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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
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/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended March 31, 1999
or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from to
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Commission File No. 1-12235
TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 51-0347963
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
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FOUR GLENHARDIE CORPORATE CENTER,
1255 DRUMMERS LANE, SUITE 200, WAYNE, PENNSYLVANIA 19087
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (610) 975-0420
Securities registered pursuant to Section 12(b) of the Act:
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Title of Class Name of Exchange on which Registered
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COMMON STOCK, PAR VALUE $.001 PER SHARE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The number of outstanding shares of the Registrant's Common Stock, par value
$.001 per share, and Class D Common Stock, par value $.001 per share, on May 28,
1999 was 8,382,836 and 3,348,535, respectively. In making such calculation,
Registrant is not making a determination of the affiliate or non-affiliate
status of any holders of shares of Common Stock or Class D Common Stock.
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The aggregate market value of the shares of Common Stock held by
non-affiliates of the Registrant (computed by reference to the closing price of
such voting stock on the New York Stock Exchange on May 28, 1999 of $30.625) was
approximately $192,487,435.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated herein by reference:
Proxy Statement of Triumph Group, Inc. in connection with its 1999 Annual
Meeting of Stockholders is incorporated in part in Part III hereof, as specified
herein.
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TABLE OF CONTENTS
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ITEM NO. PAGE
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Part I.................................................................................................... 4
1. Business............................................................................................... 4
2. Properties............................................................................................. 19
3. Legal Proceedings...................................................................................... 20
4. Submission of Matters to a Vote of Security Holders.................................................... 20
Part II................................................................................................... 20
5. Market for Registrant's Common Equity and Related Stockholder Matters.................................. 20
6. Selected Financial Data................................................................................ 21
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 23
7a. Quantitative and Qualitative Disclosures about Market Risk............................................ 30
8. Financial Statements and Supplementary Data............................................................ 31
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 53
Part III.................................................................................................. 53
10. Directors and Executive Officers of Registrant........................................................ 53
11. Executive Compensation................................................................................ 54
12. Security Ownership of Certain Beneficial Owners and Management........................................ 54
13. Certain Relationships and Related Transactions........................................................ 54
Part IV................................................................................................... 54
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................... 54
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PART I
ITEM 1. BUSINESS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to Triumph's future
operations and prospects, including statements that are based on current
projections and expectations about the markets in which Triumph operates, and
management's beliefs concerning future performance and capital requirements
based upon current available information. Actual results could differ materially
from management's current expectations and additional capital may be required
and additional capital, if required, may not be available on reasonable terms,
if at all, at the times and in the amounts as may be needed by Triumph. In
addition to these factors and others described elsewhere in this report, among
other factors that could cause actual results to differ materially are
uncertainties relating to the integration of acquired businesses, general
economic conditions affecting Triumph's two business segments, Year 2000
readiness, dependence of some of Triumph's businesses on 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 Triumph, see the
Risk Factors described in Item 1 of this Annual Report on Form 10-K. Triumph
does not undertake any obligation to revise these forward-looking statements to
reflect future events.
GENERAL
Triumph designs, engineers, manufactures, repairs, overhauls and distributes
aircraft components, such as mechanical and electromechanical control systems,
aircraft and engine accessories, auxiliary power units, commonly referred to as
APUs, avionics and aircraft instruments. Triumph serves a broad spectrum of the
aviation industry, including commercial airlines and air cargo carriers, as well
as original equipment manufacturers, commonly referred to as OEMs, of aerospace
vehicles, commercial and military aircraft, and aircraft components.
PRODUCTS AND SERVICES
Triumph's aviation products and services may generally be divided into three
categories: structural components, flight controls and instrumentation, and
subassembly components. The following is a description of some of the products
and services offered by Triumph in each of these three categories:
STRUCTURAL COMPONENTS. Triumph performs stretch forming, bending, die
forming, machining, milling, welding, assembly and other fabrication on aircraft
wings, fuselages and skins for aircraft produced by OEMs such as The Boeing
Company. Triumph also manufactures metallic and composite bonded honeycomb
assemblies for fuselage, wings and flight control surface parts for commercial
airlines and other aircraft operators.
FLIGHT CONTROLS AND INSTRUMENTATION. Triumph designs and engineers
mechanical and electromechanical controls such as remote valve operators and
push/pull controls ranging from simple vent controls to sophisticated
flight-critical engine controls for OEMs and commercial airlines and general
aviation. In certain cases, principally at Triumph Controls, Inc., a wholly
owned subsidiary of Triumph, Triumph's designs and engineering for these
controls are proprietary because these designs are not sold to the OEM for whom
the control is manufactured. Consequently, the OEM generally relies on Triumph
to repair or replace these components. Triumph also performs repair and overhaul
services and supplies spare parts for various types of cockpit instruments and
gauges for a broad range of commercial airlines on a worldwide basis.
SUBASSEMBLY COMPONENTS. Triumph performs complete repair and overhaul
services on APUs and components for APUs for both commercial airlines and OEMs.
APUs are used to provide power for all non-propulsion aircraft functions such as
air conditioning, lights and other electrical functions. Triumph also repairs
and overhauls aircraft accessories, including constant speed drives, pneumatic
or electrically
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actuated valves, cabin compressors, starters and generators. Some of these
components, like the APUs, are repaired pursuant to SFAR 36 certifications. In
addition, Triumph manufactures hot section components for small propulsion jet
engines, APUs and land-based power units and combustion system components for
power equipment manufacturers. Finally, Triumph provides precision machining
services for other operational components manufactured from refractory and other
metals for the aviation and aerospace industry.
INDUSTRY OVERVIEW AND TRENDS
Both the aircraft component production and component repair industries are
highly fragmented, each consisting of a limited number of well-capitalized
companies, which offer a broad range of products and services, and a large
number of smaller, specialized companies. The aviation industry has been
consolidating at an increasing pace in recent years, and it is expected that
this consolidation will continue for the foreseeable future.
A number of significant trends are currently affecting the market for the
design, engineering, manufacture, repair and overhaul of aircraft components.
These trends include the following:
INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION. According to Boeing's
1998 Current Market Outlook, the worldwide fleet of commercial airplanes may
double from approximately 12,300 airplanes at the end of 1997 to approximately
26,200 airplanes by 2017. Further, the Boeing Report projects that cargo jet
aircraft will increase from approximately 1,430 airplanes in 1997 to
approximately 2,706 airplanes by 2017. Additionally, the number of airplanes in
service for more than ten years will continue to increase, and these older
airplanes are the primary market for independent providers of manufacture,
repair and overhaul services. The continued growth in air transit and aircraft
production will increase the demand for aircraft component purchases and
repairs.
INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators
have come under increasing pressure to reduce both operating and capital costs
associated with providing aviation services. While several of the expenditures
incurred by aircraft operators are beyond their direct control, such as fuel
prices and labor costs, aircraft operators seeking cost reductions have
increased purchases of some components from third parties and have outsourced
repair and overhaul functions. Aircraft components sold by third party suppliers
and aircraft components that have been repaired and overhauled are generally
less expensive than new aircraft components sold by OEMs. In addition, OEMs are
increasingly becoming "assemblers" of aviation products by outsourcing more
manufacturing and repair functions to third parties. In this regard, Triumph
supplies many OEMs with aircraft components and subassemblies, in addition to
performing repair and overhaul services. In addition, as consolidation in the
aviation services industry continues, aviation services consumers are requiring
vendors to offer a broader range of services including, in some instances,
inventory maintenance and management services. Triumph believes that its broad
array of aviation products and services and its reputation for quality and
timely and reliable delivery will position Triumph to continue to capitalize on
the outsourcing trend. Triumph anticipates that increased reliance on
outsourcing will continue to cause consolidation in the industry since only
those suppliers with extensive capacities and adequate capital will secure
agreements with OEMs and aircraft operators.
REDUCTION IN THE NUMBER OF APPROVED SUPPLIERS AND VENDORS. In order to
reduce purchasing costs, streamline purchasing decisions and have greater
control over quality, purchasing departments of OEMs and aircraft operators have
been reducing the number of approved suppliers and vendors. In the past several
years, several OEMs and aircraft operators have reduced their supplier and
vendor lists from as many as 50 to a core group of five to ten "mega-suppliers"
or "mega-vendors" who have the size and capacity to meet their needs. Triumph
has secured a position on these lists of a number of OEMs and airlines. Triumph
believes that this trend will continue in the future and that, due to its
established market presence and reputation for quality, Triumph will continue to
be selected as an approved supplier and vendor. See "--Government Regulation."
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INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations
promulgated by the FAA and similar agencies in other countries, including the
Joint Aviation Authority and the Civil Aviation Administration of China, as well
as guidelines established by OEMs and aircraft operators, when an aircraft
component fails to perform within prescribed limits or after logging a
prescribed number of flight hours, the aircraft component must be brought to a
repair facility certified by the FAA or similar agency of a foreign nation for
various types of designated service or replacement. The FAA has changed the
nature of the licenses that it grants, from the grant of broad licenses for
aircraft accessories or instruments within broad classifications to more limited
licenses covering specific parts within more narrow classifications. Triumph
holds many perpetual broad licenses that will continue unless abandoned,
suspended or revoked. In addition, aircraft components require regular
maintenance and inspection and replacement of "life-limited" components. The
trend toward more stringent maintenance requirements and more frequent
maintenance and overhaul has increased the size of the market for the repair of
these components, because the use of new components is not always cost
effective. Triumph believes that, because of its broad licenses and
long-standing emphasis on quality control, it benefits from these higher
maintenance and safety standards.
INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding
the use of unapproved aircraft spare parts, regulatory authorities have
increased the level of documentation that must be maintained on spare parts.
This requirement has been extended by OEMs and aircraft operators to the vendors
of spare parts. The high cost of required technology to compete effectively in
the redistribution market has made entry into and survival in the aircraft spare
parts redistribution market increasingly difficult and expensive. Triumph has
implemented technology to enable it to meet these more stringent traceability
requirements and intends to continue to do so in the future.
COMPETITIVE ADVANTAGES
Triumph believes that it is well positioned to take advantage of trends
affecting the market for the design, engineering, manufacture, repair and
overhaul of aircraft components due to:
BROAD ARRAY OF PRODUCTS AND SERVICES. Triumph offers the aviation industry
a consolidated point of purchase for a broad array of aviation products and
services. Triumph designs, engineers and manufactures aircraft components to
fulfill the particular needs and requirements of its customers. In some cases,
Triumph owns the proprietary rights to these designs and, accordingly, the
customer generally relies on Triumph to provide service on these aircraft
components at every stage of their useful lives, including the repair and
overhaul or replacement of these components. In addition, Triumph manufactures
aviation components according to its customers' specifications. Triumph also
performs repair and overhaul services for customers on various aviation
components manufactured by third parties such as AlliedSignal, Inc. In addition,
Triumph offers to maintain and manage inventories of aircraft components and
other products for some of its customers. In some instances, Triumph's customers
require it to maintain and manage their inventories.
GOVERNMENT CERTIFICATIONS. Triumph operates 16 FAA-certified repair
stations and has been granted licenses from the FAA and foreign regulatory
counterparts, including the Joint Aviation Authority and the Civil Aviation
Administration of China, to perform repair and overhaul services on broad
classifications of aircraft instruments and accessories. Without these broad
certifications and licenses, which are often expensive and time consuming to
obtain and involve extensive audit procedures, other companies are precluded
from offering these products and services, thereby constituting a significant
barrier to entry. See "--Government Regulation." In addition, Triumph holds two
exclusive licenses issued by the FAA which permit Triumph to design, engineer,
repair, test and release into service without FAA approval particular products
to its own specifications for particular aircraft components and therefore to
compete directly with OEMs with respect to these components. These exclusive
licenses, known as SFAR 36 certifications, enable Triumph to offer, on a
proprietary basis, some repaired parts relating to various aircraft accessories
6
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such as APUs and constant speed drives to its customers at a lower cost than
other companies that must purchase replacement parts from third parties. Triumph
employs designated engineering representatives who are certified to act on
behalf of the FAA to develop, substantiate and approve repairs on components.
EMPHASIS ON QUALITY CONTROL. Triumph incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that Triumph satisfy requirements relating
to the quality of its products and services. Triumph has continually met or
exceeded these requirements, and has successfully completed many audits
conducted on a regular basis by the Coordinated Agency for Supplier Evaluation,
a consortium of United States airlines, commonly referred to as C.A.S.E. As a
vendor listed with C.A.S.E., Triumph is reviewed on a regular basis for quality
and efficiency. Triumph also performs testing and certification procedures on
all of the products that it designs, engineers, manufactures, repairs and
overhauls, and maintains detailed records to ensure traceability of the
production of and service on each aircraft component. Triumph believes that its
emphasis on quality control has enabled it to obtain many of the FAA licenses it
enjoys, including its exclusive SFAR 36 certifications. The expense required to
institute and maintain Triumph's quality control procedures represents a barrier
to entry for other companies.
BROAD CUSTOMER BASE. Due to Triumph's broad array of products and services
and its emphasis on quality control and timely delivery, Triumph's customers
include virtually all of the world's major commercial airlines and an increasing
number of the most widely recognized air cargo carriers, including Federal
Express Corporation and United Parcel Service of America, Inc., and OEMs such as
Boeing, AlliedSignal, Bombardier, Inc. and Aerospatiale (AirBus). Triumph
expects that its customer base will continue to strengthen and broaden with
increased cross-selling efforts by Triumph of its related products and services.
Boeing and AlliedSignal each accounted for more than 10% of Triumph's
consolidated revenues for the 12 months ended March 31, 1999. Although the loss
of Boeing or AlliedSignal could have a material adverse effect on Triumph,
Triumph provides various products and services to numerous Boeing and
AlliedSignal facilities and, accordingly, Triumph believes that the loss of all
Boeing or AlliedSignal business is unlikely.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
Triumph's Aviation Group have substantial experience in the aviation industry.
These entities are characterized by experienced management and highly-skilled
employees. Because of its established industry presence, Triumph enjoys strong
customer relations, name recognition and repeat business.
COMPANY STRATEGY
Triumph intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. Triumph will continue to introduce new
aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, Triumph plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. Triumph will also expand its assembly and subassembly
capabilities on particular aircraft components. By broadening its products and
services, Triumph intends to further expand its position as a consolidated point
of purchase to the aviation industry, capitalizing on the increasing trend
toward outsourcing and the reduction by aircraft operators and OEMs of the
number of approved suppliers and vendors.
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ACQUISITIONS. Triumph expects to continue its growth through acquisitions
of other companies, assets or product lines that add to or complement Triumph's
existing aviation products and services. Triumph successfully completed seven
acquisitions since April 1, 1998.
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EFFECTIVE DATE OF
COMPANY ACQUIRED ACQUISITION BUSINESS OF COMPANY ACQUIRED
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Nu-Tech Industries, Inc. July 1, 1998 Produces complex structural components for
the commercial and military aircraft
markets.
DV Industries, Inc. October 1, 1998 Provides metal finishing, processing and
other services for the military and
commercial industries.
DG Industries, Inc. October 1, 1998 Specializes in precision machining
services for the aerospace, military and
commercial industries.
Chase Aerospace, Ltd., operated by Triumph January 1, 1999 Repairs and overhauls APUs and other
as Triumph Air Repair (Europe) Ltd. subassembly components for commercial
transport carriers and the commuter
aviation industry.
Hartford Tool & Die Company, operated by January 1, 1999 Manufactures precision components and
Triumph as HTD Aerospace, Inc. assemblies for the military and commercial
industries.
May Industries, Inc., operated by Triumph February 1, 1999 Manufactures and machines precision tubing
as Triumph Precision, Inc. and provides heat-treating and brazing
services for the aerospace industry.
Ralee Engineering Corp. April 1, 1999 Manufactures long structural components
for the airline industry.
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Because of the fragmented nature of much of the market for aircraft products
and services, Triumph believes that many additional acquisition opportunities
exist in the aviation industry. Triumph steadily evaluates acquisition
opportunities. Triumph may not successfully complete any of these acquisitions
and if so acquired, these entities may not be properly integrated into Triumph.
EXPANDED OPERATING CAPACITY. Triumph plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. Triumph will increase its capital expenditures, including expenditures
for additional equipment and skilled labor, to support this increased capacity.
Triumph intends to continue to invest in state of the art machinery to increase
its operating efficiencies and improve operating margins.
INCREASED INTERNATIONAL MARKETING. Triumph intends to continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations purchase used
aircraft that require more frequent repair and maintenance. Triumph currently
supplies products and services to virtually every major commercial airline in
the world and retains independent sales representatives in a number of foreign
countries. In addition, Triumph participates each year in several international
trade shows, including the Paris Air Show and the Singapore Air Show. Triumph
intends to build on its existing international presence through continued market
penetration and, as appropriate opportunities arise, foreign acquisitions.
CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation
of Triumph's operating divisions and subsidiaries, Triumph plans to increase
cross-selling of related capabilities to its customers. In
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addition, Triumph has added a corporate Vice President who will coordinate this
cross-selling among companies. Triumph's operating divisions and subsidiaries
will continue to share independent sales representatives and jointly bid on
projects where appropriate, while still maintaining their individual identities.
HISTORICAL BACKGROUND
Triumph was formed by members of management and Citicorp Venture Capital,
Ltd. to acquire particular businesses and assets from IKON Office Solutions,
Inc. In connection with this acquisition, 19 members of management contributed
capital in the aggregate amount of approximately $1.1 million and Citicorp
Venture Capital, an institutional investor, contributed capital in the aggregate
amount of approximately $6.9 million.
PROPRIETARY RIGHTS
Triumph benefits from its proprietary rights relating to designs,
engineering, manufacturing processes and repair and overhaul procedures. For
example, at Triumph Controls, one of Triumph's subsidiaries, Triumph designs and
engineers flight control systems and retains the proprietary rights to these
designs and engineering. Accordingly, the customer generally relies on Triumph
to provide initial and additional components, as well as to redesign,
reengineer, replace or repair and provide overhaul services on these aircraft
components at every stage of their useful lives. In addition, Triumph has
proprietary rights to some of its manufacturing processes. For some products,
Triumph's unique manufacturing capabilities are required by the customer's
specifications or designs, thereby necessitating reliance on Triumph for
production of this designed product. Triumph also holds two SFAR 36
certifications that permit it to develop proprietary repair procedures to be
used in some repair and overhaul processes, enabling Triumph to offer the
customer a lower cost alternative to purchasing the OEM's replacement part.
Triumph employs three designated engineering representatives who are certified
to act on behalf of the FAA to develop, substantiate and approve repairs on
components for some of Triumph's operating divisions and subsidiaries.
RAW MATERIALS AND REPLACEMENT PARTS
Triumph purchases raw materials, primarily consisting of steel and aluminum
coils, sheets and shapes, from various vendors. Triumph also purchases
replacement parts which are utilized in its various repair and overhaul
operations. Although Triumph believes that these raw materials and replacement
parts are generally available at competitive prices from numerous sources, at
times, castings and extrusions are in short supply and difficult to purchase in
sufficient amounts to meets its customers' demands. See "Risk Factors--Limited
Availability of Raw Materials."
OPERATING DIVISIONS AND SUBSIDIARIES
Triumph operates through several operating divisions and subsidiaries which
are divided into two groups: the Aviation Group and the Metals Group. The
following chart describes the operations, customer base and certain other
information with respect to Triumph's operating divisions and subsidiaries at
March 31, 1999:
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OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
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AVIATION GROUP
A. Biederman(1) Glendale, CA Sells and services Commercial airlines, 84
(1933) aircraft and industrial U.S. military and cargo
instruments. carriers.
Advanced Materials Chandler, AZ Repairs and manufactures Aviation OEMs and 354
Technologies, Inc.(3) Tempe, AZ components for APUs and aircraft operators.
(1987) gas turbine engines.
Aerospace Technologies, Fort Worth, TX Manufactures Commercial airlines, 130
Inc.(1) (1969) metallic/composite U.S. military and
bonded honeycomb component supplier
assemblies and repairs industry.
fuselage, wing, flight
control surface parts
and other flight
critical components.
DG Industries, Inc. Phoenix, AZ Specializes in precision Military and commercial 27
(1978) machining of aerospace industry.
components.
DV Industries, Inc. Lynwood, CA Provides metal Aerospace, military and 131
(1978) finishing, processing commercial industries.
and other services.
Frisby Aerospace, Clemmons, NC Designs, manufactures, Military and commercial 136
Inc.(3) (1940) Freeport, NY assembles and tests OEMs, U.S. government,
precision aircraft prime contractors and
components. major airlines.
Hydro-Mill Co.(1) (1937) Chatsworth, CA Manufactures, repairs Aviation OEMs, 162
and overhauls precision commercial airlines and
machine parts and aircargo carriers.
assemblies.
HTD Aerospace, Inc. Bloomfield, CT Manufactures precision Commercial industry and 34
(1935) components and military.
assemblies.
JDC Company(3) (1985) Ft. Lauderdale, FL Specializes in the Commercial Airlines and 61
Austin, TX repair, overhaul and general aviation
exchange of aircraft operators.
electromechanical and
pneumatic aircraft
instruments.
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OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------ ------------------------ ------------------------ ------------------------ -------------
<S> <C> <C> <C> <C>
K-T Corporation (1963) Shelbyville, IN Performs stretch Aviation OEMs, U.S. 161
forming, bending, die military and aerospace,
forming, machining, mass transportation,
welding, assembly and energy and heavy
other fabrication on trucking industries.
aircraft wings,
fuselages and skins.
L.A. Gauge (1954) Sun Valley, CA Machines, bonds and Defense, aerospace, 39
fabricates ultra- medical, automotive and
precision parts. computer industries.
Lamar Electro-Air(1)(2) Wellington, KS Repairs and overhauls U.S. government, 108
(1965) aircraft and engine commercial airlines and
accessories, general aviation
manufactures pneumatic aircraft operators.
and electrically
actuated valves for
aircraft.
Northwest Industries Albany, OR Machines and fabricates Aerospace, nuclear, 32
(1960) refractory, reactive, medical, electronic and
heat and chemical industries.
corrosion-resistant
precision products.
Nu-Tech Industries, Inc. Grandview, MO Produces complex Commercial and military 125
(1972) structural components. aircraft market.
Ralee Engineering Corp. City of Industry, CA Manufactures long Aviation OEMs. 139
(1962) structural components
such as stringers, cords
and flooring.
Special Processes of Phoenix, AZ Produces and applies Aviation OEMs and 26
Arizona, Inc.(1) (1987) plasma coating. aircraft operators.
Stolper-Fabralloy Phoenix, AZ Fabricates precision Commercial, military and 273
Company(3) (1908) Brookfield, WI sheet metal components aerospace OEMs.
from high temperature
alloys and provides
repair and overhaul
services.
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<TABLE>
<CAPTION>
OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------ ------------------------ ------------------------ ------------------------ -------------
<S> <C> <C> <C> <C>
Triumph Air Repair(1)(2) Phoenix, AZ Repairs and overhauls Worldwide commercial 127
(1979) APUs and supplemental airlines.
equipment.
Triumph Air Repair Hampshire, England Repairs and overhauls Commercial transport 33
(Europe) Limited APUs and constant speed carriers and the
(1989)(1) drives and integrated commuter aviation
drive generators. industry.
Triumph Controls, North Wales, PA Designs and manufactures Aviation OEMs, 284
Inc.(1) (1943) mechanical and shipyards, repair and
electromechanical overhaul facilities,
control systems. airlines and U.S. and
NATO military forces.
Triumph Precision, Inc. Phoenix, AZ Manufactures and Aerospace industry. 57
(1964) machines precision
tubing and provides heat
treating and brazing
services.
METALS GROUP
Great Western Steel Chicago, IL Produces steel products, Manufacturers, primarily 34
(1918) specializing in flat in the home and office
rolled products. products industries.
Kilroy Structural Steel Cleveland, OH Erects structural steel General contractors, 18
Co. (1918) frameworks. engineers and architects
of commercial buildings
and bridges.
Triumph Industries Bridgeview, IL Produces and distributes Computer and electronic 51
(1960) specialty industries.
electrogalvanized
products.
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(1) Designates FAA-certified repair station.
(2) Designates SFAR 36 certification.
(3) Designates that two locations are FAA-certified repair stations.
METALS PROCESSING AND DISTRIBUTION
Triumph's Metals Group consists of two operating divisions and one
subsidiary with substantial experience in the metals industry. These businesses
include a leading producer of electrogalvanized steel products and a steel
service center specializing in flat rolled steel products. These entities supply
products to several hundred manufacturers and other customers in the computer
and electronics industries on a regional and national basis. In addition,
Triumph operates a business engaged in the erection of structural frameworks for
buildings and bridges in the Midwestern United States.
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Triumph's Metals Group processes, converts and distributes steel and steel
products including electrogalvanized steel products which are stamped, formed,
welded and painted, and coated steel for the electronic and computer industries.
Triumph's steel service center specializes in flat rolled products and their
processing, including hot or cold rolled sheet and coil and galvanized sheet and
coil used primarily by the home and office products and appliance industry.
Triumph also erects structural framework, including steel members and allied
materials, for buildings and bridges, with a specialty in commercial and
industrial buildings. These structural erection services are provided on a
project-by-project basis primarily in the Midwestern United States. These
projects are generally awarded on a fixed fee, competitive bid basis.
SALES AND MARKETING
Each of Triumph's operating divisions and subsidiaries independently
conducts sales and marketing efforts directed at their respective customers and
industries and, where appropriate, collaborates with other Triumph operating
divisions and subsidiaries for cross-marketing efforts. In addition, Triumph has
added a corporate Vice President who will coordinate this cross-selling among
companies. Each sales force and the respective officers of the operating
divisions and subsidiaries are responsible for obtaining new customers and
maintaining relationships with existing customers. Sales efforts are conducted
primarily by independent regional manufacturer's representatives and in-house
personnel. Generally, manufacturer's representatives receive a commission on
sales and the in-house sales personnel receive a base salary plus commission.
Engaging independent sales representatives at the local level facilitates
responsiveness to each customer's changing needs and current trends in each
marketplace in which Triumph operates.
Triumph continually looks for opportunities to leverage its growing
capabilities. The Presidents of Triumph's operating divisions and subsidiaries
in the Aviation Group and Triumph's new Vice President, hired in March 1999 to
assist in the coordination of the Group's marketing and sales efforts, meet
periodically to discuss ways to improve sales and cross-marketing opportunities.
The management of each operating division and subsidiary of Triumph also
maintains close business relationships with many customers, thereby furthering
the sales and marketing efforts of their businesses.
A significant portion of Triumph's government and defense contracts are
awarded on a competitive bidding basis. Triumph generally does not bid or act as
the primary contractor, but will typically bid and contract as a subcontractor
on contracts on a fixed fee basis. Triumph generally sells to its other
customers on a fixed fee, negotiated contract or purchase order basis.
BACKLOG
As of March 31, 1999, Triumph's Aviation and Metals Groups had outstanding
purchase orders representing an aggregate invoice price of approximately $189.9
million and $20.4 million, respectively. As of March 31, 1998, Triumph's
Aviation and Metals Groups had outstanding purchase orders representing an
aggregate invoice price of approximately $174.2 million and $12.6 million,
respectively. Triumph believes that purchase orders in an aggregate approximate
amount of $50.0 million will not be shipped by the Aviation Group by March 31,
2000. Triumph believes that all of the purchase orders will be shipped by the
Metals Group by March 31, 2000.
COMPETITION
The aircraft components production and repair industry is highly fragmented,
consisting of both a limited number of well-capitalized companies which offer a
broad range of products and services and a large number of smaller, specialized
companies. Triumph believes that the principal competitive factors in the
aviation products and services industry are quality, turnaround time, overall
customer service and price. See "--Competitive Advantages." Triumph believes
that it competes favorably on the basis of the foregoing factors. Triumph does
not believe that the location of its repair facilities is a significant factor
to
13
<PAGE>
its customers in selecting Triumph, as substantially all of the components
serviced by Triumph are transported by common carrier to Triumph's facilities
for service.
Triumph competes with third party manufacturers, some of which are divisions
or subsidiaries of OEMs or other large companies in the manufacture of aircraft
components and subassemblies. Competition for the repair and overhaul of
aviation components comes from three primary sources, some with greater
financial and other resources than Triumph: OEMs, major commercial airlines and
other independent service companies. Some major commercial airlines continue to
own and operate their own service centers, while others have begun to sell their
repair and overhaul services to other aircraft operators. The repair and
overhaul services provided by domestic airlines are primarily for their own
aircraft, although these airlines may outsource a limited amount of repair and
overhaul services to third parties. Foreign airlines that provide repair and
overhaul services typically provide these services not only for their own
aircraft but for other airlines as well. OEMs also maintain service centers
which provide repair and overhaul services for the components they manufacture.
Other independent service organizations also compete for the repair and overhaul
business of other users of aircraft components.
Triumph's principal competitors in the metals industry include national and
regional steel mills, other steel service centers, steel erection companies and
pre-engineered building manufacturers. Some of these competitors have greater
financial and other resources than Triumph.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. Triumph must be certified by the FAA
and, in some cases, by individual OEMs, in order to engineer and service parts
and components used in specific aircraft models. If material authorizations or
approvals were revoked or suspended, the operations of Triumph would be
adversely affected. New and more stringent government regulations may be
adopted, or industry oversight heightened, in the future and these new
regulations, if enacted, or any industry oversight, if heightened, may have an
adverse impact on Triumph.
Triumph must also satisfy the requirements of its customers, including OEMs,
that are subject to FAA regulations, and provide these customers with products
and services that comply with the government regulations applicable to aircraft
components used in commercial flight operations. The FAA regulates commercial
flight operations and requires that aircraft components meet its stringent
standards. In addition, the FAA requires that various maintenance routines be
performed on aircraft components, and Triumph currently satisfies these
maintenance standards in its repair and overhaul services. Several of Triumph's
operating divisions are FAA-approved repair stations.
Currently, the FAA is granting licenses only for the manufacture or repair
of a specific aircraft component, rather than the broader licenses that have
been granted in the past. The FAA licensing process may be costly and
time-consuming. In order to obtain an FAA license, an applicant must satisfy all
applicable regulations of the FAA governing repair stations. These regulations
require that an applicant have experienced personnel, inspection systems,
suitable facilities and equipment. In addition, the applicant must demonstrate a
need for the license. Because an applicant must procure manufacturing and repair
manuals from third parties relating to a particular aircraft component in order
to obtain a license with respect to this component, the application process may
involve substantial cost.
The license approval processes for the Joint Aviation Authority and Civil
Aviation Administration of China are similarly stringent, involving potentially
lengthy audits conducted by these regulatory authorities.
Triumph's aviation and metals operations are also subject to a variety of
worker and community safety laws. The Occupational Safety and Health Act of 1970
mandates general requirements for safe workplaces for all employees. In
addition, OSHA provides special procedures and measures for the handling of
hazardous and toxic substances. Specific safety standards have been promulgated
for workplaces engaged
14
<PAGE>
in the treatment, disposal or storage of hazardous waste. Triumph believes that
its operations are in material compliance with OSHA's health and safety
requirements.
ENVIRONMENTAL MATTERS
Triumph's operations are subject to federal, state and local environmental
laws and regulation by government agencies, including the Environmental
Protection Agency. Among other matters, these regulatory authorities impose
requirements that regulate the emission, discharge, generation, management,
transportation and disposal of hazardous materials, pollutants and contaminants,
govern public and private response actions to hazardous or regulated substances
which may be or have been released to the environment, and require Triumph to
obtain and maintain licenses and permits in connection with its operations. This
extensive regulatory framework imposes significant compliance burdens and risks
on Triumph. Although management believes that Triumph's operations and its
facilities are in material compliance with these laws and regulations, future
changes in these laws, regulations or interpretations thereof or the nature of
Triumph's operations may require Triumph to make significant additional capital
expenditures to ensure compliance in the future.
Certain of Triumph's facilities have been or are currently the subject of
environmental remediation activities, the cost of which is subject to
indemnification provided by IKON Office Solutions pursuant to the acquisition by
Triumph of these facilities from IKON Office Solutions. One of these facilities
is connected with a site included on the National Priorities List of Superfund
sites maintained by the EPA. Another of these facilities is located on a site
included in the EPA's database of potential Superfund sites. IKON Office
Solutions's indemnification covers Triumph for losses Triumph might suffer in
connection with liabilities and obligations (and other liabilities and
obligations arising out of or in connection with the acquisition) arising under
environmental, health and safety laws with respect to operations or use of those
facilities prior to their acquisition by Triumph. More specifically, this IKON
Office Solutions indemnification covers both (i) the costs, claims and potential
losses associated with environmental matters identified in the purchase
agreement for the acquisition as the result of environmental assessments or
other disclosures made in connection with the acquisition, including the costs,
claims and potential losses associated with all the environmental remediation
activities and identified liabilities, and (ii) the losses connected to
environmental liabilities which were not identified in the purchase agreement
and which arise from conditions or activities existing at the facilities or
operations acquired from IKON Office Solutions prior to their acquisition from
IKON Office Solutions, provided that they are identified by Triumph to IKON
Office Solutions before July 22, 2000. Some other facilities acquired and
operated by Triumph or one of its subsidiaries, including a leased facility
located on an EPA National Priorities List site, were under active investigation
for environmental contamination by federal or state agencies when acquired, and
continue to be under investigation. Triumph is indemnified by prior operators
and/or present owners of the facilities for liabilities which Triumph incurs as
a result of these investigations and the environmental contamination found which
pre-dates Triumph's acquisition of these facilities. Two Company facilities also
have been the subject of notices from a citizen group alleging failure to notify
and file reports with appropriate agencies regarding the presence of hazardous
chemicals in excess of specified threshold quantities. Triumph has denied these
allegations and the citizen group has either withdrawn or ceased actively
pursuing these claims. See "Risk Factors--Potential Exposure to Environmental
Liabilities."
EMPLOYEES
As of March 31, 1999, Triumph employed approximately 2,506 persons, of whom
164 were management employees, 90 were sales and marketing personnel, 209 were
technical personnel, 236 were administrative personnel and 1,807 were production
workers. As of March 31, 1999, approximately 342 employees were subject to
collective bargaining agreements. Two of these collective bargaining agreements
have expired and Triumph is currently negotiating with the unions for new
contracts. None of the other collective bargaining agreements will expire in the
next 12 months. Triumph has not experienced any material labor-related work
stoppage and considers its relations with its employees to be good.
15
<PAGE>
RISK FACTORS
Statements in this Annual Report on Form 10-K, including those concerning
Triumph's expectations regarding the effect of industry trends on Triumph,
competitive advantages, strategies, future sales, gross profits, capital
expenditures, selling, general and administrative expenses, and cash
requirements, include forward-looking statements. Actual results may vary
materially from these expectations. Factors which could cause actual results to
differ from expectations include dependence on the aviation industry,
requirements of capital, integration of acquired businesses, government
regulation, dependence on key customers, technological developments and obsolete
inventory. For a description of these and additional risks, see the discussion
below. Triumph's results of operations may be adversely affected by one or more
of these factors.
DEPENDENCE ON AVIATION INDUSTRY. A substantial percentage of Triumph's gross
profit and operating income is derived from its Aviation Group. Triumph's
aviation operations are focused on designing, engineering and manufacturing
aircraft components on new aircraft and performing repair and overhaul services
on existing aircraft and aircraft components; therefore, Triumph's business is
directly affected by economic factors and other trends that affect its customers
in the aviation industry, including a possible decrease in outsourcing by
aircraft operators and OEMs or projected market growth that may not materialize
or be sustainable. When these economic and other factors adversely affect the
aviation industry, they tend to reduce the overall customer demand for Triumph's
products and services, thereby decreasing Triumph's operating income. Economic
and other factors that might affect the aviation industry may have an adverse
impact on Triumph's results of operations. See "Business--Industry Overview and
Trends."
CAPITAL REQUIREMENTS AND INTEGRATION OF ACQUIRED BUSINESSES. A key element
of Triumph's strategy has been, and continues to be, internal growth and growth
through the acquisition of additional companies engaged in the aviation
industry. In order to grow internally, Triumph will be required to make
significant capital expenditures. Triumph's ability to grow by acquisition is
dependent upon, and may be limited by, the availability of suitable acquisition
candidates and capital, and by particular restrictions contained in Triumph's
revolving credit facility and its other financing arrangements. Growth by
acquisition involves risks that could adversely affect Triumph's operating
results, including difficulties in integrating the operations and personnel of
acquired companies, the potential amortization of acquired intangible assets and
the potential loss of key employees of acquired companies. Triumph may not be
able to obtain the capital necessary to pursue its internal growth and
acquisition strategy, consummate acquisitions on satisfactory terms or, if any
acquisitions are consummated, satisfactorily integrate these acquired businesses
into Triumph. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and
"Business--Company Strategy."
YEAR 2000 CONVERSION. The Year 2000 issue exists because many computer
systems and applications use two-digit date fields to designate a year. As the
century date change occurs, date-sensitive systems may recognize the year 2000
as 1900, or not at all. This inability to recognize or properly treat the year
2000 may cause systems to process financial and operational information
incorrectly. Triumph has already taken substantial steps to address the Year
2000 issue. With the implementation and completion of the Year 2000 project as
scheduled, the possibility of significant interruptions of Triumph's normal
operations is reduced. However, Triumph may not identify and address all
significant internal or external Year 2000 problems in a prompt and
cost-effective manner. These Year 2000 problems, if not fixed, could have a
material adverse effect on Triumph's business, results of operations or
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Conversion."
COMPETITION. There are numerous competitors of Triumph in both the aviation
services and metals processing and distribution industries. Competition in the
aviation industry comes from three primary sources: major commercial airlines,
many of which operate their own maintenance and overhaul units, OEMs, which
manufacture, repair and overhaul their own components, and other independent
service companies. Triumph's principal competitors in the metals industry
include national and regional steel mills,
16
<PAGE>
other steel service centers, steel erection companies and pre-engineered
building manufacturers. Some of Triumph's competitors in both aviation and
metals have substantially greater financial and other resources than Triumph.
Competitive pressures in either industry may materially adversely affect
Triumph's business, financial condition or results of operations. See
"Business--Competition."
GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT. The aviation industry is
highly regulated in the United States by the FAA and in other countries by
similar agencies. Triumph must be certified by the FAA and, in some cases, by
individual OEMs in order to engineer and service parts and components used in
specific aircraft models. If material authorizations or approvals were revoked
or suspended, the operations of Triumph would be adversely affected. New and
more stringent government regulations may be adopted, or industry oversight
heightened, in the future and any new regulations, if enacted, or any industry
oversight, if heightened, may have an adverse impact on Triumph. See
"Business--Government Regulation."
FLUCTUATIONS IN OPERATING RESULTS. Triumph's overall operating results are
affected by many factors, including the timing of orders from large customers
and the timing of expenditures to manufacture parts and purchase inventory in
anticipation of future sales of products and services. A large portion of
Triumph's operating expenses are relatively fixed. Because several operating
divisions and subsidiaries of Triumph typically do not obtain long-term purchase
orders or commitments from their customers, they must anticipate the future
volume of orders based upon the historic purchasing patterns of customers and
upon their discussions with customers as to their future requirements.
Cancellations, reductions or delays in orders by a customer or group of
customers could have a material adverse effect on Triumph's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
DEPENDENCE OF CERTAIN BUSINESSES ON KEY CUSTOMERS. Two customers of
Triumph, Boeing and AlliedSignal, each accounted for more than 10% of Triumph's
consolidated revenues during the 12 months ended March 31, 1999, and the loss of
either of these customers could have a material adverse effect on Triumph. In
addition, some of Triumph's operating divisions and subsidiaries have
significant customers, the loss of whom could have an adverse effect on those
businesses.
LIMITED AVAILABILITY OF RAW MATERIALS. Recently, Triumph has experienced
extended lead times for delivery of aircraft quality castings and extrusions.
These extended lead times may affect Triumph's ability to meet its customers'
demands on a timely basis. Triumph may not be able to purchase sufficient
aircraft-quality castings and extrusions or other raw materials to meet the
demands of its customers in the future and aircraft-quality castings and
extrusions and other raw materials may not be available on satisfactory terms or
reasonable prices or that such limited availability will not have a material
adverse effect on Triumph.
TECHNOLOGICAL DEVELOPMENTS. The aviation industry is constantly undergoing
development and change, and accordingly, it is likely that new products,
equipment and methods of repair and overhaul service will be introduced in the
future. In order to keep pace with any new developments, Triumph may need to
expend significant capital to purchase new equipment and machines or to train
its employees in the new methods of production and service. Triumph may not be
successful in developing new products and these capital expenditures may have a
material adverse effect on Triumph.
RISKS REGARDING TRIUMPH'S INVENTORY. Triumph offers to maintain and manage
inventories of aircraft components and other products for some of its customers.
In addition, some of Triumph's customers require Triumph to maintain and manage
their inventories. If this inventory is not used by Triumph, because Triumph
ceases to supply these customers with the related products or services or
because these components or other products become obsolete, Triumph will not
realize any income to offset the expenses incurred by Triumph to acquire and
maintain this inventory.
17
<PAGE>
RELIANCE ON SKILLED PERSONNEL. From time to time, some of Triumph's
operating divisions and subsidiaries have experienced difficulties in attracting
and retaining skilled personnel to design, engineer, manufacture, repair and
overhaul sophisticated aircraft components. The ability of Triumph to operate
successfully could be jeopardized if Triumph is unable to attract and retain a
sufficient number of skilled personnel.
EXISTENCE OF COLLECTIVE BARGAINING AGREEMENTS. Several of Triumph's
subsidiaries are parties to collective bargaining agreements with labor unions,
two of which have expired and are subject to current negotiation. Under those
agreements, Triumph currently employs approximately 342 full-time employees, and
from time to time employs up to an additional 114 temporary employees for its
steel erection business, all of whom are members of labor unions. Currently,
approximately 13.6% of Triumph's permanent employees are represented by labor
unions and approximately 25.8% of the Aviation Group's revenues and 100% of the
Metals Group's revenues are derived from the operating divisions and
subsidiaries a portion of whose employees are unionized. Triumph's inability to
negotiate acceptable contracts with these unions, particularly the contracts
currently under negotiation, could result in strikes by the affected workers and
increased operating costs as a result of higher wages or benefits paid to union
members. If the unionized workers were to engage in a strike or other work
stoppage, or other employees were to become unionized, Triumph could experience
a significant disruption of its operations and higher ongoing labor costs, which
could have an adverse effect on Triumph's business and results of operations.
PRODUCT LIABILITY; CLAIMS EXPOSURE. Triumph's overall operations expose it
to potential liability for personal injury or death as a result of the failure
of an aircraft component that has been serviced by Triumph, the failure of an
aircraft component designed or manufactured by Triumph or the irregularity of
metal products processed or distributed by Triumph. While Triumph believes that
its liability insurance is adequate to protect it from these liabilities and
while no material claims have been made against Triumph, claims may arise in the
future and insurance coverage may not be adequate. Additionally, insurance
coverage may not be available in the future at an acceptable cost. Any liability
not covered by insurance or for which third party indemnification is not
available could have a material adverse effect on the financial condition of
Triumph. See "Business--Legal Proceedings."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. Triumph's business
operations and facilities are subject to a number of federal, state and local
environmental laws and regulations. Although management believes that Triumph's
operations and facilities are in material compliance with such laws and
regulations, future changes in these laws, regulations or interpretations
thereof or the nature of Triumph's operations may require Triumph to make
significant additional capital expenditures to ensure compliance in the future.
Some of Triumph's facilities have been or are currently the subject of
environmental remediation activities, the cost of which is subject to
indemnification provided by IKON Office Solutions. One of these facilities is
connected with a site included in the National Priorities List of Superfund
sites maintained by the EPA. Another of these facilities is located on a site
included in the EPA's database of potential Superfund sites. The IKON Office
Solutions indemnification covers both (i) the costs and claims associated with
all of these environmental remediation activities and liabilities and (ii) the
cost of unidentified liabilities that arise from conditions or activities
existing at facilities prior to their acquisition from IKON Office Solutions and
that are identified before July 22, 2000. Some other facilities acquired and
operated by Triumph or one of its subsidiaries, including a leased facility
located on an EPA National Priorities List site, have been under active
investigation for environmental contamination by federal or state agencies when
acquired, and continue to be under investigation. Triumph is indemnified by
prior operators and/or present owners of the facilities for liabilities which
Triumph incurs as a result of these investigations and the environmental
contamination found which pre-dates Triumph's acquisition of these facilities.
Triumph does not maintain environmental liability insurance, and if Triumph were
required to pay the expenses related to these environmental liabilities, these
expenses could have a material adverse effect on Triumph. See
"Business--Environmental Matters."
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<PAGE>
ITEM 2. PROPERTIES
PROPERTIES
Triumph's executive offices are located in Wayne, Pennsylvania, where
Triumph leases 7,695 square feet of space. In addition, Triumph owns or leases
the following facilities in which its operating divisions and subsidiaries are
located.
<TABLE>
<CAPTION>
SQUARE OWNED/
LOCATION DESCRIPTION FOOTAGE LEASED
- --------------------------------------------- --------------------------------------------- --------- ---------
<S> <C> <C> <C>
AVIATION GROUP
Chandler, AZ................................. Thermal processing facility/office 7,000 Leased
Phoenix, AZ.................................. Plasma spray facility/office 13,500 Leased
Phoenix, AZ.................................. Repair and overhaul shop/office 50,000 Leased
Phoenix, AZ.................................. Manufacturing facility/office 35,000 Leased
Phoenix, AZ.................................. Machine shop/office 13,700 Owned
Phoenix, AZ.................................. Manufacturing facility/office 54,812 Leased
Tempe, AZ.................................... Manufacturing facility/office 13,500 Owned
Tempe, AZ.................................... Machine shop 9,300 Owned
Tempe, AZ.................................... Machine shop 32,100 Owned
Chatsworth, CA............................... Manufacturing facility/office 101,900 Owned
Chatsworth, CA............................... Manufacturing facility 21,600 Leased
City of Industry, CA......................... Manufacturing facility/office 75,000 Leased
Glendale, CA................................. Instrument shop/warehouse/office 25,000 Leased
Lynwood, CA.................................. Processing and finishing facility/office 59,662 Leased
Sun Valley, CA............................... Machine shop/office 30,000 Owned
Walnut, CA................................... Manufacturing facility/office 98,359 Leased
Bloomfield, CT............................... Manufacturing facility/office 25,000 Leased
Hampshire, England........................... Repair and overhaul/office 11,915 Leased
Ft. Lauderdale, FL........................... Instrument shop/warehouse/office 7,200 Leased
Shelbyville, IN.............................. Manufacturing facility/office 192,300 Owned
Shelbyville, IN.............................. Manufacturing facility/office 50,000 Owned
Wellington, KS............................... Repair and overhaul/office 65,000 Leased
Grandview, MO................................ Manufacturing facility/office 80,000 Owned
Freeport, NY................................. Manufacturing facility/office/warehouse 29,000 Owned
Clemmons, NC................................. Manufacturing facility/repair/office 20,000 Owned
Albany, OR................................... Machine shop/office 25,000 Owned
North Wales, PA.............................. Manufacturing facility/office 111,400 Leased
Austin, TX................................... Instrument shop/warehouse/office 4,500 Leased
Fort Worth, TX............................... Manufacturing facility/office 114,100 Owned
Brookfield, WI............................... Manufacturing facility/office 62,000 Leased
METALS GROUP
Bridgeview, IL............................... Steel processing facility/office 135,700 Leased
Chicago, IL.................................. Steel distributing facility/office 140,000 Owned
Cleveland, OH................................ Steel fabrication facility/office 30,950 Leased
Plain City, OH............................... Office 2,000 Leased
</TABLE>
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Triumph believes that its properties are adequate to support its operations
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Triumph is presently involved in ordinary routine litigation incidental to
its business. None of the cases or claims currently pending is expected,
individually or in the aggregate, to have a material adverse effect on Triumph.
Triumph believes that its potential exposure is adequately covered by its
aviation product and general liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is traded on the New York Stock Exchange under the symbol
"TGI." The following table sets forth the range of high and low closing prices
for the Common Stock for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL 1999
1st Quarter......................... $50 7/8 $39 3/4
2nd Quarter......................... 47 11/16 27 1/16
3rd Quarter......................... 34 7/8 24
4th Quarter......................... 35 1/8 23 1/2
FISCAL 1998
1st Quarter......................... $31 7/8 $22 3/4
2nd Quarter......................... 33 5/8 27 1/8
3rd Quarter......................... 37 1/4 30 1/2
4th Quarter......................... 45 32 15/16
</TABLE>
As of May 28, 1999, the reported closing price for the Common Stock was
$30.625. As of May 28, 1999, there were approximately 55 holders of record of
the Common Stock and Triumph believes that its Common Stock was beneficially
owned by 2,850 persons.
Triumph has never declared or paid cash dividends on any class of its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. Triumph currently intends to retain its earnings, if any, and reinvest
them in the development of its business. Triumph's credit facility and Triumph's
10.5% subordinated promissory note and payment in kind notes issued pursuant
thereto in the aggregate principal amount of approximately $7.7 million payable
to Teleflex Incorporated prohibit Triumph from paying dividends or making any
distributions on its capital stock, except for the payment of stock dividends
and redemptions of an employee's shares of capital stock upon termination of
employment.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial data should be read in
conjunction with the Consolidated Financial Statements and related Notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1996(1) 1997(2) 1998(3) 1999(4)
--------- ---------- ---------- ---------- ----------
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Aviation Group
Net sales........................................... $ 70,714 $ 100,166 $ 167,731 $ 242,317 $ 328,577
Cost of products sold............................... 51,395 70,643 110,932 164,978 220,002
--------- ---------- ---------- ---------- ----------
Gross profit........................................ 19,319 29,523 56,799 77,339 108,575
Selling, general and administrative................. 8,761 12,915 24,228 29,611 36,652
Depreciation and amortization....................... 1,780 2,513 5,066 7,991 13,301
--------- ---------- ---------- ---------- ----------
Operating income, before corporate expense(5)....... 8,778 14,095 27,505 39,737 58,622
Metals Group
Net sales........................................... 93,451 86,608 82,747 87,141 71,531
Cost of products sold............................... 74,441 69,097 65,118 68,333 55,018
--------- ---------- ---------- ---------- ----------
Gross profit........................................ 19,010 17,511 17,629 18,808 16,513
Selling, general and administrative................. 11,715 11,874 12,177 12,225 11,037
Depreciation and amortization....................... 916 999 979 1,100 1,036
--------- ---------- ---------- ---------- ----------
Operating income, before corporate expense(5)....... 6,379 4,638 4,473 5,483 4,440
--------- ---------- ---------- ---------- ----------
Combined operating income, before corporate
expense........................................... 15,157 18,733 31,978 45,220 63,062
Corporate expense(6)................................ 1,606 2,522 4,371 3,944 4,490
Interest expense and other.......................... 6,589 7,318 6,591 3,963 5,144
Gain on sale of assets.............................. -- -- -- (2,250) --
--------- ---------- ---------- ---------- ----------
Income from continuing operations, before income
taxes and
extra-ordinary items.............................. 6,962 8,893 21,016 39,563 53,428
Income tax expense.................................. 2,598 3,699 8,461 15,561 20,281
--------- ---------- ---------- ---------- ----------
Income from continuing operations, before
extraordinary items............................... 4,364 5,194 12,555 24,002 33,147
Extraordinary (loss) gain, net of income taxes...... -- -- (1,478) 610 --
(Loss)income from discontinued operations........... (2,852) 4,496 -- -- --
--------- ---------- ---------- ---------- ----------
Net income.......................................... $ 1,512 $ 9,690 $ 11,077 $ 24,612 $ 33,147
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Preferred stock dividends and accretion............... (489) (740) (460) -- --
Redemption of preferred stock......................... -- -- (1,746) -- --
--------- ---------- ---------- ---------- ----------
Income available to common stockholders............... $ 1,023 $ 8,950 $ 8,871 $ 24,612 $ 33,147
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Earnings per share:
Income from continuing operations, before
extraordinary items:
Basic............................................. $ 0.66 $ 0.76 $ 1.39 $ 2.29 $ 2.79
Diluted........................................... 0.60 0.68 1.27 2.14 2.62
Shares used in computing earnings per share:
Basic............................................. 5,850 5,850 7,447 10,485 11,896
Diluted........................................... 6,500 6,514 8,146 11,231 12,646
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1996(1) 1997(2) 1998(3) 1999(4)
--------- ---------- ---------- ---------- ----------
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 39,609 $ 60,379 $ 56,288 $ 92,171 $ 93,457
Total assets.......................................... 111,386 161,406 171,315 301,445 428,857
Long-term debt, including current portion............. 71,738 98,769 24,392 34,498 93,008
Redeemable preferred stock............................ 1,912 2,652 -- -- --
Total stockholders' equity............................ 6,094 15,065 91,413 182,879 214,777
</TABLE>
- ------------------------
(1) Results include the acquisitions of Triumph Controls, Inc. and Air Lab, Inc.
from the date of each respective acquisition.
(2) Results include the acquisition of Advanced Materials Technologies, Inc.
from the date of acquisition. See Note 3 to the Consolidated Financial
Statements.
(3) Results include the acquisitions of JDC Company, Hydro-Mill Co.,
Stolper-Fabralloy Company and Frisby Aerospace, Inc. from the date of each
respective acquisition, and the sales of Air Lab, Inc. and Deluxe
Specialties Mfg., Co. See Note 3 to the Consolidated Financial Statements.
(4) Results include the acquisitions of Nu-Tech Industries, Inc., DG Industries,
Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd., HTD Aerospace,
Inc. and Triumph Precision, Inc. from the date of each respective
acquisition. See Note 3 to the Consolidated Financial Statements.
(5) Operating income, before corporate expense, is presented by group to assist
the reader in evaluating each of the group's results of operations before
financing and corporate expenses.
(6) Corporate expenses primarily consist of compensation, rent and general costs
related to the operation of the Company's corporate office and other general
expenses of the Company including professional fees.
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(The following discussion should be read in conjunction with the
Consolidated Financial Statements contained elsewhere herein.)
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1998
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $86.3 million, or
35.6%, to $328.6 million for fiscal 1999 from $242.3 million for fiscal 1998.
This increase was primarily due to the inclusion of an aggregate of $128.8
million and $44.4 million in net sales for JDC Company ("JDC"), Hydro-Mill Co.
("Hydro-Mill"), Stolper-Fabralloy Company ("Stolper") and Frisby Aerospace, Inc.
("Frisby"), (collectively, the "1998 Acquisitions") and Nu-Tech Industries, Inc.
("Nu-Tech"), DG Industries, Inc. ("DG"), DV Industries, Inc. ("DV"), Triumph Air
Repair (Europe) Ltd. ("Triumph Air Repair (Europe)"), HTD Aerospace, Inc.
("HTD") and Triumph Precision, Inc. ("Triumph Precision"), (collectively, the
"1999 Acquisitions") in fiscal year 1999 and fiscal 1998, respectively. The
increase is partially offset by a reduction in sales due to the sale of the
Company's Air Lab division ("Air Lab") in the second quarter of fiscal 1998. Air
Lab had sales of $2.1 million for the year ended March 31, 1998.
On a pro forma basis, assuming the 1998 Acquisitions, the 1999 Acquisitions
and the sale of Air Lab had taken place on April 1, 1997, net sales for the
Aviation Group increased to $361.1 million for fiscal 1999 from $333.5 million
for fiscal 1998. This represents growth ("Internal Growth") of $27.6 million or
8.3% over the prior year.
Increased demand for overhaul and repair services from the commercial
airlines and cargo carriers, as well as increased orders of aircraft components
from OEMs, accounted for the increase in net sales in the Aviation Group.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $55.0 million, or 33.4%, to $220.0 million for fiscal 1999 from
$165.0 million for fiscal 1998. This increase was primarily due to the inclusion
of $85.6 million and $31.2 million in fiscal 1999 and fiscal 1998, respectively,
of costs of products sold associated with net sales generated by the 1998
Acquisitions and the 1999 Acquisitions. The remaining increase is associated
with the increase in net sales of the remaining operating divisions and
subsidiaries in the Aviation Group, offset by a reduction of $1.5 million due to
the sale of Air Lab.
GROSS PROFIT. Gross profit for the Aviation Group increased by $31.2
million, or 40.4%, to $108.6 million for fiscal 1999 from $77.3 million for
fiscal 1998. This increase was primarily due to the inclusion of $43.3 million
and $13.2 million in fiscal 1999 and 1998, respectively, of gross profit on the
net sales generated by the 1998 Acquisitions and the 1999 Acquisitions. The
remaining increase was generated on the increased sales volume of the other
operating divisions and subsidiaries in the Aviation Group. As a percentage of
net sales, gross profit for the Aviation Group was 33.0% and 31.9% for fiscal
1999 and fiscal 1998, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $7.0 million, or
23.8%, to $36.7 million for fiscal 1999 from $29.6 million for fiscal 1998,
primarily due to the 1998 Acquisitions and the 1999 Acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $5.3 million, or 66.4%, to $13.3 million for fiscal
1999 from $8.0 million for fiscal 1998, primarily due to the assets acquired in
connection with the 1998 Acquisitions and the 1999 Acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by
$18.9 million, or 47.5%, to $58.6 million for fiscal 1999 from $39.7 million,
excluding the $1.3 million gain on the sale of Air Lab, for fiscal 1998. This
increase was assisted by the growth in aircraft production and the increased
outsourcing of
23
<PAGE>
repair and overhaul services by commercial aircraft operators. This increase was
also due to the addition of net sales and profits generated by the 1998
Acquisitions and the 1999 Acquisitions, as well as the incremental operating
income resulting from increased sales volume. As a percentage of net sales,
operating income for the Aviation Group was 17.8% and 16.4% for fiscal 1999 and
fiscal 1998, respectively.
On a pro forma basis, assuming the 1998 Acquisitions, the 1999 Acquisitions
and the sale of Air Lab had taken place on April 1, 1997, operating income for
the Aviation Group from Internal Growth was $13.1 million or 26.7%, increasing
to $62.2 million in fiscal 1999 from $49.1 million in fiscal 1998.
METALS GROUP
NET SALES. Net sales for the Metals Group decreased by $15.6 million, or
17.9%, to $71.5 million for fiscal 1999 from $87.1 million for fiscal 1998. This
decrease was primarily due to the sale of the assets of the Company's Deluxe
Specialties Mfg. division ("Deluxe") at the end of fiscal 1998. Deluxe had sales
of $10.8 million for fiscal 1998.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
decreased by $13.3 million, or 19.5%, to $55.0 million for fiscal 1999 from
$68.3 million for fiscal 1998. This decrease was primarily due to lower raw
material prices and the sale of Deluxe. Deluxe had $8.2 million of cost of
products sold in fiscal 1998.
GROSS PROFIT. Gross profit for the Metals Group decreased by $2.3 million,
or 12.2%, to $16.5 million for fiscal 1999 from $18.8 million for fiscal 1998,
due to the reasons discussed above. As a percentage of net sales, gross profit
for the Metals Group was 23.1% and 21.6% for fiscal 1999 and fiscal 1998,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group decreased by $1.2 million, or 9.7%,
to $11.0 million for fiscal 1999 from $12.2 million for fiscal 1998, mainly due
to the sale of Deluxe.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group decreased by $0.1 million, or 5.8%, to $1.0 million for fiscal 1999 from
$1.1 million for fiscal 1998.
OPERATING INCOME. Operating income for the Metals Group decreased by $1.0
million, or 19.0%, to $4.4 million, for fiscal 1999 from $5.5 million for fiscal
1998, excluding the $1.0 million gain on the sale of Deluxe, due to the reasons
discussed above. As a percentage of net sales, operating income for the Metals
Group was 6.2% and 6.3% for fiscal 1999 and fiscal 1998, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.5 million, or 13.8%,
to $4.5 million for fiscal 1999 from $3.9 million for fiscal 1998.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by $1.2
million, or 29.8%, to $5.1 million for fiscal 1999 from $4.0 million for fiscal
1998. This increase was primarily due to increased debt levels associated with
the 1998 Acquisitions and the 1999 Acquisitions, the cash portions of which were
financed by borrowings under the Company's credit agreement, partially offset by
the application of the proceeds from the public offering of the Company's Common
stock and the proceeds from the sales of Air Lab and Deluxe.
INCOME TAX EXPENSE. The effective tax rate was 38.0% for fiscal 1999 and
39.3% for fiscal 1998.
NET INCOME. Net income increased by $8.5 million, or 34.7%, to $33.1
million for fiscal 1999 from $24.6 million for fiscal 1998. Excluding an
extraordinary gain of $0.6 million (net of tax of $0.4 million) recognized in
the second quarter of 1998 that relates to a discount realized on the prepayment
of a
24
<PAGE>
subordinated note payable to IKON Office Solutions, Inc. (formerly Alco Standard
Corporation) and the gains on the sales of the Air Lab assets (after tax gain of
$0.8 million) and the Deluxe assets (after tax gain of $0.6 million), both in
the prior year, net income increased by $10.5 million or 46.4%. The increase in
fiscal 1999 net income was primarily attributable to the 1998 Acquisitions and
the 1999 Acquisitions and the increase in income for the Aviation Group as a
whole.
FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1997
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $74.6 million, or
44.5%, to $242.3 million for fiscal 1998 from $167.7 million for fiscal 1997.
This increase was primarily due to the inclusion of an aggregate of $77.8
million and $17.8 million in net sales for Advanced Materials Technologies, Inc.
("AMTI"), Frisby, Hydro-Mill, Stolper and JDC in fiscal 1998 and fiscal 1997,
respectively. The increase is partially offset by a reduction in sales due to
the sale of Air Lab in the second quarter of fiscal 1998. Air Lab had sales of
$2.1 million and $5.5 million for the years ended March 31, 1998 and 1997,
respectively. Net sales for the other operating divisions and subsidiaries in
the Aviation Group, experienced a 12.4% increase in net sales over fiscal 1997.
Increased demand for overhaul and repair services from the commercial airlines
and cargo carriers, as well as increased orders of aircraft components from
OEMs, accounted for the increase in net sales in the Aviation Group.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $54.0 million, or 48.7%, to $165.0 million for fiscal 1998 from
$110.9 million for fiscal 1997. This increase was primarily due to the inclusion
of $51.5 million and $10.1 million in fiscal 1998 and fiscal 1997, respectively,
of costs of products sold associated with net sales generated by AMTI, Frisby,
Hydro-Mill, Stolper and JDC. The remaining increase is associated with the
increase in net sales of the remaining operating divisions and subsidiaries in
the Aviation Group.
GROSS PROFIT. Gross profit for the Aviation Group increased by $20.5
million, or 36.2%, to $77.3 million for fiscal 1998 from $56.8 million for
fiscal 1997. This increase was primarily due to the inclusion of $26.4 million
and $7.7 million in fiscal 1998 and 1997, respectively, of gross profit on the
net sales generated by AMTI, Frisby, Hydro-Mill, Stolper and JDC. The remaining
increase was generated on the increased sales volume of the other operating
divisions and subsidiaries in the Aviation Group. As a percentage of net sales,
gross profit for the Aviation Group was 31.9% and 33.9% for fiscal 1998 and
fiscal 1997, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $5.4 million, or
22.2%, to $29.6 million for fiscal 1998 from $24.2 million for fiscal 1997,
primarily due to the AMTI, Frisby, Hydro-Mill, Stolper and JDC acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $2.9 million, or 57.7%, to $8.0 million for fiscal
1998 from $5.1 million for fiscal 1997, primarily due to the assets acquired in
connection with the AMTI, Frisby, Hydro-Mill, Stolper and JDC acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by
$12.2 million, or 44.5%, to $39.7 million, excluding the $1.3 million gain on
the sale of Air Lab, for fiscal 1998 from $27.5 million for fiscal 1997. This
increase was assisted by the growth in aircraft production and the increased
outsourcing of repair and overhaul services by commercial aircraft operators.
This increase was also due to the addition of net sales and profits generated by
AMTI, Frisby, Hydro-Mill, Stolper and JDC, as well as the incremental operating
income resulting from increased sales volume. As a percentage of net sales,
operating income for the Aviation Group was 16.4% for both fiscal 1998 and
fiscal 1997.
25
<PAGE>
METALS GROUP
NET SALES. Net sales for the Metals Group increased by $4.4 million, or
5.3%, to $87.1 million for fiscal 1998 from $82.7 million for fiscal 1997. This
increase was primarily due to increased demand for both flat-rolled and
electro-galvanized steel products processed by the Company.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
increased by $3.2 million, or 4.9%, to $68.3 million for fiscal 1998 from $65.1
million for fiscal 1997. This increase was primarily due to increased sales
volume partially offset by lower costs of raw materials.
GROSS PROFIT. Gross profit for the Metals Group increased by $1.2 million,
or 6.7%, to $18.8 million for fiscal 1998 from $17.6 million for fiscal 1997,
due to the reasons discussed above. As a percentage of net sales, gross profit
for the Metals Group was 21.6% and 21.3% for fiscal 1998 and fiscal 1997,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group remained unchanged at $12.2 million
for fiscal 1998 from fiscal 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group increased by $0.1 million, or 12.4%, to $1.1 million for fiscal 1998 from
$1.0 million for fiscal 1997.
OPERATING INCOME. Operating income for the Metals Group increased by $1.0
million, or 22.6%, to $5.5 million, excluding the $1.0 million gain on the sale
of Deluxe, for fiscal 1998 from $4.5 million for fiscal 1997, due to the reasons
discussed above. As a percentage of net sales, operating income for the Metals
Group was 6.3% and 5.4% for fiscal 1998 and fiscal 1997, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses decreased by $0.4 million, or 9.8%,
to $3.9 million for fiscal 1998 from $4.4 million for fiscal 1997.
INTEREST EXPENSE. Interest expense decreased by $2.6 million, or 39.9%, to
$4.0 million for fiscal 1998 from $6.6 million for fiscal 1997. This decrease
was primarily due to reduced debt levels associated with the application of the
proceeds from the public offering of the Company's Common stock and the proceeds
from the sale of Air Lab, partially offset by the acquisitions of Frisby,
Hydro-Mill, Stolper and JDC, the cash portions of which were financed by
borrowings under the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 39.3% for fiscal 1998 and
40.3% for fiscal 1997.
INCOME BEFORE EXTRAORDINARY ITEM. Income before extraordinary item
increased by $11.4 million, or 91.2%, to $24.0 million for fiscal 1998 from
$12.6 million for fiscal 1997. This increase was primarily due to the
contribution generated by AMTI, Frisby, Hydro-Mill, Stolper and JDC and the
overall favorable conditions in the aviation industry resulting in increased net
sales of the Company's products and services.
EXTRAORDINARY ITEMS. An extraordinary gain in fiscal 1998 of $0.6 million
(net of tax provision of $0.4 million) relates to a discount for the prepayment
of the $8.0 million subordinated note payable to IKON Office Solutions, Inc. An
extraordinary loss in fiscal 1997 of $1.5 million (net of tax benefit of $1.0
million), relates to prepayment premiums and the related write-off of
unamortized deferred financing costs due to the early retirement of 11% senior
subordinated notes, senior term loans and the revolving credit facility.
NET INCOME. Net income increased by $13.5 million, or 122.2%, to $24.6
million for fiscal 1998 from $11.1 million for fiscal 1997. The increase in
fiscal 1998 net income was primarily attributable to the strong results of the
Aviation Group, the extraordinary loss recorded in fiscal 1997 and the
extraordinary gain recorded in fiscal 1998.
26
<PAGE>
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
generated approximately $34.2 million of cash flows from operating activities
for the year ended March 31, 1999. The Company used approximately $80.7 million
in investing activities, and raised $46.9 million in the year ended March 31,
1999. As of March 31, 1999, $47.5 million was available under the $125.0 million
credit facility (the "Credit Facility"). The Credit Facility would have matured
on March 21, 2003 and bore interest, at the option of the Company, at the
fluctuating prime rate or LIBOR, plus applicable points. On March 31, 1999, an
aggregate amount of approximately $76.1 million was outstanding under the Credit
Facility, $70.0 million of which was accruing interest at LIBOR plus applicable
basis points totaling 5.44% per annum, and $6.1 million of which was accruing at
the prime rate of 7.75% per annum. Amounts repaid under the Credit Facility may
be reborrowed.
The Company has renegotiated its Credit Facility ("New Credit Facility"),
which closed on June 11, 1999, with its lenders to increase the Credit Facility
to $250.0 million from $125.0 million, extend the term and amend certain terms
and covenants. The New Credit Facility bears interest at either LIBOR plus
between 0.75% and 1.75% or the prime rate (or the Federal funds rate plus 0.5%
if greater) at the option of the Company and expires on June 13, 2004. The
variation in the interest rate is based upon the Company's ratio of total
indebtedness to earnings before interest, taxes, and depreciation and
amortization. In addition, the Company is required to pay a commitment fee of
between 0.175% and 0.375% on the unused portion of the New Credit Facility
without penalty. Additionally, the Company may allocate up to $5.0 million of
the available New Credit Facility for the issuance of letters of credit.
In July 1998, in connection with the Nu-Tech acquisition, the Company
assumed approximately $9.3 million of equipment notes with interest rates
ranging from 8.5% to 9.25%, maturing between March 2004 and March 2007. Each
equipment note was secured by a piece of equipment. During March 1999, the
Company retired all of the outstanding equipment notes, using the proceeds
obtained from the sale of the equipment, which was subsequently lease-backed.
On September 15, 1997, the Company retired the remaining $8.0 million
subordinated note payable to IKON Office Solutions, Inc. The terms of the note
provided for a $1.0 million discount in the event the note was repaid by October
1, 1997. The cash payment of $7.0 million was funded by the Company's long-term
borrowings under its 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 $10.0 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 has
no established expiration date. No amount was outstanding on the Line of Credit
as of March 31, 1999.
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. At March 31, 1999, the interest rate of
the Bonds was 3.25%.
Capital expenditures were approximately $19.5 million for the year ended
March 31, 1999, primarily for manufacturing machinery and equipment for the
Aviation Group. The Company funded these expenditures through borrowings under
its Credit Facility. The Company expects capital expenditures to be
approximately $21.0 million for its fiscal year ending March 31, 2000. The
expenditures are expected to be used primarily to expand capacity at several
facilities in the Aviation Group.
27
<PAGE>
In fiscal 1999, the Company acquired all of the outstanding stock of
Nu-Tech, DG and DV and substantially all of the assets of Triumph Air Repair
(Europe), HTD and Triumph Precision. Nu-Tech, based in the Kansas City, Missouri
metropolitan area, specializes in producing complex structural components for
the commercial and military aircraft market; machining of precision parts from
aluminum extrusions; and high speed machining of precision parts from alloys
such as titanium and stainless steel. DG, based in Phoenix, Arizona, provides
precision machining services on hydraulic and pneumatic components for the
aviation industry, focusing on a wide spectrum of aircraft flap, spoiler,
auxiliary power and cooling systems. DV, located in Lynwood, California,
provides chemical processing, painting and non-destructive testing services to
the aerospace and defense industries. Triumph Air Repair (Europe), based in
Lasham Alton Hampshire, England, repairs and overhauls auxiliary power units,
constant speed drives and integrated drive generators for commercial transport
carriers and the commuter aviation industry. HTD, based in Bloomfield,
Connecticut, specializes in manufacturing precision components and assemblies
for commercial and military jet engines. Triumph Precision, based in Phoenix,
Arizona, specializes in complex aerospace tube bending, precision machining,
metal heat treating and brazing. The combined cash purchase price for these
acquisitions was $69.0 million which was funded by borrowings under the
Company's Credit Facility.
In May 1999, the Company acquired all of the outstanding stock of Ralee
Engineering Company ("Ralee"). Ralee, located in City of Industry, California,
manufactures long structural components such as stringers, cords, floor beams
and spars for the airline industry. The cash paid at closing of approximately
$13.3 million was funded by borrowings under the Company's Credit Facility.
Ralee has revenues of approximately $20.0 million.
In December 1998, the Company announced that its Board of Directors
authorized the repurchase of up to 500,000 shares of its Common stock, subject
to market conditions. Repurchases may be made from time to time in open market
transactions, block purchases, privately negotiated transactions or otherwise at
prevailing prices. No time limit has been set for completion of the program. The
Company's Board of Directors believes that at the price levels prevailing at the
time of the authorization, the repurchase of the Company's Common stock
presented an excellent investment opportunity. During fiscal 1999 the Company
purchased 52,700 shares of its Common stock, for total cash consideration of
$1.3 million. In April 1999, the Company purchased 117,500 shares of its Common
stock for total cash consideration of $2.9 million. The purchases were funded by
borrowings under the Company's Credit Facility.
The Company believes that cash generated by operations and borrowings under
the Credit Facility 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 are
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.
YEAR 2000 DATE CONVERSION
The Year 2000 issue exists because many software programs, computer
hardware, operating systems and microprocessor based embedded controls in
automated equipment use two-digit date fields to designate a year. As the
century date change occurs, date-sensitive systems may recognize the year 2000
as 1900, or not at all. This inability to recognize or properly treat the year
2000 may cause systems to process financial and operational information
incorrectly or fail to operate.
The Company has recognized the need to ensure that its business operations
will not be adversely affected by the upcoming calendar year 2000 date change
and is cognizant of the time sensitive nature of the problem. The Company's
operating units have assessed or are in the process of assessing how each may be
impacted by Year 2000 and have formulated and commenced or are formulating and
commencing
28
<PAGE>
implementation of a comprehensive plan to address all known aspects of the Year
2000 problem: information systems, production and facilities equipment,
suppliers and customers. The Company's operating units are currently making
inquiries of customers and suppliers to assess their Year 2000 readiness. The
operating units are also in the process of testing information technology ("IT")
systems, as well as non-IT systems, and verifying that vendor-supplied or
outsourced systems will be Year 2000 compliant and will repair or replace any
such systems found to be non-compliant. Currently, the Company estimates that,
on a consolidated basis, it has substantially completed its assessment of how it
may be impacted and the development of plans to address the testing and
remediation of its systems, and is approximately three-quarters of the way
through its testing and remediation activities. The Company estimates that it
will complete this process prior to October 31, 1999.
The Company has not separately tracked its Year 2000 costs as a project, but
rather has incurred the costs in conjunction with normal sustaining activities.
The discretely identifiable costs incurred through March 31, 1999 of completing
the Company's Year 2000 assessment and of modifying its computer software and
hardware, as well as its production and facilities equipment, to be Year 2000
compliant were approximately $0.4 million. The estimated costs yet to be
incurred are approximately $0.5 million. The current assessment does not include
costs related to software and hardware replaced in the normal course of business
other than replacements accelerated due to the Year 2000 issue.
The variety and complexity of the Year 2000 issues identified and the
proposed solutions, the Company's dependence on the technical skills of
employees and independent contractors, and especially the representations and
readiness of third parties are among the factors that could cause the Company's
efforts to be less than fully effective. In addition, Year 2000 issues present a
number of risks that are beyond the Company's reasonable control, such as
continued service from outside parties such as utility companies, financial
institutions, and transportation and delivery companies (such as Federal Express
and United Parcel Service). Also, certain significant customers are material to
the Company and a Year 2000 failure by one or more of these parties could result
in a material adverse effect on the Company's operating results and financial
position. The most likely worst case scenario would be the failure of particular
computer systems or machines with embedded chips that would require manual
processes in order to continue production and invoicing activities. The Company
believes that it could obtain materials at reasonably competitive prices from
alternate suppliers given a failure at a current vendor.
While the Company does not currently foresee any material problems, there
can be no assurance that the Company and its material suppliers and customers
will be Year 2000 compliant by January 1, 2000 and that any such non-compliance
will not have a material adverse effect on the Company.
The Company is in the process of developing contingency plans in the event
that any unresolved issues are identified.
The foregoing Year 2000 discussion includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
relating to the Company's efforts and management's expectations relating to Year
2000 readiness. The Company's Year 2000 project is dependent on certain future
events including the availability and cost of personnel trained to perform Year
2000 modifications, the ability of the Company to locate and correct all
non-compliant computer codes and embedded controls, the ability of material
customers, suppliers and trading partners to successfully complete their own
Year 2000 remediation projects, the accuracy of information received from third
parties concerning the Year 2000 compliance of their information systems or
automated equipment or concerning their Year 2000 business risk assessment, and
similar uncertainties.
MARKET RISK
The principal market risk to which the Company is exposed is changes in
interest rates on debt instruments. The Company manages its exposure to changes
in interest rate fluctuations by optimizing the use of fixed and variable rate
debt. The information below summarizes the Company's market risks
29
<PAGE>
associated with debt obligations and should be read in conjunction with Note 6
of the Consolidated Financial Statements.
The following table presents principal cash flows and the related interest
rates by year of maturity. Fixed interest rates disclosed represent the weighted
average rate as of March 31, 1999. Variable interest rates disclosed fluctuate
with the LIBOR, federal funds rates and other weekly rates and represent the
weighted average rate at March 31, 1999.
EXPECTED YEARS OF MATURITY
($ IN 000S)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Long -term debt, including current portion:
Fixed rate ($)............................................... 816 818 800 4,667 4,667 480
Weighted average interest rate (%)........................... 7.0 7.0 7.0 9.9 9.9 10.5
Variable rate ($)............................................ 335 335 335 76,430 335 2,990
Weighted average interest rate (%)........................... 3.25 3.25 3.25 5.4 3.25 3.25
<CAPTION>
TOTAL
---------
<S> <C>
Long -term debt, including current portion:
Fixed rate ($)............................................... 12,248
Weighted average interest rate (%)...........................
Variable rate ($)............................................ 80,760
Weighted average interest rate (%)...........................
</TABLE>
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 current available information. Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management. When used in this document, words like "may", "might",
"will", "expect", "anticipate", "believe", "potential", and similar expressions
are intended to identify forward-looking statements. 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-3 filed
with Securities and Exchange Commission in November 1997 and in Item 1 of this
Annual Report on Form 10-K, for the year ended March 31, 1999, filed with the
SEC in June 1999.
Pro forma financial information included above may not be indicative of
actual results had the 1998 Acquisitions, the 1999 Acquisitions and the sale of
Air Lab occurred on April 1, 1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion in Item 7.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Triumph Group, Inc.
We have audited the accompanying consolidated balance sheets of Triumph
Group, Inc. as of March 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended March 31, 1999. Our audits also included the financial
statement schedule listed in the index at Item 14 (a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Triumph Group, Inc. at March 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 16, 1999,
except for Note 18, as to which
the date is May 12, 1999
31
<PAGE>
TRIUMPH GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
----------------------
<S> <C> <C>
1998 1999
---------- ----------
ASSETS
Current assets:
Cash.................................................................................... $ 4,642 $ 4,953
Accounts receivable, less allowance for doubtful accounts of $1,840 and
$1,907................................................................................ 63,433 65,613
Inventories............................................................................. 77,103 104,771
Prepaid expenses and other.............................................................. 1,298 2,473
Deferred income taxes................................................................... 2,763 2,408
---------- ----------
Total current assets...................................................................... 149,239 180,218
Property and equipment, net............................................................... 78,829 107,123
Excess of cost over net assets acquired, net.............................................. 55,998 124,667
Intangible assets and other, net.......................................................... 17,379 16,849
---------- ----------
Total assets.......................................................................... $ 301,445 $ 428,857
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 27,396 $ 33,894
Accrued expenses........................................................................ 24,285 47,263
Income taxes payable.................................................................... 4,712 4,453
Current portion of long-term debt....................................................... 675 1,151
---------- ----------
Total current liabilities............................................................. 57,068 86,761
Long-term debt, less current portion...................................................... 33,823 91,857
Deferred income taxes and other........................................................... 27,675 35,462
Stockholders' equity:
Common stock, $.001 par value, 15,000,000 and 50,000,000 shares authorized, 8,547,236
and 8,551,786 shares issued........................................................... 9 9
Class D common stock convertible, $.001 par value, 6,000,000 shares authorized,
3,348,535 shares issued and outstanding............................................... 3 3
Capital in excess of par value............................................................ 135,331 135,418
Treasury stock, at cost, 52,700 shares.................................................... -- (1,336)
Retained earnings......................................................................... 47,536 80,683
---------- ----------
Total stockholders' equity.............................................................. 182,879 214,777
---------- ----------
Total liabilities and stockholders' equity............................................ $ 301,445 $ 428,857
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
TRIUMPH GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ----------
Net sales.................................................................... $ 250,478 $ 329,458 $ 400,108
Operating costs and expenses:
Cost of products sold...................................................... 176,050 233,311 275,020
Selling, general and administrative........................................ 40,748 45,723 52,130
Depreciation and amortization.............................................. 6,073 9,148 14,386
Gain on sale of businesses................................................. -- (2,250) --
---------- ---------- ----------
222,871 285,932 341,536
---------- ---------- ----------
Operating income............................................................. 27,607 43,526 58,572
Interest expense and other................................................... 6,591 3,963 5,144
---------- ---------- ----------
Income before income taxes and extraordinary item............................ 21,016 39,563 53,428
Income tax expense........................................................... 8,461 15,561 20,281
---------- ---------- ----------
Income before extraordinary item............................................. 12,555 24,002 33,147
Extraordinary (loss) gain, net of income taxes............................... (1,478) 610 --
---------- ---------- ----------
Net income................................................................. $ 11,077 $ 24,612 $ 33,147
---------- ---------- ----------
---------- ---------- ----------
Preferred stock dividends.................................................... (460) -- --
Redemption of preferred stock................................................ (1,746) -- --
---------- ---------- ----------
Income available to common stockholders...................................... $ 8,871 $ 24,612 $ 33,147
---------- ---------- ----------
---------- ---------- ----------
Earnings Per Share--Basic:
Income before extraordinary item........................................... $ 1.39 $ 2.29 $ 2.79
Extraordinary (loss) gain, net of income taxes............................. (0.20) 0.06 --
---------- ---------- ----------
Net income................................................................. $ 1.19 $ 2.35 $ 2.79
---------- ---------- ----------
---------- ---------- ----------
Weighted average common shares outstanding--Basic............................ 7,447 10,485 11,896
---------- ---------- ----------
---------- ---------- ----------
Earnings Per Share--Assuming Dilution:
Income before extraordinary item........................................... $ 1.27 $ 2.14 $ 2.62
Extraordinary (loss) gain, net of income taxes............................. (0.18) 0.05 --
---------- ---------- ----------
Net income................................................................. $ 1.09 $ 2.19 $ 2.62
---------- ---------- ----------
---------- ---------- ----------
Weighted average common shares outstanding--
Assuming Dilution.......................................................... 8,146 11,231 12,646
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
TRIUMPH GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON CAPITAL IN
STOCK EXCESS OF TREASURY RETAINED
ALL CLASSES PAR VALUE STOCK EARNINGS TOTAL
------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1996.............................. $ 6 $ 1,006 $ -- $ 14,053 $ 15,065
Net income........................................... 11,077 11,077
Issuance of 3,000,000 shares of common stock in
public offering and direct sale (net of $1,250
issuance costs).................................... 3 51,757 51,760
Redeemable preferred stock dividends................. (370) (370)
Accretion of redeemable preferred stock.............. (1,836) (1,836)
Compensation in stock options issued to employee..... 80 80
Purchase of 45,500 shares of common stock............ (85) (85)
Acquisition consideration in stock options issued.... 164 164
Exercise of options to purchase
common stock....................................... 75 75
Conversion of minority interest in subsidiary to
common stock....................................... 619 619
Retirement of treasury stock......................... (10) 10 --
Exchange of redeemable preferred stock for common
stock.............................................. 4,858 4,858
Exchange of junior subordinated promissory notes for
common stock....................................... 1 10,005 10,006
--- ---------- --------- --------- ----------
Balance at March 31, 1997.............................. 10 68,479 -- 22,924 91,413
Net income........................................... 24,612 24,612
Issuance of 2,143,945 shares of common stock in
public offering (net of $400 issuance costs)....... 2 66,810 66,812
Exercise of options to purchase
common stock....................................... 42 42
--- ---------- --------- --------- ----------
Balance at March 31, 1998.............................. 12 135,331 -- 47,536 182,879
Net income........................................... 33,147 33,147
Exercise of options to purchase
common stock....................................... 87 87
Purchase of 52,700 shares of common stock............ (1,336) (1,336)
--- ---------- --------- --------- ----------
Balance at March 31, 1999.............................. $ 12 $ 135,418 $ (1,336) $ 80,683 $ 214,777
--- ---------- --------- --------- ----------
--- ---------- --------- --------- ----------
</TABLE>
See notes to consolidated financial statements.
34
<PAGE>
TRIUMPH GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ----------
Operating Activities
Net income.................................................................... $ 11,077 $ 24,612 $ 33,147
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on sale of businesses.................................................. -- (2,250) --
Gain on extinguishment of debt.............................................. -- (1,000) --
Depreciation and amortization............................................... 6,073 9,148 14,386
Other amortization included in interest expense............................. 206 139 137
Provision for doubtful accounts receivable.................................. 959 173 508
Provision for deferred income taxes......................................... 1,067 3,555 2,339
Interest on subordinated and junior subordinated promissory notes paid by
issuance of additional notes.............................................. 1,550 758 803
Write-off deferred financing costs.......................................... 915 -- --
Changes in other current assets and liabilities, net of acquisitions and
dispositions of businesses................................................ (13,483) (20,340) (17,228)
Other....................................................................... (215) (1,216) 104
---------- ---------- ----------
Net cash provided by operating activities..................................... 8,149 13,579 34,196
---------- ---------- ----------
Investing Activities
Capital expenditures, net..................................................... (8,183) (14,220) (19,489)
Proceeds from sale of assets.................................................. -- -- 7,767
Proceeds from sale of discontinued operations................................. 27,350 -- --
Proceeds from sale of businesses, net of cash sold............................ -- 11,572 --
Cost of businesses acquired, net of cash acquired............................. (7,950) (80,708) (69,021)
---------- ---------- ----------
Net cash provided by (used in) investing activities........................... 11,217 (83,356) (80,743)
---------- ---------- ----------
Financing Activities
Net proceeds from common stock offering....................................... 51,760 66,812 --
Net (decrease) increase in revolving credit facility.......................... (23,841) 9,013 58,375
Purchase of treasury stock, net............................................... (10) -- (1,336)
Proceeds from exercise of stock options....................................... -- 42 87
Proceeds from issuance of long-term debt...................................... 54,065 5,000 --
Refinancing and retirement of long-term debt.................................. (93,616) (7,000) (8,585)
Repayment of debt and capital lease obligations............................... (6,872) (423) (1,658)
Payment of deferred financing cost............................................ (398) (18) (25)
---------- ---------- ----------
Net cash (used in) provided by financing activities........................... (18,912) 73,426 46,858
---------- ---------- ----------
Net change in cash............................................................ 454 3,649 311
Cash at beginning of year..................................................... 539 993 4,642
---------- ---------- ----------
Cash at end of year........................................................... $ 993 $ 4,642 $ 4,953
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
Triumph Group, Inc. ("Triumph") is a Delaware corporation which, through its
operating subsidiaries, is engaged in aviation services and metals converting
and distribution.
The accompanying consolidated financial statements include the accounts of
Triumph and its subsidiaries (collectively, the "Company"). Intercompany
accounts and transactions have been eliminated from the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Triumph's aviation segment designs, engineers, manufactures or repairs and
overhauls aircraft components for commercial airlines, air cargo carriers and
original equipment manufacturers on a worldwide basis. Triumph's metals segment
manufactures, machines, processes and distributes metal products to customers in
the computer, construction, container and office furniture industries, primarily
within North America. The Company's trade accounts receivable are exposed to
credit risk; however, the risk is limited due to the diversity of the customer
base and the customer base's wide geographical area. Trade accounts receivable
from AlliedSignal and Boeing Co. ("Boeing") represented approximately 11% and
15%, respectively, of total accounts receivable as of March 31, 1999 and 16% and
12%, respectively, at March 31, 1998. The Company had no other significant
concentrations of credit risk. For fiscal 1999, AlliedSignal and Boeing
represented approximately 12% and 19%, respectively, of consolidated sales.
Boeing's percentage includes the effects of Boeing's acquisitions of McDonnell
Douglas and Rocketdyne. In fiscal 1998 Boeing represented approximately 14% of
consolidated sales and AlliedSignal was less than 10% of consolidated sales. No
other single customer accounts for more than 10% of the Company's sales;
however, the loss of any significant customer, including AlliedSignal or Boeing,
could have a material effect on the Company and its operating subsidiaries.
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.
NEW ACCOUNTING STANDARDS
Effective April 1, 1998, the Company adopted the Financial Accounting
Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 superseded SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise." SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS No. 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The adoption of SFAS No. 131 did not
affect results of operations or financial position, but did affect the
disclosure of segment information (see Note 14).
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 requires all costs related to
the development of internal-use software other than those incurred
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during the application development stage to be expensed as incurred. Costs
incurred during the application development stage are required to be capitalized
and amortized over the estimated useful life of the software. SOP 98-1 is
effective for the Company's first quarter ending June 30, 1999. Adoption is not
expected to have a material effect on the Company's consolidated financial
statements.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over the
estimated useful lives of the related assets by the straight-line method.
Buildings and improvements are depreciated over a period of 15 to 39 1/2 years,
and machinery and equipment are depreciated over a period of 7 to 15 years
(except for furniture, fixtures and computer equipment which is depreciated over
a period of 3 to 10 years).
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over the fair value of net assets acquired is being
amortized on a straight-line basis over a period of twenty-five to thirty years.
Accumulated amortization at March 31, 1998 and 1999 was $1,896 and $5,264,
respectively. The carrying value of excess of cost over net assets acquired is
evaluated periodically in relation to the operating performance and expected
future undiscounted cash flows of the underlying businesses.
INTANGIBLE ASSETS
Intangible assets at March 31, 1998 and 1999 of $14,793 and $13,335,
respectively, consist primarily of patents, trademarks, aerospace designs and
covenant not-to-compete agreements. Intangible assets are amortized on a
straight-line basis over their estimated useful lives which range from five to
twenty-five years. Accumulated amortization at March 31, 1998 and 1999 was
$4,103 and $5,170, respectively.
REVENUE RECOGNITION
Revenues are recorded when services are performed or when products are
shipped except for long-term construction contracts which are recorded on the
percentage-of-completion method based on the relationship between actual costs
incurred and total estimated costs at completion. Estimated costs to complete
for each contract are reviewed periodically as work progresses and appropriate
adjustments are made to revenue recognition percentages, if necessary. In the
event such estimates indicate a loss would be incurred on the contract, the
estimated amount of such loss would be recognized in the period the estimated
loss was determined. Sales from long-term construction contracts approximated
7%, 4% and 2% of total sales for the years ended March 31, 1997, 1998 and 1999,
respectively.
STOCK-BASED COMPENSATION
The Company follows Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its employee stock-based compensation (see Note 9).
3. ACQUISITIONS AND DIVESTITURES
In fiscal 1999, the Company acquired all of the outstanding stock of Nu-Tech
Industries, Inc. ("Nu-Tech"), DG Industries, Inc. ("DG"), and DV Industries,
Inc. ("DV") and substantially all of the
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS AND DIVESTITURES (CONTINUED)
assets of Chase Aerospace (UK) Limited, renamed Triumph Air Repair (Europe)
Limited ("Triumph Air Repair (Europe)"), Hartford Tool and Die Company, renamed
HTD Aerospace, Inc. ("HTD") and May Industries, Inc. and Metal Joining, Inc.
together renamed Triumph Precision, Inc. ("Triumph Precision"). Nu-Tech, based
in the Kansas City, Missouri metropolitan area, specializes in producing complex
structural components for the commercial and military aircraft market; machining
of precision parts from aluminum extrusions; and high speed machining of
precision parts from alloys such as titanium and stainless steel. DG, based in
Phoenix, Arizona, provides precision machining services on hydraulic and
pneumatic components for the aviation industry, focusing on a wide spectrum of
aircraft flap, spoiler, auxiliary power and cooling systems. DV, located in
Lynwood, California, provides chemical processing, painting and non-destructive
testing services to the aerospace and defense industries. Triumph Air Repair
(Europe), based in Lasham Alton Hampshire, England, repairs and overhauls
auxiliary power units, constant speed drives and integrated drive generators for
commercial transport carriers and the commuter aviation industry. HTD, based in
Bloomfield, Connecticut, specializes in manufacturing precision components and
assemblies for commercial and military jet engines. Triumph Precision, based in
Phoenix, Arizona, specializes in complex aerospace tube bending, precision
machining, and metal heat treating and brazing. The combined purchase price for
these acquisitions was $102,950. The purchase price includes cash paid at
closing, net of cash acquired, the assumption of debt and certain liabilities,
direct costs of the acquisitions, deferred payments and a contingent payment of
approximately $7,000, which is included in accrued expenses at March 31, 1999.
The combined excess of the purchase price over the fair value of the net assets
acquired of $71,435 was recorded as excess of cost over net assets acquired and
is being amortized over thirty years on a straight-line basis.
In fiscal 1998, the Company acquired substantially all of the assets of
Frisby Aerospace, Inc. ("Frisby") and J.D. Chapdelaine Co., renamed JDC Company
("JDC") and also acquired all of the outstanding stock of Stolper-Fabralloy
Company, LLC ("Stolper") and Hydro-Mill Company ("Hydro-Mill"). Frisby designs,
manufactures, assembles and tests precision aircraft components and subsystems
from facilities located in Freeport, New York and Clemmons, North Carolina. JDC,
based in Ft. Lauderdale, Florida, specializes in the repair, overhaul and
exchange of electromechanical aircraft instruments. Stolper fabricates sheet
metal from high temperature alloys and provides repair and overhaul service to
aerospace end-users from facilities located in Brookfield, Wisconsin and
Phoenix, Arizona. Hydro-Mill, based in Chatsworth, California, manufactures
precision machined structural parts and assemblies for the aerospace industry.
The combined purchase price for these acquisitions was $93,632. The purchase
price includes cash paid at closing, in certain instances notes payable to the
former owner, a long-term liability related to a covenant not-to-compete
contract, the assumption of certain liabilities and direct costs of the
acquisitions. The combined excess of purchase price over the fair value of the
net assets acquired of $43,769 was recorded as excess of cost over net assets
acquired and is being amortized on a straight-line basis over twenty-five to
thirty years. The Frisby acquisition agreement provides for a reduction in the
purchase price in the event certain performance measurements are not met on each
anniversary of the acquisition through year 2003.
In fiscal 1997, the Company acquired all of the outstanding stock of
Advanced Materials Technologies, Inc. ("AMTI") based in Tempe, Arizona for an
aggregate purchase price of $16,257, including cash consideration, an option to
purchase 13,000 shares of the Company's Class A Common Stock at an exercise
price of $1.87 per share valued at $164, a five-year covenant not-to-compete
contract and the assumption of certain liabilities and direct costs of the
transaction. AMTI repairs and refurbishes gas turbine engine components used in
the aviation industry. The excess of the purchase price over the fair value of
net assets acquired of $2,870 is being amortized over twenty-five years on a
straight-line basis.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS AND DIVESTITURES (CONTINUED)
These acquisitions have been accounted for under the purchase method and,
accordingly, are included in the consolidated financial statements from their
dates of acquisition. These acquisitions were funded by the Company's long-term
borrowings in place at the date of each respective acquisition.
In fiscal 1998, the Company sold substantially all of the assets of Deluxe
Specialties Mfg. Co. ("Deluxe") and the Company's Air Lab division ("Air Lab")
(collectively the "1998 Divestitures") for $10,697 in cash and the assumption by
the purchasers of certain liabilities. The reported results for the year ended
March 31, 1998 include the $2,250 gain on sale of these assets. For the years
ended March 31, 1997 and 1998, these entities had net sales of $15,697 and
$12,906, respectively, and operating income of $1,568 and $1,386, respectively.
The following unaudited pro forma information has been prepared assuming the
above acquisitions and the 1998 Divestitures had occurred on April 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
<S> <C> <C>
1998 1999
---------- ----------
Net sales............................................................. $ 409,907 $ 432,659
Income before extraordinary item...................................... 23,736 34,133
Income before extraordinary item per share:
Basic............................................................... 2.26 2.87
Diluted............................................................. 2.11 2.70
Net income............................................................ 24,346 34,133
Earnings per common share:
Basic............................................................... 2.32 2.87
Diluted............................................................. 2.17 2.70
</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, and
equipment acquired, and the amortization of the intangible assets and excess of
cost over net assets acquired 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 the
assumed dates.
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out or last-in,
first-out methods) or market. The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
<S> <C> <C>
1998 1999
--------- ----------
Raw materials.......................................................... $ 23,665 $ 30,896
Work-in-process........................................................ 26,796 39,280
Finished goods......................................................... 27,228 34,595
--------- ----------
Total inventories at FIFO cost................................... 77,689 104,771
Less allowance to reduce certain FIFO costs to LIFO basis.............. 586 --
--------- ----------
Total inventories................................................ $ 77,103 $ 104,771
--------- ----------
--------- ----------
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVENTORIES (CONTINUED)
Approximately 12% and 10% of the inventory is valued using the LIFO method
at March 31, 1998 and 1999, respectively.
5. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
Current:
Federal..................................................... $ 6,453 $ 10,430 $ 16,211
State....................................................... 941 1,576 1,731
--------- --------- ---------
7,394 12,006 17,942
Deferred:
Federal..................................................... 1,169 2,993 1,917
State....................................................... (102) 562 422
--------- --------- ---------
1,067 3,555 2,339
--------- --------- ---------
$ 8,461 $ 15,561 $ 20,281
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
Statutory federal income tax rate............................. 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefit...... 2.6 3.5 2.6
Miscellaneous permanent items and non-deductible accruals..... 0.8 0.9 0.8
Other......................................................... 1.9 (0.1) (0.4)
--------- --------- ---------
Effective income tax rate..................................... 40.3% 39.3% 38.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reportable for income tax purposes. The components of
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
<S> <C> <C>
1998 1999
--------- ---------
Deferred tax assets:
Net operating loss carryforwards...................................... $ 436 $ --
Accruals and reserves................................................. 1,267 1,084
Accounts receivable................................................... 272 --
Inventories........................................................... 1,158 1,980
--------- ---------
3,133 3,064
Deferred tax liabilities:
Property and equipment................................................ 13,906 17,804
Other assets.......................................................... 5,129 8,682
Accounts receivable................................................... -- 352
Prepaid expenses and other............................................ 900 735
--------- ---------
19,935 27,573
--------- ---------
Net deferred tax liabilities............................................ $ 16,802 $ 24,509
--------- ---------
--------- ---------
</TABLE>
Income taxes paid during the years ended March 31, 1997, 1998 and 1999 were
$6,413, $10,611 and $16,135, respectively. At March 31, 1996, the Company had
alternative minimum tax credit carryforwards of $1,558 for income tax purposes
which were fully utilized in 1997.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
<S> <C> <C>
1998 1999
--------- ---------
Revolving credit facility............................................... $ 17,720 $ 76,095
Subordinated promissory notes........................................... 10,964 11,734
Industrial revenue bonds................................................ 5,000 4,665
Other debt and capital lease obligations................................ 814 514
--------- ---------
34,498 93,008
Less current portion.................................................... 675 1,151
--------- ---------
$ 33,823 $ 91,857
--------- ---------
--------- ---------
</TABLE>
On March 8, 1999 and December 31, 1998, the Company amended its existing
$125,000 credit agreement ("Credit Facility") with its lenders to amend certain
terms and covenants. The Credit Facility bears interest at either LIBOR plus
between 0.30% and 1.00% or the prime rate (or the Federal funds rate plus 0.5%
if greater) at the option of the Company and expires on March 21, 2003. The
variation in the interest rate is based upon the Company's ratio of total
indebtedness to earnings before interest, taxes, and depreciation and
amortization. In addition, the Company is required to pay a commitment fee of
between
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. LONG-TERM DEBT (CONTINUED)
0.10% and 0.225% on the unused portion of the Credit Facility without penalty.
Additionally, the Company may allocate up to $5,000 of the available Credit
Facility for the issuance of letters of credit of which $1,300 and $1,400 was
used as of March 31, 1998 and 1999, respectively.
In July 1998, in connection with the Nu-Tech acquisition, the Company
assumed approximately $9,300 of equipment notes with interest rates ranging from
8.5% to 9.25%, maturing between March 2004 and March 2007. Each equipment note
was secured by a piece of equipment. During March 1999, the Company retired all
of the outstanding equipment notes, using the proceeds obtained from the sale of
the equipment, which was subsequently leased-back.
On March 30, 1998, the Company amended and restated its Credit Facility to
extend the maturity date, reduce interest rates and amend certain covenants.
On September 15, 1997, the Company retired the remaining $8,000 subordinated
note payable to IKON Office Solutions, Inc. (formerly Alco Standard
Corporation). The terms of the note provided for a $1,000 discount in the event
the note was repaid by October 1, 1997. The cash payment of $7,000 was funded by
the Company's long-term borrowings under its Credit Facility. The early
extinguishment of this debt resulted in an extraordinary gain of $610, net of
income taxes of $390.
In July 1997, the Company entered into a $10,000 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 has
no established expiration date. No amounts were outstanding on this Line of
Credit as of March 31, 1998 and 1999.
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 $5,000 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, which was 3.95% and 3.25% at March 31, 1998
and 1999, respectively.
On October 30, 1996, the Company paid down the then outstanding balance on
the revolving credit facility using the proceeds from the Company's initial
public offering (see Note 7). On December 31, 1996, the Company amended the
credit agreement increasing the revolving credit facility to $85,000 and
retiring the $33,750 term loan.
On July 19, 1996, the Company entered into an unsecured credit agreement for
a $50,000 revolving credit facility and a $35,000 term loan. The proceeds of the
new term loan, amounts borrowed under the new revolving credit facility and the
proceeds received from the sale of Quality Park Products, Inc., a former
subsidiary of the Company, were used to extinguish the outstanding balances of
the revolving credit facility, the senior term loans, and the senior
subordinated notes existing at March 31, 1996. The early extinguishment of this
debt resulted in an extraordinary loss of $1,478, net of an income tax benefit
of $985 related to the write-off of unamortized deferred financing fees and
prepayment penalties.
At March 31, 1998 and 1999, the interest rate on borrowings under the Credit
Facility was 6.51% and 5.63%, respectively. As of March 31, 1999, $47,505 of
additional borrowings were available under the Credit Facility.
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. LONG-TERM DEBT (CONTINUED)
At March 31, 1999, the Subordinated Promissory Notes consist of two notes, a
$4,000 principal amount bearing interest at 7%, due in annual installments of
$800 on July 1 of each year commencing in 1999 through and including 2003, and
$7,734 principal amount bearing interest at 10.5%, due in equal installments on
December 31, 2002 and December 31, 2003. With regard to the 10.5% note, the
Company, at its sole discretion, may pay interest by issuance of additional
10.5% notes and elected to do so for $626, $692 and $770 for the years ended
March 31, 1997, 1998 and 1999, respectively.
The indentures under the debt agreements described above contain
restrictions and covenants which include limitations on the Company's ability to
incur additional indebtedness, issue stock options or warrants (excluding the
initial public offering and the employee stock option plan described in Notes 7
and 9), make certain restricted payments and acquisitions, create liens, enter
into transactions with affiliates, sell substantial portions of its assets and
pay cash dividends. Additional covenants require compliance with financial
tests, including leverage, interest coverage ratio, and maintenance of minimum
net worth.
The fair value of the Company's Credit Facility and the Bonds approximate
their carrying values. The fair value of the subordinated promissory notes,
based on a discounted cash flow method, is approximately $13,000.
Maturities of long-term debt are as follows: 2000--$1,151; 2001--$1,153;
2002--$1,135; 2003--$81,097; 2004--$5,002; thereafter, $3,470 through 2013.
Interest paid on indebtedness during the years ended March 31, 1997, 1998,
and 1999 amounted to $5,986, $3,277 and $3,957, respectively.
Financing fees and expenses of $807 incurred with respect to indebtedness
have been capitalized and are reflected in other assets. These fees and expenses
are being amortized over the terms of the related indebtedness (5-8 years).
Total amortization (included in interest expense) for the years ended March 31,
1997, 1998 and 1999 was $206, $139 and $137, respectively. On July 19, 1996, in
conjunction with the refinancing, $915 in unamortized deferred financing fees
related to the extinguished debt were written off and an additional $398 in
financing fees related to the new credit agreement were capitalized.
7. STOCKHOLDERS' EQUITY
During fiscal 1999, the Company purchased 52,700 shares of the Company's
Common stock as treasury stock. Treasury stock is recorded at cost. Also during
fiscal 1999, the Company increased its authorized shares of Common stock from
15,000,000 to 50,000,000.
In November 1997, the Company completed the sale of 2,000,845 shares of its
Common stock for $33.00 a share through an underwritten public offering. In
addition, the Company granted the underwriters of its public offering a 30-day
option to purchase additional shares to cover over-allotments. In December 1997,
the underwriters exercised the over-allotment option and the Company sold an
additional 143,100 shares of its Common stock. The net proceeds from the sale of
$66,812 were used to repay long-term debt.
In October 1996, the Company completed the sale of 2,500,000 shares of its
Common stock for $19.00 per share through an underwritten public offering and
the sale of 125,000 shares of its Common stock for $17.67 per share through a
direct sale by the Company. In addition, the Company granted the underwriters of
its public offering a 30-day option to purchase up to 375,000 additional shares
of its Common stock for $19.00 a share to cover over-allotments. In November
1996, the underwriters exercised the over-allotment
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. STOCKHOLDERS' EQUITY (CONTINUED)
option and the Company sold an additional 375,000 shares of its Common stock.
The net proceeds from the sales were $51,760. The total net proceeds were used
to pay down a portion of the Company's long-term borrowings under its credit
agreement and $5,500 of the 10% subordinated promissory note.
In October 1996, in conjunction with the public offering described above,
the Company exchanged all outstanding Redeemable preferred stock for Common
stock. The liquidation value of the Redeemable preferred stock plus accumulated
dividends at the date of the exchange of $4,858 was converted to 281,318 shares
of Common stock at the initial public offering price of $19.00 (less
underwriting discounts and commissions and estimated offering expenses payable
by the Company). The accretion of the original issue discount and accumulated
dividends of $2,206, for the year ended March 31, 1997 was charged to retained
earnings.
In addition, in October 1996, the Company exchanged all outstanding 14%
junior notes and a portion of the outstanding 10.5% junior notes for Common
stock. The face value of the junior notes exchanged plus accrued but unpaid
interest at the date of exchange of $10,006 was exchanged for 579,395 shares of
Common stock at the initial public offering price of $19.00 (less underwriting
discounts and commissions and estimated offering expenses payable by the
Company).
The holders of the Common stock and the Class D common stock are entitled to
one vote per share on all matters to be voted upon by the stockholders of
Triumph except that Class D does not participate in the voting of directors and
are entitled to participate ratably in any distributions.
The holders of Class D common stock may elect at any time to convert any or
all such shares into Common stock on a share-for-share basis. During fiscal
1997, 1998 and 1999, 197,370, 599,155 and 0 shares, respectively, of Class D
common stock were converted to shares of the Company's Common stock.
The Company issued a stock purchase warrant in conjunction with the issuance
of the senior subordinated notes which allows the holder to purchase 650,000
shares of Common stock for an aggregate exercise price of one hundred dollars
through July 31, 2003. The proceeds from the issuance of the senior subordinated
notes allocated to the warrants of $100 have been included in capital in excess
of par value.
The Company has Preferred stock of $100 par value, 250,000 shares
authorized. At March 31, 1998 and 1999 no shares of Preferred stock are
outstanding. Prior to the initial public offering of the Company's Common Stock,
the Company had Class A, B and C common shares outstanding, $.001 par value. The
Class A had 6,500,455 shares authorized and 1,300,000 shares issued. The Class B
and Class C were convertible to Class A and had 4,550,000 and 455 shares
authorized and issued, respectively. In conjunction with the public offering,
the Class A, B and C were converted to Common stock and Class D common stock.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. EARNINGS PER SHARE
The following is a reconciliation between the weighted average common shares
outstanding used in the calculation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Weighted average common shares outstanding........................ 7,447 10,485 11,896
Net effect of dilutive stock options.............................. 49 96 100
Net effect of dilutive warrant.................................... 650 650 650
--------- --------- ---------
Weighted average common shares outstanding--assuming dilution..... 8,146 11,231 12,646
--------- --------- ---------
--------- --------- ---------
</TABLE>
Options to purchase 67,000 shares of Common stock, at prices ranging from
$32.19 per share to $45.38 per share, were outstanding during fiscal 1999. These
options were not included in the computation of diluted earnings per share
because the exercise price was greater than the average market price of the
Common stock during the twelve months ended March 31, 1999 and, therefore, the
effect would be antidilutive. Also, warrants to purchase up to 60,000 shares of
Common stock at $10.00 per share, subject to certain performance criteria, were
not included in the computation of diluted earnings per share during fiscal 1999
because the number of contingently issuable warrants was zero, based on the
number of shares, if any, that would be issuable under the terms of the
arrangement, as if the end of the contingency period were March 31, 1999.
9. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PENSION PLAN
Approximately 170 employees participate in a noncontributory defined benefit
pension plan sponsored by the Company. Normal retirement under the Plan is age
65 and participants receive monthly benefits of a stated amount for each year of
service. The Company's funding policy for the Plan is to make the minimum annual
contributions required by applicable regulations. The Plan's assets are
primarily invested in stocks and bonds. The net periodic pension cost and
related pension liability is not material.
DEFINED CONTRIBUTION PENSION PLAN
The Company sponsors a defined contribution 401(k) plan, under which
salaried and certain hourly employees may defer a portion of their compensation.
Eligible participants may contribute to the plan up to 20% of their regular
compensation before taxes. During fiscal 1997, the Company increased its
matching contribution from 33% to 50% of the first 6% of compensation
contributed by the participant. All contributions and Company matches are
invested at the direction of the employee in one or more mutual funds. Company
matching contributions vest immediately and aggregated $749, $1,049 and $1,441
for the years ended March 31, 1997, 1998 and 1999, respectively.
OTHER POSTRETIREMENT BENEFITS
In connection with the acquisition of one of the Company's subsidiaries, the
Company provides certain postretirement medical and insurance benefits to
eligible employees under a collective bargaining agreement. For any employees
who retired through the date of the acquisition, the previous owner
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
retained all liabilities for benefits due and administration of the
postretirement benefits. The Company has assumed responsibility for
administration of the postretirement coverage for any eligible employee who
retires subsequent to the date of acquisition. The Company will pay the costs
related to these benefits upon retirement and will be reimbursed by the previous
owner for its pro rata portion based on relative length of service. The Company
does not fund the plan.
The Company has recorded a total liability of approximately $1,600 (as
estimated by actuaries) for other postretirement benefits, of which
approximately $1,400 is estimated to be reimbursed by the previous owner as of
March 31, 1999. These amounts are included in other liabilities and other
assets, respectively. The discount rate used was 6.65%. The annual expense for
such benefits is not material.
STOCK OPTION PLANS
The Company has stock option plans under which employees and non-employee
directors may be granted options to purchase shares of the Company's Common
stock at the fair market value at the time of the grant. Options generally vest
over three to five years and expire ten years from the date of the grant.
The Company also has issued performance-based stock purchase warrants with
an exercise price of $10.00 per share which expire ten years from the date of
grant.
SUMMARY OF STOCK OPTION AND WARRANT ACTIVITY
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE WARRANTS EXERCISE PRICE
--------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Balance, March 31, 1996............ 0 0
Granted............................ 248,340 $ 19.00 --
Forfeited.......................... (1,250) $ 19.00 --
--------- -----------
Balance, March 31, 1997............ 247,090 $ 19.00 0
Granted............................ 25,600 $ 34.00 --
Exercised.......................... (2,238) $ 19.00 --
Forfeited.......................... (10,289) $ 19.00 --
--------- -----------
Balance, March 31, 1998............ 260,163 $ 20.48 0
Granted............................ 182,200 $ 43.73 60,000 $ 10.00
Exercised.......................... (4,550) $ 19.00 --
Forfeited.......................... (7,375) $ 27.56 --
--------- -----------
Balance, March 31, 1999............ 430,438 $ 30.21 60,000 $ 10.00
--------- -----------
--------- -----------
</TABLE>
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
SUMMARY OF STOCK OPTIONS AND WARRANTS OUTSTANDING AT MARCH 31, 1999
<TABLE>
<CAPTION>
OPTIONS/WARRANTS
OPTIONS/WARRANTS OUTSTANDING EXERCISABLE
--------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE PRICE CONTRACTUAL EXERCISE EXERCISE
RANGE NUMBER LIFE (YRS.) PRICE NUMBER PRICE
- -------------- --------- --------------- ----------- --------- -----------
$10.00 60,000 9.3 $ 10.00 0
$19.00 226,238 7.6 $ 19.00 112,614 $ 19.00
$32 3/16-$34 24,000 8.6 $ 33.92 5,900 $ 34.00
$43 1/8-$45 3/8 180,200 9.1 $ 43.80 0
--------- ---------
490,438 118,514
--------- ---------
--------- ---------
</TABLE>
At March 31, 1998 and 1999, 256,349 options and 135,524 options,
respectively, were available for issuance under the plans.
During fiscal 1997, the Company adopted the disclosure-only option under
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The
Company uses the accounting method under APB Opinion No. 25 ("APB 25") and
related interpretations for its employee stock options. Under APB 25, when the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma disclosure, as required by SFAS 123, regarding net income and
earnings per share has been determined as if the Company had accounted for its
employee stock options under the fair value method.
Option valuation models use highly subjective assumptions to determine the
fair value of traded options with no vesting or trading restrictions. Because
options granted under the Plan have vesting requirements and cannot be traded,
and because changes in the assumptions can materially affect the fair value
estimate, in management's opinion, the existing valuation models do not
necessarily provide a reliable measure of the fair value of its employee stock
options.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.5% for 1997, 5.9% for 1998 and 5.5%
for 1999; no dividends; a volatility factor of the expected market price of the
Company's Common stock of .32, .30 and .30 for 1997, 1998 and 1999,
respectively, and a weighted-average expected life of the options of 6 years.
For purposes of pro forma disclosures, the weighted average fair value of
the options ($8.00 per share for the 1997 issuance, $14.19 per share for the
1998 issuance and $17.79 per share for the 1999 issuance) is amortized to
expense over the options' assumed vesting period. Since the Company's stock
options vest over three to five years and additional options may be granted each
year, the pro forma effect on net income reported below is not representative of
the effect of fair value stock option expense on future years
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
pro forma net income. The following pro forma information has been prepared
assuming the Company accounted for its stock options under the fair value
method:
PRO FORMA NET INCOME AND EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
Pro forma net income......................................... $ 10,946 $ 24,130 $ 32,008
Pro forma net income per share:
Basic...................................................... 1.17 2.30 2.69
Diluted.................................................... 1.07 2.16 2.56
</TABLE>
10. LEASES
Capital lease assets are included in property and equipment and the related
obligations in other debt and capital lease obligations. Amortization of capital
lease assets is included in depreciation expense. At March 31, 1999, future
minimum payments under noncancelable operating leases with initial or remaining
terms of more than one year were as follows: 2000--$5,180; 2001--$5,046;
2002--$4,683; 2003--$4,138; 2004--$3,529 thereafter, $11,266 through 2017. In
the normal course of business, operating leases are generally renewed or
replaced by other leases.
Total rental expense was $1,830, $2,479 and $3,679 for the years ended March
31, 1997, 1998 and 1999, respectively.
11. PROPERTY AND EQUIPMENT
Net property and equipment at March 31, 1998 and 1999 is:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
<S> <C> <C>
1998 1999
--------- ----------
Land................................................................... $ 6,460 $ 7,653
Buildings and improvements............................................. 16,814 24,489
Machinery and equipment................................................ 71,454 99,627
--------- ----------
94,728 131,769
Less accumulated depreciation........................................ 15,899 24,646
--------- ----------
$ 78,829 $ 107,123
--------- ----------
--------- ----------
</TABLE>
Depreciation expense for the years ended March 31, 1997, 1998 and 1999 was
$4,480, $6,348 and $9,558, respectively.
12. 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
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
13. COLLECTIVE BARGAINING AGREEMENTS
Approximately 14% of the Company's labor force is covered under collective
bargaining agreements. These collective bargaining agreements expire over the
next several years, with the exception at one operating location in the Metals
segment, which is currently under negotiation.
14. SEGMENT REPORTING
The Company is organized based on the products and services that it
provides. Under this organizational structure, the Company has two reportable
segments: Aviation and Metals. The Company's Aviation segment consists of twenty
operating units and the Metals segment consists of three operating units at
March 31, 1999.
The Aviation segment revenue is generated from the manufacture, repair and
overhaul of sub-assembly and structural components and flight controls and
instrumentation for aircraft and related products.
The sub-assembly components revenues are derived from repair and overhaul
services on auxiliary power units for both commercial airlines and OEMs. The
Company also repairs and overhauls aircraft accessories, including
constant-speed drives, cabin compressors, starters and generators, and pneumatic
drive units. Further, the Company provides precision machining services
primarily to various OEMs for other sub-assembly components manufactured from
refractory and other metals for the aviation and aerospace industry. The
structural components revenues are derived from stretch forming, die forming,
milling, bonding, machining, welding and assembly and fabrication on aircraft
wings, fuselages and skins for aircraft produced by OEMs such as Boeing and
Bombardier. The Company also manufactures metallic and composite bonded
honeycomb assemblies for fuselage, wings and flight control surface parts for
airlines and other aircraft operators. The flight controls and instrumentation
revenues are derived from designing and engineering of mechanical and
electromechanical controls, such as remote valve operators and push/pull
controls, ranging from simple vent controls to sophisticated flight-critical
engine controls for OEMs and commercial airlines. The Company also performs
repair and overhaul services, and supplies spare parts, for various types of
cockpit instruments and gauges for a broad range of commercial airlines on a
worldwide basis.
The Metals segment produces and distributes electrogalvanized steel, which
can be stamped, formed, welded and painted and coated steel. The Company also
operates a steel service center specializing in flat rolled products and their
processing, including hot and cold rolled sheet and galvanized sheet and coil.
In addition, the Company operates a business engaged in the erection of
structural frameworks for buildings and bridges.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
14. SEGMENT REPORTING (CONTINUED)
Segment operating income is total segment revenue reduced by operating
expenses identifiable with that segment. Corporate includes general corporate
administrative costs and any other costs not identifiable with one of the
Company's segments.
The Company evaluates performance and allocates resources based on operating
income of each reportable segment, rather than at the operating unit level. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies (see Note 2). There are no
intersegment sales. Selected financial information for each reportable segment
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ----------
Net sales:
Aviation................................................................... $ 167,731 $ 242,317 $ 328,577
Metals..................................................................... 82,747 87,141 71,531
---------- ---------- ----------
$ 250,478 $ 329,458 $ 400,108
---------- ---------- ----------
---------- ---------- ----------
Income before income taxes and extraordinary item:
Operating income (expense):
Aviation................................................................... $ 27,505 $ 39,737 $ 58,622
Metals..................................................................... 4,473 5,483 4,440
Gain on sale of businesses................................................. -- 2,250 --
Corporate.................................................................. (4,371) (3,944) (4,490)
---------- ---------- ----------
27,607 43,526 58,572
Interest expense and other................................................. 6,591 3,963 5,144
---------- ---------- ----------
$ 21,016 $ 39,563 $ 53,428
---------- ---------- ----------
---------- ---------- ----------
Assets:
Aviation................................................................... $ 139,988 $ 264,593 $ 395,745
Metals..................................................................... 28,815 33,762 31,228
Corporate.................................................................. 2,512 3,090 1,884
---------- ---------- ----------
$ 171,315 $ 301,445 $ 428,857
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Aviation................................................................... $ 6,756 $ 12,545 $ 18,676
Metals..................................................................... 1,285 1,545 808
Corporate.................................................................. 142 130 5
---------- ---------- ----------
$ 8,183 $ 14,220 $ 19,489
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Aviation................................................................... $ 5,066 $ 7,991 $ 13,301
Metals..................................................................... 979 1,100 1,036
Corporate.................................................................. 28 57 49
---------- ---------- ----------
$ 6,073 $ 9,148 $ 14,386
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
During fiscal years 1997, 1998 and 1999, the Company had foreign sales of
$32,853, $45,237 and $53,400, respectively.
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED:
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL 1998 (1) FISCAL 1999 (2)
------------------------------------------ --------------------------------------------
<CAPTION>
JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
--------- --------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 71,856 $ 75,146 $ 86,170 $ 96,286 $ 91,140 $ 99,482 $ 102,023 $ 107,463
Gross profit....................... 21,099 22,133 24,782 28,133 28,117 31,145 31,534 34,292
Income before extraordinary Item... 4,492 5,695 5,877 7,938 7,594 7,978 8,411 9,164
Extraordinary item, net of tax..... -- 610 -- -- -- -- -- --
Net income......................... 4,492 6,305 5,877 7,938 7,594 7,978 8,411 9,164
Income before extraordinary item
per share:
Basic............................ 0.46 0.58 0.56 0.67 0.64 0.67 0.71 0.77
Diluted.......................... 0.43 0.54 0.52 0.63 0.60 0.63 0.67 0.73
Net income per share:
Basic............................ 0.46 0.65 0.56 0.67 0.64 0.67 0.71 0.77
Diluted.......................... 0.43 0.60 0.52 0.63 0.60 0.63 0.67 0.73
</TABLE>
- ------------------------
(1) In fiscal 1998, the Company acquired JDC, Hydro-Mill, Stolper and Frisby on
April 30, 1997, September 1, 1997, October 29, 1997 and February 18, 1998,
respectively. Also in fiscal 1998, the Company sold substantially all of the
assets of Air Lab and Deluxe on July 31, 1997 and March 31, 1998,
respectively.
(2) In fiscal 1999, the Company acquired Nu-Tech, DG, DV, HTD, Triumph Air
Repair (Europe) and Triumph Precision on July 1, 1998, October 1, 1998,
October 1, 1998, January 1, 1999, January 1, 1999 and February 1, 1999,
respectively.
16. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ----------
Changes in other current assets and liabilities, net of acquisitions and
dispositions of businesses:
Accounts receivable......................................................... $ (5,952) $ (12,081) $ 4,149
Inventories................................................................. (8,060) (8,236) (19,007)
Prepaid expenses and other current assets................................... (323) 67 (950)
Accounts payable, accrued expenses, and accrued income taxes payable........ 852 (90) (1,420)
---------- ---------- ----------
$ (13,483) $ (20,340) $ (17,228)
---------- ---------- ----------
---------- ---------- ----------
Non-cash investing and financing activities:
Covenant not-to-compete contract liability related to acquisition........... $ 2,800 $ 1,800 $ --
Seller note related to acquired business.................................... -- 4,000 --
</TABLE>
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. DISCONTINUED PAPER OPERATIONS
On March 31, 1996, the Company sold substantially all of the assets of its
paper converting subsidiary, Quality Park Products, Inc. of St. Paul, Minnesota,
to Mail-Well, Inc. for approximately $27,350 in cash and the assumption by the
purchaser of certain liabilities.
18. SUBSEQUENT EVENTS
On May 12, 1999, the Company acquired all of the outstanding stock of Ralee
Engineering Company ("Ralee"). Ralee, located in City of Industry, California,
manufactures long structural components such as stringers, cords, floor beams
and spars for the aviation industry. The cash paid at closing of approximately
$13,316 was funded by borrowings under the Company's Credit Facility.
On April 5 and 6, 1999, the Company repurchased an additional 52,500 and
65,000 shares of Common stock, respectively. The aggregate purchase price was
$2,864.
52
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The information required for Directors is included in the Proxy Statement of
Triumph in connection with its 1999 Annual Meeting of Stockholders to be held on
July 28, 1999, under the heading "Proposal No. 1--Election of Directors" and is
incorporated herein by reference.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
ELECTION TO
NAME AGE POSITION PRESENT POSITION
- ------------------------------------------- --- ------------------------------------------- ------------------
<S> <C> <C> <C>
Richard C. Ill............................. 56 President and Chief Executive Officer July 1, 1993
John R. Bartholdson........................ 54 Senior Vice President, Chief Financial July 1, 1993
Officer and Treasurer
Richard M. Eisenstaedt..................... 53 Vice President, General Counsel and October 1, 1996
Secretary
Craig N. Kitchen........................... 48 Vice President March 15, 1999
Paul T. Stimmler........................... 60 Vice President July 1, 1993
Kevin E. Kindig............................ 42 Vice President and Controller July 1, 1993
</TABLE>
RICHARD C. ILL has been President and Chief Executive Officer and a director
of Triumph since 1993. Mr. Ill joined Alco Standard Corporation, now IKON Office
Solutions, in 1968 and became Group Vice President of Metalsource, a steel
distribution business, in 1973. In 1975, Mr. Ill became President of Triumph
Industries and, in 1983, became President of Metalsource. In 1988, Mr. Ill
became President of Alco Diversified Services, a division of Alco. He was named
Vice President of Alco in 1989. Mr. Ill is a member of the Advisory Board of
Outward Bound, USA and the Board of Directors, Chairman's Council and Policy and
Planning Committee of the Steel Service Center Institute.
JOHN R. BARTHOLDSON has been Senior Vice President, Chief Financial Officer
and Treasurer and a director of Triumph since 1993. Mr. Bartholdson joined Alco
Diversified Services in the fall of 1992. Prior to joining Alco Diversified
Services, Mr. Bartholdson was employed for 14 years by Lukens, Inc., the last
five years in the position of Senior Vice President and Chief Financial Officer.
Mr. Bartholdson serves on the Board of Directors of PBHG Funds, Inc.
RICHARD M. EISENSTAEDT became Vice President, General Counsel and Secretary
of Triumph in October 1996. From 1988 to 1996, Mr. Eisenstaedt was an attorney
with Alco and Unisource Worldwide, Inc., an affiliate of Alco, the last two
years as General Counsel of Unisource.
CRAIG N. KITCHEN became Vice President of Triumph in March 1999. From June
1997 to March 1999, Mr. Kitchen was the Director, Airline Propulsion of
AlliedSignal Engines. From October 1995 to June 1997, Mr. Kitchen was the Vice
President, Sales for Stolper-Fabralloy, now a wholly owned subsidiary of
Triumph, and from June 1991 to October 1995, Mr. Kitchen was the Vice President,
Propulsion of AlliedSignal Engines.
PAUL T. STIMMLER has been Vice President of Triumph since 1993 and also
served as Secretary of Triumph until October 1996. From 1989 to 1993, Mr.
Stimmler was Group Vice President of Alco
53
<PAGE>
Diversified Services, responsible for risk management, vehicle leasing,
advertising, benefits administration and human resources.
KEVIN E. KINDIG has been Controller of Triumph since 1993 and Vice President
since April 1999. From 1985 to 1993, Mr. Kindig was employed by Lukens, Inc. in
various positions, as Manufacturing Accounting Manager since 1989 and as a
financial analyst from 1985 to 1989.
The information regarding compliance with Section 16(a) under the Securities
Act is included in the Proxy Statement of Triumph in connection with its 1999
Annual Meeting of Stockholders to be held on July 28, 1999, under the heading
"Section 16(a) Beneficial Ownership--Reporting Compliance" and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required regarding executive compensation is included in the
Proxy Statement of Triumph in connection with its 1999 Annual Meeting of
Stockholders to be held on July 28, 1999, under the heading "Executive
Compensation" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required regarding security ownership is included in the
Proxy Statement of Triumph in connection with its 1999 Annual Meeting of
Stockholders to be held on July 28, 1999, under the heading "Security Ownership
of Principal Stockholders and Management" and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
(a)(1) The following consolidated financial statements are included in Item
8 of this report:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Triumph Group, Inc., Report of Ernst & Young, LLP, Independent Auditors.............
Consolidated Balance Sheet as of March 31, 1998 and 1999............................ 31
Consolidated Statements of Income for the Fiscal Years Ended March 31, 1997, 1998
and 1999.......................................................................... 32
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended March 31,
1997, 1998 and 1999............................................................... 33
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 1997,
1998 and 1999..................................................................... 34
Notes to Consolidated Financial Statements.......................................... 35
</TABLE>
(a)(2) The following financial statement schedule is included in this
report:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Schedule II--Valuation and Qualifying Accounts...................................... 54
</TABLE>
All other schedules have been omitted as not applicable or because the
information is included elsewhere in the Consolidated Financial Statements or
notes thereto.
(a)(3) The following is a list of exhibits. Where so indicated by footnote,
exhibits which were previously filed are incorporated by reference.
54
<PAGE>
TRIUMPH GROUP, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING ADDITIONS
OF CHARGED TO ADDITIONS(1) BALANCE AT
YEAR EXPENSE (DEDUCTIONS) (2) END OF YEAR
----------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
For year ended March 31, 1999: $ 207
Allowance for doubtful accounts receivable.............. $ 1,840 $ 508 (648) $ 1,907
For year ended March 31, 1998: 495
Allowance for doubtful accounts receivable.............. 1,619 173 (447) 1,840
For year ended March 31, 1997: 36
Allowance for doubtful accounts receivable.............. 973 959 (349) 1,619
</TABLE>
- ------------------------
(1) Additions consist of accounts receivable recoveries, miscellaneous
adjustments and amounts recorded in conjunction with the acquisitions of
Advanced Materials Technologies, Inc., JDC Company, Hydro-Mill Co.,
Stolper-Fabralloy Company, Frisby Aerospace, Inc., Nu-Tech Industries, Inc.,
DG Industries, Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd.,
HTD Aerospace, Inc. and Triumph Precision, Inc.
(2) Deductions represent write-offs of related account balances and amounts
recorded in conjunction with the sales of Air Lab, Inc. and Deluxe
Specialties, Mfg. Co.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ----------------- -------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of Triumph Group, Inc.*
3.2 Bylaws of Triumph Group, Inc.*
3.3 Certificate of Amendment to Amended and Restated Certificate of Incorporation of Triumph Group,
Inc.
4 Form of certificate evidencing Common Stock of Triumph Group, Inc.*
10.1 Form of Employment Agreement with Richard C. Ill.*
10.2 Form of Employment Agreement with John R. Bartholdson.*
10.3 Purchase Agreement dated as of July 22, 1993 between Triumph and Citicorp Venture Capital, Ltd.*
10.4 Registration Agreement dated as of July 22, 1993 among Triumph, Citicorp Venture Capital, Ltd.,
World Equity Partners, L.P. and certain members of management of Triumph.*
10.5 Warrant dated July 22, 1993 issued to World Equity Partners, L.P.*
10.6 Warrant Agreement dated as of July 22, 1993 among Triumph, Citicorp Venture Capital, Ltd. and
World Equity Partners, L.P.*
10.7 Asset Purchase Agreement dated as of December 31, 1995 among Triumph, Triumph Control Systems,
Inc. and Teleflex Incorporated.*
10.8 Subordinated Promissory Note dated December 31, 1995 payable to Teleflex Incorporated.*
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ----------------- -------------------------------------------------------------------------------------------------
<C> <S>
10.9 Stock Purchase Agreement dated as of July 31, 1996 among The Triumph Group Holdings, Inc.,
Advanced Materials Technologies, Inc. and certain members of management of Advanced Materials
Technologies, Inc.*
10.10 Executive Securities Agreement dated July 31, 1996 between Triumph and Jay Donkersloot, as
amended.*
10.11 Non-Competition Agreement dated July 31, 1996 between Triumph and Jay Donkersloot.*
10.12 Executive Stock Agreement dated as of May 9, 1995 between Triumph and John M. Brasch.*
10.13 Form of 1996 Stock Option Plan.*
10.14 Form of Executive Securities Agreement.*
10.15 Executive Stock Agreement between Triumph and Richard C. Ill.*
10.16 Executive Stock Agreement between Triumph and John R. Bartholdson.*
10.17 Executive Stock Agreement between Triumph and Paul T. Stimmler.*
10.18 Executive Stock Agreement between Triumph and Kevin E. Kindig.*
10.19 Agreement with Hydro-Mill Co. dated September 2, 1997.**
10.20 Agreement with Stolper-Fabralloy Company, L.L.C. dated October 29, 1997.***
10.21 Agreement with Nu-Tech Industries Holding Company and the Stockholders thereof effective as of
July 1, 1998.****
10.22 Agreement with Charles M. Newell and Henry H. Newell effective as of July 1, 1998.****
10.23 Directors' Stock Option Plan.
10.24 Second Amended and Restated Credit Agreement dated June 11, 1999 among Triumph Group, Inc., PNC
Bank, National Association as Administrative and Documentation Agent, First Union National Bank
as Syndication Agent and Mellon Bank, N.A. as Co-Agent.
21.1 Subsidiaries of Triumph Group, Inc.
23.1 Consent of Ernst & Young LLP.
27 Financial Data Schedule for the year ended March 31, 1999.
</TABLE>
- ------------------------
* Incorporated by reference to Triumph's Registration Statement on Form S-1
(Registration No. 333-10777), declared effective on October 24, 1996.
** Incorporated by reference to Triumph's Current Report on Form 8-K filed
September 14, 1997.
*** Incorporated by reference to Triumph's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997.
**** Incorporated by reference to Triumph's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998.
REPORTS ON FORM 8-K
Triumph filed no reports on Form 8-K during the quarter ended March 31,
1999.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed by the undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: June 24, 1999 TRIUMPH GROUP, INC.
By: /s/ RICHARD C. ILL
-----------------------------------------
Richard C. Ill
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
President, Chief Executive
/s/ RICHARD C. ILL Officer and Director
- ------------------------------ (Principal Executive June 24, 1999
Richard C. Ill Officer)
Senior Vice President,
/s/ JOHN R. BARTHOLDSON Chief Financial Officer,
- ------------------------------ Treasurer and Director June 24, 1999
John R. Bartholdson (Principal Financial
Officer)
/s/ KEVIN E. KINDIG
- ------------------------------ Controller (Principal June 24, 1999
Kevin E. Kindig Accounting Officer)
/s/ RICHARD C. GOZON
- ------------------------------ Director June 24, 1999
Richard C. Gozon
/s/ CLAUDE F. KRONK
- ------------------------------ Director June 24, 1999
Claude F. Kronk
/s/ JOSEPH M. SILVESTRI
- ------------------------------ Director June 24, 1999
Joseph M. Silvestri
/s/ MICHAEL A. DELANEY
- ------------------------------ Director June 24, 1999
Michael A. Delaney
/s/ WILLIAM O. ALBERTINI
- ------------------------------ Director June 24, 1999
William O. Albertini
</TABLE>
57
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TRIUMPH GROUP, INC.
It is hereby certified that:
1. Article FOURTH, Part A of the Amended and Restated Certificate of
Incorporation is hereby amended to read in its entirety as follows:
"FOURTH: A. The number of shares of stock which the
Corporation will have authority to issue is 50,000,000 shares of Common Stock,
$.001 par value per share ("Common Stock"), 6,000,000 shares of Class D Common
Stock, $.001 par value per share ("Class D Common Stock"), and 250,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock")."
2. This Amendment to the Amended and Restated Certificate of
Incorporation was duly adopted, pursuant to the provisions of Section 242 of the
General Corporation Law of the State of Delaware, at a meeting of all of the
Directors, duly convened pursuant to notice, at which a quorum was present and
acting throughout, and at a meeting of stockholders of the Corporation pursuant
to the vote of the holders of a majority of the outstanding voting stock of the
Corporation, duly convened pursuant to notice, at which a quorum was present and
acting throughout.
Signed and attested to on July 31, 1998.
Triumph Group, Inc.
By: /s/ Richard C. Ill
------------------------
Richard C. Ill
Attest:
/s/ Richard M. Eisenstaedt
- ------------------------------
Richard M. Eisenstaedt, Secretary
<PAGE>
EXHIBIT 10.23
TRIUMPH GROUP, INC.
DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of this Directors' Stock Option Plan (the "Plan")
is to enable Triumph Group, Inc. (the "Company") to attract and retain qualified
independent directors and to further promote the mutuality of interests between
such directors and the Company's stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the
following meanings:
2.1 "BOARD" shall mean the Board of Directors of the Company.
2.2 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
2.3 "COMMON STOCK" means the Common Stock, $.001 par value per
share, of the Company.
2.4 "EFFECTIVE DATE" shall mean the date on which the Plan is
approved by the Company's stockholders.
2.5 "ELIGIBLE DIRECTOR" shall mean any member of the Board
who, on the date of the granting of an Option, is not an officer or an employee
of the Company or any of the Company's subsidiaries.
2.6 "FAIR MARKET VALUE" for purposes of the Plan, unless
otherwise required by any applicable provision of the Code or any regulations
issued thereunder, shall mean, as of any date, the previous day's closing price
of actual sales of shares of Common Stock on the principal national securities
exchange on which the Common Stock is listed, or if not listed, as reported on
the Nasdaq Stock Market on such date, or, if such the Common Stock was not
traded or reported on such date, on the last preceding day on which the Common
Stock was traded or reported.
1
<PAGE>
2.7 "MATURE COMMON STOCK" shall mean Common Stock owned for
six months or more, or such other period as the Board may determine subject to
applicable accounting regulations, by the respective Participant.
2.8 "PARTICIPANT" shall mean an Eligible Director to whom an
Option has been granted under the Plan.
2.9 "STOCK OPTION" or "OPTION" shall mean any option to
purchase shares of Common Stock granted pursuant to Article VI of the Plan.
ARTICLE III
ADMINISTRATION
3.1 ADMINISTRATION. The Plan shall be administered and
interpreted by the Board.
3.2 GUIDELINES. Subject to Article VII hereof, the Board shall
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Option
granted under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent it shall deem necessary to carry the Plan into
effect. Notwithstanding the foregoing, no action of the Board under this Section
3.2 shall impair the rights of any Participant without the Participant's
consent, unless otherwise required by law.
3.3 DECISIONS FINAL. Any decision, interpretation or other
action made or taken in good faith by the Board arising out of or in connection
with the Plan shall be final, binding and conclusive on the Company, all members
of the Board and their respective heirs, executors, administrators, successors
and assigns.
ARTICLE IV
SHARE LIMITATION
4.1 SHARES. The maximum aggregate number of shares of Common
Stock that may be issued upon exercise of Options is 40,000 (subject to any
increase or decrease pursuant to Section 4.2), which may be either authorized
and unissued shares of Common Stock or issued Common Stock reacquired by the
Company. If any Option granted under the Plan shall expire, terminate or be
canceled for any reason without having been exercised in full, the number of
unpurchased shares shall again be available for the purposes of the Plan.
2
<PAGE>
4.2 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event
of a reorganization, recapitalization, stock split, reverse stock split,
spin-off, split-off, split up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to stockholders in respect of stock other than a cash dividend, the Board shall
make such adjustments in the number and kind of shares authorized by the Plan,
in the minimum and maximum limits set forth in Section 6.2 and in any
outstanding Options as it determines appropriate. No fractional shares of Common
Stock shall be issued pursuant to such an adjustment. The Fair Market Value of
any fractional shares resulting from adjustments pursuant to this section shall,
where appropriate, be paid in cash to the Participant. If during the term of any
Option granted hereunder the Company shall be, with the prior approval of a
majority of the members of the Board, merged into or consolidated with or
otherwise combined with or acquired by a person or entity, or there is a
liquidation of the Company, then at the election of the Board, the Company may
take such other action as the Board shall determine to be reasonable under the
circumstances to permit the Participant to realize the value of such Option,
including without limitation paying cash to such Participant equal to the value
of the Option or requiring the acquiring corporation to grant options or stock
to such Participant having a value equal to the value of the Option.
ARTICLE V
ELIGIBILITY
5.1 ELIGIBLE DIRECTORS. Only Eligible Directors are eligible
to be granted Options under the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 OPTIONS. All Stock Options granted under the Plan shall
be non-qualified stock options (I.E., options that do not qualify as incentive
stock options under section 422 of the Code).
6.2 GRANTS. The Board shall have full authority to make the
following types of grants under the Plan.
(a) ANNUAL GRANTS. For as long as the Plan remains in
effect, the Board shall make an annual grant to each Eligible Director of Stock
Options to purchase at least 500 shares of Common Stock, but no more than 1,000
shares of Common Stock. Subject to the minimum and maximum limits set forth in
the preceding sentence, the number of shares of Common Stock subject to
3
<PAGE>
such grants to Eligible Directors in any year shall be determined by the Board,
and may vary from year to year.
(b) NEW DIRECTOR GRANTS. For as long as the Plan
remains in effect, the Board may grant to any Eligible Director, upon his or her
initial election to the Board, Stock Options to purchase up to 5,000 shares of
Common Stock. Subject to the maximum limit set forth in the preceding sentence,
the number of shares of Common Stock subject to such Stock Options shall be
determined by the Board, and may be greater than or less than the number of
shares of Common Stock subject to any prior grants.
(c) DISCRETIONARY GRANTS. In addition to the grants
described in (a) and (b) above, the Board may from time to time grant to any
Eligible Director Stock Options to purchase shares of Common Stock. The Board
shall have full authority to select the Eligible Directors to whom such Options
are to be granted and to determine the number of shares of Common Stock to be
covered by each such Option.
6.3 TERMS OF OPTIONS. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the Board
shall deem desirable:
(a) STOCK OPTION CERTIFICATE. Each Stock Option shall
be evidenced by, and subject to the terms of, a Stock Option Certificate
executed by the Company. The Stock Option Certificate shall specify the number
of shares of Common Stock subject to the Stock Option, the option price, the
option term, and such other terms and conditions, consistent with the provisions
of the Plan, as the Board shall deem advisable.
(b) OPTION PRICE. The option price per share of
Common Stock purchasable upon exercise of a Stock Option shall be equal to the
Fair Market Value of a share of Common Stock on the date of grant.
(c) OPTION TERM. The term of each Stock Option shall
be ten years from the date of grant.
(d) EXERCISABILITY. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Board at the time of grant; provided that the Board
may waive any installment exercise or waiting period provisions, in whole or in
part, at any time, based on such factors as the Board shall, in its sole
discretion, deem appropriate.
(e) METHOD OF EXERCISE. Stock Options may be
exercised in whole or in part at any time during the option term by delivering
to the Company written notice of exercise specifying the number of shares of
Common Stock to be purchased and the option price therefor. The notice of
exercise shall be accompanied by payment in full of the option price and, if
requested, by the representation described in Section 9.2. The option price may
paid in cash or by check payable to the
4
<PAGE>
Company or, with the consent of the Board on or after the date of grant, in
whole or in part in shares of Mature Common Stock or by a reduction in the
number of shares of Common Stock otherwise issuable upon such exercise, with the
shares of Common Stock in either case valued at the Fair Market Value on the
date of exercise. Upon payment in full of the option price and satisfaction of
the other conditions provided herein, a stock certificate representing the
number of shares of Common Stock to which the Participant is entitled shall be
issued and delivered to the Participant.
(f) TERMINATION. Unless otherwise determined by the
Board, Stock Options held by a Participant who ceases to be a member of the
Board shall be exercisable as follows:
(i) If the Participant ceases to be a member
of the Board by reason of death, any Stock Option held by such Participant may
thereafter be exercised, to the extent such Option was exercisable at the time
of death or on such accelerated basis as the Board may determine at or after
grant, by the legal representative of the Participant's estate, until the
expiration of the stated term of the Option or until such earlier time as the
Board may determine at the time the Option is granted or such accelerated basis
is determined.
(ii) If the Participant ceases to be a
member of the Board by reason of disability (as determined by the Board), any
Stock Option held by such Participant may thereafter be exercised by the
Participant (or, where appropriate, the Participant's legal representative), to
the extent it was exercisable at the time the Participant ceased to be a member
of the Board or on such accelerated basis as the Board may determine at or after
grant, until the expiration of the stated term of the Option or until such
earlier time as the Board may determine at the time the Option is granted or
such accelerated basis is determined.
(iii) If the Participant ceases to be a
member of the Board for any reason other than death or disability, the Stock
Option shall terminate 30 days after the date on which the Participant ceased to
be a member of the Board; provided, however, that the Board may extend such
exercise period based on such factors as the Board shall, in its sole
discretion, deem appropriate, but not beyond the expiration of the stated term
of the Option.
6.4 RIGHTS AS SHAREHOLDER. A Participant shall not be deemed
to be the holder of Common Stock, or have any of the rights of a holder of
Common Stock, with respect to shares subject to an Option, until the Option is
exercised and a stock certificate representing such shares of Common Stock is
issued to the Participant.
ARTICLE VII
TERMINATION OR AMENDMENT
7.1 TERMINATION OR AMENDMENT OF PLAN. The Board may at any
time amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to
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ensure that the Company may comply with any regulatory requirement referred to
in Article IX); provided, however, that, unless otherwise required by law, the
rights of a Participant with respect to Options granted prior to such amendment,
discontinuance or termination may not be impaired without the consent of such
Participant.
7.2 AMENDMENT OF OPTIONS. The Board may amend the terms of any
Stock Option previously granted, prospectively or retroactively, but, subject to
Article IV, no such amendment or other action by the Board shall impair the
rights of any holder without the holder's consent.
ARTICLE VIII
UNFUNDED PLAN
8.1 UNFUNDED STATUS OF PLAN. The Plan is intended to
constitute an "unfunded" plan for incentive compensation. With respect to any
payment not yet made to a Participant by the Company, nothing contained herein
shall give the Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONASSIGNMENT. Except as otherwise provided in the Plan,
any Option granted hereunder and the rights and privileges conferred thereby
shall not be sold, transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any such Option, right or privilege
contrary to the provisions hereof, or upon the levy of any attachment or similar
process thereon, such Option and the rights and privileges conferred hereby
shall immediately terminate and the Option shall immediately be forfeited to the
Company.
9.2 LEGEND. The Board may require each person purchasing
shares upon exercise of a Stock Option to represent to the Company in writing
that the Participant is acquiring the shares without a view to distribution
thereof. The stock certificates representing such shares may include any legend
which the Board deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Board may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed, any applicable Federal or state
securities law,
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and any applicable corporate law, and the Board may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions.
9.3 OTHER PLANS. Nothing contained in the Plan shall prevent
the Board from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
9.4 NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor the
grant of any Option hereunder shall confer upon any person the right to continue
as a director of the Company or obligate the Company to nominate any director
for reelection by the Company's stockholders.
9.5 LISTING AND OTHER CONDITIONS.
(a) If the Common Stock is listed on a national
securities exchange, the issuance of any shares of Common Stock upon exercise of
an Option shall be conditioned upon such shares being listed on such exchange.
The Company shall have no obligation to issue any shares of Common Stock upon
exercise of an Option unless and until such shares are so listed, and the right
to exercise any Option shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of
the opinion that any sale or delivery of shares of Common Stock upon exercise of
an Option is or may in the circumstances be unlawful or result in the imposition
of excise taxes under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock, and the right to exercise any
Option shall be suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful or shall not result in the imposition of excise taxes.
(c) Upon termination of any period of suspension
under this Section 9.5, any Option affected by such suspension which shall not
then have expired or terminated shall be reinstated as to all shares available
before such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension shall
extend the term of any Option.
9.6 GOVERNING LAW. The Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of Delaware.
9.7 CONSTRUCTION. Wherever any words are used in the Plan in
the masculine gender they shall be construed as though they were also used in
the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
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9.8 LIABILITY OF BOARD MEMBERS. No member of the Board nor any
employee of the Company or any of its subsidiaries shall be liable for any act
or action hereunder, whether of omission or commission, by any other member or
employee or by any agent to whom duties in connection with the administration of
the Plan have been delegated or, except in circumstances involving bad faith,
gross negligence or fraud, for anything done or omitted to be done by himself.
9.9 COSTS. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock upon exercise of Stock Options.
9.10 SEVERABILITY. If any part of the Plan shall be determined
to be invalid or void in any respect, such determination shall not affect,
impair, invalidate or nullify the remaining provisions of the Plan which shall
continue in full force and effect.
9.11 SUCCESSORS. The Plan shall be binding upon and inure to
the benefit of any successor or successors of the Company.
9.12 HEADINGS. Article and section headings contained in this
Plan are included for convenience only and are not to be used in construing or
interpreting the Plan.
9.13 CHANGE IN CONTROL. Upon the occurrence of a Change in
Control, each Option then outstanding shall become immediately exercisable to
the full extent of the shares of Common Stock subject thereto. For purposes of
this Plan, a "Change in Control" shall be deemed to have occurred if at any time
after the Effective Date any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) becomes the "beneficial owner" (as defined in Section 13(d)(3) under the
1934 Act) of securities of the Company representing more than 35 percent (35%)
of the total aggregate voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors, and such person or
group owns more aggregate voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors than any
other person or group. Notwithstanding anything else contained in this Section
9.13, a Participant shall be eligible to exercise Options both before and after
a Change in Control to the full extent otherwise permitted under the Plan.
ARTICLE X
TERM OF PLAN
10.1 EFFECTIVE DATE. The Plan shall be effective as of the
Effective Date.
10.2 TERMINATION. Unless sooner terminated, the Plan shall
terminate ten years after it is adopted by the Board and no Options may be
granted thereafter. Termination of the Plan shall not affect Options granted
before such date, which will continue to be exercisable after the Plan
terminates.
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Exhibit 10.24
$250,000,000 REVOLVING CREDIT FACILITY
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
by and among
TRIUMPH GROUP, INC.
AS BORROWER
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION
AS ADMINISTRATIVE AND DOCUMENTATION AGENT
FIRST UNION NATIONAL BANK AS SYNDICATION AGENT
MELLON BANK, N.A. AS CO-AGENT
Dated as of June 11, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
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1. CERTAIN DEFINITIONS.....................................................................................1
1.1 Certain Definitions............................................................................1
1.2 Construction..................................................................................13
1.2.1 Number; Inclusion....................................................................13
1.2.2 Determination........................................................................13
1.2.3 Administrative Agent's Discretion and Consent........................................14
1.2.4 Documents Taken as a Whole...........................................................14
1.2.5 Headings.............................................................................14
1.2.6 Implied References to this Agreement.................................................14
1.2.7 Persons..............................................................................14
1.2.8 Modifications to Documents...........................................................14
1.2.9 From, To and Through.................................................................14
1.2.10 Shall; Will..........................................................................15
1.3 Accounting Principles.........................................................................15
2. REVOLVING CREDIT FACILITY..............................................................................15
2.1 Revolving Credit Commitments..................................................................15
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans...........................15
2.3 Commitment Fees...............................................................................15
2.4 Revolving Credit Loan Requests................................................................16
2.5 Making Revolving Credit Loans.................................................................16
2.6 Revolving Credit Notes........................................................................17
2.7 Use of Proceeds...............................................................................17
2.8 Letter of Credit Subfacility..................................................................17
2.8.1 Issuance of Letters of Credit........................................................17
2.8.2 Participations.......................................................................17
2.8.3 Letter of Credit Fees................................................................18
2.8.4 Disbursements, Reimbursement.........................................................18
2.8.5 Documentation........................................................................18
2.8.6 Determinations to Honor Drawing Requests.............................................19
2.8.7 Nature of Participation and Reimbursement Obligations................................19
2.8.8 Indemnity............................................................................20
2.8.9 Liability for Acts and Omissions.....................................................20
2.8.10 Extension by Banks of the Expiration Date............................................21
3. INTEREST RATES.........................................................................................21
3.1 Interest Rate Options.........................................................................21
3.1.1 Revolving Credit Interest Rate Options...............................................21
3.1.2 Rate Quotations......................................................................22
3.2 Interest Periods..............................................................................22
3.2.1 Ending Date and Business Day.........................................................22
3.2.2 Amount of Borrowing Tranche..........................................................22
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3.2.3 Termination Before Expiration Date...................................................22
3.2.4 Renewals.............................................................................22
3.3 Interest After Default........................................................................23
3.3.1 Letter of Credit Fees, Interest Rate.................................................23
3.3.2 Other Obligations....................................................................23
3.3.3 Acknowledgment.......................................................................23
3.4 Euro-Rate Unascertainable.....................................................................23
3.4.1 Unascertainable......................................................................23
3.4.2 Illegality; Increased Costs; Deposits Not Available..................................23
3.4.3 Administrative Agent's and Banks' Rights.............................................24
3.5 Selection of Interest Rate Options............................................................24
4. PAYMENTS...............................................................................................25
4.1 Payments......................................................................................25
4.2 Pro Rata Treatment of Banks...................................................................25
4.3 Interest Payment Dates........................................................................25
4.4 Voluntary Prepayments and Commitment Reductions...............................................26
4.4.1 Right to Prepay......................................................................26
4.4.2 Replacement of a Bank................................................................27
4.4.3 Right to Reduce Commitments..........................................................27
4.5 Additional Compensation in Certain Circumstances..............................................27
4.5.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc.................................................27
4.5.2 Indemnity............................................................................28
5. REPRESENTATIONS AND WARRANTIES.........................................................................29
5.1 Representations and Warranties................................................................29
5.1.1 Organization and Qualification.......................................................29
5.1.2 Capitalization and Ownership.........................................................29
5.1.3 Subsidiaries.........................................................................29
5.1.4 Power and Authority..................................................................30
5.1.5 Validity and Binding Effect..........................................................30
5.1.6 No Conflict..........................................................................30
5.1.7 Litigation...........................................................................31
5.1.8 Title to Properties..................................................................31
5.1.9 Financial Statements.................................................................31
5.1.10 Margin Stock.........................................................................31
5.1.11 Full Disclosure......................................................................32
5.1.12 Taxes................................................................................32
5.1.13 Consents and Approvals...............................................................32
5.1.14 No Event of Default; Compliance with Instruments.....................................33
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.......................................33
5.1.16 Insurance............................................................................33
5.1.17 Compliance with Laws.................................................................33
5.1.18 Material Contracts...................................................................33
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5.1.19 Investment Companies.................................................................34
5.1.20 Plans and Benefit Arrangements.......................................................34
5.1.21 Employment Matters...................................................................35
5.1.22 Environmental Matters................................................................35
5.1.23 Senior Debt Status...................................................................36
5.1.24 Year 2000............................................................................36
5.2 Updates to Schedules..........................................................................37
6. CONDITIONS OF LENDING..................................................................................37
6.1 First Loans...................................................................................37
6.1.1 Officer's Certificate................................................................37
6.1.2 Secretary's Certificate..............................................................37
6.1.3 Delivery of Notes and Guaranty.......................................................38
6.1.4 Opinion of Counsel...................................................................38
6.1.5 Legal Details........................................................................38
6.1.6 Payment of Fees......................................................................38
6.1.7 Consents.............................................................................38
6.1.8 Officer's Certificate Regarding MACs.................................................38
6.1.9 No Violation of Laws.................................................................38
6.1.10 No Actions or Proceedings............................................................39
6.2 Each Additional Loan..........................................................................39
7. COVENANTS..............................................................................................39
7.1 Affirmative Covenants.........................................................................39
7.1.1 Preservation of Existence, Etc.......................................................39
7.1.2 Payment of Liabilities, Including Taxes, Etc.........................................39
7.1.3 Maintenance of Insurance.............................................................40
7.1.4 Maintenance of Properties and Leases.................................................41
7.1.5 Maintenance of Patents, Trademarks, Etc..............................................41
7.1.6 Visitation Rights....................................................................41
7.1.7 Keeping of Records and Books of Account..............................................41
7.1.8 Plans and Benefit Arrangements.......................................................41
7.1.9 Compliance with Laws.................................................................42
7.1.10 Use of Proceeds......................................................................42
7.1.11 Subsidiary Dividends.................................................................42
7.2 Negative Covenants............................................................................42
7.2.1 Indebtedness.........................................................................42
7.2.2 Liens................................................................................43
7.2.3 Guaranties...........................................................................43
7.2.4 Loans and Investments................................................................44
7.2.5 Dividends and Related Distributions..................................................44
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions..................................45
7.2.7 Dispositions of Assets or Subsidiaries...............................................46
7.2.8 Affiliate Transactions...............................................................47
7.2.9 Subsidiaries, Partnerships and Joint Ventures........................................47
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7.2.10 Continuation of Present Business.....................................................47
7.2.11 Plans and Benefit Arrangements.......................................................47
7.2.12 Fiscal Year..........................................................................48
7.2.13 Issuance of Stock....................................................................48
7.2.14 Changes in Organizational Documents..................................................49
7.2.15 Operating Leases.....................................................................49
7.2.16 Minimum Interest Coverage Ratio......................................................49
7.2.17 Maximum Total Indebtedness to EBITDA Ratio...........................................49
7.2.18 Minimum Net Worth....................................................................49
7.2.19 Negative Pledges.....................................................................50
7.2.20 Capital Expenditures.................................................................50
7.3 Reporting Requirements........................................................................50
7.3.1 Quarterly Financial Statements.......................................................50
7.3.2 Annual Financial Statement...........................................................50
7.3.3 Compliance Certificate...............................................................51
7.3.4 Notice of Default....................................................................51
7.3.5 Notice of Litigation.................................................................51
7.3.6 Certain Events.......................................................................52
7.3.7 Budgets, Forecasts, Other Reports and Information....................................52
7.3.8 Notices Regarding Plans and Benefit Arrangements.....................................53
7.3.8.1 Certain Events..............................................................52
7.3.8.2 Notices of Involuntary Termination and Annual Reports.......................53
7.3.8.3 Notice of Voluntary Termination.............................................54
8. DEFAULT................................................................................................54
8.1 Events of Default.............................................................................54
8.1.1 Payments Under Loan Documents........................................................54
8.1.2 Breach of Warranty...................................................................54
8.1.3 Refusal to Permit Inspections; Breach of Negative Covenants..........................54
8.1.4 Breach of Other Covenants............................................................54
8.1.5 Defaults in Other Agreements or Indebtedness.........................................55
8.1.6 Final Judgments or Orders............................................................55
8.1.7 Loan Document Unenforceable..........................................................55
8.1.8 Uninsured Losses; Proceedings Against Assets.........................................55
8.1.9 Notice of Lien or Assessment.........................................................55
8.1.10 Insolvency...........................................................................56
8.1.11 Events Relating to Plans and Benefit Arrangements....................................56
8.1.12 Cessation of Business................................................................56
8.1.13 Change of Control....................................................................56
8.1.14 Involuntary Proceedings..............................................................57
8.1.15 Voluntary Proceedings................................................................57
8.2 Consequences of Event of Default..............................................................57
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings..........................................................................57
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.................................58
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8.2.3 Set-off..............................................................................58
8.2.4 Suits, Actions, Proceedings..........................................................59
8.2.5 Application of Proceeds..............................................................59
9. THE AGENT..............................................................................................59
9.1 Appointment...................................................................................59
9.2 Delegation of Duties..........................................................................60
9.3 Nature of Duties; Independent Credit Investigation............................................60
9.4 Actions in Discretion of Administrative Agent; Instructions from the Banks....................60
9.5 Reimbursement and Indemnification of Administrative Agent by the Borrower.....................61
9.6 Exculpatory Provisions........................................................................61
9.7 Reimbursement and Indemnification of Administrative Agent by Banks............................62
9.8 Reliance by Administrative Agent..............................................................62
9.9 Notice of Default.............................................................................63
9.10 Notices.......................................................................................62
9.11 Banks in Their Individual Capacities..........................................................62
9.12 Holders of Notes..............................................................................63
9.13 Equalization of Banks.........................................................................63
9.14 Successor Administrative Agent................................................................64
9.15 Administrative Agent's Fee....................................................................64
9.16 Availability of Funds.........................................................................64
9.17 Calculations..................................................................................65
9.18 Beneficiaries.................................................................................65
10. MISCELLANEOUS..........................................................................................65
10.1 Modifications, Amendments or Waivers..........................................................65
10.1.1 Increase of Commitment; Extension or Expiration Date.................................66
10.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of
Terms of Payment.....................................................................66
10.1.3 Miscellaneous........................................................................66
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.....................................66
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes.............................66
10.4 Holidays......................................................................................67
10.5 Funding by Branch, Subsidiary or Affiliate....................................................68
10.5.1 Notional Funding.....................................................................68
10.5.2 Actual Funding.......................................................................68
10.6 Notices.......................................................................................69
10.7 Severability..................................................................................69
10.8 Governing Law.................................................................................69
10.9 Prior Understanding...........................................................................70
10.10 Duration; Survival............................................................................70
10.11 Successors and Assigns........................................................................70
10.12 Confidentiality...............................................................................71
10.13 Counterparts..................................................................................71
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10.14 Administrative Agent's or Bank's Consent......................................................71
10.15 Exceptions....................................................................................72
10.16 Consent to Forum; Waiver of Jury Trial........................................................72
10.17 Tax Withholding Clause........................................................................72
10.18 Public Filings................................................................................73
</TABLE>
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C> <C>
SCHEDULES
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES
SCHEDULE 5.1.8 - TITLE TO PROPERTY
SCHEDULE 5.1.13 - CONSENTS AND APPROVALS
SCHEDULE 5.1.20 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.22 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(P) - PRICING GRID
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 2.4 - LOAN REQUEST
EXHIBIT 7.3.3 - COMPLIANCE CERTIFICATE
</TABLE>
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<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of June
11, 1999 and is to be effective as of June 16, 1999 and is made by and among
TRIUMPH GROUP, INC., a Delaware corporation, (the "BORROWER"), the BANKS (as
hereinafter defined), PNC BANK, NATIONAL ASSOCIATION, in its capacity as
administrative agent for the Banks under this Agreement (hereinafter referred to
in such capacity as the "ADMINISTRATIVE AGENT"), FIRST UNION NATIONAL BANK, in
its capacity as syndication agent for the Banks under this Agreement
(hereinafter referred to in such capacity as the "SYNDICATION AGENT"), and
MELLON BANK, N.A., in its capacity as co-agent for the Banks under this
Agreement (hereinafter referred to in such capacity as the "CO-AGENT").
WITNESSETH:
WHEREAS, certain of the Banks currently provide a revolving credit
facility for the Borrower in an aggregate principal amount of up to $125,000,000
pursuant to a First Amended and Restated Credit Agreement dated as of March 30,
1998, as amended (the "1998 CREDIT AGREEMENT"); and
WHEREAS, the parties wish to amend and restate the 1998 Credit
Agreement on the terms and conditions set forth below in order to, among other
things, increase the credit extended to $250,000,000 and provide for additional
Banks as party to this Agreement; and
WHEREAS, in order to induce the Banks to become parties to this
Agreement, the Borrower's Subsidiaries (as defined herein) have executed a
Guaranty and Suretyship Agreement dated as of the date hereof in favor of the
Administrative Agent for the benefit of the Banks;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS.
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
ADMINISTRATIVE AGENT shall mean PNC Bank, National Association, and its
successors and assigns, as Administrative and Documentation Agent
ADMINISTRATIVE AGENT'S FEE shall have the meaning assigned to that term
in Section 9.15.
ADMINISTRATIVE AGENT'S LETTER shall have the meaning assigned to that
term in Section 9.15.
<PAGE>
AFFILIATE as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 10% or more of any class
of the voting or other equity interests of such Person, or (iii) 10% or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
AGREEMENT shall mean this Second Amended and Restated Credit Agreement,
as the same may be supplemented or amended from time to time, including all
schedules and exhibits.
ANNUAL STATEMENTS shall have the meaning assigned to that term in
Section 5.1.9(i).
ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment and
Assumption Agreement by and among a Purchasing Bank, the Transferor Bank and the
Administrative Agent, as Administrative Agent and on behalf of the remaining
Banks, substantially in the form of EXHIBIT 1.1(A).
AUTHORIZED OFFICER shall mean those individuals, designated by written
notice to the Administrative Agent from the Borrower, authorized to execute
notices, reports and other documents on behalf of the Borrower required
hereunder. The Borrower may amend such list of individuals from time to time by
giving written notice of such amendment to the Administrative Agent.
BANKS shall mean the financial institutions named on SCHEDULE 1.1(B)
and their respective successors and assigns as permitted hereunder, each of
which is referred to herein as a Bank.
BASE RATE shall mean the greater of (i) the interest rate per annum
announced from time to time by the Administrative Agent at its Principal Office
as its then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Administrative Agent, or (ii) the Federal Funds
Effective Rate plus 1/2% per annum.
BASE RATE OPTION shall mean the Revolving Credit Base Rate Option.
BENEFIT ARRANGEMENT shall mean at any time an "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
BORROWER shall mean Triumph Group, Inc.
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BORROWING DATE shall mean, with respect to any Loan, the date for the
making thereof or the renewal or conversion thereof to the same or a different
Interest Rate Option, which shall be a Business Day.
BORROWING TRANCHE shall mean specified portions of Loans outstanding as
follows: (i) any Loans to which a Euro-Rate Option applies which become subject
to the same Interest Rate Option under the same Loan Request by the Borrower and
which have the same Interest Period shall constitute one Borrowing Tranche, and
(ii) all Loans to which a Base Rate Option applies shall constitute one
Borrowing Tranche.
BUSINESS DAY shall mean any day other than a Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required to be closed
for business in Pittsburgh, Pennsylvania.
CAPITAL STOCK shall mean any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
CLOSING DATE shall mean June 11, 1999.
CO-AGENT shall mean Mellon Bank, N.A., and its successors and assigns,
as Co-Agent.
COMMITMENT shall mean as to any Bank its Revolving Credit Commitment,
and COMMITMENTS shall mean the aggregate of the Revolving Credit Commitments of
all of the Banks.
COMMITMENT FEE shall have the meaning assigned to that term in
Section 2.3.
CONSOLIDATED ADJUSTED EBITDA shall mean for any period of determination
Consolidated Net Income (before extraordinary items) for such period plus the
amount of income tax expense, interest expense, depreciation and amortization
expense deducted from earnings in determining such Consolidated Net Income. For
any period in which Borrower or one of its Subsidiaries has completed an
acquisition permitted under this Agreement, the calculation of Consolidated
EBITDA for such period shall reflect, on a PRO FORMA basis, the financial
performance of the acquired entity or assets as though the acquisition had been
completed at the beginning of the period of determination.
CONSOLIDATED EBITDA shall mean for any period of determination
Consolidated Net Income (before extraordinary items) for such period plus the
amount of income tax expense, interest expense, depreciation and amortization
expense deducted from earnings in determining such Consolidated Net Income.
CONSOLIDATED NET WORTH shall mean as of any date of determination total
stockholders' equity of the Borrower and its Subsidiaries as of such date
determined and consolidated in accordance with GAAP.
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CONSOLIDATED INTEREST EXPENSE shall mean for any period of
determination the amount of cash interest expense deducted from the earnings of
the Borrower and its Subsidiaries in determining Consolidated Net Income for
such period in accordance with GAAP.
CONSOLIDATED NET INCOME shall mean for any fiscal period the net income
(or loss) after income taxes of the Borrower and its Subsidiaries for such
period determined and consolidated in accordance with GAAP.
CONSOLIDATED TOTAL INDEBTEDNESS shall mean as of any date of
determination the aggregate of all Indebtedness, other than PIK Subordinated
Indebtedness, of the Borrower and its Subsidiaries as of such date determined
and consolidated in accordance with GAAP.
DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean lawful money
of the United States of America.
EFFECTIVE DATE shall mean June 16, 1999.
ENVIRONMENTAL COMPLAINT shall mean any written complaint setting forth
a cause of action for personal or property damage or natural resource damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice asserting or threatening a claim relating to, arising out of, or
issued pursuant to any of the Environmental Laws or any Environmental
Conditions, as the case may be.
ENVIRONMENTAL CONDITIONS shall mean any conditions of the environment,
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the use of,
or operations on, the Property.
ENVIRONMENTAL LAWS shall mean all federal, state, local and foreign
Laws and regulations, including permits, licenses, authorizations, bonds,
orders, judgments, consent decrees issued, or entered into, pursuant thereto,
relating to pollution or protection of human health or the environment or
employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA GROUP shall mean, at any time, the Borrower and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common
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control and all other entities which, together with the Borrower, are treated as
a single employer under Section 414 of the Internal Revenue Code.
EURO-RATE shall mean with respect to the Loans comprising any Borrowing
Tranche to which the Euro-Rate Option applies for any Interest Period, the
interest rate per annum determined by the Administrative Agent by dividing (the
resulting quotient rounded upward to the nearest 1/100th of 1% per annum) (i)
the rate of interest determined by the Administrative Agent in accordance with
its usual procedures (which determination shall be conclusive absent manifest
error) to be the eurodollar rate at approximately 11:00 A.M., London time, two
(2) London Business Days prior to the first day of such Interest Period for an
amount comparable to such Borrowing Tranche and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Euro-Rate Reserve Percentage. The Euro-Rate shall be adjusted with respect
to any Euro-Rate Option outstanding on the effective date of any change in the
Euro-Rate Reserve Percentage as of such effective date. The Administrative Agent
shall give prompt notice to the Borrower of the Euro-Rate as determined or
adjusted in accordance herewith, which determination shall be conclusive absent
manifest error.
EURO-RATE OPTION shall mean the Revolving Credit Euro-Rate Option.
EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Administrative Agent which is in effect during any relevant period, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities") of a member bank
in such System.
EVENT OF DEFAULT shall mean any of the Events of Default described in
Section 8.1.
EXPIRATION DATE shall mean, with respect to the Revolving Credit
Commitments, June 13, 2004; PROVIDED that the Expiration Date may be extended
under Section 2.8.10.
FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
GAAP shall mean generally accepted accounting principles as are in
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis both as to classification of items and amounts.
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GOVERNMENTAL ACTS shall have the meaning assigned to that term in
Section 2.8.8.
GUARANTY of any Person shall mean any obligation of such Person
guaranteeing any liability or obligation of any other Person in any manner,
whether directly or indirectly, including any performance bond or other
suretyship arrangement and any other form of assurance against loss.
HISTORICAL STATEMENTS shall have the meaning assigned to that term in
Section 5.1.9(i).
INDEBTEDNESS shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations under any letter of
credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device, (iv) any other transaction
(including forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness), or (v) any Guaranty of Indebtedness for
borrowed money.
INTEREST COVERAGE RATIO shall mean for any period of determination the
ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Interest
Expense for such period.
INTEREST PERIOD shall have the meaning assigned to such term in
Section 3.2.
INTEREST RATE OPTION shall mean any Euro-Rate Option or Base Rate
Option.
INTERIM STATEMENTS shall have the meaning assigned to that term in
Section 5.1.9(i).
INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
K-T IRB shall mean the City of Shelbyville, Indiana, Adjustable Rate
Economic Development Revenue Bonds (K-T Corporation Project) Series 1997 in the
aggregate principal amount of $5,000,000.
K-T LETTER OF CREDIT shall mean the letter of credit issued by PNC
Bank, National Association in the face amount of $5,061,650 for the account of
The Triumph Group Operations, Inc., d/b/a K-T Corporation in support of the K-T
IRB.
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LABOR CONTRACTS shall mean all employment agreements, employment
contracts, collective bargaining agreements and other agreements among the
Borrower or Subsidiary of the Borrower and its employees.
LAW shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
LETTER OF CREDIT shall have the meaning assigned to that term in
Section 2.8.1.
LETTER OF CREDIT FEE shall have the meaning assigned to that term in
Section 2.8.3.
LETTERS OF CREDIT OUTSTANDING shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations. The
term does not include the K-T Letter of Credit.
LIEN shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LOAN DOCUMENTS shall mean this Agreement, the Notes, the Guaranty and
Suretyship Agreement executed by Borrower's Subsidiaries with respect to the
Obligations, and any other instruments, certificates or documents delivered or
contemplated to be delivered hereunder or thereunder or in connection herewith
or therewith, as the same may be supplemented or amended from time to time in
accordance herewith or therewith, and LOAN DOCUMENT shall mean any of the Loan
Documents.
LOAN REQUEST shall mean a request for Revolving Credit Loans made in
accordance with Section 2.4 or a request to select, convert to or renew a
Euro-Rate Option in accordance with Section 3.2.
LOANS shall mean collectively and LOAN shall mean separately all
Revolving Credit Loans or any Revolving Credit Loan.
MATERIAL ADVERSE CHANGE shall mean any set of circumstances or events
which (a) has or is reasonably expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any other
Loan Document, (b) is or is reasonably expected to be material and adverse to
the business, properties, assets, financial condition, results of operations or
prospects of the Borrower and its Subsidiaries taken as a whole , (c) impairs
materially or is reasonably expected to impair materially the ability of the
Borrower and its Subsidiaries taken as a whole to duly and punctually pay or
perform its Indebtedness, or (d) impairs materially or is reasonably expected to
impair materially the ability of the
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Administrative Agent or any of the Banks, to the extent permitted, to enforce
their legal remedies pursuant to this Agreement or any other Loan Document.
MONTH, with respect to an Interest Period under the Euro-Rate Option,
shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period. If any
Euro-Rate Interest Period begins on a day of a calendar month for which there is
no numerically corresponding day in the month in which such Interest Period is
to end, the final month of such Interest Period shall be deemed to end on the
last Business Day of such final month.
MULTIEMPLOYER PLAN shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
MULTIPLE EMPLOYER PLAN shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
NOTES shall mean the Revolving Credit Notes.
NOTICES shall have the meaning assigned to that term in Section 10.6.
OBLIGATION shall mean any obligation or liability of any of the
Borrower to the Administrative Agent or any of the Banks, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, under or in connection with this
Agreement, the Notes, the Letters of Credit, the Administrative Agent's Letter
or any other Loan Document.
OFFICIAL BODY shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court or
tribunal in each case whether foreign or domestic, with jurisdiction to act with
the force of law with respect to pertinent matters.
PARTNERSHIP INTERESTS shall have the meaning given to such term in
Section 5.1.3.
PBGC shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
PERMITTED INVESTMENTS shall mean:
(i) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations backed by the full faith and credit of
the United States of America maturing in twelve (12) months or less from the
date of acquisition;
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(ii) commercial paper maturing in 180 days or less rated not lower than
A-1, by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.
on the date of acquisition;
(iii) demand deposits, time deposits, money market account deposits or
certificates of deposit maturing within one year in commercial banks whose
obligations are rated A-1, A or the equivalent or better by Standard & Poor's
Corporation on the date of acquisition;
(iv) shares of money market mutual funds that invest substantially all
of their assets in the investments described in clauses (i) through (iii) above;
and
(v) investments in Subsidiaries permitted under this Agreement.
PERMITTED LIENS shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, old-age pensions
or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable and Liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default;
(iv) Good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of the aggregate amount
due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property or the value thereof, and none of which is violated in any
material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the
Administrative Agent for the benefit of the Banks;
(vii) Liens on property leased by the Borrower or Subsidiary of the
Borrower under capital and operating leases permitted in Section 7.2.15 securing
obligations of the Borrower or Subsidiary to the lessor under such leases;
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(viii) Any Lien existing on the date of this Agreement and described on
SCHEDULE 1.1(P), PROVIDED that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Security Interests, PROVIDED that the aggregate
amount of loans and deferred payments secured by such Purchase Money Security
Interests shall not exceed $5,000,000 (excluding for the purpose of this
computation any loans or deferred payments secured by Liens described on
SCHEDULE 1.1(P));
(x) The following, (A) if the validity or amount thereof is being
contested in good-faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within sixty (60) days of entry, and in either case they do not, in the
aggregate, materially impair the ability of the Borrower to perform its
Obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, PROVIDED that the Borrower
maintains such reserves or other appropriate provisions as shall be
required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute
on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens.
(4) Liens resulting from final judgments or orders described
in Section 8.1.6; and
(y) subject to Section 7.2.1, Liens on fixed assets securing
tax-exempt, fixed-rate industrial development bonds or notes or similar
financing.
PERSON shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, government or political subdivision or agency thereof, or any other
entity.
PLAN shall mean at any time an employee pension benefit plan (including
a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by
Title IV of ERISA or is subject to the minimum funding standards under Section
412 of the Internal Revenue Code and either (i) is maintained by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained by any entity which was
at such time a member of the ERISA Group for employees of any entity which was
at such time a member of the ERISA Group.
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PIK SUBORDINATED INDEBTEDNESS shall mean Indebtedness which by its
terms is subordinated to the Obligations of the Borrower to the Banks and on
which interest is payable, at the option of the payor, in cash or by the
issuance of additional Indebtedness that is likewise subordinated.
PNC BANK shall mean PNC Bank, National Association, its successors and
assigns.
POTENTIAL DEFAULT shall mean any event or condition which with notice,
passage of time or a determination by the Administrative Agent or the Required
Banks, or any combination of the foregoing, would constitute an Event of
Default.
PRICING GRID means the chart attached hereto as Exhibit 1.1(P) which
sets forth the rates at which Commitment Fees, Letter Credit Fees and interest
rate margins are calculated on the basis of the Total Indebtedness to EBITDA
Ratio.
PRINCIPAL OFFICE shall mean the main banking office of the
Administrative Agent in Pittsburgh, Pennsylvania.
PROHIBITED TRANSACTION shall mean any prohibited transaction as defined
in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.
PROPERTY shall mean all real property, both owned and leased, of the
Borrower.
PURCHASE MONEY SECURITY INTEREST shall mean Liens upon tangible
personal property securing loans to Borrower or any Subsidiary or deferred
payments by Borrower or such Subsidiary for the purchase of such tangible
personal property.
PURCHASING BANK shall mean a Bank which becomes a party to this
Agreement by executing an Assignment and Assumption Agreement.
RATABLE SHARE shall mean the proportion that a Bank's Commitment bears
to the Commitments of all of the Banks.
REGULATED SUBSTANCES shall mean any substance, including any solid,
liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse,
garbage, wastes, chemicals, petroleum products, by-products, coproducts,
impurities, dust, scrap, heavy metals, any substance defined as a "hazardous
substance," "pollutant," "pollution," "contaminant," "hazardous or toxic
substance," "extremely hazardous substance," "toxic chemical," "toxic waste,"
"hazardous waste," "industrial waste," "residual waste," "solid waste,"
"municipal waste," "mixed waste," "infectious waste," "chemotherapeutic waste,"
"medical waste," "regulated substance" or any related materials, substances or
wastes as now or hereafter defined pursuant to any Environmental Laws,
ordinances, rules, regulations or other directives of any Official Body, the
generation, manufacture, extraction, processing, distribution, treatment,
storage, disposal, transport,
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recycling, reclamation, use, reuse, spilling, leaking, dumping, injection,
pumping, leaching, emptying, discharge, escape, release or other management or
mismanagement of which is regulated by the Environmental Laws.
REGULATION U shall mean Regulation U, T, G or X as promulgated by the
Board of Governors of the Federal Reserve System, as amended from time to time.
REIMBURSEMENT OBLIGATION shall have the meaning assigned to such term
in Section 2.8.4(i).
REPORTABLE EVENT means a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.
REQUIRED BANKS shall mean (i) if there are no Loans outstanding, Banks
whose Commitments aggregate at least 51% of the Commitments of all of the Banks,
or (ii) if there are Loans outstanding, Banks whose Loans outstanding aggregate
at least 51% of the total principal amount of the Loans outstanding hereunder.
REVOLVING CREDIT BASE RATE OPTION shall mean the option of the Borrower
to have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(i).
REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at any time, the
amount initially set forth opposite its name on SCHEDULE 1.1(B) in the column
labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on
Schedule I to the most recent Assignment and Assumption Agreement, and REVOLVING
CREDIT COMMITMENTS shall mean the aggregate Revolving Credit Commitments of all
of the Banks.
REVOLVING CREDIT EURO-RATE OPTION shall mean the option of the Borrower
to have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(ii).
REVOLVING CREDIT LOANS shall mean collectively and REVOLVING CREDIT
LOAN shall mean separately all Revolving Credit Loans or any Revolving Credit
Loan made by the Banks or one of the Banks to the Borrower pursuant to Section
2.1 or 2.8.4(i) hereof.
REVOLVING CREDIT NOTES shall mean collectively and REVOLVING CREDIT
NOTE shall mean separately all the Revolving Credit Notes of the Borrower in the
form of EXHIBIT 1.1(R) evidencing the Revolving Credit Loans together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
REVOLVING FACILITY USAGE shall mean at any time the sum of the
Revolving Credit Loans outstanding and the Letters of Credit Outstanding.
SHARES shall have the meaning assigned to that term in Section 5.1.2.
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SUBSIDIARY of any Person at any time shall mean (i) any corporation or
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, or any partnership of which such Person is a general partner or of
which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Person's Subsidiaries, or
(ii) any corporation, trust, partnership or other entity which is controlled or
capable of being controlled by such Person or one or more of such Person's
Subsidiaries.
SUBSIDIARY SHARES shall have the meaning assigned to that term in
Section 5.1.3.
SYNDICATION AGENT shall mean First Union National Bank, and its
successors and assigns, as Syndication Agent.
TOTAL INDEBTEDNESS TO EBITDA RATIO shall mean the ratio of Consolidated
Total Indebtedness to Consolidated Adjusted EBITDA.
TRANSFEROR BANK shall mean the selling Bank pursuant to an Assignment
and Assumption Agreement.
1.2 CONSTRUCTION.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 NUMBER; INCLUSION.
references to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 DETERMINATION.
references to "determination" of or by the Administrative
Agent or the Banks shall be deemed to include good-faith estimates by the
Administrative Agent or the Banks (in the case of quantitative determinations)
and good-faith beliefs by the Administrative Agent or the Banks (in the case of
qualitative determinations) and such determination shall be conclusive absent
manifest error;
1.2.3 ADMINISTRATIVE AGENT'S DISCRETION AND CONSENT.
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whenever the Administrative Agent or the Banks are granted the
right herein to act in its or their sole discretion or to grant or withhold
consent such right shall be exercised in good-faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.5 HEADINGS.
the section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
1.2.7 PERSONS.
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or other Loan Document, as the case may be, and reference to a
Person in a particular capacity excludes such Person in any other capacity;
1.2.8 MODIFICATIONS TO DOCUMENTS.
reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.9 FROM, TO AND THROUGH.
relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 SHALL; WILL.
references to "shall" and "will" are intended to have the same
meaning.
1.3 ACCOUNTING PRINCIPLES.
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Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
2. REVOLVING CREDIT FACILITY
2.1 REVOLVING CREDIT COMMITMENTS.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrower at any time or from time to time on
or after the date hereof to the Expiration Date provided that after giving
effect to such Loan the aggregate amount of Loans from such Bank shall not
exceed such Bank's Revolving Credit Commitment minus such Bank's Ratable Share
of the Letters of Credit Outstanding. Within such limits of time and amount and
subject to the other provisions of this Agreement, the Borrower may borrow,
repay and reborrow pursuant to this Section 2.1.
2.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO REVOLVING CREDIT
LOANS.
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.4 in accordance with its Ratable
Share. The aggregate of each Bank's Revolving Credit Loans outstanding hereunder
to the Borrower at any time shall never exceed its Revolving Credit Commitment
minus its Ratable Share of the Letter of Credit Outstandings. The obligations of
each Bank hereunder are several. The failure of any Bank to perform its
obligations hereunder shall not affect the Obligations of the Borrower to any
other party nor the several obligations of the other Banks to the Borrower; nor
shall any other party be liable for the failure of such Bank to perform its
obligations hereunder. The Banks shall have no obligation to make Revolving
Credit Loans hereunder on or after the Expiration Date.
2.3 COMMITMENT FEES.
Accruing from the date hereof until the Expiration Date, the Borrower
agrees to pay to the Administrative Agent for the account of each Bank, as
consideration for such Bank's Revolving Credit Commitment hereunder, a
nonrefundable commitment fee (the "COMMITMENT FEE"), calculated on a per annum
(365 or 366 days, as appropriate, and actual days elapsed) basis under the
Pricing Grid, on the average daily difference between the amount of (i) such
Bank's Revolving Credit Commitment as the same may be constituted from time to
time and (ii) the principal amount of such Bank's Ratable Share of Revolving
Facility Usage. All Commitment Fees shall be payable in arrears on the first
Business Day of each calendar quarter after the date hereof and on the
Expiration Date or upon acceleration of the Notes.
2.4 REVOLVING CREDIT LOAN REQUESTS.
Except as otherwise provided herein, the Borrower may from time to time
prior to the
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Expiration Date request the Banks to make Revolving Credit Loans, or renew or
convert the Interest Rate Option applicable to existing Revolving Credit Loans
pursuant to Section 3.2, by delivering to the Administrative Agent, not later
than (i) 2:00 p.m., Eastern time, three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate
Option for any Revolving Credit Loans; and (ii) 1:00 p.m., Eastern time on
either the proposed Borrowing Date with respect to the making of a Revolving
Credit Loan to which the Base Rate Option applies or the last day of the
preceding Interest Period with respect to the conversion to the Base Rate Option
for any Revolving Credit Loan, of a duly completed request therefor
substantially in the form of EXHIBIT 2.4 or a request by telephone immediately
confirmed in writing by letter, facsimile or telex in such form (each, a "LOAN
REQUEST"), it being understood that the Administrative Agent may rely on the
authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Revolving Credit Loan
Request shall be irrevocable and shall specify (i) the proposed Borrowing Date;
(ii) the aggregate amount of the proposed Revolving Credit Loans comprising each
Borrowing Tranche, which shall be in integral multiples of $500,000 and not less
than $2,000,000 for each Borrowing Tranche to which the Euro-Rate Option applies
and not less than the lesser of $200,000 or the maximum amount available for
Borrowing Tranches to which the Base Rate Option applies; (iii) whether the
Euro-Rate Option or Base Rate Option shall apply to the proposed Revolving
Credit Loans comprising the Borrowing Tranche; and (iv) in the case of a
Borrowing Tranche to which the Euro-Rate Option applies, an appropriate Interest
Period for the proposed Revolving Credit Loans comprising such Borrowing
Tranche.
2.5 MAKING REVOLVING CREDIT LOANS.
The Administrative Agent shall, promptly after receipt by it of a Loan
Request pursuant to Section 2.4, notify the Banks of its receipt of such Loan
Request specifying: (i) the proposed Borrowing Date and the time and method of
disbursement of such Revolving Credit Loans; (ii) the amount and type of each
such Revolving Credit Loan and the applicable Interest Period (if any); and
(iii) the apportionment among the Banks of the Revolving Credit Loans as
determined by the Administrative Agent in accordance with Section 2.2. Each Bank
shall remit the principal amount of each Revolving Credit Loan to the
Administrative Agent such that the Administrative Agent is able to, and the
Administrative Agent shall, to the extent the Banks have made funds available to
it for such purpose, fund such Revolving Credit Loans to the Borrower in U.S.
Dollars and immediately available funds at the Principal Office prior to 2:00
p.m., Eastern time, on the Borrowing Date, PROVIDED that if any Bank fails to
remit such funds to the Administrative Agent in a timely manner, the
Administrative Agent may elect in its sole discretion to fund with its own funds
the Revolving Credit Loans of such Bank on the Borrowing Date, and such Bank
shall be subject to the repayment obligation in Section 9.16.
2.6 REVOLVING CREDIT NOTES.
The Obligation of the Borrower to repay the aggregate unpaid principal
amount of the Revolving Credit Loans made by each Bank, together with interest
thereon, shall be evidenced by
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a Revolving Credit Note dated the Closing Date payable to the order of such Bank
in a face amount equal to the Revolving Credit Commitment of such Bank.
2.7 USE OF PROCEEDS.
The proceeds of the Revolving Credit Loans shall be used for the
purpose of refinancing existing indebtedness, including the Obligations under
the 1998 Credit Agreement, and for general corporate purposes, including
acquisitions permitted hereunder. The Banks under the 1998 Credit Agreement and
the Banks under this Agreement will make such payments among themselves as are
necessary to accomplish the refinancing of the Obligations under 1998 Credit
Agreement, and all Letters of Credit Outstanding under the 1998 Credit Agreement
shall be deemed to have been issued under this Agreement. All Interest Periods
under the 1998 Credit Agreement shall end on or before the date hereof.
2.8 LETTER OF CREDIT SUBFACILITY.
2.8.1 ISSUANCE OF LETTERS OF CREDIT.
Borrower may request the issuance of a letter of credit (each
a "LETTER OF CREDIT") by delivering to the Administrative Agent a completed
application and agreement for letters of credit in such form as the
Administrative Agent may specify from time to time by no later than 10:00 a.m.,
Eastern time, at least five (5) Business Days, or such shorter period as may be
agreed to by the Administrative Agent, in advance of the proposed date of
issuance. Subject to the terms and conditions hereof and in reliance on the
agreements of the other Banks set forth in this Section 2.8, the Administrative
Agent will issue a Letter of Credit provided that each Letter of Credit shall
(A) have a maximum maturity of twelve (12) months from the date of issuance, and
(B) in no event expire later than one Business Day prior to the Expiration Date
and providing that in no event shall (i) the Letters of Credit Outstanding
exceed, at any one time, $5,000,000 or (ii) the Revolving Facility Usage exceed,
at any one time, the Revolving Credit Commitments.
2.8.2 PARTICIPATIONS.
Immediately upon issuance of each Letter of Credit, and
without further action, each Bank shall be deemed to, and hereby agrees that it
shall, have irrevocably purchased for such Bank's own account and risk from the
Administrative Agent an individual participation interest in such Letter of
Credit and drawings thereunder in an amount equal to such Bank's Ratable Share
of the maximum amount which is or at any time may become available to be drawn
thereunder, and each such Bank shall be responsible to reimburse the
Administrative Agent immediately for its Ratable Share of any disbursement under
any Letter of Credit which has not been reimbursed by Borrower in accordance
with Section 2.8.4(i).
2.8.3 LETTER OF CREDIT FEES.
The Borrower shall pay (i) to the Administrative Agent for the
ratable account of the Banks a fee (the "LETTER OF CREDIT FEE") calculated on a
per annum (365 or 366 days, as appropriate, and actual days elapsed) basis under
the Pricing Grid, and (ii) to the Administrative
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Agent for its own account a fronting fee equal to 1/8% per annum, which fees
shall be computed on the daily average Letters of Credit Outstanding and shall
be payable quarterly in arrears commencing with the first Business Day of each
calendar quarter following issuance of each Letter of Credit and on the
Expiration Date. The Borrower shall also pay to the Administrative Agent for the
Administrative Agent's sole account the Administrative Agent's then in effect
customary fees and administrative expenses payable with respect to the Letters
of Credit as the Administrative Agent may generally charge or incur from time to
time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.
2.8.4 DISBURSEMENTS, REIMBURSEMENT.
(i) Borrower shall be obligated immediately to
reimburse Administrative Agent for all amounts which Administrative Agent is
required to advance pursuant to the Letters of Credit (the "REIMBURSEMENT
OBLIGATION"). Such amounts advanced shall become, at the time they are
advanced, Revolving Credit Loans from the Banks, unless Borrower discharges
its Reimbursement Obligation before such amounts are advanced. Such Revolving
Credit Loans shall bear interest at the rate applicable under the Base Rate
Option unless the Borrower elects to have a different Interest Rate Option
apply to such Revolving Credit Loans pursuant to and in accordance with the
provisions contained in Section 3.1.1.
(ii) The Administrative Agent will notify the (A)
Borrower of each demand or presentment for payment or other drawing under
each Letter of Credit, and (B) Banks of the amount required to be advanced
pursuant to the Letters of Credit. Before 10:00 a.m., Eastern time, on the
date of any advance the Administrative Agent is required to make pursuant to
the Letters of Credit, each Bank shall make available such Bank's Ratable
Share of such advance in immediately available funds to the Administrative
Agent.
2.8.5 DOCUMENTATION.
The Borrower agrees to be bound by the terms of the
Administrative Agent's application and agreement for Letters of Credit and the
Administrative Agent's written regulations and customary practices relating to
Letters of Credit, though such interpretation may be different from the
Borrower's own. In the event of a conflict between such application or agreement
and this Agreement, this Agreement shall govern. It is understood and agreed
that, except in the case of gross negligence or willful misconduct, the
Administrative Agent shall not be liable for any error, negligence and/or
mistakes, whether of omission or commission, in following the Borrower's
instructions or those contained in the Letters of Credit or any modifications,
amendments or supplements thereto.
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2.8.6 DETERMINATIONS TO HONOR DRAWING REQUESTS.
In determining whether to honor any request for drawing under
any Letter of Credit by the beneficiary thereof, the Administrative Agent shall
be responsible only to determine that the documents and certificates required to
be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
2.8.7 NATURE OF PARTICIPATION AND REIMBURSEMENT
OBLIGATIONS.
The obligation of the Banks to participate in Letters of
Credit pursuant to Section 2.8.2 and the obligation of the Banks pursuant to
Section 2.8.4(ii) to fund Revolving Credit Loans upon a draw under a Letter
of Credit and the Obligations of the Borrower to reimburse the Administrative
Agent upon a draw under a Letter of Credit pursuant to Section 2.8.4(i) shall
be absolute, unconditional and irrevocable, and shall be performed strictly
in accordance with the terms of such sections under all circumstances,
including the following circumstances: the failure of the Borrower or any
other Person to comply with the conditions set forth in Sections 2.1, 2.4, or
2.5 or as otherwise set forth in this Agreement for the making of a Revolving
Credit Loan, it being acknowledged that such conditions are not required for
the making of a Revolving Credit Loan under Section 2.8.4;
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any Bank may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such transferee
may be acting), the Administrative Agent or other bank or any other Person or,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between the
Borrower or its Subsidiaries and the beneficiary for which any Letter of Credit
was procured);
(iii) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) payment by the Administrative Agent under any Letter of
Credit against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of the Borrower or its
Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing;
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(viii) the fact that an Event of Default or a Potential Default
shall have occurred and be continuing; or
(ix) Expiration Date shall have passed or this Agreement or the
Commitments hereunder shall have been terminated; provided that none of the
Banks nor the Borrower shall be precluded from bringing any separate action
based on any circumstances described in clauses (ii) or (v) above.
2.8.8 INDEMNITY.
In addition to amounts payable as provided in Section 9.5, the
Borrower hereby agrees to protect, indemnify, pay and save harmless the
Administrative Agent from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable and actual
fees, expenses and disbursements of counsel) which the Administrative Agent may
incur or be subject to as a consequence, direct or indirect, of (i) the issuance
of any Letter of Credit, other than as a result of (A) the gross negligence or
willful misconduct of the Administrative Agent as determined by a final judgment
of a court of competent jurisdiction, (B) the payment by the Administrative
Agent under any Letter of Credit against presentation of a demand, draft or
certificate or other document which does not substantially comply with the terms
of such Letter of Credit, or (C) subject to the following clause (ii), the
wrongful dishonor by the Administrative Agent of a proper demand for payment
made under any Letter of Credit; or (ii) the failure of the Administrative Agent
to honor a drawing under any such Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions herein
called "GOVERNMENTAL ACTS").
2.8.9 LIABILITY FOR ACTS AND OMISSIONS.
As between the Borrower and the Administrative Agent, the
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Administrative Agent
shall not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) failure of the beneficiary of any such Letter of Credit to comply
fully with any conditions required in order to draw upon such Letter of Credit
(provided the beneficiary shall have substantially complied with such
conditions); (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) errors in interpretation of technical terms; (vi)
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of
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the Administrative Agent, including any Governmental Acts, and none of the above
shall affect or impair, or prevent the vesting of, any of the Administrative
Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the
Administrative Agent under or in connection with the Letters of Credit issued by
it or any documents and certificates delivered thereunder, if taken or omitted
in good-faith, shall not put the Administrative Agent under any resulting
liability to the Borrower.
2.8.10 EXTENSION BY BANKS OF THE EXPIRATION DATE.
Upon or promptly after delivery by the Borrower of the
annual financial statements to be provided under Section 7.3.2 for the fiscal
year ending March 31, 2002 or any subsequent fiscal year, the Borrower may
request a one-year extension of the Expiration Date by written notice to the
Banks, and the Banks agree to respond to the Borrower's request for an
extension within sixty (60) days following receipt of the request; provided,
however, that all the Banks must consent to any extension of the Expiration
Date and the failure of the Banks to respond within such time period shall
not in any manner constitute an extension of the Expiration Date.
3. INTEREST RATES
3.1 INTEREST RATE OPTIONS.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrower may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, PROVIDED that there shall
not be at any one time outstanding more than five (5) Borrowing Tranches in the
aggregate among all of the Loans. If at any time the designated rate applicable
to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate
of interest on such Bank's Loan shall be limited to such Bank's highest lawful
rate.
3.1.1 REVOLVING CREDIT INTEREST RATE OPTIONS.
The Borrower shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) REVOLVING CREDIT BASE RATE OPTION: A
fluctuating rate per annum (computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) equal to the Base Rate
plus the applicable number of basis points calculated under the Pricing Grid,
such interest rate to change automatically from time to time effective as of
the effective date of each change in the Base Rate; or
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(ii) REVOLVING CREDIT EURO-RATE OPTION: A rate per
annum (computed on the basis of a year of 360 days and actual days elapsed)
equal to the Euro-Rate plus the applicable number of basis points calculated
under the Pricing Grid.
3.1.2 RATE QUOTATIONS.
The Borrower may call the Administrative Agent on or before
the date on which a Loan Request is to be delivered to receive an indication of
the rates then in effect, but it is acknowledged that such projection shall not
be binding on the Administrative Agent or the Banks nor affect the rate of
interest which thereafter is actually in effect when the election is made.
3.2 INTEREST PERIODS.
At any time when the Borrower shall select, convert to or renew a
Euro-Rate Option, the Borrower shall notify the Administrative Agent thereof at
least three (3) Business Days prior to the effective date of such Euro-Rate
Option by delivering a Loan Request. The notice shall specify an interest period
(the "INTEREST PERIOD") during which such Interest Rate Option shall apply, such
Interest Period to be one, two, three or six Months in the event of a Euro-Rate
Option, PROVIDED, that:
3.2.1 ENDING DATE AND BUSINESS DAY.
Any Interest Period which would otherwise end on a date which
is not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
3.2.2 AMOUNT OF BORROWING TRANCHE.
Each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $500,000 and not less than $2,000,000;
3.2.3 TERMINATION BEFORE EXPIRATION DATE.
The Borrower shall not select, convert to or renew an Interest
Period for any portion of the Loans that would end after the Expiration Date;
and
3.2.4 RENEWALS.
In the case of the renewal of a Euro-Rate Option at the end of
an Interest Period, the first day of the new Interest Period shall be the last
day of the preceding Interest Period, without duplication in payment of interest
for such day.
3.3 INTEREST AFTER DEFAULT.
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To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
3.3.1 Letter of Credit Fees, Interest Rate.
The Letter of Credit Fees and the rate of interest for each
Loan otherwise applicable pursuant to the Pricing Grid shall be increased by
2.0% per annum; and
3.3.2 Other Obligations.
Each other Obligation hereunder if not paid when due shall
bear interest at a rate per annum equal to the sum of the rate of interest
applicable under the Revolving Credit Base Rate Option plus an additional 2.0%
per annum from the time such Obligation becomes due and payable and until it is
paid in full.
3.3.3 Acknowledgment.
The Borrower acknowledges that such increased rates reflect,
among other things, the fact that such Loans or other amounts have become a
substantially greater risk given their default status and that the Banks are
entitled to additional compensation for such risk; and, all such interest shall
be payable by Borrower upon demand by Administrative Agent.
3.4 Euro-Rate Unascertainable.
3.4.1 Unascertainable.
If on any date on which a Euro-Rate would otherwise be
determined, the Administrative Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and
adversely affects the London interbank eurodollar market relating to the
Euro-Rate, then the Administrative Agent shall have the rights specified in
Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to
which a Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good-faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
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(ii) such Euro-Rate Option will not adequately and
fairly reflect the cost to such Bank of the establishment or maintenance of any
such Loan, or
(iii) after making all reasonable efforts, deposits
of the relevant amount in Dollars for the relevant Interest Period for a Loan to
which a Euro-Rate Option applies are not available to such Bank with respect to
such Loan in the London interbank market, then the Administrative Agent shall
have the rights specified in Section 3.4.3.
3.4.3 Administrative Agent's and Banks' Rights.
In the case of any event specified in subsection 3.4.1 above,
the Administrative Agent shall promptly so notify the Banks and the Borrower
thereof, and in the case of an event specified in subsection 3.4.2 above, such
Bank shall promptly so notify the Administrative Agent and endorse a certificate
to such notice as to the specific circumstances of such notice, and the
Administrative Agent shall promptly send copies of such notice and certificate
to the other Banks and the Borrower. Upon such date as shall be specified in
such notice (which shall not be earlier than the date such notice is given), the
obligation of (A) the Banks, in the case of such notice given by the
Administrative Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrower to select, convert to or renew a Euro-Rate Option
shall be suspended until the Administrative Agent shall have later notified the
Borrower, or such Bank shall have later notified the Administrative Agent, of
the Administrative Agent's or such Bank's, as the case may be, determination
that the circumstances giving rise to such previous determination no longer
exist. If at any time the Administrative Agent makes a determination under
subsection 3.4.1 of this Section 3.4 and the Borrower has previously notified
the Administrative Agent of its selection of, conversion to or renewal of a
Euro-Rate Option and such Interest Rate Option has not yet gone into effect,
such notification shall be deemed to provide for selection of, conversion to or
renewal of the Base Rate Option otherwise available with respect to such Loans.
If any Bank notifies the Administrative Agent of a determination under
subsection 3.4.2 of this Section 3.4, the Borrower shall, subject to the
Borrower's indemnification Obligations under Section 4.5.2, as to any Loan of
the Bank to which a Euro-Rate Option applies, on the date specified in such
notice either convert such Loan to the Base Rate Option otherwise available with
respect to such Loan or prepay such Loan in accordance with Section 4.4. Absent
due notice from the Borrower of conversion or prepayment, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period to apply to any
Borrowing Tranche of Euro-Rate Loans at the expiration of an existing Interest
Period applicable to such Borrowing Tranche in accordance with the provisions of
Section 3.1, the Borrower shall be deemed to have converted such Borrowing
Tranche to the Revolving Credit Base Rate Option, as applicable, commencing upon
the last day of the existing Interest Period.
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4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Letter of Credit Fees, Administrative Agent's Fee or
other fees or amounts due from the Borrower hereunder shall be payable prior to
1:00 p.m., Eastern time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower, and without set-off, counterclaim or other deduction of any nature,
and an action therefor shall immediately accrue. Such payments shall be made to
the Administrative Agent at the Principal Office for the ratable accounts of the
Banks with respect to the Loans in U.S. Dollars and in immediately available
funds, and the Administrative Agent shall promptly distribute such amounts to
the Banks in immediately available funds, provided that in the event payments
are received by 1:00 p.m., Eastern time, by the Administrative Agent with
respect to the Loans and such payments are not distributed to the Banks on the
same day received by the Administrative Agent, the Administrative Agent shall
pay the Banks the Federal Funds Effective Rate with respect to the amount of
such payments for each day held by the Administrative Agent and not distributed
to the Banks. The Administrative Agent's and each Bank's statement of account,
ledger or other relevant record shall, in the absence of manifest error, be
conclusive as the statement of the amount of principal of and interest on the
Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
4.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to its Ratable
Share, and each selection of, conversion to or renewal of any Interest Rate
Option and each payment or prepayment by the Borrower with respect to principal,
interest, Commitment Fees, Letter of Credit Fees, or other fees (except for the
Administrative Agent's Fee) or amounts due from the Borrower hereunder to the
Banks with respect to the Loans, shall (except as provided in Section 3.4.2
[Illegality; Increased Costs; Deposits not Available] in the case of an event
specified in Section 3.4, 3.4.1 [Euro-Rate Unascertainable], 4.4 [Voluntary
Prepayments and Commitment Reductions] or 4.5 [Additional Compensation in
Certain Circumstances]) be made in proportion to the applicable Loans
outstanding from each Bank and, if no such Loans are then outstanding, in
proportion to the Ratable Share of each Bank.
4.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall be due
and payable in arrears on the first Business Day of each calendar quarter after
the date hereof and on the date such Loans are repaid in full. Interest on Loans
to which the Euro-Rate Option applies shall be due and payable on the last day
of each Interest Period for those Loans and, if such Interest Period is longer
than three (3) months, also on the last day of every third month during such
Interest Period. Interest on mandatory prepayments of principal under Section
4.5 shall be due on the date such mandatory prepayment is due. Interest on the
principal amount of each Loan or other monetary Obligation shall be due and
payable on demand after such principal amount or
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other monetary Obligation becomes due and payable (whether on the stated
maturity date, upon acceleration or otherwise).
4.4 Voluntary Prepayments and Commitment Reductions.
4.4.1 Right to Prepay.
The Borrower shall have the right at its option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in subsection 4.4.2 below or in Section 4.5):
(i) at any time with respect to any Loan to which the
Base Rate Option applies,
(ii) on the last day of the applicable Interest
Period with respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank
pursuant to Section 3.4.2 [Illegality; Increased Costs; Deposits Not Available]
with respect to any Loan to which a Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans,
it shall provide a prepayment notice to the Administrative Agent on or before
the date of prepayment of Loans setting forth the following information:
(iv) the date, which shall be a Business Day, on
which the proposed prepayment is to be made;
(v) a statement indicating the application of the
prepayment; and
(vi) the total principal amount of such prepayment,
which shall not be less than $200,000 for the Revolving Credit Loans.
All prepayment notices shall be irrevocable. The principal
amount of the Loans for which a prepayment notice is given, together with
interest on such principal amount except with respect to Loans to which the Base
Rate Option applies, shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made.
Except as provided in Section 3.3.3, if the Borrower prepays a Loan but fail to
specify the applicable Borrowing Tranche which the Borrower is prepaying, the
prepayment shall be applied first to Loans to which the Base Rate Option
applies, then to Loans to which the Euro-Rate Option applies. Any prepayment
hereunder shall be subject to the Borrower's Obligation to indemnify the Banks
under Section 4.5.2.
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4.4.2 Replacement of a Bank.
In the event any Bank (i) gives notice under Section 3.4.2 or Section
4.5, (ii) does not fund Revolving Credit Loans because the making of such Loans
would contravene any Law applicable to such Bank, (iii) does not approve any
action as to which consent of the Required Banks is requested by the Borrower
and obtained hereunder, or (iv) becomes subject to the control of an Official
Body (other than normal and customary supervision), then the Borrower shall have
the right at its option, with the consent of the Administrative Agent, which
shall not be unreasonably withheld, to prepay the Loans of such Bank in whole,
together with all interest accrued thereon, and terminate such Bank's Commitment
within ninety (90) days after (w) receipt of such Bank's notice under Section
3.4.2 or 4.5.1, (x) the date such Bank has failed to fund Revolving Credit Loans
because the making of such Loans would contravene Law applicable to such Bank,
(y) the date of obtaining the consent which such Bank has not approved, or (z)
the date such Bank became subject to the control of an Official Body, as
applicable; provided that the Borrower shall also pay to such Bank at the time
of such prepayment any amounts required under Section 4.5 and any accrued
interest due on such amount and any related fees; provided, however, that the
Commitment of such Bank shall be provided by one or more of the remaining Banks
or a replacement bank acceptable to the Administrative Agent; provided, further,
the remaining Banks shall have no obligation hereunder to increase their
Commitments. Notwithstanding the foregoing, the Administrative Agent may only be
replaced subject to the requirements of Section 9.14 and provided that all
Letters of Credit have expired, been terminated or replaced or cash collateral
or backup letters of credit shall have been deposited.
4.4.3 Right to Reduce Commitments.
The Borrower shall have the right at its option from time to
time to reduce permanently the Revolving Credit Commitments upon at least one
Business Day's advance notice to the Administrative Agent. Each such permanent
reduction shall be in the minimum amount of $1,000,000 and shall reduce the
Revolving Credit Commitment of each Bank in proportion to its Ratable Share.
Upon the effective date of each permanent reduction in the Revolving Credit
Commitments, the Borrower shall also prepay, with interest and with any
additional compensation required under Section 4.5.2, the amount (if any) by
which the Revolving Facility Usage at the time of the reduction exceeds the
amount of the Revolving Commitments as reduced.
4.5 Additional Compensation in Certain Circumstances.
4.5.1 Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any
Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects any Bank to any tax or changes the basis
of taxation with respect to this Agreement, the Notes, the Loans or payments by
the Borrower of principal,
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interest, Commitment Fees, or other amounts due from the Borrower hereunder or
under the Notes (except for taxes on the overall net income of such Bank),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or letters of credit, other credits or commitments to extend
credit extended by, any Bank, or (B) otherwise applicable to the obligations of
any Bank under this Agreement, and the result of any of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
(including loss of margin) upon any Bank with respect to this Agreement, the
Notes or the making, maintenance or funding of any part of the Loans (or, in the
case of any capital adequacy or similar requirement, to have the effect of
reducing the rate of return on any Bank's capital, taking into consideration
such Bank's customary policies with respect to capital adequacy) by an amount
which such Bank in its sole discretion deems to be material, such Bank shall
from time to time notify the Borrower and the Administrative Agent of the amount
determined in good-faith (using any averaging and attribution methods employed
in good-faith) by such Bank to be necessary to compensate such Bank for such
increase in cost, reduction of income or additional expense (to the extent not
reflected in the determination of Base Rate). Such notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by the Borrower to such Bank ten (10) Business Days after such notice is
given.
4.5.2 Indemnity.
In addition to the compensation required by subsection 4.5.1
of this Section 4.5, the Borrower shall indemnify each Bank against all
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund or maintain
Loans subject to the Euro-Rate Option) which such Bank actually sustains or
incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any
Loan to which the Euro-Rate Option applies on a day other than the last day of
the corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any notice relating to
Loan Requests under Section 2.4 or Section 3.2 or prepayments under Section 4.4,
or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any
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failure of the Borrower to pay when due (by acceleration or otherwise) any
principal, interest, Commitment Fee or any other amount due hereunder.
If any Bank actually sustains or incurs any such loss or
expense, it shall from time to time notify the Borrower of the amount determined
in good-faith by such Bank (which determination may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to such Bank
ten (10) Business Days after such notice is given.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower represents and warrants to the Administrative Agent and
each of the Banks as follows:
5.1.1 Organization and Qualification.
The Borrower and each Subsidiary of the Borrower is a
corporation or partnership, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. The Borrower and
each Subsidiary of the Borrower has the lawful power to own or lease its
properties and to engage in the business it presently conducts or proposes to
conduct. The Borrower and each Subsidiary of the Borrower is duly licensed or
qualified and in good standing in each jurisdiction listed on Schedule 5.1.1 and
in all other jurisdictions where the property owned or leased by it or the
nature of the business transacted by it or both makes such licensing or
qualification necessary.
5.1.2 Capitalization and Ownership.
Schedule 5.1.2 states, as of the Closing Date, the authorized
capital stock of the Borrower, the issued and outstanding shares (referred to
herein as the "Shares") of such stock, and the names of any parties beneficially
owning, individually or through affiliates, more than 5% thereof. All of the
Shares have been validly issued and are fully paid and nonassessable. There are
no options, warrants or other rights outstanding to purchase any such Shares
except as indicated on Schedule 5.1.2.
5.1.3 Subsidiaries.
Schedule 5.1.3 states, as of the Closing Date, the name of
each of the Borrower's Subsidiaries, its jurisdiction of incorporation, its
authorized capital stock, the issued and outstanding shares (referred to herein
as the "Subsidiary Shares") and the owners thereof if it is a corporation and
its outstanding partnership interests (the "Partnership Interests") if it is a
partnership. The Borrower and each Subsidiary of the Borrower has good and
marketable title to all of the Subsidiary Shares and Partnership Interests it
purports to own, free and clear in each
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case of any Lien. All Subsidiary Shares and Partnership Interests have been
validly issued, and all Subsidiary Shares are fully paid and nonassessable. All
capital contributions and other consideration required to be made or paid in
connection with the issuance of the Partnership Interests have been made or
paid, as the case may be. There are no options, warrants or other rights
outstanding to purchase any such Subsidiary Shares or Partnership Interests
except as indicated on Schedule 5.1.3.
5.1.4 Power and Authority.
The Borrower and each of its Subsidiaries has full power to
enter into, execute, deliver and carry out this Agreement and the other Loan
Documents to which it is a party, to incur the Indebtedness contemplated by the
Loan Documents and to perform its Obligations under the Loan Documents to which
it is a party, and all such actions have been duly authorized by all necessary
proceedings on its part.
5.1.5 Validity and Binding Effect.
This Agreement has been duly and validly executed and
delivered by the Borrower, and each other Loan Document which the Borrower or
any of its Subsidiaries is required to execute and deliver on or after the date
hereof will have been duly executed and delivered by the Borrower on the
required date of delivery of such Loan Document. This Agreement and each other
Loan Document to which Borrower or any Subsidiary is a party constitutes, or
will constitute, legal, valid and binding obligations of each such party,
enforceable against each such party, in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
5.1.6 No Conflict.
Neither the execution and delivery of this Agreement or the
other Loan Documents by the Borrower and its Subsidiaries nor the consummation
of the transactions herein or therein contemplated or compliance with the terms
and provisions hereof or thereof by them will conflict with, constitute a
default under or result in any breach of (i) the terms and conditions of the
certificate of incorporation, bylaws or other organizational documents of the
Borrower or any Subsidiary or (ii) any Law or of any material agreement,
instrument, order, writ, judgment, injunction or decree to which the Borrower or
any Subsidiary is a party or by which it is bound or to which it is subject, or
result in the creation or enforcement of any Lien, charge or encumbrance
whatsoever upon any property (now or hereafter acquired) of the Borrower or any
Subsidiary.
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5.1.7 Litigation.
There are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Borrower, threatened against the Borrower or
any Subsidiary of the Borrower at law or equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change.
Neither the Borrower nor any Subsidiaries of the Borrower is in violation of any
order, writ, injunction or any decree of any Official Body which may result in
any Material Adverse Change.
5.1.8 Title to Properties.
The real property owned or leased by the Borrower and each
Subsidiary of the Borrower is described on Schedule 5.1.8. The Borrower and each
Subsidiary of the Borrower has good and marketable title to or valid leasehold
interests in all properties, assets and other rights which it purports to own or
lease or which are reflected as owned or leased on its books and records, free
and clear of all Liens and encumbrances except Permitted Liens, and subject to
the terms and conditions of the applicable leases. All leases of property are in
full force and effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions contemplated
hereby.
5.1.9 Financial Statements.
(i) Historical Statements. The Borrower has delivered
to the Administrative Agent copies of its audited consolidated and unaudited
consolidating year-end financial statements for and as of the end of the fiscal
year ended March 31, 1998 (the "Annual Statements"). In addition, the Borrower
has delivered to the Administrative Agent copies of its Form 10-Q for the period
ended December 31, 1998 (the "Interim Statements") (the Annual and Interim
Statements being collectively referred to as the "Historical Statements"). The
Historical Statements were compiled from the books and records maintained by the
Borrower's management, are correct and complete and present fairly in all
material respects the financial condition of the Borrower as of their dates and
the results of operations for the fiscal periods then ended and have been
prepared in accordance with GAAP consistently applied, subject (in the case of
the Interim Statements) to normal year-end audit adjustments and the absence of
footnotes.
(ii) Accuracy of Financial Statements. The Borrower
does not have any liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Historical Statements or in the notes
thereto, and except as disclosed therein there are no unrealized or anticipated
losses from any commitments of the Borrower or any Subsidiary of the Borrower
which may cause a Material Adverse Change. Since December 31, 1998, no Material
Adverse Change has occurred.
5.1.10 Margin Stock.
Neither the Borrower nor any of its Subsidiaries engages or
intends to engage principally, or as one of its important activities, in the
business of extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the
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meaning of Regulation U). No part of the proceeds of any Loan has been or will
be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of Regulation U of the Board of Governors of
the Federal Reserve System. Neither the Borrower nor any of its Subsidiaries
holds or intends to hold margin stock in such amounts that more than 25% of the
reasonable value of the assets of the Borrower or any of its Subsidiaries are or
will be represented by margin stock.
5.1.11 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the
Administrative Agent or any Bank in connection herewith or therewith, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which they were made, not misleading. On the Closing
Date, there is no fact known to the Borrower which materially adversely affects
the business, property, assets, financial condition, results of operations or
prospects of the Borrower or any Subsidiary of the Borrower which has not been
set forth in this Agreement or in the certificates, statements, agreements or
other documents furnished in writing to the Administrative Agent and the Banks
prior to or at the date hereof in connection with the transactions contemplated
hereby.
5.1.12 Taxes.
All federal, state, local and other tax returns required to
have been filed with respect to the Borrower and each Subsidiary of the Borrower
have been filed, and payment or adequate provision has been made for the payment
of all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the
extent that such taxes, fees, assessments and other charges are being contested
in good faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. Other than extensions of tax return filing deadlines for
which the Borrower has applied in the ordinary course of business, there are no
agreements or waivers extending the statutory period of limitations applicable
to any federal income tax return of the Borrower or any of its Subsidiaries for
any period.
5.1.13 Consents and Approvals.
No consent, approval, exemption, order or authorization of, or
a registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by the Borrower,
except as listed on Schedule 5.1.13, all of which shall have been obtained or
made on or prior to the Closing Date except as otherwise indicated on Schedule
5.1.13.
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5.1.14 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition
exists or will exist after giving effect to the borrowings to be made on the
Closing Date under the Loan Documents which constitutes an Event of Default or
Potential Default. Neither the Borrower nor any of its Subsidiaries is in
violation of (i) any term of its certificate of incorporation, bylaws, or other
organizational documents or (ii) any material agreement or instrument to which
it is a party or by which it or any of its properties may be subject or bound
where such violation would constitute a Material Adverse Change.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
The Borrower and each Subsidiary of the Borrower owns or
possesses all the material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and rights necessary to
own and operate its properties and to carry on its business as presently
conducted and planned to be conducted by the Borrower and its Subsidiaries,
without known conflict with the rights of others.
5.1.16 Insurance.
All insurance policies and other bonds to which the Borrower
and each of its Subsidiaries is a party are valid and in full force and effect.
No notice has been given or claim made and no grounds exist to cancel or avoid
any of such policies or bonds or to reduce the coverage provided thereby. Such
policies and bonds provide adequate coverage from reputable and financially
sound insurers in amounts sufficient to insure the assets and risks of the
Borrower and each Subsidiary of the Borrower in accordance with prudent business
practice in the industries of the Borrower and its Subsidiaries.
5.1.17 Compliance with Laws.
The Borrower and its Subsidiaries are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in subsection 5.1.22) in all jurisdictions in which
the Borrower and its Subsidiaries do business except where the failure to so
comply would not constitute a Material Adverse Change.
5.1.18 Material Contracts.
All material contracts relating to the business operations of
the Borrower and each Subsidiary of the Borrower, including all employee benefit
plans and Labor Contracts are valid, binding and enforceable upon the Borrower
or each such Subsidiary and each of the other parties thereto in accordance with
their respective terms, and there is no default thereunder by the Borrower or
any such Subsidiary or, to the Borrower's knowledge, with respect to parties
other than the Borrower or any such Subsidiary, which could result in a Material
Adverse Change.
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5.1.19 Investment Companies.
Neither the Borrower nor any of its Subsidiaries is an
"investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control."
5.1.20 Plans and Benefit Arrangements.
Except as set forth on Schedule 5.1.20:
(i) The Borrower and each member of the ERISA Group
are in compliance in all material respects with any applicable provisions of
ERISA with respect to all Benefit Arrangements, Plans and Multiemployer Plans.
There has been no Prohibited Transaction with respect to any Benefit Arrangement
or any Plan or, to the knowledge of the Borrower, with respect to any
Multiemployer Plan or Multiple Employer Plan, which could result in any material
liability of the Borrower or any other member of the ERISA Group. The Borrower
and all members of the ERISA Group have made when due any and all payments
required to be made under any agreement relating to a Multiemployer Plan or a
Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan
and Multiemployer Plan, the Borrower and each member of the ERISA Group (i) have
fulfilled in all material respects their obligations under the minimum funding
standards of ERISA, (ii) have not incurred any liability to the PBGC, and (iii)
have not had asserted against them any penalty for failure to fulfill the
minimum funding requirements of ERISA.
(ii) To the Borrower's knowledge, each Multiemployer
Plan and Multiple Employer Plan is able to pay benefits thereunder when due.
(iii) Neither the Borrower nor any other member of
the ERISA Group has instituted or intends to institute proceedings to terminate
any Plan.
No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(iv) The aggregate actuarial present value of
accumulated benefit obligations (as per Financial Accounting Standards Board
Opinion No. 87) under each Plan, as disclosed in, and as of the date of, the
most recent actuarial report for such Plan, does not exceed the aggregate fair
market value of the assets of such Plan.
(v) Neither the Borrower nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of
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Title IV of ERISA and, to the knowledge of the Borrower, no Multiemployer Plan
or Multiple Employer Plan is reasonably expected to be reorganized or
terminated, within the meaning of Title IV of ERISA.
(vi) To the extent that any Benefit Arrangement is
insured, the Borrower and all members of the ERISA Group have paid when due all
premiums required to be paid for all periods through the Closing Date. To the
extent that any Benefit Arrangement is funded other than with insurance, the
Borrower and all members of the ERISA Group have made when due all contributions
required to be paid for all periods through the Closing Date.
(vii) All Plans, Benefit Arrangements and to the
knowledge of the Borrower Multiemployer Plans have been administered in all
material respects in accordance with their terms and the applicable provisions
of ERISA.
5.1.21 Employment Matters.
The Borrower and each of its Subsidiaries is in compliance
with the Labor Contracts and all applicable federal, state and local labor and
employment Laws including those related to equal employment opportunity and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Change. To the best of Borrower's
knowledge, there are no outstanding grievances, arbitration awards or appeals
therefrom arising out of the Labor Contracts or current or threatened strikes,
picketing, handbilling or other work stoppages or slowdowns at facilities of the
Borrower or any of its Subsidiaries which in any case would constitute a
Material Adverse Change.
5.1.22 Environmental Matters.
Except as disclosed on Schedule 5.1.22:
(i) Neither the Borrower nor any Subsidiary of the
Borrower has received any Environmental Complaint from any Official Body or
private Person alleging that such Borrower or Subsidiary or, with respect to the
Property, any prior or subsequent owner of the Property is a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ss. 9601, et seq., and the Borrower has no reason
to believe that such an Environmental Complaint is reasonably likely to be
received. There are no pending or, to the Borrower's knowledge, threatened
Environmental Complaints relating to the Borrower or any Subsidiary of the
Borrower or, to the Borrower's knowledge with respect to the Property, any prior
or subsequent owner of the Property pertaining to, or arising out of, any
Environmental Conditions.
(ii) There are no circumstances at, on or under the
Property that constitute a breach of or non-compliance with any of the
Environmental Laws, and there are no Environmental Conditions at, on or under
the Property or, to the knowledge of the Borrower, at,
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on or under adjacent property, that prevent compliance with the Environmental
Laws at the Property.
(iii) Neither the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in compliance with
Environmental Laws. There are no processes, facilities, operations, equipment or
any other activities at, on or under the Property, or, to the knowledge of the
Borrower, at, on or under adjacent property, that currently result in the
release or threatened release of Regulated Substances onto the Property, except
to the extent that such releases or threatened releases are not a breach of or
otherwise not a violation of the Environmental Laws or are not likely to result
in a Material Adverse Change.
(iv) The Borrower and each Subsidiary of the Borrower
has all permits, licenses, authorizations, plans and approvals necessary under
the Environmental Laws for the conduct of the business of the Borrower and its
Subsidiaries as presently conducted. The Borrower and each Subsidiary of the
Borrower has submitted all notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which pertain to past and
current operations on the Property.
(v) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under the Property and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances has been done by the
Borrower and its Subsidiaries in accordance with the Environmental Laws.
5.1.23 Senior Debt Status.
The Obligations of the Borrower under this Agreement, the
Notes, and each of the other Loan Documents to which it is a party do rank and
will rank at least pari passu in priority of payment with all other Indebtedness
of the Borrower except Indebtedness of the Borrower to the extent secured by
Permitted Liens. There is no Lien upon or with respect to any of the properties
or income of the Borrower or any Subsidiary of the Borrower which secures
indebtedness or other obligations of any Person except for Permitted Liens.
5.1.24 Year 2000. The Borrower has reviewed the areas within
its consolidated business and operations which could be adversely affected by,
and has developed or is developing a program to address on a timely basis the
risk that certain computer applications used by the Borrower and its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). To the best of Borrower's knowledge, the Year 2000 Problem will not
result, and is not reasonably expected to result, in any material adverse effect
on the business, properties, assets, financial condition, results of operations
or prospects of the Borrower and its Subsidiaries or the ability of the Borrower
and its Subsidiaries to duly and punctually pay or perform their obligations
hereunder and under the other Loan Documents.
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5.2 Updates to Schedules.
Should any of the information or disclosures provided on any
of the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide the Administrative Agent in writing
with such revisions or updates to such Schedule as may be necessary or
appropriate to update or correct same; provided, however, that no Schedule shall
be deemed to have been amended, modified or superseded by any such correction or
update, nor shall any breach of warranty or representation resulting from the
inaccuracy or incompleteness of any such Schedule be deemed to have been cured
thereby, unless and until the Required Banks, in their sole and absolute
discretion, shall have accepted in writing such revisions or updates to such
Schedule.
6. CONDITIONS OF LENDING
The obligation of each Bank to make Loans and of the
Administrative Agent to issue Letters of Credit hereunder is subject to the
performance by Borrower of its Obligations to be performed hereunder at or prior
to the making of any such Loans or issuance of such Letters of Credit and to the
satisfaction of the following further conditions:
6.1 First Loans. On the Closing Date:
6.1.1 Officer's Certificate. The representations and
warranties of Borrower contained in Article 5 shall be true and accurate on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein), and Borrower shall have performed and complied with
all covenants and conditions hereof, no Event of Default or Potential Default
under this Agreement shall have occurred and be continuing or shall exist; and
there shall be delivered to the Administrative Agent for the benefit of each
Bank a certificate of Borrower, dated the Closing Date and signed by the Chief
Executive Officer, President or Chief Financial Officer of Borrower, to each
such effect.
6.1.2 Secretary's Certificate. There shall be delivered to the
Administrative Agent for the benefit of each Bank a certificate dated the
Closing Date and signed by the Secretary or an Assistant Secretary of Borrower,
certifying as appropriate as to:
(i) all action taken by Borrower and its Subsidiaries
in connection with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized
to sign this Agreement and the other Loan Documents and the true signatures of
such officer or officers and specifying the Authorized Officers permitted to act
on behalf of Borrower and its Subsidiaries for purposes of this Agreement and
the true signatures of such officers, on which the Administrative Agent and each
Bank may conclusively rely; and
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(iii) copies of the organizational documents,
including certificates of incorporation and bylaws as in effect on the Closing
Date, of Borrower and its Subsidiaries, certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing of Borrower and its Subsidiaries in each state where organized
or qualified to do business.
6.1.3 Delivery of Notes and Guaranty. The Notes shall have
been duly executed by the Borrower, and a Guaranty and Suretyship Agreement as
to the Obligations and a related Subrogation and Contribution Agreement shall
have been duly executed by each Subsidiary, and such documents shall have been
delivered to the Administrative Agent for the benefit of the Banks.
6.1.4 Opinion of Counsel. There shall be delivered to the
Administrative Agent for the benefit of each Bank a written opinion of general
counsel for the Borrower (who may rely on the opinions of such other counsel as
may be acceptable to the Administrative Agent), dated the Closing Date and in
form and substance satisfactory to the Administrative Agent and its counsel.
6.1.5 Legal Details. All legal details and proceedings in
connection with the transactions contemplated by the Agreement and the other
Loan Documents shall be in form and substance satisfactory to the Administrative
Agent and counsel for the Administrative Agent, and the Administrative Agent
shall have received all such other counterpart originals or certified or other
copies of such documents and proceedings in connection with such transactions,
in form and substance satisfactory to the Administrative Agent and said counsel,
as the Administrative Agent or said counsel may reasonably request.
6.1.6 Payment of Fees. The Borrower shall pay or cause to be
paid to the Administrative Agent for itself and for the account of the Banks all
costs and expenses for which the Administrative Agent and the Banks are entitled
to be reimbursed, a closing fee to each of the Administrative Agent, Co-Agent
and Syndication Agent equal to 32.5 basis points times its respective
Commitments, as Banks, and a closing fee to each other Bank equal to 20.0 basis
points times the Commitment of such other Bank.
6.1.7 Consents. All material consents required to effectuate
the transactions contemplated hereby as set forth on Schedule 5.1.13 shall have
been obtained.
6.1.8 Officer's Certificate Regarding MACs. Since March 31,
1998, no Material Adverse Change in Borrower or any Subsidiary shall have
occurred; prior to the Closing Date, there shall be no material change in the
management of Borrower or any Subsidiary; and there shall be delivered to the
Administrative Agent for the benefit of each Bank a certificate dated the
Closing Date and signed by the Chief Executive Officer, President or Chief
Financial Officer of Borrower to such effect.
6.1.9 No Violation of Laws. The making of the Loans shall not
contravene any Law applicable to Borrower or any of the Banks.
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6.1.10 No Actions or Proceedings. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain or prohibit, or to obtain damages in respect of this Agreement or the
consummation of the transactions contemplated hereby or which, in the
Administrative Agent's sole discretion, would make it inadvisable to consummate
the transactions contemplated by this Agreement or any of the other Loan
Documents.
6.2 Each Additional Loan At the time of making any new Loans or issuing
any new Letters of Credit hereunder and after giving effect to the proposed
borrowings: the representations and warranties of the Borrower contained in
Article 5 shall be true on and as of the date of such additional Loan or Letter
of Credit with the same effect as though such representations and warranties had
been made on and as of such date (except representations and warranties which
expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein) and the Borrower shall have performed and complied with all
covenants and conditions hereof and of the Loan Documents; no Event of Default
or Potential Default shall have occurred and be continuing or shall exist; the
making of the Loans or issuance of such Letter of Credit shall not contravene
any Law applicable to the Borrower or any Subsidiary of the Borrower or any of
the Banks; and the Borrower shall have delivered to the Administrative Agent a
duly executed and completed Loan Request or application for a Letter of Credit
as the case may be.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, expiration or termination of all Letters of Credit,
satisfaction of all of the Borrower's other Obligations under the Loan Documents
and termination of the Revolving Credit Commitments, the Borrower shall comply
at all times with the following affirmative covenants:
7.1.1 Preservation of Existence, Etc.
The Borrower shall, and shall cause each of its Subsidiaries
to, maintain its corporate existence and its license or qualification and good
standing in each jurisdiction in which its ownership or lease of property or the
nature of its business makes such license or qualification necessary.
7.1.2 Payment of Liabilities, Including Taxes, Etc.
The Borrower shall, and shall cause each of its Subsidiaries
to, duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good-faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP
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shall have been made, but only to the extent that failure to discharge any such
liabilities would not result in any additional liability which would adversely
affect to a material extent the financial condition of the Borrower or
Subsidiary of the Borrower, provided that the Borrower and its Subsidiaries will
pay all such liabilities forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor.
7.1.3 Maintenance of Insurance.
The Borrower shall, and shall cause each of its Subsidiaries
to, insure its properties and assets against loss or damage by fire and such
other insurable hazards as such assets are commonly insured (including fire,
extended coverage, property damage, workers' compensation, public liability and
business interruption insurance) and against other risks (including errors and
omissions) in such amounts as similar properties and assets are insured by
prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary, all as reasonably determined by the Administrative Agent. At
the request of the Administrative Agent, the Borrower shall deliver (x) on the
Closing Date and annually thereafter an original certificate of insurance signed
by the Borrower's independent insurance broker describing and certifying as to
the existence of the insurance required to be maintained by this Agreement and
the other Loan Documents, together with a copy of the endorsement described in
the next sentence attached to such certificate and (y) from time to time a
summary schedule indicating all insurance then in force with respect to the
Borrower and its Subsidiaries. Such policies of insurance shall contain special
endorsements, in form and substance acceptable to the Administrative Agent,
which shall (i) specify the Administrative Agent as an additional insured as its
interests may appear, with the understanding that any obligation imposed upon
the insured (including the liability to pay premiums) shall be the sole
obligation of the Borrower or relevant Subsidiary and not that of the
Administrative Agent, (ii) include effective waivers by the insurer of all
claims for insurance premiums against the Administrative Agent, (iii) provide
that no cancellation of such policies for any reason (including non-payment of
premium) nor any change therein shall be effective until at least thirty (30)
days after receipt by the Administrative Agent of written notice of such
cancellation or change, (iv) be primary without right of contribution of any
other insurance carried by or on behalf of any additional insureds, and (v)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
Borrower shall notify the Administrative Agent promptly of any occurrence
causing a material loss or decline in value of insured assets and the estimated
(or actual, if available) amount of such loss or decline. Any monies received by
the Administrative Agent constituting insurance proceeds may, at the option of
the Administrative Agent, be disbursed to the Borrower or the relevant
Subsidiary on such terms as are deemed appropriate by the Administrative Agent
for the repair, restoration and/or replacement of property in respect of which
such proceeds were received.
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7.1.4 Maintenance of Properties and Leases.
The Borrower shall, and shall cause each of its Subsidiaries
to, maintain in good repair, working order and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of similar
character and size, all of those properties useful or necessary to its business,
and from time to time, the Borrower will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
7.1.5 Maintenance of Patents, Trademarks, Etc.
The Borrower shall, and shall cause each of its Subsidiaries
to, maintain in full force and effect all patents, trademarks, trade names,
copyrights, licenses, franchises, permits and other authorizations necessary for
the ownership and operation of its properties and business if the failure so to
maintain the same would constitute a Material Adverse Change.
7.1.6 Visitation Rights.
The Borrower shall, and shall cause each of its Subsidiaries
to, permit any of the officers or authorized employees or representatives of the
Administrative Agent or any of the Banks to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such detail and at such times during normal business hours and as often as any
of the Banks may reasonably request, provided that each Bank shall provide the
Borrower and the Administrative Agent with reasonable notice prior to any visit
or inspection. In the event any Bank desires to conduct an audit of the
Borrower, such Bank shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Administrative Agent.
The Borrower shall not be obligated to reimburse the Administrative Agent and
the Banks for more than one audit per year.
7.1.7 Keeping of Records and Books of Account.
The Borrower shall, and shall cause each of its Subsidiaries
to, maintain and keep proper books of record and account which enable the
Borrower and its Subsidiaries to issue financial statements in accordance with
GAAP and as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Borrower or any Subsidiary of the Borrower, and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
7.1.8 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each member of the ERISA
Group to, comply with the provisions of ERISA and the Internal Revenue Code
applicable to each Plan and Benefit Arrangement except where such failure, alone
or in conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, the Borrower shall
cause all of its Plans and all Plans maintained by any member of the ERISA Group
to be funded in accordance with the minimum funding requirements of ERISA and
shall make,
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and cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer Plans.
7.1.9 Compliance with Laws.
The Borrower shall, and shall cause each of its Subsidiaries
to, comply with all applicable Laws, including all Environmental Laws, in all
respects, provided that it shall not be deemed to be a violation of this Section
7.1.9 if any failure to comply with any Law would not result in fines,
penalties, remediation costs, other similar liabilities or injunctive relief
which in the aggregate would constitute a Material Adverse Change.
7.1.10 Use of Proceeds.
The Borrower will use the proceeds of the Loans only for
lawful purposes in accordance with Section 2.7 as applicable and such uses shall
not contravene any applicable Law or any other provision hereof.
7.1.11 Subsidiary Dividends. Borrower shall cause one or more
of its Subsidiaries to pay cash dividends to Borrower (directly or through one
or more Subsidiaries) from time to time, in aggregate amounts as necessary to
permit Borrower to pay and satisfy the Obligations when due and payable (by
acceleration or otherwise).
7.2 Negative Covenants.
The Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, expiration or termination of all Letters of Credit,
satisfaction of all of the Borrower's other Obligations hereunder and
termination of the Revolving Credit Commitments, the Borrower shall comply, and
shall cause its Subsidiaries to comply, with the following negative covenants:
7.2.1 Indebtedness.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule
7.2.1 (including any extensions or renewals thereof, provided there is no
increase in the amount thereof or other significant change in the terms thereof
unless otherwise specified on Schedule 7.2.1);
(iii) Capitalized and operating leases as and to the
extent permitted under Section 7.2.15;
(iv) PIK Subordinated Indebtedness, provided that no
such Indebtedness shall mature earlier than one year after the Expiration Date
in effect at the time such
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Indebtedness was incurred, other than the PIK Subordinated Indebtedness issued
to Teleflex Incorporated which matures in December 2002, and which may be repaid
at or before maturity so long as no Event of Default then exists or will result
from such payment;
(v) Indebtedness secured by Purchase Money Security
Interests not exceeding $5,000,000 in the aggregate outstanding at any time;
(vi) Indebtedness under lines of credit to Borrower
for money market borrowings of no more than $10,000,000 in the aggregate
outstanding at any time; and
(vii) Indebtedness assumed by Borrower or any
Subsidiary in an acquisition or merger permitted under Section 7.2.6(ii),
provided that such assumption did not and will not cause an Event of Default.
Notwithstanding the foregoing, the sum of the outstanding principal amount of
(A) all Indebtedness of Subsidiaries, including Guaranties (other than the
Guaranty and Suretyship Agreement executed in connection herewith) except for
PIK Subordinated Indebtedness, which shall be excluded from the calculation,
plus (B) secured and unsecured Indebtedness of the Borrower (not including
Indebtedness described in subsection (vi) of this Section 7.2.1, or the
Obligations hereunder) shall not at any time exceed 20% of Consolidated Net
Worth.
7.2.2 Liens.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
7.2.3 Guaranties.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, except:
(i) Guaranties of Indebtedness of the Borrower and
its Subsidiaries permitted under Section 7.2.1 [Indebtedness];
(ii) endorsements of negotiable or other instruments
for deposit or collection in the ordinary course of business;
(iii) any Guaranty of an obligation to indemnify or
hold harmless any other Person incurred in connection with an acquisition or
divestiture of Capital Stock or assets permitted under this Agreement; and
(iv) any Guaranty by Borrower of the obligations of
any of its direct or indirect Subsidiaries incurred in the ordinary course of
business such as trade credit and obligations under real estate leases; and
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(v) the Guaranty and Suretyship Agreement executed in
connection herewith.
7.2.4 Loans and Investments.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) in, or any other
investment or interest in, or make any capital contribution to, any other
Person, or agree, become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary
terms in the ordinary course of business;
(iii) advances to employees to meet expenses incurred
by such employees in the ordinary course of business;
(ii) Permitted Investments;
(iii) subject to Section 7.2.9(ii), loans, advances,
investments and capital contributions in and to the Subsidiaries of the
Borrower; and
(iv) acquisitions permitted under Section 7.2.6(ii).
7.2.5 Dividends and Related Distributions.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock or partnership interests on account of the purchase, redemption,
retirement or acquisition of its shares of capital stock (or warrants, options
or rights therefor) or partnership interests, except
(i) dividends or other distributions payable to the
Borrower by its Subsidiaries;
(ii) repurchases by Borrower of its common stock and
dividends payable by the Borrower to the holders of its common stock, provided
that the aggregate amount of the repurchases made and dividends paid on or after
April 1, 1999 does not exceed (a) $10,000,000 plus (b) 25% of cumulative
Consolidated Net Income from and after April 1, 1999, and provided further that
no Event of Default exists at the time of any such payment or will result from
the payment;
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(iii) redemptions of any employee's Capital Stock in
the Borrower upon termination of employment provided that no Event of Default
then exists or will result from the redemption;
(iv) dividends or other distributions payable in
stock, including stock splits; and
(v) the distribution of common shares in Borrower to Citicorp Venture Capital,
Ltd. upon the conversion of Citicorp Venture Capital's Class D Capital Stock in
Borrower.
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person, except
that
(i) any Subsidiary may consolidate or merge into the
Borrower or another Subsidiary; and
(ii) the Borrower or any of its Subsidiaries may
acquire assets or Capital Stock of other Persons engaged in the business of
aviation services, metals converting, or metals distribution, provided that:
(a) any such Person has a history of
positive operating profits and reasonable prospects
for continuing to produce operating profits in the
future;
(b) no Event of Default exists or will
result from such acquisition;
(c) following the closing of the
acquisition, the Borrower will have at least
$10,000,000 in availability under the Revolving
Credit Commitments;
(d) the Borrower notifies the
Administrative Agent in writing of the acquisition at
least 30 days before it is scheduled to close,
(e) on a pro forma basis using historical
Consolidated EBITDA of the assets and business being
acquired in such acquisition, the Borrower is in
compliance with all financial covenants and other
covenants contained in this Agreement (including
without limitation Section 7.2.1) for the full fiscal
quarter most recently ended and for the full fiscal
year most recently ended, as though such acquisition
had occurred on the first day of each of such
respective periods,
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(f) if the aggregate amount of Consideration
(defined to mean "cost basis" as defined in Section
1012, or any successor provision, of the Internal
Revenue Code, but not including any stock of Borrower
issued to the seller(s) in such acquisition) with
respect to such acquisition equals or exceeds
$20,000,000, Borrower shall have delivered to the
Administrative Agent with the notification under (d)
above a certificate signed by its chief executive
officer, its chief financial officer or its treasurer
showing compliance with (e) above, and the Required
Banks shall not have notified Borrower that they
believe such calculations or the assumptions used in
connection therewith to be in error or manifestly
unreasonable; and
(g) the Required Banks shall have approved
such acquisition in writing, in their sole
discretion, if either (1) the aggregate amount of
Consideration (not including any stock of Borrower
issued to the seller(s) in such acquisition) with
respect to such acquisition equals or exceeds
$50,000,000, or (2) should the Total Indebtedness to
EBITDA Ratio, immediately prior to the consummation
of such acquisition, equal or exceed 2.0 to 1, the
aggregate amount of Consideration (not including any
stock of Borrower issued to the seller(s) in such
acquisition) with respect to such acquisition equals
or exceeds $30,000,000,
7.2.7 Dispositions of Assets or Subsidiaries.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest or partnership interests of a Subsidiary of the Borrower), except:
(i) transactions involving the sale of inventory in
the ordinary course of business;
(ii) any sale, transfer or lease of assets in the
ordinary course of business which are no longer necessary or required in the
conduct of the Borrower's business;
(iii) any sale, transfer or lease of assets by any
Subsidiary of the Borrower to the Borrower or another Subsidiary;
(iv) any sale, transfer or lease of assets in the
ordinary course of business which are replaced by substitute assets acquired or
leased within the parameters of Section 7.2.15;
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(v) any sale, transfer, or lease of assets the
after-tax proceeds of which, when added to the after-tax proceeds of other
sales, transfers and leases of assets in the same fiscal year, do not exceed, in
the aggregate for Borrower and its Subsidiaries, 5% of Borrower's consolidated
total assets at the start of such Fiscal Year; and
(vi) any sale, transfer or lease of assets, other
than those specifically excepted pursuant to clauses (i) through (v) above,
which is approved by the Required Banks.
7.2.8 Affiliate Transactions.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services to any Affiliate of
the Borrower or other Person) unless such transaction is not otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon fair and reasonable arm's-length terms and conditions and is in accordance
with all applicable Law. The payment of customary directors fees shall not be
considered a prohibited Affiliate transaction.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
(i) The Borrower shall not and shall not permit any
of its Subsidiaries to, become or agree to become a general or limited partner
in any general or limited partnership or a joint venturer in any joint venture,
except that the Borrower and its Subsidiaries may be general or limited partners
in any of its or their Subsidiaries.
(ii) The Borrower will not invest or advance more
than $50,000 to Triumph Group Foreign Sales Corporation.
7.2.10 Continuation of Present Business.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than aviation services and metals
converting and distribution, substantially as conducted and operated by the
Borrower or Subsidiary during the present fiscal year, and the Borrower or
Subsidiary shall not permit any material change in such business.
7.2.11 Plans and Benefit Arrangements.
The Borrower shall not, and shall not permit any of its
Subsidiaries to:
(i) fail to satisfy the minimum funding requirements
of ERISA and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the
Internal Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any
Plan, Benefit Arrangement or Multiemployer Plan which, alone or in conjunction
with any other circumstances
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or set of circumstances resulting in liability under ERISA, would constitute a
Material Adverse Change;
(iv) permit the aggregate actuarial present value of
all benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan by more than $1,000,000;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a material liability of the Borrower or any member of the ERISA
Group;
(vii) terminate, or institute proceedings to
terminate, any Plan, where such termination is likely to result in a material
liability to the Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change.
7.2.12 Fiscal Year.
The Borrower shall not, and shall not permit any Subsidiary of
the Borrower to, change its fiscal year from the twelve-month period beginning
April 1 and ending March 31.
7.2.13 Issuance of Stock.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, issue any additional shares of its Capital Stock or any
options, warrants or other rights in respect thereof, except the issuance of
Capital Stock of the Borrower:
(i) pursuant to a secondary public offering;
(ii) to the existing shareholders, management, and
directors of the Borrower under stock option plans;
(iii) to World Equity Partners, L.P. pursuant to
warrants for the issuance of 650,000 shares;
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(iv) in connection with acquisitions permitted under
Section 7.2.6, provided that such issuance does not result in an Event of
Default;
(v) to existing shareholders pursuant to stock
splits; or
(vi) to Citicorp Venture Capital, Ltd. upon the
conversion of its Class D Capital Stock to common shares.
7.2.14 Changes in Organizational Documents.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend any provisions of its certificate of incorporation
relating to capital stock without providing at least thirty (30) calendar days'
prior written notice to the Administrative Agent and the Banks and, in the event
such change would be adverse to the Banks as determined by the Administrative
Agent in its sole discretion, obtaining the prior written consent of the
Required Banks.
7.2.15 Operating Leases.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, make any payments on account of operating leases that would
cause the aggregate of all such payments to exceed in any fiscal year the
greater of (a) $8,000,000, or (b) 15% of Consolidated Adjusted EBITDA for such
fiscal year. All operating leases of Borrower and its Subsidiaries shall be made
under usual and customary terms and in the ordinary course of business.
7.2.16 Minimum Interest Coverage Ratio.
The Borrower shall not permit the Interest Coverage Ratio,
calculated as of the end of each fiscal quarter for the four fiscal quarters
then ended, to be less than 3.0 to 1.0.
7.2.17 Maximum Total Indebtedness to EBITDA Ratio.
The Borrower shall not at any time permit the Total
Indebtedness to EBITDA Ratio, calculated as of the end of each fiscal quarter
(with EBITDA to be measured for the four fiscal quarters then ending), to exceed
3.00 to 1.00.
7.2.18 Minimum Net Worth.
The Borrower shall not at any time permit Consolidated Net
Worth to be less than $193,299,000 plus (i) 50% of Consolidated Net Income for
each fiscal year in which net income was earned (as opposed to net loss)
beginning with the fiscal year ending March 31, 2000 (with the necessary
adjustment to be made as of the end of the relevant fiscal year) and (ii) 100%
of the proceeds (after the payment of any fees and expenses) from any capital
contribution to, or any sale or issuance of Capital Stock by, the Borrower (with
any necessary adjustment to be made upon the receipt of such proceeds).
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7.2.19 Negative Pledges. The Borrower shall not and shall not
permit any of its Subsidiaries to, agree with any Person (i) to limit its
ability to provide collateral security to the Banks and (ii) to limit the
ability of Borrower's Subsidiaries to pay dividends or make other distributions
to Borrower.
7.2.20 Capital Expenditures. The Borrower shall not permit
aggregate capital expenditures of Borrower and its Subsidiaries to exceed, in
any fiscal year, 200% of consolidated depreciation expense for such fiscal year.
7.3 Reporting Requirements.
The Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, expiration or termination of all Letters of Credit,
satisfaction of all of the Borrower's other Obligations hereunder and under the
other Loan Documents and termination of the Revolving Credit Commitments, the
Borrower will furnish or cause to be furnished to the Administrative Agent and
each of the Banks:
7.3.1 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, the Borrower's financial statements, consisting of consolidated
balance sheets as of the end of such fiscal quarter and related consolidated
statements of income, stockholders' equity and cash flows for the fiscal quarter
then ended and the fiscal year through that date, all in reasonable detail and
certified (subject to normal year-end audit adjustments and the absence of
footnotes) by the Chief Executive Officer, President or Chief Financial Officer
of the Borrower as having been prepared in accordance with GAAP, consistently
applied, and setting forth in comparative form the respective financial
statements for the corresponding date and period in the previous fiscal year.
7.3.2 Annual Financial Statement.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year, consolidated and consolidating financial
statements of the Borrower and its Subsidiaries consisting of consolidated and
consolidating balance sheets as of the end of such fiscal year, and related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for the fiscal year then ended, all in reasonable detail and setting
forth in comparative form the financial statements as of the end of and for the
preceding fiscal year, with the consolidated statements being certified by
independent certified public accountants of nationally recognized standing
satisfactory to the Administrative Agent. The certificate or report of
accountants shall be free of qualifications (other than any consistency
qualification that may result from a change in the method used to prepare the
financial statements as to which such accountants concur) and shall not indicate
the occurrence or existence of any event, condition or contingency which would
materially impair the prospect of payment or performance of any covenant,
agreement or duty of the Borrower under any of the Loan Documents, together with
a letter of such accountants substantially to the effect that, based upon their
ordinary and customary examination of the affairs of the Borrower, performed in
connection with the preparation of such
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consolidated financial statements, and in accordance with generally accepted
auditing standards, they are not aware of the existence of any condition or
event which constitutes an Event of Default or Potential Default or, if they are
aware of such condition or event, stating the nature thereof and confirming the
Borrower's calculations with respect to the certificate to be delivered pursuant
to Section 7.3.3 with respect to such financial statements.
7.3.3 Compliance Certificate.
Concurrently with the financial statements of the Borrower
furnished to the Administrative Agent and to the Banks pursuant to Sections
7.3.1 and 7.3.2, a certificate of the Borrower signed by the Chief Executive
Officer, President or Chief Financial Officer of the Borrower, in the form of
Exhibit 7.3.3, to the effect that, except as described pursuant to Section
7.3.4, (i) the representations and warranties of the Borrower contained in
Article 5 are true on and as of the date of such certificate with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which expressly relate solely
to an earlier date or time) and the Borrower has performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
the financial statements with all financial covenants contained in Section 7.2.
If an acquisition permitted under Section 7.2.6(ii) occurred during the
reporting period covered by the compliance certificate and if the Borrower has
provided the Administrative Agent with historical financial statements on the
acquired business, which, to the best of Borrower's knowledge, are true and
correct and fairly represent the financial position of the acquired business,
Borrower may also calculate the Section 7.2 financial covenants on a pro forma
basis to include the financial performance and condition of the acquired
business during the period; and the pro forma calculation of the Total
Indebtedness to EBITDA Ratio may be relied upon as a basis for a change in the
pricing level under the Pricing Grid.
7.3.4 Notice of Default.
Promptly after any officer of Borrower has learned of the
occurrence of an Event of Default or Potential Default, a certificate signed by
the Chief Executive Officer, President or Chief Financial Officer of Borrower
setting forth the details of such Event of Default or Potential Default and the
action which the Borrower proposes to take with respect thereto.
7.3.5 Notice of Litigation.
Promptly after the commencement thereof, notice of all
actions, suits, proceedings or investigations before or by any Official Body or
any other Person against the Borrower or Subsidiary of the Borrower which in the
good faith estimation of counsel for the Borrower involve a claim or series of
claims in excess of $750,000 or which if adversely determined would constitute a
Material Adverse Change with respect to the Borrower or Subsidiary of the
Borrower.
7.3.6 Certain Events.
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Written notice to the Administrative Agent:
(i) at least thirty (30) calendar days prior thereto,
with respect to any proposed sale or transfer of assets pursuant to Section
7.2.7(v).
(ii) within the time limits set forth in Section
7.2.14, the amendment to the charter affecting the capital structure of the
Borrower or any of its Subsidiaries.
7.3.7 Budgets, Forecasts, Other Reports and Information.
Promptly upon their becoming available to the Borrower:
(i) the annual budget and any forecasts or
projections of the Borrower and its Subsidiaries, to be supplied at the request
of the Administrative Agent prior to commencement of the fiscal year to which
any of the foregoing may be applicable,
(ii) any reports including management letters
submitted to the Borrower by independent accountants in connection with any
annual, interim or special audit,
(iii) any reports, notices or proxy statements
generally distributed by the Borrower to its stockholders on a date no later
than the date supplied to the stockholders,
(iv) regular or periodic reports, including Forms
10-K, 10-Q and 8-K, registration statements and prospectuses, filed by the
Borrower with the Securities and Exchange Commission,
(v) a copy of any order, issued by any Official Body
in any proceeding to which the Borrower or any of its Subsidiaries is a party,
and in which the amount in controversy exceeds $1,000,000,
(vi) such other reports and information as the Banks
may from time to time reasonably request. The Borrower shall also notify the
Banks promptly of the enactment or adoption of any Law which may result in a
Material Adverse Change with respect to the Borrower or any Subsidiary of the
Borrower, and
(vii) within 60 days of closing on any acquisition
permitted under Section 7.2.6 in which the total consideration paid by the
Borrower or its Subsidiary exceeded $5,000,000, such financial information as
the Administrative Agent may reasonably request concerning the acquisition and
its effect on the financial condition and performance of the Borrower.
7.3.8 Notices Regarding Plans and Benefit Arrangements.
7.3.8.1 Certain Events.
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Promptly upon becoming aware of the occurrence
thereof, notice (including the nature of the event and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with respect
thereto) of:
(i) any Reportable Event with respect to the Borrower
or any member of the ERISA Group for which reporting to the PBGC has not been
waived,
(ii) any Prohibited Transaction which could subject
the Borrower or any member of the ERISA Group to a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, Benefit Arrangement or any
trust created thereunder,
(iii) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by the Borrower or any member of the ERISA Group under Title
IV of ERISA (or assertion thereof), where such withdrawal is likely to result in
material withdrawal liability,
(v) withdrawal by the Borrower or any member of the
ERISA Group from a Multiple Employer Plan,
(vi) a failure by the Borrower or any member of the
ERISA Group to make a payment to a Plan required to avoid imposition of a lien
under Section 302(f) of ERISA,
(vii) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA, or
(viii) any change in the actuarial assumptions or
funding methods used for any Plan (other than interest rate changes required by
Financial Standards Board Opinion No. 87), where the effect of such change is to
materially increase or materially reduce the unfunded benefit liability or
obligation to make periodic contributions.
7.3.8.2 Notices of Involuntary Termination and Annual
Reports.
Promptly after receipt thereof, copies of (a) all
notices received by the Borrower or any member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by the Borrower or any
member of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b) at the request of the Administrative Agent or any Bank each annual
report (IRS Form 5500 series) and all accompanying schedules, the most recent
actuarial reports, the most recent financial information concerning the
financial status of each Plan administered or maintained by the Borrower or any
member of the ERISA Group, and schedules showing the amounts contributed to each
such Plan by or on behalf of the Borrower or any member of the ERISA Group in
which any of their personnel participate or from which such personnel may derive
a benefit, and each Schedule B (Actuarial Information) to the annual report
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filed by the Borrower or any member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
7.3.8.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form
5310, or any successor or equivalent form to Form 5310, filed with the PBGC in
connection with the termination of any Plan.
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
8.1.1 Payments Under Loan Documents.
The Borrower shall fail to pay when due any principal of any
Loan (including scheduled installments, mandatory prepayments or the payment due
at maturity) or shall fail to pay, for more than two Business Days after the due
date, any interest on any Loan or when due any other amount owing hereunder or
under the other Loan Documents;
8.1.2 Breach of Warranty.
Any representation or warranty made at any time by the
Borrower herein or in any other Loan Document, or in any certificate, other
instrument or statement furnished pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading in any material respect as of the
time it was made or furnished;
8.1.3 Refusal to Permit Inspections; Breach of Negative
Covenants.
The Borrower shall default in the observance or performance of
any covenant contained in Section 7.1.6 or Section 7.2;
8.1.4 Breach of Other Covenants.
The Borrower shall default in the observance or performance of
any other covenant, condition or provision hereof or of any other Loan Document
and such default shall continue unremedied for a period of ten (10) Business
Days after any officer of the Borrower becomes aware of the occurrence thereof;
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8.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under
the terms of any other agreement involving borrowed money or the extension of
credit or any other Indebtedness under which the Borrower or Subsidiary of the
Borrower may be obligated as a borrower or guarantor in excess of $750,000 in
the aggregate, and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect thereto,
whether waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (and such right shall not have been waived) or
the termination of any commitment to lend;
8.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in
excess of $750,000 in the aggregate shall be entered against the Borrower or any
Subsidiary of the Borrower by a court having jurisdiction in the premises, which
judgment is not discharged, vacated, bonded or stayed pending appeal within a
period of thirty (30) days from the date of entry;
8.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss,
theft or destruction of the assets of the Borrower or any of its Subsidiaries in
excess of $1,000,000 or the assets of the Borrower or any of its Subsidiaries
are attached, seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured within sixty (60) days
thereafter;
8.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $750,000 which is
not a Permitted Lien is filed of record with respect to all or any part of the
assets of the Borrower or any of its Subsidiaries by the United States, or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including the Pension Benefit Guaranty
Corporation, or if any taxes or debts owing at any time or times hereafter to
any one of these becomes payable and the same is not paid within thirty (30)
days after the same becomes payable (unless the Borrower or such Subsidiary is
contesting the obligation as provided in Section 7.1.2);
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8.1.10 Insolvency.
The Borrower or any Subsidiary of the Borrower ceases to be
solvent or admits in writing its inability to pay its debts as they mature;
8.1.11 Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i) any Reportable Event, which
the Administrative Agent determines in good-faith constitutes grounds for the
termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be continuing; (ii)
proceedings shall have been instituted or other action taken to terminate any
Plan, or a termination notice shall have been filed with respect to any Plan;
(iii) a trustee shall be appointed to administer or liquidate any Plan; (iv) the
PBGC shall give notice of its intent to institute proceedings to terminate any
Plan or Plans or to appoint a trustee to administer or liquidate any Plan; and,
in the case of the occurrence of (i), (ii), (iii) or (iv) above, the
Administrative Agent determines in good-faith that the amount of the Borrower's
liability is likely to exceed 10% of its Consolidated Tangible Net Worth; (v)
the Borrower or any member of the ERISA Group shall make any amendment to a Plan
with respect to which security is required under Section 307 of ERISA; (vi) the
Borrower or any member of the ERISA Group shall withdraw completely or partially
from a Multiemployer Plan; (vii) the Borrower or any member of the ERISA Group
shall withdraw (or shall be deemed under Section 4062(e) of ERISA to withdraw)
from a Multiple Employer Plan; or (viii) any applicable Law is adopted, changed
or interpreted by any Official Body with respect to or otherwise affecting one
or more Plans, Multiemployer Plans or Benefit Arrangements and, with respect to
any of the events specified in (v), (vi), (vii), or (viii), the Administrative
Agent determines in good-faith that any such occurrence is reasonably likely to
materially and adversely affect the total enterprise represented by the Borrower
and the other members of the ERISA Group;
8.1.12 Cessation of Business.
Except as otherwise permitted herein, the Borrower or any
Subsidiary of the Borrower ceases to conduct its business as contemplated or the
Borrower is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof;
8.1.13 Change of Control.
There occurs an event or series of events by which (i) any
"person" or "group" (as such terms are defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder), other than Citicorp Venture Capital and Affiliates, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
such Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire without
condition, other than passage of time, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 20% of the total voting power of the then outstanding voting stock of the
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Borrower, or (ii) (A) the Borrower consolidates with or merges into another
corporation or conveys, transfers or leases all or substantially all of its
properties and assets (determined on a consolidated basis for the Borrower and
its Subsidiaries taken as a whole) to any Person, or (B) any corporation
consolidates with or merges into the Borrower or a Subsidiary of the Borrower in
a transaction in which the outstanding voting stock of the Borrower is changed
into or exchanged for cash, securities or other property, other than a
transaction solely between the Borrower and a Subsidiary of the Borrower;
8.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
the Borrower or any of its Subsidiaries in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official) of the
Borrower or any of its Subsidiaries for any substantial part of its property, or
for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of sixty (60)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
8.1.15 Voluntary Proceedings.
The Borrower or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of the
foregoing.
8.2 Consequences of Event of Default.
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.
If an Event of Default specified under subsections 8.1.1
through 8.1.13 of Section 8.1 shall occur and be continuing, the Banks and the
Administrative Agent shall be under no further obligation to make Loans or issue
Letters of Credit, as the case may be, and the Administrative Agent may, and
upon the request of the Required Banks, shall (i) by written notice to the
Borrower, declare the unpaid principal amount of the Notes then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Banks hereunder and thereunder to be forthwith due and payable,
and the same shall thereupon become and be immediately due and payable to the
Administrative Agent for the benefit of each Bank without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, and (ii) require the Borrower to, and the Borrower shall thereupon,
deposit in a
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non-interest bearing account with the Administrative Agent, as cash collateral
for its Obligations under the Loan Documents, an amount equal to the maximum
amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower hereby pledges to the
Administrative Agent and the Banks, and grant to the Administrative Agent and
the Banks a security interest in, all such cash as security for such
Obligations. Upon the curing of all existing Events of Default to the
satisfaction of the Required Banks, the Administrative Agent shall return such
cash collateral to the Borrower; and
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under subsections 8.1.14 or
8.1.15 of Section 8.1 shall occur, the Banks shall be under no further
obligations to make Loans hereunder and the unpaid principal amount of the Notes
then outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrower to the Banks hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and
8.2.3 Set-off.
If an Event of Default shall occur and be continuing, any Bank
to whom any Obligation is owed by the Borrower hereunder or under any other Loan
Document or any participant of such Bank which has agreed in writing to be bound
by the provisions of Section 3.2 and 9.13 and any branch, Subsidiary or
Affiliate of such Bank or participant anywhere in the world shall have the
right, in addition to all other rights and remedies available to it, without
notice to the Borrower, to set-off against and apply to the then unpaid balance
of all the Loans and all other Obligations of the Borrower hereunder or under
any other Loan Document any debt owing to, and any other funds held in any
manner for the account of, the Borrower by such Bank or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower for its own
account (but not including funds held in custodian or trust accounts) with such
Bank or participant or such branch, Subsidiary or Affiliate. Such right shall
exist whether or not any Bank or the Administrative Agent shall have made any
demand under this Agreement or any other Loan Document, whether or not such debt
owing to or funds held for the account of the Borrower is or are matured or
unmatured and regardless of the existence or adequacy of any Guaranty or any
other security, right or remedy available to any Bank or the Administrative
Agent; and
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8.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and
whether or not the Administrative Agent shall have accelerated the maturity of
Loans to the Borrower pursuant to any of the foregoing provisions of this
Section 8.2, the Administrative Agent or any Bank, if owed any amount with
respect to the Notes, may proceed to protect and enforce its rights by suit in
equity, action at law and/or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement or
the Notes, including as permitted by applicable Law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Administrative Agent or such Bank; and
8.2.5 Application of Proceeds.
From and after the date on which the Administrative Agent has
taken any action pursuant to this Section 8.2 and until all Obligations of the
Borrower has been paid in full, any and all proceeds received by the
Administrative Agent from the exercise of any other remedy by the Administrative
Agent, shall be applied as follows: (i) first, to reimburse the Administrative
Agent and the Banks for out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' and paralegals' fees and legal expenses,
incurred by the Administrative Agent or the Banks in connection with collection
of any Obligations of the Borrower under any of the Loan Documents;
(ii) second, to the repayment of all Indebtedness then due and unpaid of the
Borrower to the Banks incurred under this Agreement or any of the Loan
Documents, whether of principal, interest, fees, expenses or otherwise, in such
manner as the Administrative Agent may determine in its discretion; and
(iii) the balance, if any, to Borrower or as required
by Law.
9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and authorizes PNC
Bank to act as Administrative Agent for such Bank under this Agreement to
execute and deliver or accept on behalf of each of the Banks the other Loan
Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note
by the acceptance of a Note shall be deemed irrevocably to authorize, the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and any other instruments and
agreements referred to herein, and to exercise such powers and to perform such
duties hereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. PNC Bank agrees to act as the Administrative
Agent on behalf of the Banks to the extent provided in this Agreement.
Furthermore, First Union National Bank shall be named Syndication Agent and
Mellon Bank, N.A. shall be named Co-
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Agent, though neither shall have any duties in connection with this Agreement or
have by reason of this Agreement a fiduciary or trust relationship in respect of
any Bank.
9.2 Delegation of Duties.
The Administrative Agent may perform any of its duties hereunder by or
through agents or employees (provided such delegation does not constitute a
relinquishment of its duties as Administrative Agent) and, subject to Sections
9.5 and 9.6, shall be entitled to engage and pay for the advice or services of
any attorneys, accountants or other experts concerning all matters pertaining to
its duties hereunder and to rely upon any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
The Administrative Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be read
into this Agreement or otherwise exist. The duties of the Administrative Agent
shall be mechanical and administrative in nature; the Administrative Agent shall
not have by reason of this Agreement a fiduciary or trust relationship in
respect of any Bank; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon the Administrative Agent
any obligations in respect of this Agreement except as expressly set forth
herein. Each Bank expressly acknowledges (i) that the Administrative Agent has
not made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Bank; (ii) that it has made and will continue to
make, without reliance upon the Administrative Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of the Borrower in connection with this Agreement and the
making and continuance of the Loans hereunder; and (iii) except as expressly
provided herein, that the Administrative Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times thereafter.
9.4 Actions in Discretion of Administrative Agent; Instructions from
the Banks.
The Administrative Agent agrees, upon the written request of the
Required Banks, to take or refrain from taking any action of the type specified
as being within the Administrative Agent's rights, powers or discretion herein,
provided that the Administrative Agent shall not be required to take any action
which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement or any other Loan Document or applicable Law. In the
absence of a request by the Required Banks, the Administrative Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
9.6. Subject to the provisions of Section 9.6, no Bank shall have any right of
action whatsoever against the Administrative Agent as a result of the
Administrative Agent acting or refraining from acting
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hereunder in accordance with the instructions of the Required Banks, or in the
absence of such instructions, in the absolute discretion of the Administrative
Agent.
9.5 Reimbursement and Indemnification of Administrative Agent by the
Borrower.
The Borrower unconditionally agrees to pay or reimburse the
Administrative Agent and save the Administrative Agent harmless against (a)
liability for the payment of all reasonable and actual out-of-pocket costs,
expenses and disbursements, including fees and expenses of counsel, appraisers
and environmental consultants, incurred by the Administrative Agent (i) in
connection with the development, negotiation, preparation, printing, execution,
administration, syndication, interpretation and performance of this Agreement
and the other Loan Documents, (ii) relating to any requested amendments, waivers
or consents pursuant to the provisions hereof, (iii) in connection with the
enforcement of this Agreement or any other Loan Document or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (iv) in any workout, restructuring
or in connection with the protection, preservation, exercise or enforcement of
any of the terms hereof or of any rights hereunder or under any other Loan
Document or in connection with any foreclosure, collection or bankruptcy
proceedings, and (b) all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by the Administrative Agent hereunder or thereunder, provided that the Borrower
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
if the same results from the Administrative Agent's gross negligence or willful
misconduct, or if the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
the Borrower shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower), or if the same results from a compromise
or settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. In addition, the Borrower agrees to
reimburse and pay all reasonable out-of-pocket expenses of the Administrative
Agent's regular employees and agents engaged periodically to perform audits of
the Borrower's books, records and business properties, provided that, before an
Event of Default, the Borrower shall not be obligated to pay for more than one
such audit per year.
9.6 Exculpatory Provisions.
Neither the Administrative Agent nor any of its directors, officers,
employees, agents, attorneys or Affiliates shall (a) be liable to any Bank for
any action taken or omitted to be taken by it or them hereunder, or in
connection herewith including pursuant to any Loan Document, unless caused by
its or their own gross negligence or willful misconduct, (b) be responsible in
any manner to any of the Banks for the effectiveness, enforceability,
genuineness, validity or the due execution of this Agreement or any other Loan
Documents or for any recital, representation, warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Loan Documents, or (c) be under any obligation to
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any of the Banks to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions hereof or thereof on the part of
the Borrower, or the financial condition of the Borrower, or the existence or
possible existence of any Event of Default or Potential Default. Neither the
Administrative Agent nor any Bank nor any of their respective directors,
officers, employees, agents, or Affiliates shall be liable to the Borrower for
consequential damages resulting from any breach of contract in connection with
the negotiation, documentation, administration or collection of the Loans or any
of the Loan Documents.
9.7 Reimbursement and Indemnification of Administrative Agent by Banks.
Each Bank agrees to reimburse and indemnify the Administrative Agent
(to the extent not reimbursed by the Borrower and without limiting the
Obligation of the Borrower to do so) in proportion to its Ratable Share from and
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by the Administrative Agent hereunder or thereunder, provided that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements (a) if
the same results from the Administrative Agent's gross negligence or willful
misconduct, or (b) if such Bank was not given notice of the subject claim and
the opportunity to participate in the defense thereof, at its expense (except
that such Bank shall remain liable to the extent such failure to give notice
does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Administrative Agent (to the extent not
reimbursed by the Borrower and without limiting the Obligation of the Borrower
to do so) in proportion to its Ratable Share for all amounts due and payable by
the Borrower to the Administrative Agent in connection with the Administrative
Agent's periodic audit of the Borrower's books, records and business properties.
9.8 Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, resolution, notice, consent, certificate,
letter, cablegram, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon the advice and
opinions of counsel and other professional advisers selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action hereunder unless it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
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9.9 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Potential Default or Event of Default unless the
Administrative Agent has received written notice from a Bank or the Borrower
referring to this Agreement, describing such Potential Default or Event of
Default and stating that such notice is a "notice of default."
9.10 Notices.
The Administrative Agent shall promptly send to each Bank a copy of all
notices received from the Borrower pursuant to the provisions of this Agreement
or the other Loan Documents promptly upon receipt thereof. The Administrative
Agent shall promptly notify the Borrower and the other Banks of each change in
the Base Rate and the effective date thereof.
9.11 Banks in Their Individual Capacities.
With respect to its Revolving Credit Commitments, the Revolving Credit
Loans made by it, the Administrative Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not the
Administrative Agent, and the term "Banks" shall, unless the context otherwise
indicates, include the Administrative Agent in its individual capacity. PNC Bank
and its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Borrower and
its Affiliates, in the case of the Administrative Agent, as though it were not
acting as Administrative Agent hereunder and in the case of each Bank, as though
such Bank were not a Bank hereunder.
9.12 Holders of Notes.
The Administrative Agent may deem and treat any payee of any Note as
the owner thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent. Any request, authority or consent of any Person who at the time of making
such request or giving such authority or consent is the holder of any Note shall
be conclusive and binding on any subsequent holder, transferee or assignee of
such Note or of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Sections 3.4.2, 4.4.2, or 4.5.1. The Banks or
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any such holder receiving any such amount shall purchase for cash from each of
the other Banks an interest in such Bank's Loans in such amount as shall result
in a ratable participation by the Banks and each such holder in the aggregate
unpaid amount under the Notes, provided that if all or any portion of such
excess amount is thereafter recovered from the Bank or the holder making such
purchase, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, together with interest or other amounts, if any,
required by law (including court order) to be paid by the Bank or the holder
making such purchase.
9.14 Successor Administrative Agent.
The Administrative Agent may resign as Administrative Agent by giving
not less than thirty (30) days' prior written notice to the Borrower. If the
Administrative Agent shall resign under this Agreement, then either (a) the
Required Banks shall appoint from among the Banks a successor agent for the
Banks, subject to the consent of the Borrower, such consent not to be
unreasonably withheld, or (b) if a successor agent shall not be so appointed and
approved within the thirty (30) day period following the Administrative Agent's
notice to the Banks of its resignation, then the Administrative Agent shall
appoint, with the consent of the Borrower, such consent not to be unreasonably
withheld, a successor agent who shall serve as Administrative Agent until such
time as the Required Banks appoint and the Borrower consent to the appointment
of a successor agent. Upon its appointment pursuant to either clause (a) or (b)
above, such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent, effective upon its appointment, and the former Administrative
Agent's rights, powers and duties as Administrative Agent shall be terminated
without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the
resignation of any Administrative Agent hereunder, the provisions of this
Article 9 shall inure to the benefit of such former Administrative Agent and
such former Administrative Agent shall not by reason of such resignation be
deemed to be released from liability for any actions taken or not taken by it
while it was an Administrative Agent under this Agreement.
9.15 Administrative Agent's Fee.
The Borrower shall pay to the Administrative Agent a nonrefundable fee
(the "Administrative Agent's Fee") under the terms of a letter (the
"Administrative Agent's Letter") between the Borrower and Administrative Agent,
as amended from time to time.
9.16 Availability of Funds.
Unless the Administrative Agent shall have been notified by a Bank
prior to the date upon which a Loan is to be made that such Bank does not intend
to make available to the Administrative Agent such Bank's portion of such Loan,
the Administrative Agent may assume that such Bank has made or will make such
proceeds available to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption (but shall not be
required to), make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent
by such Bank, the Administrative
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Agent shall be entitled to recover such amount on demand from such Bank (or, if
such Bank fails to pay such amount forthwith upon such demand from the Borrower)
together with interest thereon, in respect of each day during the period
commencing on the date such amount was made available to the Borrower and ending
on the date the Administrative Agent recovers such amount, at a rate per annum
equal to the applicable interest rate in respect of the Loan.
9.17 Calculations.
In the absence of gross negligence or willful misconduct, the
Administrative Agent shall not be liable for any error in computing the amount
payable to any Bank whether in respect of the Loans, fees or any other amounts
due to the Banks under this Agreement. In the event an error in computing any
amount payable to any Bank is made, the Administrative Agent, the Borrower and
each affected Bank shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any compensation
therefor will be calculated at the Federal Funds Effective Rate.
9.18 Beneficiaries.
Except as expressly provided herein, the provisions of this Article 9
are solely for the benefit of the Administrative Agent and the Banks, and the
Borrower shall not have any rights to rely on or enforce any of the provisions
hereof. In performing its functions and duties under this Agreement, the
Administrative Agent shall act solely as agent of the Banks and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Borrower.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Administrative
Agent, acting on behalf of all the Banks, and the Borrower may from time to time
enter into written agreements amending or changing any provision of this
Agreement or any other Loan Document or the rights of the Banks or the Borrower
hereunder or thereunder, or may grant written waivers or consents to a departure
from the due performance of the Obligations of the Borrower hereunder or
thereunder. Any such agreement, waiver or consent made with such written consent
shall be effective to bind all the Banks and the Borrower; provided that,
without the written consent of Banks whose Commitments aggregate at least 67% of
the Commitments of all of the Banks if there are no Loans outstanding, or Banks
whose Loans outstanding aggregate at least 67% of the total principal amount of
the Loans outstanding hereunder if there are Loans outstanding, no Subsidiary
that has become a signatory to the Guaranty and Suretyship Agreement (as
described in Section 6.1.3) shall be released from any obligations under that
agreement; and provided further, that, without the written consent of all the
Banks, no agreement, waiver or consent may be made which will:
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10.1.1 Increase of Commitment; Extension or Expiration Date.
Increase the amount of the Revolving Credit Commitment of any
Bank hereunder or extend the Expiration Date;
10.1.2 Extension of Payment; Reduction of Principal Interest
or Fees; Modification of Terms of Payment.
Whether or not any Loans are outstanding, extend the time for
payment of principal or interest of any Loan, the Commitment Fee or any other
fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee payable
to any Bank, or otherwise affect the terms of payment of the principal of or
interest of any Loan, the Commitment Fee or any other fee payable to any Bank;
10.1.3 Miscellaneous.
Amend Sections 4.2 [Pro Rata Treatment of Banks], 9.6
[Exculpatory Provisions], 9.13 [Equalization of Banks] or this Section 10.1,
alter any provision regarding the pro rata treatment of the Banks, change the
definition of Required Banks, or change any requirement providing for the Banks
or the Required Banks to authorize the taking of any action hereunder provided
further, that no agreement, waiver or consent which would modify the interests,
rights or obligations of the Administrative Agent in its capacity as
Administrative Agent or as the issuer of Letters of Credit shall be effective
without the written consent of the Administrative Agent.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Administrative
Agent or any Bank in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or operate as a waiver thereof, nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power, remedy or privilege preclude any further exercise thereof or of any other
right, power, remedy or privilege. The rights and remedies of the Administrative
Agent and the Banks under this Agreement and any other Loan Documents are
cumulative and not exclusive of any rights or remedies which they would
otherwise have. Any waiver, permit, consent or approval of any kind or character
on the part of any Bank of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent specifically set forth in such
writing.
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes.
The Borrower agrees unconditionally upon demand to pay or reimburse to
each Bank (other than the Administrative Agent, as to which the Borrower's
Obligations are set forth in Section 9.5) and to save such Bank harmless against
(i) liability for the payment of all reasonable and actual out-of-pocket costs,
expenses and disbursements (including fees and expenses of outside counsel for
each Bank except with respect to (a) and (b) below), incurred by such Bank
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(a) in connection with the administration and interpretation of this Agreement,
and other instruments and documents to be delivered hereunder, (b) relating to
any amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout,
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Bank, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by such Bank hereunder or thereunder, provided that the Borrower shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements (A) if
the same results from such Bank's gross negligence or willful misconduct, or (B)
if the Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrower
shall remain liable to the extent such failure to give notice does not result in
a loss to the Borrower), or (C) if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. The Banks will attempt to minimize the fees
and expenses of legal counsel for the Banks which are subject to reimbursement
by the Borrower hereunder by considering the usage of one law firm to represent
the Banks and the Administrative Agent if appropriate under the circumstances.
The Borrower agrees unconditionally to pay all stamp, document, transfer,
recording or filing taxes or fees and similar impositions now or hereafter
determined by the Administrative Agent or any Bank to be payable in connection
with this Agreement or any other Loan Document, and the Borrower agrees
unconditionally to save the Administrative Agent and the Banks harmless from and
against any and all present or future claims, liabilities or losses with respect
to or resulting from any omission to pay or delay in paying any such taxes, fees
or impositions.
10.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder shall be due
on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fee, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2 with respect to Interest Periods under the
Euro-Rate Option), and such extension of time shall not be included in computing
interest or fees, if any, in connection with such payment or action.
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10.5 Funding by Branch, Subsidiary or Affiliate.
10.5.1 Notional Funding.
Each Bank shall have the right from time to time, without
notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for
the purposes of this Section 10.5 shall mean any corporation or association
which is directly or indirectly controlled by or is under direct or indirect
common control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which the Euro-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from the Borrower to
such other office), and as a result of such change, the Borrower would not be
under any greater financial obligation pursuant to Section 4.5 than they would
have been in the absence of such change. Notional funding offices may be
selected by each Bank without regard to the Bank's actual methods of making,
maintaining or funding the Loans or any sources of funding actually used by or
available to such Bank.
10.5.2 Actual Funding.
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 6.1.6) which would otherwise not be incurred.
Notwithstanding anything to the contrary contained herein, any
Bank, (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC") the option to fund all or any part of any Loan that such Granting Bank
would otherwise be obligated to fund pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to fund
all or any part of such Loan, the Granting Bank shall be obligated to fund such
Loan pursuant to the terms hereof. The funding of a Loan by an SPC hereunder
shall utilize the Revolving Credit Commitment of the Granting Bank to the same
extent, and as if, such Loan were funded by such Granting Bank. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or payment
under this Agreement for which a Bank would otherwise be liable for so long as,
and to the extent, the Granting Bank provides such indemnity or makes such
payment. The Granting Bank shall remain primarily liable for any indemnity or
payments under this Agreement. No SPC shall be deemed a signatory to this
Agreement or have any direct rights hereunder, its rights and obligations
hereunder being governed solely by this paragraph and its agreement with the
Granting Bank. In the event of a conflict between this paragraph and such
agreement with the
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Granting Bank, this paragraph will control. Such agreement with the Granting
Bank will be subject to Section 10.11 of this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC. This Section may not be amended without the prior written
consent of each Granting Bank, all or any part of whose Loan is being funded by
an SPC at the time of such amendment.
10.6 Notices.
All notices, requests, demands, directions and other communications (as
used in this Section 10.6, collectively referred to as "notices") given to or
made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on the signature pages hereof or in accordance with
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of
hand-delivered notice, when hand-delivered, (c) in the case of telephone, when
telephoned, provided, however, that in order to be effective, telephonic notices
must be confirmed in writing no later than the next day by letter, facsimile or
telex, (d) if given by mail, four (4) days after such communication is deposited
in the mail with first-class postage prepaid, return receipt requested, and (e)
if given by any other means (including by air courier), when delivered;
provided, that notices to the Administrative Agent shall not be effective until
received. Any Bank giving any notice to the Borrower shall simultaneously send a
copy thereof to the Administrative Agent, and the Administrative Agent shall
promptly notify the other Banks of the receipt by it of any such notice.
10.7 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.8 Governing Law.
Each Letter of Credit and Section 2.8 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith, the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
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governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
10.9 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.10 Duration; Survival.
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of Loans and issuance of
Letters of Credit and shall not be waived by the execution and delivery of this
Agreement, any investigation by the Administrative Agent or the Banks, the
making of Loans, issuance of Letters of Credit, or payment in full of the Loans.
All covenants and agreements of the Borrower contained in Sections 7.1, 7.2 and
7.3 herein shall continue in full force and effect from and after the date
hereof so long as the Borrower may borrow or request Letters of Credit hereunder
and until termination of the Revolving Credit Commitments and payment in full of
the Loans and expiration or termination of all Letters of Credit. All covenants
and agreements of the Borrower contained herein relating to the payment of
additional compensation or expenses and indemnification, including those set
forth in the Notes, Article 4 and Sections 9.5, 9.7 and 10.3, shall survive
payment in full of the Loans, expiration or termination of the Letters of Credit
and termination of the Revolving Credit Commitments.
10.11 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of
the Banks, the Administrative Agent, the Borrower and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights and Obligations hereunder or any interest herein. Each Bank may,
at its own cost, make assignments of or sell participations in all or any part
of its Revolving Credit Commitment and the Loans made by it to one or more banks
or other financial institutions, subject to the consent of the Borrower and the
Administrative Agent with respect to any assignee, such consent not to be
unreasonably withheld, and provided that assignments may not be made in amounts
less than $5,000,000. In the case of an assignment, upon receipt by the
Administrative Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it had
been a signatory Bank hereunder, the Commitments in Section 2.1 shall be
adjusted accordingly, and upon surrender of any Note subject to such assignment,
the Borrower shall execute and deliver a new Note to the assignee in an amount
equal to the amount of the Revolving Credit Commitment assumed by it and a new
Revolving Credit Note to the assigning Bank in an amount equal to the Revolving
Credit Commitment retained by it hereunder. The assigning Bank shall pay to the
Administrative Agent a service fee in the amount of $3,500 for each assignment.
In the case of a participation, the
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selling Bank shall notify the Borrower and the Administrative Agent of the
participant's identity, and the participant shall only have the rights specified
in Section 8.2.3 (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto and not to include any voting rights
except with respect to changes of the type referenced in clauses 10.1.1.,
10.1.2. or 10.1.3 under Section 10.1), all of such Bank's obligations under this
Agreement or any other Loan Document shall remain unchanged, and all amounts
payable by the Borrower hereunder or thereunder shall be determined as if such
Bank had not sold such participation. Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Administrative Agent the form of
certificate described in Section 10.17 relating to federal income tax
withholding. Each Bank may furnish any publicly available information concerning
the Borrower or its Subsidiaries and any other information concerning the
Borrower or its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees or participants),
provided that such assignees and participants agree to be bound by the
provisions of Section 10.12.
10.12 Confidentiality.
The Administrative Agent and the Banks each agree to keep confidential
all information obtained from the Borrower or its Subsidiaries which is
nonpublic and confidential or proprietary in nature (including any information
the Borrower specifically designates as confidential), except as provided below,
and to use such information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The
Administrative Agent and the Banks shall be permitted to disclose such
information (i) to outside legal counsel, accountants and other professional
advisors who need to know such information in connection with the administration
and enforcement of this Agreement, subject to agreement of such Persons to
maintain the confidentiality, (ii) to assignees and participants as contemplated
by Section 10.11, (iii) to the extent requested by any bank regulatory authority
or, with notice to the Borrower, as otherwise required by applicable Law or by
any subpoena or similar legal process, or in connection with any investigation
or proceeding arising out of the transactions contemplated by this Agreement,
(iv) if it becomes publicly available other than as a result of a breach of this
Agreement or becomes available from a source not subject to confidentiality
restrictions, or (v) if the Borrower shall have consented to such disclosure.
10.13 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
10.14 Administrative Agent's or Bank's Consent.
Whenever the Administrative Agent's or any Bank's consent is required
to be obtained under this Agreement or any of the other Loan Documents as a
condition to any action, inaction, condition or event, the Administrative Agent
and each Bank shall be authorized to give or
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withhold such consent in its sole and absolute discretion and to condition its
consent upon the giving of additional collateral, the payment of money or any
other matter.
10.15 Exceptions.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.16 Consent to Forum; Waiver of Jury Trial.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF CHESTER COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWER AT THE ADDRESSES PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVE TRIAL
BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT
OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO
THE FULL EXTENT PERMITTED BY LAW.
10.17 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is not incorporated
under the Laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrower and the Administrative Agent two (2) duly
completed copies of the following: (i) Internal Revenue Service Form W-9, 4224
or 1001, or other applicable form prescribed by the Internal Revenue Service,
certifying that such Bank, assignee or participant is entitled to receive
payments under this Agreement and the other Loan Documents without deduction or
withholding of any United States federal income taxes, or is subject to such tax
at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue
Service Form W-8 or other applicable form or a certificate of the Bank, assignee
or participant indicating that no such exemption or reduced rate is allowable
with respect to such payments. Each Bank, assignee or participant required to
deliver to the Borrower and the Administrative Agent a form or certificate
pursuant to the preceding sentence shall deliver such form or certificate as
follows: (A) each Bank which is a party hereto on the Closing Date shall deliver
such form or certificate at least five (5) Business Days prior to the first
-72-
<PAGE>
date on which any interest or fees are payable by the Borrower hereunder for the
account of each Bank; (B) each assignee or participant shall deliver such form
or certificate at least five (5) Business Days before the effective date of such
assignment or participation (unless the Administrative Agent in its sole
discretion shall permit such assignee or participant to deliver such form or
certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by the Administrative Agent). Each Bank,
assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001 further
undertakes to deliver to each of the Borrower and the Administrative Agent two
(2) additional copies of such form (or a successor form) on or before the date
that such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, either certifying that
such Bank, assignee or participant is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding of any
United States federal income taxes or is subject to such tax at a reduced rate
under an applicable tax treaty or stating that no such exemption or reduced rate
is allowable. The Administrative Agent shall be entitled to withhold United
States federal income taxes at the full withholding rate unless the Bank,
assignee or participant establishes an exemption or that it is subject to a
reduced rate as established pursuant to the above provisions.
10.18 Public Filings.
The Administrative Agent agrees to use reasonable efforts to provide to
the Borrower this Agreement, any other Loan Document and any amendments or
supplements hereto or thereto in a computer readable format if so requested by
the Borrower in connection with public filings.
-73-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: 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
Address for Notices:
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
Telecopier No. (610) 975-0563
Attention: John R. Bartholdson
Telephone No. (610) 975-0420
PNC BANK, NATIONAL ASSOCIATION,
individually and as Administrative Agent
By: /s/ Frank Pugliese
------------------------------------
Title: Assistant Vice President
---------------------------------
-74-
<PAGE>
Address for Notices:
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312
Telecopier No. (610) 725-5799
Attention: Frank A. Pugliese
Telephone No. (610) 725-5731
and
[One PNC Plaza, 22nd Floor
245 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Arlene Ohler
Telephone No. (412) 762-3627
Telecopier No. (412) 762-8672]
FIRST UNION NATIONAL BANK
as Syndication Agent
By: /s/ Christopher Hetterly
------------------------------------
Title: Director
---------------------------------
Address for Notices:
1970 Chain Bridge Road
9th Floor, South Tower
McLean, Virginia 22102-4099
Telephone No.: 703.760.5965
Facsimile No.: 703.760.6019
Attn: Christopher R. Hetterly
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Christopher Hetterly
------------------------------------
Title: Director
---------------------------------
-75-
<PAGE>
Address for Notices:
1970 Chain Bridge Road
9th Floor, South Tower
McLean, Virginia 22102-4099
Telephone No.: 703.760.5965
Facsimile No.: 703.760.6019
Attn: Christopher R. Hetterly
MELLON BANK, N.A.
individually and as Co-Agent
By: /s/ J. Wade Bell
------------------------------------
Title: Vice President
---------------------------------
Address for Notices:
1735 Market Street, Room 1930750
Philadelphia, PA 19103
Telephone No.: 215-553-2199
Facsimile No.: 215-553-4899
Attn: Gilbert Mateer
and
Loan Administration Address:
Three Mellon Bank Center, 23rd Floor
Pittsburgh, PA 15859
Telephone No.: 412-234-1867
Facsimile No.: 412-234-5049
Attn: Mary Brant
NATIONSBANK, N.A.
By: /s/ James H. Peterson
------------------------------------
Title: Senior Vice President
---------------------------------
-76-
<PAGE>
Address for Notices:
10 Light Street
MD4-302-16-01
Baltimore, MD 21202
Telephone No.: 410-605-8617
Facsimile No.: 410-539-7508
Attn: James H. Peterson
THE BANK OF NEW YORK
By: /s/ Walter C. Parelli
------------------------------------
Title: Vice President
---------------------------------
Address for Notices:
One Wall Street
New York, NY 10286
Telephone No.: 212-635-6820
Facsimile No.: 212-635-7978
Attn: Walter Parelli
FMB BANK
By: /s/ Theodore K. Oswald
------------------------------------
Title: Vice President
---------------------------------
Address for Notices:
2055 South Queen Street
York, PA 17403
Telephone No.: 717-771-4900
Facsimile No.: 717-771-4914
Attn: Theodore Oswald
-77-
<PAGE>
NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ Christopher Kohler
------------------------------------
Title: Corporate Banking Officer
---------------------------------
Address for Notices:
National City Center
20 Stanwix Street
Pittsburgh, PA 15222-4802
Telephone No.: 412-644-8879
Facsimile No.: 412-644-6224
Attn: Christopher Kohler
SUMMIT BANK
By: /s/ Robert Mindick
------------------------------------
Title: Assistant Vice President
---------------------------------
Address for Notices:
Three Valley Square
512 Township Line Road - Suite 280
Blue Bell, PA 19422
Telephone No.: 215-619-4847
Facsimile No.: 215-619-4815
Attn: Robert Mindick
-78-
<PAGE>
EXHIBIT 1.1(A)
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Second Amended and Restated Credit
Agreement dated as of ___________, 1999 (as amended, supplemented or modified
from time to time, the "Credit Agreement") among TRIUMPH GROUP, INC. (the
"Borrower"), the banks named therein (the "Banks"), and PNC BANK, NATIONAL
ASSOCIATION, as Administrative Agent for the Banks (the "Administrative Agent").
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.
______________________ (the "Assignor") and
_______________________ (the "Assignee"), intending to be legally bound hereby,
make this Assignment and Assumption Agreement this day of _______, ____ and
hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE to the
Assignor, a _________ percent (____%) interest in and to all of the Assignor's
rights and obligations under the Credit Agreement as of the Effective Date (as
defined below), including without limitation, such percentage interest in the
Assignor's Revolving Credit Commitment as in effect on the Effective Date, the
Loans owing to the Assignor on the Effective Date and the Note evidencing the
outstanding Loans held by the Assignor.
2. The Assignor (i) represents and warrants that, as of the date
hereof, its Revolving Credit Commitment is $_______, the unpaid principal amount
of the Revolving Credit Loans owing to the Assignor is $_______; (ii) represents
and warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or any of the Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any of the Loan Documents or any other instrument or
document furnished pursuant thereto; (iv) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower, or the performance or observance by Borrower of any of its obligations
under the Credit Agreement or any of the Loan Documents or any other instrument
or document furnished pursuant thereto; and (v) attaches the Note referred to in
paragraph 1 above and requests that the Administrative Agent exchange such Notes
for new Note(s) as follows:
[insert instructions re: replacement Note(s)]
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the Borrower's financial statements referred
to in the Credit Agreement
-79-
<PAGE>
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption; (ii) agrees that it will, independently and without reliance upon
the Administrative Agent, the Assignor or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers under the Loan Documents as
are delegated to the Administrative Agent by the terms thereof; (iv) agrees that
it will become a party to and be bound by the Credit Agreement on the Effective
Date (including without limitation the provisions of Section 10.11) as if it
were an original Bank thereunder and will have the rights and obligations of a
Bank thereunder and will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; and (v) specifies as its address for notices the
office set forth beneath its name on the signature pages hereof.
4. The effective date of this Assignment and Assumption Agreement shall
be ____________ __, ____ (the "Effective Date"). Following the execution of this
Assignment and Assumption, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent.
5. Upon such acceptance and recording, as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Bank thereunder and under the Loan Documents and (ii) the
Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement, and the Revolving Credit Commitments of the Assignor and the
Assignee shall be as set forth in Schedule I hereto.
6. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments under the Credit
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest, Commitment Fees and
Letter of Credit Fees with respect thereto) to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date directly between
themselves.
7. The Assignor makes this assignment to the Assignee in consideration
of the payment by the Assignee to the Assignor of $________, receipt of which is
hereby acknowledged by the Assignee.
8. The Assignor has paid to the Administrative Agent, contemporaneously
with the execution and delivery of this Assignment and Assumption Agreement, the
$3,500 service fee required to be paid pursuant to Section 10.11 of the Credit
Agreement.
9. This Assignment and Assumption Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
-80-
<PAGE>
10. [This section is applicable only if the Assignee is incorporated
outside of the United States.] Assignee has delivered at least five (5) Business
Days prior to the Effective Date two duly completed copies of Internal Revenue
Service Form W-9, 4224 or 1001, or other applicable form prescribed by the
Internal Revenue Service, certifying that such Assignee is entitled to receive
payments under the Credit Agreement and the other Loan Documents without
deduction or withholding of any United States federal income taxes, or is
subject to such tax at a reduced rate under an applicable tax treaty.
[Alternative: Assignee has delivered at least five (5) Business Days prior to
the Effective Date two duly completed copies of Internal Revenue Service Form
W-8 of Assignee indicating that Assignee is subject to withholding of United
States federal income taxes.]
[NAME OF ASSIGNOR]
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
[NAME OF ASSIGNEE]
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
Notice Address:
-----------------------------------
-----------------------------------
-----------------------------------
Telephone No.:
--------------------
Telecopier No.:
--------------------
Attn:
------------------------------
CONSENTED TO this
day of__________, ____
TRIUMPH GROUP, INC.,
By:
------------------------
Title:
---------------------
-81-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Amount of Commitment for Revolving Amount of Revolving Credit Loans Amount of Term Loans held as of
Credit Loans as of the Effective as of the Effective Date the Effective Date
Date
<S> <C> <C> <C>
[Assignor] $__________________ $_________________ $_________________
[Assignee] $__________________ $__________________ $_________________
</TABLE>
<PAGE>
SCHEDULE 1.1(B)
<TABLE>
<CAPTION>
Amount of Commitment for Revolving Credit Loans
<S> <C>
PNC Bank, National Association $65,000,000
First Union Commercial Corporation $60,000,000
Mellon Bank, National Association $45,000,000
NationsBank, N.A. $25,000,000
National City Bank of Pennsylvania $17,500,000
The Bank of New York $12,500,000
FMB Bank $12,500,000
Summit Bank $12,500,000
</TABLE>
<PAGE>
EXHIBIT 1.1(P)
Pricing Grid(1)
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
If the Total If the Total If the Total
If the Total Indebtedness to Indebtedness to Indebtedness to If the Company's
Indebtedness to EBITDA Ratio is EBITDA Ratio is EBITDA Ratio is Total Indebtedness
EBITDA Ratio is greater than 1.00 to greater than 1.50 to greater than 2.00 to to EBITDA ratio is
less than or equal 1 but less than or 1 but less than or 1 but less than or greater than 2.50
Basis for Pricing to 1.00 to 1. equal to 1.50 to 1. equal to 2.00 to 1. equal to 2.50 to 1. to 1.
<S> <C> <C> <C> <C> <C>
Commitment Fee (2) 17.5 20.0 25.0 30.0 37.5
Euro-Rate plus (3) 75.0 100.0 125.0 150.0 175.0
Base Rate plus (2) 0 0 0 0 0
Letter of Credit Fee 75.0 100.0 125.0 150.0 175.0
(2)
</TABLE>
(1) All prices are expressed in basis points per annum; basis points in
"Euro-Rate" and "Base Rate" rows represent margins added to those rates
in computing the interest rate(s) payable on the Revolving Credit
Loans. Pricing levels are determined quarterly on the basis of the
Total Indebtedness to EBITDA Ratio set forth in the compliance
certificates submitted under Section 7.3.3. which shall be on a pro
forma basis to take into account acquisitions made during such quarter,
as more specifically described in Section 7.2.6(ii) (e) and (f).
Changes in pricing levels will become effective on the fifth Business
Day following the Administrative Agent's receipt of a compliance
certificate indicating a change in the Total Indebtedness to EBITDA
Ratio which requires a change in pricing level. Pricing will commence
and continue at Level II until any change is necessitated by the Total
Indebtedness to EBITDA Ratio. Pricing Level I will not be available to
the Borrower prior to the receipt by the Administrative Agent of
Borrower's compliance certificate for the quarter ended September 30,
1999.
(2) Commitment Fees, Base Rate interest and Letter of Credit Fees are
calculated on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed.
(3) Euro-Rate interest is calculated on the basis of a year of 360 days and
actual days elapsed.
<PAGE>
EXHIBIT 1.1(R)
FORM OF
REVOLVING CREDIT NOTE
$___________________________ Pittsburgh, Pennsylvania
------------------, ----
FOR VALUE RECEIVED, the undersigned, Triumph Group, Inc., a
Delaware corporation (herein called the "Borrower"), hereby promises to pay to
the order of ___________ (the "Bank") the lesser of (i) the principal sum of
__________________________ U.S. Dollars (U.S. $_____________), or (ii) the
aggregate unpaid principal balance of all Revolving Credit Loans made by the
Bank to the Borrower pursuant to Section 2.1 of the Second Amended and Restated
Credit Agreement dated as of ______________, 1999 between the Borrower, the Bank
and PNC Bank, National Association, as Administrative Agent (the "Credit
Agreement"), whichever is less, payable on the Expiration Date.
The Borrower shall pay interest on the unpaid principal
balance hereof from time to time outstanding from the date hereof at the rate or
rates per annum specified by the Borrower pursuant to Section 3 of, or as
otherwise provided in, the Credit Agreement.
Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on the entire principal amount of the
then outstanding Revolving Credit Loans evidenced by this Revolving Credit Note
at a rate per annum (based on a year of 360 days and actual days elapsed) equal
to two hundred basis points (2% per annum) above the rate of interest otherwise
applicable with respect to such loans. Such interest rate will accrue before and
after any judgment has been entered.
Subject to the provisions of the Credit Agreement, interest on
this Revolving Credit Note will be payable on the last Business Day of each
calendar month after the date hereof and on the Expiration Date.
If any payment or action to be made or taken hereunder shall
be stated to be or become due on a day which is not a Business Day, such payment
or action shall be made or taken on the next following Business Day and such
extension of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
Subject to the provisions of the Credit Agreement, payments of
both principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Administrative Agent located at
Fifth Avenue and Wood Street, Pittsburgh, Pennsylvania 15265, in lawful money of
the United States of America in immediately available funds.
<PAGE>
This Note is the Revolving Credit Note referred to in, and is
entitled to the benefits of, the Credit Agreement and other Loan Documents,
including the representations, warranties, covenants, conditions, security
interests or Liens contained or granted therein. The Credit Agreement among
other things contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayment, in certain
circumstances, on account of principal hereof prior to maturity upon the terms
and conditions therein specified.
All capitalized terms used herein shall, unless otherwise
defined herein, have the same meanings given to such terms in the Credit
Agreement.
Except as otherwise provided in the Credit Agreement, the
Borrower waives presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Credit Agreement.
This Note shall bind the Borrower and its successors and
assigns, and the benefits hereof shall inure to the benefit of the Bank and its
successors and assigns. All references herein to the "Borrower" and the "Bank"
shall be deemed to apply to the Borrower and the Bank, respectively, and their
respective successors and assigns.
This Note and any other documents delivered in connection
herewith and the rights and obligations of the parties hereto and thereto shall
for all purposes be governed by and construed and enforced in accordance with
the internal laws of the Commonwealth of Pennsylvania without giving effect to
its conflicts of law principles.
IN WITNESS WHEREOF, the undersigned has executed this Note by
its duly authorized officers with the intention that it constitute a sealed
instrument.
ATTEST: TRIUMPH GROUP, INC.
Title: By:
--------------------- ----------------------------
Title:
-------------------------
[Seal]
-2-
<PAGE>
EXHIBIT 2.4
FORM OF
LOAN REQUEST FORM
TO: PNC BANK, NATIONAL ASSOCIATION AS AGENT
Telephone No.: [____________]
Telecopier No.: [____________]
Attention: [________________]
FROM: TRIUMPH GROUP, INC.
RE: Second Amended and Restated Credit Agreement (the "Credit Agreement")
dated as of June 11, 1999 by and among TRIUMPH GROUP, INC. the
"Borrower"), the banks named therein (the "Banks") and PNC BANK,
NATIONAL ASSOCIATION, in its capacity as agent for the Banks.
(A) Pursuant to Section 2.4 of the Credit Agreement, the undersigned
hereby makes the following Revolving Credit Loan Request:
(1) Principal Amount of Loan
U.S.$__________________
(2) Proposed Borrowing Date: _______________________
(B) As of the date hereof and the date of making of the
Loans: the representations and warranties contained
in Article 5 of the Credit Agreement are and will be
true (except representations and warranties that
expressly relate solely to an earlier date or time,
which representations and warranties were true on and
as of the specific date referred to therein); the
Borrower has performed and complied with all
covenants and conditions of the Agreement; no Event
of Default or Potential Default has occurred and is
continuing or shall exist; and the making of the
Loans shall not contravene any Law applicable to the
Borrower.
Capitalized terms used but not defined herein shall have the
meanings given to them in the Agreement.
The undersigned certifies to the accuracy of the foregoing.
TRIUMPH GROUP, INC.
Date: By:
-------------------- --------------------------
Its:
-------------------------
<PAGE>
EXHIBIT 7.3.3
FORM OF
COMPLIANCE CERTIFICATE
[Date]
PNC Bank, National Association, as Agent
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312
Ladies and Gentlemen:
I refer to the Second Amended and Restated Credit Agreement
dated as of June 11, 1999 (the "Credit Agreement") among Triumph Group, Inc.,
the Banks named therein, and PNC Bank, National Association, as Administrative
Agent for the Banks. Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein with the same meanings.
I, _______________, [President/Chief Executive Officer/Chief
Financial Officer] of the Borrower, do hereby certify on behalf of the Borrower
as of the quarter ended ____________, ____] (the "Report Date"), as follows:
(1) Operating Leases (Section 7.2.15). Payments by the
Borrower and its Subsidiaries on account of operating
leases for the quarter ended on the Report Date were
$__________ in the aggregate, and for the current
fiscal year to the Report Date were $__________ in
the aggregate, which is not more than the permitted
amount of the greater of (a) $8,000,000 or (b) 15% of
Consolidated Adjusted EBITDA for the current fiscal
year.
(2) Minimum Interest Coverage Ratio (Section 7.2.16) The
ratio of Consolidated EBITDA to Consolidated Interest
Expense of the Borrower is ___ to 1.0 as of the
Report Date, which is not less than the required
minimum ratio of 3.0 to 1.0 as of the Report Date.
(3) Maximum Total Indebtedness to EBITDA Ratio (Section
7.2.17). The ratio of Consolidated Total Indebtedness
to Consolidated Adjusted EBITDA of the Borrower for
the quarter is _______ to 1.0 as of the Report Date,
which is not more than the maximum permitted ratio of
3.0 to 1.0 as of the Report Date.
<PAGE>
(4) Minimum Net Worth (Section 7.2.18). The Consolidated
Net Worth of the Borrower is $__________ as of the
Report Date, which amount is not less than the
required sum of $193,299,000 plus (i) 50% of
Consolidated Net Income for each fiscal year in which
net income was earned (as opposed to net loss)
beginning with the fiscal year ending March 31, 2000,
and each fiscal year thereafter (with the necessary
adjustment to be made as of the end of the relevant
fiscal year) and (ii) 100% of the proceeds (after the
payment of any fees and expenses) from any capital
contribution to, or any sale or issuance of Capital
Stock by the Borrower (with any necessary adjustment
to be made upon the receipt of such proceeds).
(5) Capital Expenditures (Section 7.2.20). Capital
expenditures by the Borrower and its Subsidiaries for
the quarter ended on the Report Date were $__________
in the aggregate, and for the current fiscal year to
the Report Date were $__________ in the aggregate,
which is not more than the permitted amount of 200%
of consolidated depreciation expense for this fiscal
year.
(6) Other Covenants The Borrower is in compliance with,
and since the most recent prior Report Date, has at
all times complied with, all other covenants
contained in the Credit Agreement and the Loan
Documents.
(7) Representations and Warranties The representations
and warranties of the Borrower contained in Article 5
of the Credit Agreement are still true as of today.
(8) No Defaults No event has occurred and is continuing
which constitutes an Event of Default or Potential
Default or would constitute an Event of Default but
for the requirement that notice be given or time to
elapse or both.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of __________, _______.
TRIUMPH GROUP, INC.
By:
----------------------------
Name:
Title: [President/Chief
Executive Officer/Chief
Financial Officer]
<PAGE>
EXHIBIT 21.1
Subsidiaries of Triumph Group, Inc.
Triumph Group Holdings, Inc.
Triumph Brands, Inc.
Triumph Group Acquisition Corp.
The Triumph Group Operations, Inc.
Aerospace Technologies, Inc.
Advanced Materials Technologies, Inc.
DG Industries, Inc.
DV Industries, Inc.
Frisby Aerospace, Inc.
HTD Aerospace, Inc.
Hydro-Mill Co.
Kilroy Steel, Inc.
Kilroy Structural Steel Co.
Nu-Tech Industries, Inc.
Nu-Tech Brands, Inc.
Special Processes of Arizona, Inc.
Stolper-Fabralloy Company
Triumph Controls, Inc.
Triumph Air Repair (Europe) Limited
Triumph Precision, Inc.
Triumph/JDC Company
<PAGE>
Triumph Group Foreign Sales Corporation
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-36957) pertaining to the Triumph Group, Inc. 1996 Stock Option Plan
of our report dated April 16, 1999, except for Note 18 as to which the date is
May 12, 1999, with respect to the consolidated financial statements and schedule
of Triumph Group, Inc. included in the Annual Report (Form 10-K) for the year
ended March 31, 1999.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
June 22, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRUIMPH GROUP, INC. FOR THE YEAR ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4953
<SECURITIES> 0
<RECEIVABLES> 67520
<ALLOWANCES> 1907
<INVENTORY> 104771
<CURRENT-ASSETS> 180218
<PP&E> 131769
<DEPRECIATION> 24646
<TOTAL-ASSETS> 428857
<CURRENT-LIABILITIES> 86761
<BONDS> 91857
0
0
<COMMON> 12
<OTHER-SE> 214765
<TOTAL-LIABILITY-AND-EQUITY> 428857
<SALES> 400108
<TOTAL-REVENUES> 400108
<CGS> 275020
<TOTAL-COSTS> 341536
<OTHER-EXPENSES> 92
<LOSS-PROVISION> 508
<INTEREST-EXPENSE> 5236
<INCOME-PRETAX> 53428
<INCOME-TAX> 20281
<INCOME-CONTINUING> 33147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33147
<EPS-BASIC> 2.79
<EPS-DILUTED> 2.62
</TABLE>
