<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _______ to _______
Commission File Number: 1-12235
TRIUMPH GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0347963
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(610) 975-0420
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.001 Par Value, 9,749,588 shares as of September 30, 1997
<PAGE>
TRIUMPH GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page Number
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<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 1997 and September 30, 1997....................... 1
Condensed Consolidated Statements of Income
Three months ended September 30, 1996 and 1997;
Six months ended September 30, 1996 and 1997................ 3
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1996 and 1997................ 4
Notes to Condensed Consolidated Financial Statements
September 30, 1997.......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 11
Part II. Other Information
Item 1. Legal Proceedings..................................... 15
Item 2. Changes in Securities................................. 15
Item 3. Defaults upon Senior Securities....................... 15
Item 4. Submission of Matters to a Vote of Security Holders... 15
Item 5. Other Information..................................... 16
Item 6. Exhibits and Reports on Form 8-K...................... 16
Signature Page.................................................. 17
</TABLE>
<PAGE>
Triumph Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, 1997
1997 (UNAUDITED)
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<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 993 $ 5,458
Accounts receivable, net............................................ 39,220 48,101
Inventories......................................................... 54,310 68,607
Prepaid expenses and other.......................................... 1,036 1,780
Deferred income taxes............................................... 1,795 3,793
----------- ---------
Total current assets................................................. 97,354 127,739
Property and equipment, net.......................................... 48,349 65,852
Excess of cost over net assets acquired, net......................... 13,516 35,087
Intangible assets and other, net..................................... 12,096 12,843
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Total assets......................................................... $ 171,315 $ 241,521
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</TABLE>
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<PAGE>
Triumph Group, Inc.
Condensed Consolidated Balance Sheets (continued)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, 1997
1997 (UNAUDITED)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 20,461 $ 25,810
Accrued expenses.................................................................. 16,255 17,195
Income taxes payable.............................................................. 3,951 3,106
Current portion of long-term debt................................................. 399 335
----------- --------
Total current liabilities.......................................................... 41,066 46,446
Long-term debt, less current portion............................................... 23,993 66,405
Deferred income taxes and other.................................................... 14,843 26,460
Stockholders' equity:
Common Stock, $.001 par value, 15,000,000 shares authorized, 5,801,898 and
6,021,626 shares issued and outstanding at March 31, 1997 and September 30,
1997, respectively............................................................... 6 6
Class D common stock convertible, $.001 par value, 6,000,000 shares authorized,
3,947,690 and 3,727,962 shares issued and outstanding at March 31, 1997 and
September 30, 1997, respectively................................................. 4 4
Capital in excess of par value..................................................... 68,479 68,479
Retained earnings.................................................................. 22,924 33,721
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Total stockholders' equity......................................................... 91,413 102,210
Total liabilities and stockholders' equity......................................... $ 171,315 $ 241,521
----------- --------
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</TABLE>
SEE ACCOMPANYING NOTES.
-2-
<PAGE>
Triumph Group, Inc.
Condensed Consolidated Statements of Income (continued)
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
--------- --------- --------- ---------
Net sales............................................................. $ 63,916 $ 75,146 $119,100 $147,002
Operating costs and expenses (income):
Cost of products sold............................................... 45,540 53,013 84,686 103,770
Selling, general, andadministrative................................. 10,278 11,001 19,711 22,028
Depreciation and amortization....................................... 1,597 2,003 2,855 3,875
Gain on sale of assets.............................................. -- (1,250) -- (1,250)
--------- --------- --------- ---------
57,415 64,767 107,252 128,423
Operating income...................................................... 6,501 10,379 11,848 18,579
Interest expense, net................................................. 2,118 1,043 4,404 1,879
--------- --------- --------- ---------
Income before income taxes and extraordinary item..................... 4,383 9,336 7,444 16,700
Income tax expense.................................................... 1,753 3,641 3,005 6,513
--------- --------- --------- ---------
Income before extraordinary item...................................... 2,630 5,695 4,439 10,187
Extraordinary (loss) gain, net of income taxes......................... (1,478) 610 (1,478) 610
--------- --------- --------- ---------
Net income............................................................ $ 1,152 $ 6,305 $ 2,961 $ 10,797
--------- --------- --------- ---------
--------- --------- --------- ---------
Income before extraordinary item per share............................ $ 0.38 $ 0.54 $ 0.65 $ 0.97
Extraordinary (loss) gain, net of income taxes per share.............. (0.20) 0.06 (0.20) 0.06
--------- --------- --------- ---------
Net income per share.................................................. $ 0.18 $ 0.60 $ 0.45 $ 1.03
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in computing income per share............................. 7,388 10,508 7,386 10,508
(in thousands) --------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
-3-
<PAGE>
Triumph Group, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------
<S> <C> <C>
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
---------------- ----------------
OPERATING ACTIVITIES
Net income.................................................................... $ 2,961 $ 10,797
Adjustments to reconcile net income to net cash used in operating activities:
Gain on sale of assets....................................................... -- (1,250)
Gain on extinguishment of debt............................................... -- (1,000)
Depreciation and amortization................................................ 2,855 3,875
Other amortization included in interest expense.............................. 139 68
Provision for doubtful receivables........................................... 279 17
Provision for deferred income taxes.......................................... 120 802
Interest on subordinated promissory note and junior subordinated promissory
notes paid by issuance of additional notes.................................. 1,124 380
Write-off of deferred financing costs........................................ 923 --
Compensation in stock options issued to employee............................. 80 --
Changes in operating assets and liabilities, net of acquisitions of
businesses:
Accounts receivable........................................................ (6,407) (5,963)
Inventories................................................................ (6,199) (10,421)
Prepaid expenses and other current assets.................................. (822) (620)
Accounts payable, accrued expenses, and accrued income taxes payable....... (2,033) 233
Other...................................................................... (1,784) (681)
--------- --------
Net cash used in operating activities........................................ (8,764) (3,763)
INVESTING ACTIVITIES
Capital expenditures, net..................................................... (1,999) (7,385)
Proceeds from sale of property and equipment of discontinued operation........ 27,350 --
Proceeds from sale of company................................................. -- 5,861
Cost of businesses acquired, net of cash acquired............................. (7,950) (33,458)
--------- --------
Net cash provided by (used in) investing activities........................... 17,401 (34,982)
</TABLE>
-4-
<PAGE>
Triumph Group, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------
<S> <C> <C>
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
---------------- ----------------
FINANCING ACTIVITIES
Net (decrease) increase in revolving credit facility, excluding refinancing... $ (2,801) $ 45,306
Purchase of treasury stock.................................................... (10) --
Proceeds from issuance of long-term debt...................................... 54,065 5,000
Retirement of long-term debt.................................................. (54,366) (7,000)
Payments of long-term debt.................................................... (4,936) (96)
Payment of deferred financing costs........................................... (510) --
------- -------
Net cash (used in) provided by financing activities........................... (8,558) 43,210
------- -------
Increase in cash.............................................................. 79 4,465
Cash at beginning of period................................................... 539 993
------- -------
Cash at end of period......................................................... $ 618 $ 5,458
------- -------
------- -------
NONCASH INVESTING AND FINANCING ACTIVITIES
Assumption of liabilities related to acquisition.............................. $ 10,386 $ 12,199
Covenant not to compete contract liability related to acquisition............. 2,800 1,800
Redeemable preferred stock issued in lieu of cash dividend payments and
accretion to face value..................................................... 410 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes.................................................... $ 3,448 $ 6,932
Cash paid for interest........................................................ 3,872 1,609
</TABLE>
SEE ACCOMPANYING NOTES
-5-
<PAGE>
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1998. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1997.
The Company's income per share and share data in the financial statements
have been retroactively restated to reflect the effect of the 65-for-one
stock split declared in connection with the initial public offering by the
Company of its common stock in October 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company's aviation segment designs, engineers, manufactures, repairs and
overhauls aircraft components for commercial airlines, air cargo carriers, and
original equipment manufacturers on a worldwide basis. The Company's metals
segment manufactures, machines, 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 for the periods presented is computed using the weighted
average number of shares of common stock outstanding after giving effect to the
65-for-one stock split effected in conjunction with the Company's initial public
offering. In addition, common share equivalents such as warrants and options are
included in the computation.
-6-
<PAGE>
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted for annual and
quarterly periods ended after December 15, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods presented. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options and
warrants will be excluded. Under this method, primary income before
extraordinary items per share (referred to as Basic EPS) for the three and six
month periods ended September 30, 1996 and 1997 would have been $.42 and $.58
and $.72 and $1.04, respectively. The impact of Statement No. 128 on the
calculation of fully diluted earnings per share for those years is not expected
to be material.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information". Both Statements become effective for fiscal periods
beginning after December 15, 1997, with early adoption permitted. The Company is
evaluating the effects these Statements will have on its financial reporting and
disclosures. The Statements are expected to have no material effect on the
Company's results of operations, financial condition, capital resources or
liquidity.
USE OF ESTIMATES
The preparation of the 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.
3. ACQUISITIONS
On September 1, 1997, the Company acquired all of the outstanding stock of
Hydro-Mill Company ("Hydro-Mill"), based in Chatsworth, California for an
aggregate purchase price of approximately $42.2 million. The purchase price
includes cash paid at closing, a note to the former owner, the assumption of
certain liabilities, and direct costs of the acquisition. Hydro-Mill
manufactures precision machined structural parts and assemblies for the
aerospace industry. The excess of the purchase price over net assets acquired of
$20.2 million was recorded as excess of cost over net assets acquired and is
being amortized over thirty years on a straight-line basis.
As of April 30, 1997, the Company acquired substantially all of the assets
of J. D. Chapdelaine Co. ("JDC"), based in Ft. Lauderdale, Florida for an
aggregate purchase price of approximately $5.2 million. The purchase price
includes cash paid at closing, a long-term liability related to a covenant
not-to-compete contract, the assumption of certain liabilities and direct costs
of the acquisition. JDC specializes in the repair, overhaul and exchange of
electromechanical aircraft instruments. The excess of the purchase price over
net assets acquired of $1.7 million was recorded as excess of cost over net
assets acquired and is being amortized over twenty-five years on a straight-line
basis.
These acquisitions have been accounted for under the purchase method and,
accordingly, are included in the consolidated financial statements from their
dates of acquisition. Changes in purchase accounting estimates may result in a
reallocation of the purchase price within one year of the acquisitions. The
acquisitions were funded through the Company's long-term borrowings.
-7-
<PAGE>
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
The following unaudited pro forma information has been prepared assuming the
purchases of Hydro-Mill and JDC had taken place on April 1, 1996:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1996 1997
--------------------- ---------------------
(dollars in thousands, except per share data)
<S> <C> <C>
Net Sales.................................... $ 143,659 $ 158,432
Income before extraordinary item............. 5,840 10,565
Income before extraordinary item per share... 0.84 1.01
Net income................................... 4,362 11,175
Net income per share......................... 0.64 1.06
</TABLE>
The unaudited 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 unaudited pro forma financial information is not
necessarily indicative of the results of operations as they would have been had
the transactions been effected on April 1, 1996.
4. DIVESTITURE
On July 31, 1997, the Company sold substantially all of the assets of its
Seattle, Washington based division, Air Lab, to Sextant Avionique, Inc. for
approximately $5.9 million in cash and the assumption by the purchaser of
certain liabilities. The reported results for the three and six months ended
September 30, 1997 include the gain of $1.3 million on the sale of the Air Lab
assets. For the six months ended September 30, 1996 and 1997, Air Lab had net
sales of $2.6 million and $2.1 million, respectively, and operating income of
$0.3 million and $0.2 million, respectively.
5. INVENTORIES
The components of inventories are as follows:
MARCH 31, SEPTEMBER 30,
1997 1997
----------- --------------
(dollars in thousands)
Raw materials...................................... $ 15,863 $ 23,815
Work-in-process.................................... 17,295 22,645
Finished goods..................................... 21,694 22,689
----------- -------
Total inventories at current FIFO cost............. 54,852 69,149
Less allowance to reduce certain current
FIFO costs to LIFO basis......................... 542 542
----------- -------
Total inventories.................................. $ 54,310 $ 68,607
----------- -------
----------- -------
Approximately 12% and 16% of the inventory is valued using the LIFO method at
March 31, 1997 and September 30, 1997, respectively.
-8-
<PAGE>
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
6. LONG-TERM DEBT
Long-Term debt consists of the following:
MARCH 31, SEPTEMBER 30,
1997 1997
----------- -------------
(dollars in thousands)
Revolving credit facility.......................... $ 8,707 $ 54,013
Subordinated promissory notes...................... 14,246 6,607
Junior subordinated promissory notes............... 407 426
Other debt and capital lease obligations........... 1,032 5,694
----------- -------------
24,392 66,740
Less current portion............................... 399 335
----------- -------------
$ 23,993 $ 66,405
----------- -------------
----------- -------------
On September 15, 1997, the Company retired the remaining $8 million
subordinated note payable to IKON Office Solutions, Inc. (formerly Alco Standard
Corporation). The terms of the note provided for a $1 million discount in the
event the note was repaid by October 1, 1997. The cash payment of $7 million was
funded by the Company's long-term borrowings under its revolving credit
facility. The early extinguishment of this debt resulted in an extraordinary
gain of $0.6 million, net of income taxes of $0.4 million.
In July 1997, the Company entered into a $10 million discretionary line of
credit ("Line of Credit"). The Line of Credit bears interest at the current rate
offered by the lender. Borrowings under the Line of Credit are payable on the
last day of the applicable interest period or on demand. The Line of Credit
expires in July 1998 and may be continued or renewed at that time.
On May 5, 1997 the Company entered into a loan agreement with the City of
Shelbyville, Indiana related to the City of Shelbyville, Indiana Adjustable Rate
Economic Development Revenue Bonds, Series 1997 (the "Bonds"). The proceeds of
the Bonds of $5.0 million are being used to fund the expansion of the Company's
K-T Corporation facility. The Bonds are due to mature on May 1, 2012 and are
secured by an irrevocable letter of credit issued by PNC Bank, N.A.. The Bonds
bear interest at a variable weekly rate.
7. COMMITMENTS AND CONTINGENCIES
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 IKON Office Solutions, Inc. (formerly Alco Standard Corporation) which
existed prior to the acquisition of the assets 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.
-9-
<PAGE>
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
8. SUBSEQUENT EVENTS
On October 24, 1997, the Company amended its existing credit agreement with
its lenders to provide for an additional $40 million in borrowing capacity. The
amended credit agreement increases the revolving credit facility to $125
million. The amended agreement is similar in form and substance to the $85
million credit agreement dated March 31, 1997.
On October 29, 1997, the Company acquired all of the outstanding stock of
Stolper-Fabralloy Company, LLC ("Stolper"). The transaction was funded by
borrowings under the Credit Facility. Stolper fabricates sheet metal from
high temperature alloys, which is used primarily in the hot section of jet
engines. Stolper also provides repair and overhaul services to aerospace
end-users. Stolper operates facilities in Brookfield, Wisconsin and Phoenix,
Arizona. The cash portion of the purchase price was approximately $33.6
million.
-10-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
RESULT OF OPERATIONS
Net sales for the three month period ended September 30, 1997 increased
17.6% to $75.1 million from $63.9 million for the three month period ended
September 30, 1996. Net sales for the six month period ended September 30,
1997 increased 23.4% to $147.0 million from $119.1 million for the six month
period ended September 30, 1996. The Aviation Group's sales increased 31.4%
to $53.9 million from $41.0 million for the three months ended September 30,
1997 and increased 34.2% to $102.8 million from $76.6 million for the six
months ended September 30, 1997. This increase in net sales reflects the
Aviation Group's acquisitions of Advanced Materials Technologies, Inc.
("AMTI"), JDC Company ("JDC") and Hydro-Mill Co. ("Hydro-Mill"). The increase
was primarily due to the inclusion of an aggregate of $11.8 million and $4.5
million in net sales for the three months ended September 30, 1997 and 1996,
respectively. The increase for the six months ended September 30, 1997 was
primarily due to the inclusion of an aggregate of $19.9 million and $4.5
million in net sales for the six months ended September 30, 1997 and 1996,
respectively for AMTI, JDC and Hydro-Mill. The remaining operating divisions
and subsidiaries in the Aviation Group experienced a 17.9% and 16.2% increase
in net sales over the three and six months ended September 30, 1996,
respectively. The increase in the Aviation Group was due to increased demand
for overhaul and repair services from the commercial airlines and air cargo
carriers, as well as increased orders of aircraft components from OEMs. Net
sales for the three month period ended September 30, 1997 in the Metals Group
decreased 7.2% to $21.2 million from $22.9 million for the three month period
ended September 30, 1996. Net sales for the six month period ended September
30, 1997 in the Metals Group increased 4.0% to $44.2 million from $42.5
million for the six month period ended September 30, 1996. The increase in
the Metals Group was primarily due to increased volume over the prior year.
Cost of goods sold for the three month period ended September 30, 1997
was 70.5% of sales compared to 71.2% for the three month period ended
September 30, 1996. The increase was primarily due to the inclusion of an
aggregate of $7.0 million and $1.9 million for the three months ended
September 30, 1997 and 1996, respectively, in cost of products sold
associated with the net sales generated by AMTI, JDC and Hydro-Mill. Cost of
goods sold for the six month period ended September 30, 1997 was 70.6%
compared to 71.1% for the six month period ended September 30, 1996. The
increase was primarily due to the inclusion of an aggregate of $12.0 million
and $1.9 million for the six months ended September 30, 1997 and 1996,
respectively, in cost of products sold associated with the net sales
generated by AMTI, JDC and Hydro-Mill.
Gross profit increased by $8.8 million, or 25.6%, to $43.2 million for
the six months ended September 30, 1997 from $34.4 million for the six months
ended September 30, 1996. Of this increase, $5.4 million was a result of the
inclusion of gross profit on the net sales generated by AMTI, JDC and
Hydro-Mill. As a percentage of net sales, gross profit was 29.4% and 28.9%
for the six months ended September 30, 1997 and 1996, respectively.
Selling, general and administrative expenses for the three month period
ended September 30, 1997 increased $0.7 million to $11.0 million from $10.3
million for the three month period ended September 30, 1996. The increase was
primarily due to the inclusion of an aggregate of $1.5 million and $1.2
million for the three months ended September 30, 1997 and 1996, respectively,
in selling, general and administrative expenses of AMTI, JDC and Hydro-Mill.
For the six month period ended September 30, 1997 these expenses increased
$2.3 million to $22.0 million from $19.7 million for the six months ended
September 30, 1996. The increase was primarily due to the inclusion of an
aggregate of $2.8 million and $1.2 million for the six months ended September
30, 1997 and 1996, respectively, in selling, general and administrative
expenses of AMTI, JDC and Hydro-Mill. The remaining increase is associated
with the higher sales activity level generated by the Aviation Group.
Depreciation and amortization for the three month period ended September 30,
1997 increased $0.4 million to $2.0 million from $1.6 million for the three
month period ended September 30, 1996. Depreciation and amortization for the six
month period ended September 30, 1997 increased $1.0 million to $3.9 million
from $2.9 million for the six month period ended September 30, 1997. The
increase is primarily attributable to the depreciation and amortization on the
increased asset base related to the inclusion of the Aviation Group's
acquisitions of AMTI, JDC and Hydro-Mill.
Operating income as a percentage of sales increased from 10.2% for the
three month period ended September 30, 1996 to 13.8% for the three month
period ended September 30, 1997. The increase was primarily due to the
inclusion of an aggregate of $2.6 million and $1.0 million in operating
income for AMTI, JDC and Hydro-Mill for the three months ended September 30,
1997 and 1996, respectively, accounting for $1.6 million of the increase. The
remaining increase was related to a $1.3 million gain on the sale of Air Lab,
and a $1.1 million, or 19.5%, improvement in operating income of the other
operating divisions and subsidiaries in the Aviation Group. Similarly,
operating income as a percentage of sales increased from 9.9% for the six
month period ended September 30, 1996 to 12.6% for the six month period ended
September 30, 1997.
-11-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
The increase for the six months ended September 30, 1997 was primarily
due to the inclusion of an aggregate of $4.0 million and $1.0 million in
operating income for AMTI, JDC and Hydro-Mill for the six months ended
September 30, 1997 and 1996, respectively. The remaining increase was related
to a $1.3 million gain on the sale of Air Lab, a $1.3 million, or 11.9%,
improvement in the operating income of the remaining operating divisions and
subsidiaries in the Aviation Group and $1.3 million improvement in the
operating income of the Metals Group.
Interest expense of $1.0 million for the three months ended September 30,
1997 represents a $1.1 million decrease from the three month period ended
September 30, 1996. For the six month period ended September 30,1997 interest
expense decreased $2.5 million to $1.9 million. This decrease from the prior
year was primarily due to reduced debt levels associated with the application of
the proceeds from the initial public offering of the Company's common stock and
proceeds from the sale of Air Lab, which was partially offset by the
acquisitions of AMTI, JDC and Hydro-Mill, the cash portions of which were
financed by borrowings under the Credit Agreement.
An extraordinary gain for the three and six months ended September 30, 1997
of $0.6 million (net of tax of $0.4 million) relates to a discount realized on
the prepayment of a subordinated note payable to IKON Office Solutions, Inc.
(formerly Alco Standard Corporation). An extraordinary loss for the three and
six months ended September 30, 1996 relates to prepayment premiums and the
related write-off of unamortized deferred financing costs due to the retirement
of 11% senior subordinated notes, senior term loans and the revolving credit
facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash
flows from operations and borrowings under its credit arrangements. The
Company used approximately $3.8 million of cash flows from operating
activities, principally for working capital requirements, for the six months
ended September 30, 1997. The Company used approximately $35.0 million in
investing activities, while providing $43.2 million in financing activities
for the six months ended September 30, 1997. As of September 30, 1997, $29.7
million was available under the $85.0 million revolving credit facility (the
"Credit Facility"). On October 24, 1997, the Company amended the Credit
Facility, increasing it to $125.0 million from $85.0 million. The Credit
Facility matures on March 31, 2002 and bears interest, at the option of the
Company, at the fluctuating prime rate or LIBOR, plus applicable points. On
September 30, 1997, an aggregate amount of approximately $54.0 million was
outstanding under the Credit Facility, $50.0 million of which was accruing
interest at LIBOR (plus applicable basis points) of 6.1875% per annum, and
$4.0 million of which was accruing interest at the prime rate of 8.5% per
annum. Amounts repaid under the Credit Facility may be reborrowed.
On September 15, 1997, the Company retired the remaining $8 million
subordinated note payable to IKON Office Solutions, Inc. (formerly Alco
Standard Corporation). The terms of the note provided for a $1 million
discount in the event the note was repaid by October 1, 1997. The cash
payment of $7 million was funded by the Company's long-term borrowings under
its revolving credit facility. The early extinguishment of this debt resulted
in an extraordinary gain of $0.6 million, net of income taxes of $0.4 million.
In July 1997, the Company entered into a $10 million discretionary line
of credit (the "Line of Credit"). The Line of Credit bears interest at the
current rate offered by the lender. Borrowings under the Line of Credit are
payable on the last day of the applicable interest period or on demand. The
Line of Credit expires in July 1998 and may be continued or renewed at that
time.
On May 5, 1997, the Company entered into a loan agreement with the City of
Shelbyville, Indiana related to the City of Shelbyville, Indiana Adjustable
Rate Economic Development Revenue Bonds, Series 1997 (the "Bonds"). The
proceeds of the Bonds of $5.0 million are being used to fund the expansion of
the Company's K-T Corporation facility. The Bonds are due to mature on May 1,
2012 and are secured by an irrevocable letter of credit issued by PNC Bank,
N.A.. The Bonds bear interest at a variable weekly rate.
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<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Capital expenditures were approximately $7.4 million for the six months
ended September 30, 1997 primarily for manufacturing machinery and equipment
for the Aviation Group. The Company funded these expenditures through
borrowings under its Credit Facility and from the proceeds from the Bonds.
The Company expects capital expenditures to be approximately $15.0 million
for its fiscal year ending March 31, 1998. The expenditures are expected to
be used primarily to expand capacity at several facilities in the Aviation
Group.
On October 29, 1997, the Company acquired all of the outstanding stock of
Stolper-Fabralloy Company ("Stolper"). The transaction was funded by
borrowings under the Credit Facility. Stolper fabricates sheet metal from
high temperature alloys, which is used primarily in the hot section of jet
engines. Stolper also provides repair and overhaul services to aerospace
end-users. Stolper operates facilities in Brookfield, Wisconsin and Phoenix,
Arizona. The cash portion of the purchase price was approximately $33.6
million.
On September 1, 1997, the Company acquired all of the outstanding stock
of Hydro-Mill in a cash transaction. The transaction was funded by borrowings
under the Credit Facility. Hydro-Mill, based in Chatsworth, California,
specializes in the manufacture of precision machined structural parts and
assemblies for the aerospace industry. The cash purchase price was
approximately $31.5 million.
On July 31, 1997, the Company sold substantially all of the assets of its
Seattle, Washington based division, Air Lab, to Sextant Avionique, Inc. for
approximately $5.9 million in cash and the assumption by the purchaser of
certain liabilities. In connection with the sale of AirLab, the Company and
Sextant entered into a five-year marketing and service agreement pursuant to
which A. Biederman, a division of the Company, will serve as an authorized
warranty and non-warranty repair station for certain products of Sextant and
as an authorized distributor for spare parts of Sextant. The Company
believes that such marketing and service agreement will enhance customer
service and increase its market share in instrument repair and distribution.
As of April 30, 1997, the Company acquired substantially all of the
assets of JDC in a cash transaction. The transaction was funded by borrowings
under the Credit Facility. JDC, based in Ft. Lauderdale, Florida, specializes
in the repair, overhaul and exchange of electromechanical aircraft
instruments. The cash purchase price was approximately $2.1 million.
On October 27, 1997, the Company announced its intention to file a
registration statement in early November with the Securities and Exchange
Commission to offer up to 2.0 million additional shares of common stock. The
proceeds of the offering will be used to repay indebtedness.
The Company believes that cash generated by operations, borrowings under
the Credit Facility, and proceeds from the Bonds will be sufficient to meet
anticipated cash requirements for its current operations. However, the
Company has a stated policy to grow through acquisition and is continuously
evaluating various acquisition opportunities. As a result, the Company
currently is pursuing the potential purchase of a number of candidates. In
the event that more than one of these transactions were successfully
consummated, the availability under the Credit Facility might be fully
utilized and additional funding sources may be needed. There can be no
assurance that such funding sources will be available to the Company.
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<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to the Company's
future operations and prospects, including statements that are based on
current projections and expectations about the markets in which the Company
operates, and management's beliefs concerning future performance and capital
requirements based upon currently available information. Actual results could
differ materially from management's current expectations and there can be no
assurance that additional capital will not be required or that additional
capital, if required, will be available on reasonable terms, if at all, at
such times and in such amounts as may be needed by the Company. In addition
to these factors, among other factors that could cause actual results to
differ materially are uncertainties relating to the integration of acquired
businesses, general economic conditions affecting the Company's two business
segments, dependence of certain of the Company's businesses on certain key
customers as well as competitive factors relating to the aviation and metals
industries. For a more detailed discussion of these and other factors
affecting the Company, see the risk factors described in the Company's
registration statement on Form S-1 filed with Securities and Exchange
Commission in October 1996 and the Company's Annual Report on Form 10-K for
the year ended March 31, 1997, filed with the SEC in June 1997.
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<PAGE>
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS
NOT APPLICABLE
ITEM 2. CHANGES IN SECURITIES
NOT APPLICABLE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on July 24, 1997.
At such meeting, the following matters were voted upon by the stockholders,
receiving the number of affirmative, negative and withheld votes, as well
as abstentions and broker non-votes, set forth below for each matter.
1. Election of six persons to the Company's Board of Directors to serve
until the 1998 Annual Meeting of Stockholders and until their
successors are elected and qualified.
Richard C. Ill:
--------------
5,352,360 Affirmative
96,874 Withheld
John R. Bartholdson:
-------------------
5,352,360 Affirmative
96,874 Withheld
Richard C. Gozon:
----------------
5,352,360 Affirmative
96,874 Withheld
Claude F. Kronk:
---------------
5,352,360 Affirmative
96,874 Withheld
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<PAGE>
Joseph M. Silvestri :
-------------------
5,207,369 Affirmative
241,865 Withheld
Michael A. Delaney :
------------------
5,352,360 Affirmative
96,874 Withheld
2. Ratification of the selection Ernst & Young LLP as independent public
accountants for the Company for the fiscal year ending March 31, 1998.
9,161,969 Affirmative
15,227 Negative
ITEM 5. OTHER INFORMATION
On October 29, 1997, the Company acquired all of the outstanding
stock of Stolper-Fabralloy Company, LLC ("Stolper"). The transaction was
funded by borrowings under the Credit Facility. Stolper fabricates sheet
metal from high temperature alloys, which is used primarily in the hot
section of jet engines. Stolper also provides repair and overhaul
services to aerospace end-users. Stolper operates facilities in
Brookfield, Wisconsin and Phoenix, Arizona. The cash portion of the
purchase price was approximately $33.6 million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
(10.1) Stolper-Fabralloy Company, LLC Stock Purchase Agreement
(10.2) First Amendment to Credit Agreement
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
B. Reports on Form 8-K
Form 8-K filed on September 15, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Triumph Group, Inc.
----------------------------------
(Registrant)
/s/ Richard C. Ill
----------------------------------
Richard C. Ill, President & CEO
/s/ John R. Bartholdson
----------------------------------
John R. Bartholdson, Senior Vice President & CFO
(Principal Financial Officer)
/s/ Kevin E. Kindig
----------------------------------
Kevin E. Kindig, Controller
(Principal Accounting Officer)
Dated: November 4, 1997
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated October 23, 1997,
by and among The Triumph Group Operations, Inc., a Delaware corporation
("Buyer"), and Stolper-Fabralloy Company, LLC, a Wisconsin limited liability
company, ("Company"), Ticonderoga Partners III, L.P., a limited partnership
organized under the laws of Delaware ("Ticonderoga") and Stolper Industries,
Inc., a Wisconsin corporation, ("Stolper") Lexington Partners IV, L.P., a
limited partnership organized under the laws of Delaware ("Lexington"), SBC
Warburg Dillon Read, Inc. as Agent ("SBC"), David J. Drury ("Drury"), Max O.
Mitchell ("Mitchell"), William J. Hinz ("Hinz") and Wedel Enterprises, Inc.,
a Wisconsin corporation ("Wedel") (Stolper, Lexington, SBC, Drury, Mitchell,
Hinz and Wedel are collectively referred to as the "Direct Shareholders" and
together with Ticonderoga as the "Shareholders").
RECITALS
A. The Direct Shareholders and S-F Holding Corporation, a Delaware
corporation ("S-F Holding"), collectively own 100% of the membership
interests in Company. Ticonderoga owns all of the issued and outstanding
capital stock of S-F Holding.
B. The Company's facilities consist of leased facilities located
at 115 N. Janacek Road, Brookfield, Wisconsin, and 2635 South 24th Street,
Phoenix, Arizona (collectively the "Facilities").
C. Shareholders wish to designate Jan Wedel and David J. Drury as
their agents and attorneys-in-fact (the "Shareholders' Agents") with the
authority to act on their behalf in connection with the sale of the Shares to
Buyer.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows.
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, on the
Closing Date (as hereinafter defined) Shareholders shall sell to Buyer and
Buyer shall purchase from Shareholders (i) each of the Direct Shareholders'
membership interests in Company, and (ii) the shares of S-F Holding owned by
Ticonderoga (such membership interests in Company and shares of stock in S-F
Holding collectively referred to as the "Shares").
2. PURCHASE PRICE - PAYMENT
2.1. Purchase Price. Subject to the adjustment in Section 2.3, the
aggregate purchase price (the "Purchase Price") payable for the Shares shall
be $22,205,268, based upon the calculation of the Purchase Price contained in
Schedule 2.1.(a). Except as provided in Section 2.2, all payments of
Purchase Price, including any adjustments thereto, are to be made to the
Shareholders in accordance with their respective ownership interests in the
Company as described on the attached Schedule 2.1.(b).
<PAGE>
2.2. Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
2.2.(a) Cash to Escrow Agent. At the Closing, Buyer shall
deliver to the Escrow Agent, under the Escrow Agreement, the sum of
$3,500,000 (the "Escrow Account").
2.2.(b) Cash to Shareholders' Agents. At the Closing, Buyer
shall deliver to the Shareholders' Agents, pursuant to the Shareholders
Agreement, the sum of $1,000,000.
2.2.(c) Cash to Shareholders. At the Closing, Buyer shall
deliver the Purchase Price, less the amount paid to the Escrow Agent
pursuant to Section 2.2.(a) above and less the amount paid to the
Shareholders' Agents pursuant to Section 2.2.(b) above, to the Shareholders
in accordance with the percentages on Schedule 2.1.(b).
2.2.(d) Method of Payment. All payments under this Article 2
shall be made by wire transfer of immediately available funds to accounts
designated in advance in writing by the recipients and attached as Schedule
2.2.(d).
2.3. Adjustment of Purchase Price. The Adjusted Purchase Price payable
for the Shares ("Adjusted Purchase Price") shall be $30,000,000 plus Excess
Working Capital (as hereinafter defined in Section 2.4) less Excluded Debt
(as hereinafter defined in Section 2.4). On or before the fifth business day
following the final determination of the Final Closing Balance Sheet (as
hereinafter defined) (such date referred to as the "Settlement Date"), either
(i) the Escrow Agent shall pay to Buyer the amount, if any, by which the
Purchase Price exceeds the Adjusted Purchase Price, or (ii) Buyer shall pay
to the Shareholders in accordance with the percentages on Schedule 2.1.(b)
without set-off or adjustment of any kind the amount, if any, by which the
Adjusted Purchase Price exceeds the Purchase Price. Immediately following or
simultaneously with the payments required by (i) and (ii) above of this
Section 2.3, the Escrow Agent shall pay to Shareholders the amount, if any,
by which the Escrow Account exceeds $2,500,000.
2.4. Determination of Adjusted Purchase Price.
2.4.(a) Definitions of Excess Working Capital and Excluded Debt.
2.4.(i) Excess Working Capital. The term "Excess Working
Capital" shall mean the dollar amount, if any, by which the "Net
Working Capital" of the Company on October 25, 1997 exceeds
$8,250,000. "Net Working Capital" for this purpose shall mean the
dollar amount by which the net book value of the current assets of the
Company exceeds the net book value of the current liabilities of the
Company (exclusive of current maturities of Excluded Debt) on the
Final Closing Balance Sheet. Schedule 2.4.(a) contains a calculation
of Excess Working Capital based upon the Recent Balance Sheet (as
hereinafter defined).
- ----------------------------
(*) This number will be increased in the manner shown in Schedule 2.4.(a) by
the current
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<PAGE>
2.4.(ii) Excluded Debt. The term "Excluded Debt" shall
mean the sum on October 25, 1997 of the Company's bank term debt, bank
revolving debt, subordinated debt and its liability for capital lease
obligations associated with those leases identified in Schedule
2.4.(a), in each case as reflected in the Final Closing Balance Sheet.
Schedule 2.4.(a) contains a calculation of Excluded Debt based upon
the Recent Balance Sheet.
2.4.(b) Final Closing Balance Sheet. The Final Closing Balance
Sheet of Company prepared as of October 25, 1997 shall be prepared as
follows:
(i) Prior to December 23, 1997, Buyer shall deliver to the
Shareholders a balance sheet of Company as of October 25, 1997,
prepared in accordance with generally accepted accounting principles
("GAAP") from the books and records of Company, on a basis consistent
with the GAAP theretofore followed by Company in the preparation of
the Company's Financial Statements as of December 28, 1996 (the
"Proposed Closing Balance Sheet"). The Proposed Closing Balance Sheet
shall be accompanied by detailed schedules of the assets and
liabilities of Company as of October 25, 1997, and related statements
of income and cash flows for the calendar year to date and shall set
forth: (1) the amount of Excluded Debt and Excess Working Capital, (2)
that the balance sheet has been prepared in accordance with GAAP, on a
basis consistent with the accounting principles theretofore followed
by Company, and (3) the amount of any adjustment to the Purchase Price
to be paid and by whom pursuant to Section 2.3 hereof.
(ii) Within 30 days following the delivery of the Proposed
Closing Balance Sheet referred to in (i) above, the Shareholders or a
firm of independent accountants engaged by the Shareholders
("Shareholders' Accountants") may object to any of the information
contained in said balance sheet or accompanying schedules which could
affect the necessity or amount of any payment by Buyer or the
Shareholders pursuant to Section 2.3 hereof. Any such objection shall
be made in writing and shall state the Shareholders' determination of
the amount of Excluded Debt and Excess Working Capital.
(iii) In the event of a dispute or disagreement relating
to the Proposed Closing Balance Sheet or schedules which Buyer and the
Shareholders are unable to resolve, either party may elect to have all
such disputes or disagreements resolved by an independent accounting
firm of nationally recognized standing (the "Third Accounting Firm")
to be mutually selected by the Shareholders and Buyer. The Third
Accounting Firm shall make a determination of the balance sheet of
Company as of October 25, 1997 and the calculation of Excluded Debt
and Excess Working Capital, which shall be final and binding for
purposes of this Article 2, and the resolution of such dispute shall
be incorporated into the Final Closing Balance Sheet (as hereinafter
defined). The Third Accounting Firm shall be instructed to use every
- -------------------------------------------------------------------------------
maturities of Excluded Debt as of the Closing Date.
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<PAGE>
reasonable effort to perform its services within 15 days of submission
of the Proposed Closing Balance Sheet to it, and in any case, as soon
as practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be shared 50% by Buyer and
50% by the Shareholders.
As used in this Agreement, the term "Final Closing Balance
Sheet" shall mean the balance sheet of Company as finally determined
for purposes of this Article 2, whether by acquiescence of the
Shareholders in the Proposed Closing Balance Sheet supplied by Buyer
in accordance with Section 2.4.(b)(i), by negotiation and agreement of
the parties or by the Third Accounting Firm in accordance with Section
2.4.(b)(iii).
(iv) Buyer agrees to permit the Shareholders, the
Shareholders' Accountants, and their respective representatives,
during normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of Company, which
documents and access are necessary to examine the balance sheet to be
delivered by Buyer in accordance with Section 2.4.(b)(i) as well as
related statements of operations and cash flows and prepare all
applicable income and franchise tax returns. In addition, if a
physical inventory is to be taken, Shareholders' Accountants shall
have the opportunity to take or observe the taking of the inventory in
connection with the preparation of such balance sheet.
(v) Notwithstanding any provision contained herein
requiring that the Final Closing Balance Sheet be prepared in a manner
consistent with past practices of the Company or in accordance with
generally accepted accounting principles, the Final Closing Balance
Sheet shall be prepared using the criteria identified in Schedule
2.4.(b).
2.5. LLC Tax Matters.
2.5.(a) Payment of Accounting and Tax Preparation Fees. Buyer shall
be responsible for all accounting and tax preparation fees incurred by
Shareholders in the preparation of financial statements and tax returns up
to the amount accrued for such expenses as reflected in the Final Closing
Balance Sheet.
2.5.(b) Control of Contest. Shareholders shall have the right, at
their own expense, to control any audit or determination by any taxing
authority, initiate any claim for refund or amended tax return and contest,
resolve and defend against any assessment, notice of deficiency or other
adjustment or proposed adjustment relating to Taxes of Company or Members
of Company for periods ending on or prior to October 25, 1997. Each party
will allow the other and its accountants or counsel (at its or their own
expense) to be represented during any audits of income tax returns of
Company to the extent the disputed items therein relate to Company and the
resolution of such designated items may adversely affect the other party.
2.5.(c) General. Buyer and Shareholders shall grant each other, and
following the Closing, Buyer shall cause the Company to grant to
Shareholders, the rights, at reasonable times and upon reasonable notice,
access to personnel, and to copy and use,
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<PAGE>
any records or information that may be relevant in connection with the
preparation of any tax returns, any audit or other examination by any
taxing authority or any litigation relating to liability for Taxes
attributable to operations of the Company prior to Closing. Information
required in the filing of any such return shall be provided to the other
party not less than 30 days before such return is due. Shareholders, Buyer
and Company shall retain all records relating to taxes for so long as the
statute of limitations with respect thereto shall remain open. Buyer in
turn shall be afforded the opportunity to review and comment on the
Company's tax returns filed subsequent to October 25, 1997 for periods
ending on or prior to October 25, 1997.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
Company and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall remain true and correct to and including the Closing
Date and shall survive the Closing of the transactions provided for herein
for the periods provided in Section 9.4. With respect to those
representations and warranties below that are stated to "Shareholders'
Knowledge" or similar terminology, "Knowledge" shall mean the actual
knowledge of the Shareholders and Jan Wedel, Dave Marcy, Hank Holmes, Tom
Tanner, George Semrad or Mike Liebe. In the case of Stolper, knowledge means
the actual knowledge of Lloyd Gerlach and any current employee. Regardless
of the foregoing, the representations and warranties set forth in Section 3.2
are made severally by each Shareholder, with respect to such Shareholder
only, and the representations and warranties made in Section 3.22 are made
only by Ticonderoga.
3.1. Corporate.
3.1.(a) Organization. Company is a limited liability company duly
organized and validly existing under the laws of the State of Wisconsin.
3.1.(b) Corporate Power. Company has all requisite power and
authority to own, operate and lease its properties and to carry on its
business as and where such is now being conducted.
3.1.(c) Qualification. Company is duly licensed or qualified to do
business as a foreign limited liability company, and is in good standing,
in each jurisdiction wherein the character of the properties owned or
leased by it, or the nature of its business, makes such licensing or
qualification necessary. The states in which Company is licensed or
qualified to do business are listed in Schedule 3.1.(c).
3.1.(d) Subsidiaries. Except as disclosed on Schedule 3.1.(d),
Company does not own any interest in any corporation, partnership or other
entity.
3.1.(e) Corporate Documents, etc. The copies of the Articles of
Organization and the Operating Agreement of the Company, including any
amendments thereto (the "Charter Documents"), which have been delivered by
Shareholders to Buyer are true, correct and complete copies of such
instruments as presently in effect. The officers of the Company are listed
in Schedule 3.1.(e).
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<PAGE>
3.1.(f) Capitalization of the Company. The respective membership
interests of all of the members of Company are contained on Schedule
2.1.(b). Except as set forth in Schedule 2.1.(b), or as provided for in
the Company's Operating Agreement, each of the members of Company has fully
paid in all requisite contributions to capital of Company. There are no
(a) securities convertible into or exchangeable for any ownership interest
in the Company, (b) options, warrants or other rights to purchase or
subscribe to an ownership interest in the Company or securities which are
convertible into or exchangeable for an ownership interest of Company, or
(c) contracts, commitments, agreements, understandings or arrangements of
any kind relating to the issuance, sale or transfer of any ownership
interest of Company, any such convertible or exchangeable securities or any
such options, warrants or other rights.
3.2. Shareholders.
3.2.(a) Power. Each Shareholder has full power, legal right and
authority to enter into, execute and deliver this Agreement and the other
agreements, instruments and documents contemplated hereby to which such
Shareholder is a party (such other documents sometimes referred to herein
as "Ancillary Instruments"), and to carry out the transactions contemplated
hereby.
3.2.(b) Authorization. The execution and delivery of this Agreement
and the Ancillary Instruments, and full performance thereunder, have been
duly authorized by the board of directors of (i) each Shareholder which is
a corporation, or (ii) the general partner of each Shareholder which is a
limited partnership, and no other or further act on the part of any
Shareholder is necessary therefor.
3.2.(c) Validity. This Agreement has been duly and validly executed
and delivered by each Shareholder and is, and when executed and delivered
each Ancillary Instrument will be, the legal, valid and binding obligation
of such Shareholder, enforceable in accordance with its terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
3.2.(d) Title. Each Shareholder has, and at Closing Buyer will
receive, good and marketable title to the Shares to be sold by such
Shareholder hereunder, free and clear of all Liens (as defined in Section
3.12) including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
3.3. No Violation.
3.3.(a) Except as set forth in Schedule 3.3, the execution and
delivery of this Agreement and the Ancillary Instruments, the performance
by the Company and the Shareholders of their obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereby
and thereby do not and will not conflict in any respect with, or result in
any violation of or default (or give rise to any right of termination,
cancellation or acceleration) under (i) any provision of the Charter
Documents of the Company, (ii) any note, bond, mortgage, indenture,
material lease or other material agreement of the Company or (iii) any
judgment, order, decree, statute, law, or regulation.
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<PAGE>
3.3.(b) Except for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and as set forth in
Schedule 3.3, no consent, approval, authorization, order, filing,
registration or qualification with or to any person, including, but not
limited to, any governmental authority ("Consent") is required to be
obtained by the Company or any Shareholder in connection with the execution
and delivery of this Agreement and the Ancillary Instruments, the
performance by the Company and the Shareholders of their respective
obligations hereunder and thereunder or the consummation of the
transactions contemplated hereby and thereby other than any Consent in
respect of which the failure to obtain such Consent, either individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect or materially impair the ability of the Company to perform
its obligations hereunder and to carry on its business following the
Closing Date.
3.4. Financial Statements. Company has delivered to Buyer complete and
correct copies of the financial statements of the Company for the years ended
December 31, 1995 and 1996, and the year-to-date through August 23, 1997 (the
balance sheet as of August 23, 1997 being referred to herein as the "Recent
Balance Sheet") (collectively, the "Financial Statements"), in each case,
consisting of balance sheets as of such respective dates and the related
statements of income and cash flow for each of the fiscal periods then ended
and, except for the financial statements for the year to date through August
23, 1997, audited by Price Waterhouse LLP, independent auditors for Company
for such years. Except as disclosed on Schedule 3.4, the Financial
Statements have been prepared in accordance with GAAP throughout the periods
involved, and present fairly, in all material respects, the financial
position, results of operation and cash flows of the Company as at and for
the periods indicated.
3.5. Tax Matters.
3.5.(a) Provision For Taxes. The provisions made on the Recent
Balance Sheet for payment of Taxes is sufficient for the payment of all
federal, state, foreign, county, local and other income, ad valorem,
excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and
assessments (collectively, "Taxes") which are the obligations of Company as
of said date. Since the date of the Recent Balance Sheet, Company has not
incurred any obligations for Taxes or obligations to make Tax Distributions
other than those incurred in the ordinary course of business consistent in
type and amount with past practices of Company.
3.5.(b) Tax Returns Filed. Except as set forth on Schedule 3.5.(b),
all federal, state, foreign, county, local and other tax returns (including
amendments thereto) required to be filed by or on behalf of Company have
been timely filed and when filed were true and correct in all material
respects, and the taxes shown as due thereon were paid or adequately
accrued. True and complete copies of all tax returns or reports filed by
Company for each of its 2 most recent fiscal years have been delivered to
Buyer.
3.5.(c) Tax Audits. The federal and state income tax returns of
Company have been audited by the Internal Revenue Service and appropriate
state taxing authorities
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<PAGE>
for the periods and to the extent set forth in Schedule 3.5.(c), and
Company has not received from the Internal Revenue Service or from the tax
authorities of any state, county, local or other jurisdiction any notice of
underpayment of taxes or other deficiency which has not been paid nor any
objection to any return or report filed by Company. There are outstanding
no agreements or waivers extending the statutory period of limitations
applicable to any tax return or report.
3.5.(d) Consolidated Group. Company has never been included in a
consolidated tax return of any other entity.
3.5.(e) Section 754 Election. No election under Section 754 of the
Internal Revenue Code of 1996 has been made by the Shareholders with
respect to the Company or the membership interests therein.
3.6. Accounts Receivable. All accounts receivable of the Company that
are reflected on the Recent Balance Sheet and the Final Closing Balance Sheet
(the "Accounts Receivable") represent (or will represent) valid obligations
arising from sales actually made or services actually performed in the
ordinary course of business. The Accounts Receivable will be as of the
Closing Date collectible net of the reserves shown on the Final Closing
Balance Sheet (which reserves are adequate and calculated consistent with
past practice and will not represent a material adverse change from the
Recent Balance Sheet in the composition of such Accounts Receivable in terms
of aging). To the Knowledge of Shareholders, 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. Any Accounts Receivable
which are not collected and for which Buyer makes a claim for indemnification
will be assigned to Shareholders (for their sole benefit) and Buyer will
fully cooperate (at no unreimbursed expense to Buyer) with Shareholders in
good faith to assist Shareholders in collecting any such Accounts Receivable.
Schedule 3.6 contains a true and complete list of all Accounts Receivable as
of the date of the Recent Balance Sheet, which list sets forth the aging of
such Accounts Receivable.
3.7. Inventory. All inventory of Company reflected on the Recent Balance
Sheet consists in all material respects of a quality and quantity useable and
saleable in the ordinary course of business.
3.8. Absence of Certain Changes. Except as set forth on Schedule 3.8 or
as otherwise contemplated by this Agreement, since the Recent Balance Sheet
(i) there has been no change in the financial condition or business of
Company that has had or would reasonably be expected to have a Material
Adverse Effect, except for any change resulting from general economic,
financial or market conditions, (ii) there has been no physical damage,
destruction or loss that, after taking into account any insurance recoveries
payable in respect thereof, has had or would reasonably be expected to have,
a Material Adverse Effect, (iii) there has been no sale, assignment or
transfer of any material assets of the Company except in the ordinary course
of business, (iv) except as required by GAAP, the Company has not changed any
of its accounting principles or the methods by which such principles are
applied for tax or financial reporting purposes, and (v) the Company has not
entered into any agreement to do any of the things described in this Section
3.8. The term "Material Adverse Effect" shall mean any event, occurrence,
fact, condition, change or effect that is materially adverse to the business,
assets, liabilities, results of operations, or financial condition of the
Company, taken as a
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whole.
3.9. Absence of Undisclosed Liabilities. Except as disclosed in the
Recent Balance Sheet, or in the Disclosure Schedules, Company does not have
any liabilities, commitments or obligations (secured or unsecured, and
whether accrued, absolute, contingent, direct, indirect or otherwise), other
than commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of business and consistent with
past practice and none of which have had or would reasonably be expected to
have a Material Adverse Effect.
3.10. No Litigation. Except as set forth in Schedule 3.10 there is
no action, suit, arbitration, proceeding, investigation or inquiry, whether
civil, criminal, administrative or arbitrable ("Litigation") pending, or to
the Knowledge of Shareholders, threatened against Company or any of its
assets.
3.11. Compliance With Laws and Orders.
3.11.(a) Compliance. Except as set forth in Schedule 3.11.(a), to
Shareholders' Knowledge, Company is not in default or violation of any
applicable statutes, laws, ordinances, rules or regulations ("Laws") or any
applicable judgments, orders, writs, injunctions or decrees of any court,
administrative agency, arbitrator or mediator ("Orders"), which either
individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect or materially impact the ability of Company to
perform its obligations hereunder. Except as set forth in Schedule
3.11.(a), Company has not within the last five years received written
notice of any violation or alleged violation of any Laws or Orders.
3.11.(b) Licenses and Permits. Company has all licenses, permits,
approvals, authorizations and consents of all government entities and all
certification organizations required for the conduct of the business as
presently conducted and for the operation of the Facilities. All such
licenses, permits, approvals, authorizations and consents are described in
Schedule 3.11.(b), are in full force and effect, and except as disclosed in
Schedule 3.11.(b) will not be terminated, cancelled, withdrawn or rescinded
as a result of the transactions contemplated hereby.
3.11.(c) Environmental Matters. Except as set forth in
Schedule 3.11.(c):
(i) To Shareholders' Knowledge, the Company is, and since
September 30, 1994 has been, in compliance with and is not in
violation of or liable under any Environmental Law, except for such
violations and liabilities that, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Neither any Shareholder nor the Company has received any
written order, notice or other communication of any actual or alleged
obligation to undertake or bear the cost of any liability associated
with the violation of any Environmental Law.
(ii) There are no pending or, to Shareholders' Knowledge,
threatened claims, or other restrictions of any nature, arising under
or pursuant to any Environmental Law, with respect to or affecting any
of the Facilities or any other properties or operations in which the
Company has an interest and
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which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
(iii) To Shareholders' Knowledge, there are no Hazardous
Materials present on or in the Facilities, except for such Hazardous
Materials which are present in quantities used in the ordinary course
of business and which are handled in accordance with all applicable
laws. To Shareholders' Knowledge, there are no underground storage
tanks, asbestos containing materials or detectable levels of radon at
any of the Facilities or at any other property owned or operated by
the Company. To Shareholders' Knowledge, neither any Shareholder nor
the Company, nor any other person for whose conduct it is or may be
held responsible, 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
the Company has or had an interest, except in compliance in all
material respects with all applicable Environmental Laws.
(iv) To Shareholders' Knowledge, since September 30, 1994
there has been no release, or threat of release, of any Hazardous
Materials at or from the Facilities or at or from any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, processed or disposed from or
by the Company at the Facilities, or from or by any other properties
and assets (whether real, personal, or mixed) and for which the
Company is or may be held responsible.
(v) Shareholders have made available to Buyer and its
Agents (including but not limited to ERM) true and complete copies and
results of any reports, studies or monitoring known to the
Shareholders' Agents or possessed or initiated by or for the Company
pertaining to Hazardous Materials in, on or under the Facilities, or
concerning compliance by the Company or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
(vi) To the Knowledge of Shareholders and the Company, there
are no material capital expenditures with a cost exceeding $100,000
which the Company is required to incur to meet its obligations under
applicable Environmental Laws in effect as of the Closing Date.
(vii) For purposes of this Agreement,
(A) The term "Hazardous Materials" means hazardous
substances, regulated substances, pollutants or contaminants 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;
(B) The term "Environmental Law" means any applicable
law, statute, ordinance, regulation, order or ruling promulgated
or issued by any federal, state or local legislative, juridical,
administrative or regulatory body, or any requirement of common
law, relating to the
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protection of the environment; and
(C) The term "Hazardous Activity" shall mean any
activity involving the management or use of Hazardous Materials
other than in the ordinary course of business and in compliance
in all material respects with Environmental Laws.
3.12. Title to and Condition of Properties.
3.12.(a) Marketable Title. On the Closing Date, the Company shall
have good and marketable title to all of Company's assets, business and
properties, including, without limitation, all such properties reflected in
the Recent Balance Sheet, other than inventory disposed of in the ordinary
course of business since the date of such Recent Balance Sheet, free and
clear of all mortgages, liens (statutory or otherwise), security interests,
pledges, charges or encumbrances of any nature whatsoever (collectively,
"Liens") except (i) those described in Schedule 3.12, (ii) in the case of
real property, Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, or (iii) municipal and zoning
ordinances and easements for public utilities.
3.12.(b) Condition. The property, assets and equipment of the
Company are in good operating condition and repair (except for ordinary
wear and tear and except for defects which do not interfere with the use
thereof in the conduct of normal operations of the Company), and are
adequate for the uses to which they are being put.
3.12.(c) Real Property. The Company does not own any real property.
Schedule 3.12.(c) sets forth all real property which is leased by Company,
including the material terms of such lease, and each such Schedule contains
a description of all plants and buildings contained thereon (such property
leased by Company is referred to as the "Real Property"). To the extent
required under state or local law, there are in effect duly issued
certificates of occupancy permitting the real property and improvements
thereon to be legally used and occupied as the same are now constituted.
3.13. Insurance. Schedule 3.13 contains a complete and correct list
and summary description of all insurance policies maintained at present by or
on behalf of the Company. The Company has made available to Buyer complete
and correct copies of all such policies together with all riders and
amendments thereto. Such policies are in full force and effect, and no
premiums due thereon are past due. The Company has received no notice of
cancellation, termination or non-renewal with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and
of all agreements to which the Company is a party and are valid, outstanding
and enforceable policies. The Company has not been refused any insurance
with respect to its assets or operations, nor has its coverage been limited,
by any insurance carrier to which it has applied for any such insurance or
with which it has carried insurance during the past two (2) years. Except
for the Worker's Compensation CNA policy and the General Liability CNA
Policy, no such policy provides for or is subject to any currently
enforceable retroactive rate or premium adjustment arising out of events
arising prior to the date hereof. Schedule 3.13 indicates each policy as to
which the coverage limit has been reached or the total incurred losses to
date equal 75% or more of the coverage limit. There is no claim by the
Company pending under any such policy as to which coverage has been denied
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or disputed by the underwriters of such policies.
3.14. Material Contracts. Schedule 3.14 contains a list of:
(i) all leases of personal property involving a consideration in
excess of $10,000 or involving performance over a period of more than 24
months;
(ii) all contracts and agreements with current officers, other
employees, consultants, agents, contractors, advisors, sales
representatives, distributors, or dealers of the Company other than (x)
contracts which by their terms are cancelable by the Company with notice of
not more than 90 days and (y) contracts which provide for payments based
solely on products sold and require no minimum payments;
(iii) all collective bargaining agreements with any labor union
currently representing employees of the Company;
(iv) all mortgages, indentures, pledges or security agreements, notes,
loan agreements or guarantees of the obligations of third parties binding
upon the Company or similar documents relating to borrowed money to which
the Company is a party or by which any of its assets are bound, restricted
or encumbered;
(v) joint venture and similar agreements to which Company is a party;
(vi) supply, distribution or sales agreements or commitments to
customers involving in excess of $100,000 worth of product per year;
(vii) purchase agreements or commitments for inventory items or
supplies involving in excess of $100,000 worth of product per year;
(viii) license or other agreements of the Company providing in
whole or in part for the use of any patents, trademarks, trade names,
service marks, copyrights, inventions, trade secrets or other proprietary
know-how or other intellectual property, whether the Company is the
licensor or the licensee thereunder, and all settlements, consents or
forbearance to sue agreements relating thereto;
(ix) any other contract or agreement entered into involving an
estimated total future payment or payments to or from the Company in excess
of $200,000; and
(x) all guarantees of payment or performance of any person, including
agreements to indemnify any person or act as surety or be contingently
liable for the obligations of any person.
The contracts set forth on Schedule 3.14, together with the leases of
Real Property described on Schedule 3.12.(c), are collectively referred to as
the "Material Contracts." The Company has made available to Buyer true and
correct copies of all Material Contracts. To the Knowledge of the
Shareholders, neither the Company nor any other person is in default under
any Material Contract, except for such defaults as would not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect on the business of the Company.
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3.15. Labor Relations and Employment. Except to the extent set forth
in Schedule 3.15: (i) the Company is not a party to or bound by any
collective bargaining or similar agreement with any labor organization, or
work rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company; (ii) there is no labor
strike, dispute, slowdown, stoppage, lockout pending or, to the Knowledge of
the Shareholders, threatened against or affecting the Company; (iii) to the
Knowledge of the Shareholders, there is no question concerning representation
of such employees; (iv) there is no unfair labor practice charge or complaint
pending against the Company or, to the Knowledge of the Shareholders,
threatened before the National Labor Relations Board or any similar state or
foreign agency; (v) there is no grievance arising out of any collective
bargaining agreement or other grievance procedure which, if adversely
determined, would have a Material Adverse Effect; (vi) no charges with
respect to or relating to the Company are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices which, if adversely determined, would have a
Material Adverse Effect; and (vii) the Company has not received written
notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation of the Company nor is such an investigation in progress
3.16. Employee Benefit Plans.
3.16.(a) For purposes of this Section 3.16, the following terms have
the meanings set forth below:
"Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by the Company.
"Company Plan" means all Plans of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the
Company or an ERISA Affiliate of the Company otherwise contributes or
has contributed, or in which the Company or an ERISA Affiliate of the
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
the Company or any ERISA Affiliate of the Company.
"ERISA Affiliate" means, with respect to the 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
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practices that are embodied in Plans.
"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).
3.16.(b) Schedule 3.16 contains a true and complete list of all
Company Plans and Company VEBAs of which the Company or any ERISA Affiliate
is or was a Plan Sponsor, or in which the Company or any ERISA Affiliate
participates or has participated, or to which the Company or any ERISA
Affiliate contributes or has contributed and in which employees of the
Company 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.
3.16.(c) With respect to Company Plans and Company VEBAs identified
in Schedule 3.16, Shareholders have delivered or made available to Buyer,
or will deliver or make available to Buyer within three days of the date of
this Agreement:
(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 which Shareholders or the Company is
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;
(ii) all collective bargaining agreements pursuant to which
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contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Company and the ERISA Affiliates
of the Company, and all collective bargaining agreements pursuant to
which contributions are being made or obligations are owed by such
entities;
(iii) all insurance policies purchased by or to provided
benefits under any Company Plan;
(iv) 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;
(v) 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;
(vi) the most current form 5500 with respect to each Company
Plan, including all schedules thereto and the opinions of independent
accountants;
(vii) all notices that were given by the Company or any
ERISA Affiliate of the 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 3.16;
(viii) all notices that were given by the IRS, the PBGC,
or the Department of Labor to the Company, any ERISA Affiliate of the
Company or any Company Plan within the two years preceding the date of this
Agreement;
(ix) with respect to Qualified Plans and VEBAs, the most
recent determination letter for each Company Plan that is a Qualified Plan;
and
(x) with respect to Title IV Plans, the most recent Form
PBGC-1.
3.16.(d) With respect to employees of the Company, except as set
forth in Schedule 3.16:
(i) The Company has performed, in all material respects,
its respective obligations under all Company Plans, Company Other Benefit
Obligations and Company VEBAs. The Company has made appropriate entries in
its financial records and statements for all obligations and liabilities
under such Plans, VEBAs and Obligations that have accrued but are not due.
(ii) The Company, with respect to all Company Plans, Company
Other Benefit Obligations and Company VEBAs, is and each Company Plan,
Company Other Benefit Obligation and Company VEBA in which the Company
participates or to which it contributes is in material compliance with
ERISA, the IRC and other applicable laws, including the provisions of such
laws expressly mentioned in this Section 3.16,
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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) Neither any Shareholder nor the Company has any
liability to the IRS with respect to any Plan, including any liability
imposed by Chapter 43 or the IRC.
(C) Neither any Shareholder nor the Company has any
liability to the PBGC with respect to any Plan or has any liability
under ERISA Section 502 or Section 4071 other than routine claims for
benefits.
(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 Shareholders' Knowledge, is threatened.
(iv) Each Company Plan which is a Qualified Plan is
substantially 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 substantially operated in compliance with
applicable laws.
(v) The Company and each ERISA Affiliate of the Company has
met the minimum funding standard, and has made all contributions required,
under ERISA Section 302 and IRC Section 402.
(vi) The Company has paid all amounts due to the PBGC
pursuant to ERISA Section 4007.
(vii) Neither the Company nor any ERISA Affiliate of the
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
Shareholders to liability under ERISA Section 4062(e), Section 4063, or
Section 4064.
(viii) Neither the Company nor any ERISA Affiliate of the
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
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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 the
company and each ERISA Affiliate of the 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 the Company and each ERISA Affiliate of the 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, neither
any Seller nor the Company has Knowledge of any facts or circumstances that
may give rise to any liability of any Shareholder, the Company or Buyer to
the PBGC under Title IV of ERISA.
(xv) Neither the Company nor any ERISA Affiliate of the
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 the participation, termination,
reorganization, or insolvency of, any Multiemployer Plan that could result
in any liability of either the Company or Buyer to a Multiemployer Plan.
(xvi) Neither the Company nor any ERISA Affiliate of the
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, the Company does not provide health or
welfare benefits for any retired or former employee or is obligated to
provide health or welfare benefits to any active
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employee following such employee's retirement or other termination of
service.
(xviii) The Company has substantially complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
3.17. Employment Compensation. Schedule 3.17 contains a true and
correct list of all employees to whom Company is paying compensation, including
bonuses and incentives, at an annual rate in excess of Two Hundred Thousand
Dollars ($200,000) for services rendered or otherwise.
3.18. Intellectual Property.
3.18.(a) Patents. The Company has no patents. To the Shareholders'
Knowledge, none of the products manufactured and sold, nor any process or
know-how used, by the Company infringes or is alleged to infringe any patent or
other proprietary right of any other person.
3.18.(b) Trademarks. The Company has no registered trademarks or
service marks. To the Shareholders' Knowledge, none of the trademarks, service
marks or trade names, if any, used by the Company infringes or has been alleged
to infringe any trade name, trademark, or service mark of any other person.
3.18.(c) Copyrights. The Company has no registered copyrights. To
the Shareholders' Knowledge, no person has alleged that the Company infringes
any copyright of any third party.
3.19. Product Warranty and Product Liability. Schedule 3.19 contains a
description of all product liability claims and similar litigation relating to
products manufactured or sold, or services rendered, which are presently pending
or which to Shareholders' Knowledge are threatened against Company, in which a
party thereto either requests injunctive relief or alleges damages. None of the
Company's products has been the subject of any replacements outside of the
ordinary course of business, field campaign retrofit, modification or recall
campaign by Company.
3.20. Affiliates' Relationships to Company. All leases, contracts,
agreements or other arrangements between Company and any Affiliate are described
on Schedule 3.20. For purposes hereof, "Affiliate" shall mean Shareholders and
any of their subsidiary or affiliated entities.
3.21. No Brokers or Finders. Other than Dillon, Read & Company, Inc.,
the fees and expenses of which will be paid by Shareholders, neither Company nor
any of its directors, officers, employees, Shareholders or agents has retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
3.22. Representations and Warranties Regarding S-F Holding.
Ticonderoga represents and warrants as follows:
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3.22.(a) Financial Statements. The financial statements of S-F
Holding for the fiscal year ending December 31, 1996 (the "S-F Holding
Financials"), a copy of which has been presented to Buyer, are full,
complete and accurate in all material respects and fully present in
accordance with GAAP, the assets and liabilities of S-F Holding as of such
date. There has been no material change in the assets and liabilities of
S-F Holding since the date of the S-F Holding Financials. S-F Holding has
no other liabilities, commitments or obligations of any type or description
other than those contained in the S-F Holding Financials or as disclosed in
Schedule 3.22.
3.22.(b) Conduct of S-F Holding. S-F Holding conducts no business
other than holding a membership interest in Company. S-F Holding has not
violated any Law. No Litigation is pending or threatened against S-F
Holding. S-F Holding has no employees.
3.22.(c) Ownership of S-F Holding. The authorized capital stock of
S-F Holding consists entirely of 5,000 shares of common stock $.01 par
value, of which 1,000 shares are issued and outstanding, all of which are
owned beneficially and of record by Ticonderoga, free and clear of all
Liens (as defined in Section 3.12), including, without limitation, voting
trusts, agreements or proxies. No party has any right to purchase or
acquire in any manner any capital stock of S-F Holding, and S-F Holding has
no obligation to issue capital stock to any person or entity.
3.23. Books and Records. The books of account, minute books, stock
record books and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices.
3.24. Open Orders. The Company has made available to Buyer a true and
complete copy of the Company's backlog report. The orders reflected in the
backlog report are valid and have not been cancelled. The Company has no
obligation to make any payments to representatives or any other person on or
with respect to orders shown in the backlog report. To Shareholders' Knowledge
there is no loss associated with orders reflected in the backlog report which
under GAAP should be reflected in the Company's financial statements. None of
the open orders contains any provision giving any person the right to terminate
such order solely by reason of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
3.25. Certain Payments. Neither the Company nor any director, officer,
agent or employee of the Company or to the Shareholders' Knowledge any other
person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained for the Company, or (iv) in violation of any law, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company.
3.26. Disclosure. No representation or warranty of Shareholders in
this Agreement and no statement in the Schedules 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
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misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Shareholders, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, and shall survive the
Closing of the transactions provided for herein.
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
4.1.(b) Corporate Power. Buyer has all requisite corporate power to
enter into this Agreement and the other documents and instruments to be
executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.2. Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Buyer pursuant hereto
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Buyer. No other corporate act
or proceeding on the part of Buyer or its shareholders is necessary to authorize
this Agreement or the other documents and instruments to be executed and
delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.3. No Brokers or Finders. Neither Buyer nor any of its directors,
officers, employees or agents have retained, employed or used any broker or
finder in connection with the transaction provided for herein or in connection
with the negotiation thereof.
4.4. Investment Intent. The Shares are being acquired by Buyer for
investment only and not with the view to resale or other distribution.
4.5. No Conflict; Required Consents and Filings. The execution and
delivery of this Agreement by the Buyer and the consummation of the transactions
contemplated hereby and compliance by the Buyer with any of the provisions
hereof will not (i) conflict with or violate the organization documents or
by-laws of the Buyer, (ii) require any consent, approval, authorization or
permit of, or filing or registration with, or notification to, any governmental
entity other than those required under the HSR Act, (iii) violate any order,
writ, injunction, decree, statue, rule or regulation applicable to the Buyer or
any of its properties or assets, or (iv) violate any note, bond, mortgage,
indenture, material leases or other material agreement of the Buyer.
5. COVENANTS OF THE BUYER
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The Buyer covenants to the Shareholders and the Company that, except as
otherwise consented to in writing by the Shareholders after the date of this
Agreement:
5.1. Cause Conditions to be Satisfied. The Buyer will use its commercially
reasonable efforts to cause all of the conditions described in Section 8 of this
Agreement to be satisfied prior to or on the Closing Date.
5.2. Consents. The Buyer shall use its commercially reasonable efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable laws to consummate and make
effective the transactions contemplated hereby, including without limitation
using commercially reasonable efforts to obtain all material consents of any
person or entity, whether private or governmental, required in connection with
the consummation of the transactions contemplated herein.
5.3. Confidentiality.
5.3.(a) Buyer will cause its respective officers, directors,
employees, affiliates and agents to, hold in confidence and not reveal to
any third parties any knowledge or information of a confidential nature
with respect to this Agreement, or prior to the Closing, of the business,
products, know-how and methods of operation of the Company, and will not
disclose, publish or make use of the same, provided, however, that the
foregoing shall not be applicable to any disclosure or use of confidential
information or knowledge that can be demonstrated to have (i) been publicly
known prior to the date of this Agreement, (ii) become well known by
publication or other wise not due to the unauthorized act or omission on
the part of the Buyer or the other parties that are subject to this
covenant, or (iii) been supplied to the Buyer by a third party without
violation of the rights of the Company, the Shareholders or any other
party. Notwithstanding anything else to the contrary contained herein, the
parties agree that the remedy at law for any breach by Buyer of this
Section 5.3 shall be inadequate and that the aggrieved party shall be
entitled to injunctive relief in addition to any other remedy. The Buyer
shall not be in violation of this Agreement if it complies with any request
or requirement (by interrogatories, subpoenas or other request pursuant to
any federal or state statute or regulation or otherwise) to disclose
confidential information to any tribunal, administrative agency or other
governmental body in the United States, provided that Buyer shall have
promptly provided the other parties to this Agreement with written notice
of such request or requirement, and provided further that Buyer complied
with such request or requirement as nearly as reasonably practical at the
end of the period within which they may have responded (it being agreed
that neither shall be under an obligation to seek to extend any such
response period).
5.3.(b) In the event this Agreement is terminated, the Buyer agrees
to return promptly, if so requested by the Company, every document
furnished to the Buyer or its officers, directors, employees, affiliates
and agents in connection with the transactions contemplated hereby,
including, but not limited to, any information provided to the Buyer by or
on behalf of the Company or the Shareholders in the form of computer tapes
or computer diskettes and any copies thereof which have been made.
5.4. HSR Filing. The Buyer will timely and promptly make all filings which
are
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required under the HSR Act. The Buyer will furnish to the Company such
reasonably necessary information and reasonable assistance as the Company may
reasonably request in connection with its preparation of necessary filings or
submissions to any governmental agency, including, without limitation, any
filings necessary under the provisions of the HSR Act. The Buyer will supply
the Company with a copy (cleansed of confidential or proprietary information),
of any correspondence, filing or communication (or memorandum setting for the
substance thereof) between the Buyer or its representatives, on the one hand,
and the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "DOJ") or any other governmental agency or authority
or members of their respective staffs, on the other hand, with respect to this
Agreement or the transaction contemplated hereby to the extent that any such
correspondence, filing, communication or memorandum is required by the Company
to meet its obligations under the HSR Act.
5.5. Employee Matters. The Buyer acknowledges that it shall be the Buyer's
responsibility to provide any notice of layoffs or plant closing that might be
required pursuant to the Worker Adjustment and Retraining Notification Act of
1988, as amended, and the Wisconsin Business Closing Law, as amended, and the
rules and regulations promulgated thereunder.
5.6. Shareholders' Representations and Warranties. The Buyer hereby
acknowledges and agrees that, except as specifically set forth in Section 3
hereof, and notwithstanding anything contained in any document previously
provided to Buyer, including, without limitation, the Offering Memorandum,
circulated by Dillon, Read & Co., Inc., NEITHER SHAREHOLDERS NOR COMPANY MAKE
ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO
THE SHARES OR THE VALUE THEREOF, OR WITH RESPECT TO THE COMPANY.
6. COVENANTS OF SHAREHOLDERS AND THE COMPANY
6.1. Access to Information and Records. During the period prior to the
Closing, upon reasonable advance notice, Shareholders shall cause Company to
give Buyer, its counsel, accountants and other representatives (i) access during
normal business hours to all of the properties, books, records, contracts and
documents of Company for the purpose of such inspection, investigation and
testing as Buyer deems appropriate (and Company shall furnish or cause to be
furnished to Buyer and its representatives all information with respect to the
business and affairs of Company as Buyer may reasonably request) and (ii) access
to employees, agents and representatives for the purposes of such meetings and
communications as Buyer reasonably desires.
6.2. Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by the Buyer, Company
covenants as follows, and Shareholders shall cause each of the following to
occur: (a) the Company's business will be conducted only in the ordinary course;
(b) the Company will not enter into, adopt or amend any employee benefit plan,
agreement or arrangement, enter into or amend any employment contracts, or
increase the salaries or compensation of its officers or employees, other than
ordinary increases in salaries in accordance with past practices and other then
bonuses accrued for in the Final Closing Balance Sheet; (c) the Company shall
not incur any liability for borrowed money or encumber any of its assets, except
in the ordinary course of business consistent with past practice; (d) the
Company will use commercially
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reasonable efforts to preserve its business organization intact, to keep
available the service of its officers and employees and to preserve the goodwill
of suppliers, customers and others doing business with it; (e) the Company will
not enter into any agreement for the purchase, sale or other disposition, or
purchase, sell or dispose of, any equipment, supplies, inventory, investments or
other assets, other than sales of inventory and purchases of materials and
supplies in the ordinary course of business and other than as set forth in the
Company's capital expenditure plan; (f) no change shall be made in the Charter
Documents of the Company; (g) no change shall be made in the membership
interests of Company, nor shall Company enter into or grant any options, calls,
contracts or commitments of any character relating to any membership interest;
and (h) except as otherwise contemplated herein, no distribution or payment
shall be declared or paid in respect of the membership interests of Company.
6.3. Consents. Company and Shareholders will use their commercially
reasonable efforts prior to Closing to obtain all consents necessary for the
consummation of the transactions contemplated hereby.
6.4. No Negotiations. For the period from the date hereof up to and
including the Closing Date, neither Company nor any Shareholder will directly or
indirectly (through a representative or otherwise) solicit or furnish any
information to any prospective buyer, commence, or conduct presently ongoing,
negotiations with any other party or enter into any agreement with any other
party concerning the sale of Company, Company's assets or business or any part
thereof or any equity securities of Company (an "acquisition proposal"), and
Company and Shareholders shall immediately advise Buyer of the receipt of any
acquisition proposal.
6.5. Other Action. Company and Shareholders shall use their commercially
reasonable efforts to cause the fulfillment at the earliest practicable date of
all of the conditions described in Section 7 hereof.
6.6. Disclosure Schedules. From the date hereof to the Closing Date,
Shareholders and Company shall have a continuing obligation to promptly notify
Buyer in writing with respect to any matter hereafter discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Disclosure Schedules.
6.7. HSR Filing. Company will timely and promptly make all filings which
are required under the HSR Act. Company will furnish to Buyers such necessary
information and assistance as the Buyer may reasonably request in connection
with this preparation of necessary filings or submissions to any governmental
agency, including, without limitation, any filings necessary under the
provisions of the HSR Act. Company will supply the Buyer with a copy (cleansed
of confidential or proprietary information) of any correspondence, filing or
communication (or memorandum setting forth the substance thereof) between
Company or its representatives, on the one hand, the FTC or the DOJ or any other
governmental agency or authority or member of their respective staffs, on the
other hand, with respect to this Agreement, the transaction contemplated hereby
to the extent that any such correspondence, filing, communication or memorandum
is required by the Buyer to meets its obligations under the HSR Act.
6.8. Covenant of Confidentiality. No Shareholder shall anytime subsequent
to the Closing, except as explicitly requested by Buyer, (i) use for any
purpose, (ii) disclose to any
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person, or (iii) keep or make copies of documents, tapes, disks or programs
containing any confidential information concerning Company. For purposes of
this Section 6.8, "confidential information" shall mean and include, all
Intellectual Property in which Company has an interest, all customer lists and
customer information, and all other information concerning Company's processes,
apparatus, equipment, packaging, products and distribution methods, not
previously disclosed to the public directly by Company.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived in writing by Buyer, each and every obligation of Buyer to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of each of the following conditions:
7.1. Representations and Warranties True of the Closing Date. Each of the
representations and warranties made by Shareholders and Company in this
Agreement shall be true and correct in all material respects when made and shall
be true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of the
Closing Date, except to the extent that such representations and warranties
expressly relate to an earlier date, and except for any changes permitted or
contemplated by the terms of this Agreement or consented to in writing by Buyer.
7.2. Compliance With Agreement. Shareholders and Company shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 10.
7.3. Absence of Injunction. No preliminary or permanent injunction or
other order of any court restraining or prohibiting consummation of transactions
contemplated hereby shall be in effect.
7.4. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired or been terminated.
8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
8.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
8.2. Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Closing Date, including the delivery of the closing documents and payments
specified in Section 10.
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8.3. Absence of Injunction. No preliminary or permanent injunction or
other order of any court restraining or prohibiting consummation of the
transactions contemplated hereby shall be in effect.
8.4. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired or been terminated.
9. INDEMNIFICATION
9.1. By Shareholders. Subject to the terms and conditions of this Article
9, each Shareholder, jointly and severally, shall indemnify and hold harmless
Buyer against all Losses incurred by Buyer, directly or indirectly, by reason
of, arising out of or resulting from (a) the breach of any representation or
warranty of any Shareholder or Company contained in or made pursuant to this
Agreement, (b) the breach of any covenant of any Shareholder or the Company
contained in this Agreement, or (c) the circumstances described in Section 9.5
in the case of certain environmental matters. Regardless of the foregoing,
however, breaches of representations and warranties contained in Section 3.2 and
Section 3.22 hereof shall be subject only to several indemnification by the
respective Shareholder who shall have made and breached such representations and
warranties. Additionally, Losses in excess of the amount remaining in the
Escrow Account at any time shall be the several (and not the joint and several)
obligation of the Shareholders. As used in this Article 9, the term "Losses"
shall mean (i) all debts, liabilities and obligations; (ii) all losses, damages
(but excluding consequential damages), judgments, awards, settlements, costs and
reasonable expenses, including court costs and reasonable attorneys' fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
9.2. By Buyer. Subject to the terms and conditions of this Article 9,
Buyer hereby agrees to indemnify and hold harmless each Shareholder from and
against all Losses incurred by any such person, directly or indirectly, by
reason of or resulting from (a) the inaccuracy or breach of any representation
or warranty of Buyer contained in or made pursuant to this Agreement, (b) the
breach of any covenant of Buyer contained in this Agreement, or (c) the
ownership and operation of the Company after the Closing Date.
9.3. Claims for Indemnification.
9.3.(a) Notice and Defense. Whenever any Loss shall arise which is
subject to indemnification hereunder, the party entitled to indemnification
(the "Indemnified Party") shall promptly notify the other party (the
"Indemnifying Party") of the Loss and, when known, the facts constituting
the basis for such Loss. In the event of any Loss giving rise to a claim
for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice to the Indemnifying
Party shall specify, if known, the amount of the potential liability
arising therefrom. The Indemnified Party shall not settle or compromise
any claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the Indemnifying Party
(which shall not be unreasonably withheld) unless suit shall have been
entered against it and the Indemnifying Party shall not have taken control
of such suit after notification thereof as provided in this Section 9.3.
If a firm written offer (which contains appropriate releases) is made to
settle any such third party
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claim or legal proceeding, and the Indemnified Party unreasonably refuses
to consent to such settlement offer, then: (i) the Indemnifying Party
shall be excused from, and the Indemnified Party shall be solely
responsible for, all further defense of such third party claim or legal
proceeding; and (ii) the maximum liability of the Indemnifying Party
relating to such third party claim or legal proceeding shall be the amount
of the proposed settlement.
9.3.(b) Defense by Indemnifying Party. In connection with any claim
giving rise to a right of indemnification hereunder resulting from or
arising out of any claim or legal proceeding by a person who is not a party
to this Agreement, the Indemnifying Party at its sole cost and expense may,
upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if it acknowledges to the Indemnified Party
in writing its obligations to indemnify the Indemnified Party with respect
to all elements of such claim. The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense. If the Indemnifying Party does not assume
the defense of any such claim or litigation resulting therefrom, (a) the
Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling
such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its
counsel and at its own expense. If the Indemnifying Party thereafter seeks
to question the manner in which the Indemnified Party defended such third
party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third
party claim in a reasonably prudent manner.
9.3.(c) Manner of Indemnification. All indemnification obligations
of the Shareholders shall be effected initially by payments from the Escrow
Account. Immediately following or simultaneously with the payments
required by Sections 2.3.(i) and 2.3.(ii), if any, the Escrow Account shall
be reduced to $2,500,000. On or immediately following the first
anniversary of the Closing Date, the Escrow Account shall be reduced to
zero, plus an amount reasonably required to cover any claims for
indemnification then pending. The Escrow Account shall have sub-accounts
(one for each Shareholder) and the amount of each sub-account shall be
based on the interest of each Shareholder in the Escrow Account (as set
forth in Schedule 2.1.(b)), except that an indemnification obligation as to
which a Shareholder has several liability under Section 3.2 or Ticonderoga
has several liability under Section 3.22 shall be charged solely to the
sub-account of the Shareholder who made and breached the representation.
The foregoing notwithstanding, if a Shareholder with respect to Section 3.2
or Ticonderoga with respect to Section 3.22 incurs an indemnification
obligation which is satisfied from the Escrow Account, such shareholder or
Ticonderoga hereby agrees to promptly pay to the Escrow Agent, to restore
the Escrow Account, the amount of the several indemnification obligation so
satisfied. Following exhaustion or distribution of the Escrow Account, the
Shareholders shall be liable only severally (and not jointly and severally)
for the indemnification obligation created hereby. For this purpose, the
several liability of each Shareholder shall be such Shareholder's share of
the remaining indemnification
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obligation based upon the respective membership interests of the
Shareholders in the Company set forth in Schedule 2.1.(b). In no event
shall the aggregate indemnification obligation of any Shareholder exceed
such Shareholder's share of the Purchase Price.
9.4. Limitations on Indemnification.
9.4.(a) Time Limitation. No claim or action shall be brought under
this Article 9 for breach of a representation or warranty after the lapse
of twelve (12) months following the Closing. Regardless of the foregoing,
however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims or actions
brought for breach of any representation or warranty made by
Shareholders pursuant to Section 3.2 or Ticonderoga pursuant to
Section 3.22.
(ii) Any claim or action brought for breach of any representation
or warranty made by Shareholders in or pursuant to Section 3.5 may be
brought at any time until the underlying tax obligation is barred by
the applicable period of limitation under federal and state laws
relating thereto (as such period may be extended by waiver).
(iii) Any claim or action brought for breach of any
representation or warranty made by Shareholders in or pursuant to
Section 3.11.(c) or with respect to the indemnification obligation
(referred to in Section 9.1.(c)) which arises out of the Shareholders'
undertaking in Section 9.5 with respect to certain environmental
matters may be brought until the third anniversary of the Closing
Date.
(iv) Any claim made by a party hereunder by a demand for
arbitration in accordance with Article 12 hereof for breach of a
representation or warranty prior to the termination of the survival
period for such claim shall be preserved despite the subsequent
termination of such survival period.
9.4.(b) Amount Limitation. Except with respect to claims for
breaches of representations or warranties contained in Sections 3.2 and
3.22, an Indemnified Party shall not be entitled to indemnification under
this Article 9 for breach of a representation or warranty (i) unless the
individual claim exceeds $25,000, and (ii) only to the extent that the
aggregate of all the Indemnified Party's individual indemnification claims
exceeds $250,000.
9.4.(c) Other Limitations. The indemnification obligation of an
Indemnifying Party shall be reduced by any insurance recovery or other
recovery received by the Indemnified Party for the Loss. The parties
acknowledge and agree that their respective, sole and exclusive remedies
with respect to Claims under this Agreement shall be the indemnification
provision set forth in this Section 9, and the parties further agree that
no party shall be entitled to any consequential or punitive damages.
9.5. Shareholders' Indemnification Obligation for Certain Disclosed
Environmental Matters. If Buyer or the Company incurs any Loss, including
statutory or other legal
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liabilities or obligations arising with respect to the environmental conditions
described in Schedule 9.5 (the "Environmental Conditions"), Shareholders will be
responsible for such Loss pursuant to the indemnification provisions of this
Article 9 (including Sections 9.4.(a) and 9.4.(b)), but only if all of the
following conditions are satisfied:
(i) The Loss must be incurred within three years of the Closing Date
or arise in connection with a legal or administrative proceeding in which
the Company has been made a party which has been commenced by a third party
or a governmental agency within three years of the Closing Date.
(ii) The Loss must arise in response to a claim from a third party or
governmental agency that the Company is responsible for remediation or is
obligated to contribute to the remediation of the Environmental Conditions,
or fines and/or penalties arising out of the Environmental Conditions.
(iii) The Buyer must act in good faith, assert any defenses and
make good faith efforts to resist the claims described in (i) and (ii)
above and otherwise to mitigate the Loss.
(iv) The Buyer must have been unsuccessful, after having made good
faith efforts, in recovering part or all of its Loss (or otherwise reducing
or avoiding its Loss) from parties who have responsibility for such
Environmental Conditions through any legal means, including but not limited
to indemnification or hold harmless agreements, lease provisions, asset
transfer provisions or because of their status as prior owners or operators
of the Facilities. In the case of the Wisconsin Environmental Conditions
this includes Stolper Industries, Inc. and Cascade Properties, LLC and in
the case of the Arizona Environmental Conditions it includes Daniel Wheeler
and Allied Signal and its relevant affiliates.
10. CLOSING
The closing of this transaction ("the Closing") shall take place at the
offices of Foley & Lardner, Milwaukee, Wisconsin, at 9:00 A.M. on October 29,
1997, or at such other time and place as the parties hereto shall agree upon.
Such date is referred to in this Agreement as the "Closing Date".
10.1. Documents to be Delivered by Company and Shareholders. At the
Closing, Company and Shareholders shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
10.1.(a) Stock Certificate(s). A stock certificate or certificates
representing Ticonderoga's shares in S-F Holding, duly endorsed for
transfer or with duly executed stock powers attached.
10.1.(b) Unit Certificates. Certificates representing the units or
membership interests of the Direct Shareholders in the Company, duly
endorsed for transfer or with duly executed transfer powers attached.
10.1.(c) Compliance Certificate. A certificate signed by each
Shareholder that
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each of the representations and warranties made by Shareholders and the
Company in this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that Company and
Shareholders have performed and complied with all of Company's and
Shareholders' obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
10.1.(d) Opinion of Counsel. A written opinion of Foley & Lardner,
counsel to Company, Wedel and Drury; Cahill Gordon & Reindel, counsel to
Ticonderoga, Lexington & SBC and Quarles & Brady, counsel to Stolper, dated
as of the Closing Date, addressed to Buyer, substantially in the form of
Schedules 10.1.(d) hereto.
10.1.(e) Certified Resolutions. Certified copies of the Consent
Actions of the Members of Company and the shareholders and directors of S-F
Holding, authorizing and approving this Agreement and the consummation of
the transactions contemplated by this Agreement.
10.1.(f) Escrow Agreement. The Escrow Agreement duly executed by
Shareholders and Firstar Bank Milwaukee, N.A. (the "Escrow Agent") in the
form of Schedule 10.1.(f) hereto.
10.1.(g) Articles; By-Laws. A copy of the Operating Agreement of
Company certified by the Secretary of Company, and a copy of the Articles
of Organization of Company certified by the Wisconsin Department of
Financial Institutions.
10.1.(h) Resignations. The resignations of Jan Wedel and David J.
Drury as officers of the Company, effective as of the Closing Date and in
form satisfactory to Buyer's counsel.
10.1.(i) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
10.1.(j) Records. All minute books, stock or share record books and
other books and records of the Company and S-F Holding.
10.1.(k) Consents of Lessors. Any consents required under the leases
of the Real Estate, which consents shall be in a form reasonably acceptable
to Buyer.
10.1.(l) FAA Letters. Letters from the Regional Office of the FAA
relating to the Company's FAA certificates, which letters shall be in a
form reasonably acceptable to Buyer.
10.1.(m) Non-Compete Agreements. Non-compete agreements acceptable
to Buyer executed by Drury, Wedel and Stolper.
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10.2. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Shareholders the following documents, in each case duly executed or
otherwise in proper form:
10.2.(a) Cash Purchase Price. To accounts designated by
Shareholders, the Shareholders' Agents and the Escrow Agent, the wire
transfers as required by Sections 2.2.(a), 2.2.(b) and 2.2.(c) hereof.
10.2.(b) Compliance Certificate. A certificate signed by the chief
executive officer of Buyer that the representations and warranties made by
Buyer in this Agreement are true and correct on and as of the Closing Date
with the same effect as though such representations and warranties had been
made or given on and as of the Closing Date (except for any changes
permitted by the terms of this Agreement or consented to in writing by
Shareholders), and that Buyer has performed and complied with all of
Buyer's obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
10.2.(c) Opinion of Counsel. A written opinion of Ballard, Spahr,
Andrews & Ingersoll, counsel to Buyer, dated as of the Closing Date,
addressed to Company, in substantially the form of Exhibit 10.2.(c) hereto.
10.2.(d) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this Agreement
and the consummation of the transactions contemplated by this Agreement.
10.2.(e) Escrow Agreement. The Escrow Agreement duly executed by
Buyer and the Escrow Agent in the form of Schedule 10.1.(f) hereto.
10.2.(f) Incumbency Certificate. Incumbency certificates relating to
each person executing any document executed and delivered to Company or
Shareholders by Buyer pursuant to the terms hereof.
10.2.(g) Other Documents. All other documents, instruments or
writings required to be delivered to Company at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Company may reasonably request.
11. TERMINATION
11.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
11.1.(a) by mutual written agreement of Buyer and Shareholders, or
11.1.(b) by either Buyer or Shareholders if the Closing shall not
have occurred on or before November 15, 1997, provided the terminating
party has not, through breach of a representation, warranty or covenant,
prevented the Closing from occurring on or before such date.
-30-
<PAGE>
11.2. Termination for Breach.
11.2.(a) Termination by Buyer. If (i) there has been a material
violation or breach by any Shareholder or Company of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Buyer, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Buyer within the time
period provided for the satisfaction of such condition and which has not
been so waived, or (iii) Company or any Shareholder shall have attempted to
terminate this Agreement under this Article 11 without grounds to do so,
then Buyer may, by five days prior written notice to Shareholders at any
time prior to the Closing that such violation, breach, failure or wrongful
termination attempt is continuing, terminate this Agreement with the effect
set forth in Section 11.2(c) hereof.
11.2.(b) Termination by Shareholders. If (i) there has been a
material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Shareholders or (ii) there has been a failure of
satisfaction of a condition to the obligations of Shareholders within the
time period provided for the satisfaction of such condition and which has
not been so waived, or (iii) Buyer shall have attempted to terminate this
Agreement under this Article 11 or otherwise without grounds to do so, then
Shareholders may, by five days prior written notice to Buyer at any time
prior to the Closing that such violation, breach, failure or wrongful
termination attempt is continuing, terminate this Agreement with the effect
set forth in Section 11.2(c) hereof.
11.2.(c) Effect of Termination. Termination of this Agreement
pursuant to this Section 11.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. In addition to
the right of any party under common law to redress for any such breach or
violation, each party whose breach or violation has occurred prior to
termination shall jointly and severally indemnify each other party for
whose benefit such representation, warranty, covenant, agreement or other
provision was made ("indemnified party") from and against all Losses
asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of or
resulting from such breach or violation.
12. RESOLUTION OF DISPUTES
12.1. Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms shall be settled
by binding and confidential arbitration held in Milwaukee, Wisconsin, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except as specifically provided otherwise in this
Article 12.
12.2. Arbitrators. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed $250,000, then
-31-
<PAGE>
the panel to be appointed shall consist of three neutral arbitrators; otherwise,
one neutral arbitrator.
12.3. Expenses of Arbitration. Each party shall initially bear its own
costs and expenses of arbitration; however, the arbitrator(s) shall have the
authority to award the prevailing party (if a prevailing party is determined to
exist by the arbitrator) at any proceeding or action under this Article 12 all
legal and accounting fees, expenses and other out-of-pocket costs incurred by
such party, including any costs and fees incurred by and payable to the
arbitrator(s), in such proceedings or actions, in addition to any other damages
or relief awarded, regardless of whether such proceeding or action results in a
final judgment, in each case in such amount as the arbitrator(s) determines to
be reasonable.
13. MISCELLANEOUS
13.1. Disclosure Schedule. The Schedules have been compiled in a bound
volume (the "Disclosure Schedules"), executed by Shareholders and dated and
delivered to Buyer on the date of this Agreement.
13.2. Further Assurance. From time to time, at Buyer's request and
without further consideration, Company and Shareholders will execute and deliver
to Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions contemplated
hereby.
13.3. Disclosures and Announcements. Announcements concerning the
transactions provided for in this Agreement by Buyer, Company or Shareholders
shall be subject to the approval of the other parties in all essential respects,
except that approval of the Shareholders or Company shall not be required as to
any statements and other information which Buyer may submit to the Securities
and Exchange Commission, a stock exchange on which Buyer's shares are traded or
that Buyer or its affiliates may be required to make pursuant to any rule or
regulation of the Securities and Exchange Commission or a stock exchange on
which Buyer's shares are traded.
13.4. Assignment; Parties in Interest.
13.4.(a) Assignment. Except as expressly provided herein, the rights
and obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer or S-F Holding to carry out
all or part of the transactions contemplated hereby; provided, however,
that Buyer shall, nevertheless, remain liable for all of its obligations,
and those of any such assignee, to Shareholders hereunder.
13.4.(b) Parties in Interest. This Agreement shall be binding
upon,inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing contained
herein shall be deemed to confer upon any other person any right or remedy
under or by reason of this Agreement.
13.5. Law Governing Agreement. This Agreement may not be modified or
-32-
<PAGE>
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Wisconsin, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
13.6. Amendment and Modification. Buyer and Shareholders may amend,
modify and supplement this Agreement in such manner as may be agreed upon in
writing between Buyer and Shareholders' Agents; provided, however, that Buyer
may, in Buyer's discretion, require the execution of any amendment by all the
Shareholders personally.
13.7. Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service.
The respective addresses to be used for all such notices, demands or requests
are as follows:
(a) If to Buyer, to:
The Triumph Group Operations, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
Attention: Richard M. Eisenstaedt
Facsimile: 610-975-0563
(with a copy to)
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Edward D. Slevin
Facsimile: 215-864-8999
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
(b) If to Company or to Shareholders:
David J. Drury
Stolper-Fabralloy Company
115 N. Janacek Road
Brookfield, WI 53045-6155
Facsimile: 414-796-4268
Jan Wedel
5623 N. 52nd Place
Paradise Valley, AZ 85253
Stolper Industries, Inc.
115 N. Janacek Road
-33-
<PAGE>
Brookfield, WI 53045
Attention: Lloyd A. Gerlach
Facsimile: 786-9249
Max O. Mitchell
26210 Omar Drive N.E.
Ft. Bragg, CA 95437
Facsimile: 707-964-0835
William Hinz
11869 East Gold Dust Avenue
Scottsdale, AZ 85259
Facsimile: 602-391-1972
SBC Warburg Dillon Read, Inc., Agent
535 Madison Avenue
New York, NY 10022
Attention: David Niemiec
Facsimile: 212-906-8690
Ticonderoga Partners III, L.P.
c/o Ticonderoga Capital
535 Madison Avenue
New York, NY 10022
Attention: Peter Leidel
Facsimile: 212-906-8690
(with a copy to)
Ronald L. Walter
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Facsimile: (414) 297-4900
or to such other person or address as Shareholders shall designate in accordance
with this Agreement.
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any
party to this Agreement may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this Section.
-34-
<PAGE>
13.8. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
13.8.(a) Brokerage. Except as to Dillon Read & Company, Inc., who
shall be compensated by Shareholders, Shareholders and Buyer each represent
and warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein on their behalf
respectively (and Shareholders represent and warrant that there is no
broker involved on behalf of Company) and each agrees to hold the other
harmless from and against all other claims for brokerage commissions or
finder's fees in connection with the execution of this Agreement or the
transactions provided for herein.
13.8.(b) Other. Except as otherwise provided herein, each of the
parties shall bear its own expenses and the expenses of its counsel and
other agents in connection with the transactions contemplated hereby.
13.9. Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
13.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.11. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
13.12. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Accounts Receivable" - Section 3.6
"Adjusted Purchase Price" - Section 2.3
"Ancillary Instruments" - Section 3.2.(a)
"Closing" - Preamble to Article 10
"Closing Date" - Article 10
"Code" - Section 3.5(e)
"Company Benefit Plans" - Section 3.16
"Consent" - Section 3.3.(b)
"Disclosure Schedule" - Article 13.1
"DOJ" - Section 5.4
"Environmental Conditions" - Section 9.5
"Environmental Laws" - Section 3.11.(c)
"ERISA" - Section 3.16
"Escrow Account" - Section 2.2.(a)
"Escrow Agent" - Section 10.1(f)
-35-
<PAGE>
"Escrow Agreement" - Section 10.1(f)
----------------
"Excess Working Capital" - Section 2.4.(a)(i)
----------------------
"Excluded Debt" - Section 2.4.(a)(ii)
-------------
"FTC" - Section 5.4
---
"Facilities" - Recitals
----------
"Final Closing Balance Sheet" - Section 2.4.(b)(i)
---------------------------
"Financial Statements" - Section 3.4
--------------------
"GAAP" - Section 2.4.(b)(i)
----
"Hazardous Activity" - Section 3.11.(c)
------------------
"Hazardous Materials" - Section 3.11.(c)
-------------------
"HSR Act" - Section 3.3.(b)
-------
"Indemnified Party" - Section 9.3.(a)
-----------------
"Indemnifying Party" - Section 9.3.(a)
------------------
"Intellectual Property" - Section 3.18
---------------------
"Knowledge" - Article 3
---------
"Laws" - Section 3.11
----
"Lien" - Section 3.12.(a)
----
"Litigation" - Section 3.10
----------
"Losses" - Section 9.1
------
"Material Adverse Effect" - Section 3.8
-----------------------
"Material Contracts" - Section 3.14
------------------
"Net Working Capital" - Section 1.4.(a)(i)
-------------------
"PBGC" - Section 3.16.(c)
----
"Proposed Closing Balance Sheet" - Section 2.4.(b)(i)
------------------------------
"Purchase Price" - Section 2.1
--------------
"Real Property" - Section 3.12.(c)
-------------
"Recent Balance Sheet" - Section 3.4
--------------------
"S-F Holding Financials" - Section 3.22.(a)
----------------------
"Settlement Date" - Section 2.3
---------------
"Shares" - Section 1
------
"Shareholders' Accountants" - Section 2.4.(b)(ii)
-------------------------
"Taxes" - Section 3.5.(a)
-----
"Third Accounting Firm" - Section 2.4.(b)(iii)
---------------------
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
THE TRIUMPH GROUP OPERATIONS, INC.
By /s/ Richard C. Ill
--------------------------------
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<PAGE>
STOLPER-FABRALLOY COMPANY, LLC
By /s/ Jan Wedel
--------------------------------
STOLPER INDUSTRIES, INC.
By /s/ David J. Drury
--------------------------------
TICONDEROGA PARTNERS III, L.P.
By /s/ Peter A. Leidel
--------------------------------
LEXINGTON PARTNERS IV, L.P.
By /s/ David W. Niemiec
--------------------------------
SBC WARBURG DILLON READ, INC.
By /s/ David W. Niemiec
--------------------------------
/s/ David J. Drury
----------------------------------
David J. Drury
/s/ Max O. Mitchell
----------------------------------
Max O. Mitchell
/s/ William J. Hinz
----------------------------------
William J. Hinz
WEDEL ENTERPRISES, INC.
By /s/ Jan Wedel
--------------------------------
-37-
<PAGE>
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
DATED
OCTOBER 23, 1997
The Buyer and the Shareholders hereby agree that the Stock Purchase
Agreement dated October 23, 1997 is hereby amended to the effect that the
parenthetical phrase in Section 2.4.(a)(i) which reads "exclusive of current
maturities of Excluded Debt" shall be amended to read "inclusive of current
maturities of Excluded Debt."
Dated this 29th day of October, 1997.
THE TRIUMPH GROUP OPERATIONS, INC.
By: /s/ Richard C. Ill
---------------------------------
/s/ David J. Drury
------------------------------------
David J. Drury, Individually and as
Shareholders' Agent
/s/ Jan Wedel
------------------------------------
Jan Wedel as Shareholders' Agent
STOLPER INDUSTRIES, INC.
By: /s/ Lloyd Gerlach
---------------------------------
Lloyd Gerlach
WEDEL ENTERPRISES, INC.
By: /s/ Jan Wedel
---------------------------------
Jan Wedel
<PAGE>
Exhibit 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT FOR TRIUMPH GROUP, INC.
FIRST AMENDMENT (this "Amendment"), dated October 23, 1997, to
"Credit Agreement" dated as of March 31, 1997 among TRIUMPH GROUP, INC. (the
"Borrower"); the "Banks" party thereto; and PNC BANK, NATIONAL ASSOCIATION,
as "Agent" for the Banks.
WHEREAS, the parties wish to amend the Credit Agreement to increase
the aggregate amount of the Commitments from $85,000,000 to $125,000,000.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Defined Terms. Capitalized terms not otherwise defined in this
Amendment will have the meanings that the Credit Agreement gives to those
terms.
2. Amendment to Credit Agreement. The Credit Agreement is hereby
amended as follows:
Schedule 1.1(B) Commitments of Banks.
Schedule 1.1(B) to the Credit Agreement is replaced
with Schedule 1.1(B) attached to this Amendment.
3. Conditions to Effectiveness of Amendment. The effectiveness of
this Amendment and the obligation of the Banks to make Revolving Credit Loans
under their increased Commitments is subject to the satisfaction of the
following conditions:
(A) Replacement Revolving Credit Notes in the principal amount
of the increased Commitments shall have been delivered to the Banks;
(B) The representations and warranties of the Borrower
contained in Article 5 of the Credit Agreement shall be true as though such
representations and warranties had been made today, except (i) for
representations and warranties which expressly relate solely to an earlier
date or time, which representations and warranties shall continue to be true
as of the specific dates or times referred to therein and (ii) as indicated
on the updated Credit Agreement disclosure schedules attached hereto;
<PAGE>
(C) The Borrower shall have performed and complied with all
covenants and conditions of the Credit Agreement as amended hereby;
(D) No Event of Default or Potential Default shall have
occurred and be continuing or shall exist;
(E) No Material Adverse Change in the Borrower or any of its
Subsidiaries shall have occurred since the date of the Borrower's financial
statements most recently reviewed by the Banks;
(F) The Borrower shall have delivered to the Agent for the
benefit of each Bank a certificate of the Secretary or Assistant Secretary of
the Borrower, certifying as to (i) all action taken by the Borrower in
connection with this Amendment, the replacement Revolving Credit Notes, and
any related Loan Documents (collectively, the "Amendment Documents"); (ii)
the names of the officer or officers authorized to sign this Amendment, the
replacement Revolving Credit Notes, and the related Loan Documents; and (iii)
the absence of any changes in the certificate of incorporation and bylaws of
the Borrower as they were in effect on March 31, 1997, the Closing Date under
the Credit Agreement;
(G) The Borrower shall have delivered to the Agent for the
benefit of each Bank a written opinion of Richard M. Eisenstaedt, general
counsel to the Borrower, as to the corporate existence and good standing of
the Borrower; the due authorization, execution, delivery and enforceability
of the Amendment Documents; the absence of conflicts between the Amendment
Documents and the organizational documents of the Borrower, applicable laws,
and other debt obligations of the Borrower; the absence of material
litigation or claims against the Borrower; and such other matters as the
Agent may reasonably request;
(H) The Borrower shall have delivered to the Agent satisfactory
evidence that the "Majority Holders" under the Alco Note have consented to
the increase in the amount of "Superior Debt" permitted under the Alco Note
to $125,000,000, plus interest; and
(I) The Borrower shall have paid to the Agent, for itself and
for the account of the Banks, all commitment and other fees due in connection
with this Amendment.
-2-
<PAGE>
4. Continuing Effectiveness of Credit Agreement and Other Loan
Documents. Except as amended hereby, the Credit Agreement and other Loan
Documents remain in full force and effect.
5. Counterparts. This Amendment may be exectuted in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
ATTEST: TRIUMPH GROUP, INC.
/s/ Richard M. Eisenstaedt By: /s/ John R. Bartholdson
- -------------------------------- ---------------------------------
Name: Richard M. Eisenstaedt Name: John R. Bartholdson
Title: Secretary Title: Senior Vice President
PNC BANK, NATIONAL
ASSOCIATION, individually and
as Agent
By: /s/ Warren Engel
-----------------------------
Title: Vice President
--------------------------
FIRST UNION NATIONAL BANK
By: /s/ Loretta Sawyer
-----------------------------
Title: Vice President
--------------------------
MELLON BANK, N.A.
By: /s/ Gil Mateer
-----------------------------
Title: Vice President
--------------------------
-3-
<PAGE>
Exhibit 11
Triumph Group, Inc.
Statement of Computation of Earnings Per Share
Three and six months ended September 30, 1996 and 1997
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
--------- --------- --------- ---------
Earnings per share:
Weighted average number of
outstanding common shares 5,856 9,750 5,831 9,750
Dilutive effect of outstanding
warrant 650 650 650 650
Dilutive effect of options and other 29 108 52 108
Conversion of redeemable preferred stock 279 -- 279 --
Conversion of 14% Junior
Subordinated Promissory Notes 574 -- 574 --
--------- --------- --------- ---------
Adjusted weighted average number of
outstanding common shares
and common share equivalents 7,388 10,508 7,386 10,508
--------- --------- --------- ---------
--------- --------- --------- ---------
Income before extraordinary item $ 2,630 $ 5,695 $ 4,439 $ 10,187
Interest related to 14% Junior
Subordinated Promissory Notes 338 -- 651 --
Income tax effect (135) -- (260) --
--------- --------- --------- ---------
Income before extraordinary item available to
shareholders 2,833 5,695 4,830 10,187
Extraordinary (loss) gain (1,478) 610 (1,478) 610
--------- --------- --------- ---------
Net income available to common
shareholders $ 1,355 $ 6,305 $ 3,352 $ 10,797
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share:
Income before extraordinary item $ 0.38 $ 0.54 $ 0.65 $ 0.97
Extraordinary (loss) gain (0.20) 0.06 (0.20) 0.06
--------- --------- --------- ---------
Net Income $ 0.18 $ 0.60 $ 0.45 $ 1.03
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informaiton extracted from 2nd Qtr
Financial Statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,458
<SECURITIES> 0
<RECEIVABLES> 48,101
<ALLOWANCES> 1,488
<INVENTORY> 68,607
<CURRENT-ASSETS> 127,739
<PP&E> 79,361
<DEPRECIATION> 13,509
<TOTAL-ASSETS> 241,521
<CURRENT-LIABILITIES> 46,446
<BONDS> 66,405
0
0
<COMMON> 10
<OTHER-SE> 102,200
<TOTAL-LIABILITY-AND-EQUITY> 241,521
<SALES> 147,002
<TOTAL-REVENUES> 147,002
<CGS> 103,770
<TOTAL-COSTS> 25,903<F1>
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 17
<INTEREST-EXPENSE> 1,879
<INCOME-PRETAX> 16,700
<INCOME-TAX> 6,513
<INCOME-CONTINUING> 10,187
<DISCONTINUED> 0
<EXTRAORDINARY> 610
<CHANGES> 0
<NET-INCOME> 10,797
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<FN>
<F1>Does not include $1,250 gain on sale.
</FN>
</TABLE>
