors with an aggregate principal amount plus accrued
interest to the date of this Prospectus will be exchanged at an estimated
exchange ratio of one share of Common Stock for every $14.48 of principal and
accrued interest on the 14% JSD ("14% JSD Exchange Ratio") for shares of Common
Stock (the "Preferred Stock Conversion" and the "14% JSD Conversion,"
respectively), and (iv) the sale of 125,000 shares pursuant to the Direct Sale.
All shares of Class B Common Stock, Preferred Stock (at the Preferred Stock
Exchange Ratio) and 14% JSDs (at the 14% JSD Exchange Ratio) held by CVC
Investors will be exchanged for 1,023,570 shares of Common Stock and 4,255,293
shares of Class D Common Stock, par value $.001 per share ("Class D Common
Stock") of the Company (the "CVC Exchange"). The exchange ratios for the
Preferred Stock and the 14% JSDs will be adjusted to give effect to the
accumulation of dividends on the Preferred Stock and the accrual of interest on
the 14% JSDs, respectively, to the date of the exchange and to give effect to
the actual initial public offering price of the Common Stock. The outstanding
shares of
5
<PAGE>
Common Stock and Class D Common Stock are collectively referred to herein as the
"Shares." The Common Stock Conversion, the Preferred Stock Conversion, the 14%
JSD Conversion and the TCI Conversion are collectively referred to herein as the
"Conversions."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..................... 2,375,000 shares
Shares to be outstanding after this offering............ 9,334,200 shares(1)(2)(3)
Use of Proceeds......................................... To repay certain indebtedness of
the Company and for working
capital and general corporate
purposes. See "Use of Proceeds."
Proposed New York Stock Exchange ("NYSE") symbol........ TGI
</TABLE>
- --------------
(1) Excludes 650,000 shares of Common Stock issuable upon exercise of an
outstanding warrant held by an affiliate of CVC (the "Warrant") and 43,958
shares of Common Stock issuable upon exercise of purchase options held by
members of management of certain subsidiaries of the Company outstanding at
August 20, 1996. See "Historical Background" and "Certain Transactions."
(2) Includes 125,000 shares to be sold pursuant to the Direct Sale and 4,255,293
shares of Class D Common Stock held by CVC Investors and convertible at its
option into an equal number of shares of Common Stock.
(3) Shares outstanding after this offering will be subject to adjustment to the
actual date of consummation of the Preferred Stock Conversion, the 14% JSD
Conversion and the CVC Exchange to give effect to changes to the exchange
ratio of the Preferred Stock for accumulation of dividends on the Preferred
Stock and the exchange ratio of the 14% JSDs for accrual of interest to the
date of the exchanges and the actual initial public offering price. See
"Principal Stockholders."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31, THREE MONTHS ENDED JUNE 30,
TEN MONTHS ------------------------------------- -------------------------------------
ENDED MARCH 31, PRO FORMA PRO FORMA
1994 1995 1996(1) 1996(2) 1995 1996(1) 1996(2)
--------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
AVIATION GROUP
Net sales.................... $ 57,257 $ 70,714 $ 100,166 $ 143,560 $ 21,301 $ 35,535 $ 41,750
Group operating income,
before corporate
expense(3).................. 9,138 8,778 14,095 23,329 2,765 5,948 7,394
METALS GROUP
Net sales.................... 72,738 93,451 86,608 86,608 21,073 19,649 19,649
Group operating income,
before corporate
expense(3).................. 5,376 6,379 4,638 4,638 1,140 516 516
Combined operating income,
before corporate expense...... 14,514 15,157 18,733 27,967 3,905 6,464 7,910
Corporate expense(4)........... 1,573 1,606 2,522 2,522 604 1,117 1,117
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income............... 12,941 13,551 16,211 25,445 3,301 5,347 6,793
Interest expense............... 4,908 6,589 7,318 8,124 1,600 2,286 1,808
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations, before income
taxes......................... 8,033 6,962 8,893 17,321 1,701 3,061 4,985
--------------- ----------- ----------- ----------- ----------- ----------- -----------
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations.................... 4,908 4,364 5,194 10,277 1,014 1,809 2,974
Income (loss) from discontinued
operations(5)................. (462) (2,852) 4,496 4,496 109 -- --
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Net income..................... $ 4,446 $ 1,512 $ 9,690 $ 14,773 $ 1,123 $ 1,809 $ 2,974
--------------- ----------- ----------- ----------- ----------- ----------- -----------
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings per share:
Income from continuing
operations.................. $ 0.72(6) $ 0.67(6) $ 0.78(6) $ 1.37(7) $ 0.16(6) $ 0.26(6) $ 0.40(7)
--------------- ----------- ----------- ----------- ----------- ----------- -----------
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Shares used in computing
income from continuing
operations.................. 7,291(6) 7,387(6) 7,516(6) 7,516(7) 7,424(6) 7,499(6) 7,499(7)
--------------- ----------- ----------- ----------- ----------- ----------- -----------
--------------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma income from
continuing operations, as
adjusted(8)................. $ 1.19 $ 0.34
----------- -----------
----------- -----------
Pro forma shares used in
computing income from
continuing operations, as
adjusted(8)................. 10,016 9,999
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(9) AS ADJUSTED(9)(10)
--------- ------------- ------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $ 49,608 $ 54,534 $ 54,534
Total assets.......................................................... 142,297 163,054 163,054
Long-term debt, including current portion............................. 81,467 88,214 52,014
Total stockholders' equity............................................ 16,667 28,297 64,497
</TABLE>
- ------------------
(1) The fiscal year ended March 31, 1996 includes the operating results of TCI
and Air Lab, Inc. ("Air Lab") since the dates of acquisition, January 1,
1996 and October 2, 1995, respectively. Additionally, these entities are
included in the results of operations for the three months ended June 30,
1996. The combined operations of TCI and Air Lab contributed $11.0 million
and $12.2 million, respectively, to the aviation group's net sales and $2.3
million and $3.2 million, respectively, to the aviation group's operating
income, before corporate expense, for the fiscal year ended March 31, 1996
and the three months ended June 30, 1996, respectively.
7
<PAGE>
(2) Represents historical data adjusted to reflect (i) the acquisitions of TCI
(acquired on January 1, 1996), Advanced Materials Technologies Inc. ("AMTI")
(acquired on July 31, 1996) and Air Lab (acquired on October 2, 1995) (the
"Acquisitions"), (ii) the refinancing of a portion of the Company's
long-term debt (consummated on July 19, 1996), (iii) the Conversions, and
(iv) the CVC Exchange as if they occurred on April 1, 1995. See Notes to the
Unaudited Condensed Consolidated Pro Forma Financial Statements for
information concerning the adjustments to arrive at the pro forma amounts
presented herein.
(3) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(4) Corporate expenses primarily consist of compensation, rent and general
costs related to the operation of the Company's corporate office and other
general expenses of the Company including professional fees.
(5) Represents the results of operations of Quality Park Products, Inc. which
was sold by the Company on March 31, 1996. See Note 4 of the Company's
Consolidated Financial Statements.
(6) Earnings per share information represents the Company's per share data and
weighted average shares of Common Stock outstanding restated to give effect
to the 65-for-one stock split to be effected immediately prior to this
offering, the dilutive effects of the Warrant and stock issued during the
period commencing 12 months prior to the initial filing of the proposed
initial public offering at prices below the anticipated public offering
price, the Conversions, the CVC Exchange and an adjustment for the interest
on the 14% JSDs net of tax expense. Income from continuing operations
represents the amounts reflected in the Company's Consolidated Financial
Statements. Primary and fully diluted earnings per share are the same. See
Note 2 to the Company's Consolidated Financial Statements.
(7) Pro forma earnings per share represents the Company's pro forma income from
continuing operations and historical weighted average shares outstanding
restated to give effect to the 65-for-one stock split to be effected
immediately prior to this offering, the dilutive effects of the Warrant and
stock issued during the period commencing 12 months prior to the initial
filing of the proposed initial public offering at prices below the
anticipated public offering price, the Conversions and the CVC Exchange. See
Notes to the Unaudited Condensed Consolidated Pro Forma Financial
Statements.
(8) Pro forma earnings per share, as adjusted, represents the Company's pro
forma earnings per share adjusted to give effect to the sale of shares of
Common Stock offered by the Company pursuant to this offering and the
application of the net proceeds therefrom (at an assumed initial public
offering price of $16.00 per share, less underwriting discounts and
commissions and estimated offering expenses payable by the Company) and
pursuant to the Direct Sale and the application of the proceeds therefrom to
reduce the Company's long-term borrowings. See Note 12 to the Unaudited
Condensed Consolidated Pro Forma Financial Statements for information
concerning the computation of pro forma as adjusted earnings per share. See
also "Use of Proceeds," "Capitalization" and "Dividend Policy."
(9) Adjusted to give effect to the acquisition of AMTI, the refinancing of a
portion of the Company's long-term debt, the Conversions and the CVC
Exchange as if they occurred on June 30, 1996. See Notes to the Unaudited
Condensed Consolidated Pro Forma Financial Statements for information
concerning the adjustments to arrive at the pro forma amounts presented
herein.
(10) Adjusted to give effect to the sale of shares of Common Stock offered by
the Company pursuant to this offering and the application of the net
proceeds thereof (at an assumed initial public offering price of $16.00 per
share, less underwriting discounts and commissions and estimated offering
expenses payable by the Company) and pursuant to the Direct Sale and the
application of the proceeds therefrom as set forth in "Use of Proceeds" and
"Capitalization."
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
DEPENDENCE ON AVIATION INDUSTRY. A substantial percentage of the Company's
gross profit and operating income is derived from its aviation group. The
Company's aviation operations are focused on designing, engineering and
manufacturing aircraft components on new aircraft and performing repair and
overhaul services on existing aircraft and aircraft components. Therefore, the
Company's business is directly affected by economic factors and other trends
that affect its customers in the aviation industry, including a possible
decrease in outsourcing by aircraft operators and OEMs or projected market
growth that may not materialize or be sustainable. When such economic and other
factors adversely affect the aviation industry, they tend to reduce the overall
customer demand for the Company's products and services, thereby decreasing the
Company's operating income. There can be no assurance that economic and other
factors that might affect the aviation industry will not have an adverse impact
on the Company's results of operations. See "Business -- Industry Overview and
Trends."
CAPITAL REQUIREMENTS AND INTEGRATION OF ACQUIRED BUSINESSES. A key element
of the Company's strategy has been, and continues to be, internal growth and
growth through the acquisition of additional companies engaged in the aviation
industry. In order to grow internally, the Company will be required to make
significant capital expenditures. The Company's ability to grow by acquisition
is dependent upon, and may be limited by, the availability of suitable
acquisition candidates and capital, and by restrictions contained in the
Company's revolving and term credit facility (the "Credit Facility") and its
other financing arrangements. In addition, growth by acquisition involves risks
that could adversely affect the Company's operating results, including
difficulties in integrating the operations and personnel of acquired companies,
the potential amortization of acquired intangible assets and the potential loss
of key employees of acquired companies. There can be no assurance that the
Company will be able to obtain the capital necessary to pursue its internal
growth and acquisition strategy, consummate acquisitions on satisfactory terms
or, if any such acquisitions are consummated, satisfactorily integrate such
acquired businesses into the Company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Company Strategy."
FLUCTUATIONS IN OPERATING RESULTS. The Company's overall operating results
are affected by many factors, including the timing of orders from large
customers and the timing of expenditures to manufacture parts and purchase
inventory in anticipation of future sales of products and services. A large
portion of the Company's operating expenses are fixed. Because several operating
divisions and subsidiaries of the Company typically do not obtain long-term
purchase orders or commitments from their customers, they must anticipate the
future volume of orders based upon the historic purchasing patterns of their
customers and upon their discussions with customers as to their future
requirements. Cancellations, reductions or delays in orders by a customer or
group of customers could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT. The aviation industry is
highly regulated in the United States by the FAA and in other countries by
similar agencies. The Company must be certified by the FAA and, in some cases,
by individual OEMs in order to engineer and service parts and components used in
specific aircraft models. If material authorizations or approvals were revoked
or suspended, the operations of the Company would be adversely affected. New and
more stringent government regulations may be adopted, or industry oversight
heightened, in the future and such new regulations, if enacted, or any industry
oversight, if heightened, may have an adverse impact on the Company. See
"Business -- Government Regulation."
COMPETITION. There are numerous competitors of the Company in both the
aviation services and metals processing and distribution industries. Competition
in the aviation industry comes from three primary sources: major commercial
airlines, many of which operate their own maintenance and overhaul units; OEMs,
which manufacture, repair and overhaul their own components; and other
independent
9
<PAGE>
service companies. The Company's principal competitors in the metals industry
include national and regional steel mills, other steel service centers, steel
erection companies and pre-engineered building manufacturers. Certain of the
Company's competitors in both aviation and metals have substantially greater
financial and other resources than the Company. There can be no assurance that
competitive pressures in either industry will not materially and adversely
affect the Company's business, financial condition or results of operations. See
"Business -- Competition."
TECHNOLOGICAL DEVELOPMENTS. The aviation industry is constantly undergoing
development and change, and accordingly, it is likely that new products,
equipment and methods of repair and overhaul service will be introduced in the
future. In order to keep pace with any new developments, the Company may need to
expend significant capital to purchase new equipment and machines or to train
its employees in the new methods of production and service. There can be no
assurance that the Company will be successful in developing new products or that
such capital expenditures will not have a material adverse effect on the
Company.
PRODUCT LIABILITY; CLAIMS EXPOSURE. The Company's overall operations expose
it to potential liabilities for personal injury or death as a result of the
failure of an aircraft component that has been serviced by the Company, the
failure of an aircraft component designed or manufactured by the Company or the
irregularity of metal products processed or distributed by the Company. While
the Company believes that its liability insurance is adequate to protect it from
such liabilities and while no material claims have been made against the
Company, no assurance can be given that claims will not arise in the future or
that such insurance coverage will be adequate. Additionally, there can be no
assurance that insurance coverage can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance or for which third
party indemnification is not available could have a material adverse effect on
the financial condition of the Company. See "Business -- Legal Proceedings."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. The Company's business
operations and facilities are subject to a number of federal, state and local
environmental laws and regulations. Although management believes that the
Company's operations and facilities are in material compliance with such laws
and regulations, there can be no assurance that future changes in such laws,
regulations or interpretations thereof or the nature of the Company's operations
will not require the Company to make significant additional capital expenditures
to ensure compliance in the future. Certain Company facilities are currently the
subject of environmental remediation activities, the cost of which is subject to
indemnification provided by Alco. One of these facilities is connected with a
site included on the National Priorities List of Superfund sites maintained by
the Environmental Protection Agency (the "EPA"). Another of these facilities is
located on a site included in EPA's database of potential Superfund sites. The
Alco indemnification covers both (i) the costs and claims associated with all of
these environmental remediation activities and liabilities, and (ii) the costs
of unidentified environmental liabilities that arise from conditions or
activities existing at facilities acquired from Alco prior to their acquisition
from Alco and that are identified before July 22, 2000. Another of the Company's
facilities leased from Teleflex Incorporated ("Teleflex") is located on a site
placed on the EPA's National Priorities List prior to its acquisition by the
Company, and is subject to indemnification provided by Teleflex for
environmental liabilities arising from activities or conditions existing at this
facility prior to the Company's acquisition. The Company does not maintain
environmental liability insurance, and if the Company were required to pay the
expenses related to these environmental liabilities, such expenses could have a
material adverse effect on the Company. See "Business -- Environmental Matters."
RISKS REGARDING THE COMPANY'S INVENTORY. Certain of the Company's customers
require the Company to maintain and manage a supply of certain aircraft
components and other products in inventory. If this inventory is not used by the
Company, because the Company ceases to supply such customers with the related
products or services or because such components or other products becomes
obsolete, the Company will not realize any income to offset the expenses
incurred by the Company to acquire and maintain such inventory.
10
<PAGE>
LABOR RELATIONS. Several of the Company's subsidiaries are parties to
collective bargaining agreements with labor unions, of which one agreement will
expire in the next six months and the remaining agreements will expire over the
next several years. In the aggregate, under those agreements the Company
currently employs approximately 200 full-time employees, and from time to time
employs up to an additional 150 temporary employees for its steel erection
business, all of whom are members of labor unions. The Company's inability to
negotiate acceptable contracts with these unions could result in strikes by the
affected workers and increased operating costs as a result of higher wages or
benefits paid to union members. If the unionized workers were to engage in a
strike or other work stoppage, or other employees were to become unionized, the
Company could experience a significant disruption of its operations and higher
ongoing labor costs, which could have an adverse effect on the Company's
business and results of operations. See "Business -- Employees."
DEPENDENCE OF CERTAIN BUSINESSES ON KEY CUSTOMERS. Although no individual
customer directly accounted for more than 5% of the Company's combined net sales
during the last three years, certain of the Company's operating divisions and
subsidiaries have significant customers, the loss of whom could have a material
adverse effect on their businesses.
CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this offering, CVC,
through the exercise of the Warrant held by an affiliate of CVC and the
conversion of shares of Class D Common Stock, will own or have the right to
acquire 54.1% of the outstanding Common Stock. The Company's executive officers
will own an aggregate of 6.7% of the outstanding Common Stock. After this
offering, if CVC and the Company's executive officers act together, they will be
able to control the election of a majority of the members of the Company's Board
of Directors and, therefore, to control the business, policies and affairs of
the Company. See "Principal Stockholders."
RELIANCE ON SKILLED PERSONNEL. From time to time certain of the Company's
operating divisions and subsidiaries have experienced difficulties in attracting
and retaining skilled personnel to design, engineer, manufacture or repair and
overhaul sophisticated aircraft components. The ability of the Company to
operate successfully could be jeopardized if the Company is unable to attract
and retain a sufficient number of skilled personnel.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL. The Company's
Certificate of Incorporation, as amended, and Bylaws contain provisions,
including cumulative voting, that may have the effect of discouraging certain
transactions involving an actual or threatened change of control of the Company.
In addition, the Board of Directors of the Company has the authority to issue up
to 250,000 shares of Preferred Stock in one or more series in connection with
the purchase by the Company of the assets or stock of another corporation or the
merger of the Company with or into another corporation, and to fix the
preferences, rights and limitations of any such series without stockholder
approval. See "Description of Capital Stock" for a description of these
provisions. Cumulative voting and the ability to issue Preferred Stock could
have the effect of discouraging unsolicited acquisition proposals or making it
more difficult for a third party to gain control of the Company, or otherwise
could adversely affect the market price of the Common Stock.
DILUTION. Investors in this offering will experience immediate and
substantial dilution in the net tangible book value of the shares of Common
Stock purchased in this offering. At an assumed initial public offering price of
$16.00 per share, new investors will experience dilution in net tangible book
value per share of $11.75. See "Dilution."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE. Prior to this
offering, there has been no public market for the Common Stock of the Company.
The initial public offering price of the Common Stock was determined in
negotiations among the Company and the representatives of the Underwriters (the
"Representatives"). See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. There can be no
assurance that an active trading market will develop or be sustained following
this offering. The stock market has experienced from time to time significant
price and volume fluctuations.
11
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE. As of the date of this Prospectus, in
addition to the 2,375,000 shares of Common Stock offered pursuant to this
offering and the 125,000 shares to be sold pursuant to the Direct Sale,
2,578,907 restricted shares of Common Stock held by current stockholders will be
eligible for sale pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), beginning 90 days after the date of this
offering. Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Common Stock. The Company's officers, directors and certain stockholders, who
hold an aggregate of 1,608,215 shares of Common Stock, have agreed that, for a
period of 180 days from the date of this Prospectus, they will not, without the
prior written consent of Alex. Brown & Sons Incorporated, offer, sell, contract
to sell, or otherwise dispose of, any shares of Common Stock. The Company also
has granted the Warrant. Shares issued upon exercise of the Warrant will be
restricted stock. The Company has also granted purchase options for up to 43,958
shares of Common Stock to members of management of certain subsidiaries of the
Company. Shares issued upon exercise of the Warrant and purchase options will be
subject to the 180-day lock-up agreements. Additionally, CVC and its affiliates
("CVC Affiliates") owning an aggregate of 970,692 shares of Common Stock, all of
whom are subject to the 180-day lock-up agreements, have the right to demand two
registrations of their shares of Common Stock under the Securities Act on Form
S-1 at the Company's expense and an unlimited number of registrations at the
expense of the CVC Affiliates. The holder of the Warrant has the right to demand
one registration at the Company's expense. Both the CVC Affiliates and the
holder of the Warrant have the right to demand an unlimited number of
registrations on Form S-3 at the Company's expense. In addition, the CVC
Affiliates, the holder of the Warrant and certain members of management of the
Company have the right, subject to certain limitations, to have their shares of
Common Stock included in future registered public offerings of securities of the
Company at its expense. See "Shares Eligible for Future Sale."
12
<PAGE>
HISTORICAL BACKGROUND
The Company was formed in 1993 by members of management and CVC to acquire
certain businesses and assets from Alco in the Acquisition. In connection with
the Acquisition, 19 members of management contributed capital in the aggregate
amount of approximately $1.1 million and CVC, an institutional investor,
contributed capital in the aggregate amount of approximately $6.9 million.
The businesses acquired from Alco as part of the Acquisition included a
major portion of the Company's aviation operations and its entire metals
operations, as well as Quality Park Products, Inc. ("Quality Park"), a paper
converting business. Following the Acquisition, the Company determined to focus
its efforts on its core businesses and, after restructuring, sold Quality Park
in March 1996 to Mail-Well I Corporation ("Mail-Well") for approximately $27.4
million in cash, and the assumption by Mail-Well of certain liabilities.
As part of the Company's strategy to grow its aviation businesses, the
Company has completed three acquisitions in the last 12 months:
In October 1995, the Company acquired substantially all of the assets,
including the name, and assumed certain liabilities of, Air Lab, Inc. ("Air
Lab"), for an aggregate purchase price of approximately $2.2 million, plus
additional amounts to be paid through the year 2000, as consideration for a non-
competition agreement entered into by the seller and certain of its stockholders
and as consideration for a consulting agreement entered into by the seller to
provide marketing and advisory services. Air Lab services instruments and
avionics for the commercial aviation industry.
In January 1996, the Company acquired all of the assets and assumed certain
of the liabilities of TCI, formerly a division of Teleflex, for an aggregate
purchase price of approximately $36.5 million, including a 10.5% subordinated
promissory note in the principal amount of $5.5 million (the "Teleflex Note").
The Company also assumed liabilities and incurred transaction related costs
totalling $3.6 million. TCI also sold shares of Class A Common Stock of TCI,
representing a 10% minority interest in TCI (convertible to the Company's Common
Stock at the Company's option), and 10.5% junior subordinated promissory notes
in an aggregate principal amount of $800,000 to an affiliate of Teleflex in
payment of a financing fee and to certain members of management of TCI in
consideration for cash and confidentiality and non-competition agreements. As
part of the acquisition, the Company also granted a purchase option for 21,270
shares of Common Stock to the president of TCI. TCI manufactures and services
mechanical and electromechanical controls for various end users, primarily in
the aviation industry.
In July 1996, the Company purchased all of the outstanding capital stock of
Advanced Materials Technologies Inc. ("AMTI"). The aggregate consideration for
the AMTI acquisition was approximately $7.5 million in cash paid at closing plus
a total of approximately $3.7 million to be paid through the year 2002 as
consideration for a confidentiality and non-competition agreement entered into
by one of the former owners of AMTI. In addition, the Company assumed certain
liabilities and incurred transaction related costs totalling $9.6 million. The
Company also purchased for approximately $0.5 million certain real estate leased
to AMTI by its principal stockholder and granted to such stockholder the right
to purchase 14,180 shares of Common Stock. As part of the acquisition, the
Company also acquired AMTI's wholly owned subsidiary, Special Processes of
Arizona, Inc. ("SPOA"). AMTI engages in the repair and manufacture of components
for APUs and gas turbine engines. SPOA engages in the production and application
of plasma coating used primarily by the aviation industry.
For additional information regarding the Company's acquisitions, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 3 and Note 17 to the Company's Consolidated Financial
Statements.
13
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,375,000 shares of Common Stock
offered pursuant to this offering and the 125,000 shares to be sold pursuant to
the Direct Sale are estimated to be approximately $36.2 million ($41.8 million
if the Underwriters exercise their over-allotment option in full), assuming an
initial public offering price per share of $16.00 (less underwriting discounts
and commissions and estimated offering expenses payable by the Company). The
Company intends to use a portion of the net proceeds of this offering to repay
the Teleflex Note, plus accrued interest, in full. The face amount of the
Teleflex Note is $5.5 million and accrued interest was approximately $0.4
million as of August 16, 1996. The Teleflex Note matures in equal installments
on December 31, 2002 and 2003, bears interest at 10.5% per annum and may be
prepaid in full at any time without penalty. The remaining proceeds will be used
to repay the revolving credit facility, which matures on July 19, 2001, and
bears interest, at the option of the Company, at the fluctuating prime rate or
LIBOR plus applicable basis points. On August 16, 1996, an aggregate of
approximately $30.0 million was outstanding under the revolving credit facility,
$22.0 of which was accruing interest at the LIBOR rate (plus applicable basis
points) of 6.81% per annum and $8.0 million of which was accruing interest at
the prime rate of 8.25% per annum. Amounts repaid on the revolving credit
facility may be reborrowed. The remainder of the net proceeds, if any, will be
used for working capital and other general corporate purposes. Pending such
uses, the net proceeds will be invested in short-term, interest-bearing
investments.
DIVIDEND POLICY
The Company has paid no dividends on its Common Stock. The Board of
Directors of the Company does not intend to declare any dividends on its Common
Stock in the foreseeable future. Rather, the Company intends, after consummation
of this offering, to retain its earnings, if any, for use in the operation of
its business. The Common Stock and the Class D Common Stock will be treated the
same with respect to any dividends declared by the Board of Directors.
Furthermore, the Company's ability to declare or pay dividends on its Common
Stock is limited by the terms of the Credit Facility and other financing
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
14
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and stockholders' equity
of the Company and its subsidiaries as of June 30, 1996: (i) on an actual basis,
giving effect to the Stock Split; (ii) on a pro forma basis; and (iii) on a pro
forma as adjusted basis. Pro forma amounts give effect to: (a) the acquisition
of AMTI which occurred on July 31, 1996; (b) the refinancing of the Company's
debt by the Credit Facility which occured on July 19, 1996; (c) the Conversions;
and (d) the CVC Exchange. The pro forma amounts as adjusted give effect to the
pro forma adjustments described herein and the sale by the Company of 2,375,000
shares of Common Stock in this offering (at an assumed initial public offering
price of $16.00, less underwriting discounts and commissions and estimated
offering expenses payable by the Company) and the sale of 125,000 shares of
Common Stock pursuant to the Direct Sale (at the Price to Public less
Underwriting Discounts and Commissions) and the application of the net proceeds
therefrom as described under "Use of Proceeds." This table should be read in
conjunction with the Company's Unaudited Condensed Consolidated Pro Forma
Financial Statements and the Notes thereto and the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current portion):
Revolving credit facility............................................... $ 9,109 $ 31,291 $ 884
Senior term loans....................................................... 27,598 35,000 35,000
11% senior subordinated note............................................ 14,900 -- --
10.5% subordinated note................................................. 5,793 5,793 --
10% subordinated note................................................... 13,500 13,500 13,500
10.5% junior subordinated promissory notes.............................. 835 835 835
14% junior subordinated promissory notes................................ 9,055 -- --
Other debt.............................................................. 677 1,795 1,795
----------- ----------- ------------
Total debt............................................................ 81,467 88,214 52,014
Stockholders' equity:
Preferred Stock, 14% cumulative, $.01 par value, 30,575 shares
authorized and outstanding; none pro forma and pro forma as
adjusted............................................................. 2,854 -- --
Preferred Stock, $100 par value, 250,000 shares authorized, no shares
outstanding.......................................................... -- -- --
Common stock, $.001 par value:
Class A:
6,500,455 shares authorized; 1,300,000 shares issued; none pro forma
and pro forma as adjusted.......................................... 1 -- --
Class B:
4,550,000 shares authorized and issued; none pro forma and pro forma
as adjusted........................................................ 5 -- --
Class C:
455 shares authorized and issued; none pro forma and pro forma as
adjusted........................................................... -- -- --
Common Stock, $.001 par value, 15,000,000 shares authorized, 2,578,907
shares pro forma, 5,078,907 shares pro forma as adjusted(1)............ -- 3 5
Class D Common Stock, $.001 par value, 6,000,000 shares authorized,
4,255,293 shares pro forma, 4,255,293 shares pro forma as adjusted..... -- 4 4
Additional paid-in capital................................................ 1,086 15,913 52,111
Cost of Class A Common Stock in treasury.................................. (85) -- --
Retained earnings......................................................... 15,660 12,377 12,377
----------- ----------- ------------
Total stockholders' equity............................................ 16,667 28,297 64,497
----------- ----------- ------------
Total capitalization................................................ $ 100,988 $ 116,511 $ 116,511
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
- ------------------
(1) Excludes 650,000 shares of Common Stock issuable upon exercise of the
Warrant and 43,931 shares of Common Stock issuable upon exercise of
purchase options held by members of management of certain subsidiaries of
the Company outstanding at June 30, 1996.
15
<PAGE>
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
June 30, 1996 was $3,397,000 or approximately $0.50 per share. Pro forma net
tangible book value per share represents the amount of the tangible assets of
the Company less intangible assets, divided by 6,823,090 shares of Common Stock
outstanding. For purposes hereof, pro forma net tangible book value and the
number of shares of Common Stock outstanding assume the consummation of the
Acquisitions, the Refinancing, the Conversions, the CVC Exchange and the
conversion by CVC of all shares of Class D Common Stock into shares of Common
Stock on June 30, 1996. See also Unaudited Condensed Consolidated Pro Forma
Financial Statements.
Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of Common Stock in
this offering and the pro forma net tangible book value per share of Common
Stock immediately after completion of this offering. After giving effect to the
sale of 2,375,000 shares of Common Stock in this offering (at an assumed initial
public offering price of $16.00 per share, less underwriting discounts and
commissions and estimated offering expenses payable by the Company) and the sale
of 125,000 shares of Common Stock in the Direct Sale (at the Price to Public
less Underwriting Discounts and Commissions) and application of the net proceeds
therefrom, the pro forma net tangible book value of the Company at June 30, 1996
would have been $39,597,000 or $4.25 per share. This represents an immediate
increase in pro forma net tangible book value of $3.75 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$11.75 per share to purchasers of Common Stock in this offering.
The following table illustrates the dilution in pro forma net tangible book
value per share:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................................... $ 16.00
Pro forma net tangible book value per share at June 30, 1996.............. $ 0.50
Increase per share attributable to new investors.......................... 3.75
---------
Pro forma net tangible book value per share after this offering............. 4.25
---------
Pro forma net tangible book value dilution per share to new investors....... $ 11.75
---------
---------
</TABLE>
The following table sets forth on a pro forma basis as of June 30, 1996,
assuming the consummation of the Conversions, the CVC Exchange and the
conversion by CVC of all shares of Class D Common Stock into shares of Common
Stock, the difference between the existing stockholders and new investors in
this offering (at an assumed initial public offering price of $16.00 per share)
with respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......................... 6,823,090 73.2% $ 14,762,000 27.0% $ 2.16
Direct Sale Investors......................... 125,000 1.3 1,860,000 3.4 14.88
New investors................................. 2,375,000 25.5 38,000,000 69.6 16.00
----------- --------------
Total..................................... 9,323,090 100.0% $ 54,622,000 100.0%
----------- --------------
----------- --------------
</TABLE>
The foregoing computations do not assume exercise of the Warrant (for
650,000 shares at an aggregate exercise price of $100.00) or the exercise of
purchase options outstanding at June 30, 1996 to acquire an aggregate of 43,931
shares of Common Stock at a weighted average price of $2.91 per share. To the
extent that shares of Common Stock are issued upon exercise of the Warrant and
the purchase options, the effect would be to increase the pro forma dilution to
new investors to $12.03 per share from $11.75 per share. These computations
assume that the grant of purchase options to members of management of certain
subsidiaries of the Company for 43,931 shares of Common Stock took place on June
30, 1996.
16
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical financial data for the ten months ended
March 31, 1994 and each of the two years in the period ended March 31, 1996 are
derived from the audited consolidated financial statements of Triumph Group,
Inc. and should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this
Prospectus. The selected financial data for each of the three month periods
ended June 30, 1995 and 1996 are derived from the unaudited interim financial
statements included elsewhere herein. The unaudited interim financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and results of operations for these periods. Operating results for the three
months ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the entire year ended March 31, 1997.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY TRIUMPH GROUP, INC.
--------------------------------- -------------------------------------------------------
EIGHT
MONTHS TEN MONTHS
YEARS ENDED ENDED ENDED YEARS ENDED MARCH THREE MONTHS ENDED
SEPTEMBER 30, MAY 31, MARCH 31, 31, JUNE 30,
-------------------- ----------- ----------- -------------------- --------------------
1991(1) 1992(1) 1993(1) 1994 1995 1996(2) 1995 1996(2)
--------- --------- ----------- ----------- --------- --------- --------- ---------
HISTORICAL OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVIATION GROUP
Net sales...................... $ 87,304 $ 76,346 $ 46,517 $ 57,257 $ 70,714 $ 100,166 $ 21,301 $ 35,535
Cost of products sold.......... 60,116 55,254 34,568 39,941 51,395 70,643 15,494 23,286
--------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................... 27,188 21,092 11,949 17,316 19,319 29,523 5,807 12,249
Selling, general and
administrative................ 9,541 9,161 5,830 6,799 8,761 12,915 2,554 5,276
Depreciation and
amortization.................. 2,114 2,060 1,413 1,379 1,780 2,513 488 1,025
--------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3).......... 15,533 9,871 4,706 9,138 8,778 14,095 2,765 5,948
METALS GROUP
Net sales...................... 78,020 78,258 57,216 72,738 93,451 86,608 21,073 19,649
Cost of products sold.......... 60,813 60,178 45,293 57,154 74,441 69,097 16,584 15,860
--------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................... 17,207 18,080 11,923 15,584 19,010 17,511 4,489 3,789
Selling, general and
administrative................ 10,990 10,741 7,704 9,614 11,715 11,874 3,122 3,046
Depreciation and
amortization.................. 738 832 658 594 916 999 227 227
--------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3).......... 5,479 6,507 3,561 5,376 6,379 4,638 1,140 516
--------- --------- ----------- ----------- --------- --------- --------- ---------
Combined operating income,
before corporate expense...... $ 21,012 $ 16,378 $ 8,267 14,514 15,157 18,733 3,905 6,464
--------- --------- -----------
--------- --------- -----------
Corporate expense(4)........... 1,573 1,606 2,522 604 1,117
Interest expense............... 4,908 6,589 7,318 1,600 2,286
----------- --------- --------- --------- ---------
Income from continuing
operations, before income
taxes......................... 8,033 6,962 8,893 1,701 3,061
Income tax expense............. 3,125 2,598 3,699 687 1,252
----------- --------- --------- --------- ---------
Income from continuing
operations.................... 4,908 4,364 5,194 1,014 1,809
Income (loss) from discontinued
operations.................... (462) (2,852) 4,496 109 --
----------- --------- --------- --------- ---------
Net income..................... $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Earning per share(5):
Income from continuing
operations(5)................. $ 0.72 $ 0.67 $ 0.78 $ 0.16 $ 0.26
Shares used in computing
earnings per share(5)......... 7,291 7,387 7,516 7,424 7,499
<CAPTION>
SEPTEMBER 30, MAY 31, MARCH 31, JUNE 30,
-------------------- ----------- --------------------------------- --------------------
1991 1992 1993 1994 1995 1996 1995 1996
--------- --------- ----------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................ $ 30,766 $ 32,360 $ 33,296 $ 49,152 $ 39,609 $ 60,379 $ 38,055 $ 49,608
Total assets................... 152,153 154,343 152,761 104,905 111,386 161,406 95,548 142,297
Long-term debt, including
current portion............... 64,690 64,477 69,013 74,403 71,738 98,769 82,202 81,467
Total stockholders' equity..... 61,037 69,283 63,398 5,080 6,094 15,065 7,093 16,667
</TABLE>
17
<PAGE>
- ------------------
(1) Financial information related to the years ended September 30, 1991 and
1992 and the eight month period ended May 31, 1993 is unaudited and
represents operating results for the divisions and subsidiaries of the
predecessor company which were purchased by the Company on June 1, 1993.
Information is provided through operating income to assist the investor in
evaluating the Company's historical operating trends. Financial information
after operating income is excluded as the information is not comparable to
subsequent periods because of the significantly changed corporate
organization and capital structure which resulted from the Acquisition.
(2) The fiscal year ended March 31, 1996 includes the operating results of TCI
and Air Lab since the dates of acquisition, January 1, 1996 and October 2,
1995, respectively. Additionally, these entities are included in the
results of operations for the three months ended June 30, 1996. The
combined operations of TCI and Air Lab contributed $11.0 million and $12.2
million to the aviation group's net sales and $2.3 million and $3.2 million
to the aviation group's operating income, before corporate expense, for the
fiscal year ended March 31, 1996 and the three months ended June 30, 1996,
respectively.
(3) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(4) Corporate expenses primarily consist of compensation, rent and general
costs related to the operation of the Company's corporate office and other
general expenses of the Company including professional fees.
(5) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding restated to give effect to the
65-for-one stock split to be effected immediately prior to this offering,
the dilutive effects of the Warrant and stock issued during the period
commencing 12 months prior to the initial filing of the proposed initial
public offering at prices below the anticipated public offering price, the
Conversions and an adjustment for the interest on the 14% JSDs net of tax
expense. Income from continuing operations represents the amounts reflected
in the Company's Consolidated Financial Statements. Primary and fully
diluted earnings per share are the same. See Note 2 to the Company's
Consolidated Financial Statements.
18
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The unaudited pro forma operating data for the fiscal year ended March 31,
1996 and for the three months ended June 30, 1996 set forth herein give effect
to the Acquisitions, the Refinancing, the Conversions and the CVC Exchange. The
unaudited pro forma balance sheet data gives effect to the transactions
described above, except for the acquisitions of Air Lab and TCI (which are
included in the historical balances) as if such transactions had occurred on
June 30, 1996. The pro forma as adjusted amounts also give effect to the
offering.
The selected unaudited pro forma financial data should be read in
conjunction with the Unaudited Condensed Consolidated Pro Forma Financial
Statements and the related Notes thereto and the Consolidated Financial
Statements and the related Notes thereto appearing elsewhere herein. The
unaudited pro forma financial data are provided for informational purposes only
and do not purport to represent what the Company's financial position or results
of operations actually would have been had the transactions described therein
been completed as of the date or at the beginning of the periods indicated, or
to project the Company's financial position or results of operations at any
future date or for any future period.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
MARCH 31, 1996 JUNE 30, 1996
--------------------------- --------------------------
HISTORICAL PRO FORMA(1) HISTORICAL PRO FORMA(1)
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
OPERATING DATA:
AVIATION GROUP
Net sales.............................................. $ 100,166 $ 143,560 $ 35,535 $ 41,750
Cost of products sold.................................. 70,643 94,936 23,286 26,890
----------- -------------- ----------- -------------
Gross profit........................................... 29,523 48,624 12,249 14,860
Selling, general, and administrative................... 12,915 19,972(2) 5,276 6,032
Depreciation and amortization.......................... 2,513 5,323(3) 1,025 1,434(3)
----------- -------------- ----------- -------------
Operating income, before corporate expense............. 14,095 23,329 5,948 7,394
METALS GROUP
Net sales.............................................. 86,608 86,608 19,649 19,649
Cost of products sold.................................. 69,097 69,097 15,860 15,860
----------- -------------- ----------- -------------
Gross profit........................................... 17,511 17,511 3,789 3,789
Selling, general, and administrative................... 11,874 11,874 3,046 3,046
Depreciation and amortization.......................... 999 999 227 227
----------- -------------- ----------- -------------
Operating income, before corporate expense............. 4,638 4,638 516 516
----------- -------------- ----------- -------------
Combined operating income, before corporate expense...... 18,733 27,967 6,464 7,910
Corporate expense(2)..................................... 2,522 2,522 1,117 1,117
Interest expense......................................... 7,318 8,124(4) 2,286 1,808(4)
----------- -------------- ----------- -------------
Income from continuing operations before income taxes.... 8,893 17,321 3,061 4,985
Income tax expense(5).................................... 3,699 7,044 1,252 2,011
----------- -------------- ----------- -------------
Income (loss) from continuing operations................. $ 5,194 $ 10,277 $ 1,809 $ 2,974
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
Income from continuing operations, per share(6).......... $ 0.78 $ 1.37 $ 0.26 $ 0.40
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
Shares used in computing earnings per share(6)........... 7,516 7,516 7,499 7,499
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(7) AS ADJUSTED(7)(8)
----------- ------------- -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................... $ 49,608 $ 54,534 $ 54,534
Total assets....................................................... 142,297 163,054 163,054
Long term debt, including current portion.......................... 81,467 88,214 52,014
Total stockholders' equity......................................... 16,667 28,297 64,497
</TABLE>
19
<PAGE>
(1) Adjustments to arrive at pro forma amounts relate to the following
transactions:
(a) The Company made the following acquisitions during the past 12 months:
<TABLE>
<CAPTION>
AGGREGATE
BUSINESS DATE OF PURCHASE PURCHASE PRICE
- ---------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Air Lab................................................... 10/2/95 $ 3.4 million
TCI....................................................... 1/1/96 40.1 million
AMTI...................................................... 7/31/96 21.3 million
SPOA...................................................... (acquired by AMTI on 1/31/96)
</TABLE>
The pro forma results of operations adjustments are those necessary to
reflect the Company's income from continuing operations as if each
acquisition took place at the beginning of the period presented. The
results of operations of SPOA are included in the pro forma adjustments
for periods subsequent to the date of acquisition by AMTI only.
(b) On July 19, 1996, the Company entered into an unsecured five year credit
agreement for a $50.0 million revolving credit facility and a $35.0
million term loan. Proceeds from the new credit agreement were used to
retire the Company's existing revolving credit facility, senior term
loans and senior subordinated notes. The refinancing resulted in interest
savings which are reflected herein.
(c) In conjunction with this offering, the Company has elected to exchange
the common stock of TCI held by minority shareholders (10% of the total
outstanding) for 72,450 shares of Common Stock of the Company. In
addition, the Company intends to exchange its 14% JSDs plus accrued
interest, and Preferred Stock at liquidation value plus accumulated
dividends, for shares of Common Stock at an assumed initial public
offering price of $16.00 per share (less underwriting discounts and
commissions and estimated offering expenses payable by the Company). As a
result of these exchanges 945,595 shares (as of June 30, 1996) of the
Company's stock will be issued to holders of the 14% JSDs and the
Preferred Stock.
(2) Certain amounts, aggregating $3.5 million, were excluded from selling,
general and administrative expenses for the year ended March 31, 1996 as
they related to expenses incurred prior to the acquisitions which are
neither recurring nor indicative of future operations. Corporate expenses
primarily consist of compensation, rent and general costs related to the
operation of the Company's corporate office and other general expenses of
the Company including professional fees.
(3) Adjustments to depreciation and amortization expense reflect the following:
(i) additional depreciation expense in excess of historical amounts of $0.9
million and $0.1 million for the year ended March 31, 1996 and the three
months ended June 30, 1996, respectively, due to the write-up of property,
plant and equipment to estimated fair market value and (ii) amortization of
excess cost over net assets acquired (amortized over 25 years) and
amortization of other intangible assets acquired (amortized over a period of
six to 25 years) of $0.4 million and $0.8 million for the year ended March
31, 1996 and $18 thousand and $0.2 million, for the three months ended June
30, 1996.
(4) Adjustments to interest expense for the year ended March 31, 1996 and the
three months ended June 30, 1996 consist of increases of: (i) $3.2 million
and $0.3 million, respectively, for interest incurred under the Company's
revolving credit facilities used to finance the purchases and fund
operations of the acquired companies and amounts incurred pertaining to
actual borrowings under the senior term loans used to purchase the companies
at historical interest rates; (ii) $0.5 million for the fiscal year ended
March 31, 1996 for interest incurred related to the subordinated promissory
note and junior subordinated promissory notes arising as a result of the
Acquisitions (acquisition amounts are included in the historical results for
the quarter ended June 30, 1996); (iii) $0.1 million for fiscal year ended
March 31, 1996 for amortization of deferred financing costs, classified as
interest, pertaining to the Company's increase in senior term loans
outstanding as a result of the Acquisitions (acquisition amounts are
included in the historical results for the quarter ended June 30, 1996); and
(iv) $0.2 million and $0.1 million for the fiscal year ended March 31, 1996
and the three months ended June 30, 1996, respectively, incurred relating to
the interest cost associated with long-term covenants not-to-compete with
the previous owners of certain acquired companies, partially offset by
reductions in interest expense of $2.0 million and $0.5 million relating to
the refinancing described in (1)(b) above and $1.1 million and $0.3 million
relating to the elimination of interest as a result of the 14% JSD
Conversion for the year ended March 31, 1996 and the three months ended June
30, 1996, respectively.
(5) The tax provision arising from the pro forma adjustments (excluding the
portion of the Company's income attributable to the minority interest's
investment in TCI) is based on the Company's estimated tax rate of 40.0%.
(6) The calculation of shares used in computing income from continuing
operations per share include adjustments for the outstanding Warrant, stock
issued during the period commencing 12 months prior to the initial filing of
the proposed initial public offering at prices below the anticipated public
offering price, the Conversions and the CVC Exchange. The pro forma as
adjusted shares also include the issuance of 2,375,000 shares in connection
with this offering and 125,000 shares in connection with the Direct Sale.
See also Notes to the Unaudited Condensed Consolidated Pro Forma Financial
Statements and Note 2 to the Consolidated Financial Statements.
20
<PAGE>
(7) Adjustments to the pro forma balance sheet include adjustments to record the
purchase of AMTI as though it occurred on June 30, 1996, including the
write-up of fixed assets to estimated fair value and the recording of excess
of cost over net assets acquired and intangible assets acquired, as well as
the assumption of liabilities and debt used to finance the purchase. In
addition, adjustments are made to reflect the extraordinary loss of $1.5
million, net of a tax benefit of $1.0 million related to prepayment
penalties incurred and the write-off of deferred financing fees related to
the existing debt and the additional long-term debt assumed under the
refinancing. Adjustments also give effect to the Conversions and the CVC
Exchange. See Notes to Unaudited Condensed Consolidated Pro Forma Financial
Statements.
(8) Adjustments give effect to the sale of 2,375,000 shares of Common Stock at
an assumed initial public offering price of $16.00 per share (less
underwriting discounts and commissions and estimated offering expenses
payable by the Company) and the application of the net proceeds therefrom
and the sale of 125,000 shares of Common Stock in the Direct Sale and the
application of the proceeds therefrom to reduce long-term debt by $36.2
million.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's aviation group designs, engineers, manufactures or repairs and
overhauls aircraft components for commercial airlines and air cargo carriers, as
well as OEMs, on a worldwide basis. The Company's metals group manufactures,
machines, forges, processes and distributes metal products to customers in the
computer, construction, container, farm equipment and office furniture
industries, primarily within North America.
Net sales consist of sales of aircraft components and metal products, as
well as revenues derived from repairing and overhauling aircraft components. Net
sales are recorded when services are performed or when products are shipped,
except for long-term construction contracts entered into by the Company's metals
group, which are recorded on the percentage-of-completion method based on the
relationship between actual costs incurred and total estimated costs at
completion. Net sales from long-term construction contracts which are recorded
on the percentage-of-completion method approximated 12% and 11% of total net
sales in 1996 and 1995, respectively. The Company closed its metals fabrication
operations during the first quarter of fiscal 1997.
Operating costs consist primarily of cost of products sold, selling, general
and administrative expenses and depreciation and amortization. Selling, general
and administrative expenses consist primarily of compensation and related
benefits to certain administrative employees, marketing, communications and
professional fees.
The Company focuses its acquisition activities on companies engaged in the
aviation products and services industry. This group has historically provided,
and the Company believes that it will continue to provide, higher operating
margins than the metals group.
Within the past 12 months, the Company has completed three acquisitions of
aviation companies and has sold one of its subsidiaries not engaged in the
aviation or metals business.
The acquisition of TCI has been accounted for under the purchase method of
accounting and, accordingly, the operating results of TCI have been included for
the three months ended March 31, 1996.
The acquisition of Air Lab has been accounted for under the purchase method
of accounting and, accordingly, the operating results of Air Lab have been
included in consolidated operating results since October 2, 1995.
In July 1996, the Company acquired AMTI. The acquisition was accounted for
under the purchase method of accounting. The operating results of AMTI will be
included in consolidated operating results from July 31, 1996.
In March 1996, the Company sold substantially all of the assets of its paper
converting subsidiary, Quality Park, for approximately $27.4 million in cash,
and the assumption by the purchaser of certain liabilities.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationships of expense items
to net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED
TEN MONTHS -------------------------- ----------------------
ENDED MARCH MARCH 31, MARCH 31, JUNE 30, JUNE 30,
31, 1994 1995 1996 1995 1996
------------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Aviation Group
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs:
Cost of products sold............................ 69.8% 72.7% 70.5% 72.7% 65.6%
Selling, general and administrative.............. 11.8% 12.4% 12.9% 12.0% 14.8%
Depreciation and amortization.................... 2.4% 2.5% 2.5% 2.3% 2.9%
----- ----- ----- ----- -----
Operating income, before corporate expenses........ 16.0% 12.4% 14.1% 13.0% 16.7%
Metals Group
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs:
Cost of products sold............................ 78.6% 79.7% 79.8% 78.7% 80.7%
Selling, general and administrative.............. 13.2% 12.5% 13.7% 14.8% 15.5%
Depreciation and amortization.................... 0.8% 1.0% 1.1% 1.1% 1.2%
----- ----- ----- ----- -----
Operating income, before corporate expenses........ 7.4% 6.8% 5.4% 5.4% 2.6%
</TABLE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
AVIATION GROUP
NET SALES. Net sales for the aviation group increased by $14.2 million, or
66.8%, to $35.5 million for the three months ended June 30, 1996 from $21.3
million for the three months ended June 30, 1995. This increase was primarily
due to the additional net sales generated by TCI and Air Lab, acquired in
January 1996 and October 1995, respectively, accounting for an aggregate of
$12.2 million of such increase. Net sales from the remaining operating divisions
and subsidiaries in the aviation group experienced a 9.5% increase due to higher
activity in the repair and overhaul markets and increased orders from OEMs.
COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group
increased by $7.8 million, or 50.3%, to $23.3 million for the three months ended
June 30, 1996 from $15.5 million for the three months ended June 30, 1995. Of
this increase, $7.1 million was associated with net sales generated by TCI and
Air Lab. The remaining operating divisions and subsidiaries experienced a 4.6%
increase in costs of products sold relating to increased sales volume.
GROSS PROFIT. Gross profit for the aviation group increased by $6.4
million, or 110.9%, to $12.2 million for the three months ended June 30, 1996
from $5.8 million for the three months ended June 30, 1995. Of this increase,
$5.1 million was a direct result of the net sales of TCI and Air Lab, while the
remaining operating divisions and subsidiaries experienced a $1.3 million
increase in gross profit on the higher sales volume. As a percentage of net
sales, gross profit for the aviation group was 34.5% and 27.3% of net sales for
the three months ended June 30, 1996 and June 30, 1995, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the aviation group increased by $2.7 million, or
106.6%, to $5.3 million for the three months ended June 30, 1996 from $2.6
million for the three months ended June 30, 1995. Of this increase, $2.0 million
of the increase was associated with the selling, general and administrative
costs (including costs for engineering personnel) of the acquired businesses,
TCI and Air Lab.
23
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
aviation group increased by $0.5 million, or 110.0%, to $1.0 million for the
three months ended June 30, 1996 from $0.5 million for the three months ended
June 30, 1995. This increase was primarily due to the assets acquired in
connection with the TCI and Air Lab acquisitions.
OPERATING INCOME. Operating income for the aviation group increased by $3.2
million, or 115.1%, to $5.9 million for the three months ended June 30, 1996
from $2.8 million for the three months ended June 30, 1995. This increase was
primarily due to the operating income generated by TCI and Air Lab, accounting
for $3.2 million of the increase. The balance of the increase is related to
incremental sales volume at the remaining operating divisions and subsidiaries.
As a percentage of net sales, operating income for the aviation group was 16.7%
and 13.0% of net sales for the three months ended June 30, 1996 and June 30,
1995, respectively.
METALS GROUP
NET SALES. Net sales for the metals group decreased by $1.4 million, or
6.8%, to $19.6 million for the three months ended June 30, 1996 from $21.1
million for the three months ended June 30, 1995. This decrease was primarily
due to weakened demand and lower selling prices for flat-rolled steel products
processed by the Company. In addition, the Company's electrogalvanized products
experienced greater competition from hot-dipped rolled steel products, primarily
for use in the container market.
COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group
decreased by $0.7 million, or 4.4%, to $15.9 million for the three months ended
June 30, 1996 from $16.6 million for the three months ended June 30, 1995. This
decrease was primarily due to the decline in the cost of the primary raw
material used by the metals group, flat-rolled steel, and lower costs associated
with lower sales volume.
GROSS PROFIT. Gross profit for the metals group decreased by $0.7 million,
or 15.6%, to $3.8 million for the three months ended June 30, 1996 from $4.5
million for the three months ended June 30, 1995, due to the reasons discussed
above. As a percentage of net sales, gross profit for the metals group was 19.3%
and 21.3% of net sales for the three months ended June 30, 1996 and June 30,
1995, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the metals group decreased by $0.1 million, or 2.4%,
to $3.0 million for the three months ended June 30, 1996 from $3.1 million for
the three months ended June 30, 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals
group was approximately $0.2 million for each of the three months ended June 30,
1996 and 1995, respectively.
OPERATING INCOME. Operating income for the metals group decreased by $0.6
million, or 54.7%, to $0.5 million for the three months ended June 30, 1996 from
$1.1 million for the three months ended June 30, 1995. Costs associated with the
permanent closure of the Company's fabrication operations during the quarter
ended June 30, 1996 also contributed to the decline in operating income. As a
percentage of net sales, operating income for the metals group was 2.6% and 5.4%
of net sales for the three months ended June 30, 1996 and June 30, 1995,
respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses, consisting primarily of salaries to
corporate officers and employees, travel and professional fees and expenses,
increased by $0.5 million, or 84.9%, to $1.1 million for the three months ended
June 30, 1996 from $0.6 million for the three months ended June 30, 1995. This
increase was primarily due to increased professional fees and expenses.
INTEREST EXPENSE. Interest expense increased by $0.7 million, or 42.9%, to
$2.3 million for the three months ended June 30, 1996 from $1.6 million for the
three months ended June 30, 1995. This increase was primarily due to increased
debt levels associated with the acquisitions of TCI and Air Lab, the cash
portions of which were financed by borrowings under the Company's credit
agreement.
INCOME TAX EXPENSE. The effective tax rate was 40.9% for the three months
ended June 30, 1996 and 40.4% for the three months ended June 30, 1995.
24
<PAGE>
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased by $0.8 million, or 78.4%, to $1.8 million for the three months ended
June 30, 1996 from $1.0 million for the three months ended June 30, 1995. This
increase was primarily due to the acquisitions of TCI and Air Lab and the
overall sales volume increases in the aviation group, partially offset by
reduced net sales in the metals group.
INCOME FROM DISCONTINUED OPERATIONS. Income from discontinued operations
associated with the Quality Park disposition was $0.1 million for the three
months ended June 30, 1995.
NET INCOME. Net income increased by $0.7 million, or 61.1%, to $1.8 million
for the three months ended June 30, 1996 from $1.1 million for the three months
ended June 30, 1995. This increase was primarily due to the acquisitions of TCI
and Air Lab and the overall sales volume increases in the aviation group,
partially offset by reduced net sales in the metals group. As a percentage of
net sales, net income was 3.3% and 2.7% of net sales for the three months ended
June 30, 1996 and June 30, 1995, respectively.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
AVIATION GROUP
NET SALES. Net sales for the aviation group increased by $29.5 million, or
41.6%, to $100.2 million for fiscal 1996 from $70.7 million for fiscal 1995.
This increase was primarily due to an $18.4 million increase in net sales for
the operating divisions and subsidiaries in the aviation group, representing a
26.0% increase in net sales over fiscal 1995, and the inclusion of an aggregate
of $11.0 million in net sales for TCI and Air Lab. Increased demand for overhaul
and repair services from the commercial airlines and cargo carriers, as well as
increased orders of aircraft components from OEMs, accounted for the increase in
net sales in the aviation group.
COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group
increased by $19.2 million, or 37.5%, to $70.6 million for fiscal 1996 from
$51.4 million for fiscal 1995. This increase was primarily due to $6.4 million
of increased costs of products sold associated with net sales generated by TCI
and Air Lab. The remaining increase is associated with the increase in net sales
of the remaining operating divisions and subsidiaries in the aviation group.
GROSS PROFIT. Gross profit for the aviation group increased by $10.2
million, or 52.8%, to $29.5 million for fiscal 1996 from $19.3 million for
fiscal 1995. Of this increase, $5.6 million was a direct result of the increased
sales volume at the operating divisions and subsidiaries in the aviation group
at slightly higher margins. This increase was also attributable to the inclusion
of $4.6 million of gross profit on the net sales generated by TCI and Air Lab.
As a percentage of net sales, gross profit for the aviation group was 29.5% and
27.3% of net sales for fiscal 1996 and fiscal 1995, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the aviation group increased by $4.2 million, or
47.4%, to $12.9 million for fiscal 1996 from $8.8 million for fiscal 1995, due
to increased sales volume and the TCI and Air Lab acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
aviation group increased by $0.7 million, or 41.2%, to $2.5 million for fiscal
1996 from $1.8 million for fiscal 1995, primarily due to the assets acquired in
connection with the TCI and Air Lab acquisitions.
OPERATING INCOME. Operating income for the aviation group increased by $5.3
million, or 60.6%, to $14.1 million for fiscal 1996 from $8.8 million for fiscal
1995. This increase was assisted by the growth in aircraft production and the
increased outsourcing of repair and overhaul services by commercial aircraft
operators. This increase was also due to the addition of net sales and profits
generated by TCI and Air Lab, as well as the incremental operating income
resulting from increased sales volume. As a percentage of net sales, operating
income for the aviation group was 14.1% and 12.4% of net sales for fiscal 1996
and fiscal 1995, respectively.
25
<PAGE>
METALS GROUP
NET SALES. Net sales for the metals group decreased by $6.8 million, or
7.3%, to $86.6 million for fiscal 1996 from $93.5 million for fiscal 1995. This
decrease was primarily due to weakened demand and lower selling prices for
flat-rolled steel products processed by the Company. In addition, the Company's
electrogalvanized products experienced greater competition from hot-dipped
rolled steel products.
COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group
decreased by $5.3 million, or 7.2%, to $69.1 million for fiscal 1996 from $74.4
million for fiscal 1995. This decrease was primarily due to the reduced sales
volume and lower costs of raw materials.
GROSS PROFIT. Gross profit for the metals group decreased by $1.5 million,
or 7.9%, to $17.5 million for fiscal 1996 from $19.0 million for fiscal 1995,
due to the reasons discussed above. As a percentage of net sales, gross profit
for the metals group was 20.2% and 20.3% of net sales for fiscal 1996 and fiscal
1995, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the metals group increased by $0.2 million, or 1.4%,
to $11.9 million for fiscal 1996 from $11.7 million for fiscal 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals
group increased by $0.1 million, or 9.1%, to $1.0 million for fiscal 1996 from
$0.9 million for fiscal 1995. This increase was primarily due to depreciation of
certain assets recently placed into service.
OPERATING INCOME. Operating income for the metals group decreased by $1.7
million, or 27.3%, to $4.6 million for fiscal 1996 from $6.4 million for fiscal
1995, due to the reasons discussed above. As a percentage of net sales,
operating income for the metals group was 5.4% and 6.8% of net sales for fiscal
1996 and fiscal 1995, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.9 million, or 57.0%,
to $2.5 million for fiscal 1996 from $1.6 million for fiscal 1995. This increase
was primarily due to additional incentive compensation, staffing and
professional fees.
INTEREST EXPENSE. Interest expense increased by $0.7 million, or 11.1%, to
$7.3 million for fiscal 1996 from $6.6 million for fiscal 1995. This increase
was primarily due to increased debt levels associated with the acquisitions of
TCI and Air Lab, the cash portions of which were financed by borrowings under
the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 41.6% for fiscal 1996 and
37.3% for fiscal 1995.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased by $0.8 million, or 19.0%, to $5.2 million for fiscal 1996 from $4.4
million for fiscal 1995. This increase was primarily due to the net sales
generated by TCI and Air Lab and the overall favorable conditions in the
aviation industry resulting in increased net sales of the Company's products and
services.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. The Company had income from
discontinued operations of $4.5 million in fiscal 1996, principally as a result
of the sale of Quality Park, which resulted in an after-tax gain of $2.5
million, and improved operating results at Quality Park due to the favorable
effects of restructuring efforts. The Company had a loss from discontinued
operations of $2.9 million in fiscal 1995 due to $2.0 million in operating
losses at Quality Park and a $0.9 million loss on the sale of certain assets of
Quality Park.
NET INCOME. Net income increased by $8.2 million, or 540.9%, to $9.7
million for fiscal 1996 from $1.5 million for fiscal 1995. Of this increase,
$7.3 million was attributable to the income from the discontinued Quality Park
operations in fiscal 1996 as compared to the loss at these operations during
fiscal 1995. The increase in fiscal 1996 net income was also attributable to the
strong results of the aviation group, partially offset by a decline in
profitability in the metals group. As a percentage of net sales, net income was
5.2% and 0.9% of net sales for fiscal 1996 and fiscal 1995, respectively.
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FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO TEN MONTHS ENDED MARCH 31, 1994
AVIATION GROUP
NET SALES. Net sales for the aviation group increased by $13.4 million, or
23.5%, to $70.7 million for fiscal 1995 from $57.3 million for the ten months
ended March 31, 1994 (the "1994 period"). This increase was primarily due to the
comparison of 12 months to 10 months. On an annualized basis, the increase in
net sales was $2.0 million, or 2.9%, due to increased sales of products and
services to commercial airlines, partially offset by the loss of a significant
customer at one of the Company's operating divisions.
COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group
increased by $11.5 million, or 28.7%, to $51.4 million for fiscal 1995 from
$39.9 million for the 1994 period. This increase was primarily due to the 12
month to 10 month comparison. On an annualized basis, the increase was $3.5
million, or 7.2%, resulting from higher sales volume.
GROSS PROFIT. Gross profit for the aviation group increased by $2.0
million, or 11.6%, to $19.3 million for fiscal 1995 from $17.3 million for the
1994 period. This increase was primarily due to the 12 month to 10 month
comparison. On an annualized basis, gross profit decreased by $1.5 million, or
7.0%. On an annualized basis, as a percentage of net sales, gross profit for the
aviation group was 27.3% and 30.2% of net sales for fiscal 1995 and fiscal 1994,
respectively. The decrease in gross profit margin on increased net sales was
primarily the result of the loss of a customer at one of the Company's higher
margin operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the aviation group increased by $2.0 million, or
28.9%, to $8.8 million for fiscal 1995 from $6.8 million for the 1994 period.
The increase was primarily due to the 12 month to 10 month comparison. On an
annualized basis, such expenses increased by $0.6 million, or 7.4%.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
aviation group increased by $0.4 million, or 29.1%, to $1.8 million for fiscal
1995 from $1.4 million for the 1994 period. This increase was primarily due to
the 12 month to 10 month comparison. On an annualized basis, the depreciation
and amortization increased $0.1 million, or 7.6%, resulting from depreciation
recorded on certain assets recently placed into service.
OPERATING INCOME. Operating income for the aviation group was $8.8 million
and $9.1 million for fiscal 1995 and the 1994 period, respectively. On an
annualized basis, there was a decrease in operating income of $2.2 million, or
19.9% for fical 1995, primarily as a result of the loss of a significant
customer at one of the Company's operating divisions. As a percentage of net
sales, annualized operating income for the aviation group was 12.4% and 16.0% of
net sales for fiscal 1995 and fiscal 1994, respectively.
METALS GROUP
NET SALES. Net sales for the metals group increased by $20.7 million, or
28.5%, to $93.5 million for fiscal 1995 from $72.7 million for the 1994 period.
This increase was primarily due to the 12 month to 10 month comparison. On an
annualized basis, the increase in net sales was $6.2 million, or 7.1%. This
increase was due to several factors, including increases in net sales of
containers for the agricultural industry and steel products for the housing
market and additional structural steel fabrication and erection business.
COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group
increased by $17.3 million, or 30.2%, to $74.4 million for fiscal 1995 from
$57.2 million for the 1994 period. This increase was primarily due to the 12
month to 10 month comparison. On an annualized basis, costs of products sold
increased by $5.9 million, or 8.5%, due to price increases for flat-rolled
steel.
GROSS PROFIT. Gross profit for the metals group increased by $3.4 million,
or 22.0%, to $19.0 million for fiscal 1995 from $15.6 million for the 1994
period. This increase was primarily due to the 12 month to
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10 month comparison. On an annualized basis, gross profit increased by $0.3
million, or 1.7%. On an annualized basis, as a percentage of net sales, gross
profit for the metals group was 20.3% and 21.4% of net sales for fiscal 1995 and
fiscal 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the metals group increased by $2.1 million, or
21.9%, to $11.7 million for fiscal 1995 from $9.6 million for the 1994 period.
On an annualized basis, the increase was only $0.2 million, or 1.5%.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals
group increased $0.3 million, or 54.2%, to $0.9 million for fiscal 1995 from
$0.6 million for the 1994 period. This increase was partially due to the 12
month to 10 month comparison. On an annualized basis, the increase was $0.2
million, due to new assets placed into service.
OPERATING INCOME. Operating income for the metals group increased by $1.0
million, or 18.7%, to $6.4 million for fiscal 1995 from $5.4 million for the
1994 period. This increase was primarily due to the 12 month to 10 month
comparison. On an annualized basis, there was a decrease in operating income of
$0.1 million, or 1.1%. On an annualized basis, as a percentage of net sales,
operating income for the metals group was 6.8% and 7.4% of net sales for fiscal
1995 and fiscal 1994, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses were $1.6 million for each of fiscal
1995 and the 1994 period, respectively.
INTEREST EXPENSE. Interest expense increased by $1.7 million, or 34.3%, to
$6.6 million for fiscal 1995 from $4.9 million for the 1994 period. This
increase was primarily due to the 12 month to 10 month comparison. On an
annualized basis, interest expense increased by $0.7 million due to an increase
in the prime rate.
INCOME TAX EXPENSE. The effective tax rate was 37.3% for fiscal 1995 and
38.9% for fiscal 1994.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
decreased by $0.5 million, or 11.1%, to $4.4 million for fiscal 1995 from $4.9
million for the 1994 period. This decrease was primarily due to the decrease in
profitability in the aviation group resulting from increased competition in the
repair market, loss of a significant customer at one of the Company's operating
divisions and decreases in aircraft production rates.
LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was
$2.9 million in fiscal 1995 and $0.5 million for the 1994 period due to losses
at Quality Park. The losses in fiscal 1995 were primarily due to the closure and
sale of a product line within Quality Park's operations and operating losses at
Quality Park.
NET INCOME. Net income decreased by $2.9 million, or 66.0%, to $1.5 million
for fiscal 1995 from $4.4 million for the 1994 period. This decrease was
primarily due to the above factors. On an annualized basis, as a percentage of
net sales, net income was 0.9% and 3.4% of net sales for fiscal 1995 and fiscal
1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash flows
from operations and the Credit Facility. The Company used approximately $6.8
million of cash flows from operating activities, principally for working capital
requirements, for the three months ended June 30, 1996. The Company generated
cash flows of approximately $16.1 million from operating activities for the year
ended March 31, 1996.
On July 19, 1996, the direct and indirect subsidiaries of the Company
entered into the Credit Facility, an unsecured five year credit facility for a
$50.0 million revolving credit line and a $35.0 million term loan. The Company
guarantees repayment of the loans under the Credit Facility. Both loans bear
interest at either LIBOR plus an applicable margin or the prime rate plus an
applicable margin, at the option of the borrowers. The margin applicable to
LIBOR varies between 0.63% and 1.88% and the margin
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applicable to the prime rate varies between 0% and 0.38%, in each case based
upon the borrowers' ratio of total indebtedness to earnings before interest,
taxes and depreciation and amortization. In addition, the borrowers are required
to pay a commitment fee of between 0.2% and 0.45% on the unused portion of the
Credit Facility based upon the ratio described above. Principal payments on the
term loan of approximately $1.3 million are made quarterly with a final lump sum
payment of approximately $11.3 million due on July 1, 2001. The borrowers may
repay amounts owed under the Credit Facility or reduce the revolving credit
facility commitment without penalty. Additionally, the borrowers may allocate up
to $5.0 million of the available revolving credit facility for the issuance of
letters of credit. The Credit Facility contains restrictions and covenants
applicable to the borrowers and the Company which include limitations on the
ability to incur additional indebtedness, issue stock options or warrants, make
certain restricted payments and acquisitions, create liens, enter into
transactions with affiliates, sell substantial portions of its assets and make
capital expenditures. The Credit Facility restricts the payment of cash
dividends by the Company.
Under the terms of the Credit Facility, upon completion of this offering,
the Company is required to make a capital contribution to the borrowers, in the
amount of, and the borrowers are required to make a principal payment of $15.0
million, which will be applied first to any balance outstanding on the revolving
credit facility and then to the term loan. Amounts applied to repay the
revolving credit facility may be reborrowed. Should the Company fail to receive
at least $30.0 million in proceeds from this offering by December 31, 1996, the
Credit Facility will become secured as the Company is required to grant the
lender a first priority lien and security interest in all real and personal
property owned by the Company at that time.
The proceeds of borrowings under the Credit Facility and the proceeds from
the sale of Quality Park were used to extinguish the outstanding balances of the
revolving credit facility, the senior term loans and the senior subordinated
notes existing at March 31, 1996. The extinguishment of this debt resulted in an
extraordinary loss of approximately $1.5 million, net of an income tax benefit
of approximately $1.0 million.
The Company's outstanding subordinated promissory notes consist of two
notes, a $13.5 million principal amount payable by the Company to Alco, bearing
interest at 10%, and due in equal installments on June 1, 2002 and June 1, 2003
and the Teleflex Note. The Teleflex Note will be repaid with the proceeds of
this offering.
The 14% JSDs are unsecured obligations of the Company which were issued to
CVC Affiliates and certain members of management of the Company. The 14% JSDs
will aggregate approximately $9.5 million, including principal and accrued
interest, on October 15, 1996, and will be converted into Common Stock
immediately prior to the consummation of this offering.
During 1996, junior subordinated promissory notes of TCI (the "10.5% JSDs")
were issued in the amount of $0.8 million and are contractually subordinated to
all liabilities of TCI and its subsidiaries, and bear interest at 10.5%. The
10.5% JSDs were issued to TFX Equities, Inc. and certain members of management
of TCI. The 10.5% JSDs are due in equal installments on December 31, 2005 and
2006, although the holders of the 10.5% JSDs have no right to demand payment of
principal until all superior debt, as defined, has been paid in full.
Capital expenditures were approximately $0.9 million and $1.9 million for
the three months ended June 30, 1996 and the year ended March 31, 1996,
respectively, primarily for manufacturing machinery and equipment for the
aviation group. The Company funded these expenditures through cash generated by
operations and borrowings under its credit arrangements. The Company expects
capital expenditures to be approximately $6.0 million for fiscal year ending
March 31, 1997. Of this amount, approximately $3.0 million is expected to be
used to expand capacity at the Company's stretch forming operations and the
remainder will be used for upgrades of information systems, machinery and
equipment, primarily for the aviation group. The Company believes that the cash
proceeds from this offering, together with cash generated by operations and
borrowings under the Credit Facility, will be sufficient to meet anticipated
cash requirements for the next 12 months. There can be no assurance that
additional capital will not be required or that any such additional capital will
be available on reasonable terms, if at all, at such times as may be required by
the Company.
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BUSINESS
GENERAL OVERVIEW
The Company designs, engineers, manufactures or repairs and overhauls
aircraft components such as mechanical and electromechanical control systems,
aircraft and engine accessories, APUs, avionics and aircraft instruments. The
Company serves a broad spectrum of the aviation industry, including commercial
airlines and air cargo carriers, as well as OEMs, on a worldwide basis. The
Company was incorporated in 1993 to purchase the aviation and metals businesses
from Alco. See "Historical Background."
INDUSTRY OVERVIEW AND TRENDS
According to U.S. Department of Commerce statistics, the annual worldwide
market for the design, engineering, manufacture, repair and overhaul of aircraft
components is approximately $45 billion. This market is expected to grow at an
annual rate of 5% to 6% over the next four years. The aircraft component
production and repair industry is highly fragmented, consisting of both a
limited number of well-capitalized companies, which offer a broad range of
products and services, and a large number of smaller, specialized companies. The
aviation industry has been consolidating at an increasing pace in recent years,
and it is expected that such consolidation will continue for the foreseeable
future.
A number of significant trends are currently affecting the market for the
design, engineering, manufacture, repair and overhaul of aircraft components.
These trends include the following:
INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION. Boeing's 1996 Market
Outlook projects that global air travel will increase by 70% and that the number
of passenger and cargo delivery aircraft in service will increase by 47% through
the year 2005. This trend will be driven, in part, by the anticipated continued
growth of established carriers engaged in the air freight and package delivery
businesses. Average passenger seat miles flown is also expected to increase
significantly over the next few years. Further, many new airlines are expected
to commence operations in the United States and abroad, especially in China and
other countries in Asia, where only a small percentage of the population has
ever flown. Because start-up airlines generally do not invest in the
infrastructure necessary to service their aircraft, such airlines outsource all
or most of their repair and overhaul services. To meet their needs, certain
foreign and many start-up airlines have turned to older aircraft which generally
require more frequent servicing. Further, as aging aircraft are retired, new
aircraft production is increasing. It is estimated that the number of surplus
aircraft is expected to significantly decline while new aircraft production is
expected to increase over the next several years. The continued growth in air
transit and aircraft production will increase the demand for aircraft component
purchases and repairs.
INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators
have come under increasing pressure to reduce both operating and capital costs
associated with providing aviation services. While several of the expenditures
incurred by aircraft operators are beyond their direct control, such as fuel
prices and labor costs, aircraft operators seeking cost reductions have
increased purchases of certain components from third parties and have outsourced
repair and overhaul functions. Aircraft components sold by third party suppliers
and aircraft components that have been repaired and overhauled are generally
less expensive than new aircraft components sold by OEMs. In addition, OEMs are
increasingly becoming "assemblers" of aviation products by outsourcing more
manufacturing and repair functions to third parties. In this regard, the Company
supplies many OEMs with aircraft components and subassemblies, in addition to
performing repair and overhaul services. The Company believes that its broad
array of aviation products and services and its reputation for quality and
timely and reliable delivery will position the Company to continue to capitalize
on the outsourcing trend. The Company anticipates that increased reliance on
outsourcing will continue to cause consolidation in the industry since only
those suppliers with extensive capacities and adequate capital will secure such
agreements with OEMs and aircraft operators.
REDUCTION IN THE NUMBER OF APPROVED SUPPLIERS AND VENDORS. In order to
reduce purchasing costs, streamline purchasing decisions and have greater
control over quality, purchasing departments of OEMs and aircraft operators have
been reducing the number of approved suppliers and vendors. Recently,
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several OEMs and aircraft operators have reduced their supplier and vendor lists
from as many as 50 to a core group of five to ten "mega-suppliers" or
"mega-vendors" who have the size and capacity to meet their needs. The Company
has secured a position on such lists of a number of OEMs and airlines. The
Company believes that this trend will continue in the future and that, due to
its established market presence and reputation for quality, the Company will
continue to be selected as an approved supplier and vendor.
INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations
promulgated by the FAA and similar agencies in other countries, including the
Joint Aviation Authority (the "JAA") and the Civil Aviation Administration of
China (the "CAAC"), as well as guidelines established by OEMs and aircraft
operators, when an aircraft component fails to perform within certain prescribed
limits or after logging a prescribed number of flight hours, the aircraft
component must be brought to a repair facility certified by the FAA or similar
agency of a foreign nation for various types of designated service or
replacement. The FAA has changed the nature of the licenses that it grants, from
the grant of broad licenses for aircraft accessories or instruments within broad
classifications to more limited licenses covering specific parts within more
narrow classifications. The Company holds many perpetual broad licenses that
will continue unless abandoned, suspended or revoked. In addition, aircraft
components require regular maintenance and inspection and replacement of
"life-limited" components. The trend toward more stringent maintenance
requirements and more frequent maintenance and overhaul has increased the size
of the market for the repair of such components, because the use of new
components is not always cost effective. In addition, a potential change in FAA
regulations would require aircraft repair stations and others to implement and
follow internal maintenance and safety requirements in addition to FAA
regulations. The Company believes that, because of its broad licenses and
long-standing emphasis on quality control, it will benefit from the evolving
maintenance and safety standards.
INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding
the use of unapproved aircraft spare parts, regulatory authorities have
increased the level of documentation that must be maintained on spare parts.
This requirement has been extended by OEMs and aircraft operators to the vendors
of spare parts. The high cost of required technology to compete effectively in
the redistribution market has made entry into and survival in the aircraft spare
parts redistribution market increasingly difficult and expensive. The Company
has implemented technology to enable it to meet these more stringent
traceability requirements and intends to continue to do so in the future.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of trends
affecting the market for the design, engineering, manufacture, repair and
overhaul of aircraft components due to:
BROAD ARRAY OF PRODUCT AND SERVICES. The Company offers the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers,
including electromechanical controls for McDonnell Douglas and the fuselage for
the 777 model aircraft for Boeing. In certain cases, the Company retains the
proprietary rights to these designs and, accordingly, the customer will rely on
the Company to provide service on such aircraft components at every stage of
their useful lives, including the repair and overhaul or replacement of such
components. The Company also manufactures aviation components according to its
customers' specifications. In addition, the Company performs repair and overhaul
services for customers on various aviation components manufactured by third
parties such as AlliedSignal.
GOVERNMENT CERTIFICATIONS. The Company operates nine FAA-certified repair
stations and has been granted licenses from the FAA and foreign regulatory
counterparts, including the JAA and the CAAC, to perform repair and overhaul
services on broad classifications of aircraft instruments and accessories.
Without such broad certifications and licenses, other companies may not offer
these products and services, thereby constituting a significant barrier to
entry. In addition, the Company holds two exclusive licenses issued by the FAA
which permit the Company to design, engineer, repair, test and release into
service without FAA approval certain products to its own specifications for
certain aircraft components
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and therefore to compete directly with OEMs with respect to such components.
These exclusive licenses, known as SFAR 36 certifications, enable the Company to
offer, on a proprietary basis, certain repaired parts relating to various
aircraft accessories such as APUs and constant speed drives to its customers at
a lower cost than other companies that must purchase replacement parts from
third parties.
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that the Company satisfy certain
requirements relating to the quality of its products and services. The Company
has continually met or exceeded these requirements, and has successfully
completed many audits by the Coordinating Agency for Supplier Evaluation
("C.A.S.E."), a consortium of United States airlines. The Company performs
testing and certification procedures on all of the products that it designs,
engineers, manufactures, repairs and overhauls, and maintains detailed records
to ensure traceability of the production of and service on each aircraft
component. The expense required to institute and maintain the Company's quality
control procedures represents a barrier to entry.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers including
Federal Express and United Parcel Service, and OEMs such as Boeing, McDonnell
Douglas, AirBus and AlliedSignal. The Company expects that its customer base
will continue to strengthen and broaden with increased cross-selling efforts by
the Company of its various products and services.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's aviation group have been involved in the aviation industry for an
average of over 30 years. These entities are characterized by experienced
management and highly-skilled employees. Due in large part to its established
industry presence, the Company enjoys strong customer relations, name
recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services, to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further expand its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
increasing trend toward outsourcing and the reduction by aircraft operators and
OEMs of the number of approved suppliers and vendors.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. In addition,
the Company participates each year in several international trade shows,
including the Paris Air Show and the Singapore Air Show. The Company intends to
build on its existing international presence through foreign acquisitions and
continued market penetration.
CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation
of the Company's operating divisions and subsidiaries, the Company plans to
increase cross-selling of its various capabilities to its customers. For
example, one of the Company's operating divisions has recently begun
distributing
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certain electromechanical controls manufactured by a subsidiary of the Company.
The Company's operating divisions and subsidiaries will continue to share
independent sales representatives and jointly bid on projects where appropriate,
while still maintaining their individual identities.
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
GROWTH THROUGH ACQUISITIONS. The Company expects to continue its growth
through acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
has successfully completed three acquisitions in the last 12 months. The
acquisition of TCI is an example of the Company seeking to add to its existing
product offering (in this case, mechanical and electromechanical controls)
through the acquisition of an established company in the industry. AMTI and Air
Lab represent acquisitions that expand both the Company's existing aviation
products and services and its customer base. Because of the fragmented nature of
much of the market for aircraft products and services, the Company believes that
many additional acquisition opportunities exist in the aviation industry.
PRODUCTS AND SERVICES
The Company's aviation products and services may generally be divided into
three categories: structural components, instrument and flight controls and
operational components. The following is a description of some of the products
and services offered by the Company in each of these three categories:
STRUCTURAL COMPONENTS. The Company performs stretch forming, bending, die
forming, machining, welding, assembly and other fabrication on aircraft wings,
fuselages and skins for aircraft produced by OEMs such as McDonnell Douglas and
Boeing. The Company also manufactures metallic and composite bonded honeycomb
assemblies for fuselage, wings and flight control surface parts for commercial
airlines and other aircraft operators.
INSTRUMENT AND FLIGHT CONTROLS. The Company designs and engineers
mechanical and electromechanical controls such as remote valve operators and
push/pull controls ranging from simple vent controls to sophisticated
flight-critical engine controls for OEMs and commercial airlines. The Company's
designs and engineering for such controls are proprietary. The Company also
performs repair and overhaul services, and supplies spare parts, for various
types of cockpit instruments and gauges for a broad range of commercial airlines
on a worldwide basis.
OPERATIONAL COMPONENTS. The Company performs complete repair and overhaul
services on APUs for both commercial airlines and OEMs. APUs are used to provide
power for all non-propulsion aircraft functions such as air conditioning, lights
and other electrical functions. The Company also repairs and overhauls aircraft
accessories, including constant speed drives, pneumatic or electrically actuated
valves, cabin compressors, starters and generators and manufactures refueling
booms. Certain of these components, like the APUs, are repaired pursuant to SFAR
36 certifications. Finally, the Company provides precision machining services
for other operational components manufactured from refractory and other metals
for the aviation and aerospace industry.
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OPERATING DIVISIONS AND SUBSIDIARIES
The Company operates through several operating divisions and subsidiaries
which are divided into two groups: the aviation group and the metals group. The
following chart describes the operations, customer base and certain other
information with respect to the Company's operating divisions and subsidiaries:
<TABLE>
<CAPTION>
OPERATING DIVISION/SUBSIDIARY NUMBER OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ---------------------------------------- -------------- ----------------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
AVIATION GROUP
A. Biederman, Inc.(1) Glendale, CA Sells and services Commercial airlines, 79
(1933) aircraft and industrial U.S. military and cargo
instruments. carriers.
Advanced Materials Technologies Inc.(1) Phoenix, AZ Repairs and Aviation OEMs and 172
(1987) manufactures components aircraft operators.
for APUs and gas
turbine engines.
Aerospace Technologies, Inc.(1) Fort Worth, TX Manufactures metallic/ Commercial airlines, 87
(1969) composite bonded U.S. military and
honeycomb assemblies component supplier
and repairs fuselage, industry.
wing, flight control
surface parts and other
flight critical
components.
Air Lab, Inc.(1) Seattle, WA Repairs and overhauls Commercial airlines, 34
(1974) aviation aircraft manufacturers,
instrumentation and avionics and instrument
controls. manufacturers, major
freight carriers,
corporate aircraft
operators and aviation
parts suppliers.
K-T Corporation Shelbyville, Performs stretch Aviation OEMs, U.S. 156
(1963) IN forming, bending, die military and aerospace,
forming, machining, mass transportation,
welding, assembly and energy and heavy
other fabrication on trucking industries.
aircraft wings,
fuselages and skins.
L.A. Gauge Co., Inc. Sun Valley, CA Machines, bonds and Defense, aerospace, 40
(1954) fabricates medical, automotive and
ultra-precision parts. computer industries.
Lamar Electro-Air Corporation(1)(2) Wellington, KS Repairs and overhauls U.S. government, 92
(1965) aircraft and engine commercial airlines and
accessories, general aviation
manufactures pneumatic aircraft operators.
and electrically
actuated valves for
aircraft and assembles
axles and aluminum
wheels for automobiles.
Northwest Industries, Inc. Albany, OR Machines and fabricates Aerospace, nuclear, 29
(1960) refractory, reactive, medical, electronic and
heat and chemical industries.
corrosion-resistant
precision products.
Special Processes of Arizona, Inc.(1) Phoenix, AZ Produces and applies Aviation OEMs and 19
(1987) plasma coating. aircraft operators.
Triumph Air Repairs, Inc.(1)(2) Phoenix, AZ Repairs and overhauls Worldwide commercial 112
(1979) APUs and supplemental airlines.
equipment.
Triumph Controls, Inc.(1) North Wales, Designs and Aviation OEMs, 253
(1943) PA manufactures mechanical shipyards, repair and
and electromechanical overhaul facilities,
control systems. airlines and U.S. and
NATO military forces.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
OPERATING DIVISION/SUBSIDIARY NUMBER OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ---------------------------------------- -------------- ----------------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
METALS GROUP
Deluxe Specialties Mfg Co. Hutchinson, KS Manufactures fuel tanks U.S. manufacturers of 102
(1961) and hydraulic mobile, material
reservoirs. handling, agricultural,
construction and power
generation equipment.
Great Western Steel Co. Chicago, IL Produces steel Manufacturers, 43
(1918) products, specializing primarily in the home
in flat rolled and office products
products. industries.
Kilroy Structural Steel Co. Cleveland, OH Erects structural steel General contractors, 14
(1918) frameworks. engineers and
architects of
commercial buildings
and bridges.
Triumph Industries Bridgeview, IL Produces and Computer and electronic 59
(1960) distributes specialty industries.
electrogalvanized
products
</TABLE>
- ------------------
(1) Designates FAA-certified repair station.
(2) Designates SFAR 36 certification.
METALS PROCESSING AND DISTRIBUTION
The Company's metals group consists of four divisions with industry
experience averaging 56 years in operation. These businesses include a leading
producer of electrogalvanized steel products, a steel service center
specializing in flat rolled steel products and a leading manufacturer of fuel
tanks and hydraulic reservoirs. These entities supply products to several
hundred manufacturers and other customers in the computer, electronics and
agricultural industries on a regional and national basis. In addition, the
Company operates a business engaged in the erection of structural frameworks for
buildings and bridges in the midwestern United States.
The Company's metals group processes, converts and distributes steel and
steel products on a national basis. The Company produces and distributes
electrogalvanized steel, which can be stamped, formed, welded and painted and
coated steel (including Tribrite-Registered Trademark-, Triclear-Registered
Trademark- and Trichrome-Registered Trademark-) for the electronic and computer
industries. The Company also operates a steel service center specializing in
flat rolled products and their processing, including hot or cold rolled sheet
and coil and galvanized sheet and coil used primarily by the home and office
products and appliance industry. The Company also manufactures fuel tanks and
hydraulic reservoirs for off-highway mobile equipment units, which are sold
primarily to the agricultural industry.
The Company also operates a business engaged in the erection of structural
framework, including steel members and allied materials, for buildings and
bridges, with a specialty in commercial and industrial buildings. The Company
erected the structural framework of Jacobs' Field, the Cleveland Indians' new
baseball stadium, and the Rock and Roll Hall of Fame in Cleveland, Ohio. These
structural erection services are provided on a project-by-project basis
primarily in the midwestern United States. These projects are generally awarded
on a fixed fee, competitive bid basis.
SALES AND MARKETING
Each of the Company's operating divisions and subsidiaries independently
conducts sales and marketing efforts directed at their respective customers and
industries and, in some cases, collaborate with other operating divisions and
subsidiaries within its group for cross-marketing efforts. Each sales
force and the respective officers of the operating divisions and subsidiaries
are responsible for obtaining new customers and maintaining relationships with
existing customers. Sales and marketing efforts are conducted primarily by
independent regional manufacturer's representatives and in-house personnel.
35
<PAGE>
The Company has approximately 72 independent manufacturer's representatives,
including many representatives in foreign countries, and approximately 56
in-house sales employees. Generally, manufacturer's representatives receive a
commission on sales and the in-house sales personnel receive a base salary plus
commission. Engaging independent sales representatives at the local level
facilitates responsiveness to each customer's changing needs and current trends
in each marketplace in which the Company operates.
The Company's Aviation Council, which is comprised of the presidents of each
of the Company's operating divisions and subsidiaries in the aviation group,
meets periodically to discuss ways to improve sales and cross-marketing
opportunities. The Company has also engaged in innovative marketing efforts
including participation in research groups. The management of each operating
division and subsidiary of the Company also maintains close business
relationships with many customers, thereby furthering the sales and marketing
efforts of their businesses.
A significant portion of the Company's government and defense contracts are
awarded on a competitive bidding basis. The Company generally does not bid or
act as the primary contractor, but will typically bid and contract as a
subcontractor on contracts on a fixed fee basis. The Company generally sells to
its other customers on a fixed fee, negotiated contract or purchase order basis.
BACKLOG
As of June 30, 1996, the Company's aviation group had outstanding purchase
orders representing an aggregate invoice price of approximately $69.4 million,
$17.4 million of which will not be shipped by the Company by fiscal year end. As
of June 30, 1996, the Company's metals group had outstanding purchase orders
representing an aggregate invoice price of approximately $21.3 million, $0.4
million of which will not be shipped by the Company's fiscal year end.
COMPETITION
The aircraft components production and repair industry is highly fragmented,
consisting of both a limited number of well-capitalized companies which offer a
broad range of products and services and a large number of smaller, specialized
companies. The Company believes that the principal competitive factors in the
aviation products and services industry are quality, turnaround time, overall
customer service and price. See "-- Competitive Advantages." The Company
believes that it competes favorably on the basis of the foregoing factors. The
Company does not believe that the location of its repair facilities is a
significant factor to its customers in selecting the Company, as substantially
all of the components serviced by the Company are transported by common carrier
to the Company's facilities for service.
The Company competes with third party manufacturers, some of which are
divisions or subsidiaries of OEMs or other large companies in the manufacture of
aircraft components and subassemblies. Competition for the repair and overhaul
of aviation components comes from three primary sources, some with greater
financial and other resources than the Company: OEMs, major commercial airlines
and other independent service companies. Certain major commercial airlines own
and operate their own service centers. Some major airlines have begun to sell
their repair and overhaul services to other aircraft operators. The repair and
overhaul services provided by domestic airlines are primarily for their own
components, although these airlines may outsource a limited amount of repair and
overhaul services to third parties. Foreign airlines that provide repair and
overhaul services typically provide these services for their own components and
for third parties. OEMs also maintain service centers that provide repair and
overhaul services for the components they manufacture. Other independent service
organizations also compete for the repair and overhaul business of other users
of aircraft components.
The Company's principal competitors in the metals industry include national
and regional steel mills, other steel service centers, steel erection companies
and pre-engineered building manufacturers. Some of these competitors have
greater financial and other resources than the Company.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. The Company must be certified by the
FAA and, in some cases, by individual OEMs in
36
<PAGE>
order to engineer and service parts and components used in specific aircraft
models. If material authorizations or approvals were revoked or suspended, the
operations of the Company would be adversely affected. New and more stringent
government regulations may be adopted, or industry oversight heightened, in the
future and such new regulations, if enacted, or any industry oversight, if
heightened, may have an adverse impact on the Company.
The Company must also satisfy the requirements of its customers, including
OEMs, that are subject to FAA regulations, and provide these customers with
products and services that comply with the government regulations applicable to
aircraft components used in commercial flight operations. The FAA regulates
commercial flight operations and requires that aircraft components meet its
stringent standards. In addition, the FAA requires that various maintenance
routines be performed on aircraft components, and the Company currently
satisfies these maintenance standards in its repair and overhaul services.
Several of the Company's operating divisions are FAA-approved repair stations.
The Company's aviation and metals operations are also subject to a variety
of worker and community safety laws. The Occupational Safety and Health Act of
1970 ("OSHA") mandates general requirements for safe workplaces for all
employees. In addition, OSHA provides special procedures and measures for the
handling of certain hazardous and toxic substances. Specific safety standards
have been promulgated for workplaces engaged in the treatment, disposal or
storage of hazardous waste. The Company believes that its operations are in
material compliance with OSHA's health and safety requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulation by government agencies, including the EPA.
Among other matters, these regulatory authorities impose requirements that
regulate the emission, discharge, generation, management, transportation and
disposal of hazardous materials, pollutants and contaminants, govern public and
private response actions to hazardous or regulated substances which may be or
have been released to the environment, and require the Company to obtain and
maintain licenses and permits in connection with its operations. This extensive
regulatory framework imposes significant compliance burdens and risks on the
Company. Although management believes that the Company's operations and its
facilities are in material compliance with such laws and regulations, there can
be no assurance that future changes in such laws, regulations or interpretations
thereof or the nature of the Company's operations will not require the Company
to make significant additional capital expenditures to ensure compliance in the
future.
Certain Company facilities are currently the subject of environmental
remediation activities, the cost of which is subject to indemnification provided
by Alco. One of these facilities is connected with a site included on the
National Priorities List of Superfund sites maintained by the EPA. Another of
these facilities is located on a site included in the EPA's database of
potential Superfund sites. The Alco indemnification covers both (i) the costs
and claims associated with all of these environmental remediation activities and
liabilities, and (ii) the costs of unidentified environmental liabilities that
arise from conditions or activities existing at facilities required from Alco
prior to their acquisition from Alco and that are identified before July 22,
2000. Another of the Company's facilities leased from Teleflex is located on a
site placed on EPA's National Priorities List prior to its acquisition by the
Company, and is subject to indemnification provided by Teleflex for
environmental liabilities arising from activities or conditions existing at this
facility prior to the Company's acquisition.
EMPLOYEES
As of July 31, 1996, the Company employed approximately 1,300 persons, of
whom 113 were management employees, 56 were sales and marketing personnel, 155
were technical personnel, 147 were administrative personnel and 829 were
production workers. As of July 31, 1996, approximately 200 employees were
subject to collective bargaining agreements, one of which will expire in
February 1997. There can be no assurance that the Company will be able to
renegotiate successfully its collective
37
<PAGE>
bargaining agreements without any labor disruptions or that such agreements will
be renegotiated on terms favorable to the Company. The Company has not
experienced any material labor-related work stoppage and considers its relations
with its employees to be good.
PROPERTIES
The Company's executive offices are located in Wayne, Pennsylvania, where
the Company leases 5,100 square feet of space. This lease expires in September
2000. In addition, the Company owns or leases the following facilities in which
its operating divisions and subsidiaries are located.
<TABLE>
<CAPTION>
SQUARE OWNED/LEASE
LOCATION DESCRIPTION FOOTAGE EXPIRATION
- ------------------ ----------------------------------------------------- --------- -------------
<S> <C> <C> <C>
Chandler, AZ Thermal processing facility and office 7,000 2017
Phoenix, AZ Plasma spray facility and office 13,500 2000
Phoenix, AZ Repair and overhaul shop and office 50,000 1998
Tempe, AZ Manufacturing facility and office 13,500 Owned
Tempe, AZ Machine Shop 9,300 Owned
Glendale, CA Instrument shop, warehouse and office 28,000 2005
Milpitas, CA Warehouse, repair shop and office 3,700 1997
Sun Valley, CA Machine shop and office 30,000 Owned
Bridgeview, IL Steel processing facility and office 135,700 2006
Chicago, IL Steel distribution facility and office 140,000 Owned
Shelbyville, IN Manufacturing facility and office 192,300 Owned
Hutchinson, KS Manufacturing facility and office 75,000 Owned
Wellington, KS Repair and overhaul and office 90,000 1997
Cleveland, OH Steel fabrication facility and office 163,000 Owned
Plain City, OH Office 2,000 1997
Albany, OR Machine shop and office 25,000 Owned
North Wales, PA Manufacturing facility and office 111,400 2002
Fort Worth, TX Manufacturing facility and office 114,100 Owned
Seattle, WA Instrument shop, warehouse and office 10,000 1998
</TABLE>
The Company believes that its properties are adequate to support its
operations for the foreseeable future.
LEGAL PROCEEDINGS
The Company is not presently involved in any material legal proceedings
outside of the ordinary course of business. The Company may in the future be
named as a defendant in lawsuits involving product defects, breach of warranty
or other actions relating to products that it manufactures or products that it
distributes that are manufactured by others. The Company believes that its
potential exposure is adequately covered by its aviation product and general
liability insurance.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Richard C. Ill................ 53 President, Chief Executive Officer and Director
John R. Bartholdson........... 52 Senior Vice President, Chief Financial Officer, Treasurer and
Director
Paul T. Stimmler.............. 57 Vice President and Secretary
Kevin E. Kindig............... 39 Controller
Richard C. Gozon(1)(2)........ 57 Director
Claude F. Kronk(1)(2)......... 64 Director
Joseph M. Silvestri(1)........ 35 Director
Michael A. Delaney(2)......... 42 Director
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Richard C. Ill has been President and Chief Executive Officer and a director
of the Company since 1993. Mr. Ill joined Alco in 1968 and became Group Vice
President of Metalsource, a steel distribution business, in 1973. In 1975, Mr.
Ill became President of Triumph Industries and, in 1983, became President of
Metalsource. In 1988, Mr. Ill became President of Alco Diversified Services, a
division of Alco. He was named Vice President of Alco in 1989. Mr. Ill is a
member of the Advisory Board of Outward Bound, USA and the Board of Directors,
Chairman's Council and Policy and Planning Committees of the Steel Service
Center Institute.
John R. Bartholdson has been Senior Vice President, Chief Financial Officer
and Treasurer and a director of the Company since 1993. Mr. Bartholdson joined
Alco Diversified Services in the fall of 1992. Prior to joining Alco Diversified
Services, Mr. Bartholdson was employed for 14 years by Lukens, Inc., the last
five years in the position of Senior Vice President and Chief Financial Officer.
Mr. Bartholdson serves on the Board of Directors of PBHG Funds, Inc.
Paul T. Stimmler has been Vice President and Secretary of the Company since
1993. From 1989 to 1993, Mr. Stimmler was Group Vice President of Alco
Diversified Services.
Kevin E. Kindig has been Controller of the Company since 1993. From 1985 to
1993, Mr. Kindig was employed by Lukens, Inc. in various positions, most
recently as Manufacturing Accounting Manager. Prior thereto, Mr. Kindig was in
public accounting.
Richard C. Gozon has been a director of the Company since 1993. Mr. Gozon
has been Executive Vice President of Weyerhaeuser Company since 1994. From 1960
to 1993, Mr. Gozon held various executive positions at Alco, was elected to the
Board of Directors in 1984 and served as President and Chief Operating Officer
from 1988 to 1993. Mr. Gozon serves on the Board of Directors of U.G.I.
Corporation and AmeriSource Health Corporation.
Claude F. Kronk has been a director of the Company since 1993. Mr. Kronk is
currently Vice Chairman and Chief Executive Officer and a director of J&L
Specialty Steel, Inc. Mr. Kronk held various positions with Jones & Laughlin
Steel Corporation from 1957 to 1986. Mr. Kronk serves on the Board of Directors
of Cold Metal Products, Co.
Joseph M. Silvestri has been a director of the Company since his appointment
by CVC in 1994. Mr. Silvestri has been employed by CVC since 1990 and has been a
Vice President since 1995. Mr. Silvestri serves on the Board of Directors of
International Media Group, Polyfibron Technologies, Inc., Frozen Specialties,
Inc., Glenoit Mills and Euramax International, Inc.
39
<PAGE>
Michael A. Delaney has been a director of the Company since his appointment
by CVC in January 1996. Mr. Delaney has been a Vice President of CVC since 1989.
From 1986 through 1989 Mr. Delaney was Vice President of Citicorp Mergers and
Acquisitions. Mr. Delaney serves on the Board of Directors of Sybron Chemicals,
Inc., GVC Holdings, JAC Holdings, Delco Remy International, Enterprise Media,
Inc., Southern Coil Processing, Inc., Aetna Industries, CORT Business Services,
Inc., Palomar Technologies, Inc., Farm Fresh, Inc. and AmeriSource Health
Corporation.
After the closing of this offering, all directors will be elected by the
stockholders pursuant to cumulative voting. All directors hold office until the
next annual meeting of stockholders or until their successors are duly elected
and qualified. Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve at the discretion of the Board of
Directors.
Pursuant to the terms of a Stockholders' Agreement dated July 22, 1993, the
Board of Directors is comprised of the Chief Executive Officer of the Company,
three directors of the Company designated by CVC and three directors to be
elected by CVC, as proxy for the majority of stockholders of the Company, one of
whom must be John Bartholdson, until his resignation or the termination of his
employment by the Company. There is currently a vacancy on the Board of
Directors to be filled at CVC's designation. This right of designation and proxy
will terminate simultaneously with the closing of this offering.
The Board of Directors has a Compensation and an Audit Committee. The
Compensation Committee periodically reviews and evaluates the compensation of
the Company's officers, administers the Company's stock option plans and
establishes guidelines for compensation of other personnel. The Compensation
Committee is currently comprised of Messrs. Gozon, Kronk and Silvestri. The
Audit Committee communicates and receives information directly from the
Company's independent accountants. The Audit Committee is currently comprised of
Messrs. Gozon, Kronk and Delaney.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS. Directors who are also employees of the Company,
or one of its operating divisions or subsidiaries or CVC do not receive
additional compensation for serving as directors. Each director who is not an
employee of the Company, or one of its operating divisions or subsidiaries or
CVC receives an annual fee of $7,500 and a fee of $1,000 for attendance at each
Board of Directors' meeting and $500 for each committee meeting (unless held on
the same day as a Board of Directors' meeting). Directors are also reimbursed
for out-of-pocket expenses incurred in attending meetings of the Board of
Directors or committees thereof. The Company is contemplating adopting a stock
option plan for its non-employee directors.
40
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS. The following table summarizes the
compensation paid to the President and Chief Executive Officer and to each of
the three most highly compensated executive officers of the Company and its
subsidiaries, other than the President and Chief Executive Officer, for the
fiscal years ended March 31, 1996, 1995 and 1994. The Company has four officers
that perform managerial functions for the Company and are elected and qualify as
its executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION(3)
- ------------------------------------- ------------ ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Richard C. Ill 1996 $ 280,000 $ 308,000 $ 3,080 $ 5,472
President and Chief Executive 1995 255,000 89,250 3,080 6,653
Officer 1994(4) 235,600 159,375 3,080 5,547
John R. Bartholdson 1996 $ 240,000 $ 264,000 $ 3,080 $ 4,320
Senior Vice President, Chief 1995 205,000 71,750 3,080 4,792
Financial Officer and Treasurer 1994(4) 150,000 128,125 -- 2,071
Paul T. Stimmler 1996 $ 98,500 $ 50,000 $ 1,970 $ 4,950
Vice President and Secretary 1995 92,900 23,000 1,858 3,150
1994(4) 84,500 40,000 1,690 2,826
Kevin E. Kindig 1996 $ 73,000 $ 30,000 $ 1,460 $ 462
Controller 1995 65,000 10,000 1,300 304
1994(4) 60,000 10,800 1,200 275
</TABLE>
- ------------------
(1) The amounts shown consist of cash bonuses earned in the fiscal year
identified, of which only a portion was paid in that year.
(2) "Other Annual Compensation" reflects amounts contributed by the Company to
its 401(k) Plan.
(3) The amounts shown consist of group term life insurance premiums.
(4) Compensation for fiscal year 1994 is presented on an annualized basis for
the 12 months ended March 31, 1994.
STOCK OPTION PLANS
The Company intends to adopt a 1996 Stock Option Plan (the "1996 Plan")
which will become effective upon closing of this offering. The 1996 Plan
provides for grants of stock options to officers and key employees of the
Company, or any of its operating divisions or subsidiaries, including a director
who is also a key employee. Non-employee directors of the Company are not
entitled to participate in the 1996 Plan. By encouraging stock ownership, the
Company seeks to attract, retain and motivate participants and to encourage such
participants to devote their best efforts to the business and financial success
of the Company.
Subject to adjustments in certain circumstances described below, the 1996
Plan authorizes up to 500,000 shares of Common Stock, subject to increase of
such number of shares equal to five (5%) percent of any and all Common Stock
sold pursuant to the over-allotment option granted to the Underwriters, for
issuance pursuant to the terms thereof. If and to the extent that options
granted under the 1996 Plan expire or are terminated for any reason without
being exercised, or the shares subject to the option are forfeited, the shares
of Common Stock subject to such option again would be available for grant under
the 1996 Plan.
The 1996 Plan is administered and interpreted by the Compensation Committee.
The Compensation Committee has the sole authority to administer and determine
the 1996 Plan including the determination of (i) persons to whom options may be
made under the 1996 Plan, (ii) the type, size and other terms and conditions of
each option, (iii) the time when the options will be granted and the duration of
any applicable exercise or restrictions, including the criteria for vesting and
acceleration, and (iv) other matters as set forth in the 1996 Plan.
41
<PAGE>
Options granted under the 1996 Plan may consist of (i) options intended to
qualify as incentive stock options ("ISOs") within the meaning of Section 422 of
the Code and (ii) "non-qualified stock options" that are not intended to so
qualify ("NQSOs"). Options may be granted to any officer or key employee of the
Company or its operating divisions and subsidiaries.
The option price of any ISO granted under the 1996 Plan may not be less than
the fair market value of the underlying share of the Common Stock on the date of
grant. The option price of an NQSO may be greater than, equal to or less than
the fair market value of the underlying shares of Common Stock on the date of
grant. The Compensation Committee will determine the term of each option;
provided, however, that the exercise period may not exceed ten years from the
date of grant. The participants may pay the option price under the 1996 Plan (i)
in cash, (ii) with the approval of the Compensation Committee, by delivering
shares of Common Stock owned by the participant for six months and having a fair
market value on the date of exercise equal to the option price or (iii) by a
combination of the foregoing.
The Board of Directors may amend or terminate the 1996 Plan at any time;
provided however, that the Board of Directors may not amend the plan, without
stockholder approval, to (i) increase (except for increases due to adjustments
upon changes in capitalization of the Company) the aggregate number of shares of
Common Stock for which options may be granted, (ii) change the effective date,
termination or amendment provisions of the 1996 Plan or (iii) make any other
change for which stockholder approval is required under the rules and
regulations promulgated under Section 16 of the Securities Exchange Act of 1934
or the Code. The 1996 Plan will terminate upon the earlier of the tenth
anniversary of its effective date or the date it is terminated by the Board of
Directors.
EMPLOYMENT AGREEMENTS
The Company intends to enter into employment agreements with Mr. Ill, the
Company's President and Chief Executive Officer, and Mr. Bartholdson, the
Company's Senior Vice President and Chief Financial Officer.
42
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the
Company and Richard C. Ill, the Company's President and Chief Executive Officer,
Mr. Ill purchased 3,700 shares of Class A Common Stock for $10.00 per share and
2,080 shares of Preferred Stock for $34.57 per share. In addition, Mr. Ill
purchased seven shares of Class C Common Stock for $10.00 per share. Each share
of Class C Common Stock entitled Mr. Ill to 4,000 votes. Assuming consummation
of the Stock Split and the Conversions, Mr. Ill will hold 263,211 shares of
Common Stock.
Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the
Company and John R. Bartholdson, the Company's Senior Vice President and Chief
Financial Officer, Mr. Bartholdson purchased 3,500 shares of Class A Common
Stock for $10.00 per share and 1,970 shares of Preferred Stock for $34.57 per
share. Assuming consummation of the Stock Split and the Conversions, Mr.
Bartholdson will hold 248,579 shares of Common Stock.
Pursuant to an Executive Stock Agreement dated July 22, 1993, between the
Company and Paul T. Stimmler, the Company's Vice President and Secretary, Mr.
Stimmler purchased 900 shares of Class A Common Stock for $10.00 per share and
14% JSDs in a principal amount equal to $50,625, which mature on December 31,
2003 and bear interest at the rate of 14% per annum (the "14% JSD Terms").
Assuming consummation of the Stock Split and the Conversions, Mr. Stimmler will
hold 63,809 shares of Common Stock.
Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the
Company and Kevin E. Kindig, the Company's Controller, Mr. Kindig purchased 400
shares of Class A Common Stock at $10.00 per share and 14% JSDs in a principal
amount of $22,500 on the 14% JSD Terms. Assuming consummation of the Stock Split
and the Conversions, Mr. Kindig will hold 28,360 shares of Common Stock.
Pursuant to a Purchase Agreement, dated July 22, 1993, between the Company
and CVC, the Company's majority stockholder, CVC purchased 70,000 shares of
Class B Common Stock for $10.00 per share and 26,525 shares of Preferred Stock
for $34.57 per share. Each share of Class B Common Stock entitled CVC to 6/10ths
of a vote. On September 17, 1993, CVC transferred approximately 303 shares and
277 shares, respectively, of its Class B Common Stock to Joseph M. Silvestri and
Michael A. Delaney, both directors of the Company. On December 30, 1993 and
February 17, 1995, respectively, CVC transferred approximately 750 shares of its
Class B Common Stock to each of Richard C. Gozon and Claude F. Kronk, both
directors of the Company. On September 17, 1993, CVC transferred approximately
115 and 105 shares, respectively, of Preferred Stock to each of Mr. Silvestri
and Mr. Delaney. On December 30, 1993 and February 17, 1995, respectively, CVC
transferred approximately 284 shares of Preferred Stock to each of Mr. Gozon and
Mr. Kronk. In addition, pursuant to the Purchase Agreement, CVC purchased 14%
JSDs in the principal amount of approximately $5.3 million on the 14% JSD Terms.
On September 17, 1993, CVC transferred 14% JSDs to Mr. Silvestri and Mr. Delaney
in the principal amounts of approximately $23,000 and $21,100, respectively. On
December 30, 1993 and February 17, 1995, respectively, CVC transferred 14% JSDs
to Mr. Gozon and Mr. Kronk, each in the principal amount of approximately
$57,000. Assuming the Stock Split and the CVC Exchange, CVC will hold 920,782
shares of Common Stock and 3,827,971 shares of Class D Common Stock. Assuming
consummation of the Stock Split and the Conversions, Messrs. Silvestri and
Delaney will hold 23,309 and 21,367 shares of Common Stock, respectively.
Assuming consummation of the Stock Split and the Conversions, Messrs. Gozon and
Kronk will hold 57,220 and 55,909, respectively.
On July 22, 1993, in connection with the issuance of certain financing the
Company issued the Warrant to World Equity Partners, L.P. ("WEP"), an affiliate
of CVC. The Warrant may be exercised through July 31, 2003 to purchase 650,000
shares of Common Stock for an aggregate purchase price of $100.00.
Certain of the Company's directors and executive officers and certain
employees of CVC have agreed to purchase from the Company, and the Company has
agreed to sell to such individuals, an aggregate maximum of 125,000 shares of
Common Stock at the Price to Public less Underwriting Discounts and Commissions.
See "Direct Sale."
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company, as of August 20, 1996, by: (i)
each person known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock; (ii) each director and executive officer of
the Company; and (iii) all directors and executive officers of the Company as a
group. The address of all officers and directors listed is the Company's
principal executive offices.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS
OFFERING(1) SHARES BENEFICIALLY OWNED
---------------------- AFTER THIS OFFERING
PERCENT OF ------------------------------
TOTAL PERCENT OF
SHARES TOTAL SHARES
NAME NUMBER(2) OUTSTANDING(3) NUMBER(2) OUTSTANDING(3)
- --------------------------------------------- --------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Richard C. Ill............................... 263,211 3.9% 273,211(4) 2.9%
John R. Bartholdson.......................... 248,579 3.6 258,579(4) 2.8
Paul T. Stimmler............................. 63,809 * 63,809 *
Kevin E. Kindig.............................. 28,360 * 30,860(5) *
Richard C. Gozon............................. 57,220 * 67,220(4) *
Claude F. Kronk.............................. 55,909 * 65,909(4) *
Joseph M. Silvestri.......................... 23,309(6) * 24,309(7) *
Michael A. Delaney........................... 21,367(8) * 21,367 *
Citicorp Venture Capital, Ltd................ 5,398,753(9) 72.1 5,398,753(10) 54.1
399 Park Avenue
New York, NY 10043
All executive officers and directors as a
group (8 persons)........................... 761,764 11.1% 805,264 8.6%
</TABLE>
- ------------------
* Less than one percent.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of options and warrants. Each beneficial owner's
percentage ownership is determined by assuming that options and warrants
that are held by such person (but not those held by any other person) and
that are exercisable within 60 days from the date of this Prospectus have
been exercised. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(2) For each $14.48 of aggregate accrued interest on the 14% JSDs and
accumulated dividends on the Preferred Stock after August 20, 1996,
immediately prior to the closing of this offering, each holder will be
entitled to receive upon the 14% JSD Conversion and the Preferred Stock
Conversion one additional share of Common Stock or, at CVC's election,
Class D Common Stock, at an assumed initial public offering price of $16.00
per share (less underwriting discounts and commissions and estimated
offering expenses payable by the Company).
(3) Based upon outstanding shares of Common Stock and Class D Common Stock.
(4) Increase represents 10,000 shares to be purchased pursuant to the Direct
Sale.
(5) Increase represents 2,500 to be purchased pursuant to the Direct Sale.
(6) Includes 4,520 shares of Common Stock and 18,789 shares of Class D Common
Stock. Mr. Silvestri disclaims beneficial ownership relating to shares of
Common Stock and Class D Common Stock held by CVC and CVC Affiliates.
(7) Increase represents 1,000 shares to be purchased pursuant to the Direct
Sale.
(8) Includes 4,143 shares of Common Stock and 17,224 shares of Class D Common
Stock. Mr. Delaney disclaims beneficial ownership relating to shares of
Common Stock and Class D Common Stock held by CVC and CVC Affiliates.
(9) Includes 920,782 shares of Common Stock and 3,827,971 shares of Class D
Common Stock. Includes 650,000 shares of Common Stock which may be acquired
upon exercise by WEP, an affiliate of CVC, of the Warrant. Excludes an
aggregate of 257,400 shares of Common Stock held by CVC Affiliates,
including Messrs. Silvestri and Delaney, as to which CVC disclaims
beneficial ownership.
(10) Does not include approximately 80,000 shares of Common Stock to be
purchased by certain employees of CVC pursuant to the Direct Sale, as to
which CVC disclaims beneficial ownership.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 15,000,000 shares of
Common Stock, par value $.001 per share, 6,000,000 shares of Class D Common
Stock, par value $.001 per share, and 250,000 shares of Preferred Stock, par
value $100.00 per share. Upon completion of this offering, the Company will have
outstanding 5,078,907 shares of Common Stock (5,435,157 if the Underwriters'
over-allotment option is exercised in full), 4,255,293 shares of Class D Common
Stock and no shares of Preferred Stock.
COMMON STOCK
The holders of Common Stock are generally entitled to one vote for each
share held on all matters voted upon by stockholders. Subject to the rights of
any then outstanding shares of Preferred Stock, the holders of the Common Stock
are entitled to such dividends as may be declared at the discretion of the Board
of Directors out of funds legally available therefor. Holders of Common Stock
are entitled to share ratably in the net assets of the Company upon liquidation
after payment or provision for all liabilities and any preferential liquidation
rights of any Preferred Stock then outstanding. The holders of Common Stock have
no preemptive rights to purchase securities of the Company. Shares of Common
Stock are not subject to any redemption provisions and are not convertible into
any other securities of the Company. All outstanding shares of Common Stock are,
and the shares of Common Stock to be issued pursuant to this offering will be
upon payment therefor, fully paid and non-assessable.
The directors of the Company are elected by the holders of Common Stock
pursuant to cumulative voting, which gives a stockholder the right to cast as
many votes in the aggregate as he is entitled to vote under the Certificate of
Incorporation, multiplied by the number of directors to be elected. A
stockholder may cast all his votes for one director candidate or distribute such
votes among two or more director candidates, as he sees fit. Therefore,
cumulative voting may make it more difficult to change the composition of the
Board of Directors and thereby may discourage or make more difficult an attempt
by a person or group to obtain control of the Company. Any director, or the
entire Board of Directors, may be removed by the stockholders at any time, with
or without cause, by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote for the election of
directors, except that, if less than the entire board is to be removed, no
director may be removed without cause if the votes cast against his removal
would be sufficient to elect him then cumulatively voted at an election of the
entire board of directors.
Application has been made to list the Common Stock for trading on the NYSE.
CLASS D COMMON STOCK
The rights of holders of Class D Common Stock are identical and entitle the
holders thereof to the same rights, privileges, benefits and notices as the
holders of Common Stock, except that the holders of such shares are not entitled
to vote in the election of directors of the Company. On all other matters voted
upon by the stockholders, the holders of Common Stock and the Class D Common
Stock vote together as a class, except as provided by law. Under Section
242(b)(2) of the Delaware General Corporation Law, the holders of the Class D
Common Stock shall be entitled to vote as a class upon any proposed amendment to
the Company's Certificate of Incorporation if such amendment would increase or
decrease the number of shares or the par value of the shares of such class, or
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. The Class D Common Stock is subject to
substantial restrictions on transfer. A share of Class D Common Stock will
automatically be converted into a share of Common Stock at any time at the sole
option of the holder. Once a share of Class D Common Stock has been converted
into Common Stock, it will no longer be subject to any restrictions on transfer.
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Board of Directors in
one or more series in connection with one or more acquisitions of the stock or
assets of another corporation or in connection with a merger of the Company with
or into another corporation. Subject to the provisions of the
45
<PAGE>
Company's Certificate of Incorporation, as amended, and limitations prescribed
by law, the Board of Directors is expressly authorized to adopt resolutions to
issue the shares, to fix the number of shares and to change the number of shares
constituting any series of Preferred Stock and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any series of Preferred Stock, in each case without any further action or vote
by the stockholders. The Company has no current plans to issue any series of
Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock or may otherwise adversely affect the market price of
the Common Stock.
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to the Company's Certificate of Incorporation, as amended, and as
permitted by Delaware law, directors of the Company are not liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty,
except for liability in connection with a breach of duty of loyalty, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for dividend payments or stock repurchases illegal under
Delaware law or any transaction in which a director has derived an improper
personal benefit.
WARRANT
On July 22, 1993, the Company issued the Warrant to purchase an aggregate of
650,000 shares of Common Stock to WEP for an aggregate exercise price of
$100.00. The Warrant is currently exercisable for cash. The exercise price and
number of shares of Common Stock issuable upon exercise of the Warrant are
subject to adjustment under certain circumstances, including stock splits or the
issuance of stock dividends on the Common Stock, or issuance of shares of Common
Stock or securities convertible into Common Stock for a purchase price per share
less than the per share exercise price of the Warrant.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Chase Mellon
Shareholder Services.
DIRECT SALE
Pursuant to the terms of subscription agreements with the Company, certain
of the Company's directors and executive officers and certain employees of CVC
have agreed to purchase from the Company, and the Company has agreed to sell to
such individuals, an aggregate maximum of 125,000 shares of Common Stock at the
Price to Public less Underwriting Discounts and Commissions. The purchasers in
the Direct Sale will represent to the Company that they are acquiring such
shares for their own account and not with a view to distribution. The Company's
obligations to sell such shares, and such individuals' obligations to purchase
such shares, are subject to the purchase by the Underwriters of the Common Stock
to be purchased by them as set forth under "Underwriting." CVC is the Company's
largest stockholder. See "Principal Stockholders."
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
5,078,907 shares of Common Stock (5,435,157 shares if the Underwriters'
over-allotment option is exercised in full). All of the shares sold in this
offering will be freely tradeable without restriction unless acquired by
affiliates of the Company. None of the remaining 2,578,907 outstanding shares of
Common Stock have been registered under the Securities Act, which means that
they are "Restricted Securities" within the meaning of Rule 144 under the
Securities Act and may be resold publicly only upon registration under the
Securities Act or in compliance with an exemption from the registration
requirements of the Securities Act, including the exemption provided by Rule
144.
All of the Restricted Securities will become eligible for sale pursuant to
Rule 144 beginning 90 days after the date of this Prospectus if the conditions
of Rule 144 are met. In general, under Rule 144 as currently in effect, if two
years have elapsed since the later of the date of the acquisition of the
Restricted Securities from either the Company or an affiliate of the Company,
the acquiror or subsequent holder (or persons whose shares are aggregated)
thereof may sell, within any three month period commencing 90 days after the
date of this Prospectus, a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock (50,789 shares upon
completion of this offering), or (ii) the average weekly trading volume of the
Common Stock on the NYSE during the four calendar weeks preceding the date on
which notice of the proposed sale is filed with the Securities and Exchange
Commission (the "Commission"). Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of current
public information about the Company. If three years have elapsed since the
later of the date of the acquisition the Restricted Securities from the Company
or any affiliate of the Company, a person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time for 90 days preceding a sale would be entitled to sell such shares under
Rule 144(k) without regard to the volume limitations, manner of sale provisions
or notice requirements.
The Company and its executive officers, directors and certain stockholders
who beneficially own 1,608,215 shares in the aggregate have agreed not to offer,
sell, contract to sell, or otherwise dispose of, any shares of Common Stock or
any securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, for a period of 180 days after the date of this Prospectus without
the prior written consent of Alex. Brown & Sons Incorporated.
In addition, the purchase options granted to certain members of management
of certain of the Company's subsidiaries to acquire 43,958 shares of Common
Stock and the Warrant to acquire 650,000 shares of Common Stock will be subject
to the 180-day lock-up. After the expiration of the 180-day lock-up, all shares
issued pursuant to exercise of the purchase options will be eligible for sale
under, and subject to, the limitations of Rule 144. Shares issued upon exercise
of the Warrant will be Restricted Securities within the meaning of Rule 144. See
"Principal Stockholders."
Additionally, the CVC Affiliates, all of whom are subject to the 180-day
lock-up agreements, have the right to demand two registrations of their shares
of Common Stock under the Securities Act on Form S-1 at the Company's expense
and an unlimited number of registrations at the expense of the CVC Affiliates.
The holder of the Warrant has the right to demand one registration at the
Company's expense. Both the CVC Affiliates and the holder of the Warrant have
the right to demand an unlimited number of registrations on Form S-3 at the
Company's expense. In addition, the CVC Affiliates, the holder of the Warrant
and certain members of management of the Company have the right, subject to
certain limitations, to have their shares of Common Stock included in future
registered public offerings of securities by the Company at its expense.
Prior to this offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price for
the Common Stock prevailing from time to time. Nevertheless, sales, or the
availability for sale of, substantial amounts of the Common Stock in the public
market could adversely affect prevailing market prices and the ability of the
Company to raise equity capital in the future.
No earlier than 120 days after the date of this Prospectus, the Company
intends to file a registration statement under the Securities Act to register
shares of Common Stock under the 1996 Plan, thus permitting the resale of such
shares by non-affiliates in the public market without restriction under the
Securities Act. Such registration statement would become effective on filing.
47
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters named below, through their Representatives, Alex. Brown & Sons
Incorporated and Dillon, Read & Co. Inc., have severally agreed to purchase from
the Company the following respective numbers of shares of Common Stock at an
assumed initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Alex. Brown & Sons Incorporated......................................................................
Dillon, Read & Co. Inc...............................................................................
-----------
Total................................................................................................ 2,375,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase the total number of shares of Common Stock offered hereby if any of
such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the Representatives.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 356,250
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 2,375,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,375,000 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company and its executive officers, directors and certain stockholders,
holding an aggregate of 1,608,215 shares of Common Stock have agreed not to
offer, sell or otherwise dispose of any Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of Alex.
Brown & Sons Incorporated.
48
<PAGE>
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock was
determined by negotiation between the Company and the Representatives. Among the
factors to be considered in such negotiations are prevailing market conditions,
the price-earning ratios and stages of development of other companies which the
Company and the Representatives believed to be comparable to the Company, the
results of operations of the Company in recent periods, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant. Application has been made to list
the Common Stock for trading on the NYSE.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Philadelphia, Pennsylvania. Certain legal matters related to this
offering will be passed upon for the Underwriters by Wilmer, Cutler & Pickering,
Baltimore, Maryland.
EXPERTS
The consolidated financial statements of the Company at March 31, 1996 and
1995 and for each of the years in the periods ended March 31, 1996 and 1995 and
for the ten months ended March 31, 1994, and the financial statements of
Advanced Materials Technologies, Inc. at March 31, 1996 and for the year then
ended, appearing in the Registration Statement of which this Prospectus forms a
part, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon appearing elsewhere herein and in the Registration
Statement. Such financial statements are included herein in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of North Wales Controls and Quadrants Group, a
division of Teleflex Incorporated, for each of the three years in the period
ended December 31, 1995 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-1 with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the Company and the
shares of Common Stock offered hereby, reference is made to such Registration
Statement, including the exhibits, financial statements and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and its regional offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained from the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and with quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
THE TRIUMPH GROUP HOLDINGS, INC.(1): PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<S> <C>
Introduction to Unaudited Condensed Consolidated Pro Forma Financial Statements....... F-2
Unaudited Condensed Consolidated Pro Forma Statement of Income for the year ended
March 31, 1996....................................................................... F-3
Unaudited Condensed Consolidated Pro Forma Statement of Income for the three months
ended June 30, 1996.................................................................. F-4
Unaudited Condensed Consolidated Pro Forma Statement of Income for the three months
ended June 30, 1995.................................................................. F-5
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of June 30, 1996.......... F-6
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.............. F-7
THE TRIUMPH GROUP HOLDINGS, INC.(1): HISTORICAL FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors..................................... F-12
Consolidated Balance Sheets as of March 31, 1995 and 1996 and June 30, 1996
(Unaudited).......................................................................... F-13
Consolidated Statements of Income for the ten months ended March 31, 1994, the fiscal
years ended March 31, 1995 and 1996, and for the three months ended June 30, 1995 and
1996 (Unaudited)..................................................................... F-14
Consolidated Statements of Common Stockholders' Equity for the ten months ended March
31, 1994, the fiscal years ended March 31, 1995 and 1996, and for the three months
ended June 30, 1995 and 1996 (Unaudited)............................................. F-15
Consolidated Statements of Cash Flows for the ten months ended March 31, 1994, the
fiscal years ended March 31, 1995 and 1996 and for the three months ended June 30,
1995 and 1996 (Unaudited)............................................................ F-16
Notes to Consolidated Financial Statements............................................ F-17
NORTH WALES CONTROLS AND QUADRANTS GROUP(2): HISTORICAL FINANCIAL STATEMENTS
Report of Price Waterhouse LLP, Independent Accountants............................... F-29
Statement of Income for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995.................................................................... F-30
Statement of Cash Flows for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995.................................................................... F-31
Notes to Financial Statements......................................................... F-32
ADVANCED MATERIALS TECHNOLOGIES, INC.: HISTORICAL FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors..................................... F-37
Consolidated Balance Sheets as of March 31, 1996 and June 30, 1996 (Unaudited)........ F-38
Consolidated Statements of Income for the year ended March 31, 1996 and for the three
months ended June 30, 1996 (Unaudited)............................................... F-39
Consolidated Statements of Shareholders' Equity for the year ended March 31, 1996 and
for the three months ended June 30, 1996 (Unaudited)................................. F-40
Consolidated Statements of Cash Flows for the year ended March 31, 1996 and for the
three months ended June 30, 1996 (Unaudited)......................................... F-41
Notes to Consolidated Financial Statements............................................ F-42
</TABLE>
- --------------
(1) On August 21, 1996, The Triumph Group Holdings, Inc. amended its
certificate of incorporation to change its corporate name to Triumph Group,
Inc.
(2) Triumph Controls, Inc., a subsidiary of Triumph Group Holdings, Inc., was
formed to acquire substantially all of the assets and certain liabilities of
North Wales Controls and Quadrants Group, a division of Teleflex
Incorporated, on January 1, 1996.
F-1
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma statements of income for the fiscal year ended March
31, 1996 and for the three months ended June 30, 1996 and 1995 set forth herein
give effect to the acquisitions of Air Lab, Inc., Triumph Controls, Inc. and
Advanced Materials Technologies, Inc. ("AMTI") (the "Acquisitions"), the
refinancing of a portion of the Company's long-term debt (the "Refinancing"),
the conversion of the 14% Junior Subordinated Promissory Notes, the Preferred
Stock and the minority interest in Triumph Controls, Inc. to Common Stock ("the
Conversions") and the use of the assumed net proceeds of $36,200 from the
offering and the Direct Sale as if such transactions had occurred as of the
beginning of each of the periods presented. The Unaudited Condensed Consolidated
Pro Forma Financial Statements assume the term "offering" includes both the
offering of Common Stock pursuant to this Prospectus and the Direct Sale. See
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements for
further explanation of these transactions.
The unaudited condensed consolidated pro forma balance sheet as of June 30,
1996 set forth gives effect to the acquisition of AMTI, the Refinancing, the
Conversions and the offering as if such transactions had occurred on June 30,
1996.
The unaudited condensed consolidated pro forma financial statements are not
necessarily indicative of what the Company's results of operations and balance
sheet would have been had the Acquisitions, the Refinancing, the Conversions and
the offering been consummated at the indicated dates, nor are they necessarily
indicative of the Company's results of operations and balance sheet for any
future period. The Unaudited Condensed Consolidated Pro Forma Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and Related Notes thereto and "Use of Proceeds" included elsewhere in
this Prospectus.
F-2
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------------
OTHER EQUITY PRO FORMA
HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED
----------- ---------------- -------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $ 186,774 $ 43,394 $ -- $ -- $ 230,168 $ -- $ 230,168
Cost of products
sold.................. 139,740 24,293 -- -- 164,033 -- 164,033
Selling, general and
administrative
expenses.............. 27,288 7,145(2) -- (65)(7) 34,368 -- 34,368
Depreciation and
amortization.......... 3,535 2,751(3) -- 36(8) 6,322 -- 6,322
----------- -------- ------- ------- ----------- ------------ -----------
Operating income....... 16,211 9,205 -- 29 25,445 -- 25,445
Interest expense....... 7,318 4,000(4) (2,048)(6) (1,146)(9) 8,124 (2,804)(10) 5,320
----------- -------- ------- ------- ----------- ------------ -----------
Income from continuing
operations before
income tax............ 8,893 5,205 2,048 1,175 17,321 2,804 20,125
Income tax expense..... 3,699 2,082(5) 819(5) 444(5) 7,044 1,122(5) 8,166
----------- -------- ------- ------- ----------- ------------ -----------
Income from continuing
operations............ $ 5,194 $ 3,123 $ 1,229 $ 731 $ 10,277 $ 1,682 $ 11,959
----------- -------- ------- ------- ----------- ------------ -----------
----------- -------- ------- ------- ----------- ------------ -----------
Income from continuing
operations per
share(11)............. $ 0.78
-----------
-----------
Weighted average common
shares outstanding (in
thousands)(11)........ 7,516
-----------
-----------
Pro forma income from
continuing operations
per share, as
adjusted(12).......... $ 1.37 $ 1.19
----------- -----------
----------- -----------
Pro forma weighted
average common shares
outstanding, as
adjusted (in
thousands)(12)........ 7,516 10,016
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited condensed consolidated pro forma financial
statements.
F-3
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------
OTHER EQUITY PRO FORMA
HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED
----------- ----------------- --------------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 55,184 $ 6,215 $ -- $ -- $ 61,399 $ -- $ 61,399
Cost of products sold.... 39,146 3,604 -- -- 42,750 -- 42,750
Selling, general and
administrative
expenses................ 9,433 790 -- (28)(7) 10,195 -- 10,195
Depreciation and
amortization............ 1,258 394(13) -- 9(8) 1,661 -- 1,661
----------- ------- ------ ------ ----------- ------ -----------
Operating income......... 5,347 1,427 -- 19 6,793 -- 6,793
Interest expense......... 2,286 348(14) (513)(15) (313)(9) 1,808 (701)(10) 1,107
----------- ------- ------ ------ ----------- ------ -----------
Income from continuing
operations before income
tax..................... 3,061 1,079 513 332 4,985 701 5,686
Income tax expense....... 1,252 432(5) 205(5) 122(5) 2,011 280(5) 2,291
----------- ------- ------ ------ ----------- ------ -----------
Income from continuing
operations.............. 1,809 647 308 210 2,974 421 3,395
----------- ------- ------ ------ ----------- ------ -----------
----------- ------- ------ ------ ----------- ------ -----------
Income from continuing
operations per
share(11)............... $ 0.26
-----------
-----------
Weighted average common
shares outstanding (in
thousands)(11).......... 7,499
-----------
-----------
Pro forma income from
continuing operations
per share, as
adjusted(12)............ $ 0.40 $ 0.34
----------- -----------
----------- -----------
Pro forma weighted
average common shares
outstanding, as adjusted
(in thousands)(12)...... 7,499 9,999
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited condensed consolidated pro forma financial
statements.
F-4
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------
OTHER EQUITY PRO FORMA
HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED
----------- --------------- --------------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 42,374 $ 12,225 $ -- $ -- $ 54,599 $ -- $ 54,599
Cost of products sold.... 32,078 6,709 -- -- 38,787 -- 38,787
Selling, general and
administrative
expenses................ 6,274 2,469 -- (23)(7) 8,720 -- 8,720
Depreciation and
amortization............ 721 806(16) -- 9(8) 1,536 -- 1,536
----------- --------------- ------ ------ ----------- ------ -----------
Operating income......... 3,301 2,241 -- 14 5,556 -- 5,556
Interest expense......... 1,600 1,189(17) (868)(18) (271)(9) 1,650 (701)(10) 949
----------- --------------- ------ ------ ----------- ------ -----------
Income from continuing
operations before income
tax..................... 1,701 1,052 868 285 3,906 701 4,607
Income tax expense....... 687 421(5) 347(5) 105(5) 1,560 280(5) 1,840
----------- --------------- ------ ------ ----------- ------ -----------
Income from continuing
operations.............. 1,014 631 521 180 2,346 421 2,767
----------- --------------- ------ ------ ----------- ------ -----------
----------- --------------- ------ ------ ----------- ------ -----------
Income from continuing
operations per
share(11)............... $ 0.16
-----------
-----------
Weighted average common
shares outstanding (in
thousands)(11).......... 7,424
-----------
-----------
Pro forma income from
continuing operations
per share, as
adjusted(12)............ $ 0.32 $ 0.28
----------- -----------
----------- -----------
Pro forma weighted
average common shares
outstanding, as adjusted
(in thousands)(12)...... 7,424 9,924
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited condensed consolidated pro forma financial
statements.
F-5
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
OTHER
EQUITY
HISTORICAL ACQUISITIONS(19) REFINANCING(20) TRANSACTIONS(21) PRO FORMA OFFERING(22)
----------- ------------------ ----------------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash...................... $ 430 $ -- $ -- $ -- $ 430 $ --
Accounts Receivable....... 32,086 4,547 -- -- 36,633 --
Inventories............... 48,295 1,451 -- -- 49,746 --
Prepaid expenses and
other.................... 2,490 15 -- -- 2,505 --
Deferred income taxes..... 3,345 -- -- (1,000) 2,345 --
----------- -------- ----------------- -------- ------------ ---------------
Total current assets........ 86,646 6,013 -- (1,000) 91,659 --
Property and equipment,
net........................ 36,441 8,000 -- -- 44,441 --
Excess of cost over net
assets acquired............ 10,234 2,706 -- 890 13,830 --
Intangible assets........... 6,516 4,554 -- -- 11,070 --
Other assets................ 2,460 23 (429) -- 2,054 --
----------- -------- ----------------- -------- ------------ ---------------
Total assets................ $ 142,297 $ 21,296 $ (429) $ (110) $ 163,054 $ --
----------- -------- ----------------- -------- ------------ ---------------
----------- -------- ----------------- -------- ------------ ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
OTHER
EQUITY
HISTORICAL ACQUISITIONS REFINANCING TRANSACTIONS PRO FORMA OFFERING
----------- ------------------ ----------------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable.......... $ 14,213 $ 478 $ -- $ -- $ 14,691 $ --
Accrued expenses.......... 14,161 272 (975) -- 13,458 --
Income taxes payable...... 3,458 1,226 (996) (1,000) 2,688 --
Deferred income taxes..... -- 813 -- -- 813 --
Current portion of
long-term debt........... 5,206 316 (47) -- 5,475 --
----------- -------- ----------------- -------- ------------ ---------------
Total current liabilities... 37,038 3,105 (2,018) (1,000) 37,125 --
Long-term debt, less current
portion.................... 76,261 12,451 3,082 (9,055) 82,739 (36,200)
Other liabilities........... 2,426 3,888 -- (160) 6,154 --
Deferred income taxes....... 7,051 1,688 -- -- 8,739 --
Redeemable preferred
stock...................... 2,854 -- -- (2,854) -- --
Common stock................ 6 -- -- 1 7 2
Capital in excess of par
value...................... 1,086 164 -- 14,748 15,913 36,198
Treasury stock, at cost..... (85) -- -- -- -- --
Retained earnings........... 15,660 -- (1,493) (1,790) 12,377 --
----------- -------- ----------------- -------- ------------ ---------------
Total stockholders'
equity..................... $ 16,667 164 (1,493) 12,959 28,297 36,200
----------- -------- ----------------- -------- ------------ ---------------
Total liabilities and
stockholders' equity....... $ 142,297 $ 21,296 $ (429) $ (110) $ 163,054 $ --
----------- -------- ----------------- -------- ------------ ---------------
----------- -------- ----------------- -------- ------------ ---------------
<CAPTION>
PRO FORMA AS
ADJUSTED
------------
<S> <C>
Current assets:
Cash...................... $ 430
Accounts Receivable....... 36,633
Inventories............... 49,746
Prepaid expenses and
other.................... 2,505
Deferred income taxes..... 2,345
------------
Total current assets........ 91,659
Property and equipment,
net........................ 44,441
Excess of cost over net
assets acquired............ 13,830
Intangible assets........... 11,070
Other assets................ 2,054
------------
Total assets................ $ 163,054
------------
------------
PRO FORMA AS
ADJUSTED
------------
<S> <C>
Current liabilities:
Accounts payable.......... $ 14,691
Accrued expenses.......... 13,458
Income taxes payable...... 2,688
Deferred income taxes..... 813
Current portion of
long-term debt........... 5,475
------------
Total current liabilities... 37,125
Long-term debt, less current
portion.................... 46,539
Other liabilities........... 6,154
Deferred income taxes....... 8,739
Redeemable preferred
stock...................... --
Common stock................ 9
Capital in excess of par
value...................... 52,111
Treasury stock, at cost..... --
Retained earnings........... 12,377
------------
Total stockholders'
equity..................... 64,497
------------
Total liabilities and
stockholders' equity....... $ 163,054
------------
------------
</TABLE>
See accompanying unaudited condensed notes to consolidated pro forma financial
statements.
F-6
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ACQUISITIONS
The Company made the following acquisitions during the last year:
<TABLE>
<CAPTION>
DATE OF AGGREGATE
BUSINESS PURCHASE PURCHASE PRICE
- ----------------------------------------------------------------- ---------- ---------------
<S> <C> <C>
Air Lab, Inc..................................................... 10/2/95 $ 3,400
Triumph Controls, Inc............................................ 1/1/96 $ 40,100
AMTI............................................................. 7/31/96 $ 21,300
</TABLE>
The acquisitions of Air Lab, Inc. and Triumph Controls, Inc. were made
through the acquisition of assets and assumption of certain liabilities, while
the acquisition of AMTI was made through the purchase of all the outstanding
common stock. Each acquisition was accounted for using the purchase method. On
January 31, 1996, AMTI acquired the assets and assumed certain liabilities of
Special Processes of Arizona, Inc. (SPOA), for approximately $1.5 million in
cash.
The pro forma results of operations adjustments are those necessary to
reflect the Company's income from continuing operations as if each acquisition
took place at the beginning of the period presented. The results of operations
of SPOA are included in the pro forma adjustments for periods subsequent to the
date of acquisition by AMTI only. The pro forma balance sheet includes
adjustments to reflect the purchase of AMTI, as it was the only acquisition to
occur subsequent to June 30, 1996. The following are the components of the
aggregate purchase price of AMTI:
<TABLE>
<S> <C>
Cash consideration................................................ $ 7,950
Liabilities assumed and costs related to the transaction.......... 9,250
Amounts due under the covenant not-to-compete contract............ 2,800
Deferred taxes.................................................... 1,300
---------
Total purchase price.............................................. $ 21,300
---------
---------
</TABLE>
REFINANCING
On July 19, 1996, the Company entered into an unsecured five year credit
agreement for a $50,000 revolving credit facility and a $35,000 term loan.
Proceeds from the new credit agreement were used to retire its revolving credit
facility and senior term loans (existing credit facility) and senior
subordinated notes. The refinancing resulted in an interest savings of 175 basis
points over the existing credit facility and 385 basis points (based on weighted
average interest rates for the year ended March 31, 1996) over the existing
senior subordinated notes. Additionally, the Company reduced its annual
commitment fee by $115. Due to the retirement of debt, the Company recorded an
extraordinary loss of $1,478, net of a tax benefit of $985, in July 1996 (at
June 30, 1996 the extraordinary loss would have been $1,493, net of a tax
benefit of $995 had the refinancing been consummated at such date) related to
prepayment penalties incurred and the write-off of deferred financing fees
related to the existing debt. This loss is reflected as an adjustment to
retained earnings in the pro forma balance sheet as of June 30, 1996.
OTHER EQUITY TRANSACTIONS
In conjunction with this offering, the Company has elected to exchange the
common stock of Triumph Controls, Inc. held by minority shareholders (10% of the
total outstanding) for 72,540 shares of Common Stock of the Company valued as of
June 30, 1996. As a result of the conversion, $890 will be recorded as excess of
cost over net assets acquired to reflect the excess of fair market value (based
on an assumed net initial public offering price of $16.00 per share less
underwriting discounts and commissions and estimated offering expenses payable
by the Company) over book value as an increase in the purchase price of Triumph
Controls, Inc. As a result of the transaction, Triumph Controls, Inc. will
F-7
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
become a wholly owned subsidiary of the Company. This conversion is reflected in
the June 30, 1996 pro forma balance sheet. Pro forma net income related to the
minority shareholder's interest is added back to the results of operations for
each period.
In conjunction with this offering, the Company intends to exchange its 14%
junior subordinated promissory notes plus accrued interest and preferred stock
at liquidation value plus accumulated dividends for shares of Common Stock at an
assumed initial public offering price of $16 per share (less underwriting
discounts and commissions and estimated offering expenses payable by the
Company). As a result of the exchange, 945,595 shares (as of June 30, 1996) of
the Company's stock will be issued to the holders of the notes and preferred
stock. The exchange is reflected in the pro forma balance sheet as of June 30,
1996. Interest expense related to the notes is added back to the results of
operations for each period in the pro forma income statements.
STATEMENTS OF INCOME
(1) The pro forma results of operations adjustments are those necessary to
reflect the Company's income from continuing operations as if each
acquisition took place at the beginning of the period presented. The results
of operations of SPOA are included in the pro forma adjustments for periods
subsequent to the date of acquisition by AMTI only.
(2) Selling, general and administrative expenses were increased to reflect
total expenses as if the acquisitions occurred on April 1, 1995. Certain
amounts, aggregating $3.5 million, were excluded from selling, general and
administrative expenses for the year ended March 31, 1996 as they related to
expenses incurred prior to the acquisitions which are neither recurring nor
indicative of future operations.
(3) Reflects increase in depreciation and amortization expense in excess of
historical amounts as a result of the following factors: (i) fair market
value of property, plant, and equipment acquired of $15,300, resulting in
additional depreciation for the year ended March 31, 1996 of $873; and (ii)
excess of cost over net assets acquired of $12,213 and other intangible
assets acquired of $10,061, resulting in additional amortization for the
year ended March 31, 1996 of $384 and $827, respectively. Intangible assets
consist primarily of patents, trademarks, aerospace designs and covenants
not-to-compete. Such assets are amortized on a straight line basis over
their estimated useful lives which range from six to twenty-five years. The
excess of cost over fair value of net assets acquired is amortized on a
straight-line basis over twenty-five years.
(4) Adjustments to interest expense for the year ended March 31, 1996 consist
of: (i) $3,196 for interest incurred under the Company's existing credit
facility used to finance the purchases and fund operations of the acquired
companies and amounts incurred pertaining to actual borrowings under the
senior term loans used to purchase the companies at historical rates; (ii)
$493 for interest incurred related to the subordinated promissory note and
junior subordinated promissory notes arising as a result of the
acquisitions; (iii) $71 for amortization of deferred financing costs,
classified as interest, pertaining to the Company's increase in senior term
loans outstanding as a result of the acquisitions; and (iv) $240 incurred
related to the interest cost associated with long-term covenants
not-to-compete with the previous owners of certain acquired companies.
(5) Represents the tax provision arising from the pro forma adjustments
discussed herein (excluding the portion of the Company's income attributable
to the minority interest's investment in Triumph Controls, Inc.) based on
the Company's estimated tax rate of 40.0%.
(6) Adjusted for interest savings consisting of: (i) a $579 and $1,162 net
reduction of interest expense on the senior subordinated notes and existing
credit facility, respectively, as a result of changes in
F-8
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
interest rates under the refinancing. The new credit facility is assumed to
bear interest at a weighted average rate of 7.1% for the year ended March
31, 1996, which is representative of historical interest rates plus the
basis points specified in the new credit agreement; and (ii) a $307
reduction in amortization of deferred financing fees and commitment fees.
(7) Represents the portion of the Company's income attributable to the minority
interest's investment in Triumph Controls, Inc.
(8) Represents amortization of excess of cost over net assets acquired (See
"Other Equity Transactions"). Amount is amortized using the straight-line
method over a period of twenty-five years.
(9) Adjustment reflects interest savings on the 14% junior subordinated
promissory notes converted to Common Stock.
(10) Adjustment to eliminate interest expense as a result of retirement of the
10.5% subordinated note ($5,793 as of June 30, 1996) and the reduction in
principal of the revolving credit facility of $30,407 through the use of the
proceeds from the Offering.
(11) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding restated to give effect to the
65-for-one stock split to be effected immediately prior to this offering,
the dilutive effects of the Warrant and stock issued during the period
commencing 12 months prior to the initial filing of the proposed initial
public offering at prices below the anticipated public offering price and an
adjustment for the interest on the 14% junior subordinated promissory notes,
net of tax expense. Income from continuing operations represents the amounts
reflected in the Company's Consolidated Financial Statements. Primary and
fully diluted earnings per share are the same. See Note 2 to the Company's
Consolidated Financial Statements.
(12) The calculation of pro forma, as adjusted weighted average number of shares
outstanding is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
------------------------
YEAR ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1996 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average shares outstanding........................ 5,851 5,851 5,805
Warrants outstanding....................................... 650 650 650
Stock options issued within one year of the initial
offering.................................................. 35 35 35
Assumed conversion of TCI minority interest................ 63 63 63
Assumed exchange of preferred shares....................... 309 278 321
Assumed exchange of 14% junior subordinated promissory
notes..................................................... 608 547 625
Shares issued in connection with the initial public
offering to be used to reduce debt........................ 2,500 2,500 2,500
----------- ----------- -----------
Pro Forma weighted average shares outstanding, as
adjusted.................................................. 10,016 9,924 9,999
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(13) Reflects increase in depreciation expense of $84 in excess of historical
amounts and an increase in amortization expense relating to excess of cost
over net assets acquired and intangibles of $18 and $155, respectively, for
the quarter ended June 30, 1996.
F-9
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(14) Adjustments to interest expense for the quarter ended June 30, 1996 consist
of: (i) $292 for interest incurred through the Company's existing credit
facility used to fund the acquired companies at historical interest rates;
and (2) $56 incurred related to the interest cost associated with long-term
covenants not-to-compete with the previous owners of certain acquired
companies.
(15) Adjusted for interest savings consisting of: (i) a $167 and $269 net
reduction of interest expense on the senior subordinated notes and existing
credit facility, respectively, as a result of changes in interest rates
under the refinancing. The new credit facility is assumed to bear interest
at a weighted average rate of 6.6% for the quarter ended June 30, 1996 and
is representative of historical rates plus the basis points specified in the
new credit agreement; and (ii) a $77 reduction in amortization of deferred
financing fees and commitment fees.
(16) Reflects increase in depreciation expense of $251 in excess of historical
amounts and an increase in amortization expense for excess of cost over net
assets acquired and other intangible assets of $122 and $231, respectively,
for the quarter ended June 30, 1995.
(17) Adjustments to interest expense for the quarter ended June 30, 1995 consist
of: (i) $937 for interest incurred through the Company's existing credit
facility used to fund the acquired companies and amounts incurred pertaining
to actual borrowings on the senior term loans used to purchase the companies
at historical interest rates; (ii) $164 for interest incurred related to the
subordinated promissory note and junior subordinated promissory notes
arising as a result of the acquisitions; (iii) $24 amortization of deferred
financing costs, classified as interest, pertaining to the Company's
increase in senior term loans outstanding as a result of the acquisition;
and (iv) $64 incurred related to the interest cost associated with long-term
covenants not-to-compete with the previous owners of certain acquired
companies.
(18) Adjusted for interest savings consisting of: (i) $136 and $644 net
reduction of interest expense on the senior subordinated notes and the
existing credit facility, respectively, as a result of changes in interest
rates under the refinancing. The new credit facility is assumed to bear
interest at a weighted average rate of 7.4% for the quarter ended June 30,
1995, which is representative of historical interest rates plus the basis
points specified in the new credit agreement; and (ii) a $88 reduction in
amortization of deferred financing fees and commitment fees.
BALANCE SHEET
(19) Adjusted to reflect the opening balance sheet of AMTI as though the
acquisition had occurred on June 30, 1996. These amounts include the
write-up of fixed assets to estimated fair value; the recording of excess of
cost over net assets acquired; the recording of the present value of the
previous owner's covenant not-to-compete; and the recording of the excess of
the market price over the exercise price of the options to purchase the
Company's Common Stock granted to the previous owner of AMTI. The allocation
of the purchase price is based upon estimates and will be finalized during
the current year.
(20) Adjustments reflect: (i) the write-off of the deferred financing fees
related to the existing credit facility; (ii) prepayment penalties
associated with early extinguishment of the senior subordinated note and the
existing credit facility; (iii) payment of accrued interest related to the
senior subordinated note and the existing credit facility, and the net
increase in debt necessary to fund the prepayment penalties and the
financing fees related to the new credit facility.
F-10
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(21) Adjustments reflect (i) the reclassification of the deferred taxes related
to interest on the 14% junior subordinated promissory notes; (ii) the
accretion of the preferred stock to liquidation value and (iii) the
conversion of the 14% junior subordinated promissory notes, the preferred
stock and the minority interest in Triumph Controls, Inc. to the Company's
Common Stock.
(22) Adjustments give effect to the sale of shares of Common Stock offered by
the Company hereby and the application of the net proceeds thereof to
extinguish the $5,793 senior subordinated promissory note and the
outstanding balance related to the pro forma revolving credit facility of
$30,407.
F-11
<PAGE>
REPORT OF ERNST & YOUNG LLP , INDEPENDENT AUDITORS
Board of Directors and Stockholders
The Triumph Group Holdings, Inc.
We have audited the accompanying consolidated balance sheets of The Triumph
Group Holdings, Inc. as of March 31, 1996 and 1995, and the related consolidated
statements of income, common stockholders' equity, and cash flows for each of
the two years in the period ended March 31, 1996 and for the ten months ended
March 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Triumph
Group Holdings, Inc. at March 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the two years in the period ended
March 31, 1996 and for the ten months ended March 31, 1994, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
August 22, 1996
F-12
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
----------------------
1995 1996
---------- ---------- JUNE 30,
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash............................................................................ $ 746 $ 539 $ 430
Accounts receivable, less allowance for doubtful accounts of $766,
$973 and $1,011, respectively.................................................. 27,881 29,680 32,086
Inventories..................................................................... 30,474 45,098 48,295
Estimated net realizable value of business sold or discontinued, current........ 9,296 27,350 1,800
Prepaid expenses and other...................................................... 378 698 690
Deferred income taxes........................................................... 1,878 1,917 3,345
---------- ---------- ------------
Total current assets.............................................................. 70,653 105,282 86,646
Property and equipment, at cost:
Land............................................................................ 3,009 3,009 3,009
Buildings and improvements...................................................... 7,072 7,438 7,602
Machinery and equipment......................................................... 21,437 32,823 33,535
---------- ---------- ------------
31,518 43,270 44,146
Less accumulated depreciation................................................... 3,933 6,718 7,705
---------- ---------- ------------
27,585 36,552 36,441
Other net assets of business sold or discontinued................................. 10,869 -- --
Excess of cost over net assets acquired, less accumulated amortization
of $0, $105 and $209, respectively............................................... -- 10,339 10,234
Intangible assets, less accumulated amortization of $656, $1,110 and
$1,274 respectively.............................................................. 1,134 6,680 6,516
Other assets...................................................................... 1,145 2,553 2,460
---------- ---------- ------------
Total assets...................................................................... $ 111,386 $ 161,406 $ 142,297
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 18,047 $ 18,203 $ 14,213
Accrued expenses................................................................ 9,506 15,757 14,161
Income taxes payable............................................................ 542 2,137 3,458
Current portion of long-term debt............................................... 2,949 8,806 5,206
---------- ---------- ------------
Total current liabilities......................................................... 31,044 44,903 37,038
Long-term debt, less current portion.............................................. 68,789 89,963 76,261
Other liabilities................................................................. 783 1,992 2,426
Deferred income taxes............................................................. 2,764 6,831 7,051
Redeemable preferred stock, 14% cumulative, $.01 par value 30,575
shares authorized and issued..................................................... 1,912 2,652 2,854
Common stockholders' equity:
Common stock, $.001 par value:
Class A -- 6,500,455 shares authorized; 1,300,000 shares issued............... 1 1 1
Class B convertible -- 4,550,000 shares authorized and issued................. 5 5 5
Class C convertible -- 455 shares authorized and issued....................... -- -- --
Capital in excess of par value.................................................. 994 1,006 1,086
Treasury stock, at cost......................................................... (9) -- (85)
Retained earnings............................................................... 5,103 14,053 15,660
---------- ---------- ------------
Total common stockholders' equity................................................. 6,094 15,065 16,667
---------- ---------- ------------
Total liabilities and common stockholders' equity................................. $ 111,386 $ 161,406 $ 142,297
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TEN MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED MARCH 31, JUNE 30,
MARCH 31, ------------------------ --------------------
1994 1995 1996 1995 1996
------------ ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 129,995 $ 164,165 $ 186,774 $ 42,374 $ 55,184
Operating costs and expenses:
Cost of products sold........................... 97,095 125,836 139,740 32,078 39,146
Selling, general, and administrative............ 17,966 22,060 27,288 6,274 9,433
Depreciation and amortization................... 1,993 2,718 3,535 721 1,258
------------ ----------- ----------- --------- ---------
117,054 150,614 170,563 39,073 49,837
------------ ----------- ----------- --------- ---------
Operating income.................................. 12,941 13,551 16,211 3,301 5,347
Interest expense.................................. 4,908 6,589 7,318 1,600 2,286
------------ ----------- ----------- --------- ---------
Income from continuing operations, before income
taxes............................................ 8,033 6,962 8,893 1,701 3,061
Income tax expense................................ 3,125 2,598 3,699 687 1,252
------------ ----------- ----------- --------- ---------
Income from continuing operations................. 4,908 4,364 5,194 1,014 1,809
Income (loss) from discontinued operations........ (462) (2,852) 4,496 109 --
------------ ----------- ----------- --------- ---------
Net income........................................ $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809
------------ ----------- ----------- --------- ---------
------------ ----------- ----------- --------- ---------
Income from continuing operations per share....... $ 0.72 $ 0.67 $ 0.78 $ 0.16 $ 0.26
Income from discontinued operations per share..... (0.06) (0.38) 0.60 0.01 --
------------ ----------- ----------- --------- ---------
Net income per share.............................. $ 0.66 $ 0.29 $ 1.38 $ 0.17 $ 0.26
------------ ----------- ----------- --------- ---------
------------ ----------- ----------- --------- ---------
Shares used in computing income per share (in
thousands)....................................... 7,291 7,387 7,516 7,424 7,499
------------ ----------- ----------- --------- ---------
------------ ----------- ----------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
------------------------------- EXCESS OF TREASURY RETAINED
CLASS A CLASS B CLASS C PAR VALUE STOCK EARNINGS TOTAL
--------- --------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1993
(inception)........................ $ 1 $ 5 $ -- $ 994 $ -- $ -- $ 1,000
Net income........................ 4,446 4,446
Preferred stock dividends......... (357) (357)
Accretion of preferred stock...... (9) (9)
--------- --------- --------- ----------- ----------- --------- ---------
Balance at March 31, 1994........... 1 5 -- 994 -- 4,080 5,080
Net income........................ 1,512 1,512
Preferred stock dividends......... (473) (473)
Accretion of preferred stock...... (16) (16)
Purchase of shares of Class A
common stock..................... (9) (9)
--------- --------- --------- ----------- ----------- --------- ---------
Balance at March 31, 1995........... 1 5 -- 994 (9) 5,103 6,094
Net income........................ 9,690 9,690
Preferred stock dividends......... (594) (594)
Accretion of preferred stock...... (146) (146)
Sale of shares of Class A common
stock............................ 12 9 21
--------- --------- --------- ----------- ----------- --------- ---------
Balance at March 31, 1996........... 1 5 -- 1,006 -- 14,053 15,065
Net income (unaudited)............ 1,809 1,809
Preferred stock dividends
(unaudited)...................... (166) (166)
Accretion of preferred stock
(unaudited)...................... (36) (36)
Compensation in stock options
issued to employee (unaudited)... 80 80
Purchase of shares of Class A
common stock (unaudited)......... (85) (85)
--------- --------- --------- ----------- ----------- --------- ---------
Balance at June 30, 1996
(unaudited)...................... $ 1 $ 5 -- $ 1,086 $ (85) $ 15,660 $ 16,667
--------- --------- --------- ----------- ----------- --------- ---------
--------- --------- --------- ----------- ----------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED MARCH 31, THREE MONTHS
ENDED ENDED JUNE 30,
MARCH 31, --------------------- ----------------------
1994 1995 1996 1995 1996
------------ --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809
Adjustments to reconcile net income to net cash provided
by operating activities:
Discontinued operations................................ 1,314 3,738 (4,396) (5,180) (1,030)
Depreciation........................................... 1,695 2,360 2,977 631 989
Amortization........................................... 508 610 834 153 356
Provision (benefit) for deferred and imputed income
taxes................................................. 864 877 719 289 (178)
Interest on senior and junior subordinated promissory
notes paid by issuance of additional notes............ 614 993 1,161 271 626
Compensation in stock options issued to employee....... -- -- -- -- 80
Changes in assets and liabilities, net of acquisitions
and dispositions of businesses:
Accounts receivable.................................. (3,461) (7,175) 3,783 660 (2,406)
Inventories.......................................... 4,340 (2,979) (4,201) (5,286) (3,197)
Prepaid expenses and other current assets............ (365) 318 353 2 8
Accounts payable, accrued expenses, and accrued
income taxes payable................................ 2,782 4,867 4,627 (3,136) (4,265)
Other................................................ (123) 526 554 120 438
------------ --------- ---------- ---------- ----------
Net cash provided by (used in) operating activities...... 12,614 5,647 16,101 (10,353) (6,770)
INVESTING ACTIVITIES
Capital expenditures, net................................ (1,531) (3,229) (1,897) (478) (876)
Proceeds from sale of property and equipment of
discontinued operation.................................. 798 375 -- -- 25,550
Proceeds from sale of company, net of cash sold.......... -- 1,192 -- -- --
Cost of businesses acquired, net of cash acquired........ (623) -- (40,302) -- --
------------ --------- ---------- ---------- ----------
Net cash (used in) provided by investing activities...... (1,356) (1,662) (42,199) (478) 24,674
FINANCING ACTIVITIES
Net (decrease) increase in revolving credit.............. (9,555) (617) 2,129 10,881 (13,050)
(Purchase) sale of treasury stock........................ -- (9) 21 21 (85)
Proceeds from issuance of long-term debt................. -- -- 26,692 23 40
Payments on long-term debt............................... (1,957) (3,040) (2,951) (711) (4,918)
------------ --------- ---------- ---------- ----------
Net cash (used in) provided by financing activities...... (11,512) (3,666) 25,891 10,214 (18,013)
------------ --------- ---------- ---------- ----------
(Decrease) increase in cash.............................. (254) 319 (207) (617) (109)
Cash at beginning of period.............................. 681 427 746 746 539
------------ --------- ---------- ---------- ----------
Cash at end of period.................................... $ 427 $ 746 $ 539 $ 129 $ 430
------------ --------- ---------- ---------- ----------
------------ --------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. BASIS OF PRESENTATION AND FORMATION OF THE TRIUMPH GROUP HOLDINGS, INC.
The Triumph Group Holdings, Inc. ("Holdings") is a Delaware corporation
which was formed by Citicorp Venture Capital and other investors, including
members of management of The Triumph Group, Inc. ("Triumph"), a wholly-owned
subsidiary of Holdings, and Triumph's wholly-owned subsidiaries to acquire,
effective June 1, 1993, certain operations of Alco Standard Corporation ("Alco")
which are engaged in aviation services, paper converting (which was subsequently
discontinued), and metals converting and distribution (the "acquisition").
The accompanying financial statements present the consolidated financial
position, results of operations, and cash flows of Holdings and its subsidiaries
(collectively, the "Company") as of the dates indicated. Intercompany accounts
and transactions have been eliminated from the consolidated financial
statements.
The aggregate purchase price of $115,167 for the acquisition, including
$3,500 of related costs, was allocated to assets based on their estimated fair
values. In addition, the Company assumed certain liabilities of $28,467. The net
purchase was financed as follows:
<TABLE>
<S> <C> <C>
Cash from initial capitalization of the Company:
Common stock................................................... $ 900
Cumulative redeemable preferred stock.......................... 1,057
Junior subordinated promissory notes........................... 6,043 $ 8,000
---------
Debt:
Revolving credit facility...................................... 30,200
Senior term loan............................................... 20,000
Senior subordinated note and warrants.......................... 15,000
Subordinated promissory note payable to Alco................... 13,500 78,700
--------- ---------
$ 86,700
---------
---------
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company's aviation segment contributes approximately three quarters of
the Company's operating income, while the metals converting and distribution
segment contributes the remainder. Triumph's aviation segment designs,
engineers, manufactures or repairs and overhauls aircraft components for
commercial airlines, air cargo carriers and original equipment manufacturers on
a worldwide basis. Triumph's metals segment manufactures, machines, forges,
processes and distributes metal products to customers in the computer,
construction, container, farm equipment and office furniture industries,
primarily within North America.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares
of common stock outstanding after giving effect to the 65-for-one stock split
described in Note 18, except as noted below. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins and Staff policy, common and
preferred shares, options and warrants issued during the period commencing 12
months prior to the initial filing of the proposed initial public offering at
prices below the anticipated public offering price are presumed to have been in
contemplation of the public offering and have been included in the
F-17
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
calculation as if they were outstanding for all periods presented, determined
using the treasury stock method and the anticipated price from the initial
public offering. In addition, common share equivalents such as warrants and
options are included in the computation.
Earnings per share reflected in the consolidated statements of income has
been computed as described above, but also gives effect to the exchange of all
outstanding 14% junior subordinated promissory notes and preferred stock for
common stock upon the closing of the Company's initial public offering
(determined using the if-converted method) as described in Note 18.
Additionally, income from continuing operations has been increased to reflect
interest related to the 14% junior subordinated promissory notes net of income
tax expense. Primary and fully diluted earnings per share are the same.
INTERIM FINANCIAL INFORMATION
The financial statements and disclosures included herein for the three
months ended June 30, 1995 and 1996 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements in
accordance with generally accepted accounting principles for these interim
periods have been included. The results of interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out and
last-in, first-out methods) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, which is depreciated over the
estimated useful lives of the related assets by the straight-line method.
Buildings and improvements are depreciated over a period of 15 to 39 1/2 years,
and machinery and equipment from 7 to 15 years (except for furnitures, fixtures
and computer equipment which is depreciated over a period of 3 to 10 years).
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over the fair value of net assets acquired is being
amortized on a straight-line basis over twenty-five years. The realizability of
goodwill (and other intangibles) is evaluated periodically as events or
circumstances indicate a possible inability to recover their carrying amount.
Such evaluation is based on various analyses, including cash flow and
profitability projections.
INTANGIBLE ASSETS
Intangible assets consist primarily of patents, trademarks, aerospace
designs, and licensing agreements. Intangible assets are amortized on a
straight-line basis over their estimated useful lives which range from five to
twenty-five years.
REVENUE RECOGNITION
Revenues are recorded when services are performed or when products are
shipped except for long-term construction contracts which are recorded on the
percentage-of-completion method based on the relationship between actual costs
incurred and total estimated costs at completion. Estimated costs to complete
for each contract are reviewed periodically as work progresses and apropriate
adjustments are made to revenue recognition percentages, if necessary. In the
event such estimates indicate a loss would be incurred on the contract, the
estimated amount of such loss would be recognized in the period the
F-18
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimated loss was determined. Sales from long-term construction contracts
approximated 11%, 11%, and 12% of total sales for the ten-month period ended
March 31, 1994 and the years ended March 31, 1995 and 1996, respectively.
INCOME TAXES
The Company uses the liability method to account for income taxes.
Accordingly, deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts reportable for income tax purposes. The
Company files a consolidated federal income tax return with its subsidiaries.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions (for example, long-term contract revenue recognition and
postretirement benefits) that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. ACQUISITIONS
In January 1996, the Company acquired substantially all of the assets of
Triumph Controls, Inc., formerly a division of Teleflex, Incorporated
(Teleflex), for an aggregate purchase price of $40,100. Triumph Controls, Inc.
manufactures and services mechanical controls for a broad range of end users,
primarily in the aviation industry. The purchase price includes cash paid to
Teleflex, Inc., a note to Teleflex, assumed liabilities and direct costs of the
acquisition. The acquisition has been accounted for under the purchase method
and, accordingly, the operating results of Triumph Controls, Inc. have been
included for the three months ended March 31, 1996. The aggregate purchase price
was allocated to the assets based on their estimated fair values, including
$5,500 of intangible assets (patents, trademarks and aerospace designs). The
Company assumed certain liabilities of $2,600 and incurred transaction-related
costs of approximately $1,000. The excess of the purchase price over the fair
value of net assets acquired of $10,400 was recorded as excess of cost over net
assets acquired and is being amortized over twenty-five years on a straight-line
basis. The acquisition was funded by the Company's operations and long-term
borrowings.
In October 1995, the Company acquired substantially all of the assets of Air
Lab, Inc. of Seattle, WA, for an aggregate purchase price of $3,400. Air Lab,
Inc. services instruments and avionics for the commercial aviation industry. The
purchase price includes cash paid to Air Lab, Inc., a long-term liability
related to a covenant not-to-compete contract, certain assumed liabilities and
direct costs of the acquisition. The acquisition has been accounted for under
the purchase method and, accordingly, the operating results of Air Lab, Inc.
have been included in the consolidated operating results since the date of
acquisition.
F-19
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
3. ACQUISITIONS (CONTINUED)
The following pro forma unaudited results of operations for the years ended
March 31, 1995 and 1996 and the three months ended June 30, 1995 and 1996, have
been prepared assuming the purchases of Triumph Controls, Inc. and Air Lab, Inc.
had taken place at the beginning of the respective periods:
<TABLE>
<CAPTION>
FOR YEARS ENDED MARCH FOR THREE MONTHS
31, ENDED JUNE 30,
------------------------ --------------------
1995 1996 1995 1996
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net sales............................................. $ 199,952 $ 213,131 $ 51,833 $ 55,184
Income from continuing operations..................... 6,434 6,677 1,610 1,809
Income from continuing operations per share........... $ 1.07 $ 1.12 $ 0.27 $ 0.30
</TABLE>
The pro forma information includes adjustments for interest expense that
would have been incurred to finance the purchases, additional depreciation based
on the estimated fair market value of the property, plant, and equipment
acquired, and the amortization of the intangible assets arising from the
transactions. The pro forma financial information is not necessarily indicative
of the results of operations as they would have been had the transactions been
effected on the assumed dates.
4. DISCONTINUED PAPER OPERATIONS
On March 31, 1996, the Company sold substantially all of the assets of its
paper converting subsidiary, Quality Park Products, Inc. of St. Paul, MN, to
Mail-Well, Inc. for approximately $27,350 in cash and supplemental payments,
based upon estimated earnings for the two years ending March 31, 1998, and the
assumption by the purchaser of certain liabilities.
The results of Quality Park Products, Inc. have been reported separately as
a component of discontinued operations in the Consolidated Statements of Income.
The following is a summary of the results of operations of the Company's
paper converting business:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED THREE MONTHS ENDED
ENDED MARCH 31, JUNE 30,
MARCH 31, -------------------- --------------------
1994 1995 1996 1995 1996
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 63,975 $ 84,170 $ 99,531 $ 24,321 $ --
Income (loss) from operations (net of taxes
-- $233, $1,628, $1,156, $61 and $0,
respectively)............................. (462) (2,852) 2,046 109 --
Gain on sale (net of taxes -- $1,633 in
1996)..................................... -- -- 2,450 -- --
------------ --------- --------- --------- ---------
Income (loss) from discontinued
operations................................ $ (462) $ (2,852) $ 4,496 $ 109 $ --
------------ --------- --------- --------- ---------
------------ --------- --------- --------- ---------
</TABLE>
Interest expense of $1,386, $1,700 and $2,045 was allocated to Quality Park
Products, Inc. for the ten months ended March 31, 1994 and for the years ended
March 31, 1995 and 1996, respectively, and $561 for the three months ended June
30, 1995. Such amounts are included in the income (loss) from discontinued
operations of those years. These costs were allocated based on the operation's
actual borrowings under the Company's revolving credit facility and the portion
of the acquisition debt allocated to the subsidiary.
F-20
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
5. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------- JUNE 30,
1995 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Raw materials....................................................... $ 10,897 $ 16,093 $ 17,480
Work-in-process.................................................... 6,448 12,862 13,103
Finished goods..................................................... 13,963 16,570 18,139
--------- --------- ---------
Total inventories at current FIFO cost............................. 31,308 45,525 48,722
Less allowance to reduce certain current FIFO
costs to LIFO basis............................................... 834 427 427
--------- --------- ---------
Total inventories.................................................. $ 30,474 $ 45,098 $ 48,295
--------- --------- ---------
--------- --------- ---------
</TABLE>
Inventories would have been $834, $427 and $427 higher than reported at
March 31, 1995 and 1996, and June 30, 1996, respectively, if the first-in,
first-out method of determining cost had been used for all inventories.
Approximately 22%, 15% and 17% of the inventory is valued using the LIFO method
at March 31, 1995 and 1996, and June 30, 1996 respectively.
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reportable for income tax purposes. The components of
deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------- JUNE 30,
1995 1996 1996
--------- --------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Alternative minimum and other tax credits............................. $ 1,441 $ 1,171 $ --
Net operating losses.................................................. 384 -- --
Accruals and reserves................................................. 502 942 1,414
Accounts receivable................................................... 102 28 28
Inventories........................................................... 142 2,514 2,534
--------- --------- -----------
$ 2,571 $ 4,655 $ 3,976
--------- --------- -----------
--------- --------- -----------
Deferred tax liabilities:
Property and equipment................................................ $ 2,764 $ 3,491 $ 3,723
Discontinued operations............................................... 536 2,521 320
Other assets.......................................................... -- 3,340 3,328
Prepaid expenses...................................................... 157 217 311
--------- --------- -----------
3,457 9,569 7,682
--------- --------- -----------
Net deferred tax liabilities............................................ $ 886 $ 4,914 $ 3,706
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-21
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
6. INCOME TAXES (CONTINUED)
The components of income tax expense related to continuing operations as
follows:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED THREE MONTHS
ENDED MARCH 31, ENDED JUNE 30,
MARCH 31, -------------------- --------------------
1994 1995 1996 1995 1996
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current:
Federal....................................... $ 2,053 $ 1,650 $ 2,689 $ 378 $ 1,235
State......................................... 208 71 291 20 195
------------ --------- --------- --------- ---------
2,261 1,721 2,980 398 1,430
Deferred:
Federal....................................... 254 685 574 223 (138)
State......................................... 113 192 145 66 (40)
------------ --------- --------- --------- ---------
367 877 719 289 (178)
Imputed:
Federal....................................... 483 -- -- -- --
State......................................... 14 -- -- -- --
------------ --------- --------- --------- ---------
497 -- -- -- --
------------ --------- --------- --------- ---------
$ 3,125 $ 2,598 $ 3,699 $ 687 $ 1,252
------------ --------- --------- --------- ---------
------------ --------- --------- --------- ---------
</TABLE>
Imputed income taxes represent income tax on pretax earnings of the Company
for the period June 1, 1993 through July 31, 1993. Such taxes were paid by Alco
under terms of the purchase agreement.
A reconciliation of the statutory federal income tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED MARCH 31, THREE MONTHS
ENDED ENDED JUNE 30,
MARCH 31, ---------------------- ----------------------
1994 1995 1996 1995 1996
--------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Statutory federal income tax rate.................. 34.0% 34.0% 34.0% 34.0% 34.0%
State and local income tax rate, net of federal tax
benefit........................................... 2.6 2.5 3.2 3.3 3.3
Miscellaneous permanent items and non-deductible
accruals.......................................... 0.5 -- 1.3 1.7 1.1
Other.............................................. 1.8 0.8 3.1 1.4 2.5
--- --- --- --- ---
Effective income tax rate.......................... 38.9% 37.3% 41.6% 40.4% 40.9%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
Income taxes paid during the ten months ended March 31, 1994 and the years
ended March 31, 1995 and 1996 were $1,318, $596 and $1,182, respectively. Income
taxes paid during the three months ended June 30, 1995 and 1996 were $250 and
$1,004, respectively. At March 31, 1995 and 1996, the Company had alternative
minimum tax credit carryforwards of $1,430 and $1,160, respectively, for income
tax purposes which can be carried forward indefinitely. At March 31, 1995, the
Company had a regular tax net operating loss carryforward of $1,129.
F-22
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------- JUNE 30,
1995 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Revolving credit facility............................................ $ 20,028 $ 22,157 $ 9,109
Senior term loans.................................................... 15,316 32,460 27,598
Senior subordinated notes............................................ 14,900 14,900 14,900
Subordinated promissory notes........................................ 13,500 19,000 19,293
Junior subordinated promissory notes................................. 7,625 9,575 9,890
Other debt and capital lease obligations............................. 369 677 677
--------- --------- ---------
71,738 98,769 81,467
Less current portion................................................. 2,949 8,806 5,206
--------- --------- ---------
$ 68,789 $ 89,963 $ 76,261
--------- --------- ---------
--------- --------- ---------
</TABLE>
On July 19, 1996, the Company entered into an unsecured five year credit
agreement for a $50,000 revolving credit facility and a $35,000 term loan. Both
credit instruments bear interest at either LIBOR plus between 0.63% and 1.88% or
prime plus between 0% and 0.38% at the option of the Company. The variation in
the interest rate is based upon the Company's ratio of total indebtedness to
earnings before interest, taxes and depreciation and amortization. In addition,
the Company is required to pay a commitment fee of between 0.2% and 0.45% on the
unused portion of the revolving credit facility based upon the ratio described
above. Principal payments on the term loan of $1,250 are made quarterly with a
final balloon payment of $11,250 due on July 1, 2001. The Company may repay
amounts owed under the credit agreement or reduce the revolving credit facility
commitment without penalty. Additionally, the Company may allocate up to $5,000
of the available revolving credit facility for the issuance of letters of
credit.
The proceeds of the new term loan, amounts borrowed under the new revolving
credit facility and the proceeds received from the sale of Quality Park
Products, Inc. (see Note 4) were used to extinguish the outstanding balances of
the revolving credit facility, the senior term loans and the senior subordinated
notes existing at March 31, 1996. The extinguishment of this debt resulted in an
extraordinary loss of $1,478, net of an income tax benefit of $985.
Additionally, under the terms of the new credit agreement, upon completion
of the common stock offering described in Note 18, the Company is required to
make a principal payment of $15,000 which will be applied to any balance
outstanding on the revolving credit facility followed by any balance remaining
on the term loan. Should the Company fail to receive at least $30,000 in
proceeds from the common stock offering by December 31, 1996, the new credit
agreement will become secured as the Company is required to grant the holder a
first priority lien and security interest in all real and personal property
owned by the Company at that time.
The Subordinated Promissory Notes consists of two notes, a $13,500 principal
amount payable by Holdings to Alco, bearing interest at 10%, and due in equal
installments on June 1, 2002 and June 1, 2003 and $5,500 principal amount
payable by Holdings to Teleflex, bearing interest at 10.5%, and due in equal
installments on December 31, 2002 and December 31, 2003.
The Junior Subordinated Promissory Notes ("Junior Notes") consist of
unsecured obligations of Holdings and one of its subsidiaries. The Junior Notes
of Holdings, $7,625, $8,800 and $9,055 at
F-23
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. LONG-TERM DEBT (CONTINUED)
March 31, 1995 and 1996 and June 30, 1996, respectively, are subordinated to all
liabilities of the Company and its subsidiaries and bear interest at 14%. The
Company, in its sole discretion, may pay interest by issuance of additional
Junior Notes and elected to do so for $614, $993 and $1,146 for the ten months
ended March 31, 1994 and the years ended March 31, 1995 and 1996, respectively.
Interest of $271 and $313 was paid by issuance of additional Junior Notes during
the three months ended June 30, 1995 and 1996, respectively. The Junior Notes of
Holdings mature on December 31, 2003, although the holders of the notes have no
right to demand payment of principal until all superior debt, as defined, has
been paid in full.
In January 1996, additional Junior Notes of one of Triumph's subsidiaries
were issued in the amount of $760 and are subordinated to all liabilities of the
subsidiary and all indebtedness of Triumph and its subsidiaries pursuant to the
revolving credit facility, the senior term loans and the senior subordinated
notes and bear interest at 10.5%. The subsidiary, in its sole discretion, may
pay interest by issuance of additional Junior Notes and elected to do so for $15
and $20 for the year ended March 31, 1996 and the three months ended June 30,
1996, respectively. These Junior Notes are due in equal installments on December
31, 2005 and 2006, although the holders of the notes have no right to demand
payment of principal until all superior debt, as defined, has been paid in full.
The indentures under the debt agreements described above contain
restrictions and covenants which include limitations on the Company's ability to
incur additional indebtedness, issue stock, options or warrants (excluding the
offering described in Note 18 and any employee stock option plan the Company may
enter into), make certain restricted payments and acquisitions, create liens,
enter into transactions with affiliates, sell substantial portions of its
assets, make capital expenditures and pay cash dividends.
Additional covenants require compliance with financial tests, including
current ratio, leverage, interest coverage ratio and maintenance of minimum net
worth. As of July 19, 1996, subsequent to the refinancing, $31,029 of additional
borrowings were available under the revolving credit facility.
The fair value of the Company's long-term debt at March 31, 1996, excluding
amounts which were refinanced, approximates the carrying value.
Maturities of long-term debt, excluding payments which may be required under
debt agreements based on excess cash flow (adjusted for the refinancing
described above), are as follows: 1997 -- $2,648; 1998 -- $5,169; 1999 --
$5,176; 2000 -- $5,089; 2001 -- $5,096.
Interest paid on indebtedness during the ten months ended March 31, 1994 and
the years ended March 31, 1995 and 1996 amounted to $3,968, $6,909 and $7,552,
respectively. Interest paid on indebtedness during the three months ended June
30, 1995 and 1996 amounted to $1,737 and $1,781, respectively.
Financing fees and expenses of $2,103 incurred with respect to indebtedness
have been capitalized and are reflected in other assets. These fees and expenses
are being amortized over the terms of the related indebtedness (5-8 years).
Total amortization (included in interest expense) for the ten months ended March
31, 1994 and the years ended March 31, 1995 and 1996 was $210, $252, and $276,
respectively. Total amortization (included in interest expense) for the three
months ended June 30, 1995 and 1996 was $63 and $87, respectively. On July 19,
1996, in conjunction with the refinancing, $923 in unamortized deferred
financing fees related to the extinguished debt were written-off and an
additional $510 in financing fees related to the new credit agreement were
capitalized.
F-24
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
8. COMMON STOCK
The holders of the Class A, B, and C common stock are entitled to one vote,
six-tenths of one vote, and 4,000 votes per share, respectively, on all matters
to be voted upon by the stockholders of Holdings and are entitled to participate
ratably in any distributions.
The holders of Class B common stock may elect at any time to convert any or
all such shares into the Class A common stock on a share-for-share basis. Upon
the conversion of all shares of Class B common stock, each share of Class C
common stock will automatically convert into one share of Class A common stock.
The Company issued a stock purchase warrant which allows the holder to
purchase 650,000 shares of Class A common stock at an exercise price of $.01 per
share through July 31, 2003. The proceeds from the issuance of the senior
subordinated notes allocated to the warrants of $100 has been included in
capital in excess of par value.
9. PREFERRED STOCK
The preferred stock provides for 14% cumulative dividends and redemption on
July 21, 2004 or 91 days after the retirement date of senior debt at the lesser
of the liquidation value of $100 per share ($3,058) plus all accumulated and
unpaid dividends or 40% of the Company's equity value. Accumulated and unpaid
dividends of approximately $830 or $27.15 per share, $1,424 or $46.57 per share
and $1,590 or $52.00 per share are included in preferred stock as of March 31,
1995 and 1996 and June 30, 1996, respectively.
The difference between the original issue price of $1,057 and the
liquidation value of $3,057 is being accreted through July 21, 2004 using the
effective interest method. The accretion of $9, $16 and $146 for the ten months
ended March 31, 1994, and the years ended March 31, 1995 and 1996 respectively,
and accretion of $4 and $36 for the three months ended June 30, 1995 and 1996,
respectively, is charged to retained earnings and included in preferred stock.
10. PENSION AND OTHER BENEFIT PLANS
The Company sponsors a defined contribution 401(k) plan, under which
salaried and certain hourly employees may defer a portion of their compensation.
Eligible participants may contribute to the plan up to 15% of their regular
compensation before taxes. The Company matches 33% of the first 6% of
compensation contributed by the participant. All contributions and Company
matches are invested at the direction of the employee in one or more mutual
funds. Company matching contributions vest immediately and aggregated $293, $404
and $437 for the period from August 1, 1993 (inception of the 401(k) Plan)
through March 31, 1994 and the years ended March 31, 1995 and 1996,
respectively. Company matching contributions for the three months ended June 30,
1995 and 1996 amounted to $100 and $143, respectively.
11. OTHER POSTRETIREMENT BENEFITS
In connection with the acquisition of Triumph Controls, Inc., the Company
provides certain postretirement medical and insurance benefits to eligible
employees under a Collective Bargaining Agreement. For any employees who retired
through the date of the acquisition, the Seller retained all liabilities for
benefits due and administration of the postretirement benefits. The Company has
assumed responsibility for administration of the postretirement coverage for any
eligible employee who retires subsequent to the date of acquisition. The Company
will pay the costs related to these benefits upon retirement and will be
reimbursed by the Seller for its pro rata portion based on relative length of
service.
F-25
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
11. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
At March 31, 1996, the Company has recorded a total liability of $1,053 (as
estimated by actuaries) for other postretirement benefits, of which $1,045 is
estimated to be reimbursed by the Seller. The $1,053 and $1,045 are recorded in
Other liabilities and Other assets, respectively.
12. LEASES
Capital lease assets are included in property and equipment and the related
obligations in other debt and capital lease obligations. Amortization of capital
lease assets is included in depreciation expense. At March 31, 1996, future
minimum payments under noncancelable operating leases with initial or remaining
terms of more than one year were as follows: 1997 -- $1,461; 1998 -- $1,451;
1999 -- $1,326; 2000 -- $1,147; 2001 -- $821; thereafter (through 2006) --
$3,380. In the normal course of business, operating leases are generally renewed
or replaced by other leases.
Total rental expense was $730, $950, and $1,135 for the ten months ended
March 31, 1994 and the years ended March 31, 1995 and 1996, respectively. Total
rent expense for the three months ended June 30, 1995 and 1996 amounted to $283
and $365, respectively.
13. COMMITMENTS AND CONTINGENCIES
During 1995, the Company entered into a consulting agreement for total
consideration of $1,300 payable in annual installments, which expires on April
30, 2001.
Certain of the Company's business operations and facilities are subject to a
number of federal, state and local environmental laws and regulations. The
Company is indemnified for environmental liabilities related to assets purchased
from Alco which existed prior to the acquisition (Note 1) and any unidentified
environmental liabilities which arise subsequent to the date of settlement
through July 22, 2000, arising from conditions or activities existing at these
facilities prior to the acquisition. In the opinion of management, there are no
significant environmental concerns which would have a material effect on the
financial condition or operating results of the Company which are not covered by
such indemnification.
The Company is involved in certain litigation matters arising out of its
normal business activities. In the opinion of management, the ultimate
resolution of such litigation will not have a material effect on the financial
condition or operating results of the Company.
14. COLLECTIVE BARGAINING AGREEMENTS
Approximately 30% of the Company's labor force is covered under collective
bargaining agreements. These collective bargaining agreements expire over the
next several years.
15. CONCENTRATIONS OF CREDIT RISK
No single customer accounts for more than 5% of the Company's sales,
however, the loss of any significant customer could have a material effect on
the Company and its operating subsidiaries.
F-26
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
16. SEGMENT REPORTING
Selected financial information for each segment is as follows:
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED MARCH 31,
MARCH 31, ------------------------
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Revenues:
Aviation...................................................... $ 57,257 $ 70,714 $ 100,166
Metals converting and distribution............................ 72,738 93,451 86,608
------------ ----------- -----------
$ 129,995 $ 164,165 $ 186,774
------------ ----------- -----------
------------ ----------- -----------
Operating income:
Aviation...................................................... $ 9,138 $ 8,778 $ 14,095
Metals converting and distribution............................ 5,376 6,379 4,638
Corporate expenses............................................ (1,573) (1,606) (2,522)
------------ ----------- -----------
$ 12,941 $ 13,551 $ 16,211
------------ ----------- -----------
------------ ----------- -----------
Assets:
Aviation...................................................... $ 44,512 $ 53,100 $ 101,219
Metals converting and distribution............................ 33,688 32,550 29,965
Discontinued operations....................................... 24,821 20,165 27,350
Corporate and other........................................... 3,342 5,571 2,872
------------ ----------- -----------
$ 106,363 $ 111,386 $ 161,406
------------ ----------- -----------
------------ ----------- -----------
Capital expenditures:
Aviation...................................................... $ 555 $ 2,077 $ 1,684
Metals converting and distribution............................ 976 1,152 213
------------ ----------- -----------
$ 1,531 $ 3,229 $ 1,897
------------ ----------- -----------
------------ ----------- -----------
Depreciation and amortization:
Aviation...................................................... $ 1,379 $ 1,780 $ 2,513
Metals converting and distribution............................ 594 916 999
Corporate..................................................... 20 22 23
------------ ----------- -----------
$ 1,993 $ 2,718 $ 3,535
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
17. SUBSEQUENT ACQUISITION
On July 31, 1996, the Company acquired all of the outstanding stock of
Advanced Materials Technologies, Inc. ("AMTI") based in Tempe, Arizona for an
aggregate purchase price of $21,300, including cash consideration of $7,950, an
option to purchase 200 shares of the Company's Class A Common Stock valued at
$164, a five-year covenant not-to-compete contract valued at $2,800 and the
assumption of liabilities and costs related to the transaction of $10,386. AMTI
repairs and refurbishes gas turbine engine components used in the aviation
industry. The acquisition will be accounted for under the purchase method, and
the purchase price will be allocated to the assets based on their estimated fair
values. The acquisition was funded through the Company's long-term borrowings.
18. OTHER SUBSEQUENT EVENTS
In August 1996, the Company filed a registration statement with respect to a
proposed underwritten public offering by the Company of 2,375,000 shares and an
offering directly by the Company of an additional 125,000 shares. The net
proceeds to the Company will be used to pay down a portion of the Company's
long-term borrowings under its five year credit agreement and its subordinated
promissory note of $5.5 million (see Note 7).
F-27
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
18. OTHER SUBSEQUENT EVENTS (CONTINUED)
On August 21, 1996 the Company amended its certificate of incorporation to
change its corporate name to Triumph Group, Inc.
In conjunction with the sale of common stock, the Company intends to
recapitalize the Common Stock and authorize a 65-for-one stock split. All
references to earnings per share data in the financial statements have been
restated to give effect to the stock split.
In conjunction with the proposed public offering described above, the
Company intends to exchange all outstanding preferred stock for Common Stock.
The liquidation value of the preferred stock plus accumulated dividends at the
date of the exchange (estimated to be October 15, 1996) of approximately $4,841
will convert to approximately 334,352 shares of Common Stock at an assumed
initial public offering price of $16.00 (less underwriting discounts and
commissions and estimated offering expenses payable by the Company).
In addition, the Company intends to exchange all outstanding 14% junior
subordinated promissory notes for Common Stock. The face value of the junior
subordinated promissory notes plus accrued but unpaid interest at the date of
exchange (estimated to be October 15, 1996) of approximately $9,419 will be
exchanged for 650,508 shares of Common Stock at the estimated initial public
offering price of $16.00 (less underwriting discounts and commissions and
estimated offering expenses payable by the Company).
The Company intends to adopt the 1996 Stock Option Plan (the "Plan") which
will become effective upon the closing of the proposed public offering. The Plan
provides for grants of stock options to officers and key employees of the
Company.
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------
3/31/96(1) 12/31/95(2) 9/30/95 6/30/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................. $ 54,206 $ 46,492 $ 43,702 $ 42,374
Gross profit.......................................... 15,630 10,520 10,588 10,296
Income from continuing operations..................... 1,850 1,199 1,131 1,014
Income from discontinued operations................... 4,008 315 64 109
Net income............................................ 5,858 1,514 1,195 1,123
Income from continuing operations per share(3)........ $ 0.27 $ 0.18 $ 0.17 $ 0.16
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------
3/31/95(3) 12/31/94(3) 9/30/94(3) 6/30/94(3)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................. $ 47,630 $ 37,819 $ 38,630 $ 40,086
Gross profit.......................................... 11,419 8,847 8,937 9,126
Income from continuing operations..................... 2,127 577 985 675
Income from discontinued operations................... (2,897) 241 15 (211)
Net income............................................ (770) 818 1,000 464
Income from continuing operations per share(3)........ $ 0.31 $ 0.10 $ 0.15 $ 0.11
</TABLE>
- --------------
(1) In January 1996, the Company completed its acquisition of Triumph Controls,
Inc. The operating results of Triumph Controls, Inc. are included for the
full period.
(2) In October 1995, the Company completed its acquisition of Air Lab, Inc. The
operating results of Air Lab, Inc. are included in the quarters ended
December 31, 1995 and March 31, 1996.
(3) See Note 2 "Summary of Significant Accounting Policies" for information
regarding the calculation of income from continuing operations per share.
F-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Teleflex Incorporated
In our opinion, the accompanying statements of income and of cash flows
present fairly, in all material respects, the results of operations and cash
flows of North Wales Controls and Quadrants Group, a division of Teleflex
Incorporated (the "Division") for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Division's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
June 25, 1996
F-29
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales........................................................ $ 30,254,208 $ 30,958,560 $ 31,477,611
-------------- -------------- --------------
Cost and expenses:
Materials, labor and other product costs....................... 17,039,342 17,389,166 17,801,964
Selling, engineering and administrative expenses............... 7,261,666 7,146,240 7,797,883
Interest expense............................................... 262,803 135,810
Interest income................................................ (16,970) (152,891)
-------------- -------------- --------------
24,563,811 24,654,246 25,446,956
-------------- -------------- --------------
Income before income taxes....................................... 5,690,397 6,304,314 6,030,655
Provision for income taxes....................................... 2,387,987 2,619,496 2,413,074
-------------- -------------- --------------
Net income....................................................... $ 3,302,410 $ 3,684,818 $ 3,617,581
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 3,302,410 $ 3,684,818 $ 3,617,581
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation................................................. 454,479 451,118 437,866
Decrease in accounts receivable.............................. 1,758,248 1,780,686 1,567,969
Decrease (increase) in inventories........................... 797,829 221,062 (1,317,175)
(Increase) decrease in prepaid expenses...................... (6,506) (9,015) 22,317
Increase (decrease) in accounts payable and accrued
expenses.................................................... 209,325 (5,513) 37,673
-------------- -------------- --------------
Net cash provided by operating activities........................ 6,515,785 6,123,156 4,366,231
-------------- -------------- --------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Additions to plant assets, net................................. (398,568) (871,922) (634,216)
-------------- -------------- --------------
Net cash used in investing activities............................ (398,568) (871,922) (634,216)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in intercompany notes payable......................... (6,116,629) (5,250,700) (3,733,390)
-------------- -------------- --------------
Net cash used in financing activities............................ (6,116,629) (5,250,700) (3,733,390)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents............. 588 534 (1,375)
Cash and cash equivalents at the beginning of the year........... 1,912 2,500 3,034
-------------- -------------- --------------
Cash and cash equivalents at the end of the year................. $ 2,500 $ 3,034 $ 1,659
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
North Wales Controls and Quadrants Group, a division of Teleflex
Incorporated (the "Division"), consists of two business units: aerospace and
non-aerospace. Aerospace manufactures and services qualified mechanical controls
for a broad range of end users. Non-aerospace comprises the naval group, which
produces remote valve operators, and the nuclear group, which provides flux
mapping systems for the nuclear industry. All manufacturing operations of the
Division are conducted at North Wales, PA.
These financial statements have been prepared in conformity with generally
accepted accounting principles and include management estimates and assumptions
that affect the recorded amounts. Actual results could differ from those
estimates.
The statement of income includes all charges applicable to the Division.
Teleflex Incorporated provides certain services to, and incurs costs on behalf
of, the Division. All of the allocations and estimates in the financial
statements are based on assumptions that the Division and Teleflex Incorporated
believe are reasonable. However, these allocations and estimates are not
necessarily indicative of the costs and expenses that would have resulted if the
Division had been operated as a separate entity.
In January 1996, the Division was sold by Teleflex Incorporated to Triumph
Controls, Inc. and is currently doing business under that name.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated principally at the lower of aggregate average cost or
market.
PLANT ASSETS
Plant assets include the cost of additions and those improvements which
increase the capacity or lengthen the useful lives of the assets. Repairs and
maintenance costs are expensed as incurred. With minor exceptions, straight-line
composite lives for depreciation of plant assets are as follows: machinery and
equipment -- 5 to 12 years; leasehold improvements -- 10 years. Depreciation
expense was $454,479, $451,188, and $437,866 for the years ending December 26,
1993, December 25, 1994 and December 31, 1995, respectively.
INCOME TAXES
The taxable income of the Division is included in the consolidated tax
return of Teleflex Incorporated. As such, separate income tax returns were not
prepared or filed by the Division. Income tax expense has been determined as if
the Division was a separate tax paying entity by applying an asset and liability
approach.
REVENUE RECOGNITION
Revenue is recognized upon shipment of product. Revenues from long-term
contracts, which are less than 10 percent of total sales, are recognized on a
percentage of completion basis.
3. RELATED PARTY TRANSACTIONS
NOTES PAYABLE
The Company's cash requirements are met by funds generated from operations,
supplemented as necessary by advances or borrowings from Teleflex Incorporated.
Borrowings from Teleflex Incorporated are made pursuant to unwritten, informal
arrangements. Interest is charged (earned) at a rate of 8%. Interest expense was
$262,803 and $135,810 for the years ended December 26, 1993 and December 25,
1994, respectively.
F-32
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
INSURANCE COVERAGE
WORKER'S COMPENSATION. Teleflex Incorporated purchases workers'
compensation coverage for all its U.S. Divisions from external carriers.
Premiums paid are determined based upon claims experience subject to a stop-loss
provision. Each Division is allocated a charge based upon the application of
published workers' compensation rates to division payroll costs adjusted for
claims experience. Charges for the years ended December 26, 1993, December 25,
1994 and December 31, 1995 were $536,000, $554,000 and $610,600, respectively.
MEDICAL. Certain medical and other related benefits are provided to active
employees of the Division. Monthly premiums are paid to insurance carriers by
Teleflex and reimbursed by the Division on the basis of employee headcount.
These contracts are negotiated by Teleflex on a Company-wide basis.
Medical charges allocated to the Division were $2,013,000, $1,689,000 and
$1,415,000 for the years ended December 26, 1993, December 25, 1994 and December
31, 1995. These charges and allocations are not necessarily indicative of the
costs that would have been incurred if the Division had been operating as a
separate entity.
CORPORATE EXPENSES
The results of operations include significant transactions with Teleflex
business units that are outside of the Division's operations. These transactions
involve functions and services (such as executive management, cash management,
tax administration, legal services and research funding) that were provided to
the Division by these other Teleflex units. The cost of these functions and
services has been allocated to the Division based on a predetermined percentage
of Division revenues. Teleflex management believes this allocation methodology
is reasonable. Such charges and allocations are not necessarily indicative of
the costs that would have been incurred by the Division as a separate entity.
Corporate charges were $1,180,000, $1,190,000 and $1,191,000 for the years ended
December 26, 1993, December 25, 1994 and December 31, 1995, respectively.
SALES AND PURCHASES
Sales by the Division to other divisions of Teleflex were $259,000, $212,000
and $45,000 for the years ending December 26, 1993, December 25, 1994 and
December 31, 1995, respectively. Purchases by the Division from other divisions
of Teleflex were $259,000, $245,000 and $335,000 for the years ending December
26, 1993, December 25, 1994 and December 31, 1995, respectively.
RENT
The Division rents its manufacturing facility from Teleflex under a
month-to-month net lease. Charges of approximately $156,000 including rent,
insurance and taxes were allocated to the Division for each of the three years
ended December 31, 1995.
4. BENEFITS PLANS
PENSIONS
Teleflex has defined benefit plans which provide retirement benefits to
eligible employees. The benefits for these plans are based on employee's years
of service and pay. Assumptions used in determining the actuarial present value
of benefit obligations reflect a weighted average discount rate of 7.8% in 1993,
8.0% in 1994 and 1995, and an investment return of 9% and a salary increase of
5%.
Pension costs have been assigned to the Division for all employees
participating in Plan 1039, a plan solely for Division hourly employees, in
accordance with actuarial calculations.
F-33
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. BENEFITS PLANS (CONTINUED)
Pension expense for Plan 1039 is summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during the year........ $ 145,800 $ 147,800 $ 147,600
Interest cost on projected benefit obligations......... 369,900 396,400 406,500
Actual return on plan assets........................... (135,100) (57,700) (740,320)
Net amortization and deferral.......................... (181,700) (289,500) 441,420
----------- ----------- -----------
$ 198,900 $ 197,000 $ 255,200
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Salaried employees participate in a company-wide pension plan. Allocation of
pension cost for salaried employees was made on the basis of proportional
payroll and aggregated $250,000, $269,000 and $320,000 for the years ended
December 26, 1993, December 25, 1994 and December 31, 1995, respectively. Such
costs are not necessarily indicative of the pension cost that would be incurred
if the Division operated as a separate entity.
OTHER
Teleflex has defined contribution 401(k) plans in which substantially all
employees of the Division may participate. Under these plans, employees may make
voluntary contributions of their compensation, which are partially matched by
Teleflex. Employer contributions for the years ended December 26, 1993, December
25, 1994 and December 31, 1995 were $100,000, $143,000 and $140,000,
respectively.
5. OTHER POSTRETIREMENT BENEFITS
Teleflex provides postretirement medical and other benefits to eligible
employees. Assumptions used in determining the expense and benefit obligations
include a weighted average discount rate of 7.8% in 1993 and 8.0% in 1994 and
1995 and an initial health care cost trend rate of 12% in 1993, 11% in 1994 and
10% in 1995, declining to 6% over a period of 5 years. Increasing the health
care cost trend rate by one percentage point would increase the postretirement
benefit expense by approximately $20,000.
Postretirement benefit expense has been assigned to the Division for all
hourly employees participating in Plan 1039, in accordance with actuarial
calculations. Postretirement benefit expense for this Plan allocated to the
Division is summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during the year........ $ 138,000 $ 90,000 $ 22,000
Interest cost on projected benefit obligations......... 541,000 438,000 301,000
Net amortization and deferral.......................... 307,000 272,000 144,000
----------- ----------- -----------
$ 986,000 $ 800,000 $ 467,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The reduction in the accumulated postretirement benefit expense resulted
from Plan amendments.
Salaried employees participate in a company-wide plan. Allocation of
postretirement benefit expense was made on the basis of employees headcount and
aggregated $128,000, $139,000 and $113,000 for the years ended December 26,
1993, December 25, 1994 and December 31, 1995, respectively. Such costs are not
necessarily indicative of the postretirement benefit cost that would be incurred
if the Division operated as a separate entity.
F-34
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CONCENTRATION OF CREDIT RISK AND OTHER INFORMATION
The Division's sales are made principally to commercial OEM customers,
airlines and the U.S. Government. Sales to the U.S. Government, directly and as
a subcontractor amounted to approximately $11,151,000, $9,559,000 and
$10,500,000 for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995, respectively.
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current
Federal........................................ $ 1,712,816 $ 1,858,581 $ 1,709,879
State.......................................... 713,065 760,674 567,967
------------- ------------- -------------
2,425,881 2,619,255 2,277,846
------------- ------------- -------------
Deferred
Federal........................................ (26,864) (973) 92,997
State.......................................... (11,030) 1,214 42,231
------------- ------------- -------------
(37,894) 241 135,228
------------- ------------- -------------
$ 2,387,987 $ 2,619,496 $ 2,413,074
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Deferred taxes primarily relate to additional costs capitalized in inventory
for tax accounting in accordance with S-263A of the income tax code, and because
of the use of accelerated depreciation for tax purposes.
The following is a reconciliation of the effective income tax rate with the
federal statutory income tax rate of 34%.
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Income tax expense at the statutory rate......... $ 1,934,905 $ 2,143,637 $ 2,050,423
State taxes, net of federal benefit.............. 463,343 502,090 396,657
Research credits................................. (23,861) (39,831) (47,605)
Other............................................ 13,600 13,600 13,599
------------- ------------- -------------
$ 2,387,987 $ 2,619,496 $ 2,413,074
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Division has various purchase commitments for materials, supplies and
items of permanent investment incident to the ordinary conduct of business. In
the aggregate, such commitments are not at prices in excess of current market.
The Division has entered into certain operating leases which require minimum
annual payments as follows: 1996 -- $240,000; 1997 -- $156,000; 1998 --
$100,000; 1999 -- $95,000 and 2000 -- $48,000. The total rental expense for all
operating leases was $80,000, $171,000 and $260,000 for the years ended December
26, 1993, December 25, 1994 and December 31, 1995, respectively. Certain
equipment leased by the Division is used by other Teleflex units which reimburse
the Division for their cost. Minimum annual payments for this equipment are as
follows: 1996 -- $100,000 and 1997 -- $33,000.
Teleflex is involved in a lawsuit in which a commissioned sales
representative alleges breach of contract by the Division. The Division reached
a settlement on May 14, 1996 in this lawsuit. The
F-35
<PAGE>
NORTH WALES CONTROLS AND QUADRANTS GROUP
(A DIVISION OF TELEFLEX INCORPORATED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
settlement required payment by the Division to the commissioned sales
representative of $550,000. The Division had previously accrued approximately
$430,000 in relation to this matter. No adjustment has been made to the
financial statements for the outcome of this settlement.
The United States Environmental Protection Agency notified Teleflex, as well
as six other entities, that it is potentially responsible for costs of
investigating and cleaning up a superfund site. The Division has received a
settlement proposal in a suit with the North Penn Water Authority (NPWA) in June
1996, relative to the same property. The Division may be required to make a
payment to NPWA of approximately $462,000. Teleflex has agreed to assume
liability, if any is incurred in resolving this issue. Total environmental
expenses, exclusive of allocated corporate expenses, recorded by the Division
were approximately $17,000, $65,000 and $186,000 for the years ended December
26, 1993, December 25, 1994 and December 31, 1995.
The Division is also subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
material adverse effect on the financial position, results of operations, or
cash flows of the Division.
F-36
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Advanced Materials Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Advanced
Materials Technologies, Inc. and subsidiary as of March 31, 1996 and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Advanced
Materials Technologies, Inc. and subsidiary at March 31, 1996, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
Phoenix, Arizona
July 5, 1996, except for Note 12 as to
which the date is July 31, 1996
F-37
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1996
-------------- JUNE 30,
1996
--------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 28,997 $ 310,917
Accounts receivable, less allowance for doubtful accounts of $35,000........... 3,961,012 4,617,173
Inventories.................................................................... 1,447,526 1,405,376
Other current assets........................................................... 246,214 15,080
-------------- --------------
Total current assets............................................................. 5,683,749 6,348,546
Property, plant and equipment, at cost:
Land........................................................................... 147,844 147,844
Building and leasehold improvements............................................ 1,058,682 1,104,097
Machinery and equipment........................................................ 4,126,342 4,625,202
Office equipment............................................................... 146,455 179,043
Transportation equipment....................................................... 74,598 74,598
-------------- --------------
5,553,921 6,130,784
Less accumulated depreciation and amortization................................... (1,438,980) (1,560,019)
-------------- --------------
4,114,941 4,570,765
Intangible assets, net........................................................... 861,339 840,881
Officer note receivable.......................................................... 199,541 192,316
Other assets..................................................................... 23,407 23,257
-------------- --------------
Total assets..................................................................... $ 10,882,977 $ 11,975,765
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit................................................................ $ 1,421,082 $ 1,422,645
Accounts payable............................................................... 880,402 552,519
Accrued expenses............................................................... 457,210 436,523
Income taxes payable........................................................... 352,364 1,191,364
Deferred income taxes.......................................................... 813,000 482,000
Current portion of long-term debt.............................................. 865,636 758,224
-------------- --------------
Total current liabilities........................................................ 4,789,694 4,843,275
Long-term debt, less current portion............................................. 3,142,199 3,197,988
Deferred income taxes............................................................ 382,000 410,000
Commitments...................................................................... -- --
Shareholders' equity:
Common stock, no par value, 1,000,000 shares authorized;
20,613 shares issued and outstanding.......................................... 131,193 131,193
Retained earnings.............................................................. 2,437,891 3,393,309
-------------- --------------
Total shareholders' equity....................................................... 2,569,084 3,524,502
-------------- --------------
Total liabilities and shareholders' equity....................................... $ 10,882,977 $ 11,975,765
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-38
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1996
--------------- THREE MONTHS
ENDED
JUNE 30, 1996
--------------
(UNAUDITED)
<S> <C> <C>
Net sales....................................................................... $ 17,035,936 $ 6,214,611
Cost of sales................................................................... 9,608,858 3,604,474
--------------- --------------
Gross profit.................................................................... 7,427,078 2,610,137
Selling, general and administrative expenses.................................... 5,612,344 926,509
--------------- --------------
Income from operations.......................................................... 1,814,734 1,683,628
Other income (expense):
Interest income............................................................... 19,286 1,490
Interest expense.............................................................. (270,992) (110,092)
Other......................................................................... 11,249 20,392
--------------- --------------
Total other expense............................................................. (240,457) (88,210)
--------------- --------------
Income before income taxes...................................................... 1,574,277 1,595,418
Provision for income taxes...................................................... 749,000 640,000
--------------- --------------
Net income...................................................................... $ 825,277 $ 955,418
--------------- --------------
--------------- --------------
</TABLE>
See accompanying notes.
F-39
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON SHARES
---------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Balances at April 1, 1995................................... 19,643 $ 19,643 $ 1,612,614 $ 1,632,257
Shares issued in connection with options exercised.......... 970 111,550 -- 111,550
Net income.................................................. -- -- 825,277 825,277
--------- ----------- ------------- -------------
Balances at March 31, 1996.................................. 20,613 131,193 2,437,891 2,569,084
Net income (unaudited)...................................... -- -- 955,418 955,418
--------- ----------- ------------- -------------
Balances at June 30, 1996 (unaudited)....................... 20,613 $ 131,193 $ 3,393,309 $ 3,524,502
--------- ----------- ------------- -------------
--------- ----------- ------------- -------------
</TABLE>
See accompanying notes.
F-40
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1996
--------------- THREE MONTHS
ENDED JUNE 30,
1996
--------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 825,277 $ 955,418
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization................................................. 314,305 141,497
Deferred income taxes (benefit)............................................... 351,682 (303,000)
Loss on disposal of assets.................................................... 8,250 --
Provision for doubtful accounts............................................... 17,527 --
Changes in assets and liabilities:
Accounts receivable......................................................... (1,828,656) (656,161)
Inventories................................................................. (1,066,206) 42,150
Prepaid expenses............................................................ (4,754) --
Other current assets........................................................ (191,320) 231,134
Accounts payable............................................................ 436,947 (327,883)
Accrued expenses............................................................ 80,021 (20,687)
Income taxes payable........................................................ 328,065 839,000
--------------- --------------
Net cash (used in) provided by operating activities............................. (728,862) 901,468
INVESTING ACTIVITIES
Purchases of property, plant and equipment...................................... (1,034,878) (576,863)
Proceeds from disposal of property, plant and equipment......................... 11,994 --
(Increase) decrease in deposits................................................. (9,554) 150
Acquisition of SPOA, net of cash acquired....................................... (761,221) --
--------------- --------------
Net cash used in investing activities........................................... (1,793,659) (576,713)
FINANCING ACTIVITIES
Net increase in lines of credit................................................. 1,215,194 1,563
Proceeds from long-term debt.................................................... 2,298,001 --
Payments of long-term debt...................................................... (431,416) (51,623)
(Increase) decrease in officer note receivable.................................. (199,541) 7,225
Decrease in officer note payable................................................ (678,383) --
--------------- --------------
Net cash provided by (used in) financing activities............................. 2,203,855 (42,835)
--------------- --------------
Net (decrease) increase in cash and cash equivalents............................ (318,666) 281,920
Cash and cash equivalents at beginning of period................................ 347,663 28,997
--------------- --------------
Cash and cash equivalents at end of period...................................... $ 28,997 $ 310,917
--------------- --------------
--------------- --------------
</TABLE>
See accompanying notes.
F-41
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Advanced Materials Technologies, Inc. (Company) and its wholly owned
subsidiary, Special Processes of Arizona, Inc., are in one line of business as a
repair operation of aircraft component parts used in the commercial airline
industry. The Company was incorporated in the State of Arizona in January 1984
and is a licensed FAA repair station.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. Significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined on the first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated on the basis of cost. Depreciation
and amortization are computed under the straight-line method over the estimated
useful lives of the assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Building and building improvements............................. 30 years
7 - 15
Machinery and equipment........................................ years
5 - 10
Office equipment............................................... years
Transportation equipment....................................... 5 years
</TABLE>
INTANGIBLES
Intangibles assets were acquired in connection with the acquisition of
Special Processes of Arizona, Inc. Intangible assets include a noncompete
agreement and FAA approvals. The assets are being amortized over their estimated
useful lives of 5 to 15 years. Accumulated amortization at March 31, 1996 and
June 30, 1996 was $14,452 and $34,910, respectively. Management periodically
evaluates the continuing value of its intangibles based upon the expected gross
margin on the related assets.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with Statement of Financial Accounting Standards No. 109 --
"Accounting for Income Taxes."
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and, accordingly,
recognizes no compensation expense for the stock option grants.
REVENUE RECOGNITION
Sales are recorded at the time of shipment.
F-42
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable, and borrowings under its
short-term revolving credit arrangements approximates their fair values. The
fair values of the Company's long-term debt are estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements, and the carrying amounts approximate
their fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. ACQUISITIONS
Effective January 31, 1996, the Company acquired the assets and assumed
certain liabilities of Special Processes of Arizona, Inc. (SPOA). Under the
terms of the agreement, the Company paid $764,564 in cash and issued a
promissory note in the amount of $675,128. The acquisition has been accounted
for using the purchase method of accounting; therefore, the accompanying
financial statements include the accounts of SPOA since the date of acquisition.
The purchase price was allocated to assets acquired based upon their fair market
values at the date of acquisition, as follows:
<TABLE>
<S> <C>
Cash and cash equivalents...................................... $ 3,343
Accounts receivable............................................ 416,275
Inventories.................................................... 93,359
Other current assets........................................... 17,626
Property, plant and equipment.................................. 725,000
Intangibles.................................................... 875,791
Line of credit................................................. (205,888)
Accounts payable............................................... (236,464)
Accrued expenses............................................... (21,462)
Long-term debt................................................. (227,888)
----------
$1,439,692
----------
----------
</TABLE>
Concurrent with the acquisition, the Company entered into a technical
consulting agreement with the former owner of SPOA for transition facilitation
services to be performed during February and March of 1996. The Company incurred
expense of $450,000 related to this agreement for the year ended March 31, 1996.
The results of operations of SPOA were not material when compared to the
Company.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
------------- -------------
<S> <C> <C>
Raw materials................................................... $ 152,288 $ 152,288
Work in process................................................. 1,295,238 1,253,088
------------- -------------
$ 1,447,526 $ 1,405,376
------------- -------------
------------- -------------
</TABLE>
F-43
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
4. LINES OF CREDIT
The Company has a revolving line of credit with maximum borrowings of the
lesser of $1,500,000 or 75 percent of eligible accounts receivable less a
borrowing base of $500,000. The revolving line of credit is personally
guaranteed by the majority shareholder of the company and collateralized by
substantially all receivables and equipment. The revolving line of credit bears
interest at prime plus 1 percent and matures July 1996. At March 31, 1996, and
June 30, 1996, the balance was $1,370,455 and $1,422,645, respectively, and
there were no available funds under the line of credit. The line of credit
agreement contains certain financial and other covenants for which the Company
was not in compliance as of March 31, 1996. The lines of credit were paid in
full subsequent to year-end as is discussed in Note 12.
SPOA has a revolving line of credit with maximum borrowings of the lesser of
$300,000 or 80 percent of eligible accounts receivable. The revolving line of
credit is collateralized by substantially all receivables and equipment. The
revolving line of credit bears interest at prime plus 2 percent. This line of
credit had a balance of $50,627 at March 31, 1996 and was paid in full and was
not renewed in April 1996.
The weighted average interest rates in short-term borrowings as of March 31,
1996 was approximately 9.25 percent.
F-44
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
------------- -------------
<S> <C> <C>
Long-term debt consists of the following:
Note payable to a bank, collateralized by a deed of trust, payable in
monthly installments of $16,667, plus interest at prime plus 1.0 percent
until December 1998. Guaranteed by the majority shareholder.............. $ 1,950,000 $ 1,900,000
Note payable to an individual, collateralized by substantially all assets
of SPOA, payable in annual installments of $261,973 including interest at
8 percent until January 1999. Guaranteed by the majority shareholder..... 675,128 675,128
Note payable to a mortgage company, collateralized by deed of trust,
payable in monthly installments of $3,660 including interest at 10.5
percent until March 1997, at which time the remaining balance is expected
to be refinanced with bank debt at prime over 60 months; the debt
maturities reflect the expected refinancing terms........................ 371,023 369,771
Note payable to a bank, collateralized by equipment, payable in monthly
installments of $7,525, plus interest at prime until December 1999.
Guaranteed by the majority shareholder................................... 335,636 312,061
Note payable to a bank, collateralized by equipment, payable in monthly
installments of $3,457 including interest at prime until June 2001.
Guaranteed by the majority shareholder................................... 169,000 169,000
Note payable to a bank, payable in monthly installments of $4,444, plus
interest at prime plus 2.5 percent until December 1996, at which time the
remaining balance is due. Guaranteed by the majority shareholder......... 141,399 --
Note payable to a bank, collateralized by equipment, payable in monthly
installments of $4,059 including interest at 8.15 percent until December
1998. Guaranteed by the majority shareholder............................. 116,392 105,555
Other..................................................................... 249,257 424,697
------------- -------------
4,007,835 3,956,212
Less current portion...................................................... 865,636 758,224
------------- -------------
$ 3,142,199 $ 3,197,988
------------- -------------
------------- -------------
</TABLE>
Maturities of long-term debt for the five years succeeding March 31, 1996
are $865,636 in 1997, $677,774 in 1998, $1,976,891 in 1999, $148,733 in 2000,
and $338,801 in 2001.
Certain notes payable contain various covenants pertaining to the
maintenance of working capital and net worth for which the Company was not in
compliance. The notes are classified in accordance with these scheduled
maturities given that such debt was paid in full subsequent to year-end as is
discussed in Note 12.
F-45
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
Interest paid during the year ended March 31, 1996 and the three months
ended June 30, 1996 was approximately $171,000 and $107,000, respectively.
6. INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation.................................... $ 427,000 $ 455,000
Inventory basis differences................................... 540,000 209,000
Accounts receivable basis differences......................... 348,000 348,000
------------- -------------
Total deferred tax liabilities:................................. 1,315,000 1,012,000
Deferred tax assets:
Receivables and allowances.................................... 15,000 15,000
Accrued vacation.............................................. 58,000 58,000
Other......................................................... 47,000 47,000
------------- -------------
Total deferred tax assets....................................... 120,000 120,000
------------- -------------
Net deferred tax liability...................................... $ 1,195,000 $ 892,000
------------- -------------
------------- -------------
</TABLE>
Significant components of the federal and state income tax expense are:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
----------- ------------
<S> <C> <C>
Current:
Federal.......................................................... $ 320,000 $ 730,000
State............................................................ 83,000 213,000
----------- ------------
Total current...................................................... 403,000 943,000
Deferred:
Federal.......................................................... 275,000 (235,000)
State............................................................ 71,000 (68,000)
----------- ------------
Total deferred..................................................... 346,000 (303,000)
----------- ------------
$ 749,000 $ 640,000
----------- ------------
----------- ------------
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the income tax expense effective rate is as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
--------------- -------------
<S> <C> <C>
Tax at U.S. statutory rates............................................ 34% 34%
State income taxes net of federal benefit.............................. 6 6
Nondeductible expenses................................................. 6 --
Other.................................................................. 1 --
-- --
47% 40%
-- --
-- --
</TABLE>
F-46
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
Total income tax payments, net of any refunds received, during the year
ended March 31, 1996 and the three months ended June 30, 1996 were approximately
$175,000 and $104,000, respectively.
7. STOCK OPTION PLAN
The Company has a stock option plan which covers directors, officers and key
employees of the Company. In August of 1993 the Company granted a key employee
options to purchase a total of 2,425 shares at $115 per share. The exercise
price of the options granted was at a price that approximated the fair value of
the common shares at the date of grant. The options are exercisable in five
equal annual options of 485 shares. All options expire six years after the date
of grant. Options to purchase 970 shares were exercised for $111,550 during
1996. No cash was received under the exercise of these options as the amount due
was offset against certain royalties payable due the option holder. No options
were exercisable at March 31, 1996 and June 30, 1996, respectively.
8. SIGNIFICANT CUSTOMERS
The Company's significant customers are businesses in the aerospace
components industry. Credit losses have been provided for in the financial
statements and have been within management's expectations. The Company performs
ongoing credit evaluations of its customers' financial condition, and generally
does not require collateral.
Sales to one customer accounted for approximately 62 percent and 56 percent
of total sales for the year ended March 31, 1996 and the period ended June 30,
1996, respectively.
9. COMMITMENTS
LEASE COMMITMENTS
The Company leases real property, vehicles and office equipment under
noncancelable operating leases, including buildings leased from the majority
shareholder. Certain leases have rent escalation clauses and renewal options up
to ten years. Future minimum payments under the noncancelable operating leases
with terms in excess of one year consisted of the following at March 31, 1996:
<TABLE>
<S> <C>
1997........................................................... $ 172,000
1998........................................................... 163,000
1999........................................................... 163,000
2000........................................................... 157,000
2001........................................................... 157,000
Thereafter..................................................... 905,000
----------
$1,717,000
----------
----------
</TABLE>
Rental expense under the noncancelable leases was approximately $76,000 and
$36,000 for the year ended March 31, 1996 and the three months ended June 30,
1996, respectively, including approximately $26,000 and $31,000 in rental
expenses paid to the majority shareholder.
ROYALTY AGREEMENT
During 1993, the Company formalized a royalty agreement with certain
participants regarding the development of technical processes. The participants
are compensated 12 percent, in aggregate, of gross revenues generated by the
component part number for which the technical process was utilized. The royalty
is paid based on revenues generated in the first eighteen months of each covered
part numbers
F-47
<PAGE>
ADVANCED MATERIALS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED)
9. COMMITMENTS (CONTINUED)
existence. Royalty expense under this agreement was approximately $534,000 and
$127,000 for the year ended March 31, 1996 and the three months ended June 30,
1996, respectively, of which approximately $358,000 and $127,000 was paid to the
Company's majority shareholder.
10. BENEFIT PLAN
The Company sponsors a defined contribution benefit plan covering employees
who meet specified age and service requirements. The Company contributes an
amount equal to 50 percent of each participant's contribution, not to exceed 6
percent of the employees salary per year per participant. The Company
contributed and expensed approximately $43,000 and $12,000 during the year ended
March 31, 1996 and the three months ended June 30, 1996, respectively.
11. RELATED PARTY TRANSACTIONS
During 1996, the Company incurred $2,500,000 of debt from a bank for which
the proceeds were advanced to its majority shareholder as an officer note
receivable. The Company also paid a bonus of $2,507,500 to the same officer
relating to improving operating results of the business and reduced the officer
note receivable by that amount. The outstanding balance on the officer note
receivable is unsecured, bears interest at 9.5 percent and is due on demand.
12. SUBSEQUENT EVENT
Subsequent to March 31, 1996, a letter of intent was signed by the majority
shareholder for an unrelated third party to acquire all of the outstanding stock
of the Company for an estimated price of approximately $7,500,000 in cash. On
July 31, 1996, the Company completed the sale of its stock to The Triumph Group
Holdings, Inc. at which time funds were advanced to extinguish substantially all
long-term debt.
F-48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 9
Historical Background.......................... 13
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Financial Data........................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22
Business....................................... 30
Management..................................... 39
Certain Transactions........................... 43
Principal Stockholders......................... 44
Description of Capital Stock................... 45
Direct Sale.................................... 46
Shares Eligible for Future Sale................ 47
Underwriting................................... 48
Legal Matters.................................. 49
Experts........................................ 49
Additional Information......................... 49
Index to Financial Statements.................. F-1
</TABLE>
--------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,375,000 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
------------
PROSPECTUS
------------
ALEX. BROWN & SONS
INCORPORATED
DILLON, READ & CO. INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated amount of various expenses in
connection with the sale and distribution of the securities being registered:
<TABLE>
<S> <C>
SEC registration fee......................................... $17,728.45
NASD filing fee.............................................. 5,675.00
NYSE filing fee.............................................. *
Printing and engraving expenses.............................. *
Legal fees and expenses (including blue sky fees and
expenses)................................................... *
Accounting fees and expenses................................. *
Transfer agent fees.......................................... *
Miscellaneous................................................ *
-------------
Total........................................................ $1,000,000.00
-------------
-------------
</TABLE>
- --------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of the Registrant provide for indemnification of directors and
officers in accordance with indemnification provisions of the Delaware General
Corporation Law. The Delaware statute permits indemnification of directors and
officers of a corporation under certain conditions and subject to certain
limitations.
The Registrant's Certificate of Incorporation, as amended, provides that,
subject to certain limitations, no director shall be personally liable to the
Registrant or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following sales of securities of the Company, including its
subsidiaries, took place on the dates indicated (transactions shown are on a
pre-Stock Split basis):
On May 9, 1995, the Company sold 400 shares of Class A Common Stock to the
president of Triumph Air Repair for $52.325 per share and 14% JSDs in the
aggregate principal amount of $28,818 which bear interest at the rate of 14% per
annum and mature on December 31, 2003.
On January 23, 1996, TCI, a subsidiary of the Company, in connection with
the acquisition of TCI by the Company, sold 2,150 shares of its common stock to
one corporation for $10.00 per share and 10.5% JSDs in the aggregate principal
amount of $344,000 which bear interest at the rate of 10.5% per annum and mature
in two equal installments on December 31, 2002 and 2003 and sold an aggregate of
2,850 shares of its common stock and $416,000 aggregate principal amount of such
10.5% JSDs to five employees of TCI.
On January 23, 1996, the Company issued a subordinated promissory note in
connection with its acquisition of TCI in the aggregate principal amount of
$5,500,000 which accrues interest at the rate of 10.5% per annum and matures in
two equal installments on December 31, 2002 and 2003.
The foregoing transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
4 Form of certificate evidencing Common Stock of the Company.*
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.*
10.1 1996 Stock Option Plan.*
10.2 Non-Employee Directors' Plan*
10.3 Credit Agreement with PNC Bank, N.A. dated July 19, 1996.
10.4 Guaranty of the Company to PNC Bank, N.A. dated July 19, 1996.
10.5 Purchase Agreement dated as of July 22, 1993 between the Company and Citicorp Venture Capital, Ltd.
10.6 Subordinated Promissory Note dated June 1, 1993 payable to MDR Corporation, as amended.
10.7 Stockholders Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd.,
World Equity Partners, L.P. and certain members of management of the Company, as amended on May 9,
1995.
10.8 Registration Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd.,
World Equity Partners, L.P. and certain members of management of the Company.
10.9 Warrant dated July 22, 1993 issued to World Equity Partners, L.P.
10.10 Warrant Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd. and
World Equity Partners, L.P.
10.11 Asset Purchase Agreement dated as of December 31, 1995 among the Company, Triumph Control Systems,
Inc. and Teleflex Incorporated.
10.12 Subordinated Promissory Note dated December 31, 1995 payable to Teleflex Incorporated.
10.13 Stock Purchase Agreement dated as of July 31, 1996 among The Triumph Group Holdings, Inc., Advanced
Materials Technologies Inc. and certain members of management of Advanced Materials Technologies
Inc.
10.14 Executive Securities Agreement dated July 31, 1996 between the Company and Jay Donkersloot.
10.15 Non-Competition Agreement dated July 31, 1996 between the Company and Jay Donkersloot.
10.16 Note Modification Agreement dated December 31, 1995 between the Company and MDR Corporation
10.17 Executive Stock Agreement dated as of May 9, 1995 between the Company and John M. Brasch
11.1 Statements re: computations of per share earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).*
27 Financial Data Schedule.
</TABLE>
- --------------
* To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names required by the underwriter to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Chester, Commonwealth
of Pennsylvania, on August 22, 1996.
TRIUMPH GROUP, INC.
By: ________/s/ RICHARD C. ILL________
Richard C. Ill
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ RICHARD C. ILL President, Chief Executive August 22, 1996
Richard C. Ill Officer and Director
Senior Vice President, Chief
/s/ JOHN R. BARTHOLDSON Financial Officer, Treasurer August 22, 1996
John R. Bartholdson and Director
/s/ RICHARD C. GOZON Director August 22, 1996
Richard C. Gozon
/s/CLAUDE F. KRONK Director August 22, 1996
Claude F. Kronk
/s/ JOSEPH M. SILVESTRI Director August 22, 1996
Joseph M. Silvestri
/s/ MICHAEL A. DELANEY Director August 22, 1996
Michael A. Delaney
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
- --------- -----
<S> <C> <C>
1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
4 Form of certificate evidencing Common Stock of the Company.*
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.*
10.1 1996 Stock Option Plan.*
10.2 Non-Employee Directors' Plan*
10.3 Credit Agreement with PNC Bank, N.A. dated July 19, 1996.
10.4 Guaranty of the Company to PNC Bank, N.A. dated July 19, 1996.
10.5 Purchase Agreement dated as of July 22, 1993 between the Company and Citicorp Venture Capital,
Ltd.
10.6 Subordinated Promissory Note dated June 1, 1993 payable to MDR Corporation.
10.7 Stockholders Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital,
Ltd., World Equity Partners, L.P. and certain members of management of the Company, as amended
on May 9, 1995.
10.8 Registration Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital,
Ltd., World Equity Partners, L.P. and certain members of management of the Company.
10.9 Warrant dated July 22, 1993 issued to World Equity Partners, L.P.
10.10 Warrant Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd.
and World Equity Partners, L.P.
10.11 Asset Purchase Agreement dated as of December 31, 1995 among the Company, Triumph Control
Systems, Inc. and Teleflex Incorporated.
10.12 Subordinated Promissory Note dated December 31, 1995 payable to Teleflex Incorporated.
10.13 Stock Purchase Agreement dated as of July 31, 1996 among The Triumph Group Holdings, Inc.,
Advanced Materials Technologies, Inc. and certain members of management of Advanced Materials
Technologies, Inc.
10.14 Executive Securities Agreement dated July 31, 1996 between the Company and Jay Donkersloot.
10.15 Non-Competition Agreement dated July 31, 1996 between the Company and Jay Donkersloot.
10.16 Note Modification Agreement dated December 31, 1995 between the Company and MDR Corporation
10.17 Executive Stock Agreement dated as of May 9, 1995 between the Company and John M. Brasch
11.1 Statements re: computations of per share earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).*
27 Financial Data Schedule.
</TABLE>
- --------------
* To be filed by amendment.
<PAGE>
2,375,000 SHARES
TRIUMPH GROUP, INC.
COMMON STOCK
($.001 PAR VALUE)
UNDERWRITING AGREEMENT
, 1996
ALEX. BROWN & SONS INCORPORATED
DILLON, READ & CO. INC.
As Representatives of the Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Triumph Group, Inc., a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as representatives (the "Representatives") an aggregate
of 2,375,000 shares of the Company's Common Stock, $.001 par value (the "Firm
Shares"). The respective amounts of the Firm Shares to be so purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Company also proposes to sell at the Underwriters' option an aggregate of up
to 375,000 additional shares of the Company's Common Stock (the "Option Shares")
as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
PRINCIPLE SHAREHOLDERS.
(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b)
<PAGE>
of the Act, herein referred to as the "Registration Statement," which shall be
deemed to include all information omitted therefrom in reliance upon Rule 430A
and contained in the Prospectus referred to below, has become effective under
the Act and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. "Prospectus" means (a) the form of
prospectus first filed with the Commission pursuant to Rule 424(b) or (b) the
last preliminary prospectus included in the Registration Statement filed prior
to the time it becomes effective or filed pursuant to Rule 424(a) under the Act
that is delivered by the Company to the Underwriters for delivery to purchasers
of the Shares, together with the term sheet or abbreviated term sheet filed with
the Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries
of the Company as listed in Exhibit 21 to Item 16(a) of the Registration
Statement (collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to own or
lease its properties and conduct its business as described in the Registration
Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of
the Company. The Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification. The outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and to the extent set forth on Exhibit A hereto are owned by
the Company or another Subsidiary free and clear of all liens, encumbrances and
equities and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares to be issued and sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common Stock.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the jurisdiction of
the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform, to the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.
<PAGE>
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
company. The pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(vii) Ernst & Young LLP, who have certified [certain of] the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.
(ix) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all federal, state,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the financial statements of the
Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Company and its Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into or any material transaction that is probable
of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its respective Certificate of Incorporation or charter, as
applicable, or By-Laws or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default is of material
<PAGE>
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery
of this Agreement and the consummation of the transactions herein contemplated
and the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Certificate of Incorporation or
By-Laws of the Company or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company.
(xv) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(xvi) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940 (the "1940 Act") and the rules and regulations of the Commission
thereunder.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(xix) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under
<PAGE>
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.
(xx) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or incorporated by
reference in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(xxi) The Company and its Subsidiaries (a) are in compliance with
any and all material applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (b) have no properties listed or proposed
for listing on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and neither
the Company nor any Subsidiary has received written notification of any pending
or threatened claims for personal injury or property damage with respect thereto
or notice that it or they is a potentially responsible person ("PRP") for
environmental remediation costs, (c) have received all material permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses, and (d) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, designation as a CERCLA site or as a PRP,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not have a material effect on the Company or any of its Subsidiaries.
(xxii) The Shares have been approved for listing on the New York
Stock Exchange.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment and
delivery are to be made at the offices of Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on
the third business day after the date of this Agreement or at such other time
and date not later than five business days thereafter as you and the Company
shall agree upon, such time and date being herein referred to as the "Closing
Date." (As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York are open for
business and are not permitted by law or executive order to be closed.) The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one business day prior to the
Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by
<PAGE>
you, as Representatives of the several Underwriters, to the Company setting
forth the number of Option Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Option Shares
are to be registered and the time and date at which such certificates are to be
delivered. The time and date at which certificates for Option Shares are to be
delivered shall be determined by the Representatives but shall not be earlier
than three nor later than 10 full business days after the exercise of such
option, nor in any event prior to the Closing Date (such time and date being
herein referred to as the "Option Closing Date"). If the date of exercise of
the option is three or more days before the Closing Date, the notice of exercise
shall set the Closing Date as the Option Closing Date. The number of Option
Shares to be purchased by each Underwriter shall be in the same proportion to
the total number of Option Shares being purchased as the number of Firm Shares
being purchased by such Underwriter bears to 2,500,000, adjusted by you in such
manner as to avoid fractional shares. The option with respect to the Option
Shares granted hereunder may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters. You, as Representatives of the
several Underwriters, may cancel such option at any time prior to its expiration
by giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date in New York Clearing House funds by certified or bank
cashier's check drawn to the order of the Company against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably
<PAGE>
have designated in writing and will make such applications, file such documents,
and furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company will,
from time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications in effect
for so long a period as the Representatives may reasonably request for
distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of 180 days after the
date of this Agreement, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of Alex. Brown & Sons Incorporated.
(ix) The Company will use its best efforts to cause the Shares
to be listed on the New York Stock Exchange.
(x) The Company has caused each officer and director and the
principal shareholders of the Company to furnish to you, on or prior to the date
of this agreement, a letter or letters, in
<PAGE>
form and substance satisfactory to the Underwriters, pursuant to which each such
person shall agree not to offer, sell, sell short or otherwise dispose of any
shares of Common Stock of the Company or other capital stock of the Company, or
any other securities convertible, exchangeable or exercisable for Common Shares
or derivative of Common Shares owned by such person or request the registration
for the offer or sale of any of the foregoing (or as to which such person has
the right to direct the disposition of) for a period of 180 days after the date
of this Agreement, directly or indirectly, except with the prior written consent
of Alex. Brown & Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the NASD of the terms of the sale of the Shares; the Listing
Fee of the New York Stock Exchange; and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws. The
Company agrees to pay all costs and expenses of the Underwriters, including the
fees and disbursements of counsel for the Underwriters, incident to the offer
and sale of directed shares of the Common Stock by the Underwriters to employees
and persons having business relationships with the Company and its Subsidiaries.
The Company shall not, however, be required to pay for any of the Underwriters
expenses (other than those related to qualification under NASD regulation and
State securities or Blue Sky laws) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to Section
11 hereof, or by reason of any failure, refusal or inability on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement
or to comply with any of the terms hereof on its part to be performed, unless
such failure to satisfy said condition or to comply with said terms be due to
the default or omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or
<PAGE>
the Option Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by the
Company of its covenants and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Ballard Spahr
Andrews & Ingersoll, counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares
of capital stock of each of the Subsidiaries is owned free and clear of all
liens, encumbrances and equities and claims, and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of ownership
interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable; all of the Shares conform to the
description thereof contained in the Prospectus; the certificates for the
Shares, assuming they are in the form filed with the Commission, are in due and
proper form; the shares of Common Stock, including the Option Shares, if any, to
be sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of
<PAGE>
the Company or any other person has the right, contractual or otherwise, which
has not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules).
(vi) The statements under the captions "Historical Background,"
"Business-Environmental Matters," "Management," "Certain Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale" in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all material respects
the information called for with respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or By-laws of the
Company, or any agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
In rendering such opinion Ballard Spahr Andrews & Ingersoll may rely
as to matters governed by the laws of states other than the corporate law of the
States of Delaware and Pennsylvania or
<PAGE>
Federal laws on local counsel in such jurisdictions, provided that in each case
Ballard Spahr Andrews & Ingersoll shall state that they believe that they and
the Underwriters are justified in relying on such other counsel. In addition to
the matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Ballard Spahr
Andrews & Ingersoll may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(c) The Representatives shall have received from Wilmer, Cutler &
Pickering, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv) and (ix) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Wilmer, Cutler & Pickering may rely as to all matters governed other than by the
laws of the State of Maryland or Federal laws on the opinion of counsel referred
to in Paragraph (b) of this Section 6. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Wilmer,
Cutler & Pickering may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) The Representatives shall have received at or prior to the
Closing Date from Wilmer, Cutler & Pickering a memorandum or summary, in form
and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(e) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the President and Chief Executive Officer and the Senior Vice
<PAGE>
President and Chief Financial Officer of the Company to the effect that, as of
the Closing Date or the Option Closing Date, as the case may be, each of them
severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
(g) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
listing on the New York Stock Exchange.
(i) The Lockup Agreements described in Section 4 (x) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Wilmer, Cutler &
Pickering, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
<PAGE>
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on
<PAGE>
account of the provisions of Section 8(a) or (b). In case any such proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition,
the indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or
<PAGE>
claim. Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company, you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and
upon the terms set forth herein, the Firm Shares or Option Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
<PAGE>
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
David Bannister, Managing Director, with a copy to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
General Counsel; if to the Company to Richard C. Ill, President and Chief
Executive Officer, Four Glenhardie Corporate Center, 1255 Drummers Lane, Suite
200, Wayne, Pennsylvania 19087.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading
of the Company's common stock by the Commission on the New York Stock Exchange,
or (viii) the taking of any action by any governmental body or agency in respect
of its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page
<PAGE>
(insofar as such information relates to the Underwriters), legends required by
Item 502(d) of Regulation S-K under the Act and the information under the
caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the Company
or its directors or officers and (c) delivery of and payment for the Shares
under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
TRIUMPH GROUP, INC.
By
----------------------------------------
President and Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
DILLON, READ & CO. INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
------------------------------------
Authorized Officer
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Alex. Brown & Sons Incorporated
Dillon, Read & Co., Inc.
__________
Total 2,375,000
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
THE TRIUMPH GROUP HOLDINGS, INC.
The Triumph Group Holdings, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of Delaware, DOES HEREBY
CERTIFY:
1. The corporation was incorporated in Delaware on
March 11, 1993 under the name Triumph Holdings, Inc.
2. This Restated Certificate of Incorporation restates and
integrates but does not further amend the Certificate of Incorporation, as
amended, of the Corporation, and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of Incorporation.
3. This Restated Certificate of Incorporation was duly adopted by
the Board of Directors of the corporation without a vote of the stockholders in
accordance with the provisions of Section 245 of the Delaware General
Corporation Law.
4. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby integrated and restated to read as herein set
forth in full:
FIRST: The name of the Corporation is The Triumph Group Holdings,
Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, the City of
Wilmington, County of New Castle 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
<PAGE>
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH:
PART A. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 200,589 shares, consisting of:
(1) 30,575 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock");
(2) 100,007 shares of Class A Common Stock, par value $.001 per share
(the "Class A Common");
(3) 70,000 shares of Class B Common Stock, par value $.001 per share
(the "Class B Common"); and
(4) 7 shares of Class C Common Stock, par value $.001 per share (the
"Class Common").
The Class A Common, the Class B Common and the Class C Common are
hereafter collectively referred to as the "Common Stock." The Common Stock and
the Preferred Stock are hereafter collectively referred to as the "Stock."
No amendment or waiver of any provision of this Part A shall be
effective without the prior approval of the holders of a majority of the then
outstanding Common Stock voting as a single class.
PART B. PREFERRED STOCK
The Preferred Stock shall have the preferences, rights and limitations
set forth herein. Certain capitalized terms used in this Part B are defined in
Section 7 hereof.
Section 1. DIVIDENDS.
1A. GENERAL OBLIGATION. When and as declared by the Corporation's
board of directors and to the extent permitted under the General Corporation Law
of Delaware, the Corporation shall pay preferential dividends to the holders of
shares of the Preferred Stock (each, a "Preferred Share") as provided in this
Section 1. Except as otherwise provided herein, dividends on each Preferred
Share shall accrue on a daily basis at the rate of
2
<PAGE>
14% per annum of the sum of the Liquidation Value thereof plus all accumulated
and unpaid dividends thereon, from and including the date of issuance of such
Preferred Share to and including the date on which the Liquidation Value of such
Preferred Share (plus all accrued and unpaid dividends thereon) is paid. Such
dividends shall accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends. Such dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividend, distribution or payment
may be made with respect to any Junior Securities. The date on which the
Corporation initially issues any Preferred Share shall be deemed to be its "date
of issuance" regardless of the number of times transfer of such Preferred Share
is made on the stock records maintained by or for the Corporation and regardless
of the number of certificates which may be issued to evidence such Preferred
Share.
1B. DIVIDEND REFERENCE DATES. To the extent not paid on March 31,
June 30, September 30 and December 31 of each year, beginning September 30, 1993
(the "Dividend Reference Dates"), all dividends which have accrued on each
Preferred Share outstanding during the three-month period (or other period in
the case of the initial Dividend Reference Date on which such Preferred Share is
outstanding) ending upon each such Dividend Reference Date shall be accumulated
and shall remain accrued, unpaid and accumulated dividends with respect to such
Preferred Share until paid.
1C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Preferred Stock, such payment
shall be distributed ratably among the holders of the Preferred Stock based upon
the aggregate accrued but unpaid dividends on the Preferred Shares held by each
such holder.
Section 2. LIQUIDATION, DISSOLUTION OR WINDING UP.
If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official of the Corporation or any substantial part of its property, or
make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the
3
<PAGE>
Federal or state bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or if the Corporation shall otherwise
liquidate, dissolve or wind up, each holder of Preferred Stock shall be entitled
to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation Value of (plus
all accrued and unpaid dividends on) all Preferred Shares held by such holder,
and the holders of Preferred Stock shall not be entitled to any further payment.
If upon any such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Preferred Stock
are insufficient to permit payment to such holders of the aggregate amount of
the Liquidation Value (plus all accrued and unpaid dividends) which they are
entitled to be paid, then the entire assets to be distributed shall be
distributed ratably among such holders based upon the aggregate Liquidation
Value of (plus all accrued and unpaid dividends on) the Preferred Stock held by
each such holder. Prior to the time of any liquidation, dissolution or winding
up of the Corporation, the Corporation shall declare for payment all accrued and
unpaid dividends with respect to the Preferred Stock. The Corporation shall
mail written notice of such liquidation, dissolution or winding up, not less
than 60 days prior to the payment date stated therein, to each record holder of
Preferred Stock. Neither the consolidation or merger of the Corporation into
or with any other entity or entities, nor the sale or transfer by the
Corporation of all or any part of its assets, nor the reduction of the capital
stock of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 2.
Section 3. REDEMPTIONS.
3A. SCHEDULED REDEMPTION. On the later to occur of (i) July 21, 2004
or (ii) 91 days following the Senior Debt Retirement Date (the "Scheduled
Redemption Date"), the Corporation shall redeem all of the Preferred Shares then
outstanding for an amount equal to the lesser of (x) 40% of the Company's Equity
Value or (y) the Liquidation Value thereof plus all accrued and unpaid dividends
thereon.
3B. OPTIONAL REDEMPTIONS. The Corporation may at any time redeem all
or any portion of Preferred Stock then outstanding. Redemptions made pursuant
to this paragraph shall not relieve the Corporation of its obligation on the
Scheduled Redemption Date to redeem all Preferred Shares which are then
outstanding.
3C. REDEMPTION PAYMENT. For each Preferred Share which is to be
redeemed, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender
4
<PAGE>
by such holder at the Corporation's principal office of the certificate
representing such Preferred Share) an amount in immediately available funds
equal to the Liquidation Value of such Preferred Share plus all accrued and
unpaid dividends thereon (other than pursuant to paragraph 3A above, which
redemption shall be made at the price specified in paragraph 3A above). If the
funds of the Corporation legally available for redemption of Preferred Shares on
any Redemption Date are insufficient to redeem the total number of Preferred
Shares to be redeemed on such date, those funds which are legally available for
such purpose shall be used to redeem the maximum number of Preferred Shares
which may be so redeemed ratably among the holders of the Preferred Shares to be
redeemed based upon the aggregate Liquidation Value of such Preferred Shares
held by each such holder plus all accrued and unpaid dividends thereon. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of Preferred Shares, such funds shall immediately be used to
redeem the balance of the Preferred Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed. Prior
to the time of any redemption of Preferred Stock, the Corporation shall declare
for payment all accrued and unpaid dividends with respect to the Preferred
Shares which are to be redeemed.
3D. NOTICE OF REDEMPTION. The Corporation shall mail written notice
of each redemption of Preferred Stock to each record holder of Preferred Stock
not more than 60 nor less than 30 days prior to the date on which such
redemption is to be made. In case fewer than the total number of Preferred
Shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Preferred Shares shall be issued to the
holder thereof without cost to such holder within three business days after
surrender of the certificate representing the redeemed Preferred Shares.
3E. DETERMINATION OF THE NUMBER OF EACH HOLDER'S PREFERRED SHARES TO
BE REDEEMED. The number of Preferred Shares to be redeemed from each holder
thereof in redemptions hereunder shall be determined by multiplying the total
number of Preferred Shares to be redeemed times a fraction, the numerator of
which shall be the total number of Preferred Shares then held by such holder and
the denominator of which shall be the total number of Preferred Shares then
outstanding.
3F. DIVIDENDS AFTER REDEMPTION DATE. No Preferred Share is entitled
to any dividends accruing after the date on which the Liquidation Value of such
Preferred Share plus all accrued and unpaid dividends thereon is paid to the
holder thereof. On such date all rights of the holder of such Preferred
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Share shall cease, and such Preferred Share shall not be deemed to be
outstanding.
3G. REDEEMED OR OTHERWISE ACQUIRED PREFERRED SHARES. Any Preferred
Shares which are redeemed or otherwise acquired by the Corporation shall be
cancelled and shall not be reissued, sold or transferred.
3H. SPECIAL REDEMPTIONS.
(i) If a Change in Control has occurred or the Corporation
obtains knowledge that a Change in Control is to occur or if there is a
cessation of the Corporation's business (a "Cessation"), the Corporation
shall give prompt written notice of such Change in Control or Cessation
describing in reasonable detail the definitive terms and date of
consummation thereof to each holder of Preferred Stock, but in any event
such notice shall not be given later than five days after the occurrence of
such Change in Control or Cessation. The holder or holders of a majority
of the Preferred Stock then outstanding may require the Corporation to
redeem all or any portion of the Preferred Stock owned by such holder or
holders at a price per Preferred Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon) by giving written
notice to the Corporation of such election prior to the later of (a) the
21st day after receipt of the Corporation's notice of such Change in
Control or Cessation and (b) the fifth day prior to the consummation of the
Change in Control or Cessation (the "Expiration Date"). The Corporation
shall give prompt written notice of any such election to all other holders
of Preferred Stock within five days after the receipt thereof, and each
such holder shall have until the later of (a) the Expiration Date or (b)
the tenth day after receipt of such second notice to request redemption (by
giving written notice to the Corporation) of all or any portion of the
Preferred Stock owned by such holder. Upon receipt of such election(s),
the Corporation shall be obligated to redeem the aggregate number of
Preferred Shares specified therein on the later of (a) the occurrence of
the Change in Control or Cessation or (b) five days after the Corporation's
receipt of such election(s). If in any case a proposed Change in Control
or Cessation does not occur, all requests for redemption in connection
therewith shall be automatically rescinded.
(ii) Redemptions made pursuant to this paragraph 3H shall not
relieve the Corporation of its obligation on the Scheduled Redemption Date
to redeem all Preferred Stock which is then outstanding.
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3I. SENIOR DEBT. Notwithstanding anything to the contrary contained
herein, no Preferred Stock may be redeemed by the Corporation prior to the
repayment in full of the Senior Debt.
Section 4. EVENTS OF NONCOMPLIANCE.
4A. DEFINITION. An Event of Noncompliance shall be deemed to have
occurred if:
(i) the Corporation fails to make any redemption payment with
respect to the Preferred Stock which it is obligated to make hereunder and
which it is not prohibited from making under Section 3I above; or
(ii) the Corporation makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Corporation bankrupt or insolvent; or any order for relief with respect
to the Corporation is entered under the Federal Bankruptcy Code; or the
Corporation petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Corporation or of any
substantial part of the assets of the Corporation, or commences any
proceeding relating to the Corporation under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction; or any such petition or application
is filed, or any such proceeding is commenced, against the Corporation and
either (a) the Corporation by any act indicates its approval thereof,
consent thereto or acquiescence therein or (b) such petition, application
or proceeding is not dismissed within 60 days.
4B. CONSEQUENCES OF CERTAIN EVENTS OF NONCOMPLIANCE.
(i) If an Event of Noncompliance has occurred, the holder or
holders of a majority of the Preferred Stock then outstanding may demand
(by written notice delivered to the Corporation) immediate redemption of
all or any portion of the Preferred Stock owned by such holder or holders
at a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon). Subject to the prior repayment in
full of Senior Debt, the Corporation shall redeem all Preferred Stock as to
which rights under this paragraph have been exercised within 15 days after
receipt of the initial demand for redemption.
(ii) If an Event of Noncompliance has occurred, each holder of
Preferred Stock shall also have any other
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rights which such holder is entitled to under any contract or agreement at
any time and any other rights which such holder may have pursuant to
applicable law.
Section 5. VOTING RIGHTS.
Except as otherwise provided herein or as otherwise required by law,
the Preferred Stock shall have no voting rights; provided that each holder of
Preferred Stock shall be entitled to notice of all stockholders meetings at the
same time and in the same manner as notice is given to the stockholders entitled
to vote at such meeting.
Section 6. AMENDMENT AND WAIVER.
Any provision of this Part B may be waived by holders of a majority of
the Preferred Shares outstanding at the time such action is taken. No amendment
or modification of this Part B will be binding or effective with respect to any
provision of this Part B without the prior written consent of the Corporation
and the holders of a majority of the Preferred Shares outstanding at the time
such action is taken.
Section 7. DEFINITIONS.
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
"CHANGE IN CONTROL" shall mean have the meaning given to such term in
the Senior Loan Agreement.
"CMIF NOTE" means the Senior Subordinated Note issued by the
Corporation to World Subordinated Debt Partners, L.P. as of July __, 1993 in an
original principal amount of $15,000,000.
"EQUITY VALUE" means at the date of determination the excess of (i)
all assets of the Corporation and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles over (ii) all
liabilities of the Corporation and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles.
"INDEBTEDNESS" shall mean have the meaning given to such term in the
Senior Loan Agreement.
"JUNIOR SECURITIES" means any of the Corporation's equity securities
other than the Preferred Stock.
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"LIQUIDATION VALUE" of any Preferred Share as of any particular date
shall be equal to $100.00.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"REDEMPTION DATE" as to any Preferred Share means the date specified
in the notice of any redemption at the Corporation's option or the applicable
date specified herein in the case of any other redemption; provided that no such
date shall be a Redemption Date unless the Liquidation Value of such Preferred
Share (plus all accrued and unpaid dividends thereon) is actually paid in full
on such date, and if such amount is not so paid in full on such date, the
Redemption Date shall be the date on which such amount is fully paid.
"SELLER NOTE" means the Subordinated Promissory Note issued by the
Corporation to Alco Standard Corporation as of June 1, 1993 in an original
principal amount of $13,500,000.
"SENIOR DEBT" means the Indebtedness evidenced by the CMIF Note, the
Seller Note and all other Indebtedness of the Corporation and its Subsidiaries
under the Senior Loan Agreement and any refinancings, extensions or other
modifications thereof.
"SENIOR DEBT RETIREMENT DATE" means the date on which the Senior Debt
is repaid in full.
"SENIOR LOAN AGREEMENT" means that certain Financing and Security
Agreement, dated as of July __, 1993, by and among the Corporation, The CIT
Group/Business Credit, Inc., as Lender and as Agent, and certain of the
Corporation's Subsidiaries.
"SUBSIDIARY" means any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or controlled, directly or indirectly, by the Corporation or one or more of the
other Subsidiaries of the Corporation or a combination thereof, or (ii) if a
partnership, association or other business entity, a majority of the partnership
or other similar ownership interests thereof is at the time owned or controlled,
directly or indirectly, by the Corporation or one or more of the other
Subsidiaries of the Corporation or a combination thereof. For purposes hereof,
the Corporation shall be deemed to have a majority ownership interest in a
partnership, association or other business entity if the
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Corporation shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing director or
general partner of such partnership, association or other business entity.
PART C. COMMON STOCK
Except as otherwise provided in this Part C or as otherwise required
by applicable law, all shares of Class A Common, Class B Common and Class C
Common shall be identical in all respects and shall entitle the holders thereof
to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
Section 1. VOTING RIGHTS.
Except as otherwise provided in Part A above or this Part C or as
otherwise required by applicable law, the holders of Class A Common shall be
entitled to one vote per share on all matters to be voted on by the stockholders
of the Corporation, the holders of Class B Common shall be entitled to six-
tenths (6/10) of one vote per share on all matters to be voted on by the
stockholders of the Corporation, and the holders of Class C Common shall be
entitled to 4,000 votes per share on all matters to be voted on by the
stockholders of the Corporation; provided that the holders of Class B Common
shall have the right to vote as a separate class on (i) any merger or
consolidation of the Corporation with or into another entity or entities, (ii)
any sale of all or substantially all of the Corporation's assets and (iii) any
amendment to the Corporation's Certificate of Incorporation.
Section 2. DIVIDENDS.
As and when dividends are declared or paid thereon, whether in cash,
property or securities of the Corporation, the holders of Class A Common, the
holders of Class B Common and the holders of Class C Common shall be entitled to
participate in such dividends ratably on a per share basis; provided that (i) if
dividends are declared which are payable in shares of Common Stock, dividends
shall be declared which are payable at the same rate on each class of stock and
the dividends payable to holders of Class A Common shall be payable in shares of
that class of stock, the dividends payable to holders of Class B Common shall be
payable in shares of that class of stock and the dividends payable to holders of
Class C Common shall be payable in shares of that class of stock and (ii) if the
dividends consist of other voting securities of the Corporation, the Corporation
shall make available to each holder of Class B Common, at such holder's request,
dividends consisting of non-voting securities (or securities with less of a vote
per share than the securities
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issued to holders of the Class A Common) of the Corporation which are otherwise
identical to the voting securities and which are convertible into or
exchangeable for such voting securities on the same terms as the Class B Common
is convertible into the Class A Common. The right of the holders of Common
Stock to receive dividends are subject to the provisions of the Preferred Stock.
Section 3. LIQUIDATION.
Subject to the provisions of the Preferred Stock, the holders of the
Class A Common, Class B Common and Class C Common shall be entitled to
participate ratably on a per share basis in all distributions to the holders of
Common Stock in any liquidation, dissolution or winding up of the Corporation.
Section 4. CONVERSION.
4A. RIGHT TO CONVERT. Subject to Section 4B below, each record
holder of Class B Common shall be entitled at any time to convert any or all of
the shares of such holder's Class B Common into the same number of shares of
Class A Common and, upon the conversion of all such shares of Class B Common,
each share of Class C Common shall be automatically (without any action on the
part of the holders of any shares of Class C Common) converted into one share of
Class A Common.
4B. SURRENDER OF CERTIFICATES. Each conversion of shares of Class B
Common into shares of Class A Common shall be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of shares of such Class B Common
stating that such holder desires to convert the shares, or a stated number of
the shares, of such Class B Common represented by such certificate or
certificates into shares of Class A Common. Each conversion of Class B Common
shall be deemed to have been effected as of the close of business on the date on
which such certificate or certificates have been surrendered and such notice has
been received, and at such time the rights of the holder of the converted Class
B Common as such holder shall cease and the person or persons in whose name or
names the certificate or certificates for shares of Class A Common are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of Class A Common represented thereby. The conversion
of Class C Common to Class A Common shall be deemed to have been effected as of
the close of business on the date on which all shares of Class B Common have
been deemed converted to Class A Common, and at such time the rights of the
holder of the converted Class C Common as such holder shall cease and the person
or persons in
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whose name or names the certificate or certificates for shares of Class A Common
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Class A Common represented thereby.
4C. ISSUANCE OF CERTIFICATES. Promptly after the surrender of
certificates of Class B Common or Class C Common, as applicable, and the receipt
of written notice (in the case of the Class B Common), the Corporation shall
issue and deliver in accordance with the surrendering holder's instructions (i)
the certificate or certificates for the Class A Common issuable upon such
conversion and (ii) a certificate representing any Class B Common which was
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which was not converted.
4D. NO CHARGE. The issuance of certificates for Class A Common upon
conversion of Class B Common or Class C Common will be made without charge to
the holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of Class A Common.
4E. RESERVE OF SHARES. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Class A Common,
solely for the purpose of issuance upon the conversion of the Class B Common and
Class C Common, such number of shares of Class A Common issuable upon the
conversion of all outstanding Class B Common and Class C Common. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Corporation shall take all such actions as may be necessary to assure that
all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which will be immediately transmitted by the
Corporation upon issuance).
4F. CLOSING BOOKS. The Corporation shall not close its books against
the transfer of shares of Common Stock in any manner which would interfere with
the timely conversion of any shares of Common Stock.
Section 5. STOCK SPLITS.
If the Corporation in any manner subdivides or combines the
outstanding shares of one class of Common Stock, the outstanding shares of the
other classes of Common Stock shall be proportionately subdivided or combined in
a similar manner.
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Section 6. AMENDMENT AND WAIVER.
No amendment or waiver of any provision of this Part C shall be
effective without the prior approval of the holders of a majority of the then
outstanding shares of Class A Common, Class B Common and Class C Common voting
together as one class.
PART D. OTHER PROVISIONS
Section 1. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of the Stock. Upon the surrender of any certificate representing
Stock at such place, the Corporation shall, at the request of the record holder
of such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of Stock represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of Stock as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate.
Section 2. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of any class of Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 3. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's
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address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
FIFTH: The board of directors (the "Board of Directors") is
authorized to make, alter or repeal the by-laws of the Corporation. Election of
directors need not be by written ballot.
SIXTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of the directors of the Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this paragraph by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation at the time of such repeal
or modification.
SEVENTH: The directors and officers of the Corporation shall be
imdemnified by the Corporation to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed by its duly authorized officers this
22 day of November , 1994.
Attest: THE TRIUMPH GROUP HOLDINGS, INC.
/s/Paul T. Stimmler By: /s/Richard C. III, President
- ---------------------------- ----------------------------
Paul T. Stimmler, Secretary Richard C. Ill, President
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OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
THE "THE TRIUMPH GROUP HOLDINGS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF NOVEMBER, A.D. 1994, AT 9:01 O'CLOCK A.M.
[SEAL] /s/Edward J. Freel
-------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8017016
DATE: 07-05-96
<PAGE>
B Y - L A W S
OF
THE TRIUMPH GROUP HOLDINGS, INC.
ARTICLE I
OFFICES
Section 1. The registered office in the State of Delaware shall be as
stated in the Certificate of Incorporation or at such other location in the
State of Delaware to which the registered office shall be changed by action of
the Board of Directors.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
<PAGE>
Section 2. Annual meetings of stockholders shall be held at such date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote a Board of Directors and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time,
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without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at
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any annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
Section 2. The number of directors which shall constitute the Board
of Directors shall be set by resolution of the Board. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
3 of this Article, and each director elected shall hold office until his
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successor is elected and qualified or until his earlier resignation or removal.
Directors need not be stockholders.
Section 3. Vacancies and newly created directorships resulting from
any increases in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board may be called by the
President on one day's notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two directors unless
the Board consists of only one director, in which case special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the Board a majority of the directors
shall constitute a quorum for the transaction of
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business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
8
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COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or
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rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, the Board of
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Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares then
entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and
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such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be a President, a
Secretary and a Treasurer or persons who shall act as such, regardless of the
name or title by which they may be designated, elected or appointed. The
Corporation may also have one or more Vice-Presidents and such other officers
and assistant officers as the Board of Directors may choose. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-laws otherwise provide.
Section 2. The officers and assistant officers shall be chosen by the
Board of Directors at its first meeting after each annual meeting of
stockholders and shall hold office until their successors are elected and
qualified or until their earlier resignation or removal.
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Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. Any officer elected or appointed by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
Section 5. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the
Corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
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THE VICE-PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, and if a Vice-President has been appointed by the
Board of Directors, the Vice-President (or in the event there be more than one
Vice-President, the Vice-Presidents in the order designated by the directors, or
in the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The
Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an assistant Secretary, shall have
authority to affix the same to any instrument requiring it
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and when so affixed, it may be attested by his signature or by the signature of
such assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or
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when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
Section 13. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of this office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by a
certificate, provided that the Board of Directors may provide, by resolution or
resolutions, that some or
16
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all of any or all classes or series of its stock or shall be uncertificated
shares. Certificates shall be signed by, or in the name of the Corporation by,
the chairman or vice-chairman of the Board of Directors, or the President or a
Vice-President, and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of Delaware or a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
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LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions
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from the registered owner of uncertificated shares, such uncertificated shares
shall be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books
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as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to
20
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interest of the Corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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INDEMNIFICATION
Section 7. The Corporation shall indemnify its officers and directors
to the fullest extent permitted by the General Corporation Law of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These By-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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<PAGE>
$50,000,000 REVOLVING CREDIT FACILITY
$35,000,000 TERM LOAN
CREDIT AGREEMENT
by and among
THE TRIUMPH GROUP, INC. AND ITS SUBSIDIARIES
WHO ARE OR BECOME BORROWERS HEREUNDER
AS BORROWERS
and
THE TRIUMPH GROUP HOLDINGS, INC.
AS GUARANTOR
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION
AS AGENT
Dated as of July 19, 1996
<PAGE>
TABLE OF CONTENTS
Article Page
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1. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions.. . . . . . . . . . . . . . . . . . . . . 1
1.2 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 15
1.2.1 Number; Inclusion.. . . . . . . . . . . . . . . . . 16
1.2.2 Determination.. . . . . . . . . . . . . . . . . . . 16
1.2.3 Agent's Discretion and Consent. . . . . . . . . . . 16
1.2.4 Documents Taken as a Whole. . . . . . . . . . . . . 16
1.2.5 Headings. . . . . . . . . . . . . . . . . . . . . . 16
1.2.6 Implied References to this Agreement. . . . . . . . 16
1.2.7 Persons.. . . . . . . . . . . . . . . . . . . . . . 17
1.2.8 Modifications to Documents. . . . . . . . . . . . . 17
1.2.9 From, To and Through. . . . . . . . . . . . . . . . 17
1.2.10 Shall; Will.. . . . . . . . . . . . . . . . . . . . 17
1.3 Accounting Principles.. . . . . . . . . . . . . . . . . . . . 17
2. REVOLVING CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . . 17
2.1 Revolving Credit Commitments. . . . . . . . . . . . . . . . . 17
2.2 Nature of Banks' Obligations with Respect to Revolving
Credit Loans. . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Commitment Fees.. . . . . . . . . . . . . . . . . . . . . . . 18
2.4 Revolving Credit Loan Requests. . . . . . . . . . . . . . . . 18
2.5 Making Revolving Credit Loans.. . . . . . . . . . . . . . . . 19
2.6 Revolving Credit Notes. . . . . . . . . . . . . . . . . . . . 19
2.7 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 20
2.8 Letter of Credit Subfacility. . . . . . . . . . . . . . . . . 20
2.8.1 Issuance of Letters of Credit.. . . . . . . . . . . 20
2.8.2 Participations. . . . . . . . . . . . . . . . . . . 20
2.8.3 Letter of Credit Fees.. . . . . . . . . . . . . . . 20
2.8.4 Disbursements, Reimbursement. . . . . . . . . . . . 21
2.8.5 Documentation.. . . . . . . . . . . . . . . . . . . 21
2.8.6 Determinations to Honor Drawing Requests. . . . . . 22
2.8.7 Nature of Participation and Reimbursement
Obligations. . . . . . . . . . . . . . . . . . . . 22
2.8.8 Indemnity . . . . . . . . . . . . . . . . . . . . . 23
2.8.9 Liability for Acts and Omissions. . . . . . . . . . 24
2.8.10 Extension by Banks of the Expiration Date . . . . . 24
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3. TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Term Loan Commitments.. . . . . . . . . . . . . . . . . . . . 25
3.2 Nature of Banks' Obligations with Respect to Term Loans.. . . 25
3.3 Term Loan Notes.. . . . . . . . . . . . . . . . . . . . . . . 25
3.4 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 25
4. INTEREST RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Interest Rate Options.. . . . . . . . . . . . . . . . . . . . 26
4.1.1 Revolving Credit Interest Rate Options. . . . . . . 26
4.1.3 Rate Quotations.. . . . . . . . . . . . . . . . . . 27
4.2 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 27
4.2.1 Ending Date and Business Day. . . . . . . . . . . . 27
4.2.2 Amount of Borrowing Tranche.. . . . . . . . . . . . 27
4.2.3 Termination Before Expiration Date. . . . . . . . . 27
4.2.4 Renewals. . . . . . . . . . . . . . . . . . . . . . 28
4.3 Interest After Default. . . . . . . . . . . . . . . . . . . . 28
4.3.1 Letter of Credit Fees, Interest Rate. . . . . . . . 28
4.3.2 Other Obligations.. . . . . . . . . . . . . . . . . 28
4.3.3 Acknowledgment. . . . . . . . . . . . . . . . . . . 28
4.4 Euro-Rate Unascertainable.. . . . . . . . . . . . . . . . . . 28
4.4.1 Unascertainable.. . . . . . . . . . . . . . . . . . 28
4.4.2 Illegality; Increased Costs; Deposits Not
Available. . . . . . . . . . . . . . . . . . . . . 29
4.4.3 Agent's and Banks' Rights . . . . . . . . . . . . . 29
4.5 Selection of Interest Rate Options. . . . . . . . . . . . . . 30
5. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Pro Rata Treatment of Banks.. . . . . . . . . . . . . . . . . 31
5.3 Interest Payment Dates. . . . . . . . . . . . . . . . . . . . 31
5.4 Voluntary Prepayments and Commitment Reductions.. . . . . . . 31
5.4.1 Right to Prepay.. . . . . . . . . . . . . . . . . . 31
5.4.2 Replacement of a Bank . . . . . . . . . . . . . . . 33
5.4.3 Right to Reduce Commitments.. . . . . . . . . . . . 33
5.5 Mandatory Prepayments.. . . . . . . . . . . . . . . . . . . . 33
5.5.1 The IPO.. . . . . . . . . . . . . . . . . . . . . . 33
5.5.2 Sale of Assets. . . . . . . . . . . . . . . . . . . 34
5.5.3 Issuance of Debt. . . . . . . . . . . . . . . . . . 34
5.5.4 . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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5.5.5 Application among Types of Loans. . . . . . . . . . 34
5.5.6 Application among Interest Rate Options.. . . . . . 34
5.6 Additional Compensation in Certain Circumstances. . . . . . . 35
5.6.1 Increased Costs or Reduced Return Resulting From
Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc. . . . . . . . . . . . . . . . . . . 35
5.6.2 Indemnity.. . . . . . . . . . . . . . . . . . . . . 36
6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 36
6.1 Representations and Warranties. . . . . . . . . . . . . . . . 36
6.1.1 Organization and Qualification. . . . . . . . . . . 37
6.1.2 Capitalization and Ownership. . . . . . . . . . . . 37
6.1.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . 37
6.1.4 Power and Authority.. . . . . . . . . . . . . . . . 37
6.1.5 Validity and Binding Effect.. . . . . . . . . . . . 38
6.1.6 No Conflict.. . . . . . . . . . . . . . . . . . . . 38
6.1.7 Litigation. . . . . . . . . . . . . . . . . . . . . 38
6.1.8 Title to Properties.. . . . . . . . . . . . . . . . 39
6.1.9 Financial Statements. . . . . . . . . . . . . . . . 39
6.1.10 Margin Stock. . . . . . . . . . . . . . . . . . . . 40
6.1.11 Full Disclosure.. . . . . . . . . . . . . . . . . . 40
6.1.12 Taxes.. . . . . . . . . . . . . . . . . . . . . . . 40
6.1.13 Consents and Approvals. . . . . . . . . . . . . . . 41
6.1.14 No Event of Default; Compliance with Instruments. . 41
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc. . . 41
6.1.16 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41
6.1.17 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41
6.1.18 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41
6.1.19 Insurance.. . . . . . . . . . . . . . . . . . . . . 41
6.1.20 Compliance with Laws. . . . . . . . . . . . . . . . 42
6.1.21 Material Contracts. . . . . . . . . . . . . . . . . 42
6.1.22 Investment Companies. . . . . . . . . . . . . . . . 42
6.1.23 Plans and Benefit Arrangements. . . . . . . . . . . 42
6.1.24 Employment Matters. . . . . . . . . . . . . . . . . 44
6.1.25 Environmental Matters . . . . . . . . . . . . . . . 44
6.1.26 Senior Debt Status. . . . . . . . . . . . . . . . . 45
6.2 Updates to Schedules. . . . . . . . . . . . . . . . . . . . . 45
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7. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.1 First Loans.. . . . . . . . . . . . . . . . . . . . . . . . . 46
7.1.1 Officer's Certificate.. . . . . . . . . . . . . . . 46
7.1.2 Secretary's Certificate.. . . . . . . . . . . . . . 46
7.1.3 Delivery of Loan Documents. . . . . . . . . . . . . 47
7.1.4 Opinion of Counsel. . . . . . . . . . . . . . . . . 47
7.1.5 Legal Details.. . . . . . . . . . . . . . . . . . . 47
7.1.6 Payment of Fees.. . . . . . . . . . . . . . . . . . 48
7.1.8 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 48
7.1.9 Consents. . . . . . . . . . . . . . . . . . . . . . 48
7.1.10 Officer's Certificate Regarding MACs. . . . . . . . 48
7.1.11 No Violation of Laws. . . . . . . . . . . . . . . . 48
7.1.12 No Actions or Proceedings.. . . . . . . . . . . . . 48
7.1.13 Insurance Policies; Certificates of Insurance;
Endorsements. . . . . . . . . . . . . . . . . . . 49
7.1.14 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49
7.1.15 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49
7.1.16 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49
7.1.17 Cancellation of Existing Senior and Mezzanine
Indebtedness.. . . . . . . . . . . . . . . . . . . 49
7.1.18 Other Credit Documents. . . . . . . . . . . . . . . 49
7.2 Each Additional Loan. . . . . . . . . . . . . . . . . . . . . 49
8. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.1 Affirmative Covenants.. . . . . . . . . . . . . . . . . . . . 50
8.1.1 Preservation of Existence, Etc. . . . . . . . . . . 50
8.1.2 Payment of Liabilities, Including Taxes, Etc. . . . 50
8.1.3 Maintenance of Insurance. . . . . . . . . . . . . . 51
8.1.4 Maintenance of Properties and Leases. . . . . . . . 52
8.1.5 Maintenance of Patents, Trademarks, Etc.. . . . . . 52
8.1.6 Visitation Rights.. . . . . . . . . . . . . . . . . 52
8.1.7 Keeping of Records and Books of Account.. . . . . . 52
8.1.8 Plans and Benefit Arrangements. . . . . . . . . . . 53
8.1.9 Compliance with Laws. . . . . . . . . . . . . . . . 53
8.1.10 Use of Proceeds.. . . . . . . . . . . . . . . . . . 53
8.1.11 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 53
8.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 53
8.2.1 Indebtedness. . . . . . . . . . . . . . . . . . . . 53
8.2.2 Liens.. . . . . . . . . . . . . . . . . . . . . . . 54
8.2.3 Guaranties. . . . . . . . . . . . . . . . . . . . . 54
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TABLE OF CONTENTS
Article Page
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8.2.4 Loans and Investments.. . . . . . . . . . . . . . . 54
8.2.5 Dividends and Related Distributions.. . . . . . . . 55
8.2.6 Liquidations, Mergers, Consolidations,
Acquisitions.. . . . . . . . . . . . . . . . . . . 56
8.2.7 Dispositions of Assets or Subsidiaries. . . . . . . 56
8.2.8 Affiliate Transactions. . . . . . . . . . . . . . . 57
8.2.9 Subsidiaries, Partnerships and Joint Ventures.. . . 57
8.2.10 Continuation of Present Business. . . . . . . . . . 58
8.2.11 Plans and Benefit Arrangements. . . . . . . . . . . 58
8.2.12 Fiscal Year.. . . . . . . . . . . . . . . . . . . . 59
8.2.13 Issuance of Stock.. . . . . . . . . . . . . . . . . 59
8.2.14 Changes in Organizational Documents.. . . . . . . . 60
8.2.15 Capital Expenditures and Leases.. . . . . . . . . . 60
8.2.16 Minimum Debt Service Coverage Ratio.. . . . . . . . 61
8.2.17 Maximum Total Indebtedness to EBITDA Ratio. . . . . 61
8.2.18 Minimum Net Worth.. . . . . . . . . . . . . . . . . 61
8.2.19 Minimum Current Ratio.. . . . . . . . . . . . . . . 61
8.3 Reporting Requirements. . . . . . . . . . . . . . . . . . . . 61
8.3.1 Monthly Financial Statements (pre-IPO). . . . . . . 62
8.3.2 Quarterly Financial Statements (post-IPO).. . . . . 62
8.3.3 Annual Financial Statements.. . . . . . . . . . . . 62
8.3.4 Compliance Certificate. . . . . . . . . . . . . . . 63
8.3.5 Notice of Default.. . . . . . . . . . . . . . . . . 63
8.3.6 Notice of Litigation. . . . . . . . . . . . . . . . 64
8.3.7 Certain Events. . . . . . . . . . . . . . . . . . . 64
8.3.8 Budgets, Forecasts, Other Reports and
Information. . . . . . . . . . . . . . . . . . . . 64
8.3.9 Notices Regarding Plans and Benefit Arrangements. . 65
8.3.9.1 Certain Events. . . . . . . . . . . . . . 65
8.3.9.2 Notices of Involuntary Termination and
Annual Reports.. . . . . . . . . . . . . 66
8.3.9.3 Notice of Voluntary Termination.. . . . . 66
8.4 Collateralization Upon Failure to Close IPO By December 31,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.1 Events of Default.. . . . . . . . . . . . . . . . . . . . . . 67
9.1.1 Payments Under Loan Documents.. . . . . . . . . . . 67
9.1.2 Breach of Warranty. . . . . . . . . . . . . . . . . 67
9.1.3 Breach of Negative Covenants on Visitation
Rights.. . . . . . . . . . . . . . . . . . . . . . 67
9.1.4 Breach of Other Covenants.. . . . . . . . . . . . . 68
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Article Page
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9.1.5 Defaults in Other Agreements or Indebtedness. . . . 68
9.1.6 Final Judgments or Orders.. . . . . . . . . . . . . 68
9.1.7 Loan Document Unenforceable.. . . . . . . . . . . . 68
9.1.8 Uninsured Losses; Proceedings Against Assets. . . . 68
9.1.9 Notice of Lien or Assessment. . . . . . . . . . . . 69
9.1.10 Insolvency. . . . . . . . . . . . . . . . . . . . . 69
9.1.11 Events Relating to Plans and Benefit
Arrangements.. . . . . . . . . . . . . . . . . . . 69
9.1.12 Cessation of Business.. . . . . . . . . . . . . . . 70
9.1.13 Change of Control.. . . . . . . . . . . . . . . . . 70
9.1.14 Involuntary Proceedings.. . . . . . . . . . . . . . 70
9.1.15 Voluntary Proceedings.. . . . . . . . . . . . . . . 71
9.2 Consequences of Event of Default. . . . . . . . . . . . . . . 71
9.2.1 Events of Default Other Than Bankruptcy,
Insolvency or Reorganization Proceedings.. . . . . 71
9.2.2 Bankruptcy, Insolvency or Reorganization
Proceedings. . . . . . . . . . . . . . . . . . . . 71
9.2.3 Set-off.. . . . . . . . . . . . . . . . . . . . . . 72
9.2.4 Suits, Actions, Proceedings.. . . . . . . . . . . . 72
9.2.5 Application of Proceeds.. . . . . . . . . . . . . . 73
9.3 RESERVED. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.1 Appointment.. . . . . . . . . . . . . . . . . . . . . . . . . 73
10.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . 74
10.3 Nature of Duties; Independent Credit Investigation. . . . . . 74
10.4 Actions in Discretion of Agent; Instructions from the
Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.5 Reimbursement and Indemnification of Agent by the Borrower. . 75
10.6 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . 76
10.7 Reimbursement and Indemnification of Agent by Banks.. . . . . 76
10.8 Reliance by Agent.. . . . . . . . . . . . . . . . . . . . . . 77
10.9 Notice of Default.. . . . . . . . . . . . . . . . . . . . . . 77
Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.11 Banks in Their Individual Capacities. . . . . . . . . . . . . 77
10.12 Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . 78
10.13 Equalization of Banks.. . . . . . . . . . . . . . . . . . . . 78
10.14 Successor Agent.. . . . . . . . . . . . . . . . . . . . . . . 78
10.15 Agent's Fee.. . . . . . . . . . . . . . . . . . . . . . . . . 79
10.16 Availability of Funds.. . . . . . . . . . . . . . . . . . . . 79
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Article Page
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10.17 Calculations. . . . . . . . . . . . . . . . . . . . . . . . . 79
10.18 Beneficiaries.. . . . . . . . . . . . . . . . . . . . . . . . 80
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.1 Modifications, Amendments or Waivers. . . . . . . . . . . . . 80
11.1.1 Increase of Commitment; Extension or Expiration
Date.. . . . . . . . . . . . . . . . . . . . . . . 80
11.1.2 Extension of Payment; Reduction of Principal
Interest or Fees; Modification of Terms of
Payment. . . . . . . . . . . . . . . . . . . . . . 80
11.1.3 Release of Guarantor. . . . . . . . . . . . . . . . 81
11.1.4 Miscellaneous . . . . . . . . . . . . . . . . . . . 81
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.. . 81
11.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.4 Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.5 Funding by Branch, Subsidiary or Affiliate. . . . . . . . . . 83
11.5.1 Notional Funding. . . . . . . . . . . . . . . . . . 83
11.5.2 Actual Funding. . . . . . . . . . . . . . . . . . . 83
11.6 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 84
11.8 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 84
11.9 Prior Understanding.. . . . . . . . . . . . . . . . . . . . . 84
11.10 Duration; Survival. . . . . . . . . . . . . . . . . . . . . . 85
11.11 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 85
11.12 Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . 86
11.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 86
11.14 Agent's or Bank's Consent.. . . . . . . . . . . . . . . . . . 87
11.15 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. . . . . . . . . . . . 87
11.17 Tax Withholding Clause. . . . . . . . . . . . . . . . . . . . 87
11.18 Joinder of Additional Borrowers.. . . . . . . . . . . . . . . 88
11.19 Power of Attorney for The Triumph Group Operations, Inc.;
Joint and Several Obligations of Loan Parties. . . . . . . . 89
11.20 Public Filings. . . . . . . . . . . . . . . . . . . . . . . . 89
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 6.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.2 - CAPITALIZATION
SCHEDULE 6.1.3 - SUBSIDIARIES
SCHEDULE 6.1.13 - CONSENTS AND APPROVALS
SCHEDULE 6.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.25 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 8.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B) - BORROWER JOINDER
EXHIBIT 1.1(G) - GUARANTY AGREEMENT
EXHIBIT 1.1(P) - PRICING GRID
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(T) - TERM NOTE
EXHIBIT 2.4 - LOAN REQUEST
EXHIBIT 7.1.4 - OPINION OF COUNSEL
EXHIBIT 8.3.4 - COMPLIANCE CERTIFICATE
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of July 19, 1996 and is made by and among
THE TRIUMPH GROUP, INC., a Delaware corporation, (the "COMPANY") as a Borrower,
each of the other BORROWERS (as hereinafter defined), the GUARANTOR (as
hereinafter defined), the BANKS (as hereinafter defined), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks under this Agreement
(hereinafter referred to in such capacity as the "AGENT").
WITNESSETH:
WHEREAS, the Borrowers have requested the Banks to provide (i) a revolving
credit facility to the Borrowers in an aggregate principal amount not to exceed
$50,000,000 and (ii) a $35,000,000 term loan facility; and
WHEREAS, the revolving credit and term loan facilities shall be used for
the purpose of refinancing existing indebtedness and for general corporate
purposes, including acquisitions;
WHEREAS, the Borrowers wish to give The Triumph Group Operations, Inc. a
power of attorney to act on their behalf for all purposes under this Agreement
(see Section 11.19), while confirming that their obligations hereunder are joint
and several; and
WHEREAS, the Banks are willing to provide such credit upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS.
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
AFFILIATE as to any Person shall mean any other Person (i) which directly
or indirectly controls, is controlled by, or is under common control with such
Person, (ii) which beneficially owns or holds 10% or more of any class of the
voting or other equity interests of such Person, or (iii) 10% or more of any
class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used
<PAGE>
in this definition, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be.
AGENT shall mean PNC Bank, National Association, and its successors and
assigns.
AGENT'S FEE shall have the meaning assigned to that term in Section 10.15.
AGENT'S LETTER shall have the meaning assigned to that term in Section
10.15.
AGREEMENT shall mean this Credit Agreement, as the same may be supplemented
or amended from time to time, including all schedules and exhibits.
ALCO NOTE shall mean the Subordinated Promissory Note dated June 1, 1993
issued by Guarantor to MDR Corporation in the original principal amount of
$13,500,000, as amended by a Note Modification Agreement dated as of December
31, 1995.
ANNUAL STATEMENTS shall have the meaning assigned to that term in
Section 6.1.9(i).
ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment and Assumption
Agreement by and among a Purchasing Bank, the Transferor Bank and the Agent, as
Agent and on behalf of the remaining Banks, substantially in the form of EXHIBIT
1.1(A).
AUTHORIZED OFFICER shall mean those individuals, designated by written
notice to the Agent from the Borrowers, authorized to execute notices, reports
and other documents on behalf of the Loan Parties required hereunder. The
Borrowers may amend such list of individuals from time to time by giving written
notice of such amendment to the Agent.
BANKS shall mean the financial institutions named on SCHEDULE 1.1(B) and
their respective successors and assigns as permitted hereunder, each of which is
referred to herein as a Bank.
BASE RATE shall mean the greater of (i) the interest rate per annum
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus 1/2% per
annum.
BASE RATE OPTION shall mean either the Revolving Credit Base Rate Option or
the Term Loan Base Rate Option.
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<PAGE>
BENEFIT ARRANGEMENT shall mean at any time an "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
BORROWERS shall mean the Company, each of its Subsidiaries, which is
designated as a "Borrower" on the signature page hereof, and each other Person
that joins this Agreement as a Borrower after the date hereof pursuant to
Section 11.18.
BORROWER JOINDER shall mean a joinder by a Person as a Borrower under this
Agreement and the Other Loan Documents in the form of Exhibit 1.1(B).
BORROWING DATE shall mean, with respect to any Loan, the date for the
making thereof or the renewal or conversion thereof to the same or a different
Interest Rate Option, which shall be a Business Day.
BORROWING TRANCHE shall mean specified portions of Loans outstanding as
follows: (i) any Loans to which a Euro-Rate Option applies which become subject
to the same Interest Rate Option under the same Loan Request by the Borrowers
and which have the same Interest Period shall constitute one Borrowing Tranche,
and (ii) all Loans to which a Base Rate Option applies shall constitute one
Borrowing Tranche.
BUSINESS DAY shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required to be closed for
business in Pittsburgh, Pennsylvania.
CAPITAL STOCK shall mean any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
CLOSING DATE shall mean the Business Day on which the first Loan shall be
made, which shall be July 19, 1996, or such other date as the parties agree. The
closing shall take place at 10:00 a.m., Eastern time, on the Closing Date at the
offices of Drinker Biddle & Reath in Berwyn, Pennsylvania, or at such other time
and place as the parties agree.
COLLATERAL shall mean the property described in Section 8.4(i).
COMMITMENT shall mean as to any Bank the aggregate of its Revolving Credit
Commitment and Term Loan Commitment, and COMMITMENTS shall mean the aggregate of
the Revolving Credit Commitments and Term Loan Commitments of all of the Banks.
-3-
<PAGE>
COMMITMENT FEE shall have the meaning assigned to that term in Section 2.3.
COMPANY shall mean The Triumph Group, Inc., a corporation organized and
existing under the laws of the State of Delaware.
CONSOLIDATED EBITDA shall mean for any period of determination Consolidated
Net Income (before extraordinary items) for such period plus the amount of
income tax expense, interest expense, depreciation and amortization expense
deducted from earnings in determining such Consolidated Net Income.
CONSOLIDATED NET WORTH shall mean as of any date of determination total
stockholders' equity of the Company and its Subsidiaries as of such date
determined and consolidated in accordance with GAAP.
CONSOLIDATED INTEREST EXPENSE shall mean for any period of determination
the amount of cash interest expense deducted from the earnings of the Company
and its Subsidiaries in determining Consolidated Net Income for such period in
accordance with GAAP.
CONSOLIDATED NET INCOME shall mean for any fiscal period the net income (or
loss) after income taxes of the Company and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
CONSOLIDATED TOTAL INDEBTEDNESS shall mean as of any date of determination
the aggregate of all Indebtedness (including subordinated indebtedness as to
which cash interest is contractually payable) of the Company and its
Subsidiaries as of such date determined and consolidated in accordance with
GAAP.
DEBT SERVICE COVERAGE RATIO shall mean for any period of determination the
ratio of (i) Consolidated Net Income (before extraordinary items) for such
period plus the amount of interest expense, depreciation and amortization
expense deducted from earnings in determining such Consolidated Net Income to
(ii) Consolidated Interest Expense plus required principal amortization of
Indebtedness of the Company and its Subsidiaries for such period determined and
consolidated in accordance with GAAP.
DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean lawful money of
the United States of America.
ENVIRONMENTAL COMPLAINT shall mean any written complaint setting forth a
cause of action for personal or property damage or natural resource damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice asserting or threatening a claim
-4-
<PAGE>
relating to, arising out of, or issued pursuant to any of the Environmental Laws
or any Environmental Conditions, as the case may be.
ENVIRONMENTAL CONDITIONS shall mean any conditions of the environment,
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the use of,
or operations on, the Property.
ENVIRONMENTAL LAWS shall mean all federal, state, local and foreign Laws
and regulations, including permits, licenses, authorizations, bonds, orders,
judgments, consent decrees issued, or entered into, pursuant thereto, relating
to pollution or protection of human health or the environment or employee safety
in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA GROUP shall mean, at any time, the Borrowers and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code.
EURO-RATE shall mean with respect to the Loans comprising any Borrowing
Tranche to which the Euro-Rate Option applies for any Interest Period, the
interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upward to the nearest 1/16th of 1% per annum) (i) the rate of
interest determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the "offered"
eurodollar rate evidenced by Telerate display page 3750 (or such other display
on the Telerate system as may replace such page) at approximately 11:00 A.M.,
London time, two (2) London Business Days prior to the first day of such
Interest Period for an amount comparable to such Borrowing Tranche and having a
borrowing date and a maturity comparable to such Interest Period by (ii) a
number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may
also be expressed by the following formula:
Euro-Rate = Telerate page 3750
-----------------------------------
1.00 - Euro-Rate Reserve Percentage
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<PAGE>
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option
outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrowers of the Euro-Rate as determined or adjusted in accordance herewith,
which determination shall be conclusive absent manifest error.
EURO-RATE OPTION shall mean either the Revolving Credit Euro-Rate Option or
the Term Loan Euro-Rate Option.
EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage (expressed
as a decimal rounded upward to the nearest 1/100 of 1%) as determined by the
Agent which is in effect during any relevant period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") of a member bank in such System.
EVENT OF DEFAULT shall mean any of the Events of Default described in
Section 9.1.
EXPIRATION DATE shall mean, with respect to the Revolving Credit
Commitments, the fifth anniversary of the Closing Date; PROVIDED that the
Expiration Date may be extended under Section 2.8.10.
FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
FINANCIAL PROJECTIONS shall have the meaning assigned to that term in
Section 6.1.9(ii).
GAAP shall mean generally accepted accounting principles as are in effect
from time to time, subject to the provisions of Section 1.3, and applied on a
consistent basis both as to classification of items and amounts.
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GOVERNMENTAL ACTS shall have the meaning assigned to that term in
Section 2.8.8.
GUARANTOR shall mean The Triumph Group Holdings, Inc., a corporation
organized and existing under the laws of the state of Delaware.
GUARANTY of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any performance
bond or other suretyship arrangement and any other form of assurance against
loss, except (i) endorsement of negotiable or other instruments for deposit or
collection in the ordinary course of business or (ii) any guaranty of an
obligation to indemnify or hold harmless any other Person incurred in connection
with an acquisition or divestiture of Capital Stock or assets permitted under
this Agreement.
GUARANTY AGREEMENT shall mean the Guaranty and Suretyship Agreement in
substantially the form of EXHIBIT 1.1(G) executed and delivered by the Guarantor
to the Agent for the benefit of the Banks.
HISTORICAL STATEMENTS shall have the meaning assigned to that term in
Section 6.1.9(i).
IPO means the initial public offering of Capital Stock in the Guarantor.
INDEBTEDNESS shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations under any letter of
credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device, (iv) any other transaction
(including forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are not more than sixty (60) days
past due), or (v) any Guaranty of Indebtedness for borrowed money.
INTEREST PERIOD shall have the meaning assigned to such term in
Section 4.2.
INTEREST RATE OPTION shall mean any Euro-Rate Option or Base Rate Option.
INTERIM STATEMENTS shall have the meaning assigned to that term in
Section 6.1.9(i).
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INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.
LABOR CONTRACTS shall mean all employment agreements, employment contracts,
collective bargaining agreements and other agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.
LAW shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
LETTER OF CREDIT shall have the meaning assigned to that term in
Section 2.8.1.
LETTER OF CREDIT FEE shall have the meaning assigned to that term in
Section 2.8.3.
LETTERS OF CREDIT OUTSTANDING shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations.
LIEN shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LOAN DOCUMENTS shall mean this Agreement, the Guaranty Agreement, the Notes
and any other instruments, certificates or documents delivered or contemplated
to be delivered hereunder or thereunder or in connection herewith or therewith,
as the same may be supplemented or amended from time to time in accordance
herewith or therewith, and LOAN DOCUMENT shall mean any of the Loan Documents.
LOAN PARTIES shall mean the Borrowers and the Guarantor.
LOAN REQUEST shall mean a request for Revolving Credit Loans made in
accordance with Section 2.4 or a request to select, convert to or renew a Euro-
Rate Option in accordance with Section 4.2, 10.13.
LOANS shall mean collectively and LOAN shall mean separately all Revolving
Credit Loans and the Term Loans or any Revolving Credit Loan or the Term Loan.
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MATERIAL ADVERSE CHANGE shall mean any set of circumstances or events which
(a) has or is reasonably expected to have any material adverse effect whatsoever
upon the validity or enforceability of this Agreement or any other Loan
Document, (b) is or is reasonably expected to be material and adverse to the
business, properties, assets, financial condition, results of operations or
prospects of the Loan Parties taken as a whole, (c) impairs materially or is
reasonably expected to impair materially the ability of the Loan Parties taken
as a whole to duly and punctually pay or perform its Indebtedness, or
(d) impairs materially or is reasonably expected to impair materially the
ability of the Agent or any of the Banks, to the extent permitted, to enforce
their legal remedies pursuant to this Agreement or any other Loan Document.
MONTH, with respect to an Interest Period under the Euro-Rate Option, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. If any Euro-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.
MULTIEMPLOYER PLAN shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrowers or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
MULTIPLE EMPLOYER PLAN shall mean a Plan which has two or more contributing
sponsors (including the Borrowers or any member of the ERISA Group) at least two
of whom are not under common control, as such a plan is described in Sections
4063 and 4064 of ERISA.
NOTES shall mean the Revolving Credit Notes and the Term Notes.
NOTICES shall have the meaning assigned to that term in Section 11.6.
OBLIGATION shall mean any obligation or liability of any of the Loan
Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit, the Agent's Letter or any other Loan
Document.
OFFICIAL BODY shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau, central
bank, commission, department
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or instrumentality of either, or any court or tribunal in each case whether
foreign or domestic, with jurisdiction to act with the force of law with respect
to pertinent matters.
PARTNERSHIP INTERESTS shall have the meaning given to such term in
Section 6.1.3.
PBGC shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
PERMITTED INVESTMENTS shall mean:
(i) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations backed by the full faith and credit of
the United States of America maturing in twelve (12) months or less from the
date of acquisition;
(ii) commercial paper maturing in 180 days or less rated not lower than
A-1, by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.
on the date of acquisition;
(iii) demand deposits, time deposits, money market account deposits or
certificates of deposit maturing within one year in commercial banks whose
obligations are rated A-1, A or the equivalent or better by Standard & Poor's
Corporation on the date of acquisition;
(iv) shares of money market mutual funds that invest substantially all of
their assets in the investments described in clauses (i) through (iii) above;
and
(v) investments in Subsidiaries permitted under this Agreement.
PERMITTED LIENS shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, old-age pensions
or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable and Liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default;
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(iv) Good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of the aggregate amount
due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property or the value thereof, and none of which is violated in any
material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the Agent for
the benefit of the Banks;
(vii) Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating leases permitted in Section 8.2.15 securing
obligations of such Loan Party or Subsidiary to the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement and described on
SCHEDULE 1.1(P), PROVIDED that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Security Interests, PROVIDED that the aggregate
amount of loans and deferred payments secured by such Purchase Money Security
Interests shall not exceed $5,000,000 (excluding for the purpose of this
computation any loans or deferred payments secured by Liens described on
SCHEDULE 1.1(P)); and
(x) The following, (A) if the validity or amount thereof is being
contested in good-faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within sixty (60) days of entry, and in either case they do not affect the
Collateral or, in the aggregate, materially impair the ability of any Loan Party
to perform its Obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and payable
and subject to interest or penalty, PROVIDED that the Loan Party maintains
such reserves or other appropriate provisions as shall be required by GAAP
and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
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(2) Claims, Liens or encumbrances upon, and defects of title to, real
or personal property other than the Collateral, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens.
(4) Liens resulting from final judgments or orders described in
Section 9.1.6.
PERSON shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof, or any other entity.
PLAN shall mean at any time an employee pension benefit plan (including a
Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title
IV of ERISA or is subject to the minimum funding standards under Section 412 of
the Internal Revenue Code and either (i) is maintained by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity which was at
such time a member of the ERISA Group for employees of any entity which was at
such time a member of the ERISA Group.
PIK SUBORDINATED INDEBTEDNESS shall mean Indebtedness which by its terms is
subordinated to the Obligations of the Loan Parties to the Banks and on which
interest is payable, at the option of the payor, in cash or by the issuance of
additional Indebtedness that is likewise subordinated.
PNC BANK shall mean PNC Bank, National Association, its successors and
assigns.
POTENTIAL DEFAULT shall mean any event or condition which with notice,
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.
PRICING GRID means that the charts attached hereto as Exhibit 1.1(P) which
set forth the rates at which Commitment Fees, Letter Credit Fees and interest
rate margins are calculated, both before and after the IPO and the mandatory
prepayment of the Loans required under Section 5.5.1, on the basis of the Total
Indebtedness to EBITDA Ratio.
PRINCIPAL OFFICE shall mean the main banking office of the Agent in
Pittsburgh, Pennsylvania.
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PROHIBITED TRANSACTION shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.
PROPERTY shall mean all real property, both owned and leased, of any Loan
Party or Subsidiary of a Loan Party.
PURCHASE MONEY SECURITY INTEREST shall mean Liens upon tangible personal
property securing loans to any Loan Party or Subsidiary of a Loan Party or
deferred payments by such Loan Party or Subsidiary for the purchase of such
tangible personal property.
PURCHASING BANK shall mean a Bank which becomes a party to this Agreement
by executing an Assignment and Assumption Agreement.
RATABLE SHARE shall mean the proportion that a Bank's Commitment bears to
the Commitments of all of the Banks.
REGULATED SUBSTANCES shall mean any substance, including any solid, liquid,
semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage,
wastes, chemicals, petroleum products, by-products, coproducts, impurities,
dust, scrap, heavy metals, any substance defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste,"
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
REGULATION U shall mean Regulation U, T, G or X as promulgated by the Board
of Governors of the Federal Reserve System, as amended from time to time.
REIMBURSEMENT OBLIGATION shall have the meaning assigned to such term in
Section 2.8.4(i).
REPORTABLE EVENT means a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.
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REQUIRED BANKS shall mean (i) if there are no Loans outstanding, Banks
whose Commitments aggregate at least 66 2/3% of the Commitments of all of the
Banks, or (ii) if there are Loans outstanding, Banks whose Loans outstanding
aggregate at least 66 2/3% of the total principal amount of the Loans
outstanding hereunder.
REVOLVING CREDIT BASE RATE OPTION shall mean the option of the Borrowers to
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1.1(i).
REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at any time, the
amount initially set forth opposite its name on SCHEDULE 1.1(B) in the column
labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on
Schedule I to the most recent Assignment and Assumption Agreement, and REVOLVING
CREDIT COMMITMENTS shall mean the aggregate Revolving Credit Commitments of all
of the Banks.
REVOLVING CREDIT EURO-RATE OPTION shall mean the option of the Borrowers to
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1.1(ii).
REVOLVING CREDIT LOANS shall mean collectively and REVOLVING CREDIT LOAN
shall mean separately all Revolving Credit Loans or any Revolving Credit Loan
made by the Banks or one of the Banks to the Borrowers pursuant to Section 2.1
or 2.8.4(i) hereof.
REVOLVING CREDIT NOTES shall mean collectively and REVOLVING CREDIT NOTE
shall mean separately all the Revolving Credit Notes of the Borrowers in the
form of EXHIBIT 1.1(R) evidencing the Revolving Credit Loans together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
REVOLVING FACILITY USAGE shall mean at any time the sum of the Revolving
Credit Loans outstanding and the Letters of Credit Outstanding.
SHARES shall have the meaning assigned to that term in Section 6.1.2.
SUBSIDIARY of any Person at any time shall mean (i) any corporation or
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, or any partnership of which such Person is a general partner or of
which 50% or more of the partnership interests is at the time directly or
indirectly owned by
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such Person or one or more of such Person's Subsidiaries, or (ii) any
corporation, trust, partnership or other entity which is controlled or capable
of being controlled by such Person or one or more of such Person's Subsidiaries.
SUBSIDIARY SHARES shall have the meaning assigned to that term in
Section 6.1.3.
TERM LOAN BASE RATE OPTION shall mean the option of the Borrowers to have
Term Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.2(i).
TERM LOAN COMMITMENT shall mean, as to any Bank at any time, the amount
initially set forth opposite its name on SCHEDULE 1.1(B) in the column labeled
"Amount of Commitment for Term Loans," and thereafter on Schedule I to the most
recent Assignment and Assumption Agreement, and TERM LOAN COMMITMENTS shall mean
the aggregate Term Loan Commitments of all of the Banks.
TERM LOAN EURO-RATE OPTION shall mean the option of the Borrowers to have
Term Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.2(ii).
TERM LOANS shall mean collectively and TERM LOAN shall mean separately all
Term Loans or any Term Loan made by the Banks or one of the Banks to the
Borrowers pursuant to Section 3.1.
TERM NOTES shall mean collectively and TERM NOTE shall mean separately all
of the Term Notes of the Borrowers in the form of EXHIBIT 1.1(T) evidencing the
Term Loans together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
TOTAL INDEBTEDNESS TO EBITDA RATIO shall mean the ratio of Consolidated
Total Indebtedness to Consolidated EBITDA.
TRANSFEROR BANK shall mean the selling Bank pursuant to an Assignment and
Assumption Agreement.
1.2 CONSTRUCTION.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
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1.2.1 NUMBER; INCLUSION.
references to the plural include the singular, the plural, the part
and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 DETERMINATION.
references to "determination" of or by the Agent or the Banks shall be
deemed to include good-faith estimates by the Agent or the Banks (in the case of
quantitative determinations) and good-faith beliefs by the Agent or the Banks
(in the case of qualitative determinations) and such determination shall be
conclusive absent manifest error;
1.2.3 AGENT'S DISCRETION AND CONSENT.
whenever the Agent or the Banks are granted the right herein to act in
its or their sole discretion or to grant or withhold consent such right shall be
exercised in good-faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
the words "hereof," "herein," "hereunder," "hereto" and similar terms
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
1.2.5 HEADINGS.
the section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding this Agreement
or such other Loan Document are for reference purposes only and shall not
control or affect the construction of this Agreement or such other Loan Document
or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
article, section, subsection, clause, schedule and exhibit references
are to this Agreement or other Loan Document, as the case may be, unless
otherwise specified;
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1.2.7 PERSONS.
reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement or other Loan Document, as the case may be, and reference to a Person
in a particular capacity excludes such Person in any other capacity;
1.2.8 MODIFICATIONS TO DOCUMENTS.
reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.9 FROM, TO AND THROUGH.
relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 SHALL; WILL.
references to "shall" and "will" are intended to have the same
meaning.
1.3 ACCOUNTING PRINCIPLES.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
2. REVOLVING CREDIT FACILITY
2.1 REVOLVING CREDIT COMMITMENTS.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrowers at any time or from time to time on
or after the date hereof to the Expiration Date provided that after giving
effect to such Loan the aggregate amount of Loans from such
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Bank shall not exceed such Bank's Revolving Credit Commitment minus such Bank's
Ratable Share of the Letters of Credit Outstanding. Within such limits of time
and amount and subject to the other provisions of this Agreement, the Borrowers
may borrow, repay and reborrow pursuant to this Section 2.1.
2.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO REVOLVING CREDIT LOANS.
Each Bank shall be obligated to participate in each request for Revolving
Credit Loans pursuant to Section 2.4 in accordance with its Ratable Share. The
aggregate of each Bank's Revolving Credit Loans outstanding hereunder to the
Borrowers at any time shall never exceed its Revolving Credit Commitment minus
its Ratable Share of the Letter of Credit Outstandings. The obligations of each
Bank hereunder are several. The failure of any Bank to perform its obligations
hereunder shall not affect the Obligations of the Borrowers to any other party
nor the several obligations of the other Banks to the Borrowers; nor shall any
other party be liable for the failure of such Bank to perform its obligations
hereunder. The Banks shall have no obligation to make Revolving Credit Loans
hereunder on or after the Expiration Date.
2.3 COMMITMENT FEES.
Accruing from the date hereof until the Expiration Date, the Borrowers
agree to pay to the Agent for the account of each Bank, as consideration for
such Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment
fee (the "COMMITMENT FEE"), calculated on a per annum (365 or 366 days, as
appropriate, and actual days elapsed) basis under the Pricing Grid, on the
average daily difference between the amount of (i) such Bank's Revolving Credit
Commitment as the same may be constituted from time to time and (ii) the
principal amount of such Bank's Ratable Share of Revolving Facility Usage. All
Commitment Fees shall be payable in arrears on the first Business Day of each
calendar quarter after the date hereof and on the Expiration Date or upon
acceleration of the Notes.
2.4 REVOLVING CREDIT LOAN REQUESTS.
Except as otherwise provided herein, the Borrowers may from time to time
prior to the Expiration Date request the Banks to make Revolving Credit Loans,
or renew or convert the Interest Rate Option applicable to existing Revolving
Credit Loans pursuant to Section 4.2, by delivering to the Agent, not later than
(i) 2:00 p.m., Eastern time, three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate
Option for any Revolving Credit Loans; and (ii) 12:00 Noon, Eastern time on
either the proposed Borrowing Date with respect to the making of a Revolving
Credit Loan
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to which the Base Rate Option applies or the last day of the preceding Interest
Period with respect to the conversion to the Base Rate Option for any Revolving
Credit Loan, of a duly completed request therefor substantially in the form of
EXHIBIT 2.4 or a request by telephone immediately confirmed in writing by
letter, facsimile or telex in such form (each, a "LOAN REQUEST"), it being
understood that the Agent may rely on the authority of any individual making
such a telephonic request without the necessity of receipt of such written
confirmation. Each Revolving Credit Loan Request shall be irrevocable and shall
specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed Revolving Credit Loans comprising each Borrowing Tranche, which shall
be in integral multiples of $500,000 and not less than $1,000,000 for each
Borrowing Tranche to which the Euro-Rate Option applies and not less than the
lesser of $250,000 or the maximum amount available for Borrowing Tranches to
which the Base Rate Option applies; (iii) whether the Euro-Rate Option or Base
Rate Option shall apply to the proposed Revolving Credit Loans comprising the
Borrowing Tranche; and (iv) in the case of a Borrowing Tranche to which the
Euro-Rate Option applies, an appropriate Interest Period for the proposed
Revolving Credit Loans comprising such Borrowing Tranche.
2.5 MAKING REVOLVING CREDIT LOANS.
The Agent shall, promptly after receipt by it of a Loan Request pursuant to
Section 2.4, notify the Banks of its receipt of such Loan Request specifying:
(i) the proposed Borrowing Date and the time and method of disbursement of such
Revolving Credit Loans; (ii) the amount and type of each such Revolving Credit
Loan and the applicable Interest Period (if any); and (iii) the apportionment
among the Banks of the Revolving Credit Loans as determined by the Agent in
accordance with Section 2.2. Each Bank shall remit the principal amount of each
Revolving Credit Loan to the Agent such that the Agent is able to, and the Agent
shall, to the extent the Banks have made funds available to it for such purpose,
fund such Revolving Credit Loans to the Borrowers in U.S. Dollars and
immediately available funds at the Principal Office prior to 2:00 p.m., Eastern
time, on the Borrowing Date, PROVIDED that if any Bank fails to remit such funds
to the Agent in a timely manner, the Agent may elect in its sole discretion to
fund with its own funds the Revolving Credit Loans of such Bank on the Borrowing
Date, and such Bank shall be subject to the repayment obligation in
Section 10.16.
2.6 REVOLVING CREDIT NOTES.
The Obligation of the Borrowers to repay the aggregate unpaid principal
amount of the Revolving Credit Loans made by each Bank, together with interest
thereon, shall be evidenced by a Revolving Credit Note dated the Closing Date
payable to the order of such Bank in a face amount equal to the Revolving Credit
Commitment of such Bank.
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2.7 USE OF PROCEEDS.
The proceeds of the Revolving Credit Loans shall be used for the purpose of
refinancing existing indebtedness and for general corporate purposes, including
acquisitions permitted hereunder.
2.8 LETTER OF CREDIT SUBFACILITY.
2.8.1 ISSUANCE OF LETTERS OF CREDIT.
Borrowers may request the issuance of a letter of credit (each a
"LETTER OF CREDIT") on behalf of itself or another Loan Party by delivering to
the Agent a completed application and agreement for letters of credit in such
form as the Agent may specify from time to time by no later than 10:00 a.m.,
Eastern time, at least five (5) Business Days, or such shorter period as may be
agreed to by the Agent, in advance of the proposed date of issuance. Subject to
the terms and conditions hereof and in reliance on the agreements of the other
Banks set forth in this Section 2.8, the Agent will issue a Letter of Credit
provided that each Letter of Credit shall (A) have a maximum maturity of twelve
(12) months from the date of issuance, and (B) in no event expire later than one
Business Day prior to the Expiration Date and providing that in no event shall
(i) the Letters of Credit Outstanding exceed, at any one time, $5,000,000 or
(ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit
Commitments.
2.8.2 PARTICIPATIONS.
Immediately upon issuance of each Letter of Credit, and without
further action, each Bank shall be deemed to, and hereby agrees that it shall,
have irrevocably purchased for such Bank's own account and risk from the Agent
an individual participation interest in such Letter of Credit and drawings
thereunder in an amount equal to such Bank's Ratable Share of the maximum amount
which is or at any time may become available to be drawn thereunder, and each
such Bank shall be responsible to reimburse the Agent immediately for its
Ratable Share of any disbursement under any Letter of Credit which has not been
reimbursed by Borrowers in accordance with Section 2.8.4(i).
2.8.3 LETTER OF CREDIT FEES.
The Borrowers shall pay (i) to the Agent for the ratable account of
the Banks a fee (the "LETTER OF CREDIT FEE") calculated on a per annum (365 or
366 days, as appropriate, and actual days elapsed) basis under the Pricing Grid,
and (ii) to the Agent for its own account a fronting fee equal to 1/8% per
annum, which fees shall be computed on
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the daily average Letters of Credit Outstanding and shall be payable quarterly
in arrears commencing with the first Business Day of each calendar quarter
following issuance of each Letter of Credit and on the Expiration Date. The
Borrowers shall also pay to the Agent for the Agent's sole account the Agent's
then in effect customary fees and administrative expenses payable with respect
to the Letters of Credit as the Agent may generally charge or incur from time to
time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.
2.8.4 DISBURSEMENTS, REIMBURSEMENT.
(i) Borrowers shall be obligated immediately to reimburse Agent
for all amounts which Agent is required to advance pursuant to the Letters of
Credit (the "REIMBURSEMENT OBLIGATION"). Such amounts advanced shall become, at
the time they are advanced, Revolving Credit Loans from the Banks, unless
Borrowers discharge their Reimbursement Obligation before such amounts are
advanced. Such Revolving Credit Loans shall bear interest at the rate
applicable under the Base Rate Option unless the Borrowers elect to have a
different Interest Rate Option apply to such Revolving Credit Loans pursuant to
and in accordance with the provisions contained in Section 4.1.1.
(ii) The Agent will notify the (A) Borrowers of each demand or
presentment for payment or other drawing under each Letter of Credit, and (B)
Banks of the amount required to be advanced pursuant to the Letters of Credit.
Before 10:00 a.m., Eastern time, on the date of any advance the Agent is
required to make pursuant to the Letters of Credit, each Bank shall make
available such Bank's Ratable Share of such advance in immediately available
funds to the Agent.
2.8.5 DOCUMENTATION.
Each Loan Party agrees to be bound by the terms of the Agent's
application and agreement for Letters of Credit and the Agent's written
regulations and customary practices relating to Letters of Credit, though such
interpretation may be different from the such Loan Party's own. In the event of
a conflict between such application or agreement and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct, the Agent shall not be liable for any
error, negligence and/or mistakes, whether of omission or commission, in
following any Loan Party's instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.
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2.8.6 DETERMINATIONS TO HONOR DRAWING REQUESTS.
In determining whether to honor any request for drawing under any
Letter of Credit by the beneficiary thereof, the Agent shall be responsible only
to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.
2.8.7 NATURE OF PARTICIPATION AND REIMBURSEMENT OBLIGATIONS.
The obligation of the Banks to participate in Letters of Credit pursuant to
Section 2.8.2 and the obligation of the Banks pursuant to Section 2.8.4(ii) to
fund Revolving Credit Loans upon a draw under a Letter of Credit and the
Obligations of the Borrowers to reimburse the Agent upon a draw under a Letter
of Credit pursuant to Section 2.8.4(i) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
such sections under all circumstances, including the following circumstances:
(i) the failure of any Loan Party or any other Person to
comply with the conditions set forth in Sections 2.1, 2.4, 2.5 or 7.2 or as
otherwise set forth in this Agreement for the making of a Revolving Credit Loan,
it being acknowledged that such conditions are not required for the making of a
Revolving Credit Loan under Section 2.8.4;
(ii) any lack of validity or enforceability of any Letter of
Credit;
(iii) the existence of any claim, set-off, defense or other
right which any Loan Party or any Bank may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for whom
any such transferee may be acting), the Agent or other bank or any other Person
or, whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for
which any Letter of Credit was procured);
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(v) payment by the Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
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(vi) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of any Loan
Party or Subsidiaries of a Loan Party;
(vii) any breach of this Agreement or any other Loan Document by
any party thereto;
(viii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing;
(ix) the fact that an Event of Default or a Potential Default
shall have occurred and be continuing; or
(x) the Expiration Date shall have passed or this Agreement or
the Commitments hereunder shall have been terminated;
provided that none of the Banks nor any of the Loan Parties shall be precluded
from bringing any separate action based on any circumstances described in
clauses (ii) or (v) above.
2.8.8 INDEMNITY.
In addition to amounts payable as provided in Section 10.5, the
Borrowers hereby agree to protect, indemnify, pay and save harmless the Agent
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which the
Agent may incur or be subject to as a consequence, direct or indirect, of (i)
the issuance of any Letter of Credit, other than as a result of (A) the gross
negligence or willful misconduct of the Agent as determined by a final judgment
of a court of competent jurisdiction, (B) the payment by the Agent under any
Letter of Credit against presentation of a demand, draft or certificate or other
document which does not substantially comply with the terms of such Letter of
Credit, or (C) subject to the following clause (ii), the wrongful dishonor by
the Agent of a proper demand for payment made under any Letter of Credit or (ii)
the failure of the Agent to honor a drawing under any such Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all such acts
or omissions herein called "GOVERNMENTAL ACTS").
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2.8.9 LIABILITY FOR ACTS AND OMISSIONS.
As between any Loan Party and the Agent, such Loan Party assumes all
risks of the acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Agent shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit (provided the beneficiary shall have
substantially complied with such conditions); (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of the Agent, including any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
the Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by the Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good-faith, shall not
put the Agent under any resulting liability to the Borrower.
2.8.10 EXTENSION BY BANKS OF THE EXPIRATION DATE.
Upon or promptly after delivery by the Loan Parties of the annual
financial statements to be provided under Section 8.3.3 for the fiscal year
ending March 31, 1997 or any subsequent fiscal year, the Borrowers may request a
one-year extension of the Expiration Date by written notice to the Banks, and
the Banks agree to respond to the Borrower request for an extension within sixty
(60) days following receipt of the request; provided, however, that all the
Banks must consent to any extension of the Expiration Date and the failure of
the Banks to respond within such time period shall not in any manner constitute
an extension of the Expiration Date.
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3. TERM LOANS
3.1 TERM LOAN COMMITMENTS.
Subject to the terms and conditions hereof, and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make a term loan (the "TERM LOAN") to the Borrowers on the Closing Date in such
principal amount as the Borrowers shall request up to, but not exceeding such
Bank's Term Loan Commitment.
3.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO TERM LOANS.
The obligations of each Bank to make Term Loans to the Borrowers shall be
in the proportion that such Bank's Term Loan Commitment bears to the Term Loan
Commitments of all Banks to the Borrower, but each Bank's Term Loan to the
Borrowers shall never exceed its Term Loan Commitment. The failure of any Bank
to make a Term Loan shall not relieve any other Bank of its obligations to make
a Term Loan nor shall it impose any additional liability on any other Bank
hereunder. The Banks shall have no obligation to make Term Loans hereunder
after the Closing Date. The Term Loan Commitments are not revolving credit
commitments, and the Borrowers shall not have the right to borrow, repay and
reborrow under Section 2.1.
3.3 TERM LOAN NOTES.
The Obligation of the Borrowers to repay the unpaid principal amount of the
Term Loans made by each Bank, together with interest thereon, shall be evidenced
by a Term Note dated the Closing Date payable to the order of each Bank in a
face amount equal to the Term Loan of such Bank. The principal amount as
provided therein of the Term Notes shall be payable quarterly on the first day
of each calendar quarter after the Closing Date and ending on July 1, 2001. The
aggregate amount of each of the first 19 quarterly principal payment on the Term
Notes shall be $1,250,000; the aggregate amount of the 20th and final quarterly
principal payment shall be $11,250,000 (or such lesser amount as may be
necessary to repay the outstanding principal of the Term Notes in full).
3.4 USE OF PROCEEDS.
The proceeds of the Term Loans shall be used for the purpose of refinancing
existing senior and mezzanine indebtedness of the Borrowers.
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4. INTEREST RATES
4.1 INTEREST RATE OPTIONS.
The Borrowers shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrowers may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, PROVIDED that there shall
not be at any one time outstanding more than five (5) Borrowing Tranches in the
aggregate among all of the Loans. If at any time the designated rate applicable
to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate
of interest on such Bank's Loan shall be limited to such Bank's highest lawful
rate.
4.1.1 REVOLVING CREDIT INTEREST RATE OPTIONS.
The Borrowers shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) REVOLVING CREDIT BASE RATE OPTION: A fluctuating rate per
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate plus the applicable number of
basis points calculated under the Pricing Grid, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate; or
(ii) REVOLVING CREDIT EURO-RATE OPTION: A rate per annum
(computed on the basis of a year of 360 days and actual days elapsed) equal to
the Euro-Rate plus the applicable number of basis points calculated under the
Pricing Grid.
4.1.2 TERM LOAN INTEREST RATE OPTIONS.
The Borrowers shall have the right to select from the following Interest
Rate Options applicable to the Term Loans:
(i) TERM LOAN BASE RATE OPTION: A fluctuating rate per
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate plus the applicable number of
basis points calculated
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under the Pricing Grid, such interest rate to change automatically from time to
time effective as of the effective date of each change in the Base Rate; or
(ii) TERM LOAN EURO-RATE OPTION: A rate per annum (computed on
the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate
plus the applicable number of basis points calculated under the Pricing Grid.
4.1.3 RATE QUOTATIONS.
The Borrowers may call the Agent on or before the date on which a Loan
Request is to be delivered to receive an indication of the rates then in effect,
but it is acknowledged that such projection shall not be binding on the Agent or
the Banks nor affect the rate of interest which thereafter is actually in effect
when the election is made.
4.2 INTEREST PERIODS.
At any time when the Borrowers shall select, convert to or renew a Euro-
Rate Option, the Borrowers shall notify the Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan Request. The notice shall specify an interest period (the "INTEREST
PERIOD") during which such Interest Rate Option shall apply, such Interest
Period to be one, two, three or six Months in the event of a Euro-Rate Option,
PROVIDED, that:
4.2.1 ENDING DATE AND BUSINESS DAY.
any Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day;
4.2.2 AMOUNT OF BORROWING TRANCHE.
each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $500,000 and not less than $1,000,000;
4.2.3 TERMINATION BEFORE EXPIRATION DATE.
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the Borrowers shall not select, convert to or renew an Interest Period
for any portion of the Loans that would end after the Expiration Date with
respect to Euro-Rate Revolving Loans or beyond July 1, 2001 with respect to
Euro-Rate Term Loans; and
4.2.4 RENEWALS.
in the case of the renewal of a Euro-Rate Option at the end of an
Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period, without duplication in payment of interest for
such day.
4.3 INTEREST AFTER DEFAULT.
To the extent permitted by Law, upon the occurrence of an Event of Default
and until such time such Event of Default shall have been cured or waived:
4.3.1 LETTER OF CREDIT FEES, INTEREST RATE.
the Letter of Credit Fees and the rate of interest for each Loan
otherwise applicable pursuant to the Pricing Grid shall be increased by 2.0% per
annum; and
4.3.2 OTHER OBLIGATIONS.
each other Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Revolving Credit Base Rate Option plus an additional 2.0% per annum
from the time such Obligation becomes due and payable and until it is paid in
full.
4.3.3 ACKNOWLEDGMENT.
The Borrowers acknowledge that such increased rates reflect, among
other things, the fact that such Loans or other amounts have become a
substantially greater risk given their default status and that the Banks are
entitled to additional compensation for such risk; and, all such interest shall
be payable by Borrowers upon demand by Agent.
4.4 EURO-RATE UNASCERTAINABLE.
4.4.1 UNASCERTAINABLE.
If on any date on which a Euro-Rate would otherwise be determined, the
Agent shall have determined that:
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(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and adversely
affects the London interbank eurodollar market relating to the Euro-Rate, the
Agent shall have the rights specified in Section 4.4.3.
4.4.2 ILLEGALITY; INCREASED COSTS; DEPOSITS NOT AVAILABLE.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to which a
Euro-Rate Option applies has been made impracticable or unlawful by compliance
by such Bank in good-faith with any Law or any interpretation or application
thereof by any Official Body or with any request or directive of any such
Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and fairly
reflect the cost to such Bank of the establishment or maintenance of any such
Loan, or
(iii) after making all reasonable efforts, deposits of the
relevant amount in Dollars for the relevant Interest Period for a Loan to which
a Euro-Rate Option applies are not available to such Bank with respect to such
Loan in the London interbank market,
then the Agent shall have the rights specified in Section 4.4.3.
4.4.3 AGENT'S AND BANKS' RIGHTS.
In the case of any event specified in subsection 4.4.1 above, the
Agent shall promptly so notify the Banks and the Borrowers thereof, and in the
case of an event specified in subsection 4.4.2 above, such Bank shall promptly
so notify the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrowers. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A) the Banks, in the case of such notice
given by the Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrowers to select, convert to or renew a Euro-Rate Option
shall be suspended until the Agent shall have later notified the Borrowers, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the
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circumstances giving rise to such previous determination no longer exist. If at
any time the Agent makes a determination under subsection 4.4.1 of this Section
4.4 and the Borrowers have previously notified the Agent of their selection of,
conversion to or renewal of a Euro-Rate Option and such Interest Rate Option has
not yet gone into effect, such notification shall be deemed to provide for
selection of, conversion to or renewal of the Base Rate Option otherwise
available with respect to such Loans. If any Bank notifies the Agent of a
determination under subsection 4.4.2 of this Section 4.4, the Borrowers shall,
subject to the Borrowers' indemnification Obligations under Section 5.6.2, as to
any Loan of the Bank to which a Euro-Rate Option applies, on the date specified
in such notice either convert such Loan to the Base Rate Option otherwise
available with respect to such Loan or prepay such Loan in accordance with
Section 5.4. Absent due notice from the Borrowers of conversion or prepayment,
such Loan shall automatically be converted to the Base Rate Option otherwise
available with respect to such Loan upon such specified date.
4.5 SELECTION OF INTEREST RATE OPTIONS.
If the Borrowers fail to select a new Interest Period to apply to any
Borrowing Tranche of Euro-Rate Loans at the expiration of an existing Interest
Period applicable to such Borrowing Tranche in accordance with the provisions of
Section 4.1, the Borrowers shall be deemed to have converted such Borrowing
Tranche to the Revolving Credit Base Rate Option or Term Loan Base Rate Option,
as applicable, commencing upon the last day of the existing Interest Period.
5. PAYMENTS
5.1 PAYMENTS.
All payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Letter of Credit Fees, Agent's Fee or other fees or amounts due
from the Borrowers hereunder shall be payable prior to 11:00 a.m., Eastern time,
on the date when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived by the Borrower, and without set-off,
counterclaim or other deduction of any nature, and an action therefor shall
immediately accrue. Such payments shall be made to the Agent at the Principal
Office for the ratable accounts of the Banks with respect to the Loans in U.S.
Dollars and in immediately available funds, and the Agent shall promptly
distribute such amounts to the Banks in immediately available funds, PROVIDED
that in the event payments are received by 11:00 a.m., Eastern time, by the
Agent with respect to the Loans and such payments are not distributed to the
Banks on the same day received by the Agent, the Agent shall pay the Banks the
Federal Funds Effective Rate with respect to the
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amount of such payments for each day held by the Agent and not distributed to
the Banks. The Agent's and each Bank's statement of account, ledger or other
relevant record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Loans and other
amounts owing under this Agreement and shall be deemed an "account stated."
5.2 PRO RATA TREATMENT OF BANKS.
Each borrowing shall be allocated to each Bank according to its Ratable
Share, and each selection of, conversion to or renewal of any Interest Rate
Option and each payment or prepayment by the Borrowers with respect to
principal, interest, Commitment Fees, Letter of Credit Fees, or other fees
(except for the Agent's Fee) or amounts due from the Borrowers hereunder to the
Banks with respect to the Loans, shall (except as provided in Section 4.4.2
[Illegality; Increased Costs; Deposits not Available] in the case of an event
specified in Section 4.4, 4.4.1 [Euro-Rate Unascertainable], 5.4 [Voluntary
Prepayments] or 5.6.1 [Additional Compensation in Certain Circumstances]) be
made in proportion to the applicable Loans outstanding from each Bank and, if no
such Loans are then outstanding, in proportion to the Ratable Share of each
Bank.
5.3 INTEREST PAYMENT DATES.
Interest on Loans to which the Base Rate Option applies shall be due and
payable in arrears on the first Business Day of each calendar quarter after the
date hereof and on the date such Loans are repaid in full. Interest on Loans to
which the Euro-Rate Option applies shall be due and payable on the last day of
each Interest Period for those Loans and, if such Interest Period is longer than
three (3) months, also on the last day of every third month during such Interest
Period. Interest on mandatory prepayments of principal under Section 5.5 shall
be due on the date such mandatory prepayment is due. Interest on the principal
amount of each Loan or other monetary Obligation shall be due and payable on
demand after such principal amount or other monetary Obligation becomes due and
payable (whether on the stated maturity date, upon acceleration or otherwise).
5.4 VOLUNTARY PREPAYMENTS AND COMMITMENT REDUCTIONS.
5.4.1 RIGHT TO PREPAY.
The Borrowers shall have the right at their option from time to time
to prepay the Loans in whole or part without premium or penalty (except as
provided in subsection 5.4.2 below or in Section 5.6):
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(i) at any time with respect to any Loan to which the Base
Rate Option applies,
(ii) on the last day of the applicable Interest Period with
respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank pursuant to
Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available] with respect
to any Loan to which a Euro-Rate Option applies.
Whenever the Borrowers desire to prepay any part of the Loans, they
shall provide a prepayment notice to the Agent on or before the date of
prepayment of Loans setting forth the following information:
(x) the date, which shall be a Business Day, on which the proposed
prepayment is to be made;
(y) a statement indicating the application of the prepayment between
the Revolving Credit Loans and Term Loans; and
(z) the total principal amount of such prepayment, which shall not be
less than $1,000,000 for the Term Loans or less than $250,000 for the
Revolving Credit Loans.
All prepayment notices shall be irrevocable. The principal amount of
the Loans for which a prepayment notice is given, together with interest on such
principal amount except with respect to Loans to which the Base Rate Option
applies, shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is to be made. All Term
Loan prepayments permitted pursuant to this Section 5.4 shall be applied to the
unpaid installments of principal of the Term Loans in the inverse order of
scheduled maturities. Except as provided in Section 4.3.3, if the Borrowers
prepay a Loan but fail to specify the applicable Borrowing Tranche which the
Borrowers are prepaying, the prepayment shall be applied (i) first to Revolving
Credit Loans and then to Term Loans; and (ii) after giving effect to the
allocations in clause (i) above and in the preceding sentence, first to Loans to
which the Base Rate Option applies, then to Loans to which the Euro-Rate Option
applies. Any prepayment hereunder shall be subject to the Borrower's Obligation
to indemnify the Banks under Section 5.6.2.
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5.4.2 REPLACEMENT OF A BANK.
In the event any Bank (i) gives notice under Section 4.4.2 or Section 5.6,
(ii) does not fund Revolving Credit Loans because the making of such Loans would
contravene any Law applicable to such Bank, (iii) does not approve any action as
to which consent of the Required Banks is requested by the Borrowers and
obtained hereunder, or (iv) becomes subject to the control of an Official Body
(other than normal and customary supervision), then the Borrowers shall have the
right at their option, with the consent of the Agent, which shall not be
unreasonably withheld, to prepay the Loans of such Bank in whole, together with
all interest accrued thereon, and terminate such Bank's Commitment within ninety
(90) days after (w) receipt of such Bank's notice under Section 4.4.2 or 5.6.1,
(x) the date such Bank has failed to fund Revolving Credit Loans because the
making of such Loans would contravene Law applicable to such Bank, (y) the date
of obtaining the consent which such Bank has not approved, or (z) the date such
Bank became subject to the control of an Official Body, as applicable; PROVIDED
that the Borrowers shall also pay to such Bank at the time of such prepayment
any amounts required under Section 5.6 and any accrued interest due on such
amount and any related fees; PROVIDED, however, that the Commitment and any Term
Loan of such Bank shall be provided by one or more of the remaining Banks or a
replacement bank acceptable to the Agent; PROVIDED, further, the remaining Banks
shall have no obligation hereunder to increase their Commitments.
Notwithstanding the foregoing, the Agent may only be replaced subject to the
requirements of Section 10.14 and PROVIDED that all Letters of Credit have
expired, been terminated or replaced or cash collateral or backup letters of
credit shall have been deposited.
5.4.3 RIGHT TO REDUCE COMMITMENTS.
The Borrowers shall have the right at their option from time to time
to reduce permanently the Revolving Credit Commitments upon at least one
Business Day's advance notice to the Agent. Each such permanent reduction shall
be in the minimum amount of $1,000,000 and shall reduce the Revolving Credit
Commitment of each Bank in proportion to its Ratable Share. Upon the effective
date of each permanent reduction in the Revolving Credit Commitments, the
Borrowers shall also prepay, with interest and with any additional compensation
required under Section 5.6.2, the amount (if any) by which the Revolving
Facility Usage at the time of the reduction exceeds the amount of the Revolving
Commitments as reduced.
5.5 MANDATORY PREPAYMENTS.
5.5.1 THE IPO.
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Within five (5) Business Days of the Guarantor's receipt of the
proceeds of the IPO, the Guarantor shall make a capital contribution to the
Company in the amount of not less than $15,000,000, which the Company in turn
shall use to make a mandatory prepayment of principal on the Loans in the same
amount, together with accrued interest on such principal amount.
5.5.2 SALE OF ASSETS.
Within five (5) Business Days of any sale of assets authorized by
Section 8.2.7(v), the Borrowers shall make a mandatory prepayment of principal
on the Loans equal to the after-tax proceeds of such sale (as estimated in good-
faith by the Borrowers), together with accrued interest on such principal
amount.
5.5.3 ISSUANCE OF DEBT.
Within five (5) Business Days of the issuance of any Indebtedness,
other than PIK Subordinated Indebtedness, by any Loan Party, the Borrowers shall
make a mandatory prepayment of principal on the Loans equal to 100% of the
proceeds (net of the reasonable fees and expenses incurred by the issuer) of the
Indebtedness, together with any accrued interest on such principal amount.
5.5.4 [RESERVED]
5.5.5 APPLICATION AMONG TYPES OF LOANS.
The prepayment required under Section 5.5.1 shall first be applied to
the payment in full of the principal amount of the Revolving Credit Loans by
application to the unpaid principal balance and then to the payment in full of
the principal amount of the Term Loans by application to the unpaid installments
of principal in reverse order of scheduled maturities. All other prepayments
required pursuant to this Section 5.5 shall first be applied to the payment in
full of the principal amount of the Term Loans by application to the unpaid
installments of the principal in reverse order of scheduled maturities and then
to the permanent reduction of the Revolving Credit Commitments.
5.5.6 APPLICATION AMONG INTEREST RATE OPTIONS.
All prepayments required pursuant to this Section 5.5 shall first be
applied among the Interest Rate Options to the principal amount of the Loans
subject to a Base Rate Option, then to Loans subject to the Euro-Rate Option.
In accordance with Section 5.6.2, the Borrowers shall indemnify the Banks for
any loss or expense, including loss of margin,
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actually incurred with respect to any such prepayments applied against Loans
subject to a Euro-Rate Option on any day other than the last day of the
applicable Interest Period.
5.6 ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES.
5.6.1 INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES,
RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC.
If any Law, guideline or interpretation or any change in any Law,
guideline or interpretation or application thereof by any Official Body charged
with the interpretation or administration thereof or compliance with any request
or directive (whether or not having the force of Law) of any central bank or
other Official Body:
(i) subjects any Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Notes, the Loans or payments by the
Borrowers of principal, interest, Commitment Fees, or other amounts due from the
Borrowers hereunder or under the Notes (except for taxes on the overall net
income of such Bank),
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against credits or commitments to extend credit
extended by, or assets (funded or contingent) of, deposits with or for the
account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital adequacy
or similar requirement (A) against assets (funded or contingent) of, or letters
of credit, other credits or commitments to extend credit extended by, any Bank,
or (B) otherwise applicable to the obligations of any Bank under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies with
respect to capital adequacy) by an amount which such Bank in its sole discretion
deems to be material, such Bank shall from time to time notify the Borrowers and
the Agent of the amount determined in good-faith (using any averaging and
attribution methods employed in good-faith) by such Bank to be necessary to
compensate such Bank for such increase in cost, reduction of income or
additional expense (to the extent not reflected in the determination of Base
Rate). Such notice shall set forth in reasonable detail the basis for such
determination.
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Such amount shall be due and payable by the Borrowers to such Bank ten (10)
Business Days after such notice is given.
5.6.2 INDEMNITY.
In addition to the compensation required by subsection 5.6.1 of this
Section 5.6, the Borrowers shall indemnify each Bank against all liabilities,
losses or expenses (including loss of margin, any loss or expense incurred in
liquidating or employing deposits from third parties and any loss or expense
incurred in connection with funds acquired by a Bank to fund or maintain Loans
subject to the Euro-Rate Option) which such Bank actually sustains or incurs as
a consequence of any
(i) payment, prepayment, conversion or renewal of any Loan to
which the Euro-Rate Option applies on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrowers to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice relating to Loan
Requests under Section 2.4 or Section 4.2 or prepayments under Section 5.4, or
(iii) default by the Borrowers in the performance or observance
of any covenant or condition contained in this Agreement or any other Loan
Document, including any failure of the Borrowers to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank actually sustains or incurs any such loss or expense, it
shall from time to time notify the Borrowers of the amount determined in good-
faith by such Bank (which determination may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrowers to such
Bank ten (10) Business Days after such notice is given.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES.
The Loan Parties, jointly and severally, represent and warrant to the Agent
and each of the Banks as follows:
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6.1.1 ORGANIZATION AND QUALIFICATION.
Each Loan Party and each Subsidiary of each Loan Party is a
corporation or partnership, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each Loan Party
and each Subsidiary of each Loan Party has the lawful power to own or lease its
properties and to engage in the business it presently conducts or proposes to
conduct. Each Loan Party and each Subsidiary of each Loan Party is duly
licensed or qualified and in good standing in each jurisdiction listed on
SCHEDULE 6.1.1 and in all other jurisdictions where the property owned or leased
by it or the nature of the business transacted by it or both makes such
licensing or qualification necessary.
6.1.2 CAPITALIZATION AND OWNERSHIP.
SCHEDULE 6.1.2 states, as of the Closing Date, the authorized capital
stock of the Guarantor, the issued and outstanding shares (referred to herein as
the "SHARES") of such stock, and the owners thereof. All of the Shares have
been validly issued and are fully paid and nonassessable. There are no options,
warrants or other rights outstanding to purchase any such Shares except as
indicated on SCHEDULE 6.1.2.
6.1.3 SUBSIDIARIES.
SCHEDULE 6.1.3 states, as of the Closing Date, the name of each of the
Guarantor's Subsidiaries, its jurisdiction of incorporation, its authorized
capital stock, the issued and outstanding shares (referred to herein as the
"SUBSIDIARY SHARES") and the owners thereof if it is a corporation and its
outstanding partnership interests (the "PARTNERSHIP INTEREST") if it is a
partnership. The Guarantor and each Subsidiary of the Guarantor has good and
marketable title to all of the Subsidiary Shares and Partnership Interests it
purports to own, free and clear in each case of any Lien. All Subsidiary Shares
and Partnership Interests have been validly issued, and all Subsidiary Shares
are fully paid and nonassessable. All capital contributions and other
consideration required to be made or paid in connection with the issuance of the
Partnership Interests have been made or paid, as the case may be. There are no
options, warrants or other rights outstanding to purchase any such Subsidiary
Shares or Partnership Interests except as indicated on SCHEDULE 6.1.3.
6.1.4 POWER AND AUTHORITY.
Each Loan Party has full power to enter into, execute, deliver and
carry out this Agreement and the other Loan Documents to which it is a party, to
incur the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the
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Loan Documents to which it is a party, and all such actions have been duly
authorized by all necessary proceedings on its part.
6.1.5 VALIDITY AND BINDING EFFECT.
This Agreement has been duly and validly executed and delivered by
each Loan Party, and each other Loan Document which any Loan Party is required
to execute and deliver on or after the date hereof will have been duly executed
and delivered by such Loan Party on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
6.1.6 NO CONFLICT.
Neither the execution and delivery of this Agreement or the other Loan
Documents by any Loan Party nor the consummation of the transactions herein or
therein contemplated or compliance with the terms and provisions hereof or
thereof by them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws or other organizational documents of any Loan Party or (ii) any Law or of
any material agreement, instrument, order, writ, judgment, injunction or decree
to which any Loan Party is a party or by which it is bound or to which it is
subject, or result in the creation or enforcement of any Lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan
Party (other than Liens granted under the Loan Documents).
6.1.7 LITIGATION.
There are no actions, suits, proceedings or investigations pending or,
to the knowledge of any Loan Party, threatened against such Loan Party or any
Subsidiary of such Loan Party at law or equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change.
None of the Loan Parties or any Subsidiaries of any Loan Party is in violation
of any order, writ, injunction or any decree of any Official Body which may
result in any Material Adverse Change.
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6.1.8 TITLE TO PROPERTIES.
The real property owned or leased by each Loan Party and each
Subsidiary of each Loan Party is described on SCHEDULE 6.1.8. Each Loan Party
and each Subsidiary of each Loan Party has good and marketable title to or valid
leasehold interests in all properties, assets and other rights which it purports
to own or lease or which are reflected as owned or leased on its books and
records, free and clear of all Liens and encumbrances except Permitted Liens,
and subject to the terms and conditions of the applicable leases. All leases of
property are in full force and effect without the necessity for any consent
which has not previously been obtained upon consummation of the transactions
contemplated hereby.
6.1.9 FINANCIAL STATEMENTS.
(i) HISTORICAL STATEMENTS. The Loan Parties have delivered to
the Agent copies of their audited consolidated and unaudited consolidating year-
end financial statements for and as of the end of the fiscal year ended March
31, 1996 (the "ANNUAL STATEMENTS"). In addition, the Loan Parties have
delivered to the Agent copies of their unaudited consolidated and consolidating
interim financial statements for the months of April and May, 1996 (the "INTERIM
STATEMENTS") (the Annual and Interim Statements being collectively referred to
as the "HISTORICAL STATEMENTS"). The Historical Statements were compiled from
the books and records maintained by the Loan Parties' management, are correct
and complete and present fairly in all material respects the financial condition
of the Loan Parties as of their dates and the results of operations for the
fiscal periods then ended and have been prepared in accordance with GAAP
consistently applied, subject (in the case of the Interim Statements) to normal
year-end audit adjustments and the absence of footnotes.
(ii) FINANCIAL PROJECTIONS. The Loan Parties have delivered to
the Agent financial projections of the Loan Parties for the fiscal year ending
March 31, 1997, derived from various assumptions of the Loan Parties' management
(the "FINANCIAL PROJECTIONS"). The Financial Projections represent a reasonable
range of possible results in light of the history of the business, present and
foreseeable conditions and the intentions of the Loan Parties' management. The
Financial Projections accurately reflect the liabilities of the Loan Parties
upon consummation of the transactions contemplated hereby as of the Closing
Date.
(iii) ACCURACY OF FINANCIAL STATEMENTS. None of the Loan
Parties has any liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Historical Statements or in the notes
thereto, and except as disclosed therein there are no unrealized or anticipated
losses from any commitments of the Guarantor
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or any Subsidiary of the Guarantor which may cause a Material Adverse Change.
Since March 31, 1996, no Material Adverse Change has occurred.
6.1.10 MARGIN STOCK.
None of the Loan Parties or any Subsidiaries of any Loan Party engages
or intends to engage principally, or as one of its important activities, in the
business of extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of any Loan has been or will be used,
immediately, incidentally or ultimately, to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock or to refund Indebtedness originally incurred for such purpose, or
for any purpose which entails a violation of or which is inconsistent with the
provisions of Regulation U of the Board of Governors of the Federal Reserve
System. None of the Loan Parties or any Subsidiary of any Loan Party holds or
intends to hold margin stock in such amounts that more than 25% of the
reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party
are or will be represented by margin stock.
6.1.11 FULL DISCLOSURE.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. On the Closing Date, there is no fact
known to any Loan Party which materially adversely affects the business,
property, assets, financial condition, results of operations or prospects of any
Loan Party or Subsidiary of any Loan Party which has not been set forth in this
Agreement or in the certificates, statements, agreements or other documents
furnished in writing to the Agent and the Banks prior to or at the date hereof
in connection with the transactions contemplated hereby.
6.1.12 TAXES.
All federal, state, local and other tax returns required to have been
filed with respect to each Loan Party and each Subsidiary of each Loan Party
have been filed, and payment or adequate provision has been made for the payment
of all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the
extent that such taxes, fees, assessments and other charges are being contested
in good faith by appropriate proceedings diligently conducted and
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for which such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made. Other than extensions of tax return
filing deadlines for which the Loan Parties have applied in the ordinary course
of business, there are no agreements or waivers extending the statutory period
of limitations applicable to any federal income tax return of any Loan Party or
Subsidiary of any Loan Party for any period.
6.1.13 CONSENTS AND APPROVALS.
No consent, approval, exemption, order or authorization of, or a
registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by any Loan Party,
except as listed on SCHEDULE 6.1.13, all of which shall have been obtained or
made on or prior to the Closing Date except as otherwise indicated on SCHEDULE
6.1.13.
6.1.14 NO EVENT OF DEFAULT; COMPLIANCE WITH INSTRUMENTS.
No event has occurred and is continuing and no condition exists or
will exist after giving effect to the borrowings to be made on the Closing Date
under the Loan Documents which constitutes an Event of Default or Potential
Default. None of the Loan Parties or any Subsidiaries of any Loan Party is in
violation of (i) any term of its certificate of incorporation, bylaws, or other
organizational documents or (ii) any material agreement or instrument to which
it is a party or by which it or any of its properties may be subject or bound
where such violation would constitute a Material Adverse Change.
6.1.15 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and rights necessary to
own and operate its properties and to carry on its business as presently
conducted and planned to be conducted by such Loan Party or Subsidiary, without
known conflict with the rights of others.
6.1.16 [RESERVED]
6.1.17 [RESERVED]
6.1.18 [RESERVED]
6.1.19 INSURANCE.
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All insurance policies and other bonds to which any Loan Party or
Subsidiary of any Loan Party is a party are valid and in full force and effect.
No notice has been given or claim made and no grounds exist to cancel or avoid
any of such policies or bonds or to reduce the coverage provided thereby. Such
policies and bonds provide adequate coverage from reputable and financially
sound insurers in amounts sufficient to insure the assets and risks of each Loan
Party and each Subsidiary of each Loan Party in accordance with prudent business
practice in the industry of the Loan Parties and their Subsidiaries.
6.1.20 COMPLIANCE WITH LAWS.
The Loan Parties and their Subsidiaries are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in subsection 6.1.25) in all jurisdictions in which
any Loan Party or Subsidiary of any Loan Party does business except where the
failure to so comply would not constitute a Material Adverse Change.
6.1.21 MATERIAL CONTRACTS.
All material contracts relating to the business operations of each
Loan Party and each Subsidiary of any Loan Party, including all employee benefit
plans and Labor Contracts are valid, binding and enforceable upon such Loan
Party or Subsidiary and each of the other parties thereto in accordance with
their respective terms, and there is no default thereunder, to the Loan Parties'
knowledge, with respect to parties other than such Loan Party or Subsidiary
which could result in a Material Adverse Change.
6.1.22 INVESTMENT COMPANIES.
None of the Loan Parties or any Subsidiaries of any Loan Party is an
"investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control."
6.1.23 PLANS AND BENEFIT ARRANGEMENTS.
Except as set forth on SCHEDULE 6.1.23:
(i) The Guarantor and each member of the ERISA Group are in
compliance in all material respects with any applicable provisions of ERISA with
respect to all Benefit Arrangements, Plans and Multiemployer Plans. There has
been no
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Prohibited Transaction with respect to any Benefit Arrangement or any Plan or,
to the knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiple Employer Plan, which could result in any material liability of the
Guarantor or any other member of the ERISA Group. The Guarantor and all members
of the ERISA Group have made when due any and all payments required to be made
under any agreement relating to a Multiemployer Plan or a Multiple Employer Plan
or any Law pertaining thereto. With respect to each Plan and Multiemployer
Plan, the Guarantor and each member of the ERISA Group (i) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, (ii) have not incurred any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to fulfill the minimum funding
requirements of ERISA.
(ii) To the Borrower's knowledge, each Multiemployer Plan and
Multiple Employer Plan is able to pay benefits thereunder when due.
(iii) Neither the Guarantor nor any other member of the ERISA
Group has instituted or intends to institute proceedings to terminate any Plan.
No event requiring notice to the PBGC under Section 302(f)(4)(A) of
ERISA has occurred or is reasonably expected to occur with respect to any Plan,
and no amendment with respect to which security is required under Section 307 of
ERISA has been made or is reasonably expected to be made to any Plan.
(iv) The aggregate actuarial present value of accumulated
benefit obligations (as per Financial Accounting Standards Board Opinion No. 87)
under each Plan, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(v) Neither the Guarantor nor any other member of the ERISA
Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Guarantor nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the knowledge of the Borrower, no Multiemployer Plan or Multiple
Employer Plan is reasonably expected to be reorganized or terminated, within the
meaning of Title IV of ERISA.
(vi) To the extent that any Benefit Arrangement is insured, the
Guarantor and all members of the ERISA Group have paid when due all premiums
required to be paid for all periods through the Closing Date. To the extent
that any Benefit
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Arrangement is funded other than with insurance, the Guarantor and all members
of the ERISA Group have made when due all contributions required to be paid for
all periods through the Closing Date.
(vii) All Plans, Benefit Arrangements and to the knowledge of
the Borrower Multiemployer Plans have been administered in all material respects
in accordance with their terms and the applicable provisions of ERISA.
6.1.24 EMPLOYMENT MATTERS.
Each of the Loan Parties is in compliance with the Labor Contracts and
all applicable federal, state and local labor and employment Laws including
those related to equal employment opportunity and affirmative action, labor
relations, minimum wage, overtime, child labor, medical insurance continuation,
worker adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where the failure to comply would constitute a
Material Adverse Change. There are no outstanding grievances, arbitration
awards or appeals therefrom arising out of the Labor Contracts or current or
threatened strikes, picketing, handbilling or other work stoppages or slowdowns
at facilities of any of the Loan Parties which in any case would constitute a
Material Adverse Change.
6.1.25 ENVIRONMENTAL MATTERS.
Except as disclosed on SCHEDULE 6.1.25 and except as is not reasonably
likely to constitute or result in a Material Adverse Change:
(i) None of the Loan Parties or any Subsidiaries of any Loan
Party has received any Environmental Complaint from any Official Body or private
Person alleging that such Loan Party or Subsidiary or, with respect to the
Property, any prior or subsequent owner of the Property is a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601, ET SEQ., and none of the Loan Parties
has any reason to believe that such an Environmental Complaint is reasonably
likely to be received. There are no pending or, to any Loan Party's knowledge,
threatened Environmental Complaints relating to any Loan Party or Subsidiary of
any Loan Party or, to any Loan Party's knowledge with respect to the Property,
any prior or subsequent owner of the Property pertaining to, or arising out of,
any Environmental Conditions.
(ii) There are no circumstances at, on or under the Property
that constitute a breach of or non-compliance with any of the Environmental
Laws,
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and there are no Environmental Conditions at, on or under the Property or, to
the knowledge of any officer of the Guarantor, at, on or under adjacent
property, that prevent compliance with the Environmental Laws at the Property.
(iii) Neither the Property nor any structures, improvements,
equipment, fixtures, activities or facilities thereon or thereunder contain or
use Regulated Substances except in compliance with Environmental Laws. There
are no processes, facilities, operations, equipment or any other activities at,
on or under the Property, or, to the knowledge of any officer of the Guarantor,
at, on or under adjacent property, that currently result in the release or
threatened release of Regulated Substances onto the Property, except to the
extent that such releases or threatened releases are not a breach of or
otherwise not a violation of the Environmental Laws or are not likely to result
in a Material Adverse Change.
(iv) Each Loan Party and each Subsidiary of any Loan Party has
all permits, licenses, authorizations, plans and approvals necessary under the
Environmental Laws for the conduct of the business of such Loan Party and
Subsidiary as presently conducted. Each Loan Party and each Subsidiary of any
Loan Party has submitted all notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which pertain to past and
current operations on the Property.
(v) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under the Property and all off-
site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances has been done by the
Loan Parties in accordance with the Environmental Laws.
6.1.26 SENIOR DEBT STATUS.
The Obligations of each Loan Party under this Agreement, the Notes,
the Guaranty Agreement and each of the other Loan Documents to which it is a
party do rank and will rank at least PARI PASSU in priority of payment with all
other Indebtedness of such Loan Party except Indebtedness of such Loan Party to
the extent secured by Permitted Liens. There is no Lien upon or with respect to
any of the properties or income of any Loan Party or Subsidiary of any Loan
Party which secures indebtedness or other obligations of any Person except for
Permitted Liens.
6.2 UPDATES TO SCHEDULES.
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Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Loan Parties shall promptly provide the Agent in writing with such revisions
or updates to such Schedule as may be necessary or appropriate to update or
correct same; PROVIDED, however, that no Schedule shall be deemed to have been
amended, modified or superseded by any such correction or update, nor shall any
breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby, unless
and until the Required Banks, in their sole and absolute discretion, shall have
accepted in writing such revisions or updates to such Schedule.
7. CONDITIONS OF LENDING
The obligation of each Bank to make Loans and of the Agent to issue
Letters of Credit hereunder is subject to the performance by each of the Loan
Parties of its Obligations to be performed hereunder at or prior to the making
of any such Loans or issuance of such Letters of Credit and to the satisfaction
of the following further conditions:
7.1 FIRST LOANS.
On the Closing Date:
7.1.1 OFFICER'S CERTIFICATE.
The representations and warranties of each of the Loan Parties
contained in Article 6 shall be true and accurate on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date (except representations and warranties which relate
solely to an earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to therein),
and each of the Loan Parties shall have performed and complied with all
covenants and conditions hereof, no Event of Default or Potential Default under
this Agreement shall have occurred and be continuing or shall exist; and there
shall be delivered to the Agent for the benefit of each Bank a certificate of
each of the Loan Parties, dated the Closing Date and signed by the Chief
Executive Officer, President or Chief Financial Officer of each of the Loan
Parties, to each such effect.
7.1.2 SECRETARY'S CERTIFICATE.
There shall be delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Secretary or an Assistant
Secretary of each of the Loan Parties, certifying as appropriate as to:
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(i) all action taken by each Loan Party in connection with
this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized to sign
this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of each Loan Party for purposes of this Agreement and the true signatures
of such officers, on which the Agent and each Bank may conclusively rely; and
(iii) copies of its organizational documents, including its
certificate of incorporation and bylaws as in effect on the Closing Date
certified by the appropriate state official where such documents are filed in a
state office together with certificates from the appropriate state officials as
to the continued existence and good standing of each Loan Party in each state
where organized or qualified to do business.
7.1.3 DELIVERY OF LOAN DOCUMENTS.
The Guaranty Agreement and the Notes shall have been duly executed and
delivered to the Agent for the benefit of the Banks.
7.1.4 OPINION OF COUNSEL.
There shall be delivered to the Agent for the benefit of each Bank a
written opinion of Ballard Spahr Andrews & Ingersoll, counsel for the Loan
Parties (who may rely on the opinions of such other counsel as may be acceptable
to the Agent), dated the Closing Date and in form and substance satisfactory to
the Agent and its counsel:
(i) as to the matters set forth in EXHIBIT 7.1.4; and
(ii) as to such other matters incident to the transactions
contemplated herein as the Agent may reasonably request.
7.1.5 LEGAL DETAILS.
All legal details and proceedings in connection with the transactions
contemplated by the Agreement and the other Loan Documents shall be in form and
substance satisfactory to the Agent and counsel for the Agent, and the Agent
shall have received all such other counterpart originals or certified or other
copies of such documents
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and proceedings in connection with such transactions, in form and substance
satisfactory to the Agent and said counsel, as the Agent or said counsel may
reasonably request.
7.1.6 PAYMENT OF FEES.
The Borrowers shall pay or cause to be paid to the Agent for itself
and for the account of the Banks, to the extent not previously paid, all
commitment and other fees accrued through the Closing Date and the costs and
expenses for which the Agent and the Banks are entitled to be reimbursed.
7.1.7 [RESERVED]
7.1.8 [RESERVED]
7.1.9 CONSENTS.
All material consents required to effectuate the transactions
contemplated hereby as set forth on SCHEDULE 6.1.13 shall have been obtained.
7.1.10 OFFICER'S CERTIFICATE REGARDING MACS.
Since March 31, 1996, no Material Adverse Change in any Loan Party or
Subsidiary of any Loan Party shall have occurred; and there shall be delivered
to the Agent for the benefit of each Bank a certificate dated the Closing Date
and signed by the Chief Executive Officer, President or Chief Financial Officer
of each Loan Party to such effect.
7.1.11 NO VIOLATION OF LAWS.
The making of the Loans shall not contravene any Law applicable to any
Loan Party or any of the Banks.
7.1.12 NO ACTIONS OR PROCEEDINGS.
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of this Agreement or the consummation of the transactions
contemplated hereby or which, in the Agent's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement or any
of the other Loan Documents.
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7.1.13 INSURANCE POLICIES; CERTIFICATES OF INSURANCE; ENDORSEMENTS.
The Loan Parties shall deliver evidence acceptable to the Agent that
adequate insurance in compliance with Section 8.1.3 is in full force and effect
and that all premiums then due thereon have been paid, together with a certified
copy of each Loan Party's casualty insurance policy or policies evidencing
coverage satisfactory to the Agent, with an additional insured, special
endorsement attached thereto in form and substance satisfactory to the Agent and
its counsel naming the Agent as additional insured.
7.1.14 [RESERVED].
7.1.15 [RESERVED].
7.1.16 [RESERVED].
7.1.17 CANCELLATION OF EXISTING SENIOR AND MEZZANINE INDEBTEDNESS.
The Loan Parties shall have delivered to the Agent payoff statements
from The CIT Group/Business Credit, Inc., for itself and as agent for other
lenders (collectively ("CIT") and World Subordinated Debt Partners, L.P.
("CITICORP MEZZANINE") evidencing the fact that upon disbursement of the initial
Loans to CIT and Citicorp Mezzanine, respectively, the Loan Parties' existing
Indebtedness to those two lenders will have been repaid in full. The Loan
Parties shall also have delivered to the Agent from CIT UCC-3 termination
statements, mortgage satisfaction pieces and CIT's agreement to take all action
necessary to terminate its existing liens and security interests in the assets
of the Loan Parties.
7.1.18 OTHER CREDIT DOCUMENTS.
The Loan Parties shall have delivered to the Agent, copies of all
documents evidencing or securing any of their Indebtedness that will remain
outstanding after the Closing Date. The terms of all such Indebtedness shall be
satisfactory to the Agent in all respects.
7.2 EACH ADDITIONAL LOAN.
At the time of making any Loans or issuing any Letters of Credit other than
Loans made or Letters of Credit issued on the Closing Date hereunder and after
giving effect to the proposed borrowings: the representations and warranties of
the Loan Parties contained in Article 6 shall be true on and as of the date of
such additional Loan or Letter of Credit with
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the same effect as though such representations and warranties had been made on
and as of such date (except representations and warranties which expressly
relate solely to an earlier date or time, which representations and warranties
shall be true and correct on and as of the specific dates or times referred to
therein) and the Loan Parties shall have performed and complied with all
covenants and conditions hereof; no Event of Default or Potential Default shall
have occurred and be continuing or shall exist; the making of the Loans or
issuance of such Letter of Credit shall not contravene any Law applicable to any
Loan Party or Subsidiary of any Loan Party or any of the Banks; and the
Borrowers shall have delivered to the Agent a duly executed and completed Loan
Request or application for a Letter of Credit as the case may be.
8. COVENANTS
8.1 AFFIRMATIVE COVENANTS.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon, expiration or termination of
all Letters of Credit, satisfaction of all of the Loan Parties' other
Obligations under the Loan Documents and termination of the Revolving Credit
Commitments, the Loan Parties shall comply at all times with the following
affirmative covenants:
8.1.1 PRESERVATION OF EXISTENCE, ETC.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain its corporate existence and its license or qualification and good
standing in each jurisdiction in which its ownership or lease of property or the
nature of its business makes such license or qualification necessary.
8.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good-faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made, but only to the extent that failure to discharge any such liabilities
would not result in any additional liability which would adversely affect to a
material extent the financial condition of any Loan Party
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or Subsidiary of any Loan Party which would affect the Collateral, PROVIDED that
the Loan Parties and their Subsidiaries will pay all such liabilities forthwith
upon the commencement of proceedings to foreclose any Lien which may have
attached as security therefor.
8.1.3 MAINTENANCE OF INSURANCE.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
insure its properties and assets against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including fire, extended
coverage, property damage, workers' compensation, public liability and business
interruption insurance) and against other risks (including errors and omissions)
in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the extent
customary, all as reasonably determined by the Agent. At the request of the
Agent, the Loan Parties shall deliver (x) on the Closing Date and annually
thereafter an original certificate of insurance signed by the Loan Parties'
independent insurance broker describing and certifying as to the existence of
the insurance required to be maintained by this Agreement and the other Loan
Documents, together with a copy of the endorsement described in the next
sentence attached to such certificate and (y) from time to time a summary
schedule indicating all insurance then in force with respect to each of the Loan
Parties. Such policies of insurance shall contain special endorsements, in form
and substance acceptable to the Agent, which shall (i) specify the Agent as an
additional insured as its interests may appear, with the understanding that any
obligation imposed upon the insured (including the liability to pay premiums)
shall be the sole obligation of the applicable Loan Parties and not that of the
Agent, (ii) [RESERVED], (iii) include effective waivers by the insurer of all
claims for insurance premiums against the Agent, (iv) provide that no
cancellation of such policies for any reason (including non-payment of premium)
nor any change therein shall be effective until at least thirty (30) days after
receipt by the Agent of written notice of such cancellation or change, (v) be
primary without right of contribution of any other insurance carried by or on
behalf of any additional insureds, and (vi) provide that inasmuch as the policy
covers more than one insured, all terms, conditions, insuring agreements and
endorsements (except limits of liability) shall operate as if there were a
separate policy covering each insured. The applicable Loan Parties shall notify
the Agent promptly of any occurrence causing a material loss or decline in value
of insured assets and the estimated (or actual, if available) amount of such
loss or decline. Any monies received by the Agent constituting insurance
proceeds may, at the option of the Agent, (i) [RESERVED], or (ii) be disbursed
to the applicable Loan Parties on such terms as are deemed appropriate by the
Agent for the repair, restoration and/or replacement of property in respect of
which such proceeds were received.
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8.1.4 MAINTENANCE OF PROPERTIES AND LEASES.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in good repair, working order and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of similar
character and size, all of those properties useful or necessary to its business,
and from time to time, such Loan Party will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
8.1.5 MAINTENANCE OF PATENTS, TRADEMARKS, ETC.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect all patents, trademarks, trade names,
copyrights, licenses, franchises, permits and other authorizations necessary for
the ownership and operation of its properties and business if the failure so to
maintain the same would constitute a Material Adverse Change.
8.1.6 VISITATION RIGHTS.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
permit any of the officers or authorized employees or representatives of the
Agent or any of the Banks to visit and inspect any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times during normal business hours and as often as any of the Banks may
reasonably request, PROVIDED that each Bank shall provide the Borrowers and the
Agent with reasonable notice prior to any visit or inspection. In the event any
Bank desires to conduct an audit of any Loan Party, such Bank shall make a
reasonable effort to conduct such audit contemporaneously with any audit to be
performed by the Agent. No Loan Party shall be obligated to reimburse the Agent
and the Banks for more than one audit of such Loan Party per year.
8.1.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.
The Guarantor shall, and shall cause each Subsidiary of the Guarantor
to, maintain and keep proper books of record and account which enable the
Guarantor and its Subsidiaries to issue financial statements in accordance with
GAAP and as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Guarantor or any Subsidiary of the Guarantor, and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
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8.1.8 PLANS AND BENEFIT ARRANGEMENTS.
The Guarantor shall, and shall cause each member of the ERISA Group
to, comply with the provisions of ERISA and the Internal Revenue Code applicable
to each Plan and Benefit Arrangement except where such failure, alone or in
conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, the Guarantor shall
cause all of its Plans and all Plans maintained by any member of the ERISA Group
to be funded in accordance with the minimum funding requirements of ERISA and
shall make, and cause each member of the ERISA Group to make, in a timely
manner, all contributions due to Plans, Benefit Arrangements and Multiemployer
Plans.
8.1.9 COMPLIANCE WITH LAWS.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws, including all Environmental Laws, in all
respects, PROVIDED that it shall not be deemed to be a violation of this
Section 8.1.9 if any failure to comply with any Law would not result in fines,
penalties, remediation costs, other similar liabilities or injunctive relief
which in the aggregate would constitute a Material Adverse Change.
8.1.10 USE OF PROCEEDS.
The Borrowers will use the proceeds of the Loans only for lawful
purposes in accordance with Sections 2.7 and 3.4 as applicable and such uses
shall not contravene any applicable Law or any other provision hereof.
8.1.11 [RESERVED].
8.2 NEGATIVE COVENANTS.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon, expiration or termination of
all Letters of Credit, satisfaction of all of the Loan Parties' other
Obligations hereunder and termination of the Revolving Credit Commitments, the
Loan Parties shall comply with the following negative covenants:
8.2.1 INDEBTEDNESS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
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(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on SCHEDULE 8.2.1
(including any extensions or renewals thereof, PROVIDED there is no increase in
the amount thereof or other significant change in the terms thereof unless
otherwise specified on SCHEDULE 8.2.1);
(iii) Capitalized and operating leases as and to the extent
permitted under Section 8.2.15;
(iv) PIK Subordinated Indebtedness, PROVIDED that no such
Indebtedness shall mature earlier than one year after the Expiration Date in
effect at the time such Indebtedness was incurred;
(v) Indebtedness secured by Purchase Money Security Interests
not exceeding $5,000,000; and
(vi) Indebtedness whose net proceeds are applied as a mandatory
prepayment of the Loans under Section 5.5.3.
8.2.2 LIENS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
8.2.3 GUARANTIES.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for
Guaranties of Indebtedness of the Loan Parties permitted hereunder.
8.2.4 LOANS AND INVESTMENTS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or
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purchase, acquire or own any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) in, or any other investment or
interest in, or make any capital contribution to, any other Person, or agree,
become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in the
ordinary course of business;
(ii) advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
(iii) Permitted Investments; and
(iv) loans, advances and investments in other Loan Parties.
8.2.5 DIVIDENDS AND RELATED DISTRIBUTIONS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock or partnership interests on account of the purchase, redemption,
retirement or acquisition of its shares of capital stock (or warrants, options
or rights therefor) or partnership interests, except
(i) dividends or other distributions payable to another Loan
Party;
(ii) distributions to fund the quarterly interest payments due
on the Alco Note; PROVIDED that before making any such quarterly payment, the
Company demonstrates to the satisfaction of the Agent that the Loan Parties will
be in compliance with the financial covenants set forth in Section 8.2
(specifically with the proposed Alco Note interest payment included in the
denominator in the calculation of the Debt Service Coverage Ratio) and that no
other Event of Default then exists or will result from the payment;
(iii) REDEMPTIONS OF AN EMPLOYEE'S CAPITAL STOCK IN THE
GUARANTOR UPON TERMINATION OF EMPLOYMENT; PROVIDED THAT BEFORE MAKING ANY SUCH
REDEMPTION, THE COMPANY DEMONSTRATES TO THE SATISFACTION OF THE AGENT THAT THE
LOAN PARTIES WILL BE IN COMPLIANCE WITH THE FINANCIAL COVENANTS SET FORTH IN
SECTION 8.2 AND THAT NO OTHER EVENT OF DEFAULT THEN EXISTS OR WILL RESULT FROM
THE REDEMPTION; AND
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(iv) dividends or other distributions payable in stock.
8.2.6 LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person, except
that
(i) any Loan Party other than the Company may consolidate or
merge into another Loan Party; and
(ii) the Company or any of its Subsidiaries may acquire assets
or Capital Stock of other Persons engaged in the business of aviation services,
metals converting, or metals distribution provided that (a) any such Person has
a history of positive operating profits and reasonable prospects for continuing
to produce operating profits in the future; (b) no Event of Default exists or
will result from such acquisition; (c) following the closing of the acquisition,
the Borrowers will have at least $2,000,000 in availability under the Revolving
Credit Commitments; and (d) if the acquisition results in a new Subsidiary of
the Company, the new Subsidiary joins in this Agreement as a Borrower under
section 11.18; and
(iii) QUALITY PARK PRODUCTS, INC. MAY BE DISSOLVED.
8.2.7 DISPOSITIONS OF ASSETS OR SUBSIDIARIES.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest or partnership interests of a Subsidiary of such Loan Party), except:
(i) transactions involving the sale of Inventory in the
ordinary course of business;
(ii) any sale, transfer or lease of assets in the ordinary
course of business which are no longer necessary or required in the conduct of
the Loan Party's business;
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(iii) any sale, transfer or lease of assets by any wholly owned
Subsidiary of such Loan Party to another Loan Party;
(iv) any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets acquired or leased
within the parameters of Section 8.2.15, or
(v) any sale, transfer or lease of assets, other than those
specifically excepted pursuant to clauses (i) through (iv) above, which is
approved by the Required Banks so long as the after-tax proceeds (as reasonably
estimated by the Loan Parties) are applied as a mandatory prepayment of the Term
Loans in accordance with the provisions of Section 5.5.2 above; PROVIDED that
the sale of the C-17 HARNESS ASSETS BY TRIUMPH CONTROLS, INC. shall not require
the approval of the Required Banks or be subject to the mandatory prepayment
provisions of Section 5.5.2.
8.2.8 AFFILIATE TRANSACTIONS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services to any Affiliate of
any Loan Party or other Person) unless such transaction is not otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon fair and reasonable arm's-length terms and conditions which are fully
disclosed to the Agent and is in accordance with all applicable Law. The
payment of customary directors fees shall not be considered a prohibited
Affiliate transaction.
8.2.9 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES.
(i) Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (a) any Subsidiary which has joined this Agreement as a Borrower on the
Closing Date; and (b) any Subsidiary acquired or formed after the Closing Date
which joins this Agreement as a Borrower pursuant to Section 11.18.
(ii) Each of the Loan Parties shall not become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture, except that the Loan Parties may be general or
limited partners in other Loan Parties.
(iii) The Loan Parties shall not permit Quality Park Products, Inc.
to operate any business or to acquire any assets. The Loan Parties will not
contribute any
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capital or assets to Quality Park except as may be necessary to fulfill its
indemnification obligations to Mail-well I Corporation under the acquisition
agreement dated March 31, 1996 under which Mail-well I acquired Quality Park's
assets.
(iv) The Loan Parties will not invest or advance more than $50,000
to Triumph Group Foreign Sales Corporation.
8.2.10 CONTINUATION OF PRESENT BUSINESS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than aviation services and metals
converting and distribution, substantially as conducted and operated by such
Loan Party or Subsidiary during the present fiscal year, and such Loan Party or
Subsidiary shall not permit any material change in such business.
8.2.11 PLANS AND BENEFIT ARRANGEMENTS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to:
(i) fail to satisfy the minimum funding requirements of ERISA
and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal Revenue
Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan, Benefit
Arrangement or Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA, would
constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan by more than $1,000,000;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrowers or any member of the ERISA Group may be
required
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to make under any agreement relating to such Multiemployer Plan, or any Law
pertaining thereto;
(vi) withdraw (completely or partially) from any Multiemployer
Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from
any Multiple Employer Plan, where any such withdrawal is likely to result in a
material liability of the Borrowers or any member of the ERISA Group;
(vii) terminate, or institute proceedings to terminate, any
Plan, where such termination is likely to result in a material liability to the
Borrowers or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to which
security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all disclosures
and governmental filings required under ERISA or the Internal Revenue Code,
where such failure is likely to result in a Material Adverse Change.
8.2.12 FISCAL YEAR.
The Borrowers shall not, and shall not permit any Subsidiary of the
Borrowers to, change its fiscal year from the twelve-month period beginning
April 1 and ending March 31.
8.2.13 ISSUANCE OF STOCK.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, issue any additional shares of its Capital Stock or any
options, warrants or other rights in respect thereof, except the issuance of
Capital Stock of the Guarantor:
(i) pursuant to the IPO;
(ii) to the existing shareholders, management, and directors of
the Guarantor under stock option plans;
(iii) to World Equity Partners, L.P. pursuant to warrants for
the issuance of 10,000 shares; or
(iv) otherwise.
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8.2.14 CHANGES IN ORGANIZATIONAL DOCUMENTS.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, amend any provisions of its certificate of incorporation
relating to capital stock without providing at least thirty (30) calendar days'
prior written notice to the Agent and the Banks and, in the event such change
would be adverse to the Banks as determined by the Agent in its sole discretion,
obtaining the prior written consent of the Required Banks.
8.2.15 CAPITAL EXPENDITURES AND LEASES.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make any payments on account of the purchase or lease of any
assets which if purchased would constitute fixed assets or which if leased would
constitute a capitalized lease, except for
(i) such payments in connection with acquisitions permitted
under Section 8.2.6(ii);
(ii) such payments up to $7,000,000 in the aggregate for the
fiscal year ending March 31, 1997;
(iii) such payments in an amount not to exceed the greater of
$7,000,000 or 150% of the previous year's depreciation (for the Company and its
Subsidiaries, determined and consolidated in accordance with GAAP) for any
fiscal year ending after March 31, 1997; and
(iv) such payments up to $1,000,000 per year in the aggregate
under operating leases entered into after the Closing Date.
All such capital expenditures and leases shall be made under usual and
customary terms and in the ordinary course of business.
8.2.16 MINIMUM DEBT SERVICE COVERAGE RATIO.
The Borrowers shall not permit the Debt Service Coverage Ratio,
calculated as of the end of each fiscal quarter for the four fiscal quarters
then ended, to be less than 1.25 to 1.0.
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8.2.17 MAXIMUM TOTAL INDEBTEDNESS TO EBITDA RATIO.
The Borrowers shall not at any time permit the Total Indebtedness to
EBITDA Ratio, calculated as of the end of each fiscal quarter, to exceed 3.50 to
1.00 before the IPO or 3.00 to 1.00 after the IPO.
8.2.18 MINIMUM NET WORTH.
The Borrowers shall not at any time permit Consolidated Net Worth to
be less than $40,800,000 plus (i) 50% of Consolidated Net Income for each fiscal
year in which net income was earned (as opposed to net loss) beginning with the
fiscal year ending March 31, 1997 (with the necessary adjustment to be made as
of the end of the relevant fiscal year:PROVIDED that the adjustment to be made
for the fiscal year ending March 31, 1997 will only take into account
Consolidated Net Income earned after June 30, 1996, because the base figure of
$40,800,000 already includes 50% of Consolidated Net Income earned between April
1, 1996 and June 30, 1996) and (ii) 100% of the proceeds (after the payment of
any fees and expenses) from any capital contribution to, or any sale or issuance
of Capital Stock by, the Company (with any necessary adjustment to be made upon
the receipt of such proceeds).
8.2.19 MINIMUM CURRENT RATIO.
The Borrowers shall not at any time permit the ratio of current assets
to current liabilities (for the Company and its Subsidiaries, determined and
consolidated in accordance with GAAP) to be less than 1.50 to 1.0.
8.3 REPORTING REQUIREMENTS.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon, expiration or termination of
all Letters of Credit, satisfaction of all of the Loan Parties' other
Obligations hereunder and under the other Loan Documents and termination of the
Revolving Credit Commitments, the Loan Parties will furnish or cause to be
furnished to the Agent and each of the Banks:
8.3.1 MONTHLY FINANCIAL STATEMENTS (PRE-IPO).
Before the IPO, soon as available and in any event within thirty (30)
calendar days after the end of the first eleven months of each fiscal year, the
Loan Parties' financial statements, consisting of consolidated and consolidating
balance sheets as of the end of such month and related consolidated and
consolidating statements of income, stockholders' equity
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and cash flows for the month then ended and the fiscal year through that date,
all in reasonable detail and certified (subject to normal year-end adjustments
and the absence of footnotes) by the Chief Executive Officer, President or Chief
Financial Officer of the Guarantor as having been prepared in accordance with
GAAP, consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year.
8.3.2 QUARTERLY FINANCIAL STATEMENTS (POST-IPO).
After the IPO, as soon as available and in any event within forty-five
(45) calendar days after the end of each of the first three fiscal quarters in
each fiscal year, the Loan Parties' financial statements, consisting of
consolidated and consolidating balance sheets as of the end of such fiscal
quarter and related consolidated and consolidating statements of income,
stockholders' equity and cash flows for the fiscal quarter then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end audit adjustments and the absence of footnotes) by the Chief
Executive Office, President or Chief Financial Officer of the Guarantor as
having been prepared in accordance with GAAP, consistently applied, and setting
forth in comparative form the respective financial statements for the
corresponding date and period in the previous fiscal year.
8.3.3 ANNUAL FINANCIAL STATEMENTS.
As soon as available and in any event within one hundred twenty (120)
days after the end of each fiscal year before the IPO and within ninety (90)
days after the end of each fiscal year after the IPO, consolidated and
consolidating financial statements of the Loan Parties consisting of
consolidated and consolidating balance sheets as of the end of such fiscal year,
and related consolidated and consolidating statements of income, stockholders'
equity and cash flows for the fiscal year then ended, all in reasonable detail
and setting forth in comparative form the financial statements as of the end of
and for the preceding fiscal year, with the consolidated statements being
certified by independent certified public accountants of nationally recognized
standing satisfactory to the Agent. The certificate or report of accountants
shall be free of qualifications (other than any consistency qualification that
may result from a change in the method used to prepare the financial statements
as to which such accountants concur) and shall not indicate the occurrence or
existence of any event, condition or contingency which would materially impair
the prospect of payment or performance of any covenant, agreement or duty of the
Loan Parties under any of the Loan Documents, together with a letter of such
accountants substantially to the effect that, based upon their ordinary and
customary examination of the affairs of the Loan Parties, performed in
connection with the preparation of such consolidated financial statements, and
in accordance with generally accepted auditing standards, they are not aware of
the existence of any
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condition or event which constitutes an Event of Default or Potential Default
or, if they are aware of such condition or event, stating the nature thereof and
confirming the Loan Parties' calculations with respect to the certificate to be
delivered pursuant to Section 8.3.4 with respect to such financial statements.
8.3.4 COMPLIANCE CERTIFICATE.
Concurrently with the financial statements of the Loan Parties
furnished to the Agent and to the Banks pursuant to Sections 8.3.1 and 8.3.3, a
certificate of the Loan Parties signed by the Chief Executive Officer, President
or Chief Financial Officer of the Loan Parties, in the form of EXHIBIT 8.3.4, to
the effect that, except as described pursuant to Section 8.3.5, (i) the
representations and warranties of the Loan Parties contained in Article 6 are
true on and as of the date of such certificate with the same effect as though
such representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time) and the Loan Parties have performed and complied with all covenants and
conditions hereof, (ii) no Event of Default or Potential Default exists and is
continuing on the date of such certificate and (iii) containing calculations in
sufficient detail to demonstrate compliance as of the date of the financial
statements with all financial covenants contained in Section 8.2. If an
acquisition permitted under Section 8.2.6(ii) occurred during the reporting
period covered by the compliance certificate and if the Loan Parties have
provided the Agent with audited historical financial statements on the acquired
business, the Loan Parties may also calculate the Section 8.2 financial
covenants on a pro forma basis to include the financial performance and
condition of the acquired business during the period; and the pro forma
calculation of the Total Indebtedness to EBITDA Ratio may be relied upon as a
basis for a change in the pricing level under the Pricing Grid.
8.3.5 NOTICE OF DEFAULT.
Promptly after any officer of Guarantor has learned of the occurrence
of an Event of Default or Potential Default, a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer of Guarantor setting
forth the details of such Event of Default or Potential Default and the action
which the affected Loan Party proposes to take with respect thereto.
8.3.6 NOTICE OF LITIGATION.
Promptly after the commencement thereof, notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person
against any Loan Party or Subsidiary of any Loan Party which involve a claim or
series of claims in
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excess of $500,000 or which if adversely determined would constitute a Material
Adverse Change with respect to any Loan Party or Subsidiary of any Loan Party.
8.3.7 CERTAIN EVENTS.
Written notice to the Agent:
(i) at least thirty (30) calendar days prior thereto, with
respect to any proposed sale or transfer of assets pursuant to Section 8.2.7(iv)
or (v).
(ii) within the time limits set forth in Section 8.2.14, the
amendment to the charter affecting the capital structure of any Loan Party.
8.3.8 BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION.
Promptly upon their becoming available to the Loan Parties:
(i) the annual budget and any forecasts or projections of the
Loan Parties, to be supplied at the request of the Agent prior to commencement
of the fiscal year to which any of the foregoing may be applicable,
(ii) any reports including management letters submitted to the
Loan Parties by independent accountants in connection with any annual, interim
or special audit,
(iii) any reports, notices or proxy statements generally
distributed by the Loan Parties to its stockholders on a date no later than the
date supplied to the stockholders,
(iv) regular or periodic reports, including Forms 10-K, 10-Q
and 8-K, registration statements and prospectuses (especially for the IPO),
filed by the Guarantor with the Securities and Exchange Commission,
(v) a copy of any order, issued by any Official Body in any
proceeding to which the Borrowers or any of its Subsidiaries is a party, and in
which the amount in controversy exceeds $1,000,000,
(vi) such other reports and information as the Banks may from
time to time reasonably request. The Loan Parties shall also notify the Banks
promptly
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of the enactment or adoption of any Law which may result in a Material Adverse
Change with respect to any Loan Party, and
(vii) within 60 days of closing on any acquisition permitted
under Section 8.2.6 in which the total consideration paid by the Loan Parties
exceeded $2,500,000, such financial information as the Agent may reasonably
request concerning the acquisition and its effect on the financial conditions
and performance of the Loan Parties.
8.3.9 NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS.
8.3.9.1 CERTAIN EVENTS.
Promptly upon becoming aware of the occurrence thereof, notice
(including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to the Guarantor or any
member of the ERISA Group for which reporting to the PBGC has not been waived,
(ii) any Prohibited Transaction which could subject the
Guarantor or any member of the ERISA Group to a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal
Revenue Code in connection with any Plan, Benefit Arrangement or any trust
created thereunder,
(iii) any assertion of material withdrawal liability with
respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a Multiemployer
Plan by the Guarantor or any member of the ERISA Group under Title IV of ERISA
(or assertion thereof), where such withdrawal is likely to result in material
withdrawal liability,
(v) withdrawal by the Guarantor or any member of the ERISA
Group from a Multiple Employer Plan,
(vi) a failure by the Guarantor or any member of the ERISA
Group to make a payment to a Plan required to avoid imposition of a lien under
Section 302(f) of ERISA,
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(vii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA, or
(viii) any change in the actuarial assumptions or funding methods
used for any Plan (other than interest rate changes required by Financial
Standards Board Opinion No. 87), where the effect of such change is to
materially increase or materially reduce the unfunded benefit liability or
obligation to make periodic contributions.
8.3.9.2 NOTICES OF INVOLUNTARY TERMINATION AND ANNUAL REPORTS.
Promptly after receipt thereof, copies of (a) all notices
received by the Guarantor or any member of the ERISA Group of the PBGC's intent
to terminate any Plan administered or maintained by the Guarantor or any member
of the ERISA Group, or to have a trustee appointed to administer any such Plan;
and (b) at the request of the Agent or any Bank each annual report (IRS Form
5500 series) and all accompanying schedules, the most recent actuarial reports,
the most recent financial information concerning the financial status of each
Plan administered or maintained by the Guarantor or any member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of the Guarantor or any member of the ERISA Group in which any of their
personnel participate or from which such personnel may derive a benefit, and
each Schedule B (Actuarial Information) to the annual report filed by the
Guarantor or any member of the ERISA Group with the Internal Revenue Service
with respect to each such Plan.
8.3.9.3 NOTICE OF VOLUNTARY TERMINATION.
Promptly upon the filing thereof, copies of any Form 5310, or any
successor or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan.
8.4 COLLATERALIZATION UPON FAILURE TO CLOSE IPO BY DECEMBER 31, 1996.
If the Guarantor fails to receive at least $30,000,000 in IPO proceeds
(after the payment of fees and expenses) and the Borrowers fail to make the
mandatory prepayment of the Loans required under Section 5.5.1 by Noon on
December 31, 1996, the Loan Parties will, not later than 11:59 p.m. on December
31, 1996, (i) grant to Agent on behalf of the Banks a first priority lien and
security interest in all real and personal property then owned or thereafter
acquired by the Loan Parties (such property being the "COLLATERAL"), (ii)
execute such security agreements, stock pledge agreements, collateral
assignments, mortgages, financing statements, blank stock powers, intellectual
property assignments and other
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documents the Agent may reasonably request on behalf of the Banks to ensure they
will have a first priority perfected lien and security interest in the
Collateral, with all such documents to be in form and substance reasonably
satisfactory to the Agent, and (iii) join with the Agent and the Banks in
amending and restating this Agreement to take into account the Collateral and
make such other changes as the Agent deems reasonably necessary in view of the
failure of the IPO.
9. DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall mean the occurrence or existence of any one or
more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
9.1.1 PAYMENTS UNDER LOAN DOCUMENTS.
The Borrowers shall fail to pay when due any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity) or shall fail to pay, for more than two Business Days after the due
date, any interest on any Loan or when due any other amount owing hereunder or
under the other Loan Documents;
9.1.2 BREACH OF WARRANTY.
Any representation or warranty made at any time by any of the Loan
Parties herein or by any of the Loan Parties in any other Loan Document, or in
any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
9.1.3 BREACH OF NEGATIVE COVENANTS ON VISITATION RIGHTS.
Any of the Loan Parties shall default in the observance or performance
of any covenant contained in Section 8.1.6 or Section 8.2;
9.1.4 BREACH OF OTHER COVENANTS.
Any of the Loan Parties shall default in the observance or performance
of any other covenant, condition or provision hereof or of any other Loan
Document and such
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default shall continue unremedied for a period of ten (10) Business Days after
any officer of Guarantor becomes aware of the occurrence thereof;
9.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.
A default or event of default shall occur at any time under the terms
of any other agreement involving borrowed money or the extension of credit or
any other Indebtedness under which any Loan Party or Subsidiary of any Loan
Party may be obligated as a borrower or guarantor in excess of $500,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (and such right shall not have been waived) or
the termination of any commitment to lend;
9.1.6 FINAL JUDGMENTS OR ORDERS.
Any final judgments or orders for the payment of money in excess of
$500,000 in the aggregate shall be entered against any Loan Party by a court
having jurisdiction in the premises, which judgment is not discharged, vacated,
bonded or stayed pending appeal within a period of thirty (30) days from the
date of entry;
9.1.7 LOAN DOCUMENT UNENFORCEABLE.
Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the party executing the same or such party's
successors and assigns (as permitted under the Loan Documents) in accordance
with the respective terms thereof or shall in any way be terminated (except in
accordance with its terms) or become or be declared ineffective or inoperative
or shall in any way be challenged or contested or cease to give or provide the
respective Liens, security interests, rights, titles, interests, remedies,
powers or privileges intended to be created thereby;
9.1.8 UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS.
There shall occur any material uninsured damage to or loss, theft or
destruction of any of the Loan Parties' assets in excess of $1,000,000 or any
other of the Loan Parties' assets are attached, seized, levied upon or subjected
to a writ or distress warrant; or such come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors and the
same is not cured within sixty (60) days thereafter;
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9.1.9 NOTICE OF LIEN OR ASSESSMENT.
A notice of Lien or assessment in excess of $500,000 which is not a
Permitted Lien is filed of record with respect to all or any part of any of the
Loan Parties' assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the Pension Benefit Guaranty Corporation, or if
any taxes or debts owing at any time or times hereafter to any one of these
becomes payable and the same is not paid within thirty (30) days after the same
becomes payable (unless the Loan Party is contesting the obligation as provided
in Section 8.1.2);
9.1.10 INSOLVENCY.
Any Loan Party ceases to be solvent or admits in writing its inability
to pay its debts as they mature;
9.1.11 EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS.
Any of the following occurs: (i) any Reportable Event, which the Agent
determines in good-faith constitutes grounds for the termination of any Plan by
the PBGC or the appointment of a trustee to administer or liquidate any Plan,
shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good-faith
that the amount of the Borrower's liability is likely to exceed 10% of its
Consolidated Tangible Net Worth; (v) the Guarantor or any member of the ERISA
Group shall make any amendment to a Plan with respect to which security is
required under Section 307 of ERISA; (vi) the Guarantor or any member of the
ERISA Group shall withdraw completely or partially from a Multiemployer Plan;
(vii) the Guarantor or any member of the ERISA Group shall withdraw (or shall be
deemed under Section 4062(e) of ERISA to withdraw) from a Multiple Employer
Plan; or (viii) any applicable Law is adopted, changed or interpreted by any
Official Body with respect to or otherwise affecting one or more Plans,
Multiemployer Plans or Benefit Arrangements and, with respect to any of the
events specified in (v), (vi), (vii), or (viii), the Agent determines in good-
faith that any such occurrence is reasonably likely to materially and adversely
affect the total enterprise represented by the Guarantor and the other members
of the ERISA Group;
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9.1.12 CESSATION OF BUSINESS.
Any Loan Party ceases to conduct its business as contemplated or such
Loan Party is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof;
9.1.13 CHANGE OF CONTROL.
(i) Before the IPO, if Citicorp Venture Capital and Affiliates
own less than 50% of the equity ownership of the Guarantor; or
(ii) After the IPO, Citicorp Venture Capital and Affiliates own
less than 33 1/3% of the equity ownership of the Guarantor or any person or
group of persons (within the meaning of Sections 13(a) or 14(a) of the
Securities Exchange Act of 1934, as amended), other than the persons listed on
Schedule 6.1.2, shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act)
of more of the voting capital stock of the Guarantor than the ownership interest
of Citicorp Venture Capital and Affiliates; or
(iii) If at any time the Guarantor owns less than 100% of the
Capital Stock of the Company.
9.1.14 INVOLUNTARY PROCEEDINGS.
A proceeding shall have been instituted in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of any Loan
Party in an involuntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of sixty (60) consecutive days or such court shall enter a decree
or order granting any of the relief sought in such proceeding; or
9.1.15 VOLUNTARY PROCEEDINGS.
Any Loan Party shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall
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consent to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or other similar
official) of itself or for any substantial part of its property or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any action in furtherance of any of
the foregoing.
9.2 CONSEQUENCES OF EVENT OF DEFAULT.
9.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS.
If an Event of Default specified under subsections 9.1.1 through
9.1.13 of Section 9.1 shall occur and be continuing, the Banks and the Agent
shall be under no further obligation to make Loans or issue Letters of Credit,
as the case may be, and the Agent may, and upon the request of the Required
Banks, shall (i) by written notice to the Borrowers, declare the unpaid
principal amount of the Notes then outstanding and all interest accrued thereon,
any unpaid fees and all other Indebtedness of the Borrowers to the Banks
hereunder and thereunder to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to the Agent for the benefit
of each Bank without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, and (ii) require the Borrowers
to, and the Borrowers shall thereupon, deposit in a non-interest bearing account
with the Agent, as cash collateral for its Obligations under the Loan Documents,
an amount equal to the maximum amount currently or at any time thereafter
available to be drawn on all outstanding Letters of Credit, and the Borrowers
hereby pledge to the Agent and the Banks, and grant to the Agent and the Banks a
security interest in, all such cash as security for such Obligations. Upon the
curing of all existing Events of Default to the satisfaction of the Required
Banks, the Agent shall return such cash collateral to the Borrowers; and
9.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under subsections 9.1.14 or 9.1.15 of
Section 9.1 shall occur, the Banks shall be under no further obligations to make
Loans hereunder and the unpaid principal amount of the Notes then outstanding
and all interest accrued thereon, any unpaid fees and all other Indebtedness of
the Borrowers to the Banks hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; and
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9.2.3 SET-OFF.
If an Event of Default shall occur and be continuing, any Bank to whom
any Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any participant of such Bank which has agreed in writing to be bound
by the provisions of Section 4.2, 10.13 and any branch, Subsidiary or Affiliate
of such Bank or participant anywhere in the world shall have the right, in
addition to all other rights and remedies available to it, without notice to
such Loan Party, to set-off against and apply to the then unpaid balance of all
the Loans and all other Obligations of the Borrowers and the other Loan Parties
hereunder or under any other Loan Document any debt owing to, and any other
funds held in any manner for the account of, the Borrowers or such other Loan
Party by such Bank or participant or by such branch, Subsidiary or Affiliate,
including all funds in all deposit accounts (whether time or demand, general or
special, provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Borrowers or such other Loan Party for its own
account (but not including funds held in custodian or trust accounts) with such
Bank or participant or such branch, Subsidiary or Affiliate. Such right shall
exist whether or not any Bank or the Agent shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of the Borrowers or such other Loan Party is or are matured
or unmatured and regardless of the existence or adequacy of any Guaranty or any
other security, right or remedy available to any Bank or the Agent; and
9.2.4 SUITS, ACTIONS, PROCEEDINGS.
If an Event of Default shall occur and be continuing, and whether or
not the Agent shall have accelerated the maturity of Loans to the Borrowers
pursuant to any of the foregoing provisions of this Section 9.2, the Agent or
any Bank, if owed any amount with respect to the Notes, may proceed to protect
and enforce its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement or the Notes, including as permitted by applicable
Law the obtaining of the EX PARTE appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Agent or such Bank;
and
9.2.5 APPLICATION OF PROCEEDS.
From and after the date on which the Agent has taken any action
pursuant to this Section 9.2 and until all Obligations of the Loan Parties have
been paid in full, any and all proceeds received by the Agent from the exercise
of any other remedy by the Agent, shall be applied as follows:
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(i) first, to reimburse the Agent and the Banks for out-of-
pocket costs, expenses and disbursements, including reasonable attorneys' and
paralegals' fees and legal expenses, incurred by the Agent or the Banks in
connection with collection of any Obligations of any of the Loan Parties under
any of the Loan Documents;
(ii) second, to the repayment of all Indebtedness then due and
unpaid of the Loan Parties to the Banks incurred under this Agreement or any of
the Loan Documents, whether of principal, interest, fees, expenses or otherwise,
in such manner as the Agent may determine in its discretion; and
(iii) the balance, if any, to Borrowers or as required by Law.
9.2.6 [RESERVED]
9.3 RESERVED
10. THE AGENT
10.1 APPOINTMENT.
Each Bank hereby irrevocably designates, appoints and authorizes PNC Bank
to act as Agent for such Bank under this Agreement to execute and deliver or
accept on behalf of each of the Banks the other Loan Documents. Each Bank
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
a Note shall be deemed irrevocably to authorize, the Agent to take such action
on its behalf under the provisions of this Agreement and the other Loan
Documents and any other instruments and agreements referred to herein, and to
exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the
Agent on behalf of the Banks to the extent provided in this Agreement.
10.2 DELEGATION OF DUTIES.
The Agent may perform any of its duties hereunder by or through agents or
employees (PROVIDED such delegation does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 10.5 and 10.6, shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
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10.3 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION.
The Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Each Bank expressly acknowledges (i) that the Agent
has not made any representations or warranties to it and that no act by the
Agent hereafter taken, including any review of the affairs of any of the Loan
Parties, shall be deemed to constitute any representation or warranty by the
Agent to any Bank; (ii) that it has made and will continue to make, without
reliance upon the Agent, its own independent investigation of the financial
condition and affairs and its own appraisal of the creditworthiness of each of
the Loan Parties in connection with this Agreement and the making and
continuance of the Loans hereunder; and (iii) except as expressly provided
herein, that the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank with any credit or other information
with respect thereto, whether coming into its possession before the making of
any Loan or at any time or times thereafter.
10.4 ACTIONS IN DISCRETION OF AGENT; INSTRUCTIONS FROM THE BANKS.
The Agent agrees, upon the written request of the Required Banks, to take
or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, PROVIDED that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to
Section 10.6. Subject to the provisions of Section 10.6, no Bank shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
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10.5 REIMBURSEMENT AND INDEMNIFICATION OF AGENT BY THE BORROWER.
Subject to the limitations set forth in the letter agreement dated July 3,
1996 between the Agent and the Company, the Borrowers unconditionally agree to
pay or reimburse the Agent and save the Agent harmless against (a) liability for
the payment of all reasonable out-of-pocket costs, expenses and disbursements,
including fees and expenses of counsel, appraisers and environmental
consultants, incurred by the Agent (i) in connection with the development,
negotiation, preparation, printing, execution, administration, syndication,
interpretation and performance of this Agreement and the other Loan Documents,
(ii) relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv) in any workout, restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, PROVIDED that
the Borrowers shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from the Agent's gross negligence
or willful misconduct, or if the Borrowers were not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that the Borrowers shall remain liable to the extent such failure to
give notice does not result in a loss to the Borrower), or if the same results
from a compromise or settlement agreement entered into without the consent of
the Borrower, which shall not be unreasonably withheld. In addition, the
Borrowers agree to reimburse and pay all reasonable out-of-pocket expenses of
the Agent's regular employees and agents engaged periodically to perform audits
of the Loan Parties' books, records and business properties, PROVIDED that,
before an Event of Default, the Borrower shall not be obligated to pay for more
than one such audit per year.
10.6 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its directors, officers, employees, agents,
attorneys or Affiliates shall (a) be liable to any Bank for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith including
pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct, (b) be responsible in any
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manner to any of the Banks for the effectiveness, enforceability, genuineness,
validity or the due execution of this Agreement or any other Loan Documents or
for any recital, representation, warranty, document, certificate, report or
statement herein or made or furnished under or in connection with this Agreement
or any other Loan Documents, or (c) be under any obligation to any of the Banks
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence or
possible existence of any Event of Default or Potential Default. Neither the
Agent nor any Bank nor any of their respective directors, officers, employees,
agents, or Affiliates shall be liable to any of the Loan Parties for
consequential damages resulting from any breach of contract in connection with
the negotiation, documentation, administration or collection of the Loans or any
of the Loan Documents.
10.7 REIMBURSEMENT AND INDEMNIFICATION OF AGENT BY BANKS.
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrowers and without limiting the Obligation of the Borrowers
to do so) in proportion to its Ratable Share from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, PROVIDED that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrowers and without limiting the Obligation of the Borrowers to do so) in
proportion to its Ratable Share for all amounts due and payable by the Borrowers
to the Agent in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
10.8 RELIANCE BY AGENT.
The Agent shall be entitled to rely upon any writing, telegram, telex or
teletype message, resolution, notice, consent, certificate, letter, cablegram,
statement, order or other
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document or conversation by telephone or otherwise believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons, and upon the advice and opinions of counsel and other professional
advisers selected by the Agent. The Agent shall be fully justified in failing
or refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
10.9 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Default or Event of Default unless the Agent has received
written notice from a Bank or the Borrowers referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
10.10 NOTICES.
The Agent shall promptly send to each Bank a copy of all notices received
from the Borrowers pursuant to the provisions of this Agreement or the other
Loan Documents promptly upon receipt thereof. The Agent shall promptly notify
the Borrowers and the other Banks of each change in the Base Rate and the
effective date thereof.
10.11 BANKS IN THEIR INDIVIDUAL CAPACITIES.
With respect to its Revolving Credit Commitments, the Revolving Credit
Loans and the Term Loan made by it, the Agent shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though it were
not the Agent, and the term "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. PNC Bank and its
Affiliates and each of the Banks and their respective Affiliates may, without
liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Loan Parties
and their Affiliates, in the case of the Agent, as though it were not acting as
Agent hereunder and in the case of each Bank, as though such Bank were not a
Bank hereunder.
10.12 HOLDERS OF NOTES.
The Agent may deem and treat any payee of any Note as the owner thereof for
all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority
or consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note
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shall be conclusive and binding on any subsequent holder, transferee or assignee
of such Note or of any Note or Notes issued in exchange therefor.
10.13 EQUALIZATION OF BANKS.
The Banks and the holders of any participations in any Notes agree among
themselves that, with respect to all amounts received by any Bank or any such
holder for application on any Obligation hereunder or under any Note or under
any such participation, whether received by voluntary payment, by realization
upon security, by the exercise of the right of set-off or banker's lien, by
counterclaim or by any other non-pro rata source, equitable adjustment will be
made in the manner stated in the following sentence so that, in effect, all such
excess amounts will be shared ratably among the Banks and such holders in
proportion to their interests in payments under the Notes, except as otherwise
provided in Sections 4.4.2, 5.4.2, or 5.6.1. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the other Banks
an interest in such Bank's Loans in such amount as shall result in a ratable
participation by the Banks and each such holder in the aggregate unpaid amount
under the Notes, PROVIDED that if all or any portion of such excess amount is
thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by law
(including court order) to be paid by the Bank or the holder making such
purchase.
10.14 SUCCESSOR AGENT.
The Agent may resign as Agent by giving not less than thirty (30) days'
prior written notice to the Borrower. If the Agent shall resign under this
Agreement, then either (a) the Required Banks shall appoint from among the Banks
a successor agent for the Banks, subject to the consent of the Borrower, such
consent not to be unreasonably withheld, or (b) if a successor agent shall not
be so appointed and approved within the thirty (30) day period following the
Agent's notice to the Banks of its resignation, then the Agent shall appoint,
with the consent of the Borrower, such consent not to be unreasonably withheld,
a successor agent who shall serve as Agent until such time as the Required Banks
appoint and the Borrowers consent to the appointment of a successor agent. Upon
its appointment pursuant to either clause (a) or (b) above, such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent, effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the resignation of any Agent hereunder, the
provisions of this Article 10 shall inure to the benefit of such former Agent
and such former Agent shall
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not by reason of such resignation be deemed to be released from liability for
any actions taken or not taken by it while it was an Agent under this Agreement.
10.15 AGENT'S FEE.
The Borrowers shall pay to the Agent a nonrefundable fee (the "AGENT'S
FEE") under the terms of a letter (the "AGENT'S LETTER") between the Borrowers
and Agent, as amended from time to time.
10.16 AVAILABILITY OF FUNDS.
Unless the Agent shall have been notified by a Bank prior to the date upon
which a Loan is to be made that such Bank does not intend to make available to
the Agent such Bank's portion of such Loan, the Agent may assume that such Bank
has made or will make such proceeds available to the Agent on such date and the
Agent may, in reliance upon such assumption (but shall not be required to), make
available to the Borrowers a corresponding amount. If such corresponding amount
is not in fact made available to the Agent by such Bank, the Agent shall be
entitled to recover such amount on demand from such Bank (or, if such Bank fails
to pay such amount forthwith upon such demand from the Borrower) together with
interest thereon, in respect of each day during the period commencing on the
date such amount was made available to the Borrowers and ending on the date the
Agent recovers such amount, at a rate per annum equal to the applicable interest
rate in respect of the Loan.
10.17 CALCULATIONS.
In the absence of gross negligence or willful misconduct, the Agent shall
not be liable for any error in computing the amount payable to any Bank whether
in respect of the Loans, fees or any other amounts due to the Banks under this
Agreement. In the event an error in computing any amount payable to any Bank is
made, the Agent, the Borrowers and each affected Bank shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and any compensation therefor will be calculated at the Federal
Funds Effective Rate.
10.18 BENEFICIARIES.
Except as expressly provided herein, the provisions of this Article 10 are
solely for the benefit of the Agent and the Banks, and the Loan Parties shall
not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall
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not be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any of the Loan Parties.
11. MISCELLANEOUS
11.1 MODIFICATIONS, AMENDMENTS OR WAIVERS.
With the written consent of the Required Banks, the Agent, acting on behalf
of all the Banks, and the Loan Parties may from time to time enter into written
agreements amending or changing any provision of this Agreement or any other
Loan Document or the rights of the Banks or the Loan Parties hereunder or
thereunder, or may grant written waivers or consents to a departure from the due
performance of the Obligations of the Loan Parties hereunder or thereunder. Any
such agreement, waiver or consent made with such written consent shall be
effective to bind all the Banks and the Loan Parties; PROVIDED, that, without
the written consent of all the Banks, no such agreement, waiver or consent may
be made which will:
11.1.1 INCREASE OF COMMITMENT; EXTENSION OR EXPIRATION DATE.
Increase the amount of the Revolving Credit Commitment or Term Loan
Commitment of any Bank hereunder or extend the Expiration Date;
11.1.2 EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL INTEREST OR
FEES; MODIFICATION OF TERMS OF PAYMENT.
Whether or not any Loans are outstanding, extend the time for payment
of principal or interest of any Loan, the Commitment Fee or any other fee
payable to any Bank, or reduce the principal amount of or the rate of interest
borne by any Loan or reduce the Commitment Fee or any other fee payable to any
Bank, or otherwise affect the terms of payment of the principal of or interest
of any Loan, the Commitment Fee or any other fee payable to any Bank;
11.1.3 RELEASE OF GUARANTOR.
Release the Guarantor from its Obligations under the Guaranty
Agreement;
11.1.4 MISCELLANEOUS
Amend Sections 5.2 [Pro Rata Treatment of Banks], 10.6 [Exculpatory
Provisions], 10.13 [Equalization of Banks] or this Section 11.1, alter any
provision regarding
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the pro rata treatment of the Banks, change the definition of Required Banks, or
change any requirement providing for the Banks or the Required Banks to
authorize the taking of any action hereunder.
PROVIDED further, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent or as the
issuer of Letters of Credit shall be effective without the written consent of
the Agent.
11.2 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED.
No course of dealing and no delay or failure of the Agent or any Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
11.3 REIMBURSEMENT AND INDEMNIFICATION OF BANKS BY THE BORROWER; TAXES.
The Borrowers agree unconditionally upon demand to pay or reimburse to each
Bank (other than the Agent, as to which the Borrower's Obligations are set forth
in Section 10.5) and to save such Bank harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel for each Bank except with respect to (a)
and (b) below), incurred by such Bank (a) in connection with the administration
and interpretation of this Agreement, and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to the provisions hereof, (c) in connection with the enforcement of
this Agreement or any other Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim arising under
this Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout, restructuring or in connection
with the protection, preservation, exercise or enforcement of any of the terms
hereof or of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy proceedings, or (ii)
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against such
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Bank, in its capacity as such, in any way relating to or arising out of this
Agreement or any other Loan Documents or any action taken or omitted by such
Bank hereunder or thereunder, PROVIDED that the Borrowers shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements (A) if the same
results from such Bank's gross negligence or willful misconduct, or (B) if the
Borrowers were not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrowers
shall remain liable to the extent such failure to give notice does not result in
a loss to the Borrower), or (C) if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. The Banks will attempt to minimize the fees
and expenses of legal counsel for the Banks which are subject to reimbursement
by the Borrowers hereunder by considering the usage of one law firm to represent
the Banks and the Agent if appropriate under the circumstances. The Borrowers
agree unconditionally to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter determined by the Agent
or any Bank to be payable in connection with this Agreement or any other Loan
Document, and the Borrowers agree unconditionally to save the Agent and the
Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
11.4 HOLIDAYS.
Whenever payment of a Loan to be made or taken hereunder shall be due on a
day which is not a Business Day such payment shall be due on the next Business
Day and such extension of time shall be included in computing interest and fee,
except that the Loans shall be due on the Business Day preceding the Expiration
Date if the Expiration Date is not a Business Day. Whenever any payment or
action to be made or taken hereunder (other than payment of the Loans) shall be
stated to be due on a day which is not a business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 4.2 with respect to Interest Periods under the Euro-Rate Option), and
such extension of time shall not be included in computing interest or fees, if
any, in connection with such payment or action.
11.5 FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE.
11.5.1 NOTIONAL FUNDING.
Each Bank shall have the right from time to time, without notice to
the Borrower, to deem any branch, Subsidiary or Affiliate (which for the
purposes of this Section 11.5 shall mean any corporation or association which is
directly or indirectly
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controlled by or is under direct or indirect common control with any corporation
or association which directly or indirectly controls such Bank) of such Bank to
have made, maintained or funded any Loan to which the Euro-Rate Option applies
at any time, PROVIDED that immediately following (on the assumption that a
payment were then due from the Borrowers to such other office), and as a result
of such change, the Borrowers would not be under any greater financial
obligation pursuant to Section 5.6 than they would have been in the absence of
such change. Notional funding offices may be selected by each Bank without
regard to the Bank's actual methods of making, maintaining or funding the Loans
or any sources of funding actually used by or available to such Bank.
11.5.2 ACTUAL FUNDING.
Each Bank shall have the right from time to time to make or maintain
any Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make
or maintain such Loan subject to the last sentence of this Section 11.5.2. If
any Bank causes a branch, Subsidiary or Affiliate to make or maintain any part
of the Loans hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise, be applicable to such part of the
Loans to the same extent as if such Loans were made or maintained by such Bank,
but in no event shall any Bank's use of such a branch, Subsidiary or Affiliate
to make or maintain any part of the Loans hereunder cause such Bank or such
branch, Subsidiary or Affiliate to incur any cost or expenses payable by the
Borrowers hereunder or require the Borrowers to pay any other compensation to
any Bank (including any expenses incurred or payable pursuant to Section 5.6
which would otherwise not be incurred).
11.6 NOTICES.
All notices, requests, demands, directions and other communications (as
used in this Section 11.6, collectively referred to as "NOTICES") given to or
made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on the signature pages hereof or in accordance with
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of hand-
delivered notice, when hand-delivered, (c) in the case of telephone, when
telephoned, PROVIDED, however, that in order to be effective, telephonic notices
must be confirmed in writing no later than the next day by letter, facsimile or
telex, (d) if given by mail, four (4) days after such communication is deposited
in the mail with first-class postage prepaid, return receipt requested, and (e)
if given by any other means
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(including by air courier), when delivered; PROVIDED, that notices to the Agent
shall not be effective until received. Any Bank giving any notice to any Loan
Party shall simultaneously send a copy thereof to the Agent, and the Agent shall
promptly notify the other Banks of the receipt by it of any such notice.
11.7 SEVERABILITY.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
11.8 GOVERNING LAW.
Each Letter of Credit and Section 2.8 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith, the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
11.9 PRIOR UNDERSTANDING.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
11.10 DURATION; SURVIVAL.
All representations and warranties of the Loan Parties contained herein or
made in connection herewith shall survive the making of Loans and issuance of
Letters of Credit and shall not be waived by the execution and delivery of this
Agreement, any investigation by the Agent or the Banks, the making of Loans,
issuance of Letters of Credit, or payment in full of the Loans. All covenants
and agreements of the Loan Parties contained in Sections 8.1, 8.2 and 8.3 herein
shall continue in full force and effect from and after the date hereof so long
as the Borrowers may borrow or request Letters of Credit hereunder and until
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termination of the Revolving Credit Commitments and payment in full of the Loans
and expiration or termination of all Letters of Credit. All covenants and
agreements of the Borrowers contained herein relating to the payment of
additional compensation or expenses and indemnification, including those set
forth in the Notes, Article 5 and Sections 10.5, 10.7 and 11.3, shall survive
payment in full of the Loans, expiration or termination of the Letters of Credit
and termination of the Revolving Credit Commitments.
11.11 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of the
Banks, the Agent, the Loan Parties and their respective successors and assigns,
except that none of the Loan Parties may assign or transfer any of its rights
and Obligations hereunder or any interest herein. Each Bank may, at its own
cost, make assignments of or sell participations in all or any part of its
Revolving Credit Commitment and the Loans made by it to one or more banks or
other financial institutions, subject to the consent of the Borrowers and the
Agent with respect to any assignee, such consent not to be unreasonably
withheld, and PROVIDED that assignments may not be made in amounts less than
$5,000,000. In the case of an assignment, upon receipt by the Agent of the
Assignment and Assumption Agreement, the assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights, benefits
and obligations as it would have if it had been a signatory Bank hereunder, the
Commitments in Section 2.1 shall be adjusted accordingly, and upon surrender of
any Note subject to such assignment, the Borrowers shall execute and deliver a
new Note to the assignee in an amount equal to the amount of the Revolving
Credit Commitment or Term Loan assumed by it and a new Revolving Credit Note or
Term Note to the assigning Bank in an amount equal to the Revolving Credit
Commitment or Term Loan retained by it hereunder. The assigning Bank shall pay
to the Agent a service fee in the amount of $3,000 for each assignment. In the
case of a participation, the selling Bank shall notify the Borrowers and the
Agent of the participants identity, and the participant shall only have the
rights specified in Section 9.2.3 (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto and not to include any
voting rights except with respect to changes of the type referenced in clauses
11.1.1, 11.1.2, or 11.1.3 under Section 11.1), all of such Bank's obligations
under this Agreement or any other Loan Document shall remain unchanged, and all
amounts payable by any Loan Party hereunder or thereunder shall be determined as
if such Bank had not sold such participation. Any assignee or participant which
is not incorporated under the Laws of the United States of America or a state
thereof shall deliver to the Borrowers and the Agent the form of certificate
described in Section 11.17 relating to federal income tax withholding. Each
Bank may furnish any publicly available information concerning any Loan Party or
its Subsidiaries and any other information concerning any Loan Party or its
Subsidiaries in the possession of such Bank
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from time to time to assignees and participants (including prospective assignees
or participants), PROVIDED that such assignees and participants agree to be
bound by the provisions of Section 11.12.
11.12 CONFIDENTIALITY.
The Agent and the Banks each agree to keep confidential all information
obtained from any Loan Party or its Subsidiaries which is nonpublic and
confidential or proprietary in nature (including any information the Borrowers
specifically designates as confidential), except as provided below, and to use
such information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to assignees and
participants as contemplated by Section 11.11, (iii) to the extent requested by
any bank regulatory authority or, with notice to the Borrower, as otherwise
required by applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
subject to confidentiality restrictions, or (v) if the Borrowers shall have
consented to such disclosure.
11.13 COUNTERPARTS.
This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall be
an original, and all such counterparts shall together constitute one and the
same instrument.
11.14 AGENT'S OR BANK'S CONSENT.
Whenever the Agent's or any Bank's consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, the Agent and each Bank shall be authorized to
give or withhold such consent in its sole and absolute discretion and to
condition its consent upon the giving of additional collateral, the payment of
money or any other matter.
11.15 EXCEPTIONS.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed
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to be an exception to any other representation, warranty or covenant contained
herein unless expressly provided, nor shall any such exceptions be deemed to
permit any action or omission that would be in contravention of applicable Law.
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF CHESTER COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
11.17 TAX WITHHOLDING CLAUSE.
Each Bank or assignee or participant of a Bank that is not incorporated
under the Laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrowers and the Agent two (2) duly completed
copies of the following: (i) Internal Revenue Service Form W-9, 4224 or 1001,
or other applicable form prescribed by the Internal Revenue Service, certifying
that such Bank, assignee or participant is entitled to receive payments under
this Agreement and the other Loan Documents without deduction or withholding of
any United States federal income taxes, or is subject to such tax at a reduced
rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8
or other applicable form or a certificate of the Bank, assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments. Each Bank, assignee or participant required to deliver to the
Borrowers and the Agent a form or certificate pursuant to the preceding sentence
shall deliver such form or certificate as follows: (A) each Bank which is a
party hereto on the Closing Date shall deliver such form or certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable
-87-
<PAGE>
by the Borrowers hereunder for the account of each Bank; (B) each assignee or
participant shall deliver such form or certificate at least five (5) Business
Days before the effective date of such assignment or participation (unless the
Agent in its sole discretion shall permit such assignee or participant to
deliver such form or certificate less than five (5) Business Days before such
date in which case it shall be due on the date specified by the Agent). Each
Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001
further undertakes to deliver to each of the Borrowers and the Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrowers or the Agent, either certifying that such Bank,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents without deduction or withholding of any United States
federal income taxes or is subject to such tax at a reduced rate under an
applicable tax treaty or stating that no such exemption or reduced rate is
allowable. The Agent shall be entitled to withhold United States federal income
taxes at the full withholding rate unless the Bank, assignee or participant
establishes an exemption or that it is subject to a reduced rate as established
pursuant to the above provisions.
11.18 JOINDER OF ADDITIONAL BORROWERS.
Any Subsidiary of the Company which is required to join this Agreement as
an additional Borrower pursuant to Section 8.2.9 shall execute and deliver to
the Agent (i) a Borrower Joinder in substantially the form attached hereto as
EXHIBIT 1.1(G)(1) pursuant to which it shall join as a Borrower each of the
documents to which the Borrowers are parties and (ii) documents in the forms
described in Section 7.1 modified as appropriate to relate to such Subsidiary.
The Loan Parties shall deliver such Borrower Joinder and related documents to
the Agent within five (5) Business Days after the date such Subsidiary was
organized or acquired.
11.19 POWER OF ATTORNEY FOR THE TRIUMPH GROUP OPERATIONS, INC.; JOINT
ANDSEVERAL OBLIGATIONS OF LOAN PARTIES.
(i) Each Borrower other than The Triumph Group Operations,
Inc. hereby grants to The Triumph Group Operations, Inc. an irrevocable power of
attorney to act as its attorney-in-fact with regard to all matters relating to
this Agreement and each other Loan Document, including, without limitation,
execution and delivery of any Loan Request, and amendments, supplements, waivers
or other modifications hereto or thereto, receipt of any notices hereunder or
thereunder and receipt of service of process in connection herewith or therewith
and making all elections as to interest rates and interest
-88-
<PAGE>
periods. Each such Borrower hereby explicitly acknowledges that the Agent and
each Bank have executed and delivered this Agreement and each other Loan
Document to which they are parties, and have performed their obligations under
this Agreement and each other Loan Document to which they are parties, in
reliance upon the irrevocable grant of such power of attorney pursuant to this
Section 11.19.
(ii) The obligations of the Borrowers and the Loan Parties
under this Agreement and the other Loan Documents are joint and several.
11.20 PUBLIC FILINGS. The Agent agrees to use reasonable efforts to
provide to the Company this Agreement, any other Loan Document and any
amendments or supplements hereto or thereto in a computer readable format if so
requested by the Company in connection with public filings.
-89-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: THE TRIUMPH GROUP, INC.
/s/ Paul T. Stimler By: /s/ John R. Bartholdson
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: John R. Bartholdson
Title: Secretary Title: President
ATTEST: THE TRIUMPH GROUP OPERATIONS, INC.
/s/ Paul T. Stimler By: /s/ John R. Bartholdson
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: John R. Bartholdson
Title: Secretary Title: Senior Vice President
Address for Notices for all Borrowers:
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
Telecopier No. (610) 975-0563
Attention: John R. Bartholdson
Telephone No. (610) 975-0420
-90-
<PAGE>
ATTEST: TRIUMPH CONTROLS, INC.
/s/ Paul T. Stimler By: /s/ Richard C. Ill
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: Richard C. Ill
Title: Assistant Secretary Title: Chairman
ATTEST: AEROSPACE TECHNOLOGIES, INC.
/s/ Paul T. Stimler By: /s/ John R. Bartholdson
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: John R. Bartholdson
Title: Secretary Title: Vice President
ATTEST: KILROY STEEL, INC.
/s/ Paul T. Stimler By: /s/ John R. Bartholdson
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: John R. Bartholdson
Title: Secretary Title: Vice President
ATTEST: KILROY STRUCTURAL STEEL CO.
/s/ Paul T. Stimler By: /s/ John R. Bartholdson
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: John R. Bartholdson
Title: Secretary Title: Vice President
-91-
<PAGE>
ATTEST: THE TRIUMPH GROUP HOLDINGS, INC., as
Guarantor
/s/ Paul T. Stimler By: /s/ Richard C. Ill
- ----------------------------- -----------------------------
Name: Paul T. Stimmler Name: Richard C. Ill
Title: Secretary Title: President
Address for Notices:
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
Telecopier No. (610)925-0563
Attention: John R. Bartholdson
Senior Vice President
Telephone No. (610) 925-0420
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/
--------------------------------
Title:
-----------------------------
Address for Notices:
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312
Telecopier No. (610) 725-5799
Attention: Mark E. Bevilacqua
Vice President
Telephone No. (610) 725-5740
-92-
<PAGE>
and
One PNC Plaza
Fourth Floor Annex
245 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Arlene Ohler
Telephone No. (412) 762-3627
Telecopier No. (412) 762-8672
-93-
<PAGE>
CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP
This Continuing Agreement of Guaranty and Suretyship (the "Guarantee")
is made and entered into this 19th day of July, 1996, by and between THE TRIUMPH
GROUP HOLDINGS, INC., a Delaware corporation (the "Guarantor"), in favor of PNC
BANK, NATIONAL ASSOCIATION (the "Agent") as agent for the Banks under the Credit
Agreement described below.
BACKGROUND
In order to induce the Banks to make loans to The Triumph Group, Inc.
and its subsidiaries (the "Borrowers"), in accordance with that certain Credit
Agreement of even date herewith (as it may hereafter from time to time be
amended, restated, modified or supplemented, the "Credit Agreement") by and
among the Borrowers, the Guarantor and the "Banks" named therein, and the Agent,
the Guarantor hereby unconditionally and irrevocably guarantees and becomes
surety as though it was a primary obligor for the full and timely payment when
due, whether at maturity, by declaration, acceleration or otherwise, of the
principal of and interest and fees on all Loans (as defined in the Credit
Agreement), both those now in existence and those that shall hereafter be made,
of the Banks to the Borrowers under the Credit Agreement and the Notes issued by
the Borrowers in connection therewith and any extensions, renewals, replacements
or refundings thereof, and each and every other obligation or liability (both
those now in existence and those that shall hereafter arise and including,
without limitation, all costs and expenses of enforcement and collection,
including reasonable attorney's fees) of the Borrowers to the Banks under the
Credit Agreement and the other Loan Documents (as defined in the Credit
Agreement) except this Agreement, and any extensions, renewals, replacements or
refundings thereof (hereinafter referred to as the "Guaranteed Indebtedness"),
whether or not such Guaranteed Indebtedness or any portion thereof shall
hereafter be discharged in bankruptcy or is for any reason invalid or
unenforceable.
1. Capitalized terms used herein and not otherwise defined herein shall
have such meanings given to them in the Credit Agreement.
2. Guarantor agrees to make such full payment forthwith upon demand of
the Agent when the Guaranteed Indebtedness or any
<PAGE>
portion thereof is due to be paid by the Borrowers to the Banks, whether at
stated maturity, by declaration, acceleration or otherwise. Guarantor agrees to
make such full payment irrespective of whether or not any one or more of the
following events has occurred: (i) the Agent has made any demand on the
Borrower; (ii) the Agent has taken any action of any nature against the
Borrower; (iii) the Agent has pursued any rights which it has against any other
Person who may be liable for the Guaranteed Indebtedness; (iv) the Agent holds
or has resorted to any security for the Guaranteed Indebtedness; or (v) the
Agent has invoked any other remedy or right it has available with respect to the
Guaranteed Indebtedness. The Guarantor further agrees to make full payment to
the Banks even if circumstances exist which otherwise constitute a legal or
equitable discharge of the Guarantor as surety or guarantor.
3. Guarantor warrants that: (i) no other agreement, representation or
special condition exists between the Guarantor and any Bank regarding the
liability of the Guarantor hereunder, nor does any understanding exist between
the Guarantor and any Bank that the obligations of the Guarantor hereunder are
or will be other than as set forth herein; and (ii) as of the date hereof, the
Guarantor has no defense whatsoever to any action or proceeding that may be
brought to enforce this Guarantee.
4. Until the Gauranteed Obligations have been finally and indefeasibly
paid in full, Guarantor agrees not to enforce any of its rights against the
Borrowers, including, but not limited to: (i) any right of the Guarantor to be
subrogated in whole or in part to any right or claim with respect to any
Guaranteed Indebtedness or any portion thereof to the Banks which might
otherwise arise from payment by the Guarantor to the Banks on the account of the
Guaranteed Indebtedness or any portion thereof; and (ii) any right of the
Guarantor to require the marshalling of assets of the Borrowers which might
otherwise arise from payment by the Guarantor to the Banks on account of the
Guaranteed Indebtedness or any portion thereof. If any amount shall be paid to
the Guarantor in violation of the preceding sentence, such amount shall be
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for the benefit of, the Banks and shall forthwith be paid to the Agent to be
credited and applied upon the Guaranteed Indebtedness, whether matured or
unmatured, in accordance with the terms of the Credit Agreement.
5. Guarantor waives promptness and diligence by the Banks with respect to
its rights under the Credit Agreement or any of the other Loan Documents,
including, but not limited to, this Guarantee.
6. Guarantor waives any and all notice with respect to: (i) acceptance
by the Agent on behalf of the Banks of this Guarantee; (ii) the provisions of
any note, instrument or
<PAGE>
agreement relating to the Guaranteed Indebtedness; and (iii) any default in
connection with the Guaranteed Indebtedness.
7. Guarantor waives any presentment, demand, notice of dishonor or
nonpayment, protest, and notice of protest in connection with the Guaranteed
Indebtedness.
8. Guarantor agrees that the Banks may from time to time do any of the
following without notice to Guarantor and without adversely affecting the
validity or enforceability of this Guarantee: (i) release, surrender, exchange,
compromise, or settle the Guaranteed Indebtedness or any portion thereof; (ii)
change, renew, or waive the terms of the Guaranteed Indebtedness or any portion
thereof; (iii) change, renew, or waive the terms, including without limitation,
the rate of interest charged to the Borrowers on any note, instrument, or
agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv)
grant any extension or indulgence with respect to the payment to the Banks of
the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement
of forbearance with respect to the Guaranteed Indebtedness or any portion
thereof; (vi) release, surrender, exchange or compromise any security held by
the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a
guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or
any portion thereof; and (viii) release, surrender, exchange or compromise any
security or Lien held by the Banks for the liabilities of any Person who is a
guarantor or surety for the Guaranteed Indebtedness or any portion thereof.
Guarantor agrees that the Agent on behalf of the Banks may do any of the above
as it deems necessary or advisable, in its sole discretion, without giving any
notice to Guarantor, and that Guarantor will remain liable for full payment to
the Banks of the Guaranteed Indebtedness.
9. If any amount owing hereunder shall have become due and payable (by
acceleration or otherwise), each Bank and any branch, subsidiary or affiliate of
such Bank anywhere in the world shall each have the right, at any time and from
time to time to the fullest extent permitted by Law, in addition to all other
rights and remedies available to it, without prior notice to the Guarantor, to
set-off against and to appropriate and apply to such due and payable amounts any
debt owing to, and any other funds held in any manner for the account of the
Guarantor by such Bank or any such branch, subsidiary or affiliate including,
without limitation, all funds in all deposit accounts (whether time or demand,
general or special, provisionally credited or finally credited, or otherwise)
now or hereafter maintained by the Guarantor with such Bank or such branch,
subsidiary or affiliate. Such right shall exist whether or not the Bank shall
have given notice or made any demand hereunder or under any of the Notes or Loan
Documents, whether or not such debt owing to or funds held for the account of
the Guarantor is or are matured or
<PAGE>
unmatured, and regardless of the existence or adequacy of any collateral,
guarantee or any other security, right or remedy available to such Bank.
Guarantor hereby consents to and confirms the foregoing arrangements, and
confirms such Bank's rights and each such branch's, subsidiary's and affiliate's
rights of banker's lien and set-off.
10. Guarantor recognizes and agrees that the Borrowers, after the date
hereof, may incur additional Indebtedness or other obligations, fees and
expenses to the Banks under the Credit Agreement, refinance existing Guaranteed
Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur
additional Indebtedness to the Banks under the Credit Agreement, and that in any
such transaction, even if such transaction is not now contemplated, the Banks
will rely in any such case upon this Guarantee and the enforceability thereof
against the Guarantor and that this Guarantee shall remain in full force and
effect with respect to such future Indebtedness of the Borrowers to the Bank and
such Indebtedness shall for all purposes constitute Guaranteed Indebtedness.
11. Guarantor further agrees that, if at any time all or any part of any
payment, from whomever received, theretofore applied by the Banks to any of the
Guaranteed Indebtedness is or must be rescinded or returned by the Banks for any
reason, such liability shall, for the purposes of this Guarantee, to the extent
that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Banks, and this
Guarantee shall continue to be effective or be reinstated, as the case may be,
as to such liabilities, all as though such application by the Banks had not been
made.
12. Guarantor agrees that no failure or delay on the part of the Agent to
exercise any of its rights, powers or privileges under this Guarantee shall be a
waiver of such rights, powers or privileges or a waiver of any default, nor
shall any single or partial exercise of any of the Agent's rights, powers or
privileges preclude other or further exercise thereof or the exercise of any
other right, power or privilege or be construed as a waiver of any default.
Guarantor further agrees that no waiver or modification of any rights of the
Agent under this Guarantee shall be effective unless in writing and signed by
the Agent. Guarantor further agrees that each written waiver shall extend only
to the specific instance actually recited in such written waiver and shall not
impair the rights of the Agent in any other respect.
13. Guarantor unconditionally agrees to pay all costs and expenses,
including attorney's fees, incurred by the Bank in enforcing this Guarantee
against it.
<PAGE>
14. Guarantor agrees that this Guarantee and the rights and obligations of
the parties hereto shall for all purposes be governed by and construed and
enforced in accordance with the substantive law of the Commonwealth of
Pennsylvania without giving effect to its principles of conflict of laws.
15. Guarantor recognizes that this Guarantee when executed constitutes a
sealed instrument and as a result the instrument will be enforceable as such
without regard to any statute of limitations which might otherwise be applicable
and without any consideration.
16. Guarantor acknowledges that in addition to binding itself to this
Guarantee, at the time of execution of this Guarantee the Agent offered to the
Guarantor a copy of this Guarantee in the form in which it was executed and that
by acknowledging this fact the Guarantor may not later be able to claim that a
copy of the Guarantee was not received by it.
17. Guarantor agrees that this Guarantee shall be binding upon the
Guarantor, its successors and assigns; provided, however, that Guarantor may not
assign or transfer any of rights and obligations hereunder or any interest
herein. Guarantor further agrees that (i) this Guarantee is freely assignable
and transferable by the Banks in connection with any permitted assignment or
transfer of the Guaranteed Indebtedness and (ii) this Guarantee shall inure to
the benefit of the Banks, their successors and assigns.
18. Guarantor agrees that if it fails to perform any covenant or agreement
hereunder or if there occurs an Event of Default under the Credit Agreement, all
or any part of the Guaranteed Indebtedness may be declared to be forthwith due
and payable and, in the case of an Event of Default described in subsections
9.1.14 or 9.1.15 of Section 9 of the Credit Agreement, the Guaranteed
Indebtedness shall be immediately due and payable, in any case without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
19. Guarantor agrees that the enumeration of the Banks' rights and
remedies set forth in this Guarantee is not intended to be exhaustive and the
exercise by the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement among the parties to the Loan Documents or which may now or hereafter
exist at law or in equity or by suit or otherwise.
20. Guarantor agrees that all notices, statements, requests, demands and
other communications under this Guarantee shall be given to the Guarantor at the
address set forth below
<PAGE>
its respective name on the signature page hereof in the manner provided in
Section 11.6 of the Credit Agreement.
21. (a) Guarantor agrees that the provisions of this Guarantee are
severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision in this Guarantee in
any jurisdiction.
(ii) if this Guarantee would be held or determined to be void,
invalid or unenforceable on account of the amount of a Guarantor's aggregate
liability under this Guarantee, then, notwithstanding any other provision of
this Guarantee to the contrary, the aggregate amount of such liability shall,
without any further action by the Bank, the Guarantor or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding, which (without limiting
the generality of the foregoing) may be an amount which is not greater than the
greater of:
(A) the fair consideration actually received by the
Guarantor under the terms of and as a result of the Loan Documents, including,
without limiting the generality of the foregoing, and to the extent not
inconsistent with applicable federal and state laws affecting the enforceability
of guarantees, distributions or advances made to the Guarantor with the proceeds
of any credit extended under the Loan Documents in exchange for its guaranty of
the Guaranteed Indebtedness, or
(B) the excess of (1) the amount of the fair saleable value
of the assets of the Guarantor as of the date of this Guarantee as determined in
accordance with applicable federal and state laws governing determinations of
the insolvency of debtors as in effect on the date thereof over (2) the amount
of all liabilities of the Guarantor as of the date of this Guarantee, also as
determined on the basis of applicable federal and state laws governing the
insolvency of debtors as in effect on the date thereof.
(b) If the guarantee by the Guarantor of the Guaranteed Indebtedness
is held or determined to be void, invalid or unenforceable, in whole or in part,
such holding or determination shall not impair or affect the validity and
enforceability of any clause or provision not so held to be void, invalid or
unenforceable.
<PAGE>
22. [RESERVED.]
23. GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
GUARANTEE. GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND
DELIVERY HEREOF BY THE GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO
OF THE CREDIT AGREEMENT BY THE BANK HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION.
24. Guarantor (i) hereby irrevocably submits to the nonexclusive
jurisdiction of the Court of Common Pleas of Chester County, Commonwealth of
Pennsylvania, or any successor to said court, and to the nonexclusive
jurisdiction of the United States District Court for the Eastern District of
Pennsylvania, or any successor to said court (hereinafter referred to as the
"Pennsylvania Courts") for purposes of any suit, action or other proceeding
which relates to this Guarantee or any other Loan Document, (ii) to the extent
permitted by applicable Law, hereby waives and agrees not to assert by way of
motion, as a defense or otherwise in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of the Pennsylvania
Courts; that such suit, action or proceeding is brought in an inconvenient
forum; that the venue of such suit, action or proceeding is improper; or that
this Guarantee or any Loan Document may not be enforced in or by the
Pennsylvania Courts, (iii) hereby agrees not to seek, and hereby waives, any
collateral review by any other court, which may be called upon to enforce the
judgment of any of the Pennsylvania Courts, of the merits of any such suit,
action or proceeding or the jurisdiction of the Pennsylvania Courts, and (iv)
waives personal service of any and all process upon it and consents that all
such service of process made by certified or registered mail addressed as
provided in Section 21 hereof and service so made shall be deemed to be
completed upon actual receipt thereof. Nothing herein shall limit the Bank's
right to bring any suit, action or other proceeding against the Guarantor or any
of Guarantor's assets or to serve process on the Guarantor by any means
authorized by Law.
25. Guarantor waives all defenses based on suretyship not specifically
waived above.
<PAGE>
IN WITNESS WHEREOF, Guarantor intending to be legally bound, has executed
this Guarantee as of the date first above written with the intention that this
Guarantee shall constitute a sealed instrument.
Attest: THE TRIUMPH GROUP HOLDINGS, INC.
By: /s/Paul T. Stimmler By: /s/Richard T. Ill
----------------------- --------------------------
Name:Paul T. Stimmler Name:Richard T. Ill
--------------------- ------------------------
Title:Secretary Title:President
-------------------- -----------------------
Address for Notices:
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, Pennsylvania 19087-1565
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 22, 1993 by and among The Triumph
Group Holdings, Inc., a Delaware corporation (the "COMPANY") and the Persons
listed on the Schedule of Purchasers attached hereto (collectively referred to
herein as the "PURCHASERS" and individually as a "PURCHASER"). Certain
capitalized terms used herein are defined in Section 10 below.
The parties hereto agree as follows:
1. AUTHORIZATION AND CLOSING.
(a) AUTHORIZATION OF THE SECURITIES. The Company shall
authorize the issuance and sale to the Purchasers of (i) 70,000 shares of its
Class B Common Stock, par value $.001 per share (the "CLASS B COMMON"), and
26,525 shares of its Preferred Stock, par value $.01 per share (the
"PREFERRED"), each having the rights and preferences set forth in EXHIBIT A
attached hereto, and (ii) promissory notes in the form set forth in EXHIBIT B
attached hereto (the "NOTES") in the aggregate principal amount of
$5,323,030.75. The Class B Common and the Preferred are collectively referred
to herein as the "STOCK." The Stock and the Notes are collectively referred to
herein as the "SECURITIES."
(b) PURCHASE AND SALE OF THE SECURITIES. At the Closing, the
Company shall sell to each Purchaser and, subject to the terms and conditions
set forth herein, each Purchaser shall purchase from the Company (i) the number
of shares of Class B Common set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price of $10.00 per share, (ii) the
number of shares of Preferred set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price of $34.57 per share and (iii)
a Note in the principal amount set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price equal to the face amount
thereof.
(c) THE CLOSING. The closing of the purchase and sale of the
Securities (the "CLOSING") shall take place at the offices of Kirkland & Ellis,
55 East 52nd Street, New York, NY at 10:00 a.m. on July 22, 1993 or at such
other place or such other date as may be mutually agreeable to the Company and
each Purchaser. At the Closing, the Company shall deliver to each Purchaser (i)
stock certificates evidencing the Stock to be purchased by such Purchaser and
(ii) a Note in the principal amount to be purchased by such Purchaser, each
registered in such Purchaser's or its nominee's name, upon payment of the
purchase price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to an account designated by the Company.
<PAGE>
2. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall,
upon the request of any Purchaser (so long as such Purchaser holds any
Securities), deliver to such Purchaser:
(a) as soon as available but in any event within 45 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period from the
beginning of the fiscal year to the end of such month, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the annual budget
and to the corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(b) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such fiscal year, setting forth in each case comparisons to the annual budget
and to the preceding fiscal year, all prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by (a)
with respect to the consolidated portions of such statements, an opinion of an
independent accounting firm of recognized national standing, (b) a certificate
from such accounting firm, addressed to the Company's board of directors,
stating that in the course of its examination nothing came to its attention that
caused it to believe that there was any default by the Company or any Subsidiary
in the fulfillment of or compliance with any of the terms, covenants, provisions
or conditions of any other material agreement to which the Company or any
Subsidiary is a party or, if such accountants have reason to believe any default
by the Company or any Subsidiary exists, a certificate specifying the nature and
period of existence thereof, and (c) a copy of such firm's annual management
letter to the board of directors;
(c) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant aspects
of the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
(d) at least 30 days prior to the beginning of each fiscal year,
an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of income
and cash flows and balance
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sheets), and promptly upon preparation thereof any other significant budgets
prepared by the Company and any revisions of such annual or other budgets, and
within 30 days after any monthly period in which there is a material adverse
deviation from the annual budget, an Officer's Certificate explaining the
deviation and what actions the Company has taken and proposes to take with
respect thereto;
(e) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material agreement
to which it or any of its Subsidiaries is a party or any other material adverse
event or circumstance affecting the Company or any Subsidiary (including the
filing of any material litigation against the Company or any Subsidiary or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
(f) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or any of its officers or directors file with respect to the Company,
with the Securities and Exchange Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press releases
and other statements made available generally by the Company to the public
concerning material developments in the Company's businesses; and
(g) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this Section 2 may reasonably request.
3. RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Class A
Common, solely for the purpose of issuance upon the conversion of the Class B
Common, such number of shares of Class A Common issuable upon the conversion of
all outstanding Class B Common. All shares of Class A Common which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Company shall
take all such actions as may be necessary to assure that all such shares of
Class A Common may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Class A Common may be listed (except for official notice
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of issuance which shall be immediately transmitted by the Company upon
issuance).
4. REGULATORY COMPLIANCE COOPERATION. In the event that Citicorp
Venture Capital, Ltd., a New York corporation ("CVC"), determines that it has a
Regulatory Problem (as defined below), the Company agrees to take all such
actions as are reasonably requested by CVC in order (a) to effectuate and
facilitate any transfer by CVC of any securities of the Company then held by CVC
to any Person designated by CVC and (b) to continue and preserve the respective
allocation of the voting interests with respect to the Company provided for in
the Stockholders Agreement by and among the Company, CVC and others dated as of
the date hereof, and with respect to CVC's ownership of the Company's Stock.
Such actions may include, but shall not necessarily be limited to entering into
such additional agreements, adopting such amendments to the Certificate of
Incorporation and bylaws of the Company and taking such additional actions as
are reasonably requested by CVC in order to effectuate the intent of the
foregoing. For purposes of this Agreement, a "REGULATORY PROBLEM" means any set
of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or CVC believes that there is a substantial risk of such
assertion) that CVC is not entitled to hold, or exercise any significant right
with respect to, the Stock.
5. PRO RATA PAYMENT. Any payments to the holders of the Notes
(whether for principal, interest or otherwise) shall be made pro rata among such
holders based upon the aggregate unpaid principal amount of the Notes held by
each such holder. If any holder of a Note obtains any payment (whether
voluntary, involuntary, by application of offset or otherwise) of principal or
interest on any Note in excess of such holder's pro rata share of payments
obtained by all holders of the Notes, by acceptance of the Note such holder
agrees to purchase from the other holders of the Notes such participation in the
Notes held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this Section 5.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
inducement to each Purchaser to enter into this Agreement and purchase the
Securities, the Company hereby represents and warrants that:
(a) ORGANIZATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify. The
Company has all requisite corporate power and authority to carry out the
transactions contemplated by this Agreement.
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(b) AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement has been duly authorized by the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms. The execution and delivery by the Company of this
Agreement, the offering, sale and issuance of the Securities hereunder and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company, do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Company's capital stock or assets pursuant to, (iv) give any third
party the right to modify, terminate or accelerate any obligation under, (v)
result in a violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to the charter or bylaws of the Company, or any law,
statute, rule or regulation to which the Company is subject, or any agreement,
instrument, order, judgment or decree to which the Company is subject.
(c) CONDUCT OF BUSINESS; LIABILITIES. Prior to the Closing, the
Company has not conducted any business, incurred any expenses, obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company, and whether due or to become due), violated
any laws or governmental rules or regulations, or entered into any contracts or
agreements other than this Agreement, the Stockholders Agreement, the
Registration Agreement, the Executive Stock Agreements, the Stock and Asset
Purchase Agreement and any other agreements contemplated by such agreements. In
addition, prior to the Closing, the Company has not violated any laws or
governmental rules or regulations.
(d) SMALL BUSINESS MATTERS. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
Section 121.401), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder, including Title
13, Code of Federal Regulations, Section 121.802. The information set forth in
the Small Business Administration Forms 480, 652 and Section A of Form 1031
regarding the Company is accurate and complete. Copies of such forms shall have
been completed by the Company and delivered to each Purchaser at the Closing.
Neither the Company nor any Subsidiary presently engages in, and it shall not
hereafter engage in, any activities, nor shall the Company or any Subsidiary use
directly or indirectly the proceeds from the sale of the Securities hereunder
for any purpose, for which a Small Business Investment Company is prohibited
from providing funds by the Small Business Investment Act of 1958 and the
regulations thereunder, including Title 13, Code of Federal Regulations, Section
107.901.
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7. TRANSFER OF RESTRICTED SECURITIES.
(a) Restricted Securities are transferable only pursuant to (i)
public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if such rule is available and (iii) subject to the conditions specified
in Section 7(b) below, any other legally available means of transfer.
(b) In connection with the transfer of any Restricted Securities
(other than a transfer described in clause (i) or (ii) of Section 7(a) above),
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
counsel to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the Securities
Act. In addition, if the holder of the Restricted Securities delivers to the
Company an opinion of counsel that no subsequent transfer of such Restricted
Securities shall require registration under the Securities Act, the Company
shall promptly upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 8 below. If the Company is not required to deliver new certificates for
such Restricted Securities not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this Section
7 and Section 8 below.
(c) Upon the request of any Purchaser, the Company shall
promptly supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
(d) Upon the request of any holder of Restricted Securities, the
Company shall remove the foregoing legend from the certificates for such
holder's Restricted Securities; provided that such Restricted Securities are
eligible for sale pursuant to Rule 144(k) of the Securities and Exchange
Commission.
(e) Transfers of Restricted Securities are subject to the terms
of the Stockholder Agreement to the extent applicable.
8. PURCHASERS' INVESTMENT REPRESENTATIONS. Each Purchaser hereby
represents that it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws;
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provided that nothing contained herein shall prevent the Purchasers and
subsequent holders of Restricted Securities from transferring such securities in
compliance with the provisions of Section 7 hereof. Each certificate for
Restricted Securities shall be imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON JULY _, 1993, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
PURCHASE AGREEMENT, DATED AS OF JULY _, 1993, BETWEEN THE ISSUER (THE
"COMPANY") AND CERTAIN INVESTORS. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
9. SBA FORMS. Prior to the Closing, the Company shall deliver to
each Purchaser all of the following documents: SBA Forms 480, 652 and 1031 and
a list of (a) the name of each of the Company's directors as of the Closing, (b)
the name and title of each of the Company's officers as of the Closing and (c)
after giving effect to the transactions contemplated by this Agreement, the name
of each of the Company's stockholders setting forth the number and class of
shares held.
10. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" of any particular Person or entity means any other Person
or entity controlling, controlled by or under common control with such
particular Person or entity and, in the case of a limited partnership,
"Affiliate" includes limited partners of such limited partnership.
"CERTIFICATE OF INCORPORATION" means the Company's certificate of
incorporation, as amended from time to time.
"EXECUTIVE STOCK AGREEMENTS" means those certain Executive Stock
Agreements dated as of the date hereof between the Company and certain members
of the management of the Company and its Subsidiaries.
"OFFICER'S CERTIFICATE" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) such certificate does not misstate any
material fact and does not omit to state any fact necessary to make the
certificate not misleading.
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"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"REGISTRATION AGREEMENT" means that certain Registration Agreement
dated as of the date hereof among the Company, the Purchasers and certain other
parties thereto.
"RESTRICTED SECURITIES" means (i) the Securities issued hereunder and
(ii) any securities issued with respect to the securities referred to in clause
(i) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in Section 8 have been delivered by the Company
in accordance with Section 7(b). Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing a Securities
Act legend of the character set forth in Section 8.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"STOCK AND ASSET PURCHASE AGREEMENT" means that certain Stock and
Asset Purchase Agreement dated as of April 21, 1993 among the Company, Alco
Standard Corporation and certain Subsidiaries of Alco Standard Corporation.
"STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement
dated as of the date hereof among the Company, the Purchasers and certain other
parties thereto.
"SUBSIDIARY" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
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11. MISCELLANEOUS.
(a) EXPENSES. The Company agrees to pay and hold each Purchaser
harmless from and against liability for the payment of all fees and expenses
incurred in connection with the transactions contemplated by this Agreement and
each of the agreements contemplated hereby, including (i) reasonable attorneys',
consultants', and accountants' fees and expenses arising in connection with the
negotiation, execution and consummation of the transactions contemplated by this
Agreement and each of the agreements contemplated hereby, (ii) reasonable fees
and expenses incurred with respect to any amendments or waivers (whether or not
the same become effective) under or in respect of this Agreement, the agreements
contemplated hereby or the Certificate of Incorporation, (iii) stamp and other
taxes which may be payable in respect of the execution and delivery of this
Agreement, (iv) reasonable fees and expenses incurred in respect of the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby and the Certificate of Incorporation, and (v) fees and
expenses incurred by any Purchaser in filing with any governmental agency with
respect to its investment in the Company or any other filing with any
governmental agency with respect to the Company which mentions any Purchaser.
(b) REMEDIES. The Purchasers shall have all rights and remedies
set forth in this Agreement and the Certificate of Incorporation and all rights
and remedies which the Purchasers have been granted at any time under any other
agreement or contract and all of the rights which the Purchasers have under any
law. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
Person having any rights under this Agreement may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or other security) for specific performance and for other injunctive relief
in order to enforce or prevent violation of the provisions of this Agreement.
(c) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(d) CONSENT TO AMENDMENTS. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended and the Company
may take any action herein prohibited, or
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omit to perform any act herein required to be performed by it, only if the
Company has obtained the written consent of holders of a majority of the issued
and outstanding shares of Common Stock issued hereunder. No other course of
dealing between the Company and any Purchaser or any delay in exercising any
rights hereunder or under the Certificate of Incorporation shall operate as a
waiver of any rights of such Purchaser.
(e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by the Purchasers or on their behalf.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(g) ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(h) COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
(i) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
(j) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE TRIUMPH GROUP HOLDINGS, INC.
By /s/ Richard C. Ill
-----------------------------------------
Its President and Chief Executive Officer
-----------------------------------------
CITICORP VENTURE CAPITAL, LTD.
By /s/
-----------------------------------------
Its Vice President
-----------------------------------------
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SCHEDULE OF PURCHASERS
Shares of Shares of Principal Total
Purchaser Class B Common Preferred Amount of Notes Purchase Price
- --------- -------------- --------- --------------- --------------
Citicorp Venture
Capital Ltd. 70,000 25,525 $5,323,030.75 $6,940,000
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EXHIBITS
Exhibit A - Article IV of Certificate of Incorporation
Exhibit B - Form of Promissory Note
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THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO
CERTAIN SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 3 HEREIN. THIS
NOTE WAS ORIGINALLY ISSUED ON JUNE 1, 1993 AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE
SECURITIES LAW. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN PARAGRAPH 9 HEREIN.
SUBORDINATED PROMISSORY NOTE
June 1, 1993 $13,500,000
THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to MDR Corporation (the "Seller"), or its
permitted assigns (the Seller and each of its permitted assigns is a "Holder")
the principal amount of Thirteen Million Five Hundred Thousand Dollars, together
with interest thereon calculated from the date hereof in accordance with the
provisions of this Note. This Note is the "SUBORDINATED NOTE" issued pursuant to
that certain Stock and Asset Purchase Agreement, dated as of April 21, 1993 (the
"PURCHASE AGREEMENT"), by and among the Company, the Seller and the other
parties named therein. Certain defined terms used herein are set forth in
paragraph 14 hereof.
1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten
percent (10%) per annum, compounded quarterly, on the unpaid principal amount of
this Note outstanding from time to time. Subject to the provisions of
subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to the holder of
this Note quarterly, in arrears, all accrued interest on each March 31, June 30,
September 30 and December 31 during the term of this Note (each such date being
hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on September
30, 1993. Any accrued interest which for any reason has not theretofore been
paid shall be paid in full on the date on which the remaining principal amount
of this Note is paid. Interest shall accrue on any principal payment due under
this Note, and, unless otherwise prohibited under applicable law, on any
interest which has not been paid on the date on which it is due, until such time
as payment therefor is actually delivered to the holder of this Note.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) SCHEDULED PAYMENT. The Company shall repay 50% of the original
principal amount of this Note, together with all accrued and unpaid interest
thereon on June 1, 2002 (the "INITIAL PRINCIPAL
<PAGE>
PAYMENT DATE"). The Company shall repay the entire remaining principal amount of
this Note, together with all accrued and unpaid interest thereon, on June 1,
2003 (the "Maturity Date").
(b) PREPAYMENTS.
(i) OPTIONAL. Subject to the provisions of paragraph 3 hereof, the
Company may, at any time and from time to time without premium or penalty,
prepay all or a portion of the outstanding principal amount of this Note.
(ii) MANDATORY. At such time as the Superior Debt is no longer
outstanding, the Company shall, within 90 days after the end of each if its
fiscal years, use 50% of Excess Cash Flow (as defined in the Senior Loan
Agreement) for such prior fiscal year to make prepayments of the
outstanding principal amount of this Note.
(c) TIME OF PAYMENT. If any payment of principal or interest on this
Note shall become due on a Saturday, Sunday, or legal holiday under the laws of
the State of New York, such payment shall be made on the next succeeding
business day and such extension of time shall in such case be included in
computing interest in connection with such payment.
3. SUBORDINATION; RESTRICTIONS ON PAYMENT.
(a) Notwithstanding anything in this Note to the contrary, the
obligations of the Company in respect of the principal, interest, fees and
charges on this Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all Superior Debt.
(b) Upon the occurrence of any Insolvency Event with respect to the
Company or upon any acceleration of the Superior Debt, then:
(i) the holders of Superior Debt shall be entitled to receive payment
in full in cash of all principal, premium, interest, fees and charges then
due on all Superior Debt (including interest, fees and charges accruing
thereon after the commencement of any such proceedings) before the Holder
is entitled to receive any payment on account of principal, interest or
other amounts due (or past due) upon this Note, and the holders of Superior
Debt shall be entitled to receive for application in payment thereof any
payment or distribution of any kind or character, whether in cash, property
or securities or by set-off or otherwise, which may be payable or
deliverable in any such proceedings in respect of this Note; and
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<PAGE>
(ii) any payment or distribution of assets of the Company, of any kind
or character, whether in cash, property or securities, to which the Holder
would be entitled except for the provisions of this subparagraph 3(b) shall
be paid or delivered by the Company directly to the holders of all Superior
Debt in the manner provided in paragraph 3(f) below, for application in
payment thereof until all Superior Debt (including interest, fees and
charges accrued thereon after the date of commencement of such proceedings)
shall have been paid in full (whether in cash or such other form of
consideration acceptable to the holders of Superior Debt in their sole
discretion (hereinafter "Acceptable Assets")).
(c) Until all Superior Debt shall have been paid in full in Acceptable
Assets, the Company shall not, directly or indirectly, make any payment of any
amount payable with respect to this Note if there shall have occurred and be
continuing or there would exist as a result of such payment or distribution any
default or event of default under any of the terms of any Superior Debt
Agreement which (whether with or without notice, lapse of time or both) would
permit the holder of such Superior Debt to accelerate all or any portion of such
Superior Debt (collectively, the "BLOCKAGE EVENTS"); provided that if,
immediately prior to the time a particular payment is due hereunder, (x) no
Blockage Event is continuing, and (y) payment in full of the amount then due is
prohibited by this paragraph 3(c), then the Company shall be permitted to, and
shall, pay to the Holder the maximum portion of such amount as would not create
a default under any of the terms of any Superior Debt Agreement which (whether
with or without notice, lapse of time or both) would permit the holder of such
Superior Debt to accelerate all or any portion of such Superior Debt. The
Company shall use reasonable efforts to notify the Holder in writing of the
occurrence of a Blockage Event; provided that notwithstanding anything to the
contrary in this Note, the failure of the Company to so notify the Holder of the
occurrence of a Blockage Event shall have no effect on the obligations of the
Company or the Holder during the continuance of such Blockage Event as set forth
herein.
(d) Any amendment or modification of the terms of paragraph 3 of this
Note shall not be effective against any Person who was a holder of Superior Debt
prior to or at the time of such amendment or modification unless such holder of
Superior Debt so consents in writing.
(e) The holders of Superior Debt may, at any time, in their
discretion, renew, amend, extend or otherwise modify the terms and provisions of
Superior Debt so held or exercise any of their rights under the Superior Debt
including, without limitation, the waiver of defaults thereunder and the
amendment of any of the terms or provisions thereof (or any notice evidencing or
creating
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<PAGE>
the same), all without notice to or assent from the Holder. No compromise,
alteration, amendment, renewal or other change of, or waiver, consent or other
action in respect of any liability or obligation under or in respect of, any
terms, covenants or conditions of the Superior Debt (or any instrument
evidencing or creating the same), whether or not such compromise, alteration,
amendment, renewal, change, waiver, consent or other action is in accordance
with the provisions of the Superior Debt (or any instrument evidencing or
creating the same), shall in any way alter or affect any of the subordination
provisions of this Note.
(f) If, notwithstanding the provisions of paragraph 3 of this Note,
any payment or distribution of any character (whether in cash, securities or
other property) or any security shall be received by the Holder in contravention
of this paragraph 3 before all the Superior Debt shall have been paid in full in
Acceptable Assets, such payment, distribution or security shall be held in trust
for the benefit of, and shall be immediately paid over or delivered or
transferred to, the holders of Superior Debt or their duly appointed agents for
application of payment according to the priorities of such Superior Debt and
ratably among the holders of any class of Superior Debt. Such payments received
by the Holder and delivered to the holders of the Superior Debt shall be deemed
not to be a payment on this Note for any reason whatsoever and the indebtedness
under this Note shall remain as if such erroneous payment had never been paid by
the Company or received by the Holder. In the event of the failure of any Holder
to endorse or assign any such payment, distribution or security, each holder of
any Superior Debt is hereby irrevocably authorized to endorse or assign the
same.
(g) No present or future holder of Superior Debt shall be prejudiced
in its right to enforce the provisions of paragraph 3 of this Note by any act or
failure to act on the part of the Company.
(h) If there shall exist any Blockage Event, no Holder shall (other
than in connection with a failure by the Company to make a scheduled principal
payment) take or continue any action, or exercise or continue to exercise any
rights, remedies or powers under the terms of this Note, or exercise or continue
to exercise any other right or remedy at law or equity that such holder might
otherwise possess, to collect any amount due and payable in respect of this
Note, including, without limitation, the acceleration of this Note (and if this
Note has already been accelerated, the holder will, immediately upon becoming
aware of the occurrence of such Blockage Event, reverse such acceleration), the
commencement of any foreclosure on any lien or security interest, the filing of
any petition in bankruptcy or the taking advantage of any other insolvency law
of any jurisdiction, unless and until the Superior Debt shall have been fully
and finally paid in Acceptable Assets and satisfied, unless one or more of the
holders of the Superior
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<PAGE>
Debt shall have commenced any action or taken any judicial action to enforce
their rights as provided in their respective agreements relating to, or
instruments evidencing, their Superior Debt in connection with an Insolvency
Event (other than an action to dismiss a proceeding commenced against the
Company).
Notwithstanding the foregoing or any permissible action taken by the
Holder, the Holder shall not be entitled to receive any payment in contravention
of the other provisions of this paragraph 3, including, without limitation,
subparagraphs 3(b), 3(c) and 3(f). Notwithstanding anything to the contrary in
this subparagraph 3(h), the Holder may take such steps as are necessary to avoid
a loss of its rights as a result of the running of any applicable statute of
limitations or any other statute or rule which limits the time for filing
claims, or making proofs of claims, or would otherwise cause a claim to be
timebarred.
(i) If any payment or distribution to which the Holder would otherwise
have been entitled but for the provisions of this paragraph 3 shall have been
applied, pursuant to the provisions of this paragraph 3, to the payment of the
Superior Debt, then in such case and to such extent, the Holder (x) shall be
entitled to receive from the holders of Superior Debt then outstanding any
payments or distributions received by such Persons in excess of the amount
sufficient to pay all of the Superior Debt in full in Acceptable Assets (whether
or not then due), (y) following payment in full in Acceptable Assets of the
Superior Debt, shall be entitled to receive any and all further payments or
distributions applicable to the Superior Debt, and (z) following payment in full
in Acceptable Assets of the Superior Debt, shall be subrogated to the rights of
the holders of Superior Debt to receive distributions applicable to the Superior
Debt, in each case until this Note shall have been paid in full. If the Holder
has been subrogated to the rights of the holders of Superior Debt due to the
operation of this subparagraph 3(i), the Company agrees to take all such actions
as are reasonably requested by such Person in order to cause such Person to be
able to obtain payments from the Company with respect to such subrogation rights
as soon as possible.
(j) The provisions of this paragraph 3 are solely for the purpose of
defining the relative rights of the holders of Superior Debt, on the one hand,
and the Holder on the other, against the Company and its assets, and nothing
herein is intended to or shall impair, as between the Company and the Holder,
the obligations of the Company which are absolute and unconditional, to pay to
the Holder the principal and interest on this Note as and when they become due
and payable in accordance with their terms, or is intended to or will affect the
relative rights of the Holder and creditors of the Company other than the
holders of Superior Debt, nor, except as provided in this paragraph 3, will
anything herein or therein prevent the Holder from exercising all remedies
5
<PAGE>
otherwise permitted by applicable law upon default under this Note, subject to
the rights, if any, under this paragraph 3 of the holders of Superior Debt in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy and subject to this paragraph 3.
4. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT" shall
be deemed to have occurred if:
(i) the Company shall default in the payment of (A) principal of this
Note on the date when due, whether at maturity, by acceleration or
otherwise, or (B) the portion of the interest on this Note which is
permitted to be paid pursuant to paragraph 3(c) above within 5 days of the
date when due;
(ii) an Insolvency Event occurs with respect to the Company; or
(iii) a Change in Ownership occurs. A "CHANGE IN OWNERSHIP" will be
deemed to have occurred if (a) Citicorp Venture Capital, Ltd. ("CVC") and
its Affiliates cease to own at least one-third (1/3) of the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK"), on a fully
diluted basis, if, at such time, the Common Stock is not registered with
the Securities and Exchange Commission pursuant to Section 12 of the
Securities Exchange Act of 1934 or (b) the Company sells all or
substantially all of its assets to an Independent Third Party. For purposes
of this paragraph (iii), "INDEPENDENT THIRD PARTY" means any Person who,
immediately prior to the contemplated transaction, does not own in excess
of 5% of the Common Stock on a fully-diluted basis (a "5% OWNER"), who is
not controlling, controlled by or under common control with any such 5%
Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons. In connection with any sale of a material amount of assets by the
Company to an Independent Third Party which does not constitute a Change in
Ownership hereunder, the Company shall use the net proceeds received in
such transaction to repay the Superior Debt then outstanding and/or replace
assets sold in such transaction as required by the Senior Loan Agreement.
(b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this
paragraph 4(b) are expressly subject to paragraph 3 hereof.
(i) If an Event of Default of the type described in clause (i) or
(iii) of subparagraph 4(a) has occurred and is
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<PAGE>
continuing, the Holder may declare all or any portion of the outstanding
principal amount of this Note due and payable and demand immediate payment
of all or any portion of the outstanding principal amount of this Note. If
the Holder demands immediate payment of all or any portion of this Note,
the Company shall immediately pay to such Holder the principal amount of
this Note requested to be paid together with all accrued and unpaid
interest thereon.
(ii) If an Event of Default of the type described in clause (ii) of
subparagraph 4(a) has occurred, all of the outstanding principal amount of
this Note shall automatically be immediately due and payable without any
notice or other action on the part of the Holder.
(iii) Upon the occurrence of an Event of Default, the Holder shall
also have any other rights which such Person may have pursuant to
applicable law; provided that no Holder shall have the right to set-off or
any similar right prior to payment in full in Acceptable Assets of the
Superior Debt.
6. SUPERIOR DEBT. Without the prior written consent of the Majority
Holders, the Company shall not permit the amount of Superior Debt to exceed an
aggregate of $90 million.
7. RESTRICTED PAYMENTS. So long as any portion of the principal
amount of this Note (together with all accrued interest thereon) remains
outstanding, without the prior written consent of the Majority Holders, the
Company shall not (a) declare or pay any cash dividends or make any cash
distributions upon any of its Common Stock or (b) redeem, retire, purchase or
otherwise acquire any of its equity securities for cash (other than redemptions,
retirements, purchases or acquisitions of equity securities from employees in
connection with the termination of their employment) (each such prohibited
declaration, payment, distribution, purchase, redemption, acquisition or
retirement being referred to as a "RESTRICTED PAYMENT"); provided that at such
time as the Superior Debt is no longer outstanding, the Company may use up to
50% of Excess Cash Flow to make Restricted Payments.
8. FINANCIAL STATEMENTS. So long as any portion of the principal
amount of this Note remains outstanding and the Seller is the holder of at least
a majority of such outstanding principal amount, the Company will deliver to the
Seller (a) as soon as available but in any event within 45 days after the end of
each quarterly accounting period in each fiscal year, unaudited consolidated
statements of income for such quarterly period, and consolidated balance sheets
as of the end of such quarterly period, and all such statements will be prepared
in accordance with United States generally accepted accounting principles,
consistently
7
<PAGE>
applied ("GAAP"), and (b) within 120 days after the end of each fiscal year,
audited consolidated statements of income for such fiscal year and audited
consolidated balance sheets as of the end of such fiscal year, all prepared in
accordance with GAAP.
9. TRANSFER RESTRICTIONS. This Note has not been registered under
the Securities Act of 1933, as amended or any comparable state securities law.
If the Holder desires to transfer this Note, such Person first must furnish the
Company with (i) a written opinion reasonably satisfactory to the Company in
form and substance from counsel reasonably satisfactory to the Company to the
effect that the Holder may transfer this Note as desired without registration
under the Securities Act or any relevant state securities law and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Company in form and substance agreeing to be bound by all of the provisions of
this Note, including, without limitation, the subordination provisions set forth
in paragraph 3 hereof.
10. AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of (i) the
Majority Holders, and (ii) the holders of a majority of the outstanding
principal amount of the Senior Notes.
11. CANCELLATION. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note shall be surrendered to
the Company for cancellation and shall not be reissued.
12. PLACE OF PAYMENT; NOTICES. Payments of principal and interest and
any notice hereunder are to be delivered to the Holder at the following address:
MDR Corporation
Silverside Carr Executive Center
501 Silverside Road
Wilmington, DE 19809
or to such other address as specified in a written notice delivered to the
Company by Holder. Notices sent by the Company shall be deemed received when
delivered personally or one (1) day after being sent by Federal Express or other
overnight carrier or three (3) days after being sent by certified or registered
mail.
13. GOVERNING LAWS. The validity, construction, and interpretation of
this Note will be governed by the internal laws, and not the laws of conflicts,
of the State of New York.
8
<PAGE>
14. DEFINITIONS. Unless otherwise indicated herein, capitalized terms
used in this Note shall have the meanings given such terms in the Purchase
Agreement.
"INDEBTEDNESS" shall mean, with respect to any Person at a particular
time, without duplication, (a) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which such Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) or any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such Person, including
guarantees in the form of an agreement to repurchase or reimburse, (c)
obligations under capitalized leases in respect of which obligations such Person
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss and (d)
any unsatisfied obligation of such Person for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"MAJORITY HOLDERS" means the holders of Notes representing a majority
of the principal amount then outstanding under all of the Notes.
"NOTES" means all of the Notes issued pursuant to the Purchase
Agreement.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
governmental entity or any department or agency thereof.
"SENIOR LENDER" means the Lender or Lenders as defined in the Senior
Loan Agreement.
"SENIOR LOAN AGREEMENT" means that certain Financing and Security
Agreement, dated as of July 22, 1993, by and among The CIT Group/Business
Credit, Inc., as Lender and as Agent for the Lender(s) named or to be named
therein, the Company and certain Subsidiaries of the Company as Borrowers and
certain Subsidiaries and affiliates of the Company as Guarantors, including all
amendments, modifications, supplements, waivers, extensions and refinancings
thereof.
"SENIOR NOTE" means the promissory note(s) issued to the Senior Lender
by the Company and certain of its Subsidiaries on July 22, 1993 pursuant to the
Senior Loan Agreement in the original principal amount of up to $55 million,
including all amendments,
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<PAGE>
modifications, supplements, waivers, extensions and refinancings thereof.
"SUBSIDIARY" shall mean any Person which the Company has the direct or
indirect right to control, direct or cause direction of management and policies
of, whether through the ownership of voting securities, by contract or
otherwise.
"SUPERIOR DEBT" means the Indebtedness evidenced by the Senior Note
and such additional Indebtedness incurred by the Company and its Subsidiaries
from time to time and permitted under paragraph 5 above.
"SUPERIOR DEBT AGREEMENT" means any agreement relating to, or
instrument evidencing, any Superior Debt.
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on the date first above written.
THE TRIUMPH GROUP HOLDINGS, INC.
By: /s/ Richard C. Ill
----------------------------
Its: President
----------------------------
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<PAGE>
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of July 22 , 1993, by and among The Triumph
Group Holdings, Inc., a Delaware corporation (the "Company"), Citicorp Venture
Capital, Ltd., a New York corporation ("CVC"), World Equity Partners, L.P. (the
"Fund"), and each of the executives listed on the signature pages hereto (the
"Executives"). CVC, the Fund and the Executives are collectively referred to
herein as the "Stockholders" and individually as a "Stockholder." Capitalized
terms used herein are defined in paragraph 5 hereof.
CVC will purchase shares of the Company's Class B Common Stock, par
value $.001 per share (the "Common Stock), pursuant to a purchase agreement
between CVC and the Company dated as of the date hereof (the "Purchase
Agreement"). The Fund will receive warrants to purchase shares of the Company's
Class A Common Stock, par value $.001 per share (the "Warrants"), which Warrants
shall be subject to a Warrant Agreement dated as of the date hereof between the
Fund and the Company. The Company and each Executive are parties to an
Executive Stock Agreement, dated as of the date hereof (the "Executive Stock
Agreements"), pursuant to which each Executive will purchase shares of the
Common Stock.
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Executives' Common Stock may be transferred. The execution and
delivery of this Agreement is a condition to CVC's purchase of the Common Stock
pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. BOARD OF DIRECTORS.
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this paragraph 1 cease to be effective,
each Stockholder shall vote all of his Stockholder Shares and any other voting
securities of the Company over which such Stockholder has voting control and
shall take all other necessary or desirable actions within his control (whether
in his capacity as a stockholder, director, member of a board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written
<PAGE>
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) The authorized number of directors on the Board shall
be established at five directors;
(ii) the following persons shall be elected to the Board:
(A) two representatives designated by CVC (the "CVC
Directors");
(B) the Company's Chief Executive Officer; and
(C) two directors designated by the holders of a
majority of the voting power represented by the Stockholder Shares,
one of which until the termination of his employment with the Company
shall be John Bartholdson (the "Majority Holders Directors").
(iii) the removal from the Board (with or without cause)
of any of the CVC Directors or the Majority Holders Directors shall be only
at the written request of the person or persons originally entitled to
designate such director pursuant to Section l(a)(ii) hereof (or in the case
of John Bartholdson as one of the Majority Holders Directors, the
termination of John Bartholdson's employment), provided that if any
director elected pursuant to (ii)(B) above ceases to be Chief Executive
Officer of the Company, he shall be removed as a director promptly after
his employment ceases; and
(iv) in the event that any representative designated
hereunder for any reason ceases to serve as a member of the Board during
his term of office, the resulting vacancy on the Board shall be filled by a
representative designated by the person or persons originally entitled to
designate such director pursuant to Section l(a)(ii) hereof, other than a
vacancy resulting from the termination of the employment of the Company's
Chief Executive Officer, which vacancy shall be filled by the Company's
subsequent Chief Executive Officer.
(b) The Company shall pay reasonable fees to each director
(other than directors who are employees of the Company or any of its
subsidiaries and directors who are employees of CVC) and shall pay the
reasonable out-of-pocket expenses incurred by each director in connection with
attending the meetings of the Board and
2
<PAGE>
any committee thereof. So long as any CVC Director serves on the Board and for
six years thereafter, the Company shall maintain directors and officers
indemnity insurance coverage satisfactory to CVC.
(c) The provisions of this paragraph 1 shall terminate
automatically and be of no further force and effect upon the first to occur of
(i) the tenth anniversary of the date hereof (unless extended by the parties
hereto in accordance with Section 218 of the Delaware General Corporation Law)
or (ii) a Qualified Public Offering.
(d) If any party fails to designate a representative to fill a
directorship pursuant to the terms of this paragraph 1, the election of a person
to such directorship shall be accomplished in accordance with the Company's
bylaws and applicable law.
2. IRREVOCABLE PROXY: CONFLICTING AGREEMENTS.
(a) In order to secure each Executive's obligation to vote his
Stockholder Shares and other voting securities of the Company in accordance with
the provisions of paragraph 1 hereof, each Executive hereby appoints CVC as his
true and lawful proxy and attorney-in-fact, with full power of substitution, to
vote all of his Stockholder Shares and other voting securities of the Company
for the election and/or removal of directors and all such other matters as
expressly provided for in paragraph 1. CVC may exercise the irrevocable proxy
granted to him hereunder at any time any Executive fails to comply with the
provisions of this Agreement. The proxies and powers granted by each Executive
pursuant to this paragraph 2 are coupled with an interest and are given to
secure the performance of the Executive's obligations to CVC under this
Agreement. Such proxies and powers will be irrevocable for the term set forth
in paragraph 1(d) of this Agreement and will survive the death, incompetency and
disability of such Executive and the holders of his Stockholder Shares.
(b) Each Stockholder represents that he has not granted and is
not a party to any proxy, voting trust or other agreement which is inconsistent
with or conflicts with the provisions of this Agreement, and no holder of
Stockholder Shares shall grant any proxy or become party to any voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement.
3. LEGEND. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be
3
<PAGE>
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate are subject
to a Stockholders Agreement dated as of July __, 1993, among
the issuer of such securities (the "Company") and certain of
the Company's stockholders. A copy of such Stockholders
Agreement will be furnished without charge by the Company to
the holder hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 6 hereof.
4. TRANSFER. Prior to transferring any Stockholder Shares (other
than in a Public Sale) to any person or entity, the transferring Stockholder
shall cause the prospective transferee to execute and deliver to the Company and
the other Stockholders a counterpart of this Agreement.
5. DEFINITIONS.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully-diluted basis (a "5% Owner"), who is not controlling, controlled by
or under common control with any such 5% Owner and who is not the spouse or
descendent (by birth or adoption) of any such 5% Owner or a trust for the
benefit of such 5% Owner and/or such other persons.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $40 million.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder, (ii) any Common Stock issued or issuable with
respect to the Warrants, (iii) any equity securities issued or issuable directly
or indirectly with respect
4
<PAGE>
to the Common Stock referred to in clauses (i) and (ii) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iv) any
other shares of any class or series of capital stock of the Company held by a
Stockholder. As to any particular shares constituting Stockholder Shares, such
shares will cease to be Stockholder Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (y) sold to the public through a broker,
dealer or market maker pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act.
6. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
7. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or the holders of at
least a majority of the Stockholder Shares, respectively. The failure of any
party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
8. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
9. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
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<PAGE>
10. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
11. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
12. REMEDIES. The Company, CVC, the Fund and the Executives shall be
entitled to enforce their rights under this Agreement specifically to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company, CVC, the Fund and any
Executive may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
13. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the signature pages hereto and to any
subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
The Triumph Group Holdings, Inc.
c/o The Triumph Group Management Services, Inc.
825 Duportail Road
Wayne, PA 19087
Attention: President
14. GOVERNING LAW. The corporate law of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal law, and not the law of conflicts,
of Delaware.
6
<PAGE>
15. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE TRIUMPH GROUP HOLDINGS, INC.
By /s/ Richard C. Ill
------------------------------------------
Its President & CEO
-----------------------------------------
CITICORP VENTURE CAPITAL, LTD.
Address: By /s/
399 Park Avenue ------------------------------------------
New York, NY 10043 Its V.P.
Attention: Bruce C. Bruckman -----------------------------------------
Joseph M. Silvestri
WORLD EQUITY PARTNERS, L.P.
Address: By /s/
399 Park Avenue ------------------------------------------
New York, NY 10043 Its
Attention: Byron Knief -----------------------------------------
Address: /s/ Richard C. Ill
1356 Sugartown Road ---------------------------------------------
Berwyn, PA 19312 Richard C. Ill
Address: /s/ John R. Bartholson
168 Hollow Road ---------------------------------------------
Malvern, PA 19355 John R. Bartholson
Address: /s/ Robert E. Janis
94 Briarwood Circle ---------------------------------------------
Oak Brook, IL 60521 Robert E. Janis
Address: /s/ Richard R. Rockwood
32112 Canyon Ridge ---------------------------------------------
Westlake Village, CA 91361 Richard R. Rockwood
Address: /s/ Richard J. LeJeurne
10 Pinecrest ---------------------------------------------
Wellington, KS 87152 Richard J. LeJeurrne
8
<PAGE>
Address:
443 South Jackson /s/ Thomas J. Fournier
Hinsdale, IL 60521 ---------------------------------------------
Thomas J. Fournier
Address:
906 Thistle Lane /s/ Paul T. Stimmler
West Chester, PA 19382 ---------------------------------------------
Paul T. Stimmler
Address:
700 Dorchester Drive /s/ John W. Malec
Bolingbrook, IL 60439 ---------------------------------------------
John W. Malec
Address:
111 Marquette Avenue S, Apt. 2601 /s/ Kenneth E. Templin
Minneapolis, MN 55401 ---------------------------------------------
Kenneth E. Templin
Address:
1400 Mayview N.E. /s/ Frederick W. Kuebrich
Albany, OR 97321 ---------------------------------------------
Frederick W. Kuebrich
Address:
5619 Blair Drive /s/ Frank R. Hondlik
Highland Heights, OH 44143 ---------------------------------------------
Frank R. Hondlik
Address:
1500 N. Markdale, Villa #40 /s/ K. Neil Mottern
Mesa, AZ 85201 ---------------------------------------------
K. Neil Mottern
Address:
24234 West Lema Drive /s/ Steven W. Williamson
Valencia, CA 91356 ---------------------------------------------
Steven W. Williamson
Address:
603 Brademas Court /s/ James E. Hunt
Wood Ranch, CA 93065 ---------------------------------------------
James E. Hunt
Address:
1027 St. Paul Street /s/ Donald E. Kendall
Shelbyville, IN 46176 ---------------------------------------------
Donald E. Kendall
9
<PAGE>
Address:
3159 E Meadow Dr. /s/ George J. Bakker
Shelbyville, IN 46176 ---------------------------------------------
George J. Bakker
Address:
38575 Carriage Lane /s/ John P. Lawson, Jr.
Willoughby, OH 44094 ---------------------------------------------
John P. Lawson, Jr.
Address:
216 N. Park Drive /s/ M. David Brummet
Hutchinson, KS 67502 ---------------------------------------------
M. David Brummet
Address:
1148 Fielding Drive /s/ Kevin E. Kindig
West Chester, PA 19382 ---------------------------------------------
Kevin E. Kindig
Address:
1118 Whirloway Avenue /s/ Richard W. Carney, Jr.
Naperville, IL 60540 ---------------------------------------------
Richard W. Carney, Jr.
10
<PAGE>
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of July 22,1993, among The Triumph Group
Holdings, Inc., a Delaware corporation (the "Company"), Citicorp Venture
Capital, Ltd. a New York corporation ("CVC"), World Equity Partners, L.P. (the
"Fund"), and the executives of the Company and its subsidiaries listed on the
signature pages hereto (the "Executives").
The Company and each of the Executives are parties to Executive Stock
Agreements, dated as of the date hereof (the "Executive Stock Agreements"),
pursuant to which each of the Executives will purchase shares of the Company's
Class A Common Stock, par value $.001 per share (the "Class A Common"). The
Company and CVC are parties to a Purchase Agreement of even date herewith (the
"Purchase Agreement"), pursuant to which CVC will purchase shares of the
Company's Class B Common Stock par value $.001 per share (the "Class B Common").
The Fund will receive warrants to purchase shares of the Class A Common (the
"Warrants"), which Warrants will be subject to a Warrant Agreement dated as of
the date hereof between the Fund and the Company. In order to induce CVC and
the Fund (the "Investors") to enter into the Purchase Agreement and the Warrant
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the Closing under the Purchase Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
paragraph 8 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time the holders of at least a
majority of the CVC Registrable Securities or, after the later to occur of (i)
the fifth anniversary of the date hereof or (ii) a Qualified Public Offering,
the holders of a majority of Fund Registrable Securities may request
registration under the Securities Act of all or part of their Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations"), and the holders of at least a majority of the CVC Registrable
Securities or the holders of a majority of Fund Registrable Securities may
request registration under the Securities Act of all or part of their
Registrable Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations"), if available. Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within
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ten days after receipt of any such request, the Company will give written notice
of such requested registration to all other holders of CVC Registrable
Securities or Fund Registrable Securities, as applicable, and will include in
such registration all CVC Registrable Securities or Fund Registrable Securities,
as applicable, with respect to which the Company has received written requests
for inclusion therein within 15 days after the receipt of the Company's notice.
All registrations requested pursuant to this paragraph 1(a) are referred to
herein as "Demand Registrations".
(b) LONG-FORM REGISTRATIONS. Subject to paragraph 1(a) hereof, the
holders of CVC Registrable Securities will be entitled to request (i) two
Long-Form Registrations in which the Company will pay all Registration Expenses
("Company-paid Long-Form Registrations") and (ii) an unlimited number of
Long-Form Registrations in which the holders of CVC Registrable Securities will
pay their share of the Registration Expenses as set forth in paragraph 5 hereof.
Subject to paragraph 1(a) hereof, the holders of Fund Registrable Securities
will be entitled to request (i) one Company-paid Long-Form Registration and (ii)
no Long-Form Registrations in which the holders of Fund Registrable Securities
will pay their share of the Registration Expenses as set forth in paragraph 5
hereof. A registration will not count as one of the permitted Company-paid
Long-Form Registrations until it has become effective (unless such Long-Form
Registration has not become effective due solely to the fault of the holders
requesting such registration) and unless the holders of Registrable Securities
are able to register and sell at least 90% of the Registrable Securities
requested to be included in such registration; provided that in any event the
Company will pay all Registration Expenses in connection with any registration
initiated as a Company-paid Long-Form Registration whether or not it has become
effective. All Long-Form Registrations shall be underwritten registrations.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
CVC Registrable Securities and the holders of a majority of Fund Registrable
Securities will be entitled to request an unlimited number of Short-Form
Registrations in which the Company will pay all Registration Expenses. Demand
Registrations will be Short-Form Registrations whenever the Company is permitted
to use any applicable short form. After the Company has become subject to the
reporting requirements of the Exchange Act, the Company will use its best
efforts to make Short-Form Registrations available for the sale of Registrable
Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not include
in any Demand Registration any securities which
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are not Registrable Securities without the prior written consent of the holders
of at least a majority of the Registrable Securities initially requesting such
registration. If a Demand Registration is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold in an orderly manner
in such offering within a price range acceptable to the holders of a majority of
the Registrable Securities initially requesting registration, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold in an orderly
manner within the price range of such offering, pro rata among the respective
holders thereof on the basis of the amount of Registrable Securities owned by
each such holder. Any Persons other than holders of Registrable Securities who
participate in Demand Registrations which are not at the Company's expense must
pay their share of the Registration Expenses as provided in paragraph 5 hereof.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities initially requesting such registration will have the
right to select the investment banker(s) and manager(s) to administer the
offering.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement,
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of at least a majority of the CVC Registrable Securities
and a majority of the Fund Registrable Securities.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in
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such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder, and (iii) third, other securities requested to
be included in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company will include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among the holders of such Registrable Securities
on the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval will not be
unreasonably withheld.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities
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<PAGE>
or securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least six months has elapsed from the effective
date of such previous registration.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) to cause each holder of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before
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<PAGE>
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than six months and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
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(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable
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<PAGE>
statement and to require the insertion therein of material, furnished to the
Company in writing, which in the reasonable judgment of such holder and its
counsel should be included; and
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order.
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
If any such registration or comparable statement refers to any holder
by name or otherwise as the holder of any securities of the Company and if, in
its sole and exclusive judgment, such holder is or might be deemed to be a
controlling person of the Company, such holder shall have the right to require
(i) the insertion therein of language, in form and substance satisfactory to
such holder and presented to the Company in writing, to the effect that the
holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such holder; provided that with respect to this
clause (ii) such holder shall furnish to the Company an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to the
Company.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of
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compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne as provided in this
Agreement, except that the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
the NASDAQ National Market System.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
initially requesting such registration.
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers, directors, partners and
each Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will
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<PAGE>
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
will be individual to each holder and will be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or
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any officer, director or controlling Person of such indemnified party and will
survive the transfer of securities. The Company also agrees to make such
provisions as are reasonably requested by any indemnified party for contribution
to such party in the event the Company's indemnification is unavailable for any
reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder and
such holder's intended method of distribution.
8. DEFINITIONS.
"Common Stock" means the Company's Class A Common and Class B Common
and any equity securities issued in exchange therefor or replacement thereof.
"CVC Registrable Securities" means (i) any Common Stock issued
pursuant to the Purchase Agreement, (ii) any equity security issued or issuable
with respect to the securities referred to in clause (i) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iii) any
shares of Common Stock held by Persons holding securities described in clause
(i) or (ii), inclusive, above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fund Registrable Securities" means (i) any Common Stock issued or
issuable pursuant to the Warrants issued pursuant to the Warrant Agreement, (ii)
any equity security issued or issued or issuable with respect to the securities
referred to in clause (i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any shares of Common Stock held by Persons
holding securities described in clause (i) or (ii), inclusive, above.
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $40 million.
"Registrable Securities" means (i) any Common Stock issued pursuant to
the Purchase Agreement or the Executive Stock Agreements, (ii) any Common Stock
issued or issuable upon the exercise of the Warrants issued pursuant to the
Purchase Agreement, (iii) any equity security issued or issuable with respect to
the securities referred to in clauses (i) and (ii) by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and (iv) any other shares of
Common Stock held by Persons holding securities described in clauses (i) to
(iii), inclusive, above. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker in
compliance with Rule 144 under the Securities Act (or any similar rule then in
force). For purposes of this Agreement, a Person will be deemed to be a holder
of Registrable Securities whenever such Person has the right to acquire directly
or indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Purchase Agreement.
9. MISCELLANEOUS.
(a) SELECTION OF INVESTMENT BANKERS. Except as otherwise provided
herein in connection with Demand Registrations, the selection of investment
banker(s) and manager(s) for any public offering or private sale by the Company
of its securities must be approved by the holders of a majority of the
Registrable Securities, which approval will not be unreasonably withheld.
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(b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(d) REMEDIES. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(e) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of at least a majority of the CVC
Registrable Securities and a majority of the Fund Registrable Securities.
(f) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(g) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the
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extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(h) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(i) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(j) GOVERNING LAW. The corporate law of Delaware will govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto will be governed by the internal
law, and not the law of conflicts, of Delaware.
(k) NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to each Investor at the address indicated on the
signature pages hereto and to the Company at the address indicated below:
The Triumph Group Holdings, Inc.
c/o The Triumph Group Management Services, Inc.
825 Duportail Road
Wayne, PA 19087
Attention: President
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE TRIUMPH GROUP HOLDINGS, INC.
By /s/ Richard C. Ill
-----------------------------------------
Its President & CEO
-----------------------------------------
CITICORP VENTURE CAPITAL, LTD.
Address:
399 Park Avenue By /s/
New York, NY 10043 ----------------------------------------
Attention: Bruce C. Bruckman Its VP
Joseph M. Silvestri ----------------------------------------
WORLD EQUITY PARTNERS, L.P.
Address:
399 Park Avenue By /s/
New York, NY 10043 -----------------------------------------
Attention: Byron Knief It VP
-----------------------------------------
Address:
1356 Sugartown Road /s/ Richard C. Ill
Berwyn, PA 19312 --------------------------------------------
Richard C. Ill
Address:
168 Hollow Road /s/ John R. Bartholson
Malvern, PA 19355 --------------------------------------------
John R. Bartholson
Address:
94 Briarwood Circle /s/ Robert E. Janis
Oak Brook, IL 60521 --------------------------------------------
Robert E. Janis
Address:
32112 Canyon Ridge /s/ Richard R. Rockwood
Westlake Village, CA 91361 --------------------------------------------
Richard R. Rockwood
Address:
10 Pinecrest /s/ Richard J. Lejeurrne
Wellington, KS 87152 ---------------------------------------------
Richard J. Lejeurrne
15
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Address:
443 South Jackson /s/ Thomas J. Fournier
Hinsdale, IL 60521 --------------------------------------------
Thomas J. Fournier
Address:
906 Thistle Lane /s/ Paul T. Stimmler
West Chester, PA 19382 ---------------------------------------------
Paul T. Stimmler
Address:
700 Dorchester Drive /s/ John W. Malec
Bolingbrook, IL 60439 ---------------------------------------------
John W. Malec
Address:
111 Marquette Avenue S, Apt. 2601 /s/ Kenneth E. Templin
Minneapolis, MN 55401 ---------------------------------------------
Kenneth E. Templin
Address:
1400 Mayview N.E. /s/ Frederick W. Kuebrich
Albany, OR 97321 ---------------------------------------------
Frederick W. Kuebrich
Address:
5619 Blair Drive /s/ Frank R. Hondlik
Highland Heights, OH 44143 ---------------------------------------------
Frank R. Hondlik
Address:
1500 N. Markdale, Villa #40 ---------------------------------------------
Mesa, AZ 85201 K. Neil Mottern
Address:
24234 West Lema Drive /s/ Steven W. Williamson
Valencia, CA 91356 --------------------------------------------
Steven W. Williamson
Address:
603 Brademas Court /s/ James E. Hunt
Wood Ranch, CA 93065 ---------------------------------------------
James E. Hunt
Address:
1027 St. Paul Street /s/ Donald E. Kendall
Shelbyville, IN 46176 ---------------------------------------------
Donald E. Kendall
16
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Address:
3159 E. Meadow Drive /s/ George J. Bakker
Shelbyville, IN 46176 ---------------------------------------------
George J. Bakker
Address:
38575 Carriage Lane /s/ John P. Lawson, Jr.
Willoughby, OH 44094 ---------------------------------------------
John P. Lawson, Jr.
Address:
216 N. Park Drive /s/ M. David Brummet
Hutchinson, KS 67502 ---------------------------------------------
M. David Brummet
Address:
1148 Fielding Drive /s/ Kevin E. Kindig
West Chester, PA 19382 ---------------------------------------------
Kevin E. Kindig
Address:
1118 Whirloway Avenue /s/ Richard W. Carney, Jr.
Naperville, IL 60540 ---------------------------------------------
Richard W. Carney, Jr.
17
<PAGE>
Exhibit 10.9
THIS WARRANT WAS ORIGINALLY ISSUED ON JULY 22, 1993 AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER
OR THE PROVISIONS OF THIS WARRANT. THIS WARRANT IS ALSO SUBJECT TO A
WARRANT AGREEMENT DATED JULY 22, 1993 AMONG THE TRIUMPH GROUP HOLDINGS,
INC., CITICORP VENTURE CAPITAL, LTD. AND THE ORIGINAL HOLDER HEREOF. A COPY
OF THE WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO
THE HOLDER HEREOF UPON REQUEST.
STOCK PURCHASE WARRANT
Date of Issuance: July 22, 1993 Certificate No. W-1
For value received, THE TRIUMPH GROUP HOLDINGS, INC., a Delaware
corporation (the "COMPANY"), hereby grants to WORLD EQUITY PARTNERS, L.P.
("WEP"), or its transferees and assigns, the right to purchase from the Company
a total of 10,000 Warrant Shares (as defined herein) at a price per share of
$.01 (the "INITIAL EXERCISE PRICE"). The exercise price and number of Warrant
Shares (and the amount and kind of other securities) for which this Warrant is
exercisable shall be subject to adjustment as provided herein. Certain
capitalized terms used herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The purchase rights represented by this Warrant
may be exercised, in whole or in part, at any time and from time to time after
the date hereof to and including 5:00 p.m., New York City time, on July 31, 2003
or, if such day is not a business day, on the next preceding business day (the
"EXERCISE PERIOD"). The Company shall give the Registered Holder written notice
of the expiration of the Exercise Period at least 60 days but not more than 90
days prior to the expiration of the Exercise Period.
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "EXERCISE TIME"):
(a) a completed Exercise Agreement, as described in Section
1C below, executed by the Person exercising all or part of the purchase rights
represented by this Warrant (the "PURCHASER");
<PAGE>
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in EXHIBIT II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (x) a check payable to the Company in an amount
equal to the product of the Exercise Price (as such term is defined in
Section 2) multiplied by the number of Warrant Shares being purchased upon
such exercise (the "AGGREGATE EXERCISE PRICE"), (y) the surrender to the
Company of securities of the Company having a value equal to the Aggregate
Exercise Price of the Warrant Shares being purchased upon such exercise
(which value in the case of debt securities shall be the principal amount
thereof and in the case of shares of Common Stock shall be the Fair Market
Value thereof), or (z) the delivery of a notice to the Company that the
Purchaser is exercising the Warrant by authorizing the Company to reduce
the number of Warrant Shares subject to the Warrant by the number of shares
having an aggregate Fair Market Value equal to the Aggregate Exercise
Price.
(ii) Certificates for Warrant Shares purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within five days
after the date of the Exercise Time together with any cash payable in lieu of a
fraction of a share pursuant to Section 14 hereof. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such five-day period, deliver such
new Warrant to the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
record holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company
2
<PAGE>
shall from time to time take all such action as may be necessary to assure that
the par value per share of the unissued Warrant Shares acquirable upon exercise
of this Warrant is at all times equal to or less than the Exercise Price then in
effect. In the event that the Company fails to comply with its obligations set
forth in the foregoing sentence, the Purchaser may (but shall not be obligated
to) purchase Warrant Shares hereunder at par value, and the Company shall be
obligated to reimburse the Purchaser for the aggregate amount of consideration
paid in connection with such exercise in excess of the Exercise Price then in
effect.
(vi) The Company shall assist and cooperate with the Registered
Holder or any Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant.
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a public
offering or a sale of the Company (pursuant to a merger, sale of stock or
otherwise), such exercise may at the election of the holder be conditioned upon
the consummation of such transaction, in which case such exercise shall not be
deemed to be effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued Warrant Shares solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. All Warrant Shares which are so
issuable shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance). The Company will use its best efforts to cause the
Warrant Shares, immediately upon such exercise, to be listed on any domestic
securities exchange upon which shares of Common Stock or other securities
constituting Warrant Shares are listed at the time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities
of the Company, the Company shall, at the Purchaser's option and upon surrender
of this Warrant by such Purchaser as provided above together with any notice,
statement or payment required to effect such conversion or exchange of Warrant
3
<PAGE>
Shares, deliver to such Purchaser (or as otherwise specified by such Purchaser)
a certificate or certificates representing the stock or securities into which
the Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. EXERCISE AGREEMENT Upon any exercise of this Warrant, the
Purchaser shall deliver to the Company an Exercise Agreement in substantially
the form set forth in EXHIBIT I hereto, except that if the Warrant Shares are
not to be issued in the name of the Registered Holder, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be issued does
not include all of the Warrant Shares purchasable hereunder, it shall also state
the name of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be issued.
SECTION 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In order
to prevent dilution of the rights granted under this Warrant, the Initial
Exercise Price shall be subject to adjustment from time to time as provided in
this Section 2 (as so adjusted, the "EXERCISE PRICE"), and the number of Warrant
Shares obtainable upon exercise of this Warrant shall be subject to adjustment
from time to time, each as provided in this Section 2.
2A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
COMMON STOCK. If and whenever, on or after the date hereof, the Company issues
or sells, or in accordance with Section 2B is deemed to have issued or sold,
other than pursuant to a Permitted Issuance, any shares of Common Stock for a
consideration per share less than the Fair Market Value per share of the Common
Stock determined as of the date of such issuance or sale, then immediately upon
such issuance or sale the Exercise Price shall be reduced to equal the amount
determined by multiplying the Exercise Price in effect immediately prior to such
issuance or sale by a fraction, the numerator of which will be the sum of (1)
the number of shares of Common Stock Deemed Outstanding immediately prior to
such issuance or sale multiplied by the Fair Market Value per share of the
Common Stock determined as of the date of such issuance or sale, plus (2) the
consideration, if any, received by the Company upon such issuance or sale, and
the denominator of which will be the product derived by multiplying such Fair
Market Value per share of the Common Stock by the number of shares of Common
Stock Deemed Outstanding immediately after such issuance or sale. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares
acquirable upon exercise of this Warrant shall be adjusted to equal the number
of shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment
4
<PAGE>
and dividing the product thereof by the Exercise Price resulting from such
adjustment.
2B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants any rights or options (other than Purchase Rights covered by Section 4
hereof or a Permitted Issuance) to subscribe for or to purchase Common Stock or
any stock or other securities convertible into or exchangeable for Common Stock
(including without limitation convertible common stock) (such rights or options
being herein called "OPTIONS" and such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES") and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the Fair
Market Value per share of the Common Stock then in effect, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon exercise of such Options or upon conversion
or exchange of such Convertible Securities" is determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made
upon the actual issuance of such Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of such Common
Stock upon conversion or exchange of such convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Fair Market Value per share of the Common Stock then in effect, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and
5
<PAGE>
to have been issued and sold by the Company for such price per share. For the
purposes of this paragraph, the "price per share for which Common Stock is
issuable upon such conversion or exchange" is determined by dividing (A) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Exercise Price have been or
are to be made pursuant to other provisions of this Section 2B, no further
adjustment of the Exercise Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time, the Exercise Price in
effect at the time of such change shall be adjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold and the number of Warrant Shares shall be
correspondingly readjusted.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder shall be adjusted to the Exercise
Price and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration,
6
<PAGE>
except where such consideration consists of marketable securities, in which case
the amount of consideration received by the Company shall be the market price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger or other business combination in which the Company is
the surviving entity, the amount of consideration therefor shall be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or marketable securities shall be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Required Holders, whose
determination shall be final and binding on the Company and all holders of
Warrants. The fees and expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed to
have been issued for no consideration.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any subsidiary of the Company and the disposition
of any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the
case may be.
2C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Warrant Shares obtainable
upon exercise of this Warrant shall be proportionately
7
<PAGE>
increased. If the Company at any time combines (by reverse stock split or
otherwise) the Common Stock into a smaller number of shares, the Exercise Price
in effect immediately prior to such combination shall be proportionately
increased and the number of Warrant Shares obtainable upon exercise of this
Warrant shall be proportionately decreased.
2D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an "ORGANIC CHANGE". Prior to the consummation of any Organic Change, the
Company shall make appropriate provision to ensure that each holder of Warrants
shall thereafter have the right to acquire and receive upon exercise thereof, in
lieu of or addition to (as the case may be) the Warrant Shares immediately
theretofore acquirable and receivable upon exercise of such holder's Warrants,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of Warrant Shares immediately
theretofore acquirable and receivable upon exercise of such holder's Warrants
had such Organic Change not taken place. In any such case, the Company shall
make appropriate provision with respect to such holder's rights and interests to
insure that the provisions hereof (including this Section 2) shall thereafter be
applicable to the Warrants (including, in the case of any such Organic Change in
which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of Warrant Shares acquirable and receivable upon
exercise of the Warrants, if the value so reflected is less than the Fair Market
Value of the Common Stock in effect immediately prior to such Organic Change).
The Company shall not effect any such Organic Change unless, prior to the
consummation thereof, the successor entity (if other than the Company)
resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument the
obligation to deliver to each holder of Warrants such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire upon exercise of Warrants.
2E. CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's board of directors shall make an appropriate adjustment in the
Exercise
8
<PAGE>
Price and the number of Warrant Shares obtainable upon exercise of this Warrant
so as to protect the rights of the holder of this Warrant.
2F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. CERTAIN RIGHTS OF HOLDERS REGARDING DIVIDENDS. If the
Company pays a dividend or distribution upon the Common Stock, other than
dividends or distributions described in Section 2C, then the Company shall pay
to the holder of this Warrant, at the time of payment thereof, such dividend or
distribution which would have been paid to such holder had this Warrant been
fully exercised immediately prior to the date on which a record is taken for
such dividend or distribution or, if no record is taken, the date as of which
the record holders of Common Stock entitled to said dividends or distributions
are to be determined.
SECTION 4. PURCHASE RIGHTS. If at any time the Company grants, issues
or sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of the
Common Stock (the "PURCHASE RIGHTS"), then the Company shall distribute to the
Registered Holder the aggregate Purchase Rights which such holder would have
acquired if such holder had held the maximum number of Warrant Shares acquirable
upon complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
SECTION 5. DEFINITIONS. The following terms have the meanings set
forth below:
9
<PAGE>
"COMMON STOCK" means the Company's Class A Common Stock, $.001 par
value per share, or any securities into which such Common Stock is hereafter
converted or exchanged.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Section 2B(i) or
2B(ii) hereof.
"FAIR MARKET VALUE" means (i) the average of the closing sales prices
of the Common Stock on all domestic securities exchanges on which the Common
Stock is listed, or (ii) if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, (iii) if on any day the Common Stock is not
so listed, the sales price for the Common Stock as of 4:00 P.M., New York time,
as reported on the NASDAQ National Market System or, (iv) if the Common Stock is
not reported on the NASDAQ National Market System, the average of the
representative bid and asked quotations for the Common Stock as of 4:00 P.M.,
New York time, as reported on the NASDAQ interdealer quotation system, or any
similar successor organization, in each such case averaged over a period of 21
trading days consisting of the day as of which "Fair Market Value" is being
determined and the 20 consecutive trading days prior to such day.
Notwithstanding the foregoing, if at any time of determination either (x) the
Common Stock is not registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, and either listed on a national securities exchange or
authorized for quotation in the NASDAQ system, or (y) less than 25% of the
outstanding Common Stock is held by the public free of transfer restrictions
under the Securities Act of 1933, as amended, then Fair Market Value shall mean
the price that would be paid for the entire common equity interest in the
Company in an orderly sale transaction between a willing buyer and a willing
seller, taking into account the appropriate lack of liquidity of the Company's
securities and appropriate any discount for the minority position represented by
the Warrants and Warrant Shares, using valuation techniques then prevailing in
the securities industry and assuming full disclosure of all relevant information
and a reasonable period of time for effectuating such sale. Fair Market Value
shall be determined by the Company's Board of Directors in its good faith
judgment. A majority of the Required Holders shall have the right to require
that an independent investment banking firm mutually acceptable to the Company
and the Required Holders determine Fair Market Value, which firm shall submit to
the Company and the Warrantholders a written report setting forth such
determination. The expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
10
<PAGE>
"PERMITTED ISSUANCE" means any issuance of any class of Common Stock
upon (a) the conversion of any other class of common stock in accordance with
the terms thereof, (b) a registered offering to the public, (c) exercise of the
Warrant and (d) up to 5,000 shares of Common Stock in the aggregate issued to
members of management of the Company and its subsidiaries (as adjusted for stock
splits, stock dividends and similar events).
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or department or
agency thereof.
"REGISTERED HOLDER" means the holder of this Warrant as
reflected in the records of the Company maintained pursuant to
Section 13.
"REQUIRED HOLDERS" means the holders of a majority of the purchase
rights represented by this Warrant as originally issued which remain outstanding
and unexercised.
"WARRANT SHARES" means shares of the Company's Common Stock; provided,
however, that if the securities issuable upon exercise of the Warrants are
issued by an entity other than the Company or there is a change in the class of
securities so issuable, then the term "Warrant Shares" shall mean shares of the
security issuable upon exercise of the Warrants if such security is issuable in
shares, or shall mean the equivalent units in which such security is issuable if
such security is not issuable in shares.
SECTION 6. NO VOTING RIGHTS: LIMITATIONS OF LIABILITY. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such holder for the Exercise Price of Warrant Shares acquirable
by exercise hereof or as a stockholder of the Company.
SECTION 7. WARRANT TRANSFERABLE. This Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder
upon surrender of this Warrant with a properly executed Assignment (in the form
of EXHIBIT II hereto) at the principal office of the Company.
SECTION 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall
11
<PAGE>
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. At the request of the Registered Holder (pursuant
to a transfer of Warrants or otherwise), this Warrant may be exchanged for one
or more Warrants to purchase Common Stock. The date the Company initially issues
this Warrant shall be deemed to be the date of issuance hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"WARRANTS."
SECTION 9. EXCHANGE. In the event that it becomes unlawful or, in the
reasonable judgment of any holder of this Warrant, unduly burdensome by reason
of a change in legal or regulatory considerations or the interpretation thereof
affecting the ability of financial institutions or their affiliates to hold
equity securities, or any material change (including a reduction in the number
of shares of Common Stock outstanding) in the capital structure of the Company,
to hold any or all of the Warrants or Warrant Shares, the holder of this Warrant
shall have the right to require all or part of such holder's Warrants or Warrant
Shares to be exchanged for non-voting stock or similar interests that convey
equivalent economic benefits to such Warrants or Warrant Shares and include
equivalent anti-dilution protection. Any such exchange shall occur as soon as
practicable but in any event within 60 days after written notice by the holder
of this Warrant to the Company (or such earlier date if required to comply with
applicable law).
SECTION 10. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the Company
(provided that if the holder is a financial institution or other institutional
investor its own agreement shall be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 11. NOTICES. Except as otherwise expressly provided herein,
all notices and deliveries referred to in this Warrant shall be in writing and
shall be delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid and shall be deemed to have been given when
so delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such holder's address as it appears
12
<PAGE>
in the records of the Company (unless otherwise indicated by any such holder).
SECTION 12. AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Registered Holder.
SECTION 13. WARRANT REGISTER. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 14. FRACTIONS OF SHARES. The Company may, but shall not be
required to, issue a fraction of a Warrant Share upon the exercise of this
Warrant in whole or in part. As to any fraction of a share which the Company
elects not to issue, the Company shall make a cash payment in respect of such
fraction in an amount equal to the same fraction of the Fair Market Value of a
Warrant Share on the date of such exercise.
SECTION 15. DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
* * * *
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the date hereof.
THE TRIUMPH GROUP HOLDINGS, INC.
By: _/s/ Richard C. Ill___________
Name: Richard C. Ill
Title: President and Chief
Executive Officer
[Corporate Seal]
Attest:
/s/_______________________
Treasurer
14
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-___), hereby agrees to subscribe for the purchase of
______ Warrant Shares covered by such Warrant and makes payment herewith in full
therefor at the price per share provided by such Warrant.
Signature ____________________
Address ______________________
15
<PAGE>
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ___________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W- ) with respect to the number of the Warrant Shares covered
thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Dated: Signature ____________________
____________________
Witness ____________________
16
<PAGE>
Exhibit 10.10
WORLD EQUITY PARTNERS, L.P.
WARRANT AGREEMENT
Warrant Agreement (the "Agreement") dated as of July 22, 1993 among
WORLD EQUITY PARTNERS, L.P., a Delaware limited partnership (the "Purchaser"),
THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation ("Holdings"), and
CITICORP VENTURE CAPITAL, LTD., a New York corporation ("CVC").
WHEREAS, the Purchaser is acquiring from Holdings, (a) a warrant
attached as Exhibit 1 hereto (the "Warrant"), representing the right to purchase
from Holdings certain Warrant Shares (as adjusted from time to time pursuant to
the provisions of the Warrant) on the terms and conditions set forth in the
Warrant.
WHEREAS, the Warrant is being issued as an inducement and partial
consideration for World Subordinated Debt Partners, L.P., a Delaware limited
partnership ("WSDP"), to enter into that certain Senior Subordinated Loan
Agreement (the "Loan Agreement") dated as of the date of this Agreement between
WSDP and The Triumph Group Operations, Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of Holdings ("TGI"), and to make the loan to
TGI contemplated therein (the "Loan"), and without such issuance, WSDP will
not enter into the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. PURCHASE PRICE AND CLOSING.
A. ALLOCATION. The parties agree to allocate a portion of the Loan
under the Loan Agreement to the Warrant following delivery of the Warrant.
B. CLOSING. The closing of the issuance of the Warrant to the
Purchaser (the "Closing") shall take place simultaneously with the closing
pursuant to the Loan Agreement. The date of such Closing is hereinafter referred
to as the "Closing Date."
C. TRANSACTIONS ON CLOSING DATE. At the Closing, Holdings shall
deliver to the Purchaser the duly issued Warrant.
II. REPRESENTATIONS AND WARRANTIES OF HOLDINGS. Holdings represents and
warrants to the Purchaser as follows:
A. GOOD STANDING. Holdings is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
<PAGE>
B. AUTHORITY RELATIVE TO THIS AGREEMENT. Holdings has all requisite
corporate power and authority to enter into and perform this Agreement and to
issue and deliver the Warrant to the Purchaser. The execution, delivery and
performance by Holdings of this Agreement, including the issuance and delivery
of the Warrant to the Purchaser, have been duly authorized by all necessary
corporate action on the part of Holdings. This Agreement has been duly executed
and delivered by Holdings and (assuming due execution and delivery by the
Purchaser) is a legal, valid and binding obligation of Holdings and is
enforceable against Holdings in accordance with its terms.
C. NO CONFLICT OR VIOLATION. The execution and delivery of this
Agreement by Holdings, the performance by Holdings of its terms and the issuance
and delivery of the Warrant to the Purchaser will not on the Closing Date
conflict with or result in a violation of (i) the Restated Certificate of
Incorporation or By-Laws of Holdings, or (ii) any agreement, instrument, law,
rule, regulation, order, writ, judgment or decree to which Holdings is a party
or is subject, except for such conflicts and violations which will not, in the
aggregate, have a material adverse effect on the business, operations, assets or
financial condition of Holdings and will not deprive the Purchaser of any
material benefit under this Agreement.
D. VALIDITY OF ISSUANCE. The Warrant to be issued to the Purchaser
pursuant to this Agreement and the Warrant Shares issued upon exercise of the
Warrant will, when issued, be duly and validly issued, fully paid and
nonassessable (assuming in the case of the Warrant Shares, payment of the
exercise price is made in accordance with the terms of the Warrant).
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to Holdings as follows:
A. INVESTMENT INTENTION. The Purchaser is acquiring the Warrant, and
if exercised, the Warrant Shares, for investment solely for its own account and
not with a view to, or for resale in connection with, the distribution or other
disposition thereof. The Purchaser agrees and acknowledges that it will not,
directly or indirectly, offer, transfer or sell the Warrant or any Warrant
Shares, or solicit any offers to purchase or acquire the Warrant or any Warrant
Shares, unless the transfer or sale is (x) pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") and has been registered under any
applicable state securities or "blue sky" laws or (y) pursuant to an exemption
from registration under the Securities Act and applicable state securities or
"blue sky" laws.
2
<PAGE>
B. LEGEND. The Purchaser has been advised by Holdings that the
certificates representing the Warrant and the Warrant Shares will bear the
following legend:
THIS WARRANT [CERTIFICATE] WAS ORIGINALLY ISSUED ON JULY 22,
1993 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF
SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT CERTIFICATE. THIS WARRANT
[CERTIFICATE] IS ALSO SUBJECT TO A WARRANT AGREEMENT DATED
JULY 22, 1993 AMONG THE TRIUMPH GROUP, INC., CITICORP
VENTURE CAPITAL, LTD. AND THE ORIGINAL HOLDER HEREOF. A COPY
OF THE WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON REQUEST. A COPY OF THE
WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON REQUEST.
Upon reasonable request of Holdings in connection with any transfer of
the Warrant or the Warrant Shares (other than a transfer pursuant to a public
offering registered under the Securities Act, pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act (or any similar rules then in effect), or
to an affiliate of the Purchaser), the Purchaser will deliver, if requested by
Holdings, an opinion of counsel knowledgeable in securities laws reasonably
satisfactory to Holdings to the effect that such transfer may be effected
without registration under the Securities Act. Holdings agrees to issue
certificates evidencing the Warrant Shares that do not contain such legend upon
receipt of an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Holdings, to the effect that registration under the Securities
Act is not required because of the availability of an exemption from such
registration.
C. ADDITIONAL INVESTMENT REPRESENTATIONS. The Purchaser is an
"accredited investor" as such term is defined in Rule 501 promulgated under the
Securities Act.
IV. TAG-ALONG. If CVC proposes to transfer any shares of any class of
common stock of Holdings (collectively, "Common Stock"), CVC shall give written
notice to the Purchaser not less than 30 days before the date of the proposed
disposition of such proposed transfer specifying the identity of the proposed
transferee(s) and disclosing in reasonable detail the price and other terms and
conditions of the proposed transfer. The Purchaser may elect to participate in
the proposed transfer by delivering written notice to CVC prior to the
expiration of the 30-day period. If the Purchaser elects to participate in such
transfer, the Purchaser shall be entitled to sell in such proposed transfer, at
the same price and on the same terms as CVC, a number of Warrant Shares
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<PAGE>
equal to the product of (a) the quotient determined by dividing (i) the number
of shares of Common Stock proposed to be sold by (ii) the aggregate number of
shares of Common Stock then held by CVC, its affiliates and the Purchaser
(including shares which may be purchased under the Warrant), and (b) the number
of shares of Common Stock then held by the Purchaser (including shares which may
be purchased under the Warrant).
This Section IV shall not apply to transfers to affiliates of CVC or
transfers pursuant to a public offering under the Securities Act; provided that
in the case of a transfer to an affiliate such affiliate agrees to be bound by
the terms of this Article IV.
V. CERTAIN RIGHTS OF PURCHASE. If Holdings proposes to issue any shares
of Common Stock other than pursuant to a Permitted Issuance or by virtue of a
stock split, stock dividend or similar event, the Purchaser shall have the right
of first refusal to purchase a portion of Common Stock sufficient to enable the
Purchaser to maintain its percentage interest in the Common Stock on a
fully-diluted basis (giving effect to the exercise of all presently exercisable
options or other rights to acquire Common Stock, including the Warrant)
immediately prior to such issuance. Holdings shall give the Purchaser at least
30 days' prior written notice of any such proposed issuance setting forth in
reasonable detail the proposed terms and conditions thereof and shall offer to
the Purchaser the opportunity to purchase such securities at the same price, on
the same terms, and at the same time as the securities proposed to be issued by
Holdings. The Purchaser may exercise its right of first refusal by delivery of
an irrevocable written notice to Holdings not more than 10 days after delivery
of Holdings' notice.
VI. INSPECTION RIGHTS. Holdings shall permit one holder of the Warrant or
the Warrant Shares selected by the holders of the majority of the Warrant Shares
(assuming for purposes of this section that the Warrant has been exercised),
upon reasonable notice and during normal business hours and such other times as
any such holder may reasonably request, to (i) visit and inspect any of the
properties of Holdings and its subsidiaries (ii) examine the corporate and
financial records of Holdings and its subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the directors, officers, key employees and independent
accountants of Holdings and its subsidiaries.
VII. ATTENDANCE AT BOARD MEETINGS. Holdings shall give one holder of the
Warrant or Warrant Shares selected by the holders of a majority of the Warrant
Shares (assuming the Warrant has been exercised), written notice of each meeting
of its board of directors and each meeting of the board of directors of TGI at
the
4
<PAGE>
same time and in the same manner as notice is given to the directors, and
Holdings shall permit a representative of such holder to attend, as an observer,
all such meetings unless attendance at such meeting, in Holdings' reasonable
judgment, would create a conflict of interest for such holder; provided that in
the case of telephonic meetings, such holder need receive only actual notice
thereof at the same time and in the same manner as notice is given to the
directors, and such holder's representative shall be given the opportunity to
listen to such telephonic meetings. Each representative shall be entitled to
receive all written materials and other information (including, without
limitation, copies of meeting minutes) given to directors of such corporations
in connection with such meetings at the same time such materials and information
are given to the directors unless receipt of such materials would create a
conflict of interest by such holder. Holdings shall give written notice of any
action by written consent in lieu of a meeting of directors of such corporations
to such holder prior to the effective date of such consent describing in
reasonable detail the nature and substance of such action.
VIII. INFORMATION RIGHTS. For so long as the Purchaser shall hold any
Warrant Shares or the Warrant, the Purchaser shall have the right to receive the
financial information set forth in Section 5.1(a), (b) and (c) of the Loan
Agreement, regardless of whether such agreement shall continue to be in force
and effect.
IX. MISCELLANEOUS
A. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the following meanings:
"PERMITTED ISSUANCE" means any issuance of any class of Common Stock
upon (a) the conversion of any other class of common stock in accordance with
the terms thereof, (b) a registered offering to the public, (c) exercise of the
Warrant and (d) up to 5,000 shares of Common Stock in the aggregate issued to
members of management of Holdings and its subsidiaries (as adjusted for stock
splits, dividends and similar events).
"WARRANT SHARES" means shares of the Common Stock obtained or
obtainable upon exercise of the Warrant; PROVIDED, HOWEVER, that if there is a
change such that the securities issuable upon exercise of the Warrant are issued
by an entity other than Holdings or there is a change in the class of securities
so issuable, then the term "Warrant Shares" shall mean shares of the security
issuable upon exercise of the Warrant if such security is issuable in shares, or
shall mean the equivalent units in which such security is issuable if such
security is not issuable in shares.
5
<PAGE>
B. NOTICES. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given (i)
when delivered, if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid, and (iii) when received if delivered
otherwise, to the party to whom it is directed:
Holdings:
The Triumph Group Holdings, Inc.
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Attention: Bruce Bruckman
with a copy to:
Kirkland & Ellis
55 East 52nd Street
New York, NY 10055
Attention: Stephen Zide, Esq.
Purchaser:
World Equity Partners, L.P.
c/o Citicorp Capital Investors Ltd.
399 Park Avenue
New York, New York 10043
Attention: Byron Knief
with a copy to:
Kirkland & Ellis
55 East 52nd Street
New York, NY 10055
Attention: Steven S. Siegel, Esq.
CVC:
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Attention: Bruce Bruckman
with a copy to:
Kirkland & Ellis
55 East 52nd Street
New York, NY 10055
Attention: Kirk Radke, Esq.
6
<PAGE>
or to such other address as either party hereto shall have specified by notice
in writing to the others.
C. ASSIGNMENT. This Agreement and all the provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any rights or obligations hereunder shall be assigned by Holdings without
the prior written consent of the Purchaser.
D. AMENDMENT. This Agreement may be amended only by a written
instrument signed by Holdings and the Purchaser and, in the case of Section IV,
with the consent of CVC.
E. WAIVER. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid as to such party if
set forth in an instrument in writing signed by such party.
F. SEVERABILITY. In the event that any one or more of the provisions
hereof, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, it being intended
that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
G. APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to the conflicts of laws rules thereof.
H. EXPENSES. All reasonable fees and expenses incurred by Purchaser
in connection with the preparation of this Agreement and the transactions
referred to herein, including the reasonable fees of Purchaser's counsel, shall
be paid by Holdings, whether or not the issuance of the Warrant, the execution
and delivery of the Loan Agreement or any other transaction contemplated hereby
is consummated.
I. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
7
<PAGE>
J. DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of the terms contained herein.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be signed and attested by its duly authorized officers under its
corporate seal and to be dated the date hereof.
THE TRIUMPH GROUP HOLDINGS, INC.
By: __/s/ Richard C. Ill_______________
Name: Richard C. Ill
Title: President and Chief
Executive Officer
WORLD EQUITY PARTNERS, L.P.
By: _/s/_______________________________
its general partner
By: _/s/_______________________________
Name:
Title:
CITICORP VENTURE CAPITAL, LTD.
By: __/s/______________________________
Name:
Title:
8
<PAGE>
ASSET PURCHASE AGREEMENT
DATED AS OF DECEMBER 31, 1995
BY AND BETWEEN
THE TRIUMPH GROUP HOLDINGS, INC.,
TRIUMPH CONTROL SYSTEMS, INC.
AND
TELEFLEX INCORPORATED
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. ASSETS TO BE ACQUIRED . . . . . . . . . . . . . . . . . . . . . 2
1.1 Description of Assets to be Purchased by Holdings. . . . . . . . . 2
1.2 Description of Assets to be Purchased by Buyer . . . . . . . . . . 3
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2. THE PURCHASE PRICE AND RELATED MATTERS. . . . . . . . . . . . . 9
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . 10
2.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . 12
SECTION 3. ASSUMPTION OF ENUMERATED LIABILITIES. . . . . . . . . . . . . . 13
3.1 Assumed Liabilities and Obligations. . . . . . . . . . . . . . . . 13
3.2 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Consent of Third Parties . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . 26
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . 26
4.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Consents and Approvals of Governmental Authorities and Others. . . 28
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . 29
4.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 30
4.8 No Prior Sale or Licensing of Purchased Assets . . . . . . . . . . 31
4.9 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.11 Technical Information. . . . . . . . . . . . . . . . . . . . . . . 32
4.12 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.14 Open Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.15 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . 34
4.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.18 Warranty; Product Liability. . . . . . . . . . . . . . . . . . . . 34
4.19 Absence of Sensitive Payments. . . . . . . . . . . . . . . . . . . 35
4.20 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 35
4.22 Subsidiaries; Investments. . . . . . . . . . . . . . . . . . . . . 39
4.23 Benefit Plans and Employment Arrangements. . . . . . . . . . . . . 39
i
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS. . . . . . 42
5.1 Representations and Warranties of Buyer. . . . . . . . . . . . . . 42
5.2 Representations and Warranties of Holdings . . . . . . . . . . . . 44
SECTION 6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Access to Offices, Officers, Accountants, Due Diligence, Etc.. . . 47
6.3 Buyer's Environmental Investigation. . . . . . . . . . . . . . . . 48
6.4 Approvals; Consents. . . . . . . . . . . . . . . . . . . . . . . . 49
6.5 Preservation of Business Organization. . . . . . . . . . . . . . . 49
6.6 Approval of Certain Transactions . . . . . . . . . . . . . . . . . 50
6.7 Exclusive Dealing. . . . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Leased Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.9 Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . . 52
6.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 52
6.11 Supply Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7. THE ESCROW CLOSING. . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
AND HOLDINGS TO DIRECT THE RELEASE FROM ESCROW . . . . . . . . . 53
8.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 54
8.3 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 55
8.4 Instruments of Conveyance, Etc.. . . . . . . . . . . . . . . . . . 55
8.5 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 56
8.7 Required Consents. . . . . . . . . . . . . . . . . . . . . . . . . 56
8.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.9 Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.10 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.11 Audited Financials . . . . . . . . . . . . . . . . . . . . . . . . 57
8.12 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . 57
SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SELLER TO DIRECT THE RELEASE FROM ESCROW. . . . . . . . . . . . 57
9.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 58
9.3 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 58
9.4 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 59
9.6 Required Consents. . . . . . . . . . . . . . . . . . . . . . . . . 59
9.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.8 Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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SECTION 11. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 60
11.1 Environmental Indemnity and Covenant . . . . . . . . . . . . . . . 60
11.2 Indemnity by Seller. . . . . . . . . . . . . . . . . . . . . . . . 65
11.3 Indemnity by Buyer.. . . . . . . . . . . . . . . . . . . . . . . . 66
11.4 Indemnity by Holdings. . . . . . . . . . . . . . . . . . . . . . . 66
11.5 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.6 Limitation of Indemnification. . . . . . . . . . . . . . . . . . . 68
11.7 No Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.8 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12. NONCOMPETITION; NON-SOLICITATION.. . . . . . . . . . . . . . . 70
12.1 NonCompetition.. . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.2 Non-Solicitation.. . . . . . . . . . . . . . . . . . . . . . . . . 71
12.3 Limitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.4 Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 13. TERMINATION; MODIFICATION OR WAIVER. . . . . . . . . . . . . . 72
13.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.2 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 14. COSTS INCIDENT TO PREPARATION OF AGREEMENT . . . . . . . . . . 73
SECTION 15. RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 16. BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 17. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
17.1 Parties in Interest; Assignment. . . . . . . . . . . . . . . . . . 74
17.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 75
17.3 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . 76
17.4 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
17.5 Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
17.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
17.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 78
17.8 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
17.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17.12 Facsimiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17.13 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17.14 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 80
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SCHEDULES
1.1 Intellectual Property
1.2(b) Equipment
1.2(d) Open Orders
1.2(e) Other Contracts
1.2(g) Permits, Licenses
1.2(j) Computer Software Assets
1.3(g) Owned Real Property
1.3(l) Excluded Assets
2.2(a) Operating Cash Flow
2.3 Preliminary Allocation of Purchase Price
3.1 Bid Balance Sheet
3.4 Material Non-Assignable Contracts
4.4 Consents
4.5 Material Adverse Changes
4.6 Litigation; Compliance with Laws
4.7 Intellectual Property
4.8 Prior Sales or Licenses
4.13 Material Contracts
4.17 Insurance
4.18 Warranty; Product Liability
4.20 Taxes
4.21 Environmental Matters
4.23 Benefit Plans and Employment Arrangements
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EXHIBITS
A Seller's Union Plan Documents
B Seller's Counsel Opinion
C Buyer's Counsel Opinion
v
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GLOSSARY OF TERMS
Defined Term Section
- ------------ -------
Accounts Receivable 1.2(f)
Adjusted Closing Net Book Value 2.2(a)
Affiliate 1.2
Agreement Heading
Assumed Liabilities 3.1
Bid Balance Sheet 3.1(a)
Books and Records 4.5
Business Recitals
Buyer Heading
Buyer Purchased Assets 1.2
Buyer's Union Plan 3.3(h)
Cash Portion 2.1(a)
Closing Balance Sheet 2.2(b)
Code 4.23(c)
Collective Bargaining Agreement 3.3(a)(iii)
Computer Software Assets 1.2(j)
Contracts 1.2(e)
Disposal 4.21(f)
Disposed 4.21(f)
Effective Date 2.2(a)
Environmental Permits 4.21(c)
Environmental Laws 4.21(a)
Environmental Reports 11.1(a)
Equipment 1.2(b)
ERISA 4.23(a)
Escrow Closing 7
Escrow Agent 7
Escrowed Documents 7
Excluded Assets 1.3
Excluded Liabilities 3.2
GAAP 1.2(k)
Governmental Authority 4.21(a)
Hazardous Materials 4.21(a)
Hired Represented Employees 3.3(a)(iv)
Hired Non-Represented Employees 3.3(b)
HSR Act 4.4
Indemnified Party 11.5
Indemnifying Party 11.5
Intellectual Property 1.1
Interim Note 1.3(b)
Inventory 1.2(c)
Lease 1.2(h)
Liens 4.10(b)
Local 1039 3.3(a)(i)
Losses 11.2
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Material Contract 4.13(b)
Material Non-Assignable Contracts 3.4
Multiemployer Plan 4.23(b)
Non-Assignable Contract 3.4
Non-Competition Period 12.1
Open Orders 1.2(d)
Owned Real Property 1.3(g)
Permits 1.2(g)
Person 1.2
Product Liability Claims 3.2(e)
Purchase Price 2.1
Purchased Assets 1.2
Related Rights 1.1
Release 4.21(a)
Release Date 7
Remediation 11.1(b)
Restricted Business 12.1
Seller Heading
Seller's Union Plan 3.3(h)
Subordinated Note 1.3(b)
Taxes 3.2(c)
TCE Remediation 11.1(b)
Technical Information 1.2(a)
Warranty Claims 3.2(i)
Warranty Reserve 3.2(i)
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of this 31st day of December, 1995
("AGREEMENT") by and among THE TRIUMPH GROUP HOLDINGS, INC., a Delaware
corporation ("HOLDINGS"), TRIUMPH CONTROL SYSTEMS, INC., a Pennsylvania
corporation and indirect subsidiary of Holdings ("BUYER"), and TELEFLEX
INCORPORATED, a Delaware corporation ("SELLER").
RECITALS:
Seller is engaged in the business of designing, manufacturing and
selling mechanical and electromechanical control systems and electrical
actuation systems for commercial and military aircraft, nuclear reactors, space
vehicles, ground support equipment, missiles and naval vessels for the
aerospace, naval, industrial and power industries through Seller's
Aerospace/Defense division located at North Wales, Pennsylvania (the
"BUSINESS"). Seller desires to sell, and Buyer and Holdings desire to acquire,
certain of the assets of the Business upon the terms and conditions set forth
herein.
In consideration of the mutual covenants, agreements, representations
and warranties contained herein, and in reliance thereon, Buyer, Holdings and
Seller, intending to be legally bound, agree as follows:
<PAGE>
SECTION 1. ASSETS TO BE ACQUIRED.
1.1 DESCRIPTION OF ASSETS TO BE PURCHASED BY HOLDINGS. Subject to
the terms and conditions of this Agreement, and in reliance on the
representations, warranties and covenants contained herein, on the Release Date
(capitalized terms shall be used as defined in the Sections mentioned in the
Glossary of Terms to this Agreement), Seller will sell, convey, assign, transfer
and deliver to Holdings, and Holdings will purchase and acquire all of Seller's
right, title and interest in and to the following assets used principally in the
Business, as the same shall exist on the Release Date (other than the Excluded
Assets): all unpatented inventions, invention disclosures, multinational
invention registrations, patents and patent applications (including, but not
limited to, all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations) and all rights therein provided by law,
multinational treaties or conventions; publications and copyrights; mask works;
trade secrets, know-how and show-how; formulas; and all common law and
registered trademarks, trademark registrations, applications for trademark
registrations, tradenames, trade dress, brand names, service marks and logos;
including in each case without limitation, those identified on SCHEDULE 1.1,
together with the goodwill associated therewith and symbolized thereby
(collectively, the "INTELLECTUAL PROPERTY"); , and an assignment of any licenses
relating to the Business for Intellectual Property to or from Seller and all
income,
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royalties, damages and payments due or payable with respect to any time on or
after the Release Date, including, without limitation, damages and payments for
infringements or misappropriations of any thereof throughout the world after the
Release Date; together with an assignment of all rights of Seller in and to,
including rights to enforce the terms of, confidentiality agreements and
noncompetition agreements of, and any agreements relating to the assignment of
inventions made by, prior and present employees the Business and any such
agreements with any other Person with respect to the Intellectual Property
(collectively, the "RELATED RIGHTS").
1.2 DESCRIPTION OF ASSETS TO BE PURCHASED BY BUYER. Subject to the
terms and conditions of this Agreement, and in reliance on the representations,
warranties and covenants contained herein, on the Release Date, Seller will
sell, convey, assign, transfer and deliver to Buyer, and Buyer will purchase and
acquire, the Business as a going concern and all of Seller's right, title and
interest in and to the assets, properties and rights of every kind and
description, real, personal and mixed, tangible and intangible, wherever
situated constituting or used principally in the Business, as the same shall
exist on the Release Date (other than the Excluded Assets, the Intellectual
Property and the Related Rights) (the "BUYER PURCHASED ASSETS" and together with
the Intellectual Property and the Related Rights, the "PURCHASED ASSETS"),
including without limitation:
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(a) TECHNICAL INFORMATION. All customer, dealer, supplier and
installation lists; serial number records; engineering, manufacturing, design,
installation and other technical drawings and specifications, calculations and
manufacturing and production processes and techniques; research and development
information; operating, maintenance and repair manuals and instruction books;
cost and estimating information, cost records, vendor data and other business
records (including without limitation, sales histories); sales inquiries;
consultant's reports; bills of material, test data and selected test material
samples; advertising and promotional literature, including reproducible masters
and all other commercial, sales, marketing and technical data (including, but
not limited to, data stored electronically or on other format, together with an
assignment of any third party licenses necessary to use such data)
(collectively, the "TECHNICAL INFORMATION");
(b) EQUIPMENT. All machinery, equipment, owned trucks, owned
automobiles, office furniture, office equipment, computing and
telecommunications equipment (including the software loaded on such equipment
other than software listed on SCHEDULE 1.2(j)), including leased equipment if
the lease agreement relating thereto is a Contract; existing patterns, dies,
jigs, fixtures, tooling, test equipment and working models, including that
identified on SCHEDULE 1.2(b) (collectively, the "EQUIPMENT");
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<PAGE>
(c) INVENTORY. All raw materials inventory, work-in-process
inventory, finished goods inventory and spare parts inventory, together with all
manufacturing supplies and boxing, labeling and other shipping materials and an
assignment of all related manufacturer or fabricator warranties, guaranties and
indemnities (collectively, the "INVENTORY");
(d) OPEN ORDERS. Open orders for goods and services with
customers of Seller arising from the Business, including those set forth on
SCHEDULE 1.1(d) (the "OPEN ORDERS"), together with related purchase orders,
contracts, subcontracts and accounts receivable and credit support associated
with such Open Orders;
(e) OTHER CONTRACTS. All contracts, orders for spare parts,
distribution agreements, service agreements, development agreements, consulting
agreements, leases of machinery, equipment and other personal property,
guarantees, commitments, instruments and other agreements relating to the
acquisition or ownership or any of the Buyer Purchased Assets or relating
principally to the operation of the Business, including those listed on SCHEDULE
1.1(e) (the "CONTRACTS");
(f) ACCOUNTS. All accounts and notes receivable of Seller
arising from the Business including, after the Effective Date, intercompany
receivables for products shipped or sold by the Business to Seller or an
Affiliate of Seller (collectively, the "ACCOUNTS RECEIVABLE");
5
<PAGE>
(g) PERMITS, LICENSES. All governmental permits, licenses,
registrations, orders and approvals relating to the Business, including those
listed on SCHEDULE 1.1(g), to the extent such permits, licenses, registrations,
orders and approvals are legally transferrable to Buyer (collectively, the
"PERMITS");
(h) LEASED REAL PROPERTY. Seller's interest as lessee, under
the Lease Agreement dated June 29, 1995, between Advance Lane Associates, as
lessor, and Seller, as lessee (the "LEASE") and the leasehold interest and
leasehold improvements leased pursuant thereto;
(i) BUSINESS RECORDS AND SUPPLIES. All other records of Seller
relating principally to the Business, including property records and copies of
personnel records of employees who become employees of Buyer, all office
supplies and the right to receive and retain mail and other communications
relating to the Business;
(j) COMPUTER SOFTWARE ASSETS. All computer software, data
rights, documentation and associated license, escrow, support and maintenance
agreements, used in the conduct of the Business, including those listed on
SCHEDULE 1.1(j) to the extent they are legally transferrable by Seller with or
without the consent of any other party (the "COMPUTER SOFTWARE ASSETS");
(k) PREPAID EXPENSES. All payments made by Seller with respect
to the Business, which constitute prepaid expenses of the Business and which are
included on the asset side of the Closing Balance Sheet in accordance with
generally
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accepted accounting principles ("GAAP") consistently applied, to the extent the
benefits thereof are transferable to Buyer;
(l) QUALITY CONTROL SYSTEMS. All certifications, ratings,
listings and similar benefits from any product or quality control certification
organization and all systems and manuals related thereto; and
(m) OTHER ASSETS. All other assets of the Seller used
principally in the Business and which are included on the asset side of the
Closing Balance Sheet.
As used in this Agreement, the term "AFFILIATE" shall mean any Person who
controls, is controlled by or is under common control with the designated party,
and ownership, directly or indirectly, of 20% or more of the voting stock or
other equity interest shall be deemed to constitute control; and "PERSON" shall
mean an individual, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint venture, limited liability
company or any other entity of whatever nature. 1.3 EXCLUDED ASSETS.
Notwithstanding Section 1.1 or Section 1.2, the following assets (collectively,
the "EXCLUDED ASSETS") shall be excluded from this Agreement and shall not be
sold, conveyed, assigned, transferred or delivered to Buyer or to Holdings:
(a) Any insurance policies maintained by Seller with respect to
the Business and any prepaid insurance expenses;
(b) Any intercompany deposits with Seller and intercompany
receivables from Seller, except intercompany
7
<PAGE>
receivables for products shipped or sold by the Business to Seller or an
Affiliate of Seller after the Effective Date;
(c) All of Seller's goodwill and rights in and to the name
"Teleflex" or the stylized "T" Teleflex logo and in any trade name, trademark or
service mark thereof, or application therefor or registrations thereof;
(d) Corporate minute books and stock books;
(e) Any claims and rights against third parties (including,
without limitation, insurance carriers), to the extent they relate to
liabilities or obligations that are not assumed by Buyer;
(f) Any notes, pension, health or welfare plans, prepaid
expenses, claims for refunds of Taxes and other governmental charges whether or
not included on the Closing Balance Sheet;
(g) The real property owned in fee by Seller at 205 Church Road,
North Wales, Pennsylvania together with the improvements located thereon as
described on SCHEDULE 1.3(g) (the "OWNED REAL PROPERTY");
(h) All cash and cash equivalents on hand related to the
Business, wherever located, including without limitation, at the Owned Real
Property, in lock boxes or accounts (whether maintained at a bank, thrift,
mutual fund or other similar financial institution);
(i) Seller's or any of its Affiliates licenses, permits and
other governmental authorizations and deposits that are not legally
transferrable;
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<PAGE>
(j) All claims, choses in action and rights of action by Seller
or any of its Affiliates against third parties, including but not limited to
claims for refunds against Governmental Authorities or other Persons, rebates,
refunds, prepaid discounts, allowances or other monies or consideration received
by Seller or any of its Affiliates under any agreement or transaction effected
prior to the Release Date and other general intangibles arising from the
operations of Seller or its Affiliates at the Owned Real Property prior to the
Release Date unless otherwise included as an asset on the Closing Balance Sheet;
(k) any other right or asset used principally by Seller and its
Affiliates not in connection with the Business; and
(l) All assets listed on SCHEDULE 1.3(l).
SECTION 2. THE PURCHASE PRICE AND RELATED MATTERS.
2.1 PURCHASE PRICE. In consideration of the sale, conveyance,
assignment, transfer and delivery of the Purchased Assets, and subject to
adjustment pursuant to Section 2.2, Buyer agrees to pay and deliver to Seller
$31,000,000 and Holdings agrees to pay and deliver to Seller $5,500,000
(collectively, the "PURCHASE PRICE") to be paid as follows:
(a) Holdings shall deliver a subordinated promissory note in the
principal amount of $36,500,000 to the Escrow Agent at the Escrow Closing (the
"INTERIM NOTE"). Buyer shall pay $31,000,000 of the Purchase Price (the "CASH
PORTION")
9
<PAGE>
plus a cash payment in the amount of all accrued, unpaid interest on the Interim
Note to Seller on the Release Date for the Buyer Purchased Assets by wire
transfer of immediately available funds to a bank account designated by Seller
by prior written notice; and
(b) $5,500,000 shall be paid by Holdings to Seller for the
Intellectual Property and the Related Rights by delivery on the Release Date of
a subordinated promissory note of Holdings to Seller (the "SUBORDINATED NOTE").
2.2. ADJUSTMENT OF PURCHASE PRICE.
(a) The Cash Portion of the Purchase Price shall be decreased by
one dollar for each dollar that the Adjusted Closing Net Book Value as reflected
in the Closing Balance Sheet is less than $16,198,000.00, and shall be increased
by one dollar for each dollar that the Adjusted Closing Net Book Value as
reflected in the Closing Balance Sheet is greater than $16,198,000.00. After
the close of business on December 31, 1995 (the "EFFECTIVE DATE"), Seller shall
operate the business for the benefit of Buyer, and all Operating Cash Flow (as
defined in SCHEDULE 2.2(a)) shall belong to Buyer. There shall be a reduction
to the Cash Portion of the Purchase Price to the extent Seller has removed
Operating Cash Flow from the Business on or after the Effective Date and an
increase to the Cash Portion of the Purchase Price to the extent Seller has
deposited Operating Cash Flow to the Business on or after the Effective Date.
"ADJUSTED CLOSING NET BOOK VALUE" shall mean the value of the
10
<PAGE>
owner's net investment as reflected on the Closing Balance Sheet minus $253,000.
(b) Prior to or as soon as practical after the Release Date,
Seller shall furnish to Buyer special purpose financial statements for the North
Wales Controls and Quadrants Group of Seller as of the close of business on the
Effective Date prepared in accordance with GAAP, properly and consistently
applied and audited by Price Waterhouse LLP, including a special purpose balance
sheet at December 31, 1995 (the "CLOSING BALANCE SHEET"), and a calculation of
the Adjusted Closing Net Book Value and any required adjustment to the Purchase
Price. If Buyer has no objection to the calculation of Adjusted Closing Net
Book Value and if the Adjusted Closing Net Book Value is less than
$16,198,000.00, Seller shall pay the difference to Buyer. If Buyer has no
objection to the calculation of Adjusted Closing Net Book Value and if the
Adjusted Closing Net Book Value is greater than $16,198,000.00, Buyer shall pay
the difference to Seller. In the event Buyer disputes the calculation of the
Adjusted Closing Net Book Value or any cash flow adjustment, Buyer shall notify
Seller in writing of such dispute and the basis therefor and Buyer and Seller
shall attempt to resolve such dispute for a period of thirty days. In the event
Buyer and Seller are unable to resolve such dispute within thirty days, they
shall reduce to writing those points on which they agree and those points on
which they disagree and shall (i) retain as arbitrator Arthur Andersen or,
failing their agreement to act as arbitrator, such
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<PAGE>
other independent accounting firm as may be mutually agreed upon by Buyer and
Seller to review such matters as to which the parties have not agreed in writing
and (ii) request such arbitrator to act as promptly as practicable in accordance
with the rules to be established by Buyer, Seller and such arbitrator to resolve
all such disputed matters within thirty days after being retained. The decision
of the arbitrator shall be issued in writing to both Buyer and Seller and shall
be final, non-appealable and binding on Seller and Buyer, and the fees and
expenses, if any, of such arbitrator shall be paid one-half by Seller and one-
half by Buyer. If the arbitrator determines that the Adjusted Closing Net Book
Value is less than or greater than $16,198,000.00 or that a cash flow adjustment
is due, Seller or Buyer, as the case may be, shall pay the amount of any
required adjustment to the Purchase Price within ten days after receipt of the
arbitrator's determination.
2.3 ALLOCATION OF PURCHASE PRICE. Buyer, Holdings and Seller agree
that the Purchase Price and the Assumed Liabilities (each as adjusted pursuant
to Section 2.2) shall be allocated to the various assets comprising the
Purchased Assets for all purposes (including Tax and financial accounting
purposes) in a manner to be determined in writing by Buyer, Holdings and Seller,
as soon as practicable following the final determination of Adjusted Closing Net
Book Value. The Purchase Price will be allocated in a manner consistent with
the allocation schedule attached as SCHEDULE 2.3 prepared by Buyer, Holdings and
Seller.
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<PAGE>
Buyer, Holdings and Seller acknowledge that the final allocation shall be
binding upon the parties for all applicable federal, state, local and foreign
Tax purposes. Buyer, Holdings and Seller covenant to report gain or loss or
cost basis, as the case may be, in a manner consistent with such allocation on
all Tax returns filed by any of them subsequent to the Release Date and not to
take voluntarily any inconsistent position therewith in any administrative or
judicial proceeding relating to such returns. Buyer, Holdings and Seller shall
exchange mutually acceptable and completed IRS Forms 8594, which they shall use
to report the transaction contemplated hereunder to the Internal Revenue Service
in accordance with such allocation.
SECTION 3. ASSUMPTION OF ENUMERATED LIABILITIES.
3.1 ASSUMED LIABILITIES AND OBLIGATIONS. On and subject to the terms
and conditions set forth in this Agreement, as additional consideration for the
Purchased Assets, on the Release Date, Buyer shall undertake, assume, perform
and otherwise pay, satisfy and discharge, and hold Seller harmless from only the
following liabilities and obligations of the Seller relating to the Business
(collectively, the "ASSUMED LIABILITIES"):
(a) Seller's liabilities and obligations relating to the
Business to the extent incurred in the ordinary course of business and reflected
on the liability side of the Closing Balance Sheet except liabilities which
constitute Excluded
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Liabilities (but not including any liability or obligation which relates to any
indebtedness or capitalized lease obligation, breach of contract, breach of
warranty, product liability, tort, infringement, cash overdrafts, litigation and
litigation accruals, violation of law or liabilities relating to Environmental
Laws from occurrences prior to the Release Date or which arose out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
demand made prior to the Release Date) which liabilities and obligations are of
the same type as the liabilities and obligations reflected on the liability side
of the audited special purpose balance sheet of the Business dated as of
September 24, 1995 and attached hereto as SCHEDULE 3.1 (the "BID BALANCE SHEET")
and (ii) all payables to Seller or any Affiliate of Seller by the Business;
(b) the liabilities and obligations of the Business pursuant to
Open Orders, Contracts, Permits and the Lease, but not including any liability
or obligation arising out of or in connection with any breach thereof occurring
prior to the Release Date; and
(c) the liabilities expressly assumed in Section 3.3.
3.2 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
contained in this Agreement, neither Buyer nor Holdings will assume or in any
way become liable for, and Seller shall retain, all of Seller's and its
Affiliates debts, liabilities and obligations of any nature whatsoever (other
than
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the Assumed Liabilities) (the "EXCLUDED LIABILITIES"), whether accrued, absolute
or contingent, whether known or unknown, whether due or to become due, including
without limitation the following:
(a) the liabilities or obligations of Seller to its stockholders
respecting dividends, distributions to its stockholders in liquidation,
redemptions of stock, or otherwise;
(b) liabilities or obligations of Seller arising out of any
transactions occurring, or obligations incurred, after the Release Date;
(c) any obligations of Seller for expenses, Taxes or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, all attorneys and
accountants fees and all brokers or finders fees or commissions payable by
Seller. As used in this Agreement, the term "TAXES" shall mean all income or
profits taxes (including, but not limited to, federal income taxes and state
income taxes), estimated taxes, payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, value added taxes, excise taxes, capital stock or franchise taxes, gross
receipts taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and
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other obligations of the same or of a similar nature to any of the foregoing,
which a corporation may be required to pay, withhold or collect, imposed by
any federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government.
(d) any obligation of Seller under or arising out of this
Agreement;
(e) all liabilities and obligations of the Business resulting
from product liability claims for damages or injury to persons or property
arising from the ownership, possession or use of any product of the Business (i)
sold before the Release Date or (ii) manufactured prior to the Release Date (the
"PRODUCT LIABILITY CLAIMS"); provided that a Product Liability Claim shall be
deemed an Assumed Liability if the existence thereof shall have first been
asserted after the fifth anniversary of the Release Date;
(f) any liability or obligation of the Business to Seller or
Affiliates of Seller, except payables for products sold or shipped to the
Business by Seller or an Affiliate of Seller after the Effective Date;
(g) any obligations or liabilities of Seller to indemnify its
officers, directors, employees or agents;
(h) all Taxes imposed on Seller, including any Tax of any other
corporation, which Tax is assessed against Seller by virtue of its status as a
member of any consolidated group of which such other corporation was also a
member;
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(i) all liabilities and obligations of the Business to furnish
warranty service under unexpired warranties for the repair or replacement of
products manufactured, sold or delivered by Seller prior to the Release Date or
otherwise to provide credits or price adjustments for such products, ("WARRANTY
CLAIMS"); provided, however, that Warranty Claims shall be deemed an Assumed
Liability to the extent that (i) the amount thereof does not exceed the average
of the last three years' Warranty Claims plus twenty percent (the "WARRANTY
RESERVE"), or (ii) with respect to any Warranty Claim, it shall have first been
asserted after the later of (A) the first anniversary of the Effective Date, or
(B) the date on which any written warranty applicable to such Warranty Claim
expires; and provided further that Buyer shall provide service for all Warranty
Claims after the Release Date and shall be reimbursed therefor by Seller once
the Warranty Reserve is exceeded until any such Warranty Claim becomes an
Assumed Liability;
(j) all liabilities and obligations arising under or imposed
pursuant to Environmental Laws, whether or not attributable to actions or
failures to act by Seller, with respect to the operation of or properties
utilized in connection with the Business at any time prior to the Release Date;
(k) all liabilities and obligations for employee benefits of the
Business, except as expressly assumed by Buyer in Section 3.3; and
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(l) all other liabilities of Seller relating to the Business
that arise as a result of actions or events occurring before the Release Date.
3.3 EMPLOYEES.
(a) REPRESENTED EMPLOYEES.
(i) Local Union No. 1039 of the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America (UAW)
("LOCAL 1039") is the only labor union or other collective bargaining agent
which represents or claims to represent any of the employees of Seller at
its plant in North Wales, Upper Gwynedd Township, Montgomery County,
Pennsylvania.
(ii) Buyer agrees to recognize Local 1039 as the exclusive
collective bargaining agent for all hourly rated production and maintenance
employees at the Seller's plant in North Wales, Upper Gwynedd Township,
Montgomery County, Pennsylvania.
(iii) Buyer agrees to assume the obligations of Seller under
the terms and conditions of the Agreement between Seller and Local 1039,
dated March 4, 1994, and effective from February 26, 1994, through February
28, 1997 (the "COLLECTIVE BARGAINING AGREEMENT").
(iv) At the Release Date, Buyer will extend offers of
employment to the represented current employees of Seller covered by the
Collective Bargaining Agreement
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("HIRED REPRESENTED EMPLOYEES") under the terms and conditions stated in
the Collective Bargaining Agreement.
(v) Seller agrees that nothing in this Section 3.3 shall be
construed or interpreted to modify in any way or transfer to Buyer the
"Excluded Employee Liabilities" in Section 3.3(e).
(b) NON-REPRESENTED EMPLOYEES. At the Release Date, Buyer will
extend offers of employment to the non-represented employees who are actively
employed at Seller's plant in North Wales, Upper Gwynedd Township, Montgomery
County, Pennsylvania and who are not hourly rated production and maintenance
employees in the collective bargaining unit ("HIRED NON-REPRESENTED EMPLOYEES").
Such offers of employment, subject to Buyer's right to terminate any such
employee following the Release Date, shall be on terms and conditions, including
without limitation compensation and employee benefits, as may be determined by
Buyer in its sole discretion; provided that Buyer will make the benefits
available to Hired Non-Represented Employees as of the Effective Date that are
at least comparable to employee benefits provided to other employees of The
Triumph Group Operations, Inc. and its divisions and will maintain such
comparable employee benefits until June 30, 1997.
(c) ACCRUED VACATION. Buyer agrees to assume and pay the
accrued and unused vacation as of the Release Date for all Hired Represented
Employees and Hired Non-Represented Employees.
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(d) TERMINATION OF EMPLOYMENT. Seller shall discharge all its
employees from Seller's employment as of the Release Date and shall pay in a
timely manner all wages, salaries and other sums due its employees through the
close of business on the Release Date.
(e) EXCLUDED EMPLOYEE LIABILITIES. Except as specifically set
forth in this Section 3.3, Buyer shall assume no and shall have no obligations
to any of Seller's employees for accrued benefits, severance or deferred pay,
pension, medical or disability benefits or any other payments or benefits, which
may be or become due to such employees from Seller. Seller agrees that, with
respect to claims for workers' compensation and all claims under Seller's
employee benefit programs by persons working for the Business arising out of
events occurring prior to the Release Date, whether reported or unreported as of
the Release Date and whether insured or uninsured (including, but not limited
to, workers' compensation, unemployment compensation, life insurance and
disability programs), Seller shall, at its own expense, honor or cause its
insurance carriers to honor such claims in accordance with the terms and
conditions of such programs or applicable workers' compensation or unemployment
compensation statutes. Without limiting the scope of the preceding sentence,
Seller shall be responsible for any and all claims and liabilities arising out
of or relating to (i) its employment of its employees; (ii) the termination by
Seller of such employment of any such employees; and (iii) the provision of
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any employee benefits to such employees (and their beneficiaries and eligible
dependents) attributable to their employment with, or their participation in any
plans or programs maintained or contributed to by Seller or any of its
Affiliates.
(f) SERVICE CREDIT FOR HIRED REPRESENTED AND HIRED NON-
REPRESENTED EMPLOYEES. Buyer shall give to Hired Represented Employees and
Hired Non-Represented Employees service credit for time worked at Seller for
purposes of eligibility and vesting requirements in pension and medical plans,
for purposes of severance by Buyer and for purposes of determining sick and
vacation pay. Buyer's medical plan insuring Hired Represented Employees, Hired
Non-Represented Employees and their covered dependents shall not contain any
exclusion or limitation with respect to pre-existing conditions. Seller shall
continue to be responsible for all pre-Release Date incurred, but unpaid
incurred, health claims and expenses for Hired Represented Employees and Hired
Non-Represented Employees and their covered dependents. Buyer shall be
responsible for all post-Release Date incurred, health claims and expenses for
Hired Represented Employees and Hired Non-Represented Employees and their
covered dependents.
(g) WELFARE PLANS. If any welfare plans maintained under the
Collective Bargaining Agreement provide health care benefits, health insurance
coverage or life insurance coverage for retirees (collectively, "COVERAGES") who
were employees of the Business and whose retirement occurred prior to
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the Release Date, Seller shall be responsible for such Coverages for such
retirees and their covered dependents and Buyer shall have no liability with
regard thereto. Buyer shall assume responsibility for the payment of post-
retirement Coverages including the payment of premiums for post-retirement
health insurance for Hired Represented Employees and their covered dependents as
required by the Collective Bargaining Agreement. Seller shall reimburse Buyer
for such payments and premiums for Coverages in an amount per retired Hired
Represented Employee equal to the amount provided under the welfare plan as
required by the Collective Bargaining Agreement, multiplied by the ratio of a
Hired Represented Employee's service with Seller as a member of Local 1039
through the Release Date to such Hired Represented Employee's combined service
with Seller and Buyer as a member of Local 1039. Seller shall not be liable for
any additional amounts that are due solely to modifications to benefits as a
result of collective bargaining or as a result of any additional benefits made
available outside of the collective bargaining process after the Release Date.
Buyer shall invoice Seller quarterly in arrears for such reimbursable amounts,
and Seller shall pay such amount within thirty (30) days of receipt of Buyer's
invoice. Seller shall have the right, upon giving reasonable notice to Buyer in
advance, to audit at Seller's expense, at Buyer's business office during
business hours, all of the books and records in Buyer's possession reasonably
related to
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the determination of the amounts Seller is required to pay Buyer under this
Section 3.3(g) after the Release Date.
(h) UNION PENSION PLAN. As of the Release Date, Buyer shall
establish a defined benefit pension plan (the "BUYER'S UNION PLAN"), which shall
be intended to meet the requirements of Section 401(a) of the Code, to cover
Hired Represented Employees and that complies with the terms of the Collective
Bargaining Agreement. No assets or liabilities shall be transferred from the
Teleflex Incorporated UAW Local 1039 Retirement Income Plan (the "SELLER'S UNION
PLAN") to the Buyer's Union Plan. Each Hired Represented Employee shall be
given credit for all purposes, including, but not limited to, benefit accrual,
under the Buyer's Union Plan for all service with which such employee had been
credited under Seller's Union Plan, regardless of whether Seller fulfills its
obligations under the Seller's Union Plan. The benefits under the Buyer's Union
Plan shall be based on the benefit rate in effect at the time of the employee's
termination of service with Buyer and such rate shall apply to all service,
including service with Seller. The monthly benefit paid from the Buyer's Union
Plan to each Hired Represented Employee shall be reduced by the amount of the
monthly benefit to which such employee is entitled under the Seller's Union
Plan. Benefits under the Seller's Union Plan shall be paid to Hired Represented
Employees according to the terms of the Seller's Union Plan. Seller shall
deliver to Buyer
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on the Release Date all records as are reasonably required by Buyer for the
proper administration of the Buyer's Union Plan.
(i) V.I.P. PLAN. Seller shall deliver to Buyer on the Release
Date a list of all Hired Represented Employees who are eligible to participate
as of the Release Date in the Teleflex Incorporated Voluntary Investment Plan.
3.4 CONSENT OF THIRD PARTIES. Nothing in this Agreement shall be
construed as an attempt by Seller to assign to Buyer any contract, agreement,
permit, franchise, claim or asset included in the Purchased Assets which is by
its terms or by law nonassignable without the consent of any other party or
parties, unless such consent or approval shall have been given, or as to which
all the remedies for the enforcement thereof available to Seller would not by
law pass to Buyer as an incident of the assignments provided for by this
Agreement (a "NON-ASSIGNABLE CONTRACT"). Prior to the Release Date, Seller
shall use its best efforts to obtain consents or approvals to the assignment of
the Contracts, Open Orders and Permits described on SCHEDULE 3.4 (collectively
"MATERIAL NON-ASSIGNABLE CONTRACTS"); provided that Seller and its Affiliates
shall not be required to pay any money or other consideration or grant
forbearances to any third party to effect such consent or approval. To the
extent that any such consent or approval in respect of, or a novation of, a Non-
Assignable Contract shall not have been obtained on or before the Release Date,
the parties hereto shall use reasonable efforts and shall cooperate in any
reasonable arrangement to assure Buyer the
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benefits of such Non-Assignable Contract to the extent permitted by law. To the
extent lawful, practicable and reasonable in the circumstances, including the
obtaining of any such necessary consent or approval after the Release Date
(provided that Seller and its Affiliates shall not be required to pay any money
or other consideration or grant forbearances to any third party to effect such
consent or approval), Seller at the request and under the direction of Buyer
shall take all reasonable actions to assure that the rights of Seller under the
Non-Assignable Contracts shall be preserved for the benefit of Buyer to the
extent not involving any undue hardships upon Seller or unreasonable time
constraints in the request or compliance with such instructions. Buyer shall
reimburse Seller and its Affiliates for their reasonable out-of-pocket expenses
related thereto. Except with respect to the Material Non-Assignable Contracts,
Buyer acknowledges that certain consents to the transactions contemplated by
this Agreement may be required from parties to the Contracts, Permits and Open
Orders and that such consents may not be obtained. Buyer agrees that Seller
shall not have any liability arising solely out of or solely relating to the
failure to obtain any consents that may have been or may be required in
connection with the transactions contemplated by this Agreement or because of
the default under or acceleration or termination of any Contract, Permit or Open
Order solely as a result thereof. Buyer further agrees that no representation,
warranty or covenant of Seller contained herein shall be breached
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or deemed breached as a result of the failure to obtain any such consent, or as
a result of any default, acceleration or termination resulting solely from such
failure. Buyer further agrees that no condition to Buyer's obligations to close
the transactions contemplated by this Agreement shall be deemed not satisfied as
a result of the failure to obtain any such consent, except consents with respect
to Material Non-Assignable Contracts. Buyer and Seller shall jointly cooperate
in attempting to obtain any consents required in connection with the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that Seller
shall not be required to incur our-of-pocket expenses, commence any litigation
or offer or grant any accommodation (financial or otherwise) to any third party.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer and to Holdings that:
4.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with full corporate power and authority to carry on the
Business as presently conducted by it, and Seller is qualified to do business in
each foreign jurisdiction where the failure to be so qualified would materially
and adversely affect the condition (financial or otherwise), properties, assets
or operations of the Business.
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4.2 CORPORATE AUTHORITY. Seller has full corporate power and
authority to execute and deliver this Agreement and the instruments of transfer
and other documents delivered or to be delivered pursuant hereto, to perform all
the terms and conditions hereof and thereof to be performed by it and to
consummate the transactions contemplated hereby and thereby. This Agreement and
all instruments of transfer and other documents delivered or to be delivered by
Seller in connection with this Agreement have been duly authorized and approved
by all necessary and proper corporate action of Seller (including all necessary
shareholder action) and constitute, and will constitute, the valid and binding
obligations of Seller enforceable against Seller in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws or equitable
principles from time to time in effect relating to or affecting the rights of
creditors generally.
4.3 NO VIOLATION. Neither the execution and delivery by Seller of
this Agreement or the instruments of transfer and other documents delivered or
to be delivered pursuant hereto by Seller and the performance by Seller
hereunder or thereunder, nor the consummation of the transactions contemplated
hereby or thereby, will violate, conflict with, result in the breach of or
accelerate the performance required by any of the terms, conditions or
provisions of the Certificate of Incorporation or Bylaws of Seller or any
covenant, agreement or understanding to
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which Seller is a party or any order, ruling, decree, judgment, arbitration
award or stipulation to which Seller is subject, or constitute a default
thereunder or result in the creation or imposition of any Lien upon any of the
Purchased Assets, or allow any Person to accelerate any debt secured by any
Purchased Asset, if as a result of any such violation, conflict, breach or
acceleration, default or lien, Seller could not consummate the transactions
contemplated by, or otherwise perform its obligations under, this Agreement in
accordance with the terms hereof.
4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES AND OTHERS.
No approval or authorization of, filing or registration with, or notification
to, any governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by Seller or the performance of its
obligations hereunder or the consummation of the transactions contemplated
hereby, except as required by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"). Except as disclosed on SCHEDULE 4.4, no
consent, approval or authorization of any Person is required in connection with
the execution or delivery of this Agreement by Seller, the transfer to Buyer of
the tangible personal property included in the Purchased Assets or the
assignment of the Material Non-Assignable Contracts or the performance by Seller
of its indemnification obligations under Section 11 of this Agreement.
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4.5 FINANCIAL STATEMENTS. The Bid Balance Sheet has been, and the
Audited Balance Sheets, including the Closing Balance Sheet will be, prepared in
accordance with GAAP consistently applied throughout the periods involved except
as may be noted therein, present or will present fairly in all material respects
the financial condition of Seller, including all Purchased Assets and Assumed
Liabilities of Seller as of the dates thereof, subject only to normal year-end
adjustments in the case of the Bid Balance Sheet.
Except as set forth in SCHEDULE 4.5, there has not been since
September 24, 1995, any material adverse change in the condition (financial or
other), properties, assets or liabilities of the Business.
All books of account and other financial records of Seller directly
relating to the Business (the "BOOKS AND RECORDS") have been prepared and
maintained, where applicable, in conformity with GAAP and in compliance with
applicable laws, regulations and other requirements and have been made available
to Buyer.
4.6 LITIGATION; COMPLIANCE WITH LAWS. Except as disclosed on
SCHEDULE 4.6 or except as would not have a material adverse effect on the
condition (financial or other), properties, assets, operations, liabilities or
prospects of the Business, Seller is not engaged in, or a party to, or, to its
knowledge, threatened with, any legal action, suit, investigation or other
proceeding by or before any court, arbitrator or administrative
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agency relating to the Business. There are no outstanding orders, rulings,
decrees, judgments or stipulations or proceedings relating to the Business to
which Seller is a party or by which Seller is bound, by or with any court,
arbitrator or administrative agency that could have a material adverse effect on
the condition (financial or other), properties, assets, operations, liabilities
or prospects of the Business. Seller is operating the Business in material
compliance with the requirements of all federal, state and local laws,
regulations, judgments, injunctions, decrees, court orders and administrative
orders regarding such operations.
4.7 INTELLECTUAL PROPERTY. The Intellectual Property, Related
Rights, Technical Information and Computer Software Assets include all
intellectual property and proprietary rights that are necessary to operate the
Business as currently conducted by Seller. Seller requires no material rights
under any patent, trade secret or other proprietary information or computer
software license known to Seller, which Seller does not have or does not have
the lawful right to use, in order to conduct the Business as currently conducted
or to manufacture and sell any product manufactured and sold by the Business.
Except as described on SCHEDULE 4.7, all patents, copyrights (where such
registration is permitted or required by applicable law), trademarks, tradenames
and service marks included in the Intellectual Property are registered to or
owned by or licensed to Seller, and all annuities, if any, are fully paid.
There are
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no pending or, to the knowledge of Seller, threatened actions against Seller for
infringement of any patents, copyrights, trademarks, tradenames or service
marks. None of the patents or patent applications included in the Intellectual
Property is involved in a reissue, reexamination, interference, opposition or
similar proceeding, and, to Seller's knowledge, there is no threat or other
indication that any such proceeding will be declared or commenced. All licenses
permitting Seller to use any Intellectual Property, Technical Information or
Computer Software Assets are in full force and effect and, the terms of such
licenses do not provide that they shall be terminated or restricted as a result
of the consummation of the transactions contemplated by this Agreement.
4.8 NO PRIOR SALE OR LICENSING OF PURCHASED ASSETS. Except as
disclosed on SCHEDULE 4.8, Seller is not a party to any license with respect to,
and has not made any sale, pledge or other transfer of, and has not granted any
rights or options to purchase or acquire, all or any part of the Purchased
Assets, except as contemplated by this Agreement.
4.9 CERTAIN FEES. Neither Seller nor any of its officers, directors,
employees or other affiliates has agreed to pay or has incurred any claims for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby other than to Coopers & Lybrand LLP.
4.10 PURCHASED ASSETS. (a) The Lease and all leases of personal
property included in the Purchased Assets are valid
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and enforceable against Seller in accordance with their respective terms. There
is not, under any such lease, any existing default by Seller, or a claim by any
other party to any such lease that the lease is unenforceable. All commissions
payable by Seller under or with respect to the Lease have been paid.
(b) Seller has good title to, and all right, title and interest
in, all the Purchased Assets, and will transfer and convey the Purchased Assets
to Buyer, free and clear of all Liens. None of the Purchased Assets were
purchased by Seller in a bulk sale. As used in this Agreement, "LIENS" shall
mean and include all mortgages, liens, pledges, charges, title retention or
security agreements, claims, restrictions, leases, options, rights of first
offer or first refusal, defects of title or other encumbrances or rights of
others.
(d) All the tangible Purchased Assets of Seller are used and
operated by Seller in conformity in all material respects with all applicable
laws and regulations.
(e) The Purchased Assets include all tangible and intangible
personal property which are necessary to operate the Business as currently
operated by Seller, except the Excluded Assets.
4.11 TECHNICAL INFORMATION. On the Release Date, Seller will have
delivered all patterns, manufacturer's manuals and copies of all other Technical
Information in its possession to Buyer.
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4.12 INVENTORY. The Inventory (whether finished or unfinished, to
which title has not yet passed, or which has not been delivered, to a customer)
of Seller is valued at the lower of cost on a first-in, first-out basis or fair
market value, in accordance with GAAP consistently applied.
4.13 CONTRACTS. (a) A true and correct copy of each Contract has
previously been made available to Buyer. All Contracts are valid, binding and
in full force and effect, and neither Seller nor, to Seller's knowledge, any
other party to any such Contracts is in default thereunder. The Business is
in compliance in all material respects with all CAS requirements with respect
to any Contracts with the United States or any agency thereof.
(b) Set forth on SCHEDULE 4.13 is a list of all Contracts having
an aggregate future liability in excess of $100,000 which are not terminable by
Seller on (i) not more than 90 days notice without penalty or premium or (ii)
for an aggregate cost of less than $100,000 (the "MATERIAL CONTRACTS").
4.14 OPEN ORDERS. All Open Orders are valid, binding and in full
force and effect and neither Seller nor, to Seller's knowledge, the other
party thereto is in default thereunder.
4.15 ACCOUNTS RECEIVABLE. All of the Accounts Receivable arose in
BONA FIDE transactions in the ordinary course of Seller's business. The
accounts receivable balances reflected on the Bid Balance Sheet and the Closing
Balance Sheet include
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appropriate reserves for doubtful accounts in accordance with GAAP consistently
applied.
4.16 PERMITS AND LICENSES. The Permits (other than the Environmental
Permits which are subject to Section 4.21) are the only permits, franchises,
licenses or authorizations currently necessary for the operation of the Business
as operated by Seller. Seller has no actual knowledge and has received no
written notice that any other permit, franchise, license or authorization is
required to be obtained to operate the Business as currently operated by Seller.
All Permits are in full force and effect and, to Seller's knowledge, no
suspension or cancellation of any have been threatened. No claims have been
made in writing by any Governmental Authority or other Person relating to the
Permits and, to Seller's knowledge, no such claim is contemplated by any
Governmental Authority or other Person nor does any basis therefor exist. True
and correct copies of all Permits have been delivered to Buyer.
4.17 INSURANCE. Set forth on SCHEDULE 4.17 is a list and description
of all insurance policies held by or on behalf of Seller as of the date hereof
covering the Business. Seller has not received any notice of actual or proposed
cancellation or of reduction in coverage of, or of any increase in premium
under, such policies of insurance.
4.18 WARRANTY; PRODUCT LIABILITY. Except as set forth on SCHEDULE
4.18, there is not presently any action, suit, proceeding, claim or
investigation pending, or to Seller's
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knowledge, threatened, against Seller for personal injury or property damage or
otherwise relating to the safety or fitness of the goods or products
manufactured by the Business.
4.19 ABSENCE OF SENSITIVE PAYMENTS. Seller has not made any
contributions, payments or gifts to or for the private use of any governmental
official, governmental employee or governmental agent in any amount where either
the payment or the purpose in making such contribution, payment or gift is
illegal under the laws of the United States or any other jurisdiction; Seller
has not established or maintained any unrecorded fund or asset for any purpose
or made any false or artificial entries on its books; and Seller has not made
any payments to any Person with the intention or understanding that any part of
such payment was to be used for any purpose other than that described in the
document supporting the payment.
4.20 TAXES. Except as described on SCHEDULE 4.20 attached hereto,
Seller has duly and timely filed all tax returns required to be filed by it or
for which it may be held responsible, and has paid all Taxes, interest,
penalties, duties, assessments and deficiencies due and payable by it, where the
failure to pay could result in a Lien on the Purchased Assets.
4.21 ENVIRONMENTAL MATTERS.
Except as set forth in SCHEDULE 4.21:
(a) in connection with the use, ownership, or operation of the
Business and the Purchased Assets, to Seller's knowledge, Seller is in
continuous compliance in all material
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respects with all applicable laws, agreements, and regulations promulgated or
issued or applied to the Business by any municipal, local, city, county, state,
federal or foreign court, agency, board, legislature, commission or other
legislative, judicial, administrative or regulatory body ("GOVERNMENTAL
AUTHORITY") relating to the protection of the environment ("ENVIRONMENTAL LAWS")
(including, without limitation, all Environmental Laws concerning (i) emission,
discharge, spill, leak, release or threatened release ("RELEASE") of Hazardous
Materials into the environment, or (ii) the production, manufacture, processing,
distribution, generation, use, treatment, storage, disposal, transportation or
handling of Hazardous Materials), in connection with which the failure to comply
could have a material adverse effect on the condition (financial or other),
properties, assets, operations, liabilities or prospects of the Business. The
term "HAZARDOUS MATERIALS" means hazardous substances or regulated substances as
defined under any applicable federal, state or local Environmental Law, or any
other substance considered toxic, hazardous or a potential threat to human
health or the environment under applicable law or common law, the presence of
which has resulted or might result in a party incurring costs, losses,
liabilities, damages or legal obligations;
(b) no facts, events or conditions relating to the facilities,
properties or operations of the Business will prevent, hinder or limit continued
compliance with any
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Environmental Laws in a way which could have a material adverse effect on the
condition (financial or other), operations, liabilities or prospects of the
Business or the Purchased Assets;
(c) all permits necessary for the operation of the Business in
compliance with Environmental Laws ("ENVIRONMENTAL PERMITS") have been obtained
by Seller and are listed on SCHEDULE 4.21, except such Environmental Permits the
lack of which could not have a material adverse effect on the condition
(financial or other), operations, liabilities or prospects of the Business or
the Purchased Assets. All Environmental Permits are in full force and effect
and are not subject to any appeals or to any unsatisfied conditions which
pursuant to Environmental Law had to be satisfied by the Release Date. To
Seller's knowledge, no modification, suspension, recision, revocation or
cancellation of any Environmental Permit is pending or threatened;
(d) Seller has not given or received written notice to or from
any Governmental Authority or Person of, and no notice, citation, summons or
order has been issued, no review remains pending or has been threatened in
writing by any Governmental Authority with respect to, any alleged Release,
event, condition, activity, practice or incident concerning the reissuance of
permits to Buyer or to proposed or adopted changes in Environmental Law that (i)
would have some reasonable likelihood of preventing material compliance or
continued material compliance by Seller (or by Buyer after the Release
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Date) with any Environmental Law or (ii) would be reasonably likely to give rise
to or result in any liability of Buyer after the Release Date to the Person or
Governmental Authority, and which, with respect to either (i) or (ii), could
have a material adverse effect on the condition (financial or other),
properties, assets, operations, liabilities or prospects of the Business.
(e) SCHEDULE 4.21 identifies all sites at or to which any waste
generated by the Business is currently being transported, stored, treated or
disposed ("DISPOSED" or "DISPOSAL"). Except as identified in SCHEDULE 4.21:
(i) To the knowledge of Seller, none of the sites
identified in SCHEDULE 4.21 is or may become the subject of a response action
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, or any similar federal, state or local law imposing liability for
remediation;
(ii) Seller has not, in connection with the Business,
received (A) a written request for information from any Governmental Authority
with respect to any discharge or removal of any Hazardous Materials, or (B)
other written notice that it has been identified in any litigation,
administrative proceeding or investigation as a responsible party or a
potentially responsible party for any liability under any Environmental Law or
in connection with any Hazardous Material;
(iii) Seller has not filed any notice with any Governmental
Authority reporting a release of Hazardous
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Materials in connection with the Business or any property owned, leased or
operated by the Business.
4.22 SUBSIDIARIES; INVESTMENTS. The Business does not own, directly
or indirectly, any shares in the capital of any corporation, association, trust
or similar entity, any interest in the equity of any partnership or similar
entity, any share in any joint venture, or any other equity or proprietary
interest in any entity or enterprise, however organized and however such
interest may be denominated or evidenced.
4.23 BENEFIT PLANS AND EMPLOYMENT ARRANGEMENTS.
(a) SCHEDULE 4.23 is a list of each welfare plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); pension plan, as defined in Section 3(2) of ERISA; or retirement,
insurance, bonus, deferred compensation or other plan or arrangement currently
maintained by Seller or to which Seller contributes or is obligated to
contribute for the benefit of one or more Hired Represented Employees or Hired
Non-Represented Employees.
(b) The acquisition by Buyer and Holdings of the Purchased
Assets and the employment of the Hired Represented Employees and Hired Non-
Represented Employees by Buyer will not, directly or indirectly, give rise to
any withdrawal liability or potential withdrawal liability on the part of Buyer
with respect to any plan maintained by Seller or to which Seller has or has had
any obligation to contribute for the benefit of any such employees that is a
"multiemployer plan" as that term is defined
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in Section 3(37)(A) of ERISA ("MULTIEMPLOYER PLAN"). Except as described on
SCHEDULE 4.23, Seller has no unfulfilled obligation to contribute to any
Multiemployer Plan or collectively bargained welfare plan. Seller (i) has not
incurred any liability, which has not been discharged, that arises from either a
complete or partial withdrawal (as defined in Section 4203 or 4205 of ERISA,
respectively) from any Multiemployer Plan and (ii) has not incurred a decline in
contributions to a Multiemployer Plan such that, if the current rate of
contributions continues, a 70% or greater decline in contributions will occur
within the next three plan years.
(c) All material liabilities to the Pension Benefit Guaranty
Corporation pursuant to Section 4007 of ERISA and all liabilities to the
Internal Revenue Service under Section 4971 of the Internal Revenue Code of
1986, as amended (the "CODE") have been fully paid. Apart from such liabilities
under Section 4007 of ERISA and Section 4971 of the Code, Seller has no
liability to the Pension Benefit Guaranty Corporation or to the Internal Revenue
Service with respect to any pension plan intended to be qualified under Section
401 of the Code. To Seller's knowledge, there does not exist any condition,
there has not occurred any event, and there has not been any omission, with
respect to the sponsorship, funding or administration of any employee benefit
plan which has or could result in a Lien upon or claim with respect to any of
the Purchased Assets, or Buyer or Holdings being liable for any contribution,
withdrawal liability,
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benefit, claim, settlement, Tax, penalty, or payment of any nature.
(d) Except as set forth in SCHEDULE 4.23, each group health plan
that provides health coverage to any present or former employee of the Business
has operated in compliance with all requirements of Sections 601 through 608 of
ERISA and either Section 162(i)(2) and (k) of the Code and the regulations
promulgated thereunder (for years prior to 1989) or Section 4980B of the Code
and the regulations promulgated under former Section 162(i)(2) and (u) of the
Code (for years after 1988), relating to the continuation of coverage under
certain circumstances in which coverage would otherwise cease. SCHEDULE 4.23,
to be delivered on or before the Release Date, sets forth a true and complete
list of all Hired Represented Employees of the Business and their respective
beneficiaries who are receiving or who are eligible to elect to receive such
continuation coverage under such group health plans pursuant to such provisions
of ERISA and the Code.
(e) Except with respect to Local 1039, Seller has not carried on
discussions regarding organization with any labor union and there has not been
any strike, work stoppage, labor dispute or other labor trouble relating to
employees of the Business, and there are no significant threats of work stoppage
or labor trouble by employees of the Business.
(f) Attached as EXHIBIT B is a true and correct copy of the
Seller's Union Plan.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS.
5.1 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has full
corporate power and authority to execute and deliver this Agreement and the
other documents delivered or to be delivered pursuant hereto, to perform all the
terms and conditions hereof and thereof to be performed by it and to consummate
the transactions contemplated hereby and thereby. This Agreement and the other
documents delivered or to be delivered pursuant hereto have been duly authorized
and approved by all necessary and proper corporate action of Buyer (including
all necessary shareholder action) and constitute, and will constitute, the valid
and binding obligations of Buyer, enforceable against Buyer in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws or
equitable principles from time to time in effect relating to or affecting the
rights of creditors generally.
(b) Neither the execution and delivery by Buyer of this
Agreement or the instruments of transfer and other documents delivered or to be
delivered pursuant hereto by Buyer and the performance by Buyer hereunder or
thereunder, nor the
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consummation of the transactions contemplated hereby or thereby, will violate,
conflict with, result in the breach of or accelerate the performance required by
any of the terms, conditions or provisions of the Articles of Incorporation or
Bylaws of Buyer or any covenant, agreement or understanding to which Buyer is a
party or any order, ruling, decree, judgment, arbitration award or stipulation
to which Buyer is subject, or constitute a default thereunder.
(c) No approval or authorization of, filing or registration
with, or notification to, any Governmental Authority is required in connection
with the execution and delivery of this Agreement by Buyer or the performance of
its obligations hereunder or the consummation of the transactions contemplated
hereby, except filings under the HSR Act.
(d) Neither Buyer nor any of its officers, directors, employees
or Affiliates has agreed to pay or has incurred any claims for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby, other than a $365,000 financing fee to TFX Equities in
connection with issuance of a subordinated note to TFX Equities.
(e) Except as would not have a material adverse effect on the
condition (financial or other), properties, assets, liabilities or prospects of
Buyer, Buyer is not engaged in, or a party to, or, to its knowledge, threatened
with, any legal action, suit, investigation or other proceeding by or before any
court, arbitrator or administrative agency. There are no
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outstanding orders, rulings, decrees, judgments or stipulations or proceedings
to which Buyer is a party or by which Buyer is bound, by or with any court,
arbitrator or administrative agency that could have a material adverse effect on
the condition (financial or other), properties, assets, liabilities or prospects
of the Business when it is acquired by Buyer.
(f) Buyer does not own of record or beneficially, directly or
indirectly, any shares of outstanding capital stock or securities convertible
into capital stock of any corporation or any participating interest in any
noncorporate business enterprise.
5.2 REPRESENTATIONS AND WARRANTIES OF HOLDINGS.
(a) Holdings is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
full corporate power and authority to execute and deliver this Agreement, the
Subordinated Note and the other documents delivered or to be delivered pursuant
hereto, to perform all the terms and conditions hereof and thereof to be
performed by it and to consummate the transactions contemplated hereby and
thereby. As of the Release Date, this Agreement, the Subordinated Note and the
other documents delivered or to be delivered pursuant hereto will be authorized
and approved by all necessary and proper corporate action of Holdings (including
all necessary shareholder action) and will constitute the valid and binding
obligations of Holdings, enforceable against Holdings in accordance with their
respective terms, except as such
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles from time to
time in effect relating to or affecting the rights of creditors generally.
(b) Neither the execution and delivery by Holdings of this
Agreement, the Subordinated Note or the instruments of transfer and other
documents delivered or to be delivered pursuant hereto by Holdings and the
performance by Holdings hereunder or thereunder, nor the consummation of the
transactions contemplated hereby or thereby, will, as of the Release Date,
violate, conflict with, result in the breach of or accelerate the performance
required by any of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of Holdings or any covenant, agreement or understanding
to which Holdings is a party or any order, ruling, decree, judgment, arbitration
award or stipulation to which Holdings is subject, or constitute a default
thereunder. No approval or authorization of, filing or registration with, or
notification to, any Governmental Authority is required in connection with the
execution and delivery of this Agreement by Holdings or the performance of its
obligations hereunder or the consummation of the transactions contemplated
hereby, except filings under the HSR Act.
(c) Neither Holdings nor any of its officers, directors,
employees or Affiliates has agreed to pay or has incurred any claims for any
brokerage fees, commissions or
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finders' fees in connection with the transactions contemplated hereby, other
than a $365,000 financing fee to TFX Equities in connection with issuance of the
Subordinated Note.
(d) Except as would not have a material adverse effect on the
condition (financial or other), properties, assets, liabilities or prospects of
Holdings, Holdings is not engaged in, or a party to, or, to its knowledge,
threatened with, any legal action, suit, investigation or other proceeding by or
before any court, arbitrator or administrative agency. There are no outstanding
orders, rulings, decrees, judgments or stipulations or proceedings to which
Holdings is a party or by which Holdings is bound, by or with any court,
arbitrator or administrative agency that could have a material adverse effect on
the condition (financial or other), properties, assets, liabilities or prospects
of Holdings.
(e) Holdings has furnished to Seller the consolidated balance
sheet of Holdings and its subsidiaries as of March 31, 1995 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal year then ended. Such financial statements have been
prepared in accordance with GAAP consistently applied and present fairly in all
material respects the consolidated financial position of Holdings and its
subsidiaries as of such date, and the consolidated results of their operations
for the period then ended.
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SECTION 6. COVENANTS.
6.1 SALES TAXES. Buyer and Seller shall each pay one half of, and
Seller shall collect and remit, all sales, use and transfer Taxes, if any,
arising from the sale of the Purchased Assets pursuant hereto. Buyer shall
deliver to Seller on of before the Release Date one or more fully executed sales
tax resale certificates as reasonably requested by Seller in connection with the
purchase and sale of inventory under this Agreement.
6.2 ACCESS TO OFFICES, OFFICERS, ACCOUNTANTS, DUE DILIGENCE, ETC.
Seller will afford to, and will cause its Affiliates to afford to, the officers
and authorized representatives of Buyer and Holdings (including without
limitation, attorneys, accountants, surveyors, building inspectors, engineers,
environmental consultants, insurance brokers, financial advisors and bankers)
reasonable access during regular business hours to the offices, officers,
properties, books and records of Seller relating to the Business, including
contact with attorneys, accountants and other representatives of Seller and its
Affiliates, and will furnish Buyer and Holdings with such additional financial
and operating data and other information as to the Business and Purchased Assets
as Buyer or Holdings may from time to time reasonably request. Seller will
cooperate with Buyer to facilitate Buyer's contacting, jointly with Seller,
vendors, dealers, customers and such other Persons as Buyer and its
representatives may reasonably desire to contact
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in connection with Buyer's investigation of the Business. Investigations
conducted Buyer, Holdings and their agents shall be conducted in such a manner
as to minimize, to the extent reasonably practicable, the disruption of orderly
business operations of Seller and properties examined shall be returned to their
preexamination condition by Buyer and Holdings.
6.3 BUYER'S ENVIRONMENTAL INVESTIGATION. Buyer has commissioned an
investigation of Seller's compliance with Environmental Laws, and a Phase I
assessment of the presence of Hazardous Materials or other toxic or hazardous
materials on properties currently owned, leased or operated by the Business. In
connection with any such investigation:
(a) Seller will comply, and will cause its Affiliates to comply,
with any reasonable request for non-privileged, non-confidential information
made by Buyer or its agents in connection with any such investigation.
(b) Seller will assist Buyer or its agents to obtain any non-
privileged, non-confidential records pertaining to the Business or to properties
owned or operated by the Business in connection with such an investigation.
(c) Seller will accord, and will cause its Affiliates to accord,
Buyer and its agents access to all areas of the properties owned or operated by
Seller at reasonable times and in a reasonable manner in connection with any
such investigation.
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6.4 APPROVALS; CONSENTS. (a) Seller and Buyer have filed the
notification required under the HSR Act relating to the purchase and sale
contemplated by this Agreement with the United States Department of Justice and
the Federal Trade Commission, (ii) shall promptly respond to inquiries from the
United States Department of Justice and the Federal Trade Commission in
connection with such notification, and (iii) have requested early termination of
the waiting period under the HSR Act.
(b) Subject to Section 3.4, Seller shall use its best efforts to
obtain the consents of all other parties to all Contracts, Open Orders, Permits
and rights of Seller, which require the consent of such parties for the
consummation of the transactions contemplated hereby.
(c) Buyer will promptly file and use its best efforts to transfer or
have issued to it all Environmental Permits relating to the Business that are
currently maintained by Seller and which are required to be obtained by a tenant
in connection with the operation of the Business.
6.5 PRESERVATION OF BUSINESS ORGANIZATION. Seller will conduct the
Business in the ordinary course, in a manner consistent with applicable federal
and state regulations, and will use its best efforts to preserve Seller's
business relationships intact and to preserve the goodwill of Seller with its
suppliers, customers and others having business relations with it.
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6.6 APPROVAL OF CERTAIN TRANSACTIONS. Except as specifically
contemplated by this Agreement, without the prior written consent of Buyer,
Seller will not, in the conduct of the Business:
(a) incur or agree to incur any liability or obligation or enter
into any agreement or transaction that cannot be cancelled upon sixty days (60)
notice, except purchase orders and supply contracts for less than $100,000 in
any individual instance entered into in the ordinary course of business and
renewals or replacements of existing Contracts in the ordinary course on
substantially the same terms;
(b) mortgage, pledge, sell, lease, distribute, dispose of or
otherwise encumber or convey any interest in any Purchased Assets;
(c) make any capital expenditures in excess of $100,000;
(d) waive or release any material rights with respect to the
Purchased Assets or the Business;
(e) change its methods of accounting;
(f) adopt or modify or pay any bonus, pension, profit sharing or
other compensation plan, other than budgeted increases for non-management
employees, or enter into or modify any Contract or terms and conditions of
employment; or
(g) take any other action (i) which would result in a material
adverse change in the condition (financial or other) of the Business or the
Purchased Assets or (ii) which if
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taken prior to the date hereof would constitute a breach of any representation
or warranty contained in Section 4 of this Agreement.
6.7 EXCLUSIVE DEALING. Seller will not:
(a) solicit or initiate discussions or engage in negotiations
with any Person other than Buyer and Holdings (whether or not such discussions
are initiated by Seller), with respect to the possible acquisition of the
Business or the Purchased Assets by such Person (whether by merger, purchase of
capital stock, purchase of assets or otherwise);
(b) provide any information with respect to Seller, the Business
or the Purchased Assets to any Person other than Buyer and Holdings relating to
the possible acquisition of Seller, the Business or the Purchased Assets by such
Person (whether by merger, purchase of capital stock, purchase of assets or
otherwise); or
(c) enter into a transaction with any Person other than Buyer
and Holdings concerning the possible acquisition of Seller, the Business or the
Purchased Assets by such Person (whether by merger, purchase of capital stock,
purchase of assets or otherwise).
6.8 LEASED VEHICLES. Seller shall maintain the fleet lease agreement
with respect to leased automobiles and trucks used by the Business and otherwise
comply with all the terms and conditions of such lease agreement, until such
lease expires by its terms, without extension. Buyer will reimburse Seller
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monthly as invoiced for the monthly lease payments under such lease agreement
for such leased automobiles and trucks.
6.9 INTERCOMPANY ACCOUNTS. As of the opening of business on the
Effective Date, Seller and the Business will have cancelled and forgiven
(without recourse), as between Seller on the one hand and Buyer and the Business
on the other hand, all amounts with respect to any intercompany accounts or
otherwise (a) due by Seller to the Business or (b) due by the Business to
Seller.
6.10 FURTHER ASSURANCES. From time to time after the Release Date, at
Buyer's or Holdings' request and without further consideration, Seller will,
consistent with Section 3.4, execute and deliver such other and further
instruments of conveyance, assignment and transfer, and take such other action,
as Buyer or Holdings may reasonably request for the more effective conveyance
and transfer of the Buyer Purchased Assets to Buyer and the Intellectual
Property and the Related Rights to Holdings. To the extent that the assignment
of confidentiality and noncompetition agreements to Buyer or Holdings is not
enforceable against the other parties to such agreements, Seller shall use its
best efforts to enforce such agreements with respect to the Business at Buyer's
or Holdings' expense. Seller shall cooperate with Buyer in obtaining execution
of any documents by current or prior employees of Seller with respect to
inventions, invention disclosures and patent applications for goods or processes
invented prior to the Release Date.
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6.11 SUPPLY CONTRACTS. Buyer and Seller shall continue to sell
products to the other on substantially similar terms and conditions as in effect
on December 31, 1995.
SECTION 7. THE ESCROW CLOSING.
The closing in escrow of the sale and purchase of the Purchased Assets
(the "ESCROW CLOSING") shall take place at the offices of Ballard Spahr Andrews
& Ingersoll, 1735 Market Street, 51st Floor, Philadelphia, PA, on December 29,
1995. At the Escrow Closing, this Agreement, the Interim Note, a lease from
Seller to Buyer of the Owned Real Property and improvements located thereon,
bills of sale for the Purchased Assets and an assignment and assumption
agreement (collectively, the "ESCROWED DOCUMENTS") shall be deposited in escrow
with Ballard Spahr Andrews & Ingersoll to be replaced by a financial institution
(the "ESCROW AGENT") and shall be held and released on the terms and conditions
of the Escrow Agreement dated December 29, 1995 by and among Buyer, Holdings,
Seller and the Escrow Agent when all conditions precedent to the obligation to
such release described in Section 8 and Section 9 of this Agreement are met or
waived (such date, the "RELEASE DATE"), or on the date this Agreement is
terminated pursuant to Section 13.1.
SECTION 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND
HOLDINGS TO DIRECT THE RELEASE FROM ESCROW.
The obligation of Buyer and Holdings to direct the Escrow Agent to
release the Escrowed Documents from the escrow is
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subject to the satisfaction, or waiver in writing by Buyer and Holdings, on or
prior to the Release Date of each of the following conditions:
8.1 CORPORATE ACTION. All corporate and other actions necessary to
authorize and effectuate the consummation of the transactions contemplated
hereby by Seller, Buyer and Holdings shall have been duly taken prior to the
Release Date, and Seller shall have delivered to Buyer and Holdings a
certificate of duly authorized officers or employees of Seller to that effect
with respect to Seller, together with certified copies of resolutions of the
Executive Committee of the Board of Directors of Seller authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
8.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects on and as of the Release Date with the same effect as
though all such representations and warranties had been made on and as of such
date, and there shall have been delivered to Buyer and Holdings a certificate to
that effect, dated the Release Date, signed by a duly authorized officer of
Seller. For purposes of this Section 8.2 only, the representations and
warranties will not be true in all material respects if Buyer and Holdings are
not fully indemnified with respect to the change in such representation and
warranty or the change in all such representations and warranties for which
Buyer and Holdings are
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not fully indemnified is likely to result in any loss, claim, obligation,
action, damage, penalty, liability, cost, expense or other adverse monetary
effect in an amount equal to or greater than $50,000 in the aggregate.
8.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and
agreements of Seller to be performed or complied with pursuant to this Agreement
on or prior to the Release Date shall have been duly performed and complied
with, except in any immaterial respect, or duly waived and there shall have been
delivered to Buyer and Holdings a certificate to that effect, dated the Release
Date, signed by a duly authorized officer of Seller.
8.4 INSTRUMENTS OF CONVEYANCE, ETC. Seller shall have executed and
delivered to Holdings patent assignments to transfer to Holdings of all of
Seller's right, title and interest in and to the patents included in the
Purchased Assets for recording with the applicable Governmental Authorities,
trademark assignments to transfer to Buyer all of Seller's right, title and
interest in and to the trademarks included in the Purchased Assets for recording
with the applicable Governmental Authorities and a license agreement for the use
of the name "Teleflex," and all Purchased Assets shall be free and clear of all
Liens.
8.5 DELIVERY. On the Release Date, Seller shall deliver physical
possession of all Equipment, Inventory, Technical Information and tangible
property included in the Purchased Assets and any tangible evidence of all Open
Orders and
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Accounts Receivable to Buyer, and Seller shall deliver any tangible evidence of
all Intellectual Property to Holdings.
8.6 OPINION OF COUNSEL. Buyer and Holdings shall have been provided
with an opinion of Seller's counsel substantially in form attached as EXHIBIT B.
8.7 REQUIRED CONSENTS. Seller shall have obtained all consents and
approvals of all third parties with respect to Material Non-Assignable
Contracts, and all Governmental Authorities required for the transactions
contemplated hereby, and all waiting periods specified by law the passing of
which is necessary for the consummation of such transactions (including without
limitation the waiting period under the HSR Act) shall have passed or been
terminated. Seller shall have cooperated with Buyer in novating any Contracts
that require a novation for Buyer to have the benefit of such Contracts.
8.8 LITIGATION. No order of any court or administrative agency shall
be in effect which restrains or prohibits the transactions contemplated hereby
and there shall not have been threatened in writing, nor shall there be pending,
any action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, seeking to enjoin the
transactions contemplated by this Agreement or seeking monetary relief from
Buyer Holdings for which Buyer or Holdings is not fully indemnified by Seller
under Section 11, by reason of the consummation of such transactions.
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8.9 LEASE. Seller and Buyer shall have entered into a lease for
record storage space at Seller's facility in Limerick, Pennsylvania on terms and
conditions satisfactory to Buyer and Seller.
8.10 FINANCING. Buyer will have obtained financing from the CIT
Group/Business Credit, Inc. on terms and conditions substantially similar to
those described in the term sheet dated December 27, 1995, and Holdings shall
have obtained all required waivers and consents from existing lenders.
8.11 AUDITED FINANCIALS. Seller shall have delivered financial
statements for the Business audited by Price Waterhouse LLP for the periods
ended December 31, 1993, December 31, 1994 and September 24, 1995 (which
includes the Bid Balance Sheet).
8.12 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, financial condition, prospects, assets
or operations of the Business or the Purchased Assets.
SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
TO DIRECT THE RELEASE FROM ESCROW.
The obligation of Seller to direct the Escrow Agent to release the
Escrowed Documents from the escrow is subject to the satisfaction, or waiver in
writing by Seller, on or prior to the Release Date of each of the following
conditions:
9.1 CORPORATE ACTION. All corporate and other actions necessary to
authorize and effectuate the consummation of the
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transactions contemplated hereby by Seller, Buyer and Holdings shall have been
duly taken prior to the Release Date, and Buyer and Holdings shall each have
delivered to Seller a certificate of duly authorized officers or employees of
Buyer or Holdings, as the case may be, to that effect, together with certified
copies of resolutions of the Board of Directors of Buyer and Holdings
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
9.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Holdings set forth in this Agreement shall be true and
correct on and as of the Release Date with the same effect as though all such
representations and warranties had been made on and as of such date and there
shall have been delivered to Seller a certificate of Buyer and of Holdings to
that effect, dated the Release Date, signed by a duly authorized officer of
Buyer or Holdings, as the case may be.
9.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and
agreements of Buyer and Holdings to be performed or complied with pursuant to
this Agreement on or prior to the Release Date shall have been duly performed
and complied with, except in any immaterial respect, or duly waived and there
shall have been delivered to Seller certificates to that effect, dated the
Release Date, signed by a duly authorized officer of Buyer and of Holdings.
9.4 PAYMENT. Buyer shall have paid the Cash Portion of the Purchase
Price together with cash equal to all accrued
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interest on the Interim Note to Seller and shall have issued and delivered to
Seller the Subordinated Note which shall be in form and substance acceptable to
Seller and Holdings.
9.5 OPINION OF COUNSEL. Seller shall have been provided with an
opinion of Buyer's and Holdings' counsel substantially in form attached as
EXHIBIT C.
9.6 REQUIRED CONSENTS. Buyer and Holdings shall have obtained all
consents and approvals of all third parties set forth on SCHEDULE 3.4 and all
Governmental Authorities required for the transactions contemplated hereby, and
all waiting periods specified by law the passing of which is necessary for the
consummation of such transactions (including without limitation the waiting
period under the HSR Act) shall have passed or been terminated.
9.7 LITIGATION. No order of any court or administrative agency shall
be in effect which restrains or prohibits the transactions contemplated hereby
and there shall not have been threatened in writing, nor shall there be pending,
any action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, seeking to enjoin the
transactions contemplated by this Agreement.
9.8 EQUITY. Buyer shall have issued and delivered to TFX Equities
certificates evidencing a number of shares of Buyer's common stock representing
4.294% of the outstanding shares of common stock of Buyer on a fully diluted
basis on terms
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and conditions and subject to stock purchase and shareholder's agreements
satisfactory to Buyer and TFX Equities.
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations and warranties made by Seller or Buyer or Holdings
as to any fact or condition existing on or before the Release Date in this
Agreement, in any Schedule or in any certificate delivered pursuant to this
Agreement, shall survive until June 30, 1997; provided that there shall be no
termination of any such representation or warranty as to which a claim has been
asserted prior to the termination of any such survival period; and provided
further that the representations and warranties in Section 4.2 and in Section
5.1(a) and Section 5.2(a) shall survive indefinitely. All such representations
and warranties shall be unaffected by any investigation made by or on behalf of
Buyer or Seller or by knowledge obtained as a result thereof or otherwise.
Except as otherwise expressly provided in this Agreement, all covenants,
agreements, undertakings and indemnities set forth in this Agreement shall
survive indefinitely.
SECTION 11. INDEMNIFICATION.
11.1 ENVIRONMENTAL INDEMNITY AND COVENANT. (a) Seller has provided
Buyer access to a copy of the results of all non-privileged, non-confidential
environmental reports in connection
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with the Owned Real Property by or on behalf of Seller through the date hereof.
(This information shall be referred to collectively as the "ENVIRONMENTAL
REPORTS".)
(b) Seller agrees that it shall bear the expenses of, and
responsibility for, any monitoring, remediation and other response actions and
costs, claims, liabilities, damages or losses in relation to the matter of NORTH
PENN WATER AUTHORITY V. LEEDS & NORTHRUP COMPANY, ET AL, United Sates District
Court, Eastern District of Pennsylvania, Civil Action No. 94-CV-0455, and in
connection with the North Penn Area 7 Superfund site, except to the extent
caused or exacerbated by actions attributable to Buyer after the Release Date
("TCE REMEDIATION"). Any such monitoring, remediation and any other response
action required at or in connection with the Owned Real Property shall be
completed by Seller, at Seller's expense, subject to the provisions of Section
11.1(d). All such monitoring, remediation and any other response action
required at the Owned Real Property shall be performed to the least stringent
levels, criteria and requirements in effect at the time of such monitoring,
remediation or response action acceptable to all Governmental Authorities with
jurisdiction over the Owned Real Property. Subject to the limitations set forth
in Section 11.1(c), all remediation shall be conducted under the exclusive
direction and control of Seller, and/or its agents and consultants unless,
because of Seller's failure to perform such remediation, a Governmental
Authority takes action against Buyer, and Seller,
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except as provided in Section 11.1(c), shall have the sole right to negotiate
with any Governmental Authority concerning the timing, scope and levels of
remediation, but shall proceed according to applicable levels, criteria and
requirements applied by the respective Governmental Authority; provided however,
Seller shall be entitled to contest the applicability of any such level,
criteria or requirement. (All monitoring, remediation and other response
activities required to be performed by Seller pursuant to this Section 11.1
shall collectively be referred to as the "REMEDIATION".)
(c) Buyer agrees to cooperate with Seller with respect to any
TCE Remediation or any other Remediation. During the course of any Remediation,
Buyer shall, and hereby does, grant to Seller, its agents, employees,
contractors and consultants, all access reasonably necessary to perform such
remediation at reasonable times and in compliance with any health and safety
requirements of Buyer. Such access shall include access to employees at the
Business, including those with relevant environmental, health and safety
knowledge or experience, as well as use of utilities at Seller's expense, and
shall also include reasonable parking and storage space. Buyer agrees to allow
Seller to install any remediation devices at, on or under the Owned Real
Property, including, but not limited to, monitoring wells or pump and treat
systems, that are required by any Governmental Authority or that Seller deems
reasonably necessary to perform the Remediation, provided that such
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remediation devices shall be installed and located to minimize impact on Buyer's
operations considering technical and economic feasibility for both Buyer and
Seller. During the course of the Remediation, Seller shall use its best efforts
to avoid or minimize interference with the ongoing business of Buyer. Buyer
may, at its own expense (such expense to include costs of consultants' and
attorneys' fees), monitor the remediation in person, obtain split samples of any
samples taken by Seller and/or its consultants, take samples from wells
installed at any time by Seller on the Owned Real Property, provided Seller has
consented (which consent shall not unreasonably be withheld), review all filings
with any Governmental Authority prior to submission to the Governmental
Authority and recommend changes to minimize interference with Buyer's
operations. Buyer shall be entitled, at its own expense, to participate in any
meetings with any Governmental Authority concerning the Remediation. Seller
shall give Buyer access to information reasonably necessary to allow Buyer to
undertake such activities and to monitor the progress of the Remediation,
including, but not limited to, any materials or data created after the Release
Date. If such access would require Seller to reveal information that would
otherwise be protected by the attorney-client privilege, or any attorney work
product doctrine or other privilege pertaining to confidentiality, then Seller
and Buyer shall enter into a reasonable joint defense agreement, or similar
agreement, governing the terms and conditions of such access and preserving,
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to the greatest extent possible, the confidentiality of the information
provided. Seller will provide Buyer (by informing Buyer's facility manager)
with reasonable advance notice of any entry or access or other actions it
proposes to or on the Owned Real Property.
(d) Except for Buyer's monitoring expenses and Buyer's fees, if
any, set forth in Section 11.1(c), Seller shall defend, indemnify and hold
Buyer, its officers, directors, employees, subsidiaries and Affiliates harmless
from all claims, liabilities, losses, damages, costs and expenses, including
reasonable attorneys' fees and disbursements and other legal costs and
consultants' fees, (i) arising from a failure by Seller to operate, own or
conduct the Business in compliance with Environmental Laws, (ii) arising out of
third party claims to the extent based on conditions that require the TCE
Remediation or any other Remediation or the TCE Remediation or any other
Remediation itself, (iii) arising from the off-site transportation, treatment,
storage or disposal of Hazardous Materials at any time prior to the Release Date
by Seller, and (iv) arising from any Release or presence of Hazardous Materials
prior to the Release Date, including but not limited to from any response action
relating to such Release or presence of Hazardous Materials at, on, in or under
any real property now or previously owned, leased or operated by Seller at any
such property. This indemnification obligation shall not include consequential
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damages, lost profits or costs or expenses relating to any interruption of the
Business.
11.2 INDEMNITY BY SELLER. (a) Seller shall defend, indemnify and
hold Buyer and Holdings, their officers, directors, employees, subsidiaries and
Affiliates harmless from and against all claims, damages, losses, liabilities,
costs and expenses (including reasonable attorneys' fees and disbursements and
any other legal costs) (collectively, "LOSSES") arising out of or resulting
from:
(i) Seller's operation or ownership of the Business or the
Purchased Assets before the Release Date;
(ii) the Excluded Liabilities;
(iii) the breach by Seller of any covenant contained herein or in
any agreement entered into by Seller pursuant to this Agreement requiring
performance after the Release Date;
(iv) the failure of any representation or warranty of Seller
contained herein (other than in Section 4.2), in any Schedule or in any
certificate delivered on the Release Date pursuant hereto to be true and
correct; and
(v) the failure of the representation and warranty of Seller
contained in Section 4.2 to be true and correct.
(b) Seller shall not have any liability under Section 11.2(a)(iv)
until the aggregate amount of all such Losses exceeds $375,000, and then only to
the extent that such Losses exceed
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$250,000, and the Seller's maximum aggregate liability under Section 11.2(a)(iv)
shall not exceed $10,000,000.
11.3 INDEMNITY BY BUYER. (a) Buyer shall defend, indemnify and hold
Seller, its officers, directors, employees, subsidiaries and Affiliates harmless
from and against all Losses arising out of or resulting from:
(i) Buyer's operation or ownership of the Business or the Buyer
Purchased Assets on and after the Release Date;
(ii) the Assumed Liabilities;
(iii) the breach by Buyer of any covenant contained herein or in
any agreement entered into by Buyer pursuant to this Agreement requiring
performance after the Release Date;
(iv) the failure of any representation or warranty of Buyer
contained herein (other than in Section 5.1(a)), in any Schedule or in any
certificate delivered on the Release Date pursuant hereto to be true and
correct; and
(v) the failure of any representation or warranty of Buyer
contained in Section 5.1(a) to be true and correct.
(b) Buyer shall not have any liability under Section 11.3(a)(iv)
until the aggregate amount of all such Losses exceeds $375,000, and then only to
the extent that such Losses exceed $250,000.
11.4 INDEMNITY BY HOLDINGS. (a) Holdings shall defend, indemnify and
hold Seller, its officers, directors,
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employees, subsidiaries and Affiliates harmless from and against all Losses
arising out of or resulting from:
(i) Holdings' ownership of the Intellectual Property and the
Related Rights on and after the Release Date;
(ii) the breach by Holdings of any covenant contained herein or
in any agreement entered into by Buyer pursuant to this Agreement requiring
performance after the Release Date;
(iii) the failure of any representation or warranty of Holdings
contained herein (other than in Section 5.2(a)), in any Schedule or in any
certificate delivered on the Release Date pursuant hereto to be true and
correct; and
(iv) the failure of any representation or warranty of Holdings
contained in Section 5.2(a) to be true and correct.
(b) Holdings shall not have any liability under Section 11.4(a)(iii)
until the aggregate amount of all such Losses exceeds $375,000, and then only to
the extent that such Losses exceed $250,000.
11.5 NOTICE OF CLAIM. Promptly after service of notice of any claim
or of process on Buyer, on Seller or on Holdings (hereinafter in this Section
11.5, the "INDEMNIFIED PARTY") by any third party, or promptly after obtaining
actual knowledge by the Indemnified Party of any other claim, in any matter in
respect of which indemnity may be sought pursuant to this Section 11, the
Indemnified Party shall promptly notify Buyer, Holdings or Seller (hereinafter
in this Section 11.5, the "INDEMNIFYING
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PARTY") of the receipt thereof. In the case of any action or proceeding by a
third party, the Indemnifying Party shall have the right to participate in, or
assume, at its own expense, the defense of any such claim or process or
settlement thereof. After notice from the Indemnifying Party of its election so
to assume the defense thereof, the Indemnified Party shall not be liable to the
Indemnifying Party for any legal or other expense in connection with such
defense. Such defense shall be conducted expeditiously (but with due regard for
obtaining the most favorable outcome reasonably likely under the circumstances,
taking into account costs and expenditures) and the Indemnified Party shall be
advised of all significant developments. With respect to any matter which is
the subject of any such claim and as to which the Indemnified Party fails to
give the Indemnifying Party such notice as aforesaid, and such failure adversely
affects the ability of the Indemnifying Party to defend such claim or materially
increases the amount of indemnification which the Indemnifying Party is
obligated to pay hereunder, the amount of indemnification which the Indemnified
Party shall be entitled to receive shall be reduced to an amount which the
Indemnified Party would have been entitled to receive had such notice been
timely given.
11.6 LIMITATION OF INDEMNIFICATION. (a) The obligation of Seller to
indemnify Buyer under Section 11.1, under Section 11.2(a)(i), under Section
11.2(a)(ii) and under Section 11.2(a)(v) shall survive without time limitation.
The obligation
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of Seller to indemnify Buyer under Section 11.2(a)(iii) shall expire with
respect to each covenant six months after performance of the last event required
under such covenant by its terms and the obligation of Seller to indemnify Buyer
under Section 11.2(a)(iv) shall terminate on June 30, 1997. The obligation of
Buyer to indemnify Seller under Section 11.3(a)(i), under Section 11.3(a)(ii)
and under Section 11.3(a)(v) shall survive without time limitation; the
obligation of Buyer to indemnify Seller under Section 11.3(a)(iii) shall expire
with respect to each covenant six months after performance of the last event
required under such covenant by its terms and the obligation of Buyer to
indemnify Seller under Section 11.3(a)(iv) shall terminate on June 30, 1997.
The obligation of Holdings to indemnify Seller under Section 11.4(a)(i) and
under Section 11.4(a)(iv) shall survive without time limitation; the obligation
of Holdings to indemnify Seller under Section 11.4(a)(ii) shall expire with
respect to each covenant six months after performance of the last event required
under such covenant by its terms and the obligation of Holdings to indemnify
Seller under Section 11.4(a)(iii) shall terminate on June 30, 1997. No such
termination shall occur as to matters as to which an Indemnified Person has
given notice of a claim for indemnification in accordance with Section 11.5 on
or prior to the applicable termination date, in which case the obligation shall
survive until the claim is finally resolved, and (b) except with respect to any
fraudulent misrepresentation or fraudulent material
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omission or fraudulent breach of warranty, which shall survive without time
limitation.
11.7 NO SET OFF. Neither Buyer nor Holdings shall be authorized at
any time to set off and apply against any sum which is due and payable to Seller
by Buyer or Holdings, any sum, liability or other obligation which may be owed
to Buyer or Holdings by Seller under this Agreement or otherwise. Seller shall
not be authorized at any time to set off and apply against any sum which is due
and payable to Buyer or Holdings by Seller, any sum, liability or other
obligation which may be owed to Seller by Buyer or Holdings under this Agreement
or otherwise.
11.8 EXCLUSIVE REMEDY. Except as set forth in Section 12.4, Buyer,
Holdings and Seller each acknowledge and agree that from and after the Release
Date, their sole and exclusive remedy with respect to all claims relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions of this Section 11.
SECTION 12. NONCOMPETITION; NON-SOLICITATION.
12.1 NONCOMPETITION. The term "RESTRICTED BUSINESS" shall mean the
manufacture or sale of controls of which flexible cable is a principal feature:
(a) in the aerospace market; (b) for use in mechanical valve actuation in
commercial and military shipping; and (c) for flux mapping systems of nuclear
reactors. As a significant inducement to Buyer to enter into and to perform its
obligations under this Agreement, and to acquire the
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Business, Seller agrees that, for a period of five years after the Release Date
(the "NONCOMPETITION PERIOD"), Seller will not, directly or indirectly, own,
manage, control, operate, invest or acquire any interest in, or otherwise engage
in, or act for or on behalf of any person engaged in, any Restricted Business;
provided that this Section 12.1 shall not prohibit: (a) the acquisition of the
securities or assets of a business where the gross annual revenues of such
business attributable to a Restricted Business do not constitute more than 20%
of the total gross revenues of such business, provided Seller offers to sell the
Restricted Business to Buyer at the fair market value thereof, and (b) the
acquisition of not more than 5% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Seller shall have no active
participation in the management of such corporation.
12.2 NON-SOLICITATION. Seller agrees that for a period of five years
after the Release Date, neither it nor any of its Affiliates will directly or
indirectly offer employment to or hire any then current employee of the Business
who is hired by Buyer without the prior written consent of Buyer.
12.3 LIMITATION. If, at the time of enforcement of this Section 12, a
court shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
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12.4 REMEDIES. Seller agrees that if it commits or threatens to
commit a breach of any of the covenants and agreements contained in this Section
12, Buyer shall have the right to seek and obtain appropriate injunctive and
other equitable remedies therefor, in addition to any other rights and remedies
that may be available at law, it being acknowledged and agreed that any such
breach would cause irreparable injury to Buyer and that money damages would not
provide an adequate remedy therefor.
SECTION 13. TERMINATION; MODIFICATION OR WAIVER.
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the Release Date:
(a) by mutual written agreement of Buyer and Seller;
(b) by Buyer or Holdings if the conditions to release of the
Escrowed Documents have not been satisfied, through no fault or failure of
Buyer and Holdings, on or before January 19, 1996; or
(c) by Seller if the conditions to release of the Escrowed
Documents have not been satisfied, through no fault or failure of Seller,
on or before January 19, 1996.
13.2 MODIFICATION. This Agreement may be amended, modified and
supplemented only by written agreement of the parties hereto.
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13.3 WAIVER. Any failure of Seller, Buyer or Holdings to comply with
any obligation, covenant, agreement or condition contained herein may be
expressly waived in writing by Buyer and Holdings in the case of any such
failure by Seller or by Seller in the case of any such failure by Buyer or
Holdings, but such waiver or failure to insist upon strict compliance shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
13.3.
SECTION 14. COSTS INCIDENT TO PREPARATION OF AGREEMENT.
Each of the parties hereto shall pay, without right of reimbursement
from the other, all costs incurred by it incident to the preparation, execution
and delivery of this Agreement and the performance of its obligations hereunder,
whether or not the transactions contemplated by this Agreement shall be
consummated, including without limitation fees and disbursements of legal
counsel, accountants and consultants employed by the respective parties hereto
in connection with the transactions contemplated by this Agreement.
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SECTION 15. RISK OF LOSS.
All risk of damage or loss of any sort from any cause with respect to
the Purchased Assets shall remain with Seller until the Release Date.
SECTION 16. BEST EFFORTS.
Each of the parties covenants to use its best efforts to cause the
satisfaction of all conditions to release of the Escrowed Documents to be
performed by it or satisfied on its part at or prior to January 19, 1996.
SECTION 17. GENERAL.
17.1 PARTIES IN INTEREST; ASSIGNMENT. (a) This Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, this Agreement is not made for the benefit of any
Person not a party hereto, and nothing in this Agreement will be construed as
giving any Person, other than the parties hereto and their respective successors
and permitted assigns, any right, remedy or claim under or in respect of this
Agreement, or any provision hereof.
(b) Buyer and Holdings may assign their rights under this
Agreement for collateral security purposes to the lenders providing financing
for the transactions contemplated
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hereby and all extensions, renewals, replacements, refinancings and refundings
thereof in whole or in part.
(c) After the Release Date, Buyer and Holdings may assign their
rights under this Agreement to any purchaser of Buyer or to any purchaser of the
Business, whether such purchase is accomplished by purchase of stock, purchase
of assets, merger, consolidation or otherwise.
(d) No party to this Agreement shall assign its rights and
obligations under this Agreement without the prior written consent of all other
parties.
17.2 CONFIDENTIALITY. Each party to this Agreement shall take all
reasonable precautions to maintain the confidentiality of the negotiation or
existence of this Agreement, the identity of the parties hereto and any
nonpublic information concerning the other parties or their subsidiaries or
affiliates provided to or discovered by it or its representatives and shall not
disclose any of the above information to anyone other than (i) those people
directly involved in the investigation and negotiations pertaining to the
transactions contemplated by this Agreement, including without limitation,
attorneys, accountants and similar representatives, (ii) such lenders or
investors as may be necessary to finance the transactions contemplated hereby
and (iii) such Persons or Governmental Authorities whose consents or approvals
may be necessary or to whom notice needs to be given to permit consummation of
the transactions contemplated hereby. In the
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event of termination of this Agreement, Buyer and Holdings shall promptly return
or destroy all documents, records or other information concerning Seller and/or
the Business and shall not retain any copies of same.
17.3 PUBLIC STATEMENTS. No party to this Agreement shall, without the
prior written consent of the other parties hereto, such consent not to be
unreasonably withheld, make or cause to be made any press release or other
public statement or announcement that directly or indirectly discloses the
transactions contemplated by this Agreement.
17.4 CHOICE OF LAW. This Agreement shall be governed by, construed,
interpreted and the rights of the parties determined in accordance with the
laws, including equitable principles but without regard to principles of
conflict of laws, of the Commonwealth of Pennsylvania.
17.5 MEDIATION. In the event of a dispute arising out of or related
to this Agreement, the parties shall, prior to initiating litigation, first
submit the dispute to non-binding mediation under the commercial mediation rules
of the American Arbitration Association. The parties hereby acknowledge and
agree that such mediation shall be deemed to be in the nature of settlement
discussions and that neither the fact that such discussions took place, nor any
statement or conduct of any participant in such discussions shall be admissible
into evidence in any subsequent litigation or in any arbitration or other
dispute resolution proceeding involving the parties. It is
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further understood and agreed that any disclosure in any form, including oral,
by any Person participating in such mediation shall not operate as a waiver of
any privilege, including work product or attorney-client privilege, applicable
to the subject matter thereof.
17.6 NOTICES. Any notice, request, consent, waiver or other
communication required or permitted to be given hereunder shall be effective
only if in writing and shall be deemed sufficiently given only if delivered in
person or sent by telecopy, telegram, cable or by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
IF TO SELLER:
Teleflex Incorporated
630 West Germantown Pike, Suite 450
Plymouth Meeting, PA 19462
Attention: Steven K. Chance
Vice President and General Counsel
with a copy to:
Christopher G. Karras, Esquire
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
IF TO BUYER OR HOLDINGS:
The Triumph Group Operations, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane - Suite 200
Wayne, PA 19087
Attention: President
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with a copy to:
E. Carolan Berkley
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
or to such other Person or address as either such party may have specified in a
notice duly given by the sender as provided herein. Such notice or
communication shall be deemed to have been given as of the date so delivered,
telegraphed, cabled or mailed.
17.7 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits attached hereto) and the documents referred to herein as having been
entered into by any of the parties hereto or delivered by a party hereto to
another party hereto constitute the entire agreement and understanding of the
parties relating to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings, representations and warranties,
whether oral or written, relating to the subject matter hereof. The terms of
this Agreement cannot be changed, modified, released or discharged orally.
17.8 NO WAIVER. No delay or failure on the part of any party in
exercising any rights hereunder, and no partial or single exercise thereof, will
constitute a waiver of such rights or of any other rights hereunder. The rights
and remedies provided in this Agreement are cumulative and are not exclusive of
any rights or remedies a party may otherwise have at law or in equity.
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17.9 SEVERABILITY. The unenforceability or invalidity of any Section
or subsection or provision of this Agreement shall not affect the enforceability
or validity of the balance of this Agreement. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
17.10 HEADINGS. The headings of the Sections and subsections
contained in this Agreement are for reference purposes only and shall not in any
way affect the meaning, interpretation, enforceability or validity of this
Agreement.
17.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed will be deemed to be an original, but
all of which together will constitute one and the same agreement.
17.12 FACSIMILES. Any facsimile signature of any party hereto or to
any other agreement executed in connection herewith shall constitute a legal,
valid and binding execution hereof by such party.
17.13 CONSTRUCTION. Seller, Buyer and Holdings hereby agree that any
rule of law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived. Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include all other genders, all as the meaning and the context of this
Agreement shall require.
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Section, Exhibit and Schedule references contained in this Agreement refer to
those contained in or attached to this Agreement unless otherwise specified.
17.14 WAIVER OF JURY TRIAL. SELLER, BUYER AND HOLDINGS HEREBY WAIVE
ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT AND
THE OTHER DOCUMENTS EXECUTED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
TELEFLEX INCORPORATED
By /s/ John R. Bartholdson
-----------------------------
Title Sr. Vice Pres
---------------------------
THE TRIUMPH GROUP HOLDINGS, INC.
By /s/ Richard C. Ill
-----------------------------
Title President
---------------------------
TRIUMPH CONTROL SYSTEMS, INC.
By /s/ Richard C. Ill
-----------------------------
Title President
---------------------------
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Exhibit 10.12
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN
SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 8 HEREIN. THIS NOTE WAS
ORIGINALLY ISSUED ON DECEMBER 31, 1995 AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. THE
TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN PARAGRAPH
12 HEREIN.
SUBORDINATED PROMISSORY NOTE
December 31, 1995 $5,500,000
THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "COMPANY"),
hereby promises to pay to Teleflex Incorporated (the "SELLER"), or its permitted
assigns (the Seller and each of its permitted assigns is a "HOLDER") the
principal amount of Five Million Five Hundred Thousand Dollars, together with
interest thereon calculated from the date hereof in accordance with the
provisions of this Note. This Note is the "SUBORDINATED NOTE" issued pursuant to
that certain Asset Purchase Agreement, dated as of December 31, 1995 (the
"PURCHASE AGREEMENT"), by and among The Triumph Group Holdings, Inc., Triumph
Control Systems, Inc. and the Seller. Certain defined terms used herein are set
forth in paragraph 17 hereof.
1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten and
one-half percent (10-1/2%) per annum, compounded quarterly, on the unpaid
principal amount of this Note outstanding from time to time. Subject to the
provisions of paragraph 6 and paragraph 8 hereof, the Company shall pay to the
holder of this Note quarterly, in arrears, all accrued interest on each April
30, July 31, October 31 and January 31 during the term of this Note (each such
date being hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on
April 30, 1996. The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law to the extent that such interest is
an allowed claim enforceable against the debtor in a bankruptcy case under Title
11 of the U.S. Code) on overdue principal, at the rate then borne by this Note
plus 2%; it shall pay interest to the extent permitted by law (including
post-petition interest in any proceeding under any Bankruptcy Law to the extent
that such interest is an allowed claim enforceable against the debtor in a
bankruptcy case under Title 11 of the U.S. Code), on overdue installments of
interest at the rate then borne by this Note to the extent legally permitted.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts (payment may be by check payable in such money), except
that the Company may, at its option and in its sole discretion at any time and
from time to time elect to pay all or any portion of such
<PAGE>
interest on any Interest Payment Date in the form of additional Notes (the
"Additional Notes"). If the Company elects to issue Additional Notes in lieu of
cash payment of interest due on any Note on any Interest Payment Date, the
Company shall issue Additional Notes, dated the date of such Interest Payment
Date, in a principal amount equal to the amount of cash interest due but not
paid in cash on such Interest Payment Date. Any Additional Notes issued during
any fiscal year of the Company shall be delivered to the Holder or Holders with
the financial statements delivered pursuant to paragraph 11 hereof. The issuance
of such Additional Notes shall constitute payment in full of the interest in
lieu of cash payment of which such Additional Notes are issued. Each issuance of
Additional Notes in lieu of cash payments of interest on this Note shall be made
pro rata with respect to the outstanding Notes. Each Additional Note shall be
subject to the same terms and conditions as this Note.
2. TRANSFER OR EXCHANGE OF NOTES. The Company shall keep at its office or
agency maintained as provided in subparagraph 7(a) a register in which) the
Company shall provide for the registration of Notes and for the registration of
transfer and exchange of Notes. The holder of this Note may, at its option, and
either in person or by duly authorized attorney, surrender the same for
registration of transfer or exchange at the office or agency of the Company
maintained as provided in subparagraph 7(a), and, without expense to such holder
(except for taxes or governmental charges imposed in connection therewith),
receive in exchange therefor a Note or Notes each in such denomination or
denominations as such holder may request, dated as of the date to which interest
has been paid on the Note or Notes so surrendered for transfer or exchange, for
the same aggregate principal amount as the then unpaid principal amount of the
Note or Notes so surrendered for transfer or exchange, and registered in the
name of such person or persons as may be designated by such holder. Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed, or shall be accompanied by a written instrument of transfer,
satisfactory in form to the Company, duly executed by the holder of such Note or
his attorney duly authorized in writing. Every Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and have
the same terms as this Note. Seller shall not transfer more than 49% of the sum
of the original principal amount of this Note and the aggregate principal amount
of all Additional Notes outstanding on the date of transfer; provided, however
that no Note shall be issued in a denomination of less than $1,000,000, and
there shall be no more than three Holders at any one time. No transfer or
exchange of any Note shall be valid unless made in the foregoing manner at such
office or agency.
3. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon receipt of
evidence satisfactory to the Company of the loss,
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<PAGE>
theft, destruction or mutilation of this Note, and, in the case of any such
loss, theft or destruction, upon receipt of an affidavit of loss from the holder
hereof and indemnity if the Holder is Seller and if the Holder is another Person
indemnity and/or bond as may be reasonably required by the Company, in each case
in form reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on this Note.
4. SCHEDULED PAYMENT. The Company shall prepay 50% of the sum of the
original principal amount of this Note and any Additional Notes outstanding,
together with all accrued and unpaid interest thereon, on December 31, 2002 (the
"INITIAL PRINCIPAL PAYMENT DATE"). The Company shall repay the entire remaining
principal amount of this Note and any Additional Notes outstanding, together
with all accrued and unpaid interest thereon, on December 31, 2003 (the
"MATURITY DATE").
5. OPTIONAL PREPAYMENT. Subject to the provisions of paragraph 8 hereof,
the Company may, at any time and from time to time without premium or penalty,
prepay all or a portion of the outstanding principal amount of this Note at 100%
of the principal amount paid together with interest on the amount prepaid
accrued to the date of prepayment.
6. TIME OF PAYMENT; PAR. If any payment of principal or interest on this
Note shall become due on a Saturday, Sunday, or legal holiday under the laws of
the Commonwealth of Pennsylvania, such payment shall be made on the next
succeeding day that is not a Saturday, Sunday or such legal holiday (a "BUSINESS
DAY") and such extension of time shall in such case be included in computing
interest in connection with such payment.
7. COVENANTS. The Company covenants and agrees that, so long as any Note
shall be outstanding:
(a) MAINTENANCE OF OFFICE. The Company shall maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof, where the Notes may be
presented for registration of transfer and for exchange as herein provided,
where notices and demands to or upon the Company in respect of the Notes may be
served and where, at the option of the holders thereof, the Notes may be
presented for payment. Until the Company otherwise notifies the holders of the
Notes, said office shall be the principal office of the Company in Wayne,
Pennsylvania.
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<PAGE>
(b) PAYMENT OF TAXES. The Company shall promptly pay and discharge or
cause to be paid and discharged, before any material penalty or fine shall be
incurred with respect thereto, all lawful taxes and assessments imposed upon the
Company or any Subsidiary or upon the income and profits of the Company or any
Subsidiary, or upon any property, real, personal or mixed, belonging to the
Company or any Subsidiary, or upon any part thereof by the United States or any
State thereof; PROVIDED, HOWEVER, that neither the Company nor any Subsidiary
shall be required to pay and discharge or to cause to be paid and discharged any
such tax or assessment so long as both (x) the Company has set aside adequate
reserves for such tax or assessment and (y)(i) the Company or Subsidiary shall
be contesting the validity thereof in good faith by appropriate proceedings and
(ii) with respect to which any right to execute upon or sell any assets of the
Company or the respective Subsidiary has not matured or has been and continues
to be effectively enjoined, superseded or stayed.
(c) CORPORATE EXISTENCE. The Company shall do or cause to be done all
things necessary and lawful to preserve and keep in full force and effect its
corporate existence, rights and franchises and the corporate existence, rights
and franchises of each of its Subsidiaries, except where failure to so preserve
or keep rights and franchises will not have a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries taken as a whole or
(b) the rights and remedies of the holders under the Notes.
(d) INSURANCE. The Company will maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such corporations.
(e) KEEPING OF BOOKS. The Company shall at all times keep, and cause
each of its Subsidiaries to keep, proper books of record and account in which
proper entries will be made of its transactions in accordance with generally
accepted accounting principles consistently applied.
(f) TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its
Subsidiaries will enter into any transaction (including, without limitation, the
purchase, sale or exchange of property or the rendering of any service) with any
holder of 5% or more of any class of equity securities of the Company or with
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<PAGE>
any Subsidiary, on terms that are less favorable to the Company or such
Subsidiaries, as the case may be, than those that might be obtained at the time
from persons who are not such a holder or Subsidiary as determined by the
Company's Board of Directors (which determination shall be presumed reasonable);
provided that this subparagraph 7(f) shall not apply to (i) any transaction
between the Company and any of its Subsidiaries or between any of its
Subsidiaries; (ii) customary fees paid by the Company or a Subsidiary to members
of its Board of Directors; (iii) any transaction between the Company or any
Subsidiary and any employee of such Person that is approved by such Person's
Board of Directors (provided that approval shall not be required with respect to
normal compensation arrangements involving any such employee), (iv) payment of a
management fee to Citicorp Venture Capital Ltd. in an annual amount not to
exceed $400,000, so long as such fee is permitted to be paid by the Senior
Lender and (v) the exercise of the Warrants to purchase common stock of the
Company by World Equity Partners, L.P. in accordance with the terms and
conditions of such warrants as outstanding and in effect on the date of original
issuance of this Note.
(g) NOTICE OF DEFAULT. If any one or more Events of Default under
paragraph 9 shall occur, or if the holder of any Note shall demand payment or
take any other action permitted upon the occurrence of any such Event of
Default, the Company shall promptly give notice to all holders of the Notes,
specifying the nature of such Event of Default or of such demand or action, as
the case may be.
8. SUBORDINATION: RESTRICTIONS ON PAYMENT.
(a) Notwithstanding anything in this Note to the contrary, the
obligations of the Company to pay the principal of, and interest on, this Note
shall be subordinate and junior in right of payment, to the extent and in the
manner hereinafter set forth, to all obligations of the Company under all
Superior Debt.
(b) Upon-the occurrence of any Insolvency Event or upon any
acceleration of the Superior Debt, then:
(i) the holders of Superior Debt shall be entitled to receive payment
in full in cash of all principal of, and premium, interest, fees and
charges then due on, all Superior Debt (including, in the case of an
Insolvency Event, interest, fees and charges accruing thereon after the
commencement of any such proceedings) before the holder of this Note is
entitled to receive any payment on account of principal of, interest or
other amounts due (or past due) upon this Note, and the holders of Superior
Debt shall be entitled to receive for application in payment thereof any
payment or distribution of any kind or character, whether in
5
<PAGE>
cash, property or securities, which may be payable or deliverable in any
such proceedings in respect of this Note except that the holder of this
Note may receive securities that are subordinate to the Superior Debt at
least to the same extent as this Note; and
(ii) any payment or distribution of assets of the Company, of any kind
or character, whether in cash, property or securities, to which the Holder
would be entitled except for the provisions of this subparagraph 8(b) shall
be paid or delivered by the Company directly to the holders of all Superior
Debt in the manner provided in paragraph 8(e) below, for application in
payment thereof until all Superior Debt (including, in the case of an
Insolvency Event, interest, fees and charges accrued thereon after the date
of commencement of such proceedings) shall have been paid in full (whether
in cash or such other form of consideration acceptable to the holders of
Superior Debt in their discretion (hereinafter "Acceptable Assets")).
(c) Until all Superior Debt shall have been paid in full in
Acceptable Assets, the Company shall not, directly or indirectly, make any
payment of any amount payable with respect to this Note if at the time of such
payment there exists a default in the payment of all or any portion of principal
of, premium, if any, or interest on any Superior Debt (a "PAYMENT DEFAULT"), and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Superior Debt. In
addition, during the continuance of any other event of default with respect to
any Superior Debt pursuant to which the maturity thereof may be accelerated,
upon the occurrence of (A) receipt by the Holders of written notice from the
Senior Lender (the "Suspension Notice") or (B) if such event of default results
from the acceleration of the Notes, the date of such acceleration, no such
payment may be made by the Company upon or in respect of the Notes during a
Payment Blockage Period commencing on the earlier of the date of receipt of such
notice or the date of such acceleration. Notwithstanding the foregoing, if,
immediately prior to the time a particular payment is due hereunder, (x) no
Payment Default or Payment Blockage Period is continuing, and (y) payment in
full of the amount then due is prohibited by this paragraph 8(c), then the
Company shall be permitted to, and shall, pay to the Holder the maximum portion
of such amount as would not create a default under any of the terms of any
Superior Debt Agreement which (whether with or without notice, lapse of time or
both) would permit the holder of such Superior Debt to accelerate all or any
portion of such Superior Debt. The Company shall notify the Holder in writing of
the occurrence of a Payment Default, provided that notwithstanding anything to
the contrary in this Note, the failure of the Company so to notify the Holder of
the
6
<PAGE>
occurrence of a Payment Default shall have no effect on the obligations of the
Company or, from and after the Holder's receipt of notice (from any source), the
Holder, as set forth herein.
"Payment Blockage Period" shall mean a period of up to 179 consecutive
days, which period the Senior Lender may terminate at any time prior to the
179th day upon written notice of such termination to the Holder and the Company.
With respect to Suspension Notice(s):
(i) there shall be no limit of the number of Suspension Notices which
the Senior Lender may give;
(ii) the Senior Lender shall not be entitled to give successive
Suspension Notices based on a continuing event of default under Superior
Debt, which event of default was the basis for a prior Suspension Notice;
and
(iii) nothing contained herein shall prohibit the Senior Lender from
giving successive Suspension Notices based upon an event of default under
the Superior Debt other than the event of default which was the basis for
any prior Suspension Notice or any other event of default of which the
Senior Lender had actual knowledge of such event of default at the time it
gave such prior Suspension Notice; PROVIDED that no subsequent Suspension
Notice shall be effective prior to the expiration of a number of days equal
to the Payment Blockage Period last in effect.
(d) The holders of Superior Debt may, at any time, in their
discretion, renew, amend, extend or otherwise modify the terms and provisions of
Superior Debt so held or exercise any of their rights under the Superior Debt
including, without limitation, the waiver of defaults thereunder and the
amendment of any of the terms or provisions thereof (or any notice evidencing or
creating the same), all without notice to or assent from the Holder. No
compromise, alteration, amendment, renewal or other change of, or waiver,
consent or other action in respect of any liability or obligation under or in
respect of, any terms, covenants or conditions of the Superior Debt (or any
instrument evidencing or creating the same), whether or not such compromise,
alteration, amendment, renewal, change, waiver, consent or other action is in
accordance with the provisions of the Superior Debt (or any instrument
evidencing or creating the same), shall in any way alter or affect any of the
subordination provisions of this Note.
(e) If, notwithstanding the provisions of paragraph 8 of this Note,
any payment or distribution of any character (whether in cash, securities or
other property) or any security
7
<PAGE>
shall be received by the Holder in contravention of this paragraph 8 before all
the Superior Debt shall have been paid in full in Acceptable Assets, such
payment, distribution or security shall be held in trust for the benefit of, and
shall be immediately paid over or delivered or transferred to, the holders of
Superior Debt or their duly appointed agents for application of payment
according to the priorities of such Superior Debt and ratably among the holders
of any class of Superior Debt. Such payments received by the Holder and
delivered to the holders of the Superior Debt shall be deemed not to be a
payment on this Note for any reason whatsoever and the indebtedness under this
Note shall remain as if such erroneous payment had never been paid by the
Company or received by the Holder. In the event of the failure of any Holder to
endorse or assign any such payment, distribution or security, each holder of any
Superior Debt is hereby irrevocably authorized to endorse or assign the same.
(f) No present or future holder of Superior Debt shall be prejudiced
in its right to enforce the provisions of paragraph 8 of this Note by any act or
failure to act on the part of the Company.
(g) If there shall exist any Payment Default or Payment Blockage
Period on any Superior Debt of which the Holder has received notice (from the
Company or otherwise), no Holder shall (other than in connection with a failure
by the Company to make a scheduled principal payment) take or continue any
action, or exercise or continue to exercise any rights, remedies or powers under
the terms of this Note, or exercise or continue to exercise any other right or
remedy at law or equity that such holder might otherwise possess, to collect any
amount due and payable in respect of this Note, including, without limitation,
the acceleration of this Note (and if this Note has already been accelerated,
the Holder will, immediately upon becoming aware of the occurrence of such
Payment Default or Payment Blockage Period or upon its receipt of a Suspension
Notice or other notice that a Payment Blockage Period is in effect, reverse such
acceleration), the commencement of any foreclosure on any lien or security
interest, the filing of any petition in bankruptcy or the taking advantage of
any other insolvency law of any jurisdiction, unless and until the Superior Debt
shall have been fully and finally paid in Acceptable Assets and satisfied,
unless one or more of the holders of the Superior Debt shall have commenced any
action or taken any judicial action to enforce their rights as provided in their
respective agreements relating to, or instruments evidencing, their Superior
Debt in connection with an Insolvency Event (other than an action to dismiss a
proceeding commenced against the Company).
Notwithstanding the foregoing or any permissible action taken by the
Holder, the Holder shall not be entitled to receive
8
<PAGE>
any payment in contravention of the other provisions of this paragraph 8,
including, without limitation, subparagraphs 8(b), 8(c) and 8(e).
Notwithstanding anything to the contrary in this subparagraph 8(g), the Holder
may take such steps as are necessary to avoid a loss of its rights as a result
of the running of any applicable statute of limitations or any other statute or
rule which limits the time for filing claims, or making proofs of claims, or
would otherwise cause a claim to be time-barred.
(h) If any payment or distribution to which the Holder would otherwise
have been entitled but for the provisions of this paragraph 8 shall have been
applied, pursuant to the provisions of this paragraph 8, to the payment of the
Superior Debt, then in such case and to such extent, the Holder, together with
holders of other debt of the Company subordinated to the Superior Debt on
similar terms and conditions, (x) shall be entitled to receive from the holders
of Superior Debt then outstanding any payments or distributions received by such
Persons in excess of the amount sufficient to pay all of the Superior Debt in
full in Acceptable Assets (whether or not then due), (y) following payment in
full in Acceptable Assets of the Superior Debt, shall be entitled to receive any
and all further payments or distributions applicable to the Superior Debt, and
(z) following payment in full in Acceptable Assets of the Superior Debt, shall
be subrogated to the rights of the holders of Superior Debt to receive
distributions applicable to the Superior Debt, in each case until this Note
shall have been paid in full. If the Holder has been subrogated to the rights of
the holders of Superior Debt due to the operation of this subparagraph 8(h), the
Company agrees to take all such actions as are reasonably requested by such
Person, consistent with the rights of other Persons having similar subrogation
rights, in order to cause such Person to be able to obtain payments from the
Company with respect to such subrogation rights as soon as possible.
(i) The provisions of this paragraph 8 are solely for the purpose of
defining the relative rights of the holders of Superior Debt, on the one hand,
and the Holder on the other, against the Company and its assets, and nothing
herein is intended to or shall impair, as between the Company and the Holder,
the obligations of the Company which are absolute and unconditional, to pay to
the Holder the principal and interest on this Note as and when they become due
and payable in accordance with their terms, or is intended to or will affect the
relative rights of the Holder and creditors of the Company other than the
holders of Superior Debt, nor, except as provided in this paragraph 8, will
anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights, if any, under this paragraph 8 of the holders of Superior Debt in
respect
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<PAGE>
of cash, property or securities of the Company received upon the exercise of any
such remedy and subject to this paragraph 8.
9. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT"
shall be deemed to have occurred if:
(i) the Company shall default in the payment of (A)
principal of this Note on the date when due, whether at maturity, by
acceleration or otherwise, or (B) any interest on this Note and such
default shall continue for 5 Business Days;
(ii) default shall be made in the due observance or
performance of any other covenant, condition or agreement on the part
of the Company to be observed or performed pursuant to the terms
hereof and such default shall continue for 30 days after written
notice thereof, specifying such default and requesting that the same
be remedied, shall have been given to the Company by the holder of
this Note;
(iii) default as defined in any instrument evidencing or
under which the Company has outstanding at the time any indebtedness
for money borrowed in excess of $5,000,000 in aggregate principal
amount shall occur and as a result thereof the maturity of any such
indebtedness shall have been accelerated so that the same shall have
become due and payable prior the date on which the same would
otherwise have become due and payable and such acceleration shall not
have been rescinded or annulled within 30 days;
(iv) an Insolvency Event occurs.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
Subject in all respects to paragraph 8,
(i) If an Event of Default of the type other than that
described in clause (iv) of subparagraph 9(a) has occurred and is
continuing, the Holder may declare all or any portion of the
outstanding principal amount of the Notes due and payable and demand
immediate payment of all or any portion of the outstanding principal
amount of the Notes. If the Holder demands immediate payment of all or
any portion of the Notes, the Company shall immediately pay to such
Holder the principal amount of the Notes requested to be paid together
with all accrued and unpaid interest thereon.
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<PAGE>
(ii) If an Event of Default of the type described in clause
(iv) of subparagraph 9(a) has occurred, all of the outstanding
principal amount of the Notes shall automatically be immediately due
and payable without any notice or other action on the part of the
Holder.
(iii) Upon the occurrence of an Event of Default, each
Holder shall also have any other rights which such Person may have
pursuant to applicable law.
10. RESTRICTED PAYMENTS. So long as any portion of the principal
amount of any Note or Additional Note remains outstanding, without the prior
written consent of the Majority Holders, the Company shall not (a) declare any
dividends on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for the purchase, repurchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class of
capital stock of the Company or any Subsidiary, whether now 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 Company or
any Subsidiary, or permit any Subsidiary or Affiliate of any thereof to make any
payment on account of, or purchase or otherwise acquire, any shares of any class
of capital of the Company or any Subsidiary from any Person (such actions,
collectively, "SHAREHOLDER DISTRIBUTIONS"), (b) make any payment (whether of
principal, premium, interest or otherwise) on account of, or set apart assets
for a sinking fund or other analogous fund for the purchase, repurchase,
redemption, defeasance, retirement or other acquisition of, any Junior Debt,
whether now or hereafter outstanding, or make any other payment in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company or any Subsidiary, or permit any Subsidiary or
Affiliate of any thereof to make any payment on account of, or purchase or
otherwise acquire, any Junior Debt from any Person (such actions, collectively,
"JUNIOR DEBT DISTRIBUTIONS") or (c) enter into any agreement requiring
Shareholder Distributions or Junior Debt Distributions, except that:
(i) any Subsidiary may pay dividends to the Company or any
Wholly-Owned Subsidiary of the Company,
(ii) unless an Event of Default has occurred and is
continuing or would result therefrom, the Company may repurchase or
redeem shares of its common stock from officers or employees of the
Company or any Subsidiary who are no longer employed by the Company or
any Subsidiary, so long as (A) the Company has determined such
repurchase or redemption would not
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<PAGE>
materially adversely affect its liquidity and (B) the aggregate number
of shares acquired by the Company in connection with such repurchases
and redemptions after the date of original issuance of this Note does
not exceed (a) 2% of the shares of common stock of the Company
outstanding on the date of original issuance of this Note plus (b)
such number of shares of common stock as may have been repurchased or
redeemed in accordance with this clause (ii) after the date of
original issuance of this Note,
(iii) unless an Event of Default has occurred and is
continuing or would result therefrom, a Subsidiary may repurchase or
redeem shares of its common stock from officers or employees of such
Subsidiary who are no longer employed by the Subsidiary, so long as
(A) the Subsidiary has determined such repurchase or redemption would
not materially adversely affect its liquidity and (B) the aggregate
number of shares acquired by the Subsidiary in connection with such
repurchases and redemptions from the date of original issuance of this
Note does not exceed (a) 2% of the shares of common stock outstanding
on the date of initial capitalization of the Subsidiary plus (b) such
number of shares of common stock as may have been repurchased or
redeemed in accordance with this clause (iii) after the date of
initial issuance of this Note,
(iv) unless an Event of Default has occurred and is
continuing and there are no Additional Notes outstanding (the Company
having paid all interest due and owing to the Holders in cash), the
Company may pay regular dividends in cash on the Preferred Stock in
accordance with the terms of the Preferred Stock as in effect on the
date of original issuance of this Note and pay interest in cash on the
JSDs in accordance with the terms of the JSDs as in effect on the date
of original issuance of this Note, and
(v) unless an Event of Default has occurred and is
continuing, the Company may make payments of interest on Junior Debt
in additional Junior Debt to the extent required in the instrument
governing the Junior Debt.
11. FINANCIAL STATEMENTS. So long as any portion of the principal
amount of this Note remains outstanding, the Company will deliver to the Holders
(a) within 120 days after the end of each fiscal year, audited consolidated
statements of income, changes in stockholders' equity and cash flows for such
fiscal
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<PAGE>
year and audited consolidated balance sheets as of the end of such fiscal year,
all prepared in accordance with United States generally accepted accounting
principles, consistently applied; and (b) within 45 days after the end of each
fiscal quarter, unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for such fiscal quarter and unaudited
balance sheets as at the end of such fiscal quarter, all prepared in accordance
with United States generally accepted accounting principles, consistently
applied. Seller shall not disclose such financial statements to any Person other
than (i) Seller's executive officers, (ii) prospective purchasers of a portion
of the Notes that are Qualified Institutional Buyers (as such term is used in
Rule 144A under the Securities Act of 1933, as amended) and (iii) with the prior
written consent of the Company (which shall not be unreasonably withheld) any
other Person.
12. TRANSFER RESTRICTIONS. This Note has not been registered under the
Securities Act of 1933, as amended or any applicable state securities law. If
the Holder desires to transfer this Note, such Person at its sole cost and
expense first must furnish the Company with (i) a written opinion reasonably
satisfactory to the Company in form and substance from counsel reasonably
satisfactory to the Company to the effect that the Holder may transfer this Note
as desired without registration under the Securities Act or any applicable state
securities law and (ii) a written acknowledgement executed by the transferee
stating that such transferee is aware (x) of the Subordination provisions set
forth in paragraph 8 hereof and (y) that the Company is party to certain
agreements that restrict or prohibit the Company from amending this Note without
the prior written consent of the holders of certain Superior Debt.
13. AMENDMENT AND WAIVER. This Note may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the written consent of the
Majority Holders.
14. CANCELLATION. After all principal and accrued interest at any time
owed on this Note has been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
15. PLACE OF PAYMENT: NOTICES. Payments of principal and interest and
any notice hereunder are to be delivered to the Holder at the following address:
Teleflex Incorporated
630 West Germantown Pike, Suite 450
Plymouth Meeting, PA 19462
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<PAGE>
Attention: Steven K. Chance
Vice President and General Counsel
or to such other address as specified in a written notice delivered to the
Company by Holder. Notices sent by the Company shall be deemed received when
delivered personally or one (1) Business Day after being sent by Federal Express
or other overnight carrier or three (3) Business Days after being sent by
certified or registered mail.
16. GOVERNING LAWS. The validity, construction, and interpretation of
this Note shall be governed by the internal laws, and not the laws of conflicts,
of the Commonwealth of Pennsylvania.
17. DEFINITIONS. Unless otherwise indicated herein, capitalized terms
used in this Note shall have the following meanings:
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal or
state law for the relief of debtors.
"INDEBTEDNESS" shall mean, with respect to any Person at a particular
time, without duplication, (a) indebtedness for borrowed money or for~the
deferred purchase price of property or services in respect of which such Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) or any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such Person, including
guarantees in the form of an agreement to repurchase or reimburse, and (c)
obligations under capitalized leases in respect of which obligations such Person
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss.
"INSOLVENCY EVENT" means any dissolution, winding up, liquidation,
reorganization, arrangement, adjustment, protection, relief or composition of
the Company or its debts, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership, arrangement, reorganization, relief or other
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Company.
"JSD" means the Junior Subordinated Debt Securities of the Company
outstanding on the date of original issuance of this Note.
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"JUNIOR DEBT" means the Company's JSDs.
"MAJORITY HOLDERS" means the holders of Notes representing a majority
of the principal amount then outstanding under all of the Notes.
"NOTES" means all of the Notes issued pursuant to the Purchase
Agreement.
"PREFERRED STOCK" means the 14 percent Preferred Stock due on or after
July 21, 2004 of the Company issued and outstanding on the date of original
issuance of this Note.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof.
"SENIOR LENDER" means the Lender or Lenders as defined in the Senior
Loan Agreement.
"SENIOR LOAN AGREEMENT" means that certain Financing and Security
Agreement, dated as of July 22, 1993, by and among The CIT Group/Business
Credit, Inc., as Lender and as Agent for the Lender(s) named or to be named
therein, the Company and certain Subsidiaries of the Company as Borrowers and
certain Subsidiaries and affiliates of the Company as Guarantors, including all
amendments, modifications, supplements, waivers, extensions and refinancings
thereof.
"SENIOR NOTE" means the promissory note(s) issued or to be issued to
the Senior Lender by the Company and/or certain of its Subsidiaries and
affiliates pursuant to the Senior Loan Agreement.
"SUBSIDIARY" means any Person which the Company has the direct or
indirect right to control, direct or cause direction of management and policies
of, whether through the ownership of voting securities, by contract or
otherwise.
"SUPERIOR DEBT" means all obligations under the Indebtedness evidenced
by the Senior Note and such additional Indebtedness incurred by the Company from
time to time unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding,it is provided that such obligations
are not superior in right of payment to the Notes; PROVIDED, HOWEVER, that
Superior Debt shall not be deemed to include any Junior Debt or (i) any
obligations of the Company to any of its Subsidiaries, (ii) the Company's
$13,500,000 Subordinated Promissory Note dated June 1, 1993 issued by Holdings
to MDR Corporation, (iii) any obligations of the Company
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to any person from which, or from any Affiliate of which, the Company or any of
its Affiliates obtained, directly or indirectly, any goods or services in a
transaction substantially concurrent with the incurrence by the Company of such
obligations, (iv) any liability for federal, state, local or other taxes owed or
owing by the Company and (v) any accounts payable or other liability to trade
creditors arising in the ordinary course of business.
"SUPERIOR DEBT AGREEMENT" means any agreement relating to, or
instrument evidencing, any Superior Debt.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all of the capital stock
of which is owned by the Company or by another Wholly-Owned Subsidiary of the
Company.
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on the date first above written.
THE TRIUMPH GROUP HOLDINGS, INC
By: /s/ Richard C. Ill
---------------------------------
Its: President
---------------------------------
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this 31st
day of July, 1996, by and among The Triumph Group, Inc., a Delaware corporation,
or its nominee ("Buyer"), Advanced Materials Technologies Inc., an Arizona
corporation (the "Company"), Daryl Jay Donkersloot ("Mr. Donkersloot") and Gayla
Sue Donkersloot ("Mrs. Donkersloot") (with Mr. Donkersloot and Mrs. Donkersloot
hereinafter collectively referred to as the "Stockholders").
RECITALS
The Company provides turbine engine coatings technologies to gas turbine
engine manufacturers and repairs and recoating services in the gas turbine
engine aftermarket. All of the issued and outstanding shares of capital stock
of the Company are owned by the Stockholders.
The Stockholders desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares of capital stock of the Company (the "Shares"),
for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms have the
meanings set forth in this Section 1:
"ACQUIRED COMPANIES" means the Company and Special Processes of
Arizona, Inc., an Arizona corporation which is a wholly owned Subsidiary of the
Company.
"BALANCE SHEET" has the meaning set forth in Section 3.4.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously and as cost effectively as possible.
"BUYER" has the meaning set forth in the first paragraph of this
Agreement.
"CLOSING" has the meaning set forth in Section 2.3.
"CLOSING DATE" means the date and time as of which the Closing
actually takes place.
<PAGE>
"COMPANY" has the meaning set forth in the Recitals of this Agreement.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" has the meaning set forth in Section 11.2.
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law.
"ENVIRONMENTAL LAW" means any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
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(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done to
public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES" means any real property, leaseholds or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION" means any approval, Consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any governmental body or pursuant to any
Legal Requirement.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from the Facilities or any part thereof into the Environment, and any
other act, business, operation or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
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<PAGE>
"INTERIM BALANCE SHEET" has the meaning set forth in Section 3.4.
"IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the IRC or any
successor law.
"IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of
a particular fact or other matter if (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter. A Person other than an individual will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other governmental body or by any arbitrator.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"PLAN" has the meaning set forth in Section 3.13.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any governmental body or arbitrator.
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<PAGE>
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"RELATED PERSON" means with respect to a particular individual: (a)
each other member of such individual's Family; (b) any Person that is
directly or indirectly controlled by such individual or one or more members
of such individual's Family; (c) any Person in which such individual or
members of such individual's Family hold (individually or in the aggregate) a
Material Interest; and (d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor or trustee (or in a similar capacity). "Related
Person" means with respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person; (b) any Person that holds a Material Interest in
such specified Person; (c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity); (d) any Person in which such specified Person holds a Material
Interest; (e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and (f) any
Related Person of any individual described in clause (b) or (c). For
purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's
spouse within the second degree, and (iv) any other natural person who
resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or
equity securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the Environment,
whether intentional or unintentional.
"REPRESENTATIVE" means, with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" means the Acquired Companies and the Stockholders.
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<PAGE>
"SHARES" has the meaning set forth in the Recitals of this Agreement.
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"THREAT OF RELEASE" means a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"THREATENED" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any written demand or
statement has been made or any written notice has been given that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken or otherwise pursued in
the future.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, the Stockholders will sell and transfer the Shares to Buyer, and
Buyer will purchase the Shares from the Stockholders.
2.2 PURCHASE PRICE. The purchase price for the Shares will be
$7,500,000 (the "Purchase Price").
2.3 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at the offices of Nearhood & Associates, P.C.,
Suite 114N, 7501 East McCormick Parkway, Scottsdale, Arizona 85258, at 10:00
a.m. (local time), on July 31, 1996.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Buyer will deliver an amount equal to the Purchase Price by wire
transfer of same day funds to an account specified by the Stockholders.
(b) Upon bank acknowledgement of receipt of the Purchase Price wired
by Buyer to the Stockholders' account, the Stockholders will deliver to Buyer
certificates representing the Shares, accompanied by duly executed stock powers
(the "Certificates"), for transfer to Buyer, with signatures guaranteed.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS. The Acquired Companies and the
Stockholders (collectively, "Sellers"), jointly and severally, represent and
warrant to Buyer that:
3.1 ORGANIZATION AND GOOD STANDING. Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Arizona, with full corporate power and authority to conduct
its business as it is now being conducted. Each Acquired Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
3.2 AUTHORITY AND LEGAL CAPACITY; DUE AUTHORIZATION, EXECUTION AND
DELIVERY; NO CONFLICT.
(a) The Company has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement. The
execution, delivery, and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby, subject to the conditions
set forth herein, have been duly authorized by all necessary corporate action on
the part of the Company. Each Stockholder has the full power and legal right
and authority to execute and deliver this Agreement and to perform his
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by Sellers. This Agreement constitutes the legal, valid
and binding obligation of Sellers, enforceable against Sellers in accordance
with its terms.
(b) Except as set forth in SCHEDULE 3.2 attached hereto, neither the
execution and delivery of this Agreement nor the consummation or performance of
any obligations hereunder will, directly or indirectly (i) contravene, conflict
with or result in a violation of the charter or Bylaws of any Acquired Company;
(ii) contravene, conflict with or result in a violation of, or give any
governmental body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any Seller, or any of the
assets owned or used by any Acquired Company, may be subject; (iii) contravene,
conflict with or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any material Contract. Except as set forth in SCHEDULE 3.2 attached hereto,
Sellers are not required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the transactions contemplated by this Agreement.
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3.3 CAPITALIZATION. The authorized equity securities of the Company
consist of 1,000,000 shares of Common Stock, no par value per share ("Common
Stock"), of which 20,613 shares of Common Stock are currently issued and
outstanding, which, in the aggregate, constitute the Shares. Except as set
forth in SCHEDULE 3.3 attached hereto, the Stockholders are the record and
beneficial owners and holders of the Shares, free and clear of all Encumbrances.
With the exception of the Shares (which are owned by the Stockholders), all of
the outstanding equity securities and other securities of each Acquired Company
are owned of record and beneficially by one or more of the Acquired Companies,
free and clear of all Encumbrances. There are no Contracts relating to the
issuance or transfer of any equity securities or other securities of any
Acquired Company (other than a stock option agreement between Frank Boorboor and
the Company and a stock purchase agreement between Frank Boorboor and Mr.
Donkersloot, copies of which have been provided to Buyer (collectively, the
"Boorboor Agreements"), and no legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. The Acquired Companies neither own nor have any
Contract to acquire any equity securities or other securities of any Person or
any direct or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer:
(a) consolidated reviewed balance sheets of the Acquired Companies as at March
31 in each of the years 1993 through 1995, and the related consolidated reviewed
statements of income, changes in stockholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of Valentine &
Bond Ltd., independent certified public accountants, (b) a consolidated reviewed
balance sheet of the Acquired Companies as at March 31, 1996 (including the
notes thereto, the "Balance Sheet"), and the related consolidated reviewed
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, together with the report thereon of Valentine & Bond
Ltd., independent certified public accountants, and (c) a consolidated unaudited
balance sheet of the Acquired Companies as at June 30, 1996 (including the notes
thereto, the "Interim Balance Sheet"), and the related consolidated unaudited
statements of income, changes in stockholders' equity, and cash flow for the
three months then ended, including in each case the notes thereto. Except as
set forth in SCHEDULE 3.4 attached hereto, such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Acquired Companies as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP; the financial statements referred to in
this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. No financial statements of
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any Person other than the Acquired Companies are required by GAAP to be included
in the financial statements of the Acquired Companies.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of the Acquired Companies, all of which have been
made available to Buyer, have been maintained in accordance with sound business
practices.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 3.6 attached hereto
contains a true and complete list of all real property, leaseholds, or other
interests therein owned by any Acquired Company. The Acquired Companies own
(with good and marketable title in the case of real property) all the properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
reflected as owned in the books and records of the Acquired Companies, including
all of the properties and assets reflected in the Interim Balance Sheet (except
for personal property sold since the date of the Interim Balance Sheet in the
ordinary course of business), and all of the properties and assets purchased or
otherwise acquired by the Acquired Companies since the date of the Interim
Balance Sheet (except for personal property acquired and sold since the date of
the Interim Balance Sheet in the ordinary course of business and consistent with
past practice). Except as set forth in SCHEDULE 3.6 attached hereto, all
material properties and assets reflected in the Interim Balance Sheet are free
and clear of all Encumbrances.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. To Sellers' Knowledge, the
buildings, plants, structures, and equipment of the Acquired Companies are
structurally sound, are in good operating condition and repair and are adequate
for the uses to which they are being put. None of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. To Sellers' Knowledge, the building, plants, structures, and equipment of
the Acquired Companies are sufficient for the continued conduct of the Acquired
Companies' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. Unless paid prior to the Closing Date, the Accounts Receivable are
current and collectible net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the
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Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). Subject to such reserves, each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within 180 days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off, other than returns in
the ordinary course of business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. SCHEDULE 3.8 attached hereto contains a true and complete list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 INVENTORY. All inventory of the Acquired Companies, whether or
not reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Acquired Companies
as of the Closing Date, as the case may be. All inventories not written off have
been priced at the lower of cost or first in, first out basis. The quantities
of each item of inventory (whether raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable in the present circumstances of the
Acquired Companies' operations.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.10
attached hereto, the Acquired Companies have no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for liabilities or obligations reflected or reserved
against in the Balance Sheet or the Interim Balance Sheet and current
liabilities incurred in the ordinary course of business since the respective
dates thereof.
3.11 TAXES.
(a) Except as set forth in SCHEDULE 3.11 attached hereto, the Acquired
Companies have filed or caused to be filed all tax returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Legal Requirements.
Sellers have made available to Buyer copies of all such tax returns filed since
1993. Except as set forth in SCHEDULE 3.11 attached hereto, the Acquired
Companies have paid, or made provision for the payment of, all taxes that have
or may have become due pursuant to those tax returns or otherwise, or pursuant
to any assessment received by any Acquired Company, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Interim Balance
Sheet.
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(b) Except as set forth in SCHEDULE 3.11 attached hereto, the charges,
accruals, and reserves with respect to taxes on the respective books of each
Acquired Company are adequate (determined in accordance with GAAP) and are at
least equal to that Acquired Company's liability for taxes. There exists no
proposed tax assessment against any Acquired Company except as disclosed in the
Interim Balance Sheet. All taxes that any Acquired Company is or was required
by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper governmental
body or other Person.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Acquired Companies, taken as
a whole, and no event has occurred or circumstance exists that may result in
such a material adverse change.
3.13 EMPLOYEE BENEFITS.
(a) For purposes of this Section 3.13, the following terms have the
meanings set forth below:
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation
owed, adopted, or followed by an Acquired Company or an ERISA Affiliate of an
Acquired Company.
"COMPANY PLAN" means all Plans of which an Acquired Company or an
ERISA Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has participated.
All references to Plans are to Company Plans unless the context requires
otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of any
Acquired Company or any ERISA Affiliate of an Acquired Company.
"ERISA AFFILIATE" means, with respect to an Acquired Company, any
other Person that, together with the Company, would be treated as a single
employer under IRC Section 414.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees or agents, other than obligations, arrangements and
practices that are embodied in Plans.
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"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PENSION PLAN" has the meaning set forth in ERISA
Section 3(2)(A).
"PLAN" has the meaning set forth in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning set forth in ERISA
Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. Section 1301 et seq., other than Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
Section 501(c)(9).
"WELFARE PLAN" has the meaning set forth in ERISA
Section 3(1).
(b) SCHEDULE 3.13 attached hereto contains a true and complete list of
all Company Plans and Company VEBAs of which an Acquired Company or any ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or in which an
Acquired Company or any ERISA Affiliate of an Acquired Company participates or
has participated, or to which an Acquired Company or any ERISA Affiliate of an
Acquired Company contributes or has contributed and in which employees of the
Acquired Companies participate, and identifies as such all Company Plans that
are (i) defined benefit Pension Plans, (ii) Qualified Plans other than Pension
Plans or (iii) Multiemployer Plans.
(c) With respect to Company Plans and Company VEBAs identified in
SCHEDULE 3.13 attached hereto, Sellers have delivered to Buyer:
(i) all documents that set forth the terms of each Company
Plan, Company Other Benefit Obligation or Company VEBA and of any related trust,
including:
(A) all plan descriptions and summary plan
descriptions of Company Plans for which Sellers or the Acquired Companies are
required to prepare, file and distribute, and
(B) all summaries and descriptions furnished to
participants and beneficiaries regarding Company Plans, Company Other Benefit
Obligations and Company VEBAs for which a summary plan description is not
required;
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(ii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Acquired Companies and the ERISA Affiliates
of the Acquired Companies, and all collective bargaining agreements pursuant to
which contributions are being made or obligations are owed by such entities;
(iii) all registration statements filed with respect to
any Company Plan;
(iv) all insurance policies purchased by or to provide
benefits under any Company Plan;
(v) all Contracts with third party administrators,
actuaries, investment managers, consultants and other independent contractors
that relate to any Company Plan, Company Other Benefit Obligations or Company
VEBA;
(vi) the most recent reports submitted by third party
administrators, actuaries, investment managers, consultants or other independent
contractors with respect to any Company Plan, Company Other Benefit Obligation
or Company VEBA;
(vii) the most current Form 5500 with respect to each
Company Plan, including all schedules thereto and the opinions of independent
accountants;
(viii) all notices that were given by any Acquired
Company or any ERISA Affiliate of an Acquired Company or any Company Plan to the
IRS, the PBGC, or any participant or beneficiary, pursuant to statute, within
the two years preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.13;
(ix) all notices that were given by the IRS, the PBGC,
or the Department of Labor to any Acquired Company, any ERISA Affiliate of an
Acquired Company or any Company Plan within the two years preceding the date of
this Agreement;
(x) with respect to Qualified Plans and VEBAs, the
most recent determination letter for each Company Plan that is a Qualified Plan;
and
(xi) with respect to Title IV Plans, the most recent
Form PBGC-1.
(d) With respect to employees of the Company, except as set forth in
SCHEDULE 3.13 attached hereto:
(i) The Acquired Companies have performed, in all
material respects, their respective obligations under all Company Plans, Company
Other Benefit Obligations and Company VEBAs. The Acquired Companies have made
appropriate entries in their financial
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records and statements for all obligations and liabilities under such Plans,
VEBAs and Obligations that have accrued but are not due.
(ii) The Acquired Companies, with respect to all
Company Plans, Company Other Benefit Obligations and Company VEBAs, are, and
each Company Plan, Company Other Benefit Obligation and Company VEBA in which an
Acquired Company participates or to which an Acquired Company contributes is, in
material compliance with ERISA, the IRC and other applicable laws, including the
provisions of such laws expressly mentioned in this Section 3.13, including
that:
(A) No transaction prohibited by ERISA Section 406
and no "prohibited transaction" under IRC Section 4975(c) have occurred with
respect to any Company Plan.
(B) No Seller or Acquired Company has any
liability to the IRS with respect to any Plan, including any liability imposed
by Chapter 43 of the IRC.
(C) No Seller or Acquired Company has any
liability to the PBGC with respect to any Plan or has any liability under ERISA
Section 502 or Section 4071.
(D) All filings required by ERISA and the IRC as
to each Plan have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or
accrued with respect to all Company Plans, Company Other Benefit Obligations
and Company VEBAs are deductible under IRC Section 162 or Section 404. No
amount, or any asset of any Company Plan or Company VEBA, is subject to tax
as unrelated business taxable income.
(iii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or Proceeding involving, any
Company Plan, Company Other Benefit Obligation or Company VEBA is pending or, to
Sellers' Knowledge, is Threatened.
(iv) Each Company Plan which is a Qualified Plan is in
compliance with IRC Section 401(a); each trust for each such Plan is exempt from
federal income tax under IRC Section 501(a) and each such Plan has been operated
in compliance with applicable laws.
(v) Each Acquired Company and each ERISA Affiliate
of an Acquired Company has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC Section 402.
(vi) The Acquired Companies have paid all amounts due
to the PBGC pursuant to ERISA Section 4007.
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(vii) No Acquired Company or any ERISA Affiliate of an
Acquired Company has ceased operations at any Facility or has withdrawn from any
Title IV Plan in a manner that would subject any such entity or Sellers to
liability under ERISA Section 4062(e), Section 4063, or Section 4064.
(viii) No Acquired Company or any ERISA Affiliate of an
Acquired Company has filed a notice of intent to terminate any Plan or has
adopted any amendment to treat a Plan as terminated. The PBGC has not
instituted proceedings to treat any Company Plan as terminated. No event has
occurred or circumstance exists that may constitute grounds under ERISA Section
402 for the termination of, or the appointment of a trustee to administer, any
Company Plan.
(ix) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could require the
provision of security under ERISA Section 307 or IRC Section 401(a)(29).
(x) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency as of
the last day of the current plan year of any such Plan.
(xi) The actuarial report for each Pension Plan of each
Acquired Company and each ERISA Affiliate of an Acquired Company fairly presents
the financial condition and the results of operations of each such Plan in
accordance with GAAP.
(xii) Since the last valuation date for each Pension
Plan of each Acquired Company and each ERISA Affiliate of an Acquired Company,
no event has occurred or circumstance exists that would increase the amount of
benefits under any such Plan or that would cause the excess of Plan assets over
benefit liabilities (as defined in ERISA Section 4001) to decrease, or the
amount by which benefit liabilities exceed assets to increase, except insofar as
such event or circumstance has occurred as a result of the operation of the
Plan.
(xiii) Except with respect to the transaction
contemplated by this Agreement, no reportable event (as defined in ERISA Section
4043 and in regulations issued thereunder) has occurred.
(xiv) Except with respect to annual premiums, no Seller
or Acquired Company has Knowledge of any facts or circumstances that may give
rise to any liability of any Seller, any Acquired Company or Buyer to the PBGC
under Title IV of ERISA.
(xv) No Acquired Company or any ERISA Affiliate of an
Acquired Company has withdrawn from any Multiemployer Plan with respect to which
there is any outstanding liability as of the date of this Agreement. No event
has occurred or circumstance exists that presents a risk of the occurrence of
any withdrawal from, or
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the participation, termination, reorganization, or insolvency of, any
Multiemployer Plan that could result in any liability of any Acquired Company or
Buyer to a Multiemployer Plan.
(xvi) No Acquired Company or any ERISA Affiliate of an
Acquired Company has received notice from any Multiemployer Plan that it is in
reorganization or is insolvent, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise tax, or that
such Plan intends to terminate or has terminated.
(xvii) Except to the extent required under ERISA
Section 601 et seq. and IRC Section 4980B, no Acquired Company provides health
or welfare benefits for any retired or former employee or is obligated to
provide health or welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xviii) The Acquired Companies have substantially
complied with the provisions of ERISA Section 601 et seq. and IRC Section
4980B.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in
SCHEDULE 3.14 attached hereto, (i) each Acquired Company is in compliance with
each Legal Requirement that is applicable to it, except where the failure so to
comply would not reasonably be expected, in the aggregate, to have a material
adverse effect on the operations or assets of the Acquired Company; and (ii) no
Acquired Company has received, at any time since September 30, 1995, any written
notice or other written communication from any governmental body regarding any
actual or potential material violation of, or material failure to comply with,
any Legal Requirement.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in SCHEDULE 3.15 attached hereto, there is no
pending Proceeding (i) that has been commenced by or against any Acquired
Company; or (ii) that challenges, or that may have the effect of preventing or
delaying, any of the transactions contemplated by this Agreement; and, to
Sellers' Knowledge, no such Proceeding has been Threatened.
(b) Except as set forth in SCHEDULE 3.15 attached hereto, there is no
Order to which any Acquired Company, or any of the assets owned or used by any
Acquired Company, is subject that would reasonably be expected to have a
material adverse effect on the operations or assets of any Acquired Company.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 3.16 attached hereto, since the date of the Interim Balance Sheet, the
Acquired Companies have conducted their
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businesses only in the ordinary course of business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock, except as set forth in the
Boorboor Agreements;
(b) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition or prospects of
the Acquired Companies, taken as a whole;
(c) entry into, termination of or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction, involving a
total remaining commitment by or to any Acquired Company of at least $25,000; or
(d) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any material asset or property of any
Acquired Company or mortgage, pledge, or imposition of any Encumbrance on any
material asset or property of any Acquired Company.
Since the date of the Interim Balance Sheet, Sellers have not (a)
taken any affirmative action, or failed to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur; (b) declared, set aside or paid any
dividends or other distributions in respect of any Acquired Company's capital
stock or redeemed, purchased or otherwise acquired any shares of any Acquired
Company's capital stock (except pursuant to the Boorboor Agreements); (c)
amended any Acquired Company's charter or Bylaws; or (d) made adjustments to the
compensation of, or bonuses to, any Acquired Company's employees or entered into
any new employment, severance or similar agreements or modified any such
existing agreements.
3.17 CONTRACTS; NO DEFAULTS.
(a) SCHEDULE 3.17 attached hereto contains a true and complete list
of:
(i) each Contract that involves performance of services or
delivery of goods or materials to or by one or more Acquired Companies of an
amount or value in excess of $25,000
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(other than the purchase of inventory in the ordinary course of business);
(ii) each Contract that was not entered into in the ordinary
course of business and that involves expenditures or receipts of one or more
Acquired Companies in excess of $25,000;
(iii) each collective bargaining agreement and other Contract
to or with any labor union or other employee representative of a group of
employees;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement and other Contract affecting the
ownership of, leasing of, title to, use of or any leasehold or other interest
in, any real or personal property;
(v) each licensing agreement or other Contract with respect
to patents, trademarks, copyrights or other intellectual property, including
agreements with current or former employees, consultants or contractors
regarding the appropriation or the non-disclosure of any intellectual property,
to which any Acquired Company is a party;
(vi) each joint venture, partnership and other Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person; and
(vii) each Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired Company or
any Affiliate of an Acquired Company to engage in any line of business or to
compete with any Person.
(b) Except as set forth in SCHEDULE 3.17 attached hereto, each
Acquired Company is in compliance with applicable terms and requirements of each
Contract under which such Acquired Company has any obligation or liability or by
which such Acquired Company or any of the assets owned or used by such Acquired
Company is bound.
3.18 INSURANCE.
(a) Sellers have delivered to Buyer true and complete copies of all
policies of insurance (and applications therefor) to which any Acquired Company
is a party or under which any Acquired Company, or any director of any Acquired
Company, is covered.
(b) No Seller or Acquired Company has received (i) any written refusal
of coverage, or (ii) any written notice of cancellation or any other written
indication that any insurance policy is no longer in full force or effect or
will not be renewed
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or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.19
attached hereto:
(a) To Sellers' Knowledge, each Acquired Company is in compliance
with, in all material respects, and is not in violation of or liable under,
in any material respect, any Environmental Law. No Seller or Acquired
Company received any actual or Threatened order, notice, or other
communication from (i) any governmental body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or Threatened obligation to undertake
or bear the cost of any Environmental, Health and Safety Liabilities with
respect to any of the Facilities or any other properties or assets in which
Sellers or any Acquired Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers
or any Acquired Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending (in which Sellers have received notice) or,
to Sellers' Knowledge, Threatened claims, Encumbrances, or other restrictions
of any nature, resulting from any Environmental, Health and Safety
Liabilities or arising under or pursuant to any Environmental Law, with
respect to or affecting any of the Facilities or any other properties and
assets in which any Acquired Company has an interest.
(c) Except as set forth on SCHEDULE 3.19 attached hereto, there are no
Hazardous Materials present on or in the Environment at the Facilities or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. None of Sellers, any other Person for
whose conduct they are or may be held responsible or, to Sellers' Knowledge, any
other Person has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Sellers have or had an interest,
except in full compliance with all applicable Environmental Laws.
(d) There has been no Release or, to Sellers' Knowledge, Threat of
Release of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced,
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imported, used or processed from or by the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which Sellers have
or had an interest, or, to Sellers' Knowledge, any geologically or
hydrologically adjoining property, whether by Sellers or any other Person.
(e) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests or monitoring possessed or
initiated by Sellers pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by Sellers or any
other Person for whose conduct they are or may be held responsible with
Environmental Laws.
3.20 LABOR RELATIONS; COMPLIANCE. Except as described in SCHEDULE
3.17 attached hereto, no Acquired Company is a party to any collective
bargaining agreement. Since the date of the Interim Balance Sheet, there is not
presently pending or existing, and to Sellers' Knowledge there is not
Threatened, (a) any strike, slowdown, picketing, or work stoppage, (b) any
Proceeding against any Acquired Company relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National Labor
Relations Board, affecting any Acquired Company that would reasonably be
expected to have a material adverse effect on any Acquired Company, or (c) any
application for certification of a collective bargaining agent.
3.21 INTELLECTUAL PROPERTY.
(a) PATENTS. SCHEDULE 3.21 attached hereto contains a true and
complete list of all patents and patent applications owned by the Acquired
Companies (collectively, the "Patents"). One of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Patents, free and
clear of all Encumbrances and other adverse claims. No Patent is now involved
in any interference, reissue, reexamination or opposition proceeding and, to
Sellers' Knowledge, no such action is Threatened with respect to any of the
Patents. To Sellers' Knowledge, no Patent is infringed or has been challenged
or threatened in any way. To Sellers' Knowledge, none of the products
manufactured and sold, nor any process or know-how used, by the Acquired
Companies infringes or is alleged to infringe any patent or other proprietary
right of any other Person.
(b) TRADEMARKS. SCHEDULE 3.21 contains a true and complete list of
all registered and unregistered trademarks and service marks owned by the
Acquired Companies (the "Marks"). One of the Acquired Companies is the owner of
all right, title, and interest in and to each of the Marks, free and clear of
all Encumbrances and other adverse claims. No Mark is now involved in any
opposition, invalidation or cancellation proceeding and, to Sellers' Knowledge,
no such action is Threatened with the respect to any of the Marks. To Sellers'
Knowledge, no Mark is infringed
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or has been challenged or threatened in any way. To Sellers' Knowledge, none of
the Marks used by the Acquired Companies infringes or is alleged to infringe any
trade name, trademark or service mark of any third party.
3.22 CUSTOMERS. SCHEDULE 3.22 contains a true and complete list of
all customers of each Acquired Company who or which accounted for five percent
(5%) or more of such Acquired Company's gross sales in any of the three most
recent years. Sellers have received no notice that, and have no reason to
believe that, any customer of the Acquired Companies does not plan to continue
to do business with the Acquired Companies or plans to reduce its volume of
orders from the Acquired Companies or will not do business with Buyer on
substantially the same terms and conditions as such customer currently is doing
business with the Acquired Companies.
3.23 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers have caused all indebtedness owed to the
Acquired Companies by any Stockholder or Related Person of any Seller to be paid
in full prior to Closing.
3.24 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Schedules attached hereto omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading. Except as set forth
in this Agreement, Sellers make no representations or warranties, express or
implied, regarding the Shares or the Acquired Companies.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Sellers that:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
4.2 AUTHORITY; DUE AUTHORIZATION, EXECUTION AND DELIVERY. Buyer has
the corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement. The execution, delivery, and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer. This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
4.3 NO CONFLICT. Except as set forth in SCHEDULE 4.3 attached hereto,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the transactions contemplated by this Agreement will give
any Person the right to prevent, delay, or otherwise interfere with any of the
transactions contemplated by this Agreement pursuant to (a) any
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provision of Buyer's charter or Bylaws; (b) any resolution adopted by the Board
of Directors or stockholders of Buyer; (c) any Legal Requirement or Order to
which Buyer may be subject; or (d) any Contract to which Buyer is a party or by
which Buyer may be bound. Except as set forth in SCHEDULE 4.3 attached hereto,
Buyer is not required to obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the transactions contemplated by this Agreement.
4.4 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.5 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement. To Buyer's Knowledge, no such
Proceeding has been Threatened.
4.6 AVAILABILITY OF FUNDS. Buyer has sufficient funds available to it
to enable it to consummate the transactions contemplated by this Agreement.
5. COVENANTS OF SELLERS. [INTENTIONALLY OMITTED.]
6. COVENANT OF BUYER. [INTENTIONALLY OMITTED.]
7. EMPLOYMENT AND EMPLOYEE BENEFIT ARRANGEMENTS.
7.1 EMPLOYMENT.
(a) CONTINUATION OF EMPLOYMENT. Following the Closing Date, Buyer
will cause the Acquired Companies to continue to employ all employees of the
Acquired Companies as of the Closing Date, including, without limitation, all
employees who on the Closing Date are on layoff or leave of absence and who,
under applicable policies and procedures of the Acquired Companies as in effect
on the day immediately preceding the Closing Date, are entitled to recall or
return rights which have not yet expired (including but not limited to
circumstances where such employees have the right to be reinstated to active
employment under the terms of an applicable collective bargaining agreement or
applicable law, including, without limitation, the Family and Medical Leave Act
of 1993, as amended, and the Americans with Disabilities Act of 1990, as
amended, or upon the expiration of any holiday, vacation or leave taken pursuant
to the policies or practices of the Acquired Companies as in effect on the day
immediately preceding the Closing Date), who Buyer reasonably determines are
able, with or without reasonable accommodation, to adequately perform all of the
essential functions of the job that they held immediately prior to the Closing;
PROVIDED, HOWEVER, that neither Buyer nor the Acquired Companies is required to
continue such employment thereafter.
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(b) INSTALLATION OF BUYER'S BENEFIT PLANS. On or prior to the Closing
Date, the Acquired Companies shall contribute to the accounts of participants
under each Company Plan any contributions that the Acquired Companies are
required to make with respect to such accounts based on service as of the
Closing Date. As of the Closing Date, Buyer will establish retirement and
welfare benefit plans (including, without limitation, group health insurance),
programs and arrangements for the benefit of the Acquired Companies' employees
that are substantially comparable to those plans, programs and arrangements
currently maintained by Buyer and its affiliates for their current employees.
Buyer will cause the Acquired Companies to recognize, for all purposes,
including but not limited to eligibility, vesting, level of benefits and benefit
accruals, all service, compensation and plan participation credited to each
employee by the Acquired Companies through the Closing Date. Those employee
benefit plans, programs and arrangements in effect prior to the Closing Date for
the benefit of the Acquired Companies' employees will be terminated by Buyer.
Notwithstanding the foregoing, it is Buyer's expectation to maintain the
Seller's existing benefit arrangements for a brief period of time following the
Closing Date, to extend participation in the Buyer's 401(k) retirement plan on
approximately October 1, 1996, and to convert the Seller's health, dental,
vision and life insurance benefits into comparable (although not necessarily
identical) arrangements maintained by the Buyer on approximately November 1,
1996. Buyer may require employees covered under the Buyer's above-described
welfare benefit arrangements to pay a portion of the cost of coverage.
(c) PERSONNEL INFORMATION. Sellers will furnish to Buyer such
information in its personnel files as Buyer may reasonably request in connection
with determining whether to continue or resume the employment of any person
currently employed by the Acquired Companies after the Closing Date.
7.2 NO THIRD PARTY BENEFICIARY RIGHTS. Nothing in this Section 7 will
create any third party beneficiary rights in any employee or former employee of
the Acquired Companies or Buyer (including any dependent or beneficiary thereof)
to continued or resumed employment or to benefits that may be provided under any
employee benefits plan or arrangement.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
purchase the Shares and to take the other actions required to be taken by Buyer
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Buyer, in whole
or in part):
8.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
of Sellers set forth in Section 3 hereof shall be true and complete as of the
Closing in all material respects (giving full effect to any supplements to the
Schedules that were delivered by Sellers to Buyer prior to the Closing Date).
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8.2 SELLERS' PERFORMANCE. The covenants of Sellers set forth in
Section 7 hereof shall have been duly performed and complied with in all
material respects.
8.3 APPROVALS AND CONSENTS. Each of the Consents identified in
SCHEDULE 3.2 attached hereto shall have been obtained and shall be in full force
and effect.
8.4 DELIVERY OF DOCUMENTS. Each of the following documents shall have
been delivered to Buyer:
(a) an opinion of Nearhood & Associates, P.C., dated the Closing Date,
substantially in the form attached hereto as EXHIBIT 8.4(A);
(b) a certificate executed by Sellers representing and warranting to
Buyer that each of Sellers' representations and warranties set forth in Section
3 hereof is true and complete as of the Closing Date (giving full effect to any
supplements to the Schedules that were delivered by Sellers to Buyer prior to
the Closing Date), in the form attached hereto as EXHIBIT 8.4(B);
(c) an employment agreement executed by Mr. Donkersloot, in the form
attached hereto as EXHIBIT 8.4(C);
(d) a non-competition agreement executed by Mr. Donkersloot, in the
form attached hereto as EXHIBIT 8.4(D);
(e) an asset purchase agreement executed by the Stockholders, in the
form attached hereto as EXHIBIT 8.4(E), pursuant to which a facility and other
assets owned by the Stockholders and used in connection with the Acquired
Companies' businesses will be purchased by Buyer for a purchase price of
$450,000;
(f) a written acknowledgement of Allied Signal, Inc. that it (i) plans
to continue to do business with the Acquired Companies, (ii) does not plan to
reduce its volume of orders from the Acquired Companies, and (iii) will do
business with Buyer on substantially the same terms and conditions as it
currently is doing business with the Acquired Companies;
(g) the Certificates; and
(h) such other documents as Buyer may reasonably request for the
purpose of facilitating the consummation or performance of any of the
transactions contemplated by this Agreement.
8.5 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there shall not have been any material adverse change in the business,
operations, properties, prospects, assets, or condition of the Acquired
Companies, taken as a whole, and no event shall have occurred or circumstance
shall exist that may result in such a material adverse change.
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<PAGE>
8.6 NO INJUNCTION. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Shares by
the Stockholders to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
8.7 NO PROCEEDINGS. There must not have been commenced or threatened
against Buyer, or against any Person affiliated with Buyer, any Proceeding
(a) involving any challenge to, or seeking damages or other relief in connection
with, any of the transactions contemplated by this Agreement, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions contemplated by this Agreement.
9. CONDITIONS PRECEDENT TO STOCKHOLDERS' OBLIGATION TO CLOSE. The
Stockholders' obligation to sell the Shares and to take the other actions
required to be taken by the Stockholders at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Stockholders, in whole or in part):
9.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
of Buyer set forth in Section 4 hereof shall be true and complete as of the
Closing in all material respects.
9.2 BUYER'S PERFORMANCE. The covenant of Buyer set forth in Section
2.4(a) hereof shall have been duly performed and complied with in all respects,
and the covenants of Buyer set forth in Section 7 hereof shall have been duly
performed and complied with in all material respects.
9.3 APPROVALS AND CONSENTS. Each of the Consents identified in
SCHEDULE 4.3 attached hereto shall have been obtained and shall be in full force
and effect.
9.4 DELIVERY OF DOCUMENTS. Each of the following documents shall have
been delivered to the Stockholders:
(a) an opinion of Ballard Spahr Andrews & Ingersoll, dated the Closing
Date, substantially in the form attached hereto as EXHIBIT 9.4(a);
(b) a certificate executed by Buyer representing and warranting to
Sellers that each of Buyer's representations and warranties set forth in Section
4 hereof is true and complete as of the Closing Date, in the form attached
hereto as EXHIBIT 9.4(b); and
(c) such other documents as the Stockholders may reasonably request
for the purpose of facilitating the consummation of any of the transactions
contemplated by this Agreement.
9.5 NO INJUNCTION. There must not be in effect any Legal Requirement
or any injunction or other Order that
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<PAGE>
(a) prohibits the sale of the Shares by the Stockholders to Buyer, and (b) has
been adopted or issued, or has otherwise become effective.
10. TERMINATION. [INTENTIONALLY OMITTED.]
11. INDEMNIFICATION; REMEDIES.
11.1 SURVIVAL. The representations and warranties set forth in this
Agreement, the Schedules, any supplements to the Schedules that are delivered
prior to the Closing Date, and any other certificate or document delivered
pursuant to this Agreement, and the covenants and obligations set forth in this
Agreement, will survive the Closing Date and, except for the representations set
forth in Sections 3.3 (relating to capitalization) and 3.11 (relating to taxes)
which will survive the Closing Date until the expiration of the applicable
statutory period of limitation, and except for the representation set forth in
Section 3.19 (relating to environmental matters) which will expire on the sixth
anniversary of the Closing Date, will expire on the second anniversary of the
Closing Date, and, thereafter, no claim may be brought arising under or in
connection with this Agreement or any of the transactions contemplated hereby;
PROVIDED, HOWEVER, that any covenants and obligations of Buyer set forth in this
Agreement to be performed by Buyer after the Closing Date will survive without
limitation. The right to indemnification, payment of Damages (as defined in
Section 11.2) or other remedy based on such representations, warranties,
covenants and obligations will not be affected by any investigation conducted,
or any Knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDERS. The
Stockholders, jointly and severally, will indemnify and hold harmless Buyer, and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees), or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with (a) any breach of any representation
or warranty made by Sellers in Section 3 of this Agreement, the Schedules, any
supplements to the Schedules, or any other certificate or document delivered by
Sellers to Buyer pursuant to this Agreement (including, without limitation, the
Employment Agreement and the Non-Competition Agreement); (b) any breach by any
Seller of any covenant or obligation of such Seller in this Agreement; (c) any
product shipped or manufactured by, or any services provided by, the Acquired
Companies prior to the Closing
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<PAGE>
Date; (d) any claim arising out of, relating to or in connection with the
Acquired Companies on account of any matter arising, occurring or taking place
prior to the Closing Date; (e) any claim or liability with respect to the
investment by participants of their accounts under the Advanced Materials
Technologies Inc. Retirement Savings Plan which claim or liability arises, in
whole or in part, from that Plan's failure to comply with the requirements of
Section 404(c) of ERISA; or (f) any claim or liability with respect to an
employee benefit plan or plans sponsored or maintained by Special Processes of
Arizona, Inc. or Advanced Materials Joining Corp.
The remedies provided in this Section 11.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDERS --
ENVIRONMENTAL MATTERS. In addition to the provisions of Section 11.2, the
Stockholders, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and the other Indemnified Persons for, and will pay to
Buyer, the Acquired Companies, and the other Indemnified Persons the amount of,
any Damages (including costs of cleanup, containment, or other remediation)
arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing Date of the Facilities or any other properties and
assets (whether real, personal, or mixed and whether tangible or intangible) in
which Sellers has or had an interest, or (B) any Hazardous Materials or other
contaminants that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or otherwise handled by
Sellers or by any other Person for whose conduct they are or may be held
responsible at any time on or prior to the Closing Date, or (B) any Hazardous
Activities that were, or were allegedly, conducted by Sellers or by any other
Person for whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Sellers or any
other Person for whose conduct they are or may be held responsible, in any way
arising from or allegedly arising from any Hazardous Activity conducted or
allegedly conducted with respect to the Facilities or the operation of the
Acquired Companies prior to
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<PAGE>
the Closing Date, or from Hazardous Material that was (i) present or suspected
to be present on or before the Closing Date on or at the Facilities (or present
or suspected to be present on any other property, if such Hazardous Material
emanated or allegedly emanated from any of the Facilities and was present or
suspected to be present on any of the Facilities on or prior to the Closing
Date), or (ii) Released or allegedly Released by Sellers or any other Person for
whose conduct they are or may be held responsible, at any time on or prior to
the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 11.3. The procedure
described in Section 11.5 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 11.3.
11.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless the Stockholders, and will pay to the Stockholders
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any breach of any representation or warranty made by Buyer in this
Agreement, the Schedules, any supplements to the Schedules or any certificate
delivered by Buyer to Sellers pursuant to this Agreement; (b) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement; or (c) any claim
arising out of, relating to or in connection with the Acquired Companies on
account of any matter arising, occurring or taking place on or after the Closing
Date.
11.5 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Sections
11.2, (to the extent provided in the last sentence of Section 11.3) 11.3, or
11.4 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) The indemnifying party will, unless the claim involves taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and,
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<PAGE>
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 11 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
an indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
11.6 PROCEDURE FOR INDEMNIFICATION-- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
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<PAGE>
12. GENERAL PROVISIONS.
12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, (a) all expenses incurred by Buyer in connection with the
preparation, execution, and performance of this Agreement and the transactions
contemplated by this Agreement, including all fees and expenses of agents,
Representatives, investment bankers, counsel, and accountants, whether incurred
as of the date hereof or later incurred, will be paid by Buyer; and (b) all
expenses incurred by Sellers in connection with the preparation, execution, and
performance of this Agreement and the transactions contemplated by this
Agreement, including all fees and expenses of agents, Representatives,
investment bankers, counsel, and accountants, whether incurred as of the date
hereof or later incurred, will be paid by the Stockholders. Further, Buyer will
pay any fee required in order to obtain any Governmental Authorization necessary
to consummate the transactions contemplated by this Agreement. Sellers will
cause the Acquired Companies not to incur any out-of-pocket expenses in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated by this Agreement.
12.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the transactions contemplated by
this Agreement will be issued, if at all, at such time and in such manner as
Buyer determines. Prior to the Closing, unless consented to by Buyer in advance
or required by Legal Requirements, Sellers will keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Buyer and Sellers will consult with each other concerning the means by which the
Acquired Companies' employees, customers and suppliers and others having
dealings with the Acquired Companies will be informed of the transactions
contemplated by this Agreement, and Buyer will have the right to be present for
any such communication. Without limitation to the foregoing, the parties agree
that the Purchase Price and other monetary terms of this Agreement will not be
disclosed to any third party, except as may be required by Legal Requirements.
12.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Companies to maintain in confidence, and not use to the detriment of another
party any written, oral, or other information obtained in confidence from
another party in connection with this Agreement or the transactions contemplated
by this Agreement, unless (a) such information is already known to such party or
to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by this Agreement, or (c) the furnishing or use of such information
is required by or necessary
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<PAGE>
or appropriate in connection with legal proceedings or legal filings required to
be made by Buyer.
If the transactions contemplated by this Agreement are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request. Whether or not
the Closing takes place, Sellers waive any cause of action, right, or claim
arising out of the access of Buyer or its Representatives to any trade secrets
or other confidential information of the Acquired Companies except for the
intentional competitive misuse by Buyer of such trade secrets or confidential
information.
12.4 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier,
provided that a copy is concurrently mailed by first class mail, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service, in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Sellers: Advanced Materials Technologies Inc.
2015 West Alameda Drive
Tempe, Arizona 85282-3170
Attention: Mr. Daryl Jay Donkersloot
Telecopier: (602) 431-9051
with a copy to:
James R. Nearhood, Esq.
Nearhood & Associates, P.C.
7501 East McCormick Parkway, Suite 114N
Scottsdale, Arizona 85258
Telecopier: (602) 998-0820
Buyer: The Triumph Group, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, Pennsylvania 19087-1565
Attention: Mr. John R. Bartholdson
Telecopier: (610) 975-0563
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<PAGE>
with a copy to:
Edward D. Slevin, Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Telecopier: (215) 864-8999
12.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
12.6 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter (except
the letter of intent between Buyer and Mr. Donkersloot dated May 15, 1996, and
accepted May 31, 1996) and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
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<PAGE>
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
12.9 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.10 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
12.11 GOVERNING LAW. This Agreement will be governed by the laws of
the Commonwealth of Pennsylvania without regard to conflicts of laws principles.
12.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
THE TRIUMPH GROUP, INC.
By: /s/Richard C. Ill
-------------------------
President and Chief Executive
Officer
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THE COMPANY:
ADVANCED MATERIALS TECHNOLOGIES
INC.
By: /s/Daryl Jay Donkersloot
---------------------------
Daryl Jay Donkersloot
President
THE STOCKHOLDERS:
/s/Daryl Jay Donkersloot
-------------------------
Daryl Jay Donkersloot
/s/Gayla Sue Donkersloot
----------------------------
Gayla Sue Donkersloot
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<PAGE>
EXECUTIVE SECURITIES AGREEMENT
THIS AGREEMENT is made as of July 31, 1996 between THE TRIUMPH GROUP
HOLDINGS, INC., a Delaware corporation (the "Company"), and Jay Donkersloot
("Executive").
The Company and Executive desire to enter into an agreement pursuant
to which Executive will be entitled to purchase, and the Company will sell, Two
Hundred (200) shares of the Company's Class A Common Stock, par value $.01 per
share (the "Common Stock"), and a junior subordinated promissory note
substantially in the form of Exhibit A attached hereto (such note and any
Additional Notes issued pursuant thereto being referred to herein, unless the
context indicates otherwise, as (the "Note")) in the principal amount of
$17,162.45. This Agreement is being entered into contemporaneously with the
closing of the Stock Purchase Agreement dated as of July 31, 1996 (the "Stock
Purchase Agreement") by and between The Triumph Group, Inc., a wholly-owned
subsidiary of the Company, and the Executive and represents a further inducement
to Executive to enter into the Stock Purchase Agreement and to complete the
transactions contemplated thereby.
All of such shares of Common Stock now owned or hereafter acquired by
Executive are referred to herein as "Executive Common Stock." Executive Common
Stock and the Note are referred to herein as "Executive Securities." Certain
definitions are set forth in paragraph 11 of this Agreement.
The parties hereto agree as follows:
1. PURCHASE AND SALE OF EXECUTIVE SECURITIES.
(a) Upon execution of this Agreement, Executive will be entitled
purchase, for a period of ninety (90) days following the date on which the
Memorandum referred to in Section 1(b) hereof is delivered to Executive (the
"Subscription Term"), and the Company will sell, upon receipt of the Election
Notice (as defined in Section 1(b) hereof) from Executive, Two Hundred (200)
shares of Common Stock at a price of $121.55 per share and the Note at a price
equal to the face amount thereof.
(b) Not later than thirty (30) days following the date hereof,
the Company shall deliver to Executive a Memorandum containing the information
required by Rule 502(a)(2)(i) of the Securities and Exchange Commission issued
under the Securities Act of 1933, as amended, in order to assist Executive in
determining whether to exercise his right to subscribe to the Executive
Securities pursuant hereto.
<PAGE>
(c) Executive shall be entitled to purchase the Executive
Securities at any time during the Subscription Term by delivering to the Company
notice of his election to as subscribe (the "Election Notice"). The sale and
purchase of the Executive Securities shall occur on the fifth business day
following the day on which the Company receives the Election Notice (the "Sale
Date"). On the Sale Date the Company will deliver to Executive a certificate or
certificates representing the Common Stock and the Note, and Executive will
deliver to the Company a cashier's or certified check or wire transfer of funds
in the aggregate amount of $41,472.45
(d) Within thirty (30) days after Executive purchases any
Executive Securities from the Company, Executive will make an effective election
with the Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in the form of Annex A attached
hereto.
(e) In connection with the purchase and sale of the Executive
Securities hereunder, Executive will represent and warrant to the Company, on
the Sale Date, that:
(i) The Executive Securities to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act, or any applicable state securities laws, and the Executive
Securities will not be disposed of in contravention of the 1933 Act or any
applicable state securities laws.
(ii) Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the Executive
Securities.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Securities for an indefinite period of time
because the Executive Securities have not been registered under the 1933
Act and, therefore, cannot be sold unless subsequently registered under the
1933 Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Securities and has had full access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and
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<PAGE>
performance of this Agreement by Executive does not and will not conflict
with, violate or cause a breach of any agreement, contract or instrument to
which Executive is a party or any judgment, order or decree to which
Executive is subject.
(f) As an inducement to the Company to issue the Executive
Securities to Executive and as a condition thereto, Executive acknowledges and
agrees that:
(i) neither the issuance of the Executive Securities to
Executive nor any provision contained herein shall entitle Executive to
remain in the employment of the Company or any of its Subsidiaries or
affect the right of the Company or any such Subsidiary to terminate
Executive's employment other than in accordance with the terms and
conditions of the Employment Agreement, dated July 31, 1996, by and
between Advanced Material Technologies Inc., an Arizona corporation, and
Executive; and
(ii) the Company shall have no duty or obligation to
disclose to Executive, and Executive shall have no right to be advised of,
any material information regarding the Company at any time prior to, upon
or in connection with the repurchase of Executive Securities upon the
termination of Executive's employment with the Company or any of its
Subsidiaries, or as otherwise provided hereunder.
2. REGULAR AND TIME VALUED EXECUTIVE COMMON STOCK.
(a) Except as otherwise provided in paragraph 2(b) below, the
shares of Executive Common Stock will become "Time Valued Shares" in accordance
with the following schedule, if as of each such date Executive is still employed
by the Company:
Cumulative
Percentage of Executive
Common Stock to become
Date Time Valued Shares
- ---- -----------------------
Date hereof: 0.0%
On the first anniversary
of the date hereof: 20.0%
On the second
anniversary of the date
hereof: 40.0%
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<PAGE>
On the third anniversary
of the date hereof: 60.0%
On the fourth
anniversary of the date
hereof: 80.0%
On the fifth anniversary
of the date hereof: 100.0%
(b) If Executive ceases to be employed by the Company or a
Subsidiary of the Company for any reason, including the death or permanent
disability of Executive, on any date other than any anniversary date prior to
the fifth anniversary date, the cumulative percentage of Executive Common Stock
to become Time Valued Shares will be determined on a pro rata basis according to
the number of days elapsed since the prior anniversary date. Upon the
occurrence of a Sale of the Company or a Qualified Public Offering, all shares
of Executive Common Stock which have not yet become Time Valued Shares shall
become Time Valued Shares at the time of such event. For purposes of this
paragraph 2(b), the determination of permanent disability shall be made in good
faith by the Company's board of directors (the "Board"). All shares of
Executive Common Stock which have not become Time Valued Shares are referred to
herein as "Regular Shares."
3. REPURCHASE OPTION.
(a) In the event Executive ceases to be employed by the Company
or a Subsidiary of the Company for any reason (the "Termination"), the Executive
Securities (whether held by Executive or one or more of Executive's transferees)
will be subject to repurchase by the Company, pursuant to the terms and
conditions set forth in this paragraph 3 (the "Repurchase Option").
(b) Except as provided in subsection 3(c) below, the purchase
price for each Regular Share of Executive Common Stock will be the lesser of
Book Value or Executive's Original Cost for such share, and the purchase price
for each Time Valued Share of Executive Common Stock will be the Book Value for
such share. The purchase price for the Note will be the outstanding principal
amount thereof plus all accrued and unpaid interest thereon until the date of
payment (whether or not represented by an Additional Note).
(c) If the Executive resigns or his employment is terminated for
Cause, the purchase price for each Time Valued and
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Regular Share will be the lesser of Book Value or Executive's Original Cost for
such share.
(d) The Board may elect to purchase all or any portion of the
Executive Common Stock and the Note by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Executive Securities within
90 days after the Termination. The Repurchase Notice will set forth the number
of Regular Shares and Time Valued Shares and the amount of the Note (in each
case if less than all) to be acquired from each holder, the aggregate
consideration to be paid for such shares and the Note (or portion thereof) and
the time and place for the closing of the transaction. The number of shares to
be repurchased by the Company shall first be satisfied to the extent possible
from the shares of Executive Common Stock held by Executive at the time of
delivery of the Repurchase Notice. If the number of shares of Executive Common
Stock and the principal amount of the Note then held by Executive are less than
the total number of shares of Executive Common Stock and the amount of the Note
the Company has elected to purchase, the Company shall purchase the remaining
shares and amount of the Note elected to be purchased from the transferees of
such Executive's Executive Common Stock and Note under this Agreement, pro rata
according to the number of shares of Executive Common Stock and principal amount
of Note held by such transferees at the time of delivery of such Repurchase
Notice (determined as nearly as practicable to the nearest share or nearest
dollar, as applicable). The number of Regular Shares and Time Valued Shares to
be repurchased hereunder will be allocated among Executive and such transferees
of Executive Common Stock (if any) pro rata according to the number of shares of
Executive Common Stock to be purchased from such persons.
(e) The closing of the purchase of the Executive Securities
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice which date shall not be more than 60 days nor
less than five days after the delivery of the later of any such notice to be
delivered. The Company will pay for the Executive Securities to be purchased by
delivery of (i) a check or wire transfer of funds, (ii) a subordinated note or
notes payable in up to three equal annual installments beginning on the first
anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate announced from time to
time by Citibank, N.A. or (iii) both (i) and (ii), in each case, in the
aggregate amount of the purchase price for such securities. Any notes issued by
the Company pursuant to this paragraph 3(e) shall be subject to any restrictive
covenants to which the Company is subject at the time of such purchase. In
addition, the Company may pay the purchase price for the Executive Securities by
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company. If less than all of the Note is
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purchased, the Company shall issue to the holder or holders a note or notes of
like tenor as the Note in the amount not purchased, which note shall thereafter
be the Note for purposes of this Agreement.
(f) The rights of the Company to repurchase Time Valued Shares
pursuant to this paragraph 3 shall terminate upon the first to occur of the Sale
of the Company or a Qualified Public Offering.
(g) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Common Stock and the Note (or portion
thereof) by the Company shall be subject to applicable restrictions contained in
the Pennsylvania Business Corporation Law and in the Company's financing
agreements. If any such restrictions prohibit the repurchase of Executive
Common Stock and the Note (or portion thereof) hereunder which the Company is
otherwise entitled or required to make, the Company may make such repurchases
(plus interest accruing at the rate of 7% per annum from the date the Company
elects to make such prohibited repurchase to the date such repurchase is
actually made) as soon as it is permitted to do so under such restrictions.
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE SECURITIES. Executive shall not sell,
transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in any of the Executive Securities (a "Transfer"), except pursuant
to (i) the provisions of paragraph 3 hereof, a Public Sale or a Sale of the
Company ("Exempt Transfers") or (ii) the provisions of this paragraph 4;
provided that in no event shall any Transfer of Executive Securities pursuant to
this paragraph 4 be made for any consideration other than cash payable upon
consummation of such Transfer or in installments over time. Prior to making any
Transfer other than an Exempt Transfer, Executive will give written notice (the
"Sale Notice") to the Company. The Sale Notice will disclose in reasonable
detail the identity of the prospective transferee(s), the number of shares of
Executive Common Stock and the portion of the Note to be transferred and the
terms and conditions of the proposed transfer. Executive will not consummate any
Transfer until 60 days after the Sale Notice has been given to the Company,
unless the parties to the Transfer have been finally determined pursuant to this
paragraph 4 prior to the expiration of such 60-day period. (The date of the
first to occur of such events is referred to herein as the "Authorization
Date").
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(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all
or any portion of the Executive Securities to be transferred upon the same terms
and conditions as those set forth in the Sale Notice by delivering a written
notice of such election to Executive within 25 days after the Sale Notice has
been given to the Company. If the Company does not elect to purchase all of the
Executive Securities specified in the Sale Notice, Executive may transfer the
remaining Executive Securities specified in the Sale Notice at a price and on
terms no more favorable to the transferee(s) thereof than specified in the Sale
Notice during the 60-day period immediately following the Authorization Date.
Any Executive Securities not transferred within such 60-day period will be
subject to the provisions of this paragraph 4(b) upon subsequent transfer. The
Company may pay the purchase price for such shares by offsetting amounts
outstanding under any bona fide debts owed by Executive to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in
this paragraph 4 will not apply with respect to transfers of Executive
Securities (i) pursuant to applicable laws of descent and distribution or (ii)
among Executive's family group; provided that (x) such restrictions will
continue to be applicable to the Executive Securities after any such transfer
and (y) the transferees of such Executive Securities have agreed in writing to
be bound by the provisions of this Agreement. Executive's "family group" means
Executive's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Executive and/or Executive's spouse and/or
descendants.
(d) PLEDGES. Notwithstanding the provisions of this paragraph
4, Executive may not pledge any Executive Securities.
(e) TERMINATION OF RESTRICTIONS. The restrictions on the
transfer of shares of Executive Securities set forth in this paragraph 4 will
continue with respect to all Executive Securities following any transfer
thereof; provided that in any event such restrictions will terminate on the
first to occur of a Sale of the Company or a Qualified Public Offering.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) the certificates representing the Executive Common Stock and
the Note will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED AS OF
________________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE
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<PAGE>
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS
AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT
BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SECURITIES EVIDENCED
HEREBY. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT
THE COMPANY PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Securities may sell, transfer or
dispose of any Executive Securities (except pursuant to an effective
registration statement under the 1933 Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the 1933 Act and
applicable state securities laws is required in connection with such transfer.
(c) Each holder of Executive Securities agrees not to effect any
public sale or distribution of any Executive Securities or other equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for any of the Company's equity securities, during the seven days
prior to and the 180 days after the effectiveness of any underwritten public
offering, except as part of such underwritten public offering or if otherwise
permitted by the Company.
6. SALE OF THE COMPANY.
(a) If the Board and the holders of a majority of the Company's
Common Stock approve a Sale of the Company (the "Approved Sale"), the holders of
Executive Securities will consent to and raise no objections against the
Approved Sale, and if the Approved Sale of the Company is structured as a sale
of stock, the holders of Executive Common Stock will agree to sell their shares
of Executive Common Stock on the terms and conditions approved by the Board and
the holders of a majority of the Company's Common Stock and will raise no
objections to process and will waive dissenters or similar rights. The holders
of Executive Securities will take all necessary and desirable actions in
connection with the consummation of the Approved Sale of the Company.
(b) The obligations of the holders of Executive Securities with
respect to the Approved Sale of the Company are subject to the satisfaction of
the following conditions: (i) upon the consummation of the Approved Sale, all of
the holders of Common Stock will receive the same form and amount of
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consideration per share of Common Stock, or if any holders of Common Stock are
given an option as to the form and amount of consideration to be received, all
holders will be given the same option; and (ii) all holders of rights to acquire
shares of Common Stock will be given an opportunity to either (A) exercise such
rights prior to the consummation of the Approved Sale and participate in such
sale as holders of Common Stock or (B) upon the consummation of the Approved
Sale, receive in exchange for such rights consideration equal to the amount
determined by multiplying (1) the same amount of consideration per share of
Common Stock received by the holders of Common Stock in connection with the
Approved Sale less the exercise price per share of Common Stock of such rights
to acquire Common Stock by (2) the number of shares of Common Stock represented
by its rights.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Common Stock
will, at the request of the Company, appoint a purchaser representative (as such
term is defined in Rule 501) reasonably acceptable to the Company. If any
holder of Executive Common Stock appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative,
but if any holder of Executive Common Stock declines to appoint the purchaser
representative designated by the Company such holder will appoint another
purchaser representative (reasonably acceptable to the Company), and such holder
will be responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Common Stock
(if any) will bear their pro rata share (based upon the number of shares sold)
of the costs of any sale of Executive Common Stock pursuant to an Approved Sale
to the extent such costs are incurred for the benefit of all holders of Common
Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by Executive and the other holders of Executive Common Stock on their
own behalf will not be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 6 will terminate upon the
completion of a Qualified Public Offering.
7. CONFIDENTIAL INFORMATION. The Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
concerning the business or affairs of the Company ("Confidential Information")
are the
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property of the Company. Therefore, Executive agrees that he shall not disclose
to any unauthorized person or use for his own account any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall deliver to the Company at the termination of the
Executive's employment, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined in Section 9 below) or the business of the
Company which he may then possess or have under his control.
8. INVENTIONS AND PATENTS. Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by Executive's Business ("Work Product") belong to the Company.
Executive will promptly disclose such Work Product to the Board and perform all
actions reasonably requested by the Board (whether during or after Executive's
employment period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
9. NON-COMPETE; NON-SOLICITATION.
(a) Executive acknowledges that in the course of his employment
with the Company he has become familiar, and he will become familiar, with the
Company's trade secrets and with other confidential information concerning the
Company and that his services have been and will be of special, unique and
extraordinary value to the Company. Therefore, Executive agrees that, prior to
the termination of Executive's employment and for two years thereafter (the
"Noncompete Period"), he shall not directly or indirectly own, manage, control,
participate in, consult with, render services for, or in any manner engage in
any business competing with the businesses of the Company as such businesses
exist or are in process on the date of the termination of Executive's
employment, within any geographical area in which the Company engages or plans
to engage in such businesses. Nothing herein shall prohibit Executive from
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
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(b) During the Noncompete Period, Executive shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee of the Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any employee thereof,
(ii) hire any person who was an employee of the Company at any time during the
Executive's employment period, or (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company to cease
doing business with the Company, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company.
(c) If, at the time of enforcement of this paragraph 9, a court
should hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by
Executive of any of the provisions of this paragraph 10, the Company, in
addition and supplementary to other rights and remedies existing in its favor,
may apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce or prevent any
violations of the provisions hereof (without posting a bond or other security).
10. DEFINITIONS.
"BOOK VALUE" of each share of Executive Common Stock or Triumph
Common Stock will be equal to the quotient determined by dividing (A) the excess
of Company's or Triumph's assets over its liabilities as of the end of the
fiscal quarter immediately preceding the date of Executive's Termination or an
Exchange (provided however that if Executive's Termination occurs in connection
with a Sale of the Company, the excess of the Company's assets over its
liabilities shall be determined on a pro forma basis assuming the Sale of the
Company occurred on the last day of such fiscal quarter), determined on a
consolidated basis in accordance with generally accepted accounting principles,
consistently applied, less the liquidation value of all outstanding preferred
stock, by (B) the total number of shares of Common Stock or Triumph Common Stock
outstanding on a fully diluted basis (including in such calculation the
aggregate conversion price and exercise price of all outstanding convertible
securities, options and warrants).
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"CAUSE" shall mean (i) a material breach of this Agreement by
Executive, (ii) a breach of Executive's duty of loyalty to the Company, (iii)
the commission by Executive of a felony, a crime involving moral turpitude or
other act causing material harm to the Company's standing and reputation, (iv)
Executive's continued failure to perform his duties to the Company or (v)
Executive's substandard performance. For the purposes of this agreement,
"substandard performance" shall be determined in good faith by a majority of the
Board. In assessing Executive's performance, the Board shall give due
consideration to the overall industry experience in assessing Executive's
performance. After due consideration of these factors, if a majority of the
Board determines in good faith that the Company would have performed
substantially better with other management and that the future performance of
the Company would be best served by new management, the Board may terminate
Executive for "substandard performance."
"EXECUTIVE COMMON STOCK" will continue to be Executive Common
Stock in the hands of any holder other than Executive (except for the Company
and except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Common Stock will succeed to all
rights and obligations attributable to Executive as a holder of Executive Common
Stock hereunder. Executive Common Stock will also include shares of the
Company's capital stock issued with respect to Executive Common Stock by way of
a stock split, stock dividend or other recapitalization.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior
to the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 5% owner of the Company's Common Stock and
who is not the spouse or descendent (by birth or adoption) of any such 5% owner
of the Company's Common Stock.
"1933 ACT" means the Securities Act of 1933, as amended from time
to time.
"ORIGINAL COST" of each share of Common Stock purchased hereunder
will be equal to $121.55 (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"PERMITTED TRANSFEREE" means any holder of Executive Common Stock
who acquired such stock pursuant to a transfer permitted by paragraph 4(c).
"PUBLIC SALE" means any sale pursuant to a registered public
offering under the 1933 Act or any sale to the
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public pursuant to Rule 144 promulgated under the 1933 Act effected through a
broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten
public offering registered under the 1933 Act of shares of the Company's Common
Stock having an aggregate offering value of at least $15 million.
"REGULAR SHARES" means those shares of Executive Common Stock
designated as such pursuant to Section 2.
"SALE OF THE COMPANY" means the sale of the Company to an
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"SUBSIDIARY" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or through one or more subsidiaries.
"TIME VALUED SHARES" means those shares of Executive Common Stock
designated as such pursuant to Section 2.
12. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
To the Company,
The Triumph Group Holdings, Inc.
c/o The Triumph Group Operations, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087
Attention: President
With a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market St., 51st Floor
Philadelphia, PA 19103
Attention: Edward D. Slevin, Esquire
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To Executive:
Mr. Daryl Jay Donkersloot
9681 South Palm Drive
Tempe, AZ 85284
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
13. GENERAL PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Executive Securities as the
owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company and their respective successors and assigns (including
subsequent holders of Executive Securities); provided that the rights and
obligations of Executive under this Agreement shall not be
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assignable except in connection with a permitted transfer of Executive
Securities hereunder.
(f) CHOICE OF LAW. The corporate law of the Commonwealth of
Pennsylvania will govern all questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto will be
governed by the internal law, and not the law of conflicts, of the Commonwealth
of Pennsylvania.
(g) REMEDIES. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach
of any provision of this Agreement and to exercise all other rights existing
in its favor. The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement
and that any party may in its sole discretion apply to any court of law or
equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(h) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company and
Executive.
(i) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
THE TRIUMPH GROUP HOLDINGS, INC.
By /s/ Richard C. Ill
-----------------------------------------
Its President
-----------------------------------------
/s/ Daryl Jay Donkersloot
-----------------------------------------
Daryl Jay Donkersloot
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CONSENT
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Executive Securities Agreement and that I understand its
contents. I am aware that the Agreement provides for the repurchase of my
spouse's Executive Securities (as defined in the foregoing agreement) under
certain circumstances and imposes other restrictions on the transfer of such
Executive Securities. I agree that my spouse's interest in the Executive
Securities is subject to this Agreement and any interest I may have in such
Executive Securities shall be irrevocably bound by this Agreement and further
that my community property or equitable interest in such Executive Securities,
if any, shall be similarly bound by this Agreement.
I am aware that the legal, financial and other matters contained in
this Agreement are complex and I am free to seek advice with respect thereto
from independent counsel. I have either sought such advice or determined after
carefully reviewing this Agreement that I will waive such right.
/s/ Gayla Sue Donkersloot
---------------------------------------------
Gayla Sue Donkersloot
---------------------------------------------
Witness
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EXHIBIT A
The payment of principal and interest on this Note is subject to certain
subordination provisions set forth in paragraph 3 herein. This Note was
originally issued on _____________ and has not been registered under the
Securities Act of 1933, as amended, or any comparable state securities law. The
transfer of this Note is subject to certain restrictions set forth in
paragraph 6 herein.
The following information is provided solely for purposes of applying the U.S.
federal income tax original issue discount ("OID") rules to this note. The
issue date of this note is __________, and the issue price is equal to 100% of
its face amount. Assuming that the issuer exercises its right to issue
additional notes in lieu of cash interest payments at each opportunity, and that
all payments of principal and interest on this note and such additional notes
are made on the scheduled maturity date of December 31, 2006, the total amount
of OID on this note (including OID with respect to the additional notes issued
in lieu of cash interest payments) will be $_________ per $1,000 face amount of
this note, and the yield to maturity of this Note will be 10 1/2%, compounded
quarterly.
JUNIOR SUBORDINATED
PROMISSORY NOTE
(Date) $_________
THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the
"Company"), hereby promised to pay to _____________ (the "LENDER") the principal
amount of ___________________, together with interest thereon calculated from
the date hereof in accordance with the provisions of this Note. This Note is
the "Note" issued pursuant to that certain Executive Securities Agreement, dated
as of __________ (the "EXECUTIVE SECURITIES AGREEMENT"), between the Company and
the Lender. Certain defined terms used herein are set forth in paragraph 11
hereof.
1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten
and one-half percent (10 1/2%) per annum, compounded quarterly, on the unpaid
principal amount of this Note outstanding from time to time. Subject to the
provisions of subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to
the Lender quarterly, in arrears, all accrued interest on each April 30, July
31, October 31 and January 31 during the term of this Note (each such date being
hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on
___________. The Company, in its sole discretion, in lieu of paying cash
interest on any Interest Payment Date, may pay all or any portion of the accrued
interest by issuance of a promissory note or notes (the
<PAGE>
"Additional Notes") in an amount or amounts equal to the amount of interest due
on such Interest Payment Date (less any cash interest payments), payable to the
Lender and otherwise identical to this Note. Any such Additional Notes shall be
issued annually, but shall include accrued interest as if issued quarterly and
shall be delivered to the Lender on or before May 31 in each year. All accrued
interest which for any reason has not theretofore been paid shall be paid in
full on the Maturity Date, as defined in Section 2(a) below, of this Note.
Interest shall accrue on any principal payment due under this Note, and, unless
otherwise prohibited under applicable law, on any interest which has not been
paid on the date on which it is due, until such time as payment therefor is
actually delivered to the Lender.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) SCHEDULED PAYMENT. The Company shall repay the principal
amount of this Note in two equal installments on December 31, 2005 and
December 31, 2006 (the latter being referred to as the "MATURITY DATE").
(b) OPTIONAL PREPAYMENTS. Subject to the provisions of
paragraph 3 hereof, the Company may, at any time and from time to time without
premium or penalty, prepay all or a portion of the outstanding principal amount
of this Note.
(c) TIME OF PAYMENT. If any payment of principal or interest on
this Note shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall in such case be included in computing interest in connection with such
payment.
3. SUBORDINATION; RESTRICTIONS ON PAYMENT.
(a) Notwithstanding anything in this Note to the contrary, the
obligations of the Company in respect of the principal, interest, fees and
charges on this Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all Superior Debt.
(b) Upon the occurrence of any Insolvency Event with respect to
the Company or any of its Subsidiaries or upon any acceleration of the Superior
Debt, then:
(i) the holders of Superior Debt shall be entitled to
receive payment in full of all principal, premium, interest, fees and
charges then due on all Superior Debt (including interest, fees and charges
accruing thereon after the commencement of any such proceedings) before the
Lender is entitled to receive any payment on account of
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<PAGE>
principal, interest or other amounts due (or past due) upon this Note, and
the holders of Superior Debt shall be entitled to receive for application
in payment thereof any payment or distribution of any kind or character,
whether in cash, property or securities or by set-off or otherwise (other
than in the form of Additional Notes), which may be payable or deliverable
in any such proceedings in respect of this Note, and
(ii) any payment or distribution of assets of the Company,
of any kind or character, whether in cash, property or securities (other
than in the form of Additional Notes), to which the Lender would be
entitled except for the provisions of this subparagraph 3(b) shall be paid
or delivered by the Company directly to the holders of all Superior Debt in
the manner provided in paragraph 3(f) below, for application in payment
thereof until all Superior Debt (including interest, fees and charges
accrued thereon after the date of commencement of such proceedings) shall
have been paid in full.
(c) Until all Superior Debt shall have been paid in full, the
Company shall not, directly or indirectly, make any payment of any amount
payable with respect to this Note (other than in the form of Additional Notes)
if there shall have occurred and be continuing or there would exist as a result
of such payment or distribution any default or event of default under any of the
terms of any Superior Debt Agreement which (whether with or without notice,
lapse of time or both) would permit the holder of such Superior Debt to
accelerate all or any portion of such Superior Debt (collectively, the "BLOCKAGE
EVENTS"); provided that if, immediately prior to the time a particular payment
is due hereunder, (x) no Blockage Event is continuing, and (y) payment in full
of the amount then due is prohibited by this paragraph 3(c), then the Company
shall be permitted to, and may, pay to the Lender in cash the maximum portion of
such amount as would not create a default under any of the terms of any Superior
Debt Agreement which would permit the holder of such Superior Debt to accelerate
all or any portion of such Superior Debt. The Company shall use reasonable
efforts to notify the Lender in writing of the occurrence of a Blockage Event;
provided that notwithstanding anything to the contrary in this Note, the failure
of the Company to so notify the Lender of the occurrence of a Blockage Event
shall have no effect on the obligations of the Company or the Lender during the
continuance of such Blockage Event as set forth herein.
(d) Any amendment or modification of the terms of paragraph 3 of
this Note shall be effective against any Person who was a holder of Superior
Debt prior to or at the time
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<PAGE>
of such amendment or modification unless such holder of Superior Debt so
consents.
(e) The holders of Superior Debt may, at any time, in their
discretion, renew, amend, extend or otherwise modify the terms and provisions
of Superior Debt so held or exercise any of their rights under the Superior
Debt including, without limitation, the waiver of defaults thereunder and the
amendment of any of the terms or provisions thereof (or any notice evidencing
or creating the same), all without notice to or assent from the Lender. No
compromise, alteration, amendment, renewal or other change of, or waiver,
consent or other action in respect of any liability or obligation under or in
respect, any terms, covenants or conditions of the Superior Debt (or any
instrument evidencing or creating the same), whether or not such compromise,
alteration, amendment, renewal, change, waiver, consent or other action is in
accordance with the provisions of the Superior Debt (or any instrument
evidencing or creating the same), shall in any way alter or affect any of the
subordination provisions of this Note.
(f) If, notwithstanding the provisions of paragraph 3 of this
Note, any payment or distribution of any character, whether in cash,
securities or other property (except in the form of Additional Notes), or any
security shall be received by the Lender in contravention of this paragraph 3
before all the Superior Debt shall have been paid in full, such payment,
distribution or security shall be held in trust for the benefit of, and shall
be immediately paid over or delivered or transferred to, the holders of
Superior Debt or their duly appointed agents for application of payment
according to the priorities of such Superior Debt and ratably among the
holders of any class of Superior Debt. Such payments received by the Lender
and delivered to the holders of the Superior Debt shall be deemed not to be a
payment on this Note for any reason whatsoever and the indebtedness under
this Note shall remain as if such erroneous payment had never been paid by
the Company or received by the Lender. In the event of the failure of any
Lender to endorse or assign any such payment, distribution or security, each
holder of any Superior Debt is hereby irrevocably authorized to endorse or
assign the same.
(g) No present or future holder of Superior Debt shall be
prejudiced in its right to enforce the provisions of paragraph 3 of this Note by
any act or failure to act on the part of the Company.
(h) If there shall exist any Blockage Event, the Lender shall
not (other than in connection with a failure by the Company to make a scheduled
principal payment) take or continue any action, or exercise or continue to
exercise any rights,
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<PAGE>
remedies or powers under the terms of this Note, or exercise or continue to
exercise any other right or remedy at law or equity that the Lender might
otherwise possess, to collect any amount due and payable in respect of this
Note, including, without limitation, the acceleration of this Note (and if this
Note has already been accelerated, the Lender will, immediately upon becoming
aware of the occurrence of such Blockage Event, reverse such acceleration), the
commencement of any foreclosure on any lien or security interest, the filing of
any petition in bankruptcy or the taking advantage of any other insolvency law
of any jurisdiction, unless and until the Superior Debt shall have been fully
and finally paid (whether in cash or such other form of consideration acceptable
to the holders of Superior Debt in their sole discretion) and satisfied, unless
one or more of the holders of the Superior Debt shall have commenced any action
or taken any judicial action to enforce their rights as provided in their
respective agreements relating to, or instruments evidencing, their Superior
Debt in connection with an Insolvency Event (other than an action to dismiss a
proceeding commenced against the Company).
Notwithstanding the foregoing or any permissible action taken by the
Lender, the Lender shall not be entitled to receive any payment in contravention
of the other provisions of this paragraph 3, including, without limitation,
subparagraphs 3(b), 3(c), and 3(f). Notwithstanding anything to the contrary in
this subparagraph 3(h), the Lender may take such steps as are necessary to avoid
a loss of its rights as a result of the running of any applicable statute of
limitations or any other statute or rule which limits the time for filing
claims, or making proofs of claims, or would otherwise cause a claim to be time-
barred.
(i) If any payment or distribution to which the Lender would
otherwise have been entitled but for the provisions of this paragraph 3 shall
have been applied, pursuant to the provisions of this paragraph 3, to the
payment of the Superior Debt, then in such case and to such extent, the
Lender (x) shall be entitled to receive from the holders of Superior Debt then
outstanding any payments or distributions received by such Persons in excess of
the amount sufficient to pay all of the Superior Debt in full (whether or not
then due and whether such payment was in cash or such other form of
consideration acceptable to the holders of Superior Debt in their sole
discretion), (y) following payment in full of the Superior Debt (whether in cash
or such other form of consideration acceptable to the holders of Superior Debt
in their sole discretion), shall be entitled to receive any and all further
payments or distributions applicable to the Superior Debt, and (z) following
payment in full of the Superior Debt (whether in cash or such other form of
consideration acceptable to the holders of Superior
5
<PAGE>
Debt in their sole discretion), shall be subrogated to the rights of the holders
of Superior Debt to receive distributions applicable to the Superior Debt, in
each case until this Note shall have been paid in full. If the Lender has been
subrogated to the rights of the holders of Superior Debt due to the operation of
this subparagraph 3(i), the Company agrees to take all such actions as are
reasonably requested by the Lender in order to cause the Lender to be able to
obtain payments from the Company with respect to such subrogation rights as soon
as possible.
(j) The provisions of this paragraph 3 are solely for the
purpose of defining the relative rights of the holders of Superior Debt, on
the one hand, and the Lender on the other, against the Company and its
assets, and nothing herein is intended to or shall impair, as between the
Company and the Lender, the obligations of the Company which are absolute and
unconditional, to pay to the Lender the principal and interest on this Note
as and when they become due and payable in accordance with their terms, or is
intended to or will affect the relative rights of the Lender and creditors of
the Company other than the holders of Superior Debt, nor, except as provided
in this paragraph 3, will anything herein or therein prevent the Lender from
exercising all remedies otherwise permitted by applicable law upon default
under this Note, subject to the rights, if any, under this paragraph 3 of the
holders of Superior Debt in respect of cash, property or securities of the
Company received upon the exercise of any such remedy and subject to this
paragraph 3.
4. CONVERSION. The Company may upon a completion of Qualified
Public Offering cause the Note and any Additional Notes issued pursuant to
paragraph 1 hereof to be converted into shares of Common Stock of the
Company. The number of shares of Common Stock to be issued upon such
conversion shall be determined by dividing the principal amount of this Note
and any Additional Notes issued by the Company pursuant to paragraph 1 hereof
and all accrued and unpaid interest hereon and thereon to the Conversion Date
(as herein defined) by the net offering price per share (the "Net Offering
Price") in any such Qualified Public Offering. The Company shall give
written notice of its election to issue shares of Common Stock in conversion
of the Note and the Additional Notes (the "Conversion Notice") at any time
after its announcement of a Qualified Public Offering, but not less than
three (3) days prior to the date designated for the conversion in the
Conversion Notice (the "Conversion Date"). On the Conversion Date the Holder
shall deliver to the Company this Note and any Additional Notes to be
converted in exchange for a certificate or certificates evidencing the shares
of Common Stock into which this Note and such Additional Notes have been
converted pursuant hereto (the "Conversion"). No fractional share of Common
Stock shall be issued in the Conversion, but in lieu thereof the
6
<PAGE>
Company shall pay to the Holder in cash an amount equal to the product derived
by multiplying the Net Offering Price by such fraction. The shares of Common
Stock issued in the Conversion shall thereafter be subject to all of the
restrictions set forth in the Executive Securities Agreement.
5. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "EVENT OF
DEFAULT" shall be deemed to have occurred if:
(i) the Company shall default in the payment of (A)
principal of this Note on the dates when due, whether at maturity, by
acceleration or otherwise, or (B) the portion of the interest on this Note
which is permitted to be paid pursuant to paragraph 3(C) above within five
(5) Business Days of the dates when due; or
(ii) an Insolvency Event occurs with respect to the Company.
(b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this
paragraph 5(b) are expressly subject to paragraph 3 hereof.
(i) If an Event of Default of the type described in clause
(i) of subparagraph 5(a) has occurred and is continuing, the Lender may
declare all of any portion of the outstanding principal amount of this Note
due and payable and demand immediate payment of all or any portion of the
outstanding principal amount of this Note. If the Lender demands immediate
payment of all or any portion of this Note, the Company shall immediately
pay to the Lender the principal amount of this Note requested to be paid
together with all accrued and unpaid interest thereon.
(ii) If an Event of Default of the type described in clause
(ii) of subparagraph 5(a) has occurred, all of the outstanding principal
amount of this Note shall automatically be immediately due and payable
without any notice or other action on the part of the Lender.
(iii)Upon the occurrence of an Event of Default, the Lender
shall also have any other rights which the Lender may have been afforded by
the Company under any contract or agreement at any time and any other
rights which such Person may have pursuant to applicable law.
6. CHANGE IN OWNERSHIP. Upon a Change in Control, the Company will
pay to the Lender the principal amount of this Note then outstanding together
with all accrued and unpaid
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<PAGE>
interest thereon. The term "CHANGE IN CONTROL" shall have the meaning set forth
for such term in the Senior Loan Agreement.
7. TRANSFER RESTRICTIONS. This Note may be transferred only as a
whole and not in part. This Note has not been registered under the Securities
Act or any comparable state securities law. If the Lender desires to transfer
this Note, the Lender first must furnish the Company with (i) the legal opinion
required under Paragraph 4 of the Executive Securities Agreement and (ii) a
written undertaking executed by the desired transferee in form and substance
reasonably satisfactory to the Company agreeing to be bound by all of the
provisions of this Note, including, without limitation, the subordination
provisions set forth in paragraph 3 hereof.
8. AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Lender.
9. CANCELLATION. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note shall be surrendered to
the Company for cancellation and shall not be reissued.
10. PLACE OF PAYMENT; NOTICES. Payments of principal and interest
and any notice hereunder are to be delivered to the Lender at the following
address:
or to such other address as specified in a written notice delivered to the
Company by Lender. Notices sent by the Company shall be deemed received when
delivered personally or one (1) day after being sent by Federal Express or other
overnight carrier or three (3) days after being sent by certified or registered
mail.
11. GOVERNING LAWS. The validity, construction, and
interpretation of this Note will be governed by the internal laws, and not the
laws of conflicts, of the Commonwealth of Pennsylvania.
12. DEFINITIONS. Unless otherwise indicated herein, capitalized
terms used in this Note shall have the meanings given such terms in the
Executive Securities Agreement.
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<PAGE>
"BUSINESS DAY" shall mean any day other than Saturday, Sunday or legal
holiday under the laws of the Commonwealth of Pennsylvania.
"INDEBTEDNESS" shall mean, with respect to any Person at a particular
time, without duplication, (a) indebtedness for borrowed money or for the
deferred purchase price of property (or services in respect of which such Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) or any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters
of credit, (b) indebtedness guaranteed in any manner by such Person, including
guarantees in the form of an agreement to repurchase or reimburse, (c)
obligations under capitalized leases in respect of which obligations such Person
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss and (d)
any unsatisfied obligation of such Person for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"INSOLVENCY EVENT" shall mean any of the occurrences referred to in
Sections 9.1.10, 9.1.14 and 9.1.15 of the Senior Loan Agreement.
"NOTES" shall mean the Note and notes of similar tenor issued pursuant
to and Executive Securities Agreements between the Company and certain members
of the management of the Company.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
governmental entity or any department or agency thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SENIOR LOAN AGREEMENT" shall mean that certain Credit Agreement,
dated as of July 19, 1996, as amended, by and among The Triumph Group, Inc.
("TG") and its Subsidiaries and PNC Bank, National Association.
"SUBSIDIARY" shall mean any Person which the Company or TG has the
direct or indirect right to control, direct or cause direction of management and
policies of, whether through the ownership of voting securities, by contract or
otherwise.
"SUPERIOR DEBT" shall mean (i) all Indebtedness incurred by the
Company and its Subsidiaries from time to time
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<PAGE>
which is not by its terms expressly subordinate to the Notes and (ii) all
Indebtedness incurred by TG and its Subsidiaries from time to time pursuant to
the Senior Loan Agreement.
"SUPERIOR DEBT AGREEMENT" shall mean any agreement relating to, or
instrument evidencing, any Superior Debt.
"TG" shall mean The Triumph Group, Inc., all of the outstanding voting
shares of which are owned by the Company.
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on the date first above written.
THE TRIUMPH GROUP HOLDINGS, INC.
By:
-----------------------------
Its:
----------------------------
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<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made as of this 31st
day of July, 1996, by and between The Triumph Group, Inc., a Delaware
corporation, or its nominee ("Buyer"), and Daryl Jay Donkersloot, an individual
residing at 9681 South Palm Drive, Tempe, Arizona 85284 ("Seller").
RECITALS
Concurrently with the execution and delivery of this Agreement, Buyer is
purchasing from Seller and Gayla Sue Donkersloot, an individual residing at 9681
South Palm Drive, Tempe, Arizona 85284 ("Mrs. Donkersloot"), all of the issued
and outstanding shares (the "Shares") of Common Stock, no par value per share,
of Advanced Materials Technologies Inc., an Arizona corporation (the "Company"),
pursuant to the terms and conditions of a Stock Purchase Agreement dated as of
the date hereof (the "Stock Purchase Agreement"). Section 8.4(d) of the Stock
Purchase Agreement requires that a non-competition agreement be executed and
delivered by Seller as a condition to the purchase of the Shares by Buyer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. Capitalized terms used but not expressly defined in this
Agreement have the meanings assigned to them in the Stock Purchase Agreement.
2. ACKNOWLEDGMENTS BY SELLER. Seller acknowledges that (a) Seller has occupied
a position of trust and confidence with the Acquired Companies prior to the date
hereof and has become familiar with the following, any and all of which
constitute confidential information of the Acquired Companies (collectively, the
"Confidential Information"): (i) any and all Trade Secrets (as defined below)
concerning the business and affairs of the Acquired Companies, (ii) any and all
information concerning the business and affairs of the Acquired Companies (which
includes historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, the names
and backgrounds of key personnel, personnel training and techniques and
materials), however documented, and (iii) any and all notes, analysis,
compilations, studies, summaries and other material prepared by or for the
Acquired Companies containing or based, in whole or in part, on any information
included in the foregoing; (b) the business of the Acquired Companies is
national in scope; (c) its products and
<PAGE>
services are marketed throughout the United States; (d) the Acquired Companies
compete with other businesses that are or could be located in any part of the
United States; (e) Buyer has required that Seller make the covenants set forth
in Sections 3 and 4 of this Agreement as a condition to Buyer's purchase of the
Shares owned by Seller and Mrs. Donkersloot; (f) the provisions of Sections 3
and 4 of this Agreement are reasonable and necessary to protect and preserve the
Acquired Companies' businesses; and (g) the Acquired Companies would be
irreparably damaged if Seller were to breach the covenants set forth in Sections
3 and 4 of this Agreement. As used herein, the term "Trade Secrets" will mean
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current and planned research and development, current and planned
manufacturing and distribution methods and processes, customer lists, current
and anticipated customer requirements, price lists, market studies, business
plans, computer software and programs (including object code and source code),
computer software and database technologies, systems, structures and
architectures of the Acquired Companies and any other information, however
documented, of the Acquired Companies that is a "trade secret" within the
meaning of the Arizona Uniform Trade Secrets Act.
3. CONFIDENTIAL INFORMATION. Seller acknowledges and agrees that all
Confidential Information known or obtained by Seller, whether before or after
the date hereof, is the property of the Acquired Companies. Therefore, Seller
agrees that Seller will not, at any time, disclose to any unauthorized Persons
or use for his own account or for the benefit of any third party (other than the
Company, the Acquired Companies or any of their successors) any Confidential
Information, whether Seller has such information in Seller's memory or embodied
in writing or other physical form, without Buyer's written consent, unless and
to the extent that the Confidential Information is or becomes generally known to
and available for use by the public other than as a result of Seller's fault or
the fault of any other Person bound by a duty of confidentiality to Buyer or the
Acquired Companies. Seller agrees to deliver to Buyer, at any time Buyer may
request, all documents, memoranda, notes, plans, records, reports and other
documentation, models, components, devices or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations or affairs of the Acquired Companies and
any other Confidential Information that Seller may then possess or have under
Seller's control.
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<PAGE>
4. NONCOMPETITION. As an inducement for Buyer to enter into the Stock Purchase
Agreement and as additional consideration for the consideration to be paid to
Seller under the Stock Purchase Agreement and the consideration to be paid under
this Agreement, Seller agrees that:
(a) For a period of six years after the Closing:
(i) Seller will not, directly or indirectly, engage or invest in,
own, manage, operate, finance, control or participate in the ownership,
management, operation, financing, or control of, be employed by, associated
with, or in any manner connected with, lend Seller's name or any similar name
to, lend Seller's credit to, or render services or advice to, any business whose
products or activities compete in whole or in part with the products or
activities of the Acquired Companies, anywhere within the United States;
provided, however, that Seller may purchase or otherwise acquire up to (but not
more than) one percent (1%) of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934.
Seller agrees that this covenant is reasonable with respect to its duration,
geographical area and scope.
(ii) Seller will not, directly or indirectly, either for himself or
any other Person, (A) induce or attempt to induce any employee of an Acquired
Company to leave the employ of such Acquired Company, (B) in any way interfere
with the relationship between an Acquired Company and any employee of such
Acquired Company, (C) employ, or otherwise engage as an employee, independent
contractor or otherwise, any non-secretarial employee of an Acquired Company, or
(D) induce or attempt to induce any customer, supplier, licensee or business
relation of an Acquired Company to cease doing business with such Acquired
Company, or in any way interfere with the relationship between any customer,
supplier, licensee or business relation of an Acquired Company.
(iii) Seller will not, directly or indirectly, either for himself or
any other Person, solicit the business of any Person known to Seller to be a
customer of an Acquired Company, whether or not Seller had personal contact with
such Person, with respect to products or activities which compete in whole or in
part with the products or activities of the Acquired Companies.
(b) In the event of a breach by Seller of any covenant set forth in
Section 4(a) of this Agreement, the term of such covenant will be extended by
the period of the duration of such breach.
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<PAGE>
(c) Seller will not, at any time during or after the six year period,
disparage Buyer or the Acquired Companies, or any of their stockholders,
directors, officers, employees or agents.
(d) Seller will, for a period of six years after the Closing, within ten
days after accepting any employment, advise Buyer of the identity of any
employer of Seller.
5. COMPENSATION. As additional consideration for the covenants in Section 4 of
this Agreement, Buyer will pay to Seller the sum of $3,720,000 (the
"Consideration"), in six consecutive annual installments of $620,000 each, due
and payable on each of the six anniversary dates of the Closing; provided,
however, that in the event the IRS challenges Seller's past compensation,
installments of the Consideration will be reduced by amounts equal to any taxes,
penalties and expenses (including reasonable attorneys' fees) (not to exceed, in
the aggregate, $300,000) paid by Buyer in connection with the defense of such
matter.
6. BUYERS' REMEDIES. If Seller breaches the covenants set forth in Sections 3
or 4 of this Agreement, Buyer and the Acquired Companies will be entitled to the
following remedies:
(a) Damages from Seller;
(b) To offset against any and all amounts owing to Seller under
Section 5(b) of this Agreement the amount of any money judgment awarded to Buyer
or the Acquired Companies by a court of competent jurisdiction based upon a
claim under Section 6(a) of this Agreement, plus costs of defense and reasonable
attorneys' fees; and
(c) In addition to its right to Damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate Buyer and the Acquired Companies and would be
an inadequate remedy for such breach.
7. SELLER'S REMEDIES. If a court of competent jurisdiction determines that
Buyer breached any covenant set forth in Section 5 of this Agreement, Seller
may elect either (a) to terminate this Agreement whereupon Seller will be
released from all of the covenants set forth in Sections 3 and 4 of this
Agreement and Buyer and the Acquired Companies will be relieved of all
liability hereunder, or (b) to receive a money judgment, together with
pre-judgment interest at the rate of ten percent (10%) per annum on the
unpaid installment only, commencing on the date on which the court determines
that such installment was due and payable.
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<PAGE>
8. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon Buyer and
Seller and will inure to the benefit of Buyer and its affiliates, successors and
assigns and Seller and Seller's assigns, heirs and legal representatives. Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
9. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
10. GOVERNING LAW. This Agreement will be governed by the laws of the
Commonwealth of Pennsylvania without regard to conflicts of laws principles.
11. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the Commonwealth of
Pennsylvania, County of Montgomery, or, if it has or can acquire jurisdiction,
in the United States District Court for the Eastern District of Pennsylvania,
and each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
12. SEVERABILITY. Whenever possible each provision and term of this Agreement
will be interpreted in a manner to be effective and valid but if any provision
or term of this Agreement is held to be prohibited or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of this
Agreement. If any of the covenants set forth in Section 4 of this Agreement are
held to be unreasonable,
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<PAGE>
arbitrary or against public policy, such covenants will be considered divisible
with respect to scope, time and geographic area, and in such lesser scope, time
and geographic area, will be effective, binding and enforceable against Seller.
13. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
14. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
15. NOTICES. All notices, consents, waivers and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
Seller: Mr. Daryl Jay Donkersloot
9681 South Palm Drive
Tempe, Arizona 85284
with a copy to:
James R. Nearhood, Esq.
Nearhood & Associates, P.C.
7501 East McCormick Parkway, Suite 114N
Scottsdale, Arizona 85258
Telecopier: (602) 998-0820
Buyer: The Triumph Group, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, Pennsylvania 19087-1565
Attention: Mr. John R. Bartholdson
-6-
<PAGE>
Telecopier: (610) 975-0563
with a copy to:
Edward D. Slevin, Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Telecopier: (215) 864-8999
16. ENTIRE AGREEMENT. This Agreement, the Employment Agreement and the Stock
Purchase Agreement constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and supersede all prior written
and oral agreements and understandings between Buyer and Seller with respect to
the subject matter of this Agreement. This Agreement may not be amended except
by a written agreement executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
THE TRIUMPH GROUP, INC.
By: /s/ Richard C. Ill
-------------------------------------
Richard C. Ill
President and Chief Executive Officer
SELLER:
/s/ Daryl Jay Donkersloot
----------------------------------------
Daryl Jay Donkersloot
-7-
<PAGE>
NOTE MODIFICATION AGREEMENT
This Note Modification Agreement is made as of December 31, 1995 by
and between The Triumph Group Holdings, Inc., a Delaware corporation ("Company")
and MDR Corporation, a Delaware corporation ("Holder").
BACKGROUND
Company issued its $13,500,000 Subordinated Promissory Note dated June
1, 1993 to Holder (the "Note") in connection with a certain Stock and Asset
Purchase Agreement dated as of April 21, 1993 by and among Company, Holder and
certain other parties named therein. Each capitalized term used herein, which
is not separately defined herein, shall have the meaning given to such term in
the Note.
The Company and a newly formed indirect subsidiary have entered into
an Asset Purchase Agreement with Teleflex Incorporated to purchase certain
assets of the aerospace/defense division of Teleflex Incorporated. In order to
consummate such acquisition, the Company and certain other subsidiaries will
incur additional Indebtedness. Company has requested, and Holder has agreed, to
amend the Note to permit the incurrence of additional Superior Debt, as more
fully set forth herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
<PAGE>
1. Paragraph 6 of the Note is hereby amended to change the reference
to "$90 million" to $110 million.
2. As required by the terms of the Note, the holders of a majority
of the outstanding Senior Notes are being requested to consent to such
amendment.
3. Except as hereinabove modified and amended, the Note shall remain
unaltered and in full force and effect, and is hereby ratified and confirmed in
all respects, as amended.
4. THE VALIDITY, CONSTRUCTION AND INTERPRETATION OF THIS AGREEMENT
WILL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAWS OF CONFLICTS, OF THE
STATE OF NEW YORK.
5. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successor and assigns.
IN WITNESS WHEREOF, Company and Holder have caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
THE TRIUMPH GROUP HOLDINGS, INC.
By: /s/ Richard C. Ill
----------------------------
Title: President
-------------------------
MDR CORPORATION
By: /s/ Barbara H. Moyer
----------------------------
Title: Secretary
-------------------------
2
<PAGE>
Consented to and agreed
this 22 day of April, 1996.
-- -----
THE CIT GROUP/BUSINESS CREDIT, INC.,
individually and as agent for itself,
BOT Financial Corporation and
Heller Financial, Inc.
By: /s/
-----------------------------
Title: Vice President
--------------------------
3
<PAGE>
EXECUTIVE STOCK AGREEMENT
THIS AGREEMENT is made as of May 9, 1995 between The Triumph Group
Holdings, Inc., a Delaware corporation (the "Company"), and John M. Brasch
("Executive").
The Company and Executive desire to enter into an agreement pursuant
to which Executive will purchase, and the Company will sell, 400 shares of the
Company's Class A Common Stock, par value $.001 per share (the "Common Stock"),
and the Company's Promissory Note substantially in the form of EXHIBIT A
attached hereto (the "JSDs") in an aggregate principal amount of $28,818. All of
such shares of Common Stock and all shares of Common Stock hereafter acquired by
Executive are referred to herein as "Executive Common Stock." Executive Common
Stock and all JSDs, including JSDs acquired hereafter are referred to herein as
"Executive Securities." Certain definitions are set forth in paragraph 10 of
this Agreement.
The execution and delivery of this Agreement by the Company and
Executive is required by the terms of a Purchase Agreement dated as of July 22,
1993 (the "Purchase Agreement") pursuant to which Citicorp Venture Capital, Ltd.
("CVC") purchased shares of Common Stock, shares of the Company's Preferred
Stock, par value $.01 per share (the "Preferred Stock") and JSDs. Certain
provisions of this Agreement are intended for the benefit of, and will be
enforceable by, CVC.
The parties hereto agree as follows:
1. PURCHASE AND SALE OF EXECUTIVE SECURITIES.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 400 shares of Common Stock at a price of $52.325 per
share and JSDs in an aggregate principal amount of $28,818 at a price equal to
the face amount thereof. The Company will deliver to Executive the JSDs and the
certificates representing the Common Stock, and Executive will deliver to the
Company a cashier's or certified check or wire transfer of funds in the
aggregate amount of $49,748.
(b) Within 30 days after Executive purchases any Executive
Securities from the Company, Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code and
the regulations promulgated thereunder in the form of Annex A attached hereto.
<PAGE>
(c) In connection with the purchase and sale of the Executive
Securities hereunder, Executive represents and warrants to the Company that:
(i) The Executive Securities to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the 1933
Act, or any applicable state securities laws, and the Executive Securities will
not be disposed of in contravention of the 1933 Act or any applicable state
securities laws.
(ii) Executive is an executive officer of the Company or a
Subsidiary or a Division, is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the Executive Securities.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Securities for an indefinite period of time because
the Executive Securities have not been registered under the 1933 Act and,
therefore, cannot be sold unless subsequently registered under the 1933 Act or
an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Executive
Securities and has had full access to such other information concerning the
Company as he has requested. Executive has reviewed, or has had an opportunity
to review, a copy of the Stock and Asset Purchase Agreement, dated April 21,
1993 (the "Purchase Agreement"), between the Company and Alco Standard
Corporation, MDR Corporation, Paper Corporation of America, and PCA Brands, Inc.
(collectively the "Sellers"), pursuant to which the Company acquired all of the
assets and stock of the divisions and subsidiaries of the Sellers which, upon
closing of the Purchase Agreement, comprised the Company's Subsidiaries, and
Executive is familiar with the transactions contemplated thereby. Since his
employment by the Company, Executive has received monthly financial statements
showing the performance of each of the Company's operating units. Executive has
also had an opportunity to review the following documents: (A) the Company's
Certificate of Incorporation and Bylaws; (B) the loan agreements, notes and
related documents with the Company; senior and subordinated lenders; (C) the
Private Placement Memorandum prepared by the Company; and (D) the audited
financial statements of the Company for the fiscal year ended March 31, 1995.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in
2
<PAGE>
accordance with its terms, and execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, violate or cause a
breach of any agreement, contract or instrument to which Executive is a party or
any judgment, order or decree to which Executive is subject.
(d) As an inducement to the Company to issue the Executive
Securities to Executive, as a condition thereto, Executive acknowledges and
agrees that:
(i) neither the issuance of the Executive Securities to
Executive nor any provision contained herein shall entitle Executive to remain
in the employment of the Company or its Subsidiaries or Divisions or affect the
right of the Company or its Subsidiaries or Divisions to terminate Executive's
employment at any time for any reason; and
(ii) the Company shall have no duty or obligation to
disclose to Executive, and Executive shall have no right to be advised of, any
material information regarding the Company and its Subsidiaries and Divisions at
any time prior to, upon or in connection with the repurchase of Executive
Securities upon the termination of Executive's employment with the Company and
its Subsidiaries or Divisions or as otherwise provided hereunder.
2. REGULAR AND TIME VALUED EXECUTIVE COMMON STOCK.
(a) Except as otherwise provided in paragraph 2(b) below, the
shares of Executive Common Stock will become "Time Valued Shares" in accordance
with the following schedule, if as of each such date Executive is still employed
by the Company or any of its Subsidiaries or Divisions:
Cumulative
Percentage of Executive
Common Stock to become
Date Time Valued Shares
---------------------- -----------------------
On May 9, 1996: 20.0%
On May 9, 1997: 40.0%
On May 9, 1998: 60.0%
On May 9, 1999: 80.0%
On May 9, 2000: 100.0%
(b) If Executive ceases to be employed by the Company or its
Subsidiaries or Divisions for any reason, including the death or permanent
disability of Executive, on any date other than any May 9 prior to May 9, 2000,
the cumulative
3
<PAGE>
percentage of Executive Common Stock to become Time Valued Shares will be
determined on a pro rata basis according to the number of days elapsed since the
prior May 9th. Upon the occurrence of a Sale of the Company or a Qualified
Public Offering, all shares of Executive Common Stock which have not yet become
Time Valued Shares shall become Time Valued Shares at the time of such event.
For purposes of this paragraph 2(b), the determination of permanent disability
shall be made in good faith by the Company's board of directors (the "Board").
All shares of Executive Common Stock which have not become Time Valued Shares
are referred to herein as "Regular Shares."
3. REPURCHASE OPTION.
(a) In the event Executive ceases to be employed by the Company
and its Subsidiaries and Divisions for any reason (the "Termination"), the
Executive Securities (whether held by Executive or one or more of Executive's
transferees) will be subject to repurchase by the Company, Management and CVC
pursuant to the terms and conditions set forth in this paragraph 3 (the
"Repurchase Option").
(b) Except as provided in subsection 3(c) below, the purchase
price for each Regular Share of Executive Common Stock will be the lesser of
Book Value or Executive's Original Cost for such share, and the purchase price
for each Time Valued Share of Executive Common Stock will be the Book Value for
such Share. The purchase price for the JSDs will be the outstanding principal
amount so purchased plus all accrued and unpaid interest thereon until the date
of payment.
(c) If the Executive resigns or his employment is terminated for
Cause, the purchase price for each Time Valued and Regular Share will be the
lesser of Book Value or Executive's Original Cost for such share.
(d) The Board may elect to purchase all or any portion of the
Executive Securities by delivering written notice (the "Repurchase Notice") to
the holder or holders of the Executive Securities within 90 days after the
Termination. The Repurchase Notice will set forth the number of Regular Shares
and Time Valued Shares and the principal amount of JSDs to be acquired from each
holder, the aggregate consideration to be paid for such shares or JSDs and the
time and place for the closing of the transaction. The number of shares and
principal amount of JSDs to be repurchased by the Company shall first be
satisfied to the extent possible from the shares of Executive Common Stock or
principal amount of JSDs held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Common Stock or
principal amount of JSDs then held by Executive is less than the total number of
shares of Executive
4
<PAGE>
Common Stock or principal amount of JSDs the Company has elected to purchase,
the Company shall purchase the remaining shares elected to be purchased from the
transferees of such Executive's Executive Common Stock or JSDs under this
Agreement, pro rata according to the number of shares of Executive Common Stock
or principal amount of JSDs held by such transferees at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the nearest share
or nearest dollar, as applicable). The number of Regular Shares and Time Value
Shares to be repurchased hereunder will be allocated among Executive and such
transferees of Executive Common Stock (if any) pro rata according to the number
of shares of Executive Common Stock to be purchased from such persons.
(e) If for any reason the Company does not elect to purchase all
of the Executive Securities pursuant to the Repurchase Option, Management shall
be entitled to exercise the Repurchase Option for the shares of Executive Common
Stock and principal amount of JSDs the Company has not elected to purchase (the
"Available Securities"). As soon as practicable after the Company has
determined that there will be Available Securities, but in any event within 30
days after the Termination, the Company shall give written notice (the "Option
Notice") to each member of Management setting forth the Available Securities and
the purchase price for the JSDs and Executive Common Stock comprising the
Available Securities. Each member of Management may elect to purchase his pro
rata share (based on the number of shares of Common Stock owned by such member
and the total number of shares owned by Management) of the Available Securities
by giving written notice to the Company within 20 days after the Option Notice
has been given by the Company. As soon as practicable, and in any event within
fifteen days after the expiration of the 20-day period set forth above, the
Company shall notify each holder of Executive Common Stock and JSDs as to the
number of shares and principal amount of JSDs being purchased from such holder
by Management (the "Supplemental Repurchase Notice"). At the time the Company
delivers the Supplemental Repurchase Notice to the holder(s) of Executive
Securities, the Company shall also deliver written notice to each member of
Management who is purchasing Available Securities setting forth the number of
shares and principal amount of JSDs that each member of Management is entitled
to purchase, the aggregate purchase price and the time and place of the closing
of the transaction. The number of Regular Shares and Time Valued Shares to be
repurchased hereunder shall be allocated among the Company and each member of
Management pro rata according to the number of shares of Executive Common Stock
to be purchased by each of them.
(f) If for any reason the Company and Management do not elect to
purchase all of the Executive Securities pursuant to the Repurchase Option, CVC
shall be entitled to exercise the
5
<PAGE>
Repurchase Option for the shares of Executive Common Stock and principal amount
of JSDs the Company and Management have not elected to purchase (the "CVC
Available Securities"). As soon as practicable after the Company has determined
that there will be CVC Available Securities, but in any event within 60 days
after the Termination, the Company shall give written notice (the "CVC Option
Notice") to CVC setting forth the CVC Available Securities and the purchase
price for the JSDs and Executive Common Stock comprising the CVC Available
Securities. CVC may elect to purchase any or all of the CVC Available
Securities by giving written notice to the Company within 20 days after the CVC
Option Notice has been given by the Company. As soon as practicable, and in any
event within ten days after the expiration of the 20-day period set forth above,
the Company shall notify each holder of Executive Common Stock and JSDs as to
the number of shares and principal amount of JSDs being purchased from such
holder by CVC (the "CVC Supplemental Repurchase Notice"). At the time the
Company delivers the CVC Supplemental Repurchase Notice to the holder(s) of
Executive Securities, the Company shall also deliver written notice to CVC
setting forth the number of shares and principal amount of JSDs that CVC is
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction. The number of Regular Shares and Time Valued Shares
and principal amount of JSDs to be repurchased hereunder shall be allocated
among the Company, Management and CVC pro rata according to the number of shares
of Executive Common Stock and principal amount of JSDs to be purchased by each
of them.
(g) The closing of the purchase of the Executive Securities
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice, Supplemental Repurchase Notice or CVC
Supplemental Repurchase Notice, which date shall not be more than 60 days nor
less than five days after the delivery of the later of any such notice to be
delivered. The Company, Management and/or CVC will pay for the Executive
Securities to be purchased pursuant to the Repurchase Option by delivery of, in
the case of Management or CVC, a check or wire transfer of funds and, in the
case of the Company, (i) a check or wire transfer of funds, (ii) a subordinated
note or notes payable in up to three equal annual installments beginning on the
first anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate announced from time to
time by Citibank, N.A. or (iii) both (i) and (ii), in each case, in the
aggregate amount of the purchase price for such securities. Any notes issued by
the Company pursuant to this paragraph 3(g) shall be subject to any restrictive
covenants to which the Company is subject at the time of such purchase. In
addition, the Company may pay the purchase price for the Executive Securities by
offsetting amounts outstanding under any bona fide debts owed by
6
<PAGE>
Executive to the Company. The purchasers of Executive Common Stock hereunder
will be entitled to receive customary representations and warranties from the
sellers regarding such sale and to require all sellers' signatures be
guaranteed.
(h) The rights of the Company, Management and CVC to repurchase
Time Valued Shares pursuant to this paragraph 3 shall terminate upon the first
to occur of the Sale of the Company or a Qualified Public Offering.
(i) Notwithstanding anything to the contrary contained in
this Agreement, all repurchases of Executive Common Stock by the Company shall
be subject to applicable restrictions contained in the Delaware General
Corporation Law and in the Company's and its Subsidiaries' debt and equity
financing agreements. If any such restrictions prohibit the repurchase of
Executive Common Stock hereunder which the Company is otherwise entitled or
required to make, the Company may make such repurchases (plus interest accruing
at the rate of 7% per annum from the date the Company elects to make such
prohibited repurchase to the date such repurchase is actually made) as soon as
it is permitted to do so under such restrictions.
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE SECURITIES. Executive shall not sell,
transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in any of the Executive Securities (a "Transfer"), except pursuant
to (i) the provisions of paragraph 3 hereof, a Public Sale or a Sale of the
Company ("Exempt Transfers") or (ii) the provisions of this paragraph 4;
provided that in no event shall any Transfer of Executive Securities pursuant to
this paragraph 4 be made for any consideration other than cash payable upon
consummation of such Transfer or in installments over time. Prior to making any
Transfer other than an Exempt Transfer, Executive will give written notice (the
"Sale Notice") to the Company and CVC. The Company shall send a copy of the
Sale Notice to each member of Management. The Sale Notice will disclose in
reasonable detail the identity or the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the proposed transfer.
Executive will not consummate any Transfer until 60 days after the Sale Notice
has been given to the Company and to CVC, unless the parties to the Transfer
have been finally determined pursuant to this paragraph 4 prior to the
expiration of such 60-day period. (The date of the first to occur of such events
is referred to herein as the "Authorization Date").
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all
or any portion of the Executive Securities to be
7
<PAGE>
transferred upon the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to Executive, each member
of Management and CVC within 25 days after the Sale Notice has been given to the
Company. If the Company has not elected to purchase all of the Executive
Securities to be transferred, each member of Management may elect to purchase
his pro rata portion (based on the number of shares of Common Stock owned by
such member and the total number of shares owned by Management) of the Executive
Securities not purchased or not to be purchased by the Company upon the same
terms and conditions as those set forth in the Sale Notice by giving written
notice of such election to Executive within 40 days after the Sale Notice has
been given to the Company. If the Company and Management have not elected to
purchase all of the Executive Securities to be transferred, CVC may elect to
purchase all or any portion of the Executive Securities not purchased or not to
be purchased by the Company and Management upon the same terms and conditions as
those set forth in the Sale Notice by giving written notice of such election to
Executive within 50 days after the Sale Notice has been given to CVC. If the
Company, Management and CVC do not elect to purchase all of the Executive
Securities specified in the Sale Notice, Executive may transfer the remaining
Executive Securities specified in the Sale Notice at a price and on terms no
more favorable to the transferee(s) thereof than specified in the Sale Notice
during the 60-day period immediately following the Authorization Date. Any
Executive Securities not transferred within such 60-day period will be subject
to the provisions of this paragraph 4(b) upon subsequent transfer. The Company
may pay the purchase price for such shares by offsetting amounts outstanding
under any bona fide debts owed by Executive to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in
this paragraph 4 will not apply with respect to transfers of Executive
Securities (i) pursuant to applicable laws of descent and distribution or (ii)
among Executive's family group; provided that (x) such restrictions will
continue to be applicable to the Executive Securities after any such transfer
and (y) the transferees of such Executive Securities have agreed in writing to
be bound by the provisions of this Agreement. Executive's "family group" means
Executive's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Executive and/or Executive's spouse and/or
descendants.
(d) PLEDGES. Notwithstanding the provisions of this paragraph
4, Executive may not pledge any Executive Securities.
(e) TERMINATION OF RESTRICTIONS. The restrictions on the
transfer of shares of Executive Securities
8
<PAGE>
set forth in this paragraph 4 will continue with respect to all Executive
Securities following any transfer thereof; provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) The JSDs and the certificates representing the Executive
Common Stock will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
EXECUTIVE STOCK AGREEMENT BETWEEN THE COMPANY AND THE
ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE DATED AS OF MAY 9, 1995. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Securities may sell, transfer or
dispose of any Executive Securities (except pursuant to an effective
registration statement under the 1933 Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the 1933 Act and
applicable state securities laws is required in connection with such transfer.
(c) Each holder of Executive Securities agrees not to effect any
public sale or distribution of any Executive Securities or other equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for any of the Company's equity securities, during the seven days
prior to and the 180 days after the effectiveness of any underwritten public
offering, except as part of such underwritten public offering or if otherwise
permitted by the Company.
6. SALE OF THE COMPANY.
(a) If the Board and the holders of a majority of the Company's
Common Stock approve a Sale of the Company (the
9
<PAGE>
"Approved Sale"), the holders of Executive Securities will consent to and raise
no objections against the Approved Sale of the Company, and if the Approved
Sale of the Company is structured as a sale of stock, the holders of
Executive Securities will agree to sell their shares of Executive Securities
on the terms and conditions approved by the Board and the holders of a
majority of the Company's Common Stock and will raise no objections to
process and will waive dissenters or similar rights. The holders of
Executive Securities will take all necessary and desirable actions in
connection with the consummation of the Approved Sale of the Company. The
Company shall give management thirty days notice prior to a Sale of the
Company.
(b) The obligations of the holders of Executive Securities with
respect to the Approved Sale of the Company are subject to the satisfaction of
the following conditions: (i) upon the consummation of the Approved Sale, all of
the holders of Common Stock will receive the same form and amount of
consideration per share of Common Stock, or if any holders of Common Stock are
given an option as to the form and amount of consideration to be received, all
holders will be given the same option; and (ii) all holders of rights to acquire
shares of Common Stock will be given an opportunity to either (A) exercise such
rights prior to the consummation of the Approved Sale and participate in such
sale as holders of Common Stock or (B) upon the consummation of the Approved
Sale, receive in exchange for such rights consideration equal to the amount
determined by multiplying (1) the same amount of consideration per share of
Common Stock in connection with the Approved Sale less the exercise price per
share of Common Stock of such rights to acquire Common Stock by (2) the number
of shares of Common Stock represented by such rights.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Common Stock
will, at the request of the Company, appoint a purchaser representative (as such
term is defined in Rule 501) reasonably acceptable to the Company. If any
holder of Executive Common Stock appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative,
but if any holder of Executive Common Stock declines to appoint the purchaser
representative designated by the Company such holder will appoint another
purchaser representative (reasonably acceptable to the Company), and such holder
will be responsible for the fees of the purchaser representative so appointed.
10
<PAGE>
(d) Executive and the other holders of Executive Common Stock
(if any) will bear their pro rata share (based upon the number of shares sold)
of the costs of any sale of Executive Common Stock pursuant to an Approved Sale
to the extent such costs are incurred for the benefit of all holders of Common
Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by Executive and the other holders of Executive Common Stock on their
own behalf will not be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 6 will terminate upon the
completion of a Qualified Public Offering.
7. CONFIDENTIAL INFORMATION. The Executive acknowledges that the
information, observations and data obtained by him while employed by Executive's
Business concerning the business or affairs of the Company, Executive's Business
or any other Subsidiary or Division ("Confidential Information") are the
property of the Company or such Subsidiary or Division. Therefore, Executive
agrees that he shall not disclose to any unauthorized person or use for his own
account any Confidential Information without the prior written consent of the
Board, unless and to the extent that the aforementioned matters become generally
known to and available for use by the public other than as a result of
Executive's acts or omissions to act. Executive shall deliver to the Company at
the termination of the Executive's employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined in Section 8 below) or the
business of the Company or any Subsidiary or Division which he may then possess
or have under his control.
8. INVENTIONS AND PATENTS. Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information which relates to the Company's or
any of its Subsidiaries' or Divisions' actual or anticipated business, research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by Executive's Business
("Work Product") belong to the Company or such Subsidiary or Division.
Executive will promptly disclose such Work Product to the Board and perform all
actions reasonably requested by the Board (whether during or after Executive's
employment period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
11
<PAGE>
9. NON-COMPETE NON-SOLICITATION.
(a) Executive acknowledges that in the course of his employment
with Executive's Business he has become familiar, and he will become familiar,
with the Company's and its Subsidiaries' and Divisions' trade secrets and with
other confidential information concerning the Company and its Subsidiaries and
Divisions and that his services have been and will be of special, unique and
extraordinary value to the Company. Therefore, Executive agrees that, prior to
the termination of Executive's employment and, in the event Executive resigns or
is terminated for cause, for a period of two years thereafter (the "Noncompete
Period"), he shall not directly or indirectly own, manage, control, participate
in, consult with, render services for, or in any manner engage in any business
competing with the businesses of the Executive's Business as such businesses
exist or are in process on the date of the termination of Executive's
employment, within any geographical area in which Executive's Business engages
or plans to engage in such businesses. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee of the Company or any Subsidiary or Division to leave the employ of the
Company or such Subsidiary or Division, or in any way interfere with the
relationship between the Company or any Subsidiary or Division and any employee
thereof, (ii) hire any person who was an employee of the Company or any
Subsidiary or Division at any time during the Executive's employment period, or
(iii) induce or attempt to induce any customer, supplier, licensee or other
business relation of the Company or any Subsidiary or Division to cease doing
business with the Company or such Subsidiary or Division, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any Subsidiary or Division.
(c) If, at the time of enforcement of this paragraph 9, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
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(d) In the event of the breach or a threatened breach by
Executive of any of the provisions of this paragraph 9, the Company, in addition
and supplementary to other rights and remedies existing in its favor, may apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security).
10. DEFINITIONS.
"BOOK VALUE" of each share of Executive Common Stock will be equal to
the quotient determined by dividing (A) the excess of Company's assets over its
liabilities as of the end of the fiscal quarter immediately preceding the date
of Executive's Termination (provided however that if Executive's Termination
occurs in connection with a Sale of Executive's Business, the excess of the
Company's assets over its liabilities shall be determined on a pro forma basis
assuming the Sale of Executive's Business occurred on the last day of such
fiscal quarter), determined on a consolidated basis in accordance with generally
accepted accounting principles, consistently applied, less the liquidation value
of all outstanding preferred stock, by (B) the total number of shares of Common
Stock outstanding on a fully diluted basis (including in such calculation the
aggregate conversion price and exercise price of all outstanding convertible
securities, options and warrants).
"CAUSE" shall mean (i) a material breach of this Agreement by
Executive, (ii) a breach of Executive's duty of loyalty to the Company, (iii)
the commission by Executive of a felony, a crime involving moral turpitude or
other act causing material harm to the Company's standing and reputation, (iv)
Executive's continued failure to perform his duties to the Company or (v)
Executive's substandard performance. For the purposes of this agreement,
"substandard performance" shall be determined in good faith by a majority of the
Board (excluding Executive). In assessing Executive's performance, the Board
shall give due consideration to the overall industry experience in assessing
Executive's performance. After due consideration of these factors, if a majority
of the Board (excluding Executive) determines in good faith that the Company
would have performed substantially better with other management and that the
future performance of the Company would be best served by new management, the
Board may terminate Executive for "substandard performance."
"CREDIT AGREEMENT" means the Financing and Security Agreement, dated
as of July 22, 1993, among the Company, certain of the Company's Subsidiaries
and The CIT Group/Business Credit, Inc., as Lender and as Agent, as now or
hereafter amended.
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"DIVISION" means an operating division of the Company or any
Subsidiary.
"EXECUTIVE COMMON STOCK" will continue to be Executive Common Stock in
the hands of any holder other than Executive (except for the Company and CVC and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Common Stock will succeed to all
rights and obligations attributable to Executive as a holder of Executive Common
Stock hereunder. Executive Common Stock will also include shares of the
Company's capital stock issued with respect to Executive Common Stock by way of
a stock split, stock dividend or other recapitalization.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 5% owner of the Company's Common Stock and
who is not the spouse or descendent (by birth or adoption) of any such 5% owner
of the Company's Common Stock.
"MANAGEMENT" means all of the other executive officers of the Company
and its Subsidiaries and Divisions who have purchased JSDs or Preferred Stock
and shares of Common Stock from time to time pursuant to Executive Stock
Agreements between such executive officers and the Company, substantially in the
form hereof.
"1933 ACT" means the Securities Act of 1933, as amended from time to
time.
"ORIGINAL COST" of each share of Common Stock purchased hereunder will
be equal to $52.325 (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalization).
"PERMITTED TRANSFEREE" means any holder of Executive Common Stock who
acquired such stock pursuant to a transfer permitted by paragraph 4(c).
"PUBLIC SALE" means any sale pursuant to a registered public offering
under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated
under the 1933 Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the 1933 Act of shares of the Company's Common Stock
having an aggregate offering value of at least $40 million.
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<PAGE>
"REGULAR SHARES" means those shares of Executive Common Stock
designated as such pursuant to Section 2.
"SALE OF THE COMPANY" means the sale of the Company to an Independent
Third Party or affiliate group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power to elect a majority of the Company's board of directors (whether by
merger, consolidation or sale or transfer of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SUBSIDIARY" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or through one or more subsidiaries.
"TIME VALUED SHARES" means those shares of Executive Common Stock
designated as such pursuant to Section 3.
11. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
To the Company:
The Triumph Group Holdings, Inc.
c/o The Triumph Group
1255 Drummers Lane, Suite 200
Wayne, PA 19087
Attention: President
With copies to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Edward D. Slevin
To Executive:
John M. Brasch
12093 E. Gold Dust Avenue
Scottsdale, AZ 85259
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<PAGE>
To CVC:
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Attention: Joseph Silvestri
with a copy to:
Kirkland & Ellis
55 East 52nd Street
New York, NY 10055
Attention: Kirk A. Radke
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
12. GENERAL PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Executive Securities as the
owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an
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original and all of which taken together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, CVC and their respective successors and assigns
(including subsequent holders of Executive Securities); provided that the rights
and obligations of Executive under this Agreement shall not be assignable except
in connection with a permitted transfer of Executive Securities hereunder.
(f) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by the
internal law, and not the law of conflicts, of the State of Delaware.
(g) REMEDIES. Each of the parties to this Agreement (including
CVC) will be entitled to enforce its rights under this Agreement specifically,
to recover damages and costs (including reasonable attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(h) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company,
Executive and CVC.
(i) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
each Saturday, Sunday or holiday.
* * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
15 day of September, 1996.
- -- ---------
The Triumph Group Holdings, Inc.
By /s/
---------------------------
Its Senior Vice President
--------------------------
/s/ John M. Brasch
------------------------------
John M. Brasch
Agreed and Accepted:
Citicorp Venture Capital, Ltd.
By /s/
-------------------------
Its AVP
-------------------------
CONSENT
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Executive Stock Agreement and that I understand its contents.
I am aware that the Agreement provides for the repurchase of my spouse's
Executive Securities (as defined in the foregoing agreement) under certain
circumstances and imposes other restrictions on the transfer of such Executive
Securities. I agree that my spouse's interest in the Executive Securities is
subject to this Agreement and any interest I may have in such Executive
Securities shall be irrevocably bound by this Agreement and further that my
community property interest in such Executive Securities, if any, shall be
similarly bound by this Agreement.
I am aware that the legal, financial and other matters contained in
this Agreement are complex and I am free to seek advice with respect thereto
from independent counsel. I have either sought such advice or determined after
carefully reviewing this Agreement that I will waive such right.
/s/ Christine M. Fox /s/ Barbara A. Brasch
- -------------------- ------------------------------
Witness Print Name:BARBARA A. BRASCH
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EXHIBIT A
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN
SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 3 HEREIN. THIS NOTE WAS
ORIGINALLY ISSUED ON ______________, 1995 AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. THE
TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN PARAGRAPH
9 HEREIN.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE U.S.
FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS NOTE. THE DATE
OF THIS NOTE IS MAY 9, 1995, AND THE ISSUE PRICE IS EQUAL TO 100% OF ITS FACE
AMOUNT. ASSUMING THAT THE ISSUER EXERCISES ITS RIGHT TO ISSUE ADDITIONAL NOTES
IN LIEU OF CASH INTEREST PAYMENTS AT EACH OPPORTUNITY, AND THAT ALL PAYMENTS OF
PRINCIPAL AND INTEREST ON THIS NOTE AND SUCH ADDITIONAL NOTES ARE MADE ON THE
SCHEDULED MATURITY DATE OF DECEMBER 31, 2003, THE TOTAL AMOUNT OF OID ON THIS
NOTE (INCLUDING OID WITH RESPECT TO THE ADDITIONAL NOTES ISSUED IN LIEU OF CASH
INTEREST PAYMENTS) WILL BE $__________ PER $1,000 FACE AMOUNT OF THIS NOTE, AND
THE YIELD TO MATURITY OF THIS NOTE WILL BE 14%, COMPOUNDED QUARTERLY.
PROMISSORY NOTE
Dated as of: May 9, 1995 $28,818.00
Delivered: _______________, 1995
THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to John M. Brasch (the Lender"), or its
permitted assigns (the Lender and each of its permitted assigns is a "Holder")
the principal amount of Twenty Eight Thousand Eight Hundred Eighteen Dollars,
together with interest thereon calculated from the date hereof in accordance
with the provisions of this Note. This Note is the "Note" issued pursuant to
that certain Executive Stock Agreement, dated as of even date herewith (the
"Purchase Agreement"), by and among the Company and the Lender. Certain defined
terms used herein are set forth in paragraph 11 hereof.
1. PAYMENT OF INTEREST. Interest shall accrue at the rate of
fourteen percent (14%) per annum, compounded quarterly, on the unpaid principal
amount of this Note outstanding from time to time. Subject to the provisions of
subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to the holder of
this Note quarterly, in arrears, all accrued interest on each March
<PAGE>
31, June 30, September 30 and December 31 during the term of this Note (each
such date being hereinafter referred to as an "Interest Payment Date"),
beginning on June 30, 1995. The Company, in its sole discretion, in lieu of
paying cash interest on any Interest Payment Date, may pay all or any portion of
the accrued interest by issuance of a promissory note or notes in an amount or
amounts equal to the amount of interest due on such Interest Payment Date (less
any cash interest payments), payable to the holder of this Note and otherwise
identical to this Note. Any accrued interest which for any reason has not
theretofore been paid shall be paid in full on the date on which the remaining
principal amount of this Note is paid. Interest shall accrue on any principal
payment due under this Note, and, unless otherwise prohibited under applicable
law, on any interest which has not been paid on the date on which it is due,
until such time as payment therefor is actually delivered to the holder of this
Note.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) SCHEDULED PAYMENT. The Company shall repay the entire
remaining principal amount of this Note, together with all accrued and unpaid
interest thereon, on December 31, 2003 (the "Maturity Date").
(b) OPTIONAL PREPAYMENTS. Subject to the provisions of paragraph
3 hereof, the Company may, at any time and from time to time without premium or
penalty, prepay all or a portion of the outstanding principal amount of this
Note.
(c) TIME OF PAYMENT. If any payment of principal or interest on
this Note shall become due on a Saturday, Sunday, or legal holiday under the
laws of the State of New York, such payment shall be made on the next succeeding
business day and such extension of time shall in such case be included in
computing interest in connection with such payment.
3. SUBORDINATION; RESTRICTIONS ON PAYMENT.
(a) Notwithstanding anything in this Note to the contrary, the
obligations of the Company in respect of the principal, interest, fees and
charges on this Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all Superior Debt.
(b) Upon the occurrence of any Insolvency Event with respect to
the Company or upon any acceleration of the Superior Debt, then:
(i) the holders of Superior Debt shall be entitled to receive
payment in full of all principal,
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<PAGE>
premium, interest, fees and charges then due on all Superior Debt
(including interest, fees and charges accruing thereon after the
commencement of any such proceedings) before the Holder is entitled to
receive any payment on account of principal, interest or other amounts due
(or past due) upon this Note, and the holders of Superior Debt shall be
entitled to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash, property or
securities or by set-off or otherwise, which may be payable or deliverable
in any such proceedings in respect of this Note; and
(ii) any payment or distribution of assets of the Company,
of any kind or character, whether in cash, property or securities, to which
the Holder would be entitled except for the provisions of this subparagraph
3(b) shall be paid or delivered by the Company directly to the holders of
all Superior Debt in the manner provided in paragraph 3(f) below, for
application in payment thereof until all Superior Debt (including interest,
fees and charges accrued thereon after the date of commencement of such
proceedings) shall have been paid in full.
(c) Until all Superior Debt shall have been paid in full, the
Company shall not, directly or indirectly, make any payment of any amount
payable with respect to this Note if there shall have occurred and be continuing
or there would exist as a result of such payment or distribution any default or
event of default under any of the terms of any Superior Debt Agreement which
(whether with or without notice, lapse of time or both) would permit the holder
of such Superior Debt to accelerate all or any portion of such Superior Debt
(collectively, the "Blockage Events"); provided that if, immediately prior to
the time a particular payment is due hereunder, (x) no Blockage Event is
continuing, and (y) payment in full of the amount then due is prohibited by this
paragraph 3(c), then the Company shall be permitted to, and shall, pay to the
Holder the maximum portion of such amount as would not create a default under
any of the terms of any Superior Debt Agreement which would permit the holder of
such Superior Debt to accelerate all or any portion of such Superior Debt. The
Company shall use reasonable efforts to notify the Holder in writing of the
occurrence of a Blockage Event; provided that notwithstanding anything to the
contrary in this Note, the failure of the Company to so notify the Holder of the
occurrence of a Blockage Event shall have no effect on the obligations of the
Company or the Holder during the continuance of such Blockage Event as set forth
herein.
(d) Any amendment or modification of the terms of paragraph 3 of
this Note shall not be effective against any Person who was a holder of Superior
Debt prior to or at the time
3
<PAGE>
(e) The holders of Superior Debt may, at any time, in their
discretion, renew, amend, extend or otherwise modify the terms and provisions of
Superior Debt so held or exercise any of their rights under the Superior Debt
including, without limitation, the waiver of defaults thereunder and the
amendment of any of the terms or provisions thereof (or any notice evidencing or
creating the same), all without notice to or assent from the Holder. No
compromise, alteration, amendment, renewal or other change of, or waiver,
consent or other action in respect of any liability or obligation under or in
respect of, any terms, covenants or conditions of the Superior Debt (or any
instrument evidencing or creating the same), whether or not such compromise,
alteration, amendment, renewal, change, waiver, consent or other action is in
accordance with the provisions of the Superior Debt (or any instrument
evidencing or creating the same), shall in any way alter or affect any of the
subordination provisions of this Note.
(f) If, notwithstanding the provisions of paragraph 3 of this
Note, any payment or distribution of any character (whether in cash, securities
or other property) or any security shall be received by the Holder in
contravention of this paragraph 3 before all the Superior Debt shall have been
paid in full, such payment, distribution or security shall be held in trust for
the benefit of, and shall be immediately paid over or delivered or transferred
to, the holders of Superior Debt or their duly appointed agents for application
of payment according to the priorities of such Superior Debt and ratably among
the holders of any class of Superior Debt. Such payments received by the Holder
and delivered to the holders of the Superior Debt shall be deemed not to be a
payment on this Note for any reason whatsoever and the indebtedness under this
Note shall remain as if such erroneous payment had never been paid by the
Company or received by the Holder. In the event of the failure of any Holder to
endorse or assign any such payment, distribution or security, each holder of any
Superior Debt is hereby irrevocably authorized to endorse or assign the same.
(g) No present or future holder of Superior Debt shall be
prejudiced in its right to enforce the provisions of paragraph 3 of this Note by
any act or failure to act on the part of the Company.
(h) If there shall exist any Blockage Event, no Holder shall
(other than in connection with a failure by the Company to make a scheduled
principal payment) take or continue any action, or exercise or continue to
exercise any rights, remedies or powers under the terms of this Note, or
exercise or continue to exercise any other right or remedy at law or equity that
such holder might otherwise possess, to collect any amount due and payable in
respect of this Note, including, without
4
<PAGE>
limitation, the acceleration of this Note (and if this Note has already been
accelerated, the holder will, immediately upon becoming aware of the occurrence
of such Blockage Event, reverse such acceleration), the commencement of any
foreclosure on any lien or security interest, the filing of any petition in
bankruptcy or the taking advantage of any other insolvency law of any
jurisdiction, unless and until the Superior Debt shall have been fully and
finally paid (whether in cash or such other form of consideration acceptable to
the holders of Superior Debt in their sole discretion) and satisfied, unless one
or more of the holders of the Superior Debt shall have commenced any action or
taken any judicial action to enforce their rights as provided in their
respective agreements relating to, or instruments evidencing, their Superior
Debt in connection with an Insolvency Event (other than an action to dismiss a
proceeding commenced against the Company).
Notwithstanding the foregoing or any permissible action taken by
the Holder, the Holder shall not be entitled to receive any payment in
contravention of the other provisions of this paragraph 3, including, without
limitation, subparagraphs 3(b), 3(c) and 3(f). Notwithstanding anything to the
contrary in this subparagraph 3(h), the Holder may take such steps as are
necessary to avoid a loss of its rights as a result of the running of any
applicable statute of limitations or any other statute or rule which limits the
time for filing claims, or making proofs of claims, or would otherwise cause a
claim to be time-barred.
(i) If any payment or distribution to which the Holder would
otherwise have been entitled but for the provisions of this paragraph 3 shall
have been applied, pursuant to the provisions of this paragraph 3, to the
payment of the Superior Debt, then in such case and to such extent, the Holder
(x) shall be entitled to receive from the holders of Superior Debt then
outstanding any payments or distributions received by such Persons in excess of
the amount sufficient to pay all of the Superior Debt in full (whether or not
then due and whether such payment was in cash or such other form of
consideration acceptable to the holders of Superior Debt in their sole
discretion), (y) following payment in full of the Superior Debt (whether in cash
or such other form of consideration acceptable to the holders of Superior Debt
in their sole discretion), shall be entitled to receive any and all further
payments or distributions applicable to the Superior Debt, and (z) following
payment in full of the Superior Debt (whether in cash or such other form of
consideration acceptable to the holders of Superior Debt in their sole
discretion), shall be subrogated to the rights of the holders of Superior Debt
to receive distributions applicable to the Superior Debt, in each case until
this Note shall have been paid in full. If the Holder has been subrogated
5
<PAGE>
of the holders of Superior Debt to receive distributions applicable to the
Superior Debt, in each case until this Note shall have been paid in full. If
the Holder has been subrogated to the rights of the holders of Superior Debt
due to the operation of this subparagraph 3(i), the Company agrees to take
all such actions as are reasonably requested by such Person in order to cause
such Person to be able to obtain payments from the Company with respect to
such subrogation rights as soon as possible.
(j) The provisions of this paragraph 3 are solely for the
purpose of defining the relative rights of the holders of Superior Debt, on the
one hand, and the Holder on the other, against the Company and its assets, and
nothing herein is intended to or shall impair, as between the Company and the
Holder, the obligations of the Company which are absolute and unconditional, to
pay to the Holder the principal and interest on this Note as and when they
become due and payable in accordance with their terms, or is intended to or will
affect the relative rights of the Holder and creditors of the Company other than
the holders of Superior Debt, nor, except as provided in this paragraph 3, will
anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights, if any, under this paragraph 3 of the holders of Superior Debt in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy and subject to this paragraph 3.
4. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "Event of Default"
shall be deemed to have occurred if:
(i) the Company shall default in the payment of (A)
principal of this Note on the date when due, whether at maturity, by
acceleration or otherwise, or (B) the portion of the interest on this Note
which is permitted to be paid pursuant to paragraph 3(c) above within 5
days of the date when due; or
(ii) an Insolvency Event occurs with respect to the
Company.
(b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this
paragraph 4(b) are expressly subject to paragraph 3 hereof.
(i) If an Event of Default of the type described in clause
(i) of subparagraph 4(a) has occurred and is continuing, the Holder may
declare all or any portion of the outstanding principal amount of this Note
due and
6
<PAGE>
payable and demand immediate payment of all or any portion of the
outstanding principal amount of this Note. If the Holder demands immediate
payment of all or any portion of this Note, the Company shall immediately
pay to such Holder the principal amount of this Note requested to be paid
together with all accrued and unpaid interest thereon.
(ii) If an Event of Default of the type described in clause
(ii) of subparagraph 4(a) has occurred, all of the outstanding principal amount
of this Note shall automatically be immediately due and payable without any
notice or other action on the part of the Holder.
(iii) Upon the occurrence of an Event of Default, the
Holder shall also have any other rights which such Person may have been afforded
by the Company under any contract or agreement at any time and any other rights
which such Person may have pursuant to applicable law.
5. CHANGE IN OWNERSHIP. Upon a Change in Control, the Company will
pay to the Holder the principal amount of this Note then outstanding together
with all accrued and unpaid interest thereon. The term "Change in Control"
shall have the meaning set forth for such term in the Senior Loan Agreement.
6. TRANSFER RESTRICTIONS. This Note has not been registered under
the Securities Act or any comparable state securities law. If the Holder
desires to transfer this Note, such Person first must furnish the Company with
(i) a written opinion in form and substance reasonably satisfactory to the
Company from counsel reasonably satisfactory to the Company to the effect that
the Holder may transfer this Note as desired without registration under the
Securities Act or any relevant state securities law and (ii) a written
undertaking executed by the desired transferee in form and substance reasonably
satisfactory to the Company agreeing to be bound by all of the provisions of
this Note, including, without limitation, the subordination provisions set forth
in paragraph 3 hereof.
7. AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Majority Holders.
8. CANCELLATION. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note shall be surrendered to
the Company for cancellation and shall not be reissued.
7
<PAGE>
9. PLACE OF PAYMENT: NOTICES. Payments of principal and interest and
any notice hereunder are to be delivered to the Holder at the following address:
John M. Brasch
12093 E. Gold Dust Avenue
Scottsdale, AZ 85259
or to such other address as specified in a written notice delivered to the
Company by Holder. Notices sent by the Company shall be deemed received when
delivered personally or one (1) day after being sent by Federal Express or other
overnight carrier or three (3) days after being sent by certified or registered
mail.
10. GOVERNING LAWS. The validity, construction, and interpretation of
this Note will be governed by the internal laws, and not the laws of conflicts,
of the State of Delaware.
11. DEFINITIONS. Unless otherwise indicated herein, capitalized
terms used in this Note shall have the meanings given such terms in the Purchase
Agreement.
"Excess Cash Flow" shall have the meaning assigned to such term in the
Senior Loan Agreement.
"Indebtedness" shall mean, with respect to any Person at a particular
time, without duplication, (a) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which such Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) or any commitment by which such Person assures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such Person, including
guarantees in the form of an agreement to repurchase or reimburse, (c)
obligations under capitalized leases in respect of which obligations such Person
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss and (d)
any unsatisfied obligation of such Person for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"Insolvency Event" means any of the occurrences referred to in
Sections 12.01(e) and (f) of the Senior Loan Agreement.
"Majority Holders" means the holders of Notes representing a majority
of the principal amount then outstanding under all of the Notes.
8
<PAGE>
"Notes" means all of the notes issued pursuant to the Purchase
Agreement, the other Executive Stock Agreements between the Company and certain
members of the management of the Company and its Subsidiaries and the Purchase
Agreement dated as of July 22, 1993 between the Company and Citicorp Venture
Capital Ltd.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
governmental entity or any department or agency thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Loan Agreement" means that certain Financing and Security
Agreement, dated as July 22, 1993, by and among the Company and its Subsidiaries
and The CIT Group/Business Credit, Inc., as amended from time to time.
"Subsidiary" shall mean any Person which the Company has the direct or
indirect right to control, direct or cause direction of management and policies
of, whether through the ownership of voting securities, by contract or
otherwise.
"Superior Debt" means all Indebtedness incurred by the Company and its
Subsidiaries from time to time which is not by its terms expressly subordinate
to the Notes.
"Superior Debt Agreement" means any agreement relating to, or
instrument evidencing, any Superior Debt.
* * * * *
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on the _____ day of __________ , 1996.
THE TRIUMPH GROUP HOLDINGS, INC.
By:____________________________
9
<PAGE>
ANNEX A
______________, 1995
ELECTION TO INCLUDE STOCK IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased shares of Common Stock, par value $.001 per
share (the "Shares"), of The Triumph Group Holdings, Inc. (the "Company") on
______________, 1995. Under certain circumstances, the Company has the right to
repurchase the Shares at cost or book value from the undersigned (or from the
holder of the Shares, if different from the undersigned) should the undersigned
cease to be employed by the Company and its subsidiaries. Hence, the Shares are
subject to a substantial risk of forfeiture and are non-transferable. The
undersigned desires to make an election to have the Shares taxed under the
provision of Code Section 83(b) at the time he purchased the Shares.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Shares (described below), to report as taxable income for
calendar year 1995 the excess (if any) of the Shares' fair market value on
_____________, 1995 over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the undersigned:
John M. Brasch
12093 East Gold Dust Avenue
Scottsdale, Arizona 85259
S.S.#:
2. A description of the property with respect to which the election
is being made: 400 shares of The Triumph Group Holdings, Inc. Common Stock, par
value $.001 per share.
3. The date on which the property was transferred:
________________, 1995. The taxable year for which such election is made:
calendar 1995.
4. The restrictions to which the property is subject: If before May
9, 2000, the undersigned ceases to be employed by the Company or any of its
subsidiaries, the unvested portion of the Shares will be subject to repurchase
by the Company at the lesser of cost or book value, and at any time prior to a
public
<PAGE>
offering by the Company or a sale of the company the undersigned ceases to be
employed by the Company or any of its subsidiaries, the vested portion of the
Shares will be subject to repurchase by the Company at book value. One-fifth of
the Shares will become vested shares on May 9 of each year commencing on May 9,
1996, subject to acceleration in certain circumstances.
5. The fair market value on ____________, 1995 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $___________ per share of Common Stock.
6. The amount paid for such property: $52.325 per share of Common
Stock.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: ________________, 1995 _______________________
John M. Brasch
2
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR EACH OF THE THREE MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
EARNINGS PER SHARE:
Weighted Average Number of Outstanding Common Shares 5,850,455 5,804,955
Dilutive Effect of Outstanding Warrant 649,994 649,994
Dilutive Effect of Options Issued Within One Year of Filing
At a Price Below the Estimated IPO Price 35,590 35,590
Dilutive Effect of the Conversion of the Minority
Interest in Triumph Controls, Inc. 62,534 62,534
Conversion of Preferred Stock 278,068 320,717
Conversion of 14% Junior Subordinated Promissory Notes 546,892 624,852
---------- ----------
Weighted Average Number of Outstanding Common
Shares and Common Share Equivalents 7,423,532 7,498,642
---------- ----------
---------- ----------
Income From Continuing Operations $ 1,014 $ 1,792
Interest related to 14% Junior Subordinated Promissory Notes 271 313
Income Tax Effect (108) (125)
---------- ----------
Income from Continuing Operations Available to Common Shareholders 1,177 1,980
(Loss)/Income from Discontinued Operations 109 --
---------- ----------
Net Income Available to Common Shareholders $ 1,286 $ 1,980
---------- ----------
---------- ----------
Earnings per Share
Continuing Operations $ 0.16 $ 0.26
Discontinued Operations 0.01 --
---------- ----------
Total $ 0.17 $ 0.26
---------- ----------
---------- ----------
</TABLE>
<PAGE>
THE TRIUMPH GROUP HOLDINGS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR EACH OF THE TWO YEARS ENDED MARCH 31, 1996 AND
THE TEN MONTHS ENDED MARCH 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended
March 31, March 31,
---------------------------------------------
1994 1995 1996
----------- ------------ -----------
<S> <C> <C> <C>
EARNINGS PER SHARE:
Weighted Average Number of Outstanding Common Shares 5,804,955 5,843,955 5,850,455
Dilutive Effect of Outstanding Warrant 649,994 649,994 649,994
Dilutive Effect of Options Issued Within One Year of Filing
At a Price Below the Estimated IPO Price 35,590 35,590 35,590
Dilutive Effect of the Conversion of the Minority
Interest in Triumph Controls, Inc. 62,534 62,534 62,534
Conversion of Preferred Stock 232,890 268,401 309,496
Conversion of 14% Junior Subordinated Promissory Notes 459,738 526,588 607,681
----------- ------------ -----------
Weighted Average Number of Outstanding Common
Shares and Common Share Equivalents 7,245,700 7,387,062 7,515,750
----------- ------------ -----------
----------- ------------ -----------
Income From Continuing Operations $ 4,908 $ 4,364 $ 5,194
Interest related to 14% Junior Subordinated Promissory Notes 614 993 1,146
Income Tax Effect (246) (397) (458)
----------- ------------ -----------
Income from Continuing Operations Available to Common Shareholders 5,276 4,960 5,882
(Loss)/Income from Discontinued Operations (462) (2,852) 4,496
----------- ------------ -----------
Net Income Available to Common Shareholders $ 4,814 $ 2,108 $ 10,378
----------- ------------ -----------
----------- ------------ -----------
Earnings per Share
Continuing Operations $ 0.72 $ 0.67 $ 0.78
Discontinued Operations (0.06) (0.39) 0.60
----------- ------------ -----------
Total $ 0.66 $ 0.29 $ 1.38
----------- ------------ -----------
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
<PAGE>
271118.001(B&F)
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Triumph Group Holdings, Inc.
The Triumph Group Operations, Inc.
Aerospace Technologies, Inc.
Kilroy Structural Steel Co.
Kilroy Steel, Inc.
Triumph Controls, Inc.
Advanced Materials Technologies Inc.
Special Processes of Arizona, Inc.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 5, 1996 (except Note 12, as to which the date is
July 31, 1996), with respect to the financial statements of Advanced
Materials Technologies, Inc. included in the Registration Statement (Form S-1
No. _________) and related Prospectus of Triumph Group, Inc. for the
registration of 2,500,000 shares of its common stock.
/s/ Ernst & Young LLP
Phoenix, Arizona
August 22, 1996
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 22, 1996, in the Registration Statement (Form S-1
No. _________) and related Prospectus of Triumph Group, Inc. (formerly The
Triumph Group Holdings, Inc.) for the registration of 2,500,000 shares of its
common stock.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
August 22, 1996
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 25, 1996, relating
to the financial statements of North Wales Controls and Quadrants Group, a
division of Teleflex Incorporated, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, PA
August 21, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> APR-01-1995 APR-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 539 430
<SECURITIES> 0 0
<RECEIVABLES> 30,653 33,097
<ALLOWANCES> 973 1,011
<INVENTORY> 45,098 48,295
<CURRENT-ASSETS> 105,282 86,646
<PP&E> 43,270 44,146
<DEPRECIATION> 6,718 7,705
<TOTAL-ASSETS> 161,406 142,297
<CURRENT-LIABILITIES> 44,903 37,038
<BONDS> 89,963 76,261
2,652 2,854
0 0
<COMMON> 6 6
<OTHER-SE> 15,059 16,661
<TOTAL-LIABILITY-AND-EQUITY> 161,406 142,297
<SALES> 186,774 55,184
<TOTAL-REVENUES> 186,774 55,184
<CGS> 139,740 39,146
<TOTAL-COSTS> 170,563 49,837
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,318 2,286
<INCOME-PRETAX> 8,893 3,061
<INCOME-TAX> 3,699 1,252
<INCOME-CONTINUING> 5,194 1,809
<DISCONTINUED> 4,496 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,690 1,809
<EPS-PRIMARY> 1.38 0.26
<EPS-DILUTED> 1.38 0.26
</TABLE>
